[Federal Register Volume 63, Number 6 (Friday, January 9, 1998)]
[Rules and Regulations]
[Pages 1646-1658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-270]



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_______________________________________________________________________

Part III





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



_______________________________________________________________________



42 CFR Part 411



Medicare Program; Physicians' Referrals; Issuance of Advisory Opinions; 
Final Rule



42 CFR 411 et al.



Medicare and Medicaid Programs; Physicians' Referrals to Health Care 
Entities With Which They Have Financial Relationships; Proposed Rule

  Federal Register / Vol. 63, No. 6 / Friday, January 9, 1998 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 411

[HCFA-1902-IFC]
RIN: 0938-AI38


Medicare Program; Physicians' Referrals; Issuance of Advisory 
Opinions

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

ACTION: Final rule with comment period.

-----------------------------------------------------------------------

SUMMARY: This final rule with comment period incorporates into HCFA's 
regulations the provisions of section 1877(g)(6) of the Social Security 
Act (the Act), as added by section 4314 of the Balanced Budget Act of 
1997. Section 1877(g)(6) requires that the Secretary issue written 
advisory opinions to outside parties concerning whether the referral of 
a Medicare patient by a physician for certain designated health 
services (other than clinical laboratory services) is prohibited under 
the physician referral provisions in section 1877 of the Act. Section 
1877 not only prohibits certain referrals under the Medicare program, 
but also affects Federal financial participation payments to States 
under the Medicaid program for medical assistance consisting of 
designated health services furnished as the result of certain physician 
referrals. This final rule sets forth the specific procedures HCFA will 
use to issue advisory opinions.

EFFECTIVE DATES: The regulations are effective January 9, 1998.
    Comment Date: Comments will be considered if we receive them at the 
appropriate address as provided below, no later than 5 p.m on March 10, 
1998.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1902-IFC, P.O. Box 26688, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

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

    Comments may also be submitted electronically to the following e-
mail address: hcfa1902ifc.hcfa.gov. E-mail comments must include the 
full name and address of the sender and must be submitted to the 
referenced address in order to be considered. All comments must be 
incorporated in the e-mail message because we may not be able to access 
attachments. Because of staffing and resource limitations, we cannot 
accept comments by facsimile (FAX) transmission. In commenting, please 
refer to file code HCFA-1902-IFC. 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 Avenue, SW., 
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 
5 p.m. (phone: (202) 690-7890).
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 783-3238 or by faxing to (202) 275-
6802. The cost for each copy is $8. As an alternative, you can view and 
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libraries throughout the country that receive the Federal Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. Free public access is available on a Wide 
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is http://www.access.gpo.gov/su__docs/, by using local WAIS client 
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(no password required). Dial-in users should use communications 
software and modem to call (202) 512-1661; type swais, then log in as 
guest (no password required).

FOR FURTHER INFORMATION CONTACT: Joanne Sinsheimer (410) 786-4620.

SUPPLEMENTARY INFORMATION:

I. Background

A. Legislative history of section 1877

    Section 6204 of the Omnibus Budget Reconciliation Act of 1989 
(OBRA`89), Public Law 101-239, enacted on December 19, 1989, added 
section 1877 to the Social Security Act (the Act). (Unless we indicate 
otherwise, all references in this document to sections of the law are 
references to the Act.) In general, section 1877 as it read under 
OBRA`89 provided that, if a physician (or an immediate family member of 
a physician) had a financial relationship with a clinical laboratory, 
that physician could not make a referral to the laboratory for the 
furnishing of clinical laboratory services for which Medicare might 
otherwise pay. It also provided that the laboratory could not present 
or cause to be presented a Medicare claim or bill to any individual, 
third party payer, or other entity for clinical laboratory services 
furnished under the prohibited referral. Additionally, it required a 
refund of any amount collected from an individual as the result of 
billing for an item or service furnished under a prohibited referral. 
These provisions were effective for referrals made on or after January 
1, 1992.
    The statute defined ``financial relationship'' as an ownership or 
investment interest in the entity providing clinical laboratory 
services or a compensation arrangement between the physician (or 
immediate family member) and the entity. The statute provided a number 
of exceptions to the prohibition. Some of these exceptions applied to 
both ownership/investment interests and compensation arrangements, 
while other exceptions applied to only one or the other of these. 
Additionally, the statute imposed reporting requirements relating to a 
physician's (or family member's) financial relationships and provided 
for sanctions.
    Section 4207(e) of the Omnibus Budget Reconciliation Act of 1990 
(OBRA`90), Public Law 101-508, enacted on November 5, 1990, amended 
certain provisions of section 1877 to clarify the definitions in 
section 1877(h), alter the reporting requirements, and to provide an 
additional exception to the prohibition.
    Section 1877 was extensively revised by section 13562 of the 
Omnibus Budget Reconciliation Act of 1993 (OBRA`93, Public Law 103-66, 
enacted on August 10, 1993). It modified the prior law to apply to 
referrals for ten ``designated health services'' in addition to 
clinical

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laboratory services, modified some exceptions, and added new ones. Some 
of the amendments were retroactively effective to January 1, 1992, 
while others (such as the expansion to the additional designated health 
services) did not become effective until January 1, 1995. Section 152 
of the Social Security Act Amendments of 1994 (SSA`94), Public Law 103-
432, enacted on October 31, 1994, amended the list of designated 
services, effective January 1, 1995. It also changed the reporting 
requirements in section 1877(f) and amended some of the effective dates 
of the OBRA`93 provisions. The amended list of designated health 
services includes:
     Clinical laboratory services.
     Physical therapy services.
     Occupational therapy services.
     Radiology services, including magnetic resonance imaging, 
computerized axial tomography scans, and ultrasound services.
     Radiation therapy services and supplies.
     Durable medical equipment and supplies.
     Parenteral and enteral nutrients, equipment, and supplies.
     Prosthetics, orthotics, and prosthetic devices and 
supplies.
     Home health services.
     Outpatient prescription drugs.
     Inpatient and outpatient hospital services.
    Section 13624 of OBRA`93 extended aspects of the referral 
prohibition to the Medicaid program, adding a new paragraph (s) to 
section 1903 of the Social Security Act. This provision denies Federal 
financial participation (FFP) payment under the Medicaid program to a 
State for certain expenditures for designated health services. A State 
cannot receive FFP for designated health services furnished to an 
individual on the basis of a physician referral that would result in a 
denial of payment under the Medicare program if Medicare covered the 
services to the same extent and under the same terms and conditions as 
under the State Medicaid plan. Section 13624 also specified that the 
reporting requirements in section 1877(f) and the civil money penalty 
provision in section 1877(g)(5) (which relates to reporting) apply to a 
provider of a designated health service for which payment may be made 
under Medicaid in the same manner as they apply to a provider of a 
designated health service for which payment may be made under Medicare. 
Section 1903(s) applies to a physician's referrals made on or after 
December 31, 1994.

B. Regulations relating to section 1877

    On March 11, 1992, we published a proposed rule (57 FR 8588) 
setting forth the self-referral prohibition and exceptions to the 
prohibition in section 1877, as enacted by OBRA' 89 and amended by OBRA 
'90, relating to a physician's referrals for clinical laboratory 
services.
    On August 14, 1995, we published, at 60 FR 41914, a final rule with 
comment period that incorporated into the Medicare regulations the 
provisions of section 1877 that relate to the prohibition on physician 
referrals for clinical laboratory services. The August 1995 final rule 
contains revisions to the March 11, 1992, proposal based on comments 
submitted by the public. Further, it incorporates the amendments and 
exceptions created by OBRA '93 and the amendments in SSA '94 that 
relate to referrals for clinical laboratory services. It addresses only 
those changes that had a retroactive effective date of January 1, 1992; 
it does not incorporate those modifications to section 1877 that became 
effective for referrals made on or after January 1, 1995. (Even though 
the August 1995 final rule incorporates OBRA '93 and SSA '94 
provisions, it generally only reiterates them without interpreting 
them. We interpreted the new provisions only in a few instances in 
which it was necessary to do so in order to implement the statute at 
all.)
    We are publishing elsewhere in this same issue of the Federal 
Register a proposed rule that interprets the OBRA`93 and SSA `94 
provisions described above and incorporates and interprets the 
provisions of section 1877 that became effective on January 1, 1995, 
and concern the other designated health services. This proposed rule 
also addresses the application of sections 1877 and 1903(s) to the 
Medicaid program.

C. Advisory Opinions: Section 4314 of Public Law 105-33

    Section 4314 of the Balanced Budget Act of 1997, Public Law 105-33, 
enacted on August 5, 1997, added section 1877(g)(6) to the Act. This 
provision requires that the Department provide additional formal 
guidance to outside parties regarding the application of the physician 
referral statute.
    Section 1877(g)(6)(A) requires that the Secretary issue written 
advisory opinions concerning whether a referral relating to designated 
health services (other than clinical laboratory services) is prohibited 
under the provisions in section 1877. This paragraph states that each 
advisory opinion issued by the Secretary will be binding on the 
Secretary and the party or parties who requested the opinion.
    Section 1877(g)(6)(B) requires the Secretary, in issuing physician 
referral advisory opinions, to apply the rules in paragraphs (b)(3) and 
(4) of section 1128D of the Act, to the extent practicable. Section 
1128D was added to the Act by section 205 of the Health Insurance 
Portability and Accountability Act of 1996, Public Law 104-191, 
effective August 21, 1996. It requires the Secretary, in consultation 
with the Attorney General, to issue written advisory opinions to 
particular parties on certain specified matters involved in applying 
the anti-kickback statute in section 1128B(b) of the Act, the safe 
harbor provisions in 42 CFR 1001.952, as well as other health care 
fraud and abuse sanctions handled by the Office of Inspector General 
(OIG).
    Section 1128D(b)(3)(A) prohibits the OIG in its advisory opinions 
from addressing whether fair market value will be or was paid or 
received for any goods, services, or property. Section 1128D(b)(3)(B) 
prohibits the OIG from addressing whether an individual is a bona fide 
employee within the requirements of section 3121(d)(2) of the Internal 
Revenue Code of 1986. As noted above, HCFA is required to apply these 
provisions ``to the extent practicable.'' We are incorporating these 
provisions in their entirety into our own advisory opinion rules.
    Section 1128D(b)(4)(A) states that the OIG advisory opinions are 
binding on the Secretary and the party or parties requesting the 
opinion. Section 1128D(b)(4)(B) provides that if a party fails to seek 
an advisory opinion, this fact may not be introduced into evidence to 
prove that the party intended to violate the provisions of sections 
1128, 1128A, or 1128B. We are also required to apply these provisions 
``to the extent practicable.'' We are incorporating section 
1128D(b)(4)(B) in its entirety. However, we are not incorporating 
section 1128D(b)(4)(A) because we believe that it is redundant with our 
own advisory authority in section 1877(g)(6)(A). This provision states 
that each advisory opinion issued by the Secretary will be binding on 
the Secretary and on the party or parties requesting the opinion.
    Section 1877(g)(6)(B) also requires us to take into account the 
regulations promulgated by the OIG to cover advisory opinions, issued 
by the OIG under the authority of section 1128D(b)(5). We believe that 
``take into account'' means that we should use the OIG regulations as 
our model, but that we are not bound to follow them. We have attempted 
to follow the OIG

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regulations as closely as possible in each instance in which we 
believed that it was reasonable to do so.
    Section 1128D(b)(5)(A) states that the OIG's regulations must 
provide for--
     The procedure to be followed by a party applying for an 
advisory opinion;
     The procedure to be followed by the Secretary in 
responding to a request for an advisory opinion;
     The interval in which the Secretary will respond;
     The reasonable fee to be charged to the party requesting 
an advisory opinion; and
     The manner in which advisory opinions will be made 
available to the public.
    Under section 1128D(b)(5)(B), the OIG is required to issue an 
advisory opinion to a party by not later than 60 days after receiving 
the request for the opinion and to charge the requesting party a fee 
that is equal to the costs the Secretary incurs in responding to the 
request.
    The OIG's procedures for advisory opinions are set forth in 42 CFR 
part 1008. They were published as an interim final rule with comment 
period on February 19, 1997 (62 FR 7350). In section III. of this 
preamble, we discuss each of the elements required by section 
1128D(b)(5)(A) (for the OIG's regulations). Many of our procedures are 
based on those articulated in the OIG regulations.

II. Provisions of the Interim Final Rule with Comment Period

A. Overview of the advisory opinion requirement

    This interim final rule with comment period creates regulations at 
sections 411.370 through 411.389 that establish procedures for the 
advisory opinions described in section 1877(g)(6). These advisory 
opinions will provide the public with meaningful advice regarding 
whether, based on specific facts, a physician's referrals for a 
designated health service (other than a clinical laboratory service) 
are prohibited by the referral provisions in section 1877. The advisory 
opinion process will be meaningful to any parties who are interested in 
learning whether a particular business arrangement involving a 
physician (or a physician's immediate family member) will result in the 
physician being prohibited from making certain referrals under the 
Medicare program. This process also could prove significant to parties 
who are interested in the status of a physician's referrals under the 
Medicaid program. That is because the FFP provision in section 1903(s) 
of the Act depends upon whether a physician's referrals would be 
prohibited under the Medicare rules if the Medicare program covered a 
designated health service in the same manner as it is covered under the 
State Medicaid plan.
    In an advisory opinion, we will restate the material facts known to 
us, present our analysis, and provide conclusions about how we believe 
the law applies to the facts presented. We will base our analysis on 
our interpretation of the provisions in section 1877.
    Section 1877(g)(6) requires advisory opinions only on the issue of 
whether a referral relating to designated health services (other than 
clinical laboratory services) is a prohibited referral under section 
1877. If a physician has an unexcepted financial relationship with an 
entity, as defined by the statute and our regulations, then that 
physician's referrals for designated health services for a Medicare 
patient would be prohibited, regardless of the intent of any of the 
parties involved in the arrangement. Thus, our advisory opinions will 
be fact-based, and will contain no discussions about what we believe 
the parties knew when they entered into the arrangement or what they 
may have intended.
    While section 1877 is primarily a payment ban that is effective 
regardless of the intent of the parties involved, there are additional 
sanctions under section 1877(g)(3) and (g)(4) that include elements of 
knowledge or intent. Section 1877(g)(4), in fact, imposes a penalty for 
certain referrals that might not otherwise be prohibited, if the 
parties involved in an arrangement have a particular purpose in mind. 
This provision applies to any physician or other entity that enters 
into an arrangement or scheme (such as a cross-referral arrangement) 
that the physician or entity knows or should know has a principal 
purpose of ensuring referrals by the physician to a particular entity 
that, if the physician directly made referrals to that entity, would be 
in violation of section 1877. Sanctions under this provision include 
potentially significant civil money penalties and possible exclusion 
from the Medicare and other health care programs.
    We do not believe that section 1877(g)(6) requires us to express 
any opinion about what the parties to an arrangement knew or intended, 
for purposes of any of the sanctions in section 1877(g) (3) and (4). 
Even if we wished to comment on any intent-based aspect of the referral 
provisions, we believe that it is not practical for us to make an 
independent determination of the subjective intent of the parties based 
only upon written materials that have been submitted by the requestor. 
While we expect requestors to submit complete written descriptions of 
their arrangements and transactions, along with relevant portions of 
documents, these materials do not afford a satisfactory basis upon 
which we could make a reliable determination of subjective intent.
    Section 1877(g)(6)(A) states that an advisory opinion shall be 
binding on the Secretary and on the party or parties requesting an 
opinion. It is also our view that an advisory opinion may legally be 
relied upon only by the requestors.
    We believe that advisory opinions are capable of being misused by 
persons not a party to the transaction in question in order to 
inappropriately escape liability. Advisory opinions are intended only 
to address the facts of a particular arrangement. A third party may 
implement an arrangement that appears similar to the arrangement 
described in the advisory opinion, but the third party may introduce 
additional factors that may make a difference in the outcome of an 
advisory opinion.
    As set forth below, this interim final rule with comment period has 
been developed primarily to address the following issues:
     The procedure to be followed by a party applying for an 
advisory opinion.
     The procedure we will follow in responding to a request.
     The interval within in which we will respond to a request 
for an advisory opinion.
     The reasonable fee we will charge to the party requesting 
an advisory opinion.
     The manner in which we will make advisory opinions 
available to the public.
    This final rule with comment period does not address the substance 
or the content of advisory opinions issued by us.

B. Responsibilities of outside parties seeking advisory opinions

1. Who can request an advisory opinion
    Any individual or entity may submit a request to us for a written 
advisory opinion about whether a physician's referral relating to a 
designated health service, other than a clinical laboratory service, is 
prohibited under section 1877. We anticipate that most requests will 
involve financial relationships that involve health care business 
arrangements. Therefore, for purposes of this discussion, we will 
generally use the term ``arrangement'' to refer to the factual 
circumstances that are involved

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in a request for an advisory opinion, even though some requests might 
involve facts that are not related to a business arrangement.
    As indicated above, the advisory opinion process is designed to 
provide authoritative guidance to participants in particular 
arrangements. Therefore, the arrangement in question must either be in 
existence at the time of the request for an advisory opinion or, with 
respect to prospective arrangements, there must be a good faith 
intention to enter into the described arrangement in the near future. 
(With respect to prospective conduct, we are stating that the requestor 
can declare the intention to enter into the arrangement contingent upon 
receiving a favorable advisory opinion from us or from both us and the 
OIG.)
    Requestors who are not individuals are required to disclose certain 
ownership information, so that we can check to ensure that the matter 
which is the subject of the advisory opinion request is not under 
current investigation. We are also requiring that requestors inform us, 
to the best of their knowledge, about whether the arrangement involved 
in the request is the subject of any current investigations.
2. Matters not subject to an advisory opinion
    As explained above, even if a party requests it, we will not 
address the issue of whether fair market value was, or will be, paid or 
received for any goods, services, or property or the issue of whether 
an individual is a bona fide employee within the requirements of 
section 3121(d)(2) of the Internal Revenue Code of 1986.
    In addition, we do not believe that it is appropriate to provide 
advisory opinions to persons not involved in the arrangement in 
question. For example, we believe that a description of a competitor's 
arrangement is not the proper subject of an advisory opinion since the 
participants to the particular transaction would not be involved in the 
request. A party to an actual arrangement--either existing or about to 
be entered into--is in a position to provide full and complete 
information regarding the facts in question. By contrast, third parties 
are not in a position to provide a reliable statement about the facts 
of a particular arrangement in which the third party is not a 
participant. In addition, it is unclear who would be bound by an 
advisory opinion on an arrangement that does not involve the requestor.
    Similarly, we do not believe it is appropriate to provide advisory 
opinions on hypothetical or generalized arrangements. Section 
1877(g)(6) requires the Secretary to issue advisory opinions concerning 
``whether a referral relating to designated health services (other than 
clinical laboratory services) is prohibited under this section.'' 
(Emphasis added.) We interpret this provision to mean a specific 
referral involving a physician in a specific situation. We also believe 
there are reasons to avoid opinions on generalized arrangements. 
Because of the complexity of the business arrangements that exist in 
today's health care community, physician referral cases are not likely 
to be the same in all material respects. The introduction by a party of 
any additional factors could make a material difference in the 
resulting opinion. We believe it would not be possible for an advisory 
opinion to reliably identify all the possible hypothetical factors that 
might lead to different results.
3. Initiating the process for an advisory opinion
    A requestor must submit a written request for an advisory opinion 
in order to initiate the process. The request must clearly and 
thoroughly present a complete description of the situation that is the 
subject of the advisory opinion. The request should include all facts 
that would be relevant in determining whether a particular situation 
could result in a physician's referrals being prohibited under section 
1877. To the extent that the request provides the necessary information 
in a clear and orderly manner, we will be better able to process it.
    We are requiring any submission to include copies of all relevant 
documents or relevant portions of documents, such as financial 
statements, contracts, leases, employment agreements and court 
documents (requestors may withhold irrelevant portions), as well as 
descriptions of any other arrangements or relationships that may affect 
the documents or our analysis. In addition, the submission should 
include a narrative description of the arrangement. In making the 
request, a requestor must include the identities (including names and 
addresses) of the requestor and all other actual and potential parties 
to the arrangement, to the extent known to the requestor. In addition, 
the request must include the Taxpayer Identification Number (TIN) of 
the requestor. The Debt Collection Improvement Act of 1996 (section 
31001 of Public Law 104-134) requires agencies to collect the TIN from 
all persons or businesses ``doing business with a Federal agency.'' 
(See 31 U.S.C. 7701(c).) We believe that requesting, receiving, and 
paying for our work on an advisory opinion fits into the category of 
``doing business with a Federal agency.'' Therefore, a request for an 
advisory opinion must include the TIN of the requestor. The TIN will be 
used for purposes of collecting and reporting on any delinquent amounts 
arising out of the requestor's failure to render proper payment for the 
advisory opinion. In addition to the above information, we are also 
requiring the requestor to identify a designated contact person who 
will be available to communicate with us.
    We are also requiring that requestors make two certifications as 
part of their request for an advisory opinion. If the requestor is an 
individual, the individual must sign the certification; if the 
requestor is a corporation, it must be signed by the Chief Executive 
Officer, or a comparable officer; if the requestor is a partnership, it 
must be signed by a managing partner; and, if the requestor is a 
limited liability company, the certification must be signed by a 
managing member. The responsible individual must certify that all of 
the information provided as part of the request is true and correct, 
and constitutes a complete description of the facts regarding which an 
advisory opinion is being sought, to the best of the requestor's 
knowledge. If the request relates to prospective conduct, the 
regulations state that the request must also include a certification 
that the requestor intends in good faith to enter into the arrangement 
described in the request. A requestor may make this certification 
contingent upon receiving a favorable advisory opinion from us or from 
both us and the OIG.
    While all submissions should include the above categories of 
information, we cannot in these interim final regulations provide 
complete details on exactly what information a requestor must provide. 
We anticipate that we will receive requests that involve a wide variety 
of business arrangements, some of which may be quite complex. At a 
minimum, any request must describe the entities and parties involved in 
an arrangement, the specific terms of the arrangement, and the direct 
or indirect relationship between the physician (or a physician's 
immediate relative) and any entity that furnishes designated health 
services. Requestors should also include any information they believe 
demonstrates that the arrangement meets one of the exceptions to the 
referral prohibition.
    We are soliciting public comment and input on any other types of 
information that a requestor should routinely provide and intend to 
address this point

[[Page 1650]]

further in any revised final rulemaking. In the interim, prior to 
submitting a request for an advisory opinion, we strongly advise that a 
requestor contact us to inquire about the information HCFA will need to 
process a request of the type the requestor intends to submit. 
Inquiries can be made by telephoning Joanne Sinsheimer at (410) 786-
4620. We may, depending on the subject matter of the inquiry, 
informally provide parties with preliminary questions to help them 
structure their requests. Our goal is to help ensure that the requests 
include the factual information we will need to respond to them. 
Requestors should (but are not required to) answer these questions in 
their requests for an advisory opinion. If the information we need is 
in the first submission, we will be better able to render a prompt, 
concise, and appropriate advisory opinion. We welcome comments on this 
approach.
    The regulation also requires that a requestor inform us about 
whether the parties involved in the request have also asked for or are 
planning to ask for an advisory opinion on the arrangement in question 
from the OIG under section 1128D(b) of the Act. We plan to routinely 
exchange information with the OIG on requests that we receive and on 
our intended responses. We plan, in particular, to establish a system 
that will help guarantee adequate coordination when parties have asked 
for opinions from both us and the OIG.
4. Fees charged to requesting parties
    There is no express authority for us to charge a user fee to 
individuals who request an advisory opinion under section 4314 of the 
Balanced Budget Act of 1997. However, in the absence of express 
authority for this particular purpose, we can rely on the authority for 
collecting such a fee provided by the Independent Offices 
Appropriations Act of 1952 (IOAA), 31 U.S.C. 9701. That statute 
generally governs Federal agencies' imposition and collection of user 
fees. In Sec. 9701(a), the Congress expressed its intent that each 
service or thing of value provided by a Government agency to a person 
is to be self-sustaining to the extent possible. Section 9701(b) 
authorizes agencies to prescribe regulations establishing the fee for a 
service or thing of value provided by the agency. The fee must be 
``fair'' and based on the cost to the government of providing the 
service or thing, the value of the service or thing to the recipient, 
public policy or interest served, and other relevant facts. 31 U.S.C. 
9701(b).
    In 1974, the Supreme Court ruled that the user fee statute must be 
read narrowly as authorizing not a ``tax'' (which may be levied only by 
Congress and need not relate to benefits bestowed on the taxpayer), but 
a ``fee'' for a particular benefit. National Cable Television Ass'n, 
Inc. v. United States, 415 U.S. 336 (1974)(FCC had authority to impose 
fees; costs that inure to the public's benefit should not be included 
in the fee imposed). In a companion case, Federal Power Commission v. 
New England Power Company, 415 U.S. 345 (1974), the Court opined that 
the Office of Management and Budget (OMB) had properly construed the 
user fee statute in a 1959 circular, which stated that a reasonable 
charge ``should be made to each identifiable recipient for a measurable 
unit or amount of government service or property from which he derives 
a special benefit.'' Id. at 349. The OMB Circular A-25 was revised in 
1993, and currently provides under the heading ``General policy'' that 
a user charge ``will be assessed against each identifiable recipient 
for special benefits derived from Federal activities beyond those 
received by the general public.'' 58 FR 38142, 38144. The language of 
currently applicable OMB guidance to agencies about when a ``special 
benefit'' will be considered to accrue for purposes of imposing a 
charge is virtually identical to that cited by the Court with approval. 
Id. at 349, fn. 3.
    More recent appellate court decisions addressing agencies' 
authority to impose user fees similarly examine the extent to which 
there is a ``specific service that confers a special private benefit on 
an identifiable beneficiary.'' Seafarers Int'l Union of N. Am. v. Coast 
Guard, 81 F.3d 179, 184 (D.C. Cir. 1996) (emphasis in original). See, 
also, Engine Mfrs. Ass'n v. EPA, 20 F.2d 1177 (D.C. Cir. 1994) and 
Central & Southern Motor Freight Tariff Ass'n v. United States, 777 
F.2d 722 (D.C. Cir. 1985). We believe that the advisory opinions we 
must provide under section 4314 fall squarely into this category. That 
is, they are an ``extra'' service that an interested party can request 
from the Secretary, they relate to the party's own, unique situation, 
and they are binding on the Secretary and the requesting party alone, 
with no general application.
    Section 411.372(b)(9) requires that a requestor make payment for an 
advisory opinion directly to us. We believe that HCFA has the authority 
to both collect and retain the fees. Annual appropriations acts have 
since 1996 authorized our retention of otherwise authorized user fees, 
and this authority would apply to all user fees we are authorized to 
collect. The retention language appears in the most recent 
appropriations act, enacted on November 13, 1997, Public Law 105-78, in 
the paragraphs covering appropriations for our program management. This 
language states that, in carrying out titles XVIII and XIX of the Act, 
the Secretary is authorized to use a specific amount of money that will 
be transferred from the Federal Hospital Insurance and the Federal 
Supplementary Medical Insurance Trust Funds, together with ``such sums 
as may be collected from authorized user fees and the sale of data, 
which shall remain available until expended, * * *.''
    Since section 1877(g)(6) of the Act requires that we take into 
account the OIG regulations implementing section 1128D(b)(5), we have 
modeled our user fee on the fee that appears in those regulations. 
Under section 1128D(b)(5)(A)(iv), the OIG regulations must provide for 
a ``reasonable fee'' to be charged to the party requesting an advisory 
opinion. Section 1128D(b)(5)(B)(ii) requires that requestors be charged 
a fee equal to the costs incurred by the Department in responding to 
the request.
    We have adopted the ``actual cost'' fee from the OIG regulations. 
Section 411.375(b) of our regulations indicates that in determining the 
actual costs, we will factor in the salary, benefits, and overhead 
costs of policy analysts, attorneys, and others who may work on 
analyzing requests and writing advisory opinions, including 
administrative and supervisory support for these individuals. Because 
we expect that requests may range widely in their complexity, we do not 
believe it is possible to calculate or accurately estimate the cost of 
providing an advisory opinion in advance. In fact, the OIG has 
interpreted section 1128D(b)(5)(B)(ii) to require a fee that represents 
the actual costs that it has incurred in processing each individual 
request. We are also reflecting this concept in our regulations.
    We have included in our regulations the OIG's requirement that, 
once the advisory opinion process is complete, either because we have 
issued the opinion or the request has been withdrawn, the requestor is 
responsible for paying an amount equal to the costs incurred by the 
Government in responding to the request.
    Although we cannot reliably project the processing costs in 
advance, we can make broad estimates that may be of use to prospective 
requestors. We estimate that, currently, the actual cost of processing 
a request, including salaries, benefits and overhead, would be 
approximately $75 an hour. We must include in our estimate the time of

[[Page 1651]]

technical staff, attorneys, supervisors, and support staff, as well as 
others with whom we may consult on various issues.
    The time it will take us to process a request will depend on the 
complexity of the request and the quality of the submission. Simple 
requests might only take a few hours. For example, a request concerning 
whether a physician can refer patients to his wife, who works for a 
physical therapy facility, may take approximately 3 hours to analyze 
and produce a written opinion. On the other hand, a request involving 
the application of the physician referral rules to a large, multi-
party, intricate business arrangement may take us in excess of 40 hours 
to fully analyze and produce a written advisory opinion.
    We believe that it is reasonable to expect that requests for an 
advisory opinion will, at present, cost at least $250 for initial 
processing. It will take time for us to carefully read and analyze 
every request for an advisory opinion and to ensure that we have 
accurately understood all the material facts in each request. 
Accordingly, the regulations provide for a nonrefundable payment of 
$250 that must accompany any request for an advisory opinion that we 
receive through the end of 1998. Once we have gained experience in 
estimating the resources we will need and have factored in any 
inflation in our costs, we may need to revise our initial fee through a 
program issuance. We expect to revise the fee periodically after 
December 31, 1998.
    Because we do not believe that we can accurately estimate our costs 
in advance for a particular request, we intend to try to accommodate 
requestors who may want to limit the costs of receiving an advisory 
opinion. The regulations provide that requestors may designate a 
``triggering dollar amount'' in their requests for an advisory opinion. 
If we calculate that the cost of processing a request has reached, or 
is likely to exceed, that triggering amount, we will stop processing 
the request and promptly notify the requestor. The requestor may then 
decide to either authorize us to continue or withdraw the request. We 
believe we will be able to more accurately reflect costs in advance 
once we have gained experience. In the interim, this triggering 
mechanism should be useful in helping to ensure that requestors do not 
pay costs far in excess of what they expect to pay when they submit 
their requests.
    Section 411.375(c)(4) of the regulations specifically indicates 
that, while a requestor may withdraw a request for an advisory opinion 
at any time, he or she will be responsible for any costs we incurred in 
processing the request before it was withdrawn.
    When we have completed the advisory opinion as discussed below, or 
the requestor has withdrawn the request, we will calculate the total 
costs that we incurred in processing the request. In calculating this 
amount, we will take into account any previous payments associated with 
the request, such as the initial $250 fee, and then notify the 
requestor of the amount he or she still owes. Once the requestor has 
paid the full cost, we will release the opinion to the requestor.
    We believe that our approach for payment and release will be 
sufficient for the vast majority of requests for advisory opinions. 
However, we also believe that we need an additional procedure for cases 
in which the request will necessitate that we acquire expert advice. We 
may, for example, need to consult with accountants or with business 
professionals in order to better understand complex financial 
relationships.
    Because such expert reviews will entail additional time and 
expense, we believe that we should treat differently any request that 
requires outside consultation rather than just a standard application 
of the governing law to a given set of facts. If we determine that we 
require an expert opinion, we will obtain an estimate for the costs of 
the opinion and provide the requestor with that estimate. The requestor 
may then decide to either pay the estimated cost of the expert review 
or withdraw the request. If the requestor pays the estimated cost, we 
will promptly refer the matter to the expert for review. Once the 
outside expert has provided us with the review, we will continue the 
advisory opinion process by applying the expert evaluation to the legal 
questions at issue. If the expert evaluation ultimately costs more than 
the estimated cost, we will bill the requestor for the additional 
expense as part of the Department's overall costs in responding to the 
request. These additional costs will be included when we determine 
whether we are approaching a requestor's ``triggering dollar amount.''
    We intend to begin processing requests as soon as we receive them. 
However, although we will be charging user fees for the cost to the 
Government for responding to these requests, we will not be adding 
staff until we determine the volume of requests and the complexity of 
the legal issues and fact patterns. Once we have had some experience 
processing requests for advisory opinions, we intend to reconsider the 
method described in this section for calculating fees. We are 
specifically soliciting comments on our methodology for determining 
costs.

C. HCFA's responsibilities

1. Reviewing requests for advisory opinions
    Once we receive a request for an advisory opinion, we will promptly 
examine it to determine if it appears to contain sufficient information 
for us to form the basis for an informed advisory opinion. (Generally 
speaking, a request is most likely to be sufficient if the requestor 
sought our advice before submitting a formal request, and the request 
contains responses to any preliminary questions we may have posed at 
that time.) If a request does not appear to us to be sufficient, we 
will promptly notify the requestor about the additional information we 
need. On the other hand, if the request appears to be sufficient, we 
will accept the request. In all cases, we will either ask for 
additional information or accept the request within 15 working days 
after we receive the request. If we have requested additional 
information and the requestor resubmits the advisory opinion request, 
we will assess the resubmission within 15 working days to determine 
whether it can be accepted or whether we still need further 
information. At the point when we accept the request, we will notify 
the requestor by U.S. mail of the date of our acceptance.
    We believe that this approach will provide us with a reasonable 
amount of time to identify requests that do not contain sufficient 
information. We are limiting the time period for this initial 
assessment in order to ensure that we promptly process requests that 
appear to be complete. We are interested in public comments on whether 
we have developed an appropriate method for screening advisory opinion 
requests before we accept them.
    Even in situations in which we have accepted a request, we reserve 
the right to later determine that we need additional information. If we 
decide that additional information is necessary, we will notify the 
requestor in the same manner as we would notify a requestor before 
accepting a request. The time period between when we notify the 
requestor about the additional information we need and when we receive 
the requested information will not be counted as part of the time 
within which we must issue an opinion.
    Because we believe that we may need to make fact-intensive 
inquiries in order to render many advisory opinions, we

[[Page 1652]]

anticipate that we may need to request additional information from many 
requestors. In responding, the requestor should provide us with the 
necessary information and include with it a certification from the same 
individual who certified the original request for an advisory opinion 
(or, if the requestor is an entity, from an individual who is in a 
comparable position).
2. Timeframe for issuing advisory opinions
    Section 1128D(b)(5)(B) of the Act requires that the OIG issue an 
advisory opinion within 60 days after it has received the request for 
the opinion. The OIG has reflected this timeframe in its regulations at 
42 CFR 1008.43. Because section 1877(g)(6) does not impose any 
deadline, we have established our own 90-day timeframe for most 
requests. In addition, for requests that we determine, in our 
discretion, involve complex legal issues or highly complicated fact 
patterns, we reserve the right to issue an advisory opinion within a 
reasonable timeframe. We have created this timeframe based upon our 
perception that we will receive many requests for advisory opinions and 
that a large percentage will involve complex fact patterns. This 
perception is based on the quantity and the nature of phone calls we 
have received, on a daily basis, over many years. We believe that the 
number of requests will be affected by the fact that the referral 
provisions in section 1877 apply to many parties because they can be 
triggered regardless of the intent of the parties. In addition, if an 
arrangement involves a physician who has a problematic financial 
relationship with an entity that furnishes designated health services, 
the parties must know that the arrangement meets an exception before 
that physician can refer. We have also based our timeframe on staffing 
limitations.
    Although we will be charging user fees for the cost to the 
Government for responding to these requests, we will not be adding 
staff until we determine the volume of requests and the complexity of 
the legal issues and fact patterns.
    Once we have had some experience processing requests for advisory 
opinions, we intend to reevaluate the timeframe to ensure that it is 
fair and to determine whether more staff is necessary. We are 
specifically soliciting comments on this issue.
    We intend to begin processing requests as soon as we receive them. 
Once we receive a request that appears to meet all the submission 
criteria, we will promptly accept the request and our 90-day period for 
issuing an opinion will begin. We will send the advisory opinion to the 
requestor by regular U.S. mail by the end of the 90-day period and once 
the requestor has paid all the required fees.
    We believe that under certain circumstances the running of our 90-
day period for issuing an opinion should be tolled (suspended). The 
suspended periods will only reflect time when we cannot work on 
analyzing the request. If we notify a requestor that the costs have 
reached, or are likely to exceed, the triggering amount designated by 
that requestor, we will stop processing the request until the requestor 
instructs us to continue. Similarly, if we notify a requestor of the 
need for, and estimated cost of, an outside expert opinion on a 
nonlegal issue, the regulations state that we will stop processing the 
request until the requestor pays the estimated cost and the outside 
expert provides its opinion. Likewise, in those instances in which we 
request additional information from the requestor that we believe is 
necessary for us to issue the advisory opinion, we will stop processing 
the opinion until we receive the additional information.
    The time period for issuing an advisory opinion does not include 
the time after we notify the requestor that the advisory opinion is 
complete and the requestor must pay the full balance due for the cost 
of the opinion.
    While we intend to issue advisory opinions within 90 days of 
receiving the request, we do not believe that the 90-day time period 
should include delays in the processing of the request that are not 
within our control. With the exception of the delay that occurs while 
we wait for a necessary outside expert opinion, all of the possible 
events that can suspend the period are under the exclusive control of 
the requestor. We believe that for the vast majority of advisory 
opinion requests, the 90-day period will only be suspended for those 
periods during which the requestor has not paid a required fee or has 
not provided the information we need to process the request.
    We will issue an advisory opinion to the requestor after we have 
considered the complete description of all the facts the requestor has 
provided to us. In the opinion, we will restate the material facts 
known to us, present our analysis, and provide conclusions about how we 
believe the law applies to the facts presented to us.
3. Dissemination of advisory opinions
    Section 1128D(b)(5)(A)(v) requires that the OIG's regulations 
describe the manner in which advisory opinions will be made available 
to the public. We have adopted the OIG's policy as follows: As set 
forth in Sec. 411.384(b) of these regulations, once we issue an 
advisory opinion to a requestor, we will promptly make a copy of that 
opinion available for public inspection (in Room 309-G of the 
Department's offices at 200 Independence Avenue, SW., Washington, DC 
(phone: 202-690-7890)) during our normal hours of operation and on our 
web site (http://www.hcfa.gov/regs/aop/). We also anticipate that 
commercial publishers and trade groups are likely to make advisory 
opinions widely available to interested members of the public. We 
welcome public comments and additional suggestions about disseminating 
advisory opinions to the public.
    We will make available documents that are related to a request for 
an advisory opinion and have been submitted to us and any related 
internal government documents, to the extent we are required to do so 
by the Freedom of Information Act (FOIA) (5 U.S.C. 552). If a requestor 
provides information it believes is not subject to disclosure under 
FOIA, such as items that the requestor believes are trade secrets or 
privileged and confidential commercial or financial information, the 
requestor should identify this information in the manner described in 
45 CFR 5.65 (c) and (d). The requestor's assertions about the nature of 
the information, however, are not controlling.
    In addition, although a document may be exempt from disclosure 
under FOIA, facts reflected in that document may become part of the 
advisory opinion that HCFA will provide to the public. We will describe 
the material facts of the arrangement in question in the body of each 
advisory opinion, which will be made fully available to the public. To 
the extent that it may be necessary to reveal specific facts that could 
be regarded as confidential information, we believe we have the 
authority to do so under sections 1106(a) and 1877(g)(6) of the Act. We 
do not intend to release any such facts unless we believe it is 
necessary to do so.
4. Rescission of an advisory opinion
    Section 411.382 reserves our right to rescind or revoke an advisory 
opinion after we issue it, in limited circumstances. For example, we 
can rescind an opinion if we learn after issuing it that the 
arrangement in question may lead to fraud and abuse. In such a 
situation, we will notify the requestor that we have rescinded and make 
the notice available to the same extent as an advisory opinion. The

[[Page 1653]]

requestor would not be subject to sanctions for any actions it took 
prior to the notice of rescission, if the requestor relied in good 
faith on the advisory opinion (unless we establish that the requestor 
failed to provide us with material information when it submitted the 
request for the opinion) and where the parties promptly discontinue the 
action upon receiving notice that we have rescinded or revoked our 
approval. We would also allow the parties to discontinue the action 
within what we believe is a reasonable ``wind down'' period, if we 
believe that the business arrangement is one that cannot be 
discontinued immediately. We are specifically soliciting comments on 
whether this approach reasonably balances the Government's need to 
ensure that advisory opinions are legally correct and the requestor's 
interest in finality.
5. Scope and effect of advisory opinions
    Section 411.387 of these regulations addresses the scope and effect 
of advisory opinions. When we issue an advisory opinion under this 
process, it is legally binding on the Department and the requestor, but 
only with respect to the specific conduct of the particular requestor. 
Section 1877(g)(6)(A) requires only that an advisory opinion issued by 
the Secretary be binding upon the Secretary and the party or parties 
requesting the opinion. In light of this provision, the Department is 
not legally bound with respect to the conduct of a third party, even if 
the conduct of that party appears similar to the conduct of the 
requestor. Thus, under these regulations, no third parties are bound by 
nor may they rely upon an advisory opinion. Each advisory opinion will 
apply legal standards to a set of facts involving certain known persons 
who provide specific statements about key factual issues. A third party 
may create a look-alike arrangement, but any additional characteristics 
could lead to an unfavorable opinion. Therefore, by their very nature, 
advisory opinions cannot be applied generally.
    We believe that even if a party has received a favorable advisory 
opinion from us regarding a particular arrangement, the Government is 
not totally prevented from commencing an action against a party to that 
arrangement. For example, this could occur if a requestor has failed to 
disclose a material fact. In any such action under sections 1128, 1128A 
or 1128B of the Act, an individual or entity who has requested and 
received an advisory opinion from us regarding the arrangement in 
question may seek to introduce the advisory opinion into evidence in 
the proceeding.

III. Regulatory Impact Analysis

    We have examined the impact of this rule as required by Executive 
Order 12866 and the Regulatory Flexibility Act (RFA) (Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, when regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). The RFA requires agencies to analyze 
options for regulatory relief of small businesses. For purposes of the 
RFA, most hospitals, and most other providers, physicians, and health 
care suppliers are small entities, either by nonprofit status or by 
having revenues of $5 million or less annually.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any proposed rule that 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 603 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 a 
Metropolitan Statistical Area and has fewer than 50 beds.
    This rule establishes procedures for us to receive, review, and 
respond to requests for advisory opinions on the issue of whether a 
physician's referrals for certain designated health services are 
prohibited under section 1877 of the Social Security Act. This rule 
does not address the substance of section 1877 nor the substance or 
content of the advisory opinions we may issue in the future. Any effect 
an advisory opinion may have on the behavior of health care providers 
is the result of the substantive content of section 1877 and of the 
advisory opinions themselves, and not this rule.
    Parties interested in advisory opinions will incur certain costs in 
requesting the opinions. However, it is the law that allows us to 
require that requestors pay cost-based fees for advisory opinions. This 
rule merely lays out procedures for paying the costs.
    Estimated number of respondents: Many individuals and entities that 
provide certain designated health services that may be paid for by 
Medicare or Medicaid could potentially have questions regarding the 
referral provisions in section 1877.
    We estimate that, within the last year, we received an average of 
eight telephone calls each day regarding the physician self-referral 
provisions. We believe that some percentage of calls involved issues 
and situations about which the callers would be unlikely to request 
written advisory opinions. Nevertheless, we believe that we can use the 
number of inquiries as a basis for estimating the number of requests we 
are likely to receive for advisory opinions. Using this basis, we 
estimate that 200 physicians, health care entities, and other entities 
or individuals will request advisory opinions within the first year 
following publication of this rule. We also anticipate that the number 
of requests will decline in subsequent years, unless there are 
significant changes in the law. The costs to these requestors will vary 
depending on the complexity of each request. Compared, however, to the 
costs of seeking private legal advice, we believe that the fees charged 
for our review will not be substantial, and in many cases will not 
exceed the $250 minimum payment.
    Obviously, the actual number of requests could be larger since, for 
the first time, formal written opinions are available. Conversely, the 
numbers could be smaller for a combination of many unquantifiable 
reasons, such as the desire not to subject an arrangement to official 
scrutiny.
    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), if a rule 
has a significant economic effect on a substantial number of small 
businesses, the Secretary must specifically consider the effects of the 
rule on small business entities and analyze regulatory options that 
could lessen the impact of the rule. As stated above, this rule does 
not address the substance of section 1877 of the Act or the substance 
of advisory opinions that may be issued in the future. It describes the 
process by which an individual or entity may receive an opinion about 
how section 1877 applies to particular business practices. The 
aggregate economic impact of this rulemaking on small business entities 
should, therefore, be minimal.
    Thus, we have concluded, and the Secretary certifies, that this 
final rule will not have a significant economic impact on a substantial 
number of small business entities, and that a regulatory flexibility 
analysis is not required for this rulemaking.
    In accordance with the provisions of E.O. 12866, this regulation 
was reviewed by the Office of Management and Budget.

[[Page 1654]]

IV. Authority for an Interim Final Rule with Comment Period, and 
Waiver of Delayed Effective Date

    We ordinarily publish a general notice of proposed rulemaking in 
the Federal Register and invite public comment on the proposed rule. 
That rule would have included a reference to the legal authority under 
which we are proposing it, and the terms and substance of the proposed 
rule or a description of the subjects and issues involved. Further, we 
generally provide for final rules to be effective no sooner than 30 
days after the date of publication unless we find good cause to waive 
the delay.
    In order to implement the provisions in section 1877(g)(6) in a 
timely manner, section 1877(g)(6)(C) gives us the authority to 
promulgate regulations that take effect on an interim basis after 
notice and pending opportunity for public comment. We have chosen to 
exercise this authority for the following reasons. We believe that the 
statutory requirement that we accept requests for advisory opinions 
that are submitted on or after November 4, 1997, makes it imperative 
that, by that date, we have in place specific procedures to address how 
we will receive and process advisory opinion requests. It would be 
contrary to the public interest for us to receive and process advisory 
opinions without first setting forth procedural guidelines. We also 
believe that the 60-day period for public comment established by this 
interim final rule will protect the public's interest in this 
rulemaking, while providing us with additional input and 
recommendations, without unduly delaying the advisory opinion process. 
We are therefore publishing the advisory opinion procedures as an 
interim final rule with comment period. We also find that for good 
cause it would be against the public interest to delay the effective 
date of this rule. We will respond to all appropriate and relevant 
public comments that we receive during the 60-day comment period, and 
we will make any necessary revisions to these regulations through a 
revised final rule.

V. Collection of Information Requirements

    In order to provide appropriate advisory opinions, we will need 
certain information from the parties who request advisory opinions. 
Sections 411.372, 411.373, and 411.378 of this interim final rule 
contain information collection requirements that require approval by 
OMB. We are required to solicit public comments under section 
3506(c)(2)(A) of the Paperwork Reduction Act of 1995. Specifically, 
comments are invited on (1) whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the estimate of the burden of the proposed 
collection of information; (3) ways to enhance the quality, utility and 
clarity of the information collected; and (4) ways to minimize the 
burden of the collection of information on respondents, including 
through the use of automated collection techniques or other forms of 
information technology.
    We are requesting an emergency review of this interim final rule 
with comment period. In compliance with section 3506(c)(2)(A) of the 
Paperwork Reduction Act of 1995, we are submitting to OMB the 
collection of information requirements described below for emergency 
review. We are requesting an emergency review because the collection of 
this information is needed before the expiration of the normal time 
limits under OMB's regulations at 5 CFR part 1320, to ensure compliance 
with section 1877(g)(6)(D) of the Act, which was added by section 4314 
of the Balanced Budget Act of 1997. Section 1877(g)(6)(D) requires us 
to respond to requests for advisory opinions that are submitted after 
November 3, 1997. We cannot reasonably comply with normal clearance 
procedures because of the statutory deadline and public harm is likely 
to result if the agency cannot provide for advisory opinions.
    We are providing a 3-day public comment period from the date of 
publication of this interim final rule, with OMB review and approval 4 
days from the date of publication, and a 180-day approval. During this 
180-day period, we will publish a separate Federal Register notice 
announcing the initiation of an extensive 60-day agency review and 
public comment period on these requirements. We will submit the 
requirements for OMB review and an extension of this emergency 
approval.
    Title: HCFA Advisory Opinion Procedure.
    Summary of the collection of information: Section 4314 of Public 
Law 105-33, in establishing section 1877(g)(6) of the Act, requires the 
Department to provide advisory opinions to the public regarding whether 
a physician's referrals for certain designated health services are 
prohibited under the other provisions in section 1877 of the Act. These 
regulations provide the procedures under which members of the public 
may request advisory opinions from HCFA. Because all requests for 
advisory opinions are purely voluntary, respondents will only be 
required to provide information to us that is relevant to their 
individual requests.
    The following discussion describes the aggregate effect of the 
collections of information included in the text of this interim final 
rule.
    Respondents: The ``respondents'' for the collection of information 
described in these regulations will be self-selected individuals and 
entities that choose to submit requests for advisory opinions to HCFA. 
We anticipate that the respondents will include health care providers 
of many types, from physicians who are sole practitioners to large 
diversified publicly-traded corporations.
    Estimated number of respondents: 200. This estimate is based on the 
number of telephone calls we have received regarding the physician 
referral provisions.
    Estimated number of responses per respondent: 1.
    Estimated total annual burden on respondents: We believe that the 
burden of preparing a request for an advisory opinion will vary widely 
depending upon the size and complexity of the business transactions in 
question. We estimate that the average burden for each submitted 
request for an advisory opinion will be in the range of 2 to 40 hours. 
We further believe that the burden for most requests will be closer to 
the lower end of the range, with an average burden of 10 hours per 
respondent. Total burden for this proposed information collection is 
estimated to be 2000 hours.
    We are requiring that requests for advisory opinions involve 
existing conduct, or conduct in which the requestor intends to engage. 
We anticipate that most requests will involve business arrangements 
into which the requesting party intends to enter. Because the facts 
will relate to business plans, we believe the requesting party in many 
cases will already have collected and analyzed all or almost all of the 
information we will need in order to review the request. Therefore, in 
order to request an advisory opinion, the requestor will most likely 
simply need to compile for our examination information that the 
requestor has already collected and reviewed. In some cases, however, 
the requestor may need to expend a more significant amount of time in 
order to submit information relating to a complex arrangement that 
involves a large number of parties.
    Comments on this information collection should be sent to both:


[[Page 1655]]


Health Care Financing Administration, Office of Information Services, 
Information Technology Investment Management Group, Division of HCFA 
Enterprise Standards, Attn: HCFA-1902-IFC, Room C2-26-17, 7500 Security 
Boulevard, Baltimore, MD 21244-1850
      and
Allison Herron Eydt, HCFA Desk Officer, Office of Management and 
Budget, Room 10235, New Executive Office Building, 725 17th Street, NW, 
Washington, D.C. 20503.
    You may also fax comments on these paperwork reduction requirements 
to the Health Care Financing Administration at (410) 786-1415 and to 
Ms. Eydt at (202) 395-6974. All comments should refer to file code 
HCFA-1902-IFC.
    To be considered, you must submit comments on these paperwork 
reduction requirements to the individuals listed above within 3 days 
after this interim final rule is published in the Federal Register.

List of Subjects in 42 CFR Part 411

    Administrative practice and procedures, Fraud, Grant programs--
health, Health facilities, Health professions, Medicaid, Medicare, 
Penalties.
    42 CFR part 411 is amended as set forth below:

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

    1. 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).

    2. Sections 411.370, 411.372, 411.373, 411.375, 411.377 through 
411.380, 411.382, 411.384, and 411.386 through 411.389 are added to 
subpart J to read as follows:


Sec. 411.370  Advisory opinions relating to physician referrals.

    (a) Period during which HCFA will accept requests. The provisions 
of Secs. 411.370 through 411.389 apply to requests for advisory 
opinions that are submitted to HCFA after November 3, 1997, and before 
August 21, 2000, and to any requests submitted during any other time 
period during which HCFA is required by law to issue the advisory 
opinions described in this subpart.
    (b) Matters that qualify for advisory opinions and who may request 
one. Any individual or entity may request a written advisory opinion 
from HCFA concerning whether a physician's referral relating to 
designated health services (other than clinical laboratory services) is 
prohibited under section 1877 of the Act. In the advisory opinion, HCFA 
determines whether a business arrangement described by the parties to 
that arrangement appears to constitute a ``financial relationship'' (as 
defined in section 1877(a)(2) of the Act) that could potentially 
restrict a physician's referrals, and whether the arrangement or the 
designated health services at issue appear to qualify for any of the 
exceptions to the referral prohibition described in section 1877 of the 
Act.
    (1) The request must involve an existing arrangement or one into 
which the requestor, in good faith, specifically plans to enter. The 
planned arrangement may be contingent upon the party or parties 
receiving a favorable advisory opinion. HCFA does not consider, for 
purposes of an advisory opinion, requests that present a general 
question of interpretation, pose a hypothetical situation, or involve 
the activities of third parties.
    (2) The requestor must be a party to the existing or proposed 
arrangement.
    (c) Matters not subject to advisory opinions. HCFA does not address 
through the advisory opinion process--
    (1) Whether the fair market value was, or will be, paid or received 
for any goods, services, or property; and
    (2) Whether an individual is a bona fide employee within the 
requirements of section 3121(d)(2) of the Internal Revenue Code of 
1986.
    (d) Facts subject to advisory opinions. HCFA considers requests for 
advisory opinions that involve applying specific facts to the subject 
matter described in paragraph (b) of this section. Requestors must 
include in the advisory opinion request a complete description of the 
arrangement that the requestor is undertaking, or plans to undertake, 
as described in Sec. 411.372.
    (e) Requests that will not be accepted. HCFA does not accept an 
advisory opinion request or issue an advisory opinion if--
    (1) The request is not related to a named individual or entity;
    (2) HCFA is aware that the same, or substantially the same, course 
of action is under investigation, or is or has been the subject of a 
proceeding involving the Department of Health and Human Services or 
another governmental agency; or
    (3) HCFA believes that it cannot make an informed opinion or could 
only make an informed opinion after extensive investigation, clinical 
study, testing, or collateral inquiry.
    (f) Effects of an advisory opinion on other Governmental authority. 
Nothing in this part limits the investigatory or prosecutorial 
authority of the OIG, the Department of Justice, or any other agency of 
the Government. In addition, in connection with any request for an 
advisory opinion, HCFA, the OIG, or the Department of Justice may 
conduct whatever independent investigation it believes appropriate.


Sec. 411.372  Procedure for submitting a request.

    (a) Format for a request. A party or parties must submit a request 
for an advisory opinion to HCFA in writing, including an original 
request and 2 copies. The request must be addressed to: Health Care 
Financing Administration, Department of Health and Human Services, 
Attention: Advisory Opinions, P.O. Box 26505, Baltimore, MD 21207.
    (b) Information HCFA requires with all submissions. The request 
must include the following:
    (1) The name, address, telephone number, and Taxpayer 
Identification Number of the requestor.
    (2) The names and addresses, to the extent known, of all other 
actual and potential parties to the arrangement that is the subject of 
the request.
    (3) The name, title, address, and daytime telephone number of a 
contact person who will be available to discuss the request with HCFA 
on behalf of the requestor.
    (4) A complete and specific description of all relevant information 
bearing on the arrangement, including--
    (i) A complete description of the arrangement that the requestor is 
undertaking, or plans to undertake, including: the purpose of the 
arrangement; the nature of each party's (including each entity's) 
contribution to the arrangement; the direct or indirect relationships 
between the parties, with an emphasis on the relationships between 
physicians involved in the arrangement (or their immediate family 
members who are involved) and any entities that provide designated 
health services; the types of services for which a physician wishes to 
refer, and whether the referrals will involve Medicare or Medicaid 
patients;
    (ii) Complete copies of all relevant documents or relevant portions 
of documents that affect or could affect the arrangement, such as 
personal services or employment contracts, leases, deeds, pension or 
insurance plans, financial statements, or stock certificates (or, if 
these relevant documents do not yet exist, a complete description, to 
the best of the requestor's knowledge, of what these documents are 
likely to contain);

[[Page 1656]]

    (iii) Detailed statements of all collateral or oral understandings, 
if any; and
    (iv) Descriptions of any other arrangements or relationships that 
could affect HCFA's analysis.
    (5) Complete information on the identity of all entities involved 
either directly or indirectly in the arrangement, including their 
names, addresses, legal form, ownership structure, nature of the 
business (products and services) and, if relevant, their Medicare and 
Medicaid provider numbers. The requestor must also include a brief 
description of any other entities that could affect the outcome of the 
opinion, including those with which the requestor, the other parties, 
or the immediate family members of involved physicians, have any 
financial relationships (either direct or indirect, and as defined in 
section 1877(a)(2) of the Act and Sec. 411.351), or in which any of the 
parties holds an ownership or control interest as defined in section 
1124(a)(3) of the Act.
    (6) A discussion of the specific issues or questions the requestor 
would like HCFA to address including, if possible, a description of why 
the requestor believes the referral prohibition in section 1877 of the 
Act might or might not be triggered by the arrangement and which, if 
any, exceptions to the prohibition the requestor believes might apply. 
The requestor should attempt to designate which facts are relevant to 
each issue or question raised in the request and should cite the 
provisions of law under which each issue or question arises.
    (7) An indication of whether the parties involved in the request 
have also asked for or are planning to ask for an advisory opinion on 
the arrangement in question from the OIG under section 1128D(b) of the 
Act (42 U.S.C. 1320a-7d(b)) and whether the arrangement is or is not, 
to the best of the requestor's knowledge, the subject of an 
investigation.
    (8) The certification(s) described in Sec. 411.373. The 
certification(s) must be signed by--
    (i) The requestor, if the requestor is an individual;
    (ii) The chief executive officer, or comparable officer, of the 
requestor, if the requestor is a corporation;
    (iii) The managing partner of the requestor, if the requestor is a 
partnership; or
    (iv) A managing member, if the requestor is a limited liability 
company.
    (9) A check or money order payable to HCFA in the amount described 
in Sec. 411.375(a).
    (c) Additional information HCFA might require. If the request does 
not contain all of the information required by paragraph (b) of this 
section, or, if either before or after accepting the request, HCFA 
believes it needs more information in order to render an advisory 
opinion, it may request whatever additional information or documents it 
deems necessary. Additional information must be provided in writing, 
signed by the same person who signed the initial request (or by an 
individual in a comparable position), and be certified as described in 
Sec. 411.373.


Sec. 411.373  Certification.

    (a) Every request must include the following signed certification: 
``With knowledge of the penalties for false statements provided by 18 
U.S.C. 1001 and with knowledge that this request for an advisory 
opinion is being submitted to the Department of Health and Human 
Services, I certify that all of the information provided is true and 
correct, and constitutes a complete description of the facts regarding 
which an advisory opinion is sought, to the best of my knowledge and 
belief.''
    (b) If the advisory opinion relates to a proposed arrangement, in 
addition to the certification required by paragraph (a) of this 
section, the following certification must be included and signed by the 
requestor: ``The arrangement described in this request for an advisory 
opinion is one into which [the requestor], in good faith, plans to 
enter.'' This statement may be made contingent on a favorable advisory 
opinion, in which case the requestor should add one of the following 
phrases to the certification:
    (1) ``if HCFA issues a favorable advisory opinion.''
    (2) ``if HCFA and the OIG issue favorable advisory opinions.''


Sec. 411.375  Fees for the cost of advisory opinions.

    (a) Initial payment. Parties must include with each request for an 
advisory opinion submitted through December 31, 1998, a check or money 
order payable to HCFA for $250. For requests submitted after this date, 
parties must include a check or money order in this amount, unless HCFA 
has revised the amount of the initial fee in a program issuance, in 
which case, the requestor must include the revised amount. This initial 
payment is nonrefundable.
    (b) How costs are calculated. Before issuing the advisory opinion, 
HCFA calculates the costs the Department has incurred in responding to 
the request. The calculation includes the costs of salaries, benefits, 
and overhead for analysts, attorneys, and others who have worked on the 
request, as well as administrative and supervisory support for these 
individuals.
    (c) Agreement to pay all costs. (1) By submitting the request for 
an advisory opinion, the requestor agrees, except as indicated in 
paragraph (c)(3) of this section, to pay all costs the Department 
incurs in responding to the request for an advisory opinion.
    (2) In its request for an advisory opinion, the requestor may 
designate a triggering dollar amount. If HCFA estimates that the costs 
of processing the advisory opinion request have reached or are likely 
to exceed the designated triggering dollar amount, HCFA notifies the 
requestor.
    (3) If HCFA notifies the requestor that the actual or estimated 
cost of processing the request has reached or is likely to exceed the 
triggering dollar amount, HCFA stops processing the request until the 
requestor makes a written request for HCFA to continue. If HCFA is 
delayed in processing the request for an advisory opinion because of 
this procedure, the time within which HCFA must issue an advisory 
opinion is suspended until the requestor asks HCFA to continue working 
on the request.
    (4) If the requestor chooses not to pay for HCFA to complete an 
advisory opinion, or withdraws the request, the requestor is still 
obligated to pay for all costs HCFA has identified as costs it incurred 
in processing the request for an advisory opinion, up to that point.
    (5) If the costs HCFA has incurred in responding to the request are 
greater than the amount the requestor has paid, HCFA, before issuing 
the advisory opinion, notifies the requestor of any additional amount 
that is due. HCFA does not issue an advisory opinion until the 
requestor has paid the full amount that is owed. Once the requestor has 
paid HCFA the total amount due for the costs of processing the request, 
HCFA issues the advisory opinion. The time period HCFA has for issuing 
advisory opinions is suspended from the time HCFA notifies the 
requestor of the amount owed until the time HCFA receives full payment.
    (d) Fees for outside experts. (1) In addition to the fees 
identified in this section, the requestor also must pay any required 
fees for expert opinions, if any, from outside sources, as described in 
Sec. 411.377.
    (2) The time period for issuing an advisory opinion is suspended 
from the time that HCFA notifies the requestor that it needs an outside 
expert opinion

[[Page 1657]]

until the time HCFA receives that opinion.


Sec. 411.377  Expert opinions from outside sources.

    (a) HCFA may request expert advice from qualified sources if HCFA 
believes that the advice is necessary to respond to a request for an 
advisory opinion. For example, HCFA may require the use of accountants 
or business experts to assess the structure of a complex business 
arrangement or to ascertain a physician's or immediate family member's 
financial relationship with entities that provide designated health 
services.
    (b) If HCFA determines that it needs to obtain expert advice in 
order to issue a requested advisory opinion, HCFA notifies the 
requestor of that fact and provides the identity of the appropriate 
expert and an estimate of the costs of the expert advice. As indicated 
in Sec. 411.375(d), the requestor must pay the estimated cost of the 
expert advice.
    (c) Once HCFA has received payment for the estimated cost of the 
expert advice, HCFA arranges for the expert to provide a prompt review 
of the issue or issues in question. HCFA considers any additional 
expenses for the expert advice, beyond the estimated amount, as part of 
the costs HCFA has incurred in responding to the request, and the 
responsibility of the requestor, as described in Sec. 411.375(c).


Sec. 411.378  Withdrawing a request.

    The party requesting an advisory opinion may withdraw the request 
before HCFA issues a formal advisory opinion. This party must submit 
the withdrawal in writing to the same address as the request, as 
indicated in Sec. 411.372(a). Even if the party withdraws the request, 
the party must pay the costs the Department has expended in processing 
the request, as discussed in Sec. 411.375. HCFA reserves the right to 
keep any request for an advisory opinion and any accompanying documents 
and information, and to use them for any governmental purposes 
permitted by law.


Sec. 411.379  When HCFA accepts a request.

    (a) Upon receiving a request for an advisory opinion, HCFA promptly 
makes an initial determination of whether the request includes all of 
the information it will need to process the request.
    (b) Within 15 working days of receiving the request, HCFA--
    (1) Formally accepts the request for an advisory opinion;
    (2) Notifies the requestor about the additional information it 
needs, or
    (3) Declines to formally accept the request.
    (c) If the requestor provides the additional information HCFA has 
requested, or otherwise resubmits the request, HCFA processes the 
resubmission in accordance with paragraphs (a) and (b) of this section 
as if it were an initial request for an advisory opinion.
    (d) Upon accepting the request, HCFA notifies the requestor by 
regular U.S. mail of the date that HCFA formally accepted the request.
    (e) The 90-day period that HCFA has to issue an advisory opinion 
set forth in Sec. 411.380(c) does not begin until HCFA has formally 
accepted the request for an advisory opinion.


Sec. 411.380  When HCFA issues a formal advisory opinion.

    (a) HCFA considers an advisory opinion to be issued once it has 
received payment and once the opinion has been dated, numbered, and 
signed by an authorized HCFA official.
    (b) An advisory opinion contains a description of the material 
facts known to HCFA that relate to the arrangement that is the subject 
of the advisory opinion, and states HCFA's opinion about the subject 
matter of the request based on those facts. If necessary, HCFA includes 
in the advisory opinion material facts that could be considered 
confidential information or trade secrets within the meaning of 18 
U.S.C. 1095.
    (c)(1) HCFA issues an advisory opinion, in accordance with the 
provisions of this part, within 90 days after it has formally accepted 
the request for an advisory opinion, or, for requests that HCFA 
determines, in its discretion, involve complex legal issues or highly 
complicated fact patterns, within a reasonable time period.
    (2) If the 90th day falls on a Saturday, Sunday, or Federal 
holiday, the time period ends at the close of the first business day 
following the weekend or holiday;
    (3) The 90-day period is suspended from the time HCFA--
    (i) Notifies the requestor that the costs have reached or are 
likely to exceed the triggering amount as described in 
Sec. 411.375(c)(2) until HCFA receives written notice from the 
requestor to continue processing the request;
    (ii) Requests additional information from the requestor until HCFA 
receives the additional information;
    (iii) Notifies the requestor of the full amount due until HCFA 
receives payment of this amount; and
    (iv) Notifies the requestor of the need for expert advice until 
HCFA receives the expert advice.
    (d) After HCFA has notified the requestor of the full amount owed 
and has received full payment of that amount, HCFA issues the advisory 
opinion and promptly mails it to the requestor by regular first class 
U.S. mail.


Sec. 411.382  HCFA's right to rescind advisory opinions.

    Any advice HCFA gives in an opinion does not prejudice its right to 
reconsider the questions involved in the opinion and, if it determines 
that it is in the public interest, to rescind or revoke the opinion. 
HCFA provides notice to the requestor of its decision to rescind or 
revoke the opinion so that the requestor and the parties involved in 
the requestor's arrangement may discontinue any course of action they 
have taken in accordance with the advisory opinion. HCFA does not 
proceed against the requestor with respect to any action the requestor 
and the involved parties have taken in good faith reliance upon HCFA's 
advice under this part, provided--
    (a) The requestor presented to HCFA a full, complete and accurate 
description of all the relevant facts; and
    (b) The parties promptly discontinue the action upon receiving 
notice that HCFA had rescinded or revoked its approval, or discontinue 
the action within a reasonable ``wind down'' period, as determined by 
HCFA.


Sec. 411.384  Disclosing advisory opinions and supporting information.

    (a) Advisory opinions that HCFA issues and releases in accordance 
with the procedures set forth in this subpart are available to the 
public.
    (b) Promptly after HCFA issues an advisory opinion and releases it 
to the requestor, HCFA makes available a copy of the advisory opinion 
for public inspection during its normal hours of operation and on the 
DHHS/HCFA web site.
    (c) Any predecisional document, or part of such predecisional 
document, that is prepared by HCFA, the Department of Justice, or any 
other Department or agency of the United States in connection with an 
advisory opinion request under the procedures set forth in this part is 
exempt from disclosure under 5 U.S.C. 552, and will not be made 
publicly available.
    (d) Documents submitted by the requestor to HCFA in connection with 
a request for an advisory opinion are available to the public to the 
extent they are required to be made available by 5 U.S.C. 552, through 
procedures set forth in 45 CFR part 5.
    (e) Nothing in this section limits HCFA's obligation, under 
applicable

[[Page 1658]]

laws, to publicly disclose the identity of the requesting party or 
parties, and the nature of the action HCFA has taken in response to the 
request.


Sec. 411.386  HCFA's advisory opinions as exclusive.

    The procedures described in this subpart constitute the only method 
by which any individuals or entities can obtain a binding advisory 
opinion on the subject of a physician's referrals, as described in 
Sec. 411.370. HCFA has not and does not issue a binding advisory 
opinion on the subject matter in Sec. 411.370, in either oral or 
written form, except through written opinions it issues in accordance 
with this subpart.


Sec. 411.387  Parties affected by advisory opinions.

    An advisory opinion issued by HCFA does not apply in any way to any 
individual or entity that does not join in the request for the opinion. 
Individuals or entities other than the requestor(s) may not rely on an 
advisory opinion.


Sec. 411.388  When advisory opinions are not admissible evidence.

    The failure of a party to seek or to receive an advisory opinion 
may not be introduced into evidence to prove that the party either 
intended or did not intend to violate the provisions of sections 1128, 
1128A or 1128B of the Act.


Sec. 411.389  Range of the advisory opinion.

    (a) An advisory opinion states only HCFA's opinion regarding the 
subject matter of the request. If the subject of an advisory opinion is 
an arrangement that must be approved by or is regulated by any other 
agency, HCFA's advisory opinion cannot be read to indicate HCFA's views 
on the legal or factual issues that may be raised before that agency.
    (b) An advisory opinion that HCFA issues under this part does not 
bind or obligate any agency other than the Department. It does not 
affect the requestor's, or anyone else's, obligations to any other 
agency, or under any statutory or regulatory provision other than that 
which is the specific subject matter of the advisory opinion.

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

    Dated: December 2, 1997.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Dated: December 30, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 98-270 Filed 1-5-98; 8:45 am]
BILLING CODE 4120-01-P