[Federal Register Volume 63, Number 104 (Monday, June 1, 1998)]
[Rules and Regulations]
[Pages 29648-29656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14309]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 441 and 489
[HCFA-1152-1-F]
RIN 0938-AI86
Medicare and Medicaid Programs; Surety Bond Requirements for Home
Health Agencies
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
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SUMMARY: This final rule revises several provisions of an earlier final
rule concerning surety bond requirements published in the Federal
Register on January 5, 1998 (63 FR 292). This rule also establishes the
surety bond submission compliance date, as described in a notice of
intent and in a final rule concerning surety bond requirements
published in the Federal Register on March 4, 1998 (63 FR 10730 and
10732). The March 4 documents advised the public that we intended to
[[Page 29649]]
make technical revisions to the January 5, 1998 final rule and extend
the February 27, 1998 compliance date for all home health agencies
(HHAs) to furnish a surety bond to HCFA and/or the State Medicaid
agency, or both, until 60 days after the date of publication of this
final rule. In this rule, for Medicare-participating HHAs, we are
establishing a new compliance date to submit a surety bond that is 60
days after the date of publication of this final rule. For Medicaid-
participating HHAs, we are establishing a new compliance date to
furnish a surety bond that is a date established by the State Medicaid
agency up to 120 days after the date of publication of this final rule.
We are also responding to comments we received in response to the
January 5, 1998 final rule that pertain to the technical revisions we
discussed in our March 4, 1998 notice. It is our intention to respond
to all comments not addressed herein in a future Federal Register
document. This final rule revision does not change the beginning date
of the term the initial surety bond is to cover, that is, January 1,
1998.
EFFECTIVE DATE: This final rule is effective on July 1, 1998.
FOR FURTHER INFORMATION CONTACT: Ralph Goldberg, (410) 786-4870
(Medicare Provisions). Mary Linda Morgan, (410) 786-2011 (Medicaid
Provisions).
SUPPLEMENTARY INFORMATION:
I. Background
The Balanced Budget Act of 1997 (BBA '97) requires each home health
agency (HHA) to secure a surety bond in an amount of at least $50,000
in order to participate in either the Medicare or the Medicaid
programs. This requirement applies to all participating HHAs and those
that seek to participate in the Medicare and Medicaid programs. On
January 5, 1998, we published in the Federal Register a final rule with
comment period (63 FR 292) to implement the surety bond requirements of
BBA '97. The comment period for that final rule ended on March 6, 1998.
Generally, the rule requires each HHA participating in Medicare to
obtain from an authorized Surety and then to furnish to HCFA a surety
bond in an amount that is the greater of $50,000 or 15 percent of the
annual amount paid to the HHA by the Medicare program, as such annual
amount appears in the HHA's most recently accepted cost report.
The rule also prohibits payment to a State for home health services
furnished to Medicaid recipients unless the HHA has furnished the
Medicaid State agency with a surety bond similar to one that meets
Medicare requirements. The amount of the Medicaid surety bond would be
the greater of $50,000 or 15 percent of the annual amount paid to the
HHA by the Medicaid State agency for home health services.
II. Provisions of the March 4 Notice and Final Rule
As a result of technical issues concerning potential Surety
liability raised by representatives of both the Surety and HHA
industries after the publication of the January 5, 1998 final rule, we
published a notice in the Federal Register on March 4, 1998 (63 FR
10732). That notice advised the public that we intended to make
technical revisions to the January 5, 1998 final rule and would extend
the compliance date for submitting bonds. In a final rule also
published in the March 4, 1998 Federal Register (63 FR 10730), we
removed the February 27, 1998 compliance date, and announced that we
intended to establish the compliance date as 60 days after the date of
publication of a subsequent (i.e., this) final rule.
Described below are our responses to the comments we received
concerning our technical changes, a discussion of their intended
effect, and the changes that we are making in this rulemaking. In
general, these changes address concerns regarding the uncertainty of
the scope of a Surety's liability under the January 5, 1998 regulation,
which appears to have resulted in less than a fully robust market for
underwriting bonds for HHAs in Medicare and Medicaid.
III. Discussion of Public Comments
In response to the January 5, 1998 final rule, we received 344
timely items of correspondence. A summary of the comments that pertain
to those issues discussed in our March 4, 1998 notice and our responses
are set forth below. We will respond to the remaining comments on the
January 5, 1998 final rule in a subsequent Federal Register document.
The following sections generally follow the order the topics were
discussed in the January 5, 1998 final rule.
Continuous Bond
Comment: Several Surety associations suggested that we consider
using a continuous bond that, when necessary, would be updated by the
Surety. The continuous bond would be an alternative option to the
annual bond.
Response: We understand that the use of a continuous bond is common
practice in the surety industry. A continuous bond is one that remains
in full force and effect unless it is canceled or terminated. The use
of a continuous bond would significantly reduce the paperwork burden
and administrative processes for the HHAs, Sureties, and the Medicare
and Medicaid programs. Therefore, in 42 CFR 441.16(i)(2) and 489.67(b),
we are providing that the HHA--at its option--may submit an annual bond
each year or may submit a continuous bond that remains in effect from
year to year. A continuous bond would be updated by the Surety at the
start of a new year if the amount of the required bond increases or
decreases. The updating of a continuous bond would be accomplished by
the Surety issuing a ``rider,'' which is a notice issued by a Surety
that a change in the bond has occurred or will occur. A continuous bond
should not be misinterpreted as providing cumulative liability. For
example, this does not mean that an initial bond in the amount of
$50,000 would increase to $100,000 in the second year, $150,000 in the
third year, etc. This change affects several regulation sections and is
more fully discussed in section IV. of this preamble.
Government Security
Comment: One commenter suggested that we consider allowing HHAs to
furnish a Government security in lieu of furnishing a surety bond, in
that the Department of Treasury regulations authorize such
substitution.
Response: We are exploring the desirability of this option as well
as the various means by which this option may be implemented. We will
issue the result of our decision in a subsequent document.
Surety Liability
Comment: Several commenters had concerns regarding the uncertainty
of the scope of a Surety's liability under the current regulation. The
commenters were specifically concerned that our ability to reach back
several years to recover payments leaves the door open for almost
unlimited Surety liability.
Response: The uncertain scope of potential liability for Sureties
has made it difficult for some apparently reputable and well-run HHAs
to obtain an affordable surety bond. We are addressing this concern by
limiting the Surety's liability on the bond to the term during which we
determine that funds owed have become unpaid, regardless of when the
overpayment or other events causing such funds to be owed took place.
In the Medicare program, the Surety is liable if the claim, civil money
[[Page 29650]]
penalty, or assessment becomes unpaid, as defined in Sec. 489.60, and
we make a written demand for payment from the Surety during the term of
the bond. If the HHA fails to furnish a bond that meets our
requirements for the year following expiration of the term of the bond,
or if the HHA's provider agreement terminates prior to the end of the
fiscal year, the last bond in effect has an additional 2-year discovery
period for unpaid claims, civil money penalties, and assessments that
we impose on or assert against the HHA.
Likewise, in the Medicaid program, the Surety is liable for
uncollected overpayments, as defined by paragraph (a), provided such
uncollected overpayments are determined during the term of the bond and
regardless of when the overpayments took place. In addition, the Surety
remains liable if the HHA fails to furnish a subsequent annual bond
that meets the requirements of this subpart or fails to furnish a rider
for a year for which a rider is required to be submitted, or if the
HHA's provider agreement terminates and that the Surety's liability
will be based on the last bond or rider in effect for the HHA. The
Surety's period of liability will remain in effect for an additional 2
year period.
Appeals
Comment: Several commenters recommended that the Surety be given
appeal rights.
Response: To address this concern, we are making another technical
revision to the regulation. In the Medicare program, we are giving
Surety bond companies the right to appeal overpayments, civil money
penalties, and assessments. This change grants the Surety standing to
appeal any matter that the HHA could appeal, provided the Surety
satisfies all jurisdictional and procedural requirements that would
otherwise have applied to the HHA and provided the HHA is not, itself,
actively pursuing its appeal rights, and provided further that, with
respect to unpaid claims, the Surety has paid HCFA all amounts owed to
HCFA by the HHA on such unpaid claims, up to the amount of the bond. In
order to ensure that Sureties are furnished with proper notice of
matters on which an appeal right may ripen, we are further specifying
that surety bonds must include the Surety's full name and address to
which we can send a written notice of an overpayment, civil money
penalty, or assessment. In the Medicaid program, we are directing the
State Medicaid agencies to grant Sureties appeal rights. This change
affects several regulation sections and is more fully discussed in
section IV. of this preamble.
Surety Reimbursement
Comment: A commenter recommended that we provide for reimbursing
the Surety when HCFA collects from both the HHA and the Surety on the
same overpayment, civil money penalty, or assessment.
Response: We have provided for reimbursement to the Surety in cases
where both the HHA and Surety have repaid the Medicare or Medicaid
program on the same overpayment, civil money penalty, or assessment. We
are adding a new subsection (m) to Sec. 441.16 and a new Sec. 489.73 to
effectuate this change.
HCFA Payment Demand
Comments: Several commenters wanted to know the circumstances under
which we will demand payment from a Surety.
Response: We will first seek collection from the HHA, employing
available administrative collection methods, e.g., offset of interim
payments, repayment schedule, etc., prior to seeking payment from the
Surety under the terms of the bond.
Computation of the 15 Percent of Annual Payments
Comment: Commenters questioned the application of the 15 percent
standard to the annual payments paid to the HHA by the Medicare program
as reflected on the most recently accepted cost report, in determining
the bond amount.
Response: Approximately half of the current Medicare overpayments
are attributable to HHAs. In comparing overpayments to revenues paid to
the HHAs for four previous years, we also found that uncollected
overpayments have been rising significantly both in absolute dollar
amounts and as a percentage of the original amount of overpayment.
In developing our regulation, we reviewed the Office of Inspector
General's (OIG) July 1997 report Home Health: Problem Providers and
Their Impact on Medicare (page 18), in which the OIG recommended that
each HHA be required to obtain a surety bond equal to the amount of
anticipated Medicare billings during the fiscal year. We also consulted
with industry representatives.
We believe that a bond amount of 15 percent of payments will
adequately cover the overpayment amounts, if any, for which the vast
majority of HHAs would be responsible and yet would not be so high that
it would prevent reputable and well-run HHAs from obtaining bonds at a
reasonable cost. The 15 percent standard was also adopted in
conjunction with other provisions of this rule that afford us more
protection by permitting us to apply the standard to more recent
payment history and by permitting us to substitute the amount of prior
overpayments as the bond amount when the overpayment amount exceeds 15
percent of payments. Thus, we believe that the rules established in
Sec. 489.65 for calculating the bond amount are a reasonable starting
point for implementing the bond provision. However, we will continue to
monitor payments to HHAs and will modify our policy for future years if
conditions warrant. Any revisions would be proposed in a Federal
Register document. Also, we are including a provision that will sunset
the 15 percent bond amount provision on June 1, 2005. Prior to that
time, we will analyze available data on the impact of the surety bond
requirement and the prospective payment system for HHAs to determine if
the 15 percent computation is appropriate. We will publish a Federal
Register document addressing the 15 percent amount prior to the sunset
date. However, we may act sooner if we believe circumstances warrant.
IV. Provisions of the Final Rule
In this final rule, we are revising certain sections of the January
5, 1998 final rule as a result of public comments on that rule that
pertain to the issues discussed in our March 4, 1998 notice. These
changes are as follows:
A. Surety Bond Requirements Under Medicare
In Sec. 489.60 (``Definitions.''), we are revising the definition
of ``Unpaid civil money penalty or assessment'' to add the Surety as a
potential party to the administrative appeals process. We are also
adding a new definition for the term ``Rider'' in this section.
In Sec. 489.62 (``Requirement waived for Government-operated
HHAs.''), we are making an editorial change by removing the word
``section'' and replacing it with the word ``subpart''.
In Sec. 489.65(g) (``Expiration of the 15 percent provision.''), we
provide that for an annual surety bond, or for a rider on a continuous
surety bond, that is required to be submitted on or after June 1, 2005,
notwithstanding any reference in this subpart to 15 percent as a basis
for determining the amount of the bond, the amount of the bond or
rider, as applicable, must be $50,000 or such amount as HCFA specifies
in
[[Page 29651]]
accordance with paragraph (f) of this section, whichever amount is
greater.
In Sec. 489.66(b) (``Additional requirements of the surety
bond.''), we specify that a Surety's liability is based on unpaid
claims, unpaid civil money penalties, and unpaid assessments that are
determined to have become unpaid during the term of the bond,
regardless of when the payment, overpayment, or other event giving rise
to the unpaid claim, civil money penalty, or assessment occurred. Also,
we specify that if an HHA fails to furnish us with a subsequent annual
bond that meets the requirements of this subpart, or fails to furnish
us with a rider for a year for which a rider is required to be
submitted, or if the HHA's provider agreement terminates prior to the
end of the fiscal year, then the last bond or rider in effect for such
HHA remains in effect and the Surety remains liable for an additional
2-year period.
We revise Sec. 489.66(c) to correct a drafting error to clarify
that the Surety's liability may be extinguished if the Surety furnishes
us with a notice of an HHA's action to terminate or limit the scope of
the bond not later than 10 days after receiving notice from the HHA of
such action by the HHA, or not later than 60 days before the effective
date of such action by the Surety or if the HHA has submitted to HCFA a
new bond that meets our requirements.
In new Sec. 489.66(e), we are making a technical change to specify
that surety bonds must include the Surety's full name and address to
which we can send a written notice of an overpayment, civil money
penalty, or assessment.
In Sec. 489.67(a) (``Submission date and term of the bond.''), we
have amended this provision to specify that the initial bond must be
submitted to HCFA by 60 days from the date of publication of this rule,
for the term beginning January 1, 1998. An HHA that submitted an
initial surety bond under the provisions of the January 5, 1998 final
rule is not required to, but may, submit a substitute surety bond that
conforms to the technical revisions established by this final rule. If
an annual bond is submitted for the initial term, it must be effective
through the ending date of the HHA's current fiscal year. For
subsequent terms, an HHA must submit to us either an annual surety bond
or where the HHA has submitted a continuous bond, a rider (showing the
period for which the rider is effective), not later than 30 days before
the beginning of the HHA's fiscal year. When an HHA has furnished a
continuous bond, no action is necessary by the HHA to submit a rider as
long as the continuous bond remains in full force and effect and there
is no change in the bond amount.
In Sec. 489.67(b), we specify the type of bond that an HHA must
secure as either an annual or continuous bond.
In Sec. 489.71 (``Surety's standing to appeal Medicare
determinations.''), we specify that a Surety has standing to appeal any
matter that the HHA could appeal, provided the Surety satisfies all
jurisdictional and procedural requirements that would otherwise have
applied to the HHA and provided the HHA, itself, is not pursuing its
appeal rights, and provided further that, with respect to unpaid
claims, the Surety has paid HCFA all amounts owed to HCFA by the HHA on
such unpaid claims, up to the amount of the bond.
In new Sec. 489.73 (``Effect of conditions of payment''), we
specify that if the Surety has paid an amount on the basis of liability
incurred under a bond obtained by an HHA, and we subsequently collect
from the HHA on the same indebtedness that gave rise to the Surety's
liability, we will reimburse the Surety the amount we collected from
the HHA up to the amount paid to us by the Surety, provided the Surety
has no other liability to us under the bond.
B. Surety Bond Requirements Under Medicaid
In keeping with our intent and practice of affording States
flexibility in implementing these surety bond provisions, and in
recognition that the States' administration of Medicaid may differ
significantly from the Medicare model, we have not changed the Medicaid
requirements in Sec. 441.16 to conform to all of Medicare's changes in
part 489, subpart F. We believe that allowing States the discretion to
decide, for example, the means and mechanism by which the Surety is
notified of any overpayment that is asserted against the HHA is the
best way to retain State flexibility. Nevertheless, the Medicaid
changes in part 441 that are discussed below were made generally in
order to conform with changes being made to Medicare in part 489,
subpart F.
In Sec. 441.16(g)(7) (``Expiration of the 15 percent provision''),
we provide that for an annual surety bond, or for a rider on a
continuous surety bond, that is required to be submitted on or after
June 1, 2005, notwithstanding any reference in this section to 15
percent as a basis for determining the amount of the bond, the amount
of the bond or rider, as applicable, must be $50,000 or such amount as
the Medicaid agency specifies in accordance with subparagraph (6) of
this paragraph, whichever amount is greater.
In Sec. 441.16(h)(2) (``Additional requirements of the surety
bond''), we state that the bond must provide that the Surety is liable
for uncollected overpayments as defined in paragraph (a), provided such
uncollected overpayments are determined during the term of the bond and
regardless of when the overpayments took place.
In addition, we state that if an HHA fails to furnish the Medicaid
State agency with a subsequent annual bond that meets the requirements
of this subpart, or fails to furnish a rider for a year for which a
rider is required to be submitted, or if the HHA's agreement with the
State Medicaid agency terminates, then the last bond or rider in effect
for such HHA remains in effect for an additional 2-year period.
In Sec. 441.16(h)(3)(i), we state that the Surety's potential
liability under a bond may be extinguished if the Surety furnishes the
Medicaid agency with notice of an HHA's action to terminate or limit
the scope of the bond not later than 10 days after receiving notice
from the HHA of such action by the HHA or not later than 60 days before
the effective date of such action by the Surety, or if the HHA has
submitted a new bond to the Medicaid agency and the bond meets all
Federal and State requirements.
In Sec. 441.16(i)(1) (``Submission date, term, and type of the
bond''), we have amended this provision to specify that the initial
bond must be submitted by a date specified by the State Medicaid agency
up to 120 days following the publication of this rule. (The term of the
initial bond is for a term beginning January 1, 1998.) In the preamble
to the March 4, 1998 rule, we stated our intention to establish a new
surety bond compliance date that would be 60 days after the date of
publication of this rule. However, upon further consideration and
analysis, we concluded that 60 days may not be sufficient time for all
States to furnish appropriate notice to Medicaid-participating HHAs.
Therefore, we are providing for each State to establish a compliance
date for the submission of a surety bond up to 120 days from the date
of publication of this rule.
We have also amended this provision to specify that an HHA must
submit a ``rider'' to the Medicaid agency for subsequent terms in the
event the HHA has previously submitted a continuous bond and the
required amount of the bond changes.
In Sec. 441.16(i)(2), we specify that the bond submitted by an HHA
must be either an annual bond (that is, a bond that specifies an
effective annual period corresponding to an annual period
[[Page 29652]]
specified by the Medicaid agency) or a continuous bond (that is, a bond
that remains in full force and effect from term to term unless it is
terminated or canceled as provided for in the bond or as otherwise
provided by law) and which must be updated by the Surety, for a
particular annual period via the issuance of a ``rider,'' when the bond
amount changes. We have defined a ``rider'' to mean a notice issued by
a Surety that a change in a bond has occurred or will occur. In
addition, we state that if the HHA has submitted a continuous bond and
there is no increase or decrease in the bond amount, no action is
necessary by the HHA to submit a rider as long as the continuous bond
remains in full force and effect.
In Sec. 441.16(l) (``Surety's standing to appeal Medicaid
determinations''), we specify that the Medicaid agency must establish
procedures for granting appeal rights to Sureties.
In new Sec. 441.16(m) (``Effect of conditions of payment''), we
require that in the event a Surety has paid the Medicaid agency an
amount on the basis of liability incurred under a bond obtained by an
HHA under this section, and the Medicaid agency subsequently collects
an amount on the overpayment from the HHA, which overpayment gave rise
to the Surety's liability, the Medicaid agency must reimburse the
Surety the amount the agency collected from the HHA up to the amount
paid to the agency by the Surety, provided the Surety has no other
liability under the bond.
V. Regulatory Impact Statement
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless we
certify that a rule will not have a significant economic impact on a
substantial number of small entities. For purposes of the RFA, we treat
all providers and suppliers as small entities. Individuals and States
are not included in the definition of a small entity.
Also, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. That
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 of a Metropolitan
Statistical Area and has fewer than 50 beds.
Publication of this rule generally limits the Surety's liability on
the bond to the term when it is determined that funds owed to Medicare
and Medicaid have become ``unpaid,'' regardless of when the payment,
overpayment, or other action causing such funds to be owed took place;
establishes that a Surety remains liable on a bond for an additional 2
years after the date an HHA leaves the Medicare or Medicaid program;
gives a Surety the right to appeal, under Medicare, any matter that the
HHA could appeal, provided the Surety satisfies all jurisdictional and
procedural requirements that would otherwise have applied to the HHA
and provided the HHA, itself, is not pursuing its appeal rights and
provided the Surety has paid HCFA on amounts relating to unpaid claims;
directs State Medicaid agencies to grant appeal rights to Sureties; and
establishes the use of a continuous or annual bond.
While we cannot predict the effect these revisions will have on the
number of HHAs having an agreement with us and with the Medicaid
agencies, we believe these revisions will remove the uncertainty of the
scope of a Surety's liability. The removal of this underwriting
uncertainty, coupled with the fact that Sureties are provided with
their own appeal rights, should result in a more robust surety bond
market, thereby giving HHAs an increased opportunity to obtain a bond.
Although we are unable to estimate either savings or costs to the
Medicare Trust Funds, the savings that may result from this regulation
would be, principally, from recovery of overpayments that Medicare and
Medicaid may collect from the Sureties and from the prevention of
overpayments that would have been generated by HHAs that are unable to
obtain surety bonds. In the final rule published on January 5, 1998, we
estimated Medicare savings at $10 million beginning in 2000 and $20
million each year thereafter. These estimates were based on the
assumption that HHAs will not repeat their past aberrant billing
activities and that we will experience a reduction in unrecovered
program overpayments as a result of either having debts guaranteed by a
Surety company, or by high risk businesses being unable to obtain
surety bonds and, thus, leaving the Medicare and/or Medicaid program.
While the changes made by this rule may make it possible for some of
the HHAs that were not able to obtain a surety bond that met the
requirements of the January 5, 1998 rule to now obtain a bond, we do
not believe that those HHAs will be the high-risk business whose
departure from the program was a factor in making our savings
estimates.
For these reasons, we have determined, and we certify, that this
regulation does not result in a significant impact on a substantial
number of small entities and does not have a significant effect on the
operations of a substantial number of small rural hospitals. Therefore,
we are not preparing an analysis for either the RFA or section 1102(b)
of the Act because we have determined, and we certify, that this
proposed rule would not have a significant impact on a substantial
number of small entities or a significant impact on the operations of a
substantial number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
VI. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite prior public comment on the proposed rule.
The notice of proposed rulemaking can be waived, however, if an agency
finds good cause that notice-and-comment procedures are impracticable,
unnecessary, or contrary to the public interest and it incorporates a
statement of the finding and its reasons in the rule issued.
In this final rule, we are addressing matters on which we received
public comments to our January 5, 1998 final rule with comment, as well
as on matters on which we received interim comments from both the
Surety and HHA industries that concern the technical issues discussed
in our March 5, 1998 notice.
We find good cause to waive notice-and-comment procedures for this
final rule because it is impracticable to employ notice-and-comment
procedures with respect to both the Medicare and Medicaid regulations
and establish new, timely compliance dates for submission of surety
bonds. Because a fully viable market for HHA surety bonds apparently
failed to develop following the publication on January 5, 1998 of a
final rule establishing surety bond requirements for HHAs, on March 4,
1998 we published a final rule to remove from the January 5th rule the
date by which HHAs were required to submit surety bonds. This measure
was taken in order to consider technical revisions to the rule that
might be necessary in order to facilitate the development of a fully
viable surety bond market for reputable and well-run HHAs. This rule
includes those revisions and establishes new submission compliance
dates for both
[[Page 29653]]
the Medicare and Medicaid bonds. We believe that the new submission
compliance dates should not be so remote in time from the effective
date of the initial bonds, i.e., January 1, 1998, so as, possibly, to
create another market disincentive for surety bond companies and
possible access problems for program beneficiaries. However, employing
notice and comment procedures would substantially delay establishing
new, timely submission compliance dates. Accordingly, we find it
impracticable both to employ notice and comment procedures and to
establish new submission compliance dates that are not temporally
remote from the effective date of the term of the initial bonds.
We also find good cause to waive notice-and-comment procedures
because employing such procedures for this rule would be contrary to
the public interest. For the reasons just discussed, this final rule
must be published as soon as possible so as to ensure a fully viable
surety bond market for reputable and well-run HHAs and to establish new
bond submission compliance dates. Employing notice-and-comment
procedures would, as a practical matter, substantially delay the
implementation of the surety bond requirement and such substantial
delay would be contrary to the public interest.
For these reasons, we find good cause to waive notice-and-comment
procedures and to issue this final rule.
VII. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, agencies are required to
provide a 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 (PRA) requires that we solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
In compliance with section 3506(c)(2)(A) of the PRA, we are
submitting to the OMB the following requirements 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 4312(b) and 4724(b) of BBA '97, which requires Medicare and
Medicaid-participating HHAs to secure a surety bond, effective as of
January 1, 1998, in order to continue participation in the Medicare and
Medicaid programs. We cannot reasonably comply with normal clearance
procedures because public harm is likely to result if the agency cannot
enforce the surety bond requirements of the BBA '97 in order to protect
the Federal government (especially the Medicare Trust Funds) from
losses due to uncollectible debts incurred by HHAs.
Written comments and recommendations will be accepted from the
public if received by the individuals designated below within 10
workings days from the date of this publication. HCFA is requesting OMB
review and approval of this collection within 11 working days of this
publication, with a 180-day approval period. 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.
The information collection requirements contained in the rule
published in the Federal Register on January 5, 1998 have been approved
by OMB under approval number 0938-0713, with an expiration date of May
31, 1998. Under the terms of OMB approval, HCFA is required to submit
this revised final rule for emergency PRA clearance. As such, we are
requesting an emergency review of the information collections contained
in this final rule and re-approval of the information collection
requirements currently approved under OMB approval number 0938-0713.
Type of Information Request: Revision of a currently approved
collection.
Title of Information Collection: Surety Bond Requirements for Home
Health Agencies (HHA) and Supporting Regulations in 42 CFR
Secs. 441.16, 489.66, and 489.67.
Form Number: HCFA-R-213.
OMB Approval Number: 0938-0713.
Use: In summary, these information collection requirements ensure
that HHAs furnish the required surety bond and continue to demonstrate
that they meet the applicable requirements set forth in 42 CFR Parts
441 and 489, in order to continue participation in the Medicare and
Medicaid programs.
Frequency: Other; As needed.
Affected Public: Business or other for-profit, Not-for-profit
institutions.
Number of Respondents: 8,062.
Total Annual Responses: 7,001.
Total Annual Hours Requested: 18,071.
In addition to HCFA's continued solicitation of comments on the
currently approved information collection requirements we are
particularly interested in obtaining comment on each of the
modifications to the currently approved information collections
requirements, as referenced in this regulation and summarized below.
Section 441.16(h)(3)(i) requires that if a Surety wants to avoid
future liability with respect to a particular bond, the Surety must
furnish the Medicaid agency with notice of any action by the HHA or the
Surety to terminate or limit the scope or term of the bond and that
such notice must be furnished not later than 10 days after the date of
notice of such action by the HHA, or not later than 60 days before the
effective date of the action by the Surety.
The burden associated with this requirement is the time required
for a Surety to provide a State Medicaid agency with a notice of an
action by the HHA or the Surety to terminate or limit the scope or term
of the bond. HCFA met with surety bond industry representatives to
discuss the time and effort associated with furnishing a notice to
terminate or limit the scope or term of a bond. It is estimated that
less than 1 percent (80 entities) of all 8,062 participating HHAs will
terminate or limit the scope or term of a bond. It is also estimated
that it will take a surety company 3 hours to generate and furnish a
notice of such action for a total burden of 240 hours.
Section 441.16(i)(1)(ii) requires that, for subsequent terms of a
bond, by a date as the Medicaid agency specifies, the HHA must submit
to the Medicaid agency a surety bond or, if the HHA has furnished a
continuous bond and the required amount of the bond has changed, a
rider, that is effective for an annual period specified by the Medicaid
agency.
Previously, all HHAs were required to submit, on an annual basis, a
copy of an annual surety bond. However, HHAs now have the option to
submit a continuous surety bond. If an HHA submits a continuous surety
bond it must thereafter submit a rider to the
[[Page 29654]]
Medicaid agency when the amount of the continuous surety bond changes.
Therefore, the burden associated with this modified requirement is
the time required to submit either an annual bond or, if necessary, a
rider with a continuous bond. Since we anticipate that virtually all
HHAs will obtain a continuous surety bond, but only approximately 1,100
HHAs will require a bond in a different amount each year, we estimate
it will take 1 hour each for 1,100 HHAs to submit a rider on an annual
basis.
Section 489.66 (c)(1) provides that the Surety's liability on the
bond is not extinguished unless, in the event the HHA or the Surety
takes any action to terminate or limit the scope or term of the bond,
the Surety furnishes us with notice of such action not later than 10
days after receiving notice of such action by the HHA, or not later
than 60 days before the effective date of such action by the Surety.
The burden associated with this requirement is the time required
for a Surety to provide Medicare with a notice of an action by the HHA
or the Surety to terminate or limit the scope or term of the bond. It
is estimated that less than 1 percent (80 entities) of all 8,062
participating HHAs will terminate or limit the scope or term of a bond.
It is also estimated that it will take a surety company 3 hours to
generate and furnish a notice of such action for a total burden of 240
hours.
Section 489.66(e) has been modified to explicitly require that the
bond provide the Surety's name, street address or post office box
number, city, state, and zip code to which the HCFA notice provided for
in paragraph (a) of this section is to be sent. Since this requirement
was inherent to the previous surety bond submission requirement, there
is no additional burden associated with this requirement.
Section 489.67(a)(2) now requires that not later than 30 days
before the beginning of the HHA's fiscal year, a surety bond or, if
necessary, a rider, effective for a term concurrent with the HHAs
fiscal year, be submitted to HCFA.
Previously, all HHAs were required to submit, on an annual basis, a
copy of an annual surety bond. However, HHAs now have the option to
submit a continuous surety bond. If an HHA submits a continuous surety
bond, it must thereafter submit a rider to HCFA when the amount of the
continuous surety bond changes.
Therefore, the burden associated with this modified requirement is
the time required to submit either an annual bond or, if necessary, a
rider reflecting a change to a continuous bond. Since, we anticipate
that virtually all HHAs will obtain a continuous surety bond, but only
approximately 1,100 HHAs will require a bond in a different amount each
year, we estimate it will take 1 hour each for 1,100 HHAs to submit a
rider on an annual basis.
We have submitted a copy of this final rule and the revised PRA
submission to OMB for its review of the information collection
requirements. These revised requirements are not effective until they
have been approved by OMB. A notice will be published in the Federal
Register when approval is obtained.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced above, access HCFA's
Web Site address at http://www.hcfa.gov/regs/prdact95.htm, or E-mail
your request, including your address, phone number, OMB number, and
HCFA document identifier, to P[email protected], or call the Reports
Clearance Office on (410) 786-1326.
Interested persons are invited to send comments regarding the
burden or any other aspect of these collections of information
requirements. However, as noted above, comments on these information
collection and recordkeeping requirements must be mailed and/or faxed
to the designees referenced below, within 10 working days of this
publication:
Health Care Financing Administration, Office of Information Services,
Information Technology Investment Management Group, Division of HCFA
Enterprise Standards, Room C2-26-17, 7500 Security Boulevard,
Baltimore, MD 21244-1850 ATTN: John Burke HCFA-1152-1-F Fax number:
(410) 786-1415 and,
Office of Information and Regulatory Affairs, Office of Management and
Budget Room 10235, New Executive Office Building Washington, D.C. 20503
Attn.: Allison Herron Eydt, HCFA Desk Officer Fax number: (202) 395-
6974 or (202) 395-5167.
List of Subjects
42 CFR Part 441
Family planning, Grant programs-health, Infants and children,
Medicaid, Penalties, Reporting and record keeping requirements.
42 CFR Part 489
Health facilities, Medicare, Reporting and record keeping
requirements.
42 CFR Chapter IV is amended as set forth below:
PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC
SERVICES
A. Part 441 is amended as follows:
1. The authority citation for part 441 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. Section 441.16 is amended by adding paragraph (g)(7),
republishing the introductory text of paragraph (h), revising paragraph
(h)(2), republishing the introductory text of paragraph (h)(3),
revising paragraph (h)(3)(i), revising the title of paragraph (i),
paragraphs (i)(1)(i) and (ii), redesignating paragraphs (i)(2) through
(i)(5) as (i)(3) through (i)(6), respectively and adding a new
paragraph (i)(2), revising paragraph (l), and adding a new paragraph
(m), to read as follows:
Sec. 441.16 Home health agency requirements for surety bonds;
Prohibition on FFP.
(g) Amount of the bond.
* * * * *
(7) Expiration of the 15 percent provision. For an annual surety
bond, or for a rider on a continuous surety bond, that is required to
be submitted on or after June 1, 2005, notwithstanding any reference in
this section to 15 percent as a basis for determining the amount of the
bond, the amount of the bond or rider, as applicable, must be $50,000
or such amount as the Medicaid agency specifies in accordance with
paragraph (g)(6) of this section, whichever amount is greater.
(h) Additional requirements of the surety bond. The surety bond
that an HHA obtains under this section must meet the following
additional requirements:
* * * * *
(2) The bond must provide that the Surety is liable for uncollected
overpayments, as defined in paragraph (a), provided such uncollected
overpayments are determined during the term of the bond and regardless
of when the overpayments took place. Further, the bond must provide
that the Surety remains liable if the HHA fails to furnish a subsequent
annual bond that meets the requirements of this subpart or fails to
furnish a rider for a year for which a rider is required to be
submitted, or if the HHA's provider agreement terminates and that the
Surety's liability shall be based on the last bond or rider in effect
for the HHA, which shall then remain in effect for an additional 2-year
period.
(3) The bond must provide that, except as provided in paragraph
(h)(3)(i)
[[Page 29655]]
of this section, the Surety's liability to the Medicaid agency is not
extinguished by any of the following:
(i) Any action by the HHA or the Surety to terminate or limit the
scope or term of the bond. The Surety's liability may be extinguished,
however, when--
(A) The Surety furnishes the Medicaid agency with notice of such
action not later than 10 days after receiving notice from the HHA of
action by the HHA to terminate or limit the scope of the bond, or not
later than 60 days before the effective date of such action by the
Surety; or
(B) The HHA furnishes the Medicaid agency with a new bond that
meets the requirements of both this section and the Medicaid agency.
* * * * *
(i) Submission date, term, and type of bond.
(1) Each participating HHA that is not exempted by paragraph (d) of
this section must submit to the Medicaid agency a surety bond for a
term as follows:
(i) Initial submission date and term. By a date specified by the
State Medicaid agency up to September 29, 1998. The initial bond is for
a term beginning January 1, 1998. If an annual bond is submitted for
the initial term, it must be effective for an annual period specified
by the State Medicaid agency.
(ii) Subsequent submission date and term. By a date the Medicaid
agency specifies, effective for an annual period specified by the
Medicaid agency a surety bond or rider as described in subparagraph
(e).
(2) Type of bond. The type of bond required to be submitted by an
HHA, under this section, may be either--
(i) An annual bond (that is, a bond that specifies an effective
annual period that corresponds to an annual period specified by the
Medicaid agency); or
(ii) A continuous bond (that is, a bond that remains in full force
and effect from term to term unless it is terminated or canceled as
provided for in the bond or as otherwise provided by law) that is
updated by the Surety for a particular period, via the issuance of a
``rider,'' when the bond amount changes. For the purposes of this
section, ``Rider'' means a notice issued by a Surety that a change to a
bond has occurred or will occur. If the HHA has submitted a continuous
bond and there is no increase or decrease in the bond amount, no action
is necessary by the HHA to submit a rider as long as the continuous
bond remains in full force and effect.
* * * * *
(l) Surety's standing to appeal Medicaid determinations. The
Medicaid agency must establish procedures for granting appeal rights to
Sureties.
(m) Effect of conditions of payment. If a Surety has paid the
Medicaid agency an amount on the basis of liability incurred under a
bond obtained by an HHA under this section, and the Medicaid agency
subsequently collects from the HHA, in whole or in part, on such
overpayment that was the basis for the Surety's liability, the Medicaid
agency must reimburse the Surety such amount as the Medicaid agency
collected from the HHA, up to the amount paid by the Surety to the
Medicaid agency, provided the Surety has no other liability under the
bond.
PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL
B. Part 489 is amended as follows:
1. The authority citation for part 489 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
2. In section 489.60, the definition of ``Unpaid civil money
penalty or assessment, the words ``90 days after the HHA'' are removed,
and the words ``after the HHA or Surety'' are added in their place.
Section 489.60 is further amended by adding the definition of the term
``Rider'', in alphabetical order, to read as follows:
Sec. 489.60 Definitions.
Rider means a notice issued by a Surety that a change in the bond
has occurred or will occur.
* * * * *
Sec. 489.62 [Amended]
3. In Sec. 489.62 introductory text, the word ``section'' is
removed, and the word ``subpart'' is added in its place.
4. In Sec. 489.65, paragraph (g) is added to read as follows:
Sec. 489.65 Amount of the bond.
* * * * *
(g) Expiration of the 15 percent provision. For an annual surety
bond, or for a rider on a continuous surety bond, that is required to
be submitted on or after June 1, 2005, notwithstanding any reference in
this subpart to 15 percent as a basis for determining the amount of the
bond, the amount of the bond or rider, as applicable, must be $50,000
or such amount as HCFA specifies in accordance with paragraph (f) of
this section, whichever amount is greater.
5. In Sec. 489.66, paragraph (b) is revised, paragraph (c)
introductory text is republished, paragraph (c)(1) is revised, and new
paragraph (e) is added, to read as follows:
Sec. 489.66 Additional requirements of the surety bond.
* * * * *
(b) The bond must provide the following:
(1) The Surety is liable for unpaid claims, unpaid civil money
penalties, and unpaid assessments that are discovered when the surety
bond is in effect, regardless of when the payment, overpayment, or
other event giving rise to the claim, civil money penalty, or
assessment occurred, provided HCFA makes a written demand for payment
from the Surety during, or within 90 days after, the term of the bond.
(2) If the HHA fails to furnish a bond meeting the requirements of
this subpart F for the year following expiration of the term of an
annual bond, or if the HHA fails to submit a rider when a rider is
required to be submitted under this subpart, or if the HHA's provider
agreement is terminated, the last bond or rider, as applicable,
submitted by the HHA to HCFA, which bond or applicable rider meets the
requirements of this subpart, remains effective and the Surety remains
liable for unpaid claims, civil money penalties, and assessments that--
(i) HCFA determines or imposes on or asserts against the HHA based
on overpayments or other events that took place during or prior to the
term of the last bond or rider; and
(ii) Were determined or imposed during the 2 years following the
date the HHA failed to submit a bond or required rider or the date the
HHA's provider agreement is terminated, whichever is later.
(c) The bond must provide that, except as provided in paragraph
(c)(1) of this section, the Surety's liability to HCFA under the bond
is not extinguished by any action of the HHA, the Surety, or HCFA,
including but not necessarily limited to any of the following actions:
(1) Action by the HHA or the Surety to terminate or limit the scope
or term of the bond. The Surety's liability may be extinguished,
however, when--
(i) The Surety furnishes HCFA with notice of such action not later
than 10 days after receiving notice from the HHA of action by the HHA
to terminate or limit the scope of the bond, or not later than 60 days
before the effective date of such action by the Surety; or
(ii) The HHA furnishes HCFA with a new bond that meets the
requirements of this subpart.
* * * * *
(e) The bond must provide the Surety's name, street address or post
office box number, city, state, and
[[Page 29656]]
zipcode to which the HCFA notice provided for in paragraph (a) of this
section is to be sent.
6. In Sec. 489.67, paragraphs (b) through (e) are redesignated as
paragraphs (c) through (f), respectively, paragraph (a) is revised, and
a new paragraph (b) is added to read as follows:
Sec. 489.67 Submission date and term of the bond.
(a) Each participating HHA that does not meet the criteria for
waiver under Sec. 489.62 must submit to HCFA, in such a form as HCFA
may specify, a surety bond as follows:
(1) Initial submission date and term: By July 31, 1998. The term of
the initial bond is for a term beginning January 1, 1998. If an annual
bond is submitted for the initial term, it must be effective through
the end of the HHA's current fiscal year.
(2) Subsequent submission date and term. Not later than 30 days
before the beginning of the HHA's fiscal year, a surety bond, or, if
necessary, a rider, effective for a term concurrent with the HHA's
fiscal year.
(b) Type of bond. The type of bond required to be submitted by an
HHA under this subpart may be either--
(1) An annual bond (that is, a bond that specifies an effective
annual period corresponding to the HHA's fiscal year); or
(2) A continuous bond (that is, a bond that remains in full force
and effect from term to term unless it is terminated or canceled as
provided for in the bond or as otherwise provided by law) that is
updated by the Surety, via the issuance of a rider, for a particular
fiscal year for which the bond amount has changed or will change.
* * * * *
7. Section 489.71 is revised to read as follows:
Sec. 489.71 Surety's standing to appeal Medicare determinations.
A Surety has standing to appeal any matter that the HHA could
appeal, provided the Surety satisfies all jurisdictional and procedural
requirements that would otherwise have applied to the HHA, and provided
the HHA is not, itself, actively pursuing its appeal rights under this
chapter, and provided further that, with respect to unpaid claims, the
Surety has paid HCFA all amounts owed to HCFA by the HHA on such unpaid
claims, up to the amount of the bond.
8. Section 489.73 is redesignated as Sec. 489.74 in subpart F, and
a new Sec. 489.73 is added to read as follows:
Sec. 489.73 Effect of conditions of payment.
If a Surety has paid an amount to HCFA on the basis of liability
incurred under a bond obtained by an HHA under this subpart F, and HCFA
subsequently collects from the HHA, in whole or in part, on such unpaid
claim, civil money penalty, or assessment that was the basis for the
Surety's liability, HCFA reimburses the Surety such amount as HCFA
collected from the HHA, up to the amount paid by the Surety to HCFA,
provided the Surety has no other liability to HCFA under the bond.
(Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh)).
(Catalog of Federal Domestic Assistance Program No. 93.774,
Medicare--Supplementary Medical Insurance Program, and Program No.
93.778, Medical Assistance Program)
Dated: April 8, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Dated: May 8, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-14309 Filed 5-26-98; 4:58 pm]
BILLING CODE 4120-01-P