[Federal Register Volume 63, Number 239 (Monday, December 14, 1998)]
[Rules and Regulations]
[Pages 68687-68697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33010]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 400, and 402

[HCFA-6135-FC]


Medicare and Medicaid Program; Civil Money Penalties, 
Assessments, Exclusions, and Related Appeals Procedures

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

ACTION: Final rule with comment period.

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SUMMARY: This rule establishes procedures for imposing civil money 
penalties, assessments, and exclusions for certain violations of the 
Medicare and Medicaid programs. The regulations also provide for 
hearings and appeals when those penalties, assessments, and exclusions 
are imposed. These procedures are based on the procedures that the 
Office of the Inspector General has promulgated for the civil money 
penalties, assessments, and exclusions. These regulations are designed 
to protect program beneficiaries from unfit health care practitioners 
and to otherwise improve antifraud provisions under the Medicare and 
Medicaid Acts.

DATES: These regulations are effective on January 13, 1999. Comments 
must be received by February 12, 1999.

FOR FURTHER INFORMATION CONTACT: Joel Cohen, (410) 786-3349

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-6135-FC, PO Box 26676, 
Baltimore, MD 21207-0519.
    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: [email protected]. For e-mail comment procedures, see 
the beginning of SUPPLEMENTARY INFORMATION. For further information on 
ordering copies of the Federal Register containing this document and on 
electronic access, see the beginning of SUPPLEMENTARY INFORMATION. 
Electronically submitted comments will be available for public 
inspection at the Independence Avenue address below.

SUPPLEMENTARY INFORMATION:

E-Mail, Comments, Procedures, Availability of Copies, and 
Electronic Access

    E-mail comments must include the full name and address of the 
sender and must be submitted to the referenced address 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-0047-P and the specific section or sections of the 
proposed rule. Both electronic and written comments received by the 
time and date indicated above 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). 
Electronic and legible written comments will also be posted, along with 
this proposed rule, at the following web site: http://aspe.os.dhhs.gov/
admnsimp/.
    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) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8. As an alternative, you can view and 
photocopy the Federal Register document at most libraries designated as 
Federal Depository Libraries and at many other public and academic 
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 
Area Information Server (WAIS) through the Internet and via 
asynchronous dial-in. Internet users can access the database by using 
the World Wide Web, http://www.access.gpo.gov/nara/, by using local 
WAIS client software, or by telnet to swais.access.gpo.gov, then login 
as guest (no password required). Dial-in users should use 
communications software and modem to call (202) 512-1661; type swais, 
then login as guest (no password required).

I. Background

    In 1981, the Congress added section 1128A to the Social Security 
Act (the Act) (section 2105 of Pub.L. 97-35) to authorize the Secretary 
of Health and Human Services to impose civil money penalties and 
assessments on certain health care facilities, health care 
practitioners, and other suppliers under the Medicare and Medicaid 
programs. Civil money penalties and assessments provide an alternative 
enforcement tool for agencies to establish compliance with legal and 
program standards and are in addition to potential criminal 
proceedings.
    Since 1981, the Congress has significantly increased both the 
number and the types of circumstances under which the Secretary may 
impose civil money penalties. Some of the civil money penalty 
authorities address fraud, misrepresentation, or falsification while 
others address noncompliance with programmatic or regulations 
requirements. The Secretary has delegated the authority for these 
provisions to either the Office of Inspector General (OIG) or HCFA (58 
FR 52967, October 20, 1994). Under this delegation of authority, the 
OIG has the authority to impose civil money penalties and prosecute 
cases involving civil money penalties and assessments that were 
delegated to HCFA if HCFA and the OIG jointly determine it to be

[[Page 68688]]

in the interest of economy, efficiency, or effective coordination of 
activities.
    On October 31, 1994, the Social Security Amendments of 1994 (Pub. 
L. 103-432) were enacted. This law repealed several statutory 
provisions providing for civil money penalties and established 
additional civil money penalty provisions. On August 21, 1996, the 
Health Insurance Portability and Accountability Act of 1996 (Pub. L. 
104-191) was enacted. This law provides for higher maximum civil money 
penalties ($10,000 instead of $2,000) for certain of the violations and 
also increased the assessments that can be imposed for those 
violations.
    Most of the specific statutory provisions authorizing civil money 
penalties also permit the Secretary of Health and Human Services (or 
his or her designee) to impose an assessment in addition to the civil 
money penalty. An assessment is an additional monetary payment in lieu 
of damages sustained by HHS or a State agency. The maximum amount of 
the assessment varies according to the civil money penalty (from $1,000 
to $25,000) and is not more than three times the amount claimed for 
each service upon which the civil money penalty was based. Also, for 
many statutory violations, the Secretary of Health and Human Services 
or his or her designee may exclude the individual or entity violating 
the statute from participating in a Federal health care program for 
certain specific periods of time. A Federal health care program is 
defined in section 1128B of the Act (42 U.S.C. 1320(a)-7b) as ``any 
plan or program that provides health benefits, whether directly, 
through insurance, or otherwise, which is funded directly, in whole or 
in part, by the United States Government (other than the health 
insurance program under chapter 89 of title 5, United States Code); or 
* * * any State health care program as defined in section 1128(h) of 
the Social Security Act.''
    The regulations currently governing civil money penalties, 
assessments, and civil money penalty-related exclusions are contained 
in 42 CFR part 1003. Procedures for hearings and appeals of civil money 
penalties, assessments, and exclusions are in 42 CFR part 1005.

II. Regulations Revisions

    This final rule with comment period duplicates in substance 42 CFR 
part 1003 for most of the civil money penalties and related assessments 
that have been delegated to HCFA. Other rules concerning civil money 
penalties and assessment authorities that have been delegated to HCFA, 
such as those imposed for violations by long term care facilities and 
clinical laboratories, have already been codified in the Code of 
Federal Regulations. Civil money penalties and assessments that were 
added by the Balanced Budget Act of 1997 (BBA), Pub. L. 105-33 (August 
5, 1997) and that are delegated to HCFA in the future will be added to 
the Code of Federal Regulations through another Federal Register 
document, as will the specific rules concerning the exclusions that 
HCFA is authorized to impose.
    Although we are not addressing the civil money penalties and 
assessments added by the BBA in this regulation, it is important to 
recognize the impact of the BBA on certain provisions of this 
regulation. Section 4507 of the BBA permits a physician or practitioner 
to enter into private contracts with Medicare beneficiaries for 
services furnished on or after January 1, 1998. If a physician or 
practitioner enters into a private contract, he or she has ``opted 
out'' of the Medicare program for two years for all covered items or 
services furnished to Medicare beneficiaries. A beneficiary who enters 
into a private contract agrees to waive the right to Medicare payment 
for services rendered by the physician or practitioner and to pay the 
physician or practitioner without regard to any limits that would 
otherwise apply to what the physician or practitioner could charge. We 
are clarifying here that physicians and practitioners who enter into 
valid private contracts will not be subject to civil money penalties 
and assessments under this regulation unless they knowingly and 
willfully violate the terms of the private agreement. In particular, 
physicians and practitioners will not be subject to penalties and 
assessments pursuant to section 1834(c)(4) of the Social Security Act, 
which provides for sanctions against physicians who charge in excess of 
the limiting charge, or section 1848(g)(4) of the Act, which imposes 
sanctions on physicians and practitioners who violate the mandatory 
submission of claims requirement of the statute.
    The civil money penalties to which this rule pertains include those 
that apply to Medicare payments or billings as ``assignment'' 
violations; violations involving the failure to provide information or 
improperly providing information; violations of charge or service 
limits; and violations of Medigap and Medicare Select requirements.
    This rule adds a new part to chapter IV of title 42 of the Code of 
Federal Regulations. This new part is part 402 and is entitled Civil 
Money Penalties, Assessments and Exclusions. We are dividing the part 
into three subparts for the present: Subpart A-General Requirements; 
Subpart B-Civil Money Penalties and Assessments; and Subpart C-
Exclusions (which is reserved for future use).
    Subpart A contains the statutory authorities for most of the civil 
money penalties, assessments, and exclusions that the Secretary has 
delegated to HCFA. The remainder of the subpart contains the general 
requirements and procedures that are common to the imposition of civil 
money penalties, assessments, and exclusions. These procedures are 
based on the OIG regulations in 42 CFR part 1003.
    Under the Secretary's delegation, some authorities will be enforced 
by the Office of Inspector General, even though similar penalties, 
applicable under other statutes, are delegated to HCFA. For instance, 
two of the statutory citations that subject violators to potential 
sanctions (section 1842(p)(3)(A) and 1848(g)(1)(B)) authorize HCFA to 
impose various penalties for abusive practices involving bills or 
requests for payment that are not made on an assignment-related basis. 
We note that the OIG has the comparable authority under section 1128A 
of the Act to impose civil money penalties for those abusive practices 
in cases where payment is requested on an assignment-related basis. 
Although the OIG penalties are not listed in this section, we want to 
make clear that individuals involved in abusive billing practices are 
subject to penalties, whether or not the claim is submitted on an 
assignment-related basis.
    Subpart B includes procedures specific to the imposition of civil 
money penalties and assessments. These rules are also based on those 
the OIG uses in 42 CFR part 1003.
    Our regulations are based on those in part 1003 but are organized 
somewhat differently in order to be able to, in the future, include all 
our rules regarding exclusions in more detail. The organization will 
also make the regulations easier to understand and to find. The 
organizational changes are not substantive; they change neither the 
procedures nor the extent of the regulations' applicability.
    Although the OIG regulations generally refer to the OIG as the 
government entity implementing a given function, our new regulations 
will refer to ``HCFA or OIG'' as the government agent.
    Another purely technical departure from the OIG regulations is our 
inclusion of a description of all the statutory citations. HCFA is 
revising its rules to include a description of all pertinent statutory 
citations in a

[[Page 68689]]

particular section, rather than using a long list of citations (by 
number only) in the ``Authority'' paragraph that currently appears in 
each part or subpart in title 42 of the Code of Federal Regulations. 
The descriptions, of course, also include the new authorities that are 
not in the existing OIG rules. We also make several editorial changes 
and clarifying changes designed to make the language clearer to the 
public.
    The regulations provisions in this rule do not revise any 
procedures or rights currently available to any person on whom we may 
impose a civil money penalty, assessment, or exclusion. The procedures 
we will follow also remain the same.

III. Impact Analysis

    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, all 
health care providers and suppliers of services (except some individual 
physicians) are considered to be small entities. Individuals and States 
are not included in the definition of a small entity.
    In addition, 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. Such 
an analysis must conform to the provisions of section 604 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    As indicated above, the provisions in this final rule with comment 
period provide HCFA (and the OIG) with regulations to implement the 
statutory authorities to levy civil money penalties and assessments 
against providers and physicians and other suppliers of services. The 
civil money penalties to which this rule pertains include those that 
apply to Medicare payments or billings as ``assignment'' violations; 
violations involving the failure to provide information or the improper 
provision of information; violations of charge or service limits; and 
violations of Medigap and Medicare Select requirements. Most of these 
authorities rested solely with the OIG until October 1994; there are 
also a few new authorities, which are included in the new part 402. 
These new authorities do not materially expand or increase the overall 
impact of civil money penalty oversight activities. This final rule 
basically transfers the existing civil money penalty functional 
responsibility (along with the new authorities) for assuring compliance 
with programatic and/or regulations violations (versus fraud, 
misrepresentation, and falsification types of violations, which remain 
with the OIG) from the OIG to HCFA. It is expected that no significant 
economic impact will be imposed on a substantial number of small 
business entities as a result of this action.
    For this reason, any new economic effect of these regulations 
should be minimal, affecting only those that have engaged in prohibited 
behavior contained in the authorities put in place on or after October 
31, 1994; the economic effect of the already existing authorities is 
not new and is also minimal because of the relatively few violators 
involved. We believe the majority of the persons and entities subject 
to these regulations do not commit the violations discussed in these 
regulations. Those providers, physicians, and suppliers that are not 
currently in compliance with existing and new authorities will be 
subject to more vigorous enforcement of these provisions of the CMP 
oversight activity and may experience a significant economic impact as 
a result of such violations. However, the population subject to such 
actions is reasonably believed to be a very minor portion of the total 
population of providers, physicians and other suppliers. Moreover, 
small rural hospitals are not expected to be appreciably affected by 
this final rule. In addition, there are minimal costs and savings to 
the government.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102(b) of the Act because we have determined, and we 
certify, that this rule will not have a significant economic 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.

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the ``DATES'' 
section of this preamble and will respond to the comments in the 
preamble to any subsequent Federal Register document.

V. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite prior public comment on proposed rules. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed and the terms and substances 
of the proposed rule or a description of the subjects and issues 
involved. This procedure can be waived, however, if an agency finds 
good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    It would be contrary to the public interest to delay the 
publication of these rules pending completion of the usual notice and 
comment procedures. The delay would be contrary to the public interest 
because HCFA would not be able to utilize fully civil money penalties 
and assessments as tools to encourage compliance with certain 
provisions of the Medicare Act as the Congress intended. These 
provisions are designed to discourage entities from engaging in 
fraudulent and abusive behavior. According to the General Accounting 
Office's report, Vulnerable Payers Lose Billions to Fraud and Abuse 
(GAO/HRD-92-69), costs of health care fraud and abuse are estimated to 
be ten percent of our total health care spending. The Medicare trust 
funds and the public are significantly harmed by these abusive 
practices, and we find that further delaying the use of these sanctions 
pending the end of a public comment period would be contrary to the 
public's interest.
    We also believe it is unnecessary to delay publication of these 
final rules pending completion of a notice and comment period. We are 
adopting the OIG's procedures and policies as our own and are not 
revising the rights of persons to whom the provisions pertain. Over the 
years, the Department of Health and Human Services has published the 
substance of the OIG's regulations in proposed rules that solicited 
comment and responded to those comments in final rules (55 FR 12205, 
April 2, 1990; 57 FR 3298, January 29, 1992). The procedures in this 
rule do not differ significantly from the OIG rules and we believe it 
is redundant to, in effect, propose rules that are already contained in 
the Code of Federal Regulations.
    Finally, a delay of publication of the final rule is unnecessary 
because all of

[[Page 68690]]

the specific civil money penalties are required by the current statute. 
Thus, the one significant addition to the OIG rules, the addition of 
the new authorities, is not discretionary and we would not be able to 
change these authorities in the regulations in response to public 
comment.
    Accordingly, we find good cause for waiving the prior notice-and-
comment procedure as unnecessary and contrary to the public interest.

List of Subjects in 42 CFR Part 402

    Administrative practice and procedure, Health facilities, Health 
professions, Medicaid, Medicare, Penalties.
    42 CFR chapter IV is amended as set forth below:

PART 400--[AMENDED]

    A. Part 400 is amended as follows:
    1. The authority citation continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh) and 44 U.S.C. Chapter 35.

    2. Section 400.200 is amended by adding, in alphabetical order, a 
definition for ``DAB'' to read as follows:


Sec. 400.200  General definitions.

* * * * *
    DAB stands for Departmental Appeals Board.
* * * * *
    B. A new part 402 is added to read as follows:

PART 402--CIVIL MONEY PENALTIES, ASSESSMENTS, AND EXCLUSIONS

Subpart A--General Provisions

Secs.
402.1  Basis and scope.
402.3  Definitions.
402.5  Right to a hearing before the final determination.
402.7  Notice of proposed determination.
402.9  Failure to request a hearing.
402.11  Notice to other agencies and other entities.
402.13  Penalty, assessment, and exclusion not exclusive.
402.15  Collateral estoppel.
402.17  Settlement.
402.19  Hearings and appeals.
402.21  Judicial review.

Subpart B--Penalties and Assessments

Secs.
402.105  Amount of penalty.
402.107  Amount of assessment.
402.109  Statistical sampling.
402.111  Factor consideration determinations regarding the amount of 
penalties and assessments.
402.113  When a penalty and assessment are collectible.
402.115  Collection of assessment and penalty.

Subpart C--Exclusions [Reserved]

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

Subpart A--General Provisions


Sec. 402.1  Basis and scope.

    (a) Basis. This part is based on the sections of the Act that are 
specified in paragraph (c) of this section.
    (b) Scope. This part--
    (1) Provides for the imposition of civil money penalties, 
assessments, and exclusions against persons that violate the provisions 
of the Act specified in paragraph (c), (d), or (e) of this section; and
    (2) Sets forth the appeal rights of persons subject to penalties, 
assessments, or exclusion and the procedures for reinstatement 
following exclusion.
    (c) Civil money penalties. HCFA or OIG may impose civil money 
penalties against any person or other entity specified in paragraphs 
(c)(1) through (c)(30) of this section under the identified section of 
the Act. The authorities that also permit imposition of an assessment 
or exclusion are noted in the applicable paragraphs.
    (1) Sections 1833(h)(5)(D) and 1842(j)(2)--Any person that 
knowingly and willfully, and on a repeated basis, bills for a clinical 
diagnostic laboratory test, other than on an assignment-related basis. 
This provision includes tests performed in a physician's office but 
excludes tests performed in a rural health clinic. (This violation may 
also include an assessment and cause exclusion.)
    (2) Section 1833(i)(6)--Any person that knowingly and willfully 
presents, or causes to be presented, a bill or request for payment for 
an intraocular lens inserted during or after cataract surgery for which 
the Medicare payment rate includes the cost of acquiring the class of 
lens involved.
    (3) Section 1833(q)(2)(B)--Any entity that knowingly and willfully 
fails to provide information about a referring physician, including the 
physician's name and unique physician identification number for the 
referring physician, when seeking payment on an unassigned basis. (This 
violation, if it occurs in repeated cases, may also cause an 
exclusion.)
    (4) Sections 1834(a)(11)(A) and 1842(j)(2)--Any durable medical 
equipment supplier that knowingly and willfully charges for a covered 
service that is furnished on a rental basis after the rental payments 
may no longer be made (except for maintenance and servicing) as 
provided in section 1834(a)(7)(A). (This violation may also include an 
assessment and cause exclusion.)
    (5) Sections 1834(a)(18)(B) and 1842(j)(2)--Any nonparticipating 
durable medical equipment supplier that knowingly and willfully, in 
violation of section 1834(a)(18)(A), fails to make a refund to Medicare 
beneficiaries for a covered service for which payment is precluded due 
to an unsolicited telephone contact from the supplier. (This violation 
may also include an assessment and cause exclusion.)
    (6) Sections 1834(b)(5)(C) and 1842(j)(2)--Any nonparticipating 
physician or supplier that knowingly and willfully charges a Medicare 
beneficiary more than the limiting charge, as specified in section 
1834(b)(5)(B), for radiologist services. (This violation may also 
include an assessment and cause exclusion.)
    (7) Sections 1834(c)(4)(C) and 1842(j)(2)--Any nonparticipating 
physician or supplier that knowingly and willfully charges a Medicare 
beneficiary more than the limiting charge, as specified in section 
1834(c)(4)(B), for mammography screening. (This violation may also 
include an assessment and cause exclusion.)
    (8) Sections 1834(h)(3) and 1842(j)(2)--Any supplier of prosthetic 
devices, orthotics, and prosthetics that knowingly and willfully 
charges for a covered prosthetic device, orthotic, or prosthetic that 
is furnished on a rental basis after the rental payment may no longer 
be made (except for maintenance and servicing). (This violation may 
also include an assessment and cause exclusion.)
    (9) Section 1834(j)(2)(A)(iii)--Any supplier of durable medical 
equipment, including a supplier of prosthetic devices, prosthetics, 
orthotics, or supplies, that knowingly and willfully distributes a 
certificate of medical necessity in violation of section 
1834(j)(2)(A)(i) or fails to provide the information required under 
section 1834(j)(2)(A)(ii).
    (10) Sections 1834(j)(4) and 1842(j)(2)--
    (i) Any supplier of durable medical equipment, including a supplier 
of prosthetic devices, prosthetics, orthotics, or supplies, that 
knowingly and willfully fails to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assignment-
related basis if--
    (A) The supplier does not possess a Medicare supplier number;

[[Page 68691]]

    (B) The service is denied in advance under section 1834(a)(15); or
    (C) The service is determined not to be medically necessary or 
reasonable.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (11) Sections 1842(b)(18)(B) and 1842(j)(2)--Any practitioner 
specified in section 1842(b)(18)(C) (physician assistants, nurse 
practitioners, clinical nurse specialists, certified registered nurse 
anesthetists, certified nurse-midwives, clinical social workers, and 
clinical psychologists) or other person that knowingly and willfully 
bills or collects for any services by the practitioners on other than 
an assignment-related basis. (This violation may also include an 
assessment and cause exclusion.)
    (12) Sections 1842(k) and 1842(j)(2)--Any physician who knowingly 
and willfully presents, or causes to be presented, a claim or bill for 
an assistant at cataract surgery performed on or after March 1, 1987 
for which payment may not be made because of section 1862(a)(15). (This 
violation may also include an assessment and cause exclusion.)
    (13) Sections 1842(l)(3) and 1842(j)(2)--Any nonparticipating 
physician who does not accept payment on an assignment-related basis 
and who knowingly and willfully fails to refund on a timely basis any 
amounts collected for services that are not reasonable or medically 
necessary or are of poor quality, in accordance with section 
1842(l)(1)(A). (This violation may also include an assessment and cause 
exclusion.)
    (14) Sections 1842(m)(3) and 1842(j)(2)--(i) Any nonparticipating 
physician, who does not accept payment for an elective surgical 
procedure on an assignment-related basis and whose charge is at least 
$500, who knowingly and willfully fails to--
    (A) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and
    (B) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare 
program.
    (ii) This violation may also include an assessment and cause 
exclusion.
    (15) Sections 1842(n)(3) and 1842(j)(2)--Any physician who 
knowingly and willfully, in repeated cases, bills one or more 
beneficiaries, for purchased diagnostic tests, any amount other than 
the payment amount specified in section 1842(n)(1)(A) or section 
1842(n)(1)(B). (This violation may also include an assessment and cause 
exclusion.)
    (16) Section 1842(p)(3)(A)--Any physician who knowingly and 
willfully fails promptly to provide the appropriate diagnosis code or 
codes upon request by HCFA or a carrier on any request for payment or 
bill not submitted on an assignment-related basis for any service 
furnished by the physician. (This violation, if it occurs in repeated 
cases, may also cause exclusion.)
    (17) Sections 1848(g)(1)(B) and 1842(j)(2)--
    (i) Any nonparticipating physician, supplier, or other person that 
furnishes physicians' services and does not accept payment on an 
assignment-related basis, that--
    (A) Knowingly and willfully bills or collects in excess of the 
limiting charge (as defined in section 1848(g)(2)) on a repeated basis; 
or
    (B) Fails to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A)(iii) or (iv).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (18) Section 1848(g)(3)(B) and 1842(j)(2)--Any person that 
knowingly and willfully bills for State plan approved physicians' 
services, as defined in section 1848(j)(3), on other than an 
assignment-related basis for a Medicare beneficiary who is also 
eligible for Medicaid (these individuals include qualified Medicare 
beneficiaries). This provision applies to services furnished on or 
after April 1, 1990. (This violation may also include an assessment and 
cause exclusion.)
    (19) Section 1848(g)(4)(B)(ii), 1842(p)(3), and 1842(j)(2)(A)--
    (i) Any physician, supplier, or other person (except any person 
that has been excluded from the Medicare program) that, for services 
furnished after September 1, 1990, knowingly and willfully--
    (A) Fails to submit a claim on a standard claim form for services 
provided for which payment is made under Part B on a reasonable charge 
or fee schedule basis; or
    (B) Imposes a charge for completing and submitting the standard 
claims form.
    (ii) These violations, if they occur in repeated cases, may also 
cause exclusion.
    (20) Section 1862(b)(5)(C)--Any employer (other than a Federal or 
other governmental agency) that, before October 1, 1998, willfully or 
repeatedly fails to provide timely and accurate information requested 
relating to an employee's group health insurance coverage.
    (21) Section 1862(b)(6)(B)--Any entity that knowingly, willfully, 
and repeatedly--
    (i) Fails to complete a claim form relating to the availability of 
other health benefit plans in accordance with section 1862(b)(6)(A); or
    (ii) Provides inaccurate information relating to the availability 
of other health benefit plans on the claim form.
    (22) Section 1877(g)(5)--Any person that fails to report 
information required by HHS under section 1877(f) concerning ownership, 
investment, and compensation arrangements. (This violation may also 
include an assessment and cause exclusion.)
    (23) Sections 1879(h), 1834(a)(18), and 1842(j)(2)--
    (i) Any durable medical equipment supplier, including a supplier of 
prosthetic devices, prosthetics, orthotics, or supplies, that knowingly 
and willfully fails to make refunds in a timely manner to Medicare 
beneficiaries for services billed on an assignment-related basis if--
    (A) The supplier did not possess a Medicare supplier number;
    (B) The service is denied in advance under section 1834(a)(15) of 
the Act; or
    (C) The service is determined not to be payable under section 
1834(a)(17)(b) because of unsolicited telephone contacts.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (24) Section 1882(a)(2)--Any person that issues a Medicare 
supplemental policy that has not been approved by the State regulatory 
program or does not meet Federal standards on and after the effective 
date in section 1882(p)(1)(C). (This violation may also include an 
assessment and cause exclusion.)
    (25) Section 1882(p)(8)--Any person that sells or issues Medicare 
supplemental policies, on or after July 30, 1992, that fail to conform 
to the NAIC or Federal standards established under section 1882(p). 
(This violation may also include an assessment and cause exclusion.)
    (26) Section 1882(p)(9)(C)--
    (i) Any person that sells a Medicare supplemental policy and--
    (A) Fails to make available for sale the core group of basic 
benefits when selling other Medicare supplemental policies with 
additional benefits; or
    (B) Fails to provide the individual, before the sale of the policy, 
an outline of coverage describing the benefits provided by the policy.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (27) Section 1882(q)(5)(C)--
    (i) Any person that fails to--
    (A) Suspend a Medicare supplemental policy at the policyholder's 
request, if

[[Page 68692]]

the policyholder applies for and is determined eligible for medical 
assistance, and the policyholder provides notice within 90 days of the 
eligibility determination; or
    (B) Automatically reinstate the policy as of the date of 
termination of medical assistance if the policyholder loses eligibility 
for medical assistance and the policyholder provides notice within 90 
days of loss of eligibility.
    (ii) These violations may also include an assessment and cause 
exclusion.
    (28) Section 1882(r)(6)(A)--Any person that fails to provide 
refunds or credits as required by section 1882(r)(1)(B). (This 
violation may also include an assessment and cause exclusion.)
    (29) Section 1882(s)(3)--
    (i) Any issuer of a Medicare supplemental policy that--
    (A) Does not waive any time periods applicable to preexisting 
conditions, waiting periods, elimination periods, or probationary 
periods if the time periods were already satisfied under a preceding 
Medicare supplemental policy; or
    (B) Denies a policy, conditions the issuance or effectiveness of 
the policy, or discriminates in the pricing of the policy based on 
health status or other criteria as specified in section 1882(s)(2)(A).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (30) Section 1882(t)(2)--
    (i) Any issuer of a Medicare supplemental policy that--
    (A) Fails substantially to provide medically necessary services to 
enrollees seeking the services through the issuer's network of 
entities;
    (B) Imposes premiums on enrollees in excess of the premiums 
approved by the State;
    (C) Acts to expel an enrollee for reasons other than nonpayment of 
premiums; or
    (D) Does not provide each enrollee at the time of enrollment with 
the specific information provided in section 1882(t)(1)(E)(i) or fails 
to obtain a written acknowledgment from the enrollee of receipt of the 
information (as required by section 1882(t)(1)(E)(ii)).
    (ii) These violations may also include an assessment and cause 
exclusion.
    (d) Assessments. HCFA or OIG may impose assessments in addition to 
civil money penalties for violations of the following statutory 
sections:
    (1) Section 1833: Paragraph (h)(5)(D).
    (2) Section 1834: Paragraphs (a)(11)(A), (a)(18)(B), (b)(5)(C), 
(c)(4)(C), (h)(3), and (j)(4).
    (3) Section 1842: Paragraphs (k), (l)(3), (m)(3), and (n)(3).
    (4) Section 1848: Paragraph (g)(1)(B).
    (5) Section 1877: Paragraph (g)(5).
    (6) Section 1879: Paragraph (h).
    (7) Section 1882: Paragraphs (a)(2), (p)(8), (p)(9)(C), (q)(5)(C), 
(r)(6)(A), (s)(3), and (t)(2).
    (e) Exclusions. (1) HCFA or OIG may exclude any person from 
participation in the Medicare program on the basis of any of the 
following violations of the statute:
    (i) Section 1833: Paragraphs (h)(5)(D) and, in repeated cases, 
(q)(2)(B).
    (ii) Section 1834: Paragraphs (a)(11)(A), (a)(18)(B), (b)(5)(C), 
(c)(4)(C), (h)(3), and (j)(4).
    (iii) Section 1842: Paragraphs (b)(18)(B), (k), (l)(3), (m)(3), 
(n)(3), and, in repeated cases, (p)(3)(B).
    (iv) Section 1848: Paragraphs (g)(1)(B), (g)(3)(B), and, in 
repeated cases, (g)(4)(B)(ii).
    (v) Section 1877: Paragraph (g)(5).
    (vi) Section 1879: Paragraph (h).
    (vii) Section 1882: Paragraphs (a)(2), (p)(8), (p)(9)(C), 
(q)(5)(C), (r)(6)(A), (s)(3), and (t)(2).
    (2) HCFA or OIG must exclude from participation in the Medicare 
program any of the following, under the identified section of the Act:
    (i) Section 1834(a)(17)(C)--Any supplier of durable medical 
equipment and supplies that are covered under section 1834(a)(13) that 
knowingly contacts Medicare beneficiaries by telephone regarding the 
furnishing of covered services in violation of section 1834(a)(17)(A) 
and whose conduct establishes a pattern of prohibited contacts as 
described under section 1834(a)(17)(A).
    (ii) Section 1834(h)(3)--Any supplier of prosthetic devices, 
orthotics, and prosthetics that knowingly contacts Medicare 
beneficiaries by telephone regarding the furnishing of prosthetic 
devices, orthotics, or prosthetics in the same manner as in the 
violation under section 1834(a)(17)(A) and whose conduct establishes a 
pattern of prohibited contacts in the same manner as described in 
section 1834(a)(17)(C).
    (f) Responsible persons. (1) If HCFA or OIG determines that more 
than one person is responsible for any of the violations described in 
paragraph (c) or paragraph (d) of this section, it may impose a civil 
money penalty or a civil money penalty and assessment against any one 
of those persons or jointly and severally against two or more of those 
persons. However, the aggregate amount of the assessments collected may 
not exceed the amount that could be assessed if only one person were 
responsible.
    (2) A principal is liable for penalties and assessments for the 
actions of his or her agent acting within the scope of the agency.
    (g) Time limits. Neither HCFA nor OIG initiates an action to impose 
a civil money penalty, assessment, or proceeding to exclude a person 
from participation in the Medicare program unless it begins the action 
within 6 years from the date on which the claim was presented, the 
request for payment was made, or the incident occurred.


Sec. 402.3  Definitions.

    For purposes of this part:
    Assessment means the amount described in Sec. 402.107 and includes 
the plural of that term.
    Assignment-related basis means that the claim submitted by a 
physician, supplier or other person is paid on the basis of an 
assignment, whereby the physician, supplier or other person agrees to 
accept the Medicare payment as payment in full for the services 
furnished to the beneficiary and is precluded from charging the 
beneficiary more than the deductible and coinsurance based upon the 
approved Medicare fee amount. Additional obligations, including 
obligations to make refunds in certain circumstances, are established 
at section 1842(b)(3) of the Act.
    Claim means an application for payment for a service for which the 
Medicare or Medicaid program may pay.
    Covered means that a service is described as reasonable and 
necessary for the diagnosis or treatment of illness or injury or to 
improve the functioning of a malformed body member. A service is not 
covered if it is specifically identified as excluded from Medicare Part 
B coverage or is not a defined Medicare Part B benefit.
    Exclusion means the temporary or permanent barring of a person or 
other entity from participation in the Medicare or State health care 
program and that services furnished or ordered by that person are not 
paid for under either program.
    General Counsel means the General Counsel of HHS or his or her 
designees.
    Knowingly or knowingly and willfully means that a person, with 
respect to information--
    (1) Has actual knowledge of the information;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
information; or
    (3) Acts in reckless disregard of the truth or falsity of the 
information; and
    (4) No proof of specific intent is required.
    Medicare supplemental policy means a policy guaranteeing that a 
health plan will pay a policyholder's coinsurance and deductible and 
will cover other

[[Page 68693]]

limitations on payment imposed under title XVIII of the Act and will 
provide additional health plan or non-Medicare coverage for services up 
to a predefined benefit limit.
    NAIC stands for the National Association of Insurance 
Commissioners.
    Nonparticipating describes a physician, supplier, or other person 
(excluding any provider of services) that, at the time of furnishing 
the services to Medicare Part B beneficiaries, is not a participating 
physician or supplier.
    Participating describes a physician or supplier (excluding any 
provider of services) that, before the beginning of any given year, 
enters into an agreement with HHS that provides that the physician or 
supplier will accept payment under the Medicare program on an 
assignment-related basis for all services furnished to Medicare Part B 
beneficiaries.
    Penalty means the amount described in Sec. 402.105 and includes the 
plural of that term.
    Person means an individual, trust or estate, partnership, 
corporation, professional association or corporation, or other entity, 
public or private.
    Physicians' services means the following Medicare covered 
professional services:
    (1) Surgery, consultation, home, office and institutional calls, 
and other professional services performed by physicians.
    (2) Services and supplies furnished ``incident to'' a physician's 
professional services.
    (3) Outpatient physical and occupational therapy services.
    (4) Diagnostic x-ray tests and other diagnostic tests (excluding 
clinical diagnostic laboratory tests).
    (5) X-ray, radium, and radioactive isotope therapy, including 
materials and services of technicians.
    (6) Antigens prepared by a physician.
    Radiologist service means radiology services performed only by, or 
under the direction of, a physician who is certified, or eligible to be 
certified, by the American Board of Radiology or for whom radiology 
services account for at least 50 percent of the total amount of charges 
made under part B of title XVIII of the Act.
    Request for payment means an application submitted by a person to 
any person for payment for a service.
    Respondent means the person upon which HCFA or OIG has imposed, or 
proposes to impose, a civil money penalty, assessment, or exclusion.
    Service includes--
    (1) Any item, device, medical supply, or service claimed to have 
been furnished to a patient and listed in an itemized claim for program 
payment; or
    (2) In the case of a claim based on costs, any entry or omission in 
a cost report, books of account or other documents supporting the 
claim.
    State includes the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, the Northern Mariana Islands, and the 
Trust Territory of the Pacific Islands.
    Timely basis means that the adjustment to a bill or a refund is 
considered ``on a timely basis'' if the physician, supplier, or other 
person makes the adjustment or refund to the appropriate party no later 
than 30 days after the date the physician, supplier, or other person is 
notified by the Medicare Part B contractor of the violation and the 
requirement to refund any excess collections.


Sec. 402.5  Right to a hearing before the final determination.

    HCFA or OIG does not make a determination adverse to any person 
under this part until the person has been given a written notice and 
opportunity for the determination to be made on the record after a 
hearing at which the person is entitled to be represented by counsel, 
to present witnesses, and to cross-examine witnesses against the 
person.


Sec. 402.7  Notice of proposed determination.

    (a) If HCFA or OIG proposes a penalty and, as applicable, an 
assessment, or proposes to exclude a respondent from participation in 
Medicare in accordance with this part, it sends the respondent written 
notice of its intent by certified mail, return receipt requested. The 
notice includes the following information:
    (1) Reference to the statutory basis or bases for the penalty, 
assessment, exclusion, or any combination, as applicable.
    (2)(i) A description of the claims, requests for payment, or 
incidents with respect to which the penalty, assessment, and exclusion 
are proposed; or
    (ii) If HCFA or OIG is relying upon statistical sampling to project 
the number and types of claims or requests for payment and the dollar 
amount, a description of the claims and requests for payment comprising 
the sample and a brief description of the statistical sampling 
technique HCFA or OIG used.
    (3) The reason why the claims, requests for payment, or incidents 
are subject to a penalty and assessment.
    (4) The amount of the proposed penalty and of any proposed 
assessment.
    (5) Any mitigating or aggravating circumstances that HCFA or OIG 
considered when it determined the amount of the proposed penalty and 
any applicable assessment.
    (6) Information concerning response to the notice, including--
    (i) A specific statement of the respondent's right to a hearing; 
and
    (ii) A statement that failure to request a hearing within 60 days 
renders the proposed determination final and permits the imposition of 
the proposed penalty and any assessment.
    (iii) A statement that the debt may be collected through an 
administrative offset.
    (7) In the case of a respondent that has an agreement under section 
1866 of the Act, notice that imposition of an exclusion may result in 
termination of the provider's agreement in accordance with section 
1866(b)(2)(C) of the Act.


Sec. 402.9  Failure to request a hearing.

    (a) If the respondent does not request a hearing within 60 days of 
receipt of the notice of proposed determination specified in 
Sec. 402.7, any civil money penalty, assessment, or exclusion becomes 
final and HCFA or OIG may impose the proposed penalty, assessment, or 
exclusion, or any less severe penalty, assessment, or suspension.
    (b) HCFA or OIG notifies the respondent by certified mail, return 
receipt requested, of any penalty, assessment, or exclusion that has 
been imposed and of the means by which the respondent may satisfy the 
judgment.
    (c) The respondent has no right to appeal a penalty, assessment, or 
exclusion for which he or she has not requested a hearing.


Sec. 402.11  Notice to other agencies and other entities.

    (a) Whenever a penalty, assessment, or exclusion becomes final, 
HCFA or OIG notifies the following organizations and entities about the 
action and the reasons for it:
    (1) The appropriate State or local medical or professional 
association.
    (2) The appropriate peer review organization.
    (3) As appropriate, the State agency responsible for the 
administration of each State health care program (Medicaid, the 
Maternal and Child Health Services Block Grant Program, and the Social 
Services Block Grant Program).
    (4) The appropriate Medicare carrier or fiscal intermediary.
    (5) The appropriate State or local licensing agency or organization 
(including the Medicare and Medicaid State survey agencies).

[[Page 68694]]

    (6) The long-term care ombudsman.

    (b) For exclusions, HCFA or OIG also notifies the public and 
specifies the effective date.

Sec. 402.13

  Penalty, assessment, and exclusion not exclusive.

    Penalties, assessments, and exclusions imposed under this part are 
in addition to any other penalties prescribed by law.

Sec. 402.15

  Collateral estoppel.

    (a) When a final determination that the respondent presented or 
caused to be presented a claim or request for payment falling within 
the scope of Sec. 402.1 has been rendered in any proceeding in which 
the respondent was a party and had an opportunity to be heard, the 
respondent is bound by that determination in any proceeding under this 
part.

    (b) A person who has been convicted (whether upon a verdict after 
trial or upon a plea of guilty or nolo contendere) of a Federal crime 
charging fraud or false statements is barred from denying the essential 
elements of the criminal offense if the proceedings under this part 
involve the same transactions.

Sec. 402.17

  Settlement.

    HCFA or OIG has exclusive authority to settle any issues or case, 
without the consent of the ALJ or the Secretary, at any time before a 
final decision by the Secretary. Thereafter, the General Counsel has 
the exclusive authority.

Sec. 402.19

  Hearings and appeals.

    The hearings and appeals procedures set forth in part 1005 of 
chapter V of this title are available to any person that receives an 
adverse determination under this part. For an appeal of a civil money 
penalty, assessment, or exclusion imposed under this part, either HCFA 
or OIG may represent the government in the hearing and appeals process.

Sec. 402.21

  Judicial review.

    After exhausting all available administrative remedies, a 
respondent may seek judicial review of a penalty, assessment, or 
exclusion that has become final. The respondent may seek review only 
with respect to a penalty, assessment, or exclusion with respect to 
which the respondent filed an exception under Sec. 1005.21(c) of this 
title unless the court excuses the failure or neglect to urge the 
exception in accordance with section 1128A(e) of the Act because of 
extraordinary circumstances.

Subpart B--Civil Money Penalties and Assessments

Sec. 402.105

  Amount of penalty.

    (a) $2,000. Except as provided in paragraphs (b) through (f) of 
this section, HCFA or OIG may impose a penalty of not more than $2,000 
for each service, bill, or refusal to issue a timely refund that is 
subject to a determination under this part and for each incident 
involving the knowing, willful, and repeated failure of an entity 
furnishing a service to submit a properly completed claim form or to 
include on the claim form accurate information regarding the 
availability of other health insurance benefit plans 
(Sec. 402.1(c)(21)).

    (b) $1,000. HCFA or OIG may impose a penalty of not more than 
$1,000 for the following:

    (1) Per certificate of medical necessity knowingly and willfully 
distributed to physicians on or after December 31, 1994 that--

    (i) Contains information concerning the medical condition of the 
patient; or

    (ii) Fails to include cost information.

    (2) Per individual about whom information is requested, for willful 
or repeated failure of an employer to respond to an intermediary or 
carrier about coverage of an employee or spouse under the employer's 
group health plan (Sec. 402.1(c)(20)).

    (c) $5,000. HCFA or OIG may impose a penalty of not more than 
$5,000 for each violation resulting from the following:

    (1) The failure of a Medicare supplemental policy issuer, on a 
replacement policy, to waive any time periods applicable to pre-
existing conditions, waiting periods, elimination periods, or 
probationary periods that were satisfied under a preceding policy 
(Sec. 402.1(c)(29)); and

    (2) Any issuer of any Medicare supplemental policy denying a 
policy, conditioning the issuance or effectiveness of the policy, or 
discriminating in the pricing of the policy based on health status or 
other criteria as specified in section 1882(s)(2)(A). 
(Sec. 402.1(c)(29)).

    (d) $10,000. (1) HCFA or OIG may impose a penalty of not more than 
$10,000 for each day that reporting entity ownership arrangements is 
late (Sec. 402.1(c)(22)).

    (2) HCFA or OIG may impose a penalty of not more than $10,000 for 
the following violations that occur on or after January 1, 1997:

    (i) Knowingly and willfully, and on a repeated basis, billing for a 
clinical diagnostic laboratory test, other than on an assignment-
related basis (Sec. 402.1(c)(1)).

    (ii) By any durable medical equipment supplier, knowingly and 
willfully charging for a covered service that is furnished on a rental 
basis after the rental payments may no longer be made (except for 
maintenance and servicing) as provided in section 1834(a)(7)(A) 
(Sec. 402.1(c)(4)).

    (iii) By any durable medical equipment supplier, knowingly and 
willfully, in violation of section 1834(a)(18)(A), failing to make a 
refund to Medicare beneficiaries for a covered service for which 
payment is precluded due to an unsolicited telephone contact from the 
supplier (Sec. 402.1(c)(5)).

    (iv) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting 
charge, as specified in section 1834(b)(5)(B), for radiologist services 
(Sec. 402.1(c)(6)).

    (v) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting 
charge, as specified in section 1834(c)(3), for mammography screening 
(Sec. 402.1(c)(7)).

    (vi) By any supplier of prosthetic devices, orthotics, and 
prosthetics, knowingly and willfully charging for a covered prosthetic 
device, orthotic, or prosthetic that is furnished on a rental basis 
after the rental payment may no longer be made (except for maintenance 
and servicing) (Sec. 401.2(c)(8)).

    (vii) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assigned-
related basis if--

    (A) The supplier does not possess a Medicare supplier number;

    (B) The service is denied in advance; or

    (C) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(10)).

    (viii) Knowingly and willfully billing or collecting for any 
services on other than an assignment-related basis for practitioners 
specified in section 1842(b)(18)(B) (Sec. 402.1(c)(11)).

    (xix) By any physician, knowingly and willfully presenting, or 
causing to be presented, a claim or bill for an assistant at cataract 
surgery performed on or after March 1, 1987 for which payment may not 
be made because of section 1862(a)(15) (Sec. 402.1(c)(12)).

    (x) By any nonparticipating physician who does not accept payment 
on an

[[Page 68695]]

assignment-related basis, knowingly and willfully failing to refund on 
a timely basis any amounts collected for services that are not 
reasonable or medically necessary or are of poor quality, in accordance 
with section 1842(l)(1)(A) (Sec. 402.1(c)(13)).

    (xi) By any nonparticipating physician, who does not accept payment 
for an elective surgical procedure on an assignment-related basis and 
whose charge is at least $500, knowingly and willfully failing to--

    (A) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and

    (B) Refund on a timely basis any amount collected for the procedure 
in excess of the charges recognized and approved by the Medicare 
program (Sec. 402.1(c)(14)).

    (xii) By any physician, in repeated cases, knowingly and willfully 
billing one or more beneficiaries, for purchased diagnostic tests, any 
amount other than the payment amount specified in section 1842(n)(1)(A) 
or section 1842(n)(1)(B) (Sec. 402.1(c)(15)).

    (xiii) By any nonparticipating physician, supplier, or other person 
that furnishes physicians' services and does not accept payment on an 
assignment-related basis--

    (A) Knowingly and willfully billing or collecting in excess of the 
limiting charge (as defined in section 1843(g)(2)) on a repeated basis; 
or

    (B) Failing to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A)(iii) or (iv) (Sec. 402.1(c)(17)).

    (xiv) Knowingly and willfully billing for State plan approved 
physicians' services on other than an assignment-related basis for a 
Medicare beneficiary who is also eligible for Medicaid 
(Sec. 402.1(c)(18)).

    (xv) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed on an assignment-related 
basis if--

    (A) The supplier did not possess a Medicare supplier number;

    (B) The service is denied in advance; or

    (C) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(23)).

    (e) $15,000. HCFA or OIG may impose a penalty of not more than 
$15,000 if the seller of a Medicare supplemental policy is not the 
issuer, for each violation described in paragraphs (f)(2) and (f)(3) of 
this section (Sec. 402.1 (c)(25) and (c)(26)).

    (f) $25,000. HCFA or OIG may impose a penalty of not more than 
$25,000 for each of the following violations:

    (1) Issuance of a Medicare supplemental policy that has not been 
approved by an approved State regulatory program or does not meet 
Federal standards on and after the effective date in section 
1882(p)(1)(C) of the Act (Sec. 402.1(c)(23)).

    (2) Sale or issuance after July 30, 1992, of a Medicare 
supplemental policy that fails to conform with the NAIC or Federal 
standards established under section 1882(p) of the Act 
(Sec. 402.1(c)(25)).

    (3) Failure to make the core group of basic benefits available for 
sale when selling other Medicare supplemental plans with additional 
benefits (Sec. 402.1(c)(26)).

    (4) Failure to provide, before sale of a Medicare supplemental 
policy, an outline of coverage describing the benefits provided by the 
policy (Sec. 402.1(c)(26)).

    (5) Failure of an issuer of a policy to suspend or reinstate a 
policy, based on the policy holder's request, during entitlement to or 
upon loss of eligibility for medical assistance (Sec. 402.1(c)(27)).

    (6) Failure to provide refunds or credits for Medicare supplemental 
policies as required by section 1882(r)(1)(B) (Sec. 402.1(c)(28)).

    (7) By an issuer of a Medicare supplemental policy--

    (i) Substantial failure to provide medically necessary services to 
enrollees seeking the services through the issuer's network of 
entities;

    (ii) Imposition of premiums on enrollees in excess of the premiums 
approved by the State;

    (iii) Action to expel an enrollee for reasons other than nonpayment 
of premiums; or

    (iv) Failure to provide each enrollee, at the time of enrollment, 
with the specific information provided in section 1882(t)(1)(E)(i) or 
failure to obtain a written acknowledgment from the enrollee of receipt 
of the information (as required by section 1882(t)(1)(E)(ii)) (section 
1882(t)(2)).

Sec. 402.107

  Amount of assessment.

    A person subject to civil money penalties specified in 
Sec. 402.1(c) may be subject, in addition, to an assessment. An 
assessment is a monetary payment in lieu of damages sustained by HHS or 
a State agency.

    (a) The assessment may not be more than twice the amount claimed 
for each service that was a basis for the civil money penalty, except 
for the violations specified in paragraph (b) of this section that 
occur before January 1, 1997.

    (b) For the violations specified in this paragraph occurring after 
January 1, 1997, the assessment may not be more than three times the 
amount claimed for each service that was the basis for a civil money 
penalty. The violations are the following:

    (1) Knowingly and willfully billing, and on a repeated basis, for a 
clinical diagnostic laboratory test, other than on an assignment-
related basis (Sec. 402.1(c)(1)).

    (2) By any durable medical equipment supplier, knowingly and 
willfully charging for a covered service that is furnished on a rental 
basis after the rental payments may no longer be made (except for 
maintenance and servicing) as provided in section 1834(a)(7)(A) 
(Sec. 402.1(c)(4)).

    (3) By any durable medical equipment supplier, knowingly and 
willfully failing, in violation of section 1834(a)(18)(A), to make a 
refund to Medicare beneficiaries for a covered service for which 
payment is precluded due to an unsolicited telephone contact from the 
supplier (Sec. 402.1(c)(5)).

    (4) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting 
charge, as specified in section 1834(b)(5)(B), for radiologist services 
(Sec. 402.1(c)(6)).

    (5) By any nonparticipating physician or supplier, knowingly and 
willfully charging a Medicare beneficiary more than the limiting charge 
as specified in section 1834(c)(3), for mammography screening 
(Sec. 402.1(c)(7)).

    (6) By any supplier of prosthetic devices, orthotics, and 
prosthetics, knowingly and willfully charging for a covered prosthetic 
device, orthotic, or prosthetic that is furnished on a rental basis 
after the rental payment may no longer be made (except for maintenance 
and servicing) (Sec. 401.2(c)(8)).

    (7) By any supplier of durable medical equipment, including a 
supplier of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed other than on an assignment-
related basis if--

    (i) The supplier does not possess a Medicare supplier number;

    (ii) The service is denied in advance; or

    (iii) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(10)).


[[Page 68696]]


    (8) Knowingly and willfully billing or collecting for any services 
on other than an assignment-related basis for practitioners specified 
in section 1842(b)(18)(B) (Sec. 402.1(c)(11)).

    (9) By any physician, knowingly and willfully presenting, or 
causing to be presented, a claim or bill for an assistant at cataract 
surgery performed on or after March 1, 1987 for which payment may not 
be made because of section 1862(a)(15) (Sec. 402.1(c)(12)).

    (10) By any nonparticipating physician who does not accept payment 
on an assignment-related basis, knowingly and willfully failing to 
refund on a timely basis any amounts collected for services that are 
not reasonable or medically necessary or are of poor quality, in 
accordance with section 1842(l)(1)(A) (Sec. 402.1(c)(13)).

    (11) By any nonparticipating physician, who does not accept payment 
for an elective surgical procedure on an assignment-related basis and 
whose charge is at least $500, knowingly and willfully failing to--

    (i) Disclose the information required by section 1842(m)(1) 
concerning charges and coinsurance amounts; and

    (ii) Refund on a timely basis any amount collected for the 
procedure in excess of the charges recognized and approved by the 
Medicare program (Sec. 402.1(c)(14)).

    (12) By any physician, in repeated cases, knowingly and willfully 
billing one or more beneficiaries, for purchased diagnostic tests, any 
amount other than the payment amount specified in section 1842(n)(1)(A) 
or section 1842(n)(1)(B) (Sec. 402.1(c)(15)).

    (13) By any nonparticipating physician, supplier, or other person 
that furnishes physicians' services and does not accept payment on an 
assignment-related basis--

    (i) Knowingly and willfully billing or collecting in excess of the 
limiting charge (as defined in section 1843(g)(2)) on a repeated basis; 
or

    (ii) Failing to make an adjustment or refund on a timely basis as 
required by section 1848(g)(1)(A) (iii) or (iv) (Sec. 402.1(c)(17)).

    (14) Knowingly and willfully billing for State plan approved 
physicians' services on other than an assignment-related basis for a 
Medicare beneficiary who is also eligible for Medicaid 
(Sec. 402.1(c)(18)).

    (15) By any supplier of durable medical equipment, including 
suppliers of prosthetic devices, prosthetics, orthotics, or supplies, 
knowingly and willfully failing to make refunds in a timely manner to 
Medicare beneficiaries for services billed on an assignment-related 
basis if--

    (i) The supplier did not possess a Medicare supplier number;

    (ii) The service is denied in advance; or

    (iii) The service is determined not to be medically necessary or 
reasonable (Sec. 402.1(c)(23)).

Sec. 402.109

  Statistical sampling.

    (a) Purpose. HCFA or OIG may introduce the results of a statistical 
sampling study to show the number and amount of claims subject to 
sanction under this part that the respondent presented or caused to be 
presented.

    (b) Prima facie evidence. The results of the statistical sampling 
study, if based upon an appropriate sampling and computed by valid 
statistical methods, constitute prima facie evidence of the number and 
amount of claims or requests for payment subject to sanction under 
Sec. 402.1.

    (c) Burden of proof. Once HCFA or OIG has made a prima facie case, 
the burden is on the respondent to produce evidence reasonably 
calculated to rebut the findings of the statistical sampling study. 
HCFA or OIG then has the opportunity to rebut this evidence.

Sec. 402.111

  Factors considered in determinations regarding the amount of 
penalties and assessments.

    (a) Basic factors. In determining the amount of any penalty or 
assessment, HCFA or OIG takes into account the following:

    (1) The nature of the claim, request for payment, or information 
given and the circumstances under which it was presented or given.

    (2) The degree of culpability, history of prior offenses, and 
financial condition of the person submitting the claim or request for 
payment or giving the information.

    (3) The resources available to the person submitting the claim or 
request for payment or giving the information.

    (4) Such other matters as justice may require.

    (b) Criteria to be considered. As guidelines for taking into 
account the factors listed in paragraph (a) of this section, HCFA or 
OIG considers the following circumstances:

    (1) Aggravating circumstances of the incident. An aggravating 
circumstance is any of the following:

    (i) The services or incidents were of several types, occurring over 
a lengthy period of time.

    (ii) There were many of these services or incidents or the nature 
and circumstances indicate a pattern of claims or requests for payment 
for these services or a pattern of incidents.

    (iii) The amount claimed or requested for these services was 
substantial.

    (iv) Before the incident or presentation of any claim or request 
for payment subject to imposition of a civil money penalty, the 
respondent was held liable for criminal, civil, or administrative 
sanctions in connection with a program covered by this part or any 
other public or private program of payment for medical services.

    (v) There is proof that a respondent engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to government programs or in connection with the delivery of a health 
care service. (The statute of limitations governing civil money penalty 
proceedings does not apply to proof of other wrongful conduct as an 
aggravating circumstance.)

    (2) Mitigating circumstances. The following circumstances are 
mitigating circumstances:

    (i) All the services or incidents subject to a civil money penalty 
were few in number and of the same type, occurred within a short period 
of time, and the total amount claimed or requested for the services was 
less than $1,000.

    (ii) The claim or request for payment for the service was the 
result of an unintentional and unrecognized error in the process of 
presenting claims or requesting payment and the respondent took 
corrective steps promptly after discovering the error.

    (iii) Imposition of the penalty or assessment without reduction 
would jeopardize the ability of the respondent to continue as a health 
care provider.

    (3) Other matters as justice may require. Other circumstances of an 
aggravating or mitigating nature are taken into account if, in the 
interests of justice, they require either a reduction of the penalty or 
assessment or an increase in order to ensure the achievement of the 
purposes of this part.

    (c) Effect of aggravating or mitigating circumstances. In 
determining the amount of the penalty and assessment to be imposed for 
every service or incident subject to a determination under 
Sec. 402.1(c)--

    (1) If there are substantial or several mitigating circumstances, 
the aggregate amount of the penalty and assessment is set at an amount 
sufficiently below the maximum permitted by Secs. 402.105(a) and 
402.107 to reflect that fact.

    (2) If there are substantial or several aggravating circumstances, 
the aggregate

[[Page 68697]]

amount of the penalty and assessment is set at an amount at or 
sufficiently close to the maximum permitted by Secs. 402.105(a) and 
402.107 to reflect that fact.

    (d)(1) The standards set forth in this section are binding, except 
to the extent that their application would result in imposition of an 
amount that would exceed limits imposed by the United States 
Constitution.

    (2) The amount imposed is not less than the approximate amount 
required to fully compensate the United States, or any State, for its 
damages and costs, tangible and intangible, including but not limited 
to the costs attributable to the investigation, prosecution, and 
administrative review of the case.
    (3) Nothing in this section limits the authority of HCFA or OIG to 
settle any issue or case as provided by Sec. 402.19 or to compromise 
any penalty and assessment as provided by Sec. 402.115.


Sec. 402.113  When a penalty and assessment are collectible.

    A civil money penalty and assessment become collectible after the 
earliest of the following:
    (a) Sixty days after the respondent receives HCFA's or OIG's notice 
of proposed determination under Sec. 402.7, if the respondent has not 
requested a hearing before an ALJ.
    (b) Immediately after the respondent abandons or waives his or her 
appeal right at any administrative level.
    (c) Thirty days after the respondent receives the ALJ's decision 
imposing a civil money penalty or assessment under Sec. 1005.20(d) of 
this title, if the respondent has not requested a review before the 
DAB.
    (d) If the DAB grants an extension of the period for requesting the 
DAB's review, the day after the extension expires if the respondent has 
not requested the review.
    (e) Immediately after the ALJ's decision denying a request for a 
stay of the effective date under Sec. 1005.22(b) of this title.
    (f) If the ALJ grants a stay under Sec. 1005.22(b) of this title, 
immediately after the judicial ruling is completed.
    (g) Sixty days after the respondent receives the DAB's decision 
imposing a civil money penalty if the respondent has not requested a 
stay of the decision under Sec. 1005.22(b) of this title.


Sec. 402.115  Collection of penalty or assessment.

    (a) Once a determination by HHS has become final, HCFA is 
responsible for the collection of any penalty or assessment.
    (b) The General Counsel may compromise a penalty or assessment 
imposed under this part, after consultation with HCFA or OIG, and the 
Federal government may recover the penalty or assessment in a civil 
action brought in the United States district court for the district 
where the claim was presented or where the respondent resides.
    (c) The United States or a State agency may deduct the amount of a 
penalty and assessment when finally determined, or the amount agreed 
upon in compromise, from any sum then or later owing to the respondent.
    (d) Matters that were raised or that could have been raised in a 
hearing before an ALJ or in an appeal under section 1128A(e) of the Act 
may not be raised as a defense in a civil action by the United States 
to collect a penalty under this part.

Subpart C--Exclusions [Reserved]

    (Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778, 
Medical Assistance Program)

    Dated: July 7, 1998.
Nancy-Ann Min De Parle,
Administrator, Health Care Financing Administration.
[FR Doc. 98-33010 Filed 12-11-98; 8:45 am]
BILLING CODE 4120-01-P