[Federal Register Volume 64, Number 227 (Friday, November 26, 1999)]
[Rules and Regulations]
[Pages 66396-66402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30678]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 420

[HCFA-4000-FC]
RIN 0938-AJ30


Medicare Program; Suggestion Program on Methods to Improve 
Medicare Efficiency

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period establishes a program to 
encourage individuals to submit suggestions that could improve the 
efficiency of the Medicare program. The rule implements section 203(c) 
of the Health Insurance Portability and Accountability Act of 1996. The 
intent of this rule is to encourage suggestions and to award, if we 
deem appropriate, monetary payments to individuals for suggestions that 
improve efficiency and produce monetary savings to the Medicare 
program.


[[Page 66397]]


DATES: Effective date: This final rule is effective December 27, 1999. 
Comment date: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. eastern 
time on January 25, 2000.

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-4000-FC, P.O. Box 26688, 
Baltimore, MD 21207-0488.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 443-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]. 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. 
Electronically submitted comments will be available for public 
inspection at the Independence Avenue address below.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-4000-FC. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 443-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).

FOR FURTHER INFORMATION CONTACT: Sam Della Vecchia, (410) 786-4481.

SUPPLEMENTARY INFORMATION:

I. Background

A. Establishment of a Program to Collect Suggestions for Improving 
Medicare Program Efficiency and to Reward Suggesters for Monetary 
Savings

    It has long been our policy to encourage the use of incentive 
awards to recognize and reward individuals who directly contribute to 
the economy, efficiency, and effectiveness of government programs. For 
example, recognition of Federal employee suggestions and rewards for 
individuals whose adopted ideas benefit the government motivate Federal 
employees to increase productivity and creativity.
    With the August 1996 enactment of the Health Insurance Portability 
and Accountability Act of 1996 (HIPPA) (Public Law 104-191), the 
Congress recognized that the public at large, especially the 
beneficiaries, physicians, and suppliers actively involved in the 
delivery and utilization of Medicare health care services, may be in a 
position to suggest ideas that might contribute directly to improving 
Medicare program efficiency. By enacting section 203(c) of HIPPA, the 
Congress has required us to establish a program that encourages 
individuals to submit suggestions on methods that might improve the 
efficiency of the Medicare program. This legislation gives us the 
discretion to make a payment to a suggester, in an amount that we 
consider appropriate, as a reward for, and in recognition of, a 
suggestion we adopt that improves efficiency and results in monetary 
savings to the Medicare program.

B. Provisions of This Final Rule

    As required by section 203(c), this final rule establishes a 
program that will provide a vehicle to submit suggestions on methods 
that could improve the efficiency of the Medicare program. Therefore, 
we are adding a new Sec. 420.410 to subpart E of part 420, 
``Establishment of a program to collect suggestions for improving 
Medicare program efficiency and to reward suggesters for monetary 
savings,'' that sets forth procedures and requirements for the public 
to submit suggestions, for us to evaluate them and, if appropriate, to 
reward the suggester whose suggestion we adopt.
    In Sec. 420.410(a), we define a ``suggestion program'' to mean the 
specific procedures and requirements established by us for receiving 
suggestions, evaluating the suggestions, and, if appropriate, paying a 
reward to the suggester for an adopted suggestion that improves 
efficiency and produces monetary savings to the Medicare program. We 
define ``suggester'' as an individual, a group of individuals, or a 
legal entity, such as a corporation, partnership, or professional 
association, not otherwise excluded under Sec. 420.410(d), who submits 
a suggestion under this section.
    We specify that ``suggestion'' used in this context means an 
original idea submitted in writing. We specify that ``payment'' means a 
monetary award given to the suggester in recognition of, and as a 
reward for, a suggestion we adopt that improves the efficiency of the 
Medicare program and results in monetary savings. We define ``savings'' 
to mean the monetary value of the net benefits the Medicare program 
derives from implementing the suggestion.
    In Sec. 420.410(b), we specify that, as a general rule, we may make 
a payment to the suggester for suggestions we have adopted that 
increase efficiency and result in monetary savings to the Medicare 
program. However, in order to ensure that the suggestion program does 
not duplicate other Government incentive programs, we specify that we 
may make a monetary award only in instances in which an award is not 
otherwise provided by law. That is, if the suggestion furnished by the 
suggester qualifies for an award under another Government program, the 
suggester is not entitled to an award under this program.
    This paragraph also specifies that we have the sole discretion to 
determine whether it is appropriate and desirable for us to adopt a 
particular suggestion, to make monetary payment for any adopted 
suggestion, and to select the method by which we will calculate the 
payment award.
    We believe that the Congress intended that any individual, group of 
individuals or legal entity would be eligible to submit suggestions 
that improve Medicare program efficiency. For the reasons discussed 
below, we have chosen to exclude suggesters who have one of the 
relationships with the Federal Government described in Sec. 420.410(d). 
Therefore, in Sec. 420.410(c), we provide that, except as specified in 
Sec. 420.410(d), any individual, group of individuals or legal entity 
is eligible to submit suggestions under this suggestion program and to 
be considered for a reward if the suggester submits the information in 
the prescribed manner discussed in Sec. 420.410(e).
    In Sec. 420.410(d), we list who is ineligible to receive a reward 
under this suggestion program. Specifically, we provide that Medicare 
contractors, their officers and employees, individuals who work for 
Federal agencies under a contract, employees of Federally-sponsored 
research and demonstration projects, Federal officers and employees, 
and immediate family members of any of these groups of individuals, are 
not eligible for a reward under this suggestion program. The purpose of 
the exclusion is to prevent Federal employees, contractors, or grantees 
from personally profiting from information gained while doing public 
business. Suggestions made by Federal employees are covered under the 
Office

[[Page 66398]]

of Personnel Management policies and requirements for administering 
incentive award programs, which are set forth at 5 CFR Part 451. If, 
after the suggester receives an award, we later find that the suggester 
was ineligible, the recipient must refund the reward money.
    To discourage submission of frivolous suggestions, we indicate in 
Sec. 420.410(e) that suggesters must mail all suggestions in writing to 
us. This allows us to make a thorough and fair evaluation of all the 
relevant facts, to have an adequate record of the suggester's idea, to 
document the date the idea was sent to us, and to identify any 
redundancy or overlap with previously submitted suggestions. We will 
not accept oral suggestions because we could misconstrue them or have 
difficulty evaluating them. In addition, while we do not plan to 
develop a standardized format for submitting suggestions, we specify 
that written suggestions must include the following pertinent 
information:
    (1) A description of an existing problem or need;
    (2) A suggested method for solving the problem or filling the need; 
and
    (3) If known, an estimate of the savings potential that could 
result from implementing the suggestion.
    This information will enable us to evaluate suggestions 
expeditiously, fairly, and uniformly. Suggestions that do not contain 
the above information will not be considered under this program. All 
suggestions must be mailed to Health Care Financing Administration, 
Suggestion Program, 7500 Security Blvd., Baltimore, Maryland 21224-
1850.
    In Sec. 420.410(e), we also specify that any suggester wishing to 
receive an award for submitting a suggestion must provide us with a 
name, address, telephone number, and any other identifying information 
we request so that we can contact the suggester if we need additional 
information and, in appropriate cases, so that we can mail the reward 
payment. We also require all of the names constituting a group of 
suggesters, or the name of a legal entity and its representative. For 
example, when we deem it appropriate to pay a reward, we must request, 
for income tax purposes, the suggester's social security number or tax 
identification number.
    We specify in Sec. 420.410(f) that we evaluate all suggestions, as 
presented by the suggester, on the basis of originality, accuracy, 
feasibility, nature and complexity, estimated potential monetary 
savings to the Medicare program, the extent to which Medicare program 
efficiency would be improved if we were to adopt the suggestion, and 
any other factors that appear to us to be relevant to a particular 
situation. If, in the final evaluation, we determine that the 
suggestion is likely to improve efficiency and result in monetary 
savings to the Medicare program, we will decide whether, all factors 
considered, it would be appropriate for us to adopt the suggestion. One 
of the major factors may be budget constraints at the time we complete 
our review of a suggestion. This constraint could preclude us from 
adopting the suggestion if it requires a significant outlay of funds to 
implement, even though it may be demonstrated that the Medicare program 
would realize savings in the long run. Also, we may choose to adopt a 
suggestion in part. We may adopt and reward a suggestion in part if the 
program would realize verifiable monetary savings from a partial 
adoption.
    While it is our intention to evaluate suggestions as quickly as 
possible, some suggestions may require more processing time than 
others. The complexity of the suggestion, consideration of the 
feasibility of various implementation strategies, and our workload or 
manpower constraints make it difficult to specify how long it will take 
us to evaluate a suggestion. Therefore, we specify that the evaluation 
process will be concluded in a reasonable amount of time, not to exceed 
2 years from the date we receive a suggestion, taking into 
consideration the complexity of the suggestion, the number of possible 
implementation strategies, and our current workload.
    We indicate in Sec. 420.410(g) that, should we choose to adopt a 
suggestion in its entirety, or a part of a suggestion, and issue 
monetary payment as a reward, the payment amount will be determined 
based either on the actual first-year net savings, or the average 
annual net savings expected to be realized over a period of not more 
than 3 years. In either case, (as we discuss later in 
Sec. 420.410(h)(2)), we will not make the reward payment until the 
suggestion has been in operation for 1 year. We use the average annual 
net savings to calculate a reward payment if we expect that an 
improvement is likely to yield monetary savings for more than 1 year 
and implementation involves substantial costs, or we believe that 
monetary savings will be negligible in the first year but we expect 
them to substantially increase in subsequent years. We have the sole 
discretion in selecting the methodology for calculating net savings. In 
accordance with Sec. 420.410(g)(2), the reward payment amount will be 
calculated as follows:
     Net savings from $1,000 to $10,000--10 percent of the 
savings, with a minimum award amount of $100 (that is, we will only pay 
awards that amount to $100 or more).
     Net savings of $10,001 to $100,000--$1,000 for the first 
$10,000 of savings, plus 3 percent of the savings over $10,000.
     Net savings of more than $100,000, $3,700 for the first 
$100,000 of savings, plus 0.5 percent of the savings over $100,000, not 
to exceed $25,000.
    Because we have successfully used this same payment calculation 
methodology to determine award amounts for Federal employees whose 
suggestions have resulted in monetary savings to the Medicare program, 
we have chosen to adopt this same process for this program.
    In accordance with section 203(c) of HIPPA and as noted above in 
our discussion of Sec. 420.410(b), we specify in Sec. 420.410(h)(1) 
that we determine whether it would be appropriate and desirable for us 
to adopt or to reward a particular suggestion. If we receive the same 
or an overlapping suggestion from two or more unrelated parties, we 
will consider a reward only for the suggestion we received first, if 
the suggestion or overlapping part of the suggestion are identical, and 
we have adopted that part. If the suggestions are not identical, we 
will consider rewarding the suggestion we received first, if it is 
feasible and we have been able to adopt and implement the suggestion. 
If the first suggestion cannot be implemented, we may consider 
rewarding the suggestion we received next, even if it is similar, 
provided we can adopt and implement the suggestion.
    We specify in Sec. 420.410(h)(2) that payment will be mailed only 
after the suggestion has been in operation for 1 year.
    We specify in Sec. 420.410(i) that if a group of individuals 
submits a suggestion that we deem appropriate to reward, individuals in 
the group will receive an equal share of the award. If the suggestion 
is submitted by an organization, such as a corporation, partnership, or 
professional association, we will make a single reward payment to that 
organization.
    We specify in Sec. 420.410(j) that it is the suggester's 
responsibility to notify us of any change in the information required 
in Sec. 420.410(e) above. If our mailed award is returned to us as 
``undeliverable'' or ``address unknown,'' the suggester has up to 1 
year from the date of our notification letter to claim

[[Page 66399]]

the award. We have set this 1-year limitation to minimize the 
administrative burden associated with this program. We believe 1 year 
is a reasonable period of time to claim a monetary award that has been 
returned to us. In addition, the 1-year limitation protects the 
Government from the administrative and fiscal burden that would be 
associated with maintaining claims for a longer or indefinite period. 
Awards not claimed within 1 year from the date they were first mailed 
to the suggester will not be awarded. Also, no interest will be paid on 
awards for any reason.
    We specify in Sec. 420.410(k), that, if the suggester has become 
incapacitated or has died, an executor, administrator, or other legal 
representative may claim the award payment on behalf of the suggester 
or the suggester's estate. In order to protect participants from being 
defrauded by individuals falsely claiming to be their legal 
representatives, we state that the claimant must submit certified 
copies of letters testamentary, letters of administration, or other 
similar evidence to show his or her authority to claim the award 
payment. We also specify that the payment must be claimed within 1 year 
from the date on which we first mailed the award.
    Finally, in Sec. 420.410(l), we indicate that all records related 
to the administration of this suggestion program are retained in 
accordance with the regulations of the National Archives and Records 
Administration (36 CFR Part 1228). We state that no information 
submitted under this suggestion program will be disclosed, except as 
required by law.

II. 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, if we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document.

III. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this final rule as required by 
Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Pub. L. 
96-354). Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). The RFA requires agencies 
to analyze options for regulatory relief of small businesses. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and governmental agencies. Most hospitals and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of $5 million or less annually. Individuals are 
not considered to be small entities.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any proposed rule that may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b), we define a 
small rural hospital as a hospital that is located outside a 
Metropolitan Statistical Area and has fewer than 50 beds.
    The Unfunded Mandates Reform Act of 1995 also requires (in section 
202) that agencies prepare an assessment of anticipated costs and 
benefits before proposing any rule that may mandate an annual 
expenditure by State, local, or Tribal governments, in the aggregate, 
or by the private sector, of $100 million or more. We believe that this 
proposed rule does not mandate such expenditures.

B. Summary of the Final Rule

    The final rule establishes a suggestion program as a means of (1) 
encouraging the submission of suggestions for improving the efficiency 
of the Medicare program and (2) rewarding those who make suggestions 
when we deem that it is appropriate and when a reward is not otherwise 
provided by law or prohibited by this program. The rule describes the 
program, lists information requirements and eligibility criteria, 
establishes a lower and an upper limit for payments, and outlines the 
process and time limitations we must follow in issuing a reward.

C. Discussion of Impact

    This rule is expected to affect beneficiaries and their personal 
representatives and advocates, providers, physicians, other suppliers, 
and managed care plans. Taxpayers, small rural hospitals, and the 
Medicare Trust Fund could also be impacted by this rule.
    Beneficiaries as a group are expected to be impacted by this 
regulation in several ways. First, beneficiaries are often the first to 
recognize and question provider and program practices. This knowledge 
may stimulate the formation of ideas for improvement in our program 
operations. This regulation encourages these individuals to share 
program improvement suggestions with us by (1) providing a clearly 
defined process for submitting information to the appropriate source 
and, (2) in appropriate cases, offering a monetary incentive to support 
the effort.
    Advocates for beneficiaries and other private sector organizations 
have often shared ideas with agency components for improving the 
Medicare program. Some of these have been related to specific 
activities like proposed rulemaking and the development of program 
guidelines, and special committee recommendations. This regulation 
expands the opportunity for these individuals or their organizations to 
apply their creative energies to any and all aspects of the Medicare 
program for potential improvement. It is also likely that advocacy 
groups and other beneficiary representatives will view this regulation 
as supporting their efforts to identify areas for program improvement 
and bring their suggestions to our attention.
    We expect a similar potential impact on business entities, 
providers, other suppliers, managed care organizations, small rural 
hospitals, and others. Overall we expect that all of these groups could 
benefit qualitatively from this rule. Many of these individuals and 
entities and the associations representing them have contributed ideas 
to us over the years in much the same way as the beneficiary advocacy 
groups. We believe that they are a valuable source of ideas about how 
to make the Medicare program more efficient, and the suggestion program 
provides them with a specific, ongoing mechanism for submitting these 
ideas to us. In addition, these groups could receive a monetary award 
for their suggestions.
    Because this is a new program, we cannot predict at this time what 
effect any particular suggestion might have on a specific individual or 
entity; we have no way of knowing what kinds of suggestions we will 
receive or whether we will achieve any results if we adopt them. Also, 
this rule does not address the substance of any particular suggestions 
we may receive in the future; it simply describes the process by which 
individuals or entities can submit their ideas. Therefore, we cannot in 
any way predict the aggregate economic impact of any suggestions in 
which this rulemaking may result on any particular individual or 
entity, including small business entities, nor

[[Page 66400]]

can we estimate the savings to the Medicare Trust Fund, or the 
taxpayer. However, we anticipate that establishing the program 
described in this rulemaking will itself have a minimal economic 
impact.

D. Conclusion

    We conclude that this final rule could ultimately lead to program 
improvements and money saved, and could help extend the solvency of the 
Medicare Trust Fund. Because the Medicare program is continually 
becoming more complex, we recognize the value of objective critiques by 
those who are most affected by the myriad of Medicare statutes, 
provisions, and guidelines.
    Based on the above analysis we have determined and certify that 
this final rule would not have a significant economic impact on a 
substantial number of small entities. We also have determined and 
certify that this final rule would not have a significant impact on the 
operations of a substantial number of small rural hospitals. We are, 
however, inviting comments on whether this rule would have a 
significant impact on any of the groups listed in this section.

IV. Federalism

    We have reviewed this notice under the threshold criteria of 
Executive Order 13132, Federalism. We have determined that it does not 
significantly affect the States rights, roles, and responsibilities.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 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 PRA requires that we 
solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirement discussed below.

 Section 420.410  Establishment of a program to collect suggestions for 
improving Medicare program efficiency and to reward suggesters for 
monetary savings

    Section 420.410 establishes a program to collect suggestions for 
improving Medicare program efficiency and to reward some suggesters for 
monetary savings. The ``respondents'' for the collection of information 
described in these regulations will be self-selected individuals and 
entities that choose to submit suggestions.
    Section 420.410(e) states that in order to be considered, the 
suggestion must be in writing, mailed to us and must include the 
following information:
    (1) A description of an existing problem or need;
    (2) A suggested method for solving the problem or filling the need; 
and
    (3) If known, an estimate of the savings potential that could 
result from implementing the suggestion. Any suggester interested in 
receiving a reward must provide us with a name, address, telephone 
number, and any other identifying information we may need to contact 
the suggester, if we require additional information and, where 
applicable, to mail the reward.
    The burden associated with this requirement is the time and effort 
for the suggester to submit to us the information described above. It 
is estimated that this requirement will take each suggester 20 minutes. 
We anticipate 400 suggestions for a total of 134 burden hours.
    Section 420.410(j) states that it is the suggester's responsibility 
to notify HCFA of any change of address or other relevant information.
    We believe the above requirement is not subject to the PRA in 
accordance with 5 CFR 1320.3(c)(4) since this requirement does not 
collect information from ten or more persons on an annual basis. We 
have submitted a copy of this final rule with comment to OMB for its 
review of the information collection requirements described above. 
These requirements are not effective until they have been approved by 
OMB.
    If you comment on any of these information collection and record 
keeping requirements, please mail copies directly to the following:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850, Attn: 
Louis Blank, HCFA-4000-FC, and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Allison Eydt, HCFA Desk Officer.

VI. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite 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 contrary to the 
public interest, and it incorporates a statement of the finding and its 
reasons in the rule issued.
    Publishing this final rule expeditiously to supplement activities 
that identify and reduce the drain on the Medicare Trust Fund is in the 
public interest. Specifically, we anticipate that the implementation of 
this rule will encourage suggestions that will improve program 
efficiency and result in savings to the Medicare program.
    We find good cause to waive notice-and-comment procedures for this 
final rule because it is in the public interest to establish this 
suggestion program as soon as possible to afford the general public the 
opportunity to submit their suggestions for program improvement. To 
employ notice-and-comment procedures would only delay potential program 
savings. We are providing a 60-day period for public comment.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 420

    Fraud, Health facilities, Health professions, Incentive programs, 
Medicare.

    For the reasons set forth in the preamble, 42 CFR part 420 is 
amended as set forth below:

PART 420--PROGRAM INTEGRITY: MEDICARE

    1. The authority citation for part 420 continues to read as 
follows:

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

    2. The heading of subpart E is revised to read as follows:

[[Page 66401]]

Subpart E--Rewards for Information Relating to Medicare Fraud and 
Abuse, and Establishment of a Program to Collect Suggestions for 
Improving Medicare Program Efficiency and to Reward Suggesters for 
Monetary Savings

    3. Section 420.400 is revised to read as follows:


Sec. 420.400  Basis and scope.

    This subpart implements sections 203(b) and (c) of Public Law 104-
191, which require the establishment of programs to encourage 
individuals to report suspected cases of fraud and abuse and submit 
suggestions on methods to improve the efficiency of the Medicare 
program. Sections 203(b) and (c) of Public Law 104-191 also provide the 
authority for HCFA to reward individuals for reporting fraud and abuse 
and for submitting suggestions that could improve the efficiency of the 
Medicare program. This subpart sets forth procedures for rewarding 
individuals.
    4. New Sec. 420.410 is added to read as follows:


Sec. 420.410  Establishment of a program to collect suggestions for 
improving Medicare program efficiency and to reward suggesters for 
monetary savings.

    (a) Definitions. As used in this section, the following definitions 
apply:
    Payment means a monetary award given to a suggester in recognition 
of, and as a reward for, a suggestion adopted by HCFA that improves the 
efficiency of, and results in monetary savings to, the Medicare 
program.
    Savings means the monetary value of the net benefits the Medicare 
program derives from implementing the suggestion.
    Suggester means an individual, a group of individuals, or a legal 
entity such as a corporation, partnership, or professional association, 
not otherwise excluded under Sec. 420.410(d), who submits a suggestion 
under this section.
    Suggestion means an original idea submitted in writing.
    Suggestion program means the specific procedures and requirements 
established by HCFA for receiving suggestions from the suggester on 
methods to improve the efficiency of the Medicare program, evaluating 
the suggestions and, if appropriate, paying a reward to the suggester 
for adopted suggestions that result in improved efficiency and produce 
monetary savings to the Medicare program.
    (b) General rule. HCFA may make payment for adopted suggestions 
that increase the efficiency of the Medicare program and result in 
monetary savings. HCFA only makes payment for suggestions in instances 
in which a reward is not otherwise provided by law. The determination 
to adopt a suggestion, to reward the suggester, and the method of 
calculating a reward are at the sole discretion of HCFA.
    (c) Eligibility. Except as specified in paragraph (d) of this 
section, any individual, group of individuals or legal entity, such as 
a corporation, partnership or professional association, is eligible to 
submit a suggestion and be considered for a reward under this 
suggestion program if the suggestion is submitted to HCFA in the manner 
set forth in paragraph (e) of this section.
    (d) Exclusions. Medicare contractors, their officers and employees, 
individuals who work for Federal agencies under a contract, employees 
of Federally-sponsored research and demonstration projects, Federal 
officers and employees, and immediate family members of these 
individuals, are excluded from receiving payment under the suggestion 
program. If, after the suggester receives a reward payment, HCFA 
determines that the suggester was ineligible to receive the reward, 
HCFA is not liable for the reward payment and the suggester must refund 
all monies received.
    (e) Requirements for submitting suggestions--(1) To be considered, 
the suggestion must be in writing, mailed to HCFA, and must include the 
following information:
    (i) A description of an existing problem or need;
    (ii) A suggested method for solving the problem or filling the 
need; and
    (iii) If known, an estimate of the savings potential that could 
result from implementing the suggestion.
    (2) Suggestions must be mailed to: Health Care Financing 
Administration Suggestion Program, 7500 Security Blvd., Baltimore, 
Maryland 21244-1850.
    (3) Any suggesters interested in receiving a reward must provide 
HCFA with the following information: An individual suggester must 
provide his or her name, a group of suggesters must provide the names 
of all the group members, and a legal entity must provide its name and 
the name of its representative. All suggesters must provide an address, 
telephone number, and any other identifying information that HCFA needs 
to contact the suggester for additional information and, where 
applicable, to mail the reward.
    (f) Evaluation process--(1) Relevant factors. HCFA evaluates all 
suggestions on the basis of the following factors:
    (i) Originality of suggestion.
    (ii) An estimate of potential monetary savings to the Medicare 
program.
    (iii) The extent to which Medicare program efficiency would be 
improved if HCFA adopts the suggestion.
    (iv) Accuracy of the information reflected in the suggestion.
    (v) Feasibility of implementation.
    (vi) Nature and complexity of the suggestion.
    (vii) Any other factors that appear to be relevant.
    (2) Evaluation time limit. HCFA concludes the evaluation process in 
a reasonable amount of time, not to exceed 2 years from the receipt 
date, taking into consideration the complexity of the suggestion, the 
number of possible implementation strategies, and HCFA's current 
workload.
    (g) Basis for reward payment--(1) General rule. If HCFA determines 
that it is appropriate to make a reward payment for a suggestion 
adopted in whole or in part, that results in improved efficiency and 
monetary savings to the Medicare program, the payment is based on--
    (i) The actual first-year net savings to the Medicare program, or
    (ii) The average annual net savings to the Medicare program 
expected to be realized over a period of not more than 3 years if--
    (A) An improvement is expected to yield monetary savings for more 
than 1 year and implementation involves substantial costs; or
    (B) Monetary savings are negligible in the first year but are 
expected to substantially increase in subsequent years.
    (2) Reward payment amount. HCFA determines the amount of a reward 
payment using the following formula:
    (i) Net savings from $1,000 to $10,000--10 percent of the savings, 
with a minimum award amount of $100;
    (ii) Net savings of $10,001 to $100,000--$1,000 for the first 
$10,000 of savings, plus 3 percent of the net savings over $10,000;
    (iii) Net savings of more than $100,000--$3,700 for the first 
$100,000 of savings, plus 0.5 percent of savings over $100,000, with a 
maximum award amount of $25,000.
    (h) Adoption of suggestion and issuance of reward payment--(1) 
Adoption. Upon completing its evaluation, HCFA decides whether to adopt 
a suggestion. If HCFA receives the same or an overlapping suggestion 
from two or more unrelated parties, HCFA will consider a reward only 
for the suggestion HCFA received first, if the suggestion or 
overlapping part of the suggestion are identical, and HCFA has adopted 
that part. If the suggestions are

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not identical, HCFA will consider rewarding the suggestion received 
first, if it is feasible and HCFA is able to adopt and implement the 
suggestion. If the first suggestion cannot be implemented, HCFA may 
consider rewarding the suggestion received next, even if it is similar, 
provided HCFA can adopt and implement the suggestion.
    (2) Issuance of reward payment. After the reward payment amount is 
determined, as described in paragraph (g) of this section, HCFA mails 
payment to the suggester (or to the legal representatives referenced in 
paragraph (k) of this section) only after the suggestion has been in 
operation for 1 year.
    (i) Group suggestions. When HCFA deems that a reward payment is 
appropriate for a suggestion submitted by a group of individuals, HCFA 
pays an equal share of the reward to each of the individuals identified 
in the group. If an organization such as a corporation, partnership, or 
professional association submits a suggestion, HCFA makes a single 
reward payment to that organization.
    (j) Change in name or address. It is the suggester's responsibility 
to notify HCFA of any change of address or other relevant information. 
If the suggester fails to update HCFA on any change in this 
information, and the reward payment mailed to the suggester is returned 
to HCFA, the suggester must claim the reward payment by contacting HCFA 
within 1 year from the date HCFA first mailed the reward payment to the 
suggester. HCFA does not pay interest on rewards that, for any reason, 
are delayed or are not immediately claimed.
    (k) Incapacitated or deceased suggester. If the suggester is 
incapacitated or has died, an executor, administrator, or other legal 
representative may claim the reward on behalf of the suggester or the 
suggester's estate. The claimant must submit certified copies of the 
letters testamentary, letters of administration, or other similar 
evidence to HCFA showing his or her authority to claim the reward. The 
claim must be filed within 1 year from the date on which HCFA first 
attempted to pay the reward to the individual who submitted the 
suggestion.
    (l) Maintenance of records--(1) HCFA retains records related to the 
administration of the suggestion program in accordance with 36 CFR part 
1228 (the regulations for the National Archives and Records 
Administration).
    (2) HCFA does not disclose information submitted under the 
suggestion program, except as required by law.

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

    Dated: April 30, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
    Dated: May 25, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-30678 Filed 11-24-99; 8:45 am]
BILLING CODE 4120-01-P