[Federal Register Volume 66, Number 16 (Wednesday, January 24, 2001)]
[Proposed Rules]
[Pages 7593-7606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1864]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 66, No. 16 / Wednesday, January 24, 2001 / 
Proposed Rules  

[[Page 7593]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 422 and 489

[HCFA-4024-P]
RIN 0938-AK48


Medicare Program; Improvements to the Medicare+Choice Appeal and 
Grievance Procedures

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule sets forth several improvements to the 
Medicare+Choice (M+C) appeal and grievance procedures. Most notably, 
this proposed rule would ensure that M+C enrollees receive written 
notice, including information about appeal rights, at least 4 calendar 
days before the proposed termination date of provider services; and 
establish a new fast-track independent review process for appealing 
decisions to terminate services. (Affected providers include skilled 
nursing facilities (SNFs), home health agencies (HHAs), and 
comprehensive outpatient rehabilitation facilities (CORFs)). The 
proposed rule also discusses and solicits comments on how to provide 
appropriate notice and appeal procedures in situations where an M+C 
organization decides to reduce provider services. We note that 
publication of this proposed rule is a required element of the 
settlement agreement entered into between the parties in Grijalva, et 
al. v. Shalala, Civ. 93-711 (U.S.D.C. Az), a class action lawsuit in 
which the Department agreed to promulgate a notice of proposed 
rulemaking addressing certain notice and appeal procedures for 
enrollees when an M+C organization decides to terminate coverage of 
provider services.
    This proposed rule also would specify hospitals' responsibility for 
issuing discharge notices under both the original Medicare and the M+C 
programs, amend the Medicare provider agreement regulations with regard 
to beneficiary notification requirements, and set forth M+C beneficiary 
grievance procedures.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on March 26, 2001.

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-4024-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    To insure that mailed comments are received in time for us to 
consider them, please allow for possible delays in delivering them.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses: Room 443G, 
Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, 
DC 20201, or Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 
21244-8013.
    Comments mailed to the above addresses may be delayed and received 
too late for us to consider them.
    Because of staff and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-4024-P. 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 office at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 to 5 p.m. (phone: 
(202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Nydia Tirado Peel, (410) 786-1619.

SUPPLEMENTARY INFORMATION:

I. Background

A. Introduction

    Section 4001 of the Balanced Budget Act of 1997 (BBA) (Public Law 
105-33), enacted August 5, 1997, added sections 1851 through 1859 to 
the Social Security Act (the Act) to establish a new Part C of the 
Medicare program, known as the ``Medicare+Choice Program.'' 
Implementing regulations for the M+C program are set forth in 42 CFR 
part 422. Subpart M of part 422 implements sections 1852(f) and (g), 
which set forth the procedures M+C organizations must follow with 
regard to grievances, organization determinations, and reconsiderations 
and other appeals. Under section 1852(f), an M+C organization must 
provide meaningful procedures for hearing and resolving grievances 
between the organization (including any other entity or individual 
through which the organization provides health care services) and 
enrollees in its M+C plans.
    Section 1852(g) addresses the procedural requirements concerning 
coverage determinations (called ``organization determinations''), and 
reconsiderations and other appeals of such determinations. In general, 
organization determinations involve the question of whether an enrollee 
is entitled to receive, or continue to receive, a health service, and 
the amount the enrollee is expected to pay for that service. An 
organization determination may also concern an enrollee's request for 
reimbursement for services obtained without plan approval. As discussed 
in detail below, only disputes concerning organization determinations 
are subject to the reconsideration and other appeal requirements under 
section 1852(g). All other disputes are subject to the grievance 
requirements under section 1852(f). For purposes of this regulation, a 
reconsideration consists of a review of an adverse organization 
determination (a decision that is unfavorable to the M+C enrollee, in 
whole or in part) by either the M+C organization itself or an 
independent review entity. We use the term ``appeal'' to denote any of 
the procedures that deal with the review of organization 
determinations, including reconsiderations, hearings before 
administrative law judges (ALJs), reviews by the Departmental Appeals 
Board (DAB) and judicial review.
    As indicated in our June 29, 2000 M+C final rule (65 FR 20272), we 
made limited changes in the appeal procedures in that rule, but 
intended to publish a proposed rule addressing other improvements to 
the M+C dispute resolution process, including both appeals and 
grievances. This rule fulfills that commitment, as well as meeting the 
Department's obligation pursuant to the Grijalva, et al. v. Shalala 
lawsuit, as discussed below.

[[Page 7594]]

B. Grijalva v. Shalala

    Grijalva v. Shalala is a class action lawsuit brought in 1993 by 
Medicare managed care enrollees. The lawsuit involved, among other 
things, the adequacy of the notice and appeals process provided by 
managed care organizations contracting with Medicare on a risk basis, 
and whether HCFA properly ensured that these contractors afforded 
appropriate rights to enrollees when the contractors denied, reduced, 
or terminated health care coverage.
    On August 9, 2000, the Department and the plaintiffs agreed to 
settle the lawsuit. The settlement agreement was approved by the 
Arizona District Court on December 4, 2000. Under the settlement, we 
agreed to publish proposed regulations to establish new notice and 
appeal procedures when an M+C organization decides to terminate 
coverage of provider services to an enrollee. Affected providers under 
the settlement agreement include skilled nursing facilities (SNFs), 
home health agencies (HHAs) and comprehensive outpatient rehabilitation 
facilities (CORFs). M+C organizations would be required to provide 
written notices to M+C enrollees at least four calendar days before the 
proposed termination date of provider services. The notices, which will 
be subject to public review and comment through OMB's Paperwork 
Reduction Act process, will include a detailed explanation why services 
are no longer medically necessary or covered and a description of the 
appeals process. Additionally, we agreed to establish a new fast-track 
independent review process for appealing decisions to terminate 
services.
    Under the proposed fast-track appeal process, if an enrollee 
disagrees with an M+C organization's decision to terminate the provider 
services at issue, an enrollee may request an immediate review of such 
decision by an independent review entity (IRE) under contract with 
HCFA. This entity would be independent of any managed care 
organization, or company affiliated with a managed care organization. 
The enrollee would have a right to continued coverage of the provider 
services in question, without financial liability, until at least noon 
of the day following the IRE's decision, or the date that the M+C 
organization proposes for termination of services, whichever is later. 
If the IRE is unable to make a decision because the M+C organization 
did not timely supply necessary information or records to the IRE, the 
M+C organization would continue to be liable for the costs of any 
extended coverage resulting from the delayed IRE decision.
    We note that an enrollee would not be required to use the fast-
track IRE appeals process and could use other appeal procedures 
available under the M+C regulations (that is, the reconsideration 
procedures described under Secs. 422.582, 422.584, and 422.592); 
however, the right to continued coverage during the appeals process 
would not apply if the enrollee does not use the fast-track IRE appeals 
process.
    The Grijalva settlement agreement included a great deal of 
specificity with regard to the relevant M+C notice and appeal 
requirements, and these proposed requirements are set forth below in 
section II.A. The agreement explicitly establishes that publication of 
these proposed requirements shall in no way be construed as a promise 
or predetermination regarding the content of a subsequent final rule on 
notice and appeal procedures for M+C organization decisions to 
terminate provider services. Thus, we will consider fully all public 
comments on all aspects of this proposed rule, including the Grijalva-
related provisions.

II. Provisions of This Proposed Rule

A. Proposed Notice and Appeal Procedures

1. Applicability
    As noted above, under the terms of the Grijalva settlement 
agreement, the types of Part A Medicare providers to whom the proposed 
notice and appeal provisions would apply include SNFs, HHAs, and CORFs. 
(Note that similar notice and appeal requirements are already in effect 
for M+C enrollees admitted to inpatient hospitals, under 42 CFR 422.620 
and 422.622.) For purposes of this proposed rule, subsequent uses of 
the term ``provider'' should be assumed to refer to these three 
provider types, unless otherwise indicated.
    In addition, as stated in the settlement agreement, 
Sec. 422.624(a)(2) would establish that for purposes of these 
provisions, ``terminations'' refer to the discontinuation or discharge 
of an enrollee from covered provider services where the enrollee has 
been authorized by the M+C organization, either directly or by 
delegation, to receive an ongoing course of treatment from that 
provider. Under this definition, terminations would include (but not be 
limited to) cessation of coverage at the end of a course of treatment 
preauthorized in a discrete increment, regardless of whether the 
enrollee agrees that services should end. Examples of terminations 
would include both discontinuations of a length of stay in a SNF, or of 
a preauthorized number of visits in an HHA or CORF setting. (See 
section II.B below for a discussion of situations involving reductions 
in services.)
2. Termination Notices to M+C Enrollees
    Section 422.624(b) sets forth the proposed advance notification 
requirements when an M+C organization decides, either directly or by 
delegation, to terminate coverage for provider services to an enrollee. 
In general, for any termination of a provider service, the provider of 
the service would be required to notify the enrollee (or the enrollee's 
authorized representative--see parenthetical note below) using a 
standardized notice, of the M+C organization's decision to terminate 
provider services. In developing the standardized notice, HCFA would 
obtain public comment and subsequent approval through the Office of 
Management and Budget (OMB), consistent with section 3506(c)(2) of the 
Paperwork Reduction Act.
    (Consistent with the existing M+C appeal regulations at 
Sec. 422.561, as revised in the June 29, 2000 final rule, an 
``authorized representative'' means any individual authorized by an 
enrollee, or under State law, to act on an enrollee's behalf in 
obtaining an organization determination or in dealing with any of the 
levels of the appeals process, including for example an enrollee's 
legal guardian, attorney, or other legally authorized person. Section 
422.561 clearly establishes that the term ``enrollee'' encompasses an 
enrollee's authorized representative for all aspects of any M+C appeal 
procedures. Thus, references to the ``enrollee'' in subsequent preamble 
and regulatory language can be assumed to apply to an enrollee's 
authorized representative as well, unless the context clearly indicates 
otherwise (such as a reference to the enrollee's health status).)
    a. Provider Notification of Termination. An important feature of 
the proposed notice provisions is that we would charge providers with 
the actual delivery of the required notices. We believe that the 
providers themselves are in the best position to deliver the notices to 
enrollees, and that it would be placing an unreasonable burden on M+C 
organizations to require that they deliver the notices to affected 
enrollees. The M+C organization would retain ultimate responsibility 
for the decision to terminate services and for financial coverage of 
the services, however. The services would remain

[[Page 7595]]

covered until four calendar days after an enrollee receives the 
termination notice, or if the IRE reviews the decision, until noon on 
the day after an IRE decision upholding the M+C organization's 
decision. Thus, we believe that the requirement that providers issue 
these notices, in effect on behalf of M+C organizations, best ensures 
that beneficiaries receive these notices in a timely manner. To 
facilitate implementation of this policy, we are proposing under 
Sec. 422.502(i) that all contracts between M+C organizations and their 
providers must specify that the providers will comply with the notice 
and appeal provisions in subpart M.
    We note that the proposal that providers issue termination notices 
for Part A Medicare services to M+C enrollees is consistent with the 
policy position we outlined in the preamble to the recent M+C final 
rule with respect to hospitals (65 FR 40284). We accordingly are also 
proposing regulations addressing how M+C enrollees are notified of 
terminations of hospital care, as promised in the M+C final rule. 
Specifically, under proposed Sec. 422.620(a), we would specify that in 
situations involving inpatient admissions of M+C enrollees, hospitals 
must provide a written notice of termination of coverage to each 
enrollee that includes the reasons for the discharge. Consistent with 
existing Sec. 422.620, an enrollee would be entitled to coverage of 
hospital services, generally at the expense of the M+C organization, 
until at least noon of the day after the hospital issues such notice.
    We also are amending Sec. 489.27 to provide expressly for this 
hospital responsibility and to provide that this responsibility applies 
for all inpatient hospital Medicare discharges, including both 
discharges of original Medicare beneficiaries and discharges of M+C 
enrollees. Section 489.27 implements the requirement in section 
1866(a)(1)(M) that hospitals provide a notice to all Medicare 
beneficiaries of the individual's rights (referred to as the 
``Important Message from Medicare'' for beneficiaries). Section 
1866(a)(1)(M) provides that this notice must include ``such additional 
information as the Secretary may specify.'' We are specifying in 
proposed revisions to Sec. 489.27 that this information include the 
reasons for the discharge and the right to PRO review, and that this 
information be provided to each beneficiary the day before the 
effective date of the discharge.
    b. Timing of Notices. Section 422.624(b)(1) addresses the timing of 
the required notices. In general, the provider would notify the 
enrollee of the M+C organization's decision to terminate covered 
services four calendar days before the scheduled termination. If the 
provider services are expected to be furnished to an enrollee for a 
time span of fewer than four calendar days in duration, the enrollee 
should be given the notice upon admission to the provider (or at the 
beginning of the service period if there is no official ``admission'' 
to a noninstitutional provider, such as in an HHA setting). The notice 
must be given in all situations, regardless of whether an enrollee 
agrees with the decision that his or her services should end.
    As noted in section I. B above, this proposed rule also provides 
that an enrollee may obtain review by an IRE of a decision to terminate 
services after the enrollee receives proper notice of a decision to 
terminate. As discussed further below, we believe that the 4-day period 
between enrollee notification and the proposed termination of services 
generally should provide sufficient time for all aspects of the 
proposed IRE appeal process. That is, the IRE can obtain the necessary 
documentation from the parties to the appeal, make a decision on the 
enrollee's appeal, and if applicable, notify the enrollee of a decision 
to uphold an M+C organization's termination decision, with coverage 
terminating at noon of the day after the IRE's notification--the fourth 
day of the process. We note that, like the process established under 
Sec. 422.620 for Peer Review Organization (PRO) reviews of appeals of 
hospital discharges, these regulations would establish 12 noon as the 
time when an M+C organization's coverage of an enrollee's services 
would end, if the IRE upholds the M+C organization's decision to 
terminate services.
    A closely related issue on which we are particularly interested in 
receiving public comments involves what constitutes four-day advance 
notice. We are proposing to in effect allow providers a full working 
``day'' within which to deliver the termination notice, with any 
notification delivered during normal business hours on a given day 
serving to initiate the four-day standard on that day, even if the 
timing of the delivery of the notice resulted in fewer than 24 hours to 
ask for an IRE appeal, and fewer than 96 hours between notification and 
the proposed termination of services. That is, a notice delivered to an 
enrollee at 2:00 p.m., Monday, would indicate that the enrollee has 
until noon, Tuesday, to appeal to the IRE, with termination of services 
scheduled for noon, Friday. (Consistent with long-standing 
administrative policy with respect to PRO review of appeals of hospital 
discharges, we would instruct providers that termination notices should 
be delivered no later than 3:00 p.m. on the fourth day before the 
proposed termination of services.) HCFA will develop and publish a 
mandatory standardized notice for distribution by providers, subject to 
public comment through OMB's Paperwork Reduction Act procedures. We 
specifically invite public comment on this approach.
    c. Content of Notices. Section 422.624(b)(2) sets forth proposed 
requirements governing the content of the required termination notices. 
Essentially, each notice would include a specific and detailed 
explanation why services are either no longer medically necessary or 
are no longer covered, with a description of any applicable Medicare 
coverage rule, instruction or other policy (including an appropriate 
citation or information about how to obtain a copy of the Medicare 
policy from the M+C organization). The notice would explain any 
applicable M+C organization policy, contract provision, or rationale 
upon which the termination decision was based. It would include 
specific, relevant information to an extent sufficient to advise the 
enrollee of how a Medicare or M+C organization policy applies to the 
enrollee's case, as well as the date and time that the organization's 
coverage of services ends (and the enrollee's liability would begin).
    In addition to these enrollee-specific items, we would include on 
the standardized termination notices a description of the enrollee's 
fast-track appeal rights under Sec. 422.626, including how to contact 
the IRE to initiate an appeal, as well as the availability of other M+C 
appeal procedures if the enrollee fails to meet the deadline for (or 
decides not to pursue) a fast-track IRE appeal. The standardized notice 
would also inform enrollees of their right, but not obligation, to 
submit evidence to the IRE that the services in question should 
continue.
    As noted above, the termination notice would be subject to public 
review and comment through the OMB's Paperwork Reduction Act process 
before implementation.
    d. Delivery of Notices. Proposed Sec. 422.624(c) specifies that 
``delivery'' of a notice is valid only if an enrollee has signed the 
notice to indicate that he or she both received the notice and can 
comprehend its contents. This proposed policy is consistent with our 
requirements governing delivery of similar notices, such as the

[[Page 7596]]

requirements set forth in HCFA program memoranda A-99-52 and A-99-54 
for HHA advanced beneficiary notices. Under this concept, an enrollee 
who is comatose, confused, or otherwise unable to understand or act on 
his or her rights could not validly ``receive'' the notice, 
necessitating the presence of an authorized representative for purposes 
of receiving the notice. Similarly, presenting the standardized notice 
to a person who is illiterate, blind, or unable to understand English 
would not constitute successful ``delivery'' of the notice. Such 
situations could be remedied either through use of an authorized 
representative if that person has no barriers to receiving the notice 
or through other steps (such as use of a translator or language 
accessible version of the notice) that overcome the difficulties 
associated with notification. Note that we would not interpret the 
requirement for successful delivery to permit an enrollee to extend 
coverage indefinitely by refusing to sign a notice of termination. If 
an enrollee refuses to sign a notice, the provider would annotate its 
copy of the notice to indicate the refusal, and the date of the refusal 
would be considered the date of receipt of the notice.
    Paragraph (c) describes what constitutes an effective delivery of a 
termination notice. The notice would have to be delivered timely, using 
standardized format and language, and include all of the elements 
required under Sec. 422.624(b)(2).
3. Enrollee Appeal Rights
    Proposed Sec. 422.626 would establish an enrollee's right to a 
fast-track appeal of an M+C organization's decision to terminate 
provider services, including the procedures to be followed by the 
various entities involved in the appeal. Under proposed 
Sec. 422.626(a), an enrollee who wishes to appeal a termination 
decision to the IRE must contact the IRE, in writing or by telephone, 
by noon of the first calendar day after receiving the termination 
notice. (We note that in our contract with the IRE, we intend to 
require that the IRE have the capability to log in an enrollee's appeal 
on a daily basis at any time, barring emergencies.) The regulations 
explain that an enrollee who fails to meet this deadline would still be 
able to ask the M+C organization for an expedited reconsideration of 
its determination that services should be terminated, consistent with 
existing Sec. 422.584, but the provision in this rule for the 
completion of IRE review prior to the end of coverage would not apply.
    Under Sec. 422.584, the M+C organization has 72 hours to conduct an 
expedited reconsideration, and must do so when a physician makes or 
supports the request or when not doing so could jeopardize an 
enrollee's health or ability to regain maximum function. We considered 
proposing to amend these regulations to mandate that an M+C 
organization automatically grant any request for an expedited 
reconsideration that involves a situation where an enrollee failed to 
submit a timely request for an IRE appeal of a provider termination of 
services. However, we concluded that the existing standard remains 
appropriate, since it allows a broad spectrum of cases to be considered 
on their merits for reconsideration, rather than inadvertently 
narrowing the types of cases that can be expedited by establishing a 
more specific standard. We welcome comments on this issue.
    Note that when an enrollee receives a termination notice, he or she 
is free to choose to discontinue receiving the covered services (for 
example, leave a SNF) before the termination date specified in the 
notice. Proposed Sec. 422.626(a)(3) clarifies, however, that if the 
enrollee chooses to leave the facility or otherwise discontinue 
receiving covered services before the scheduled date for termination of 
services, the enrollee may not subsequently assert fast-track IRE 
appeal rights relative to the service or expect the services to resume, 
even if the enrollee newly requests the appeal or resumption of 
services before the discontinuation date in the notice. In such a 
situation, if the enrollee changes his or her mind after having 
discontinued receipt of covered services, the enrollee must seek an 
organization determination from the M+C organization for what would be 
considered a request for a new service.
    Proposed Sec. 422.626(b) specifies that an enrollee who timely 
seeks IRE review is protected from liability for the costs of services 
during the fast-track appeals process. Coverage of provider services 
would continue until noon of the day after an enrollee receives notice 
of an IRE's decision upholding the M+C organization's determination, or 
until the time and date designated on the termination notice, whichever 
is later. As noted above, if the IRE decision does not occur by the 
date designated on the termination notice as the result of the M+C 
organization's failure to provide the IRE with necessary information or 
records, the M+C organization would be liable for the costs of the 
resulting additional days of coverage. (Note that our contract with the 
IRE will specify whether the IRE or HCFA assumes financial liability in 
situations where the IRE fails to make a decision on a timely basis.) 
If the IRE finds that the enrollee did not receive proper notice of the 
termination (discussed below), coverage would continue until 4 calendar 
days after proper notice has been received, or until noon on the day 
after notice of an IRE decision upholding the M+C organization's 
decision, whichever is later. Continuation of coverage under these 
circumstances would not be required in the unusual situation where the 
IRE finds that continuation could pose a threat to the enrollee's 
health or safety (e.g., unsafe conditions were found to exist at the 
provider in question).
    Proposed Sec. 422.626(d) and (e) address the basis for the IRE's 
decision, and the procedures it must follow in making the decision. 
Section 422.626(d) would establish that when an enrollee appeals an M+C 
organization's decision to terminate provider services, the burden is 
on the M+C organization to prove to the IRE that the termination is the 
correct decision, either on the basis of medical necessity or other 
Medicare coverage policies. To meet this burden, the M+C organization 
must supply any and all information that the IRE requires to sustain 
the M+C organization's termination decision, including a copy of the 
termination notice. The enrollee may submit evidence to the IRE in 
support of an appeal, but is under no obligation to do so; however, the 
M+C organization or the IRE may require an enrollee to authorize access 
to his or her medical records to the extent reasonably necessary for 
the M+C organization to demonstrate the correctness of its decision or 
for the IRE to determine the appeal. Moreover, as part of its decision-
making process in each appealed case, an IRE would be required under 
proposed Sec. 422.626(e)(4) to solicit the enrollee's views regarding 
the reason(s) specified in the notice for termination of services, or 
any other reason upon which the IRE intends to base its review 
determination.
    Other IRE obligations under proposed Sec. 422.626(e) include:
     On the date it receives the enrollee's appeal request, 
notifying the M+C organization and the provider of the appeal and of 
their documentation submission responsibilities.
     Determining whether an enrollee received proper notice of 
the termination decision, and informing HCFA in each instance of 
improper notification.
     Making a decision on the appeal and notifying the 
enrollee, the M+C organization, and the provider of its decision by 
close of business of the day after it receives the information 
necessary to make the decision.

[[Page 7597]]

    Assuming that the IRE receives all needed information on a timely 
basis, this process would result in an IRE decision by close of 
business on the second full day after the deadline for an enrollee's 
appeal request, with termination of services to take place at noon the 
next day if an M+C organization's termination decision were sustained 
by the IRE. We recognize, however, that in some instances the IRE will 
not receive sufficient information to sustain an M+C organization's 
decision to terminate services. In such a case, the IRE may make a 
decision based on the information at hand that services should not be 
terminated, or it may defer its decision until it receives the 
necessary information. If the IRE makes a decision that services should 
not be terminated, a new termination notice would be required, with 
attendant appeal rights, before the M+C organization could terminate 
services. If the IRE defers its decision, coverage of the services 
would continue until the decision is made but no additional termination 
notice would be required.
    In the event that the M+C organization's decision to discontinue 
services is upheld by the IRE, coverage of the enrollee's services 
would end at noon on the day after the IRE makes its decision or as 
specified in the termination notice, whichever is later. The enrollee 
would then be financially liable for any services provided to him or 
her after the effective date identified in the notice. However, if the 
enrollee further appeals the IRE's determination, and the enrollee 
ultimately receives a determination that overturns the M+C 
organization's decision to discontinue coverage of services, the 
enrollee would be reimbursed by the M+C organization.
    Section 422.626(f) sets forth the M+C organization's 
responsibilities upon contact by the IRE. As noted above, when an 
enrollee requests IRE review of an M+C organization's proposed 
termination of provider services, the burden of proof rests with the 
M+C organization to demonstrate that discontinuation of Medicare 
coverage is the correct decision, either on the basis of medical 
necessity or because of Medicare coverage rules. Accordingly, proposed 
Sec. 422.626(f)(1) requires that the M+C organization supply any and 
all information, including a copy of the termination notice sent to the 
enrollee, that the IRE needs to decide on the appeal. The M+C 
organization must supply such information, either by phone or in 
writing (as determined by the IRE), as soon as possible but no later 
than the close of business of the first day after the day the IRE 
notifies the M+C organization that the enrollee has requested a review. 
(If information is transmitted by phone, there should be a written 
record made of what is transmitted in this manner, so that a record of 
what was said can be accessed by the enrollee).
    Section 422.626(f)(2) would require that, if an enrollee requests a 
copy of (or access to) documentation sent to the IRE, the M+C 
organization must accommodate the enrollee's request by no later than 
the day after the request is made. To accommodate such a request, we 
believe that an M+C organization must make every reasonable effort to 
make such information available, such as allowing the enrollee to view 
or obtain the material at a plan location or faxing or express mailing 
the material to an address specified by the enrollee. The M+C 
organization would be permitted to charge the enrollee a reasonable 
amount, for example, the costs of mailing and/or an amount comparable 
to the charges established by a PRO for duplicating case file material. 
We would expect that the M+C organization could provide the enrollee 
with a reasonable estimate of the costs of duplicating and mailing the 
material to the enrollee at the time of the enrollee's request.
    The proposed regulations clarify that the M+C organization remains 
financially responsible for continuation of coverage throughout the IRE 
appeal process (that is, until the later of the date and time specified 
in the notice of termination or noon of the day after the IRE issues 
its decision on an appeal), regardless of whether it has delegated 
responsibility for authorizing coverage of termination decisions to its 
provider. Again, services that were never authorized by an M+C 
organization, such as services obtained out of the plan, are not 
subject to the IRE appeal process.
    Section 422.626(g) sets forth proposed requirements related to 
reconsiderations of the IRE's decisions. This section would provide 
that an enrollee's first recourse after an unfavorable IRE decision 
would be to request, within 60 days, that the IRE reconsider its 
decision. The IRE would have up to 14 calendar days from the date of 
the request for reconsideration to issue its reconsidered 
determination, with subsequent appeals available to an ALJ, the DAB, 
and a federal court, consistent with the procedures set forth in the 
existing M+C regulations beginning at Sec. 422.600. Because the 
protection against enrollee liability associated with IRE appeals 
extends only to the initial appeal, proposed Sec. 422.626(g)(4) 
specifies that if on reconsideration an IRE's initial decision is 
subsequently reversed in the enrollee's favor, the M+C organization 
must reimburse the enrollee, consistent with the reconsidered decision, 
for the costs of any covered services for which the enrollee has 
already paid the M+C organization or provider.

B. Reductions of Service

    As part of the Grijalva settlement, we agreed to solicit comments 
on how to provide new notice and appeal procedures for decisions by M+C 
organizations to reduce provider services. The issue of what 
constitutes appropriate notice and appeal procedures in these reduction 
of service situations has also been raised by commenters on the M+C 
regulations, most recently in the June 29, 2000 final rule (65 FR 
40277). As discussed in detail in that rule, we made several changes to 
Sec. 422.566(b), which describes actions that constitute organization 
determinations. For example, we added language at Sec. 422.566(b)(3) to 
clarify that an organization's refusal to pay for or provide services 
``in whole or in part, including the type or level of services'' can 
constitute an organization determination if the enrollee believes they 
should be furnished or arranged for. We stated in the preamble to that 
rule (65 FR 40277) that we agreed that ``a reduction in services can be 
considered an organizational determination that is subject to appeal. 
To the extent that a reduction results in an enrollee no longer 
receiving services to which the enrollee believes he or she is 
entitled, this would be subject to appeal under the language in the 
first sentence in section 1852(g)(5) of the Act, which addresses 
appeals based on failure to receive a health service.'' We also noted 
that to the extent that the organization was refusing to continue to 
provide all or part of the services the enrollee believes should be 
furnished, and the enrollee has not received the services, this would 
also fall within the language in Sec. 422.566(b)(3). However, the 
existing M+C regulations do not specify that notices are routinely 
required in connection with a reduction of a service. Instead, 
Sec. 422.566 effectively requires written notifications in connection 
with service reductions only if the enrollee disagrees that the 
services are no longer medically necessary, while Sec. 422.568 
specifies that notices are required for ``denial'' of services.
    We have consulted extensively on this issue with industry, 
provider, consumer, and government groups, and have reviewed numerous 
public comments. Clearly, it is a complicated

[[Page 7598]]

issue, and we recognize that there are many reasonable, divergent 
viewpoints. Industry representatives generally point out the 
administrative and financial burden associated with notice 
requirements. They maintain that is unnecessary to require notification 
to enrollees for a reduction of an ongoing course of treatment and 
argue that once an M+C organization has authorized treatment for a set 
period of time, the organization never retracts the authorization. Some 
commenters have argued that providing detailed notice in all reduction 
situations would be confusing, burdensome and intrusive upon the 
physician/patient relationship. Other commenters urged that written 
notice should take place in all instances where services are reduced, 
in order to ensure that enrollees are always made aware of their appeal 
rights.
    Based on our review of previous comments on this issue, as well as 
an examination of analogous Medicaid requirements, we are considering 
adopting the position that a written notice should be required if there 
is a reduction in any previously authorized ongoing course of 
treatment. That is, notice would not be required at every reduction, 
but only when there is a change in an authorized plan of treatment that 
reduces the level of services from those previously authorized. We 
note, however, that unlike under the Medicaid program, the current M+C 
regulations do not call for a required plan of treatment in all cases, 
and we are not proposing that plans of care should be routinely 
required. (Existing Sec. 422.112(a)(4)(iii) does require a treatment 
plan for individuals with serious medical conditions.) In cases where a 
plan of treatment is in place, however, we believe that enrollees 
should be entitled to written notification when the prescribed 
treatments are to be reduced. We believe that this approach could serve 
to balance the need for adequate notice with the potential burdens or 
beneficiary confusion that might ensue if notice were required in all 
cases of reductions of services. Note that we are not putting forth 
specific regulatory language that would implement this approach; 
rather, we are soliciting comments on this proposal. We particularly 
welcome comments that include specific revisions to the existing 
regulations with respect to enrollee notification requirements.

C. Grievance Procedures (Sec. 422.564)

    Section 1852(f) of the Act requires that each M+C organization 
provide ``meaningful procedures for hearing and resolving grievances.'' 
Existing Sec. 422.561 defines a grievance as any complaint or dispute 
other than one that involves an ``organization determination'' (as 
described under Sec. 422.566(b)). (This definition retains the meaning 
of grievance used in part 417.) An enrollee might file a grievance if, 
for example, the enrollee received a service but believed that the 
service was not carried out properly or that the demeanor of the person 
providing the service was insulting or otherwise inappropriate. 
Grievance procedures also apply when an enrollee disagrees with an M+C 
organization's decision not to expedite an enrollee's request for an 
organization determination or a reconsideration.
    In the June 26, 1998 interim final rule that implemented the M+C 
program (63 FR 35030), we set forth the general requirement that an M+C 
organization must resolve grievances in a timely manner and have 
grievance procedures that meet HCFA guidelines, in anticipation of 
future HCFA policy direction on grievance procedures. At that time, we 
indicated that we intended to establish more detailed requirements for 
grievance procedures through a notice of proposed rulemaking (NPRM). To 
inform the NPRM development process, we requested public comments on 
the necessary elements of a meaningful grievance procedure (such as 
recommended time frames, the types of issues that should be considered 
grievances, need for an expedited grievance process, and the type of 
notification enrollees should receive concerning the outcome of their 
grievance.) As anticipated, commenters had varied recommendations 
related to organization-level grievance procedures.
    Subsequently, we consulted with representatives of the managed care 
industry, beneficiary advocacy groups, and PROs, reviewed comments we 
received from the public, and examined recent standards in this area, 
such as those developed by the National Association of Insurance 
Commissioners (NAIC). (NAIC has developed and adopted a Model Grievance 
Act setting forth standards for grievance procedures.) We also took 
into consideration that section 1852(c)(2)(C) requires M+C 
organizations to provide data on the number of grievances and their 
disposition in aggregate data reporting. The proposals set forth below 
are the result of this consultation and public comment process.
    First, we propose to include the following revised definition of a 
grievance under Sec. 422.561: ``Grievance means any complaint or 
dispute, other than one that constitutes an organization determination, 
expressing dissatisfaction with any aspect of an M+C organization's or 
provider's operations, activities, or behavior, regardless of whether 
remedial action is requested.'' Under Sec. 422.564(a), we would retain 
the general rule that each M+C organization must provide meaningful 
procedures for timely hearing and resolution of grievances between 
enrollees and the organization or any other entity or individual 
through which the organization provides health care services under any 
M+C plan it offers. We would also retain current regulatory text under 
Secs. 422.564(b) and (c) describing how grievances are distinguished 
from organization determination and appeal procedures and from the PRO 
complaint process, respectively. (Under section 1154(a)(14) of the Act, 
a PRO must review beneficiaries' written complaints about the quality 
of services they have received under the Medicare program; this process 
is separate and distinct from the M+C organization's grievance 
procedures.) We would add to Sec. 422.564(b) a proposed requirement 
that when an M+C organization receives a complaint, it must promptly 
determine and inform the enrollee whether the issue is subject to its 
grievance procedures or its appeal procedures.
    Note that we view ``complaint'' and ``dispute'' as generic terms 
that cover various expressions of dissatisfaction or disagreement that 
may be brought to the attention of an M+C organization or its 
providers. Thus, complaints or disputes can encompass grievable or 
appealable issues, but in either case would require resolution in 
accordance with the organization's internal procedures.
    We note that in our consultations on grievance issues, there were 
conflicting views on the most appropriate means for dealing with 
quality of care issues; for example, should a quality of care issue 
first be raised with the M+C organization and subsequently sent to the 
PRO, immediately referred to the PRO, or allowed to proceed on 
separate, simultaneous tracks. As reflected under proposed 
Sec. 422.564(c), we concluded that the appropriate course was to permit 
maximum discretion to M+C enrollees in this regard. Accordingly, 
Sec. 422.564(c) explains that, for quality of care issues, an enrollee 
may file a grievance with the M+C organization, file a written 
complaint with the PRO, or both.
    We considered including a definition of ``quality of care'' issue 
in the proposed regulations, such as the following suggestion developed 
by a workgroup we formed to discuss grievance procedures: ``Quality of 
care

[[Page 7599]]

issues may include complaints regarding the timeliness, 
appropriateness, access to, and/or setting of a provided health 
service, procedure, or item. Quality of care issues may also include 
complaints that a covered health service, procedure or item during a 
course of treatment did not meet accepted standards for delivery of 
health care.'' However, we concluded that the term ``quality of care'' 
does not lend itself to the specificity that would be implied by a 
regulatory definition and instead believe that it would be in the best 
interests of M+C enrollees not to unduly limit the types of complaints 
that could be viewed as quality of care issues. We intend to adopt a 
more flexible approach that would rely on providing general guidance as 
to the types of issues that could fall into the quality of care 
category. We welcome comments on this approach, the definition above, 
and the appropriateness of including such a definition in the M+C 
regulations as opposed to issuing other forms of guidance in this area.
    Section 422.564(d) specifies that an enrollee must file a 
grievance, either orally or in writing, no later than 60 days after the 
event or incident that precipitates the grievance. We welcome comments 
on whether this or any time limitation is appropriate.
    Proposed Sec. 422.564(e) sets forth procedures for grievance 
disposition and enrollee notification. Proposed Sec. 422.564(e)(1) 
would establish that an M+C organization must notify the enrollee of 
its decision as expeditiously as the case requires, based on the 
enrollee's health status, but no later than 30 calendar days after the 
date the organization receives the grievance. In arriving at this time 
frame, we researched recent standards in this area, such as the NAIC's 
model Grievance Act. Additionally, our research indicated that a 
majority of M+C organizations have procedures that require resolution 
of a grievance within time frames between 5 and 30 days, with a 
possible 10 to 15 day extension. Thus, we believe that a maximum time 
frame of 30-calendar days for resolving a grievance is a reasonable 
standard. Given that a majority of the M+C organizations are already 
resolving grievances within less than 30 days, achieving this time 
frame should not be burdensome, while still satisfying the statutory 
requirement that an M+C organization provide ``meaningful procedures 
for resolving grievances.''
    In conjunction with this time frame, we are also proposing under 
Sec. 422.564(e)(2) that the M+C organization may extend the time frame 
by up to 14 calendar days if the enrollee requests the extension or if 
the organization justifies a need for additional information and the 
delay is in the interest of the enrollee. This extension period is 
consistent with the extensions currently permitted for standard and 
expedited organization determinations.
    Section 422.564(e)(3) would require an M+C organization to inform 
the enrollee of the disposition of the grievance as follows: (1) All 
grievances submitted in writing must be responded to in writing; and 
(2) grievances submitted orally may be responded to either orally or in 
writing unless a written response is specifically requested by the M+C 
enrollee. The M+C organization's written response to a grievance 
involving quality of care issues or concerns must describe the 
enrollee's right to seek PRO review. (Again, we intend to issue further 
guidance on what constitutes a quality of care issue, but we generally 
believe that an M+C organization should err on the side of a broad 
interpretation of this concept.) For any complaint involving a PRO, the 
M+C organization must cooperate with the PRO in resolving the 
complaint. Thus, regardless of whether an enrollee pursued the 
grievance with an M+C organization, the M+C organization would have an 
obligation to provide necessary records to the PRO and/or implement a 
PRO-directed action with regard to a written quality of care complaint.
    Section 422.564(f) addresses expedited grievances. Under proposed 
Sec. 422.564(f), an M+C organization would be required to expedite a 
grievance under any of the following circumstances: (1) The grievance 
involves an M+C organization's decision to invoke an extension relating 
to an organization determination or reconsideration; (2) the grievance 
involves an M+C organization's refusal to grant an enrollee's request 
for an expedited organization determination under Sec. 422.570 or 
reconsideration under Sec. 422.584; or (3) applying the standard time 
frame for resolving a grievance seriously jeopardize the enrollee's 
life, health or ability to regain maximum function (if, for example, a 
quality of care dispute required immediate resolution). We are 
proposing that the M+C organization notify the enrollee of its decision 
on an expedited grievance within 72 hours of receipt of the enrollee's 
grievance, consistent with the time frame for expedited appeals.
    The new grievance procedures would conclude with the proposed 
requirement under Sec. 422.564(g) that the M+C organization have a 
system to track and maintain records on all grievances received both 
orally and in writing, including the final disposition of the 
grievance. The tracking system should maintain, at a minimum, date of 
receipt, disposition and date the response was given. We believe such a 
system is necessary to ensure that an M+C organization can comply with 
the requirement under section 1852(c)(2)(C) of the Act that it be able 
to provide aggregate information on the number and disposition of 
appeals.

D. Sanctions for a Failure To Comply With IRE Appeal Requirements

    As in the case of all other grievance and appeal requirements in 
subpart M of part 422, under Sec. 422.510(a)(6), a substantial failure 
to comply with the new requirements proposed in this notice of proposed 
rulemaking would be grounds for termination of an M+C organization's 
contract. Pursuant to Sec. 422.752(b), such a failure to comply would 
also be grounds for intermediate sanctions under Sec. 422.756(c)(1) and 
(c)(3), and pursuant to Sec. 422.758, would be grounds for civil money 
penalties.

E. Proposed Changes to the Medicare Provider Agreement Regulations 
(Secs. 489.20 and 489.27)

    In this proposed rule, we would also set forth changes to the 
provider agreement regulations at 42 CFR part 489 that would specify 
that distribution of the notices required under this proposed rule is 
one of the basic commitments that the providers subject to the IRE 
process must fulfill as part of their agreement to provide Medicare 
services. Specifically, we would amend Secs. 489.20(p) and 489.27 to 
set forth these provider obligations under the IRE appeals process. As 
noted above, we have also proposed to revise the provision implementing 
the ``important message'' requirement in section 1866(a)(1)(M) to 
require that hospitals provide notices with information on the reasons 
for a discharge in accordance with Sec. 422.620. We are proposing that 
such notification requirements could only be implemented when the 
notices in question have been approved by the Office of Management and 
Budget under section 3506(c)(2)(A) of the Paperwork Reduction Act. We 
believe these changes are critical to facilitating and enforcing the 
required distribution of notices similar to those that would be under 
this proposed rule as a mandatory responsibility of the affected 
Medicare providers.

[[Page 7600]]

III. Collection of Information Requirements--Paperwork Reduction 
Act

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 60-day notice in the Federal Register and solicit 
public comment when a collection of information requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. To fairly evaluate whether an information collection should 
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comments on the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
     The accuracy of the agency's estimate of the information 
collection burden;
     The quality, utility, and clarity of the information to be 
collected; and
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirements discussed below.

Section 422.564  Grievance Procedures

    An enrollee may file a grievance either orally or in writing. For 
quality of care issues, an enrollee may file a grievance with the M+C 
organization or file a written complaint with the PRO, or both.
    We conducted a random sampling of M+C enrollees in ten states from 
the most recent Medicare Health Plan Compare data. In rating the 
overall quality of their managed care plans on a scale of 0-10 (0--
worst possible care, 10--best possible care), an average of 17% of M+C 
enrollees gave their plans the lowest ratings of seven or less. Based 
on the results of the sampling, we extrapolated that approximately 17% 
of all M+C enrollees likely would experience some dissatisfaction with 
their M+C organizations. Since there are currently 6.2 million M+C 
enrollees, we determined that 1,054,000 enrollees likely would 
experience some dissatisfaction with their M+C organizations in a given 
year. Based on the General Accounting Office's (GAO) April 1999 report, 
Medicare Managed Care: Greater Oversight Needed to Protect Beneficiary 
Rights, M+C organizations resolved approximately 75% of appeals between 
January 1996 and May 1998. HCFA's current managed care independent 
review entity, the Center for Health Dispute Resolution (CHDR), 
received approximately 20,000 appeals from M+C organizations for 2000. 
Therefore, we estimate that approximately 80,000 (approx. 8% of the 
total number of those dissatisfied) enrollees filed appeals during 
2000. Since grievances are broader in scope than appeals, we believe 
that there are likely to be twice as many grievances than appeals. 
Thus, we estimate that it will take approximately 160,000 enrollees 
(approx. 16% of the total number of those dissatisfied) 15 minutes to 
file a written grievance on an annual basis. The total annual burden 
associated with this requirement is 40,000 hours.
    The M+C organization must notify the enrollee of its decision as 
expeditiously as the case requires, based on the enrollee's health 
status, no later than 30 calendar days after the date the organization 
receives the oral or written grievance. Generally, only written 
grievances will be responded to in writing.
    It is estimated that it will take M+C organizations 15 minutes to 
prepare and furnish each notice and that each M+C organization will be 
required to provide an estimated 160,000 notices on an annual basis. 
The total annual burden associated with this requirement is 40,000 
hours.
    An M+C organization may extend the 30-day time frame by up to 14 
calendar days if the enrollee requests the extension or if the 
organization justifies a need for additional information and documents 
how the delay is in the interest of the enrollee. When the M+C 
organization extends the deadline, it must immediately notify the 
enrollee in writing, in accordance with the requirements and procedures 
set forth in this section.
    We believe that M+C organizations generally will be able to meet 
the 30 day time frame. However, M+C organizations are more likely to 
invoke an extension for quality of care complaints since they often 
require investigations. We estimate that of the 160,000 grievances 
filed, approximately 20% (32,000) will be related to quality of care 
issues. It is estimated that it will take M+C organizations 15 minutes 
to prepare and furnish each notice and that each M+C organization will 
be required to provide an estimated 32,000 notices on an annual basis. 
The total annual burden associated with this requirement is 8,000 
hours.
    For an expedited grievance, the M+C organization must notify the 
enrollee of its decision within 72 hours of receipt of the enrollee's 
grievance. In accordance with paragraph (e)(2) and (f)(1) through (3) 
of this section.
    We believe that most expedited grievances will be related to 
quality of care issues and the M+C organization's decision not to 
process an appeal on an expedited basis. As explained above, we 
estimate that there will be 32,000 quality of care grievances. Because 
all quality of care grievances must be responded to in writing 
irrespective of the time frame in which they are being processed (i.e., 
30 days + 14 day extension for standard and 72 hours for expedited 
grievance requests), the number of written decisions already have been 
accounted, i.e., 8,000 hours.
    CHDR data show that it will process approximately 3800 (19% of the 
IRE's total number of appeals) expedited appeals for 2000. On the basis 
of GAO's finding that 75% of appeals are resolved at the M+C 
organization level (see above discussion), we infer that M+C 
organizations will process approximately 15,000 expedited cases per 
year (19% of 80,000 appeals at the M+C organization level). Although we 
have no data at the M+C organization level to deduce the number of 
expedited appeal requests in a given year, we estimate that M+C 
organizations deny processing approximately 10% (1500) above the total 
number expedited. Of the 1500 denied expedited requests, we estimate 
that approximately 20% (300) will file a grievance. It is estimated 
that it will take M+C organizations 15 minutes to prepare and furnish 
each decision and that each M+C organization will be required to 
provide an estimated 300 notifications on an annual basis. The total 
annual burden associated with this requirement is 75 hours.
    An M+C organization must maintain records on all grievances 
received both orally and in writing, including the final disposition of 
the grievance.
    It is estimated that it will take M+C organizations 30 minutes (per 
enrollee who files a grievance) to maintain records on all grievances 
on an annual basis. Of the 1,054,000 enrollees likely to be 
dissatisfied with their M+C organizations, we estimate that 
approximately 420,000 will file an oral or written grievance. The total 
annual burden associated with this requirement is 210,000 hours.

Section 422.620  How Hospitals Must Notify Enrollees of M+C 
Organizations of Noncoverage of Inpatient Hospital Care

    When an M+C organization has authorized coverage of the inpatient 
admission of an enrollee, either directly or by delegation (or the 
admission constitutes emergency or urgently needed care, as described 
in Secs. 422.2

[[Page 7601]]

and 422.113), the hospital must provide a written notice of termination 
of coverage to each enrollee, consistent with paragraph (c) of this 
section.
    Based on 1998 statistics, approximately 11,000,000 beneficiaries 
(original Medicare and M+C) received inpatient hospital services. It is 
estimated that it will take hospitals 20-30 minutes to prepare and 
furnish each notice and that each hospital will be required to provide 
an estimated 11,000,000 notifications on an annual basis. The total 
annual burden associated with this requirement is approximately 
3,666,667--5,500,000 hours. There are approximately 6,200,000 (16% of 
the total Medicare population) M+C enrollees out of approximately 39 
million Medicare beneficiaries. We extrapolate that approximately 
1,760,000 M+C enrollees received inpatient hospital services. Thus, the 
total annual burden associated with providing notices to M+C enrollees 
is approximately 586,667--880,000 hours. (Note that issuance of these 
notices will not take effect until a separate PRA statement has been 
published.

Section 422.624  Notifying Enrollees of Provider Service Terminations

    For any termination of service, the provider of the service must 
notify the enrollee in writing of the M+C organization's decision to 
terminate services. The provider must use a standardized notice, 
required by the Secretary, in accordance with the requirements and 
procedures set forth in this section.
    It is estimated that it will take providers (skilled nursing 
facilities (SNFs), home health agencies (HHAs), and comprehensive 
outpatient rehabilitation facilities (CORFs)) 15 minutes to prepare and 
furnish each notice. In 1997, there were 1,503,000 Medicare 
beneficiaries receiving SNF services and 3,505,000 Medicare 
beneficiaries receiving HHA services. (Note that the amount of Medicare 
business with CORFs is so small that Medicare statistical summaries do 
not include a separate line item for patient encounters with these 
facilities. Thus, we are unable to extrapolate under original Medicare. 
The number of possible M+C CORF cases, and the analysis below, is 
necessarily limited to SNF and HHA services.) The total annual burden 
associated with this requirement is 200,320 hours. We extrapolate that 
providers will be required to give an estimated 801,280 (16% of 
5,008,000 Medicare beneficiaries) notices to M+C enrollees.

Section 422.626  Fast-Track Appeals of Service Terminations to the IRE

    An enrollee who desires a fast-track appeal must submit a request 
for an appeal to the IRE, in writing or by telephone, by noon of the 
first calendar day after receipt of the written termination notice. If 
the IRE is closed on the day the enrollee requests a fast-track appeal, 
the enrollee must file a request by noon of the next day that the IRE 
is open for business.
    Based on our figures above, approximately 8% of all enrollees file 
appeals. Thus, 8% of the 801,280 M+C enrollees who receive notices are 
likely to file appeals with the IRE. It is estimated that it will take 
approximately 64,000 enrollees 15 minutes to file an appeal on an 
annual basis. The total annual burden associated with this requirement 
is 16,000 hours.
    The enrollee may submit evidence to be considered by the IRE in 
making its decision and may be required by the IRE to authorize access 
to his or her medical records in order to pursue the appeal.
    It is likely that 10% of the 64,000 enrollees who file appeals will 
also submit additional evidence. It is estimated that it will take 
6,400 enrollees 60 minutes to submit evidence on an annual basis. Since 
beneficiaries will not be functioning at their maximum capacity and it 
will take them longer to gather their thoughts and evidence, we 
estimate that it will take them 4 times longer than providers to submit 
additional information. The total annual burden associated with this 
requirement is 6400 hours.
    Upon notification by the IRE of a fast-track appeal, the M+C 
organization must supply any and all information, including a copy of 
the notice sent to the enrollee, no later than by close of business of 
the first day after the day that the IRE notifies the M+C organization, 
that the IRE needs to decide on the appeal.
    It is estimated that it will take M+C organizations 60-90 minutes 
to furnish any and all information, including a copy of the notice sent 
to the enrollee, and that each M+C organization will be required to 
provide an estimated 64,000 disclosures on an annual basis. The total 
annual burden associated with this requirement is 64,000-96,000 hours.
    Upon an enrollee's request, the M+C organization must provide a 
copy of, or access to, any documentation sent to the IRE no later than 
close of business of the first day after the day the material is 
requested.
    We estimate that 20% of the 64,000 enrollees who file an appeal 
will request copies of information forwarded to the IRE. It is 
estimated that it will take M+C organizations 15 minutes to provide a 
copy of all information provided to the IRE, to the enrollee, and that 
each M+C organization will be required to provide an estimated 12,800 
disclosures on an annual basis. The total annual burden associated with 
this requirement is 3,200 hours.
    If the IRE upholds an M+C organization's termination decision in 
whole or in part, the enrollee may file, no later than 60 days after 
notification that the IRE has upheld the decision, a request with the 
IRE for an IRE reconsideration of its original decision.
    It is estimated that 40% of the 64,000 appeals (25,600) will be 
overturned by the IRE. Of those, we estimate that 20% of the enrollees 
will request a reconsideration by the IRE. It is estimated that it will 
take 5,120 enrollees 30 minutes to file a request for reconsideration 
on an annual basis. The total annual burden associated with this 
requirement is 2,560 hours.
    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements in Secs. 422.564, 422.620, 
422.624, and 422.626. These requirements are not effective until they 
have been approved by OMB.
    If you have any comments on any of these information collection and 
record keeping requirements, please mail the original and 3 copies 
within 60 days of this publication date directly to the following:

Health Care Financing Administration, Office of Information Services, 
Information Technology Investment Management Group, Division of HCFA 
Enterprise Standards, Room N2-14-26, 7500 Security Boulevard, 
Baltimore, MD 21244-1850. Attn: John Burke HCFA-4024-P.
And, Office of Information and Regulatory Affairs, Office of Management 
and Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Allison Heron Eydt, HCFA Desk Officer.

IV. Regulatory Impact Statement

A. Introduction

    We have examined the impact of this proposed rule as required by 
Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Public 
Law 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

[[Page 7602]]

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, non-
profit 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.
    The Unfunded Mandate Reform Act of 1995, in section 202, requires 
that agencies prepare an assessment of anticipated costs and benefits 
before proposing any rule that may result in an expenditure by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $100 million in any one year. This rule has no consequential 
effect on State, local, or tribal governments.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any 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) of the Act, we define a 
small rural hospital as a hospital that is located outside a 
Metropolitan Statistical Area and has fewer than 50 beds.
    As discussed in detail above, this proposed rule would establish 
new notice and appeal procedures for enrollees when an M+C organization 
decides to terminate coverage of services by SNFs, HHAs, and CORFs. 
This proposed rule also would specify hospitals' responsibility for 
issuing discharge notices, amend the Medicare provider agreement 
regulations with regard to beneficiary notification requirements, and 
set forth M+C grievance procedures. In general, we believe that these 
changes would enhance the rights of M+C enrollees and other Medicare 
beneficiaries, without imposing any significant financial burden on 
these individuals. The impact of the specific provisions of the 
proposed rule on M+C organizations and providers is discussed below.

B. New Notice and Appeal Procedures for Provider Terminations 
(Secs. 422.624 and 422.626)

    Although some aspects of this proposed rule do not lend themselves 
to quantifiable cost estimates, we believe that the most significant 
costs associated with the new M+C notice and appeal procedures will 
result from the Secretary's commitment to contract with an independent 
review entity to conduct an expedited review of all provider 
termination cases appealed by M+C enrollees. In order to project the 
number of appeals that may be involved, we examined the latest 
available appeals data from the Center for Health Dispute Resolution 
(CHDR), the organization with whom HCFA now contracts to conduct 
appeals of M+C reconsiderations. (Under existing Sec. 422.592, any case 
where an M+C organization's reconsideration results in affirming an 
adverse organization determination is automatically sent to CHDR for 
review.) In 1999, CHDR reviewed approximately 3,000 cases involving 
services provided by SNFs, HHAs, or CORFs. (Note that we have no way of 
knowing the proportion of these cases that involved service 
terminations but, for impact analysis purposes, will assume that all 
cases could be subject to the new expedited appeal procedures.) 
According to the General Accounting Office's 1999 Report to the Special 
Committee on Aging, ``Greater Oversight Needed to Protect Beneficiary 
Rights,'' managed care organizations reverse their original adverse 
determinations in approximately 75 percent of appealed cases; thus we 
believe that the 3,000 cases that went to CHDR likely represent about 
25 percent of all appeals (i.e., ``reconsiderations'') involving 
affected providers that are now conducted by M+C organizations. Thus, 
we believe that the minimum number of provider appeals that would 
likely be heard by an IRE under the procedures proposed in this NPRM 
would be 12,000 cases, with contracting costs to HCFA estimated at a 
minimum of $10 million.
    For each of these 12,000 cases, M+C organizations would be required 
under these proposed rules to make available to the IRE, and to the 
enrollee upon request, a copy of any documentation needed to decide on 
the appeal. Although we recognize the administrative burden associated 
with this requirement, we believe that the existing M+C reconsideration 
process would already result in the M+C organization gathering and 
reviewing the case file to reach a reconsidered determination. 
Moreover, any burden on M+C organizations would be more than offset by 
the fact that M+C organizations would no longer be required to conduct 
reconsideration of any cases covered under this proposed rule. That is, 
the new IRE would conduct reviews not just of the 3,000 cases that now 
go to CHDR but also of the 9,000 cases which are now subject to the M+C 
organization reconsideration process.
    Currently, we have no M+C encounter data that would permit a 
precise count of the annual number of SNF, HHA, and CORF admissions, 
and thus the number of notices that must be issued under this proposed 
rule. Based on comparisons with data available from original Medicare 
admissions (as well as extrapolating from the original Medicare appeals 
rate of 1 percent), we estimate a total of approximately 800,000 to 1 
million provider terminations for which notices would be required under 
this proposed rule, with an associated aggregate financial impact of $8 
to $10 million.
    Another important element of this proposed rule is the provision 
that an M+C organization would be financially liable for services 
provided during the 4-day period between issuance of the termination 
notice and resolution of the enrollee appeal, if any. However, our 
expectation is that notices would be provided four days before care is 
expected to be no longer medically necessary, with any appeals competed 
by the end of those four days. Moreover, we believe that M+C 
organizations are generally covering all medically necessary care for 
their enrollees under the existing regulations. Thus, this proposed 
provision should have minimal, if any financial impact on M+C 
organizations.

C. Grievance Procedures (Sec. 422.564)

    Proposed Sec. 422.564 includes several provisions that clarify the 
existing requirement that each M+C organization provide meaningful 
procedures for timely hearing and resolution of grievances between 
enrollees and the M+C organization. Grievances essentially include any 
complaint or dispute, other than one that constitutes an organization 
determination, expressing dissatisfaction with any aspect of an M+C 
organization's or provider's operations. We have no data on the the 
number of grievances that are currently brought to the attention of M+C 
organizations, and would welcome any quantifiable estimates from 
commenters. As discussed in detail in section II.C of this proposed 
rule, however, we have carefully examined the grievance procedures now 
in use by M+C organizations, and in particular the grievance procedures 
spelled out in the NAIC's Model Grievance Act, in developing our 
proposed procedures. We believe that M+C organizations are in large 
measure already in compliance with proposed grievance procedures set 
forth here, and that these proposals would not result in any 
substantial impact on most M+C organizations.

D. Hospital Discharge Notices (Secs. 422.620 and 489.27)

    This proposed rule would clarify that hospitals are required to 
notify M+C

[[Page 7603]]

enrollees of terminations of hospital care. This proposal is consistent 
with the policy position we outlined in the preamble to the recent M+C 
final rule with respect to hospitals (65 FR 40284). Specifically, 
proposed Sec. 422.620(a) would specify that in situations involving 
inpatient admissions of M+C enrollees, hospitals must provide a written 
notice of termination of coverage to each enrollee that includes the 
reasons for the discharge. We also are amending Sec. 489.27 to provide 
expressly for this hospital responsibility. Section 489.27 implements 
the requirement in section 1866(a)(1)(M) that hospitals provide a 
notice to all Medicare beneficiaries of the individual's rights 
(referred to as the ``Important Message from Medicare'' for 
beneficiaries). Section 1866(a)(1)(M) provides that this notice must 
include ``such additional information as the Secretary may specify.''
    As a general rule, we believe that hospitals are already issuing 
these notices and thus that these proposed regulatory changes will not 
have a substantial financial impact, with one exception as discussed 
below. Under the M+C program, for example, hospitals are required under 
section 1866(a)(1)(M) of the Act to issue the ``Important Message from 
Medicare'' to each enrollee upon admission. In addition, existing 
Sec. 422.620(c) requires that written notice of discharge (the ``Notice 
of Discharge and Medicare Appeal Rights''--NODMAR) be provided M+C 
enrollees no later than the day before hospital coverage ends. Although 
the regulations now do not specify who must issue these notices, our 
understanding is that hospitals generally carry out this function on 
the behalf of M+C organizations, and we would expect that practice to 
continue.
    Similarly, under original Medicare, hospitals are now required (1) 
under section 1866(a)(1)(M) of the Act to issue the ``Important Message 
from Medicare'' upon admission; and (2) in order to be protected from 
liability under section 1879 of the Act, to issue the ``Hospital Issued 
Notice of Noncoverage'' (HINN) near the time of discharge. These 
notices are necessary to ensure that beneficiaries are aware of their 
rights to appeal a hospital's determination that inpatient care is no 
longer necessary under the Medicare program. To the extent that 
hospitals are issuing these notices, this proposed rule would not 
impose any additional costs on hospitals for original Medicare 
admissions; costs associated with patient notifications would be paid 
for under inpatient hospital standardized payment amount, which 
encompasses all administrative costs.
    However, our understanding is that although hospitals are routinely 
issuing the ``Important Message from Medicare,'' many hospitals are not 
now routinely issuing HINNs to original Medicare beneficiaries, but are 
instead issuing them only for disputed discharges. Consistent with the 
estimates discussed above in section III of this proposed rule, we 
believe that the number of original Medicare hospital discharges where 
HINNs should be issued is roughly 9.4 million, at an estimated annual 
cost of approximately $117,000,000 (30 minutes per notice at $25 per 
hour). Based on an estimated 6,300 participating hospitals, the 
projected financial impact of distributing these discharge notices as 
required under this proposed rule would be $18,500 per hospital, to the 
extent that hospitals are not now issuing the discharge notices. Given 
that we are unable to determine the extent to which the discharge 
notices are now being issued by hospitals to original Medicare 
beneficiaries, we believe that the associated costs may represent an 
additional financial impact on hospitals. We welcome comments on these 
estimates.
    Therefore, this proposed rule would be a major rule as defined in 
Title 5, United States Code, section 804(2). In accordance with 
Executive Order 12866, this regulation was reviewed by the Office of 
Management and Budget.

V. Other Required Information

A. Federalism Summary Impact Statement

    On August 4, 1999, the president signed Executive Order 13132 
(effective November 2, 1999) establishing certain requirements that an 
agency must meet when it promulgates regulations that impose 
substantial direct compliance costs on State and local governments, 
preempt State law, or otherwise have federalism implications. Any such 
regulations must include a federalism summary impact statement that 
describes the agency's consultation with State and local officials and 
summarizes the nature of their concerns, the extent to which these 
concerns have been met, and the agency's position supporting the need 
to issue the regulation. In this NPRM, we are not proposing any changes 
to the existing M+C regulations that meet any of the criteria mentioned 
above that would require the inclusion of a federalism impact statement 
under Executive Order 13132.

B. Responses to Comments

    Because of the large number of items of correspondence we normally 
receive on a rule, we are not able to acknowledge or respond to them 
individually. We will, however, consider all comments that we receive 
by the date specified in the DATES section of this preamble and respond 
to the comments a subsequent rulemaking document.

List of Subjects

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Medicare+Choice, Penalties, Privacy, 
Provider-sponsored organizations (PSO), Reporting and recordkeeping 
requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Health Care 
Financing Administration proposes to amend 42 CFR chapter IV as set 
forth below:

PART 422--MEDICARE+CHOICE PROGRAM

    A. Part 422 is amended as set forth below:
    1. The authority citation for part 422 continues to read as 
follows:

    Authority: Secs. 1102, 1851 through 1857, 1859, and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395W-21 through 1395w-27, and 
1395hh).

    2. In Sec. 422.502, paragraph (i)(3)(iv) is added to read as 
follows:


Sec. 422.502  Contract provisions.

* * * * *
    (i) * * *
    (3) * * *
    (iv) A provision specifying that these entities will comply with 
applicable notice and appeal provisions in subpart M of this part, 
including but not limited to, the notification requirements in 
Secs. 422.620 and 422.624 and the requirements in Sec. 422.626 
concerning supplying information to an IRE.
* * * * *
    3. In Sec. 422.561, the definition of ``grievance'' is revised to 
read as follows:


Sec. 422.561  Definitions.

* * * * *
    Grievance means any complaint or dispute, other than one that 
constitutes an organization determination, expressing dissatisfaction 
with any aspect of an M+C organization's or

[[Page 7604]]

provider's operations, activities, or behavior, regardless of whether 
remedial action is requested.
* * * * *
    4. Section 422.564 is revised to read as follows:


Sec. 422.564  Grievance procedures.

    (a) General rule. Each M+C organization must provide meaningful 
procedures for timely hearing and resolution of grievances between 
enrollees and the organization or any other entity or individual 
through which the organization provides health care services under any 
M+C plan it offers.
    (b) Distinguished from appeals. Grievance procedures are separate 
and distinct from appeal procedures, which address organization 
determinations as defined in Sec. 422.566(b). Upon receiving a 
complaint, an M+C organization must promptly determine and inform the 
enrollee whether the complaint is subject to its grievance procedures 
or its appeal procedures.
    (c) Distinguished from the PRO complaint process. Under section 
1154(a)(14) of the Act, the PRO must review beneficiaries' written 
complaints about the quality of services they have received under the 
Medicare program; this process is separate and distinct from the 
grievance procedures of the M+C organization. For quality of care 
issues, an enrollee may file a grievance with the M+C organization, 
file a written complaint with the PRO, or both.
    (d) Method for filing a grievance. (1) An enrollee may file a 
grievance with the M+C organization either orally or in writing.
    (2) An enrollee must file a grievance no later than 60 days after 
the event or incident that precipitates the grievance.
    (e) Grievance disposition and notification. (1) The M+C 
organization must notify the enrollee of its decision as expeditiously 
as the case requires, based on the enrollee's health status, but no 
later than 30 days after the date the organization receives the oral or 
written grievance.
    (2) The M+C organization may extend the 30-day timeframe by up to 
14 days if the enrollee requests the extension or if the organization 
justifies a need for additional information and documents how the delay 
is in the interest of the enrollee. When the M+C organization extends 
the deadline, it must immediately notify the enrollee in writing of the 
reasons for the delay.
    (3) The M+C organization must inform the enrollee of the 
disposition of the grievance in accordance with the following 
procedures:
    (i) All grievances submitted in writing must be responded to in 
writing.
    (ii) Grievances submitted orally may be responded to either orally 
or in writing, unless the enrollee requests a written response.
    (iii) All grievances related to quality of care, regardless of how 
the grievance is filed, must be responded to in writing. The response 
must include a description of the enrollee's right to file a written 
complaint with the PRO. For any complaint submitted to a PRO, the M+C 
organization must cooperate with the PRO in resolving the complaint.
    (f) Exception--expedited grievances. For a grievance that is 
required to be expedited as provided in this paragraph (f), the M+C 
organization must notify the enrollee of its response to the enrollee's 
grievance within 72 hours of receipt of the grievance. An extension is 
permitted consistent with the procedures set forth in paragraph (e)(2) 
of this section. The M+C organization must expedite a grievance under 
any of the following circumstances:
    (1) The grievance involves an M+C organization's decision to invoke 
an extension relating to an organization determination or 
reconsideration.
    (2) The grievance involves an M+C organization's refusal to grant 
an enrollee's request for an expedited organization determination under 
Sec. 422.570 or reconsideration under Sec. 422.584.
    (3) Applying the standard timeframe could seriously jeopardize the 
enrollee's life, health, or ability to regain maximum function. The M+C 
organization's decision as to whether a grievance meets any of these 
criteria and thus must be expedited is not subject to further review.
    (g) Recordkeeping. The M+C organization must have a system to track 
and maintain records on all grievances received both orally and in 
writing, including, at a minimum, the date of receipt, final 
disposition of the grievance, and the date that the M+C organization 
notified the enrollee of the disposition.
    5. In Sec. 422.620, the heading of the section and paragraph (a) 
are revised to read as follows:


Sec. 422.620  How hospitals must notify enrollees of M+C organizations 
of noncoverage of inpatient hospital care.

    (a) Enrollee's entitlement. When an M+C organization has authorized 
coverage of the inpatient admission of an enrollee, either directly or 
by delegation (or the admission constitutes emergency or urgently 
needed care, as described in Secs. 422.2 and 422.113), the hospital 
must provide a written notice of termination of coverage to each 
enrollee, consistent with paragraph (c) of this section, before the M+C 
organization may terminate coverage for such services. An enrollee is 
entitled to coverage until at least noon of the day after the notice is 
provided. If PRO review is requested under Sec. 422.622, coverage is 
extended as provided in that section.
* * * * *
    6. New Secs. 422.624 and 422.626 are added to subpart M to read as 
follows:


Sec. 422.624  Notifying enrollees of provider service terminations.

    (a) Applicability. (1) For purposes of this section and 
Sec. 422.626, providers include home health agencies (HHAs), skilled 
nursing facilities (SNFs), and comprehensive outpatient rehabilitation 
facilities (CORFs).
    (2) Termination of service defined. For purposes of this section 
and Sec. 422.626, a termination of service is the discontinuation or 
discharge of an enrollee from covered provider services when the 
enrollee has been authorized by the M+C organization, either directly 
or by delegation, to receive an ongoing course of treatment from that 
provider. Termination includes (but is not limited to) cessation of 
coverage at the end of a course of treatment preauthorized in a 
discrete increment, regardless of whether the enrollee agrees that such 
services should end.
    (b) Advance written notification of termination. Prior to any 
termination of service, the provider of the service must deliver valid 
written notice to the enrollee of the M+C organization's decision to 
terminate services. The provider must use a standardized notice, 
required by the Secretary, in accordance with the following 
procedures--
    (1) Timing of notice. The provider must notify the enrollee of the 
M+C organization's decision to terminate covered services four calendar 
days before the proposed end of the services. If the enrollee's 
services are expected to be fewer than four calendar days in duration, 
the provider should notify the enrollee at the time of admission to the 
provider.
    (2) Content of the notice. The standardized termination notice must 
include the following information:
    (i) A specific and detailed explanation of the reason(s) services 
are either no longer reasonable and necessary or are otherwise no 
longer covered.
    (ii) A description of any applicable Medicare coverage rule, 
instruction, or other Medicare policy, including citations to the 
applicable Medicare policy rules, or information about how

[[Page 7605]]

the enrollee may obtain a copy of the Medicare policy from the M+C 
organization.
    (iii) Any applicable M+C organization policy, contract provision, 
or rationale upon which the termination decision is based.
    (iv) Facts specific to the enrollee and relevant to the coverage 
determination that are sufficient to advise the enrollee of the 
applicability of the coverage rule or policy to the enrollee's case.
    (v) The date and time that coverage of services ends and the 
enrollee's financial liability for continued services begins.
    (vi) A description of the enrollee's right to a fast-track appeal 
under Sec. 422.626, including information about how to contact the 
independent review entity (IRE), an enrollee's right (but not 
obligation) to submit evidence showing that services should continue, 
and the availability of other M+C appeal procedures if the enrollee 
fails to meet the deadline for a fast-track IRE appeal.
    (vii) Any other information required by HCFA.
    (c) When delivery of notice is valid. (1) Delivery of the 
termination notice is not valid unless--
    (i) The enrollee has signed the notice to indicate that he or she 
has received the notice and can comprehend its contents; and
    (ii) The notice is delivered timely, in the format and language 
specified by the Secretary, and includes all content elements required 
under paragraph (b)(2) of this section.
    (2) If the provider does not deliver valid notice as specified in 
paragraph (c)(1) of this section, the M+C organization may not 
discontinue coverage for services until four calendar days after it 
provides such valid notice or, if later, until noon of the day after 
the enrollee receives notice of a decision by the IRE upholding the M+C 
organization as provided for in Sec. 422.626(b).


Sec. 422.626  Fast-track appeals of service terminations to an 
independent review entity (IRE).

    (a) Enrollee's right to a fast-track appeal of an M+C 
organization's termination decision. An enrollee of an M+C organization 
has a right to a fast-track appeal of an M+C organization's decision to 
terminate provider services.
    (1) An enrollee who desires a fast-track appeal must submit a 
request for an appeal to the IRE under contract with HCFA, in writing 
or by telephone, by noon of the first day after the day of delivery of 
the written termination notice. If, due to an emergency, the IRE is 
closed and unable to accept the enrollee's request for a fast-track 
appeal, the enrollee must file a request by noon of the next day that 
the IRE is open for business.
    (2) If an enrollee fails to request a timely IRE review, he or she 
may request an expedited reconsideration by the M+C organization as 
described in Sec. 422.584, but the protection against liability for 
services pending a decision described in paragraph (b) of this section 
would not apply.
    (3) If, after delivery of the written termination notice, an 
enrollee chooses to leave a provider or discontinue receipt of covered 
services on or before the proposed termination date, the enrollee may 
not later assert fast-track IRE appeal rights under this section 
relative to the services or expect the services to resume, even if the 
enrollee requests an appeal before the discontinuation date in the 
termination notice.
    (b) Continuation of coverage during appeals to the IRE where the 
IRE upholds the M+C organization's decision. If an enrollee files a 
timely appeal with the IRE, coverage of provider services continues 
until noon of the day after the enrollee receives notice of an IRE 
decision upholding the M+C organization's decision, or until the date 
and time designated on the termination notice, whichever is later. If 
the IRE's decision is delayed because the M+C organization did not 
timely supply necessary information or records, the M+C organization is 
liable for the costs of any additional coverage required by the delayed 
IRE decision. If the IRE finds that the enrollee did not receive valid 
notice, coverage of provider services by the M+C organization continues 
until four calendar days after valid notice has been received, or until 
noon of the day after the enrollee receives notice of an IRE's decision 
on the appeal, whichever is later. Continuation of coverage is not 
required if the IRE determines that coverage could pose a threat to the 
enrollee's health or safety.
    (c) Continuation of coverage during appeals to the IRE when the IRE 
does not uphold the M+C organization's decision. If an enrollee timely 
files an appeal with the IRE, and the IRE does not uphold the M+C 
organization's determination, the M+C organization must continue 
coverage until four calendar days after a new valid notice of 
termination is provided.
    (d) Burden of proof. When an enrollee appeals an M+C organization's 
decision to terminate services to an IRE, the burden of proof rests 
with the M+C organization to demonstrate that termination of coverage 
is the correct decision, either on the basis of medical necessity, or 
based on other Medicare coverage policies.
    (1) To meet this burden, the M+C organization must supply any and 
all information that the IRE requires to sustain the M+C organization's 
termination decision, consistent with paragraph (f) of this section, 
including a copy of the termination notice.
    (2) The enrollee may submit evidence to be considered by the IRE in 
making its decision.
    (3) The M+C organization or the IRE may require an enrollee to 
authorize release to the IRE of his or her medical records, to the 
extent that the records are reasonably necessary for the M+C 
organization to demonstrate the correctness of its decision or for the 
IRE to determine the appeal.
    (e) Procedures the IRE must follow. (1) On the date the IRE 
receives the enrollee's request for an appeal, the IRE must notify the 
M+C organization and the provider that the enrollee has filed a request 
for a fast-track appeal, and of the M+C organization's responsibility 
to submit documentation consistent with paragraph (f)(1) of this 
section.
    (2) When an enrollee requests a fast-track appeal, the IRE must 
determine whether the provider delivered a valid notice of the 
termination decision.
    (3) The IRE must notify HCFA about each case in which it determines 
that improper notification occurs.
    (4) Before making its decision, the IRE must solicit the enrollee's 
views regarding the reason(s) for termination of services as specified 
in the written termination notice provided by the M+C organization, or 
any other reason that the IRE intends to use as the basis of its review 
determination.
    (5) The IRE must make a decision on an appeal and notify the 
enrollee, the M+C organization, and the provider of services, by close 
of business of the day after it receives the information necessary to 
make the decision. If the IRE does not receive the information needed 
to sustain an M+C organization's decision to terminate services, it may 
make a decision on the case based on the information at hand, or it may 
defer its decision until it receives the necessary information. If the 
IRE defers its decision, coverage of the services would continue until 
the decision is made, consistent with paragraph (b) of this section, 
but no additional termination notice would be required.
    (f) Responsibilities of the M+C organization. (1) Upon notification 
by the IRE of a fast-track appeal, the M+C organization must supply any 
and all information, including a copy of the notice sent to the 
enrollee, that the IRE

[[Page 7606]]

needs to decide on the appeal. The M+C organization must supply this 
information as soon as possible, but no later than by close of business 
of the first day after the day that the IRE notifies the M+C 
organization that an appeal has been received from the enrollee. The 
M+C organization must make the information available by phone (with a 
written record made of what is transmitted in this manner) and/or in 
writing, as determined by the IRE.
    (2) Upon an enrollee's request, the M+C organization must provide 
the enrollee a copy of, or access to, any documentation sent to the IRE 
by the M+C organization, including records of any information provided 
by telephone. The M+C organization may charge the enrollee a reasonable 
amount to cover the costs of duplicating the information for the 
enrollee and/or delivering the documentation to the enrollee. The M+C 
organization must accommodate such a request by no later than close of 
business of the first day after the day the material is requested.
    (3) An M+C organization is financially responsible for continuation 
of coverage as provided in paragraphs (b) and (c) of this section, 
regardless of whether it has delegated responsibility for authorizing 
coverage or termination decisions to its providers.
    (g) Reconsiderations of IRE decisions. (1) If the IRE upholds an 
M+C organization's termination decision in whole or in part, the 
enrollee may file, no later than 60 days after notification that the 
IRE has upheld the decision, a request with the IRE for a 
reconsideration of its original decision.
    (2) The IRE must issue its reconsidered determination as 
expeditiously as the enrollee's health condition requires but no later 
than within 14 days of receipt of the enrollee's request for a 
reconsideration.
    (3) If the IRE reaffirms its decision, in whole or in part, the 
enrollee is permitted to appeal the IRE's reconsidered determination to 
an ALJ, the DAB, or a federal court, as provided for under this subpart 
M.
    (4) If on reconsideration the IRE determines that coverage of 
provider services should terminate on a given date, the enrollee is 
liable for the costs of continued services after that date unless the 
IRE's decision is reversed on appeal. If the IRE's decision is reversed 
on appeal, the M+C organization must reimburse the enrollee, consistent 
with the appealed decision, for the costs of any covered services for 
which the enrollee has already paid the M+C organization or provider.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

    B. Part 489 is amended as set forth below:
    1. The authority citation for part 489 continues to read as 
follows:

    Authority: Secs. 1102, 1819, 1861, 1864(m), 1866, and 1871 of 
the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 
1395cc, and 1395hh).

    2. In Sec. 489.20, paragraph (p) is revised to read as follows:


Sec. 489.20  Basic commitments.

    The provider agrees to the following:
    (p) To comply with Sec. 489.27 concerning notification of Medicare 
beneficiaries of their rights associated with the termination of 
Medicare services.
    3. In Sec. 489.27, the existing text is redesignated as paragraph 
(a) and revised as follows; and a new paragraph (b) is added to read as 
follows:


Sec. 489.27  Beneficiary notice of discharge rights

    (a) Notification by hospitals. A hospital that participates in the 
Medicare program must furnish each Medicare beneficiary, or authorized 
representative, notice of the beneficiary's rights in the case of a 
termination of hospital services, as required under section 
1866(a)(1)(M) and in the format specified by HCFA, provided that the 
notices have been approved by the Office of Management and Budget under 
section 3506(c)(2)(A) of the Paperwork Reduction Act. In the case of 
all Medicare beneficiaries, including those enrolled in an M+C plan, 
the notice specified in the previous sentence (specifying the reasons 
for the discharge and the right to PRO review of the discharge 
decision) must be provided to the beneficiary a day before the 
effective date of the discharge. In the case of beneficiaries enrolled 
in an M+C plan, notice must be provided in accordance with 
Sec. 422.620. The hospital must be able to demonstrate compliance with 
this requirement.
    (b) Notification by other providers. Other providers (that is, 
nonhospital providers identified at Sec. 489.2(b)) that participate in 
the Medicare program must furnish each Medicare beneficiary, or 
authorized representative, applicable HCFA notices in advance of the 
termination of Medicare services, provided that the notices have been 
approved by the Office of Management and Budget under section 
3506(c)(2)(A) of the Paperwork Reduction Act.

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


    Dated: January 2, 2001.
Robert A. Berenson,
Acting Deputy Administrator, Health Care Financing Administration.

    Dated: January 5, 2001.
Donna E. Shalala,
Secretary.
[FR Doc. 01-1864 Filed 1-19-01; 3:50 pm]
BILLING CODE 4120-01-P