[Federal Register Volume 67, Number 115 (Friday, June 14, 2002)]
[Notices]
[Pages 40941-40946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15009]


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

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services


Privacy Act of 1974; Report of Modified or Altered System

AGENCY: Department of Health and Human Services (HHS), Centers for 
Medicare & Medicaid Services (CMS) (formerly the Health Care Financing 
Administration).

ACTION: Notice of modified or altered system of records (SOR).

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

SUMMARY: In accordance with the requirements of the Privacy Act of 
1974, we are proposing to modify or alter a SOR, ``Physician/Supplier 
1099 File (Statement for Recipients of Medical and Health Care 
Payments)(1099), System No. 09-70-0517.'' We propose to delete 
published routine use number 4 authorizing disclosure to contractors, 
and an unnumbered routine use

[[Page 40942]]

authorizing disclosure to the Social Security Administration (SSA). The 
proposed routine use for contractors and consultants makes material 
changes to published routine use number 4, and as proposed should be 
treated as a new routine use. Disclosure of data from this system to 
the SSA is no longer necessary since SSA has been established as a 
separate agency outside of the HHS and a routine use for the purpose 
stated is no longer necessary.
    We propose to add two new routine uses to combat fraud and abuse in 
certain federally funded health care programs. The security 
classification previously reported as ``None'' will be modified to 
reflect that the data in this system is considered to be ``Level Three 
Privacy Act Sensitive.'' We are modifying the language in the remaining 
routine uses to provide clarity to CMS's intention to disclose 
individual-specific information contained in this system. The routine 
uses will then be prioritized and reordered according to their usage. 
We will also take the opportunity to update any sections of the system 
that were affected by the recent reorganization and to update language 
in the administrative sections to correspond with language used in 
other CMS SORs.
    The primary purpose of the SOR is to provide periodic reporting to 
the Internal Revenue Service (IRS). Information in this system will 
also be disclosed to: the IRS, support regulatory and policy functions 
performed within the agency or by a contractor or consultant, support 
constituent requests made to a congressional representative, support 
litigation involving the agency related to this system of records, and 
combat fraud and abuse in certain federally funded health care 
programs. We have provided background information about the modified 
system in the ``Supplementary Information'' section below. Although the 
Privacy Act requires only that CMS provide an opportunity for 
interested persons to comment on the proposed routine uses, CMS invites 
comments on all portions of this notice. See Effective Dates section 
for comment period.

EFFECTIVE DATES: CMS filed a modified or altered system report with the 
Chair of the House Committee on Government Reform and Oversight, the 
Chair of the Senate Committee on Governmental Affairs, and the 
Administrator, Office of Information and Regulatory Affairs, Office of 
Management and Budget (OMB) on May 30, 2002. To ensure that all parties 
have adequate time in which to comment, the modified or altered SOR, 
including routine uses, will become effective 40 days from the 
publication of the notice, or from the date it was submitted to OMB and 
the congress, whichever is later, unless CMS receives comments that 
require alterations to this notice.

ADDRESSES: The public should address comments to: Director, Division of 
Data Liaison and Distribution, CMS, Room N2-04-27, 7500 Security 
Boulevard, Baltimore, Maryland 21244-1850. Comments received will be 
available for review at this location, by appointment, during regular 
business hours, Monday through Friday from 9 a.m.-3 p.m., eastern 
daylight time.

FOR FURTHER INFORMATION CONTACT: G. Jeff Chaney, Director, Division of 
Accounting, Accounting and Risk Management Group, Office of Financial 
Management, CMS, Room N3-11-17, 7500 Security Boulevard, Baltimore, 
Maryland 21244-1850. The telephone number is 410-786-5412. The e-mail 
address is [email protected].

SUPPLEMENTARY INFORMATION:

I. Description of the Modified System

A. Background

    In 1980, CMS established a SOR under the authority of the Internal 
Revenue Code, Title 26 United States Code (USC) sec. 6041. Notice of 
this system, ``Physician/Supplier 1099 File (Statement for Recipients 
of Medical and Health Care Payments), HHS/CMS/BPO, System No. 09-70-
0517'' was published in the Federal Register on Monday, December 22, 
1980 (45 FR 84476), 61 FR 6645 (added unnumbered social security use), 
63 FR 50552 (added three fraud and abuse uses), and 65 FR 50552 
(deleted one and modified two fraud and abuse uses).

B. Statutory and Regulatory Basis for SOR

    Authority for the maintenance of this SOR is given under the 
Internal Revenue Code, Title 26 United States Code (USC) sec. 6041.

II. Collection and Maintenance of Data in the System

A. Scope of the Data Collected

    The system contains information on total Medicare payments that 
have been made to physicians and suppliers by Medicare carriers and 
intermediaries. It contains the name, address, assigned provider 
number, employer identification number (EIN), and social security 
number (SSN) of the physicians and suppliers.

B. Agency Policies, Procedures, and Restrictions on the Routine Use

    The Privacy Act permits us to disclose information without an 
individual's consent if the information is to be used for a purpose 
which is compatible with the purpose(s) for which the information was 
collected. Any such disclosure of data is known as a ``routine use.'' 
The government will only release 1099 information that can be 
associated with an individual as provided for under ``Section III. 
Proposed Routine Use Disclosures of Data in the System.'' Both 
identifiable and non-identifiable data may be disclosed under a routine 
use. We will only disclose the minimum personal data necessary to 
achieve the purpose of 1099. CMS has the following policies and 
procedures concerning disclosures of information which will be 
maintained in the system. In general, disclosure of information from 
the system of records will be approved only for the minimum information 
necessary to accomplish the purpose of the disclosure only after CMS:
    1. Determines that the use or disclosure is consistent with the 
reason that the data is being collected, e.g., to provide periodic 
reporting to the IRS.
    2. Determines:
    a. That the purpose for which the disclosure is to be made can only 
be accomplished if the record is provided in individually identifiable 
form;
    b. That the purpose for which the disclosure is to be made is of 
sufficient importance to warrant the effect and/or risk on the privacy 
of the individual that additional exposure of the record might bring; 
and
    c. That there is a strong probability that the proposed use of the 
data would in fact accomplish the stated purpose(s).
    3. Requires the information recipient to:
    a. Establish administrative, technical, and physical safeguards to 
prevent unauthorized use of disclosure of the record;
    b. Remove or destroy at the earliest time all individually-
identifiable information; andgree to not use or disclose the 
information for any purpose other than the stated purpose under which 
the information was disclosed.
    4. Determines that the data are valid and reliable.

III. Proposed Routine Use Disclosures of Data in the System

A. Entities Who May Receive Disclosures Under Routine Use

    These routine uses specify circumstances, in addition to those 
provided by statute in the Privacy Act

[[Page 40943]]

of 1974, under which CMS may release information from the 1099 without 
the consent of the individual to whom such information pertains. Each 
proposed disclosure of information under these routine uses will be 
evaluated to ensure that the disclosure is legally permissible, 
including but not limited to ensuring that the purpose of the 
disclosure is compatible with the purpose for which the information was 
collected. We are proposing to establish or modify the following 
routine use disclosures of information maintained in the system:
    1. To the Internal Revenue Service in connection with the 
determination of the individual's self-employment income.
    We contemplate disclosing information under this routine use only 
in situations in which the IRS requires 1099 data to assist in the 
implementation and maintenance of the IRS code.
    2. To agency contractors, or consultants who have been engaged by 
the agency to assist in accomplishment of a CMS function relating to 
the purposes for this SOR and who need to have access to the records in 
order to assist CMS.
    We contemplate disclosing information under this routine use only 
in situations in which CMS may enter into a contractual or similar 
agreement with a third party to assist in accomplishing a CMS function 
relating to purposes for this SOR. CMS occasionally contracts out 
certain of its functions when doing so would contribute to effective 
and efficient operations. CMS must be able to give a contractor or 
consultant whatever information is necessary for the contractor or 
consultant to fulfill its duties. In these situations, safeguards are 
provided in the contract prohibiting the contractor or consultant from 
using or disclosing the information for any purpose other than that 
described in the contract and requires the contractor or consultant to 
return or destroy all information at the completion of the contract.
    3. To Member of Congress or to a congressional staff member in 
response to an inquiry of the congressional office made at the written 
request of the constituent about whom the record is maintained.
    Individuals sometimes request the help of a Member of Congress in 
resolving issues relating to a matter before CMS. The Member of 
Congress then writes CMS, and CMS must be able to give sufficient 
information to be responsive to the inquiry.
    4. To the Department of Justice (DOJ), court or adjudicatory body 
when:
    a. The agency or any component thereof, or
    b. Any employee of the agency in his or her official capacity, or
    c. Any employee of the agency in his or her individual capacity 
where the DOJ has agreed to represent the employee, or
    d. The United States Government,

is a party to litigation or has an interest in such litigation, and by 
careful review, CMS determines that the records are both relevant and 
necessary to the litigation.
    Whenever CMS is involved in litigation, or occasionally when 
another party is involved in litigation and CMS's policies or 
operations could be affected by the outcome of the litigation, CMS 
would be able to disclose information to the DOJ, court or adjudicatory 
body involved.
    5. To a CMS contractor (including, but not limited to fiscal 
intermediaries and carriers) that assists in the administration of a 
CMS-administered health benefits program, or to a grantee of a CMS-
administered grant program, when disclosure is deemed reasonably 
necessary by CMS to prevent, deter, discover, detect, investigate, 
examine, prosecute, sue with respect to, defend against, correct, 
remedy, or otherwise combat fraud or abuse in such program.
    We contemplate disclosing information under this routine use only 
in situations in which CMS may enter into a contract or grant with a 
third party to assist in accomplishing CMS functions relating to the 
purpose of combating fraud and abuse.
    CMS occasionally contracts out certain of its functions when doing 
so would contribute to effective and efficient operations. CMS must be 
able to give a contractor or grantee whatever information is necessary 
for the contractor or grantee to fulfill its duties. In these 
situations, safeguards are provided in the contract prohibiting the 
contractor or grantee from using or disclosing the information for any 
purpose other than that described in the contract and requiring the 
contractor or grantee to return or destroy all information.
    6. To another federal agency or to an instrumentality of any 
governmental jurisdiction within or under the control of the United 
States (including any state or local governmental agency), that 
administers, or that has the authority to investigate potential fraud 
or abuse in, a health benefits program funded in whole or in part by 
federal funds, when disclosure is deemed reasonably necessary by CMS to 
prevent, deter, discover, detect, investigate, examine, prosecute, sue 
with respect to, defend against, correct, remedy, or otherwise combat 
fraud or abuse in such programs.
    Other agencies may require 1099 information for the purpose of 
combating fraud and abuse in such federally funded programs.

B. Additional Circumstances Affecting Routine Use Disclosures

    This SOR contains Protected Health Information as defined by HHS 
regulation ``Standards for Privacy of Individually Identifiable Health 
Information'' (45 CFR parts 160 and 164, 65 FR 82462 (12-28-00), as 
amended by 66 FR 12434 (2-26-01)). Disclosures of Protected Health 
Information authorized by these routine uses may only be made if, and 
as, permitted or required by the ``Standards for Privacy of 
Individually Identifiable Health Information''.
    In addition, our policy will be to prohibit release even of non-
identifiable data, except pursuant to one of the routine uses, if there 
is a possibility that an individual can be identified through implicit 
deduction based on small cell sizes (instances where the patient 
population is so small that individuals who are familiar with the 
enrollees could, because of the small size, use this information to 
deduce the identity of the beneficiary).

IV. Safeguards

A. Administrative Safeguards

    The 1099 system will conform to applicable law and policy governing 
the privacy and security of Federal automated information systems. 
These include but are not limited to: the Privacy Act of 1984, Computer 
Security Act of 1987, the Paperwork Reduction Act of 1995, the Clinger-
Cohen Act of 1996, and the Office and Management and Budget (OMB) 
Circular A-130, Appendix III, ``Security of Federal Automated 
Information Resources.'' CMS has prepared a comprehensive system 
security plan as required by OMB Circular A-130, Appendix III. This 
plan conforms fully to guidance issued by the National Institute for 
Standards and Technology (NIST) in NIST Special Publication 800-18, 
``Guide for Developing Security Plans for Information Technology 
Systems. Paragraphs A-C of this section highlight some of the specific 
methods that CMS is using to ensure the security of this system and the 
information within it.
    Authorized users: Personnel having access to the system have been 
trained in Privacy Act and systems security requirements. Employees and

[[Page 40944]]

contractors who maintain records in the system are instructed not to 
release any data until the intended recipient agrees to implement 
appropriate administrative, technical, procedural, and physical 
safeguards sufficient to protect the confidentiality of the data and to 
prevent unauthorized access to the data. In addition, CMS is monitoring 
the authorized users to ensure against excessive or unauthorized use. 
Records are used in a designated work area or workstation and the 
system location is attended at all times during working hours.
    To insure security of the data, the proper level of class user is 
assigned for each individual user as determined at the Agency level. 
This prevents unauthorized users from accessing and modifying critical 
data. The system database configuration includes five classes of 
database users:
     Database Administrator class owns the database objects; 
e.g., tables, triggers, indexes, stored procedures, packages, and has 
database administration privileges to these objects;
     Quality Control Administrator class has read and write 
access to key fields in the database;
     Quality Indicator Report Generator class has read-only 
access to all fields and tables;
     Policy Research class has query access to tables, but are 
not allowed to access confidential patient identification information; 
and
     Submitter class has read and write access to database 
objects, but no database administration privileges.

B. Physical Safeguards:

    All server sites have implemented the following minimum 
requirements to assist in reducing the exposure of computer equipment 
and thus achieve an optimum level of protection and security for the 
1099 system:
    Access to all servers is controlled, with access limited to only 
those support personnel with a demonstrated need for access. Servers 
are to be kept in a locked room accessible only by specified management 
and system support personnel. Each server requires a specific log-on 
process. All entrance doors are identified and marked. A log is kept of 
all personnel who were issued a security card, key and/or combination 
that grants access to the room housing the server, and all visitors are 
escorted while in this room. All servers are housed in an area where 
appropriate environmental security controls are implemented, which 
include measures implemented to mitigate damage to Automated 
Information System resources caused by fire, electricity, water and 
inadequate climate controls.
    Protection applied to the workstations, servers and databases 
include:
     User Log on--Authentication is performed by the Primary 
Domain Controller/Backup Domain Controller of the log-on domain.
     Workstation Names--Workstation naming conventions may be 
defined and implemented at the Agency level.
     Hours of Operation--May be restricted by Windows NT. When 
activated all applicable processes will automatically shut down at a 
specific time and not be permitted to resume until the predetermined 
time. The appropriate hours of operation are determined and implemented 
at the Agency level.
     Inactivity Log-out--Access to the NT workstation is 
automatically logged out after a specified period of inactivity.
     Warnings--Legal notices and security warnings display on 
all servers and workstations.
     Remote Access Services (RAS)--Windows NT RAS security 
handles resource access control. Access to NT resources is controlled 
for remote users in the same manner as local users, by utilizing 
Windows NT file and sharing permissions. Dial-in access can be granted 
or restricted on a user-by-user basis through the Windows NT RAS 
administration tool.

C. Procedural Safeguards

    All automated systems must comply with Federal laws, guidance, and 
policies for information systems security as stated previously in this 
section. Each automated information system should ensure a level of 
security commensurate with the level of sensitivity of the data, risk, 
and magnitude of the harm that may result from the loss, misuse, 
disclosure, or modification of the information contained in the system.

V. Effect of the Modified System on Individual Rights

    CMS proposes to establish this system in accordance with the 
principles and requirements of the Privacy Act and will collect, use, 
and disseminate information only as prescribed therein. We will only 
disclose the minimum personal data necessary to achieve the purpose of 
1099. Disclosure of information from the SOR will be approved only to 
the extent necessary to accomplish the purpose of the disclosure. CMS 
has assigned a higher level of security clearance for the information 
in this system to provide added security and protection of data in this 
system.
    CMS will take precautionary measures to minimize the risks of 
unauthorized access to the records and the potential harm to individual 
privacy or other personal or property rights. CMS will collect only 
that information necessary to perform the system's functions. In 
addition, CMS will make disclosure from the proposed system only with 
consent of the subject individual, or his/her legal representative, or 
in accordance with an applicable exception provision of the Privacy 
Act.
    CMS, therefore, does not anticipate an unfavorable effect on 
individual privacy as a result of the disclosure of information 
relating to individuals.

    Dated: May 30, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
09-70-0517

SYSTEM NAME:
    Physician/Supplier 1099 File (Statement for Recipients of Medical 
and Health Care Payments)(1099), HHS/CMS/OFM.

SECURITY CLASSIFICATION:
    Level Three Privacy Act Sensitive

SYSTEM LOCATION:
    CMS Data Center, 7500 Security Boulevard, North Building, First 
Floor, Baltimore, Maryland 21244-1850.

CATEGORIES OF INDIVIDUALS COVERED BY THE SYSTEM:
    The system contains information on total Medicare payments that 
have been made to physicians and suppliers by Medicare carriers and 
intermediaries.

CATEGORIES OF RECORDS IN THE SYSTEM:
    The system contains the name, address, assigned provider number, 
employer identification number (EIN), and social security number (SSN) 
of the physicians and suppliers.

AUTHORITY FOR MAINTENANCE OF THE SYSTEM:
    Authority for the maintenance of this SOR is given under the 
Internal Revenue Code, Title 26 United States Code (USC) sec. 6041.

PURPOSE(S):
    The primary purpose of the SOR is to provide periodic reporting to 
the Internal Revenue Service (IRS). Information in this system will 
also be disclosed to: the IRS, support regulatory and policy functions 
performed within the agency or by a contractor or consultant, support 
constituent requests

[[Page 40945]]

made to a congressional representative, support litigation involving 
the agency related to this system of records, and combat fraud and 
abuse in certain federally funded health care programs.

ROUTINE USES OF RECORDS MAINTAINED IN THE SYSTEM, INCLUDING CATEGORIES 
OR USERS AND THE PURPOSES OF SUCH USES:
    These routine uses specify circumstances, in addition to those 
provided by statute in the Privacy Act of 1974, under which CMS may 
release information from the EDB without the consent of the individual 
to whom such information pertains. Each proposed disclosure of 
information under these routine uses will be evaluated to ensure that 
the disclosure is legally permissible, including but not limited to 
ensuring that the purpose of the disclosure is compatible with the 
purpose for which the information was collected. In addition, our 
policy will be to prohibit release even of non-identifiable data, 
except pursuant to one of the routine uses, if there is a possibility 
that an individual can be identified through implicit deduction based 
on small cell sizes (instances where the patient population is so small 
that individuals who are familiar with the enrollees could, because of 
the small size, use this information to deduce the identity of the 
beneficiary).
    This SOR contains Protected Health Information as defined by HHS 
regulation ``Standards for Privacy of Individually Identifiable Health 
Information'' (45 CFR parts 160 and 164, 65 Federal Register (FR) 82462 
(12-28-00), as amended by 66 FR 12434 (2-26-01)). Disclosures of 
Protected Health Information authorized by these routine uses may only 
be made if, and as, permitted or required by the ``Standards for 
Privacy of Individually Identifiable Health Information.'' We are 
proposing to establish or modify the following routine use disclosures 
of information maintained in the system:
    1. To the Internal Revenue Service in connection with the 
determination of the individual's self-employment income.
    2. To agency contractors, or consultants who have been engaged by 
the agency to assist in accomplishment of a CMS function relating to 
the purposes for this SOR and who need to have access to the records in 
order to assist CMS.
    3. To a Member of Congress or to a congressional staff member in 
response to an inquiry of the congressional office made at the written 
request of the constituent about whom the record is maintained.
    4. To the Department of Justice (DOJ), court or adjudicatory body 
when:
    a. The agency or any component thereof, or
    b. Any employee of the agency in his or her official capacity, or
    c. Any employee of the agency in his or her individual capacity 
where the DOJ has agreed to represent the employee, or
    d. The United States Government, is a party to litigation or has an 
interest in such litigation, and by careful review, CMS determines that 
the records are both relevant and necessary to the litigation
    5. To a CMS contractor (including, but not limited to fiscal 
intermediaries and carriers) that assists in the administration of a 
CMS-administered health benefits program, or to a grantee of a CMS-
administered grant program, when disclosure is deemed reasonably 
necessary by CMS to prevent, deter, discover, detect, investigate, 
examine, prosecute, sue with respect to, defend against, correct, 
remedy, or otherwise combat fraud or abuse in such program.
    6. To another federal agency or to an instrumentality of any 
governmental jurisdiction within or under the control of the United 
States (including any state or local governmental agency), that 
administers, or that has the authority to investigate potential fraud 
or abuse in, a health benefits program funded in whole or in part by 
federal funds, when disclosure is deemed reasonably necessary by CMS to 
prevent, deter, discover, detect, investigate, examine, prosecute, sue 
with respect to, defend against, correct, remedy, or otherwise combat 
fraud or abuse in such programs.

POLICIES AND PRACTICES FOR STORING, RETRIEVING, ACCESSING, RETAINING, 
AND DISPOSING OF RECORDS IN THE SYSTEM:
STORAGE:
    Computer diskette and on magnetic storage media.

RETRIEVABILITY:
    Information maintained in this system can be retrieved by the name, 
SSN, EIN, and an assigned physician/supplier identification number.

SAFEGUARDS:
    CMS has safeguards for authorized users and monitors such users to 
ensure against excessive or unauthorized use. Personnel having access 
to the system have been trained in the Privacy Act and systems security 
requirements. Employees who maintain records in the system are 
instructed not to release any data until the intended recipient agrees 
to implement appropriate administrative, technical, procedural, and 
physical safeguards sufficient to protect the confidentiality of the 
data and to prevent unauthorized access to the data.
    In addition, CMS has physical safeguards in place to reduce the 
exposure of computer equipment and thus achieve an optimum level of 
protection and security for the 1099 system. For computerized records, 
safeguards have been established in accordance with the Department of 
Health and Human Services (HHS) standards and National Institute of 
Standards and Technology guidelines, e.g., security codes will be used, 
limiting access to authorized personnel. System securities are 
established in accordance with HHS, Information Resource Management 
(IRM) Circular 10, Automated Information Systems Security 
Program; CMS Automated Information Systems (AIS) Guide, Systems 
Securities Policies, and OMB Circular No. A-130 (revised), Appendix 
III.

RETENTION AND DISPOSAL:
    Records are maintained in a secure storage area with identifiers 
for 5 years.

SYSTEM MANAGER(S) AND ADDRESSES
    Director, Division of Accounting, Accounting and Risk Management 
Group, Office of Financial Management, CMS, Room N3-11-17, 7500 
Security Boulevard, Baltimore, Maryland 21244-1850.

NOTIFICATION PROCEDURE:
    For purpose of access, the subject individual should write to the 
system manager who will require the system name, address, date of 
birth, and sex, and for verification purposes, the subject individual's 
name (woman's maiden name, if applicable), and social security number 
(SSN). Furnishing the SSN is voluntary, but it may make searching for a 
record easier and prevent delay.

RECORD ACCESS PROCEDURE:
    For purpose of access, use the same procedures outlined in 
Notification Procedures above. Requestors should also reasonably 
specify the record contents being sought. (These procedures are in 
accordance with Department regulation 45 CFR 5b.5(a)(2)).

CONTESTING RECORD PROCEDURES:
    The subject individual should contact the system manager named 
above, and reasonably identify the record and specify the information 
to be contested. State the corrective action sought and the reasons for 
the correction with supporting justification. (These

[[Page 40946]]

procedures are in accordance with Department regulation 45 CFR 5b.7).

RECORD SOURCE CATEGORIES:
    The record of the total annual payments made to each physician or 
supplier is derived from the individual Medicare bill payments.

SYSTEMS EXEMPTED FROM CERTAIN PROVISIONS OF THE ACT:
    None.
[FR Doc. 02-15009 Filed 6-13-02; 8:45 am]
BILLING CODE 4120-03-P