[Federal Register Volume 67, Number 144 (Friday, July 26, 2002)]
[Proposed Rules]
[Pages 48840-48844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18982]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 413

[CMS-1199-P]
RIN 0938-AL11


Medicare Program; Electronic Submission of Cost Reports

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend 42 CFR part 413 by requiring 
that, for cost reporting periods ending on or after December 31, 2002, 
all hospices, organ procurement organizations, rural health clinics, 
federally qualified health centers, community mental health centers, 
and end-stage renal disease facilities must submit cost reports 
currently required under the Medicare regulations in a standardized 
electronic format. This rule also allows a delay or waiver of this 
requirement when implementation would result in financial hardship for 
a provider. The provisions of this rule allow for more accurate 
preparation and more efficient processing of cost reports.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on September 24, 2002.

ADDRESSES: In commenting, please refer to file code CMS-1199-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Mail written comments (one original and 
three copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1199-P, P.O. Box 8014, Baltimore, MD 21244-8014.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.

[[Page 48841]]

    If you prefer, you may deliver (by hand or courier) your written 
comments (1 original and 3 copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201; or
Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for commenters wishing to retain a proof of filing by 
stamping in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments see the beginning of the 
Supplementary Information section.

FOR FURTHER INFORMATION CONTACT: Tom Talbott, (410) 786-4592.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments

    Comments received timely will be available for public inspection as 
they are received, generally beginning approximately three weeks after 
publication of a document, at the headquarters of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 
p.m. To schedule an appointment to view public comments, call (410) 
786-7197.

I. Background

    Generally, under the Medicare program, hospices, organ procurement 
organizations, rural health clinics (RHCs), federally qualified health 
centers (FQHCs), community mental health centers (CMHCs), and end-stage 
renal disease (ESRD) facilities are paid for the reasonable costs of 
the covered items and services they furnish to Medicare beneficiaries. 
Sections 1815(a) and 1833(e) of the Social Security Act (the Act) 
provide that no payments will be made to a provider unless it has 
furnished the information, requested by the Secretary of the Department 
of Health and Human Services (the Secretary), needed to determine the 
amount of payments due the provider. In general, providers submit this 
information through cost reports that cover a 12-month period. Rules 
governing the submission of cost reports are set forth in Secs. 413.20 
and 413.24 of the Code of Federal Regulations (CFR).
    Under Sec. 413.20(a), all providers participating in the Medicare 
program are required to maintain sufficient financial records and 
statistical data for proper determination of costs payable under the 
program. In addition, providers must use standardized definitions and 
follow accounting, statistical, and reporting practices that are widely 
accepted in the health care industry and related fields. Under 
Secs. 413.20(b) and 413.24(f), providers are required to submit cost 
reports annually, with the reporting period based on the provider's 
accounting year. Additionally, under Sec. 412.52, all hospitals 
participating in the prospective payment system must meet cost 
reporting requirements set forth at Secs. 413.20 and 413.24.
    Section 1886(f)(l)(B)(i) of the Act requires the Secretary to 
establish a standardized electronic cost reporting system for all 
hospitals participating in the Medicare program. This provision was 
effective for hospital cost reporting periods beginning on or after 
October 1, 1989. On January 2, 1997, we revised our regulations at 
Sec. 413.24(f)(4)(ii) to extend the electronic cost reporting 
requirement to skilled nursing facilities (SNFs) and home health 
agencies (62 FR 26-31).
    The required cost reports must be electronically transmitted to the 
intermediary in American Standard Code for Information Interchange 
(ASCII) format. In addition to the electronic file, hospitals, SNFs, 
and HHAs were initially required to submit a hard copy of the full cost 
report. We later revised our regulations in Sec. 413.24(f)(4)(iv) to 
state that providers were required to submit, instead, a hard copy of a 
one-page settlement summary, a statement of certain worksheet totals 
found in the electronic file, and a statement signed by the provider's 
administrator or chief financial officer certifying the accuracy of the 
electronic file. In order to preserve the integrity of the electronic 
file, in the January 1997 final rule we specified procedures regarding 
the processing of the electronic cost report once it is submitted to 
the intermediary (62 FR 27).

II. Provisions of the Proposed Regulations

    In this rule, we propose to apply the current hospital, SNFs, and 
HHAs electronic cost reporting requirements to hospices, organ 
procurement organizations, RHCs, FQHCs, CMHCs, and ESRD facilities with 
the exception that, for the first 2 years, the hard copy of the cost 
report must be submitted with the electronic cost report. Over that 2-
year period, the hard copy will continue to be the official copy. We 
believe that the use of electronically prepared cost reports will be 
beneficial for hospices, organ procurement organizations, RHCs, FQHCs, 
CMHCs, and ESRD facilities because the cost reporting software for 
these reports will virtually eliminate computational errors and 
substantially reduce preparation time. Moreover, the use of cost 
reporting software will save time whenever the provider needs to change 
individual entries in a cost report.
    In this rule we also propose that a hospice, organ procurement 
organization, RHC, FQHC, CMHC, or ESRD facilities may submit a written 
request for a waiver or a delay of these requirements if it believes 
that implementation of the electronic submission requirement would 
cause a financial hardship. Consistent with the existing regulations 
(see Sec. 413.24), we are continuing to allow providers with low or no 
Medicare utilization to request a waiver of electronic cost reporting.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA 1995), we are 
required to provide 60-day notice in the Federal Register and solicit 
public comment before a collection of information requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. In order to fairly evaluate whether an information collection 
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork 
Reduction Act of 1995 requires that we solicit comment on the following 
issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
     We are soliciting public comment on each of these issues 
for the following sections of this document that contain information 
collection requirements:
Section 413.24--Adequate Cost Data and Cost Finding
    Paragraph (f)(4)(ii) requires that, for cost periods ending on or 
after December 31, 2002, hospices, organ procurement organizations, 
RHCs,

[[Page 48842]]

FQHCs, CMHCs, and ESRD facilities, submit cost reports to fiscal 
intermediaries in a standardized electronic format readable by the 
fiscal intermediary's automated system. The electronic file must 
contain the input data required to complete the cost report and to pass 
specified edits. Paragraph (f)(4)(iii) requires that the fiscal 
intermediary make a ``working copy'' of the as-filed electronic cost 
reports filed by these providers to be used, as necessary, throughout 
the settlement process (that is, desk review, processing audit 
adjustments, and final settlement). Paragraph (f)(4)(iv) requires that, 
for cost reporting periods after December 31, 2002, hospices, organ 
procurement organizations, RHCs, FQHCs, CMHCs, and ESRD facilities must 
submit a hard copy of a settlement summary, a statement of certain 
worksheet totals found within the electronic file, and a statement 
signed by its administrator or chief financial officer certifying the 
accuracy of the electronic file or the manually prepared cost report. 
During a transition period (first two cost-reporting periods on or 
after December 31, 2002), hospices, organ procurement organizations, 
RHCs, FQHCs, CMHCs, and ESRD facilities must submit a hard copy of the 
completed cost report forms in addition to the electronic file.

    We believe the burden associated with these provisions will 
actually reduce the amount of time currently spent on preparing and 
collating hardcopy documents. Because we are unsure how much time will 
be saved for the various providers, however, we are requesting comments 
on these provisions so that we can more accurately determine how much 
time may be saved.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Information 
Services, DCES, SSG, ATTN.: John Burke, Room N2-14-26, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503. Attn: Brenda Aguilar, CMS Desk Officer.

IV. Response to Comments

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

V. Regulatory Impact Statement

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 19, 1980 Regulatory Planning and Review) and the 
Regulatory Flexibility Act (RFA) (September 19, 1980 Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). A regulatory impact analysis (RIA) 
must be prepared for major rules with economically significant effects 
($100 million or more annually). This rule is not considered to have a 
significant economic impact on hospices, organ procurement 
organizations, RHCs, FQHCs, CMHCs, and ESRD facilities, like hospitals, 
and, therefore, is not considered a major rule. There are no 
requirements for hospices, organ procurement organizations, RHCs, 
FQHCs, CMHCs, and ESRD facilities to initiate new processes of care, 
and reporting; to increase the amount of time spent on providing or 
documenting patient care services; or to purchase computer software.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having annual 
receipts of $5 million to $25 million or less annually (See 65 FR 
69432). For purposes of the RFA, all providers and small businesses 
that distribute cost-report software to providers are considered small 
entities. Our intermediaries are not considered small entities for the 
purposes of the RFA. Individuals and States are not included in the 
definition of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and we certify, that this rule 
will not have a significant economic impact on a substantial number of 
small entities or a significant impact on the operations of a 
substantial number of small rural hospitals.
    As stated above, under Secs. 413.20(b) and 413.24(f), providers are 
required to submit cost reports annually, with reporting periods based 
on the provider's accounting year. This proposed rule would require 
hospices, organ procurement organizations, RHCs, FQHCs, CMHCs, and ESRD 
facilities, like hospitals, SNFs and HHAs, to submit their Medicare 
cost reports in a standardized electronic format. We anticipate that 
this requirement would take effect for cost reporting periods ending on 
or after December 31, 2002, meaning that the first electronic cost 
reports would be due May 31, 2003.
    Currently, approximately 55 percent of all hospices, organ 
procurement organizations, RHCs, FQHCs, CMHCs, and ESRD facilities 
submit a hard copy of an electronically prepared cost report to the 
intermediary. We believe that the provisions of this proposed rule 
would have little or no effect on these providers, except to reduce the 
time involved in copying and collating a hard copy of the report for 
intermediaries. Under this proposed rule, instead of submitting a 
complete hard copy of the report, providers would be required to submit 
only hard copies of a settlement summary, statement of certain 
worksheet totals, and a statement signed by the administrator or chief 
financial officer certifying the accuracy of the electronic file or the 
manually prepared cost report. In addition to the 55 percent of 
providers that currently use electronic cost reporting, this rule would 
not affect those providers that do not file a full cost report and, as 
stated above, would not be required to submit cost reports 
electronically.
    This proposed rule may have an impact on those providers who do not 
prepare electronic cost reports, some of whom may have to purchase 
computer equipment, obtain the necessary software, and train staff to 
use the software. However, as discussed below, we believe that the 
potential impact of this proposed rule on those providers who do not 
prepare electronic cost reports would be insignificant.
    First, a small number of the 45 percent of providers that do not 
submit electronic cost reports may have to

[[Page 48843]]

purchase computer equipment to comply with the provisions of this 
proposed rule. These providers are generally owned and operated by one 
or two individuals and are often located in rural areas. They include 
approximately 1500 RHCs and 1500 FQHCs. We estimate that 1350 of the 
3000 RHCs and FQHCs may not have the necessary computer equipment. We 
believe, however, that most providers already have access to computer 
equipment, which they are now using for internal record keeping 
purposes, as well as for submitting electronically generated bills to 
their fiscal intermediaries, for example. Thus, we do not believe that 
obtaining computer equipment would be a major obstacle to electronic 
cost reporting for most providers. For those providers that would have 
to purchase computer equipment, we note that, in accordance with 
current regulations governing payment of provider costs, we would pay 
for the cost of the equipment as an overhead cost. Rural health clinics 
and FQHCs would be reimbursed subject to a payment limit; organ 
procurement organizations reimbursed based on costs; hospices 
reimbursed according to fee schedule; ESRDs paid a composite rate, and 
CMHCs would be reimbursed through a blend of prospective payment (PPS) 
and cost.
    We recognize that a potential cost for providers that do not submit 
electronic cost reports would be that of training staff to use the 
software. Since most hospices, organ procurement organizations, RHCs, 
FQHCs, CMHCs, and ESRD facilities currently use computers, we do not 
believe that training staff to use the new software would impose a 
large burden on providers. An additional cost would be the cost of the 
software offered by commercial vendors. However, providers could 
eliminate this cost by obtaining the necessary software from us, free 
of charge. In those instances when these requirements may cause 
hardship, a waiver can be granted.
    The requirement that hospitals submit cost reports in a 
standardized electronic format has been in place since October 1989. 
Since that time, the accuracy of cost reports has increased and we have 
received very few requests for waivers. Additionally, we have not 
received any comments from the hospital industry indicating that the 
use of electronic cost reporting is overly burdensome. We believe that 
electronic cost reporting would be equally effective for hospices, 
organ procurement organizations, RHCs, FQHCs, CMHCs, and ESRD 
facilities, with the benefits (such as increased accuracy and decreased 
preparation time) outweighing the costs of implementation for most 
providers. We solicit comments on the potential benefits and 
implementation costs of these rules for all providers.
    Section 202 of the Unfunded Mandate Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, that exceeds the inflation-adjusted threshold of $110 
million. This rule does not impose any costs that would exceed the $110 
million threshold on the governments mentioned, or the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have examined this proposed rule and have determined 
that this rule will not have a negative impact on the rights, rules, 
and responsibilities of State, local, or tribal governments.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as follows:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES

    1. The authority citation for part 413 continues to read as 
follows:

    Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

    2. Section 413.24 is amended by revising existing paragraphs 
(f)(4)(i) through (f)(4)(v) to read as follows:


Sec. 413.24  Adequate cost data and cost finding.

* * * * *
    (f) Cost reports. * * *
    (4) Electronic submission of cost reports. (i) As used in this 
paragraph, ``provider'' means a hospital, skilled nursing facility, 
home health agency, hospice, organ procurement organization, rural 
health clinic, federally qualified health clinic, community mental 
health center, or end-stage renal disease facility.
    (ii) Effective for cost reporting periods beginning on or after 
October 1, 1989 for hospitals, cost reporting periods ending on or 
after December 31, 1996 for skilled nursing facilities and home health 
agencies, and cost reporting periods ending on December 31, 2002 for 
hospices, organ procurement organizations, rural health clinics, 
federally qualified health centers, community mental health centers, 
and end-stage renal disease facilities, a provider is required to 
submit cost reports in a standardized electronic format. The provider's 
electronic program must be capable of producing the CMS standardized 
output file in a form that can be read by the fiscal intermediary's 
automated system. This electronic file, which must contain the input 
data required to complete the cost report and to pass specified edits, 
must be forwarded to the fiscal intermediary for processing through its 
system.
    (iii) The fiscal intermediary stores the provider's as-filed 
electronic cost report and may not alter that file for any reason. The 
fiscal intermediary makes a ``working copy'' of the as-filed electronic 
cost report to be used, as necessary, throughout the settlement process 
(that is, desk review, processing audit adjustments, and final 
settlement). The provider's electronic program must be able to disclose 
if any changes have been made to the as-filed electronic cost report 
after acceptance by the intermediary. If the as-filed electronic cost 
report does not pass all specified edits, the fiscal intermediary must 
return it to the provider for correction. For purposes of the 
requirements in paragraph (f)(2) of this section concerning due dates, 
an electronic cost report is not considered to be filed until it is 
accepted by the intermediary.
    (iv) Effective for cost reporting periods ending on or after 
September 30, 1994 for hospitals, cost reporting periods ending on or 
after December 31, 1996 for skilled nursing facilities and home health 
agencies, and cost reporting periods ending on or after December 31, 
2002 for hospices, organ procurement organizations, rural health 
clinics, federally qualified health centers, community mental health 
centers, and end-stage renal disease facilities, a provider must submit 
a hard copy of a settlement summary, a statement of certain worksheet 
totals found within the electronic file, and a statement signed by its 
administrator or chief financial officer certifying the

[[Page 48844]]

accuracy of the electronic file or the manually prepared cost report. 
During a transition period (first two cost-reporting periods on or 
after December 31, 2002), hospices, organ procurement organizations, 
rural health clinics, federally qualified health centers, community 
mental health centers, and end-stage renal disease facilities must 
submit a hard copy of the completed cost report forms in addition to 
the electronic file. The following statement must immediately precede 
the dated signature of the provider's administrator or chief financial 
officer:

    I hereby certify that I have read the above certification 
statement and that I have examined the accompanying electronically 
filed or manually submitted the cost report and the Balance Sheet 
Statement of Revenue and Expenses prepared by _____ (Provider 
Name(s) and Number(s)) for the cost reporting period beginning ___ 
and ending ___ and that to the best of my knowledge and belief, this 
report and statement are true, correct, complete and prepared from 
the books and records of the provider in accordance with applicable 
instructions, except as noted. I further certify that I am familiar 
with the laws and regulations regarding the provision of health care 
services, and that the services identified in this cost report were 
provided in compliance with such laws and regulations.

    (v) A provider may request a delay or waiver of the electronic 
submission requirement in paragraph (f)(4)(ii) of this section if this 
requirement would cause a financial hardship or if the provider 
qualifies as a low or no Medicare utilization provider. The provider 
must submit a written request for delay or waiver with necessary 
supporting documentation to its intermediary no later than 30 days 
after the end of its cost reporting period. The intermediary reviews 
the request and forwards it, with a recommendation for approval or 
denial, to CMS central office within 30 days of receipt of the request. 
CMS central office either approves or denies the request and notifies 
the intermediary within 60 days of receipt of the request.
* * * * *

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

    Dated: March 4, 2002.
Thomas A Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: April 29, 2002.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-18982 Filed 7-25-02; 8:45 am]
BILLING CODE 4120-01-P