[Federal Register Volume 68, Number 65 (Friday, April 4, 2003)]
[Rules and Regulations]
[Pages 16652-16669]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8204]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 422 and 489



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

  Federal Register / Vol. 68, No. 65 / Friday, April 4, 2003 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare and Medicaid Services

42 CFR Parts 422 and 489

[CMS-4024-FC]
RIN 0938-AK48


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

AGENCY: The Centers for Medicare & Medicaid Services, HHS.

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period responds to comments on 
the January 24, 2001, proposed rule regarding improvements to the 
Medicare+Choice (M+C) appeal and grievance procedures. It establishes 
new notice and appeal procedures for enrollees when an M+C organization 
decides to terminate coverage of provider services. The January 24, 
2001 proposed rule was published as a required element of an agreement 
entered into between the parties in Grijalva v. Shalala, civ. 93-711 
(U.S.D.C. Az.), to settle a class action lawsuit.
    This rule also specifies a Medicare-participating hospital's 
responsibility for issuing discharge or termination notices under both 
the original Medicare and M+C programs, amends the Medicare provider 
agreement regulations with regard to beneficiary notification 
requirements, and amends M+C enrollee grievance procedures.

DATES: Effective date: Except for Sec. Sec.  422.564, 422.620, 422.624, 
and 422.626, which are subject to the Paperwork Reduction Act (PRA), 
this final rule with comment period is effective May 5, 2003. We will 
publish the effective dates of those sections of the rule that are 
subject to the PRA in the Federal Register when the sections have been 
approved by the Office of Management and Budget.
    Comment date: We will consider comments on this final rule if 
received at the appropriate address, as provided below, no later than 5 
p.m. on June 3, 2003.

ADDRESSES: 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-4024-FC, 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 CMS-4024-FC. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 443-G of 
the Department's office at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Chris Gayhead, (410) 786-6429 (for 
issues concerning improvements to the M+C appeals and grievance 
procedures); Rhonda Greene Bruce, (410) 786-7579 (for issues related to 
hospital discharge notices).

I. Background

A. Balanced Budget Act of 1997

    Section 4001 of the Balanced Budget Act of 1997, (BBA) (Pub. L. 
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 (M+C) 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 
respect to grievances, organization determinations, and 
reconsiderations and other appeals. Under section 1852(f) of the Act, 
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) of the Act 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 should 
continue to receive, a health service, and the amount the enrollee is 
expected to pay for the service. An organization determination may also 
involve an enrollee's request for reimbursement for services obtained 
with or without prior authorization. Only disputes concerning 
organization determinations are subject to the reconsideration and 
other appeal requirements under section 1852(g) of the Act. All other 
disputes are subject to the grievance requirements under section 
1852(f) of the Act. For purposes of this final rule, 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 or an independent review entity (IRE) or 
entities. We use the term ``appeal'' to denote any of the procedures 
that deal with the reviews of organization determinations, including 
reconsiderations, hearings before administrative law judges (ALJs), 
reviews by the Medicare Appeals Council (MAC) and judicial review.

B. Grijalva v. Shalala

    Grijalva v. Shalala is a 1993 class action lawsuit brought by 
beneficiaries enrolled in Medicare risk-based managed care 
organizations. The plaintiffs challenged the adequacy of the managed 
care appeals process and claimed that CMS failed to assure that 
contracting managed care organizations afforded enrollees rights to 
which plaintiffs contended enrollees were entitled when the 
organization denied, reduced, or terminated health care coverage.
    The Secretary and the plaintiffs reached a settlement agreement in 
the case, which the Arizona District Court approved on December 4, 
2000. Under the settlement agreement, we agreed to publish a notice of 
proposed rulemaking (NPRM) proposing regulations that would establish 
new notice and appeal procedures when an M+C organization decides to 
terminate coverage of provider services to an enrollee. Providers that 
would be affected under the proposed rules published pursuant to the 
settlement agreement included skilled nursing facilities (SNFs), home 
health agencies (HHAs) and comprehensive outpatient rehabilitation 
facilities (CORFs). A key element of the agreement was that CMS would 
propose to establish an independent review entity to conduct fast-track 
reviews of appeals of decisions to terminate services. Under the 
proposed process, M+C enrollees would receive detailed written notices 
concerning their service

[[Page 16653]]

terminations and their appeal rights at least four days before a 
service termination. The proposed appeal process would be carried out 
during those four days. (See our January 24, 2001, proposed rule, 66 FR 
7594, for a more detailed description of the settlement agreement.)
    The settlement agreement contained a great deal of specificity with 
respect to both the notice and appeal procedures to be set forth in the 
proposed rule, and the timeframes for publication of proposed and final 
rules. However, consistent with Administrative Procedure Act (APA) 
standards for notice and comment rulemaking, the agreement explicitly 
established that publication of the proposed requirements ``[should] 
not be construed as a promise or predetermination regarding the content 
of [the] final rule * * * on notice and appeal procedures for M+C 
organization decisions to terminate provider services.''

II. Provisions of the Proposed Rule

    On January 24, 2001, we published an NPRM (66 FR 7593) that, 
consistent with the settlement agreement, proposed regulations that 
would establish that an M+C enrollee who is dissatisfied with an M+C 
organization's decision to terminate SNF, HHA, or CORF services would 
have the right to a fast-track review by an independent entity. As 
described below, the proposed rule set forth the notification and 
appeals procedures for implementing this new appeal right. The proposed 
rule also addressed the notification procedures associated with similar 
appeal rights available to Medicare beneficiaries receiving inpatient 
hospital services as well as M+C beneficiary grievance procedures.

A. Proposed Notice and Appeal Procedures

    We proposed that for any termination of services furnished by one 
of the affected types of providers, the enrollee would receive a 
standardized notice informing them of the M+C organization's decision 
to terminate the services. Under our proposal, the provider would be 
charged with the delivery of the notice four calendar days before the 
scheduled termination. If the services were expected to be furnished to 
an enrollee for a time span of fewer than four calendar days in 
duration, the enrollee would be given the notice upon admission. Valid 
delivery of the notice required the enrollee to sign the notice to 
indicate that he or she had received the notice and could comprehend 
it.
    We proposed that the termination notice contain the following 
information:
    A specific and detailed explanation why services were either no 
longer medically necessary or were no longer covered (with a 
description of any applicable Medicare coverage rule).
    Any applicable M+C organization policy, contract provision, or 
rationale upon which the termination decision was based.
    Specific, relevant information to an extent sufficient to advise 
the enrollee of how a Medicare or M+C organization policy applied to 
the enrollee's case, as well as the date and time that the 
organization's coverage of services would end (and the enrollee's 
liability would begin).
    A description of the enrollee's fast-track appeal rights, including 
how to contact the IRE to initiate an appeal, as well as the 
availability of other M+C appeal procedures if the enrollee failed to 
meet the deadline for (or decided not to pursue) a fast-track IRE 
appeal.
    Under our proposal, an enrollee who wanted to appeal a termination 
decision to the IRE needed to contact the IRE by noon of the first 
calendar day after receiving the termination notice. We specified that 
an enrollee who timely sought IRE review would be 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 received 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 was later.
    We proposed that when an enrollee appealed an M+C organization's 
decision to terminate provider services, the burden was on the M+C 
organization to prove that the termination was the correct decision. 
The M+C organization would be required to supply any information that 
the IRE required to sustain the termination decision, including a copy 
of the termination notice. The M+C organization would be required to 
supply this information as soon as possible, but no later than the 
close of business of the first day after the day the IRE notified the 
M+C organization that the enrollee had requested a review.
    Assuming that the IRE received all needed information on a timely 
basis, the proposed process would have resulted in a decision by the 
close of business on the second full day after the deadline for an 
enrollee's appeal request, with the following possible results:
    If the IRE decided 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 deferred its decision, coverage of the services would 
continue until the decision was made but no additional termination 
notice would be required.
    If the IRE decided to uphold the M+C organization's decision to 
discontinue services, coverage of the enrollee's services would end at 
noon on the day after the IRE made its decision or as specified in the 
termination notice, whichever is later.
    In the event that the M+C organization's decision was upheld, the 
enrollee would be financially liable for any services provided after 
the effective date identified in the notice. The proposed rule outlined 
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 possible to an ALJ and the MAC, 
consistent with the procedures set forth in the existing M+C 
regulations.

B. Hospital Notification Procedures

    We also proposed in the January 24, 2001, rule requirements 
regarding hospitals' responsibility for issuing discharge notices under 
both the original Medicare and the M+C program. Specifically, we 
proposed that hospitals be required to provide to all Medicare 
beneficiaries (including those enrolled in M+C plans) a notice that 
includes the reasons for a discharge and information on their appeal 
rights. Under the proposed rule, hospitals would be responsible for 
delivering such a notice to each beneficiary the day before the date of 
the discharge. We noted that these notices would have to be approved by 
the Office of Management and Budget under section 3506(c)(2)(A) of the 
Paperwork Reduction Act.

C. Grievance Procedures

    The January 2001 rule also proposed to revise the existing 
definition of a ``grievance,'' and proposed that an M+C organization be 
required to notify the enrollee of its decision as expeditiously as the 
case required, but no later than 30 calendar days after the date the 
organization received the grievance. In conjunction with this 
timeframe, we also proposed that the M+C organization be permitted to 
extend the timeframe by

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up to 14 calendar days if the enrollee requested the extension or if 
the organization justified a need for additional information and the 
delay was in the interest of the enrollee.
    Our proposal would require an M+C organization to inform the 
enrollee of the disposition of the grievance in writing if the 
grievance was submitted in writing. Grievances submitted orally could 
under the proposal be responded to either orally or in writing unless a 
written response was specifically requested by the M+C enrollee.
    We proposed that 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 Quality Improvement Organization (QIO) 
review. For any complaint involving a QIO, the M+C organization must 
cooperate with the QIO in resolving the complaint.
    The proposed rule specified that an M+C organization would be 
required to expedite a grievance if: (1) The grievance involved an M+C 
organization's decision to invoke an extension relating to an 
organization determination or reconsideration; (2) the grievance 
involved an M+C organization's refusal to grant an enrollee's request 
for an expedited organization determination; or (3) applying the 
standard timeframe could seriously jeopardize the enrollee's life, 
health or ability to regain maximum function. We proposed 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. The 
proposed grievance procedures concluded with the requirement 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 would be required to 
maintain, at a minimum, date of receipt, disposition and date the 
response was given.

D. Reductions of Service

    As part of the Grijalva settlement, we agreed to solicit comments 
in the January 2001 rule on how to provide notice and appeal procedures 
for decisions by M+C organizations to reduce provider services. We 
stated in the January 2001 proposed rule that, based on our review of 
this issue, we were considering adopting the position that a written 
notice should be required whenever there was a reduction in any 
previously authorized ongoing course of treatment. We did not put forth 
specific regulatory language to implement this approach, but instead 
asked for public comments on the appropriateness of such a requirement 
and recommendations on specific regulatory revisions in this regard.

III. Analysis of and Responses to Public Comments

A. Overview of Comments on January 24, 2001 Proposed Rule

    We received 33 timely comments from organizations representing 
hospitals and other providers, M+C organizations, beneficiary advocacy 
groups and others. Commenters representing providers and managed care 
organizations uniformly agreed that the new appeals procedures were 
unworkable as proposed. They raised a series of objections to the 
proposed provisions, with concerns focusing on the following areas:
    [sbull] Creation of a fast-track appeals process.
    [sbull] Timing of the termination notices.
    [sbull] Content and delivery of the notices.

The commenters representing beneficiary groups generally supported the 
procedures as proposed and urged CMS to finalize the proposed 
provisions. Commenters also expressed concern over the revised 
procedures for notifying Medicare beneficiaries of their right to 
appeal when discharged from an inpatient hospital. We also received 
comments on the proposed grievance procedures and the appropriateness 
of establishing notice and appeal procedures for reductions in provider 
services. These comments and our responses are discussed below.

B. The Proposed Fast-Track Review Process (Sections 422.624 and 
422.626)

1. Need for a New Fast-Track Appeals Process
    Comment: Several commenters opposed the creation of a fast-track, 
independent appeals process. These commenters argued that the current 
expedited appeals process is effective to handle appeals of provider 
terminations. They pointed out that the appeals process had changed 
considerably since the Grijalva lawsuit was first filed in 1993, 
including the implementation of an expedited appeals process for 
Medicare managed care enrollees (through an April 30, 1997, final rule 
(62 FR 23375)) and the subsequent establishment of the M+C program 
appeals procedures (under the BBA and implementing regulations). They 
asserted that the new fast-track appeals process would be confusing, 
duplicative, burdensome and expensive.
    Response: We recognize that many of the problems that led to the 
original Grijalva lawsuit have been rectified through subsequent 
statutory and regulatory changes, and we believe that the existing 
expedited appeals process constitutes an important and effective 
beneficiary protection. However, the current expedited appeals process 
was designed primarily to address denials of the initiation of a 
service. The fast-track appeals process proposed in the January 24, 
2001, rule would deal with decisions about the termination of provider 
services. Moreover, obtaining an independent review of an M+C 
organization's decision to terminate an enrollee's provider services 
now takes at least 6 days to complete, under a process where both the 
M+C organization and CMS's independent contractor must review an 
adverse organization determination about the need for further services. 
Our experience has been that decisions involving the termination of 
provider services, particularly in nursing homes, have been among the 
most contentious, and have often exposed enrollees to potentially 
significant financial liability for continuation of services. Under the 
fast-track process, an enrollee may appeal directly to an IRE, with 
greatly limited, if any, financial liability. This one-step process, 
carried out at government expense, can limit appeal processing costs 
for both the enrollee and the M+C organization.
    We also note that section 1869(b) of the Act, as amended by section 
521 of the Medicare Medicaid, and SCHIP Benefits Improvement and 
Protection Act (BIPA), has introduced significant new appeal 
requirements for beneficiaries under the original Medicare program that 
substantially parallel those proposed pursuant to the Grijalva 
settlement. BIPA requires the Secretary to establish a new fast-track 
appeal process when a provider of services plans to terminate an 
individual's services or discharge the individual from the provider. 
Currently, this right to an expedited review only exists with respect 
to hospital discharges under sections 1154 and 1155 of the Act. Our 
decision to implement an independent review process for terminations of 
provider services furnished to M+C enrollees is entirely consistent 
with, and bolstered by, the Congressional intent and direction 
evidenced by the BIPA provisions. (See our November 15, 2002, proposed 
rule, at 67 CFR 69312 for further details on the BIPA statute and our 
proposed new appeal provisions.) We believe that CMS must assure that 
all Medicare beneficiaries are afforded a fair and equitable process to 
appeal

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provider terminations whether the beneficiary is enrolled in M+C or 
original Medicare.
2. Timing of the Termination Notices
    Comment: Many commenters stated that it is clinically improbable 
that an M+C organization or provider could accurately predict four days 
in advance when a discharge would be appropriate, particularly in the 
nursing home setting where discharge decisions are made ``at most 48 
hours prior to discharge.'' They argued that requiring delivery of the 
termination notices four days in advance would result in unnecessary 
appeals being initiated in situations where there could be a subsequent 
decision that services should not be terminated. They also believe that 
the four-day advance notice would greatly complicate the appeals 
decision-making process, since appeals would need to be decided as much 
as two days before the actual termination of services. Commenters 
suggested a number of alternative requirements for delivery of the 
termination notice, including: three days before termination of 
services, two days before termination, one day before termination of 
services, and ``promptly'' after the M+C organization decides that 
termination is appropriate.
    Several commenters representing home health providers expressed 
concern that providers of such intermittent care in effect would be 
required to arrange for their staff to make extra visits solely to 
deliver termination notices. Commenters also suggested that if CMS 
retained the four-day advance notice requirement, the requirement 
should be more flexible, i.e., delivery could be carried out before the 
proposed four-day deadline if circumstances permitted.
    Response: The primary intent of the proposed four-day advance 
notification requirement was to enable the appeals process to be 
completed by the time services were scheduled to end, and thus to 
protect enrollees from any financial liability during the course of the 
appeal process. However, we have become convinced based on our review 
of the comments and further research into medical practice patterns 
that providing these notices four days in advance of termination is 
often not practical, particularly in institutional settings. Therefore, 
in this final rule, we are requiring under 422.624(b)(1) that enrollees 
receive notices no later than two days in advance of termination of 
services. We are also revising the proposed requirements to state 
explicitly that if, in a noninstitutional setting, the span of time 
between services exceeds two days, the notice may be provided the next 
to last time services are furnished.
    We recognize that the result of this change would be that in some 
situations, enrollees will be exposed to potential liability for 
services that are found unnecessary by the independent review entity. 
However, we have concluded that it is not possible to construct a 
system that in all situations provides a meaningful notice about 
termination of services and still builds in complete financial 
protection for enrollees during the course of an appeal to an IRE. Note 
that we are also revising the appeals process itself (by shortening the 
time frame for records to be sent to the IRE, under 422.626(e)(3)) to 
ensure that it is completed within three days of the notice of 
termination. The effect of these changes is that an enrollee will face 
a maximum of one day of financial liability if the IRE rules that the 
disputed discharge date is appropriate.
    In establishing this policy, we carefully considered how to balance 
two conflicting responsibilities--the need to ensure that an M+C 
enrollee has an opportunity to a meaningful appeal without undue 
financial exposure with the obligation not to impose inappropriate 
financial burdens on M+C organizations. Clearly, except in the 
inpatient hospital setting, the Medicare statute generally does not 
provide financial liability protection for either M+C enrollees or 
other Medicare beneficiaries who have chosen to continue to receive 
services pending the result of an appeal or claim determination. Absent 
a statutory mandate, we do not believe we have the authority to require 
M+C organizations to pay for services that are subsequently determined 
by an independent review entity not to be medically necessary, or 
otherwise covered, for the enrollee in question. (As noted above, 
section 521 of BIPA establishes a similar right to a fast track appeal 
of a termination of provider services (under section 1869(b)(1)(F) of 
the Act), but did not provide for continuation of Medicare coverage 
during the pendency of the appeal.)
    It is important to note that an enrollee's potential financial 
liability for continuing provider services occurs only after valid 
delivery of the advance termination notice. That is, consistent with 
the requirements outlined at Sec.  422.624(b), a standardized, signed 
and dated advance termination notice is required for financial 
liability to accrue to the enrollee. Providing this notice as soon as 
the termination date is known (rather than waiting until two days in 
advance of service termination) will in many cases serve the best 
interests of both plan enrollees and the M+C organizations who are 
responsible for payment for the services.
    Comment: Several commenters responded to our specific request for 
comments on what constituted four-day notice and expressed confusion 
over whether the deadline for notice delivery would be 3 p.m. or 
``close of business.'' Commenters indicated that requiring that the 
notices be delivered by 3 p.m. was not appropriate, given for example 
that physicians frequently visit nursing homes late in the afternoon or 
early in the evening after their office hours are over. Commenters 
recommended that CMS clarify that termination notices could be given 
until the end of the business day, which would still enable enrollees 
to request an appeal by noon of the next day.
    Response: We agree with commenters that the deadline for notice 
delivery needs to be later than 3 p.m. to allow physicians and other 
practitioners enough time to visit nursing homes or other service 
settings late in the day. We recognize that practice patterns are 
different in these settings than in inpatient hospitals and thus that 
it may not be appropriate to apply the same standard across all 
provider settings. Thus, rather than establish a more precise time 
standard in regulations, the regulations will continue to indicate the 
latest day that a notice must be delivered. We intend to issue further 
program guidance that will be based on the prevalent practice patterns 
for the various service types. This guidance will reflect our general 
agreement that delivery of the advance termination notice by ``close of 
business'' will provide sufficient time for an enrollee to appeal by 
noon of the next day.
    Comment: Two commenters raised concern over whether the four-day 
advance notice requirement should include weekends and holidays. One 
commenter asked that we consider the fact that many of the notices may 
be given on a day that would place the fourth day on a Saturday, 
Sunday, or holiday. Another commenter stated that since HHA and CORF 
services are not usually rendered on weekends or holidays, and M+C 
organizations have limited staff available on these days, CMS should 
consider using business rather than calendar days, where appropriate.
    Response: As noted above, this final rule changes the requirement 
for advance notification of termination of services or discharge from 
the four day standard in the proposed rule to no later than two 
calendar days prior to termination of services or discharge. The new 
standard of ``at least'' two days

[[Page 16656]]

affords an M+C organization or provider the option of providing notice 
more than two days in advance if the second day before discharge is a 
non-business day (for example, for a Monday discharge). We have also 
provided that situations involving non-institutional settings, where 
the time-span between service delivery exceeds two days, an enrollee 
should be notified no later than the next to the last time services are 
furnished. We will work with provider and M+C organization 
representatives, and with the IRE to develop uniform procedures to deal 
with those rare situations where an enrollee needs to be given notice 
or discharged on a weekend. At a minimum, we intend to require, through 
its contract, that the IRE be able to accept expedited review requests 
on any day of the week and notify an M+C organization of that request.
3. Content and Delivery of the Termination Notice
    Comment: Commenters raised a series of related concerns about both 
the delivery and content of the termination notices. Many commenters 
viewed as unnecessarily burdensome the requirement that each enrollee 
in a provider setting receive a detailed termination notice, regardless 
of whether the enrollee agreed with the termination of services. They 
generally believe that in most situations the contents of the required 
notice were too extensive and would provide little or no benefit to 
most enrollees.
    Commenters were divided on the issue of who should be responsible 
for distributing the notices. Managed care industry commenters 
generally supported the proposed requirement that the providers of 
services deliver the notices, although they expressed concern over 
their liability in situations where the providers failed to do so. 
Commenters representing providers objected to being charged with this 
responsibility, particularly in view of the detailed nature of the 
notice. They indicated that it would be difficult to obtain all needed 
information from M+C organizations and that it was unfair to in effect 
shift the responsibilities of M+C organizations to providers. One 
commenter argued that a policy whereby providers would be responsible 
for giving notices does not comport with the settlement agreement.
    Response: We continue to believe that providers clearly are in a 
better position than M+C organizations to carry out routine delivery of 
service termination notices to their patients. At the same time, 
although all enrollees need to be made aware of their appeal rights on 
a timely basis, we recognize that only a small proportion are likely to 
object to the termination of their services. Thus, it is in the best 
interests of all parties that the notice delivery process be as 
streamlined and simple to administer as possible.
    To that end, we are requiring a two-step notification procedure 
under this final rule. We are revising the proposed requirement that 
providers deliver a detailed termination notice to M+C enrollees. 
Instead, we are requiring under 422.624(b) that providers deliver a 
standardized, largely generic, notice to each M+C enrollee whose 
services are terminating that will explain the enrollee's appeal 
rights. The notice will contain only two enrollee-specific elements--
the enrollee's name and the date services will end. These notices will 
contain standardized information on an enrollee's appeal rights and how 
to initiate an appeal if necessary. Unless the enrollee wishes to 
dispute the termination of services, no further notice will be 
required.
    The notice will instruct the enrollee to contact the IRE if he or 
she believes that the services should continue. If the enrollee 
indicates to the IRE that he or she disagrees with the discharge, the 
IRE will immediately contact the M+C organization, which will be 
required under 422.626(e) to deliver a detailed notice to the 
dissatisfied enrollee and to the IRE. The detailed notice must contain 
the remaining elements required under the proposed rule, including an 
explanation of why services were no longer needed, a description of any 
applicable Medicare coverage rule or policy, a statement of any 
applicable M+C organization policy or rationale, and facts specific to 
the enrollee that establish the applicability of Medicare or M+C 
organization policies. We believe that M+C organizations are in the 
best position to give detailed notices regarding their specific 
policies and the criteria that they applied in deciding to terminate 
provider services. Moreover, in view of the fact that M+C organizations 
ultimately bear the responsibility for both the service termination/
discharge decision and for paying for services covered under their 
plans, we believe that is appropriate that M+C organizations be 
responsible for preparing and delivering them under the limited 
circumstances when they are needed.
    Comment: Commenters were concerned that providers would refuse to 
comply with instructions to deliver notices and wanted to know what 
incentives were in place to obligate providers to deliver notices.
    Response: We believe that the streamlined notification process 
should greatly ameliorate this concern. Providers will be obligated to 
comply with notice requirements through the amendment of the provider 
agreement regulations at Sec.  489.27(b), as well as through their 
contractual arrangements with M+C organizations. We recognize that M+C 
organizations may also choose to delegate to providers the 
responsibility for discharge and termination decisions, and for the 
delivery of detailed notices in disputed termination cases. M+C 
organizations may choose to offer incentives to providers for 
compliance with these responsibilities, or penalties for non-
compliance, through these private contractual arrangements. However, 
consistent with 422.502(i), M+C organizations remain ultimately 
responsibility for carrying out such delegated requirements.
    We also note that section 1819(h) of the Act specifies remedies 
that may be used by the Secretary when a SNF is not in substantial 
compliance with the requirements for participation in the Medicare 
program. These penalties are applied on the basis of surveys conducted 
by CMS or by a survey agency. The regulations at Sec.  488.406 include 
other penalties for non-compliance such as denials of payment, and 
corrective action plans. Also, HHAs are regulated in part by conditions 
of participation found at Sec.  484.12, which indicate that HHAs must 
operate and furnish services in compliance with all applicable Federal, 
State and local laws and regulations.
    Comment: Several commenters raised questions about financial 
liability in situations where a provider failed to deliver timely 
notice. They believe that it would be unfair for M+C organizations to 
be liable for services in such situations.
    Response: Again, we believe that the prevalence of this sort of 
situation will be greatly lessened in light of the direction that we 
have taken in this final rule, which places a clear, reasonable 
obligation on both providers and M+C organizations with respect to 
informing enrollees of their rights. Nevertheless, the nature of the 
arrangement between an enrollee and a managed care organization 
dictates that the organization is ultimately responsible for payment 
for services that are found to be covered under the enrollee's plan. 
When an IRE makes a decision on an enrollee's appeal of a service 
termination, that decision will determine the extent to which liability 
rests on either the M+C organization or the enrollee. Consistent with

[[Page 16657]]

422.624(a)(2), an IRE's review will be available with respect to 
termination decisions where an enrollee first was ``authorized, either 
directly or by delegation, to receive an ongoing course of treatment 
from that provider.'' Thus, the IRE's determination is limited to 
whether continuation of an ongoing course of treatment is covered under 
an enrollee's plan. The IRE will not be expected to assign liability 
between the provider and the M+C organization.
    Accomplishing proper advance notification of termination by the 
provider requires coordination and information sharing between the 
provider and the M+C organization to ensure that the enrollee receives 
the correct information at the proper time. We believe that the 
interdependence between M+C organizations and SNFs, HHAs, and CORFs 
reflects the typical daily reality of health plans and insurers.
    Comment: Some commenters suggested that the 4-day advance notice 
requirement could result in the overutilization of services. They were 
concerned, for example, that an enrollee could be kept in a SNF 
unnecessarily even if the individual's condition had improved 
sufficiently to permit an unexpectedly early discharge. Commenters also 
asked about situations where an IRE determined that services should 
continue only one or two additional days. They questioned the need for 
additional notices in such situations.
    Response: The notice requirement is not intended to impede or 
substitute for appropriate medical decision-making practices. Nothing 
in these requirements precludes an enrollee from being discharged from 
a SNF or HHA when an enrollee and his or her physician are in agreement 
that the discharge is medically appropriate. To clarify this point, we 
have revised section 422.624(d) to specify that, although an M+C 
organization is financially liable for continued services until 2 days 
after an enrollee receives a termination notice, the enrollee may waive 
the right to continued services if he or she agrees with being 
discharged sooner than 2 days after receiving the notice. However, an 
enrollee who objects to the service termination would not be liable for 
the services until 2 days after receiving the notice.
    Similarly, it is not our intent to require M+C organizations to 
provide more care than an IRE determines would be appropriate. If an 
IRE specifies the number of days that coverage should continue, the 
IRE's decision itself takes the place of any further notice. However, 
there may be instances where an IRE will defer to an M+C organization 
to determine when coverage should end. In those cases, another advance 
termination notice must be given to the enrollee within a time frame 
consistent with the circumstances involved. Again, we believe that this 
concern is lessened or eliminated under the change to a 2-day advance 
notice.
    Comment: Several commenters were concerned about the length and 
complexity of the notice, believing that this would cause delays in its 
preparation and create noncompliance with the delivery and appeals 
timeframes. Some commenters also argued that preparing these detailed 
notices about policies, coverage rules and contract provisions for 
every enrollee prior to provider services terminating would be 
administratively burdensome.
    Response: As discussed above, we agree that it is not necessary to 
provide a detailed notice to all enrollees. We have learned through 
consumer testing that Medicare beneficiaries prefer to receive relevant 
information timed according to when they need to act. Thus, we have 
revised the proposed policy from requiring 100 percent distribution of 
a detailed notice from providers to all enrollees, to 100 percent 
distribution of a largely generic notice that explains when services 
will end, where to appeal if the enrollee disagrees, and potential 
liability for continued coverage during an appeal. For those enrollees 
who choose to appeal, M+C organizations would be required to provide a 
detailed notice that: explains why services are no longer covered or 
medically necessary, describes any applicable coverage rules, policies, 
or contract provisions, and contains facts specific to the enrollee and 
relevant to the coverage determination that are sufficient to advise 
the enrollee about the enrollee's care. We believe that this two-step 
notification process meet the needs of the large majority of enrollees 
who need to know when their services will end and what their appeal 
rights are, as well as the small minority of enrollees who want more 
specific information about why their services are ending. This approach 
also ensures that providers and M+C organizations are not faced with 
unnecessary administrative costs and burdens. CMS will develop both 
notices--the advance termination notice, and the detailed termination 
notice, through OMB's PRA process.
    Comment: Some commenters viewed our proposal to require providers 
to deliver termination notices as evidence that CMS was unfairly 
favoring M+C organizations over providers, by allowing M+C 
organizations to avoid responsibility for providing notices. Some 
commenters believed that making providers responsible for termination 
notices simply because they were in the best position to deliver 
notices was unprecedented and argued that this violated the 
Administrative Procedure Act (APA).
    Response: In developing these proposals, as well as in developing 
this final rule, we have attempted to arrive at policies that balance 
the rights and responsibilities of all the involved parties, including 
Medicare beneficiaries, providers, and M+C organizations. We continue 
to believe that beneficiaries need to be informed of their appeal 
rights and that providers are in the best position to carry out this 
function. At the same time, we are very cognizant of the need to 
accomplish such notification in the most cost-effective and least 
burdensome manner. Thus, as explained above, we have made adjustments 
to the proposed provisions to reflect concerns raised by commenters. 
This is the essence of notice and comment rulemaking, and thus we 
believe that implementing the notification requirement through this 
rulemaking process is entirely consistent with the APA. That is, the 
preamble to the proposed rule satisfied the requirements of the APA by 
describing our proposed policies and explaining the reasoning behind 
the proposal that providers deliver the termination notices. This final 
rule then reflects our careful consideration of the comments received. 
In response to comments on the burden imposed by the proposal on 
providers, we have in this final rule lessened that burden.
    Comment: Various commenters raised questions regarding whether a 
notice needed to be provided in certain scenarios, such as when 
services did not meet Medicare coverage criteria, or where a provider 
or attending physician disagreed with an M+C organization's decision to 
terminate services.
    Response: M+C organizations must determine when services should end 
on the basis that services are no longer medically necessary, or 
otherwise are not covered under Medicare or the M+C plan's coverage 
policies. Once an M+C organization determines that provider services 
should end, providers must deliver notices to enrollees at least two 
days in advance of services terminating. The requirement to provide the 
notice is independent of the basis for termination of a course of 
treatment. In other words, it applies whether the decision is based on 
a medical necessity judgment or the application of a Medicare coverage 
rule.

[[Page 16658]]

Similarly, the provider's obligation to give an advance termination 
notice to the enrollee exists even if a provider or attending physician 
disagrees with the M+C organization that services should terminate. The 
M+C organization's decision to end services is not an indication that 
the provider necessarily agrees that services should end, but it is 
necessary to ensure that the enrollee has the opportunity to appeal the 
M+C organization's decision.
    Comment: Commenters recommended that CMS permit providers to 
request appeals on behalf of enrollees and recommended that an IRE's 
decision bind an M+C organization to pay a provider for necessary 
services.
    Response: Providers have the ability to file appeals on behalf of 
enrollees as authorized representatives in accordance with Sec.  
422.562(d). We have not created any additional provider appeal rights 
in this regulation. The purpose of these regulations is to ensure that 
enrollees receive the services that they are entitled to under their 
M+C plans, through the implementation of appropriate notice and appeal. 
CMS generally does not specify the payment arrangements between M+C 
organizations and providers; therefore, an IRE's reversal of an M+C 
organization's decision to terminate services is not a ruling on 
whether, or the extent to which, an M+C organization is financially 
obligated to the provider. Instead, the relevance of an IRE's reversal 
is that the M+C organization is obligated to continue services for the 
enrollee beyond the services that the M+C organization previously 
authorized.
    Comment: Some commenters suggested that the requirement for a 4-day 
advance notice in situations where an IRE determined that services 
should continue only one or two additional days would result in the 
overutilization of health care services. They questioned the need for 
additional notices in such situations.
    Response: It is not our intent to require M+C organizations to 
provide more care than an IRE determines would be appropriate. If an 
IRE specifies the number of days that coverage should continue, the 
IRE's decision itself takes the place of any further notice. However, 
there may be instances where an IRE will defer to an M+C organization 
to determine when coverage should end. In those cases, another advance 
termination notice must be given to the enrollee within a time frame 
consistent with the circumstances involved. Again, we believe that this 
concern is lessened or eliminated under the change to a two-day advance 
notice.
    Comment: Commenters expressed concern that an IRE might delay 
making a decision if it believed that it needed additional information 
from the M+C organization. The commenter proposed that CMS require an 
IRE to inform the M+C organization promptly, by fax or e-mail, if an 
IRE believed that it needed more information to make a decision, and to 
specify the precise information it required to make a decision on the 
merits.
    Response: Section 422.626(d)(5) specifies that if an M+C 
organization fails to provide sufficient information to support its 
decision to terminate an enrollee's services, an IRE may defer issuing 
a decision until it receives needed information about the case. If an 
IRE chooses to do so (rather than simply decide the case in the 
enrollee's favor based on the evidence at hand), we agree that an IRE 
should make best efforts to promptly notify an M+C organization of the 
information the IRE needs, and that the submission of this information 
could affect the IRE's decision on the merits. However, M+C 
organizations should not expect IREs to routinely follow-up to complete 
the record. It is the M+C organization's responsibility to provide all 
relevant material necessary to sustain its termination decision by 
close of business of the day that the IRE notifies the M+C organization 
that an enrollee has requested an appeal. Thus, we will instruct IREs 
through their contracts with CMS that in the event that the M+C 
organization fails to submit documentation that would sustain the M+C 
organization's decision, and the IRE either cannot obtain the prompt 
cooperation of the M+C organization, or does not deem it practical to 
obtain additional information, the IRE should issue a decision based on 
the information available and err on the side of the beneficiary.
    Comment: One commenter suggested that CMS should extend the same 
provider notice requirements to original Medicare beneficiaries whose 
services are being terminated.
    Response: As noted above, section 1869(b)(1)(F) of the Act, as 
amended by section 521 of BIPA, establishes appeal rights for 
beneficiaries under original Medicare that are largely parallel to 
those available to M+C enrollees under this final rule. As discussed in 
detail in our November 15, 2002, proposed rule concerning those 
provisions, we believe that existing Advance Beneficiary Notices (ABNs) 
that are now used in Medicare fee-for-service settings are the 
appropriate vehicle to trigger the right to an expedited appeal of a 
provider termination of services. (See 67 FR 69337.)
    Comment: Several commenters are concerned that the standard for 
``valid delivery'' of a termination notices is difficult to meet. They 
indicated that it would require a clinician to deliver the notice in 
order to determine the enrollee's level of consciousness, and ability 
to read and comprehend it, which would be expensive and burdensome.
    Response: Section 422.624(c) specifies that ``delivery'' of a 
notice is valid only if an enrollee has signed and dated the notice to 
indicate that he or she both received the notice and can comprehend its 
contents. This policy is consistent with other CMS requirements 
governing the delivery of similar notices such as those set forth in 
CMS program memoranda A-99-52 and A-99-54 for HHA advanced beneficiary 
notices under original Medicare. We have no indication that this 
standard has proven problematic and believe that it is appropriate to 
apply similar protections to enrollees in the M+C program. Note that 
this requirement for successful delivery does not 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.
    By the time that termination notices are issued, providers will 
have already needed to assess an enrollee's ability to accept delivery 
of a notice, based on typical admission assessments, care planning 
evaluations and discharge planning activities that have taken place 
during the course of treatment. In the event a provider believes that 
an enrollee is not capable to receive the notice, providers should be 
well-acquainted enough with the enrollee's particular situation to make 
alternative arrangements, if necessary, to deliver a valid notice. For 
example, an incapacitated enrollee is not able to act on his or her 
rights and, therefore, could not validly ``receive'' the notice. This 
situation could be remedied through the use of an authorized 
representative under Federal or State law.
4. Other Comments
    Comment: Several commenters objected to the proposed requirement 
under Sec.  422.502(i)(3)(iv) that M+C organizations include specific 
provisions in their contracts with providers to require providers to 
comply with the notice requirements in 422.624. They believe it is 
burdensome to reopen

[[Page 16659]]

contracts with providers to incorporate these requirements, citing that 
the change in the conditions of participation at Sec.  489.27(b) should 
be sufficient to ensure compliance.
    Response: We agree that the change in conditions of participation 
at Sec.  489.27(b) is sufficient to ensure that providers comply with 
the notice requirements at Sec.  422.624. Although we believe that it 
would be in the best interests of providers and M+C organizations to 
include these notice requirements in their contracts, we do not intend 
to require that providers and M+C organizations renegotiate their 
contracts solely for the purpose of including a clause regarding notice 
delivery requirements. Therefore we have removed proposed Sec.  
422.502(i)(3)(iv).
    Comment: One commenter wanted to know if M+C organizations could 
charge enrollees a reasonable flat fee for the costs of duplicating and 
mailing case files to enrollees upon request.
    Response: In accordance with the Privacy Act and 45 CFR 5b.13, 
``[f]ees may only be charged where an individual requests that a copy 
be made of the record to which he is granted access.'' No fee is 
permissible unless the copying costs are at least $25. Thus, an M+C 
organization may not charge a fixed fee for the costs of duplicating 
and mailing case files to enrollees, but may apply the fee schedule 
outlined in Sec.  5b.13(b). This would allow an M+C organization to 
charge $.10 per page for photocopied records above the $25 threshold, 
or the actual cost determined on a case-by-case basis for records not 
susceptible to photocopying.
    Comment: One commenter noted that the proposed rule was silent on 
the type of entity that could serve as an IRE. The commenter (an 
organization representing Quality Improvement Organizations) 
recommended that QIOs should be designated as IREs since QIOs already 
interact on a daily basis with families who question whether the timing 
of a provider discharge is appropriate. The commenter indicated that 
relying on an entity other than QIOs would be confusing to enrollees. 
The commenter recommended that CMS change all references from IRE to 
QIO so that CMS would not have to develop and maintain a costly and 
unnecessary contractual and regulatory structure that duplicates the 
QIO program.
    Response: Although we recognize that QIOs have experience with 
making similar determinations, we do not believe that it is appropriate 
to designate in a final rule that QIOs will carry out the fast-track 
reviews. We are still evaluating whether these reviews are more 
appropriately accomplished through a single IRE, or multiple entities, 
as well as the extent to which these procedures can be linked with 
expedited reviews required under the new BIPA provisions. There are 
various independent entities, including QIOs, which already have 
contractual relationships with CMS to make coverage decisions. As we 
attempt to develop improved, more efficient appeals procedures under 
both M+C and original Medicare, CMS will determine whether it is 
prudent to use these existing contractors to fulfill the requirements 
of this regulation, or whether it is necessary to seek bids for this 
important work.
    Comment: One commenter expressed concern that the proposed rule did 
not require that IRE reviewers include clinicians or practicing 
physicians. The commenter also believed that a reviewer should have a 
background in the specialty or subspecialty relevant to the case.
    Response: The regulations at Sec. Sec.  422.624 and 626 are part of 
the overall M+C appeals process under subpart M. These fast-track 
reviews effectively replace M+C organization's reconsiderations on SNF, 
HHA, and CORF termination cases. Thus, similar to the requirement under 
Sec.  422.590(g)(2) for reconsideration decisions by M+C organizations, 
we intend to require through our contract with the IRE(s) that 
decisions involving denial of coverage based on a lack of medical 
necessity ``must be made by a physician with expertise in the field of 
medicine that is appropriate for the services at issue. The physician 
making the reconsidered determination need not, in all cases, be of the 
same specialty or subspecialty as the treating physician.''

C. Hospital Discharge Notices (Sec. Sec.  422.620 and 489.27)

    Comment: Many commenters strongly opposed the proposed requirements 
under 422.620 and 489.27 that hospitals issue a standardized notice of 
appeal rights for a second time on the day before discharge to all 
Medicare beneficiaries, including those that are enrolled in a Medicare 
managed care health plan. They believe that this requirement poses a 
significant administrative burden in both delivering and explaining the 
form and takes away from time better spent on providing services and 
discharge planning. They contend that the notice is unnecessary in 
either the managed care or fee-for-service context and indicated that, 
in many cases, beneficiaries are confused by the notice. One commenter 
stated that after the enactment in 1998 of the requirement under 
422.620 that all M+C enrollees receive discharge notices the day before 
the end of their hospital stay, the Quality Improvement Organizations 
(QIO) received many phone calls from confused beneficiaries not 
understanding the notice. The commenters believe that very few 
beneficiaries have any interest in disputing their hospital discharges 
and thus the cons of this requirement far outweigh any benefits.
    Two commenters supported the proposal that hospitals issue notices, 
both near admission and the day before discharge, to all Medicare 
beneficiaries. They supported CMS's efforts to combine the Important 
Message from Medicare (IM) with the Notice of Discharge & Medicare 
Appeals Rights (NODMAR), and Hospital Issued Notice of Noncoverage 
(HINN). The commenters found the notices largely duplicative and 
welcomed the simple one page document. (Please note that since the 
publication of the proposed rule, the required notices and the 
distribution process have also been the subject of public comment 
through the Office of Management and Budget (OMB) approval process 
required under section 3506(c)(2)(A) of the Paperwork Reduction Act 
(PRA).)
    Response: After careful consideration of the public comments on 
these requirements, the many comments received on the notices 
themselves through the PRA process, and evaluation of CMS data on the 
hospital discharge appeals process, we are convinced that changes are 
needed in the proposed notice requirements. Consistent with the notice 
requirements discussed above for other provider termination situations, 
we are revising 422.620 to eliminate the requirement that hospitals 
provide a written notice of noncoverage to each M+C enrollee the day 
before discharge. Section 489.27 will continue to require that 
hospitals furnish the Important Message from Medicare, which explains a 
beneficiary's appeal rights to every Medicare inpatient during their 
stay, but will not specify that the notice be delivered the day before 
discharge.
    We continue to strongly believe that all beneficiaries need to be 
informed of their Medicare appeal rights when admitted as inpatients to 
hospitals, and this will continue to take place in compliance with 
section 1866(a)(1)(M) of the Act. However, we have reached the 
conclusion that requiring that this notice in effect be delivered 
twice, once upon admission and again before discharge, would be an 
unnecessarily burdensome requirement on hospitals. We have reviewed 
data from the QIOs

[[Page 16660]]

via CMS's Standard Data Processing System covering the period November 
1999-March 2001. During this time, there were approximately 11 million 
Medicare beneficiaries discharged from hospitals, only about 15,000 of 
whom (slightly more than one tenth of 1 percent) chose to appeal the 
hospital discharge decision. Tellingly, the proportion of M+C enrollees 
that exercised their right to appeal was no different than that for 
other beneficiaries, despite the ongoing requirement that all M+C 
enrollees receive notice of their discharge and Medicare appeal rights 
the day before discharge--a requirement that does not exist for other 
Medicare beneficiaries. Thus, we believe this evidence indicates the 
efficacy of the current practice under which hospitals issue detailed 
notices of noncoverage to beneficiaries under original Medicare only 
when they express dissatisfaction with the termination of hospital 
services.
    Therefore, hospitals will continue to be responsible for issuing 
both the Important Message from Medicare to all Medicare inpatients, as 
well as for issuing HINNs to inpatients covered under the original 
Medicare program when they indicate that they disagree with a 
hospital's discharge decision. For enrollees in the M+C program, we are 
revising 422.620 to specify that M+C organizations are responsible for 
providing a written notice of noncoverage when an enrollee disagrees 
with a discharge decision. The notice must be issued no later than the 
day before hospital coverage ends and must explain the reason why care 
is no longer needed, the enrollee's appeal rights, and the effective 
date of time of the enrollee's liability for continued inpatient care. 
We believe that it is appropriate to place this responsibility on M+C 
organizations, given their financial liability for continued care in 
such situations.
    We intend to submit updated versions of both the Important Message 
from Medicare and the detailed notices of noncoverage to OMB for public 
comment through the PRA process. (We anticipate that there will 
continue to be two notices of noncoverage--one for patients under 
original Medicare and one for patients enrolled in the M+C program.) 
Until that process is completed, hospitals and M+C organizations should 
continue to use the existing Important Message, HINN, and NODMAR for 
accomplishing the notification requirements of this final rule. We 
intend to continue our efforts to simplify the messages delivered by 
these notices, including limiting each notice to a one-page format.
    Comment: One commenter stated that although the proposed rule made 
it clear that CMS intends to have hospitals administer the IM to all 
Medicare beneficiaries, it was unclear as to when and how often the 
notice is to be administered during an inpatient stay. The commenter 
acknowledges the value to beneficiaries of administering appeal notices 
for inpatient stays, but believes that hospitals should continue to 
distribute the IM only at admission, as they have done for years.
    Response: We recognize the need for clarity in this regard. The 
intent of the proposed rule, in conjunction with the procedures set 
forth through the PRA process, was that hospitals generally would issue 
the notice twice during an inpatient stay, that is, once at or near the 
time of admission and again before discharge. However, that proposal 
has been superceded by the requirements of this final rule. As 
explained above, hospitals thus should continue their current practice 
of issuing the IM at or near admission to all Medicare inpatients, and 
issuing a notice of noncoverage before discharge only in situations 
where a beneficiary other than an M+C enrollee has indicated 
dissatisfaction with his or her scheduled discharge date. M+C 
organizations will be responsible for administering notices of 
noncoverage to inpatient M+C enrollees when they disagree with an M+C 
organization's discharge decision.
    Comment: One commenter suggests that CMS increase its educational 
and outreach efforts to ensure beneficiaries' understanding of the 
notices they receive. The commenter stated that hospitals should not be 
relied upon to provide all of the education necessary for a beneficiary 
to understand their Medicare rights.
    Response: We are committed to ensuring that notices provided to 
beneficiaries are clear and understandable, and that beneficiaries with 
questions can get prompt, reliable answers. To this end, we now 
routinely consumer test major beneficiary notices such as these 
hospital notices, as well as subject them to public comment through 
OMB's Paperwork Reduction Act process. Beneficiaries with questions can 
contact Medicare's toll free number (1-800-MEDICARE) or work with 
beneficiary outreach groups sponsored by CMS, such as the State Health 
Insurance Assistance Programs (SHIPs).
    Comment: Two commenters were strongly opposed to CMS's practice of 
submitting standard termination and similar notices, such as the 
hospital Important Message, for review by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act (PRA). For notices like 
these, these commenters believe that this practice makes no sense, and 
introduces lengthy and they believe unnecessary delays in the 
implementation of legally required notices. The commenters, citing 44 
U.S.C. 3501 et seq., contend that these notices do not fall within the 
requirements of the PRA for agency actions involving collection of 
information. They allege that the delay in implementing standardized 
notices caused by CMS's practice delays compliance with legal 
requirements, as noted above. Another commenter contends that, while 
Congress created the PRA to reduce the amount of paperwork providers 
utilize, over the past five years, providers have seen nothing but 
increases in the amount of paperwork they must complete. The commenter 
further argues that the notices required under the proposed rule add to 
the paperwork burden that providers have to comply with instead of 
decreasing the burden, as outlined under the PRA.
    Response: We do not agree with the commenter's interpretation of 
the requirements of section 3506(c)(2)(A) of the Paperwork Reduction 
Act (PRA). The PRA applies both to information collection and paperwork 
burden, and thus we believe it is required and appropriate to obtain 
public comment on notices that are required under Federal regulations. 
We intend to work closely with OMB to minimize any delays in the 
development and clearance of the revised standardized notices. We note 
that in this final rule, we have reduced the paperwork burden that 
would have been imposed under the proposed rule, including the 
elimination of certain notice requirements absent an objection to, or 
decision to appeal, a discharge.
    Comment: Several commenters raised concerns about the discharge 
decision-making process for hospital inpatients who are enrollees of 
M+C plans. They contend that there will inevitably be disagreements 
between plans and providers about the timing of patient discharges and 
that the proposed rule would exacerbate these disputes by requiring 
hospitals to distribute detailed discharge notices to all M+C 
enrollees. This in effect requires a hospital to explain an M+C 
organization's decision. Another commenter stated that over the past 
few years, its member hospitals have encountered numerous instances in 
which M+C plans have reduced or denied payment to hospitals for days 
during which the plan and the beneficiary's physician have disagreed

[[Page 16661]]

about whether the beneficiary should be discharged.
    Response: Clearly, the hospital discharge decision-making process 
requires substantial coordination and cooperation between M+C 
organizations and hospitals. We recognize that requiring detailed 
discharge notices for all M+C inpatients would have potentially 
increased the difficulties in this regard without achieving any 
demonstrable benefits for enrollees. Thus, we have revised the 
requirements in this final rule to make clear that such notices, when 
needed, are the responsibility of M+C organizations. However, we 
continue to believe that it is inappropriate for CMS to interfere in 
the business relationships between M+C organizations and their hospital 
providers and that any tension between these parties largely parallels 
that in the private health insurance sector.
    Comment: One commenter noted that under the original Medicare, 
hospitals must provide QIOs copies of all HINNs given to beneficiaries. 
In view of the proposal that a detailed discharge notice be given to 
each Medicare inpatient, the commenter suggested that we eliminate the 
requirement that QIOs receive copies of every discharge notice.
    Response: We believe that hospitals should continue to provide QIOs 
with copies of all HINNs, and that M+C organization should provide QIOs 
with copies of the noncoverage notices that they provide to 
dissatisfied beneficiaries. This is consistent with the policy 
described above for expedited reviews of other provider terminations, 
where M+C organizations will furnish copies of their detailed 
termination notices to both the IRE and the enrollee when there is a 
dispute over a discharge or service termination.

D. Grievance Procedures (Sec. Sec.  422.561 and 422.564)

    Comment: Some commenters argued that the proposed grievance 
procedures were overly prescriptive, while others supported 
establishing the proposed new standards. One commenter believed that 
grievance procedures should be flexible, given our interpretation of 
the preemption provision under section 1856(b)(3)(B)(iii), i.e., 
Federal rules do not specifically preempt State grievance requirements 
unless they relate to coverage determinations. One commenter stressed 
that any grievance requirements we imposed should be consistent with 
those applied by accrediting organizations, so that M+C organizations 
would not have to change current procedures to a great extent.
    Response: In the June 26, 1998, interim final rule to establish the 
M+C program (63 FR 35,030), we set forth the general requirement that 
an M+C organization must resolve grievances in a timely manner and have 
grievance procedures to meet CMS guidelines. In both the interim final 
rule and the June 29, 2000, final rule (65 FR 40,170, 40,275), we 
indicated that we intended to establish more detailed requirements for 
grievance procedures.
    We generally agree with the commenters that the regulations should 
not be overly prescriptive with respect to grievance procedures. We 
note that many States have processes to address complaints that involve 
issues other than coverage, and State grievance procedures, unlike 
appeal procedures, are not specifically preempted by Federal rules. We 
consulted with representatives of the managed care industry, 
beneficiary advocacy groups, and QIOs, and examined standards developed 
by the National Association of Insurance Commissioners (NAIC). We 
learned that M+C organizations already adhere to State requirements 
concerning grievances. Also, our experience has shown that enrollees 
overwhelmingly pursue appeals rather than grievances, and rarely raise 
concerns or problems associated with the existing grievance procedures. 
Therefore, as discussed below, we are not including in this final rule 
the proposed procedural provisions set forth in Sec.  422.564(d) and 
(e), which pertain to the method for filing and the notification and 
time frames associated with grievances.
    Nevertheless, we believe that a basic uniform grievance structure 
should be in place to address those issues that fall outside of the 
appeals process. In particular, we believe that grievance provisions 
are needed to address complaints involving procedural issues that arise 
during the appeals process. Thus Sec.  422.564(d) establishes an 
expedited grievance process for the following circumstances: (1) The 
grievance involves an M+C organization's decision to invoke an 
extension related to an organization determination or reconsideration; 
or (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.
    We believe that the changes we are setting forth in this final rule 
either have a direct effect on the M+C appeals process, or provide 
clarification in existing requirements, but allow M+C organizations the 
flexibility needed to maintain current procedures that comply with 
State requirements.
    Comment: Several commenters strongly encouraged CMS to establish 
mandatory time frames and notification procedures for resolving 
grievances. One commenter suggested that grievance time frames mirror 
those for standard and expedited organization determinations. Two 
commenters suggested a 30-calendar day time frame to render a grievance 
decision, with an opportunity for a 14-calendar day extension for peer 
review. Another commenter argued that the grievance procedure must have 
a mechanism to resolve a dispute regarding an M+C organization's denial 
to grant an expedited review within 24 hours, so that an 
inappropriately denied request can proceed quickly in the appeals 
process. Finally, one commenter expressed concern about State privacy 
requirements, which, in some cases, prevent health plans from providing 
specific information on how grievances get resolved.
    Response: As noted above, we have not in this final rule adopted 
the proposed provisions that prescribed time frames for responding to 
grievances generally. We do not believe that establishing Federal 
requirements for the manner and timeliness within which grievances must 
be disposed is necessary, and as we have noted it could be unduly 
burdensome in light of varying State requirements. Furthermore, we have 
not received any reports that enrollees have encountered frustration or 
problems in getting M+C organizations to respond to enrollees' 
grievances timely or communicate in an effective manner. Enrollees will 
continue to have regulated formal avenues to pursue complaints 
involving all payment, coverage and quality of care issues.
    We also agree with the commenter who suggested that grievances 
involving expedited appeals needed to be addressed as quickly as 
possible. Therefore, as noted above, we are specifying under Sec.  
422.564(d) that an M+C organization must notify the enrollee within 24 
hours of receiving a grievance about the M+C organization's refusal to 
expedite a review, or the M+C organization's decision to invoke an 
extension to the organization determination or reconsideration time 
frames. This will ensure that any inappropriate procedural actions 
under the appeals process are resolved and that the appeal proceeds 
without delay. In this situation, any extension would clearly be 
inappropriate, since it would constitute a de facto denial of the

[[Page 16662]]

enrollee's request for an expedited review.
    Comment: One commenter asked who will determine which route is more 
appropriate for the beneficiary in pursuing a remedy to a complaint, 
since we acknowledge that the same claim or circumstances that gave 
rise to an appeal could have elements of a grievance. This may cause 
the beneficiary to be confused as to which route is more appropriate. 
Another commenter asserted that M+C organizations should be required to 
provide clear, accurate and standardized information concerning 
grievance and appeal procedures.
    Response: We are adding to Sec.  422.564(b) a 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.
    CMS already requires M+C organizations to provide clear and concise 
information to all enrollees regarding appeal and grievance procedures. 
M+C organizations include this information annually in their Evidence 
of Coverage (EOC). In addition to other information that M+C 
organizations wish to convey, CMS also provides standard information 
that all EOCs must contain regarding appeals and grievances.
    Comment: Various commenters expressed conflicting views on the most 
appropriate means for dealing with quality of care issues. Some 
commenters believed that a quality of care issue should first be 
resolved by the M+C organization and subsequently sent to the QIO. 
Other commenters argued that quality of care issues should be referred 
immediately to the QIO for resolution, while others maintained that 
complaints should be processed by both M+C organizations and QIOs 
simultaneously.
    Response: As reflected under new Sec.  422.564(c), we decided that 
the most flexible approach would be to permit enrollees to file quality 
of care complaints with either the M+C organization, the QIO, or both. 
We expect M+C organizations and QIOs to coordinate and cooperate with 
one another to resolve enrollees' complaints.
    Comment: Many commenters suggested that CMS should not include a 
definition of ``quality of care'' in the regulations because defining 
it would oversimplify the many issues that quality of care might 
encompass.
    Response: We agree with the commenters that the term ``quality of 
care'' does not lend itself to a regulatory definition. Instead, we 
will rely on the States and M+C organizations to identify the types of 
issues that might fall into the quality of care category.
    Comment: A commenter questioned how CMS would enforce record-
keeping requirements for M+C organization grievances.
    Response: Section 422.564(e) requires M+C organizations to maintain 
records associated with processing grievances. M+C organizations 
already should have a system to track and maintain records on all 
grievances in light of existing requirements under section 
1852(c)(2)(C) and Sec.  422.111(c)(3), whereby M+C organizations must 
report aggregate information on the disposition of grievances. Thus, 
the record-keeping requirement will be enforced through CMS' existing 
procedures to monitor grievance activities, and if appropriate, place 
M+C organizations on corrective action plans. We expect M+C 
organizations, at a minimum, to keep track of the receipt date and 
final disposition of the grievance, and the date that the M+C 
organization notified the enrollee of the disposition.

E. Reductions of Services

    This final rule does not set forth any new regulations regarding 
reductions in services. As part of the Grijalva settlement, we agreed 
to solicit comments on whether new notice and appeal procedures were 
needed for decisions by M+C organizations to reduce health services. 
The issue of what constitutes appropriate notice and appeal procedures 
for reductions of service was also raised in the regulations to 
implement the M+C program.
    In the M+C final rule, we made several changes to Sec.  422.566(b), 
which describes actions that constitute organization determinations. 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 that services 
should be furnished or arranged. We stated in the preamble to the final 
rule that we agreed that a reduction in service could be considered an 
organization determination that was subject to an appeal. To the extent 
that the organization refused to continue to provide all or part of the 
services that the enrollee believed should be furnished, the reduction 
constituted an appealable issue.
    However, the existing M+C regulations do not specify that notices 
are routinely required in connection with reductions of services. The 
notices are required only if the enrollee disagrees that the services 
are no longer medically necessary.
    We have reviewed several public comments on these issues, both 
after the publication of the M+C interim final rule on June 26, 1998, 
and again with respect to the January 24, 2000, proposed rule. Several 
commenters both times strongly urged us to consider the administrative 
and financial burden associated with notice requirements. They 
maintained that it is unnecessary to require notification to enrollees 
when services are reduced because the normal progression of a clinical 
course of treatment is from increased to decreased services. Some 
commenters have argued that providing detailed notices in all reduction 
situations would be confusing, burdensome and intrusive upon the 
physician/patient relationship.
    Based on our review of current and previous comments on this issue, 
we believe that the process of changing the notice requirement for 
reductions of services is unnecessary, particularly in light of the 
requirement that all enrollees receive notice of their appeal rights 
before the termination of services in hospital and other provider 
settings. We will monitor the new policy on discontinuations of 
provider services, and if we find that it is necessary to create 
additional procedures for reductions of services, we will initiate the 
necessary rulemaking.

IV. Provisions of This Final Rule With Comment Period

A. Summary of Provisions

    For the convenience of the reader, listed below are the major 
changes to the M+C regulations that are set forth in this final rule 
with comment period. This listing is intended solely as a reference aid 
rather than as a comprehensive statement of the policies set forth in 
the regulation text.
    [sbull] New Sec.  422.502(i)(3)(iv) specifies that M+C organization 
contracts with providers and other related entities entered into after 
(the effective date of this final rule) must contain a provision 
specifying that these entities will comply with the applicable notice 
and appeal provisions in Sec. Sec.  422.620, 422.624, and 422.626.

[[Page 16663]]

    [sbull] In Sec.  422.561, the definition of grievance is revised to 
mean 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.
    [sbull] In Sec.  422.564, paragraph (c) clarifies that an enrollee 
may file a quality of care complaint either with the QIO, the M+C 
organization, or both entities. New paragraphs (d) and (e) establish 
specific procedures for handling expedited grievances and for record-
keeping with respect to grievances, respectively.
    [sbull] Section 422.620 provides that an M+C organization (or a 
hospital that has accepted delegation of the authority to make the 
discharge decision) must issue a written notice of noncoverage to any 
M+C enrollee who disagrees with the M+C organization's decision to 
discharge the enrollee. As discussed above, this represents a change 
from the proposed provision that hospitals issue such notices for all 
discharges of M+C enrollees.
    [sbull] Section 422.624 sets forth the requirements for notifying 
enrollees when their SNF, HHA, or CORF services are being terminated. 
These procedures require that the provider deliver, generally no later 
than two days before the termination of services, a standardized 
advanced termination notice that informs the enrollee of the date of 
discharge and how to file an appeal. As discussed above, the provisions 
set forth in this final rule represent a change from the proposed 
provisions, which would have required that more detailed notices be 
delivered four days in advance of service termination.
    [sbull] Section 422.626 establishes an enrollee's right to a fast-
track appeal of an M+C organization's decision to terminate these 
provider services, and the requirements and procedures associated with 
these fast-track appeals. This section explains the liability rules and 
evidence standards during these appeals, and establishes the procedures 
to be followed, including the responsibilities of M+C organizations and 
the IRE that makes the decisions on the appeals. As discussed above, 
this final rule with comment period provides that M+C organizations 
must furnish detailed termination notices only to enrollees who timely 
request a fast-track appeal but must furnish these notices to the 
enrollee and the IRE on the day of the request. This change from the 
proposed rule may result in a maximum of one day of potential financial 
liability for services for an enrollee whose appeal is unsuccessful. 
(Note that under existing M+C appeal procedures, an enrollee's 
potential liability in an unsuccessful appeal would be at least 4 
days.)
    [sbull] Section 489.27 specifies that, as an element of the 
provider's agreement to participate in the Medicare program, hospitals 
and other providers must furnish beneficiaries with applicable OMB-
approved notices concerning their discharge rights, including the 
hospital discharge notice required under section 1866(a)(1)(M) of the 
Act and the advance termination notice for M+C enrollees whose SNF, 
HHA, or CORF services are being terminated. This final rule with 
comment period does not specify that a hospital discharge notice must 
be provided the day before a discharge.

B. Decision To Issue a Final Rule With Comment Period

    As discussed above, section 1869(b)(1)(F) of the Act, as revised by 
section 521 of BIPA, requires that the Secretary establish a process by 
which a beneficiary may obtain an independent, expedited determination 
if he or she receives a notice from a provider of services that the 
provider plans to terminate the services or discharge the individual 
from the provider. Currently, this right to an expedited review exists 
only with respect to hospital discharges (under sections 1154 and 1155 
of the Act). On November 15, 2002, we published a proposed rule setting 
forth the procedures needed to implement this statutory directive.
    Clearly, the new appeal rights proposed in accordance with section 
1869 of the Act in many ways resemble those envisioned by the Grijalva 
settlement agreement and now set forth in this final rule. However, for 
the most part, the January 24, 2001, proposed rule that preceded this 
final rule was developed without the benefit of that statutory 
direction. We believe it is prudent and appropriate to consider further 
public comments on the requirements set forth here, now that the public 
has had an opportunity to review our proposal to implement the BIPA 
provisions. For example, we welcome comments on whether, and the extent 
to which, the procedures set forth here for M+C enrollees and those 
proposed to implement the BIPA expedited determination rights for 
original Medicare beneficiaries can or should be integrated or 
combined, or at least made uniform. If these additional comments result 
in changes to these requirements, we will publish a subsequent final 
rule to set forth these changes. (Note that publication of such a final 
rule would not delay the implementation of the procedures established 
under this final rule, which will begin on January 1, 2004, consistent 
with our commitment not to implement significant changes to the M+C 
program on a mid-year basis.)

V. Response to Comments

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

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 30-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.
    Several commenters addressed the burden associated with the 
proposed termination notice provisions, and these comments are 
discussed in detail above in section III.B.3 of this final rule. As 
discussed there, this final rule contains changes to these provisions 
based on public comments. Our estimates of the revised information 
collection requirements are set forth below, and we welcome further 
comments on these issues.

Section 422.564--Grievance Procedures

    As discussed in detail in section II.D of this preamble, this final 
rule does not include the proposed detailed requirements with respect 
to the general grievance procedures to be followed by

[[Page 16664]]

M+C organizations. Instead, we have largely maintained the existing 
standard. That is, an M+C organization must have an established process 
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. We have specified that an M+C 
organization must respond to an enrollee's grievance within 24 hours if 
the complaint involves an M+C organization's refusal to grant an 
enrollee's request for an expedited organization determination or an 
M+C organization's decision to invoke an extension on an appeal 
request. M+C organizations must routinely respond to such grievances, 
and although the 24-hour time frame represents a new requirement, it 
does not affect the information collection burden. (Note that M+C 
organizations already document their case files or notify enrollees 
when they process requests for expedited reviews under Sec. Sec.  
422.570 and 422.584, and invoke extensions to the organization 
determination and reconsideration times frames under Sec. Sec.  
422.568, 422.572, and 422.590.) Thus, while the new requirement is 
subject to the PRA, the burden associated with this requirement is 
captured by the requirements in Sec. Sec.  422.568, 422.572 and 
422.590, approved under OMB number 0938-0829.

Section 422.620--How M+C Enrollees Must Be Notified 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 sections 422.2 and 422.113), the M+C organization (or hospital that 
has been delegated the authority to make the discharge decision) must 
provide a written notice of noncoverage when the beneficiary disagrees 
with the discharge decision.
    Based on the 2002 CMS Data Compendium, (CMS Publication Number 
03437), there are approximately 11.8 million Medicare beneficiaries 
discharged from hospitals each year. We extrapolate that approximately 
1.8 million of these are M+C discharges. As discussed in section II.C 
of this preamble, based on previous inpatient hospital appeals data 
from the QIO's Standard Data Processing System, we estimate that about 
0.1 to 0.2 percent (1,800 to 3,6000) of M+C enrollees' hospital 
discharges will be disputed. We project that it would take M+C 
organizations (or hospitals that have been delegated the authority to 
make the discharge decision) approximately 30 minutes to prepare and 
furnish the notice required in these cases. Thus, the total annual 
burden associated with providing notices to M+C enrollees is 
approximately 900 to 1800 hours. (Note that issuance of these notices 
will not take effect until a separate PRA statement has been 
published.)

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.
    In 1999, the Center for Health Dispute Resolution (CHDR), the 
entity with whom CMS now contracts to conduct appeals of M+C 
reconsiderations, reviewed approximately 3,000 cases involving services 
provided by SNFs, HHAs, and CORFs. (Note that we have no way of knowing 
the proportion of these cases that involved service terminations, but 
for purposes of this analysis, we will make the assumption that all of 
these 3,000 cases involve service terminations.) Based on 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 organization 
determinations in approximately 75 percent of appealed cases. 
Therefore, 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 estimate that the number of provider appeals 
that would likely be heard by an IRE would be 12,000 cases. This 
constitutes approximately 2 percent of the 616,500 M+C enrollees that 
we estimate will receive termination notices, which we believe is a 
reasonable estimate of the maximum number of enrollees that are likely 
to file appeals with the IRE. It is estimated that it will take 12,000 
enrollees 15 minutes to file an appeal on an annual basis. The total 
annual burden associated with this requirement is 3,000 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 no more than 10 percent of the 12,000 enrollees who file 
appeals will also submit additional evidence. It is estimated that it 
will take 1,200 enrollees 60 minutes to submit evidence on an annual 
basis. That is, since enrollees may not be functioning at their maximum 
capacity, they may need to contact family members, friends, or their 
personal physicians who might provide assistance in gathering 
additional evidence. The total annual burden associated with this 
requirement is 1,200 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 following day. It is estimated that it will take M+C organizations 
60-90 minutes to gather and prepare a case file to send to the IRE. 
Since we have estimated that approximately 12,000 enrollees would 
request appeals, the total annual burden associated with this 
requirement is 12,000-18,000 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 12,000 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 of the information provided to the IRE, to 2,400 enrollees. 
The total annual burden associated with this requirement is 600 hours.
    If the IRE upholds an M+C organization's termination decision in 
whole or in part, the enrollee may appeal by requesting that the IRE 
reconsider its decision. It is estimated that 50 percent of the 12,000 
appeals will result in the IRE upholding the M+C organization's 
termination decision. Of those 6,000 cases, we estimate that 20 percent 
of the enrollees will request a reconsideration by the IRE. It is 
estimated that it will take 1,200 enrollees 30 minutes to file a 
request for reconsideration on an annual basis. The total annual burden 
associated with this requirement is 600 hours.

Section 489.27--Beneficiary Notice of Discharge Rights

    A hospital that participates in the Medicare program must furnish 
each Medicare beneficiary, or an individual acting or his or her 
behalf, the notice of discharge rights required under section

[[Page 16665]]

1866(a)(1)(M) of the Act. In addition, providers (as identified at 
Sec.  489.2(b)) that participate in the Medicare program must furnish 
each Medicare beneficiary, or authorized representative, applicable CMS 
notices in advance of the termination of Medicare services, including 
the notices required under Sec.  422.624 of this part.
    The information collection requirements associated with Sec.  
489.27 are currently approved under OMB PRA approval number 0938-0692.
    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements in Sec. Sec.  422.564, 
422.620, 422.624,and 422.626. The new hours associated with these 
collections are summarized in the chart below.

 
------------------------------------------------------------------------
                                                        Estimated Burden
           Section No.                   Entity              Hours
------------------------------------------------------------------------
422.620.........................  Hospitals..........           900-1800
422.624.........................  SNFs/HHAs/CORFs....            200,320
422.626 (a) and (c).............   M+C Enrollees.....              4,200
422.626 (e).....................   M+C organizations.      12,600-18,600
422.626 (f).....................   M+C organizations.                600
------------------------------------------------------------------------

    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 30 days of this publication date directly to the following: 
Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Office of Regulations Development 
and Issuances, Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 
21244-1850. Attn: Julie Brown, CMS-4024-FC.
    And, 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.

VII. Regulatory Impact Statement

A. Introduction

    We have examined the impact of this rule under the criteria of 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
section 1102(b) of the Social Security Act, the Regulatory Flexibility 
Act (RFA), Pub. L. No. 96-354, the Unfunded Mandates Reform Act of 
1995, Pub. L. No. 104-4, and Executive Order 13132. 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). We estimate a burden of not more than $10 
million associated with this final rule. Thus, this rule does not meet 
the $100 million threshold and is not, therefore, a major rule. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    The RFA requires agencies, in issuing certain rules, to analyze 
options for regulatory relief of small businesses. For purposes of the 
RFA, small entities include small businesses, nonprofit organizations 
and government agencies. Most hospitals, SNFs, and HHAs are small 
entities, either by nonprofit status or by having revenues of $25 
million or less annually. For purposes of the RFA, all providers 
affected by this regulation are considered to be small entities. 
Individuals and States are not included in the definition of a small 
entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for a final 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 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 
would 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. While it will have an 
impact on small entities, the economic impact on any particular entity 
will be negligible.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that would include any Federal mandate that may result 
in expenditure in any one year by State, local, or tribal governments, 
in the aggregate, or by the private sector, of $110 million. This rule 
would not have such an effect on State, local, or tribal governments, 
or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a rule that would impose 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has federalism implications. This rule 
does not have a substantial effect on State and local governments.
    Although a regulatory impact analysis is not mandatory for this 
final rule, we believe it is appropriate to discuss the possible 
impacts of the new appeals procedures on beneficiaries, providers, and 
M+C organizations, regardless of the monetary threshold of that impact. 
Therefore, a discussion of the anticipated impact of this rule is 
presented below.

B. Scope of the Proposed Changes

    As discussed in detail above, this final rule establishes new 
notice and appeal procedures for enrollees when an M+C organization 
decides to terminate coverage of services by SNFs, HHAs, and CORFs. 
This rule specifies the responsibilities of M+C organizations and 
providers in issuing termination notices associated with these new 
appeal rights. It also clarifies the responsibilities of hospitals and 
M+C organizations for informing Medicare beneficiaries of their right 
to appeal a hospital discharge and amends the associated Medicare 
provider agreement regulations with regard to beneficiary notification 
requirements. Finally, it revises the existing regulations with respect 
to 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

[[Page 16666]]

significant financial burden on these individuals. The impact of the 
final rule on M+C organizations and providers is discussed below.

C. New Notice and Appeal Procedures for Provider Terminations 
(Sec. Sec.  422.624 and 422.626)

    As explained in detail in the proposed rule, we examined available 
appeals data from the Center for Health Dispute Resolution (CHDR), the 
organization with whom CMS now contracts to conduct appeals of M+C 
reconsiderations to project the likely number of appeals that may be 
expected under these new provisions. (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.) Based on this analysis, we estimated that the annual number of 
possible appeals that will be heard by an IRE under the procedures set 
forth in this final rule will be approximately 12,000 cases. We 
received no comments on the validity of this estimate and continue to 
believe that it is realistic. (See our January 24, 2001, proposed rule 
for further details--66 FR 6600-6602.)
    Although commenters generally did not object to this volume 
estimate, both provider and M+C industry commenters found the 
procedures associated with implementing the new expedited appeals very 
problematic. Throughout this preamble, we have acknowledged and 
responded to the comments concerning the unnecessarily burdensome 
nature of these procedures. As discussed in detail above, we have made 
several significant changes to the notification procedures that we 
believe should ameliorate these concerns. Most notably, this final rule 
greatly simplifies the notice that providers furnish to enrollees whose 
services are ending and provides that M+C organizations must furnish 
detailed termination notices only to enrollees who timely request a 
fast-track appeal.
    Thus, for approximately 12,000 cases, M+C organizations will be 
required under this final rule to make available to the enrollee a copy 
of the detailed termination notice, and to the IRE, and to the enrollee 
upon request, a copy of any documentation needed to decide on the 
appeal. Although we recognize that there is an 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 termination decision. 
Moreover, we note that this burden on M+C organizations is largely 
offset by the fact that M+C organizations will no longer be responsible 
for conduct internal reconsiderations of any cases covered under this 
final rule. That is, IREs will conduct reviews not just of the 3,000 
cases that now go to CHDR but also of the 9,000 cases that are now 
subject to the M+C organization reconsideration process.
    Similarly, with respect to providers, the requirements of this 
final rule should prove much easier to implement than those in the 
proposed rule. The required termination notices will be largely 
standardized, requiring only the insertion of the enrollee's name and 
discharge date. We estimate that it should take no more than 5 minutes 
to deliver such a notice, at a per-notice cost of no more than $7.50 
(based on a $30 per hour rate if the notice is delivered by health care 
personnel). Based on an estimated 600,000 notices annually, we estimate 
the aggregate cost of delivering these notices should be less than $5 
million.
    Thus, we believe that the new notice and appeal provisions of this 
final rule should have minimal financial impact on M+C organizations 
and providers. We note that both the advance termination notice and the 
detailed termination notice will be developed through OMB's Paperwork 
Reduction Act process and thus will be the subject of further 
opportunity for public comment.

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

    Under the proposed rule, hospitals would have been required to 
issue a standardized discharge notice to each Medicare beneficiary 
twice during an inpatient stay, that is, once at or near the time of 
admission and again before discharge. The second notice (a revised 
version of the Important Message from Medicare now required under 
section 1866(a)(1)(M) of the Act and 489.27) would have included more 
detailed information about the reason for the discharge. Comments on 
this proposal, many of which focused on the administrative burden 
associated with this notice, are discussed in detail above. We 
estimated that the additional aggregate burden on hospitals would 
exceed $100 million.
    Under this final rule, hospitals instead will continue to be 
responsible for issuing the Important Message from Medicare to all 
Medicare inpatients, as well as for issuing HINNs to inpatients covered 
under the original Medicare program when they indicate that they 
disagree with a hospital's discharge decision. These requirements are 
identical to those currently in effect and thus will entail no 
additional burden for hospitals.
    All inpatient enrollees in the M+C program will also continue to 
receive the Important Message from their hospital during an admission. 
In addition, consistent with the notice requirement for other Medicare 
beneficiaries, we are revising 422.620 to specify that M+C 
organizations are responsible for providing a written notice of 
noncoverage when an enrollee disagrees with a discharge decision. The 
notice must be issued no later than the day before hospital coverage 
ends and must explain the reason why care is no longer needed, the 
enrollee's appeal rights, and the effective date of time of the 
enrollee's liability for continued inpatient care. Again, we estimate 
that the incidence of this notice will be no more than 0.1 to 0.2 
percent of all M+C enrollee discharges, or roughly 1800 to 3600 
notices, at an estimate aggregate annual cost to M+C organizations of 
$15,000-$30,000. Again, all of the required notices for hospital 
inpatient discharges will be published through the OMB PRA process.

E. Grievance Procedures (Sec.  422.564)

    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. As discussed in detail above, the primary new requirements 
set forth under this final rule (422.564(d) and (e)) are that an M+C 
organization establish specific procedures for handling expedited 
grievances and for record-keeping with respect to grievances, 
respectively.
    Again, 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 these 
procedures. We believe that M+C organizations are in large measure 
already in compliance with the grievance procedures set forth here, and 
thus these requirements will have no substantial impact on most M+C 
organizations.

F. Federalism Summary Impact Statement

    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 requirement costs on State 
and local governments, preempts State law, or otherwise has federalism 
implications.

[[Page 16667]]

This rule would not have a substantial effect on State or local 
governments.
    In accordance with Executive Order 12866, this regulation was 
reviewed by the Office of Management and Budget.

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.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 422--MEDICARE+CHOICE PROGRAM

    Part 422 is amended as set forth below:

0
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).


0
2. 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 provider's operations, 
activities, or behavior, regardless of whether remedial action is 
requested.
* * * * *
    3. 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 resolving 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 quality improvement organization (QIO) 
complaint process. Under section 1154(a)(14) of the Act, the QIO 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 QIO, or both. For any 
complaint submitted to a QIO, the M+C organization must cooperate with 
the QIO in resolving the complaint.
    (d) Expedited grievances. An M+C organization must respond to an 
enrollee's grievance within 24 hours if:
    (1) The complaint involves an M+C organization's decision to invoke 
an extension relating to an organization determination or 
reconsideration.
    (2) The complaint 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.
    (e) Recordkeeping. The M+C organization must have an established 
process 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.

0
4. Section 422.620 is revised to read as follows:


Sec.  422.620  How M+C enrollees must be notified of noncoverage of 
inpatient hospital care.

    (a) Enrollee's entitlement. (1) Where 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 Sec. Sec.  422.2 and 422.113), 
the M+C organization (or hospital that has been delegated the authority 
to make the discharge decision) must provide a written notice of 
noncoverage when--
    (i) The beneficiary disagrees with the discharge decision; or
    (ii) The M+C organization (or the hospital that has been delegated 
the authority to make the discharge decision) is not discharging the 
individual but no longer intends to continue coverage of the inpatient 
stay.
    (2) An enrollee is entitled to coverage until at least noon of the 
day after such notice is provided. If QIO review is requested under 
Sec.  422.622, coverage is extended as provided in that section.
    (b) Physician concurrence required. Before notice of noncoverage is 
provided, the entity that makes the noncoverage/discharge determination 
(that is, the hospital by delegation or the M+C organization) must 
obtain the concurrence of the physician who is responsible for the 
enrollee's inpatient care.
    (c) Notice to the enrollee. The written notice of non-coverage must 
be issued no later than the day before hospital coverage ends. The 
written notice must include the following elements:
    (1) The reason why inpatient hospital care is no longer needed.
    (2) The effective date and time of the enrollee's liability for 
continued inpatient care.
    (3) The enrollee's appeal rights.
    (4) Additional information specified by CMS.

0
5. New Sec. Sec.  422.624 and 422.626 are added to subpart M to read as 
follows:


Sec.  422.624  Notifying enrollees of termination of provider services.

    (a) Applicability. (1) For purposes of Sec. Sec.  422.624 and 
422.626, the term provider includes 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 discharge of an 
enrollee from covered provider services, or discontinuation of 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 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 no later than 
two days before the proposed end of the services. If the enrollee's 
services are expected to be fewer than two days in duration, the 
provider should notify the enrollee at

[[Page 16668]]

the time of admission to the provider. If, in a non-institutional 
setting, the span of time between services exceeds two days, the notice 
should be given no later than the next to last time services are 
furnished.
    (2) Content of the notice. The standardized termination notice must 
include the following information:
    (i) The date that coverage of services ends.
    (ii) The date that the enrollee's financial liability for continued 
services begins.
    (iii) A description of the enrollee's right to a fast-track appeal 
under Sec.  422.626, including information about how to contact an 
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.
    (iv) The enrollee's right to receive detailed information in 
accordance with Sec.  422.626 (e)(1) and (2).
    (v) Any other information required by the Secretary.
    (c) When delivery of notice is valid.
    Delivery of the termination notice is not valid unless--
    (1) The enrollee (or the enrollee's authorized representative) has 
signed and dated the notice to indicate that he or she has received the 
notice and can comprehend its contents; and
    (2) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph 
(b)(2) of this section.
    (d) Financial liability for failure to deliver valid notice. An M+C 
organization is financially liable for continued services until 2 days 
after the enrollee receives valid notice as specified under paragraph 
(c) of this section. An enrollee may waive continuation of services if 
he or she agrees with being discharged sooner than 2 days after 
receiving the notice.


Sec.  422.626  Fast-track appeals of service terminations to 
independent review entities (IREs).

    (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 an IRE under contract with CMS, in writing or 
by telephone, by noon of the first day after the day of delivery of the 
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) When an enrollee fails to make a timely request to an IRE, he 
or she may request an expedited reconsideration by the M+C organization 
as described in Sec.  422.584.
    (3) If, after delivery of the 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) Coverage of provider services. Coverage of provider services 
continues until the date and time designated on the termination notice, 
unless the enrollee appeals and the IRE reverses the M+C organization's 
decision. 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 at least two days after valid 
notice has been received. Continuation of coverage is not required if 
the IRE determines that coverage could pose a threat to the enrollee's 
health or safety.
    (c) 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 an IRE requires to sustain the M+C organization's 
termination decision, consistent with paragraph (e) of this section.
    (2) The enrollee may submit evidence to be considered by an IRE in 
making its decision.
    (3) The M+C organization or an IRE may require an enrollee to 
authorize release to the IRE of his or her medical records, to the 
extent that the records are necessary for the M+C organization to 
demonstrate the correctness of its decision or for an IRE to determine 
the appeal.
    (d) Procedures an IRE must follow. (1) On the date an IRE receives 
the enrollee's request for an appeal, the IRE must immediately 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 (e)(3) 
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, and whether a detailed notice has been provided, 
consistent with paragraph (e)(1) of this section.
    (3) The IRE must notify CMS 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 detailed written notice provided by the M+C organization, or 
regarding any other reason that the IRE uses as the basis of its review 
determination.
    (5) An 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 by the M+C 
organization would continue until the decision is made, consistent with 
paragraph (b) of this section, but no additional termination notice 
would be required.
    (e) Responsibilities of the M+C organization. (1) When an IRE 
notifies an M+C organization that an enrollee has requested a fast-
track appeal, the M+C organization must send a detailed notice to the 
enrollee by close of business of the day of the IRE's notification. The 
detailed termination notice must include the following information:
    (i) A specific and detailed explanation why services are either no 
longer reasonable and necessary or are 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 the information about how the 
enrollee may obtain a copy of the Medicare policy from the M+C 
organization.

[[Page 16669]]

    (iii) Any applicable M+C organization policy, contract provision, 
or rationale upon which the termination decision was 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) Any other information required by CMS.
    (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) 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 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 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.
    (4) An M+C organization is financially responsible for coverage of 
services as provided in paragraph (b) of this section, regardless of 
whether it has delegated responsibility for authorizing coverage or 
termination decisions to its providers.
    (5) If an IRE reverses an M+C organization's termination decision, 
the M+C organization must provide the enrollee with a new notice 
consistent with Sec.  422.624(b).
    (f) Reconsiderations of IRE decisions. (1) If the IRE upholds an 
M+C organization's termination decision in whole or in part, the 
enrollee may request, no later than 60 days after notification that the 
IRE has upheld the decision that the IRE reconsider 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 may to appeal the IRE's reconsidered determination to an ALJ, 
the DAB, or a federal court, as provided for under this subpart.
    (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

    Part 489 is amended as set forth below:

0
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).


0
2. In Sec.  489.20, paragraph (p) is revised to read as follows:


Sec.  489.20  Basic commitments.

    The introductory text of Sec.  489.20 is republished without change 
and paragraph (p) is revised to read as follows:
    The provider agrees to the following:
* * * * *
    (p) To comply with Sec.  489.27 of this part concerning 
notification of Medicare beneficiaries of their rights associated with 
the termination of Medicare services.
* * * * *

0
3. Section 489.27 is revised as follows;


Sec.  489.27  Beneficiary notice of discharge rights.

    (a) A hospital that participates in the Medicare program must 
furnish each Medicare beneficiary, or an individual acting on his or 
her behalf, the notice of discharge rights required under section 
1866(a)(1)(M) of the Act. The hospital must provide timely notice 
during the course of the hospital stay. For purposes of this paragraph, 
the course of the hospital stay begins with the provision of a package 
of information regarding scheduled preadmission testing and 
registration for a planned hospital admission. The hospital must be 
able to demonstrate compliance with this requirement.
    (b) Notification by other providers. Other providers (as identified 
at Sec.  489.2(b)) that participate in the Medicare program must 
furnish each Medicare beneficiary, or authorized representative, 
applicable CMS notices in advance of the termination of Medicare 
services, including the notices required under 42 CFR 422.624. These 
notices must be approved by the Office of Management and Budget prior 
to implementation under section 3506(c)(2)(A) of the Paperwork 
Reduction Act.

    Dated: February 10, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: February 25, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-8204 Filed 4-1-03; 2:28 pm]
BILLING CODE 4120-01-P