[Federal Register Volume 68, Number 143 (Friday, July 25, 2003)]
[Proposed Rules]
[Pages 44000-44003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-18994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 424

[CMS-1185-P]
RIN 0938-AK79


Medicare Program; Elimination of Statement of Intent Procedures 
for Filing Medicare Claims

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would remove the written statement of 
intent (SOI) procedures used to extend the time for filing Medicare 
claims. One of the goals of our regulatory reform efforts is to update 
our regulations based on recent experiences with filing practices and 
changes in the law. The SOI procedures extend the time to file a claim 
by 6 months after the month in which a Medicare contractor acknowledges 
the receipt of a valid statement of intent. We are proposing to remove 
the SOI procedures because beneficiaries, whom the SOI procedures were 
intended to benefit, rarely file claims or SOIs. Instead, SOIs are 
filed in great numbers on behalf of, especially, dually-eligible 
beneficiaries by States that have previously made Medicaid payments, 
and occasionally by providers and suppliers. The large number of SOIs 
imposes a significant expenditure of resources on our contractors, and 
may also be due to, in part, a lack of careful screening as to whether 
claims should have initially been presented to and paid by Medicaid. In 
the absence of an SOI, providers and suppliers (and, where applicable, 
beneficiaries) would still have from 15-27 months (depending on the 
date of service) to file claims with Medicare contractors.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on September 23, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1185-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Mail written comments (one original and 
three copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1185-P, P.O. Box 8014, Baltimore, MD 21244-8014.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and three copies) to one of the following 
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.


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

FOR FURTHER INFORMATION CONTACT: David Walczak, (410) 786-4475.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: Comments received timely will be 
available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, at the 
headquarters of the Centers for Medicare & Medicaid Services, 7500 
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of 
each week from 8:30 a.m. to 4 p.m. by calling (410) 786-7197.

I. Background

    The purpose of the statement of intent (SOI) procedures is to 
extend the timely filing period for the submission of an initial 
Medicare claim. An SOI, by itself, does not constitute a claim, but 
rather is a means of extending the deadline for filing a timely and 
valid claim. Our regulations at 42 CFR 424.32, ``Basic requirements for 
all claims,'' and Sec.  424.44, ``Time limits for filing claims,'' 
require that Medicare claims be filed on Medicare-designated claims 
forms by providers, suppliers, and beneficiaries according to Medicare 
instructions, by the end of the year following the year in which the 
services were furnished. Services furnished in the last 3 months of a 
calendar year are deemed to be furnished in the subsequent calendar 
year, and thus, in this situation, a provider, supplier, or beneficiary 
has until December 31 of the second year following the year in which 
the services were furnished to file claims. Where an SOI has been filed 
with the appropriate Medicare contractor and the contractor notifies 
the submitter of the SOI that the SOI is valid (that is, the SOI 
sufficiently identifies the beneficiary and the items or services 
rendered), the period in which to file a claim may be extended an 
additional 6 months after the month of the contractor's notice.
    The original regulation on extending the time to file claims for 
Medicare benefits was codified at 20 CFR 405.1693, and was based on 20 
CFR 404.613, which pertained to applications for Social Security 
benefits. Section 404.613 reflected the Social Security program's 
interest in allowing virtually any type of writing to be a placeholder 
for filing a claim for Social Security benefits, provided that a 
perfected claim was submitted shortly thereafter. Because we believed 
that Medicare beneficiaries might sometimes need extra time to file a 
Part B claim due to extenuating circumstances such as poor health or 
unfamiliarity with the claims filing process, we instituted the SOI 
procedures.
    Experience has shown, however, that beneficiaries rarely submit 
SOIs directly. Medicare contractors that we surveyed reported no SOIs 
were directly submitted by beneficiaries for the claims filing period 
ending December 31, 2000, the latest year for which we have complete 
data. One reason for the lack of beneficiary-initiated SOIs is the fact 
that beneficiaries rarely need to file claims. The percentage of Part B 
claims taken on assignment is about 98 percent today, compared to about 
52 percent in 1975. (``Assignment'' is the process by which the 
physician or other supplier agrees to accept Medicare payment in full 
for a Part B item or service and file the claim for such payment.) Even 
for Part B claims not taken on assignment, the law now requires the 
physician or other supplier to file the claim and provides for 
sanctions for failure to do so. (See section 1848(g)(4) of the Act (42 
U.S.C. 1395w-4(g)(4)). The number of Part A claims filed by 
beneficiaries has always been minimal because the law requires that 
payment for Part A services generally be made only to providers of 
services, with very limited exceptions. (See section 1814(a) of the Act 
(42 U.S.C. 1395f(a)). Thus, we believe that the SOI procedures are no 
longer necessary insofar as they are not serving their intended 
purpose.
    Further, we believe retention of the SOI procedures is 
counterproductive because of the amount of resources needed to process 
SOIs submitted by States and because the SOI procedures may encourage 
or facilitate inappropriate behavior on the part of some States and 
some providers.
    Each year, our contractors receive an enormous number of SOIs that 
are submitted by States that, having first made Medicaid payments to 
dually-eligible (that is, Medicare and Medicaid) beneficiaries, 
subsequently believe that Medicare should be the proper payor. 
Subsequent to several court decisions in the early 1990s, we permitted 
States to ``stand in the shoes'' of a dually-eligible beneficiary with 
respect to claims filing and appeals. For example, States are not 
required to obtain a beneficiary's signature in order to request 
providers to file a Part A claim or in order to file an appeal. We also 
have permitted States and their contractors to file SOIs on the States' 
behalf or as appointed representatives of the beneficiaries.
    The great majority of these SOIs are filed on paper and thus must 
be manually processed to determine whether they are valid SOIs. 
(According to our requirements, SOIs must contain detailed and specific 
information to ensure that a subsequently filed claim was in fact 
protected by an SOI. (See Program Memorandum AB-03-61)). Also, these 
SOIs are typically filed in large batches near the end of the timely 
filing period. All of these factors contribute to the amount of 
resources and consequent cost incurred in processing the SOIs.
    We also believe that the SOI procedures may contribute to States 
``paying and chasing'' instead of following the required cost-avoidance 
procedures, and to the incorrect submission of claims to Medicaid by 
providers. Our regulations at Sec.  433.139(b) provide that, unless a 
waiver is granted under Sec.  433.139(e), a State Medicaid agency that 
has established the probable existence of third party liability 
(including Medicare liability) at the time a claim for Medicaid payment 
is presented to it, must reject the claim and return it to the provider 
for a determination of liability. This process is known as cost 
avoidance. Some States, however, have been paying thousands of Medicaid 
claims, despite the knowledge that the beneficiaries involved are 
entitled to Medicare. These States subsequently identify a significant 
portion of the claims that they have paid as ones for which Medicare 
should be the proper payor, and use the SOI procedures to extend the 
time for providers to file claims.
    The fact that such large numbers of claims are paid first by 
Medicaid and then identified as payable by Medicare raises the 
inference that providers are not as careful as they should be as to 
which payor they initially submit claims, and that States, by initially 
paying such claims, are not fully practicing cost avoidance. We are 
concerned that the availability of the SOI procedures to extend the 
time for filing claims is contributing to such inappropriate behavior. 
We also note that many of the claims filed with Medicare subsequent to 
the SOIs are ``demand bills,'' which require full medical review, thus 
increasing the

[[Page 44002]]

claims processing cost for our contractors. (Where a provider believes 
that a service is not covered by Medicare but the beneficiary (or the 
State as the beneficiary's subrogee) requests the provider to bill 
Medicare regardless, the provider's Medicare provider agreement 
requires it to bill Medicare. Such a bill is known as a ``demand 
bill.'' It requires full medical review because the fact that the 
provider initially believed that the service was not covered by 
Medicare raises the question of whether Medicare should pay it.)
    Finally, we are cognizant that providers and suppliers sometimes 
file SOIs. We believe, however, that the filing periods in Sec.  424.44 
(15 to 27 months, depending on the date the service was rendered) are 
more than an adequate amount of time to submit claims.
    Based on a survey of SOI requests filed with Medicare contractors 
for the claims filing period that ended December 31, 2001 (the latest 
year for which data was available), a very small percentage of claims 
were processed and paid compared to the total number of SOI requests 
received. The entire process of receiving an SOI request, determining 
if an SOI is valid or invalid, examining a later-submitted claim to 
determine whether the claim was in fact protected by the earlier-
submitted SOI, and adjudicating the claim (which, in many cases 
involves full medical review) are all done manually, and the costs 
associated with such manual processing are not included in our 
contractors' budgets (contractors are not required to calculate costs 
at this level). Therefore, the expenditure of resources and money for 
such manual processing takes away from the resources needed to do the 
activities and functions that are included in our contractors' budgets. 
This proposed rule, if finalized, should have little financial impact 
on entities that currently submit SOI requests. The rule would simply 
require these entities to submit their claims six months or so earlier, 
to comply with Medicare's timely filing requirements (that is, 15 to 27 
months after the date of service, depending on the particular month the 
service was rendered). Given that the requirements for submitting a 
claim are not much different than submitting a valid SOI, and given 
that an SOI must be filed within the timely filing period, we 
anticipate no significant difficulty for such entities to timely submit 
claims.
    Therefore, for the above reasons, we propose removing Sec.  424.45 
from our regulations.

II. Provisions of the Proposed Regulation

    This regulation proposes to remove 42 CFR 424.45. In the absence of 
Sec.  424.45, providers, suppliers and beneficiaries still would have 
from 15-27 months to submit claims to Medicare.

III. Collection of Information Requirements

    This document does not impose new information collection and 
recordkeeping requirements but does remove an old one.
    The elimination of Sec. 424.45 will reduce costs and workload 
burdens on providers and suppliers. Specifically, by eliminating the 
written SOI procedures, we hope to: (1) Reduce provider, supplier and 
Medicare contractor resource burdens; (2) reduce the burden placed on 
providers and suppliers from having to resubmit claims, and also from 
having to reimburse States for claims that were incorrectly paid for by 
the States; (3) reduce Medicare contractor administrative costs; (4) 
eliminate changes to existing intermediary/carrier claims payment 
systems; (5) encourage States to pursue cost-avoidance procedures to 
ensure that Medicaid is truly the payor of last resort, and thus reduce 
the need to use ``pay and chase'' procedures; (6) reduce the necessity 
for medical review at the contractor level; (7) strengthen Medicare and 
Medicaid program integrity efforts to ensure correct payment the first 
time; and (8) improve coordination efforts between the Medicare and 
Medicaid programs.
    Given that CMS, in the past, did not specifically quantify the 
burden associated with this regulatory requirement, we are seeking 
public comment on the burden reduction associated with the elimination 
of section 42 CFR 424.45.
    If you have any comments on any of these information collection and 
record keeping requirements, please mail the original and three copies 
directly to the following:
Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, DRDI, DRD-B, Baltimore, MD 21244-
1850, ATTN: Julie Brown, CMS-1185-P; 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 CMS-1185-P.
    Comments submitted to OMB may also be emailed to the following 
address: email: [email protected]; or faxed to OMB at (202) 395-
6974.

IV. Response to Comments

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

V. Regulatory Impact Statement

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1955 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more annually). This 
is not a major rule. This proposed rule will have no substantial 
economic impact on either costs or savings to the Medicare or Medicaid 
programs.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million annually (see 65 FR 69432). Individuals and 
States are not included in the definition of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital located outside of a Metropolitan Statistical 
Area with fewer than 100 beds.

[[Page 44003]]

    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and we certify, that this rule 
will not have a significant impact on a substantial number small 
entities or rural hospitals because providers and suppliers will still 
have 15 to 27 months to file claims. Although some providers and 
suppliers may be small entities or rural hospitals, they are not filing 
a significant number of SOIs and the information required to file a 
valid SOI is essentially the same information that providers and 
suppliers are required to provide when filing a valid claim. We are 
aware that some States rely on the SOI process at the end of the period 
for Medicare timely claims filing, to pay and recover expenditures for 
some of their claims that could have been paid by Medicare. Elimination 
of the SOI process will require that these States revert to the 
standard recovery process in the Medicaid regulations to assure that 
claims are filed within the (15-27 months) Medicare timely filing 
requirements. While the elimination of the SOI process will not 
completely eliminate the issue of ``pay and chase,'' we believe it will 
encourage States to pursue cost-avoidance procedures to ensure that 
Medicaid is truly the payer of last resort, reducing the need to use 
``pay and chase'' procedures. We solicit comment on the impact of this 
regulation on States and providers.
    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits before issuing any 
rule that may result in an expenditure in any one year by State, local, 
or tribal governments, in the aggregate, or by the private sector, 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 proposed rule that would impose 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications.
    While this rule would not have a substantial effect on State and 
local governments, States need to preserve their ability to 
appropriately recover expenditures for Medicaid benefits that should 
have been paid by Medicare. We are aware that some States rely on the 
SOI process, at the end of the period for Medicare timely claims 
filing, to recover expenditures for some of their claims that could 
have been paid by Medicare. Elimination of the SOI process will require 
that these States revert to the standard recovery process in the 
Medicaid regulations to assure that claims are filled within the (15-27 
months) Medicare timely filing requirements.
    For the reasons discussed earlier in this regulation, we believe 
this time frame is adequate to address the States' need for recovering 
claims from Medicare. We will continue to address the States' concerns 
on these payment and recoupment issues, through the efforts of the 
State Technical Advisory Group (TAG) on Third Party Liability, and will 
continue to consult with States about issues affecting their ability to 
recover expenditures for some of their claims that should have been 
covered by Medicare.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

    Part 424 is amended as follows:
    1. The authority citation for part 424 continues to read as 
follows:

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


Sec.  424.45  [Removed]

    2. Section 424.45 is removed.

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

    Dated: December 20, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: April 18, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-18994 Filed 7-24-03; 8:45 am]
BILLING CODE 4120-01-P