[Federal Register Volume 68, Number 216 (Friday, November 7, 2003)]
[Rules and Regulations]
[Pages 63692-63731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27742]



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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 400, 405, and 426



Medicare Program: Review of National Coverage Determinations and Local 
Coverage Determinations; Final Rule

  Federal Register / Vol. 68, No. 216 / Friday, November 7, 2003 / 
Rules and Regulations  

[[Page 63692]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 400, 405, and 426

[CMS-3063-F]
RIN 0938-AK60


Medicare Program: Review of National Coverage Determinations and 
Local Coverage Determinations

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

ACTION: Final rule.

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SUMMARY: This final rule will create a new process to allow certain 
Medicare beneficiaries to challenge national coverage determinations 
(NCDs) and local coverage determinations (LCDs). It will implement 
portions of section 522 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000. The right to challenge NCDs and 
LCDs will be distinct from the existing appeal rights that Medicare 
beneficiaries have for the adjudication of Medicare claims.

EFFECTIVE DATE: The provisions set forth in this final rule are 
effective December 8, 2003.

FOR FURTHER INFORMATION CONTACT: Vadim Lubarsky, 410-786-0840 for 
National Coverage Determinations. Misty Whitaker, 410-786-3087 for 
Local Coverage Determinations.

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    Note: The former name of the Centers for Medicare & Medicaid 
Services (CMS) was the Health Care Financing Administration (HCFA). 
The terms CMS and HCFA can be used interchangeably.

    In addition, because of the many terms to which we refer by acronym 
in this final rule, we are listing these acronyms and their 
corresponding terms in alphabetical order below.

ALJ--Administrative Law Judge
CAC--Carrier Advisory Committee
CMP--Comprehensive Medical Plan
DMERC--Durable Medical Equipment Regional Carrier
FI--Fiscal Intermediary
HCPP--Health Care Prepayment Plan
HMO--Health Maintenance Organization
LCD--Local Coverage Determination
LMRP--Local Medical Review Policy
M+C--Medicare+Choice
MCAC--Medical Coverage Advisory Committee
NCD-National Coverage Determination
QIO--Quality Improvement Organization
RHHI--Regional Home Health Intermediary

I. Background

A. Background of Rulemaking

    On August 22, 2002, we issued a proposed rule (67 FR 54534) 
implementing certain provisions of section 522 of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA), proposing a process for the review of local coverage 
determinations (LCDs) and national coverage determinations (NCDs). The 
notice and comment period closed on October 21, 2002. We received 31 
timely comments, which were quite useful in identifying issues and 
concerns. We have made significant changes to this final rule to 
address the public comments. We believe that these changes will 
contribute to a fairer and more efficient process. Significant changes 
to the proposed rule based on public comments, which are discussed in 
section III, below, include:
    [sbull] More broadly defining beneficiaries ``in need.''
    [sbull] Reducing the burden for physician certification 
requirements.
    [sbull] Allowing for participation in the BIPA section 522 
adjudicatory process as an amicus curiae (friend of the court) for NCD 
appeals.
    [sbull] Creating a mechanism to allow new evidence to be received 
subject to time-limited remands.
    [sbull] Expanding the effect of a final decision by the 
Administrative law judge (ALJ) or the HHS Departmental Appeals Board 
(Board).

B. Overview of Existing Statutes, Regulations, and Policies

    Medicare is the nation's largest health insurance program covering 
approximately 41 million Americans. Beneficiaries consist primarily of 
individuals 65 years of age or older, some disabled people under 65 
years of age, and people with end-stage renal disease (permanent kidney 
failure treated with dialysis or a transplant).
    The original Medicare program consists of two parts. Part A, known 
as the hospital insurance program, covers certain care provided to 
inpatients in hospitals, critical access hospitals, skilled nursing 
facilities, as well as hospice care and some home health care. Part B, 
the supplementary medical insurance program, covers certain physicians' 
services, outpatient hospital care, and other medical services that are 
not covered under Part A. While the original Medicare program covers 
many health care items and services, it does not cover all health care 
expenses. The Medicare statute specifically excludes from coverage 
certain items and services under section 1862(a) of the Social Security 
Act (the Act).
    In addition to the original Medicare program, beneficiaries may 
elect to receive health care coverage under the Medicare+Choice (M+C) 
program under Part C of the Medicare program. This program provides 
beneficiaries with various options, including the right to choose a 
Medicare managed care plan or a Medicare private fee-for-service plan. 
Under the M+C program, an individual is entitled to those items and 
services (other than hospice care) for which benefits are available 
under Part A and Part B. An M+C plan may provide additional health care 
items and services that are not covered under the original Medicare 
program.
    The Act gives beneficiaries specific rights to challenge particular 
types of decisions. We are committed to providing beneficiaries an 
opportunity to fully exercise these statutory rights. Moreover, we are 
committed to resolution of these disputes in a fair and efficient 
manner.

C. Claims Appeal Process

    Under the original Medicare program, a beneficiary may generally 
obtain health services from any institution, agency, or person 
qualified to participate in the Medicare program that undertakes to 
provide the service to the individual. Assuming that a qualified 
provider or supplier has furnished medical care, the health care 
provider or supplier, or, in some cases, a beneficiary would submit a 
claim for benefits under

[[Page 63693]]

the Medicare program. If the claim is for an item or service that falls 
within a Medicare benefit category, is reasonable and necessary for the 
individual, and is not otherwise statutorily excluded, a government 
contractor (either a fiscal intermediary for claims under Part A or 
Part B, or a carrier for claims under Part B) would pay the claim. 
However, if the Medicare contractor determines that the medical care is 
not covered under the Medicare program, the Medicare contractor would 
deny the claim.
    This final rule does not seek to significantly alter the existing 
claims appeal process. Nor does this rule significantly alter our 
existing regulations for M+C beneficiaries as established at Sec.  
422.560 through Sec.  422.622. However, it does create an expanded 
definition of aggrieved party to include a beneficiary who received a 
service, but whose claim for the service was denied, extending an 
opportunity to that beneficiary to file a complaint under Sec.  426.400 
or Sec.  426.500. For further discussion of the claims appeal process 
please consult the proposed rule.

D. National Coverage Determinations (NCDs)

    Section 1869(f)(1) of the Act defines national coverage 
determination as ``a determination by the Secretary with respect to 
whether or not a particular item or service is covered nationally under 
title XVIII, but does not include a determination of what code, if any, 
is assigned to a particular item or service covered under this title or 
a determination with respect to the amount of payment made for a 
particular item or service so covered.'' For the full discussion of 
NCDs please consult our proposed rule at 67 FR 54535 published on 
August 22, 2002.

E. Local Medical Review Policy (LMRP)

    As explained in the preamble to the proposed rule, Local Medical 
Review Policies are contractor-specific policies that identify the 
circumstances under which particular items or services will be (or will 
not be) considered covered and correctly coded. An LMRP is not 
controlling authority for ALJs or the Board in the claims appeals 
process. These guidelines simply help to ensure that similar claims are 
processed in a consistent manner within those jurisdictions. LMRPs may 
not conflict with an NCD, but may be written in the absence of, or as 
an adjunct to, an NCD.
    An LMRP may contain any or all of the following:
    [sbull] Coding provisions.
    [sbull] Benefit category provisions.
    [sbull] Statutory exclusion provisions.
    [sbull] Provisions related to the authority under section 
1862(a)(1)(A) of the Act, which prohibits payment for any expenses 
incurred for services that are not reasonable and necessary for the 
diagnosis or treatment of illness or injury, or to improve the 
functioning of a malformed body member.
    Some LMRPs contain only a single type of provision, while other 
LMRPs contain all four types. The provisions described in bullets two 
through four above constitute coverage provisions.
    For further information on LMRPs please consult our proposed rule 
at 67 FR 54535.

F. Local Coverage Determinations

    Section 522 of BIPA does not use the term ``LMRP,'' but uses the 
term ``Local Coverage Determination'' (LCD). Section 522 of BIPA amends 
section 1869(f)(2)(B) of the Act, to define LCD as ``a determination by 
a fiscal intermediary or a carrier under part A or part B, as 
applicable, respecting whether or not a particular item or service is 
covered on an intermediary-or carrier-wide basis under such parts, in 
accordance with section 1862(a)(1)(A).''
    An LMRP may contain four different types of provisions (coding, 
benefit category, statutory exclusion, and reasonable and necessary). 
Section 1869(f)(2)(B) of the Act limits an LCD as a determination only 
under section 1862(a)(1)(A) of the Act's ``reasonable and necessary 
provision.'' For the purposes of this regulation, we will use the term 
``reasonable and necessary provision'' to describe section 
1862(a)(1)(A) of the Act. We intend to work with contractors to divide 
LMRPs into separate LCD and non-LCD documents; however, it is likely 
that LMRPs will continue to exist for the next several years. During 
this time, the term LCD will refer to both of the following:
    [sbull] Separate, stand-alone documents entitled ``LCDs'' that 
contain only reasonable and necessary language; and
    [sbull] The reasonable and necessary provisions of an LMRP.

G. Differences Between NCDs and LMRPs/LCDs

    Under our claims appeals process, ALJs may consider, but are not 
bound by, LMRPs or LCDs. Thus, an ALJ may rule that Medicare payment is 
due on a particular item or service received by a beneficiary, based on 
the particular circumstances represented by the case, even if the 
contractor's LMRP or LCD clearly prohibits payment for the particular 
service. (We note that a regulation which may impact ALJ consideration 
of LCDs in claims appeal cases has been proposed. See 67 FR 69328, 
69351.) On the other hand, contractors and ALJs are bound by NCDs. ALJs 
may not review an NCD.

H. Individual Claim Determinations

    In addition to policy determinations, contractors may make 
individual claim determinations, even in the absence of an NCD, LMRP, 
or LCD. In circumstances when there is no published policy on a 
particular topic, decisions are made based on the individual's 
particular factual situation. See Heckler v. Ringer, 466 U.S. 602, 617 
(1984) (recognizing that the Secretary has discretion to either 
establish a generally applicable rule or to allow individual 
adjudication).

I. Impact of Section 522 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA)

1. Overview of the Legislation
    Section 522 of the BIPA created a new review process that enables 
certain beneficiaries to challenge LCDs and NCDs. These appeal rights 
are distinct from the existing appeal rights for the adjudication of 
Medicare claims. This section also creates additional avenues for 
beneficiaries to seek judicial review. Before BIPA, the statute did not 
provide an administrative avenue to challenge the facial validity of 
LCDs or NCDs.
2. Differences Between the Claims Appeal Process and the LCD/NCD Review 
Processes
    The existing claims appeal rights were not significantly changed by 
section 522 of the BIPA. Our claims appeal regulations will continue to 
provide detailed administrative appeal rights for beneficiaries whose 
claims are denied. These claims appeal procedures permit beneficiaries 
to challenge the initial claims denial and include de novo review by an 
independent ALJ. If still dissatisfied after exhausting all 
administrative remedies, a beneficiary has a right to seek judicial 
review in a Federal district court. This claim appeal system enables 
beneficiaries to submit any relevant information pertaining to an 
individual claim. Moreover, because LCDs are not controlling 
authorities for ALJs, when an ALJ does not find an LCD persuasive, an 
individual claim appeal could result in the claim being paid without 
the need to challenge the underlying LCD. We have proposed rules that 
would modify the claims appeals process at 67 FR 69312 (November 15, 
2002).
    Section 522 of the BIPA created a review process that is separate 
and

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independent from the claims appeal process. This process will be 
different, because the nature of the challenge and the relevant 
evidence is different. The procedures used in this process will be 
different from the claims appeals process. Review of an LCD or NCD 
requires examination of an entire policy, or specific provisions 
contained therein, and not just one claim denial. Therefore, such 
reviews may lead to changes that impact other beneficiaries if the 
policies are found to be unreasonable. A beneficiary, thus, may elect 
to pursue a claims denial through the claims appeal process, seek 
review of an LCD or NCD using the process in this final rule, or both. 
In no way does filing a 522 challenge, or a decision on a 522 
challenge, affect beneficiary appeal rights or other issues that may 
arise in the claims appeal process.
    Complaints under section 522 of the BIPA are subject to standing 
rules. Namely, under section 1869(f)(5) of the Act ``[a]n action under 
this subsection seeking review of a national coverage determination or 
local coverage determination may be initiated only by individuals 
entitled to benefits under part A, or enrolled under part B, or both, 
who are in need of the items or services that are the subject of the 
coverage determination.'' In this final rule, we are interpreting the 
standing provision to include individuals who have received the item or 
service and whose initial claim was denied based on an LCD or NCD and, 
thus, are in need of Medicare coverage. We will also permit the estates 
of certain individuals to have standing. Only individuals who have 
standing may bring a challenge under section 522 of the BIPA, and in 
this final rule, we refer to these individuals as ``aggrieved 
parties.''
    As discussed in the proposed rule, the aggrieved party may not 
assign the right to bring a challenge under section 522 of the BIPA to 
anyone else. However, the aggrieved party is permitted to obtain 
assistance from any individual in pursuing the challenge. (We discuss 
the difference between assigning rights and receiving assistance in 
section IV of this final rule.)
    The definition of an ``aggrieved party'' will permit an individual 
to bring a challenge to an LCD or NCD in advance of receiving an item 
or service, or after the LCD or NCD is applied to a claim causing the 
claim to be denied. As we discuss in greater detail in section IV.E of 
this preamble, a successful challenge would permit the individual to 
have his or her specific claim reviewed without reference to the 
challenged policy. Claims that are otherwise payable can be paid. In 
addition, a successful challenge to an LCD or NCD may result in the 
following:
    [sbull] The policy being retired/withdrawn in its entirety, or
    [sbull] The policy being revised to effectuate the Board decision, 
or the ALJ decision if it is not appealed to the Board.
3. The Reconsideration Process
    We previously established a procedure by which individuals could 
seek reconsideration of policies established in an LCD or NCD. The 
procedures for NCDs were set forth in the September 26, 2003 notice (68 
FR 55634, 55641). The procedures for LCDs were set forth in the Program 
Integrity Manual, Chapter 13, Section 11.
4. The Role of Other Interested Individuals or Entities
    The section 522 review process is intended to be initiated only by 
aggrieved parties. However, consistent with several public comments, we 
are expanding Sec.  426.510(f) to allow for limited participation in an 
NCD challenge by other individuals as amicus curiae when the 
individuals or entities meet the standards set forth in these 
regulations. Please note that the reconsideration process described in 
section I.I.3 of this preamble remains the appropriate process by which 
all other interested entities may submit new evidence pertaining to the 
review of current LCDs and NCDs.
5. Differences Between an LCD/NCD Review and an LCD/NCD Reconsideration
    The main difference between an LCD/NCD review under section 522 of 
the BIPA and an LCD/NCD reconsideration is the avenue an individual 
chooses to take to initiate a change to a coverage policy and who may 
initiate the review. All interested parties, including an aggrieved 
party, may request a reconsideration of an LCD or NCD, rather than 
filing a complaint to initiate the review of an LCD or NCD. Conversely, 
only an aggrieved party may file a complaint to initiate the review of 
an LCD or NCD. If the aggrieved party believes that we, or the 
contractor, misinterpreted evidence or excluded available evidence in 
making the coverage determination or has new evidence to submit, then 
the aggrieved party has the option to file a request for a 
reconsideration by the contractor or us, respectively, or to file a 
complaint to seek review by an adjudicator.
    In the reconsideration process, all interested parties, not just 
aggrieved parties, have the opportunity to submit new scientific and 
medical evidence for review by individuals with medical and scientific 
expertise. The reconsideration process permits experts to make 
judgments about those policies, rather than using an adjudicatory 
proceeding.

II. Provisions of the Proposed Rule

    For a discussion of the specific provisions of the proposed rule, 
please see 67 FR 54534-54563. The significant changes to the final 
rule, based on public comments, are reflected in section III, below.

III. Analysis of and Response to Public Comments

    We received 31 comments from the public on the proposed rule. 
Summaries of the major comments received and our responses to those 
comments are set forth below.

Definition of an NCD

    Comment: We received several comments on our interpretation of what 
qualifies as an NCD, and which policies are subject to review. Some 
public comments stated that we interpreted the statute too narrowly, 
and that additional policies should be subject to review; other public 
comments suggested that we interpreted the statute too broadly, and 
that benefit category determinations should not be defined as NCDs, and 
should not be subject to review before the Board.
    Response: Our definition of an NCD is consistent with the statutory 
language, and we are not accepting the public comments that suggest the 
definition is either too broad or too narrow. We continue to believe 
that the statute is clear, and that the Congress has created a new 
definition of NCD to include benefit category determinations. The 
Congress's definition of an NCD is now broader than the prior statute 
at section 1869(b)(3) of the Act. Moreover, it is broader than the 
definition of LCD that is specifically limited to determinations made 
in accordance with section 1862(a)(1)(A) of the Act. We presume that 
the Congress acted intentionally and precisely in defining an NCD, and 
we are following that definition in this final rule.

Definition of LCD

    Comment: One commenter suggested that an LCD should be synonymous 
with LMRP.
    Response: Because the statutory definition of an LCD is limited to 
the reasonable and necessary provisions in section 1862(a)(1)(A) of the 
Act, we could not make the definition of an LCD synonymous with the 
definition of an LMRP. As discussed earlier in this preamble, an LMRP 
may contain coding,

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benefit category, and statutory exclusion provisions that are not based 
on section 1862(a)(1)(A) of the Act.
    Comment: Several commenters suggested that both procedure codes and 
diagnosis codes be included within the definition of LCD. These 
commenters stated that the final regulation should not preclude an 
aggrieved party from challenging the reasonable and necessary 
provisions of an LCD that contain diagnosis codes.
    Response: An LCD or LMRP provision stating that a service is not 
reasonable and necessary for specified diagnoses (whether listed in 
text or listed by ICD-9 diagnosis code) is considered part of the LCD.

Definition of an Aggrieved Party

    Comments: We received two comments in support of our proposed 
definition of an aggrieved party as a beneficiary in need of a service 
and who has not yet received the service that is the subject of the 
coverage determination. While these commenters felt that it is correct 
to allow aggrieved parties to initiate the review of an LCD or NCD, 
they wrote that opening up the LCD/NCD review process to beneficiaries 
who have already received the service would result in unnecessarily 
complicated adjudications. However, over half of all commenters on the 
rule suggested that the definition was too narrow and should be 
expanded. Some commenters stated that the proposed definition was far 
too restrictive and suggested that we remove the requirement that the 
service not be received at the time the complaint is filed. One 
commenter pointed out that the proposed definition would insulate 
certain LCDs and NCDs from ever being challenged because some LCDs/NCDs 
address services that are only used in emergency or urgent situations 
where the beneficiary would be incapable of filing a challenge prior to 
receiving the service. Some commenters suggested that beneficiaries 
would lose their section 522 rights if they chose not to forego urgent 
treatment. One commenter suggested that we revise the definition to 
require that the beneficiary be in need of coverage for a service. One 
commenter specifically requested the establishment of an emergency 
appeals process.
    Response: In response to these comments, we have interpreted the 
statutory requirements more broadly and have expanded the definition of 
aggrieved party to require that the beneficiary be in need of coverage 
of a service. Therefore, the definition includes beneficiaries who have 
already received the service. We believe this change obviates the need 
for an emergency appeals process because a beneficiary can obtain an 
emergency service and then seek review without forgoing his or her 
rights. In order to define which beneficiaries have standing as 
aggrieved parties, we have added a requirement in Sec.  426.400(b)(2) 
and Sec.  426.500(b)(2) that aggrieved parties, who have received a 
service and have filed a claim, must file their section 522 challenge 
within 120 days of the date of the initial denial notice from the 
contractor.
    Comment: One commenter stated that beneficiaries should be allowed 
to challenge coverage NCDs as well as non-coverage NCDs.
    Response: We conclude in this final rule that a beneficiary is 
aggrieved by an NCD only if it denies coverage for a service which that 
beneficiary needs. Therefore, the ALJ/Board may accept a complaint 
regarding an NCD that limits coverage. Since the Congress provided for 
review upon the filing of a complaint by an aggrieved party, we believe 
that the Congress intended the process to be available only when the 
beneficiary is in need of coverage for an item or service that would be 
denied or has been denied, under an LCD or NCD.

Allowing a Beneficiary To Assign Appeal Rights

    Comment: We received a number of public comments suggesting that 
the aggrieved party should be able to assign LCD or NCD review rights 
under section 522 of the BIPA to another person or entity. Several of 
the comments suggested that the procedures were complex and that, by 
enabling a beneficiary to assign the rights to another person, it would 
relieve the beneficiary of the burden of participating in the process 
and would be more equitable, or, perhaps, more efficient. One commenter 
suggested that permitting providers to be aggrieved parties would have 
been consistent with an earlier proposal in a Senate bill. Some 
commenters suggested that allowing physicians or other interested 
parties to assist the beneficiary in requesting review would be useful 
to beneficiaries. Other commenters recognized that the Medicare program 
permitted the assignment of rights in other contexts.
    On the other hand, one commenter noted that the statute requires a 
beneficiary in need to initiate a review. Another commenter agreed with 
our proposal, and believed it would be inappropriate under the statute 
to permit the assignment of rights to request a review of an LCD or NCD 
to other interested parties. That commenter noted that the ``Medicare 
program is fundamentally a beneficiary, or patient, program designed to 
assure access to clinically sound services.''
    Response: We are retaining our position that an aggrieved party may 
not assign legal rights to request a review of an LCD or NCD to a third 
party, but are clarifying our rules to ensure that a challenger is not 
precluded from obtaining assistance or representation from individuals 
or entities who may assist the beneficiary in pursuing the individual's 
appeal.
    We agree with the commenter who suggested that the statute was 
clear in this regard. The standing provision in section 1869(f)(5) of 
the Act is precise. Moreover, as one commenter correctly observed, a 
broader standing provision, that would have enabled other interested 
parties to file complaints about LCDs and NCDs, existed in earlier 
drafts of the legislation. It appears that the Congress's narrowing of 
the language in the final bill was intentional and deliberate. We do 
not believe it would be consistent with this history to expand the 
scope of individuals who have a legal right to initiate and pursue a 
challenge to an LCD or NCD.
    We do, however, agree that beneficiaries may seek assistance from 
knowledgeable physicians, suppliers, providers, manufacturers, and 
attorneys in developing the individual's request for review. The 
individual is free to consult with these individuals and to follow 
those suggestions, recommendations, or advice. Thus, while these 
individuals may assist the beneficiary in navigating the adjudicatory 
process in an efficient manner, the beneficiary may not assign his or 
her legal right to request a review of an LCD or an NCD to a third 
party.
    Comment: A commenter suggests that dually eligible Medicare and 
Medicaid beneficiaries have already assigned rights to third party 
payment to Medicaid agencies by virtue of sections 1902(a)(45) and 1912 
of the Act, and Sec.  433.137 of the Medicaid regulations, and that 
States, therefore, should be allowed to participate in the process.
    Response: We disagree with the commenter. The provisions of the Act 
and regulations cited concern the assignment of rights to seek medical 
support or payments and in providing information to assist the State in 
pursuing financially liable third parties. In contrast, a person 
initiating a challenge to an LCD or NCD is seeking to have a coverage 
policy held invalid and is not establishing a right to medical support 
or payment. Should a dually eligible beneficiary prevail in a policy 
challenge, a State may benefit in the

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claims adjudication process if it is determined that the policy was 
invalid. Furthermore, although this adjudicatory process is not 
available to a State directly, a State may always request 
reconsideration of an LCD or NCD.

Dismissal of Complaint Upon Death of Beneficiary

    Comments: We received comments about the proposed policy that would 
have dismissed complaints if the beneficiary died after initiating a 
section 522 challenge. Approximately one third of the commenters were 
opposed to this policy, and only one supported it. That commenter 
concluded that since the deceased would no longer be considered ``in 
need,'' it would be appropriate to dismiss the claim. The majority of 
those who commented objected to permitting an estate to appeal a claim 
without permitting the estate to continue a challenge to the policy 
that could determine the outcome of the appeal, thereby denying 
meaningful relief. One commenter indicated that the policy of automatic 
dismissal of a complaint upon death runs contrary to Federal common law 
that allows for the survival of remedial, as distinguished from penal 
or punitive, claims. In describing the burdens created by an automatic 
dismissal, the commenters referred to the potential for delay, the 
requirement to seek meaningful redress in Federal court rather than 
through the administrative appeals process, wasted resources expended 
prior to the death of the beneficiary in LCD/NCD challenges, and the 
potential for devastating financial burdens on the estates of deceased 
beneficiaries.
    Response: We have revised the final rule to permit the estate of a 
beneficiary, as a successor in interest, to continue a challenge in 
those cases where the aggrieved party received the service and filed a 
timely complaint prior to death. In addition, we will allow an estate 
to initiate a challenge within 120 days of the issuance of a denial 
notice.

Acceptability of Complaints

    Comments: Some commenters stated their belief that the complaint 
filing process in the proposed rule was overly complex. One commenter 
suggested that complaints should be deemed acceptable if sent to the 
ALJ, the local Social Security office, carrier or fiscal intermediary 
(FI), or the Board.
    Response: We have revised the final rule to simplify and clarify 
the complaint filing procedures and to make them more beneficiary-
friendly. We have eliminated a number of requirements that we believe 
are unnecessary. However, it is the duty of the beneficiary to file the 
complaint correctly under these regulations. Nevertheless, we will 
issue instructions advising our contractors of procedures for a 
misdirected LCD/NCD complaint. These instructions will inform the 
contractor that it should forward the complaint to the proper location 
and notify the beneficiary.

Physician Certification

    Comment: Some commenters stated that physician documentation of 
medical need is a reasonable way of determining whether beneficiaries 
have a basis for challenging LCDs/NCDs. However, other commenters felt 
that the physician certification requirements imposed unnecessary new 
paperwork burdens on physicians. Some commenters argued that it was 
unrealistic to require physicians to be certain of the intricacies of 
Medicare policies. Others felt these requirements would prove to be a 
significant impediment to the process and suggested that the original 
physician order for the service suffice as certification that the 
beneficiary needed the service. Finally, a number of commenters 
suggested that non-physician practitioners should be allowed to 
document the beneficiary's need.
    Response: We have revised the certification requirements at Sec.  
426.400(c) and Sec.  426.500(c) in this final regulation by clarifying 
that the certification of need can be in the form of a written order 
for the service in question or other documentation in the medical 
record, thus significantly simplifying the certification requirements. 
We have also removed the requirement that the practitioner predict that 
payment would be denied. However, we continue to believe that the 
beneficiary's treating physician--not any treating practitioner--is 
best situated to determine ``in need'' status, both because he or she 
is the primary caregiver and also is responsible for the beneficiary's 
overall care.

Joint Complaints

    Comments: We proposed permitting multiple parties to file a single 
complaint. We received one comment in support of the joint complaint 
option noting that it permits more effective resource utilization in 
addressing complaints. One commenter recommended that the criterion for 
joint complaints should not require ``a similar medical condition,'' 
rather that the adverse impact created by the LCD or NCD should create 
standing. Another commenter asserted that requiring a similar medical 
condition was unnecessary and inconsistent with the Federal Rules of 
Civil Procedure and that requiring a challenge to the same provisions 
of the same policy should be sufficient.
    Response: In response to the comments concerning the requirement of 
a ``similar medical condition'' for the filing of a joint complaint, we 
believe that this requirement is reasonable, given the specific focus 
of these adjudications. Moreover, the Federal Rules of Civil Procedure 
are not controlling on our administrative proceedings. We believe that 
these procedures appropriately fit the specific requirements for LCD 
and NCD adjudications and are consistent with the Secretary's authority 
(42 U.S.C. 405(a)). Moreover, we do not eliminate the possibility of 
combining actions based upon different medical conditions if a party 
believes, and the ALJ/Board finds, that there are other bases for 
consolidating complaints.

Adjudicator Consolidation of Complaints

    Comment: We received three comments on adjudicator authority to 
consolidate complaints. One commenter recommended merging the 
provisions for joint and consolidated complaints or, alternatively, 
having the provisions cross-reference one another. Another commenter 
objected to the consolidation of complaints without the aggrieved party 
having reviewed the other complaint(s) to determine whether or not the 
consolidation might negatively impact the individual's specific issue 
with the LCD or NCD. Another commenter questioned whether the 
consolidation might result in lengthening the process if an adjudicator 
combined a later complaint with an earlier one.
    Response: We believe that preserving the procedures for aggrieved 
parties to file joint complaints and for adjudicators to consolidate 
complaints promotes efficiency in adjudicating challenges to LCDs and 
NCDs. While we recognize that the two procedures support a common goal, 
we note that they are separate and distinct and therefore should remain 
in their respective sections. With respect to the comments concerning 
the possibility that a party might find consolidation adverse or 
burdensome, we believe it is appropriate for the adjudicator to 
determine whether consolidation is appropriate under the specific 
circumstances. We will allow any aggrieved party who feels 
disadvantaged by consolidation to raise these issues to the ALJ/Board. 
We have added language to Sec.  426.410(e) and Sec.  426.510(e) to

[[Page 63697]]

clarify that the ALJ/Board may not consolidate complaints if doing so 
would unduly delay the ALJ/Board decision.

Amending a Complaint

    Comment: Several commenters indicated that they were concerned that 
the proposed rule allowed a beneficiary to amend a complaint only once 
and then required the ALJ/Board to dismiss the challenge if the 
aggrieved party failed to submit an acceptable amended complaint.
    Response: The statute requires that the section 522 challenge begin 
with the filing of a complaint. We believe that it would be inefficient 
if an aggrieved party had an unlimited number of attempts to file an 
acceptable complaint. A complaint is a significant document in 
identifying issues on appeal and leads to the production of the record. 
The final rule continues to allow the aggrieved party one opportunity 
to amend an unacceptable complaint before a time penalty is imposed.

Withdrawal of Complaint--Six-Month Limit on Refiling

    Comment: We received two comments in support of our proposal to 
establish a six-month limitation if an aggrieved party withdraws a 
complaint. One commenter was opposed, stating that if the aggrieved 
party has new evidence, he or she should be allowed to file another 
complaint regardless of the timeframe. We received two additional 
comments suggesting that, if the aggrieved party has new evidence, he 
or she should be allowed to file another complaint without a time 
limitation.
    Response: We continue to believe that the six-month time limit is 
necessary to ensure the efficient use of scarce resources. If the 
aggrieved party withdraws a complaint, that aggrieved party must still 
wait six months before filing a new complaint on the same LCD/NCD. 
However, we have clarified that, once an acceptable complaint has been 
filed, if the aggrieved party identifies new evidence that was not 
available at the filing of the original complaint, the aggrieved party 
may submit that new evidence at any time without withdrawing and 
resubmitting the complaint.

Aggrieved Party Submitting a Brief

    Comment: We received one comment suggesting that an aggrieved party 
should have the opportunity to submit a brief after the aggrieved party 
has had the opportunity to review the record upon which the LCD or NCD 
was based.
    Response: We agree that an aggrieved party should have an 
opportunity to make his or her case. In seeking to make this process 
accessible to Medicare beneficiaries, who may or may not have legal 
representation, we did not want to mandate that parties submit legal 
briefs in support of their claims. However, in view of the changes we 
have made to the review process in this final rule, particularly for 
the introduction and use of new evidence, we are clarifying that, while 
briefs are not required in all cases, the adjudicator may request or 
permit the parties to submit written briefs and that the aggrieved 
party has the option to retain representation and to submit these 
written briefs.

Educating Beneficiaries and Providers About the Process

    Comment: Many commenters stressed the importance of having a well-
constructed and advertised educational campaign for providers and 
beneficiaries. Some commenters suggested that a template for an 
acceptable complaint, a physician's certification, and an acceptable 
appeal of an ALJ's decision be available on the CMS Web site to assist 
beneficiaries in filing an acceptable complaint. Another commenter 
suggested that beneficiaries should be informed of their rights in the 
LCD or NCD review process and that one means of providing this might be 
to include it with advanced beneficiary notice (ABN) forms. Another 
commenter encouraged us to inform beneficiaries clearly as to their 
financial obligations while the complaint is pending. Several other 
commenters suggested that we provide model language for use by Medicare 
managed care organizations to use in their evidence of coverage 
documents.
    Response: In the proposed rule (67 FR 54547), we explained our 
intent to produce a user-friendly guide that beneficiaries may use in 
accessing the section 522 process. We will work with the ALJs and Board 
to develop educational materials to inform the public of--
    (1) The elements of an acceptable complaint;
    (2) The standards for treating physician certifications; and
    (3) The elements of an acceptable appeal of an ALJ decision. We 
intend to prepare this educational material (including templates) and 
make it publicly available, but we will not delay implementation of the 
final rule to wait for these materials to be developed. We will work 
with ALJs and the Board to make available to Medicare managed care 
organizations and Medicaid State agencies, relevant information on 
complaints and decisions. We do not intend to revise ABNs as part of 
this educational program.

Allowing Participation by Interested Entities

    Comment: Several commenters believed that we should allow for more 
public participation of interested entities in the process, along with 
submission of evidence by those parties.
    Response: The LCD and NCD reconsideration processes currently exist 
to give all interested entities the right to request and participate in 
reconsiderations of these policies. These processes will continue to 
exist to provide an avenue for all interested entities to submit 
evidence that they consider pertinent. In contrast, the adjudicatory 
process created by section 522 is initiated only by a beneficiary in 
need of coverage, and not by all interested individuals. We are 
concerned that allowing any member of the public to submit evidence 
would make these adjudicatory proceedings unwieldy. We are modifying 
this final rule at Sec.  426.513, however, to permit participation as 
amicus curiae, in the NCD process. We recognize that NCD reviews may 
impact a large number of stakeholders apart from the aggrieved parties 
initiating the review. We believe that the nationwide effect of an NCD 
review decision requires public notice and opportunities for input in a 
way that LCD reviews do not. In addition, this impact may be 
significant, even where no change to existing policy results from the 
review, such as when the Board concludes that an NCD record is complete 
and contains adequate information to support the validity of the NCD.
    Anyone who has information that can assist the Board in reviewing 
an NCD challenge is permitted to request participation as an amicus 
curiae. Given the nationwide effect of an NCD review decision, the 
process must strike a careful balance between providing reasonable 
opportunities for input by those who may ultimately be substantially 
affected by any decision, and creating a workable process to address 
the issues presented by the aggrieved party seeking review. Because of 
the regional nature and high number of LCDs, allowing the opportunity 
for amicus curiae participation in the review of LCDs would create an 
inefficient process. However, at any time, any party within the 
contractor's jurisdiction who wishes to bring forward new evidence 
relating to a policy may do so through the contractor's LCD 
reconsideration process. This process is frequently used

[[Page 63698]]

and is an efficient method to bring new evidence to the contractor's 
attention.

Making NCD Complaints and Documentation Available and Announcing the 
Proceedings

    Comments: A number of commenters suggested that all interested 
parties should have notice of an LCD/NCD complaint and have the 
opportunity to participate in the proceedings. One commenter 
recommended the use of an on-line docketing system whereby the public 
could learn of LCD/NCD challenges and determinations made by the ALJs 
and Board in these cases.
    Response: The statute does not require that we develop such a 
nationwide online docketing system. While the concept is interesting, 
an online docketing system is beyond the scope of this regulation. 
Currently, we are exploring options for the best way to docket and 
track challenges.
    Changes in NCDs may determine the health care services, 
technologies, and treatments to which beneficiaries have access. The 
denial of coverage for a service that is allegedly reasonable and 
necessary may have an adverse impact on others across the nation. 
Hence, it is important that the review decisions are based on a 
comprehensive and well-developed record.
    In addition, the general public may have a substantial interest in 
the outcome of some NCD reviews. NCD review decisions will constitute a 
legal precedent with respect to the outcome. Board decisions will 
clarify the extent of available Medicare coverage.
    Therefore, under the final rule, the Board will make available to 
the public information about all NCD complaints by means of posting on 
the Internet. This method will provide the broadest possible public 
notice, without unreasonably delaying review of the complaint already 
filed. Any request to participate as an amicus must then generally be 
filed within the timeframes set by the Board.
    Although LCDs are also important, LCDs are regional in nature. 
Because LCD reviews generally impact only a limited geographic area, we 
will not require the ALJs to make public all LCD complaints.

Notice to Managed Care Organizations (MCOs) and State Agencies

    Comment: Several commenters suggested that Medicare managed care 
organizations (MCOs) and State agencies receive timely notification 
when a challenge is filed at each stage of review, when an ALJ/Board 
decision is made, and when a revised LCD/NCD is effective. One 
commenter suggested that the regulation be revised to require the ALJ 
or the Board to notify MCOs when an enrollee challenges an LCD/NCD.
    Response: We will work with the ALJs and the Board to make 
available to MCOs and State agencies, relevant information about 
complaints and decisions.

Mediation

    Comment: We received one comment for and one comment against using 
mediation in an evidence-based review process.
    Response: We have added a provision authorizing the Board to stay 
the review proceedings for a reasonable time when all parties 
voluntarily engage in settlement negotiations, with or without the 
assistance of an impartial mediator. In general, we do not consider it 
appropriate to negotiate about clinical issues that affect the health 
or safety of Medicare beneficiaries. In some instances, however, it may 
be worthwhile to explore alternative and less costly means of resolving 
a dispute. Mediation may be useful to narrow the issues in dispute in 
order to make the review process more efficient. Using alternative 
means of resolving disputes is consistent with the Federal 
Administrative Dispute Resolution Act and HHS policy. Under this final 
rule, the ALJ or the Board could not compel mediation. Where the 
parties consent to mediation, the ALJ or the Board may provide an 
impartial mediator or assist the parties in finding an impartial 
mediator acceptable to them.

Automatic Dismissal When a Contractor Retires an LCD or CMS Withdraws 
an NCD

    Comments: One commenter agreed that, if an NCD is withdrawn, the 
purpose for the review has been eliminated and the claims can be 
adjudicated without consideration of the repealed NCD, but objected to 
the statement that the repeal will have the same effect as a decision 
under Sec.  426.560(b). The commenter, however, interpreted section 
Sec.  426.560(b) as permitting a contractor to continue to rely on a 
withdrawn NCD.
    Response: Retiring an LCD or withdrawing an NCD would result in the 
retired/withdrawn policy no longer applying in the claims adjudication 
process for services rendered on or after the date that the policy is 
retired/withdrawn. Moreover, the aggrieved party would be granted 
individual claim review. Since a claimant would receive the same relief 
that would have been available had the adjudicator found that the 
relevant LCD or NCD was not valid, there would be no reason to continue 
the appeal.
    Comment: One commenter recommended against automatic dismissal if a 
policy were retired or withdrawn. As an alternative, the commenter 
suggested giving the adjudicator discretion to dismiss ``where the 
decision normally occurs'' and opined that since a retired or withdrawn 
policy may be reconsidered or reaffirmed, the automatic dismissal 
provision effectively nullifies the entire policy appeal process.
    Response: When we retire/withdraw an LCD/NCD we will not apply 
those policies for services furnished after the retirement/withdrawal 
date and we will reprocess the aggrieved party's affected claims 
without applying the retired/withdrawn policy. If, in the future, the 
contractor or CMS issues a new LCD/NCD on that subject the change would 
be adopted after an opportunity for public comment. Any such change 
would be prospective in nature, and a new LCD/NCD would be subject to 
challenge under this final rule.
    Comment: Two commenters indicated that automatic dismissal would 
not permit an ALJ's or the Board's findings to be used in the appeal of 
claims decisions based upon the invalidated policy.
    Response: Because the ALJ or the Board would not be required to 
make a decision in a case where the contractor/CMS retired/withdrew the 
LCD/NCD, there would be no Board decision with precedential effect. 
However, we believe our approach conserves resources for all parties 
and adjudicators.

Timeline for Beneficiary Getting the LCD/NCD Record

    Comment: We received one comment on the timing of the LCD/NCD 
record production requirement. That commenter suggested that we should 
create a 45-day response timeframe to ensure that the review process 
proceeds without inordinate delays.
    Response: We agree that the establishment of timeframes will 
promote the efficiency of the BIPA 522 process. However, we believe 
that the time required will vary with the size and scope of the record 
requested. Therefore, we have revised the final rule at Sec.  
426.410(d) and Sec.  426.510(d) to state that the contractor or CMS 
must generally produce the record within 30 days, subject to extension 
for good cause shown.

Timeline for an Aggrieved Party to Review the LCD or NCD Record

    Comment: One commenter suggested that 30 days might not be enough 
time

[[Page 63699]]

for the aggrieved party to review the record, particularly for an 
individual pursuing a complaint with minimal outside assistance. The 
commenter recommended a 45-to-60-day timeframe for the aggrieved party 
to respond.
    Response: We accept the commenter's suggestion to increase the time 
for review of the record. While we have maintained the 30-day 
timeframe, we have added an exception for good cause shown, for review 
and response to the relevant LCD or NCD record, if additional time is 
required.

No Evidence To Support an LCD/NCD

    Comment: We received several comments stating that where no record 
exists to support an LCD/NCD, the beneficiary should not have to 
introduce new evidence.
    Response: We expect it would be a rare event that no record exists. 
In that rare event, we agree with the commenter. We have made changes 
to clarify that, in the rare event that no evidence exists to support 
an LCD or NCD, we will either voluntarily retire/withdraw the policy, 
or request the ALJ/Board to strike down the applicable provision(s) of 
the policy, whichever is the more expeditious option.

New Evidence

    Comment: Approximately half of the commenters made comments on the 
issue of new evidence. Most of the comments stated that allowing us to 
have an automatic stay, coupled with the absence of specific deadlines, 
would unduly delay the review process. Other commenters suggested that 
the stay should be a matter of ALJ/Board discretion. Numerous comments 
specifically requested that the ALJ or Board review all evidence, 
including new evidence, to allow for a more efficient process.
    Response: We agree that a more efficient and time-sensitive 
adjudicatory process is important, and we have addressed several 
aspects of these comments in the final rule. We have taken considerable 
steps to create an efficient adjudicatory process that still preserves 
the important role of the clinical and scientific experts in making 
LCDs and NCDs.
    We have eliminated the proposed automatic stay when new evidence is 
submitted. Instead, our final rule will require that, if new evidence 
has been received by the ALJ/Board that would otherwise be admissible, 
the ALJ/Board will review the new evidence after the period for 
discovery and the taking of evidence is complete, and decide if it has 
the potential to significantly affect the LCD/NCD provision in 
question. If not, the review will continue. If the ALJ/Board determines 
that the new evidence has the potential to significantly affect the 
validity of the LCD/NCD, the ALJ/Board will stay the proceedings and 
forward the material to the contractor or to us for a brief review. The 
contractor/CMS will have 10 days to provide a statement indicating 
whether or not: (1) A reconsideration will be initiated, or (2) the 
policy will be revised or retired/withdrawn. If the Agency undertakes a 
reconsideration, it must be completed within a period set by the ALJ/
Board that is not more than 90 days. We believe this 90-day timeframe 
is reasonable due to the potentially large body of evidence that must 
be reviewed. Following a reconsideration, the contractor/CMS will 
prepare and submit the new LCD/NCD record, and the ALJ/Board 
proceedings will continue on the revised LCD/NCD. If the contractor/CMS 
chooses not to initiate a reconsideration, the ALJ/Board proceedings 
will continue on the original LCD/NCD as supplemented with the new 
evidence. The aggrieved party will have an opportunity to submit a 
statement about whether the record still fails to support the validity 
of the LCD/NCD. The contractor/CMS will have an opportunity to respond. 
No further evidence will be taken at this stage, and the ALJ/Board will 
proceed to make a determination on the merits.
    We have also made changes to the definition of ``new evidence'' to 
clarify that new evidence means evidence that was not considered by the 
contractor or CMS.

When Does the Review Stop?

    Comments: In the proposed rule, we specifically asked for comments 
on alternatives for structuring the review process. We proposed to 
divide the decision making process for cases at the ALJ/Board level 
into two stages and thereby establish the prerequisites for discovery 
under the statutory framework set forth at section 
1869(f)(1)(A)(iii)(I) and section 1869(f)(2)(A)(i)(I) of the Act. Under 
the proposed regulation, in order to obtain discovery, a challenger was 
required to first file a motion with the Board or ALJ alleging that the 
record was incomplete or lacked adequate information to support the 
validity of the determination. Only if the record was incomplete or 
otherwise inadequate would an aggrieved party be able to pursue 
discovery. Even if the challenger did not file such a discovery motion, 
however, a beneficiary could seek a decision on whether the 
determination was based on reasonable findings of fact, reasonable 
interpretations of law, and reasonable applications of fact to law.
    We outlined another possible approach in our proposed rule at 67 FR 
54542. That approach would require a party to file a statement 
regarding whether that party considers the record complete and 
adequate, and an ``offer of proof'' supporting factual allegations 
about incompleteness. The adjudicator would then decide whether the 
record is complete and adequate to support the decision and would 
prepare a written decision. If the adjudicator found that the record 
was complete and adequate, this decision would be a final Agency action 
appealable to the court.
    There were two public comments on this issue. One commenter 
suggested that, if the adjudicator found that the record was incomplete 
or inadequate, the Board would be legally required to determine that 
the ``NCD is not reasonable.'' This commenter believed that the Board 
would be precluded from allowing discovery or any other new evidence at 
this point, but must automatically rule against CMS. A commenter 
appeared to prefer the following approach: ``If, upon review of the 
record, the aggrieved party does not have objections to the 
completeness or adequacy of the LCD or NCD record, then what is the 
basis of the aggrieved parties complaint? Presumably the coverage 
policy would be challenged on the basis that it is inconsistent with 
current clinical or scientific evidence. In such case, a motion by the 
aggrieved party would appear to be a necessary part of the complaint 
process and an appropriate step given the limited time and resources of 
adjudicators, CMS and contractors.'' The commenter ``believed that the 
aggrieved party should challenge the completeness or adequacy of the 
record before an adjudicator should make a determination with respect 
thereto.''
    Response: We have re-examined our proposed procedures in light of 
the public comments and the unique statutory language in section 
1869(f)(1)(A)(iii)(I) and section 1869(f)(2)(A)(i)(I) of the Act. In 
this final rule, we clarify at Sec.  426.400 and Sec.  426.500, the 
procedural and substantive steps involved in the appeal. The revised 
procedures incorporate approaches from both alternatives discussed in 
the proposed rule. We believe that the revised procedures are fair, 
consistent with the statutory framework, and will enable the ALJs and 
Board to fairly resolve challenges to LCDs and NCDs in an expeditious 
manner.
    The administrative review provisions in BIPA section 522 are 
unique. While

[[Page 63700]]

the reviews are, at the outset, based on the medical and scientific 
evidence that the contractor/CMS considered in issuing the LCD/NCD, and 
the statute requires that the adjudicator ``shall review the record,'' 
it does permit discovery in some limited circumstances and also permits 
that adjudicator to consult with ``appropriate scientific and clinical 
experts.'' Obviously, new evidence obtained through discovery or 
testimony could not have been considered by the agency when the policy 
predates the new evidence. Thus, the procedures are not entirely based 
on the record, but new evidence and testimony may influence the ALJ's/
Board's decision in some cases.
    It is possible that an aggrieved party would attempt to challenge 
an LCD/NCD for several reasons. For instance, a challenger may believe 
that a policy that was correct when it was issued has become outdated 
and is no longer valid in light of advances in medicine. Those 
challengers may be most interested in presenting new medical evidence 
in support of changing the policy rather than challenging the original 
factual basis for the policy. As noted previously, we are modifying our 
procedures to allow a party to submit new evidence to the ALJ/Board. We 
have modified the procedures at Sec.  426.340 to allow the ALJ/Board to 
make a preliminary determination on whether the new evidence submitted 
would have a significant bearing on the validity of the LCD/NCD. If the 
evidence is found significant, it would be sent to the contractor/CMS 
to determine whether the contractor/CMS agrees that the evidence 
warrants a formal reconsideration. As mentioned earlier, the 
reconsideration process would be time limited but would allow the 
public to submit medical and scientific evidence and allow the agency 
to fully develop the record in light of advances in medical science. 
Following the time-limited reconsideration, a supplemental record would 
be filed and the adjudication could continue, if necessary.
    This approach will provide the contractor/CMS the initial 
opportunity to permit medical and scientific experts to examine the new 
evidence and to make findings of fact concerning the new evidence. 
Among other things, the statute requires that the ALJ/Board ``shall 
defer only to the reasonable findings of fact'' and it was impossible 
for the agency to have made findings on evidence that did not yet exist 
or that had not been furnished to the agency for consideration. We 
believe this approach is necessary to ensure that the medical and 
scientific opinions of the agency experts illuminate the record, since 
these appeals could involve very technical medical and scientific 
material related to the new evidence.
    While it is possible that the challenger may submit credible 
medical and scientific studies that warrant a formal reconsideration, 
it is also possible that the evidence submitted would not be either 
relevant or persuasive, or that a challenger may seek to challenge the 
policy on other grounds. Because the public comments have highlighted 
the different types of disputes that may be presented, we have modified 
our procedures in attempt to fairly, yet expeditiously, resolve any 
type of challenge that may be presented. Our revised approach would 
allow the ALJ or the Board to resolve some cases without need for a 
reconsideration and would also allow the review proceedings to be 
resolved in a more expeditious manner. To resolve any confusion, we 
will describe the significant procedural and substantive steps of the 
review.
    Under the revised procedures at Sec.  426.425 and Sec.  426.525, 
all aggrieved parties, after reviewing the LCD or NCD record, will be 
able to file a statement that includes the challenger's arguments as to 
why the record is not complete, or not adequate to support the validity 
of the LCD/NCD under the reasonableness standard. This may be the most 
important step in the review process from the aggrieved party's 
perspective because this is the opportunity to present any arguments 
for the LCD/NCD being held invalid. (See Sec.  426.425(a), Sec.  
426.525(a)). CMS or the contractor will have 30 days to submit a 
response to this statement. (See Sec.  426.425(b), Sec.  426.525(b)).
    After evaluating the materials and the record, our revised 
procedures will permit the ALJ/Board to make a prompt decision in the 
nature of a summary judgment if the case warrants this approach. For 
instance, if applying the reasonableness standard, the adjudicator 
finds that record is complete and has adequate information to support 
the validity of the LCD or NCD, the ALJ or the Board may issue a 
decision that ``the record is complete and adequate'' to support the 
policy. (See Sec.  426.425(c)(1), and Sec.  426.525(c)(1)). For cases 
involving an NCD, the aggrieved party would have the right to challenge 
this final agency action in Federal court. (Section 1869(f)(1)(A)(v) of 
the Act). For cases involving an LCD, the aggrieved party would have 
the right to challenge the ALJ's decision at the Board, and potentially 
in Federal Court. (Sec.  426.465).
    If, on the other hand, after evaluating the materials submitted by 
the parties and the record, the ALJ/Board determines that the record is 
not complete or not adequate to support the validity of the LCD/NCD, 
the adjudicator will permit discovery and the taking of evidence. 
Following discovery and the taking of evidence as set forth in these 
final rules, the ALJ/Board will issue a final decision. (See Sec.  
426.447, Sec.  426.547). Those final decisions may also be appealed in 
appropriate circumstances.
    Although we recognize that one commenter suggested that the ALJ or 
the Board would be legally required to hold invalid the LCD/NCD rather 
than allowing the agency to supplement the record, the case cited is 
not relevant given the unique language and history of BIPA section 522. 
The ALJs and the Board are not acting as a Federal court reviewing 
final agency action. The case relied on by the commenter concerned the 
scope of review under the judicial review provisions of the 
Administrative Procedure Act, 5 U.S.C. 706. Moreover, under prior 
provisions for court review of NCDs, even courts were required to 
permit us to supplement the record before declaring an NCD invalid. We 
believe our approach is consistent with the specific requirements of 
the statute.

Scope and Weight of Evidence

    Comment: One commenter believed that the proposed rule would have 
the effect of excluding highly relevant information such as physicians' 
standards of practice and their professional opinions from the review 
process. Another commenter believed that we should define the hierarchy 
of evidence strength to assure proper weighting by the ALJ or Board 
when considering scientific and clinical information.
    Response: We are not accepting the recommendation to include a 
hierarchy of evidence in order to allow flexibility in analyzing 
evidence. We recognize that many types of evidence have value, and will 
consider clinical experience, as well as other forms of medical, 
technical, and scientific evidence in making LCDs and NCDs. We note 
that the ALJ/Board may seek input from clinical and scientific experts 
at their discretion. There is no prohibition against the ALJ or the 
Board seeking the input of practicing physicians or considering 
standards of practice.

Discovery

    Comment: We received several comments on the nature and scope of 
discovery. One commenter supported the limitation upon discovery that

[[Page 63701]]

would allow contractors to produce existing records rather than 
requiring them to develop and produce new documentation.
    Response: We appreciate the commenter's support of our proposals 
and have taken its views into account in considering the comments of 
those commenters who recommended revisions.
    Comment: One commenter objected to our proposal not to initiate 
discovery between parties until after an adjudicator has made a 
determination about the adequacy of the record. The commenter suggested 
that discovery should be available any time after the complaint is 
filed.
    Response: We note that the statute establishes the timing of 
discovery. Section 1869(f)(1)(A)(iii)(I) and section 
1869(f)(2)(A)(i)(I) of the Act provide for discovery and the taking of 
evidence only in instances where an ALJ or the Board has reviewed the 
record and made a determination that it is incomplete or lacks adequate 
information to support the validity of the LCD or NCD at issue. 
Therefore, we believe that an initial determination regarding the 
completeness and adequacy of a record must precede the initiation of 
discovery between parties.
    Comment: Several commenters opposed our rule limiting discovery to 
requests for documents only. The commenters suggested that parties 
should be permitted to use interrogatories and other discovery means. A 
commenter also objected to the rules at Sec.  426.435 and Sec.  426.535 
setting forth the subpoena procedures on the basis that they are 
inconsistent with the Federal Rules of Civil Procedure, particularly 
with respect to the 30-day notice requirement. Finally, one commenter 
suggested that discovery should not be restricted to material relating 
to a specific LCD or NCD but should include other policies that might 
be relevant to an evaluation of whether a coverage policy is 
reasonable.
    Response: The BIPA gives a right to discovery, but does not specify 
permissible forms and does not require that these administrative 
proceedings follow the discovery or subpoena rules set forth in the 
Federal Rules of Civil Procedure or the rules of any other 
administrative proceedings. We proposed limiting discovery to requests 
for documents and believe this approach is consistent with other 
Departmental rules permitting discovery. (See, for example, 42 CFR 
1005.7). After consideration of the comments, however, we are expanding 
discovery under Sec.  426.432(c) and Sec.  426.532(c) to include the 
opportunity to submit 10 written interrogatory questions. This is 
intended to be a limited opportunity, available when needed to promote 
the overall efficiency of the review proceeding, that we expect ALJs 
and the Board to narrowly construe to minimize the burden on the 
agency. We are also revising Sec.  426.432(e) and Sec.  426.532(e) to 
exclude written interrogatories from the list of unavailable discovery. 
We are not allowing for depositions, requests for admissions, or other 
types of discovery because we view them as unnecessary for this kind of 
administrative proceeding and because this limitation will reduce the 
time and expense associated with these appeals. We believe that 
limiting discovery in this way will ensure the timely and efficient 
disposition of LCD and NCD challenges.
    Comment: A commenter objected to an adjudicator's issuance of a 
protective order without the employment of a balancing test to 
determine whether the moving party has a sufficient basis for 
requesting the order. Another commenter objected to the absence of any 
provision authorizing a beneficiary or the Board to compel disclosure 
of documents by us.
    Response: Sections 426.432(b)(2) and 426.532(b)(2) set forth 
criteria that adjudicators must utilize in determining whether to grant 
or deny protective orders. We believe that these criteria are 
sufficient to evaluate the merits of a request for a protective order 
without developing an additional balancing test. As a result, we will 
not be incorporating the commenter's suggestion into this final rule. 
Furthermore, we believe that a process for compelling disclosure of all 
documents by us is not necessary because these regulations already set 
forth and define the scope of what must be provided through discovery.

Expert Witness

    Comment: One commenter objected to the restrictions on the 
introduction of expert evidence, having interpreted them as permitting 
oral testimony by an expert witness only if written evidence were 
submitted.
    Response: Sections 426.440(e) and 426.540(e) do not require that a 
witness provide a written report, but rather require that any expert 
witness providing written testimony be available for oral cross 
examination. Under Sec.  426.440(d) and Sec.  425.540(d), the ALJ or 
the Board may require or permit expert witnesses to submit a written 
report. Moreover, it is common practice for expert witnesses to submit 
written reports in order to use hearing time efficiently and to focus 
questioning effectively.

Withholding Evidence Deemed To Be Proprietary

    In the proposed rule, we sought to limit disclosure of 
``proprietary data'' based on the parenthetical phrase included in 
section 1862(a) of the Act in the paragraph that follows. The provision 
in this paragraph establishes several procedural requirements that the 
Secretary must follow in making NCDs. The provision states:

    In making a national coverage determination (as defined in 
paragraph (1)(B) of section 1869(f)) the Secretary shall ensure that 
the public is afforded notice and an opportunity to comment prior to 
implementation by the Secretary of the determination; meetings of 
advisory committees established under section 1114(f) with respect 
to the determination are made on the record; in making the 
determination, the Secretary has considered the applicable 
information (including clinical experience and medical, technical, 
and scientific evidence) with respect to the subject matter of the 
determination; and in the determination, provide a clear statement 
of the basis for the determination (including responses to comments 
received from the public), the assumptions underlying that basis, 
and make available to the public the data (other than proprietary 
data) considered in making the determination.

    The reference to ``proprietary data'' reflects a limitation on 
disclosure to the public. We specifically invited public comments ``on 
the scope of proprietary data and the extent to which this material 
should not be disclosed'' (67 FR 54541). Comments we received on this 
issue follow.
    Comment: We received several public comments concerning proprietary 
data and information disclosure. Several commenters agreed with the 
proposal to limit disclosure of proprietary data. One commenter 
suggested that the record contain only the materials referenced in the 
LCD. One commenter indicated that it should apply to the studies and 
analysis purchased or performed by a contractor. Another commenter 
observed that patient specific information should also be protected and 
disseminated only with patient permission.
    Other commenters opposed the concept. One commenter asked that the 
regulation be revised to state that the record contains ``all the 
information presented to the Agency and/or the Medicare contractor when 
the coverage determination was being established[.]'' One commenter 
suggested that the record should be expanded to include relevant 
information that comes to CMS ``after a policy is published.'' Another 
commenter wrote that, ``a contractor or CMS can withhold from the 
reviewing body information it believes to be

[[Page 63702]]

proprietary, creating a huge loophole that allows the withholding of 
evidence in support of the beneficiary's claim. Because the proposed 
regulation provides for very limited discovery, a beneficiary will have 
very little opportunity to determine whether supporting documentation 
has been withheld.'' Other commenters suggested that ``these proposed 
regulations be revised to state that the record includes any document 
or materials that were presented to CMS or the contractor in the 
development of the LCD or NCD.''
    Another commenter suggested that when we compile the record of the 
LCD or NCD, we should also produce an index of all material that was 
excluded, and then seek a protective order from the adjudicator to 
exclude that material from the record. We would be required to state 
for each document the specific basis for a claim of privilege or the 
specific provisions of Federal statute authorizing the withholding or 
prohibiting disclosure. A beneficiary would be given an opportunity to 
respond and object.
    Response: In section 1862(a) of the Act, the Congress provided that 
the Secretary was not required to disclose ``proprietary data'' to the 
public when making available the data considered in making the 
determination. We believe it is likely that this exception serves to 
encourage manufacturers and others to submit evidence that would be 
useful in making LCDs/NCDs. Prior to this statute, manufacturers may 
have been reluctant to submit valuable business and commercial data if 
they believed it would be publicly disclosed as part of a record in a 
judicial proceeding. This provision enables the Secretary to receive 
and consider proprietary data and to assure that proprietary data would 
not be disclosed without the expressed consent of the individual or 
entity that submitted the documents. This may enable the contractor/CMS 
to make LCDs/NCDs, including determinations that may expand Medicare 
coverage, more rapidly and accurately.
    We are aware that there is tension in the statute between the 
specific right given to an aggrieved party to seek discovery during the 
appeal process (section 1869(f)(1)(A)(iii)(I) of the Act), and the 
opportunity that the Secretary is given to withhold from the public 
``proprietary data.'' The public comments include cogent views from 
both perspectives. The Secretary has the discretion and challenge to 
balance these competing interests, and must resolve this issue in order 
to implement the expanded appeal rights that the Congress has provided.
    We are resolving this tension by issuing this regulation to inform 
the public that we will withhold proprietary data from the public 
during the ALJ or the Board process. We do not expect to have 
proprietary data in our possession in most cases. In the rare instance 
that we obtain and consider proprietary data, this information will be 
presented to the ALJ or the Board under seal but will not be disclosed 
to any party or disclosed as part of the public record of the LCD/NCD 
proceedings. We believe that the Congress's concern about disclosure of 
proprietary information to the public in section 1862(a) of the Act 
suggests that the Congress did not intend to mandate disclosure of that 
same data during the LCD/NCD appeal. The limited assurance of 
maintaining confidentiality during the process of preparing an LCD/NCD, 
but not during the administrative appeal, would discourage 
manufacturers from submitting crucial confidential information.
    At Sec.  426.110, we are specifically defining ``proprietary data'' 
and ``privileged information'' as information from a source external to 
CMS or a contractor, or protected health information, that meets the 
following criteria: (1) It is ordinarily protected from disclosure 
pursuant to 45 CFR Part 164, under the Trade Secrets Act (18 U.S.C. 
1905) or under Exemptions 4 or 5 of the Freedom of Information Act (5 
U.S.C. 552) as specifically interpreted in our Departmental regulations 
at 45 CFR 5.65; and (2) the party who possesses the right to protection 
of the information from public release or disclosure has not provided 
its consent to the public release or disclosure of the information. Any 
information submitted by the public that is not marked as proprietary 
will not be considered proprietary. We may review this assertion in 
determining whether the information is proprietary data. Any 
information received that is not designated as ``proprietary data'' 
will not be considered ``proprietary data.'' In order for proprietary 
data to be considered and given weight in LCD or NCD reviews, any such 
proprietary data submitted by a manufacturer of a drug or device should 
contain true and complete records of all clinical and scientific data 
existent and, therefore, any submission must include an affidavit that 
the data consists of true and correct copies of all data submitted by 
the manufacturer to any other Federal or State agency or department in 
relation to that drug or device. This is to limit the possibility that 
review decisions are based on partial or biased presentations of 
available evidence. Consistent with this requirement, CMS will request 
such certifications when receiving proprietary data for its initial NCD 
analysis, and would anticipate a similar procedure by carriers or 
intermediaries in their LCD analysis.
    We believe this relatively narrow exception will still provide 
beneficiaries adequate access to all of the evidence that is typically 
considered in making LCDs/NCDs. There is a great deal of helpful and 
useful information available in publicly disclosable documents that are 
relevant to the subjects that we consider. In many cases the 
proprietary data may just reaffirm conclusions that are consistent with 
publicly available sources. While we recognize that this resolution may 
be somewhat awkward for a party challenging an LCD/NCD, we believe this 
result is in the best interests of the public. This approach will 
support more accurate and rapid coverage determinations through greater 
access to more data and may lead to faster and better LCDs/NCDs that 
may increase access to new advances in medicine and technology.
    For the comment that we provide an index of all excluded material, 
we are adopting this comment in part. In the rare event that we rely on 
proprietary and privileged data in formulating a coverage decision, 
these data will be given to the ALJ/Board under seal. In this rare 
event, these data will not be furnished to the aggrieved party; rather, 
we, or our contractors, will include an index that lists all of the 
excluded material as part of the LCD/NCD record. To implement the 
statutory protections for proprietary data and privileged information 
in section 1862(a) of the Act, we are not furnishing proprietary and 
privileged data as part of the public record, but the seal will be 
maintained on that information for use by a court in relation to an NCD 
review. In the event that a court seeks to obtain or requires 
disclosure of proprietary data or privileged information, CMS or the 
Department will seek to have a protective order applied to that 
information, to prohibit any recipients of the information from further 
disclosing the information or from using it for any purpose other than 
the challenge. The statutory protection accorded this data ensures the 
availability of the best relevant information whether proprietary or 
not, and maximizes flexibility in developing coverage determinations.

Consulting Scientific and Clinical Experts

    Comment: We received two comments requesting a clearer definition 
of who could be considered a scientific or

[[Page 63703]]

clinical expert, and requesting that those with conflicts of interest 
not be considered as experts. A related comment stated that the ALJs/
Board may solicit testimony from any expert on issues relevant to the 
LCD/NCD provision(s) in question.
    Response: We agree with these comments. We are clarifying that 
scientific and clinical experts consulted by the ALJ/Board must be 
independent and impartial and have significant experience and published 
work pertaining to the subject of the review to be considered experts.
    Comment: A commenter objected to the rule allowing the Board to 
call its own witnesses. The commenter suggested that the rule would 
compromise the role of the Board by placing it in an advocacy position.
    Response: While we appreciate the commenter's concern regarding the 
appropriate role of the Board, we are obligated to comply with 
statutory requirements, and section 1869(f)(1)(A)(iii)(II) of the Act 
specifically provides that the Board ``may, as appropriate, consult 
with appropriate scientific and clinical experts.'' Therefore, we 
believe it proper to interpret this statutory provision to permit 
adjudicators to call their own witnesses when reviewing LCDs or NCDs. 
Moreover, similar provisions exist in many administrative procedures, 
especially those involving public health or safety.

Witness and Legal Fees

    Comment: One commenter referred to Sec.  426.445 and questioned 
whether or not we would pay for witness fees for contractors' witnesses 
and legal fees incurred in connection with LCD review.
    Response: The compensation of Medicare contractors and their 
witnesses is an internal policy matter, which need not be resolved in 
this final rule.

Role of CAC/MCAC

    Comment: Two commenters suggested that members of the Contractor 
Advisory Committee (CAC) and members of the Medicare Coverage Advisory 
Committee (MCAC) should have substantial input into the LCD/NCD review 
process.
    Response: The CAC/MCAC members already serve an important role in 
developing certain Medicare policies. We believe it would be 
inappropriate for these individuals to serve as expert witnesses in 
these proceedings. Therefore, we are not revising the final rule in 
response to this comment.

Burden of Proof

    Comment: We received several comments regarding the proper burden 
of proof in the adjudicatory proceedings when an LCD or NCD is 
challenged. One commenter believed we should make it clearer that the 
burden of proof was on the challenger to show that an item or service 
is safe and effective for the proposed indication. Two commenters 
believed we should stop requiring proponents to show that Medicare 
coverage is appropriate. These commenters suggest that the Social 
Security Act places the burden of proof on us if it wishes to deny 
Medicare coverage and suggested that the contractor/CMS should have the 
burden of showing why evidence supports retention of an LCD or NCD.
    Response: We disagree with the commenters who suggest that the 
burden of proof should rest on the government. The Social Security Act 
contains no ``presumption that services are covered.'' Rather, the Act 
expressly provides that ``[n]otwithstanding any other provision of this 
title, no payment may be made * * * for expenses incurred for items or 
services * * * not reasonable and necessary * * *.'' (Section 
1862(a)(1)(A) of the Act (42 U.S.C. 1395y(a)(1)(A)). Courts have 
recognized that this language ``which bars benefits for services `not 
reasonable and necessary' for diagnosis or treatment, is not reasonably 
interpreted as an affirmative mandate to extend coverage to all 
necessary services.'' Goodman v. Sullivan, 891 F.2d 449, 450 (2d Cir. 
1989). Moreover, section 205(a) of the Social Security Act, 42 U.S.C. 
405(a), expressly incorporated in title XVIII by section 1872, 42 
U.S.C. 1395ii, permits the Secretary to adopt ``reasonable and proper 
rules and regulations to regulate and provide for the nature and extent 
of proofs and evidence'' and the method of furnishing that evidence. In 
light of this authority, we are clarifying our final rule at Sec.  
426.330 to more clearly place the burden of production and persuasion 
on the individual challenging an LCD or NCD.

Reasonableness Standard

    In the proposed rule, we adopted a reasonableness standard 
requiring the adjudicator to determine whether the findings of fact, 
interpretations of law, and applications of fact to law by CMS or the 
contractor were reasonable. Comments on this issue follow.
    Comment: One commenter supported the approach we had taken to 
define reasonableness. One commenter suggested that we need a better 
definition of reasonableness. Two commenters stated that the 
reasonableness standard is too ``soft'' or ``lax'' for a meaningful 
review, and instead, a substantial evidence or ``de novo'' standard 
should be used. One commenter suggested that a ``totality of the 
circumstances test'' should be used.
    Response: We proposed a standard of review that was consistent with 
the specific language of the statute. Therefore, we believe it would 
not be appropriate to use any other standard. We use the 
``reasonableness standard'' as the standard that an ALJ or the Board 
must apply when conducting an LCD or an NCD review. In determining 
whether LCDs or NCDs are valid, the adjudicator must uphold a 
challenged policy (or a provision or provisions of a challenged policy) 
if the findings of fact, interpretations of law, and applications of 
fact to law by the contractor or us are reasonable based on the LCD or 
NCD record and the record developed before the ALJ/Board. We are using 
the statutory language from sections 1869(f)(1)(A)(iii) and 
(f)(2)(A)(i) of the Act, which instructs adjudicators to defer only to 
the reasonable findings of fact, reasonable interpretations of law, and 
reasonable applications of fact to law by the Secretary.
    The logical corollary is that the ALJs and the Board must accord 
deference if the contractor's or CMS's findings of fact, 
interpretations of law, and application of fact to law are reasonable. 
The concept of deference is one that is generally applied by courts to 
administrative decisionmaking, in recognition of the expertise of a 
program agency. Thus, we view the statute as setting out a 
reasonableness standard that recognizes the expertise of the 
contractors and CMS in the Medicare program--specifically, in the area 
of coverage requiring the exercise of clinical or scientific judgment.
    So long as the outcome is one that could be reached by a rational 
person, based on the evidence in the record as a whole (including 
logical inferences drawn from that evidence), the determination must be 
upheld. This is not simply based on the quantity of the evidence 
submitted, but also includes an evaluation of the persuasiveness of the 
material. If the contractor or CMS has a logical reason as to why some 
evidence is given more weight than other evidence, the ALJs and the 
Board may not overturn the determination simply because they would have 
accorded more weight to the evidence in support of coverage. In some 
situations, different judgments by different contractors may be 
supportable, especially if explained by differences

[[Page 63704]]

such as the ready availability of qualified medical professionals in 
one contractor's area, but not in another. Moreover, an ALJ or the 
Board may not determine that an LCD is unreasonable solely on the basis 
that another Medicare contractor has issued an LCD that permits 
coverage of the service at issue, under the clinical circumstances 
presented by the complaint.
    For legal interpretations, the reasonableness standard would not be 
met if an interpretation is in direct conflict with the plain language 
of the statute or regulation being interpreted. Moreover, an 
interpretation in an LCD would not meet the reasonableness standard if 
it directly conflicts with an NCD or with a CMS Ruling. So long as an 
interpretation is one of the readings permitted by the plain language 
of the law and can be reconciled with relevant policy, however, it must 
be upheld, even if the ALJ or the Board might have reached a different 
result if interpreting the statute or regulation in the first instance.

Authority of ALJs and the Board

    Comment: Some comments supported the limited authority granted to 
the ALJs/Board in issuing decisions, and many comments requested that 
the ALJ/Board be granted greater authority in issuing decisions. A 
number of comments suggested that the proposed rule restricted ALJ/
Board authority so that the main outcome of a decision of 
unreasonableness would be contractor/CMS reconsideration, and that a 
decision of unreasonableness should result in the policy being null and 
void. Furthermore, numerous comments suggested that authority is not 
granted to the ALJ or the Board in the way that the Congress intended, 
and that the contractor/CMS retains too much authority over the 
process.
    Response: We have revised the final regulation to allow for greater 
authority for the adjudicators in several respects. In appropriate 
cases, the ALJ/Board may find a provision(s) of the LCD/NCD invalid and 
may limit that holding to a beneficiary's clinical indication (or 
similar condition). Furthermore, the contractor or CMS would effectuate 
the ALJ/Board decision within 30 days (if not sooner), by either 
retiring or withdrawing the policy or revising the policy that would be 
applied prospectively. This means that neither the contractor nor CMS 
will apply a policy that has been held invalid to a claim of the 
aggrieved party or to any other similar Medicare claim with date(s) of 
service beginning on or after 30 days of the adjudicatory decision. 
Even though we are giving broader effect to the ALJ/Board decision by 
extending the decision to others on a prospective basis, we continue to 
believe that the Congress intended that CMS or its contractors would 
have the authority to develop clinical policies. Thus, we will maintain 
in the final rule the prohibition against adjudicators developing new 
language for LCDs and NCDs.
    After a policy has been held invalid, it will not be applied to the 
beneficiary who raised the challenge or to others who receive services 
after the effective date of the invalidation. CMS or the contractor may 
issue a new or revised LCD/NCD that does not include the invalid 
provision(s). The new or revised LCD/NCD would be applied 
prospectively. The new/revised LCD/NCD would also be subject to 
challenge under this review process.
    Please note that whenever we discuss claim relief or dates of 
service in the context of an ALJ or DAB decision holding invalid an LCD 
or NCD, the references should be read to include pre-service requests 
denied by an M+C organization and the dates of pre-service requests. 
The application of this regulation in the M+C context is discussed 
further below.

Effective Dates

    Comment: Several commenters stated that timeframes should be set in 
this process to reflect the timeframes set in the NCD process notice.
    Response: We agree with the concept of timeframes, but do not 
reference the ``NCD process notice'' since that notice does not speak 
to this issue, and we have added language to Sec.  426.460 and Sec.  
426.560 requiring that contractors/CMS either--
    1. Retire/withdraw the LCD/NCD in its entirety within 30 days of 
the ALJ/Board decision; or
    2. Issue a revised LCD/NCD removing the invalid provisions, 
effective for claims with dates of service after the 30th day of the 
ALJ/Board decision.
    If the Board issues a decision finding an NCD provision invalid and 
the NCD is revised to reflect the Board's decision, all contractors 
must review and appropriately revise any related LCDs so as not to be 
in conflict with the revised NCD. If we choose to withdraw the entire 
NCD, the contractors must review and appropriately revise any LCDs so 
as not to rely on the withdrawn NCD as the basis for the LCD.

Precedential Value of ALJ/Board Decisions

    Comment: One commenter stated that previous ALJ/Board decisions 
should be controlling precedent. Another commenter recommended that 
ALJs/Board be bound by previous ALJ decisions on local policies in 
other jurisdictions.
    Response: We have revised the final rule at Sec.  426.431(a) to 
require ALJs to treat as precedential Board LCD and NCD decisions, and 
to require the Board to follow its own applicable precedents. We 
believe this will improve the efficiency of the review process. Because 
of differences in the local practice of medicine, we do not believe it 
would be prudent for ALJs to treat as precedential other ALJ decisions 
on an LCD challenge.

Appeals of Decisions Involving Joint Complaints and Consolidated 
Reviews

    Comment: One commenter requested that for joint appeals, aggrieved 
parties should be prohibited from appealing decisions to higher levels 
unless all parties to the initial appeal agree to appeal.
    Response: We will not require in this final rule that all parties 
must agree to appeal an ALJ decision as a prerequisite for the appeal 
to continue. Even if some individuals decide not to pursue an appeal, 
other parties in the case may exercise their appeal rights. Section 
426.470 of the regulation allows the Board to consolidate similar 
appeals.

Appeal of ALJ Decision/Board Review of ALJ Decisions

    Comment: One commenter suggested that we should not be allowed to 
appeal ALJ decisions to the Board due to conflicts of interest. Another 
commenter objected to having the Board overturn ALJ decisions that were 
favorable to the aggrieved party due to potential burdens on the 
beneficiary. Another commenter felt that the regulation should not 
require the Board to affirm or reverse the ALJ decision in its entirety 
and suggested that the Board should have the discretion to reverse a 
decision in part. We received one comment suggesting the Board should 
not support a policy based on a rationale that is not stated in the 
supporting documents that were submitted. We also received three 
comments requesting that the Board not be limited to fundamental rules 
of procedures, and that it have broader discretion in reviewing ALJ 
decisions.
    Response: Nothing in the statutory language of section 522 suggests 
that the Congress intended to bar the government from appealing an 
adverse decision of an ALJ. We believe that such an appeal is warranted 
as a mechanism to ensure that ALJs are applying the statute and 
regulations correctly, even if we rarely employ this strategy. Because 
the statute provides that ALJ decisions

[[Page 63705]]

may be reviewed by the Board, we have retained the language allowing 
either the contractor or CMS to seek Board review of ALJ decisions. 
Furthermore, our final rule provides flexibility in the Board's review 
of ALJ decisions.
    We have modified the final rule at Sec.  426.476(b) to provide that 
the Board will review an ALJ decision on appeal to determine whether it 
contains any material error, including any failure to properly apply 
the reasonableness standard. The Board will not reverse a decision for 
harmless error, but may remand if a prejudicial procedural error was 
made. Further, if the ALJ erred in determining that the LCD record was 
complete and adequate to support the validity of the LCD, the Board 
will reverse and remand the case to the ALJ to complete discovery and 
the taking of evidence. We believe that this standard of review 
provides appropriate discretion for Board review of ALJ decisions.

Impact on Medicare+Choice (M+C)

    Comment: One commenter suggested that we should clarify an M+C 
organization's obligations when a complaint is under review by both the 
section 522 process and the M+C organization's existing appeals 
process.
    Response: If an M+C enrollee files both an LCD/NCD review request 
and a request for reconsideration of an adverse organization 
determination for the same item or service, the M+C organization should 
adjudicate the reconsideration using the coverage policies in place on 
the date the service or item was requested (in the case of a pre-
service determination) or provided (in the case of a payment 
determination). If the LCD/NCD under review is subsequently found to be 
unreasonable, then the aggrieved party who sought review of the LCD/NCD 
is entitled to have the previously adjudicated organization 
determinations or reconsidered determinations reopened and adjudicated 
without consideration of the invalid LCD/NCD provision(s). M+C 
organizations would be responsible for reopening and adjudicating 
organization determinations, and the independent review entity (IRE) 
would be responsible for reopening and adjudicating reconsidered 
determinations.
    Comment: One commenter requested that we clarify the obligations of 
M+C organizations when an enrollee has an appeal pending at the time 
the revised LCD/NCD becomes effective.
    Response: The type of organization determination being reconsidered 
(payment or pre-service) will determine an M+C organization's 
obligations when an enrollee has a reconsideration pending at the time 
a revised LCD/NCD becomes effective. Consistent with original Medicare, 
LCD/NCD changes may only be applied prospectively to requests for 
payment. Therefore, when an enrollee requests reconsideration of a 
payment determination and the reconsideration is pending at the time a 
revised LCD/NCD becomes effective, the M+C organization should apply 
the LCD/NCD in place at the time the item or service was provided. In 
responding to a request for reconsideration of a pre-service 
determination that would be affected by a revised LCD/NCD, an M+C 
organization should dismiss the appeal and reopen the adverse 
organization determination on the basis of new and material evidence. 
The M+C organization should then apply the revised LCD/NCD in effect 
and issue a revised organization determination.
    We recognize the importance of ensuring timely transmission of ALJ/
Board decisions and intend to work closely with the Medicare managed 
care industry to make certain that an effective method of communicating 
LCD/NCD changes is in place.
    Comment: Another M+C-related comment stated that claims that were 
adjudicated using the invalidated LCD/NCD should be eligible for a new 
decision (so long as the appeals timeframes have not passed).
    Response: As noted in the comment above, LCD/NCD changes can only 
be applied prospectively to requests for payment, as was the case under 
original Medicare. Therefore, regardless of subsequent policy changes, 
for purposes of reconsidering a payment determination, the relevant 
LCD/NCD is the policy in effect at the time the item or service was 
provided.
    Comment: One commenter requested that we clarify whether a decision 
made under individual claim review is considered an ``organization 
determination,'' as defined under parts 417 and 422, giving rise to 
appeal rights.
    Response: When an M+C organization reopens and adjudicates an 
organization determination under Sec.  426.460(b)(1), the M+C 
organization must issue a revised organization determination, which 
gives rise to appeal rights under parts 417 and 422. An enrollee could 
benefit from a revised LCD/NCD by filing a new request for an 
organization determination.
    Comment: One commenter requested clarification as to whether our 
statutory obligation, under section 1852(a)(5) of the Act, to make fee-
for-service payments for a significant cost, midyear change in benefits 
would apply if a significant cost threshold for an NCD is met as a 
result of a decision by the Board to revise an NCD.
    Response: Section 1852(a)(5) of the Act provides that if an NCD or 
legislative change in benefits effective in the middle of an M+C 
contract year generates a significant change in the costs to a M+C 
organization of providing benefits that are the subject of the NCD, and 
if this significant change in costs was not incorporated into the M+C 
payment rates at the time the NCD becomes effective, the NCD does not 
apply to the M+C contracts until the first contract year after new M+C 
rates are published. Moreover, section 1853(c)(7) of the Act provides 
that, if there is a change in benefits resulting in a significant 
increase in costs to the M+C organization, we will adjust appropriately 
the M+C payment rates to reflect this change. The M+C organization must 
provide coverage of the NCD or legislative change in benefits by 
furnishing or arranging for the NCD service or legislative change in 
benefits. However, the M+C organization is not required to pay or 
assume risk for the costs of that service or benefit until the contract 
year for which payments are adjusted to take into account the cost of 
the NCD service or legislative change in benefits. Section 422.109 has 
been revised to define ``significant cost'' thresholds, and notes that, 
if the costs for new coverage or a change in benefits is significant, 
CMS will pay on a fee-for-service basis on behalf of the M+C 
organization for the new benefit until the M+C rates are appropriately 
adjusted. (These provisions do not apply if the change in benefits does 
not meet either significant cost threshold described at Sec.  422.109.)

Automatic Stay Upon Appeal

    Comment: Three commenters disagreed with the automatic stay of an 
ALJ decision when the contractor/CMS appeals a decision to the Board.
    Response: We disagree. We believe it would be disruptive to 
beneficiaries overall to have ALJ decisions implement policies only to 
have these policies reversed by the Board. This would create both an 
inefficient and confusing process. Furthermore, a contrary ruling would 
require the expenditure of significant resources to implement an ALJ 
decision only to have to change the decision if the Board reverses.

Dual Track Process

    Comment: We received one comment for and one comment against 
allowing aggrieved parties the option to pursue both a reconsideration 
and a review under these rules.

[[Page 63706]]

    Response: We believe that both options should be available to 
aggrieved parties, in order to allow for the parties to seek a decision 
in the most appropriate way possible, and to allow the most flexibility 
to these parties.

Expedited Judicial Review

    Comment: Several commenters suggested that the final regulations 
should address section 1869(f)(3) of the Act, which relates to 
circumstances where a challenger may seek expedited judicial review 
when there are no material issues of fact in dispute.
    Response: We are not adopting these comments. This section of the 
statute does not require regulatory action by CMS because it is related 
to the jurisdiction of the judicial branch of the government. The 
statute is self-implementing and does not require additional rulemaking 
by the Secretary.

IV. Provisions of the Final Rule

A. Overview

    We are establishing that a Medicare beneficiary who qualifies as an 
aggrieved party may challenge an LCD or an NCD (or specific provisions 
therein) by filing a complaint concerning an LCD with the office 
designated by CMS on the Medicare Web site, http://www.medicare.gov/coverage/static/appeals.asp (information on the designated office will 
be available by calling 1-800-Medicare) or by filing a complaint 
concerning an NCD with the Board of HHS. After a complaint is filed, 
the adjudicator determines whether the complaint is acceptable.
    In this final rule, we are adding in Sec.  400.202 a definition of 
``Local coverage determination (LCD)'' and revising the definition of 
``National coverage determination (NCD).'' The definitions are specific 
to Medicare and reflect the definitions for these terms found in 
section 522 of BIPA. With one exception described below, this final 
rule makes clear that a determination of the code assigned to a 
service, if any, or a determination with respect to the amount of 
payment to be made for the service is not included in the definition of 
an LCD or an NCD. We have clarified that diagnosis codes used in an 
LMRP to describe when a service is considered medically necessary are 
also part of the LCD. We use the term ``Services'' as defined in Sec.  
400.202 to include both ``items and services.''
    In Sec.  405.732, ``Review of a national coverage decision (NCD),'' 
we revise paragraph (a) regarding appeals of Part A cases, to state 
that an NCD is a determination by the Secretary with respect to whether 
or not a particular item or service is covered nationally under title 
XVIII. An NCD does not include a determination of what code, if any, is 
assigned to a particular item or service covered under title XVIII or a 
determination with respect to the amount of payment made for a 
particular item or service. NCDs are made under section 1862(a)(1) of 
the Act or other applicable provisions of the Act. An NCD is binding on 
all Medicare carriers, fiscal intermediaries, QIOs, HMOs, CMPs, HCPPs, 
the Medicare Appeals Council, and ALJs.
    This final rule revises Sec.  405.732(b) to specify that an ALJ may 
not disregard, set aside, or otherwise review an NCD. An ALJ may review 
the facts of a particular case to determine whether an NCD applies to a 
specific claim for benefits and, if so, whether the NCD has been 
applied correctly to the claim.
    We are revising Sec.  405.732(c) to specify that for initial 
determinations and NCD challenges under section 1862(a)(1) of the Act, 
arising before October 1, 2002, a court's review of an NCD is limited 
to whether the record is incomplete or otherwise lacks adequate 
information to support the validity of the decision, unless the case 
has been remanded to the Secretary to supplement the record regarding 
the NCD. In such cases, the court may not invalidate an NCD except upon 
review of the supplemental record. For Part B appeals, we are making 
similar changes.
    In Sec.  405.860, ``Review of a national coverage decision (NCD),'' 
we revise paragraph (a) regarding appeals of Part B cases to specify 
that an NCD is a determination by the Secretary with respect to whether 
or not a particular item or service is covered nationally under title 
XVIII. An NCD does not include a determination of what code, if any, is 
assigned to a particular item or service covered under title XVIII or a 
determination with respect to the amount of payment made for a 
particular item or service. NCDs are made under section 1862(a)(1) of 
the Act or other applicable provisions of the Act. An NCD is binding on 
all Medicare carriers, fiscal intermediaries, QIOs, HMOs, CMPs, HCPPs, 
Medicare Appeals Council, and ALJs.
    We are revising Sec.  405.860(b) to specify that an ALJ may not 
disregard, set aside, or otherwise review an NCD. An ALJ may review the 
facts of a particular case to determine whether an NCD applies to a 
specific claim for benefits and, if so, whether the NCD has been 
applied correctly to the claim.
    In Sec.  405.860(c), we specify that for initial determinations and 
NCD challenges under section 1862(a)(1) of the Act, arising before 
October 1, 2002, a court's review of an NCD is limited to whether the 
record is incomplete or otherwise lacks adequate information to support 
the validity of the decision, unless the case has been remanded to the 
Secretary to supplement the record regarding the NCD. The court may not 
determine that an item or service is covered except upon review of the 
supplemental record.
    We are also adding a new part 426, titled ``Reviews of Local and 
National Coverage Determinations,'' to title 42 of the CFR to include 
the following subparts:
    [sbull] Subpart A contains general provisions applicable to the 
entire part.
    [sbull] Subpart B is reserved.
    [sbull] Subpart C contains the general provisions applicable to the 
review of LCDs and NCDs.
    [sbull] Subpart D contains the provisions specific to the review of 
LCDs
    [sbull] Subpart E contains the provisions specific to the review of 
NCDs.

B. Subpart A (General Provisions)

    Subpart A of part 426 specifies the general provisions applicable 
to the entire part. Section 426.100, ``Basis and scope,'' sets forth 
the basis (under sections 1869(f)(1) and (f)(2) of the Act), and the 
scope specifies the requirements and procedures for the review of LCDs 
and NCDs. In Sec.  426.110, we define the terms used in part 426 whose 
definitions may not otherwise be implicit.
    Under section 522 of BIPA, only an ``aggrieved party'' may file a 
complaint to initiate the review of an LCD or an NCD. In this final 
rule, we define ``aggrieved party'' as a Medicare beneficiary who is 
entitled to benefits under Part A, enrolled under Part B, or both 
(including an individual enrolled in fee-for-service Medicare, in a 
Medicare+Choice plan, or in another Medicare managed care plan), and is 
in need of coverage for a service that is the subject of an applicable 
LCD (in the relevant jurisdiction) or an NCD as documented by the 
beneficiary's treating physician. We revised the final rule to include 
also as an aggrieved party a beneficiary who has already received the 
service and is in need of coverage, or the estate of a deceased 
beneficiary in need of coverage.
    Based on comments on our proposed rule, in this final rule we allow 
an aggrieved party's estate to pursue an LCD/NCD challenge if the 
aggrieved party died after filing a proper complaint and the aggrieved 
party received the service for which coverage is sought. We also allow 
the aggrieved

[[Page 63707]]

party's estate to file a complaint within 120 days of receipt of the 
denial notice.
    In Sec.  426.110 we define the following:
    [sbull] ``Board'' to mean the Departmental Appeals Board.
    [sbull] Clinical and scientific experts that are consulted by the 
ALJ or the Board as independent and impartial individuals, with 
significant experience and/or published work pertaining to the subject 
of the review.
    [sbull] ``Contractor'' as a carrier (including a DMERC) or a fiscal 
intermediary (FI) (including an RHHI) that has jurisdiction for the LCD 
at issue.
    [sbull] ``Deemed NCD'' as a determination that the Secretary makes 
in response to a request for an NCD by an aggrieved party under section 
1869(f)(4)(B) and (C) of the Act, that no national coverage or 
noncoverage determination is appropriate, or the Secretary's failure to 
meet the deadline under section 1869(f)(4)(A)(iv) of the Act. Section 
1869(f)(4)(C) of the Act deems certain decisions of the Secretary to be 
NCDs for purposes of administrative review. Please see our proposed 
rule for further discussion of deemed NCDs (67 FR 5434).
    [sbull] ``New evidence'' is clinical or scientific evidence that 
was not previously considered by the contractor or by us before the LCD 
or NCD was issued.
    [sbull] ``Party'' as an aggrieved party, which is an individual or 
estate who has the right to participate in the LCD or NCD review 
process, and, as appropriate, a contractor or CMS. In the case of an 
LCD review, we may choose whether to be a party in the review along 
with or instead of the contractor. These reviews involve challenges to 
important CMS policies that may impact many beneficiaries. We note that 
we are always a party to an NCD review and contractors would not 
participate in an NCD review.
    [sbull] ``Proprietary data'' and ``privileged information'' are 
information from a source external to CMS or a contractor, or protected 
health information that meets the following criteria: (1) It is 
ordinarily protected from disclosure pursuant to 45 CFR Part 164, under 
the Trade Secrets Act (18 U.S.C. 1905), or under Exemption 4 or 5 of 
the Freedom of Information Act (5 U.S.C. 552) as specifically 
interpreted in our Departmental regulations at 45 CFR 5.65, and (2) the 
party who possesses the right to protection of the information from 
public release or disclosure has not provided its consent to the public 
release or disclosure of that information. Members of the public that 
send us proprietary data must mark these documents as such, and include 
the legal basis for any such assertion. Any information received from 
the public that is not designated as ``proprietary data'' will not be 
considered ``proprietary.''
    [sbull] ``Reasonableness standard'' is the standard that an ALJ or 
the Board must apply when conducting an LCD or an NCD review. In 
determining whether LCDs or NCDs are valid, the adjudicator must uphold 
a challenged policy (or a provision or provisions of a challenged 
policy) if the findings of fact, interpretations of law, and 
applications of fact to law by the contractor or CMS are reasonable 
based on the LCD or NCD record and the relevant record developed before 
the ALJ/Board.
    [sbull] ``Supplemental LCD/NCD record'' is a record that the 
contractor/CMS provides to the ALJ/Board and any aggrieved party and 
consists of all materials received and considered during a 
reconsideration. Materials that are already in the record before the 
ALJ/Board (for example, new evidence presented in the taking of 
evidence or hearing) need not be provided but may be incorporated by 
reference in the supplement to the LCD/NCD record. The contractor/CMS 
may provide statements, evidence, or other submissions to the ALJ/Board 
during the proceedings, as provided elsewhere in these regulations, but 
such submissions are not considered as supplementing the LCD/NCD 
record.
    [sbull] ``Treating physician'' is the physician who is the 
beneficiary's primary clinician with responsibility for overseeing the 
beneficiary's care and either approving or providing the service at 
issue in the challenge.
    In Sec.  426.120, we explain how deadlines are calculated. In Sec.  
426.130, we explain that any documents submitted to the ALJ/Board after 
the initial challenge, excluding privileged or proprietary data, must 
also be served on all other parties simultaneously. These sections have 
been added to provide additional guidance in implementing the 
requirements of this final rule.

C. Subpart B (Reserved)

    We are reserving subpart B.

D. Subpart C (General Provisions for the Review of LCDs and NCDs)

    The general provisions common to both the review of LCDs and NCDs 
are established in subpart C. In Sec.  426.300(a), we state that the 
review of a challenged provision (or provisions) of an LCD is conducted 
by an ALJ only upon the receipt of an acceptable complaint as described 
in Sec.  426.400. We also state in Sec.  426.300(b) that the review of 
a challenged provision (or provisions) of an NCD is conducted by the 
Board only upon the receipt of an acceptable complaint as described in 
Sec.  426.500. An acceptable complaint must be filed with the 
applicable adjudicator by an aggrieved party. Additionally, Sec.  
426.300(c) would allow for the review of deemed NCDs, a process that 
would parallel the review of NCDs.
    In Sec.  426.310(a), we explain that LCD and NCD reviews are 
largely independent of the claims appeal processes set forth in part 
405, subparts F and G; part 417, subpart Q; and part 422, subpart M. In 
Sec.  426.310(b), we require the aggrieved party to notify the ALJ/
Board of any pending claim or appeal related to the LCD/NCD appeal.
    In Sec.  426.320(a), we explain that only an aggrieved party may 
initiate a review to challenge an LCD or NCD (including a deemed NCD), 
or an existing specific provision or provisions of an LCD or an NCD by 
filing an acceptable complaint. In Sec.  426.320(b), we explain that 
neither an ALJ nor the Board will recognize as valid any attempt to 
assign rights under section 1869(f) of the Act.
    In Sec.  426.325, we describe the policies that are, and are not, 
subject to this review. Under this requirement, an aggrieved party 
would be allowed only to challenge an LCD or NCD. Conversely, an 
aggrieved party may not use this process to challenge anything that 
does not meet the definition of an LCD or an NCD (see Sec.  426.325). 
For example, draft LCDs or NCDs, and coverage decision memos would be 
excluded from review as they are predecisional. LCD and NCD provisions 
that are no longer in effect are excluded from review. Other 
interpretive policies that are not LCDs or NCDs would also not be 
subject to review under this process. Provisions of contractor policies 
that are based on things other than the reasonable and necessary 
provision of section 1862(a)(1)(A) of the Act, such as benefit category 
determinations, statutory exclusion determinations, and HCPCS/Revenue 
Code coding determinations, would not be subject to review under this 
part. In addition, any M+C or other managed care plan policy, rule, or 
procedure is not subject to review under this process. Individual claim 
determinations by adjudicators are also not subject to review under 
this process.
    In Sec.  426.330, we state that the aggrieved party filing the 
complaint bears the burden of proof and the burden of persuasion for 
the issue or issues raised in the complaint. The burden of persuasion 
will be judged by a preponderance of the evidence.

[[Page 63708]]

    Section 426.340 provides procedures to be followed after discovery 
and the taking of evidence are complete. If an aggrieved party has 
submitted new evidence pertaining to an LCD or NCD which the ALJ or the 
Board finds admissible, the ALJ/Board must review the new evidence and 
decide if the new evidence has the potential to significantly affect 
the evaluation of the LCD/NCD provision(s) in question under the 
reasonableness standard. If the ALJ or the Board determines that the 
new evidence does not have the potential to significantly affect the 
ALJ's or the Board's evaluation of LCD/NCD provisions, the review shall 
go forward to a decision on the merits. If the ALJ or the Board decides 
that the new evidence has the potential to significantly affect the 
evaluation of the policy, the ALJ or the Board must stay the 
proceedings and send the new evidence to the contractor or CMS. The 
contractor or CMS has 10 days upon receiving the evidence from the ALJ 
or the Board to provide a statement indicating whether a revision/
reconsideration will be initiated. If the contractor or CMS informs the 
ALJ or the Board that a revision/ reconsideration has been or will be 
initiated, then the stay shall continue and the ALJ or the Board shall 
set appropriate timeframes (not more than 90 days) by which the 
revision/reconsideration will be completed. If the contractor or CMS 
chooses not to initiate a revision/reconsideration and does not retire/
withdraw the LCD/NCD, the ALJ or the Board proceedings will continue on 
the original LCD/NCD.

E. Subpart D (The Review of an LCD) and Subpart E (The Review of an 
NCD)

    In subparts D and E, we set forth the procedures for the review of 
LCDs and NCDs, respectively. The process for LCD and NCD reviews is 
largely the same with the exception of the following:
    [sbull] LCDs are based on section 1862(a)(1)(A) of the Act; NCDs 
may also be based on other statutory provisions.
    [sbull] LCD reviews are conducted by an ALJ; NCD reviews are 
conducted by the Board.
    [sbull] ALJs and contractors participate in an LCD review; there is 
no role for ALJs or contractors in an NCD review.
    [sbull] We are not always a party to an LCD review, but are always 
a party to an NCD review.
    [sbull] Amicus participation is not allowed when reviewing an LCD, 
but may be allowed when reviewing an NCD.
    [sbull] Board decisions regarding NCDs will be made available on 
the Medicare Internet site, without beneficiary-identifying 
information.
    For the purpose of this preamble, we consolidate the discussion of 
the requirements and policy decisions when possible. Sections 426.400 
and 426.500 contain the requirements for filing an acceptable complaint 
regarding a provision or provisions of an LCD and an NCD, respectively. 
In both cases, a complaint must be in writing and must be from an 
aggrieved party. In Sec.  426.400(a), we require that complaints 
regarding LCDs be submitted to the office designated by CMS on the 
Medicare Web site, http://www.medicare.gov/coverage/static/appeals.asp 
(information on the designated office will be available by calling 1-
800-Medicare) or by filing a complaint concerning an NCD with the Board 
of HHS (see Sec.  426.500(a)). Should the appropriate office change in 
the future, this regulation shall be read to conform to that change, 
and the information will be made publicly available. We have simplified 
and clarified the complaint-filing procedures.
    In Sec.  426.400(b) and Sec.  426.500(b), we explain the 
circumstances under which a complaint will be considered timely 
received. A complaint will not be considered timely unless it is 
received by the office designated by CMS/Board of HHS within--(1) 6 
months of the written statement from each aggrieved party's treating 
physician for aggrieved parties who choose to file an LCD/NCD challenge 
before receiving the service; or (2) 120 days of the initial denial 
notice for aggrieved parties who choose to file an LCD/NCD challenge 
after receiving the service.
    In Sec.  426.400(c)(1) and Sec.  426.500(c)(1), we require a valid 
complaint to contain beneficiary-identifying information and a written 
statement from the treating physician indicating that the beneficiary 
needs the service that is the subject of the LCD/NCD. We also require 
the information in Sec.  426.400(c)(2) and (c)(3) and Sec.  
426.500(c)(2) and (c)(3), which is necessary to identify the LCD or NCD 
(or the specific provision or provisions of the LCD or NCD) that is 
(are) adversely affecting the aggrieved party. In addition, we require 
a statement from the aggrieved party that explains the rationale for 
the complaint.
    In Sec.  426.400(c)(4) and Sec.  426.500(c)(4), we also allow the 
aggrieved party to submit copies of material clinical or scientific 
evidence that supports the complaint. We require that any proprietary 
data submitted be marked as ``proprietary data'' and include the legal 
basis for so identifying it. In addition, in Sec.  426.400(c)(4) and 
Sec.  426.500(c)(4), we require that, in order to be considered and 
given weight in LCD or NCD reviews, any such proprietary data submitted 
by a manufacturer of a drug or device must include an affidavit that 
the data consists of true and correct copies of all data submitted by 
the manufacturer to the Food and Drug Administration in relation to 
that drug or device. In Sec.  426.400(d), we state that two or more 
aggrieved parties may initiate the review of an LCD by filing a single 
written complaint with the ALJ if the conditions in Sec.  
426.400(d)(1)(i) and (ii) are met. Similarly, in Sec.  426.500(d), we 
state that two or more aggrieved parties may initiate the review of an 
NCD by filing a single complaint with the Board if the conditions in 
Sec.  426.500(d)(1)(i) and (ii) are met.
    Based on public comments, we have added Sec.  426.403 and Sec.  
426.503 to allow the aggrieved party to submit new evidence without 
withdrawing the complaint.
    Section 426.405 specifies the authority of the ALJ during an LCD 
review, including authority during a hearing, if applicable. Similarly, 
in Sec.  426.505, we set forth the specific authority of the Board 
during an NCD review, if applicable.
    Sections 426.406 and 426.506 prohibit ex parte contacts so that no 
party or person (except employees or consultants of the ALJ/Board's 
office) may communicate in any way with the ALJ/Board on any 
substantive matter at issue in a case, unless on notice and opportunity 
for all parties to participate. This provision does not prohibit a 
person or party from inquiring about the status of a case or asking 
routine questions concerning administrative functions or procedures.
    In Sec.  426.410, we establish the ALJ's role in docketing and 
evaluating the acceptability of LCD complaints. These procedures are 
very similar to the Board's role in docketing and evaluating the 
acceptability of NCD complaints in Sec.  426.510. Under the procedures, 
the adjudicatory body receives and dockets the complaint, evaluates the 
acceptability of the complaint, and resolves any consolidation issues. 
The appeal will be docketed under the name of the LCD or NCD rather 
than the aggrieved party or parties to protect the privacy of the 
party/parties.
    In Sec.  426.410 and Sec.  426.510, we establish the criteria that 
a complaint must meet to be considered as an acceptable complaint by an 
ALJ or the Board. An aggrieved party must file the complaint; the 
complaint must meet all of the requirements of a valid complaint 
regarding an LCD in Sec.  426.400, or regarding an NCD in Sec.  
426.500, and may only challenge a policy that meets the definition of 
an LCD or an NCD.

[[Page 63709]]

    If a complaint is deemed to be unacceptable after being evaluated 
under Sec.  426.410(b) or Sec.  426.510(b), the applicable adjudicator 
will provide the aggrieved party (or parties) one opportunity to amend 
the unacceptable complaint within a timeframe set forth by the 
adjudicator (see Sec.  426.410(c) and Sec.  426.510(c)). If the 
aggrieved party (or parties) does not submit an acceptable amended 
complaint within this timeframe, the adjudicator will issue a decision 
dismissing the unacceptable complaint. The aggrieved party will be 
precluded from filing another complaint on the same issue for 6 months.
    If, after having been evaluated under Sec.  426.410(b) or Sec.  
426.510(b), a complaint is accepted, the adjudicator will send a letter 
to the aggrieved party (or parties) acknowledging the complaint and 
informing them of the docket number (see Sec.  426.410(d)). The 
adjudicator will also forward a copy of the complaint and the 
acknowledgement letter to the applicable contractor and to us, and 
request that we or the contractor send a copy of the LCD record to the 
ALJ and all parties to the LCD review. The corresponding section in 
Sec.  426.510(d) will require the adjudicator to follow the same 
process for NCDs, with the exception that the Board will make available 
to the public information concerning the complaint on its Web site (see 
Sec.  426.510(f)) and specify a time period for affected parties to 
request amicus participation.
    In Sec.  426.410(e) and Sec.  426.510(e), we allow for adjudicators 
to consolidate complaints regarding LCDs and NCDs, respectively. Under 
this provision, several complaints may be consolidated into one review 
if the complaints are appropriately similar. The review processes are 
not changed by a decision to consolidate complaints into one review.
    In Sec.  426.510(f) and Sec.  426.513, we describe the opportunity 
and extent to which interested parties may participate in the NCD 
review process as amicus curiae.
    In Sec.  426.415, we explain that we may provide information to the 
ALJ, and all parties to the LCD review, identifying the person who 
would represent the contractor or CMS in the LCD review process. We can 
determine whether the contractor or CMS will participate in the review. 
Under the corresponding section in Sec.  426.515, we provide a copy of 
the NCD record (as described in Sec.  426.518) to the Board and all 
parties to the NCD review within 30 days of receiving the Board's 
order.
    In Sec.  426.416 and Sec.  426.516, we describe the role of 
Medicare managed care organizations and Medicaid State agencies in the 
LCD and NCD review process. In Sec.  426.417 and Sec.  426.517, we 
describe the role of contractors and CMS in reviewing any new evidence.
    Sections 426.418 and 426.518 describe, respectively, the elements 
of a contractor's LCD record and our NCD record, furnished to the 
aggrieved party. Sections 426.419 and 426.519 describe, respectively, 
the elements of a contractor's LCD record and our NCD record furnished 
to the ALJ or Board. These sections have been added in response to 
comments, and to facilitate the review process when privileged or 
proprietary data is submitted. Generally, an LCD or NCD record is 
composed of documents and materials that the contractor or we 
considered during the development of the LCD or NCD. Any MCAC 
transcripts would also be considered part of an NCD record. In the 
cases where comments are submitted, a ``comment and response'' summary 
document is sufficient for inclusion in the LCD record. In Sec.  
426.418(b) and Sec.  426.518(b), we do not include privileged 
information or proprietary data, or any new evidence, as part of the 
record furnished to the aggrieved party. In Sec.  426.419 and Sec.  
426.519, we state that official records presented to the Board may 
contain proprietary data or privileged information, if the information 
was considered in reaching the LCD or NCD under review. In these 
instances, the proprietary data and privileged information is filed 
under seal and is protected from inappropriate disclosure according to 
all applicable statutes and regulations, or common law privileges.
    In Sec.  426.420(a) and (b), we allow a contractor to retire the 
LCD under review or revise the LCD to remove or amend the provision in 
question before the date the ALJ issues a decision regarding the LCD. 
Retiring an LCD (or provision of the LCD) means that the contractor may 
no longer use that LCD in the adjudication of claims on a prospective 
basis. We also provide the aggrieved party individual claim review 
under Sec.  426.460(b). Thus, in most cases, there would no longer be a 
need for an LCD review because relief would be provided. In Sec.  
426.520(a), we may withdraw an NCD under review or revise an NCD to 
remove or amend the provision in question before the date the Board 
issues a decision regarding that NCD. Withdrawing an NCD (or provision 
of the NCD) means this policy is no longer a controlling authority for 
our contractors and certain adjudicators. Thus, there no longer would 
be a need for an NCD review. In Sec.  426.420(b), Sec.  426.420(c), 
Sec.  426.420(d), Sec.  426.420(e) and Sec.  426.520(b), Sec.  
426.520(c), Sec.  426.520(d), Sec.  426.520(e), we describe the process 
for LCDs and NCDs that are revised or reconsidered while under review. 
In cases where an LCD/NCD provision(s) has been revised, but not 
completely removed, the review continues because relief may not have 
been provided. This responds to comments received, and will ensure that 
aggrieved parties receive coverage relief when they prevail.
    Under Sec.  426.423 and Sec.  426.523, we are permitting aggrieved 
parties who filed the complaint to withdraw complaints regarding LCDs 
and NCDs, respectively. We allow an aggrieved party to withdraw a 
complaint before the applicable adjudicator issues a decision regarding 
the complaint by simply sending a written notice to the ALJ, to the 
applicable contractor, and to us (if applicable) for LCDs, or to the 
Board and to us for NCDs (see Sec.  426.423(b) and Sec.  426.523(b)). 
Under this process, the adjudicator issues a decision (discussed later 
in this section of the preamble) dismissing the complaint, and the 
aggrieved party may not file another complaint to the same coverage 
determination for 6 months.
    In the case of a joint complaint, one or more aggrieved parties may 
withdraw from the review without affecting the status of any remaining 
aggrieved party or parties named in the complaint. The adjudicator 
would issue a decision dismissing the complaint for the aggrieved party 
or parties who wish to withdraw, and the review would continue until 
the adjudicator issued a decision on the merits, or until each 
aggrieved party withdrew its complaint. Similarly, if the adjudicator 
had decided to hold a consolidated review, an aggrieved party or 
parties who are part of the consolidated review may withdraw without 
affecting the status of the other aggrieved party or parties who are 
part of the consolidated review (See Sec.  426.423(c) and Sec.  
426.523(c)).
    Sections 426.425(a) and 426.525(a) contain the processes for LCD 
and NCD reviews, respectively, that take place once the record has been 
filed. Section 522 of the BIPA added sections 1869(f)(1)(A)(iii) and 
1869(f)(2)(A)(i) of the Act, which specify that the adjudicators of NCD 
and LCD reviews, respectively, `` * * * shall review the record and 
shall permit discovery and the taking of evidence to evaluate the 
reasonableness of the determination, if the [adjudicator] determines 
that the record is incomplete or lacks adequate information to support 
the validity of the determination.'' Therefore, we allow the aggrieved 
party who submitted the complaint to file a statement alleging that the 
LCD record (or the NCD record

[[Page 63710]]

in the case of an NCD review) is not complete, or not adequate to 
support the validity of the coverage determination, under the 
reasonableness standard. This statement will be filed after the 
aggrieved party has had adequate time to review the record (30 days 
after receipt of the record, with a possible extension for good cause 
shown). The statement will be submitted to the adjudicator, to the 
contractor (if an LCD review), and to us (if applicable). In Sec.  
426.425(b) and Sec.  426.525(b), we explain that the contractor/CMS has 
30 days to respond.
    In Sec.  426.425(c) and Sec.  426.525(c), we explain that, after 
the time for filing has expired, the ALJ or the Board will evaluate 
whether the record is complete and adequate to support the validity of 
the policy by applying the reasonableness standard. If the adjudicator 
determines that the record is not complete, not adequate to support the 
validity of the coverage determination, or both, the adjudicator will 
notify all parties to the review of this decision and allow discovery 
(as proposed in Sec.  426.432 and Sec.  426.532 and discussed later in 
this section of the preamble). If the adjudicator determines that the 
record is complete and adequate to support the validity of the coverage 
determination, the adjudicator will issue a decision finding the LCD/
NCD record complete and adequate to support the validity of the LCD/NCD 
and the review process ends. In Sec.  426.425(d) and Sec.  426.525(d), 
we state that the process described in (a), (b), and (c) applies 
whenever an LCD/NCD record is supplemented.
    Under Sec.  426.431 and Sec.  426.531, we describe the process that 
adjudicators will use to review the provision(s) named in a complaint 
based on the reasonableness standard. The actions of this process 
include the following:
    [sbull] Confining the LCD/NCD review to the provision(s) of the 
LCD/NCD raised in the aggrieved party's complaint;
    [sbull] Conducting a hearing, unless the matter can be decided on 
the written record;
    [sbull] Closing the LCD/NCD review record to the taking of 
evidence;
    [sbull] Issuing a decision as described in Sec.  426.447 and Sec.  
426.547. We further state that ALJs may consider previous ALJ decisions 
regarding the LCD provisions with the same issues and facts and the 
same clinical conditions. We also provide that ALJs must treat as 
precedential any previous Board decision that involves the same LCD 
provision(s), same specific issues and facts in question, and same 
clinical conditions. We also provide that the Board will follow 
applicable Board precedent regarding the same NCD provisions and the 
same clinical conditions.
    In addition, the adjudicator has the option, under Sec.  426.431(b) 
and 426.531(b), to consult with appropriate scientific or clinical 
experts, and to consider previous ALJ decisions (discussed in the 
section of the preamble on Sec.  426.440 and Sec.  426.540).
    In Sec.  426.431(c) and Sec.  426.531(c), we explain that ALJs and 
the Board must follow all applicable laws and regulations, and NCDs, 
with the exception that the Board is not bound by the NCD that is 
before it.
    Under Sec.  426.432 and Sec.  426.532, paragraph (a), if the ALJ or 
the Board orders discovery, the ALJ or the Board will establish a 
reasonable timeframe for discovery and ensure that a party to the LCD 
or NCD review who receives a discovery request has certain rights. In 
paragraph (b), we state that any party receiving a discovery request 
may file a motion for a protective order before the date of production 
of the discovery.
    Under Sec.  426.432 and Sec.  426.532, we also set forth the rules 
for discovery during an LCD or NCD review, respectively.
    We have eliminated proposed Sec.  426.432(a)(3) and Sec.  
426.532(a)(3) because we do not expect any non-parties to be required 
to submit evidence in these proceedings.
    In Sec.  426.432(c) and Sec.  426.532(c), we list the types of 
discovery that are available. In Sec.  426.432(d) and Sec.  426.532(d), 
we explain what the term discovery includes and state that discovery 
does not require the creation of any document. In Sec.  426.432(e) and 
Sec.  426.532(e), we identify forms of discovery that are not 
available. We believe that this is consistent with normal practice and 
will avoid unnecessary delays in the coverage determination reviews.
    For proprietary data or privileged information, Sec.  426.432(f) 
and Sec.  426.532(f), we have clarified that the ALJ/Board may not, 
under any circumstances, disclose this material to the public without 
consent from the party who possesses the right to protection of the 
information.
    In Sec.  426.432(g) and Sec.  426.532(g), we state that the ALJ/
Board will notify all parties in writing of the date when the discovery 
period will close.
    While reviewing a provision of an LCD or NCD, the adjudicator may, 
if necessary, issue subpoenas. In Sec.  426.435 and Sec.  426.535, we 
describe the process for obtaining and responding to subpoenas during a 
coverage determination review. A request for a subpoena to require the 
attendance of an individual at a hearing (or provide evidence at a 
hearing) must be filed with the adjudicator by a party to the coverage 
determination review at least 30 days before the date of a hearing. In 
addition to designating the witnesses (and their locations) and the 
evidence to be produced by those witnesses, the subpoena must state the 
facts that the party expects the witness to establish, and state 
whether these facts could be established by other evidence or without 
the use of a subpoena.
    The subpoena sections also detail the role of adjudicators in 
granting subpoenas, the role of a party in serving a subpoena, and the 
role and rights of the individual receiving a subpoena (including the 
right to file a motion to quash a subpoena). In addition, in Sec.  
426.435(h) and Sec.  426.535(h), we also set forth the remedy afforded 
under section 205(e) of the Act, if a subpoena is not obeyed.
    We describe the rules relating to evidence in coverage 
determination reviews in Sec.  426.440 and Sec.  426.540. In Sec.  
426.440(a) and Sec.  426.540(a), we state the ALJ or the Board is not 
bound by the Federal Rules of Evidence, but may apply the rules, if 
appropriate. In Sec.  426.440(b) and Sec.  426.540(b), we provide that 
the ALJ or the Board must exclude evidence that is clearly irrelevant, 
immaterial, or unduly repetitive. Sections 426.440(c) and Sec.  
426.540(c) provide admission of, and protection for the submission of 
proprietary/privileged information under seal. Sections 426.440(d) and 
Sec.  426.540(d) address the authority of the ALJ/Board over the use of 
expert witnesses. Under Sec.  426.440(e) and Sec.  426.540(e), we 
require experts submitting reports to be available for cross-
examination at an evidentiary hearing. Under Sec.  426.440(f) and Sec.  
426.540(f), we require that, unless otherwise ordered by the 
adjudicator for good cause shown, all documents and other evidence be 
open to examination by all parties to the review, except as set forth 
in Sec.  426.440(c) and Sec.  426.540(c).
    Under Sec.  426.444 and Sec.  426.544, we describe an adjudicator's 
dismissal for cause of a complaint regarding an LCD or an NCD, 
respectively. A dismissal is effectuated by the issuance of a decision 
dismissing a complaint. In general, an adjudicator may dismiss a 
complaint if an aggrieved party fails to attend or participate in a 
pre-hearing conference (the pre-hearing may be conducted by telephone) 
or hearing without good cause shown or fails to comply with a lawful 
order from an adjudicator (see Sec.  426.444(a) and Sec.  426.544(a)). 
Under Sec.  426.444(b) and Sec.  426.544(b), we require that the 
adjudicator dismiss

[[Page 63711]]

complaints that fail to meet the requirements for acceptable 
complaints, including complaints regarding inapplicable policies or 
determinations. We also require the adjudicator to dismiss a complaint 
if the aggrieved party withdraws the complaint, or if the complaint 
seeks review of a matter beyond the adjudicator's authority.
    Under Sec.  426.444(b)(6), we also require an ALJ to dismiss a 
complaint if the applicable contractor notifies the ALJ that the LCD is 
being retired or revised to remove the provision in question. 
Similarly, in Sec.  426.544(b)(6), the complaint must be dismissed when 
we notify the Board that the NCD (or provision of the NCD) is no longer 
in effect.
    In Sec.  426.445 and Sec.  426.545, we require that witness fees, 
for appearances during a hearing, be paid by the party seeking to 
present the witness.
    Under Sec.  426.446 and Sec.  426.546, we require that an ALJ and 
the Board, respectively, ensure that any hearing conducted regarding a 
LCD or NCD review is open to the public and electronically, 
mechanically, or stenographically recorded. These sections require 
that, except for privileged information and proprietary data, all 
evidence upon which the adjudicator relies for a decision be contained 
in the public record, and that any pertinent document or record be 
incorporated into the record of the LCD/NCD hearing.
    Under Sec.  426.447 and Sec.  426.547, we set forth the procedures 
for the issuance and notification of ALJ and Board decisions, 
respectively. Within 90 days from closing the review record to the 
taking of evidence, the applicable adjudicator is required either to 
issue a decision, including a description of appeal rights, or to 
provide notice that the decision is pending, and an approximate date a 
decision will be issued. In Sec.  426.547(b), we explain that Board 
decisions regarding NCDs will be available on the Medicare Web site of 
the Department of Health and Human Services and that steps will be 
taken to ensure the privacy of the parties to the review.
    Under Sec.  426.450, we describe the required elements of an ALJ's 
decision regarding an LCD. In Sec.  426.550, we describe the required 
elements of the Board's decision regarding an NCD. Since Board 
decisions will be published, identifying information about 
beneficiaries may be placed in an accompanying cover letter giving 
notice of the decision. This cover letter, however, will not be 
published, in order to preserve beneficiaries' privacy. As discussed 
earlier in this section of the preamble, a decision may include the 
dismissal of a complaint or a finding that the LCD/NCD record is 
complete and adequate to support the validity of the LCD/NCD under the 
reasonableness standard. If the ALJ/Board decision neither dismisses 
the complaint nor finds that record complete and adequate, the decision 
must contain a statement pertaining to each provision listed in the 
complaint and state whether the provision is valid or invalid under the 
reasonableness standard. We also require that the decision include the 
information in Sec.  426.450(b) and Sec.  426.550(b), which include LCD 
review or NCD review identifying information, claim information (if 
known), the basis for the decision (including findings of fact, 
interpretations of laws, and application of facts to the law), a 
summary of the evidence reviewed during the review, and a statement 
about appeal rights. We provide that the materiality of any proprietary 
data or privileged information in the validity determination should be 
discussed in the decision without disclosing the substance or contents 
of the sealed evidence. In addition, a separate statement prepared and 
maintained under seal will explain the rationale for the treatment of 
the proprietary data or privileged information, including any necessary 
discussion of the data themselves. This statement will accompany the 
proprietary data or privileged information under seal if the decision 
is appealed to the next level of review.
    In Sec.  426.455 and Sec.  426.555, we require that an ALJ or the 
Board decision be prohibited from doing any of the following:
    [sbull] Ordering us or our contractors to add any language to an 
LCD or NCD or to pay a specific claim.
    [sbull] Establishing a time limit for the creation of a new or 
revised LCD or NCD.
    [sbull] Reviewing or evaluating an LCD or NCD other than the LCD or 
NCD under review.
    [sbull] Including a requirement for us or our contractors that 
specifies payment, coding, or systems changes for an LCD or NCD, or 
deadlines for implementing these changes.
    [sbull] Ordering or addressing how we or our contractors should 
implement an LCD or NCD.
    As a result of comments we received on our proposed rule, we 
revised the requirements concerning ALJ or the Board decisions to allow 
such a decision to direct us or our contractors to delete language from 
a provision of an LCD or NCD, when the adjudicator finds provision(s) 
unreasonable with respect to the aggrieved party's clinical 
indications, and for same or similar conditions. While we have revised 
the rule accordingly, we continue to believe that ALJs or the Board 
should be prohibited from ordering us or our contractors to add 
language to a LCD or NCD provision and have maintained the prohibition 
in this final rule. The ALJ/Board decision requiring a contractor or 
CMS to strike an LCD/NCD provision may be written narrowly. In one 
example, an aggrieved party with condition X challenges an LCD stating 
that a particular service is covered for conditions Y and Z and 
contains the following sentence: ``This procedure is considered not 
reasonable or necessary for all other conditions.'' The ALJ may find 
that this sentence is invalid for condition X. The contractor would 
have several options for effectuating this decision. First, the 
contractor could remove the sentence altogether leaving coverage of all 
conditions other than Y and Z to individual consideration. Second, the 
contractor could add condition X to the list of covered conditions. 
Third, the contractor could revise the LCD to state that the service is 
covered for conditions Y and Z, individual consideration will determine 
coverage for condition X, and that the service is not covered for all 
other conditions.
    In Sec.  426.457 and Sec.  426.557, we explain that ALJ or the 
Board decisions may be written narrowly to hold specific provision(s) 
invalid as applied to specific clinical indications and for similar 
conditions.
    In Sec.  426.458, we describe the ALJ's review record furnished to 
the public, and to the Board, and specify that proprietary data or 
privileged information must be under seal.
    In Sec.  426.460 and Sec.  426.560, we describe the effect of ALJ 
or the Board decisions issued under Sec.  426.447 and Sec.  426.547. 
Although an ALJ or the Board will now be allowed to order us or our 
contractors to strike down a LCD or NCD provision, we continue to 
believe that the exact wording of a new coverage determination should 
be made by the contractor or by us. These policies affect other 
beneficiaries and, thus, these determinations must be made by 
clinicians and scientific experts who have the necessary specialized 
training. Thus, we and the contractor will remain the entities 
responsible for ensuring that the clinical and scientific policies are 
sound, in order to ensure the best quality of care for beneficiaries.
    The effect of an ALJ or Board decision will depend on the outcome 
of the coverage determination review. If the

[[Page 63712]]

adjudicator finds that the provision(s) named in the complaint was 
(were) valid under the reasonableness standard, the aggrieved party or 
parties (in the case of an LCD review) could appeal that decision to 
the Board or (in the case of NCD review) may challenge the final 
Departmental action in Federal court.
    If the adjudicator found that the provision(s) listed in the 
complaint was (were) invalid under the reasonableness standard and the 
contractor or we do not appeal this decision to the Board in a timely 
manner, the contractor must or we will do several things. First, there 
would be individual claim review for the aggrieved party or parties 
named in the complaint(s).
    [sbull] If the aggrieved party received a (fee-for-service or 
managed care) service that was the subject of the challenged coverage 
determination, then the contractor (if applicable) or Medicare managed 
care organization will not use the provision(s) of the coverage 
determination that was (were) found invalid in the adjudication of that 
claim.
    [sbull] If the aggrieved party has not received the service, the 
individual may obtain the service and file a claim, which could be 
reviewed by the contractor, without using the provision that has been 
found invalid.
    Neither the first level appeal reviewer nor the hearing officer is 
bound by the invalid provision. Specifically, we will instruct the 
contractor to make a claim determination without using the LCD or NCD 
provision(s) that has been found invalid in each of the following 
situations: (1) The claim has not been adjudicated or; (2) the claim 
was denied. It is important to note that individual claim review can 
only be provided to an aggrieved party if his or her individual claim 
or appeal has not been paid during the individual claims adjudication 
process. Furthermore, the contractor/CMS will not use the invalid 
provision as guidance to deny claims.
    Second, there would be coverage policy relief. Within 30 days of 
the issuance of an ALJ or the Board decision, the contractor or CMS 
must either retire/withdraw the LCD/NCD or revise the LCD/NCD to remove 
the provisions found to be invalid by the ALJ or the Board. The 
effective date of the retirement/withdrawal or revision must be for 
dates of service no later than the 30th day following issuance of the 
ALJ or Board decision. As discussed earlier, the retirement of a 
coverage determination or removal of a provision of a coverage 
determination means that it can no longer be used in the adjudication 
of claims with dates of service after the effective date of the ALJ/
Board decision.
    Under Sec.  426.462 and Sec.  426.562, ``Notice of an ALJ's 
decision,'' and ``Notice of the Board's decision,'' we require that, 
after the ALJ or the Board, respectively, has made a decision regarding 
an LCD or NCD complaint, the ALJ or the Board send a written notice of 
the decision to each party. The notice must state the outcome of the 
review and inform each party to the determination of his or her rights 
to seek further review if he or she is dissatisfied with the 
determination, and the time limit under which an appeal must be 
requested.
    Under Sec.  426.463 and Sec.  426.563, ``Future New/Revised LCDs/
NCDs,'' we state that the contractor and CMS may not reinstitute an 
LCD/NCD provision found to be unreasonable by an ALJ/Board unless the 
contractor/CMS has a different basis (such as additional evidence). 
However, nothing in this regulation shall be construed to prevent 
contractors or CMS from developing new or revised/reconsidered LCD/NCD 
provisions, as long as these provisions are developed using a different 
basis and evidence.
    In the remainder of the sections proposed in subpart D, we set 
forth the procedure for appealing an ALJ's decision regarding an LCD 
review. In Sec.  426.465(a), we state that an aggrieved party may 
appeal part or all of an ALJ's decision that states that a provision of 
the LCD listed in the complaint is valid under the reasonableness 
standard or that dismisses a complaint (with certain exceptions). We 
also allow an aggrieved party who was part of a joint complaint or a 
consolidated LCD review to appeal an ALJ's decision either 
independently or as a group.
    In Sec.  426.465(b), we state that a contractor or CMS may appeal 
to the Board an ALJ decision that an LCD was unreasonable. Because we 
allow Board consolidation of similar appeals, we believe that it is not 
necessary to prohibit aggrieved parties from appealing to higher levels 
if one or more parties to a joint complaint withdraw from that 
complaint.
    In Sec.  426.465(c), we require that the implementation of the ALJ 
decision will be stayed pending review by the Board.
    In Sec.  426.465(d), we establish that we do not allow an aggrieved 
party to appeal a dismissal in certain circumstances, namely, if the 
aggrieved party who filed the complaint withdraws the complaint, or 
because the contractor retired the LCD or revised the LCD to remove the 
provision in question.
    Under Sec.  426.465(e), we require that an appeal would have to be 
submitted to the Board within 30 days of the date the ALJ's decision 
was issued. We believe this is a reasonable timeframe to allow a party 
to make a decision on whether to appeal and to prepare the necessary 
documents, but we permit the Board to consider a late appeal if good 
cause is shown by the party.
    Section 426.465(f) lists the necessary components of an appeal to 
identify the relevant parties and issues.
    In Sec.  426.565, ``Board's role in making an LCD or NCD review 
record available,'' we require that upon a request from a Federal 
Court, the Board must provide to the Federal Court, a copy of the 
Board's LCD or NCD review record (as described in Sec.  426.567).
    In Sec.  426.566, we state that a Board decision is subject to 
judicial review.
    In Sec.  426.468, we explain that an aggrieved party who initiates 
an LCD review, but does not appeal any part or parts of an ALJ's 
decision to the Board in a timely manner, waives his or her right to 
any further review of that part or those parts.
    In Sec.  426.470, we state that the Board's role in docketing and 
evaluating the acceptability of appeals of ALJ decisions is similar to 
the process that an ALJ would use in docketing and evaluating the 
acceptability of a complaint. The Board assigns a number to the appeal 
and determines if it meets all of the requirements of an acceptable 
appeal proposed in Sec.  426.465. Unlike the evaluation of an initial 
complaint, however, we require, in Sec.  426.470(c), that the Board 
issue a decision dismissing an unacceptable appeal, instead of allowing 
an opportunity to amend an unacceptable appeal.
    Upon the request from the Board to provide copies of the LCD review 
record under Sec.  426.470, we require that an ALJ send a copy of the 
LCD review record to the Board.
    Once the Board has accepted an appeal to an ALJ's decision and 
received the ALJ's LCD review record, we describe in Sec.  426.476 the 
steps that the Board will take in reviewing the ALJ's decision. In 
addition to reviewing the ALJ's LCD review record and the ALJ's 
decision, the Board must allow the contractor or, if applicable, allow 
us, to submit a statement to the Board and the aggrieved party 
responding to the appeal. The final required step in the Board review 
of an ALJ's decision is to issue a Board decision. We require that the 
Board must evaluate the ALJ's application of the reasonableness 
standard to determine if the ALJ's decision was erroneous.

[[Page 63713]]

    We believe that the Board review of an appeal of an ALJ's decision 
should remain a paper review of existing materials. Accordingly, we 
establish, in Sec.  426.476(b), that the Board will determine whether 
the ALJ decision contains any material error, and prohibit the Board 
from considering any evidence that is not a part of the ALJ's LCD 
review record. We establish that the Board will remand the case for 
discovery and the taking of evidence if the ALJ erroneously determined 
that the contractor's record was complete, or if the ALJ permitted a 
prejudicial procedural error. In Sec.  426.476(c), we establish the 
Board's scope of review and that the Board is bound by applicable laws, 
regulations, and NCDs when reviewing appeals of ALJ decisions. These 
include the applicable provisions of the Act, our regulations and 
rulings, and NCDs.
    In Sec.  426.476(d), we require the Board to dismiss an appeal of 
an ALJ's decision if the contractor retired the LCD or revised the LCD 
to remove the provision(s) in question during the appeal.
    In Sec.  426.478, we allow the contractor to retire an LCD or 
revise the LCD to remove the provision(s) in question during the 
Board's review of the ALJ's decision. As stated in the previous 
paragraph, this would lead to the Board dismissing the appeal.
    In Sec.  426.480, we allow a party to withdraw an appeal of an 
ALJ's decision. The provisions proposed in this section, for a party 
acting alone or as part of a joint or consolidated appeal, would be the 
same as the provisions for withdrawing a complaint in Sec.  426.423.
    In Sec.  426.482, we require the issuance and notification of a 
Board decision regarding an appealed ALJ decision. These provisions are 
the same as the provisions we described for the issuance and 
notification of an ALJ decision.
    In Sec.  426.484, we set forth the mandatory provisions of a Board 
decision regarding an appealed ALJ decision. We require the Board to 
either dismiss the appeal or, for each part of the ALJ's decision named 
in the appeal, to uphold, modify or reverse that part or all of the 
ALJ's decision. Because the Board is conducting a review of the ALJ's 
decision using the ALJ's LCD review record, and is not conducting a de 
novo review of the LCD itself, a Board decision upholding, modifying or 
reversing each part, or all of the ALJ's decision is the proper 
outcome. The Board's decision must include the information necessary to 
identify the appeal, and the rationale for the Board's decision.
    In Sec.  426.486, we prohibit the Board's decision from including 
those provisions that we exclude from the ALJ's decision, for the 
reasons discussed earlier in this preamble. In Sec.  426.487, ``Board's 
Record on Appeal of an ALJ Decision,'' we state in paragraph (a) that 
except as provided in paragraph (b) of this section, the Board's LCD 
review record furnished to the public consists of any document or 
material that the Board compiled or considered during an LCD review.
    Paragraph (b) states that the LCD review record furnished to the 
Court under appeal includes, under seal, material that is privileged or 
proprietary.
    Paragraph (c) states that in any instance where proprietary data or 
privileged information is contained in the LCD record and the 
information goes to court, CMS or the Department will seek to have a 
protective order issued for that information, as appropriate.
    In Sec.  426.587, ``Record for Appeal of a Board/NCD decision,'' we 
set forth in paragraph (a) that, except as provided in paragraph (b) of 
this section, the Board's NCD review record furnished to the court 
consists of any document or material that the Board compiled or 
considered during an NCD review. CMS or the Department may seek to have 
a protective order issued with respect to proprietary data or 
privileged information.
    We describe in paragraph (b) that the NCD review record furnished 
the court maintain the seal on material that is privileged or 
proprietary. CMS or the Department may seek to have a protective order 
issued with respect to those documents.
    In Sec.  426.488, we set forth the effect of a Board decision. 
Section 426.488(a) explains the relief that is provided to a successful 
challenger. Moreover, there may be coverage relief for the aggrieved 
party. We also describe the effect of the Board reversing an ALJ 
decision.
    We permit the Board to remand cases to the ALJ in a limited number 
of circumstances. In Sec.  426.489(a), we explain the process the Board 
must follow to remand a case to the ALJ. In Sec.  426.489(b), we 
explain required action by an ALJ upon a Board remand. In Sec.  
426.490, a decision by the Board would constitute a final Agency action 
and would be subject to judicial review. Neither the contractor nor we 
may appeal a Board decision.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 required that we solicit comment on the following issues:
    [sbull] The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    [sbull] The accuracy of our estimate of the information collection 
burden.
    [sbull] The quality, utility, and clarity of the information to be 
collected.
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We have solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements:

Sections 426.400 and 426.500

    Sections 426.400, Procedure for filing an acceptable complaint to a 
provision (or provisions) of an LCD, and 426.500, Procedure for filing 
an acceptable complaint to a provision or provisions of an NCD, state 
that an aggrieved party may initiate a review of an LCD or NCD, 
respectively, by filing a written complaint. These sections also 
identify the information required in the complaint to qualify as an 
aggrieved party as defined in Sec.  426.110, as well as the process and 
information needed for an aggrieved party to withdraw a complaint. The 
required documentation includes a copy of the written authorization to 
represent the beneficiary, if the beneficiary has a representative, and 
a copy of a written statement from the treating physician that the 
beneficiary needs a service that is the subject of the LCD.
    Based on the lack of public comments, we continue to estimate that 
there will be 1,000 LCD complaints per year and that it will take the 
aggrieved party 4 hours to draft the complaint and gather the 
information to send to us. The national burden would be 4,000 hours 
annually. We estimate that there will be 15 to 20 NCD complaints per 
year. It will take 4 hours, maximum, to gather the information and to 
write each complaint. Thus, we estimate a total of 80 hours per year to 
comply with the requirement.
    The estimate of 4 hours is based on previous experience in both the 
local and national coverage development processes, and the estimated 
time to submit beneficiary and policy-specific information (for 
example, name,

[[Page 63714]]

address, and policy challenged) and collect and photocopy scientific 
and clinical evidence. It should actually take less than that amount of 
time in NCD challenges, since the aggrieved party has already sent us 
the information and merely has to send it again.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Regulations Development and 
Issuances Group, Attn.: Dawn Willinghan, Attn: CMS-3063-F, Room C5-14-
03, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Brenda Aguilar, CMS Desk Officer.

VI. Regulatory Impact Statement

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), as 
amended by Executive Order 13258, and the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), as amended. 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). Based on provider, beneficiary, and Agency 
costs, our analysis indicates that the costs involved with the 
implementation of this rule will not exceed $100 million annually. 
Therefore, this rule is not considered a major rule.
    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 $5 
million or less annually. 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 if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds.
    For these reasons, we are not preparing analyses for either the RFA 
or section 1102(b) of the Act because we have determined 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.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditures in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. We do not believe that this rule would 
have an effect on the governments mentioned, nor would the private 
sector costs associated with the rule be greater than $110 million.

B. Federalism

    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. This final rule will not have a substantial effect on 
State or local governments.

C. Anticipated Effects

1. Effects on Medicare Beneficiaries
    In developing this rule, we considered how to make it user-friendly 
for the individual beneficiaries who qualify as aggrieved parties to 
initiate the review of an LCD or an NCD. Possible access obstacles for 
some aggrieved parties include limited financial resources, limited 
mobility, various disabilities, absence of legal representation, and 
difficulty in compiling and presenting scientific and clinical 
materials. We have sought to include means to alleviate these obstacles 
as much as possible through this rule, but would also expect the ALJs 
and the Board to use the flexibility in this rule to respond to 
obstacles that may confront individual aggrieved parties in particular 
cases.
    Some concerns may remain about how to facilitate participation, 
especially when evidence is taken in person, by aggrieved parties with 
limited mobility or resources. This final rule seeks to address this by 
providing for most evidence to be submitted in written form and by 
allowing use of a variety of electronic means for remote attendance at 
any oral proceeding, if one is needed. In addition, the rule provides 
flexibility for ALJs and the Board to tailor proceedings in each case 
to best reflect the needs of the parties, the appropriate scope of 
participation, and the nature of the issues presented.
    While we require some documentation to support a complainant's 
assertions of being an aggrieved party (see Sec.  426.400 and Sec.  
426.500), we will accept that documentation as sufficient to show 
standing to challenge an LCD or an NCD. By limiting this documentation, 
we seek to simplify the process for the beneficiary, to alleviate 
privacy concerns about confidential medical records and other patient-
specific information, and to reduce any intrusive discovery burden on 
beneficiaries.
    Our intent is to ensure that beneficiaries fully understand these 
rights. When this final rule is published, we expect to produce a user-
friendly guide that beneficiaries may use to assist them in accessing 
this process.
    We have also provided for appropriate measures to be taken to 
address confidentiality and privilege issues relating to privileged or 
confidential trade secrets, commercial information, or financial 
information.
2. Effects on Providers
    We do not believe that the provisions of this rule will have a 
significant effect on providers, since the Congress developed the BIPA 
522 process for beneficiaries. Providers may be requested, however, to 
supply documentation that an aggrieved party is in need of a specific 
service, and to assist in representing an aggrieved party. In addition, 
we have clarified in the final rule that this document may be in the 
form of an order or other existing language from the beneficiary's 
medical record and need not be newly created material. It is also 
possible for a provider to be subpoenaed under Sec.  426.435 and Sec.  
426.535, but Sec.  426.445 and Sec.  426.545 will allow for 
compensation under this circumstance. While there may be time 
requirements placed on providers and expert witnesses in this respect, 
there will be no additional monetary expenses. As a

[[Page 63715]]

result, we believe that the rule will have an insignificant economic 
impact on health care providers or the health care industry as a whole.
3. Effects on the Medicare Program
    The Medicare program would incur certain significant administrative 
costs associated with coverage determination reviews, the cost of being 
a party to coverage determination reviews, the cost of reevaluating 
policies, and the cost of changes to the claim review and appeals 
procedures.

D. Alternatives Considered

    We considered various alternative approaches for implementing the 
ALJ or the Board decisions with respect to an LCD and NCD. One 
alternative we considered was to allow an ALJ or the Board to specify 
the type of relief that would be afforded to the aggrieved party in 
those instances in which an ALJ or the Board issued a finding of 
unreasonable under the reasonableness standard. We contemplated whether 
it would be feasible based on the record developed in this proceeding 
for an ALJ or the Board to order us to make payment for a particular 
claim for the individual. We determined, however, that because the 
record in a policy challenge adjudication focuses on the challenged 
policy, and not on the beneficiary's particular medical circumstances 
or entitlement to Medicare benefits, it is not possible to allow an ALJ 
or the Board to order payment in those circumstances. In some cases, 
other statutory restrictions may apply for a particular claim that 
would prevent Medicare from making payment even if the LCD or NCD were 
found unreasonable. For instance, if care were furnished by an excluded 
physician in other than an emergency situation, section 1862(e)(1) of 
the Act would bar Medicare payment. There are other examples where 
rules other than an NCD may lead to the denial of a claim (such as 
statutory exclusion). To avoid redundant claims/appeals processes, 
individual review is performed through our existing claims appeals 
procedures, but the LCD or NCD that was found unreasonable by the ALJ 
or the Board will not be applied.
    Further, we do not believe that it is appropriate for an ALJ or the 
Board to add language to coverage determinations. LCDs and NCDs are 
based on clinical and scientific evidence to develop policies that are 
both sound and effective, and continue to ensure the highest quality of 
covered care for Medicare recipients. For the sake of continuing to 
ensure that aggrieved parties receive the same quality care as all 
other Medicare recipients, and for the sake of efficiently 
administering this process, we believe that clinicians and scientific 
experts are best suited to continue to develop these policies.
    In accordance with the provisions of Executive Order 12866, as 
amended by Executive Order 13258, this regulation was reviewed by the 
Office of Management and Budget.

List of Subjects

42 CFR Part 400

    Grant programs-health, Health facilities, Health maintenance 
organizations (HMO), Medicaid, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 426

    Administrative practice and procedure, Medicare, Reporting and 
recordkeeping requirements.

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

PART 400--INTRODUCTION; DEFINITIONS

0
1. The authority citation for part 400 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh) and 44 U.S.C. Chapter 35.

0
2. Amend Sec.  400.202 by adding the definitions of ``Departmental 
Appeals Board,'' and ``Local coverage determination (LCD),'' and by 
revising the definition of ``National coverage determination (NCD)'' to 
read as follows:


Sec.  400.202  Definitions specific to Medicare.

* * * * *
    Departmental Appeals Board means: (1) Except as provided in 
paragraphs (2) and (3) of this definition, a Board established in the 
office of the Secretary, whose members act in panels to provide 
impartial review of disputed decisions made by operating components of 
the Department or by ALJs.
    (2) For purposes of review of ALJ decisions under part 405, 
subparts G and H; part 417, subpart Q; part 422, subpart M; and part 
478, subpart B of this chapter, the Medicare Appeals Council designated 
by the Board Chair.
    (3) For purposes of part 426 of this chapter, a Member of the Board 
and, at the discretion of the Board Chair, any other Board staff 
appointed by the Board Chair to perform a review under that part.
* * * * *
    Local coverage determination (LCD) means a decision by a fiscal 
intermediary or a carrier under Medicare Part A or Part B, as 
applicable, whether to cover a particular service on an intermediary-
wide or carrier-wide basis in accordance with section 1862(a)(1)(A) of 
the Act. An LCD may provide that a service is not reasonable and 
necessary for certain diagnoses and/or for certain diagnosis codes. An 
LCD does not include a determination of which procedure code, if any, 
is assigned to a service or a determination with respect to the amount 
of payment to be made for the service.
* * * * *
    National coverage determination (NCD) means a decision that CMS 
makes regarding whether to cover a particular service nationally under 
title XVIII of the Act. An NCD does not include a determination of what 
code, if any, is assigned to a service or a determination with respect 
to the amount of payment to be made for the service.
* * * * *

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
3. The authority citation for part 405 continues to read as follows:

    Authority: Secs. 1102, 1861, 1862(a), 1871, 1874, 1881, and 
1888(k) of the Social Security Act (42 U.S.C. 1302, 1395x, 1395y(a), 
1395hh, 1395kk, 1395rr and 1395ww(k)), and sec. 353 of the Public 
Health Service Act (42 U.S.C. 263a).


0
4. Revise Sec.  405.732 to read follows:


Sec.  405.732  Review of a national coverage determination (NCD).

    (a) General rule. (1) An NCD is a determination by the Secretary 
for whether or not a particular item or service is covered nationally 
under title XVIII of the Act.
    (2) An NCD does not include a determination of what code, if any, 
is assigned to a particular item or service covered under title XVIII 
or a determination for the amount of payment made for a particular item 
or service.
    (3) NCDs are made under section 1862(a)(1) of the Act or other 
applicable provisions of the Act.
    (4) An NCD is binding on all Medicare carriers, fiscal 
intermediaries, QIOs, HMOs, CMPs, HCPPs, the Medicare Appeals Council, 
and ALJs.

[[Page 63716]]

    (b) Review by ALJ. (1) An ALJ may not disregard, set aside, or 
otherwise review an NCD.
    (2) An ALJ may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD has been applied correctly to the claim.
    (c) Review by Court. For initial determinations and NCD challenges 
under section 1862(a)(1) of the Act, arising before October 1, 2002, a 
court's review of an NCD is limited to whether the record is incomplete 
or otherwise lacks adequate information to support the validity of the 
decision, unless the case has been remanded to the Secretary to 
supplement the record regarding the NCD. In these cases, the court may 
not invalidate an NCD except upon review of the supplemental record.


0
5. Revise Sec.  405.860 to read as follows:


Sec.  405.860  Review of a national coverage determination (NCD).

    (a) General rule. (1) An NCD is a determination by the Secretary 
for whether or not a particular item or service is covered nationally 
under title XVIII of the Act.
    (2) An NCD does not include a determination of what code, if any, 
is assigned to a particular item or service covered under title XVIII 
or a determination for the amount of payment made for a particular item 
or service.
    (3) NCDs are made under section 1862(a)(1) of the Act or other 
applicable provisions of the Act.
    (4) An NCD is binding on all Medicare carriers, fiscal 
intermediaries, QIOs, HMOs, CMPs, HCPPs, the Medicare Appeals Council, 
and ALJs.
    (b) Review by ALJ. (1) An ALJ may not disregard, set aside, or 
otherwise review an NCD.
    (2) An ALJ may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD is applied correctly to the claim.
    (c) Review by Court. For initial determinations and NCD challenges 
under section 1862(a)(1) of the Act, arising before October 1, 2002, a 
court's review of an NCD is limited to whether the record is incomplete 
or otherwise lacks adequate information to support the validity of the 
decision, unless the case is remanded to the Secretary to supplement 
the record regarding the NCD. In these cases, the court may not 
invalidate an NCD except upon review of the supplemental record.

0
6. Add part 426 to subchapter B to read as follows:

PART 426--REVIEWS OF LOCAL AND NATIONAL COVERAGE DETERMINATIONS

Subpart A--General Provisions
Sec.
426.100 Basis and scope.
426.110 Definitions.
426.120 Calculation of deadlines.
426.130 Party submissions.
Subpart B--[Reserved]
Subpart C--General Provisions for the Review of LCDs and NCDs
426.300 Review of LCDs, NCDs, and deemed NCDs.
426.310 LCD and NCD reviews and individual claim appeals.
426.320 Who may challenge an LCD or NCD.
426.325 What may be challenged.
426.330 Burden of proof.
426.340 Procedures for review of new evidence.
Subpart D--Review of an LCD
426.400 Procedure for filing an acceptable complaint concerning a 
provision (or provisions) of an LCD.
426.403 Submitting new evidence once an acceptable complaint is 
filed.
426.405 Authority of the ALJ.
426.406 Ex parte contacts.
426.410 Docketing and evaluating the acceptability of LCD 
complaints.
426.415 CMS' role in the LCD review.
426.416 Role of Medicare Managed Care Organizations (MCOs) and State 
agencies in the LCD review.
426.417 Contractor's statement regarding new evidence.
426.418 LCD record furnished to the aggrieved party.
426.419 LCD record furnished to the ALJ.
426.420 Retiring or revising an LCD under review.
426.423 Withdrawing a complaint regarding an LCD under review.
426.425 LCD review.
426.431 ALJ's review of the LCD to apply the reasonableness 
standard.
426.432 Discovery.
426.435 Subpoenas.
426.440 Evidence.
426.444 Dismissals for cause.
426.445 Witness fees.
426.446 Record of hearing.
426.447 Issuance and notification of an ALJ's decision.
426.450 Mandatory provisions of an ALJ's decision.
426.455 Prohibited provisions of an ALJ's decision.
426.457 Optional provisions of an ALJ's decision.
426.458 ALJ's LCD review record.
426.460 Effect of an ALJ's decision.
426.462 Notice of an ALJ's decision.
426.463 Future new or revised LCDs.
426.465 Appealing part or all of an ALJ's decision.
426.468 Decision to not appeal an ALJ's decision.
426.470 Board's role in docketing and evaluating the acceptability 
of appeals of ALJ decisions.
426.476 Board review of an ALJ's decision.
426.478 Retiring or revising an LCD during the Board's review of an 
ALJ's decision.
426.480 Withdrawing an appeal of an ALJ's decision.
426.482 Issuance and notification of a Board decision.
426.484 Mandatory provisions of a Board decision.
426.486 Prohibited provisions of a Board decision.
426.487 Board's record on appeal of an ALJ's decision.
426.488 Effect of a Board decision.
426.489 Board remands.
426.490 Board decision.
Subpart E--Review of an NCD
426.500 Procedure for filing an acceptable complaint concerning a 
provision (or provisions) of an NCD.
426.503 Submitting new evidence once an acceptable complaint is 
filed.
426.505 Authority of the Board.
426.506 Ex parte contacts.
426.510 Docketing and evaluating the acceptability of NCD 
complaints.
426.513 Participation as amicus curiae.
426.515 CMS' role in making the NCD record available.
426.516 Role of Medicare Managed Care Organizations (MCOs) and State 
agencies in the NCD review process.
426.517 CMS' statement regarding new evidence.
426.518 NCD record furnished to the aggrieved party.
426.519 NCD record furnished to the Board.
426.520 Withdrawing an NCD under review or issuing a revised or 
reconsidered NCD.
426.523 Withdrawing a complaint regarding an NCD under review.
426.525 NCD review.
426.531 Board's review of the NCD to apply the reasonableness 
standard.
426.532 Discovery.
426.535 Subpoenas.
426.540 Evidence.
426.544 Dismissals for cause.
426.545 Witness fees.
426.546 Record of hearing.
426.547 Issuance, notification, and posting of a Board's decision.
426.550 Mandatory provisions of the Board's decision.
426.555 Prohibited provisions of the Board's decision.
426.557 Optional provisions of the Board's decision.
426.560 Effect of the Board's decision.
426.562 Notice of the Board's decision.
426.563 Future new or revised or reconsidered NCDs.
426.565 Board's role in making an LCD or NCD review record 
available.
426.566 Board decision.
426.587 Record for appeal of a Board NCD decision.

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

[[Page 63717]]

Subpart A--General Provisions


Sec.  426.100  Basis and scope.

    (a) Basis. This part implements sections 1869(f)(1) and (f)(2) of 
the Act, which provide for the review of LCDs, NCDs, and certain 
determinations that are deemed to be NCDs by statute.
    (b) Scope. This subpart establishes the requirements and procedures 
for the review of LCDs and NCDs.


Sec.  426.110  Definitions.

    For the purposes of this part, the following definitions apply:
    Aggrieved party means a Medicare beneficiary, or the estate of a 
Medicare beneficiary, who--
    (1) Is entitled to benefits under Part A, enrolled under Part B, or 
both (including an individual enrolled in fee-for-service Medicare, in 
a Medicare+Choice plan, or in another Medicare managed care plan);
    (2) Is in need of coverage for a service that is denied based on an 
applicable LCD (in the relevant jurisdiction) or an NCD, regardless of 
whether the service was received; and
    (3) Has obtained documentation of the need by the beneficiary's 
treating physician.
    Board means the Departmental Appeals Board.
    Clinical and scientific experts mean experts that are consulted by 
the ALJ or Board as independent and impartial individuals, with 
significant experience and/or published work, pertaining to the subject 
of the review.
    Contractor means a carrier (including a Durable Medical Equipment 
Regional Carrier), or a fiscal intermediary (including a Regional Home 
Health Intermediary) that has jurisdiction for the LCD at issue.
    Deemed NCD means a determination that the Secretary makes, in 
response to a request for an NCD under section 1869(f)(4)(B) and (C) of 
the Act, that no national coverage or noncoverage determination is 
appropriate, or the Secretary's failure to meet the deadline under 
section 1869(f)(4)(A)(iv) of the Act.
    New evidence means clinical or scientific evidence that was not 
previously considered by the contractor or CMS before the LCD or NCD 
was issued.
    Party means an aggrieved party, which is an individual, or estate 
who has a right to participate in the LCD or NCD review process, and, 
as appropriate, a contractor or CMS.
    Proprietary data and Privileged information means information from 
a source external to CMS or a contractor, or protected health 
information, that meets the following criteria:
    (1) It is ordinarily protected from disclosure in accordance with 
45 CFR part 164, under the Trade Secrets Act (18 U.S.C. 1905) or under 
Exemptions 4 or 5 of the Freedom of Information Act (5 U.S.C. 552) as 
specified in 45 CFR 5.65.
    (2) The party who possesses the right to protection of the 
information from public release or disclosure has not provided its 
consent to the public release or disclosure of the information. Any 
information submitted by the public that is not marked proprietary is 
not considered proprietary.
    Reasonableness standard means the standard that an ALJ or the Board 
must apply when conducting an LCD or an NCD review. In determining 
whether LCDs or NCDs are valid, the adjudicator must uphold a 
challenged policy (or a provision or provisions of a challenged policy) 
if the findings of fact, interpretations of law, and applications of 
fact to law by the contractor or CMS are reasonable based on the LCD or 
NCD record and the relevant record developed before the ALJ or the 
Board.
    Supplemental LCD/NCD record is a record that the contractor/CMS 
provides to the ALJ/Board and any aggrieved party and consists of all 
materials received and considered during a reconsideration. Materials 
that are already in the record before the ALJ/Board (for example, new 
evidence presented in the taking of evidence or hearing) need not be 
provided but may be incorporated by reference in the supplement to the 
LCD/NCD record. The contractor/CMS may provide statements, evidence, or 
other submissions to the ALJ/Board during the proceedings, as provided 
elsewhere in these regulations, but these submissions are not 
considered as supplementing the LCD/NCD record.
    Treating physician means the physician who is the beneficiary's 
primary clinician with responsibility for overseeing the beneficiary's 
care and either approving or providing the service at issue in the 
challenge.


Sec.  426.120  Calculation of deadlines.

    In counting days, Saturdays, Sundays, and Federal holidays are 
included. If a due date falls on a Saturday, Sunday, or Federal 
holiday, the due date is the next Federal working day.


Sec.  426.130  Party submissions.

    Any party submitting material, except for material for which a 
privilege is asserted, or proprietary data, to the ALJ or the Board 
after that party's initial challenge must serve the material on all 
other parties at the same time.

Subpart B--[Reserved]

Subpart C--General Provisions for the Review of LCDs and NCDs


Sec.  426.300  Review of LCDs, NCDs, and deemed NCDs.

    (a) Upon the receipt of an acceptable LCD complaint as described in 
Sec.  426.400, an ALJ conducts a review of a challenged provision (or 
provisions) of an LCD using the reasonableness standard.
    (b) Upon the receipt of an acceptable NCD complaint as described in 
Sec.  426.500, the Board conducts an NCD review of a challenged 
provision (or provisions) of an NCD using the reasonableness standard.
    (c) The procedures established in this part governing the review of 
NCDs also apply in cases in which a deemed NCD is challenged.


Sec.  426.310  LCD and NCD reviews and individual claim appeals.

    (a) LCD and NCD reviews are distinct from the claims appeal 
processes set forth in part 405, subparts G and H; part 417, subpart Q; 
and part 422, subpart M of this chapter.
    (b) An aggrieved party must notify the ALJ or the Board, as 
appropriate, regarding the submission and disposition of any pending 
claim or appeal relating to the subject of the aggrieved party's LCD or 
NCD complaint. This reporting obligation continues through the entire 
LCD or NCD review process.


Sec.  426.320  Who may challenge an LCD or NCD.

    (a) Only an aggrieved party may initiate a review of an LCD or NCD 
(including a deemed NCD), or provisions of an LCD or NCD by filing an 
acceptable complaint.
    (b) Neither an ALJ nor the Board recognizes as valid any attempt to 
assign rights to request review under section 1869(f) of the Act.


Sec.  426. 325  What may be challenged.

    (a) Only LCDs or NCDs (including deemed NCDs) that are currently 
effective may be challenged.
    (b) Some items are not reviewable under this part, including the 
following:
    (1) Pre-decisional materials, including--
    (i) Draft LCDs;
    (ii) Template LCDs or suggested LCDs; and
    (iii) Draft NCDs, including national coverage decision memoranda.
    (2) Retired LCDs or withdrawn NCDs.
    (3) LCD or NCD provisions that are no longer in effect due to 
revisions or reconsiderations.

[[Page 63718]]

    (4) Interpretive policies that are not an LCD or NCD.
    (5) Contractor decisions that are not based on section 
1862(a)(1)(A) of the Act.
    (6) Contractor claims processing edits.
    (7) Payment amounts or methodologies.
    (8) Procedure coding issues, including determinations, 
methodologies, definitions, or provisions.
    (9) Contractor bulletin articles, educational materials, or Web 
site frequently asked questions.
    (10) Any M+C organization or managed care plan policy, rule, or 
procedure.
    (11) An individual claim determination.
    (12) Any other policy that is not an LCD or an NCD as set forth in 
Sec.  400.202 of this chapter.


Sec.  426.330  Burden of proof.

    During an LCD or NCD review, an aggrieved party bears the burden of 
proof and the burden of persuasion for the issue(s) raised in a 
complaint. The burden of persuasion is judged by a preponderance of the 
evidence.


Sec.  426.340  Procedures for review of new evidence.

    (a) The process for review of new evidence is initiated once the 
ALJ/Board completes the taking of evidence.
    (b) If an aggrieved party has submitted new evidence pertaining to 
the LCD/NCD provision(s) in question, and the ALJ or the Board finds 
that evidence admissible, the ALJ or the Board reviews the record as a 
whole and decide whether the new evidence has the potential to 
significantly affect the ALJ's or the Board's evaluation of the LCD/NCD 
provision(s) in question under the reasonableness standard.
    (c) If the ALJ or the Board determines that the new evidence does 
not have the potential to significantly affect the ALJ's or the Board's 
evaluation of the LCD/NCD provision(s) in question under the 
reasonableness standard, this evidence is included in the review 
record, and the review goes forward to a decision on the merits.
    (d) If the ALJ or the Board determines that the new evidence has 
the potential to significantly affect the ALJ's or the Board's 
evaluation of the LCD or NCD provision(s) in question under the 
reasonableness standard, then the ALJ or the Board--
    (1) Stays the proceedings and ensures that the contractor or CMS, 
whichever is appropriate, has a copy of the new evidence for its 
examination; and
    (2) Allows the contractor/CMS 10 days, generally, to examine the 
new evidence, and to decide whether the contractor or CMS initiates a 
reconsideration.
    (e) If the contractor or CMS informs the ALJ or the Board by the 
end of the 10 days that a reconsideration is initiated, and then the 
ALJ or the Board--
    (1) Continues the stay in proceedings; and
    (2) Sets a reasonable timeframe, not more than 90 days, by which 
the contractor or CMS completes the reconsideration.
    (f) The ALJ or Board lifts the stay in proceedings and continues 
the review on the challenged provision(s) of the original LCD or NCD, 
including the new evidence in the review record, if the contractor or 
CMS--
    (1) Informs the ALJ or Board that a reconsideration is not 
initiated; or
    (2) The 90-day reconsideration timeframe is not met.
    (g) If an LCD or NCD is reconsidered and revised within the 
timeframe allotted by the ALJ or Board, then the revised LCD or NCD and 
any supplement to the LCD or NCD record is forwarded to the ALJ or the 
Board and all parties and the review proceeds on the LCD or NCD.

Subpart D--Review of an LCD


Sec.  426.400  Procedure for filing an acceptable complaint concerning 
a provision (or provisions) of an LCD.

    (a) The complaint. An aggrieved party may initiate a review of an 
LCD by filing a written complaint with the office designated by CMS on 
the Medicare Web site, http://www.medicare.gov/coverage/static/appeals.asp.
    (b) Timeliness of a complaint. An LCD complaint is not considered 
timely unless it is filed with the office designated by CMS within--
    (1) 6 months of the issuance of a written statement from each 
aggrieved party's treating practitioner, in the case of aggrieved 
parties who choose to file an LCD challenge before receiving the 
service; or
    (2) 120 days of the initial denial notice, in the case of aggrieved 
parties who choose to file an LCD challenge after receiving the 
service.
    (c) Components of a valid complaint. A complaint must include the 
following:
    (1) Beneficiary-identifying information:
    (i) Name.
    (ii) Mailing address.
    (iii) State of residence, if different from mailing address.
    (iv) Telephone number, if any.
    (v) Health Insurance Claim number, if applicable.
    (vi) E-mail address, if applicable.
    (2) If the beneficiary has a representative, the representative-
identifying information must include the following:
    (i) Name.
    (ii) Mailing address.
    (iii) Telephone number.
    (iv) E-mail address, if any.
    (v) Copy of the written authorization to represent the beneficiary.
    (3) Treating physician written statement. A copy of a written 
statement from the treating physician that the beneficiary needs the 
service that is the subject of the LCD. This statement may be in the 
form of a written order for the service or other documentation from the 
beneficiary's medical record (such as progress notes or discharge 
summary) indicating that the beneficiary needs the service.
    (4) LCD-identifying information:
    (i) Name of the contractor using the LCD.
    (ii) Title of LCD being challenged.
    (iii) The specific provision (or provisions) of the LCD adversely 
affecting the aggrieved party.
    (5) Aggrieved party statement. A statement from the aggrieved party 
explaining what service is needed and why the aggrieved party thinks 
that the provision(s) of the LCD is (are) not valid under the 
reasonableness standard.
    (6) Clinical or scientific evidence. (i) Copies of clinical or 
scientific evidence that support the complaint and an explanation for 
why the aggrieved party thinks that this evidence shows that the LCD is 
not reasonable.
    (ii) Any documents or portions of documents that include 
proprietary data must be marked ``proprietary data,'' and include a 
legal basis for that assertion.
    (iii) Proprietary data submitted by a manufacturer concerning a 
drug or device for which the manufacturer has submitted information to 
the Food and Drug Administration, must be considered and given 
substantive weight only when supported by an affidavit certifying that 
the submission contains true and correct copies of all data submitted 
by the manufacturer to the Food and Drug Administration in relation to 
that drug or device.
    (d) Joint complaints--(1) Conditions for a joint complaint. Two or 
more aggrieved parties may initiate the review of an LCD by filing a 
single written complaint with the ALJ if all of the following 
conditions are met:
    (i) Each aggrieved party named in the joint complaint has a similar 
medical condition or there are other bases for combining the 
complaints.
    (ii) Each aggrieved party named in the joint complaint is filing 
the complaint

[[Page 63719]]

in regard to the same provision(s) of the same LCD.
    (2) Components of a valid joint complaint. A joint complaint must 
contain the following information:
    (i) The beneficiary-identifying information described in paragraph 
(c)(1) of this section for each aggrieved party named in the joint 
complaint.
    (ii) The LCD-identifying information described in paragraph (c)(2) 
of this section.
    (iii) The documentation described in paragraphs (c)(3) and (c)(4) 
of this section.
    (3) Timeliness of a joint complaint. Aggrieved parties, who choose 
to seek review of an LCD--
    (i) Before receiving the service, must file with the ALJ a joint 
complaint within 6 months of the written statement from each aggrieved 
party's treating physician.
    (ii) After receiving the service, must file with the ALJ a 
complaint within 120 days of each aggrieved party's initial denial 
notice.


Sec.  426.403  Submitting new evidence once an acceptable complaint is 
filed.

    Once an acceptable complaint is filed, the aggrieved party may 
submit additional new evidence without withdrawing the complaint until 
the ALJ closes the record.


Sec.  426.405  Authority of the ALJ.

    (a) An ALJ conducts a fair and impartial hearing, avoids 
unnecessary delay, maintains order, and ensures that all proceedings 
are recorded.
    (b) An ALJ defers only to reasonable findings of fact, reasonable 
interpretations of law, and reasonable applications of fact to law by 
the Secretary.
    (c) The ALJ has the authority to do any of the following:
    (1) Review complaints by an aggrieved party (or aggrieved parties).
    (2) Dismiss complaints that fail to comply with Sec.  426.400.
    (3) Set and change the date, time, and place of a hearing upon 
reasonable notice to the parties.
    (4) Continue or recess a hearing for a reasonable period of time.
    (5) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding.
    (6) Consult with scientific and clinical experts on his or her own 
motion concerning clinical or scientific evidence.
    (7) Set schedules for submission of exhibits and written reports of 
experts.
    (8) Administer oaths and affirmations.
    (9) Examine witnesses.
    (10) Issue subpoenas requiring the attendance of witnesses at 
hearings as permitted by this part.
    (11) Issue subpoenas requiring the production of existing documents 
before, and relating to, the hearing as permitted by this part.
    (12) Rule on motions and other procedural matters.
    (13) Stay the proceedings in accordance with Sec.  426.340.
    (14) Regulate the scope and timing of documentary discovery as 
permitted by this part.
    (15) Regulate the course of a hearing and the conduct of 
representatives, parties, and witnesses.
    (16) Receive, rule on, exclude, or limit evidence, as provided in 
Sec.  426.340.
    (17) Take official notice of facts, upon motion of a party.
    (18) Decide cases, upon the motion of a party, by summary judgment 
when there is no disputed issue of material fact.
    (19) Conduct any conference, argument, or hearing in person or, 
upon agreement of the parties, by telephone, picture-tel, or any other 
means.
    (20) Issue decisions.
    (21) Exclude a party from an LCD review for failure to comply with 
an ALJ order or procedural request without good cause shown.
    (22) Stay the proceedings for a reasonable time when all parties 
voluntarily agree to mediation or negotiation, and provide mediation 
services upon request.
    (d) The ALJ does not have authority to do any of the following 
under this part:
    (1) Conduct an LCD review or conduct LCD hearings on his or her own 
motion or on the motion of a nonaggrieved party.
    (2) Issue a decision based on any new evidence without following 
Sec.  426.340, regarding procedures for review of new evidence.
    (3) Review any decisions by contractors to develop a new or revised 
LCD.
    (4) Conduct a review of any draft, retired, archived, template, or 
suggested LCDs.
    (5) Conduct a review of any policy that is not an LCD, as defined 
in Sec.  400.202 of this chapter.
    (6) Conduct a review of any NCD according to section 
1869(f)(1)(A)(i) of the Act.
    (7) Conduct a review of the merits of an unacceptable LCD complaint 
as discussed in Sec.  426.410.
    (8) Allow participation by individuals or entities other than--
    (i) The aggrieved party and/or his/her representative;
    (ii) CMS and/or the contractor; and
    (iii) Experts called by the parties or the ALJ.
    (9) Compel the parties to participate in a mediation process or to 
engage in settlement negotiations.
    (10) Deny a request for withdrawal of a complaint by an aggrieved 
party.
    (11) Compel the contractor to conduct studies, surveys, or develop 
new information to support an LCD record.
    (12) Deny a contractor the right to reconsider, revise or retire an 
LCD.
    (13) Find invalid applicable Federal statutes, regulations, 
rulings, or NCDs.
    (14) Enter a decision specifying terms to be included in an LCD.


Sec.  426.406  Ex parte contacts.

    No party or person (except employees of the ALJ's office) 
communicates in any way with the ALJ on any substantive matter at issue 
in a case, unless on notice and opportunity for all parties to 
participate. This provision does not prohibit a person or party from 
inquiring about the status of a case or asking routine questions 
concerning administrative functions or procedures.


Sec.  426.410  Docketing and evaluating the acceptability of LCD 
complaints.

    (a) Docketing the complaint. The office designated by CMS does the 
following upon receiving a complaint regarding an LCD:
    Dockets the complaint.
    Determines whether the complaint is--
    (i) The first challenge to a particular LCD; or
    (ii) Related to a pending LCD review.
    (3) Forwards the complaint to the ALJ that conducts the review. In 
cases related to pending reviews, the complaint generally is forwarded 
to the ALJ who is conducting the review.
    (b) Evaluating the acceptability of the complaint. The ALJ assigned 
to the LCD review determines if the complaint is acceptable by 
confirming all of the following:
    (1) The complaint is being submitted by an aggrieved party or, in 
the case of a joint complaint, that each individual named in the joint 
complaint is an aggrieved party. (In determining if a complaint is 
acceptable, the ALJ assumes that the facts alleged by the treating 
physician's documentation regarding the aggrieved party's (or parties') 
clinical condition are true.)
    (2) The complaint meets the requirements for a valid complaint in 
Sec.  426.400 and does not challenge one of the documents in Sec.  
426.325(b).
    (c) Unacceptable complaint. (1) If the ALJ determines that the 
complaint is unacceptable, the ALJ must provide the

[[Page 63720]]

aggrieved party (or parties) one opportunity to amend the unacceptable 
complaint.
    (2) If the aggrieved party (or parties) fail(s) to submit an 
acceptable amended complaint within a reasonable timeframe as 
determined by the ALJ, the ALJ must issue a decision dismissing the 
unacceptable complaint.
    (3) If a complaint is determined unacceptable after one amendment, 
the beneficiary is precluded from filing again for 6 months after being 
informed that it is unacceptable.
    (d) Acceptable complaint. If the ALJ determines that the complaint 
(or amended complaint) is acceptable, the ALJ does the following:
    (1) Sends a letter to the aggrieved party (or parties) 
acknowledging the complaint and informing the aggrieved party (or 
parties) of the docket number and the deadline for the contractor to 
produce the LCD record.
    (2) Forwards a copy of the complaint, any evidence submitted in the 
complaint, and the letter described in paragraph (d)(1) of this section 
to the applicable contractor and CMS.
    (3) Requires CMS or the contractor to send a copy of the LCD record 
to the ALJ and all parties to the LCD review within 30 days of 
receiving the ALJ's letter, the copy of the complaint, and any 
associated evidence, subject to extension for good cause shown.
    (e) Consolidation of complaints regarding an LCD--(1) Criteria for 
consolidation. If a review is pending regarding a particular LCD 
provision(s) and no decision has been issued ending the review, and a 
new acceptable complaint is filed, the ALJ consolidates the complaints 
and conducts a consolidated LCD review if all of the following criteria 
are met:
    (i) The complaints are in regard to the same provision(s) of the 
same LCD or there are other bases for consolidating the complaints.
    (ii) The complaints contain common questions of law, common 
questions of fact, or both.
    (iii) Consolidating the complaints does not unduly delay the ALJ's 
decision.
    (2) Decision to consolidate complaints. If an ALJ decides to 
consolidate complaints, the ALJ does the following:
    (i) Provides notification that the LCD review is consolidated and 
informs all parties of the docket number of the consolidated review.
    (ii) Makes a single record of the proceeding.
    (iii) Considers the relevant evidence introduced in each LCD 
complaint as introduced in the consolidated review.
    (3) Decision not to consolidate complaints. If an ALJ decides not 
to consolidate complaints, the ALJ conducts separate LCD reviews for 
each complaint.


Sec.  426.415  CMS' role in the LCD review.

    CMS may provide to the ALJ, and all parties to the LCD review, 
information identifying the person who represents the contractor or 
CMS, if necessary, in the LCD review process.


Sec.  426.416  Role of Medicare Managed Care Organizations (MCOs) and 
State agencies in the LCD review.

    Medicare MCOs and Medicaid State agencies have no role in the LCD 
review process. However, once the ALJ has issued its decision, the 
decision is made available to all Medicare MCOs and State agencies.


Sec.  426.417  Contractor's statement regarding new evidence.

    (a) The contractor may review any new evidence that is submitted, 
regardless of whether the ALJ has stayed the proceedings, including but 
not limited to--
    (1) New evidence submitted with the initial complaint;
    (2) New evidence submitted with an amended complaint;
    (3) New evidence produced during discovery;
    (4) New evidence produced when the ALJ consults with scientific and 
clinical experts; and
    (5) New evidence presented during any hearing.
    (b) The contractor may submit a statement regarding whether the new 
evidence is significant under Sec.  426.340, within such deadline as 
the ALJ may set.


Sec.  426.418  LCD record furnished to aggrieved party.

    (a) Elements of a contractor's LCD record furnished to the 
aggrieved party. Except as provided in paragraph (b) of this section, 
the contractor's LCD record consists of any document or material that 
the contractor considered during the development of the LCD, including, 
but not limited to, the following:
    (1) The LCD being challenged.
    (2) Any medical evidence considered on or before the date the LCD 
was issued, including, but not limited to, the following:
    (i) Scientific articles.
    (ii) Technology assessments.
    (iii) Clinical guidelines.
    (iv) Statements from clinical experts, medical textbooks, claims 
data, or other indication of medical standard of practice.
    (3) Comment and Response Document (a summary of comments received 
by the contractor concerning the draft LCD).
    (4) An index of documents considered that are excluded under 
paragraph (b) of this section.
    (b) Elements of the LCD record not furnished to the aggrieved 
party. The LCD record furnished to the aggrieved party does not include 
the following:
    (1) Proprietary data or privileged information.
    (2) Any new evidence.


Sec.  426.419  LCD record furnished to the ALJ.

    The LCD record furnished to the ALJ includes the following:
    (a) Documents included in Sec.  426.418(a).
    (b) Privileged information and proprietary data considered that 
must be filed with the ALJ under seal.


Sec.  426.420  Retiring or revising an LCD under review.

    (a) A contractor may retire an LCD or LCD provision under review 
before the date the ALJ issues a decision regarding that LCD. Retiring 
an LCD or LCD provision under review has the same effect as a decision 
under Sec.  426.460(b).
    (b) A contractor may revise an LCD under review to remove or amend 
the LCD provision listed in the complaint through the reconsideration 
process before the date the ALJ issues a decision regarding that LCD. 
Revising an LCD under review to remove the LCD provision in question 
has the same effect as a decision under Sec.  426.460(b).
    (c) A contractor must notify the ALJ within 48 hours of--
    (1) Retiring an LCD or LCD provision that is under review; or
    (2) Issuing a revised version of the LCD that is under review.
    (d) If the contractor issues a revised LCD, the contractor forwards 
a copy of the revised LCD to the ALJ.
    (e) The ALJ must take the following actions upon receiving a notice 
that the contractor has retired or revised an LCD under review:
    (1) If, before the ALJ issues a decision, the ALJ receives notice 
that the contractor has retired the LCD or revised the LCD to 
completely remove the provision in question, the ALJ must dismiss the 
complaint and inform the aggrieved party(ies) who sought the review 
that he or she or they receive individual claim review without the 
retired/withdrawn provision(s).
    (2) If, before the ALJ issues a decision, the ALJ receives notice 
that the contractor has revised the LCD provision in question but has 
not removed it altogether, the ALJ must continue the review based on 
the

[[Page 63721]]

revised LCD. In this case, the contractor must send a copy of the 
supplemental record to the ALJ and all parties. In that circumstance, 
the ALJ permits the aggrieved party to respond to the revised LCD and 
supplemental record.


Sec.  426.423  Withdrawing a complaint regarding an LCD under review.

    (a) Circumstance under which an aggrieved party may withdraw a 
complaint regarding an LCD. An aggrieved party who filed a complaint 
regarding an LCD may withdraw the complaint before the ALJ issues a 
decision regarding that LCD. The aggrieved party may not file another 
complaint concerning the same coverage determination for 6 months.
    (b) Process for an aggrieved party withdrawing a complaint 
regarding an LCD. To withdraw a complaint regarding an LCD, the 
aggrieved party who filed the complaint must send a written withdrawal 
notice to the ALJ (see Sec.  426.400), CMS (if applicable), and the 
applicable contractor. Supplementing an acceptable complaint with new 
evidence does not constitute a withdrawal of a complaint, as described 
in Sec.  426.403.
    (c) Actions the ALJ must take upon receiving a notice announcing 
the intent to withdraw a complaint regarding an LCD--(1) LCD reviews 
involving one aggrieved party. If the ALJ receives a withdrawal notice 
regarding an LCD before the date the ALJ issued a decision regarding 
that LCD, the ALJ issues a decision dismissing the complaint under 
Sec.  426.444 and informs the aggrieved party that he or she may not 
file another complaint to the same coverage determination for 6 months.
    (2) LCD reviews involving joint complaints. If the ALJ receives a 
notice from an aggrieved party who is named in a joint complaint 
withdrawing a complaint regarding an LCD before the date the ALJ issued 
a decision regarding that LCD, the ALJ issues a decision dismissing 
only that aggrieved party from the complaint under Sec.  426.444. The 
ALJ continues the LCD review if there is one or more aggrieved party 
who does not withdraw from the joint complaint.
    (3) Consolidated LCD reviews. If the ALJ receives a notice from an 
aggrieved party who is part of a consolidated LCD review withdrawing a 
complaint regarding an LCD before the date the ALJ issued a decision 
regarding that LCD, the ALJ removes that aggrieved party from the 
consolidated LCD review and issues a decision dismissing that aggrieved 
party's complaint under Sec.  426.444. The ALJ continues the LCD review 
if there are one or more aggrieved parties who does not withdraw from 
the joint complaint.


Sec.  426.425  LCD review.

    (a) Opportunity for the aggrieved party, after his or her review of 
the LCD record, to state why the LCD is not valid. Upon receipt of the 
contractor's LCD record, the aggrieved party files a statement 
explaining why the contractor's LCD record is not complete, or not 
adequate to support the validity of the LCD under the reasonableness 
standard. This statement must be submitted to the ALJ and to the 
contractor, or CMS, as appropriate, within 30 days (or within the 
additional time as allowed by the ALJ for good cause shown) of the date 
the aggrieved party receives the contractor's LCD record.
    (b) Contractor response. The contractor has 30 days after receiving 
the aggrieved party's statement to submit a response to the ALJ in 
order to defend the LCD.
    (c) ALJ evaluation. (1) After the aggrieved party files a statement 
and the contractor responds, as described in Sec.  426.425(a) and Sec.  
426.425(b), or the time for filing has expired, the ALJ applies the 
reasonableness standard to determine whether the LCD record is complete 
and adequate to support the validity of the LCD.
    (2) Issuance of a decision finding the record complete and adequate 
to support the validity of the LCD ends the review process.
    (3) If the ALJ determines that the LCD record is not complete and 
adequate to support the validity of the LCD, the ALJ permits discovery 
and the taking of evidence in accordance with Sec.  426.432 and Sec.  
426.440 and evaluates the LCD in accordance with Sec.  426.431.
    (d) The process described in paragraphs (a), (b), and (c) of this 
section applies when an LCD record has been supplemented, except that 
discovery and the taking of evidence are not repeated. The period for 
the aggrieved party to file a statement begins when the aggrieved party 
receives the supplement.


Sec.  426.431  ALJ's review of the LCD to apply the reasonableness 
standard.

    (a) Required steps. To review the provision(s) listed in the 
aggrieved party's complaint based on the reasonableness standard, an 
ALJ must:
    (1) Confine the LCD review to the provision(s) of the LCD raised in 
the aggrieved party's complaint.
    (2) Conduct a hearing, unless the matter can be decided on the 
written record.
    (3) Close the LCD review record to the taking of evidence.
    (4) Treat as precedential any previous Board decision under Sec.  
426.482 that involves the same LCD provison(s), same specific issue and 
facts in question, and the same clinical conditions.
    (5) Issue a decision as described in Sec.  426.447.
    (b) Optional steps. The ALJ may do the following to apply the 
reasonableness standard to the provision(s) listed in the aggrieved 
party's complaint:
    (1) Consult with appropriate scientific or clinical experts 
concerning evidence.
    (2) Consider any previous ALJ decision made under Sec.  426.447 
regarding the same provision(s) of the LCD under review and for the 
same clinical conditions.
    (c) Authority for ALJs in LCD reviews when applying the 
reasonableness standard. In applying the reasonableness standard to a 
provision (or provisions) of an LCD, the ALJ must follow all applicable 
laws, regulations, rulings, and NCDs.


Sec.  426.432  Discovery.

    (a) General rule. If the ALJ orders discovery, the ALJ must 
establish a reasonable timeframe for discovery.
    (b) Protective order--(1) Request for a protective order. Any party 
receiving a discovery request may file a motion for a protective order 
before the date of production of the discovery.
    (2) The ALJ granting of a protective order. The ALJ may grant a 
motion for a protective order if (s)he finds that the discovery 
sought--
    (i) Is irrelevant or unduly repetitive;
    (ii) Is unduly costly or burdensome; or
    (iii) Unduly delays the proceeding.
    (c) Types of discovery available. A party may obtain discovery via 
a request for the production of documents, and/or via the submission of 
up to 10 written interrogatory questions, relating to a specific LCD.
    (d) Types of documents. For the purpose of this section, the term 
``documents'' includes relevant information, reports, answers, records, 
accounts, papers, and other data and documentary evidence. Nothing 
contained in this section is interpreted to require the creation of a 
document.
    (e) Types of discovery not available. Requests for admissions, 
depositions, or any other forms of discovery, other than those 
permitted under paragraph (c) of this section, are not authorized.
    (f) Privileged information and proprietary data. The ALJ must not, 
under any circumstance, order the disclosure of privileged information 
or proprietary data filed under seal without the consent of the party 
who

[[Page 63722]]

possesses the right to protection of the information.
    (g) Notification. The ALJ notifies all parties in writing when the 
discovery period closes.


Sec.  426.435  Subpoenas.

    (a) Purpose of a subpoena. A subpoena requires the attendance of an 
individual at a hearing and may also require a party to produce 
evidence authorized under Sec.  426.440 at or before the hearing.
    (b) Filing a motion for a subpoena. A party seeking a subpoena must 
file a written motion with the ALJ not less than 30 days before the 
date fixed for the hearing. The motion must do all of the following:
    (1) Designate the witnesses.
    (2) Specify any evidence to be produced.
    (3) Describe the address and location with sufficient particularity 
to permit the witnesses to be found.
    (4) State the pertinent facts that the party expects to establish 
by the witnesses or documents and whether other evidence may establish 
without the use of a subpoena.
    (c) Response to a motion for a subpoena. Within 15 days after the 
written motion requesting issuance of a subpoena is served on all 
parties, any party may file an opposition to the motion or other 
response.
    (d) Extension for good cause shown. The ALJ may modify the 
deadlines specified in paragraphs (b) and (c) of this section for good 
cause shown.
    (e) Motion for a subpoena granted. If the ALJ grants a motion 
requesting issuance of a subpoena, the subpoena must do the following:
    (1) Be issued in the name of the ALJ.
    (2) Include the docket number and title of the LCD under review.
    (3) Provide notice that the subpoena is issued according to 
sections 1872 and 205(d) and (e) of the Act.
    (4) Specify the time and place at which the witness is to appear 
and any evidence the witness is to produce.
    (f) Delivery of the subpoena. The party seeking the subpoena serves 
it by personal delivery to the individual named, or by certified mail 
return receipt requested, addressed to the individual at his or her 
last dwelling place or principal place of business.
    (g) Motion to quash a subpoena. The individual to whom the subpoena 
is directed may file with the ALJ a motion to quash the subpoena within 
10 days after service.
    (h) Refusal to obey a subpoena. The exclusive remedy for contumacy 
by, or refusal to obey, a subpoena duly served upon any person is 
specified in section 205(e) of the Act (42 U.S.C. 405(e)) except that 
any reference to the ``Commissioner of Social Security'' shall be 
considered a reference to the ``Secretary.''


Sec.  426.440  Evidence.

    (a) Except as provided in this part, the ALJ is not bound by the 
Federal Rules of Evidence. However, the ALJ may apply the Federal Rules 
of Evidence when appropriate, for example, to exclude unreliable 
evidence.
    (b) The ALJ must exclude evidence that (s)he determines is clearly 
irrelevant, immaterial, or unduly repetitive.
    (c) The ALJ may accept privileged information or proprietary data, 
but must maintain it under seal.
    (d) The ALJ may permit the parties to introduce the testimony of 
expert witnesses on scientific and clinical issues, rebuttal witnesses, 
and other relevant evidence. The ALJ may require that the testimony of 
expert witnesses be submitted in the form of a written report, 
accompanied by the curriculum vitae of the expert preparing the report.
    (e) Experts submitting reports must be available for cross-
examination at an evidentiary hearing upon request of the ALJ or a 
party to the proceeding, or the reports will be excluded from the 
record.
    (f) Except as set forth in paragraph (c) of this section or unless 
otherwise ordered by the ALJ for good cause shown, all documents and 
other evidence offered or taken for the record are open to examination 
by all parties.


Sec.  426.444  Dismissals for cause.

    (a) The ALJ may, at the request of any party, or on his or her own 
motion, dismiss a complaint if the aggrieved party fails to do either 
of the following:
    (1) Attend or participate in a prehearing conference (the pre-
hearing may be conducted by telephone) or hearing without good cause 
shown.
    (2) Comply with a lawful order of the ALJ without good cause shown.
    (b) The ALJ must dismiss any complaint concerning LCD provision(s) 
if the following conditions exist:
    (1) The ALJ does not have the authority to rule on that provision 
under Sec.  426.405(d).
    (2) The complaint is not timely. (See Sec.  426.400(b).)
    (3) The complaint is not filed by an aggrieved party.
    (4) The complaint is filed by an individual who fails to provide an 
adequate statement of need for the service from the treating physician.
    (5) The complaint challenges a provision or provisions of an NCD. 
(See Sec.  426.405, regarding the authority of the ALJ.)
    (6) The contractor notifies the ALJ that the LCD provision(s) is 
(are) no longer in effect.
    (7) The aggrieved party withdraws the complaint. (See Sec.  426.423 
for requirements related to withdrawing a complaint regarding an LCD 
under review.)


Sec.  426.445  Witness fees.

    (a) A witness testifying at a hearing before an ALJ receives the 
same fees and mileage as witnesses in Federal district courts of the 
United States. If the witness qualifies as an expert, he or she is 
entitled to an expert witness fee. Witness fees are paid by the party 
seeking to present the witness.
    (b) If an ALJ requests expert testimony, the appropriate office 
overseeing the ALJ is responsible for paying all applicable fees and 
mileage, unless the expert waives payment.


Sec.  426.446  Record of hearing.

    The ALJ must ensure that all hearings are open to the public and 
are electronically, mechanically or stenographically reported. Except 
for privileged information and proprietary data that are filed under 
seal, all evidence upon which the ALJ relies for decision must be 
admitted into the public record. All medical reports, exhibits, and any 
other pertinent document, either in whole or in material part, must be 
offered, marked for identification, and retained in the case record.


Sec.  426.447  Issuance and notification of an ALJ's decision.

    An ALJ must issue to all parties to the LCD review, within 90 days 
of closing the LCD review record to the taking of evidence, one of the 
following:
    (a) A written decision, including a description of appeal rights.
    (b) A written notification stating that a decision is pending, and 
an approximate date of issuance for the decision.


Sec.  426.450  Mandatory provisions of an ALJ's decision.

    (a) Findings. An ALJ's decision must include one of the following:
    (1) A determination that the provision of the LCD is valid under 
the reasonableness standard.
    (2) A determination that the provision of the LCD is not valid 
under the reasonableness standard.
    (3) A statement dismissing the complaint regarding the LCD and a 
rationale for the dismissal.
    (4) A determination that the LCD record is complete and adequate to

[[Page 63723]]

support the validity of the LCD provisions under the reasonableness 
standard.
    (b) Other information. An ALJ's decision must include all of the 
following:
    (1) The date of issuance.
    (2) The docket number of the LCD review.
    (3) A statement as to whether the aggrieved party has filed a claim 
for the service(s) named in the complaint, the date(s)-of-service, and 
the disposition, if known.
    (4) A basis for concluding that the LCD was or was not valid based 
on the application of the reasonableness standard to the record before 
the ALJ, including the contractor's:
    (i) Findings of fact.
    (ii) Interpretations of law.
    (iii) Applications of fact to law.
    (5) A summary of the evidence reviewed. If proprietary or 
privileged data were submitted under seal, the decision must state 
whether the data were material and what role they played in the 
determination, but without disclosing the substance or contents of the 
evidence under seal. A separate statement of the rationale for the 
ALJ's treatment of the sealed evidence must be prepared and kept under 
seal itself. If the ALJ decision is appealed to the Board, this 
statement must be provided to the Board under seal.
    (6) A statement regarding appeal rights.


Sec.  426.455  Prohibited provisions of an ALJ's decision.

    An ALJ's decision may not do any of the following:
    (a) Order CMS or its contractors to add any language to a provision 
or provisions of an LCD.
    (b) Order CMS or its contractors to pay a specific claim.
    (c) Set a time limit for CMS or its contractors to establish a new 
or revised LCD.
    (d) Review or evaluate an LCD other than the LCD under review.
    (e) Include a requirement for CMS or its contractors that specifies 
payment, coding, or systems changes for an LCD, or deadlines for 
implementing these types of changes.
    (f) Order or address how a contractor(s) must implement an LCD.


Sec.  426.457  Optional provisions of an ALJ's decision.

    When appropriate, the ALJ may limit a decision holding invalid a 
specific provision(s) of an LCD to specific clinical indications and 
for similar conditions.


Sec.  426.458  ALJ's LCD review record.

    (a) Elements of the ALJ's LCD review record furnished to the 
public. Except as provided in paragraph (b) of this section, the ALJ's 
LCD review record consists of any document or material that the ALJ 
compiled or considered during the LCD review, including, but not 
limited to, the following:
    (1) The LCD complaint.
    (2) The LCD and LCD record.
    (3) The supplemental LCD record, if applicable.
    (4) Transcripts of record.
    (5) Any other relevant evidence gathered under Sec.  426.440.
    (6) The ALJ's decision.
    (b) Elements of the ALJ's LCD review record furnished to the Board 
under seal. The ALJ's review record must include, under seal, any 
proprietary data or privileged information maintained under seal, and 
such data or information must not be included in the review record 
furnished to the public.


Sec.  426.460  Effect of an ALJ's decision.

    (a) Valid under the reasonableness standard. If the ALJ finds that 
the provision or provisions of the LCD named in the complaint is (are) 
valid under the reasonableness standard, the aggrieved party or parties 
may appeal that (those) part(s) of the ALJ decision to the Board under 
Sec.  426.465.
    (b) Not valid under the reasonableness standard. If the ALJ finds 
that the provision or provisions of the LCD named in the complaint is 
(are) invalid under the reasonableness standard, and no appeal is filed 
by the contractor or CMS under Sec.  426.465(b), the contractor, the 
M+C organization, or other Medicare managed care organization must 
provide the following--
    (1) Individual claim review. (i) If neither the contractor nor CMS 
appeals the ALJ decision under Sec.  426.425(b), and if the party's 
claim or appeal(s) was previously denied, the contractor, an M+C 
organization or another Medicare managed care organization must reopen 
the claim of the party who challenged the LCD and adjudicate the claim 
without using the provision(s) of the LCD that the ALJ found invalid.
    (ii) If a revised LCD is issued, the contractor, the M+C 
organization, and any other Medicare managed care organization within 
the contractor's jurisdiction uses the revised LCD in reviewing claim 
or appeal submissions or request for services delivered or services 
performed on or after the effective date of the revised LCD.
    (iii) If the aggrieved party who sought the review has not yet 
submitted a claim, the contractor adjudicates the claim without using 
the provision(s) of the LCD that the ALJ found invalid.
    (iv) In either case, the claim and any subsequent claims for the 
service provided under the same circumstances is adjudicated without 
using the LCD provision(s) found invalid.
    (2) Coverage determination relief. If neither the contractor nor 
CMS appeals the ALJ decision under Sec.  426.425(b), the contractor 
implements the ALJ decision within 30 days. Any change in policy 
applies prospectively to requests for service or claims filed with 
dates of service after the implementation of the ALJ decision.


Sec.  426.462  Notice of an ALJ's decision.

    After the ALJ has made a decision regarding an LCD complaint, the 
ALJ sends a written notice of the decision to each party. The notice 
must--
    (a) State the outcome of the review; and
    (b) Inform each party to the determination of his or her rights to 
seek further review if he or she is dissatisfied with the 
determination, and the time limit under which an appeal must be 
requested.


Sec.  426.463  Future new or revised LCDs.

    The contractor may not reinstate an LCD provision(s) found to be 
unreasonable unless the contractor has a different basis (such as 
additional evidence) than what the ALJ evaluated.


Sec.  426.465  Appealing part or all of an ALJ's decision.

    (a) Circumstances under which an aggrieved party may appeal part or 
all of an ALJ's decision. An aggrieved party (including one or more 
aggrieved parties named in a joint complaint and an aggrieved party who 
is part of a consolidated LCD review) may appeal to the Board any part 
of an ALJ's decision that does the following:
    (1) States that a provision of an LCD is valid under the 
reasonableness standard; or
    (2) Dismisses a complaint regarding an LCD (except as prohibited in 
paragraph (b) of this section).
    (b) Circumstance under which a contractor or CMS may appeal part or 
all of an ALJ's decision. A contractor or CMS may appeal to the Board 
any part of an ALJ's decision that states that a provision (or 
provisions) of an LCD is (are) unreasonable.
    (c) Stay of an implementation pending appeal. (1) If an ALJ's 
decision finds a provision or provisions of an LCD unreasonable, an 
appeal by a contractor or CMS stays implementation as described under 
Sec.  426.460(b) until the Board issues a final decision.

[[Page 63724]]

    (2) The appeal request must be submitted to the Board in accordance 
with paragraph (e) of this section.
    (d) Circumstances under which an ALJ's decision may not be 
appealed. An ALJ's decision dismissing a complaint is not subject to 
appeal in either of the following circumstances:
    (1) The contractor has retired the LCD provision(s) under review.
    (2) The aggrieved party who filed the complaint has withdrawn the 
complaint.
    (e) Receipt of the appeal by the Board. Unless there is good cause 
shown, an appeal described in paragraphs (a) or (b) of this section 
must be filed with the Board within 30 days of the date the ALJ's 
decision was issued.
    (f) Filing an appeal. (1) To file an appeal described in paragraph 
(a) of this section, an aggrieved party, who sought LCD review, a 
contractor, or CMS must send the following to the Board:
    (i) The full names and addresses of the parties, including the name 
of the LCD.
    (ii) The date of issuance of the ALJ's decision.
    (iii) The docket number that appears on the ALJ's decision.
    (iv) A statement identifying the part(s) of the ALJ's decision that 
are being appealed.
    (2) If an appeal described in paragraph (a) of this section is 
filed with the Board later than the date described in paragraph (c) of 
this section, it must include a rationale stating why the Board must 
accept the late appeal.
    (3) An appeal described in paragraph (a) of this section must 
include a statement explaining why the ALJ's decision should be 
reversed.


Sec.  426.468  Decision to not appeal an ALJ's decision.

    (a) Failure to timely appeal without good cause shown waives the 
right to challenge any part(s) of the ALJ's decision under Sec.  
426.465.
    (b) Unless the Board finds good cause shown for late filing, an 
untimely appeal is dismissed.
    (c) If a party does not timely appeal any part(s) of the ALJ's 
decision on an LCD review to the Board, as provided in this subpart, 
then the ALJ's decision is final and not subject to further review.


Sec.  426.470  Board's role in docketing and evaluating the 
acceptability of appeals of ALJ decisions.

    (a) Docketing the appeal. The Board does the following upon 
receiving an appeal of part or all of an ALJ's decision:
    (1) Dockets the appeal either separately or with similar appeals.
    (2) Assigns a docket number.
    (b) Evaluating the acceptability of the appeal. The Board 
determines if the appeal is acceptable by confirming that the appeal 
meets all of the criteria in Sec.  426.465.
    (c) Unacceptable appeal. If the Board determines that an appeal is 
unacceptable, the Board must dismiss the appeal.
    (d) Acceptable appeal. If the Board determines that an appeal is 
acceptable, the Board does the following:
    (1) Sends a letter to the appellant to acknowledge that the appeal 
is acceptable, and informs them of the docket number.
    (2) Forwards a copy of the appeal and the letter described in 
paragraph (d)(1) of this section to all parties involved in the appeal.
    (3) Requires the ALJ to send a copy of the ALJ's LCD review record 
(maintaining any sealed documents) to the Board and a copy of the 
public record to all parties involved in the appeal.
    (e) No participation as amicus curiae. The Board may not allow 
participation by amicus participants in the review of an LCD.


Sec.  426.476  Board review of an ALJ's decision.

    (a) Review steps. If the Board determines that an appeal is 
acceptable, the Board--
    (1) Permits the party that did not file the appeal an opportunity 
to respond to the appeal;
    (2) Hears oral argument (which may be held by telephone) if the 
Board determines that oral argument would be helpful to the Board's 
review of the ALJ decision;
    (3) Reviews the LCD review record and the parties' arguments; and
    (4) Issues a written decision either upholding, modifying, or 
reversing the ALJ decision, or remanding the case to the ALJ for 
further proceedings.
    (b) Standard of review. (1) In general. The Board determines 
whether the ALJ decision contains any material error, including any 
failure to properly apply the reasonableness standard.
    (2) If the ALJ erred in determining that the contractor's record 
was complete and adequate to support the validity of the LCD, the Board 
remands the case to the ALJ for discovery and the taking of evidence.
    (3) If a party alleges a prejudicial error of procedure, and the 
Board determines that such an error was made, the Board may remand the 
case to the ALJ for further proceedings consistent with the Board 
decision or may take other appropriate steps to correct the procedural 
error.
    (4) Harmless error is not a basis for reversing an ALJ decision.
    (c) Scope of review. In reaching its conclusions, the Board is 
bound by applicable laws, regulations, and NCDs.
    (d) Dismissal as moot. The Board dismisses an appeal by an 
aggrieved party of an ALJ decision finding that an LCD was valid if the 
contractor notifies the Board that it has retired the LCD or revised 
the LCD to remove the LCD provision in question.


Sec.  426.478  Retiring or revising an LCD during the Board's review of 
an ALJ's decision.

    A contractor may retire or revise an LCD during the Board's review 
of an ALJ's decision using the same process described in Sec.  426.420. 
If an LCD is retired or revised to remove completely the challenged 
provision(s), the aggrieved party who sought the review is entitled to 
individual claim review provided at Sec.  426.488(b).


Sec.  426.480  Withdrawing an appeal of an ALJ's decision.

    (a) Withdrawal of an appeal of an ALJ's decision. A party who filed 
an appeal of an ALJ's decision may withdraw the appeal before the Board 
issues a decision regarding the ALJ's decision.
    (b) Process of withdrawing an appeal of an ALJ's decision. To 
withdraw an appeal of an ALJ's decision, the party who filed the appeal 
must send a written notice announcing the intent to withdraw to the 
Board and to any other party.
    (c) Actions the Board must take upon receiving a notice announcing 
the intent to withdraw an appeal of an ALJ's decision--(1) Appeals 
involving one aggrieved party, or initiated by CMS or a contractor. If 
the Board receives a notice withdrawing an appeal of an ALJ's decision 
before the Board has issued its decision, the Board must issue a 
decision dismissing the appeal.
    (2) Appeals involving joint complaints. If the Board receives a 
notice withdrawing an appeal from an aggrieved party who is named in a 
joint appeal before the Board issues its decision, the Board must issue 
a decision dismissing only that aggrieved party from the appeal. The 
Board must continue its review of the ALJ's decision for the remaining 
aggrieved party or parties.


Sec.  426.482  Issuance and notification of a Board decision.

    The Board must issue a written decision, including a description of 
appeal rights, to all parties to the review of the ALJ decision.

[[Page 63725]]

Sec.  426.484  Mandatory provisions of a Board decision.

    (a) Findings. A Board decision must include at least one of the 
following:
    (1) A statement upholding the part(s) of the ALJ decision named in 
the appeal.
    (2) A statement reversing the part(s) of the ALJ decision named in 
the appeal.
    (3) A statement modifying the part(s) of the ALJ decision named in 
the appeal.
    (4) A statement dismissing the appeal of an ALJ decision and a 
rationale for the dismissal.
    (b) Other information. A Board decision must include all of the 
following:
    (1) The date of issuance.
    (2) The docket number of the review of the ALJ decision.
    (3) A summary of the ALJ's decision.
    (4) A rationale for the basis of the Board's decision.


Sec.  426.486  Prohibited provisions of a Board decision.

    A Board decision must not do any of the following:
    (a) Order CMS or its contractors to add any language to a provision 
or provisions of an LCD.
    (b) Order CMS or its contractors to pay a specific claim.
    (c) Set a time limit to establish a new or revised LCD.
    (d) Review or evaluate an LCD other than the LCD named in the ALJ's 
decision.
    (e) Include a requirement for CMS or its contractors that specifies 
payment, coding, or system changes for an LCD or deadlines for 
implementing these changes.
    (f) Order CMS or its contractors to implement an LCD in a 
particular manner.


Sec.  426.487  Board's record on appeal of an ALJ's decision.

    (a) Elements of the Board's LCD review record furnished to the 
public. Except as provided in paragraph (b) of this section, the 
Board's LCD review record consists of any document or material that the 
Board compiled or considered during an LCD review, including, but not 
limited to, the following:
    (1) The LCD complaint.
    (2) The LCD and LCD record.
    (3) The supplemental LCD record, if applicable.
    (4) Transcripts of record.
    (5) Any other relevant evidence gathered under Sec.  426.440.
    (6) The ALJ's decision.
    (7) The Board's decision.
    (b) Elements of the Board's LCD appeal record furnished to the 
court under seal. The Board's LCD review record must include, under 
seal, any proprietary data or privileged information submitted and 
reviewed in the LCD review process, and that data or information must 
not be included in the review record furnished to the public, but the 
information must be maintained, under seal, by the Board.
    (c) Protective order. In any instance where proprietary data or 
privileged information is used in the LCD process and a court seeks to 
obtain or require disclosure of any proprietary data or privileged 
information contained in the LCD record, CMS or the Department will 
seek to have a protective order issued for that information, as 
appropriate.


Sec.  426.488  Effect of a Board decision.

    (a) The Board's decision upholds an ALJ decision that an LCD is 
valid or reverses an ALJ decision that an LCD is invalid. If the 
Board's decision upholds the ALJ decision that an LCD is valid under 
the reasonableness standard or reverses an ALJ decision that an LCD is 
invalid, the contractor or CMS is not required to take any action.
    (b) The Board's decision upholds an ALJ determination that the LCD 
is invalid. If the Board's decision upholds an ALJ determination that 
the LCD is invalid, then the contractor, the M+C organization, or other 
Medicare managed care organization implements the decision as described 
in Sec.  426.460(b).
    (c) The Board's decision reverses a dismissal or an ALJ decision 
that the LCD is valid. If the Board reverses an ALJ decision dismissing 
a complaint or holding that an LCD is valid without requiring discovery 
or the taking of evidence, the Board remands to the ALJ and the LCD 
review continues. If the Board reverses an ALJ decision holding that an 
LCD is valid that is reached after the ALJ has completed discovery and 
the taking of evidence, the Board may remand the case to the ALJ for 
further proceedings, or the Board may find that the provision(s) of the 
LCD named in the complaint is (are) invalid under the reasonableness 
standard, and the contractor, the M+C organization, or other Medicare 
managed care organization provides the relief in Sec.  426.460(b).


Sec.  426.489  Board remands.

    (a) Notice when case is remanded to the ALJ. If the Board remands a 
case to the ALJ, the Board--
    (1) Notifies each aggrieved party who sought the LCD review, 
through his or her representative or at his or her last known address, 
the contractor, and CMS of the Board's remand decision; and
    (2) Explains why the case is being remanded and the specific 
actions ordered by the Board.
    (b) Action by an ALJ on remand. An ALJ takes any action that is 
ordered by the Board and may take any additional action that is not 
inconsistent with the Board's remand order.


Sec.  426.490  Board decision.

    A decision by the Board (other than a remand) constitutes a final 
agency action and is subject to judicial review. Neither the contractor 
nor CMS may appeal a Board decision.

Subpart E--Review of an NCD


Sec.  426.500  Procedure for filing an acceptable complaint concerning 
a provision (or provisions) of an NCD.

    (a) The complaint. An aggrieved party may initiate a review of an 
NCD by filing a written complaint with the Department of Health and 
Human Services Departmental Appeals Board.
    (b) Timeliness of a complaint. An NCD complaint is not considered 
timely unless it is filed with the Board within--
    (1) 6 months of the written statement from each aggrieved party's 
treating physician, in the case of aggrieved parties who choose to file 
an NCD challenge before receiving the service; or
    (2) 120 days of the initial denial notice, in the case of aggrieved 
parties who choose to file an NCD challenge after receiving the 
service.
    (c) Components of a valid complaint. A complaint must include the 
following:
    (1) Beneficiary-identifying information:
    (i) Name.
    (ii) Mailing address.
    (iii) State of residence, if different from mailing address.
    (iv) Telephone number, if any.
    (v) Health Insurance Claim number, if applicable.
    (vi) Email address, if applicable.
    (2) If the beneficiary has a representative, the representative's 
indetifying information must include the following:
    (i) Name.
    (ii) Address.
    (iii) Telephone number.
    (iv) E-mail address (if any)
    (v) Copy of the written authorization to represent the beneficiary.
    (3) Treating physician written statement. A copy of a written 
statement from the treating physician that the beneficiary needs the 
service that is the

[[Page 63726]]

subject of the NCD. This statement may be in the form of a written 
order for the service or other documentation from the beneficiary's 
medical record (such as progress notes or discharge summary) indicating 
that the beneficiary needs the service.
    (4) NCD-identifying information:
    (i) Title of NCD being challenged.
    (ii) The specific provision or provisions of the NCD adversely 
affecting the aggrieved party.
    (5) Aggrieved party statement. A statement from the aggrieved party 
explaining what service is needed and why the aggrieved party thinks 
that the provision(s) of the NCD is (are) not valid under the 
reasonableness standard.
    (6) Clinical or scientific evidence. (i) Copies of clinical or 
scientific evidence that supports the complaint and an explanation for 
why the aggrieved party thinks that this evidence shows that the NCD is 
not reasonable.
    (ii) Any documents or portions of documents that include 
proprietary data must be marked ``proprietary data,'' and include a 
legal basis for that assertion.
    (iii) Proprietary data submitted by a manufacturer concerning a 
drug or device for which the manufacturer has submitted information to 
the Food and Drug Administration, must be considered and given 
substantive weight only when supported by an affidavit certifying that 
the submission contains true and correct copies of all data submitted 
by the manufacturer to the Food and Drug Administration in relation to 
that drug or device.
    (d) Joint complaints--(1) Conditions for a joint complaint. Two or 
more aggrieved parties may initiate the review of an NCD by filing a 
single written complaint with the Board if all of the following 
conditions are met:
    (i) Each aggrieved party named in the joint complaint has a similar 
medical condition or there are other bases for combining the 
complaints.
    (ii) Each aggrieved party named in the joint complaint is filing 
the complaint in regard to the same provision(s) of the same NCD.
    (2) Components of a valid joint complaint. A joint complaint must 
contain the following information:
    (i) The beneficiary-identifying information described in paragraph 
(c)(1) of this section for each aggrieved party named in the joint 
complaint.
    (ii) The NCD-identifying information described in paragraph (c)(2) 
of this section.
    (iii) The documentation described in paragraphs (c)(3) and (c)(4) 
of this section.
    (3) Timeliness of a joint complaint. Aggrieved parties, who choose 
to seek review of an NCD--
    (i) Before receiving the service, must file with the Board a joint 
complaint within 6 months of the written statement from each aggrieved 
party's treating physician; or
    (ii) After receiving the service, must file with the Board a 
complaint within 120 days of each aggrieved party's initial denial 
notice.


Sec.  426.503  Submitting new evidence once an acceptable complaint has 
been filed.

    Once an acceptable complaint has been filed, the aggrieved party 
may submit additional new evidence without withdrawing the complaint 
until the Board closes the record.


Sec.  426.505  Authority of the Board.

    (a) The Board conducts a fair and impartial hearing, avoids 
unnecessary delay, maintains order, and ensures that all proceedings 
are recorded.
    (b) The Board defers only to reasonable findings of fact, 
reasonable interpretations of law, and reasonable applications of fact 
to law by the Secretary.
    (c) The Board has the authority to do any of the following:
    (1) Review complaints by an aggrieved party (or aggrieved parties).
    (2) Dismiss complaints that fail to comply with Sec.  426.500.
    (3) Set and change the date, time, and place of a hearing upon 
reasonable notice to the parties.
    (4) Continue or recess a hearing for a reasonable period of time.
    (5) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding.
    (6) Consult with scientific and clinical experts on its own motion, 
concerning clinical or scientific evidence.
    (7) Set schedules for submission of exhibits and written reports of 
experts.
    (8) Administer oaths and affirmations.
    (9) Examine witnesses.
    (10) Issue subpoenas requiring the attendance of witnesses at 
hearings as permitted by this part.
    (11) Issue subpoenas requiring the production of existing documents 
before, and relating to, the hearing as permitted by this part.
    (12) Rule on motions and other procedural matters.
    (13) Stay the proceeding in accordance with Sec.  426.340.
    (14) Regulate the scope and timing of documentary discovery as 
permitted by this part.
    (15) Regulate the course of a hearing and the conduct of 
representatives, parties, and witnesses.
    (16) Receive, rule on, exclude, or limit evidence, as provided in 
this regulation.
    (17) Take official notice of facts, upon motion of a party.
    (18) Decide cases, upon the motion of a party, by summary judgment 
when there is no disputed issue of material fact.
    (19) Conduct any conference, argument, or hearing in person or, 
upon agreement of the parties, by telephone, picture-tel, or any other 
means.
    (20) Issue decisions.
    (21) Exclude a party from an NCD review for failure to comply with 
a Board order or procedural request without good cause.
    (22) Stay the proceedings for a reasonable time when all parties 
voluntarily agree to mediation or negotiation, and provide mediation 
services upon request.
    (d) The Board does not have authority to do any of the following 
under this part:
    (1) Conduct an LCD review or conduct LCD hearings, except as 
provided by Sec.  426.465.
    (2) Conduct an NCD review or conduct NCD hearings on its own motion 
or on the motion of a nonaggrieved party.
    (3) Issue a decision based on any new evidence without following 
Sec.  426.340, regarding procedures for review of new evidence.
    (4) Review any decisions by CMS to develop a new or revised NCD.
    (5) Conduct a review of any draft NCDs, coverage decision 
memoranda, or withdrawn NCDs.
    (6) Conduct a review of the merits of an unacceptable NCD complaint 
as discussed in Sec.  426.510.
    (7) Conduct an NCD review of any policy that is not an NCD, as 
defined in Sec.  400.202 of this chapter.
    (8) Allow participation by individuals or entities other than--
    (i) The aggrieved party and/or his or her representative;
    (ii) CMS and/or the contractor;
    (iii) Experts called by the parties or Board; or
    (iv) Third parties with a clearly identifiable and substantial 
interest in the outcome of the dispute who have petitioned for and been 
granted permission by the Board to participate in the proceedings as 
amicus curiae.
    (9) Compel the parties to participate in a mediation process or to 
engage in settlement negotiations.
    (10) Deny a request for withdrawal of a complaint by an aggrieved 
party.
    (11) Compel CMS to conduct studies, surveys, or develop new 
information to support an NCD record.
    (12) Deny CMS the right to reconsider, revise, or withdraw an NCD.

[[Page 63727]]

    (13) Subject to the timely filing requirements, deny an aggrieved 
party, CMS, or its contractor the right to appeal an ALJ decision.
    (14) Find invalid applicable Federal statutes, regulations, or 
rulings.
    (15) Enter a decision specifying terms to be included in an NCD.


Sec.  426.506  Ex parte contacts.

    No party or person (except Board staff) communicates in any way 
with the Board on any substantive matter at issue in a case, unless on 
notice and opportunity for all parties to participate. This provision 
does not prohibit a person or party from inquiring about the status of 
a case or asking routine questions concerning administrative functions 
or procedures.


Sec.  426.510  Docketing and evaluating the acceptability of NCD 
complaints.

    (a) Docketing the complaint. The Board does the following upon 
receiving a complaint regarding an NCD:
    (1) Dockets the complaint.
    (2) Determines whether the complaint is--
    (i) The first challenge to a particular NCD; or
    (ii) Related to a pending NCD review.
    (3) Forwards the complaint to the Board member who conducts the 
review.
    (b) Evaluating the acceptability of the complaint. The Board 
determines if the complaint is acceptable by confirming all of the 
following:
    (1) The complaint is being submitted by an aggrieved party or, in 
the case of a joint complaint, that each individual named in the joint 
complaint is an aggrieved party. (In determining if a complaint is 
acceptable, the Board assumes that the facts alleged by the treating 
physician's documentation regarding the aggrieved party's (or parties') 
clinical condition are true.)
    (2) The complaint meets the requirements for a valid complaint in 
Sec.  426.500 and is not one of the documents in Sec.  426.325(b).
    (c) Unacceptable complaint. (1) If the Board determines that the 
complaint is unacceptable, the Board must provide the aggrieved party 
(or parties) one opportunity to amend the unacceptable complaint.
    (2) If the aggrieved party (or parties) fail(s) to submit an 
acceptable amended complaint within a reasonable timeframe as 
determined by the Board, the Board must issue a decision dismissing the 
unacceptable complaint.
    (3) If a complaint is determined to be unacceptable after one 
amendment, the beneficiary is precluded from filing again for 6 months 
after being informed that it is unacceptable.
    (d) Acceptable complaint. If the Board determines that the 
complaint (or amended complaint) is acceptable, the Board does the 
following:
    (1) Sends a letter to the aggrieved party (or parties) 
acknowledging the complaint and informing the aggrieved party (or 
parties) of the docket number and the deadline for CMS to produce the 
NCD record.
    (2) Forwards a copy of the complaint, any evidence submitted in the 
complaint, and the letter described in paragraph (d)(1) of this section 
to CMS.
    (3) Requires CMS to send a copy of the NCD record to the Board and 
all parties to the NCD review within 30 days of receiving the Board's 
letter, a copy of the complaint, and any associated evidence, subject 
to extension for good cause shown.
    (e) Consolidation of complaints regarding an NCD--(1) Criteria for 
condideration. If a review is pending regarding a particular NCD 
provision(s) and no decision has been issued ending the review, and a 
new acceptable complaint is filed, the Board consolidates the 
complaints and conducts a consolidated NCD review if all of the 
following criteria are met:
    (i) The complaints are in regard to the same provision(s) of the 
same NCD, or there are other bases for consolidating the complaints.
    (ii) The complaints contain common questions of law, common 
questions of fact, or both.
    (iii) Consolidating the complaints does not unduly delay the 
Board's decision.
    (2) Decision to consolidate complaint. If the Board decides to 
consolidate complaints, the Board does the following:
    (i) Provides notification that the NCD review is consolidated and 
informs all parties of the docket number of the consolidated review.
    (ii) Makes a single record of the proceeding.
    (iii) Considers the relevant evidence introduced in each NCD 
complaint as introduced in the consolidated review.
    (3) Decision not to consolidate complaints. If the Board decides 
not to consolidate complaints, the Board conducts separate NCD reviews 
for each complaint.
    (f) Public notice of complaint and opportunity for interested 
parties to participate. (1) If an acceptable complaint is the first 
complaint the Board has received challenging the particular NCD or 
provision, then the Board posts notice on its Web site that it has 
received the complaint, specifying a time period for requests to 
participate in the review process.
    (2) If an acceptable complaint challenges an NCD provision when 
review is pending and no decision has been issued ending the review, 
the Board may supplement the public notice on its Web site and extend 
the time for participation requests if indicated.
    (3) The Board may allow participation, in the manner and by the 
deadlines established by the Board, when an NCD is being challenged and 
the Board decides that--
    (i) The amicus participant has a clearly identifiable and 
substantial interest in the outcome of the dispute;
    (ii) Participation would clarify the issues or otherwise be helpful 
in resolution of the dispute;
    (iii) Participation does not result in substantial delay; and
    (iv) The petition for participation meets the criteria in Sec.  
426.513.


Sec.  426.513  Participation as amicus curiae.

    (a) Petition for participation. Any person or organization that 
wishes to participate as amicus curiae must timely file with the Board 
a petition that concisely states--
    (1) The petitioner's interest in the hearing;
    (2) Who will represent the petitioner; and
    (3) The issues on which the petitioner intends to present argument.
    (b) The nature of the proposed amicus participation. An amicus 
curiae is not a party to the hearing but may participate by--
    (1) Submitting a written statement of position to the Board before 
the beginning of the hearing;
    (2) Presenting a brief oral statement or other evidence at the 
hearing, at the point in the proceedings specified by the Board; and
    (3) Submitting a brief or a written statement when the parties 
submit briefs.
    (c) Service by amicus curiae. Serving copies of any briefs or 
written statements on all parties.


Sec.  426.515  CMS' role in making the NCD record available.

    CMS will provide a copy of the NCD record (as described in Sec.  
426.518) to the Board and all parties to the NCD review within 30 days 
of the receipt of the Board's order.


Sec.  426.516  Role of Medicare Managed Care Organizations (MCOs) and 
State agencies in the NCD review process.

    Medicare MCOs and Medicaid State agencies may participate in the 
NCD review process only if they meet the amicus participant criteria 
listed in Sec.  426.510(f)(3) and Sec.  426.513.

[[Page 63728]]

Sec.  426.517  CMS' statement regarding new evidence.

    (a) CMS may review any new evidence that is submitted, regardless 
of whether the Board has stayed the proceedings, including but not 
limited to new evidence:
    (1) Submitted with the initial complaint;
    (2) Submitted with an amended complaint;
    (3) Produced during discovery;
    (4) Produced when the Board consults with scientific and clinical 
experts; and
    (5) Presented during any hearing.
    (b) CMS may submit a statement regarding whether the new evidence 
is significant under Sec.  426.340, by a deadline set by the Board.


Sec.  426.518  NCD record furnished to the aggrieved party.

    (a) Elements of the NCD record furnished to the aggrieved party. 
Except as provided in paragraph (b) of this section, the NCD record 
consists of any document or material that CMS considered during the 
development of the NCD, including, but not limited to, the following:
    (1) The NCD being challenged.
    (2) Any medical evidence considered on or before the date the NCD 
was issued, including, but not limited to, the following:
    (i) Scientific articles.
    (ii) Technology assessments.
    (iii) Clinical guidelines.
    (iv) Statements from clinical experts, medical textbooks, claims 
data, or other indication of medical standard of practice.
    (v) MCAC transcripts.
    (3) Public comments received during the notice and comment period.
    (4) Coverage decision memoranda.
    (5) An index of documents considered that are excluded under 
paragraph (b) of this section.
    (b) Elements of the NCD record not furnished to the aggrieved 
party. The NCD record furnished to the aggrieved party does not include 
the following:
    (1) Proprietary data or privileged information.
    (2) Any new evidence.


Sec.  426.519  NCD record furnished to the Board.

    The NCD record furnished to the Board includes--
    (a) Documents included in Sec.  426.518(a); and
    (b) Privileged information and proprietary data considered that 
must be filed with the Board under seal.


Sec.  426.520  Withdrawing an NCD under review or issuing a revised or 
reconsidered NCD.

    (a) CMS may withdraw an NCD or NCD provision under review before 
the date the Board issues a decision regarding that NCD. Withdrawing an 
NCD or NCD provision under review has the same effect as a decision 
under Sec.  426.560(b).
    (b) CMS may revise an NCD under review to remove or amend the NCD 
provision listed in the complaint through the reconsideration process 
before the date the Board issues a decision regarding that NCD. 
Revising an NCD under review to remove the NCD provision in question 
has the same effect as a decision under Sec.  426.560(b).
    (c) CMS must notify the Board within 48 hours of--
    (1) Withdrawing an NCD or NCD provision that is under review; or
    (2) Issuing a revised or reconsidered version of the NCD that is 
under review.
    (d) If CMS issues a revised or reconsidered NCD, CMS forwards a 
copy of the revised/reconsidered NCD to the Board.
    (e) The Board must take the following actions upon receiving a 
notice that CMS has withdrawn or revised/reconsidered an NCD under 
review:
    (1) If, before the Board issues a decision, the Board receives 
notice that CMS has withdrawn the NCD or revised the NCD to completely 
remove the provision in question, the Board must dismiss the complaint 
and inform the aggrieved party (ies) who sought the review that he or 
she or they will receive individual claim review without the retired/
withdrawn provisions.
    (2) If, before the Board issues a decision, the Board receives 
notice that CMS has revised the NCD provision in question but has not 
removed it altogether, the Board must continue the review based on the 
revised NCD. In this case, CMS must send a copy of the supplemental 
record to the Board and all parties. In that circumstance, the Board 
permits the aggrieved party to respond to the revised NCD and the 
supplemental record.


Sec.  426.523  Withdrawing a complaint regarding an NCD under review.

    (a) Circumstance under which an aggrieved party withdraws a 
complaint regarding an NCD. An aggrieved party who filed a complaint 
regarding an NCD may withdraw the complaint before the Board issues a 
decision regarding that NCD. The aggrieved party may not file another 
complaint concerning the same coverage determination for 6 months.
    (b) Process for an aggrieved party withdrawing a complaint 
regarding an NCD. To withdraw a complaint regarding an NCD, the 
aggrieved party who filed the complaint must send a written withdrawal 
notice to the Board (see Sec.  426.500) and CMS. Supplementing an 
acceptable complaint with new evidence does not constitute a withdrawal 
of a complaint, as described in Sec.  426.503.
    (c) Actions the Board must take upon receiving a notice announcing 
the intent to withdraw a complaint regarding an NCD--(1) NCD reviews 
involving one aggrieved party. If the Board receives a withdrawal 
notice regarding an NCD before the date the Board issued a decision 
regarding that NCD, the Board issues a decision dismissing the 
complaint under Sec.  426.544 and informs the aggrieved party that he 
or she may not file another complaint to the same coverage 
determination for 6 months.
    (2) NCD reviews involving joint complaints. If the Board receives a 
notice from an aggrieved party who is named in a joint complaint 
withdrawing a complaint regarding an NCD before the date the Board 
issued a decision regarding that NCD, the Board issues a decision 
dismissing only that aggrieved party from the complaint under Sec.  
426.544. The Board continues the NCD review if there is one or more 
aggrieved party who does not withdraw from the joint complaint.
    (3) Consolidated NCD reviews. If the Board receives a notice from 
an aggrieved party who is part of a consolidated NCD review withdrawing 
a complaint regarding an NCD before the date the Board issued a 
decision regarding that NCD, the Board removes that aggrieved party 
from the consolidated NCD review and issues a decision dismissing that 
aggrieved party's complaint under Sec.  426.544. The Board continues 
the NCD review if there is one or more aggrieved party who does not 
withdraw from the joint complaint.


Sec.  426.525  NCD review.

    (a) Opportunity for the aggrieved party after his or her review of 
the NCD record to state why the NCD is not valid. Upon receipt of the 
NCD record, the aggrieved party files a statement explaining why the 
NCD record is not complete, or not adequate to support the validity of 
the NCD under the reasonableness standard. This statement must be 
submitted to the Board and CMS, within 30 days (or within additional 
time as allowed by the Board for good cause shown) of the date the 
aggrieved party receives the NCD record.
    (b) CMS response. CMS has 30 days, after receiving the aggrieved 
party's

[[Page 63729]]

statement, to submit a response to the Board in order to defend the 
NCD.
    (c) Board evaluation. (1) After the aggrieved party files a 
statement and CMS responds as described in Sec.  426.525(a) and Sec.  
426.525(b), or the time for filing has expired, the Board applies the 
reasonableness standard to determine whether the NCD record is complete 
and adequate to support the validity of the NCD.
    (2) Issuance of a decision finding the record complete and adequate 
to support the validity of the NCD ends the review process.
    (3) If the Board determines that the NCD record is not complete and 
adequate to support the validity of the NCD, the Board permits 
discovery and the taking of evidence in accordance with Sec.  426.532 
and Sec.  426.540, and evaluate the NCD in accordance with Sec.  
426.531.
    (d) The process described in paragraphs (a), (b), and (c) of this 
section applies when an NCD record has been supplemented, except that 
discovery and the taking of evidence is not repeated. The period for 
the aggrieved party to file a statement begins when the aggrieved party 
receives the supplement.


Sec.  426.531  Board's review of the NCD to apply the reasonableness 
standard.

    (a) Required steps. The Board must do the following to review the 
provision(s) listed in the aggrieved party's complaint based on the 
reasonableness standard:
    (1) Confine the NCD review to the provision(s) of the NCD raised in 
the aggrieved party's complaint.
    (2) Conduct a hearing unless the matter can be decided on the 
written record.
    (3) Close the NCD review record to the taking of evidence.
    (4) Treat as precedential any previous Board decision made under 
Sec.  426.547 that involves the same NCD provision(s), same specific 
issue and facts in question, and the same clinical conditions.
    (5) Issue a decision as described in Sec.  426.547.
    (b) Optional steps. The Board may consult with appropriate 
scientific or clinical experts concerning clinical and scientific 
evidence to apply the reasonableness standard to the provision(s) 
listed in the aggrieved party's complaint.
    (c) Authority for the Board in NCD reviews when applying the 
reasonableness standard. In applying the reasonableness standard to a 
provision (or provisions) of an NCD, the Board must follow all 
applicable laws and regulations, as well as NCDs other than the one 
under review.


Sec.  426.532  Discovery.

    (a) General rule. If the Board orders discovery, the Board must 
establish a reasonable timeframe for discovery.
    (b) Protective order--(1) Request for a protective order. Any party 
receiving a discovery request may file a motion for a protective order 
before the date of production of the discovery.
    (2) The Board granting of a protective order. The Board may grant a 
motion for a protective order if it finds that the discovery sought--
    (i) Is irrelevant or unduly repetitive;
    (ii) Is unduly costly or burdensome; or
    (iii) Will unduly delay the proceeding.
    (c) Types of discovery available. A party may obtain discovery via 
a request for the production of documents, and/or via the submission of 
up to 10 written interrogatory questions, relating to a specific NCD.
    (d) Types of documents. For the purpose of this section, the term 
documents includes relevant information, reports, answers, records, 
accounts, papers, and other data and documentary evidence. Nothing 
contained in this section will be interpreted to require the creation 
of a document.
    (e) Types of discovery not available. Requests for admissions, 
depositions, or any other forms of discovery, other than those 
permitted under paragraph (c) of this section, are not authorized.
    (f) Privileged information or proprietary data. The Board must not 
under any circumstances order the disclosure of privileged information 
or proprietary data filed under seal without the consent of the party 
who possesses the right to protection of the information.
    (g) Notification. The Board notifies all parties in writing when 
the discovery period will be closed.


Sec.  426.535  Subpoenas.

    (a) Purpose of a subpoena. A subpoena requires the attendance of an 
individual at a hearing and may also require a party to produce 
evidence authorized under Sec.  426.540 at or before the hearing.
    (b) Filing a motion for a subpoena. A party seeking a subpoena must 
file a written motion with the Board not less than 30 days before the 
date fixed for the hearing. The motion must do all of the following:
    (1) Designate the witnesses.
    (2) Specify any evidence to be produced.
    (3) Describe the address and location with sufficient particularity 
to permit the witnesses to be found.
    (4) State the pertinent facts that the party expects to establish 
by witnesses or documents and state whether those facts could be 
established by evidence other than by the use of a subpoena.
    (c) Response to a motion for a subpoena. Within 15 days after the 
written motion requesting issuance of a subpoena is served on all 
parties, any party may file an opposition to the motion or other 
response.
    (d) Extension for good cause shown. The Board may modify the 
deadlines specified in paragraphs (b) and (c) of this section for good 
cause shown.
    (e) Motion for a subpoena granted. If the Board grants a motion 
requesting issuance of a subpoena, the subpoena must do the following:
    (1) Be issued in the name of the presiding Board member.
    (2) Include the docket number and title of the NCD under review.
    (3) Provide notice that the subpoena is issued according to 
sections 1872 and 205(d) and (e) of the Act.
    (4) Specify the time and place at which the witness is to appear 
and any evidence the witness is to produce.
    (f) Delivery of the subpoena. The party seeking the subpoena serves 
it by personal delivery to the individual named, or by certified mail 
return receipt requested, addressed to the individual at his or her 
last dwelling place or principal place of business.
    (g) Motion to quash a subpoena. The individual to whom the subpoena 
is directed may file with the Board a motion to quash the subpoena 
within 10 days after service.
    (h) Refusal to obey a subpoena. The exclusive remedy for contumacy 
by, or refusal to obey, a subpoena duly served upon any person is 
specified in section 205(e) of the Act (42 U.S.C. 405(e)) except that 
any reference to the ``Commissioner of Social Security'' shall be 
considered a reference to the ``Secretary.''


Sec.  426.540  Evidence.

    (a) Except as provided in this part, the Board is not bound by the 
Federal Rules of Evidence. However, the Board may apply the Federal 
Rules of Evidence when appropriate, for example, to exclude unreliable 
evidence.
    (b) The Board must exclude evidence that it determines is clearly 
irrelevant or immaterial, or unduly repetitive.
    (c) The Board may accept privileged information or proprietary 
data, but must maintain it under seal.
    (d) The Board may permit the parties to introduce the testimony of 
expert witnesses on scientific and clinical issues, rebuttal witnesses, 
and other relevant evidence. The Board may require that the testimony 
of expert witnesses be submitted in the form of a

[[Page 63730]]

written report, accompanied by the curriculum vitae of the expert 
preparing the report.
    (e) Experts submitting reports must be available for cross-
examination at an evidentiary hearing upon request of the Board or a 
party to the proceeding, or the report will be excluded from the 
record.
    (f) Except as set forth in paragraph (c) of this section or unless 
otherwise ordered by the Board for good cause shown, all documents and 
other evidence offered or taken for the record is open to examination 
by all parties.


Sec.  426.544  Dismissals for cause.

    (a) The Board may, at the request of any party, or on its own 
motion, dismiss a complaint if the aggrieved party fails to do either 
of the following:
    (1) Attend or participate in a prehearing conference (the 
prehearing may be conducted by telephone) or hearing without good cause 
shown.
    (2) Comply with a lawful order of the Board without cause shown.
    (b) The Board must dismiss any complaint concerning NCD 
provision(s) if the following conditions exist:
    (1) The Board does not have the authority to rule on that provision 
under Sec.  426.505(d).
    (2) The complaint is not timely. (See Sec.  426.500(b)).
    (3) The complaint is not filed by an aggrieved party.
    (4) The complaint is filed by an individual who fails to provide an 
adequate statement of need for the service from the treating physician.
    (5) The complaint challenges a provision or provisions of an LCD 
except as provided in Sec.  426.476, regarding the Board's review of an 
ALJ decision. (See Sec.  426.505, regarding the authority of the 
Board.)
    (6) CMS notifies the Board that the NCD provision(s) is (are) no 
longer in effect.
    (7) The aggrieved party withdraws the complaint. (See Sec.  
426.523, for requirements for withdrawing a complaint regarding an NCD 
under review.)


Sec.  426.545  Witness fees.

    (a) A witness testifying at a hearing before the Board receives the 
same fees and mileage as witnesses in Federal district courts of the 
United States. If the witness qualifies as an expert, he or she is 
entitled to an expert witness fee. Witness fees are paid by the party 
seeking to present the witness.
    (b) If the Board requests expert testimony, the Board is 
responsible for paying all applicable fees and mileage, unless the 
expert waives payment.


Sec.  426.546  Record of hearing.

    The Board must ensure that all hearings are open to the public and 
are electronically, mechanically, or stenographically reported. Except 
for privileged information and proprietary data that are filed under 
seal, all evidence upon which the Board relies for decision must be 
admitted into the public record. All medical reports, exhibits, and any 
other pertinent document, either in whole or in material part, must be 
offered, marked for identification, and retained in the case record.


Sec.  426.547  Issuance, notification, and posting of a Board's 
decision.

    The Board must do the following:
    (a) Issue to all parties to the NCD review, within 90 days of 
closing the NCD review record to the taking of evidence, one of the 
following:
    (1) A written decision, including a description of appeal rights.
    (2) A written notification stating that a decision is pending, and 
an approximate date of issuance for the decision.
    (b) Make the decision available at the HHS Medicare Internet site. 
The posted decision does not include any information that identifies 
any individual, provider of service, or supplier.


Sec.  426.550  Mandatory provisions of the Board's decision.

    (a) Findings. The Board's decision must include one of the 
following:
    (1) A determination that the provision of the NCD is valid under 
the reasonableness standard.
    (2) A determination that the provision of the NCD is not valid 
under the reasonableness standard.
    (3) A statement dismissing the complaint regarding the NCD, and a 
rationale for the dismissal.
    (4) A determination that the LCD or NCD record is complete and 
adequate to support the validity of the LCD or NCD provisions under the 
reasonableness standard.
    (b) Other information. The Board's decision must include all of the 
following:
    (1) The date of issuance.
    (2) The docket number of the NCD review.
    (3) A statement as to whether the aggrieved party has filed a claim 
for the service(s) named in the complaint, the date(s)-of-service, and 
the disposition, if known.
    (4) A basis for concluding that the NCD was or was not valid based 
on the application of the reasonableness standard to the record before 
the Board, including CMS':
    (i) Findings of fact.
    (ii) Interpretations of law.
    (iii) Applications of fact to law.
    (5) A summary of the evidence reviewed. Where proprietary or 
privileged data were submitted under seal, the decision must state 
whether the data were material and what role they played in the 
determination, but without disclosing the substance or contents of the 
evidence under seal. A separate statement of the rationale for the 
Board's treatment of the sealed evidence must be prepared and kept 
under seal itself. If the Board decision is appealed to the court, this 
statement must be provided to the court, under seal.
    (6) A statement regarding the right to judicial review.


Sec.  426.555  Prohibited provisions of the Board's decision.

    The Board's decision may not do any of the following:
    (a) Order CMS to add any language to a provision or provisions of 
an NCD.
    (b) Order CMS or its contractors to pay a specific claim.
    (c) Set a time limit for CMS to establish a new or revised NCD.
    (d) Review or evaluate an NCD other than the NCD under review.
    (e) Include a requirement for CMS or its contractors that specifies 
payment, coding, or systems changes for an NCD, or deadlines for 
implementing these types of changes.
    (f) Order or address how CMS implements an NCD.


Sec.  426.557  Optional provisions of the Board's decision.

    When appropriate, the Board may limit a decision holding invalid a 
specific provision(s) of an NCD to specific clinical indications and 
for similar conditions.


Sec.  426.560  Effect of the Board's decision.

    (a) Valid under the reasonableness standard. If the Board finds 
that the provision (or provisions) of an NCD named in the complaint is 
(are) valid under the reasonableness standard, the aggrieved party may 
challenge the final agency action in Federal court.
    (b) Not valid under the reasonableness standard. If the Board finds 
that the provision (or provisions) of an NCD named in the complaint is 
(are) invalid under the reasonableness standard, then CMS instructs its 
contractor, M+C organization, or other Medicare managed care 
organization to provide the following--
    (1) Individual claim review. (i) If the aggrieved party's claim/
appeal(s) was previously denied, the contractor, an

[[Page 63731]]

M+C organization, or another Medicare managed care organization must 
reopen the claim of the party who challenged the LCD and adjudicate the 
claim without using the provision(s) of the NCD that the Board found 
invalid.
    (ii) If a revised NCD is issued, contractors, M+C organizations, 
and other Medicare managed care organizations must use the revised NCD 
in reviewing claim/appeal submissions or request for services delivered 
or services performed on or after the effective date of the revised 
NCD.
    (iii) If the aggrieved party who sought review has not yet 
submitted a claim, the contractor must adjudicate the claim without 
using the provision(s) of the NCD that the Board found invalid.
    (iv) In either case, the claim and any subsequent claims for the 
service provided under the same circumstances, must be adjudicated 
without using the NCD provision(s) found invalid.
    (2) Coverage determination relief. Within 30 days, CMS implements 
the Board decision. Any change in policy is applied prospectively to 
requests for service or claims filed with dates of service after the 
implementation of the Board decision.


Sec.  426.562  Notice of the Board's decision.

    After the Board has made a decision regarding an NCD complaint, the 
Board sends a written notice of the decision to each party. The notice 
must--
    (a) State the outcome of the review; and
    (b) Inform each party to the determination of his or her rights to 
seek further review if he or she is dissatisfied with the 
determination, and the time limit under which an appeal must be 
requested.


Sec.  426.563  Future new or revised or reconsidered NCDs.

    CMS may not reinstate an NCD provision(s) found to be unreasonable 
unless CMS has a different basis (such as additional evidence) than 
what the Board evaluated.


Sec.  426.565  Board's role in making an LCD or NCD review record 
available.

    Upon a request from a Federal Court, the Board must provide to the 
Federal Court a copy of the Board's LCD or NCD review record (as 
described in Sec.  426.587).


Sec.  426.566  Board decision.

    A decision by the Board constitutes a final agency action and is 
subject to judicial review. CMS may not appeal a Board decision.


Sec.  426.587  Record for appeal of a Board NCD decision.

    (a) Elements of the Board's NCD review record furnished to the 
public. Except as provided in paragraph (b) of this section, the 
Board's NCD review record consists of any document or material that the 
Board compiled or considered during an NCD review, including, but not 
limited to, the following:
    (1) The NCD complaint.
    (2) The NCD and NCD record.
    (3) The supplemental NCD record, if applicable.
    (4) Transcripts of record.
    (5) Any other evidence relevant gathered under Sec.  426.540.
    (6) The Board's decision.
    (b) Documents excluded from the NCD review record furnished to the 
court. The NCD review record furnished to the court maintains the seal 
on privileged information or proprietary data that is maintained under 
seal by the Board. In the event a court seeks to obtain or requires 
disclosure of any documents excluded from the NCD record as privileged 
information or proprietary data, CMS or the Department seeks to have a 
protective order issued for those documents, as appropriate.

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

    Dated: July 1, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.

    Approved: October 30, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-27742 Filed 10-31-03; 11:58 am]
BILLING CODE 4120-01-P