[Federal Register Volume 69, Number 66 (Tuesday, April 6, 2004)]
[Rules and Regulations]
[Pages 17933-17935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7716]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 411 and 424

[CMS-1810-CN]
RIN 0938-AK67


Medicare Program; Physicians' Referrals to Health Care Entities 
With Which They Have Financial Relationships (Phase II); Correction

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

ACTION: Correction of interim final rule with comment period.

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SUMMARY: This document corrects a technical error in the interim final 
rule with comment period published in the Federal Register on March 26, 
2004, entitled ``Physicians' Referrals to Health Care Entities With 
Which They Have Financial Relationships (Phase II).''

EFFECTIVE DATE: This correction is effective July 26, 2004.

FOR FURTHER INFORMATION CONTACT: Joanne Sinsheimer (410) 786-4620.

SUPPLEMENTARY INFORMATION:

I. Background

    In FR Doc. 04-6668 of March 26, 2004 (69 FR 16054), there was a 
technical error that we are identifying and correcting in the 
Correction of Errors section below. (The provisions in this correction 
are effective as if they were included in the document published March 
26, 2004.)
    We inadvertently omitted two sections from the preamble of the 
document, ``Section IX. Reporting Requirements'' and ``Section X. 
Sanctions.'' We are publishing the omitted sections in this correction.

II. Correction of Errors

    In FR Doc. 04-6668 of March 26, 2004 (69 FR 16054), make the 
following correction--
    On page 16099, column three, before the fourth paragraph, add 
``Section IX. Reporting Requirements'' and ``Section X. Sanctions'' to 
read as follows:

IX. Reporting Requirements (Section 1877(f) of the Act; Phase II; Sec.  
411.361)

[If you choose to comment on issues in this section, please include 
the caption ``Reporting Requirements'' at the beginning of your 
comments.]

    Existing Law: Section 1877(f) of the Act sets forth certain 
reporting requirements for all entities providing covered items or 
services for which payment may be made under Medicare. Under section 
1877(f) of the Act, each entity must report to the Secretary 
information concerning the entity's ownership, investment, and 
compensation arrangements, including--
    (1) The covered items and services provided by the entity, and
    (2) The names and unique physician identification numbers 
(UPINs) of all physicians who have an ownership or investment 
interest in, or a compensation arrangement with, the entity, or 
whose immediate relatives have such an ownership or investment 
interest in, or compensation relationship with, the entity.
    The requirements do not apply to DHS provided outside the United 
States or to entities that the Secretary determines provide services 
for which payment may be made under Medicare very infrequently.
    The required information must be provided in a form, manner, and 
at such times that the Secretary specifies. Section 1877(g)(5) of 
the Act provides that any person who is required, but fails, to meet 
one of these reporting requirements is subject to a civil money 
penalty of not more than $10,000 for each day for which reporting is 
required to have been made.
    The August 1995 final rule with comment period (60 FR 41914), 
which applied only to referrals for clinical laboratory services, 
addressed the provisions of sections 1877(f) and (g)(5) of the Act 
in Sec.  411.361. Section 411.361 stated that the reporting 
requirements applied to all entities furnishing items or services 
for which payment may be made under Medicare, except for entities 
that provide 20 or fewer Part A and Part B services during a 
calendar year or DHS provided outside the United States. Entities 
were required to submit information to us concerning any ownership 
or investment interest or any compensation arrangement, as described 
in section 1877 of the Act. We specified that the information 
submitted must include at least the following:
    (1) The name and UPIN of each physician who has a financial 
relationship with the entity;
    (2) The name and UPIN of each physician with an immediate 
relative (as then defined in Sec.  411.351) who has a financial 
relationship with the entity;
    (3) The covered items and services provided by the entity; and
    (4) With respect to each physician identified under (1) and (2), 
the nature of the financial relationship (including the extent and/
or value of the ownership or investment interest or the compensation 
arrangement, if requested by us).
    Section 411.361 of the August 1995 final rule provided that the 
required information must be submitted on a form prescribed by us 
within the time period specified by the servicing carrier or 
intermediary. Entities were given at least 30 days from the date of 
the carrier's or intermediary's request to provide the information. 
Thereafter, the entity must provide updated information within 60 
days of the date of any change in the submitted information. This 
section required the entity to retain documentation sufficient to 
verify the information provided on the forms and, upon request, to 
make that documentation available either to us or to the Office of 
the Inspector General (OIG). Information furnished under Sec.  
411.361 was subject to public disclosure in accordance with the 
provisions of 42 CFR part 401.
    Proposed Rule: The January 1998 proposed rule stated that we 
were in the process of developing a procedure and form for 
implementing the reporting requirements and that we planned to 
notify affected parties about the procedures at a later date (63 FR 
1703). We stated that, until then, physicians and entities were not 
required to report to us. We also noted that the 60-day timeframe 
for reporting updated information could be onerous and thus, we 
proposed to modify Sec.  411.361 to require entities to report 
annually to us updated information regarding their financial 
relationships with physicians.
    The proposed rule also noted in Sec.  411.361(d) that a 
reportable financial relationship was defined as ``any ownership or 
investment interest or any compensation arrangement, as described in 
section 1877 of the Act.'' Under that definition, we were concerned 
that an entity could decide that it fell within one of the 
exceptions and thus report no information to us. As a result, we 
would have no opportunity to scrutinize the entity's financial 
arrangements to determine if that assessment was correct. We 
proposed to modify Sec.  411.361(d) to include those relationships 
excepted in the statute.
    We also proposed that the information that an entity must 
acquire, retain, and submit to us if requested, for each physician 
identified in the rule, include the nature of the financial 
relationship (including the extent and/or value of the ownership or 
investment interest or any compensation arrangement).
    Final Rule: The final rule generally requires entities to retain 
reportable information and furnish it upon request. For reasons set 
out in more detail in the responses to comments that follow, we have 
reconsidered some of the proposed provisions regarding reporting 
requirements.
    We have modified the proposed definition of ``reportable 
financial relationship'' in Sec.  411.361(d). While we are still 
including in the definition those relationships excepted under Sec.  
411.355 through Sec.  411.357, we are specifically excluding from 
that definition ownership or investment interests in publicly-traded 
securities and mutual funds if such interests satisfy the exceptions 
in Sec.  411.356(a) or Sec.  411.356(b), respectively. This 
exclusion from the definition of reportable financial relationships 
for publicly-traded securities and mutual funds is limited to 
shareholder information; contractual arrangements concerning these 
ownership or investment interests are reportable financial 
relationships.
    We are also modifying Sec.  411.361(c)(4) to specify that the 
information required is only that information that the entity knows 
or should know in the course of prudently conducting business, 
including, but not limited to, records that the entity is already 
required to retain to comply with Internal

[[Page 17934]]

Revenue Service and Securities and Exchange Commission rules and 
other rules under the Medicare and Medicaid programs.
    We do not intend to develop any forms for the submission of 
information. We are requiring that records be retained for the 
length of time specified by the applicable regulatory requirements 
for the information, including the Internal Revenue Service, the 
Securities and Exchange Commission, and the Medicare and Medicaid 
programs and be made available upon request. We have dropped the 
requirement to report updated information every 12 months.
    Comment: Most commenters were concerned that the proposed 
reporting requirements were unduly burdensome.
    Response: We believe we have significantly reduced the burden on 
entities with the modifications we have made to the proposed rule.
    Comment: Several organizations requested that we limit the 
reporting requirements to only those financial relationships that do 
not meet a Stark exception. Of those, half of the commenters asked 
that we specifically exempt publicly-traded securities and mutual 
funds.
    Response: We do not agree that all excepted financial 
relationships should be exempt from the reporting requirements. We 
are still concerned that an entity could decide that one or more of 
its financial relationships falls within an exception, fail to 
retain data concerning those financial relationships, and thereby 
prevent the government from reviewing the arrangements to see if 
they qualify for an exception. However, we are persuaded that, in 
the case of shareholder information for ownership interests in 
publicly-traded securities and mutual funds that satisfies the 
exceptions in Sec.  411.356(a) or Sec.  411.356(b), respectively, 
the burden of collecting, retaining, and reporting shareholder 
information outweighs the benefit of reviewing it, and the potential 
for abuse is minimal. Therefore, we are providing that shareholder 
information for ownership interests in publicly-traded securities 
and mutual funds need not be reported. Nevertheless, entities must 
report other financial relationships with referring physicians who 
are shareholders, such as personal services arrangements.
    Comment: Several commenters were of the opinion that the 
reporting requirements exceeded those in the statute and thus, we 
were without statutory authority to impose them.
    Response: As explained in the January 2001 final rule, we 
believe that the statute allows us to gather information on all 
financial relationships without regard to whether the relationships 
qualify for an exception. Section 1877(f) of the Act states that 
each entity providing any covered items or services for which 
payment may be made under Medicare shall provide the Secretary with 
information concerning the entity's ``ownership, investment, and 
compensation arrangements, including * * * the names and unique 
physician identification numbers of all physicians with an ownership 
or investment interest (as described in subsection (a)(2)(A)), or 
with a compensation arrangement (as described subsection (a)(2)(B)), 
in the entity. * * *'' (emphasis added). Thus, we believe the 
statute allows us to gather data on financial relationships, 
including, but not limited to, financial relationships that do not 
qualify for an exception under sections 1877(a)(2)(A) or 
1877(a)(2)(B) of the Act.
    Comment: Several commenters suggested that we confine our 
requests for information to records that an entity is already 
required to retain under Internal Revenue Service, Securities and 
Exchange Commission, and Medicare and Medicaid requirements.
    Response: We agree with the commenters that these records should 
be retained to provide information, upon request, concerning an 
entity's financial relationships. However, we are also requiring 
that entities retain, and provide upon request, other records that 
they know or should know about in the course of prudently conducting 
business and that would evidence the nature of the financial 
relationships (including the extent and/or value of the ownership or 
investment interest or compensation arrangement).
    Comment: Three organizations believed that the ``knows or should 
know'' standard was too vague to provide guidance concerning which 
records should be retained.
    Response: We disagree with the commenters. Entities are required 
to discern which records they know or should know about in the 
course of prudently conducting business on a daily basis. We are 
only requiring retention of those records that entities would retain 
in the prudent conduct of their business. We are not requiring that 
any additional records be created specifically to comply with the 
requirements of this rule. We have defined the scope of the required 
information and the reportable financial relationships with 
sufficient specificity to allow an entity to determine what 
information should be retained.
    Comment: Two associations believed that 30 days was not enough 
time in which to respond to a request for information.
    Response: The regulation states that entities must submit the 
required information within the time period specified in the 
request, but will be given at least 30 days from the date of the 
request to provide the information. Since the records requested will 
already be retained in the course of conducting business, in most 
cases 30 days should be sufficient to collect them in response to a 
request. In addition, the rule states that the entity will be given 
at least 30 days, leaving open the possibility of a greater period 
of time if reasonably necessary.
    Comment: Two commenters felt that the information requested 
should be confidential.
    Response: We are bound to comply with the Freedom of Information 
Act (FOIA), (5 U.S.C. Sec.  552), as implemented by the Department's 
regulations at 45 CFR part 5 and our own regulations as 42 CFR part 
401. To the extent we are obligated to disclose records that we have 
received pursuant to the physician self-referral reporting 
requirements, we cannot maintain these records as confidential. 
However, because Sec.  411.361(e) requires information to be 
disclosed to CMS or the OIG, we are modifying Sec.  411.361(g) to 
provide that information furnished to either CMS or the OIG will be 
subject to public disclosure in accordance with 42 CFR part 401. 
Nevertheless, to the extent that reported information is protected 
from disclosure under the Privacy Act of 1974 (December 31, 1974, 
Pub. L. 93-579), the information will not be disclosed in response 
to a FOIA request.

X. Sanctions (Section 1877(g) of the Act; Phase II; Sec.  411.353)

[If you choose to comment on issues in this section, please include 
the caption ``Sanctions'' at the beginning of your comments.]

    Violations of the physician self-referral prohibition are 
subject to the following sanctions: (i) Nonpayment of claims for DHS 
furnished as a result of a prohibited referral, and (ii) the 
obligation to refund amounts collected as a result of submitting 
claims for DHS performed pursuant to a prohibited referral. These 
sanctions are addressed in section III.B of the January 1998 
proposed rule (63 FR 1695), in section III. A of the Phase I 
preamble (66 FR 864), in section II.A of this Phase II preamble, and 
in the regulations at Sec.  411.353. We are making no changes to the 
sanction provisions in Sec.  411.353. Under section 1877(g)(3) and 
(g)(4), individuals and entities that knowingly violate the 
prohibition are subject to civil monetary penalties (CMPs). The CMP 
sanctions set forth in section 1877(g)(3) and (g)(4) are enforced by 
the OIG in accordance with the regulations at 42 CFR part 1003.

III. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of a notice take effect. We can waive this procedure, 
however, if we find good cause that notice and comment procedure is 
impracticable, unnecessary, or contrary to the public interest and 
incorporate a statement of the finding and the reasons for it into the 
notice issued.
    We believe that it is unnecessary to subject the correction 
identified above to public comment because it merely provides preamble 
language that was inadvertently omitted from the regulation preamble. 
For this reason, and because the public will have an opportunity to 
comment on this section with the interim final rule with comment 
period, we find it unnecessary to provide separately the opportunity 
for comment on the technical correction made in this notice. Therefore, 
we find good cause to waive notice and comment procedures.

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


[[Page 17935]]


    Dated: March 31, 2004.
Ann C. Agnew,
Executive Secretary to the Department.
[FR Doc. 04-7716 Filed 4-1-04; 11:57 am]
BILLING CODE 4120-01-P