[Federal Register Volume 69, Number 79 (Friday, April 23, 2004)]
[Rules and Regulations]
[Pages 21963-21966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9316]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 424

[CMS-1185-F]
RIN 0938-AK79


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

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

ACTION: Final rule.

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SUMMARY: This final rule removes the written statement of intent (SOI) 
procedures, set forth in 42 CFR 424.45, used to extend the time for 
filing Medicare claims. In the absence of an SOI, providers and 
suppliers (and, where applicable, beneficiaries) have from 15 to 27 
months (depending on the date of service) to file claims with Medicare 
contractors.

Effective Date: This final rule is effective on May 24, 2004.

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

I. Background

    The purpose of the statement of intent (SOI) procedures is to 
extend the timely filing period for the submission of an initial 
Medicare claim. An SOI, by itself, does not constitute a claim, but 
rather is a means of extending the deadline for filing a timely and 
valid claim. Our regulations at Sec.  424.32, ``Basic requirements for 
all claims,'' and Sec.  424.44, ``Time limits for filing claims,'' 
require that Medicare claims be filed on Medicare-designated claims 
forms by providers, suppliers, and beneficiaries according to Medicare 
instructions. These claims must be filed by the end of the year 
following the year in which the services were furnished. Services 
furnished in the last 3 months of a calendar year are deemed to be 
furnished in the subsequent calendar year; therefore, a provider, 
supplier, or beneficiary has until December 31 of the second year 
following the year in which the services were furnished to file claims. 
Where an SOI has been filed with the appropriate Medicare contractor 
and the contractor notifies the submitter of the SOI that the SOI is 
valid (that is, the SOI sufficiently identifies the beneficiary and the 
items or services rendered), the period in which to file a claim may be 
extended an additional 6 months after the month of the contractor's 
notice.

[[Page 21964]]

    The original regulation on extending the time to file claims for 
Medicare benefits at 20 CFR 405.1693, was based on 20 CFR 404.613, 
which pertained to applications for Social Security benefits. Section 
404.613 reflected the Social Security program's interest in allowing 
virtually any type of writing to be a placeholder for filing a claim 
for Social Security benefits, provided that a perfected claim was 
submitted shortly thereafter. We instituted the SOI procedures because 
we believed that Medicare beneficiaries might sometimes need extra time 
to file a Part B claim due to extenuating circumstances such as poor 
health or unfamiliarity with the claims filing process.
    However, experience has shown that beneficiaries rarely submit SOIs 
directly. Medicare contractors that we surveyed reported no SOIs were 
directly submitted by beneficiaries for the claims filing period ending 
December 31, 2001, the latest year for which we have complete data. One 
reason for the lack of beneficiary-initiated SOIs is the fact that 
beneficiaries rarely need to file claims. The percentage of Part B 
claims taken on assignment is about 98 percent today, compared to about 
52 percent in 1975. (``Assignment'' is the process by which the 
physician or other supplier agrees to accept Medicare payment in full 
for a Part B covered item or service and files the claim for the 
payment.) Even for Part B claims not taken on assignment, the statute 
now requires the physician or supplier to file the claim and provides 
for sanctions for failure to do so. (See section 1848(g)(4) of the 
Social Security Act (the Act)). The number of Part A claims filed by 
beneficiaries has always been minimal because the statute requires that 
payment for Part A services generally be made only to providers of 
services, with very limited exceptions. (See section 1814(a) of the 
Act). Therefore, we believe that the SOI procedures are no longer 
necessary because they are not serving their intended purpose.
    Further, we believe retention of the SOI procedures is 
counterproductive because of the amount of resources needed to process 
SOIs submitted by States and because the SOI procedures may encourage 
or facilitate inappropriate behavior on the part of some States and 
some providers.
    Each year, our contractors receive an enormous number of SOIs that 
are submitted by States that, having first made Medicaid payments to 
dually-eligible (that is, Medicare and Medicaid) beneficiaries, 
subsequently believe that Medicare should be the proper payor. 
Subsequent to several court decisions in the early 1990s, we permitted 
States to ``stand in the shoes'' of a dually-eligible beneficiary for 
claims filing and appeals. For example, States are not required to 
obtain a beneficiary's signature to request providers to file a Part A 
claim or to file an appeal. We also have permitted States and their 
contractors to file SOIs on the States' behalf or as appointed 
representatives of the beneficiaries.
    The great majority of SOIs are filed on paper and therefore, must 
be manually processed to determine whether they are valid. According to 
our requirements, SOIs must contain detailed and specific information 
to ensure that a subsequently filed claim was in fact protected by an 
SOI. (See Program Memorandum AB-03-61)). Also, these SOIs are typically 
filed in large batches near the end of the timely filing period. All of 
these factors contribute to the amount of resources and consequent cost 
incurred in processing the SOIs.
    We also believe that the SOI procedures may contribute to States 
``paying and chasing'' instead of following the required cost-avoidance 
procedures and to the incorrect submission of claims to Medicaid by 
providers. Our regulations at Sec.  433.139(b) provide that, unless a 
waiver is granted under Sec.  433.139(e), a State Medicaid agency that 
has established the probable existence of third party liability 
(including Medicare liability) at the time a claim for Medicaid payment 
is presented to it, must reject the claim and return it to the provider 
for a determination of liability. This process is known as cost 
avoidance. Some States, however, have been paying thousands of Medicaid 
claims, despite the knowledge that the beneficiaries involved are 
entitled to Medicare. These States subsequently identify a significant 
portion of the claims that they have paid as ones for which Medicare is 
the proper payor, and use the SOI procedures to extend the time for 
providers to file claims.
    The fact that large numbers of claims are paid first by Medicaid 
and then identified as payable by Medicare raises the inference that 
providers are not as careful as they should be as to which payor they 
initially submit claims, and that States, by initially paying these 
claims, are not fully practicing cost avoidance. We are concerned that 
the availability of the SOI procedures to extend the time for filing 
claims is contributing to inappropriate behavior. We also note that 
many of the claims filed with Medicare subsequent to the SOIs are 
``demand bills,'' which require full medical review, thus increasing 
the claims processing cost for our contractors. (Where a provider 
believes that a service is not covered by Medicare but the beneficiary 
(or the State as the beneficiary's representative) requests the 
provider to bill Medicare regardless, the provider's Medicare provider 
agreement requires it to bill Medicare. This bill is known as a 
``demand bill.'' It requires full medical review because the fact that 
the provider initially believed that the service was not covered by 
Medicare raises the question of whether Medicare must pay it.)
    Moreover, we are aware that providers and suppliers sometimes file 
SOIs. However, we believe, that the filing periods in Sec.  424.44 (15 
to 27 months, depending on the date the service was furnished) are more 
than an adequate amount of time to submit claims.
    The percentage of claims processed and paid compared to the total 
number of SOI claim requests received was 4.4 percent, based on a 
survey of SOI requests filed with Medicare contractors for the claims 
filing period that ended December 31, 2001 (the latest year for which 
data were available).
    The entire SOI claims process is performed manually. The steps in 
this process are the following:
     Determining if an SOI request is valid or 
invalid;
     Examining a later-submitted claim to determine 
whether the claim was protected by the SOI that was submitted earlier; 
and
     Adjudicating the claim (which, in many cases, 
involves full medical review).
    Based on the survey of SOI claim requests submitted to Medicare 
contractors for 2001, we have estimated the manual processing of SOI 
claim requests to cost approximately $12,000,000. (It is noted that 
this cost estimate may vary from year to year because of the following: 
(1) The number of SOI claim requests submitted by providers, suppliers 
and States is not a constant number and varies from year to year; (2) 
the manual processing costs may vary for each SOI claim request, 
depending on the size and complexity of the SOI claim request; and, (3) 
changes in State billing practices may result in fewer submissions of 
SOI claim requests, if a State chooses to ``cost avoid'' rather than 
``pay and chase.'')
    It is also noted that the above cost estimate does not include 
overtime costs and is not inclusive of all SOI claim requests submitted 
to all Medicare contractors for the claims filing period that ended 
December 31, 2001. In addition, this cost estimate does not include 
hearing costs, for example, in the case of a provider or supplier who 
disagrees with the final claim

[[Page 21965]]

determination and files an appeal. As stated, only 4.4 percent of SOI 
claim requests submitted were actually processed and paid. Therefore, 
based on the above information, we have concluded that the SOI process 
is a resource burden on Medicare contractors, providers, and suppliers, 
with little return or benefit to the States.
    This final rule will have little financial impact on entities that 
currently submit SOI requests. The requirements for submitting a claim 
are similar to the requirements for submitting a valid SOI claim 
request. Since an SOI must be filed within the timely filing period, we 
anticipate no additional burden for these entities to submit claims 
timely. Therefore, for the above reasons, we are removing Sec.  424.45 
from the regulations.

II. Provisions of the Proposed Regulation

    On July 25, 2003 we published a proposal in the Federal Register 
(68 FR 44000) to remove Sec.  424.45. In the absence of Sec.  424.45, 
providers, suppliers and beneficiaries will still have from 15 to 27 
months to submit claims to Medicare.

III. Analysis of and Responses to Public Comments

    We received two timely public comments on the July 25, 2003 
proposed rule concerning the removal of the SOI procedures. A summary 
of the comments and responses follow:
    Comment: A commenter wrote that the SOI process benefits some 
physician groups that experience physician turnover. The commenter 
stated that the physician turnover results in extended delays in 
obtaining needed documents to complete the CMS-855 enrollment forms. 
The SOI process has enabled this entity to bill the Medicare program 
after the timely filing period has expired, for services furnished by 
physicians who had not completed these forms.
    Response: We believe that the timely filing period of 15 to 27 
months (depending on the date of service) is sufficient time for a 
physician group to submit the necessary enrollment paperwork and have 
it processed by Medicare prior to filing a claim. A physician group 
must have all the necessary provider/supplier enrollment paperwork 
completed for all of its physicians before the physicians furnish 
services to Medicare beneficiaries. In any case where this is not 
feasible, the paperwork must be completed and signed in a reasonable 
time following the delivery of services. This will allow the physician 
group to submit the enrollment forms and have them processed prior to 
the expiration of the timely filing period.
    Comment: One commenter believes that elimination of the SOI process 
will simply shift a burden from Medicare contractors to dually-eligible 
beneficiaries and their providers. The commenter believes that 
providers will experience cash flow problems if States deny Medicaid 
payment until after a Medicare demand bill is processed and provided 
two suggestions to address the concerns. Finally, the commenter asserts 
that changing the timeframe in which demand bills must be submitted 
will not reduce the burden on Medicare contractors, because contractors 
will still need to process demand bills.
    The commenter suggested that if the current SOI process is 
eliminated, then the Medicare regulation on the time limits for filing 
claims be modified to extend the timely filing period in two instances. 
First, the time limit for claims that are submitted within the timely 
filing period but are rejected by Medicare's claims processing system 
during the last three months of the filing period should automatically 
be extended for at least an additional three months. Second, if we 
experience systems problems that prevent claims processing, the timely 
filing period should be extended for a period equal to the number of 
days within the timely filing period that we are unable to process a 
provider's claims (because of the systems problems).
    Response: We disagree that eliminating the SOI procedures will 
shift a burden to providers. Instead, we expect that there will be 
improved efficiencies for States and providers, as well as Medicare 
contractors, because there will be incentives to bill and pay correctly 
the first time. One reason for our proposal to eliminate the SOI 
process is our belief that it may contribute to the inappropriate 
billing and payment practices of some providers and States concerning 
claims for dually-eligible beneficiaries. By removing what amounts to 
an automatic extension of time for States to decide whether a claim 
that it has paid must be submitted to Medicare, we hope to focus 
States' and providers' attention on whether a claim must be paid by 
Medicaid or Medicare in the first instance. We believe that providers 
will wish to avoid the possibility of having to file a claim with 
Medicare on short notice because they submitted it to Medicaid 
inappropriately, and that States will wish to avoid having to notify 
their Medicaid providers on short notice that they have to submit 
claims to Medicare. We note that processing written SOIs is a separate 
process from processing demand bills. Therefore, eliminating the SOI 
process will, in fact, reduce a resource burden on Medicare 
contractors.
    The timely filing period is 15 to 27 months, depending on the date 
of service. We believe this already provides sufficient time for 
providers to submit claims and to correct any problems that cause a 
rejection of a claim. Providers and suppliers must file claims promptly 
to allow enough time to correct any claims that may be rejected for 
technical reasons.
    Additionally, current rules already protect providers in potential 
instances of our systems problems that prevent claims processing. If a 
claim is submitted timely and there is a delay in our processing of a 
claim, there is no need for an extension of the timely filing period. 
If a claim cannot be accepted by us because of a CMS systems problem 
(and not a systems problem of the provider), then the administrative 
error provision specified at Sec.  424.44(b) may be applied to extend 
the timely filing period.

IV. Provisions of this Final Rule

    This final rule incorporates the provisions of the proposed rule by 
removing the SOI procedures found at Sec.  424.45.

V. Collection of Information Requirements

    This document does not impose new information collection and 
recordkeeping requirements but does remove an old one.
    Removing Sec.  424.45 will reduce costs and workload burdens on 
providers and suppliers. Specifically, by removing the written SOI 
procedures, we hope to: (1) Reduce provider, supplier and Medicare 
contractor resource burdens; (2) reduce the burden placed on providers 
and suppliers from having to resubmit claims, and also from having to 
reimburse States for claims that were incorrectly paid for by the 
States; (3) reduce Medicare contractor administrative costs; (4) 
eliminate changes to existing intermediary/carrier claims payment 
systems; (5) encourage States to pursue cost-avoidance procedures to 
ensure that Medicaid is truly the payor of last resort, and thus reduce 
the need to use ``pay and chase'' procedures; (6) reduce the necessity 
for medical review at the contractor level; (7) strengthen Medicare and 
Medicaid program integrity efforts to ensure correct payment the first 
time; and (8) improve coordination efforts between the Medicare and 
Medicaid programs.

[[Page 21966]]

VI. Regulatory Impact Statement

    We have examined the impacts of this final rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects; distributive impacts; and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more annually). This 
is not a major rule. This final rule will have no substantial economic 
impact on either costs or savings to the Medicare or Medicaid programs.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million annually (see 65 FR 69432). Individuals and 
States are not included in the definition of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital located outside of a Metropolitan Statistical 
Area with fewer than 100 beds.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and we certify, that this rule 
will not have a significant impact on a substantial number of small 
entities or rural hospitals because providers and suppliers will still 
have 15 to 27 months to file claims. Although some providers and 
suppliers may be small entities or rural hospitals, they are not filing 
a significant number of SOIs and the information required to file a 
valid SOI is essentially the same information that providers and 
suppliers are required to provide when filing a valid claim. We are 
aware that some States rely on the SOI process at the end of the period 
for Medicare timely claims filing, to pay and recover expenditures for 
some of their claims that could have been paid by Medicare. Elimination 
of the SOI process will require that these States revert to the 
standard recovery process in the Medicaid regulations to assure that 
claims are filed within the Medicare timely filing requirements (15 to 
27 months). While the elimination of the SOI process will not 
completely eliminate the issue of ``pay and chase,'' we believe it will 
encourage States to pursue cost-avoidance procedures to ensure that 
Medicaid is truly the payer of last resort, reducing the need to use 
``pay and chase'' procedures.
    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits before issuing any 
rule that may result in an expenditure in any one year by State, local, 
or tribal governments, in the aggregate, or by the private sector, of 
$110 million. This rule would not have such an effect on State, local, 
or tribal governments, or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes a final rule that would impose 
substantial direct requirement costs on State and local governments, 
preempts State law, or otherwise has Federalism implications.
    While this rule will not have a substantial effect on State and 
local governments, States need to preserve their ability to 
appropriately recover expenditures for Medicaid benefits that should 
have been paid by Medicare. We are aware that some States rely on the 
SOI process, at the end of the period for Medicare timely claims 
filing, to recover expenditures for some of their claims that could 
have been paid by Medicare. Elimination of the SOI process will require 
that these States revert to the standard recovery process in the 
Medicaid regulations to assure that claims are filed within the 
Medicare timely filing requirements (15 to 27 months).
    For the reasons discussed earlier in this regulation, we believe 
this timeframe is adequate to address the States' need for recovering 
claims from Medicare. We will continue to address the States' concerns 
on these payment and recoupment issues, through the efforts of the 
State Technical Advisory Group on Third Party Liability, and will 
continue to consult with States about issues affecting their ability to 
recover expenditures for some of their claims that should have been 
covered by Medicare.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 424

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

0
For reasons set forth in the Preamble, the Centers for Medicare and 
Medicaid Services is amending 42 CFR chapter IV as set forth below.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
1. The authority citation for part 424 continues to read as follows:

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


Sec.  424.45  [Removed]

0
2. Section 424.45 is removed.

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

    Dated: December 10, 2003.
Thomas A Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: January 21, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-9316 Filed 4-22-04; 8:45 am]
BILLING CODE 4120-01-P