[Federal Register Volume 69, Number 141 (Friday, July 23, 2004)]
[Proposed Rules]
[Pages 43956-43964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16791]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 402

[CMS-6146-P]
RIN 0938-AL53


Medicare Program; Revised Civil Money Penalties, Assessments, 
Exclusions, and Related Appeals Procedures

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish the procedures for imposing 
exclusions for certain violations of the Medicare program. These 
procedures are based on the procedures that the Office of Inspector 
General has published for civil money penalties, assessments, and 
exclusions under their delegated authority. These regulations would 
protect beneficiaries from health care providers and entities found in 
noncompliance with Medicare rules and regulations and would otherwise 
improve the safeguard provisions under the Medicare statute.

DATES: To be assured consideration, comments must be received at the 
appropriate address, as provided below, no later than 5 p.m. on 
September 21, 2004.

ADDRESSES: In commenting, please refer to file code CMS-6146-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission or e-mail. Mail written comments (one 
original and three copies) to the following address only: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-6146-P, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and three copies) to one of the following 
addresses: Room 443-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Joel Cohen, (410) 786-3349.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-6146-P and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: Comments received timely will be 
available for public inspection as they are processed, generally 
beginning approximately 3 weeks after publication of a document, at the 
headquarters of the Centers for Medicare & Medicaid Services, 7500 
Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of 
each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view 
public comments, phone (410) 786-7197.
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order

[[Page 43957]]

payable to the Superintendent of Documents, or enclose your Visa or 
Master Card number and expiration date. Credit card orders can also be 
placed by calling the order desk at (202) 512-1800 or by faxing to 
(202) 512-2250. The cost for each copy is $10. As an alternative, you 
can view and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
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Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. The Web site address is: http://www.access.gpo.gov/nara/index.html.

I. Background

    [If you choose to comment on issues in this section, please include 
the caption ``Background'' at the beginning of your comments.]
    Section 2105 of the Omnibus Budget Reconciliation Act of 1981 (Pub. 
L. 97-35) added section 1128A to the Social Security Act (the Act) to 
authorize the Secretary of Health and Human Services to impose civil 
money penalties, assessments, and/or exclusion from the Medicare 
program for certain health care facilities, practitioners, suppliers or 
other entities under prescribed circumstances. Exclusion provides the 
ultimate enforcement tool for agencies attempting to establish 
compliance with legal and program standards, and is used in addition to 
potential civil, criminal, and/or administrative proceedings.
    Since 1981, the Congress has significantly increased both the 
number and types of circumstances under which the Secretary may impose 
an exclusion of a provider or an entity from the Medicare and State 
health care programs. The Secretary has delegated the authority for 
these provisions to either the Office of Inspector General (OIG) or the 
Centers for Medicare & Medicaid Services (CMS) (59 FR 52967, October 
20, 1994). The exclusion authorities delegated to the OIG address 
fraud, misrepresentation, or falsification, while those that address 
noncompliance with programmatic or regulatory requirements are 
delegated to CMS. However, the OIG has the authority to impose an 
exclusion and to prosecute cases involving exclusions that were 
delegated to CMS if CMS and the OIG jointly determine it to be in the 
interest of economy, efficiency, or effective coordination of 
activities. The determination may be made either on a case-by-case 
basis, or for all cases brought under a particular listed authority.
    On December 14, 1998, we published a final rule in the Federal 
Register (63 FR 68687), delineating the procedures for pursuing civil 
money penalties (CMPs) and assessments. That final rule added a new 
part 402 to title 42, chapter IV of the Code of Federal Regulations 
(CFR) to incorporate our CMP and assessment authorities. We did not 
address exclusions in that final rule, but did reserve subpart C to 
incorporate this information at a future date.
    In the December 14, 1998 rule, we indicated that our procedures for 
imposing the CMPs and assessment authorities delegated to CMS were 
based on the procedures that the OIG has delineated in 42 CFR part 
1003. We also made the OIG's hearing and appeal procedures set forth in 
42 CFR part 1005 effective for the CMP, assessment, and exclusion 
authorities delegated to CMS.

II. Provisions of the Proposed Rule

    This proposed rule would amend part 402, subpart C, Exclusions, to 
incorporate the rules concerning exclusions associated with the CMP 
violations identified in part 402. Subpart C contains the general 
requirements and procedures that are common to the imposition of an 
exclusion from Medicare, Medicaid, and, where applicable, other Federal 
health care programs. These regulations would not materially impact the 
hearing and appeal procedures currently available to any person on whom 
we could impose an exclusion.
    Specifically, we are proposing to add the following provisions to 
subpart C:
     Section 402.200, Basis and purpose.
    [If you choose to comment on issues in this section, please include 
the caption ``Basis and purpose'' at the beginning of your comments.]
    This section provides the basis and purpose for the imposition of 
an exclusion from Medicare, Medicaid, and, where applicable, other 
Federal health care programs for noncompliance with the respective 
provisions of the Act specified in Sec.  402.1(e). This subpart also 
sets forth the appeal rights of persons subject to exclusion, and the 
procedures for reinstatement following exclusion. This subpart is based 
on Sec.  1003.102, Sec.  1003.105, Sec.  1003.107, and Sec.  1003.109 
of the OIG's regulations.
     Section 402.205, Length of exclusion.
    [If you choose to comment on issues in this section, please include 
the caption ``Length of exclusion'' at the beginning of your comments.]
    This section describes the duration of exclusion from Medicare, 
Medicaid, and, where applicable, other Federal health care programs for 
the applicable violation. Currently, there are four general categories 
for which violations may cause exclusions. These categories involve 
non-compliance with assignment billings, non-compliance with charge or 
service limits, failure to provide information or improperly providing 
information, or non-compliance with Medigap or Medicare Select. Some 
exclusion provisions provide that the exclusion is imposed in 
accordance with section 1842(j)(2) of the Act. Section 1842(j)(2) 
provides for exclusion from participation in the programs under the 
Act. These exclusions may not exceed 5 years. For these exclusion 
provisions, CMS proposes to use its discretion to set a duration for 
the exclusion, up to 5 years, after considering aggravating and 
mitigating circumstances as described in this proposed rule. By 
contrast, many other exclusion provisions extend to all Federal health 
care programs, and do not address the minimum or maximum duration of 
the exclusion, but instead simply refer to applying the provisions of 
section 1128A of the Act, or section 1128(c) of the Act for imposition 
of the exclusion. However, neither section 1128A, nor section 1128(c) 
addresses the specific duration of an exclusion for any of the title 
XVIII exclusion provisions described in this proposed rule. Therefore, 
where the duration of an exclusion is not specifically addressed by 
statute for a specific exclusion provision, CMS proposes to use its 
discretion to apply a time period it believes is justified, taking into 
account appropriate aggravating and mitigating factors as described in 
this proposed rule.
    While several provisions of title 18 of the Act refer on their face 
only to CMPs, they also make cross-references to section 1128A of the 
Act, from which we assert that our exclusion authority derives. For 
example, several provisions within section 1882 of the Act refer to 
CMPs. Each of these provisions incorporates by reference portions of 
section 1128A, articulating with precise specificity which provisions 
of section 1128A are applicable. In each case, this includes section 
1128A's exclusion authority found in section 1877, though there the 
exclusion authority is made even more clear with the term ``exclusion'' 
being found in the section heading. The applicable provision of section 
1128A is that provision's last sentence, explicitly made applicable to 
all the foregoing, which provides that the Secretary ``may make a 
determination in the same [CMP]

[[Page 43958]]

proceeding to exclude the person from participation in * * * Federal 
health care programs * * *''
     Section 402.208, Factors considered in determining whether 
to exclude, and the length of exclusion.
    [If you choose to comment on issues in this section, please include 
the caption ``Factors considered'' at the beginning of your comments.]
    The statute specifies the grounds for imposition of the various 
exclusions, but offers little detail regarding the adjudicatory 
processes inherent in administering them. Instead, the statute vests 
CMS with broad administrative discretion. We are sensitive to the fact 
that the nature of the grounds for imposition of exclusions vary 
widely.
    This section describes the specific details of the aggravating or 
mitigating circumstances that may be considered. This section is based 
on corresponding sections of 42 CFR parts 1001 and 1003. We note that 
our application of aggravating and mitigating factors flows both as a 
natural result of a statutory scheme that contemplates exclusions of 
varying lengths, as well as the Secretary's rulemaking authority 
specified in section 1871 of the Act.
     Section 402.209, Scope and effect of exclusion.
    [If you choose to comment on issues in this section, please include 
the caption ``Scope and effect'' at the beginning of your comments.]
    This section describes the general scope and effect of an 
exclusion. Generally, an excluded provider or supplier may not directly 
or indirectly submit claims, or cause claims to be submitted, to the 
Medicare program. Providers who submit, or cause to be submitted, 
claims during the course of an exclusion risk other possible sanctions, 
including criminal and civil liability. Medicare will not pay claims 
for beneficiaries who elect to see excluded providers, except, perhaps, 
for the first claim, which will be accompanied by a notification to the 
beneficiary that the provider/supplier has been excluded from 
participation in Medicare and that no further Medicare payments will be 
made on the beneficiary's behalf. This section is based on Sec.  
1001.1901. We note that in Sec.  402.209(b)(3), whereas in some cases 
the maximum exclusion time limit may preclude us from applying the 
specified prohibited conduct as the basis for denying reinstatement to 
the Medicare program, the fact that an excluded provider has engaged in 
such prohibited conduct may give rise to a new exclusion action by the 
initiating agency (CMS or OIG), the practical effect of which would be 
to deny reinstatement into the Medicare program.
     Section 402.210, Notice of exclusion.
    [If you choose to comment on issues in this section, please include 
the caption ``Notice of exclusion'' at the beginning of your comments.]
    This section describes the contents of the respective notices, and, 
specifically the timing for release of (a) the written notice of intent 
to exclude (that is, the proposed determination), and (b) the written 
notice of exclusion. At a minimum, the written notice of intent to 
exclude provides the person with such information as to the reason why 
the person is noncompliant with the statute, the length of the proposed 
exclusion, and instructions for responding to this notice, including 
providing argument to the exclusion for the agency to consider. The 
written notice to exclude is sent to the person in the same manner as 
the written notice of intent to exclude if the agency determines the 
exclusion is warranted. This notice will also provide the person with 
information on their appeal rights to the exclusion. This section is 
based on the notices provided by the OIG in Sec.  1001.2001, Sec.  
1001.2002, Sec.  1001.2003, and Sec.  1003.109.
     Section 402.212, Response to notice of proposed exclusion.
    [If you choose to comment on issues in this section, please include 
the caption ``Response to notice'' at the beginning of your comments.]
    This section describes the general process and procedure for the 
respondent to follow when presenting an oral or written response to the 
notice of intent to exclude (that is, the proposed determination). The 
agency will accept for consideration any supportive information the 
respondent provides. The agency does not limit nor suggest what type of 
information should be presented. The burden to present convincing 
information is left to the discretion of the respondent. This section 
is based on the process and procedures delineated by the OIG in Sec.  
1003.109. However, to encourage timely communication between the 
respondent and the initiating agency, we have added an additional 
element whereby the initiating agency will contact the respondent 
within 15 days of receipt of the respondent's request to establish a 
mutually agreed upon time and place for the hearing of oral arguments.
     Section 402.214, Appeal of exclusion.
    [If you choose to comment on issues in this section, please include 
the caption ``Appeal of exclusion'' at the beginning of your comments.]
    This section describes the general appeal process (as referenced in 
Sec.  1005) for requesting a hearing before an administrative law judge 
and details the required elements of the written request for appeal. 
Generally, the elements of the written request must include the basis 
for the disagreement with the exclusion, the general basis for the 
defense of the respondent, reasons why the proposed length of exclusion 
should be modified. This section is based on Sec.  1001.2003 and Sec.  
1001.2007.
     Section 402.300, Request for reinstatement.
    [If you choose to comment on issues in this section, please include 
the caption ``Request for reinstatement'' at the beginning of your 
comments.]
    In proposed Sec.  402.300, we discuss the request for 
reinstatement. In Sec.  402.300(a), we describe the written request for 
reinstatement. We discuss that an excluded person may submit a written 
request for reinstatement to the initiating agency no sooner than 120 
days prior to the terminal date of exclusion as specified in the notice 
of exclusion. The written request for reinstatement would be required 
to include documentation demonstrating that the person has met the 
standards set forth in Sec.  402.302. We also state that obtaining or 
reactivating a Medicare provider number (or equivalent) would not 
constitute reinstatement.
    Section 402.300(b) discusses that, upon receipt of a written 
request for reinstatement, the initiating agency may require the person 
to furnish additional, specific information, and authorization to 
obtain information from private health insurers, peer review 
organizations, and others as necessary to determine whether 
reinstatement is granted.
    In Sec.  402.300(c), we discuss that failure to submit a written 
request for reinstatement and/or to furnish the required information or 
authorization would result in the continuation of the exclusion, unless 
the exclusion had been in effect for 5 years. In that case, 
reinstatement would be automatic.
    Section 402.300(d) discusses that, if a period of exclusion is 
reduced on appeal (regardless of whether further appeal is pending), 
the excluded person would be permitted to request and apply for 
reinstatement within 120 days of the expiration of the reduced 
exclusion period. A written request for the reinstatement would include 
the same standards as noted in paragraph (b) of this section. This 
section is based on Sec.  1001.3001.
     Section 402.302, Basis for reinstatement.

[[Page 43959]]

    [If you choose to comment on issues in this section, please include 
the caption ``Basis for reinstatement'' at the beginning of your 
comments.]
    In Sec.  402.302, we discuss that the initiating agency would 
authorize reinstatement if the agency determined that-
    (1) The period of exclusion had expired;
    (2) There were reasonable assurances that the types of actions that 
formed the basis for the original exclusion did not recur and would not 
recur; and
    (3) There is no additional basis under title XVIII of the Act that 
would justify the continuation of the exclusion.
    We are also discussing that the initiating agency would not 
authorize reinstatement if it determined that submitting claims or 
causing claims to be submitted or payments to be made by the Medicare 
program for items or services furnished, ordered, or prescribed, would 
serve as a basis for denying reinstatement. This section would apply 
regardless of whether the excluded person had obtained a Medicare 
provider number (or equivalent), either as an individual or as a member 
of a group, before being reinstated.
    In making a determination regarding reinstatement, the initiating 
agency would consider--(1) The conduct of the excluded person occurring 
before the date of the notice of the exclusion, if that conduct was not 
known to the initiating agency at the time of the exclusion; (2) the 
conduct of the excluded person after the date of the exclusion; (3) 
whether all fines and all debts due and owing (including overpayments) 
to any Federal, State, or local government that relate to Medicare, 
Medicaid, or, where applicable, any Federal, State, or local health 
care program were paid in full, or satisfactory arrangements were made 
to fulfill these obligations; (4) whether the excluded person complied 
with, or had made satisfactory arrangements to fulfill, all of the 
applicable conditions of participation or conditions of coverage under 
the Medicare statutes and regulations; and (5) whether the excluded 
person had, during the period of exclusion, submitted claims, or caused 
claims to be submitted or payment to be made by Medicare, Medicaid, 
and, where applicable, any other Federal health care program, for items 
or services furnished, ordered, or prescribed, and the conditions under 
which these actions occurred.
    CMS proposes that reinstatement would not be effective until the 
initiating agency granted the request and provided notice under Sec.  
402.304. Reinstatement would be effective as provided in the notice.
    A determination for a denial of reinstatement would not be 
appealable or reviewable except as provided in Sec.  402.306.
    We also discuss that an ALJ cannot require reinstatement of an 
excluded person according to this chapter. The content of this section 
is based on the criteria provided by the OIG in Sec.  1001.3002.
     Section 402.304, Approval of request for reinstatement.
    [If you choose to comment on issues in this section, please include 
the caption ``Approval of request'' at the beginning of your comments.]
    In regard to approval of a request for reinstatement (Sec.  
402.304), we discuss that, if the initiating agency would grant a 
request for reinstatement, the initiating agency would--
    (1) Give written notice to the excluded person specifying the date 
of reinstatement; and
    (2) Notify appropriate Federal and State agencies, and, to the 
extent possible, all others that were originally notified of the 
exclusion, that the person had been reinstated into the Medicare 
program.
    A determination by the initiating agency to reinstate an excluded 
person would have no effect if Medicare, Medicaid, or, where 
applicable, any other Federal health care program had imposed a longer 
period of exclusion under its own authorities. The content of this 
section is based on the procedures provided by the OIG in Sec.  
1001.3003.
     Section 402.306, Denial of request for reinstatement.
    [If you choose to comment on issues in this section, please include 
the caption ``Denial of request'' at the beginning of your comments.]
    In Sec.  402.306, Denial of request for reinstatement, we discuss 
that, if a request for reinstatement is denied, the initiating agency 
would provide written notice to the excluded person. Within 30 days of 
the date of this notice, the excluded person could submit to the 
initiating agency--
    (1) Documentary evidence and a written argument challenging the 
reinstatement denial; or
    (2) A written request to present written evidence and/or oral 
argument to an official of the initiating agency.
    If this written request were received timely by the initiating 
agency, the initiating agency, within 15 days of receipt of the 
excluded person's request, would initiate communication with the 
excluded person to establish a time and place for the requested 
meeting.
    In addition, we discuss that, after evaluating any additional 
evidence submitted by the excluded person (or at the end of the 30-day 
period described above, if no documentary evidence or written request 
were submitted), the initiating agency would send written notice to the 
excluded person either confirming the denial, or approving the 
reinstatement as set forth in Sec.  402.304. If the initiating agency 
would elect to uphold its denial decision, the written notice would 
also indicate that a subsequent request for reinstatement would not be 
considered until at least 1 year after the date of the written denial 
notice.
    The decision to deny reinstatement would not be subject to 
administrative review. The content of this section is based on the 
procedures provided by the OIG in Sec.  1001.3004.

III. Collection of Information Requirements

    While this regulation contains information collection requirements, 
these requirements are exempt from the Paperwork Reduction Act as 
stipulated in 5 CFR 1320.4(a)(2) (collection of information to conduct 
a civil or administrative action, investigation, or audit involving an 
agency against specific individuals or entities).

IV. Response to Comments

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

V. Regulatory Impact Statement

Overall Impact

    [If you choose to comment on issues in this section, please include 
the caption ``Regulatory Impact Statement'' at the beginning of your 
comments.]
    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), Executive Order 13132 (August 4, 1999, Federalism), and the 
Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532).
    Executive Order 12866 directs agencies taking ``significant 
regulatory action'' to reflect consideration of all

[[Page 43960]]

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 
proposed rule is not a significant regulatory action as defined by 
section 3(f) of Executive Order 12866. We believe that there are no 
significant costs associated with this proposed rule that would impose 
any mandates on State, local or tribal governments, or the private 
sector that would result in an expenditure of $100 million in any given 
year. We expect that all program participants would comply with the 
statutory and regulatory requirements making unnecessary the imposition 
of an exclusion from Medicare, Medicaid and, where applicable, other 
Federal health care programs. Therefore, we do not anticipate more than 
a de minimis economic impact as a result of this proposed rule. 
Further, any impact that may occur would only affect those limited few 
individuals or entities that engage in prohibited behavior. We do not 
anticipate any savings or costs as a result of this proposed rule.
    The RFA (15 U.S.C. 603(a)), as modified by the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), requires agencies 
to determine whether the proposed rule would have a significant 
economic impact on a substantial number of small entities and, if so, 
to identify in the notice of proposed rulemaking any regulatory options 
that could mitigate the impact of the proposed regulation on small 
businesses. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations and small government jurisdictions. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $26 
million or less annually. Individuals and States are not included in 
the definition of a small entity. We believe that any impact as a 
result of the proposed rule would be minimal, since, as mentioned 
above, the only individuals or entities affected would be those limited 
few who engage in prohibited conduct. Since the vast majority of 
program participants comply with statutory and regulatory requirements, 
any aggregate economic impact would not be significant.
    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. We do not believe a 
regulatory impact analysis is required here because, for the reasons 
stated above concerning our obligations under the RFA and the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (Pub. L. 
104-121), this proposed rule would not have 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 expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. We believe that there are no significant costs 
associated with this technical rule that would impose any mandates on 
State, local, or tribal governments, or the private sector that would 
result in an expenditure of $110 million in any given year. As was 
previously mentioned, since the majority of program participants comply 
with statutory and regulatory requirements, any aggregate economic 
impact would not be significant.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it publishes 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. We have determined that this proposed rule would not 
significantly affect the rights, roles, or responsibilities of the 
States. This rule would not impose substantial direct requirement costs 
on State or local governments, preempt State law, or otherwise 
implicate Federalism.
    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 402

    Administrative practice and procedure, Health facilities, Health 
professions, Medicaid, Medicare, Penalties.

    For the reasons stated in the preamble, the Centers for Medicare & 
Medicaid Services proposes to amend 42 CFR chapter IV, part 402 as set 
forth below:

PART 402--CIVIL MONEY PENALTIES, ASSESSMENTS, AND EXCLUSIONS

    1. The authority citation for part 402 continues to read as 
follows:

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

Subpart A--General Provisions

    2. In Sec.  402.3, the introductory text is republished and a new 
definition for ``initiating agency'' is added in alphabetical order to 
read as follows:


Sec.  402.3  Definitions.

    For purposes of this part:
* * * * *
    Initiating agency means whichever agency (CMS or the OIG) initiates 
the interaction with the person.
* * * * *
    3. In part 402, a new subpart C is added to read as follows:
Subpart C--Exclusions
Sec.
402.200 Basis and purpose.
402.205 Length of exclusion.
402.208 Factors considered in determining whether to exclude, and 
the length of exclusion.
402.209 Scope and effect of exclusion.
402.210 Notice of exclusion.
402.212 Response to notice of proposed exclusion.
402.214 Appeal of exclusion.
402.300 Request for reinstatement.
402.302 Basis for reinstatement.
402.304 Approval of request for reinstatement.
402.306 Denial of request for reinstatement.

Subpart C--Exclusions


Sec.  402.200  Basis and purpose.

    (a) Basis. This subpart is based on the sections of the Act that 
are specified in Sec.  402.1(e).
    (b) Purpose. This subpart--
    (1) Provides for the imposition of an exclusion from the Medicare 
and Medicaid programs (and, where applicable, other Federal health care 
programs) against persons that violate the provisions of the Act 
provided in Sec.  402.1(e) (and further described in Sec.  402.1(c)); 
and
    (2) Sets forth the appeal rights of persons subject to exclusion 
and the procedures for reinstatement following exclusion.


Sec.  402.205  Length of exclusion.

    The length of exclusion from participation in Medicare, Medicaid, 
and, where applicable, other Federal health care programs is contingent 
on the specific violation of the Medicare statute. A full description 
of the specific violations identified in the sections of

[[Page 43961]]

the Act are cross-referenced in the regulatory sections listed in the 
table below.
    (a) In no event will the period of exclusion exceed 5 years for 
violation of the following sections of the Act:

------------------------------------------------------------------------
                                             Code of Federal Regulations
       Social Security Act paragraph                   section
------------------------------------------------------------------------
1833(h)(5)(D) in repeated cases...........  Sec.   402.1(c)(1)
1833(q)(2)(B) in repeated cases...........  Sec.   402.1(c)(3)
1834(a)(11)(A)............................  Sec.   402.1(c)(4)
1834(a)(18)(B)............................  Sec.   402.1(c)(5)
1834(b)(5)(C).............................  Sec.   402.1(c)(6)
1834(c)(4)(C).............................  Sec.   402.1(c)(7)
1834(h)(3)................................  Sec.   402.1(c)(8)
1834(j)(4)................................  Sec.   402.1(c)(10)
1834(k)(6)................................  Sec.   402.1(c)(31)
1834(l)(6)................................  Sec.   402.1(c)(32)
1842(b)(18)(B)............................  Sec.   402.1(c)(11)
1842(k)...................................  Sec.   402.1(c)(12)
1842(l)(3)................................  Sec.   402.1(c)(13)
1842(m)(3)................................  Sec.   402.1(c)(14)
1842(n)(3)................................  Sec.   402.1(c)(15)
1842(p)(3)(B) in repeated cases...........  Sec.   402.1(c)(16)
1848(g)(1)(B) in repeated cases...........  Sec.   402.1(c)(17)
1848(g)(3)(B).............................  Sec.   402.1(c)(18)
1848(g)(4)(B)(ii) in repeated cases.......  Sec.   402.1(c)(19)
1879(h)...................................  Sec.   402.1(c)(23)
------------------------------------------------------------------------

    (b) For violation of the following sections, there is no maximum 
time limit for the period of exclusion.

------------------------------------------------------------------------
                                             Code of Federal Regulations
       Social Security Act paragraph                   section
------------------------------------------------------------------------
1834(a)(17)(c) for a pattern of contacts..  Sec.   402.1(e)(2)(i)
1834(h)(3) for a pattern of contacts......  Sec.   402.1(e)(2)(ii)
1877(g)(5)................................  Sec.   402.1(c)(22)
1882(a)(2)................................  Sec.   402.1(c)(24)
1882(p)(8)................................  Sec.   402.1(c)(25)
1882(p)(9)(C).............................  Sec.   402.1(c)(26)
1882(q)(5)(C).............................  Sec.   402.1(c)(27)
1882(r)(6)(A).............................  Sec.   402.1(c)(28)
1882(s)(4)................................  Sec.   402.1(c)(29)
1882(t)(2)................................  Sec.   402.1(c)(30)
------------------------------------------------------------------------

    (c) For a person excluded under any of the grounds specified in 
paragraph (a) of this section, notwithstanding any other requirements 
in this section, reinstatement occurs--
    (1) At the expiration of the period of exclusion, if the exclusion 
was imposed for a period of 5 years; or
    (2) At the expiration of 5 years from the effective date of the 
exclusion, if the exclusion was imposed for a period of less than 5 
years and the initiating agency did not receive the appropriate written 
request for reinstatement as specified in Sec.  402.300.


Sec.  402.208  Factors considered in determining whether to exclude, 
and the length of exclusion.

    (a) General factors. In determining whether to exclude a person and 
the length of exclusion, the initiating agency considers the following:
    (1) The nature of the claims and the circumstances under which they 
were presented.
    (2) The degree of culpability, the history of prior offenses, and 
the financial condition of the person presenting the claims.
    (3) The total number of acts in which the violation occurred.
    (4) The dollar amount at issue (Medicare Trust Fund dollars and/or 
beneficiary out-of-pocket expenses).
    (5) The prior history of the person insofar as its willingness or 
refusal to comply with requests to correct said violations.
    (6) Any other facts bearing on the nature and seriousness of the 
person's misconduct.
    (7) Any other matters that justice may require.
    (b) Criteria to be considered. As a guideline for taking into 
account the general factors listed in paragraph (a) of this section, 
the initiating agency may consider any one or more of the circumstances 
listed in paragraphs (b)(1) and (b)(2) of this section, as applicable. 
The respondent, in his or her written response to the notice of intent 
to exclude (that is, the proposed exclusion), may provide information 
concerning potential mitigating circumstances:
    (1) Aggravating circumstances. An aggravating circumstance may be 
any of the following:
    (i) The services or incidents were of several types and occurred 
over an extended period of time.
    (ii) There were numerous services or incidents, or the nature and 
circumstances indicate a pattern of claims or requests for payment or a 
pattern of incidents, or whether a specific segment of the population 
was targeted.
    (iii) Whether the person was held liable for criminal, civil, or 
administrative sanctions in connection with a program covered by this 
part or any other public or private program of payment for health care 
items or services at any time before the incident or whether the person 
presented any claim or made any request for payment that included an 
item or service subject to a determination under Sec.  402.1.
    (iv) There is proof that the person engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to government programs and in connection with the delivery of a health 
care item or service. The statute of limitations governing civil money 
penalty proceedings at section 1128A(c)(1) of the Act, does not apply 
to proof of other wrongful conducts as an aggravating circumstance.
    (v) The wrongful conduct had an adverse impact on the financial 
integrity of the Medicare program or its beneficiaries.
    (vi) The person was the subject of an adverse action by any other 
Federal, State, or local government agency or board, and the adverse 
action is based on the same set of circumstances that serves as a basis 
for the imposition of the exclusion.
    (vii) The noncompliance resulted in a financial loss to the 
Medicare program of at least $5,000.
    (viii) The number of instances for which full, accurate, and 
complete disclosure was not made as required, or provided as requested, 
and the significance of the undisclosed information.
    (2) Mitigating circumstances. A mitigating circumstance may be any 
of the following:
    (i) All incidents of noncompliance were few in nature and of the 
same type, occurred within a short period of time, and the total amount 
claimed or requested for the items or services provided was less than 
$1,500.
    (ii) The claim(s) or request(s) for payment for the item(s) or 
service(s) provided by the person were the result of an unintentional 
and unrecognized error in the person's process for presenting claims or 
requesting payment, and the person took corrective steps promptly after 
the error was discovered.
    (iii) Previous cooperation with a law enforcement or regulatory 
entity resulted in convictions, exclusions, investigations, reports for 
weaknesses, or civil money penalties against other persons.
    (iv) Alternative sources of the type of health care items or 
services furnished by the person are not available to the Medicare 
population in the person's immediate area.
    (v) The person took corrective action promptly upon learning of the 
noncompliance from the person's employee or contractor, or by the 
Medicare contractor.
    (vi) The person had a documented mental, emotional, or physical 
condition before or during the commission of the noncompliant act(s) 
and that condition reduces the person's culpability for the acts in 
question.

[[Page 43962]]

    (vii) The completeness and timeliness of refunding to the Medicare 
Trust Fund or Medicare beneficiaries any inappropriate payments.
    (viii) The degree of culpability of the person in failing to 
provide timely and complete refunds.
    (3) Other matters as justice may require. Other circumstances of an 
aggravating or mitigating nature are taken into account if, in the 
interest of justice, those circumstances require either a reduction or 
increase in the sanction in order to ensure achievement for the 
purposes of this subpart.
    (c) Limitations. (1) The standards set forth in this section are 
binding on the person, except to the extent that their application 
results in an imposition of an amount that exceeds the limits imposed 
by the United States Constitution.
    (2) Nothing in this section limits the authority of the initiating 
agency to settle any issue or case as provided by Sec.  402.17, or to 
compromise any penalty and assessment as provided by Sec.  402.115.


Sec.  402.209  Scope and effect of exclusion.

    (a) Scope of exclusion. Under this title, persons may be excluded 
from the Medicare, Medicaid, and, where applicable, any other Federal 
health care programs.
    (b) Effect of exclusion on a person(s). (1) Unless and until an 
excluded person is reinstated into the Medicare program, no payment is 
made by Medicare, Medicaid, and, where applicable, any other Federal 
health care programs for any item or service furnished by the excluded 
person or at the direction or request of the excluded person when the 
person furnishing the item or service knew or had reason to know of the 
exclusion, on or after the effective date of the exclusion as specified 
in the notice of exclusion.
    (2) An excluded person may not take assignment of a Medicare 
beneficiary's claim on or after the effective date of the exclusion.
    (3) An excluded person that submits, or causes to be submitted, 
claims for items or services furnished during the exclusion period is 
subject to civil money penalty liability under section 1128A(a)(1)(D) 
of the Act, and criminal liability under section 1128B(a)(3) of the 
Act. In addition, submission of claims, or the causing of claims to be 
submitted for items or services furnished, ordered, or prescribed, by 
an excluded person may serve as the basis for denying reinstatement to 
the Medicare program.
    (c) Exceptions to paragraph (b)(1) of this section. (1) If a 
Medicare beneficiary or other person (including a supplier) submits an 
otherwise payable claim for items or services furnished by an excluded 
person, or under the medical direction or on the request of an excluded 
person after the effective date of the exclusion, CMS pays the first 
claim submitted by the beneficiary or other person and immediately 
notify the claimant of the exclusion. CMS does not pay a beneficiary or 
other person (including a supplier) for items or services furnished by, 
or under the medical direction of, an excluded person, more than 15 
days after the date on the notice to the beneficiary or other person 
(including a supplier), or after the effective date of the exclusion, 
whichever is later.
    (2) Notwithstanding the other provisions of this section, payment 
may be made for certain emergency items or services furnished by an 
excluded person, or under the medical direction or on the request of an 
excluded person during the period of exclusion. To be payable, a claim 
for the emergency items or services must be accompanied by a sworn 
statement of the person furnishing the items or services, specifying 
the nature of the emergency and the reason that the items or services 
were not furnished by a person eligible to furnish or order the items 
or services. No claim for emergency items or services is payable if 
those items or services were provided by an excluded person that, 
through employment, contractual, or under any other arrangement, 
routinely provides emergency health care items or services.


Sec.  402.210  Notice of exclusion.

    (a) Notice of proposed determination. When the initiating agency 
proposes to exclude a person from participation in a Federal health 
care program in accordance with this part, notice of the intent to 
exclude must be given in writing, and delivered or sent by certified 
mail, return receipt requested. The written notice must include, at a 
minimum, the following:
    (1) Reference to the statutory basis for the exclusion.
    (2) A description of the claims, requests for payment, or incidents 
for which the exclusion is proposed.
    (3) The reason why those claims, requests for payments, or 
incidents subject the person to an exclusion.
    (4) The length of the proposed exclusion.
    (5) A description of the circumstances that were considered when 
determining the period of exclusion.
    (6) Instructions for responding to the notice, including a specific 
statement of the person's right to submit documentary evidence and a 
written response concerning whether the exclusion is warranted, and any 
related issues such as potential mitigating circumstances. The notice 
must specify that--
    (i) The person has the right to request an opportunity to present 
oral argument to an official of the initiating agency.
    (ii) The request for oral argument must be submitted within 30 days 
of the receipt of the notice of intent to exclude.
    (7) If a person fails, within the time permitted under Sec.  
402.212, to exercise the right to respond to the notice of intent to 
exclude, the initiating agency may initiate actions for the imposition 
of the exclusion.
    (b) Notice of exclusion. Once the initiating agency determines that 
an exclusion is warranted, a written notice of exclusion is sent to the 
person in the same manner as described in paragraph (a) of this 
section. The exclusion is effective 20 days from the date of the 
notice. The written notice must include, at a minimum, the following:
    (1) The basis for the exclusion.
    (2) The length of the exclusion and, when applicable, the factors 
considered in setting the length.
    (3) The effect of exclusion.
    (4) The earliest date on which the initiating agency considers a 
request for reinstatement.
    (5) The requirements and procedures for reinstatement.
    (6) The appeal rights available to the excluded person under part 
1005 of this title.
    (c) Amendment to the notice. No later than 15 days before the final 
exhibit exchanges required under Sec.  1005.8 of this title, the 
initiating agency may amend the notice of exclusion if information 
becomes available that justifies the imposition of a period of 
exclusion other than the one proposed in the original written notice.


Sec.  402.212  Response to notice of proposed exclusion.

    (a) A person that receives a notice of intent to exclude (that is, 
the proposed determination) as described in Sec.  402.210, may present 
to the initiating agency a written response arguing whether the 
proposed exclusion is warranted, and may present additional supportive 
documentation. The person must submit this response within 60 days of 
the receipt of notice. The initiating agency reviews the materials 
presented and initiate a response to the person regarding the argument 
presented, and any changes to the determination, if appropriate.
    (b) The person is also afforded an opportunity to be heard by the 
initiating agency in order to present oral argument

[[Page 43963]]

concerning whether the proposed exclusion is warranted and any related 
matters. The person must submit this request within 60 days of the 
receipt of notice. Within 15 days of receipt of the person's request, 
the initiating agency initiates communication with the person to 
establish a mutually agreed upon time and place for the requested 
hearing.


Sec.  402.214  Appeal of exclusion.

    (a) The procedures in part 1005 of this title apply to all appeals 
of exclusions. References to the Inspector General in that part apply 
to the initiating agency.
    (b) A person excluded under this subpart may file a request for a 
hearing before an administrative law judge (ALJ) only on the issues of 
whether--
    (1) The basis for the imposition of the exclusion exists; and
    (2) The duration of the exclusion is unreasonable.
    (c) When the initiating agency imposes an exclusion for a period of 
1 year or less, paragraph (b)(2) of this section does not apply.
    (d) The excluded person must file a request for a hearing within 60 
days from the receipt of notice of exclusion. The effective date of an 
exclusion is not delayed beyond the date stated in the notice of 
exclusion simply because a request for a hearing is timely filed (see 
paragraph (g) of this section).
    (e) A timely filed written request for a hearing must include--
    (1) A statement as to the specific issues or findings of fact and 
conclusions of law in the notice of exclusion with which the person 
disagrees.
    (2) Basis for the disagreement.
    (3) The general basis for the defenses that the person intends to 
assert.
    (4) Reasons why the proposed length of exclusion should be 
modified.
    (5) Reasons, if applicable, why the health or safety of Medicare 
beneficiaries receiving items or services does not warrant the 
exclusion going into or remaining in effect before the completion of an 
ALJ proceeding in accordance with part 1005 of this title.
    (f) If the excluded person does not file a written request for a 
hearing as provided in paragraph (d) of this section, the initiating 
agency notifies the excluded person, by certified mail, return receipt 
requested, that the exclusion goes into effect or continues in 
accordance with the notice of exclusion. The excluded person has no 
right to appeal the exclusion other than as described in this section.
    (g) If the excluded person files a written request for a hearing, 
and asserts in the request that the health or safety of Medicare 
beneficiaries does not warrant the exclusion going into or remaining in 
effect before completion of an ALJ hearing, then the initiating agency 
may make a determination as to whether the exclusion goes into effect 
or continues pending the outcome of the ALJ hearing.


Sec.  402.300  Request for reinstatement.

    (a) An excluded person may submit a written request for 
reinstatement to the initiating agency no sooner than 120 days prior to 
the terminal date of exclusion as specified in the notice of exclusion. 
The written request for reinstatement must include documentation 
demonstrating that the person has met the standards set forth in Sec.  
402.302. Obtaining or reactivating a Medicare provider number (or 
equivalent) does not constitute reinstatement.
    (b) Upon receipt of a written request for reinstatement, the 
initiating agency may require the person to furnish additional, 
specific information, and authorization to obtain information from 
private health insurers, peer review organizations, and others as 
necessary to determine whether reinstatement is granted.
    (c) Failure to submit a written request for reinstatement and/or to 
furnish the required information or authorization results in the 
continuation of the exclusion, unless the exclusion has been in effect 
for 5 years. In this case, reinstatement is automatic.
    (d) If a period of exclusion is reduced on appeal (regardless of 
whether further appeal is pending), the excluded person may request and 
apply for reinstatement within 120 days of the expiration of the 
reduced exclusion period. A written request for the reinstatement 
includes the same standards as noted in paragraph (b) of this section.


Sec.  402.302  Basis for reinstatement.

    (a) The initiating agency authorizes reinstatement if it determines 
that--
    (1) The period of exclusion has expired;
    (2) There are reasonable assurances that the types of actions that 
formed the basis for the original exclusion did not recur and will not 
recur; and
    (3) There is no additional basis under title XVIII of the Act that 
justifies the continuation of the exclusion.
    (b) The initiating agency does not authorize reinstatement if it 
determines that submitting claims or causing claims to be submitted or 
payments to be made by the Medicare program for items or services 
furnished, ordered, or prescribed, may serve as a basis for denying 
reinstatement. This section applies regardless of whether the excluded 
person has obtained a Medicare provider number (or equivalent), either 
as an individual or as a member of a group, before being reinstated.
    (c) In making a determination regarding reinstatement, the 
initiating agency considers the following--
    (1) Conduct of the excluded person occurring before the date of the 
notice of the exclusion, if that conduct was not known to the 
initiating agency at the time of the exclusion;
    (2) Conduct of the excluded person after the date of the exclusion;
    (3) Whether all fines and all debts due and owing (including 
overpayments) to any Federal, State, or local government that relate to 
Medicare, Medicaid, or, where applicable, any Federal, State, or local 
health care program are paid in full, or satisfactory arrangements are 
made to fulfill these obligations;
    (4) Whether the excluded person complies with, or has made 
satisfactory arrangements to fulfill, all of the applicable conditions 
of participation or conditions of coverage under the Medicare statutes 
and regulations; and
    (5) Whether the excluded person has, during the period of 
exclusion, submitted claims, or caused claims to be submitted or 
payment to be made by Medicare, Medicaid, and, where applicable, any 
other Federal health care program, for items or services furnished, 
ordered, or prescribed, and the conditions under which these actions 
occurred.
    (d) Reinstatement is not effective until the initiating agency 
grants the request and provide notices under Sec.  402.304. 
Reinstatement is effective as provided in the notice.
    (e) A determination for a denial of reinstatement is not appealable 
or reviewable except as provided in Sec.  402.306.
    (f) An ALJ may not require reinstatement of an excluded person in 
accordance with this chapter.


Sec.  402.304  Approval of request for reinstatement.

    (a) If the initiating agency grants a request for reinstatement, 
the initiating agency--
    (1) Gives written notice to the excluded person specifying the date 
of reinstatement; and
    (2) Notifies appropriate Federal and State agencies, and, to the 
extent possible, all others that were originally notified of the 
exclusion, that the person is reinstated into the Medicare program.
    (b) A determination by the initiating agency to reinstate an 
excluded person has no effect if Medicare, Medicaid, or,

[[Page 43964]]

where applicable, any other Federal health care program has imposed a 
longer period of exclusion under its own authorities.


Sec.  402.306  Denial of request for reinstatement.

    (a) If a request for reinstatement is denied, the initiating agency 
provides written notice to the excluded person. Within 30 days of the 
date of this notice, the excluded person may submit to the initiating 
agency--
    (1) Documentary evidence and a written argument challenging the 
reinstatement denial; or
    (2) A written request to present written evidence and/or oral 
argument to an official of the initiating agency.
    (b) If a written request as described in paragraph (a)(2) of this 
section is received timely by the initiating agency, the initiating 
agency, within 15 days of receipt of the excluded person's request, 
initiates communication with the excluded person to establish a time 
and place for the requested meeting.
    (c) After evaluating any additional evidence submitted by the 
excluded person (or at the end of the 30-day period described in 
paragraph (a) of this section, if no documentary evidence or written 
request is submitted), the initiating agency sends written notice to 
the excluded person either confirming the denial, or approving the 
reinstatement in the manner set forth in Sec.  402.304. If the 
initiating agency elects to uphold its denial decision, the written 
notice also indicates that a subsequent request for reinstatement will 
not be considered until at least 1 year after the date of the written 
denial notice.
    (d) The decision to deny reinstatement is not subject to 
administrative review.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: September 5, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare and Medicaid Services.

    Dated: March 15, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-16791 Filed 7-22-04; 8:45 am]
BILLING CODE 4120-01-U