[Federal Register Volume 70, Number 44 (Tuesday, March 8, 2005)]
[Rules and Regulations]
[Pages 11420-11499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4062]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 401 and 405



Medicare Program: Changes to the Medicare Claims Appeal Procedures; 
Interim Final Rule

  Federal Register / Vol. 70, No. 44 / Tuesday, March 8, 2005 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 401 and 405

[CMS-4064-IFC]
RIN 0938-AM73


Medicare Program: Changes to the Medicare Claims Appeal 
Procedures

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

ACTION: Interim final rule with comment period.

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SUMMARY: Medicare beneficiaries and, under certain circumstances, 
providers and suppliers of health care services, can appeal adverse 
determinations regarding claims for benefits under Medicare Part A and 
Part B under sections 1869 and 1879 of the Social Security Act (the 
Act). Section 521 of the Medicare, Medicaid, and SCHIP Benefits Act of 
2000 (BIPA) amended section 1869 of the Act to provide for significant 
changes to the Medicare claims appeal procedures. This interim final 
rule responds to comments on the November 15, 2002 proposed rule 
regarding changes to these appeal procedures, establishes the 
implementing regulations, and explains how the new procedures will be 
implemented. It also sets forth provisions that are needed to implement 
the new statutory requirements enacted in Title IX of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).

DATES: Effective date: These regulations are effective on May 1, 2005. 
However, in view of the wide span of applicability of these rules and 
the complex, intertwined nature of the affected appeal procedures, not 
all of these provisions can be implemented simultaneously. Please see 
section I.E. of the preamble for a full description of the 
implementation approach.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on May 9, 2005.

ADDRESSES: In commenting, please refer to file code CMS-4064-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments. (Attachments should be in Microsoft Word, WordPerfect, or 
Excel; however, we prefer Microsoft Word.)
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-4064-
IFC, P.O. Box 8011, Baltimore, MD 21244-8011.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section below.

FOR FURTHER INFORMATION CONTACT: Michele Edmondson-Parrott, (410) 786-
6478 (for issues relating to general appeal rights). Janet Miller, 
(410) 786-1588 (for issues relating to assignment or authorized 
representatives). Jennifer Eichhorn Frantz, (410) 786-9531 (for issues 
relating to initial determinations and redeterminations). Arrah Tabe-
Bedward, (410) 786-7129 or Jennifer Eichhorn Frantz, (410) 786-9531 
(for issues relating to Qualified Independent Contractor (QIC) 
reconsiderations). Arrah Tabe-Bedward, (410) 786-7129 or John Scott 
(410) 786-3636 (for issues relating to expedited access to judicial 
review, Administrative Law Judge (ALJ) hearings and Medicare Appeals 
Council (MAC) reviews). Jennifer Collins, (410) 786-1404 or Rosalind 
Little, (410) 786-6972 (for issues relating to reopenings).

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-4064-IFC and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. After the close of the 
comment period, CMS posts all electronic comments received before the 
close of the comment period on its public website. Comments received 
timely will be available for public inspection as they are received, 
generally beginning approximately 3 weeks after publication of a 
document, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. 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 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 toll-free at 1-888-293-
6498) 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 academic libraries throughout the country 
that receive the Federal 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.
    To assist readers in referencing sections contained in this 
preamble, we are providing the following table of contents.

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Table of Contents

I. Background
    A. Overview of Existing Medicare Program
    B. Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act (BIPA) of 2000
    C. Related Provisions of the Medicare Prescription Drug, 
Improvement, and Modernization Act (MMA) of 2003
    D. Codification of Regulations
    E. Implementation of the New Appeal Requirements
II. Analysis of and Responses to Public Comments
    A. Overview of Comments on November 15, 2002 Proposed Rule
    B. Appeal Rights (Sec.  405.900 through Sec.  405.912)
    1. Basis and Scope, Definitions, General Rules, and Parties to 
Initial Determinations, Redeterminations, Reconsiderations, Hearings 
and Reviews (Sec.  405.902 through Sec.  405.906)
    2. Medicaid State Agencies (Sec.  405.908)
    3. Appointed Representatives (Sec.  405.910)
    4. Assignment of Appeal Rights (Sec.  405.912)
    5. Initial Determinations (Sec.  405.920 through Sec.  405.928)
    6. Redeterminations (Sec.  405.940 through Sec.  405.958)
    7. Redetermination, Notification, and Subsequent Limitations on 
Evidence (Sec.  405.954, Sec.  405.956, Sec.  405.966)
    8. Reconsiderations (Sec.  405.960 through Sec.  405.978)
    9. Conduct of a Reconsideration (Sec.  405.968 and Sec.  
405.976)
    10. Reopenings of Initial Determinations, Redeterminations, 
Reconsiderations, Hearings, and Reviews (Sec.  405.980 through Sec.  
405.986)
    11. Expedited Access to Judicial Review (Sec.  405.990)
    12. ALJ Hearings (Sec.  405.1000 through Sec.  405.1066)
    13. Remand Authority (Sec.  405.1034)
    14. When May an ALJ Consolidate a Hearing? (Sec.  405.1044)
    15. When May an ALJ Dismiss a Request for Hearing? (Sec.  
405.1052)
    16. Content of ALJ's Decision (Sec.  405.1046)
    17. Appeals Involving Overpayments (Sec.  405.1064)
    18. Review by the MAC and Judicial Review (Sec.  405.1100 
through Sec.  405.1140)
III. Response to Comments
IV. Collection of Information Requirements
V. Regulatory Impact Analysis
VI. Waiver of Proposed Rulemaking

I. Background

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

A. Overview of Existing Medicare Program

    The original Medicare program consists of two parts (Part A and 
Part B). Part A, known as the hospital insurance program, covers 
certain care provided to inpatients in hospitals, critical access 
hospitals, and skilled nursing facilities, as well as hospice care and 
some home health care. Part B, the supplementary medical insurance 
program, covers certain physicians' services, outpatient hospital care, 
and other medical services that are not covered under Part A.
    In addition to the original Medicare program, beneficiaries may 
elect to receive health care coverage under Part C of Medicare, the 
Medicare Advantage (MA) program. Under the MA program, an individual is 
entitled to those items and services (other than hospice care) for 
which benefits are available under Part A and Part B. An MA plan can 
provide additional health care items and services that are not covered 
under the original Medicare program. Beginning in January 2006, 
beneficiaries also can elect to receive prescription drug coverage 
under Part D of Medicare through the Medicare prescription drug 
benefit.
    Under the original Medicare program, a beneficiary can generally 
obtain health services from any institution, agency, or person 
qualified to participate in the Medicare program that undertakes to 
provide the service to the individual. After the care is provided, the 
provider or supplier (or, in some cases, a beneficiary) can submit a 
claim for benefits under the Medicare program to the appropriate 
government contractor, either a fiscal intermediary (FI) (for all Part 
A claims and certain Part B claims) or a carrier (for most claims under 
Part B). If the claim is for an item or service that falls within a 
Medicare benefit category, is reasonable and necessary for the 
individual, and is not otherwise excluded by statute or rule, then the 
contractor pays the claim. However, the Medicare program does not cover 
all health care expenses. Therefore, if the Medicare contractor 
determines that the medical care is not covered under the Medicare 
program, then it denies the claim.
    Generally, when a contractor denies a claim, it notifies the 
provider, supplier, or beneficiary of the denial and offers the 
opportunity to appeal the denial. The existing appeal procedures for 
original Medicare are set forth in regulations at 42 CFR part 405, 
subparts G and H. Separate procedures for appealing determinations made 
under the Part C program are set forth at subpart M of part 422. There 
is a similar, separate appeals process for Part D claim determinations 
set forth at subpart M of Part 423. After an appellant has exhausted 
the administrative appeal procedures offered under the Medicare 
program, the Medicare statute provides the opportunity for a 
dissatisfied individual to seek review in Federal court.
    Consistent with section 1852(g)(5) of the Act, the MA regulations 
provide that enrollees in MA plans who are dissatisfied with 
determinations regarding their Part C benefits have the right to a 
hearing before an Administrative Law Judge (ALJ), review by the 
Departmental Appeals Board (DAB), and judicial review at the Federal 
district court level in much the same manner as beneficiaries have 
under the fee-for-service Medicare program. These regulations are 
codified at Sec. Sec.  422.600 through 422.612. Section 1860D-4(h) of 
the Act establishes similar rights for enrollees in Medicare 
prescription drug plans. To the extent that there are any differences 
in the appeal procedures for these enrollees, we will address those 
differences in future Part C and Part D rulemaking documents.
    The regulations in part 405 subpart G beginning at Sec.  405.701 
describe reconsiderations and appeals under Medicare Part A. When a 
Medicare contractor makes a determination for a Part A claim, the 
beneficiary or, in some circumstances, the provider, can appeal the 
determination. (Consistent with sections 1861(u) and 1866(e) of the Act 
and Sec.  400.202, the term ``provider'' generally includes hospitals, 
skilled nursing facilities (SNFs), home health agencies (HHAs), 
comprehensive outpatient rehabilitation facilities (CORFs), and 
hospices, as well as certain clinics, rehabilitation agencies, and 
public health agencies.) If the determination is appealed, then the 
contractor reconsiders the initial determination. If the contractor 
upholds the original determination, a party can request a hearing 
before an ALJ, provided that the amount in controversy is at least 
$100. If a party is dissatisfied with the ALJ's decision, a party can 
request review by the DAB. The component within the DAB that is 
responsible for Medicare claim appeals is the Medicare Appeals Council 
(MAC). (Although the Medicare appeals regulations in part 405 contain 
some limited provisions regarding ALJ and MAC proceedings, these 
proceedings are generally governed by the Social Security 
Administration (SSA) regulations at 20 CFR part 404, subpart J.) MAC 
decisions constitute the final decision of the Secretary and can be 
appealed to a Federal court. Generally, the lower level of appeal must 
be exhausted before the appeal can be elevated to the next level.
    Medicare Part B appeal procedures are set forth in part 405 subpart 
H (Sec.  405.801 et seq.). Under these

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regulations, beneficiaries and suppliers that accept assignment for 
Medicare claims can appeal to a Medicare contractor for a review of the 
contractor's initial determination that a claim cannot be paid, either 
in full or in part. (The term ``supplier'' is defined under section 
1861(d) of the Act, as amended by section 901(b) of the MMA, and means 
a physician or other practitioner, a facility, or other entity (other 
than a provider of services that furnishes items or services) under 
Medicare. This regulation will use the term ``supplier'' to include 
physicians.) Suppliers that do not take assignment and providers, in 
some circumstances, also have appeal rights.
    If the contractor's review results in a continued denial of the 
claim, and the amount in controversy is at least $100, the appellant 
can request a second level appeal known as a ``fair hearing.'' If the 
hearing officer upholds the denial, the appellant can request a hearing 
before an ALJ, provided that the appellant meets the amount-in-
controversy requirement. (We published a ruling, CMS Ruling No. 02-1, 
which implemented the $100 amount-in-controversy requirement for Part B 
ALJ hearings specified in section 521 of BIPA for initial 
determinations made on or after October 1, 2002. See 67 FR 62478, 62480 
(Oct. 7, 2002). For initial determinations prior to October 1, 2002, 
the amount in controversy threshold was $500 for all services other 
than home health ($100).) Subsequent aspects of the appeals process for 
Part B claims are identical to those described above for a Part A 
claim.

B. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000

    Section 521 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000, (Pub. L. 106-554) (BIPA), 
amended section 1869 of the Act to require revisions to the Medicare 
fee-for-service appeals process. Among the major changes required by 
the BIPA amendments are--
     Establishing a uniform process for handling Medicare Part 
A and Part B appeals, including the introduction of a new level of 
appeal for Part A claims;
     Revising the time frames for filing a request for Part A 
and Part B appeals;
     Imposing a 30-day time frame for certain 
``redeterminations'' made by the contractors;
     Requiring the establishment of a new appeals entity, the 
qualified independent contractor (QIC), to conduct ``reconsiderations'' 
of contractors' initial determinations (including redeterminations) and 
allowing appellants to escalate cases to an ALJ hearing, if 
reconsiderations are not completed within 30 days;
     Establishing a uniform amount in controversy threshold of 
$100 for Part B appeals at the ALJ level;
     Imposing 90-day time limits for conducting ALJ and DAB 
appeals and allowing appellants to escalate cases to the next level of 
appeal if ALJs or the MAC do not meet the 90-day deadline; and
     Imposing ``de novo'' review when the MAC reviews an ALJ 
decision made after a hearing.
    On November 15, 2002, we published in the Federal Register a 
comprehensive proposed rule (67 FR 69312) to implement the provisions 
of section 521 of the BIPA, as well as other complementary changes 
needed to improve the Medicare claim appeal procedures.
    Revised section 1869 of the Act also requires that the Secretary 
establish a process by which a beneficiary can obtain an expedited 
determination if the beneficiary receives a notice from a provider of 
services that the provider plans to terminate all services or discharge 
the beneficiary from the provider. Previously, this right to an 
expedited review existed under statute only for hospital discharges 
(under sections 1154 and 1155 of the Act). On November 26, 2004, we 
published a separate final rule, Expedited Determination Procedures for 
Provider Service Terminations (69 FR 69252), to respond to comments on 
that aspect of the November 15, 2002 proposed rule and to set forth the 
regulations needed to establish new expedited review procedures for 
provider service terminations.

C. Related Provisions of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA)

    On December 8, 2003, the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted. The 
MMA includes a number of provisions that affect the Medicare claim 
appeals process, each of which is summarized below. To the extent that 
the new statutory language has necessitated revisions or additions to 
our proposed regulations to ensure that they conform to the MMA, we 
have incorporated the needed changes into this interim final rule. A 
brief summary of these provisions follows. To the extent that the MMA 
provisions entail regulatory changes, a discussion of those changes is 
set forth in the appropriate section of this preamble.
1. Requirement To Transfer the Administrative Law Judge Function to the 
Department of Health and Human Services (Section 931 of the MMA)
    Section 931 of the MMA requires transfer of the functions of 
administrative law judges (ALJs) responsible for hearing appeals under 
title XVIII of the Act (and related provisions of title XI of the Act) 
from the Commissioner of SSA to the Secretary of the Department of 
Health and Human Services (DHHS). These ALJs are required to be 
organizationally and functionally independent from CMS and must report 
to and fall under the general supervision of the Secretary of DHHS. The 
DHHS and SSA were required to jointly develop a plan to facilitate this 
transfer not later than April 1, 2004, and the transfer will take place 
no earlier than July 1, 2005, but not later than October 1, 2005. On 
March 25, 2004, DHHS and SSA submitted a report to the Congress that 
describes the process through which DHHS and SSA will accomplish the 
transfer of responsibility for the ALJ function. A copy of that report 
is available online at http://www.hhs.gov/medicare/appealsrpt.pdf.
2. Process for Expedited Access to Judicial Review (Section 932 of the 
MMA)
    Section 1869(b) of the Act provides for expedited access to 
judicial review in situations involving Medicare claims appeals. 
Section 932 of the MMA amends section 1869(b) of the Act by requiring a 
review entity to respond to a request for expedited access to judicial 
review in writing within 60 days after receiving the request. The term 
``review entity'' means up to three reviewers who are ALJs or members 
of the Departmental Appeals Board as determined by the Secretary. If 
the review entity does not act within the 60-day deadline, then the 
party can request judicial review. Expedited access to judicial review 
can be granted when the MAC does not have authority to decide questions 
of law or regulation relevant to matters in controversy and there is no 
material issue of fact in dispute. See Sec.  405.990.
3. Revisions to the Medicare Fee-for-Service Appeals Process (Section 
933 of the MMA)

a. Requirement for Full and Early Presentation of Evidence (Section 
933(a))

    Section 933(a) of the MMA amends section 1869(b) of the Act to 
require providers and suppliers to present any evidence for an appeal 
no later than the

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QIC reconsideration level, unless there is good cause that prevented 
the timely introduction of the evidence. In this interim final rule 
with comment, we are adopting regulations to specify that in the 
absence of good cause, a provider, supplier, or beneficiary represented 
by a provider or supplier must present evidence at the QIC level. 
Evidence not presented by the parties at the QIC level cannot be 
introduced at a higher level of appeal. See Sec.  405.956(b)(8), Sec.  
405.966(a), Sec.  405.1018, and Sec.  405.1122(c).

b. Use of Patients' Medical Records (Section 933(b))

    Section 933(b) of the MMA amends section 1869(c)(3)(B)(i) of the 
Act to require QICs to review an individual's medical records when 
conducting a reconsideration involving medical necessity. See Sec.  
405.968(a).

c. Notice Requirements for Medicare Appeals (Section 933(c))

    Section 933(c) of the MMA amends sections 1869(a), 1869(c), and 
1869(d) of the Act to require appeal notices issued at the initial 
determination, redetermination, reconsideration, and ALJ levels to 
include certain information. As amended, section 1869(a)(4) of the Act 
requires that a notice of an initial determination include the reasons 
for the determination, including whether a local medical review policy 
(LMRP) or local coverage determination (LCD) was used. The notice of 
initial determination must also include procedures for obtaining 
additional data concerning the determination and notification of any 
applicable appeal rights, including instructions on how to request a 
redetermination. See Sec.  405.921(a).
    Section 1869(a)(5) of the Act specifies that a notice of 
redetermination must include the specific reasons for the 
redetermination, a summary of the clinical or scientific evidence used 
to make the redetermination, if applicable, information on how to 
obtain additional information concerning the redetermination, and 
notification of any applicable appeal rights. See Sec.  405.956.
    Reconsideration notices, under the amended section 1869(c)(3)(E) of 
the Act, are required to include information about applicable appeal 
rights. See Sec.  405.976. Section 1869(d) of the Act is also amended 
to require that notices of ALJ decisions give the specific reasons for 
the decision, including, if applicable, a summary of the clinical or 
scientific evidence used in making the decision, the procedures for 
obtaining additional information about the decision, and any applicable 
appeal rights. See Sec.  405.1046(b). Additionally, section 933 of the 
MMA amends sections 1869(a), 1869(c), and 1869(d) of the Act to require 
all appeal notices to be written in a manner calculated to be 
understood by a beneficiary.

d. Qualified Independent Contractors (QICs) (Section 933(d))

    Prior to the MMA, section 1869(c) of the Act, as amended by section 
521 of BIPA, required the Secretary to enter into contracts with at 
least 12 entities called qualified independent contractors (QICs) to 
conduct reconsiderations of contested claim determinations. Section 
1869(c) sets forth certain requirements for the QICs and their reviews 
and panels. Section 933(d) of the MMA makes a number of revisions to 
section 1869(c) of the Act, including providing additional detail 
regarding the eligibility requirements for QICs (section 933(d)(1) of 
the MMA) and the eligibility requirements for QIC reviewers (section 
933(d)(2) of the MMA). We have added Sec.  405.968(c)(3) to reflect the 
requirement of section 1869(g)(1)(C) that where a claim pertains to the 
furnishing of treatment by a physician, or the provision of items or 
services by a physician, a reviewing professional must be a physician. 
In addition, section 933(d)(3) of the MMA amended section 1869(c)(4) of 
the Act to reduce from 12 to 4 the minimum number of QICs with whom the 
Secretary must contract.
4. Process for the Correction of Minor Errors or Omissions Without 
Pursuing an Appeal (Section 937 of the MMA)
    Section 937 of the MMA requires that the Secretary develop a means 
of allowing providers and suppliers to correct minor errors or 
omissions to claims submitted under the programs under title XVIII 
without initiating an appeal. The statute specifies that this process 
be available no later than December 8, 2004. We have revised Sec.  
405.980 to allow providers and suppliers to make these corrections 
through the reopenings process. See Sec.  405.927 and Sec.  405.980.
    This process was developed in consultation with Medicare 
contractors and representatives of providers and suppliers, as required 
by section 937 of the MMA. We published an article on April 30, 2004 
that is available online at http://www.cms.hhs.gov/medlearn/matters/mmarticles/2004/SE0420.pdf to address the implementation of section 937 
and consulted with providers and suppliers about this implementation 
during open door forums held between August 3 and August 31, 2004. We 
also created an e-mailbox, [email protected], for providers and 
suppliers to comment on our proposed implementation. The comment period 
closed September 10, 2004.
5. Appeals by Providers When There Is No Other Party Available (Section 
939 of the MMA)
    In situations where a beneficiary dies and there is no other party 
available to appeal an unfavorable determination, section 939 of the 
MMA amends section 1870 of the Act to permit a provider or supplier to 
file an appeal. See Sec.  405.906(c).
6. Revisions to the Appeals Time Frames and Amounts in Controversy 
(Section 940 of the MMA)
    Sections 1869(a)(3)(C)(ii) and 1869(c)(3)(C)(i) of the Act as added 
by section 521 of BIPA established 30-day decision making time frames 
at both the redetermination and reconsideration levels. Additionally, 
section 1869 (b)(1)(E) of the Act established the amount in controversy 
(AIC) requirement for ALJ hearing requests and judicial review as $100 
and $1000, respectively. Section 940 of the MMA amended these 
provisions so that the decision-making time frame for redeterminations 
and reconsiderations is 60 days and the AICs for ALJ hearings and 
judicial review will now be adjusted annually, beginning on January 1, 
2005, by the percentage increase in the medical care component of the 
consumer price index (CPI) for all urban consumers and rounded to the 
nearest multiple of $10. See Sec.  405.950(a), Sec.  405.970(a), and 
Sec.  405.1006. A conforming amendment applies these AICs to the Part C 
MA program as well, and we have proposed that they apply to Part D when 
the new prescription drug benefit becomes available in January 2006. 
See 69 Fed. Reg. 46,866, 46,910, and 46,911, 46,722 for the MA proposed 
rule and 69 Fed. Reg. 46,632 for the Part D proposed rule. (The medical 
care component of the CPI increased by 4.5 percent in 2004. 
Consequently, the AIC in 2005 for ALJ hearings will remain $100, and 
the AIC for judicial review will be $1,050.)
7. Determinations of Sustained or High Levels of Payment Errors 
(Section 935(a) of the MMA)
    Consistent with section 1893(f)(3) of the Act, as amended by 
section 935(a) of the MMA, determinations by the Secretary of sustained 
or high levels of payment errors are precluded from administrative or 
judicial review. See Sec.  405.926(p).

[[Page 11424]]

8. Limitations on Further Review of Prior Determinations (Section 
938(a) of the MMA)
    Section 1869(h)(6) of the Act, as amended by section 938(a) of the 
MMA, requires that there must be no administrative or judicial review 
of ``prior determinations'' on coverage of physicians'' services, a new 
aspect of the Medicare program that the MMA specifies must begin by 
June 2005. See Sec.  405.926(q).

D. Codification of Regulations

    The current regulations governing Medicare administrative appeals 
are set forth in 42 CFR part 405, subparts G and H. These regulations 
will continue to be necessary for an indefinite transition period until 
the completion of all appeals that result from initial determinations 
made before the implementation of the new procedures set forth in this 
interim final rule. However, the new BIPA and MMA provisions make 
possible a largely uniform set of appeals procedures that can be 
applied for claims under both Parts A and B of Medicare. Therefore, 
this interim final rule establishes a new subpart I of part 405 that 
sets forth in one location the administrative appeals requirements for 
Medicare carriers, fiscal intermediaries (FIs), QICs, ALJs, and the 
MAC. The major subjects covered in subpart I of part 405 are as 
follows:
     General Rules (Sec.  405.900 through Sec.  405.912)--
Definitions and requirements concerning initial determinations, parties 
to appeals, appointing a representative, and assigning appeal rights.
     Initial Determinations (Sec.  405.920 through Sec.  
405.928)--Requirements concerning the processing time frames for 
initial claim determinations, descriptions of actions that are initial 
determinations, and the effect of an initial determination.
     Redeterminations (Sec.  405.940 through Sec.  405.958)--
Requirements concerning requesting a redetermination, the 
redetermination process, applicable notice requirements, and the effect 
of a redetermination.
     QIC Reconsiderations (Sec.  405.960 through Sec.  
405.978)--Requirements concerning requesting a reconsideration, the 
reconsideration process, applicable notice requirements, and the effect 
of a reconsideration.
     Reopenings (Sec.  405.980 through Sec.  405.986)--
Requirements concerning reopening of determinations and decisions, 
including the good cause standard, content requirements for notices of 
revised determinations or decisions, and the effect of a revised 
determination or decision.
     Expedited Access to Judicial Review (Sec.  405.990)--
Requirements concerning obtaining expedited access to judicial review.
     ALJ Hearings (Sec.  405.1000 through Sec.  405.1064)--
Requirements concerning requesting a hearing, the hearing process, 
applicable notice requirements, the effect of an ALJ's decision, and 
the applicability of national and local coverage determinations.
     MAC Review (Sec.  405.1100 through Sec.  405.1140)--
Requirements concerning requesting a review, the review process, 
applicable notice requirements, the effect of a review decision, and 
the requirements for requesting judicial review.

E. Implementation of the New Appeal Requirements

    We believe that the changes set forth in this interim final rule, 
in conjunction with the introduction of a new case-specific appeal data 
system that we are now developing, will produce substantial 
improvements in the efficiency of the Medicare claims appeal process. 
We expect that the implementation of these new appeal procedures, along 
with the transfer of the ALJ function from SSA to DHHS, will reduce 
appellants' concerns over the fairness and timeliness of Medicare 
appeal decisions. The introduction of QICs, in particular, will not 
only reassure appellants of the independence of the reconsideration 
process, but also offer them for the first time routine 
reconsideration, by a panel of physicians or other health care 
professionals, of all medical necessity issues. As a result, we believe 
these new procedures will lead, over time, to significant reductions in 
the need to pursue appeals at the later stages of the appeals system, 
such as ALJ hearings and MAC reviews.
    In the short term, however, we recognize that implementing the 
changes set forth in this interim final rule may prove challenging both 
for the entities responsible for conducting appeals and for appellants 
themselves. For example, there may be an initial increase in requests 
for second level appeals (that is, reconsiderations by QICs), given the 
availability of these new independent appeal entities and the 
introduction of physician review panels, as well as the fact that the 
time frame for a QIC decision is only half of the current time frame 
for a contractor fair hearing. Similarly, increases in requests for ALJ 
hearings or MAC reviews are also possible, in view of the establishment 
of relatively short decision-making time frames for these entities.
    Another challenge involves the need for appeal entities to process 
appeals that were filed before and after the implementation of these 
new appeal procedures. For example, the DHHS ALJs and the MAC will need 
to continue processing appeals received before the implementation of 
QICs at the same time that they begin to receive appeals of QIC 
reconsiderations. Thus, until all appeals that were filed under the 
rules in effect before full implementation of these regulations are 
completed, different administrative deadlines and procedures may apply, 
depending on the timing and source of the previous, lower-level appeal 
decision. Based on previous experience, the need for parallel 
procedures could extend over a year, as all cases currently in the 
appeals pipeline are resolved.
    In addressing these challenges and implementing the new procedures, 
we need to balance the goal of implementing the new procedures as 
quickly as possible with our responsibility to facilitate a clear and 
well-organized transition to the new procedures for appellants and 
appeals entities alike. We also need to ensure that existing appeals 
continue to be carried out as expeditiously as possible as we 
transition fully to the new appeals procedures. These goals drive the 
implementation approach described below.
    The appeal procedures set forth in section 521 of BIPA were to take 
effect for initial determinations made on or after October 1, 2002. As 
discussed in the proposed rule, we were unable to fully implement the 
BIPA provisions by that date without disrupting other fundamental 
functions of the Medicare program (for example, the processing and 
payment of claims). We were also aware of the possibility of additional 
statutory changes, as were subsequently enacted in the MMA. 
Additionally, we recognize that the MMA has, in some cases, established 
specific deadlines for implementation of certain appeals provisions. 
For example, section 933(a)(2) of the MMA establishes an effective date 
of October 1, 2004 for the prohibition on submission of new evidence, 
absent good cause, by providers or suppliers in any ALJ or MAC appeal 
if that evidence was not presented at the QIC reconsideration. For 
other provisions, the MMA either makes no explicit reference to an 
effective date, or specifies (under section 933(d)(4)) that certain MMA 
amendments will be effective as if included in the BIPA legislation; 
that is, as of October 1, 2002. In the absence of

[[Page 11425]]

a specific effective date, the provisions became effective on the date 
of enactment of the MMA.
    Given the unavoidable delays in full implementation of the BIPA 
changes, it will not be possible to meet all of the MMA deadlines. As a 
practical matter, full, effective implementation of both the MMA and 
BIPA provisions can be achieved only in concert with the availability 
of QICs in the Medicare appeals process. Thus, we believe that full 
implementation of these regulations must be premised on, and linked to, 
QIC implementation.
    As noted above, another important related MMA provision is the 
transfer of the ALJ hearing function for Medicare claims appeals from 
SSA to DHHS. Section 931(b) of the MMA mandates that this transition 
take place not earlier than July 1, 2005, and not later than October 1, 
2005. We have also taken this impending change into account in 
establishing the implementation schedule for the new appeals provisions 
set forth in this interim final rule.
    Based on all of these considerations, the table below illustrates 
the implementation approach that we are following for the provisions of 
this interim final rule:

                         Implementation Approach
------------------------------------------------------------------------
               Section(s)                           Effective
------------------------------------------------------------------------
Sec.   401.108.........................  Effective date of interim final
                                          rule.
Sec.   405.900-Sec.   405.928..........  Effective date of interim final
                                          rule.
Sec.   405.940, Sec.   944(a), and Sec.  FI initial determinations
   944(b).                                issued on or after May 1,
                                          2005. Carrier initial
                                          determinations issued on or
                                          after January 1, 2006.
Sec.   942(a)..........................  Effective date of interim final
                                          rule.
Sec.   405.942(b), Sec.   405.944(c),    All requests for
 Sec.   405.946 through Sec.   405.958.   redeterminations received by
                                          FIs on and or after May 1,
                                          2005. All requests for
                                          redeterminations received by
                                          Carriers on or after January
                                          1, 2006.
Sec.   405.960-Sec.   405.978..........  May 1, 2005 for
                                          redeterminations issued by FIs
                                          January 1, 2006 for
                                          redeterminations issued by
                                          Carriers.
Sec.   405.980-Sec.   405.990..........  Effective date of interim final
                                          rule.
Sec.   405.1000-Sec.   405.1018........  Effective for all appeal
                                          requests stemming from a QIC
                                          reconsideration.
Sec.   405.1020........................  July 1, 2005 for all ALJ
                                          hearing requests.
Sec.   405.1022-Sec.   405.1140........  Effective for all appeal
                                          requests stemming from a QIC
                                          reconsideration.
------------------------------------------------------------------------

    As the table reflects, we have concluded that the best approach to 
implement the new appeal procedures is to phase in the new procedures 
beginning in FY 2005. QIC reconsiderations will become available in two 
stages depending on if an FI or carrier carries out the 
redetermination. For all FI redeterminations issued on or after May 1, 
2005, appellants will have a right to reconsideration by a QIC within 
60 days of their request for reconsideration, as well as escalation to 
an ALJ if the reconsideration is not completed timely. Similarly, the 
new reconsideration and escalation procedures will take effect for all 
carrier redeterminations issued on or after January 1, 2006. Thus, in 
2006, all new appeals will be carried out under the regulations set 
forth in this interim final rule, including provisions on--
     Reconsiderations by QICs;
     The new statutory time frames for reconsiderations, ALJ 
hearings, and MAC reviews;
     The possibility of escalation of cases where the time 
frames are not met;
     The new notice and evidence rules; and
     Medicare-specific ALJ procedures.
    The phased-in approach enables at least two QICs to begin carrying 
out reconsiderations of appealed FI redeterminations beginning in May 
2005, and thus to provide the second level reconsideration envisioned 
by the statute for Part A claims as soon as possible. In January 2006, 
at least four QICs will begin carrying out reconsiderations of appealed 
carrier redeterminations. We believe that this phased-in approach to 
QIC implementation constitutes the only viable approach for an 
undertaking of this magnitude and is critical to ensuring that we: (1) 
Minimize disruption among the current Medicare contractors and current 
appellants; and (2) have adequate opportunity to educate providers, 
suppliers, and beneficiaries about the new procedures. Phasing in the 
transition from the current process serves to eliminate any unnecessary 
risk in terms of our ability to manage major appeal transitions at all 
of our FIs and carriers simultaneously. In addition, these contractors 
are dealing at the same time with numerous statutorily mandated changes 
(such as the contracting reform changes required under Title IX of the 
MMA).
    We have chosen to implement the changes initially for 
redeterminations conducted by fiscal intermediaries for several 
reasons. Fiscal intermediaries are responsible for all appeals 
involving Part A claims, as well a limited number of Part B claims. The 
Part A process currently does not include a second level of contractor 
appeal prior to an ALJ hearing, unlike the Part B fair hearing 
procedure. Thus, introducing the QIC reconsideration step first for 
these claims ensures that Part A appellants have access to a second 
pre-ALJ appeal process as soon as possible. Implementing the new 
procedures for appeals resulting from FI determinations also gives us 
an opportunity over several months to identify and address any process 
problems or other technical difficulties involved in the first stages 
of QIC reconsiderations before transitioning the much larger Part B 
appeals workload that is now performed by carriers.
    One unavoidable consequence of this change will be that some 
employees of current contractors will need to be either reassigned or 
discharged since the FIs and carriers will no longer be conducting fair 
hearings. However, we believe that the slightly longer transition for 
the much larger carrier workforce will help to ameliorate the potential 
human costs of this change.
    Finally, we note that wherever it was feasible (that is, where the 
BIPA and MMA appeals provisions are not fundamentally premised on the 
introduction of QIC reconsiderations into the appeals process), we have 
already taken a series of steps to implement the new appeal provisions 
mandated by the statute, including most notably the transition to a 
uniform redetermination process by our FIs and carriers. We issued 
instructions (CR 2620) to effect this change beginning on October 1, 
2004. The instructions incorporate both the redetermination decision-
making time frames and notice requirements required by the statute

[[Page 11426]]

(under sections 1869(a)(2), 1869(a)(3) and 1869(a)(5) of the Act, as 
amended by section 521 of BIPA and sections 933 and 940 of the MMA). We 
have also issued instructions to the contractors regarding the 
implementation of section 939 of the MMA (which took effect upon 
enactment of the MMA) concerning appeals by providers when there is no 
other party available because of the death of the beneficiary 
appellant. These regulations codify those changes.

II. Analysis of and Responses to Public Comments

A. Overview of Comments on November 15, 2002 Proposed Rule

    We received 37 timely comments from organizations representing 
providers and suppliers, beneficiary advocacy groups, administrative 
law judges, law offices, health plans, and others. The issues most 
frequently raised by commenters include: Beneficiary protections, 
particularly for unrepresented beneficiaries; deadlines for filing 
appeals and time frames for decision-making; notices; differences 
between an assignee and an appointed representative of a beneficiary; 
authority of representatives of parties; time frames for the escalation 
of cases from one level to the next when adjudicators fail to meet 
their deadlines; the role of the new entities, qualified independent 
contractors (QICs), that will perform reconsiderations; evidentiary 
requirements; the perceived formality of administrative law judge (ALJ) 
procedures, especially adversarial proceedings whereby we enter the 
process in general, and the impact on beneficiaries in particular; 
whether an ALJ's role changes and how much deference the ALJ gives to 
our policies; dismissals and remands of appeals; and distinctions 
between reopenings and appeals.
    These comments and our responses are discussed below, in order of 
the new regulations text. (For the convenience of the reader, we are 
presenting below a chart offering a sequential overview of the 
available procedures and related time frames associated with the former 
and current appeals process. This chart is for illustrative purposes 
only, and certain details (such as when escalation of a case is 
permissible) have been omitted for ease of presentation. For a full 
description of the applicable requirements, please consult the preamble 
material that follows and the regulations text.)
[GRAPHIC] [TIFF OMITTED] TR08MR05.000


[[Page 11427]]



B. Appeal Rights (Sec.  405.900 Through Sec.  405.912)

1. Basis and Scope, Definitions, General Rules, and Parties to Initial 
Determinations, Redeterminations, Reconsiderations, Hearings and 
Reviews (Sec.  405.900 Through Sec.  405.906)
[If you choose to comment on issues in this section, please include the 
caption ``Appeal Rights--Basis and Scope, etc.'' at the beginning of 
your comments.]

    In the proposed rule, we proposed that providers would be allowed 
to file an administrative appeal of Medicare initial determinations to 
the same extent as beneficiaries. Currently, providers have limited 
rights to appeal Medicare initial determinations: providers can appeal 
Medicare determinations only when the determination involves a finding 
that: (1) The item or service is not covered because it constitutes 
custodial care, is not reasonable and necessary, or for certain other 
reasons; and (2) the provider knows, or reasonably could have been 
expected to know, that the item or service in question is not covered 
under Medicare (that is, there is a finding with respect to the 
limitation of liability provision under section 1879 of the Act). 
Regarding non-participating providers and suppliers, however, we 
proposed maintaining the current appeal policies.
    Consistent with section 940 of the MMA, in this interim final rule, 
we are making a change to Sec.  405.904(a)(2) concerning the amounts in 
controversy for ALJ hearings and judicial review. Section 940 of the 
MMA requires the amount in controversy to be adjusted annually based on 
the medical care component of the consumer price index for all urban 
consumers. Accordingly, we have deleted specific references to the 
previous $100 and $1,000 threshold requirements.
    We have made two revisions to proposed Sec.  405.906. In the 
proposed rule, we inadvertently omitted certain nonparticipating 
suppliers as potential parties to an initial determination. The interim 
final rule corrects that error by specifying under Sec.  405.906(a)(2) 
that a nonparticipating supplier who has accepted assignment can be a 
party to an initial determination.
    Also, consistent with section 1870(h) of the Act, as amended by 
section 939(a) of the MMA, we have added a conforming provision to 
Sec.  405.906(c) concerning parties to appeals. Where a provider or 
supplier is not already a party, revised Sec.  405.906(c) permits the 
provider or supplier to appeal an initial determination relating to 
services it rendered to a beneficiary who subsequently dies. This 
provision is intended to give appeal rights to nonparticipating 
suppliers who are not considered parties to the initial determination 
and who may not have secured an assignment of appeal rights from the 
beneficiary.
    Comment: Several commenters sought clarification on whether the 
intent of the proposed rule was to give party status to providers on 
the basis of a ``technical denial.'' (A technical denial is a denial 
based on an item or service failing to meet all of the requirements of 
a Medicare-covered benefit, rather than on a determination that an item 
or service is not reasonable and necessary under section 1862(a)(1)(A) 
of the Act, or on a determination that an item or service constitutes 
custodial care.) Many interpreted the proposed rule as maintaining the 
current policy that providers do not have appeal rights for these types 
of denials. Other commenters believed that our intent was to allow 
providers to appeal to the same extent as beneficiaries and agreed with 
the proposal. Still other commenters questioned whether the change in 
policy to expand appeal rights for providers would mean that 
contractors would no longer deny claims because the claims failed to 
meet the requirements of the Medicare benefit.
    Response: A provider or supplier can appeal a properly submitted 
claim only after the contractor has issued an initial determination on 
that claim. Thus, if a contractor rejects a claim because the claim was 
improperly submitted (for example, the claim was missing the basic 
information needed to process it), that rejection does not constitute 
an initial determination.
    Currently, Sec.  405.710(b) allows a provider to appeal an initial 
determination on Part A coverage only when a contractor determines: (1) 
That an item or service is not covered because it constitutes custodial 
care; (2) that an item or service is not covered because it did not 
qualify as covered home health services because the beneficiary was not 
confined to the home or did not need skilled nursing care on an 
intermittent basis; (3) that an item or service is not covered because 
it was a hospice service provided to a non-terminally ill individual; 
(4) that the item or service is not covered because it is not 
reasonable and necessary; and (5) either the beneficiary or provider of 
services, or both, knew, or could reasonably have been expected to 
know, that the item or service is excluded from Medicare coverage. 
Historically, only beneficiaries were afforded the right to appeal 
claims that were denied because the items or services failed to meet 
the requirements of the Medicare covered benefit (for example, a denial 
of home health services due to the lack of a physician certification). 
Despite this restriction, however, providers routinely accessed the 
appeals process by acting as the beneficiary's appointed representative 
in situations where they would otherwise not have had appeal rights.
    As discussed in the proposed rule, a clear goal of the BIPA 
legislation was to establish a uniform appeals process for Part A and 
Part B claims, and thus for all beneficiaries, providers, and 
participating suppliers. In keeping with this goal, we believe that the 
interests of the appeals process would be best served by ensuring that 
providers are afforded an equal opportunity to be heard with regard to 
all Medicare initial determinations. Therefore, as proposed, we are 
specifying that Medicare providers may file administrative appeals of 
initial determinations to the same extent as beneficiaries. With this 
change, we achieve consistency in our approach to which individuals or 
entities can bring an appeal under Part A and Part B.
    This interim final rule does not change the available bases for 
claim denials. Contractors may continue to deny claims on the basis 
that the item or service is not a Medicare benefit, or more precisely, 
that the item or service in question does not adhere to all the 
requirements set forth in the definition of the Medicare benefit. 
Rather, this interim final rule changes the appeals status of providers 
and participating suppliers, allowing them to appeal all denials on 
their own accord.
    Comment: One commenter requested clarification on whether a 
beneficiary can appeal even if the beneficiary has appointed a 
representative or initiated a valid assignment of appeal rights. The 
commenter expressed concern that under proposed Sec.  405.906, any 
party to the initial determination can request a redetermination. A 
literal reading of this section would permit a beneficiary to pursue an 
appeal even if the beneficiary has an appointed representative or has 
assigned appeal rights to a provider or supplier. In addition, the 
commenter asked if beneficiaries could pursue an appeal at the same 
time as the provider.
    Response: The commenter raises two sets of issues: (1) The appeal 
rights of a beneficiary who has appointed a representative; and (2) the 
appeal rights of a beneficiary who has assigned these rights to a 
provider or supplier.
    Beneficiaries can either exercise their appeal rights themselves or 
through an appointed representative, or they can assign their appeal 
rights to the provider

[[Page 11428]]

or supplier that delivered the service or item. (We note that 
appointment of a representative and assignment of appeal rights are two 
different and unrelated actions.) Unlike assignment, appointment of a 
representative does not entail transferring one's appeal rights, nor 
does it make the appointed representative a separate party to the 
appeal. An appointed representative is chosen by a party to assist a 
beneficiary in exercising appeal rights with respect to one or more 
initial determinations. The beneficiary retains party status during the 
appeals process, and therefore, never loses the right to appeal to 
subsequent levels of the appeals process. To avoid confusion regarding 
representation, either the beneficiary or the appointed representative 
(but not both the beneficiary and the appointed representative) should 
request the appeal.
    On the other hand, when a beneficiary completes a valid assignment 
of appeal rights, the beneficiary assigns appeal rights for the 
particular claim or claims to a provider or supplier who is not 
otherwise a party to the initial determination. If the beneficiary 
assigns appeal rights in accordance with Sec.  405.912(f), then the 
beneficiary transfers any right to request a redetermination, 
reconsideration, hearing, or MAC review with respect to the item or 
services at issue, unless the assignment is revoked in accordance with 
Sec.  405.912(g). While it is not permissible for a beneficiary to file 
an appeal when a valid assignment of appeal rights is in force, it is 
possible for more than one party to file a request for an appeal on the 
same claim when no assignment of appeal rights has been made (for 
example, a beneficiary and a supplier that has accepted assignment of a 
claim). We are providing under Sec. Sec.  405.944(c) and 405.964(c) 
that if more than one party timely files a request for redetermination 
or reconsideration on the same claim before a redetermination or 
reconsideration is made on the first timely filed request, the 
contractor or the QIC will consolidate the separate requests into one 
proceeding and issue one determination. These provisions are consistent 
with the longstanding policy that multiple parties have t he right to 
appeal the same claim. We note, however, that has been very rare for 
more than one party to exercise this right.
    Comment: One commenter pointed out that Sec.  405.906(a)(1) lists a 
beneficiary who has filed a claim for payment or has had a claim for 
payment filed as a party to the initial determination. The commenter 
suggested that we revise this provision since beneficiaries in most 
instances do not file claims.
    Response: As a general rule, we require providers and suppliers to 
submit claims to seek reimbursement for items or services that they 
have delivered to beneficiaries. Thus, beneficiaries generally do not 
need to file claims, but they continue to have the right to do so. (In 
some situations, however, beneficiaries are prohibited from filing 
claims on their own, such as for glucose test strips.) Accordingly, we 
believe that it is necessary to maintain this language in the interim 
final rule to accommodate those rare instances where beneficiaries may 
submit claims (for example, because a supplier improperly refuses or 
fails to submit a timely claim with Medicare for reimbursement). For 
clarity, we have added Sec.  405.926(n) and Sec.  405.926(o) to reflect 
that a provider or supplier's failure to request an initial 
determination or submit a timely claim does not constitute an initial 
determination, and that determinations with respect to whether an 
entity qualifies for an exception to the electronic claims submission 
requirement under 42 CFR, part 424, are not considered initial 
determinations.
2. Medicaid State Agencies (Sec.  405.908)
[If you choose to comment on issues in this section, please include the 
caption ``Medicaid State Agencies'' at the beginning of your comments.]

    In the proposed rule, we drafted a separate provision acknowledging 
the right of a Medicaid State Agency to pursue an appeal on behalf of a 
beneficiary who is entitled to benefits under both Medicare and 
Medicaid. We proposed that a Medicaid State Agency would not be 
considered a party, unless the agency actually pursued a 
redetermination on behalf of a dually eligible beneficiary. A 
contractor would not automatically send a Medicaid State Agency notice 
of determinations made during the administrative appeals process, nor 
would the agency be permitted to request QIC reconsiderations, ALJ 
hearings or MAC reviews, unless the agency actually filed a request for 
redetermination for a beneficiary. If a Medicaid State Agency filed a 
request for a redetermination, it would retain party status for the 
claim throughout the rest of the appeals process.
    Comment: With regard to a Medicaid State Agency filing an appeal on 
behalf of an individual that is entitled to both Medicare and Medicaid 
benefits, one commenter recommended that we clarify the definition of a 
dual eligible.
    Response: A dual eligible beneficiary is one who is eligible for 
and enrolled to receive benefits under both the Medicare and Medicaid 
programs. To clarify this concept, we have replaced the proposed text 
``dually eligible for Medicare and Medicaid'' in Sec.  405.908. 
Instead, the text now states that ``[w]hen a beneficiary is enrolled to 
receive benefits under both Medicare and Medicaid, the Medicaid State 
Agency may file a request for an appeal with respect to a claim for 
items or services furnished to a dual eligible beneficiary.'' We note 
that we further clarified in this provision that the Medicaid State 
Agency's appeal is only with respect to services for which has made 
payment or for which it may be liable.
    Comment: A commenter recommended that we clarify what qualifies as 
a timely filed redetermination request under Sec.  405.908.
    Response: A request for a redetermination by a Medicaid State 
Agency will be considered timely if it meets the requirements at Sec.  
405.942. Section 405.942(a) specifies that a request for a 
redetermination must be filed within 120 calendar days from the date 
the party receives the notice of the initial determination. Although 
the Medicaid State Agency is not a party to the initial determination, 
it is filing a redetermination request with respect to a claim for 
items and services furnished to a beneficiary. Therefore, the 
timeliness of the request will be determined by the date that the 
beneficiary receives the initial determination notice, otherwise known 
as the Medicare Summary Notice (MSN). For purposes of calculating the 
date of receipt of the MSN under Sec.  405.942(a)(1), it is presumed 
that the beneficiary received the MSN 5 days after the date on the MSN, 
unless there is evidence to the contrary.
3. Appointed Representatives (Sec.  405.910)
[If you would like to comment on issues in this section, please include 
the caption ``Appointed Representatives'' at the beginning of your 
comments.]

    Under proposed Sec.  405.910, we incorporated and modified several 
of the provisions in 20 CFR part 404, subpart R, and 42 CFR part 405, 
subparts G and H, as they relate to the representation of parties. 
These provisions eliminated the need for incorporation of the existing 
SSA regulations regarding appointment of representatives.
    Proposed Sec.  405.910(a) sets forth the definition of appointed 
representative as an individual authorized by a party, or

[[Page 11429]]

under State law, to act on the party's behalf in dealing with any of 
the levels of the appeals process. Appointed representatives do not 
have independent party status and take action only on behalf of the 
individual or entity they represent.
    Under proposed Sec.  405.910(d), we set forth that in order to be 
valid, an appointment both needs to be in writing, and signed by the 
party making the appointment and the individual agreeing to accept the 
appointment (even when the individual being appointed is an attorney). 
Proposed section Sec.  405.910(e) establishes the time frame governing 
the duration of representation as: (1) The life of an individual 
appeal, and (2) for purposes of appeals of other initial 
determinations, one year from its original effectuation.
    New section 1869(b)(1)(B)(iv) of the Act makes clear that section 
206(a)(4) does not apply in the case of Medicare appeals. This section 
permits the award of attorney's fees (not to exceed 25 percent) from a 
claimant's entitlement to past-due disability benefits. Therefore, in 
proposed Sec.  405.910(f), we are explicit that no award of attorney 
fees can be made against the Medicare trust funds. However, we 
requested comments on petitions to ALJs to review and approve attorney 
fees.
    In proposed Sec.  405.910(g) through Sec.  405.910(k), we 
delineated the responsibilities and rights of an appointed 
representative. In proposed Sec.  405.910(l), we established the rules 
regarding delegation. (Delegation is the act of empowering another to 
act as a representative.) In order for an appointed representative to 
designate another person to act as a representative (the designee), the 
appointed representative must: (1) Give the designee's name to the 
party; (2) secure the designee's acceptance of both the representation 
and the requirements of that representation; and (3) secure the 
represented party's acceptance of the new arrangement with a signed, 
written document. We note that the decision on whether to have an 
appointed representative belongs to the party, and we neither encourage 
nor discourage representation. Therefore, under proposed Sec.  
405.910(m), a party would have the ability to revoke an appointment for 
any reason, at any time.
    Comment: A commenter suggested amending the regulation to require 
that appointed representatives for providers be members of the bar. 
However, this commenter also recommended permitting non-attorneys to 
act as representatives for beneficiaries, but only if these 
representatives waived receipt of a fee for their services.
    Response: Section 1869(b)(1)(B)(iv) of the Act establishes that the 
requirements set out in sections 205(j) and 206 of the Act govern who 
may serve as a representative for a Medicare beneficiary. Section 
405.910 of the regulations permits anyone who satisfies the 
requirements outlined in section 205(j)(2) to act as a representative. 
The provisions of Sec.  405.910(b) discuss persons not qualified to act 
as an appointed representative. Nothing in section 205(j)(2) requires 
appointed representatives to be members of the bar. Therefore, we do 
not agree that it is appropriate or necessary to limit providers' 
access to the administrative appeals process by requiring them to 
retain attorneys if they wish to appoint a representative.
    Similarly, there is nothing in section 205(j)(2) that requires non-
attorneys who represent beneficiaries to waive their fees. However, we 
agree with the commenter that certain precautions be taken to prevent a 
conflict of interest when the party that provides an item or service is 
the same party representing the beneficiary in a claim appeal. 
Therefore, in accordance with section 1869(b)(1)(B)(iii) of the Act, 
new Sec.  405.910(f)(3) requires that a provider or supplier who both 
furnished the service being appealed and represents the beneficiary in 
the Medicare claim appeal, must waive the right to collect a fee for 
acting as the appointed representative. Additionally, if the appeal 
involves a question of liability under section 1879 of the Act, the 
provider or supplier may not represent the beneficiary unless the 
provider or supplier also waives the right to collect payment for the 
item or service at issue.
    Comment: We solicited comments on our proposal to require attorneys 
to petition ALJs for review and approval of fees. A few commenters 
suggested that appointed representatives who are members of the bar of 
one of the fifty States, the District of Columbia, or Puerto Rico, not 
be required to petition an ALJ in order to collect a fee. Instead, one 
commenter suggested that oversight should be left to the bar of which 
the attorney is a member.
    There were also a number of comments regarding the ability of 
appointed representatives to charge fees. The commenters noted that the 
proposed rule addressed only fees charged by attorney representatives, 
and recommended that we address fees for non-attorneys in this interim 
final rule. One commenter recommended that the final rule include 
explicit language requiring non-attorney representatives to waive any 
right to charge and receive a fee. Finally, other commenters inquired 
about the applicability of the Equal Access to Justice Act (EAJA) to 
the new appeals process and recommended that the final rule reference 
the availability of attorney's fees.
    Response: Section 1869(b)(1)(B)(iv) of the Act establishes that the 
provisions of sections 205(j) and 206 (other than subsection (a)(4)) of 
the Act apply to representation for Medicare claim appeals in the same 
manner as they apply to representation for Social Security claims. By 
incorporating these sections, the Congress maintained that for appeals 
before the Secretary, appointed representatives, including attorneys, 
must obtain approval of fees before charging a party.
    Consistent with the current practice of fee petitions before ALJs, 
and sections 205(j) and 206 (other than subsection (a)(4)) of the Act, 
as applied by section 1869(b)(1)(B)(iv) of the Act, we are requiring in 
new Sec.  405.910(f)(1) that an attorney or other person who represents 
a beneficiary, and who wishes to charge a fee for services rendered in 
connection with an appeal before the Secretary, must seek approval of 
the fee from the Secretary. Although it would be up to the Secretary to 
determine the reasonableness of the fee, we do not believe the 
provisions in sections 206(a)(2) and 206(a)(3) of the Act will be 
relevant in determining whether a fee is reasonable. In Social Security 
appeals, those provisions limit a representative's fee, in certain 
instances, to the lesser of 25 percent of past due benefits or $4,000 
(with the $4,000 cap subject to an update factor determined by the 
Commissioner of Social Security). Unlike Social Security appeals, 
Medicare appeals do not involve past-due cash benefits; moreover, the 
benefits at issue can vary from as little as $100 (the minimum amount 
in controversy for an ALJ appeal) to $100,000 or more, and we do not 
believe that applying a 25 percent test to these divergent figures is 
reasonable. Therefore, the test in sections 206(a)(2) and 206(a)(3) of 
the Act is irrelevant in determining the reasonableness of 
representatives' fees. Also, section 206(a)(4) does not apply, because 
the Medicare program does not involve past-due cash benefits. The 
process for obtaining fee approval will be further described either in 
future rulemaking or in ALJ and MAC level procedural manuals or other 
issuances, as appropriate.
    We do not consider services below the ALJ hearing level in 
connection with

[[Page 11430]]

claims in proceedings before Medicare contractors (such as 
intermediaries, carriers, QICs, QIOs and other independent review 
entities) to be services provided in connection with proceedings before 
the Secretary. Section 206(a) authorizes the Commissioner of Social 
Security to prescribe rules and regulations to govern the 
representation of claimants in proceedings before the Commissioner. 
This provision has been interpreted to include proceedings at the ALJ 
level and above. Thus, appeals before the Secretary of HHS have long 
been interpreted to include only the ALJ level and above. Therefore, 
the fee petition provisions do not apply to services rendered below the 
ALJ hearing level, nor do they apply to representatives of non-
beneficiary appellants.
    We also agree that fee limitations are appropriate for certain non-
attorneys who represent beneficiaries. Accordingly, Sec.  405.910(f)(3) 
requires providers and suppliers who furnished the items or services in 
question to waive the right to charge and collect any fee for 
representing a beneficiary in a claim appeal. This is required by 
section 1869(b)(1)(B)(iii) of the Act. To ensure that this policy is 
followed consistently, we will revise the Appointment of Representative 
form, CMS-1696-U4, to reflect this policy. In Sec.  405.910(f)(4), we 
also added that the Secretary does not review fee arrangements made by 
a beneficiary for the purposes of making a claim for third party 
payment (as defined in 42 CFR Sec.  411.21) even though that 
representation may ultimately include representation for a Medicare 
Secondary Payer recovery claim.
    Guidelines for the application of Equal Access to Justice Act 
(EAJA) to claims before the Department may be found at 45 CFR part 13. 
(The final rule was published in the Federal Register at 69 FR 2843 
(January 21, 2004)). The final rule governs the applicability of EAJA 
to the Medicare claim appeals process. The Department intends to review 
the EAJA provisions to determine what, if any, amendments may be 
necessary to reflect the changes being implemented in this regulation.
    Comment: A commenter asked what, if anything, are the consequences 
of failing to satisfy all seven of the requirements set out in proposed 
Sec.  405.910(d) for making out a valid appointment.
    Response: All of the requirements in new Sec.  405.910(c) are 
necessary to complete a valid appointment of representation. To clarify 
this matter, we are specifying under new Sec.  405.910(d) that if any 
of the required elements are missing or defective, adjudicators must 
contact the party with a description of the missing documentation or 
information. Unless the defect is cured, the prospective appointed 
representative lacks the authority to act on behalf of the party, and 
is not entitled to obtain or receive any information related to the 
appeal, including the appeal decision. An individual may also use a 
CMS-1696 form to appoint a representative. That form contains all of 
the required elements to complete a valid appointment of 
representation.
    Comment: We received several responses to our request for comments 
regarding alternative time frames for the duration of an appointment of 
representative. Some commenters simply wanted clarification of the 
policy in the proposed rule. Others understood our proposal to make 
appointments valid for one year, but wondered if the one-year period 
began on the date-of-service for the appealed claim, or on the date 
that the beneficiary, provider or supplier authorized another 
individual to appeal on their behalf. One commenter argued that because 
we offered no indication that representatives were initiating appeals 
without the consent of the appellants, limiting the duration of 
appointments would serve only to create unnecessary hardships for 
appellants. Providers, and suppliers would be prevented or delayed from 
entering the claim appeals process, and beneficiaries with chronic 
conditions would be required to renew the appointment every year.
    Response: A number of the comments that we received indicate some 
confusion between the appointed representative provisions at Sec.  
405.910 and the assignment provisions at Sec.  405.912. Appointing a 
representative and assigning appeal rights are two different and 
unrelated actions under the new appeals process. Beneficiaries have the 
option of either assigning their appeal rights to a provider or 
supplier, or appointing a representative to exercise their appeal 
rights for them.
    Under the assignment provision, a beneficiary transfers his or her 
right to appeal a specific claim or claims to a provider or supplier 
who is not already a party to the initial determination. In doing so, 
the beneficiary completely relinquishes any right to appeal the claim 
or claims at issue and the provider or supplier becomes a party and may 
appeal.
    Appointing a representative, however, does not transfer a party's 
appeal rights, nor does it make the appointed representative a party to 
the appeal. An appointed representative is chosen by a party for the 
duration of one year to assist the party in exercising appeal rights 
for one or more initial determinations. We believe that once an appeal 
of an initial determination has been filed, the appointed 
representative retains the right to manage that appeal through the 
entire appeals process, regardless of how long it takes to reach a 
final decision. In Sec.  405.910(e)(3), we state that unless revoked, 
an appointment is valid for the life of the appeal.
    In Sec.  405.910(e)(4), we made an exception for appointments 
signed in connection with Medicare Secondary Payer recovery claims, 
because liability, no-fault, and worker's compensation claims often 
take more than one year to resolve. Where an appointment of 
representative is related to these recovery claims, the appointment is 
valid from the date that it is signed through the duration of any 
subsequent appeal.
    We do not agree that either an appointment or the representative's 
ability to file appeals of future claims continues indefinitely. 
Appointed representatives have unlimited access to protected health 
care information, and as we stated in the proposed rule, we have an 
affirmative duty to ensure that our adjudicators only disclose 
protected health information to authorized third parties. Taking this 
into consideration, we believe that it is both necessary and 
appropriate to limit the duration of an appointment and a 
representative's ability to file additional appeals to a period of one 
year, beginning on the day that the appointment becomes effective.
    In Sec.  405.910(i)(4), we specifiy that for initial determinations 
involving MSP recovery issues, the notice of initial determination must 
be sent to the beneficiary and appointed representative. This differs 
from non-MSP determinations where only the beneficiary receives the 
notice of initial determination to prevent more than the minimum amount 
of personally identifiable health information from being disclosed. 
Unlike other notices of initial determination, which may include 
information on claims not at issue, MSP notices of initial 
determination are limited to include only the minimum necessary amount 
of information related to the claims at issue.
    Section 405.910(e)(1) clarifies that the effective date of the 
appointment is the day that the Appointment of Representative (AOR) 
form or other written instrument contains the signatures of both the 
party and appointed representative. Also, we are

[[Page 11431]]

requiring under Sec.  405.910(e)(2) that during this one-year period, 
representatives must submit a copy of the signed and dated original 
appointment with each additional appeal that they file on behalf of the 
party.
    Finally, we made one other significant change to Sec.  405.910. 
Although we proposed provisions in the context of appeals, we solicited 
comments on whether the appointment of representative procedures should 
apply for initial determination purposes as well. We did not receive 
comments on this issue, but we believe there is no reason to imply that 
different procedures or rules apply to initial determinations. 
Therefore, we have provided under Sec.  405.910(a) of this interim 
final rule that the appointment of representative provisions apply for 
initial determinations, as well as for appeals. Also, under Sec.  
405.910(e)(3), an appointment signed in connection with the party's 
efforts to request payment of a claim is valid from the date that 
appointment is signed for the duration of any subsequent appeal, unless 
the appointment is specifically revoked. When a contractor issues an 
initial determination, it sends a notice of that action only to the 
party, and not to the party's appointed representative.
    Comment: One commenter was concerned about the inability of an 
appointed representative to delegate an appointment to another person 
without first obtaining the party's signature. The commenter opined 
that requiring a beneficiary's signature in order to delegate an 
appointment would greatly impede a beneficiary's ability to receive 
timely representation. By way of example, the commenter noted that a 
signature requirement would prevent a family member acting as a 
representative for an incapacitated beneficiary from retaining an 
attorney or paralegal to represent the beneficiary in a Medicare claim 
appeal. Additionally, the commenter stated that the signature 
requirement would prevent appointed representatives who are members of 
a law firm or a legal services organization from designating a new 
representative within the firm or organization when program turnover or 
workload necessitated a change.
    Response: Although we appreciate the administrative benefits to be 
gained from allowing an appointed representative to delegate an 
appointment to another individual, the privacy concerns that we noted 
previously seriously impact our ability to permit delegation in most 
instances. We believe that the benefits that are gained by ensuring 
that a beneficiary is made aware when an appointment has been delegated 
outweigh the burden of obtaining the beneficiary's consent. We also do 
not believe that this requirement will greatly impede the beneficiary's 
ability to receive timely representation.
    In the case where a beneficiary is no longer mentally capable of 
giving consent or signing the appointment of representative form, the 
family member or friend should refer to State law. As defined in Sec.  
405.902, an authorized representative is an individual authorized under 
State or other applicable law to act on behalf of a beneficiary or 
other party involved in the appeal. Unlike an appointed representative, 
an authorized representative ``stands in the shoes'' of the 
beneficiary. State requirements differ with respect to what is required 
to legally represent an incompetent beneficiary. Individuals appointed 
or designated under State statutes may act as authorized 
representatives. For example, some States have health care consent 
statutes providing for health care decision-making by surrogates on 
behalf of patients who lack advance directives and guardians. Other 
States have laws that grant authority to individuals with durable 
powers of attorney. In an emergency, a disinterested third party, such 
as a public guardianship agency, may be an authorized representative, 
for example, in a situation where the beneficiary's inability to act 
has arisen suddenly (for example, a medical emergency, a traumatic 
accident, an emotionally traumatic incident, disabling drug 
interaction, or stroke), and there is no one who can be genuinely 
considered to be the beneficiary's choice as his or her authorized 
representative. Thus, an individual who has legal authority under State 
law is able to make decisions on behalf of a beneficiary, including the 
ability to delegate the appointment to another person, without first 
obtaining the beneficiary's signature.
    Attorneys in law firms and legal service organizations present a 
unique situation. As a general rule, attorneys within the same law firm 
already are obligated to observe strict confidentiality rules with 
respect to client information, and therefore, the common practice of 
delegating cases to other attorneys within the firm does not warrant 
privacy concerns. Thus, we believe it is appropriate to permit 
attorneys to delegate another attorney within the same firm or 
organization as a substitute representative. Section 405.910(l)(2) is 
amended to reflect this policy.
    Comment: A commenter asked that we provide information on how to 
change an appointed representative during the appeals process.
    Response: As indicated in the proposed rule, we believe that the 
decision of whether to retain an appointed representative be left 
entirely to the party bringing the appeal. Section 405.910(m) permits a 
party to revoke an appointment at any time and for any reason by 
submitting a signed, written statement to the entity processing the 
appeal. The revocation is effective once it is received by the entity 
hearing the appeal. The party can then appoint a new representative.
4. Assignment of Appeal Rights (Sec.  405.912)
[If you choose to comment on issues in this section, please include the 
caption ``Assignment of Appeal Rights'' at the beginning of your 
comments.]

    Under proposed Sec.  405.912, we created new regulatory procedures 
for the assignment of appeal rights by a beneficiary to a supplier or 
provider of services. We proposed that a provider or supplier that 
furnished the item or service at issue and that wanted to take 
assignment of a beneficiary's appeal rights for a particular claim must 
waive any right to payment from the beneficiary in order to fully 
protect beneficiaries when their appeal rights are assigned. This does 
not prohibit the provider or supplier from recovery of any coinsurance 
or deductible or claiming payment in full where the beneficiary has 
signed an Advance Beneficiary Notice (ABN) accepting responsibility for 
payment. We proposed that the assignment be valid for the duration of 
the appeals process, but only for the items or services listed on the 
assignment form.
    Comment: One commenter requested clarification on whether an 
assignment applies to an individual item or service, or to all items or 
services within an entire claim. The commenter believed that assigning 
different providers or suppliers for multiple items or services within 
a claim would be too confusing.
    Response: We do not believe that it is appropriate or necessary to 
require beneficiaries to relinquish their rights to appeal individual 
items or services. Consistent with our longstanding policy where we 
allow beneficiaries to appeal individual items or services within a 
single claim, Sec.  405.912 permits beneficiaries to assign their 
appeal rights for individual items or services to providers and 
suppliers. We believe that this will not cause confusion since each 
claim originates from a single provider or supplier. The provider or 
supplier

[[Page 11432]]

needs to ensure that the assignment form includes the full range of 
items or services furnished on the date of service.
    Comment: One commenter expressed concern that obtaining assignment 
after services were provided would adversely affect providers with 
transient populations because their beneficiary contact information is 
usually for temporary residences. The commenter suggested that the 
assignment form be available to be signed at admission.
    Response: We understand the concerns of the commenter, and agree 
that the assignment form may be completed at admission. Section 
405.912(c) does not prevent a provider and beneficiary from being able 
to complete and execute the assignment at the time that the beneficiary 
receives services. When a provider needs to appeal an initial 
determination that denies payment for the services rendered, the 
provider can submit the previously signed assignment form with the 
request for redetermination.
    Comment: One commenter suggested that the regulation be clarified 
to ensure that the waiver of collection from the beneficiary applies 
even if the appeal is unsuccessful.
    Response: We agree that the regulation should be clarified to 
specify that the waiver of the right to collect payment by the assignee 
remains valid in the event of an unfavorable determination or decision. 
We have amended our proposed Sec.  405.912(d)(1) to specify that the 
waiver remains in effect regardless of the outcome of the appeal 
decision. We have also taken the opportunity to correct an omission in 
Sec.  405.912(d)(1). The waiver of payment also remains in effect if 
the assignment is revoked under Sec.  405.912(g)(2) or Sec.  
405.912(g)(3). That is, if the assignee fails to file an appeal of an 
unfavorable decision or if an act or omission by the assignee is 
determined to be contrary to the financial interests of the 
beneficiary, the assignee will not be able to collect payment from the 
beneficiary.
    Comment: One commenter recommended that the waiver of the right to 
collect from the beneficiary apply regardless of whether there is an 
ABN in effect. The commenter expressed concern that a provider or 
supplier might be inclined to require a beneficiary to sign an ABN for 
any item or service in order to protect any future collection of 
payment.
    Response: We prohibit providers and suppliers from routinely 
issuing ABNs for all services. ABNs generally are issued only when the 
provider or supplier has reason to believe that Medicare is not likely 
to cover the furnished services. Thus, we are maintaining the provision 
at Sec.  405.912(d)(2) that an assignee that furnished the item or 
service is not prohibited from recovering payment when an ABN has been 
properly executed. We believe an alternative policy would create 
disincentives for providers and suppliers to bring appeals on behalf of 
beneficiaries when they believe Medicare is denying coverage 
improperly. If providers and suppliers are faced with the choice of 
appealing what they believe to be an erroneous denial or collecting 
from the beneficiary in the event of an unfavorable decision, they may 
simply decide to place the burden of appeal on the beneficiary.
    Comment: Some commenters raised concerns about our proposal to 
permit beneficiaries to revoke an assignment. One commenter recommended 
that assignment be irrevocable until the appeal is filed or the 
deadline for filing has expired in order to prevent a provider or 
supplier from wasting resources pursuing an appeal. The commenter 
suggested that we establish a time frame for a beneficiary to revoke an 
assignment. Another commenter requested that we define the specific 
circumstances that constitute abandonment.
    Response: We believe that it is unnecessary to establish a time 
frame to limit a beneficiary's right to revoke an assignment. The 
inherent nature of an assignment protects the interests of a 
beneficiary since transferring the appeal rights to a provider or 
supplier precludes the provider or supplier from collecting payment 
from the beneficiary in the event of an unfavorable determination. We 
believe that beneficiaries will rarely revoke an assignment; therefore, 
the possibility of providers and suppliers unnecessarily pursuing 
appeals is remote. A somewhat more likely scenario involves 
abandonment, that is, inaction on the part of the assignee to undertake 
or proceed in the appeals process. Section 405.912(g)(2) addresses this 
situation by specifying that an assignment may be revoked ``[b]y 
abandonment if the assignee does not file an appeal of an unfavorable 
decision.''
    Comment: One commenter supported the use of a standardized form for 
assignment. The commenter suggested that the form include an 
explanation of assignment and what an assignee does for a beneficiary. 
The commenter also suggested that proposed Sec.  405.912(d)(2) should 
be revised to reflect that the assignment may be executed by the 
beneficiary or his or her representative.
    Response: We agree with the commenter and are developing a 
standardized form for assignment, as required by section 1869(b)(1)(C) 
of the Act. This form, which has been consumer-tested with the 
beneficiary population, contains extensive information to assist 
beneficiaries in understanding the assignment and execution of their 
appeal rights.
    As mentioned in an earlier response, we added a definition of an 
``authorized representative'' at Sec.  405.902. Authorized 
representatives (for example, a legal guardian or someone with a power 
of attorney) possess all the rights associated with the appeals process 
to the same extent as beneficiaries. Therefore, we do not believe that 
it is necessary for new Sec.  405.912(c)(2) to reflect that an 
authorized representative may execute an assignment of appeal rights on 
behalf of a beneficiary. Appointed representatives under Sec.  405.910, 
including attorneys, may assist the beneficiary or another party with 
Medicare appeals, but they do not have any other rights or 
responsibilities with respect to the beneficiary or another party, and 
may not sign documents as the beneficiary or party. Thus, an appointed 
representative may not assign appeal rights under Sec.  405.912 without 
the beneficiary's or other party's consent.
5. Initial Determinations (Sec.  405.920 Through Sec.  405.928)
[If you choose to comment on issues in this section, please include the 
caption ``Initial Determinations'' at the beginning of your comments.]

    Section 1869(a)(2)(A) of the Act establishes that for all claims 
other than clean claims (a clean claim is a claim that has no defect or 
impropriety), an initial determination must be concluded, and a notice 
of that determination must be mailed, by no later than 45 days after 
the carrier or fiscal intermediary receives the claim. We proposed that 
interest would not accrue on non-clean claims that were not adjudicated 
within 45 days. By definition, non-clean claims are often claims that 
require additional documentation, and therefore take additional time to 
process.
    With respect to clean claims, section 1869(a)(2)(B) of the Act 
requires that interest accrues if clean claims are not processed within 
30 days. This standard remains the same as specified in sections 
1816(c)(2) and 1842(c)(2) of the Act.
    We proposed to continue to notify parties of the initial 
determination in writing. The proposed content of the notices included 
the basis for the determination and notification to the parties of 
their right to a

[[Page 11433]]

redetermination if they were dissatisfied with the outcome of the 
initial determination. Consistent with existing policy, the Remittance 
Advice (RA) and Medicare Summary Notice (MSN) would be used as a notice 
of initial determination.
    We also proposed the types of actions that constitute initial 
determinations, as well as those that do not constitute initial 
determinations. We generally proposed to maintain the existing policies 
concerning initial determinations, while at the same time unifying the 
Part A and Part B rules. We have also included examples specific to 
Medicare Secondary Payer situations in listing the type of actions that 
constitute initial determinations. We specified our longstanding policy 
that SSA will continue to make Part A and Part B entitlement and 
enrollment determinations. As noted previously in section I.C.1 of this 
interim final rule, section 931 of the MMA requires the transfer of ALJ 
hearing functions from SSA to HHS. Although SSA will continue to make 
Part A and Part B entitlement and enrollment determinations and 
reconsiderations subject to the requirements set out at 20 CFR Part 
404, Subpart J, HHS will be responsible for reviewing entitlement and 
enrollment decisions at the ALJ and MAC levels. We note, however, that 
this regulation does not provide the specific procedural requirements 
that will apply to the adjudication of entitlement appeals. These 
instructions will instead be provided separately once this interim 
final rule is published. We believe that this approach will ensure that 
beneficiaries, providers, suppliers, and other interested parties 
receive clear guidance regarding the procedures for appealing an 
entitlement determination at each level of the appeals process.
    We addressed the circumstances under which an appeal can be filed 
when a beneficiary disputes the computation of coinsurance amounts. 
Previously, our rules stated that beneficiaries could appeal Medicare 
determinations regarding the ``application of the coinsurance 
feature.'' We clarified this provision to state that the contractor's 
``computation of coinsurance'' was considered an initial determination, 
and therefore, could be appealed. In making this proposal, we 
considered that for most Part B services, beneficiaries were 
responsible for a 20 percent coinsurance payment and, since the 
contractor calculated the percentage, a beneficiary should be able to 
appeal the contractor's computation. In instances where the coinsurance 
amount was not computed by the contractor, but rather, was an amount 
prescribed by regulation (for example, outpatient services), the issue 
of the appropriateness of the coinsurance amount was not appealable 
since it was an automatically calculated amount based directly on a fee 
schedule exempt from review.
    We also specified that there be no administrative appeal rights 
available for certain aspects of initial determinations. For example, 
under section 1833(t) of the Social Security Act (the Act), 
administrative appeals are prohibited for issues involving the 
calculation of coinsurance amounts for outpatient services subject to 
prospective payment rules, and under section 1848(i) of the Act, the 
values used to calculate allowable amounts under the physician fee 
schedule may not be the subject of an administrative appeal. 
Additionally, we proposed some further examples of actions that are not 
initial determinations, such as waiver of interest determinations and 
certain Medicare Secondary Payer actions.
    Comment: One commenter suggested that the initial determination 
notice contain more details about requesting a redetermination, such as 
the documentation needed to pursue an appeal. The commenter recommended 
that the notice give exact citations for the rules and policies upon 
which the determination is based and explain how to obtain them. The 
commenter also suggested that the notice include a toll free number 
that appellants can call to receive copies of coverage rules and 
policies.
    Response: We agree with the commenter that initial determination 
notices contain information necessary for beneficiaries to initiate 
appeals. However, we believe that existing notice requirements are 
fully compatible with this objective, and we do not believe that 
additional detail is appropriate.
    Currently, beneficiaries receive initial determination notices 
through the Medicare Summary Notice (MSN), and providers and suppliers 
receive notices on the Remittance Advice (RA). The MSN is a consumer-
tested, customer-friendly monthly statement that lists all of the 
services or supplies billed to Medicare during a 30-day period. It 
contains information about requesting an appeal on the bottom of the 
last page and at the back of each page. The MSN indicates the date that 
an appeal must be filed in order for it to be considered timely. The 
MSN also allows beneficiaries to appeal by circling an item, explaining 
why they disagree, and signing and sending the notice, or a copy of the 
notice, to a specified address.
    We also agree with the commenter that MSNs indicate when the basis 
for a claim denial involves a local or national coverage determination. 
Effective during 2003, CMS now requires fiscal intermediaries and 
carriers to provide references to coverage policies when they describe 
the basis for claim denials. However, based on nationwide testing of 
Medicare beneficiary focus groups, CMS does not include regulatory 
citations in MSNs because they are confusing to beneficiaries. We 
believe that referring to a local or national coverage determination is 
more meaningful to beneficiaries in helping them understand the reason 
their claim has been denied.
    The MSN contains the Medicare toll-free number so that 
beneficiaries can obtain information about various aspects of the 
Medicare program, including individual claim determinations. 
Beneficiaries can also use the toll-free number to request a copy of 
the coverage rule or policy used as the basis to deny a claim, or they 
may access the policies via the Internet.
    Thus, in light of the information already contained in MSNs, we do 
not believe that it is necessary to modify the initial determination 
notices sent to beneficiaries. However, we believe it is appropriate to 
include in the regulations the explicit notice requirements that are 
set forth under section 933(c)(1) of the MMA. Therefore, Sec.  
405.921(a)(1) specifies that contractors must write the MSNs in a 
manner calculated to be understood by the beneficiary. We have also set 
forth the statutory content requirements as to the contents of the 
notice in Sec.  405.921(a)(2). That is, the notice must contain the 
reasons for the determination, including whether a local medical review 
policy, local coverage determination, or national coverage 
determination was applied, the procedures for obtaining additional 
information concerning the determination, such as the specific 
provision of the policy, manual, law, or regulation used in making the 
determination, and notification to the parties of their right to a 
redetermination if they are dissatisfied with the outcome of the 
initial determination. The notice also must include instructions on how 
to request a redetermination. Again, we believe that the existing MSNs 
meet all the new MMA requirements and have codified these beneficiary 
notice requirements in Sec.  405.921(a). Furthermore, although the 
statutory requirements apply only with respect to beneficiary notices, 
we have adopted very similar requirements for notices to providers and 
suppliers under

[[Page 11434]]

Sec.  405.921(b). The format and content requirements adopted as the 
national standard for remittance advice transactions under HIPAA and 
the corresponding CMS requirements for electronic and paper remittance 
advice notices already require use of messages or codes to explain 
initial determinations, and the reasons for any full or partial denial 
decisions that apply to services on a claim, as well as the appeal 
rights in relation to the decision. Thus, the MMA requirements for 
beneficiary notices are generally already in use in the remittance 
advice notices to providers and suppliers.
    Finally, we note that contractors will issue MSNs to beneficiaries 
only, and not to appointed representatives or assignees. Throughout 
Sec.  405.910, we have reinforced the concept that appointed 
representatives have the same right as beneficiaries to receive 
information on claims only after an appeal has been filed. Consistent 
with HIPAA, a contractor may not disclose protected health information 
without a valid appointment. MSNs encompass a range of health services 
and supplies that were billed to Medicare within a 30-day period. 
Because an appointed representative may not have authority to receive 
information on all such services or supplies, we believe that it is 
appropriate for contractors to disseminate MSNs only to beneficiaries. 
Furthermore, we believe that it is unnecessary to incur the substantial 
costs to modify the standard systems to generate MSNs to appointed 
representatives.
    Comment: We received several comments regarding procedures that 
should be established when contractors do not meet the statutory 
deadlines for making initial determinations. Section 521 of BIPA 
maintains the existing 30-day time frame for 95 percent of clean claims 
under sections 1816(c)(2) and 1842(c)(2) of the Act, and establishes a 
45-day time frame for claims that are defective or require special 
treatment or substantiating documentation. Some commenters believe that 
we should create an escalation provision for initial determinations 
similar to the escalation provisions required by statute for QIC 
reconsiderations, ALJ hearings and MAC reviews. This would enable 
parties to proceed to the redetermination level of the appeals process 
when contractors fail to meet the 45-day statutory time frame. One 
commenter recommended that when the contractor fails to make an initial 
determination within 45 days, the claim bypasses the redetermination 
level and advances to the reconsideration level.
    Some commenters argued for contractor penalties such as strict 
contractor evaluations, sanctions, or non-renewal of contracts based on 
noncompliance beyond a reasonable threshold. These commenters believed 
that any exceptions to the 45-day rule should be narrow. Other 
commenters urged us to assess interest penalties for non-clean claims 
that would mirror the provision for clean claims. Still other 
commenters thought that the 45-day time frame for non-clean claims 
might be too stringent and that we should set up specific, achievable 
time frames with appropriate penalties to ensure compliance.
    Response: We understand the commenters' concerns regarding the need 
for contractors to process claims timely and pay them promptly. It is 
also important that contractors employ appropriate medical review 
strategies to ensure the appropriate payment of billed claims. When a 
contractor undertakes medical review on a claim, it is not always 
possible to pay within 45 days, particularly if a provider or supplier 
does not submit the additional documentation requested in a timely 
manner. We believe that protecting the Medicare Trust Funds through 
medical review of certain questionable claims that are flagged by our 
system edits is preferable to making inappropriate payments, absent 
proper evidence. We retain reputable independent third-party auditing 
firms to ensure that contractors are following all Medicare laws, 
rules, and regulations.
    In addition, we strongly believe that providers and suppliers play 
a vital role in the FIs' and carriers' ability to meet their decision-
making time frames. If providers and suppliers submit clean claims, 
they can avoid the delays that are associated with processing non-clean 
claims. The more complete the claim is upon initial submission, the 
greater the ability of the Medicare contractor to process the claim 
quickly. Until a determination can be made, however, we continue to 
believe that no interest should accrue on non-clean claims. In 
addition, the Congress has authorized interest only in the case of 
clean, complete claims.
    We also believe that it would be inefficient and result in 
unnecessary costs to escalate undeveloped claims to the redetermination 
or reconsideration levels. These claims could not be reviewed or 
reconsidered because there would be no initial determination to review. 
Furthermore, the Congress weighed the merits of escalation and chose to 
implement that option only at the QIC level and above.
    Comment: A few commenters suggested that we define the terms ``non-
clean'' and ``clean'' in the context of claims.
    Response: As defined in sections 1816(c)(2)(B)(i) and 
1842(c)(2)(B)(i) of the Act, ``[t]he term ``clean'' claim means a claim 
that has no defect or impropriety (including any lack of any required 
substantiating documentation) or particular circumstance requiring 
special treatment that prevents timely payment from being made on the 
claim.'' Claims that do not meet this definition are considered ``non-
clean'' claims. Since the term ``clean claim'' is clearly defined in 
statute, we are maintaining this definition as proposed in Sec.  
405.902.
    We have also included in Sec.  405.902 other statutory and 
regulatory definitions, such as, beneficiary, provider, supplier, 
carrier and fiscal intermediary. We did not define these terms in the 
proposed rule because they are defined in 42 CFR part 400. However, for 
the convenience of Medicare appellants, we have decided to provide 
definitions in this section as well.
    Comment: One commenter believed that we should clearly state 
whether a beneficiary who has paid for an item or service up front is 
entitled to any interest that would accrue if the contractor does not 
pay the clean claim within the statutory time frame, regardless of 
whether the claim was submitted by the beneficiary or on the 
beneficiary's behalf. The commenter argued that in this situation, the 
beneficiary would suffer irreparable harm by the delay in processing 
the claim, as opposed to the provider or supplier, and paying interest 
to them would result in their unjust enrichment.
    Response: In the agreement and attestation statement signed by a 
provider, the provider agrees not to charge beneficiaries for services 
for which beneficiaries are entitled to have payment made on their 
behalf by the Medicare program. In accordance with the provider 
participation agreement, the provider may only bill the beneficiary 
upfront for any unmet deductible and the applicable coinsurance. 
Therefore, institutional providers are always paid directly by the FI, 
including any applicable interest.
    Likewise, participating suppliers and suppliers who accept 
assignment are also precluded from charging the beneficiary more than 
the unmet deductible and the applicable coinsurance. If the supplier 
collects any additional payment from the beneficiary before submitting 
the claim, the supplier must show on the claim form

[[Page 11435]]

the amount collected. The carrier then will refund directly to the 
beneficiary the additional payment along with any applicable interest 
on the over collected amount. In situations where the supplier does not 
accept assignment on a claim, the carrier makes payment directly to the 
beneficiary and includes any applicable interest regardless of whether 
he or she paid the supplier up-front for the item or service.
    Comment: One commenter asserted that the proposed rule's reference 
to SSA making initial determinations with regard to entitlement issues 
was incorrect.
    Response: We disagree with the commenter and maintain our 
longstanding policy that SSA makes initial determinations concerning 
applications for enrollment, as well as determinations regarding Part A 
and Part B entitlement. Consistent with our current regulations at 42 
CFR Sec.  405.704(a)(3) and Sec.  405.704(a)(4), we have also added 
language to Sec.  405.924(a)(3) to specify that an initial 
determination includes a denial of a request for withdrawal of an 
application for hospital or supplementary medical insurance or a denial 
of a request for cancellation of a request for withdrawal of an 
application for hospital or supplementary medical insurance. Section 
405.904(a)(1) clarifies the jurisdictional authority of SSA and DHHS 
with respect to initial determinations and appeals for applications and 
entitlement issues. That is, SSA will continue to perform initial 
determinations and reconsiderations, and DHHS'' ALJs and MAC will 
conduct hearings and reviews. As noted above, we intend to provide 
further guidance on how ALJs and the MAC will process entitlement 
appeals in separate instructions.
    Comment: We received a comment on whether proposed Sec.  
405.924(b)(13), which defines an initial determination as a 
determination having a current or potential effect on the amount of 
benefits to be paid, includes Resource Utilization Group (RUG) 
categories. The commenter asked that we clarify in the final rule that 
the appeal rights for RUG reclassifications established in CMS 
Transmittal A-00-08 are continued in the final rule. The commenter also 
believes that proposed Sec.  405.906(a)(3) and Sec.  405.940 appeared 
to grant providers the right to seek redeterminations when a RUG is 
down coded to another category. However, the commenter noted that this 
conflicted with the reopening provisions at Sec.  405.980, which seemed 
to suggest that all adjustments to claims must be handled through the 
reopenings process.
    Response: As the commenter points out, CMS Transmittal A-00-08, 
which is now in the Program Integrity Manual at Chapter 6, allows 
skilled nursing facilities (SNFs) to appeal denials based on section 
1862(a)(1)(A) of the Act. Nothing in this interim final rule limits the 
right of appeal created by CMS Transmittal A-00-08.
    Although down coding a RUG category may be considered an initial 
determination under new Sec.  405.924(b)(12), if the down coding was 
alleged to be the result of a clerical error as defined in Sec.  
405.980(a)(3), then the request for appeal likely can be processed as a 
request for reopening. This approach is consistent with section 937(a) 
of the MMA and the reopening provisions at Sec.  405.980, whereby 
errors or omissions may be corrected without pursuing appeal. We note 
that, in this interim final rule, we have added a new section at Sec.  
405.927 regarding initial determinations that may be subject to the 
reopenings.
    We also note that we have added specific language to new Sec.  
405.924(b)(13) to make it clear that the issue of whether a waiver of 
adjustment or recovery under sections 1870(b) and 1870(c) of the Act is 
appropriate is an initial determination with respect to a provider, 
supplier, or beneficiary in the context of both non-Medicare Secondary 
Payer overpayments and Medicare Secondary Payer recovery claims.
    Comment: One commenter questioned whether the amount of coinsurance 
owed under the outpatient prospective payment system (OPPS) would be 
considered an initial determination, given that Sec.  405.924(b)(5) 
indicates that the computation of coinsurance amounts constitutes an 
initial determination. The commenter pointed out that Sec.  405.926(b) 
states that ``coinsurance amounts prescribed by regulation for 
outpatient services under the prospective payment system'' are not 
initial determinations. The commenter believed that section 1833(t)(12) 
of the Act does not preclude administrative and judicial review of the 
computation of OPPS coinsurance amounts.
    Response: Section 4523(a) of the Balanced Budget Act of 1997 (BBA) 
amended section 1833 of the Act by adding subsection (t) which provides 
for the implementation of a prospective payment system (PPS) for 
outpatient services. Section 1833(t)(12) of the Act precludes 
administrative or judicial review of the calculation of the unadjusted 
coinsurance amount, as well as administrative or judicial review of 
coinsurance amounts directly premised on base amounts calculated 
pursuant to section 1833(t)(3) of the Act. Therefore, the unadjusted 
coinsurance amount under 1833(t)(3) of the Act is not an initial 
determination subject to any type of review. On the other hand, if a 
party believes that an item or service was incorrectly coded, leading 
to a higher coinsurance amount for that service, the party can 
challenge that determination in an appeal.
    Comment: One commenter argued that inherent reasonableness is an 
initial determination under proposed Sec.  405.924(b)(13) because it is 
an issue that has a present or potential effect on the amount of 
benefits to be paid under Part A or Part B. Another commenter believed 
that a party who is dissatisfied with an initial determination should 
be able to appeal a claim where the amount of payment was determined 
based on the application of an inherent reasonableness policy.
    Response: Sections 1842(b)(8) and 1842(b)(9) of the Act authorize 
the Secretary to deviate from the payment methodologies prescribed in 
the Act if the application of those methodologies would result in a 
payment amount for a particular service or group of services that is 
determined to be grossly excessive or deficient, and therefore, is not 
inherently reasonable. Section 1842(b)(8)(A)(i) of the Act requires the 
Secretary to describe in regulations the factors to be considered in 
determining an amount that is realistic and equitable.
    Furthermore, pursuant to section 1842(b)(9) of the Act, before 
making any adjustment for inherent reasonableness, the Secretary is 
required to publish a notice of proposed determination in the Federal 
Register and allow no less than 60 days for public comment on the 
proposed determination. The public comment period on proposed inherent 
reasonableness adjustments gives the public an opportunity to raise 
issues and concerns regarding these adjustments. All issues and 
concerns that the public raises are given full consideration, and a 
final determination is published before the actual adjustments in 
payments are made. Any adjustment would be broadly applicable to a 
given service or group of services, rather than just to an individual 
claim determination. Thus, we do not believe that the Congress intended 
for inherent reasonableness adjustments to payment amounts to 
constitute initial determinations that are subject to the appeals 
process. We have modified Sec.  405.926(c) to clarify this issue.
    We agree with the commenter that where the amount of payment on a

[[Page 11436]]

claim was determined based on an inherent reasonableness policy, this 
would result in an initial determination that is appealable. It is 
important to note the difference between an initial determination made 
on a specific claim, and the payment policy or methodology used to make 
that initial determination. The latter is not considered an appealable 
initial determination under this subpart.
    We have added six items that also do not constitute initial 
determinations under Sec.  405.926. Under Sec.  405.926(n), we 
incorporated CMS'' longstanding policy that a finding that a provider 
or supplier failed to submit a claim, or failed to submit a timely 
claim, despite being requested to do so by the beneficiary or the 
beneficiary's subrogee, does not constitute an initial determination, 
and would preclude the claim from being subject to the appeals process. 
Second, consistent with section 1893(f)(3)(A) of the Act, as amended by 
section 935(a) of the MMA, we have added a conforming provision at 
Sec.  405.926(p) that determinations by the Secretary of sustained or 
high levels of payment errors are precluded from administrative or 
judicial review. Also, consistent with section 938(a) of the MMA, Sec.  
405.926(q) provides that a contractor's prior determination related to 
coverage of physicians' services is not subject to the administrative 
appeals process or judicial review. However, a negative determination 
would not prevent an individual from obtaining a service, seeking 
reimbursement and, in the event of a denied claim, appealing the denial 
under section 1869(b) of the Act. Finally, consistent with established 
policies, we have added three items at Sec.  405.926(o), Sec.  
405.926(r), and Sec.  405.926(s). Under Sec.  405.926(o), 
determinations with respect to whether an entity qualifies for an 
exception to the electronic claims submission requirement under part 
424 of this chapter are not initial determinations. Section 405.926'' 
provides that requests for anticipated payment under the home health 
prospective payment system under Sec.  409.43(c)(ii)(2) are not initial 
determinations. Lastly, claim submissions on forms or formats that are 
incomplete, invalid, or do not meet the requirements for a Medicare 
claim and are returned or rejected to the provider or supplier also do 
not constitute initial determinations. We welcome comments on these 
additions.
6. Redeterminations (Sec.  405.940 through Sec.  405.958)
    [If you choose to comment on issues in this section, please include 
the caption ``Redeterminations'' at the beginning of your comments.]

a. Requesting and Filing a Redetermination Request

    In the proposed rule, we proposed to continue the policy of 
permitting parties to file their requests for a redetermination not 
only with the appropriate CMS contractor, as indicated on the notice of 
initial determination, but also at a local SSA or CMS office. In 
maintaining this policy for filing requests, we proposed that the date 
the redetermination request would be considered to be filed meant the 
date the contractor, SSA, or CMS received the request. Additionally, we 
specified that for purposes of issuing a redetermination, the date of 
timely filing would be considered as the date that the contractor 
responsible for the redetermination received the redetermination 
request. We proposed to allow extensions to the time frames for 
redetermination requests if a party showed good cause for missing the 
120-day deadline. In order to determine whether a party had shown good 
cause for missing the deadline, the contractor would consider: the 
circumstances that kept the party from making the request on time; 
whether the contractor's actions misled the party; and whether the 
party had any physical, mental, educational, or language limitations 
that prevented the party from filing a timely request, or from 
understanding or knowing the need to file a timely request for 
redetermination.
    We also indicated that redetermination requests would need to be 
made in writing. Previously, Part B requests for review could be made 
by telephone; however, we proposed to eliminate telephone requests in 
order to provide a reliable record of the request, and to encourage the 
submission of evidence to support the request. We proposed that 
requests would need to be made using a standard CMS form. 
Alternatively, when not made on a CMS form, the request would need to 
contain all the elements listed in Sec.  405.944(b), that is, the 
beneficiary's name, Medicare health insurance claim (HIC) number, 
specific date of service, and identification of the item or service for 
which the party was requesting the redetermination, and the name and 
signature of the party or appointed representative.
    We solicited comments on alternative approaches that would be 
convenient and easy for appellants. We also proposed that a beneficiary 
or beneficiary's appointed representative could continue to file a 
request for an appeal using the instructions on the MSN, that is, he or 
she could satisfy the requirements by circling an item on the MSN, 
signing the bottom of the MSN, and returning the MSN to the contractor. 
In situations where more than one party requested a redetermination on 
the same claim, we proposed that the contractor would consolidate the 
requests into one proceeding in order to avoid duplication.
    Comment: Several commenters suggested that we clarify the 
procedures for how fiscal intermediaries and carriers calculate and 
record the receipt date for redetermination requests. One commenter 
recommended that we establish that the receipt date is the date the 
request first arrives at the appropriate address. Another commenter 
objected to presuming that the receipt of the initial determination, 
which is used to calculate the time frame for a redetermination 
request, will be 5 days after the date of the initial determination 
notice. The commenter argued that often appellants receive initial 
determinations much later than the date on the notice. In some cases, 
the provider does not receive the initial determination until a month 
later. The commenter believed that 10 days would be a more realistic 
time frame for contractors to assume receipt and begin calculating 
whether a party met the 120-day time frame for requesting a 
redetermination.
    A few commenters requested that we define ``evidence to the 
contrary'' of the presumed 5-day receipt date in order to prevent 
discrepancies in how different contractors handle requests for 
redeterminations. One commenter suggested that ``evidence to the 
contrary'' should be a receipt from a mail delivery service containing 
the date of delivery to the appropriate address. Another commenter 
asked whether a date stamp by the provider would be an acceptable way 
to verify the date of receipt of an initial determination.
    Response: We appreciate the concerns about calculating and 
recording the receipt date for appeal requests based on the delivery 
time for the initial determination notice. We agree that a uniform 
process needs to be used for calculating and recording the date of 
receipt of an appeal request. Thus, we proposed to incorporate into the 
regulations CMS's clear, longstanding policy that the date of receipt 
is presumed to be 5 days after the date of the initial determination 
notice. We will carefully monitor our contractors to ensure that they 
calculate the time frames appropriately. If we determine that any 
additional instructions are

[[Page 11437]]

needed, we will provide them in manual instructions.
    We understand that in some cases the initial determination notice 
will be received later than 5 days from the date of the notice, which 
is why the regulations allow more than 5 days where there is evidence 
to the contrary. An example of evidence to the contrary would include a 
postmark date or a receipt from a mail service containing the date of 
delivery to the party. We do not believe it would be appropriate to 
attempt to include in regulations all the possible ways for a party to 
demonstrate when the party received an initial determination notice. 
Instead, we will allow adjudicators to exercise their discretion as to 
whether a party's evidence demonstrates that the party received the 
initial determination beyond 5 days from the date on the notice. 
Finally, we note that 120 days is a significant amount of time for a 
party to file an appeal and that appellants also have an opportunity to 
request an extension of this deadline; thus, we believe that the 
calculation of the receipt date for appeal requests based on the 
prevailing 5-day standard will not pose an undue hardship for most 
appellants.
    Comment: One commenter requested clarification on whether 
adjudicators could request appellants to provide proof to support good 
cause for failing to file an appeal within the allotted time frame.
    Response: Adjudicators may request appellants to provide supporting 
documentation that demonstrates that they have good cause for filing an 
appeal beyond the deadline. We strongly encourage appellants to provide 
supporting documentation when requesting a contractor, QIC, ALJ, or the 
MAC to consider good cause for filing an appeal late. In fact, an 
adjudicator can summarily dismiss a request made on the basis of good 
cause when there is no evidence to support the request.
    Comment: Some commenters raised objections to beginning the 
decision-making time frame on the date that the contractor received the 
redetermination request if an appellant filed an appeal at an 
alternative location. One commenter agreed with this approach, but 
indicated it would be difficult for appellants to know when the time 
frame for making a decision started. The commenter suggested that we 
add a requirement that the contractor notify the appellant when the 
request has been received and the date the time frame began. Another 
commenter suggested that we establish a definitive deadline by which an 
appeal would be presumed received by the appropriate contractor for 
purposes of tracking the adjudication time frame. The commenter thought 
that an appellant should be able to presume that a contractor received 
a request within 60 days; and therefore, the appellant should expect a 
decision within 90 days. Another commenter suggested that CMS develop a 
web-based system for local SSA, CMS or contractor staff to enter and 
immediately transmit the request to the appropriate adjudicator. A few 
commenters believed that the delayed decision-making time frame 
penalized beneficiaries for something that was beyond their control. 
They argued that the policy would be unfair to beneficiaries because 
they would not receive a timely decision when they used an alternative 
filing location.
    Response: We recognize the commenters' concerns about the confusion 
and potential delays involved in transmitting requests filed at 
alternative locations to the appropriate contractor. Further, as noted 
above, under section 931 of the MMA, SSA's role in the Medicare claims 
appeal process will end with the impending transfer of the ALJ function 
from SSA to DHHS no later than October 1, 2005. In view of the reduced 
role of SSA in the processing of Medicare appeals, we do not believe it 
is appropriate to specify in the regulations that appeals may be filed 
at SSA offices. We have revised Sec.  405.942(a) to eliminate the 
reference to alternative filing locations. We believe that directing 
appellants to only one filing location will reduce confusion and 
eliminate the potential delay in transmitting the request. We will also 
allow an extension to the filing deadline when a party, in good faith, 
sends a request to a government agency within the time period to file 
and the request does not reach the appropriate contractor until after 
the time period to file expires.
    The elimination of alternative locations will obviate any routine 
need for notices informing appellants of the date of receipt at the 
adjudicating contractor. Given the elimination of alternative filing 
locations, we think it would be unnecessarily burdensome on contractors 
to notify all appellants of the receipt date, given that it could be 
easily calculated to within a few days. In addition, we are actively 
exploring the development of a web-based system that would permit 
appellants to access real-time information about the status of their 
appeals.
    Comment: We received several comments on whether redetermination 
requests should be accepted orally or in writing. One commenter 
disagreed with the elimination of accepting requests over the 
telephone. The commenter believed that taking requests by telephone is 
a convenient and simple method for filing an appeal. Another commenter 
pointed out that telephone requests facilitated meeting the decision-
making time frame. The commenter also indicated that telephone appeals 
are advantageous because additional documentation can be requested 
while the appellant is on the phone. Other commenters agreed that 
requests for redeterminations be made in writing only. They stated that 
when the request and the response are given on the telephone, it leaves 
room for interpretation on what occurred during the telephone call. 
Also, it could be difficult for the QIC to construct the case file if 
the redetermination was handled over the telephone. The commenter 
suggested alternative methods such as the use of a secure system for 
fax or electronic mail requests. Another commenter agreed with our 
discussion in the preamble to the proposed rule that the changes to the 
reopening process could resolve the types of issues addressed in the 
current telephone appeals process, and encouraged our efforts to 
clarify the reopening rules.
    Response: We recognize that initiating a redetermination over the 
telephone can under some circumstances provide a faster process for 
appellants than a written appeal. In the past, providers and suppliers 
generally initiated reviews by phone for routine, uncomplicated 
matters. However, section 937(a) of the MMA requires CMS to develop a 
process whereby, in the case of minor errors or omissions that are 
detected in the submission of claims, a provider or supplier can be 
given an opportunity to correct these minor errors or omissions without 
the need to initiate an appeal. Contractors would also continue to 
handle these types of issues over the telephone through procedures 
other than appeals, such as reopenings, including any associated 
adjustments. The reopening process is discussed in more detail later in 
this preamble under its own heading.
    Written requests offer other advantages of efficiency and accuracy. 
An appellant submitting a written request can submit evidence at the 
same time as the request. The early submission of evidence leads to 
resolving appeals at lower levels and promotes more accurate decision-
making. Furthermore, many appeals involve judgment calls that require 
thought, research and analysis, much of which cannot be addressed in a 
phone call. Also, as noted by a commenter,

[[Page 11438]]

written appeals aid contractors in developing case files for use at 
later appeal stages.
    Thus, as proposed, we will require that appellants request 
redeterminations in writing. We will work on identifying simple and 
convenient methods for appellants to request redeterminations in 
writing, such as via facsimile or electronic mail request. Finally, we 
note that contractors are by no means prevented from communicating with 
appellants by phone in situations where contact by telephone can 
provide information needed to resolve an appeal.
    Comment: Some commenters raised questions about requests for 
redetermination made by more than one party. A few commenters objected 
to our proposal that where two or more parties requested an appeal on 
the same initial determination, the contractor's deadline for 
processing the appeal would be based on the latest filed request. One 
commenter disagreed with the consolidation of multiple requests into 
one proceeding, and argued that this would result in unwarranted 
delays. The commenter suggested that we stipulate in this final 
regulation that the decision-making time frame starts with the first 
request for redetermination. The commenter also thought that 
contractors should be required to act on beneficiary appeals when they 
are received, rather than waiting to see if another party appeals. 
Another commenter was concerned whether the contactor would wait until 
the end of the full 120-day filing deadline to see if another party 
would request an appeal.
    Response: Instances when more than one party files a request for an 
appeal of the same claim have always been rare, and we do not expect 
any change in this regard under the new appeals procedures. Although we 
appreciate the concern that contractors might wait 120 days to see if 
another party appeals, contractors could not do so even if they wanted 
to, given the requirement that they process a redetermination within 60 
days of a timely filed request. A delay will occur only if another 
request is received before the contractor issues a decision. Therefore, 
we do not believe that consolidating the decision-making time frame for 
appeals with multiple parties will create an impediment to the 
efficient resolution of appeals. To the contrary, we believe that when 
another party subsequently requests an appeal before a decision has 
been made on the original request, fairness demands that the two 
requests be combined into one case. We have amended Sec.  405.944(c) to 
clarify this point.
    Comment: Several commenters made recommendations about the place 
and method of filing redetermination requests. One commenter suggested 
that all review organizations have an address for delivery services 
other than the U.S. Postal Service. The commenter stated that 
appellants sometimes wish to use private services to deliver their 
appeals, particularly to ensure that contractors receive the appeals 
timely. A few commenters suggested that CMS provide appellants an 
opportunity to submit a redetermination request via facsimile or via e-
mail. The commenter believed that these alternatives would create 
better efficiencies for appellants.
    Response: We encourage appellants to use delivery services that 
will ensure the timely receipt by contractors of appeal requests. We 
will explore with contractors ways to achieve efficiencies in the 
appeals process, including establishing addresses for private delivery 
services. We also will look into the extent to which contractors can 
set up a process to accept facsimile and electronic requests in 
compliance with applicable security and privacy policies and 
procedures. Should these changes prove feasible, we will implement them 
through manual instructions.
    Comment: Several commenters urged us to make the standard form for 
requesting a redetermination widely available to ensure accessibility 
by beneficiaries. They suggested including the form for requesting a 
redetermination with the initial determination notice. Alternatively, 
the initial determination should provide information about where to 
obtain the standard form. Commenters recommended that the standard form 
be available upon request by telephone, on the Internet, and at all SSA 
and CMS contractor offices.
    Response: We agree that standardized forms should be readily 
accessible to beneficiaries. As mentioned earlier in our discussion 
about initial determinations, beneficiaries now routinely receive 
Medicare Summary Notices (MSNs). The MSN contains information on the 
appeals process and instructions for requesting an appeal. 
Beneficiaries can use the MSN to request an appeal by circling the item 
or service with which they disagree, explaining why they disagree, 
signing the MSN, and returning it or a copy to the specified address. 
Consumer testing has shown that the information on the MSN is complete 
and easy for beneficiaries to understand. In most cases, we believe 
that allowing beneficiaries to use the MSN to request an appeal is a 
more effective practice than referring them to a required form.
    We will ensure that customer service representatives at our 1-800-
MEDICARE number provide beneficiaries with accurate information on how 
they may obtain standardized appeal forms. Updated appeal forms will 
continue to be available on the Internet at http://www.cms.hhs.gov/forms and http://www.Medicare.gov/Basics/forms, as well as at CMS 
contractor offices.

b. Evidence Submitted With the Redetermination Request

    In the proposed rule, we specified that a party should explain why 
he or she disagrees with the contractor's initial determination and 
include any evidence that the party believes should be considered by 
the contractor in making its redetermination. We wanted to encourage 
appellants to make their case at the earliest possible level. To 
facilitate this goal, we proposed that if appellants could not submit 
relevant documentation along with their redetermination requests, then 
they could provide later submissions. However, since it would be 
difficult to process the redetermination within the appropriate time 
frame, we proposed to permit contractors to extend the decision-making 
time frame by up to 14 days based on the later submission of evidence.
    Comment: One commenter suggested that prior to issuing a 
redetermination, the contractor should request the necessary 
documentation from the appellant and allow the appellant 14 days to 
either submit the documentation requested or to certify that there are 
no additional records to submit. The commenter also indicated that if 
the appellant failed to provide the documentation, an unfavorable 
decision should be rendered based on failure to provide the necessary 
documentation. The commenter also questioned whether it was our intent 
to preclude the QIC from accepting documentation other than what is 
requested in the redetermination letter.
    Response: We believe that the efficiency and accuracy of the 
appeals process is enhanced when appellants submit all necessary 
documentation with their redetermination requests. Although appellants 
have the opportunity to submit evidence related to the claim at issue 
at any time during the redetermination process, we strongly encourage 
appellants to submit, at the time of their request, all evidence that 
they want to be considered. If supporting documentation is not 
submitted with the request, the contractor may contact the appellant to 
try to obtain the missing information.

[[Page 11439]]

The contractor will not necessarily uphold an unfavorable initial 
determination based solely on the lack of documentation submission. The 
contractor must make a decision based on the information in the case 
file.
    If the contractor believes that the appellant is missing specific 
information or documentation necessary for processing the 
redetermination, but cannot obtain the information before its deadline, 
the contractor will uphold the claim denial and then list the specific 
missing information in the redetermination letter. If the appellant 
requests a QIC reconsideration, the appellant should submit the 
documentation specified in the redetermination notice with the request 
for reconsideration. The QIC may accept any additional documentation, 
even if it is not specified in the redetermination notice. If the 
appellant fails to submit this evidence before the QIC issues its 
reconsideration, the appellant may be precluded from introducing the 
evidence at higher levels of the appeals process, absent a showing of 
good cause. (See the discussion below regarding the regulatory and 
statutory requirements for full and early presentation of evidence.)

c. Conducting a Redetermination and Time Frame for Making a Decision

    Section 1869 of the Act provides little or no guidance with respect 
to the conduct of redeterminations, with the exception of establishing 
the filing and decision-making time frames. Thus, with few exceptions, 
we did not propose major changes to the existing procedures for first 
level appeals of claim determinations. To assist appellants who might 
be unable to submit relevant documentation along with the request for 
redetermination, and to promote the resolution of appeals at the 
earliest possible level, we proposed to allow later submission of 
documentation. If the appellant submitted evidence after the request, 
an automatic 14-day extension would be added to the decision-making 
time frame. See Sec.  405.946(b).
    Comment: One commenter contended that CMS exceeded its statutory 
authority by changing the standard with respect to the established time 
frame for a decision on a request for redetermination. The commenter 
disagreed with the proposal of an automatic 14-day extension to the 
time frame when an appellant submits evidence after the request. 
Another commenter agreed that additional time might be necessary to 
issue a decision when a party submits additional evidence. The 
commenter noted that we did not specify whether a party could submit 
additional evidence more than once, and if so, what the impact would be 
on the decision-making deadline. For example, would a 14-day extension 
apply each time a party submitted additional evidence, or would there 
by only one extension, regardless of how many times a party submitted 
additional evidence? The commenter suggested that we specify that there 
are no limits on evidence submission at the redetermination level and 
that a party can submit additional evidence as many times as it deems 
appropriate until a specific point near the time to issue a decision. 
The commenter recommended that evidence should be permitted until 5 
days prior to the decision-making deadline (for example, additional 
evidence could be submitted until 55 days after the contractor received 
the redetermination request).
    Response: We believe allowing extensions of decision-making time 
frames under some circumstances is consistent with the statute. We 
believe that an appeal request should include the pertinent evidence 
for an adjudicator to make an appropriate determination, as indicated 
in Sec.  405.946(a). If the evidence is not submitted with the request, 
the 14-day extension allows time for an adjudicator to carefully review 
and consider additional evidence. It is unreasonable first to expect an 
adjudicator to prepare a decision based on incomplete information 
submitted with the appeal request, and then in as little as a few days, 
potentially rewrite a decision based on new evidence.
    While a party, by regulation, may submit additional evidence as 
many times as it deems appropriate until the contractor issues a 
decision, the impact is that the contractor may extend its decision-
making deadline by up to 14 days each time. The only way to avoid the 
need for extended decision-making time frames would be to preclude the 
submission of additional evidence by appellants after they file their 
redetermination requests. Note that although the contractor may extend 
the deadline, this does not mean that we expect the contractor to take 
the maximum time to issue the decision in all cases. As mentioned in 
the comment above, we urge appellants to submit all necessary 
documentation with their requests in order to avoid delays. We note 
that from the outset, appellants have twice the amount of time to 
request an appeal as adjudicators do to conduct the appeal.
    Comment: Some commenters argued that we should impose penalties on 
fiscal intermediaries and carriers that fail to meet the 60-day 
deadline for issuing a redetermination. In addition, the commenters 
recommended that we establish specific remedies for appellants, such as 
the ability to escalate cases to QICs, when contractors fail to meet 
their time frames. One commenter argued that non-enforcement of the 
time frame would have a negative impact on beneficiaries, since they 
cannot proceed to the QIC until the contractor issues a 
redetermination.
    Response: We do not believe that it is appropriate to permit 
escalation of redeterminations when contractors do not meet their 
deadlines. We believe this is consistent with the statute in that the 
Congress seems to have weighed the merits of escalation and chose to 
implement that option only at the QIC level and above. The statute also 
already directs that the Secretary monitor the timeliness of all 
contractors' redeterminations. Sections 1816(f) and 1842(b)(2) of the 
Act require us to develop criteria, standards and procedures to 
evaluate a fiscal intermediary's or carrier's performance of its 
functions. Measuring the timeliness of redeterminations is a critical 
part of this process, and a contractor's inability to process 
redeterminations within the required 60-day time frame will be enforced 
through corrective action plans and other tools that CMS has available 
to ensure that carriers and fiscal intermediaries fulfill their 
statutory and contractual obligations. Under our ongoing Contractor 
Performance Evaluation (CPE) process, CMS devotes extensive resources 
to onsite surveys of contractors to ensure that they meet these 
obligations.
    Comment: One commenter recommended that we prohibit Medicare 
contractors and QICs from raising new issues during an appeal. Any 
issues that are different from those in dispute should be raised 
through the reopening process. The commenter stated that bringing up 
new issues creates great confusion for appellants.
    Response: A redetermination consists of a fresh examination of all 
the issues involved in a claim to determine whether it is payable. 
Therefore, the redetermination is not limited to validating the 
original reason for the denial of the claim at issue in the appeal. All 
applicable statutory and regulatory provisions, as well as CMS-issued 
policies and procedures, bind contractors making redeterminations (for 
example, CMS Rulings, Medicare manual instructions, program memoranda, 
national coverage determinations, local coverage

[[Page 11440]]

determinations, and regional medical review determinations). As a 
result, all these authorities must be considered as part of the 
redetermination.

d. Withdrawals and Dismissals

    In the proposed rule, we proposed to allow parties to withdraw 
redetermination requests within 14 days of the original request in 
order to avoid situations where the request for withdrawal and the 
decision crossed in the mail. We also proposed several reasons a 
contractor might dismiss a request (for example, where a request for 
redetermination did not contain the minimum elements for a 
redetermination request set forth in proposed Sec.  405.944). We also 
proposed to dismiss a request if the party filing the request died and 
there was no information in the record to determine whether another 
party might be prejudiced by the redetermination.
    We also proposed that when a contractor dismissed a request, a 
written notice would be sent to the parties. Also, a dismissal could be 
vacated at any time within 6 months from the date of the dismissal 
notice for good and sufficient cause. Finally, an appellant could 
request a QIC reconsideration of the dismissal within 60 days of the 
dismissal notice. See proposed Sec.  405.974(b).
    Comment: A commenter recommended that the dismissal notice under 
Sec.  405.952(c) should inform the appellant of the right to request 
that the contractor vacate the dismissal within 6 months.
    Response: We agree that the dismissal notice should include 
information about vacating the dismissal. We have revised Sec.  
405.952(c) to require that the dismissal notice state that there is a 
right to request that the contractor vacate the dismissal action.
    Comment: Proposed Sec.  405.952(a) permits a party to withdraw its 
appeal request by filing a written and signed request for withdrawal 
within 14 calendar days of the filing of the redetermination request. A 
commenter questioned whether a contractor would disregard a request for 
withdrawal made after the 14th day. The commenter argued that there was 
no legitimate reason to issue a redetermination if someone wanted to 
withdraw an appeal request. The commenter recommended that as long as 
the withdrawal request was received before the contractor issued a 
redetermination, then the request for redetermination should be 
dismissed.
    Response: We agree with the commenter and will not limit requests 
for withdrawal to within 14 days of filing the request for 
redetermination. Under this interim final rule, a request for 
withdrawal must be received before a redetermination has been issued. 
We encourage appellants to submit written requests early to avoid 
having the notice of a redetermination and a request to withdraw cross 
in the mail.
    Comment: Proposed Sec.  405.952(b)(2) requires a contractor to 
dismiss a request for a redetermination if the contractor determines 
that a party has failed to make out a valid request for redetermination 
that substantially complies with Sec.  405.944. Proposed Sec.  
405.944(b) requires an appellant to either use a standard CMS form or 
submit a written request containing four elements: (1) The 
beneficiary's name; (2) the beneficiary's health insurance claim 
number; (3) the specific services(s) and item(s) for which the 
redetermination has been requested, as well as the specific date(s) of 
service; and (4) the name and signature of the party or appointed 
representative of the party. Two commenters pointed out that these 
elements do not mirror the requirements contained on the current 
standard CMS form to request a review.
    The commenters requested us to clarify if the current review form 
would comply with Sec.  405.944. They also inquired as to whether we 
would develop a new form. If CMS developed a new form, the commenters 
suggested providing space on the form for all of the required elements 
listed in the proposed rule. Additionally, one commenter requested that 
CMS develop and disseminate a standard form as quickly as possible so 
that parties can become familiar with the information required in the 
form.
    Response: We realize that the current standard forms for requesting 
a review and reconsideration, CMS forms 1964 and 2649 respectively, do 
not contain all of the elements required under Sec.  405.944. However, 
we are in the process of revising all of our current appeal forms. The 
standard CMS form will contain all of the elements specified in Sec.  
405.944. Once we complete the new forms, they will be released and made 
available to appellants at contractor offices, CMS offices, on the 
Internet, and by calling 1-800-MEDICARE. We intend to release the new 
forms in conjunction with the implementation of these interim final 
regulations.
    Comment: One commenter contended that allowing contractors to 
dismiss redeterminations when appellants fail to make out valid 
requests effectively denies appellants the ability to pursue appeals. 
Other commenters maintained that requiring specific elements in order 
to make a request would penalize unrepresented beneficiaries or those 
that have limited English-speaking abilities or mental capacity. One 
commenter argued that unrepresented beneficiaries should be given 
notice of any deficiencies and an opportunity to correct and file an 
amended redetermination request within a reasonable time period (for 
example, 10 business days after receipt of the notice). The commenter 
also recommended that the notice of an incomplete request should inform 
the party of the information necessary to request a redetermination; 
otherwise, the party would not know what information was missing.
    Response: We do not agree that contractors should be required to 
inform appellants of the defects in their redetermination requests 
instead of being able to issue dismissals. Section 405.944(b) requires 
only four elements for making out a valid redetermination request: (1) 
The beneficiary's name; (2) the Medicare health insurance claim number; 
(3) the specific services(s) and item(s) for which the redetermination 
is requested and the specific date(s) of service; and (4) the name and 
signature of the party or representative of the party. This constitutes 
the minimum information needed to process an appeal, and we believe 
that it is entirely appropriate to require the party appealing to 
provide this basic information. Absent this information, it would be 
difficult, if not impossible, to ascertain whether the individual 
requesting the appeal is in fact a party or representing a party, or to 
identify the claim at issue. We believe that accepting appeal requests 
with insufficient basic information about the claim and requiring 
contractors to inform appellants of the defects in their appeal 
requests would make for an inefficient appeals process. Note that 
identification of the specific items or services for which a 
redetermination is being requested can be accomplished in a variety of 
relatively simple ways. For example, a beneficiary may simply circle 
the denied service in question on the MSN. Alternatively, for revised 
initial determinations (for example, overpayment cases or Medicare 
Secondary Payer recovery cases), appellants can meet this criterion by 
including a copy of the ``demand letter'' used to initiate these cases. 
Thus, meeting these minimum requirements is not onerous.
    In arriving at the decision to allow contractors to dismiss invalid 
redetermination requests under Sec.  405.952(b)(2), we considered the 
fact that a dismissal does not necessarily

[[Page 11441]]

terminate a party's right to file an appeal. If the 120-day time frame 
for filing a redetermination has not expired at the time a contractor 
issues a dismissal, then a party may correct the defect and resubmit 
the appeal. Also, a contractor may vacate a dismissal at any time 
within 6 months from the date of the dismissal notice, if good and 
sufficient cause is shown. Alternatively, if a party believes that the 
contractor inappropriately dismissed a request, the party can request a 
reconsideration by the QIC within 60 days of the dismissal.
    Therefore, we are adopting our proposed policy in this interim 
final rule of dismissing requests that do not meet the requirements of 
Sec.  405.944. A contractor may, but is not required to, contact 
appellants to give them an opportunity to cure a defect in their 
redetermination request before dismissing it. We believe that this 
policy is reasonable given that it is clear how a party must make out a 
valid redetermination request. As under the former appeals process, we 
will continue to allow a beneficiary to file an appeal by following the 
requirements detailed on the MSN. We will instruct our contractors to 
take into consideration any special needs of unrepresented 
beneficiaries, or those with limited capacities or abilities. Also, we 
are in the process of creating a redetermination form that will assist 
appellants who are unfamiliar with the process (for example, 
unrepresented beneficiaries) with their requests.
    Comment: One commenter requested clarification on the circumstances 
under which a request for redetermination would be dismissed when a 
beneficiary dies. The commenter requested clarification about any 
potential liability of the deceased beneficiary's estate, including 
recovery by a State. The commenter believed that Sec.  405.952(b)(4) 
also should clarify the situations an adjudicator must consider to 
determine whether dismissing the redetermination request may prejudice 
another party. The commenter indicated that in almost every situation, 
the beneficiary's estate would be prejudiced by the determination and 
argued that a dismissal would preclude the beneficiary's family or 
estate from protecting its right to seek reimbursement.
    Response: We have revised the proposed language in Sec.  
405.952(b)(4) to make the needed clarifications. A contractor will 
dismiss a redetermination request when the beneficiary whose claim is 
being appealed dies while the request is pending, under the following 
circumstances: (1) The beneficiary's surviving spouse or estate has no 
remaining financial interest in the case based on whether either 
remains liable for the services or subsequent similar services; (2) no 
other individual or entity with a financial interest in the case wishes 
to pursue the appeal; and (3) no other party filed a valid and timely 
redetermination request. For example, the contractor will dismiss the 
request if the beneficiary or the beneficiary's representative filed 
the request for redetermination but the beneficiary was not held liable 
for the services at issue. The contractor will inquire whether another 
party wishes to continue the appeal. However, the contractor will not 
be required to inquire whether any other party wishes to continue the 
appeal unless a valid and timely request for redetermination is filed. 
We wish to note that when a beneficiary dies and the request for 
redetermination is subsequently dismissed, a party, including the 
beneficiary's estate, may request the contractor to vacate the 
dismissal under Sec.  405.932(c) for good and sufficient cause. 
Examples of good and sufficient cause include when there is the 
possibility of Medicaid liability or when there is a possibility the 
State (which pays Medicaid funds) will attempt recovery of its payment 
from the estate.
    As mentioned in our discussion above on parties to initial 
determinations and appeals, Sec.  405.906(c) now establishes that in 
the event of the death of a beneficiary, a provider or supplier may 
appeal if there is no other party available to appeal an initial 
determination. Thus, the provider or supplier of the item or service 
may request a redetermination in these situations, consistent with the 
clear direction of section 939 of the MMA.
    Comment: A commenter requested that we clarify the meaning of 
``otherwise transmit'' in proposed Sec.  405.952(d) in terms of a 
contractor providing a dismissal notice to the parties at their last 
known addresses. The commenter pointed out that the type of 
transmission is particularly important for beneficiaries who do not 
have access to facsimile and electronic mail.
    Response: The dismissal notice, like a redetermination notice, will 
be delivered through first class U.S. mail. Although contractors do not 
currently transmit notices by facsimile or electronic mail, we want to 
ensure that the regulations allow them the flexibility to do so in the 
future should CMS believe that other notification methods are 
appropriate. Nevertheless, even if contractors use alternate means to 
provide dismissal notices, we will instruct contractors to allow 
parties to elect their preferred method of delivery.
7. Redetermination, Notification, and Subsequent Limitations on 
Evidence'' (Sec.  405.954, Sec.  405.956, and Sec.  405.966)

[If you choose to comment on issues in this section, please include the 
caption ``Redetermination, Notification, and Subsequent Limitations on 
Evidence'' at the beginning of your comments.]

    When a contractor's redetermination fully reverses the initial 
determination, we proposed to maintain the current policy that proper 
notification would be achieved through the MSN or the RA, which 
contractors send to beneficiaries, and providers and suppliers, 
respectively. If a redetermination affirmed the initial determination, 
either in whole or in part, we proposed that a redetermination notice 
contain: (1) A clear statement indicating the extent to which the 
redetermination is favorable or unfavorable; (2) a summary of the 
facts; (3) an explanation of how the pertinent laws, regulations, 
coverage rules, and CMS policies apply to the facts of the case; (4) a 
summary of the rationale for the redetermination; (5) notification to 
the parties of their right to a reconsideration, the procedures that a 
party would follow in order to request a reconsideration, and the time 
limit for requesting a reconsideration; (6) a statement of the specific 
missing documentation that would need to be submitted with a request 
for a reconsideration; (7) an explanation that if the specific 
supporting documentation specified in the notice is not submitted with 
the request for a reconsideration, the evidence will not be considered 
at an ALJ hearing, unless the appellant demonstrates good cause as to 
why the evidence was not provided previously; and (8) any other 
requirements specified by CMS. When a redetermination notice is sent to 
a provider or supplier announcing a full or partial reversal of the 
initial determination, the Medicare contractor must also issue an 
electronic or paper remittance notice to the provider or supplier to 
explain the payment.
    In general, the proposed requirements for the redetermination 
notice were similar to existing instructions concerning the content of 
contractor appeal determinations. However, our proposal that 
contractors also specify supporting documentation that would need to 
accompany a reconsideration request was a new requirement.
    Comment: We received many comments on the requirement for the 
redetermination notice to include a statement of the specific missing

[[Page 11442]]

documentation that must be submitted with the reconsideration request. 
In general, the commenters agreed with the requirement to identify 
additional supporting documentation in the redetermination notice. They 
also agreed that this change would improve the efficiency of the 
appeals process by assisting appellants in knowing the type of 
documentation to submit.
    Several other commenters objected to this provision. Two commenters 
argued that the statute and Medicare regulations require filing certain 
documentation with particular types of claims (for example, claims for 
power wheel chairs require submission of a power wheelchair Certificate 
of Medical Necessity (CMN)). They argued that if the statute and 
regulations do not require the submission of a particular piece of 
documentation, but a contractor needs that documentation before it will 
pay a claim, then the contractor should be required to explain why it 
needs the documentation and consider the impact of requiring compliance 
with the a request (consistent with the Paperwork Reduction Act of 1995 
(PRA)). They proposed that the carrier or fiscal intermediary explain 
in detail the rationale for collecting any additional documentation not 
required for submitting a particular claim. The commenter argued that 
the rationale should include the legal and medical necessity reason for 
such collection.
    Response: We believe that the appeals time frames and procedures 
mandated by section 521 of BIPA and Title IX of the MMA clearly require 
greater efficiency in the Medicare appeals process. This belief is 
reinforced by section 933(a) of the MMA, which requires that a provider 
or supplier may not, in any subsequent level of appeal, introduce 
evidence that was not presented at the reconsideration conducted by the 
QIC, unless there is good cause that precluded the introduction of that 
evidence at or before that reconsideration. However, absent advance 
notice of what documents are needed to support a claim, appellants may 
have difficulty determining what constitutes relevant evidence for 
their claim appeals. Thus, although not required by the statute, we 
believe that requiring contractor redetermination notices to identify 
necessary missing documentation will provide very valuable information 
for appellants to present their cases to QICs. Therefore, we believe 
this provision is advantageous to appellants since it should result in 
a better understanding of the basis for the unfavorable redetermination 
and lead to more accurate reconsiderations.
    Comment: One commenter recommended revising the new evidence 
provisions to preclude the subsequent submission of information only to 
the extent that it involves objective medical information (for example, 
a specific blood gas percentage or patient height and weight). Another 
commenter suggested that we distinguish between the submission of new 
evidence that involves readily available clinical documentation 
directly implicated in the claim dispute and other evidence (for 
example, expert opinions, clarifying treating physicians' opinions, or 
evidence from providers not directly involved in the dispute). The 
commenter recommended only precluding clinical documentation.
    Other commenters argued that this provision was too burdensome for 
providers, suppliers, and beneficiaries, particularly when they do not 
have easy access to supporting documentation that may be required. Some 
of the commenters suggested that we exempt beneficiaries from these 
rules because they do not have ready access to medical records and 
other documentation.
    One commenter believed that the proposed rule was too lenient and 
recommended that we limit the rules on submission of evidence at the 
redetermination and reconsideration levels. The commenter suggested 
that we require appellants to sign a form certifying that they do not 
have any more records to submit.
    Response: We do not believe that it is either practical or 
consistent with the statute to limit the requirement on full and early 
presentation of evidence by attempting to distinguish between evidence 
that is readily available to the provider and that which is obtained 
from providers not directly involved in the claim dispute. Similarly, 
we cannot limit this provision to objective medical information. Given 
the vast amount of medical services and items that could be involved in 
a claim dispute, it would be extremely difficult to draw clear 
distinctions among the numerous types of documentation that might be 
needed. Nevertheless, where it is not feasible to obtain this 
documentation, as indicated in Sec.  405.1028, an ALJ will make a 
determination on whether good cause for failure to submit the evidence 
to the QIC exists. This applies to all documentation, including the 
items listed in the notice of redetermination.
    Finally, we note that, consistent with section 933(a) of the MMA, 
we have specified in the interim final rule that the limitation on the 
presentation of new evidence, absent good cause, applies only to 
providers and suppliers, and not to beneficiary appellants. The 
limitation on the presentation of new evidence will also apply to 
beneficiaries represented by providers or suppliers to ensure that 
providers or suppliers do not attempt to circumvent these rules by 
offering to represent beneficiaries. Further, to the extent that 
beneficiaries may not be as sophisticated as providers or suppliers 
regarding the administrative appeals process this consideration would 
not apply in the case of a beneficiary represented by a provider or 
supplier. Thus, although contractor redetermination notices will 
uniformly identify any necessary missing documentation, beneficiaries, 
except those represented by providers or suppliers, will still be 
permitted to introduce evidence after the QIC reconsideration level 
(although for efficiency reasons, they would be better served by doing 
so as soon as possible). We believe it would be unnecessarily 
burdensome to require appellants to certify that they have no further 
evidence to submit. (See section II.D.3 below for a further discussion 
of rules related to evidence at QIC reconsiderations.)
    Comment: Several commenters made additional suggestions for 
improving the notices that inform parties of the decision on an appeal. 
Some commenters suggested including a form to request a reconsideration 
on the back of the redetermination notice. Other commenters suggested 
that CMS make available upon request the laws, regulations, policy 
manuals, national coverage determinations (NCDs), local coverage 
determinations (LCDs), and local medical review policies (LMRPs) that 
were used to make the decision. They recommended that notices should 
include the correct citations to the appropriate provisions. One 
commenter recommended that if the MSN is used to inform a beneficiary 
of a redetermination that is wholly favorable, the MSN should be sent 
within the proper time frame. This commenter also suggested that the 
appointed representative receive a copy of the decision.
    Response: We agree that including a form to request a 
reconsideration with the redetermination notice would assist appellants 
and help them to provide the information QICs need to process 
reconsiderations. At one time, we had considered including a 
reconsideration request form on the reverse side of the redetermination 
notice, but consumer-testing results indicated that appellants found 
this confusing. We intend to continue exploring how best to make 
available a reconsideration request form with the redetermination. 
Consistent

[[Page 11443]]

with section 1869(a)(5) of the Act, as amended by section 933(c)(1) of 
the MMA, we require in Sec.  405.956(b)(9) that contractors make 
available upon request correct information on the laws, regulations, 
policy manuals, national coverage determinations (NCDs), local coverage 
determinations (LCDs), and local medical review policies (LMRPs) that 
were used to make the decision.
    We appreciate the commenter's concern about receiving MSNs within a 
reasonable amount of time from the date of a fully favorable 
redetermination. However, it is more efficient and cost-effective for 
beneficiaries to receive MSNs on a monthly basis, as opposed to each 
time a claim or appeal is processed. Thus, if an adjustment is made to 
a claim as the result of an appeal decision, the beneficiary will not 
receive the MSN until the next scheduled monthly release. We believe 
that this is an acceptable amount of time, and it continues a 
longstanding Medicare practice. CMS will monitor contractor performance 
in this regard.
    To ensure that appellants are made aware of the outcome of a fully 
favorable redetermination in a timely manner, we added Sec.  405.956(a) 
and Sec.  405.956(c) to reflect that contractors must send a written 
notice to the appellant within 60 calendar days of receipt of the 
request for a redetermination. The written notice must contain a clear 
statement indicating that the redetermination is wholly favorable to 
the appellant.
    Additionally, we wish to clarify that all parties to the appeal are 
required to receive a copy of an unfavorable or partially favorable 
redetermination notice, with the sole exception of overpayment cases 
involving multiple beneficiaries. Our experience has been that 
beneficiaries often are confused by the copies of notices that they 
receive in conjunction with overpayment and recovery letters to 
providers and suppliers. To minimize confusion, under Sec.  
405.956(a)(2), we specify that in these situations, contractors are 
permitted to issue written notices only to appellants.
    Although we agree that an appointed representative must receive a 
copy of the redetermination, we do not agree, for privacy reasons, that 
the appointed representative also should receive a copy of the MSN. 
MSNs contain information about other claims filed during the previous 
month, with which the appointed representative may have no authorized 
involvement.
    Comment: A commenter pointed out that we did not impose a deadline 
for a contractor to make payment on a claim after a favorable decision. 
The commenter recommended that we require payment to be made within 60 
days of the date of the favorable decision.
    Response: We agree that payment should be made within a reasonable 
time from the date of a favorable determination. We will continue to 
evaluate contractors' performance in effectuating favorable decisions.
8. Reconsiderations (Sec.  405.960 Through Sec.  405.978)
[If you choose to comment on issues in this section, please include the 
caption ``Reconsiderations'' at the beginning of your comments.]

a. Time Frame for Filing a Reconsideration Request

    Proposed Sec.  405.962(a) specified that appellants who wished to 
file a request for reconsideration would be required to do so within 
180 days of receipt of the redetermination notice, or within additional 
time as the QIC might allow for good cause. In proposed Sec.  405.964, 
we set forth the place and method for filing a request for 
reconsideration. We would permit parties to file requests with the QIC, 
CMS, or SSA offices. For purposes of establishing whether an appellant 
had timely filed a request for reconsideration, a request would be 
considered filed on the date it was received by the QIC, SSA, or CMS. 
However, for reconsideration requests submitted to CMS or SSA offices, 
the QIC's decision-making period would not begin until the QIC received 
the request.
    We also specified that reconsideration requests could either be 
made using a standard CMS form, or some other written document, as long 
as it contained the key elements captured by the form; that is, the 
beneficiary's name, HIC number, date(s) of service and service(s) at 
issue, and the name and signature of the party or representative of the 
party. If the reconsideration request did not contain any one of the 
essential elements referenced above, we proposed that the QIC would 
dismiss the reconsideration on the basis that the party failed to make 
out a valid request.
    We also proposed in Sec. Sec.  405.964(c) and 405.970(b)(3) that 
QICs would consolidate multiple requests for reconsideration into a 
single proceeding, and would issue one reconsideration determination to 
all parties within 30 days of the latest reconsideration request.
    Proposed Sec.  405.970 set forth the general requirement that QICs 
would complete their reconsiderations within 30 days of receiving a 
timely filed request. By no later than the close of the 30-day 
decision-making period, a QIC would either issue its reconsideration, 
notify all parties that it would not be able to complete its review by 
the decision-making deadline, or dismiss the request for 
reconsideration. Pursuant to section 1869(c) of the Act, the notice 
that the QIC is unable to complete its reconsideration within the 
decision-making period would advise the appellant of the right to 
request escalation of the appeal to an ALJ. Under Sec.  405.970(d), 
appellants would be able to submit a written request directing the QIC 
to escalate the appeal. We proposed that whenever a QIC received an 
escalation request, the QIC would take one of two actions within 5 
days: (1) Complete its reconsideration and notify the parties of its 
decision; or (2) acknowledge the escalation request in writing and 
forward the case file to the ALJ.
    Comment: A few commenters expressed concern about how appellants 
that filed appeals at alternative sites would know whether or when the 
proper adjudicator received their reconsideration request. To address 
this situation, the commenters recommended requiring adjudicators to 
send acknowledgement letters to appellants that file at alternative 
locations. Other commenters suggested requiring all adjudicators to use 
addresses that are accessible by delivery other than the U.S. postal 
service to enable appellants to file directly with the proper 
adjudicator.
    Response: As discussed above in the context of requests for 
redeterminations, we agree with the commenter that appellants who use 
alternate filing locations would have difficulty determining if and 
when the proper adjudicator received their request. Our experience has 
been that very few appellants use alternative filing locations (for 
example, SSA field offices). However, when they do so, requests often 
do not arrive timely at the proper adjudicating entity. Moreover, as 
noted previously, consistent with section 931 of the MMA, SSA will no 
longer play a role in Medicare claims appeals. For these reasons, and 
consistent with the policy for redetermination requests, we have 
revised Sec.  405.964(a) to specify that all requests for a 
reconsideration must be filed with the QIC indicated on the notice of 
redetermination. Just as we plan to do with intermediaries and 
carriers, we also will explore with QICs ways that we can create 
efficiencies in the appeals process, including establishing addresses 
for private delivery services.
    Comment: Many commenters disagreed with the proposal of ``tolling

[[Page 11444]]

the decision-making clock'' for a QIC reconsideration when an appeal is 
filed at an alternative location (for example, at an SSA office rather 
than with the QIC). Commenters perceived this provision as unfairly 
penalizing appellants that used alternative filing locations. Rather 
than beginning the decision-making time frame only when a QIC receives 
an appeal request, commenters suggested that CMS develop an electronic 
filing system. An electronic filing system would allow appellants to 
continue filing their appeals at alternative filing locations and 
permit adjudicators to receive the appeals almost immediately, thereby 
eliminating the need to toll the decision-making clock. (Note that the 
issue of tolling the decision-making deadline also applies to other 
levels of the appeals process.)
    Response: As discussed above, we believe the best way to facilitate 
a QIC's ability to adjudicate a reconsideration timely is to require 
that all reconsideration requests be filed at the QIC. Thus, the 
comments on the ``tolling of the clock'' issue are no longer pertinent. 
Note that redetermination notices will clearly specify the proper 
entity to whom to direct a reconsideration request. We do recognize 
that the development of an electronic filing system would make the 
appeals process more efficient; therefore, we intend to pursue this 
goal both with QICs and the new Medicare administrative contractors 
that are mandated by the MMA.
    Comment: Some commenters inquired whether carriers and 
intermediaries would be required to create case files, or to forward 
redetermination letters and documentation to the QIC for 
reconsiderations. One commenter argued that the QIC's success in 
meeting its decision-making time frame would depend upon the 
contractors' compliance with a time frame to forward cases to the QICs. 
If contractors are responsible for forwarding case files to QICs, the 
commenters suggested that CMS establish a time frame in the regulation 
for performing this activity. One commenter recommended a 15-day time 
frame to complete both the preparation and forwarding of the case file.
    Response: In order to achieve the statutory time frame for QIC 
decisions, efficient processing and forwarding of case files to the 
QICs is essential. From an appellant's perspective, however, this will 
be a seamless process, and we believe that the proper vehicle to 
address the mechanics of case file transmission is through our 
contractor evaluation process and manual instructions, rather than 
through regulations.
    Comment: Some commenters pointed out that currently, some 
contractors define the date of receipt as the day that the contractor 
logs in the request, while others define it as the day the request is 
received in the contractor's mailroom. To eliminate confusion, one 
commenter asked that CMS clarify in the final rule that the date of 
receipt of a reconsideration request would be the date that the request 
arrived in the QIC's mailroom.
    Response: We recognize the need for consistency in this regard and 
agree that inefficiencies in logging in an appeal request should not 
adversely affect an appellant. We intend to address the issue through 
the QIC contracts and instructions.

b. Withdrawal or Dismissal of a Request for Reconsideration

    Proposed Sec.  405.972 established provisions for withdrawing and 
dismissing requests for reconsideration. We proposed that appellants 
should be able to withdraw their reconsideration requests by filing a 
written request for withdrawal to the QIC within 14 calendar days of 
filing the reconsideration request. Under proposed Sec.  405.972(b), we 
set forth the reasons why a QIC would dismiss a request for 
reconsideration (for example, if the party failed to make out a valid 
request consistent with the requirements identified in Sec.  405.964). 
We also proposed under Sec.  405.972(e) to allow appellants to request 
an ALJ review of a QIC dismissal of a reconsideration request if the 
request was filed within 60 days of the QIC's dismissal notice.
    Comment: Some commenters asked us to give a rationale for allowing 
appeals of dismissals and remanding reversed dismissals. Other 
commenters argued that a reconsideration regarding the dismissal of a 
redetermination request should be final and not appealable. In 
addition, the same commenters asked that we include a provision that a 
subsequent reversal of a dismissal have no effect on a party's appeal 
rights.
    Response: Although we recognize that permitting appeals of 
dismissals can be inefficient at times, we believe our approach of 
providing for review of dismissals at the next adjudicative level 
balances the need for review with the need for finality. Because 
dismissals will only be based on the circumstances involving the appeal 
request (for example, whether the party included the proper elements in 
its appeal request, (or whether it is a proper party to request an 
appeal) rather than the merits on whether the claim is payable, we do 
not believe further review is necessary. Accordingly we are adding 
Sec.  405.1004(c) to specify that an ALJ's decision with respect to a 
QIC's dismissal of a reconsideration request is final and not subject 
to further review. Finally, we are not adopting the commenter's 
suggestion that a subsequent reversal of a dismissal have no effect on 
a party's appeal rights. On the contrary, a subsequent reversal by an 
ALJ of a dismissal would restore the party's reconsideration rights. 
Thus, it is necessary for the case to be remanded for the QIC to render 
a decision on the substantive issue of whether a claim must be paid.
    Comment: We received many comments and questions on the procedural 
aspects of the dismissal provision in the reconsideration section of 
the proposed rule. Commenters asked us to specify the circumstances in 
which a dismissal would be appropriate and to identify what an 
appellant would need to show in order to successfully appeal the 
dismissal of a reconsideration request. The commenters also asked us to 
clarify the circumstances under which an adjudicator can dismiss a 
reconsideration request when a beneficiary dies.
    Response: Section 405.972(b) describes the circumstances that 
warrant dismissal of a reconsideration request, either entirely or as 
to any stated issue. A dismissal is appropriate when the person or 
entity requesting a reconsideration is not a proper party under Sec.  
405.906 or does not otherwise have a right to a reconsideration under 
section 1869(b) of the Act. A dismissal also is warranted where a party 
fails to make out a valid request for reconsideration under Sec.  
405.964(a) and Sec.  405.964(b) or fails to file a request within the 
proper time frame under Sec.  405.962.
    On appeal, the party contesting the dismissal must provide evidence 
sufficient to refute the basis for the dismissal. For example, if a 
reconsideration request were dismissed because the person filing the 
appeal is not a proper party, then the appellant would have to show 
that they are in fact a proper party.
    We have amended Sec.  405.972(b)(4) to identify, in the event of a 
beneficiary-appellant's death, the circumstances an adjudicator must 
consider to determine whether dismissing the reconsideration request 
prejudices another party. The adjudicator will look to determine 
whether all three circumstances are present: (1) The beneficiary's 
surviving spouse or estate has no remaining

[[Page 11445]]

financial interest in the case, based on whether either remains liable 
for the services, or for subsequent similar services under the 
limitation of liability provisions, based on the denial of the services 
at issue; (2) no other individual or entity with a financial interest 
in the case wishes to pursue the appeal; and (3) no other party to the 
redetermination filed a valid and timely reconsideration request. For 
example, the QIC will dismiss the request if the beneficiary or the 
beneficiary's appointed representative filed the request for 
reconsideration, but the beneficiary was not held liable for the 
services at issue. The QIC will inquire whether the provider or 
supplier of the item or service wishes to continue the appeal. However, 
the QIC will not be required to inquire whether any other party wishes 
to continue the appeal unless a valid and timely request for 
reconsideration is filed by another party. We wish to note that when a 
beneficiary dies and the request is subsequently dismissed, a party, 
including the beneficiary's estate, may request the contractor to 
vacate the dismissal under Sec.  405.972(d) for good and sufficient 
cause. Examples of good and sufficient cause include the possibility of 
Medicaid liability or the possibility that the State (which pays 
Medicaid funds) will attempt recovery of its payment from the estate.
    As mentioned in our discussion above on parties to initial 
determinations and appeals, Sec.  405.906(c) reflects that in the event 
of the death of a beneficiary, a provider or supplier will be able to 
appeal if no other party is available to appeal the redetermination. 
Thus, the provider or supplier of the item or service is able to 
request reconsideration in these circumstances.
    Comment: Some commenters criticized the policy regarding dismissals 
of incomplete reconsideration requests. Rather than dismissing 
incomplete reconsideration requests, commenters thought that a better 
policy would be to inform appellants of the defect and afford them an 
opportunity to cure the defect. At a minimum, the commenters suggested 
an exception for beneficiaries.
    Response: Consistent with the previous discussion of dismissals of 
redetermination requests, we do not agree with the commenters that QICs 
must be required to inform appellants of the defects in their 
reconsideration requests instead of being able to issue dismissals. We 
believe that this policy is reasonable given the new redetermination 
notice requirements and the simplicity of the elements of a valid 
reconsideration request.
    Section 405.964(b) requires only five elements for making out a 
valid reconsideration request: (1) The beneficiary's name; (2) the 
beneficiary's Medicare health insurance claim number; (3) the specific 
service(s) and item(s) for which the reconsideration is requested and 
the specific date(s) of service; (4) the name and signature of the 
party or representative of the party; and (5) the name of the 
contractor that made the redetermination. We added the requirement that 
the party specify the contractor that made the redetermination to 
facilitate the QIC obtaining the case file from the appropriate 
contractor. Since QICs need this basic information in order to process 
an appeal, we believe that it is appropriate to require the party 
appealing to provide adequate information to identify the specific 
claim at issue. Further, the name and signature of the appellant is 
necessary to ascertain whether the individual requesting the appeal is 
in fact a party. This basic information is all that is required under 
Sec.  405.964(b), and it essentially mirrors the information that would 
have already been provided by an appellant at the redetermination 
level. Thus, we believe that requiring QICs to accept appeal requests 
with insufficient information about the claim and to inform appellants 
of the defects in their appeal requests makes for an inefficient 
appeals process.
    As under the former appeals process, CMS will create a standardized 
reconsideration form that will assist appellants, particularly 
unrepresented beneficiaries, with their requests. Furthermore, a 
dismissal of a request for reconsideration does not necessarily 
terminate a party's right to file an appeal. If the 180-day time frame 
for filing a request for reconsideration has not expired at the time a 
QIC issues a dismissal, then a party may correct the defect and 
resubmit the appeal. Additionally, if a party believes its 
reconsideration was inappropriately dismissed, it can either ask the 
QIC to vacate its dismissal, or appeal the dismissal to an ALJ.
    Comment: A few commenters asked how the dismissal of a consolidated 
appeal or a remand resulting from a reversed dismissal affects a 
party's appeal rights.
    Response: Under Sec.  405.964(c), QICs are required to consolidate 
multiple requests for reconsideration of the same claim into one 
proceeding. The dismissal of a party's individual appeal request within 
a consolidated appeal does not affect any remaining party's appeal. 
When a dismissal is appealed to the next level, the adjudicator will 
determine if the dismissal is correct. If the adjudicator reverses the 
dismissal, the dismissal is vacated and remanded to the previous level 
of appeal. The remand of a vacated dismissal is meant to ensure that 
appeals are resolved at the lowest level possible. If one party's 
appeal is remanded on a consolidated appeal, all other parties' appeals 
on the same claim are remanded. The previous adjudicator will reopen 
the dismissal and issue a new determination. This new determination 
will provide appeal rights.
    Comment: A few commenters opined that appellants should be able to 
withdraw a reconsideration request any time after filing the appeal 
request, but before a decision is rendered.
    Response: Consistent with our policy for redetermination requests, 
we agree with the commenters that an appellant should be allowed to 
withdraw an appeal request any time after a request is filed, but 
before the QIC issues a decision. Thus, we have removed the proposed 
provision that a withdrawal request must be filed with the QIC within 
14 calendar days of the filing of the reconsideration request. Section 
405.972(a) now reads ``an appellant that files a request for 
reconsideration may withdraw its request by filing a written and signed 
request for withdrawal * * *. The request for withdrawal must be 
received in the QIC's mailroom before the reconsideration is issued.''

c. Evidence Submitted With the Reconsideration Request

    Proposed Sec.  405.966(a) describes the type of evidence that 
accompanies reconsideration requests and specifies that the failure to 
submit documentation listed in the redetermination notice at the 
reconsideration level generally prevents the introduction of that 
evidence at subsequent appeal levels. Under proposed Sec.  405.966(b), 
if appellants submit additional documentation after their request for 
reconsideration has been filed, including documentation listed in the 
redetermination notice, the late submission results in an automatic 14-
day extension of the QIC's decision-making time frame. Section 933(a) 
of the MMA subsequently added a similar, new statutory requirement with 
respect to the full and early presentation of evidence.
    Comment: When filing a request for reconsideration, proposed Sec.  
405.966(a) requires a party to present evidence and allegations of fact 
or law related to the issue in dispute and explain why it disagrees 
with the redetermination. In addition, the evidence would need to 
include any missing documentation

[[Page 11446]]

identified in the redetermination notice. Absent good cause, the 
failure to submit evidence generally prevents its introduction at 
subsequent levels of the appeals process. Many commenters perceived 
this ``penalty'' for failing to comply with the requirement for early 
presentation of evidence as too harsh.
    Some argued that requiring beneficiaries to submit evidence and 
make allegations of fact and law at the reconsideration level changes 
the nature of the appeal from an informal review to an adversarial 
proceeding. These commenters believe that beneficiaries generally lack 
the resources and sophistication to make a showing at the time a 
reconsideration request is filed and are better able to present 
evidence and explain their case in a hearing. Other commenters 
indicated that requiring early presentation of evidence is unfair to 
all appellants, not just beneficiaries, especially since the proposed 
rule would allow CMS to enter an appeal as a party at the ALJ level and 
to submit evidence and position papers. To address this issue, 
commenters recommended either eliminating this provision entirely, or 
creating an exception to this requirement for unrepresented 
beneficiaries.
    Response: Section 1869(b)(3) of the Act, as amended by section 
933(a)(1) of the MMA, now specifies that providers and suppliers may 
not introduce evidence in any appeal that was not presented at the 
reconsideration conducted by the QIC, unless there is good cause that 
prevented the introduction of that evidence at or before that 
reconsideration. This statutory change is largely consistent with the 
policy identified in the proposed rule; therefore, we are adopting this 
provision as proposed for provider and supplier appellants.
    However, we are establishing an exception to the ``full and early 
presentation of evidence'' requirement for beneficiaries. Specifically, 
we have added Sec.  405.966(c) to allow beneficiary-appellants to 
submit documentation that was specified as missing in the notice of 
redetermination at any time during a pending appeal without the need 
for good cause. Note that Sec.  405.966(c)(2) clarifies that this 
exception does not apply to beneficiaries who are represented by 
providers or suppliers. See the discussion above at Section II, B&, 
``Redetermination, Notification, and Subsequent Limitations on 
Evidence'', for a complete discussion of this issue.
    We will develop manual instructions requiring QICs to help 
beneficiary-appellants to obtain documentation requested in the notice 
of redetermination.
    Any case involving the late submission of evidence, including 
appeals by beneficiaries, will continue to result in a 14-day extension 
of the decision-making time frame. We believe this policy is necessary 
to encourage all appellants to submit evidence with their appeal 
requests and to ensure that adjudicators have adequate time to 
thoroughly review all evidence prior to issuing a decision. A 14-day 
extension does not apply when the submission of evidence is in response 
to a request by a QIC, unless the QIC's request pertains to 
documentation specified in the redetermination notice.
    Any evidence submitted after the reconsideration level by 
providers, suppliers, or beneficiaries who are represented by a 
provider or supplier, will be evaluated against a good cause standard 
for late filing described at Sec.  405.1028. Note that the full and 
early presentation of evidence requirement established under section 
933 of the MMA and Sec.  405.966 does not apply to CMS, and therefore, 
it does not limit CMS' ability to introduce evidence at the ALJ level. 
CMS still must submit any evidence within the time frame designated by 
the ALJ. An extension of this deadline is permissible for good cause at 
the discretion of the ALJ.
    Comment: Proposed Sec.  405.966(b) allows the QIC to automatically 
extend its time frame by 14 additional days when a party submits 
additional evidence after filing its reconsideration request. One 
commenter recommended that the automatic 14-day extension apply only 
once, even if an appellant makes more than one late submission.
    Response: Consistent with our policy for redeterminations, a party 
may submit additional evidence as many times as it deems appropriate 
until the QIC issues a decision, but the QIC may extend its decision-
making deadline by up to 14 days each time. Thus, we have clarified in 
Sec.  405.966(b) that the 14-day extension applies each time a party 
submits additional evidence. We note that this provision also applies 
to late submissions of evidence by other parties to the appeal. The 14-
day extension allows time for the QIC to carefully review and consider 
the additional evidence. Again, although the QIC may extend the 
deadline, by no means do we anticipate that QICs will use the maximum 
time to issue decisions in all cases. The only time that the submission 
of evidence will not trigger the automatic 14-day extension is when the 
QIC requests documentation not previously requested in the 
redetermination notice.
9. Conduct of a Reconsideration (Sec.  405.968 and Sec.  405.976)
[If you choose to comment on issues in this section, please include the 
caption ``Conduct of a Reconsideration'' at the beginning of your 
comments.]

    In proposed Sec.  405.968, we defined a QIC reconsideration as ``an 
independent, on-the-record review of an initial determination, 
including the redetermination.'' If an initial determination involved a 
finding on whether an item or service was reasonable and necessary for 
the diagnosis or treatment of illness or injury (under section 
1862(a)(1)(A)) of the Act, a QIC's reconsideration must be based on 
clinical experience and medical, technical, and scientific evidence, to 
the extent applicable. Under proposed Sec.  405.968(b), QICs would be 
bound by NCDs. QICs would be required to follow LCDs, LMRPs and CMS 
program guidance unless the appellant questioned the policy and 
provided a persuasive reason why the policy should not be followed.
    Under proposed Sec.  405.976, we specify that reconsiderations be 
in writing and contain several substantive elements, including: (1) A 
clear statement as to whether the reconsideration is favorable or 
unfavorable; (2) a summary of the facts; (3) an explanation of how the 
pertinent laws, regulations, coverage rules, and CMS policies apply to 
the facts; (4) an explanation of the medical and scientific rationale 
for the reconsideration when the case involved determining whether an 
item or service was reasonable or necessary for the diagnosis or 
treatment of an illness or injury; and (5) a clear statement of the 
QIC's rationale for its decision. Consistent with proposed Sec.  
405.968(b)(3), if the QIC's decision conflicts with an LCD, LMRP, or 
with program guidance (for example, a CMS manual instruction), the 
notice needs to include the QIC's rationale for not following the 
policy in question. Similarly, consistent with proposed Sec.  
405.976(b)(5), the reconsideration notice needs to address how any 
missing documentation affects the reconsideration and the limitations 
on the presentation of evidence at the ALJ hearing level.
    Comment: We received many comments on the provision requiring QICs 
to give deference to a local coverage determination (LCD) or local 
medical review policy (LMRP) unless an appellant questions the policy 
and provides a reason why the policy should not be followed that the 
QIC finds persuasive. Some commenters thought that CMS had exceeded its 
statutory

[[Page 11447]]

authority by binding QICs to LCDs and LMRPs and questioned the 
propriety of requiring QICs to give deference to policies that they 
allege sometimes contradict statutes and regulations, and that are not 
promulgated through notice-and-comment rulemaking. They also expressed 
concern over whether unrepresented beneficiaries would be able to 
effectively challenge CMS policies and noted that requiring QICs to 
give deference to LCDs and LMRPs would prevent QICs from reviewing 
these policies.
    Response: We continue to believe that it is both appropriate and 
consistent with the statutory intent of BIPA to require QICs to 
consider LCDs and LMRPs and other CMS program guidance and to apply 
these policies appropriately in a particular case. A QIC is not 
required to follow a given policy in an individual case if it believes 
that the policy is not legally persuasive under specific circumstances. 
However, this does not mean a QIC may ignore or invalidate an LCD for 
all subsequent appeals. The Congress created a new and entirely 
separate process for reviewing the validity of LCDs in section 1869(f) 
of the Act, as added by section 522 of BIPA. Section 1869(f) of the Act 
permits beneficiaries who are seeking coverage from an item or service 
to challenge the reasonableness of an LCD. A challenge to an LCD under 
section 522 of BIPA is reviewed by an ALJ.
    As the commenter suggests, however, we have reevaluated the 
proposed requirement that a QIC could choose not to follow LCDs, LMRPs, 
and CMS program guidance only if the appellant questioned the policy 
and provided a persuasive reason why the policy should not be followed. 
As a result, we have revised Sec.  405.968 to provide that a QIC may 
decline to follow a policy in a particular case either at the request 
of a party or at its own discretion.
    Thus, as revised, Sec.  405.968 states that a QIC is not bound by 
LCDs, LMRPs, or CMS program guidance, but will give substantial 
deference to these policies if they are applicable to a particular 
case. Moreover, a QIC may decline to follow a policy if the QIC 
determines, either at a party's request or at its own discretion, that 
the policy does not apply to the facts of the particular case. Thus, 
QICs will not review LCDs, LMRPs, or other CMS guidance. Rather, they 
will evaluate the applicability of the LCD, LMRP, or CMS guidance to a 
particular claim denial. Their decisions will not affect subsequent 
cases and are not precedential. A QIC does not have the authority to 
require CMS or a contractor to withdraw or revise its LCDs, LMRPs, or 
other guidance. This amended provision eliminates the burden imposed on 
appellants, including beneficiaries, to challenge CMS policies in the 
claim appeals process. (See section II.G.5 of this preamble for a 
related discussion of ALJ and MAC consideration of local coverage 
policies.)
    We also note that section 522 of BIPA created a new review process 
that enables certain beneficiaries to challenge LCDs at the ALJ hearing 
and MAC review levels and NCDs at the MAC review level. Thus, we 
believe that it is important to note how the coverage appeals process 
could affect QICs in processing claim appeals.
    If a party appeals a denial that is based on an LCD or NCD by 
filing only a claim appeal, then adjudicators will apply the coverage 
policy that was in place on the date the item or service was received, 
regardless of whether some other beneficiary has filed a coverage 
appeal based on the same LCD or NCD. This policy is consistent with 
original Medicare policy that requires LCD or NCD changes to only be 
applied prospectively to requests for payment.
    If an appellant files both a claim and a coverage appeal based on 
the same initial determination, both appeals will go forward. The claim 
appeal adjudication time frames will not be impacted because the 
appeals will be conducted simultaneously. In adjudicating the claim 
appeal, adjudicators will apply the coverage policy that was in place 
on the date the item or service was provided, unless the appellant 
receives a favorable coverage appeal decision. If the appellant 
receives the favorable coverage decision prior to a decision being 
issued for the claim appeal, then pursuant to 42 CFR Sec.  426.488 and 
Sec.  426.560, the claim appeal will be adjudicated without 
consideration of the invalidated LCD or NCD provision(s). If an 
appellant receives a favorable decision in the coverage appeal after 
receiving an unfavorable claim appeal decision, then the appellant is 
entitled to have the claim appeal reopened and revised for good cause, 
subject to the provisions in Sec.  405.980 and Sec.  405.986, without 
consideration of the invalid LCD or NCD provision(s). As a result of 
these clarifications, we have added Sec.  405.1034(c) to permit ALJs to 
remand an appeal to a QIC in this situation.
    Comment: Although a few commenters agreed with the proposal that 
all QIC proceedings would be ``on-the-record,'' most commenters opposed 
this proposed policy and recommended that QICs be required to offer 
appellants an opportunity for a hearing, as has been the case under the 
existing Part B fair hearing process. Commenters stated that requiring 
all QIC proceedings to be held on-the-record was contrary to 
congressional intent and would limit an appellant's ability to interact 
with the adjudicator. The commenters believed that appellants would be 
deprived of an important opportunity to provide adjudicators with 
clarifications and additional information not contained in the record, 
and that adjudicators would not have an opportunity to personally 
assess a beneficiary's physical/mental condition. Commenters suggested 
that beneficiary appellants in particular would be adversely affected 
by this policy. Other commenters agreed that QICs should not be 
required to conduct in-person or telephone reconsiderations within the 
statutory decision-making time frame, but expressed concern over the 
accuracy of the QICs' on-the-record decisions.
    Response: As the commenters point out, under the existing appeals 
process, appellants have had an opportunity to request a ``fair 
hearing'' with respect to Part B determinations. This process, which 
has involved on-the-record, telephone, or in-person proceedings, has 
served as the second level of appeals for Part B claims, consistent 
with section 1842(b)(3)(C) of the Act, which specifies that an 
individual will be granted an opportunity for a fair hearing by the 
carrier in any case where the amount in controversy is at least $100. 
Section 1842(b)(2)(B)(ii) of the Act establishes a 120-day deadline for 
the fair hearing decision. The existing regulations governing appeals 
under Medicare Part B, in Subpart H of Part 405, describe the available 
hearing procedures.
    However, the right to a fair hearing has never been part of the 
appeals process for Part A claims. For these claims, Sec.  405.710 
establishes a right to a ``reconsideration.'' Neither the statute nor 
the implementing regulations under Subpart G of Part 405 provide for 
any type of hearing before the ALJ level for Part A claims. Neither the 
statute nor the regulations establish a minimum amount in controversy 
for Part A reconsiderations.
    In contrast to the pre-BIPA statute, revised section 1869 of the 
Act establishes a uniform set of appeals requirements for all Part A 
and Part B claim determinations. The required procedures now available 
under the statute consist of a ``redetermination'' by an intermediary 
or carrier, a ``reconsideration'' by a QIC, a ``hearing'' before an 
ALJ, and then a ``review'' by the DAB. As under the existing Part A 
process, the statute does not establish any minimum amount in 
controversy

[[Page 11448]]

for reconsiderations and sets this amount at only $100 for ALJ 
hearings.
    Section 1869 of the Act, as amended by BIPA and the MMA, does not 
require, or even mention, a hearing at the QIC level. Instead, section 
1869(c)(3)(B)(i) of the Act specifies that in conducting a 
reconsideration, the QIC ``* * * shall review initial determinations'' 
and that when the determination involves whether an item or service is 
reasonable and necessary under section 1862(a)(1)(A) of the Act, ``* * 
* such review shall include consideration of the facts and 
circumstances of the initial determination by a panel of physicians or 
other appropriate health care professionals and [decisions] shall be 
based on applicable information, including clinical experience 
(including the medical records of the individual involved) and medical, 
technical, and scientific evidence.'' The statute then specifically 
provides for ``hearings'' at the ALJ level under section 1869(d)(1). 
Finally, the Congress established rigorous decision-making time frames 
at all levels of the appeals process that will significantly reduce the 
amount of time in which an appellant who chooses to use the ALJ process 
will obtain a decision.
    Taking into consideration all of the above information, we believe 
our proposal is consistent with the substantially revised appeals 
methodology, including faster decision-making time frames, physician 
reviewers, and lower amount in controversy thresholds. We believe that 
the Congress was fully aware of the historical meaning of the terms 
``reconsideration'' and ``hearing'' and did not use them lightly in the 
new statute. Appellants retain the right to a hearing at the ALJ level, 
and this hearing will take place generally within the same time frame 
as a ``fair hearing'' under the previous Part B appeals process. Thus, 
we continue to believe that the statute does not intend or require that 
the QIC reconsideration process include an opportunity for a hearing. 
Finally, we note that QICs are not precluded from contacting appellants 
and obtaining necessary information from them by phone or other means.
    Comment: A few commenters inquired about the QICs' ability to hear 
or raise new issues. One commenter recommended that QICs be prohibited 
from raising new issues. Most commenters, however, agreed that QICs 
should be able to hear or raise new issues not raised at the initial 
determination or redetermination levels. In a related question, another 
commenter asked whether a QIC panel would adjudicate an appeal if a 
section 1862(a)(1)(A) issue (that is, a medical necessity issue) was 
raised for the first time at the reconsideration level.
    Response: A reconsideration is a new and independent review of an 
initial determination and we believe adjudicators at the 
reconsideration level should be permitted to raise and develop any 
issues that they believe are relevant to the claims in the case at 
hand. Accordingly, we have added Sec.  405.968(b)(5) to clarify this 
policy. Section 1869(c)(3)(B)(i) of the Act requires that a 
reconsidered determination involve consideration by a panel of 
physicians or other health care professionals when the initial 
determination is based on section 1862(a)(1)(A) of the Act. Thus, if a 
medical necessity issue was raised for the first time at the 
reconsideration level, we believe that review by a panel of health 
professionals would be required. Although the panel may consider new 
issues involving the claims in dispute, it must not adjudicate new 
claims for which the contractor has not issued a redetermination.
    Comment: One commenter thought that the redetermination and 
reconsideration levels were redundant and suggested eliminating one in 
order to make the appeals process more efficient.
    Response: Section 1869(a)(3)(A) of the Act gives appellants who are 
dissatisfied with their initial determination the right to request a 
redetermination. If an appellant is dissatisfied with the 
redetermination, then section 1869(b)(1)(A) of the Act grants the 
appellant the right to request a reconsideration. Thus, both the 
redetermination and reconsideration levels are unambiguously required 
by statute. It is not within CMS' discretion to eliminate either the 
redetermination or reconsideration levels of appeal.

a. Time Frame for Making a Reconsideration

    Comment: Proposed section 405.970(c) specified that, by no later 
than the close of the 30-day decision-making time frame, a QIC must 
issue to the parties either a reconsideration, a dismissal, or a notice 
stating that the QIC will not be able to complete its review by the 
deadline. The notice would also advise the appellant of the right to 
request escalation of the appeal to an ALJ. CMS further specified that, 
whenever a QIC receives an escalation request, the QIC, within 5 days, 
would either complete its reconsideration and notify the parties of the 
decision, or acknowledge the escalation request and forward the case 
file to an ALJ.
    A number of commenters felt that BIPA unequivocally requires QICs 
to issue reconsiderations within 30 days of their receipt of a request 
for reconsideration. Thus, they were critical of the proposed policy to 
allow a QIC to issue a notice to an appellant indicating that it is 
unable to complete a reconsideration within the prescribed decision-
making time frame. The commenters complained that allowing QICs to 
issue these notices, rather than an actual reconsideration, contradicts 
the statutory intent and creates a loophole for QICs to avoid 
compliance with the decision-making time frames established by BIPA.
    Response: We realize that the Congress intends for QICs to issue 
reconsiderations in response to timely filed reconsideration requests 
within 60 days as stated in section 1869(c)(3)(C)(i) of the Act (as 
amended by section 940(a)(2) of the MMA). We disagree, however, with 
the assertion that the drafters envisioned that QICs would be able to 
issue timely decisions for every reconsideration request no matter what 
the circumstances involved. To the contrary, the Congress clearly 
expected that there would be situations in which QICs would not be able 
to comply with the statutory decision-making time frames, as evidenced 
by the inclusion of the escalation provisions of section 
1869(c)(3)(C)(ii) of the Act, ``Consequences of Failure to Meet 
Deadline.'' Here, the Congress created a new right for appellants to 
escalate appeals to the ALJ level in the event that the QIC failed to 
mail the notice of reconsideration within the decision-making time 
frame. In order to accommodate appellants' ability to exercise this 
right, it is essential that QICs provide appellants with a notice when 
a reconsideration cannot be issued timely.
    Sections 405.970(a)(2) and 405.970(c)(2), therefore, do not 
conflict with the statutory intent or create a loophole for avoiding 
compliance with the statutory decision-making time frames. Rather, 
these provisions help guarantee that appellants will be able to 
exercise their right to escalate an appeal by ensuring that appellants 
receive timely notice of the QIC's inability to issue a reconsideration 
within the statutory time frame. We believe this process is highly 
preferable to not informing an appellant of this fact. We also wish to 
point out that if an escalation request is received prior to the end of 
the 60-day adjudication period, the QIC will proceed with its review of 
the reconsideration request

[[Page 11449]]

and either (1) issue its reconsideration by the end of 65 days (the 60-
day period plus 5 days from receipt of the request to escalate) or (2) 
send notification to the party on the 60-day deadline that the QIC 
cannot complete its review by the 60-day deadline and escalate the 
request at that time.
    Comment: Two commenters expressed concern over applying the 30-day 
decision-making time frame to reconsiderations of post-pay audit cases 
involving statistical sampling. The commenters stated that the large 
volume of claims to be reviewed for these types of cases would prevent 
QICs from ever meeting the 30-day time frame or would force the QICs to 
simply rubberstamp the redetermination in order to meet the 30-day 
deadline. The commenters further surmised that ALJs would regularly 
overturn QIC reconsiderations on these ``big box'' cases for lack of 
development. The commenters recommended that CMS either provide a 
longer decision-making time frame for these types of cases, or bypass 
the reconsideration level for these cases and allow appellants to go to 
the ALJ hearing level if they are dissatisfied with the audit 
determination.
    Response: We appreciate the commenters' observation that it will be 
difficult for the QICs to process ``big box'' cases resulting from 
complex post-payment audits that involve individual consideration of 
multiple claims in a timely manner, even under the new 60-day time 
frame established by section 940(a)(2) of the MMA. At this point, we do 
not have a basis for direct evaluation of this issue since the QICs are 
not yet conducting reconsiderations. However, we know that in the 
former appeals process when a fair hearing officer receives a ``big-
box'' case, it generally has taken 60 days to review the extensive 
medical records and other documentation associated with these cases. As 
mentioned in the previous response, we believe that the Congress 
expected that there would be situations in which QICs would not be able 
to comply with the decision-making time frame, as evidenced by the 
inclusion of the escalation provision of section 1869(c)(3)(C)(ii) of 
the Act. Thus, if an adjudicator fails to complete a reconsideration of 
a ``big-box'' case within 60 days, an appellant has the option of 
either waiting for the QIC's reconsideration, or requesting escalation 
of the case to the ALJ hearing level. We intend to work very closely 
with carriers, FIs, and QICs to identify ways to streamline the 
redetermination case file transmission and reconsideration procedures 
in order to facilitate the achievement of this deadline.

b. Notice of a Reconsideration

    Comment: Because the proposed rule gives providers and 
participating suppliers the same appeal rights as beneficiaries, some 
commenters wondered who would receive the reconsideration notice if 
both the beneficiary and the provider or supplier filed timely appeals.
    Response: Section 405.964(c) establishes that ``[i]f more than one 
party timely files a request for reconsideration on the same claim 
before a reconsideration is made on the first timely filed request, the 
QIC must consolidate the separate requests into one proceeding and 
issue one reconsideration.'' Thus, pursuant to Sec. Sec.  405.970(c)(1) 
and 405.976(a)(1), all of the parties will receive a copy of the 
reconsideration. This applies to all reconsiderations, including 
consolidated cases. To minimize confusion for beneficiaries who have no 
financial liability in overpayment cases involving multiple 
beneficiaries, we added an exception at Sec.  405.976(a)(2) that QICs 
need to issue written notices only to the appellants in these cases. 
Therefore, the beneficiary will only receive a written notice of the 
reconsideration in such an overpayment case when he or she files an 
appeal request or it is a consolidated case.
    We also note that we have added a requirement at Sec.  
405.976(b)(7) that the QIC must also indicate whether the amount in 
controversy meets the threshold requirement for an ALJ hearing if the 
reconsideration is partially or fully unfavorable. We believe this 
addition will be beneficial to appellants as well as to adjudicators at 
those levels where AICs apply.

c. Publication of Reconsiderations

    Comment: Citing the statutory requirement to make reconsiderations 
available, two commenters suggested that the final rule include 
information about publication of QIC reconsiderations. Specifically, 
the commenters thought that CMS should establish a time frame for 
publication of QIC decisions and identify how the public would be able 
to view and obtain copies of reconsiderations, in order to ensure that 
appellants have access to prior reconsiderations as they make their own 
reconsideration requests.
    Response: Section 1869(c)(3)(G) of the Act requires QICs to make 
reconsiderations available, but does not require CMS or the QICs to 
``publish'' all reconsiderations. However, we do not believe that this 
interim final regulation is the appropriate vehicle to provide 
information regarding the availability of reconsiderations. CMS is 
working with the QICs to determine how best to provide the public with 
specific information regarding prior QIC reconsiderations.
    Although we expect QICs to issue consistent reconsiderations, and 
appellants will have access to those prior reconsiderations, it is 
worth noting that reconsiderations, like all other Medicare 
administrative appeal decisions, have no precedential value. Moreover, 
based on current workload, there may be as many as one million QIC 
reconsiderations a year; given the large volume of anticipated 
reconsiderations, we do not intend to ``publish'' them, but we will 
ensure they are made available.

d. QIC Qualifications

    Comment: Many commenters asked that the final rule include more 
explicit information about the QICs. In particular, commenters wanted 
the final rule to identify the minimum qualifications for the QIC panel 
members and reviewers, clearly define the role of the QIC panel in the 
reconsideration process, and describe the on-going training that would 
be made available to the panel members and reviewers. Most of these 
commenters strongly believe that QIC panelists should be licensed, 
practicing health care professionals with sufficient expertise in the 
relevant area of medicine involved in the appeal, and also possess some 
legal experience. One commenter suggested that the requirements 
currently used for Quality Improvement Organization (QIO) reviewers 
might be a good model for developing the QIC reviewers' qualifications. 
Commenters also asked that the final rule spell out the provisions that 
would be put in place to ensure the QICs' independence.
    Response: We agree with commenters that details regarding the 
qualifications of the QICs' panel members and reviewers, the structure 
of the QICs, and their operational policies need to be established 
before implementation of the new appeals process. Both BIPA and the MMA 
have provided extensive direction in regard to QIC independence 
requirements and the eligibility requirements for QIC reviewers, and we 
intend to ensure through the QIC contracting process that QICs are 
fully compliant with these requirements. We have also established QIC 
training requirements through the procurement process. However, we do 
not believe it is necessary or appropriate to address these types of 
issues in regulations, and instead will follow the normal business

[[Page 11450]]

practice of including this information in the contracts with the QICs.
    Comment: Although commenters overwhelmingly agreed that using 
panels of health care professionals at the QIC level would be an 
improvement over the current appeals process, at least one commenter 
questioned the cost-effectiveness of using these panels for appeals 
involving low dollar claims and recommended that we develop alternative 
ways of reviewing these kinds of appeals.
    Response: We appreciate the commenter's concern and recognize that 
using panels of physicians and other health care professionals to 
review appeals of section 1862(a)(1)(A) denials will not always be 
cost-effective. However, based on the unambiguous language in section 
1869(c)(3)(B)(i) of the Act, the Congress clearly intended that panels 
of physicians or other health care professionals review all appeals 
involving determinations on whether an item or service is reasonable or 
necessary, regardless of the dollar value of the claim(s) involved. We 
intend to work with QIC's to determine the most cost-effective means of 
fulfilling this statutory requirement.
10. Reopenings of Initial Determinations, Redeterminations, 
Reconsiderations, Hearings and Reviews (Sec.  405.980 through Sec.  
405.986)
[If you choose to comment on issues in this section, please include the 
caption ``Reopenings of Initial Determinations, Reconsiderations, 
Hearings, and Reviews'' at the beginning of your comments.]

    Section 1869(b)(1)(G) of the Act, as added by BIPA, provides for 
the reopening and revision of any initial determination or reconsidered 
determination according to guidelines prescribed by the Secretary. As 
we pointed out in the proposed rule, clear reopening provisions are 
needed not only to comply with BIPA, but also to address longstanding 
confusion over the reopening rules for Medicare claim determinations. 
Thus, we proposed to establish a unified set of reopening regulations 
that consolidate and clarify the existing reopening provisions of 
subparts G and H of part 405. (See 67 FR 69327.)
    First, proposed Sec.  405.980(a) establishes the general rule that 
a reopening is a remedial action taken by a carrier, intermediary, QIC, 
ALJ, the MAC, or any other entity designated by CMS to change a final 
determination or decision made with respect to an initial 
determination, redetermination, reconsideration, hearing, or review, 
even though the determination or decision may have been correct based 
upon the evidence of record. (For purposes of reopenings, the term 
``contractors'' includes carriers, intermediaries, and program 
safeguard contractors.) Under proposed Sec.  405.980(a)(4), we define a 
clerical error as human and mechanical mistakes (for example, 
mathematical or computational mistakes, or inaccurate data entry).
    Proposed Sec.  405.980(b) through Sec.  405.980(e) specify the time 
frames and requirements for reopening initial determinations, 
redeterminations, reconsiderations, hearing decisions, and reviews, 
both for reopenings initiated by contractors, QICs, ALJs, or the MAC, 
as well as those requested by parties. Either a party can request a 
reopening, or a contractor can reopen on its own motion, for any 
reason, within one year from the date of the notice of the initial 
determination or redetermination. A party or a contractor has a 4-year 
time frame for requesting or initiating reopenings for good cause. 
However, although a party can request a reopening, the contractor can 
nevertheless determine that there is not good cause to reopen the case. 
(An example of good cause to reopen based on a clerical error is when 
payment for a claim is denied because an erroneous code, which is not 
covered by Medicare, was used and it is later determined that the 
procedure was miscoded.) We also proposed that a contractor can reopen 
within 5 years from the date of the initial determination or 
redetermination if the contractor discovers a pattern of billing errors 
or identifies an overpayment extrapolated from a statistical sample.
    Finally, we proposed to maintain the longstanding policy that 
reopenings are permitted at any time on claim determinations that have 
been procured through fraud or similar fault. Proposed Sec.  
405.980(b)(4)(ii) defines similar fault as ``to obtain, retain, 
convert, seek, or receive Medicare funds to which a person knows or 
should reasonably be expected to know that he or she or another for 
whose benefit Medicare funds are obtained, retained, converted, sought, 
or received is not legally entitled. This includes, but is not limited 
to, a failure to demonstrate that it filed a proper claim as defined in 
part 411 of this chapter.'' Similar fault is intended to cover 
instances where Medicare payment is obtained by those with no legal 
rights to the funds, but where law enforcement is not proceeding with a 
recovery based on fraud. This includes instances where a provider has 
been paid twice for the same claim where the contractor erroneously 
pays for codes that should not have been paid, but there is no evidence 
that the provider intentionally failed to refund the money; or where 
there is the manipulation of legitimate codes to obtain a higher 
reimbursement. While this last example might appear to be an example of 
fraud, it is also an example of an instance when the similar fault 
provision might be used. The similar fault provision is appropriately 
used where fraudulent behavior is suspected but law enforcement is not 
proceeding with recovery on the basis of fraud.
    Proposed Sec.  405.980(d)(1) and Sec.  405.980(e)(3) provide 180 
days from the date of a reconsideration for either a party to request, 
or a QIC to initiate, a reopening. Similarly, both the parties and the 
adjudicators at the ALJ and MAC levels also have 180 days from the date 
of a hearing or review decision to request or initiate a reopening. The 
party, QIC, ALJ, or the MAC have to establish good cause for a 
reopening.
    Proposed Sec.  405.982 through Sec.  405.984 require contractors, 
QICs, ALJs, or the MAC to mail notices of revised determinations or 
decisions based on reopened determinations, reconsiderations, or 
decisions to the appropriate parties at their last known addresses. In 
the case of a reopening that results in a favorable decision and 
issuance of additional payment to a provider or supplier, a revised 
remittance advice (RA) must be issued to the provider or supplier that 
explains the payment and reports the appeal rights; this RA will serve 
as the notice of the reopening determination. In the case of a 
reconsideration that results in additional payment to a provider or 
supplier, both a reconsideration determination notice and an electronic 
or paper remittance advice notice must be issued. Proposed Sec.  
405.986 specifies how a party, contractor, QIC, ALJ, or the MAC would 
establish good cause for a reopening. In this interim final rule, we 
have revised proposed Sec.  405.986(b), to clarify that although a 
change in substantive law or interpretative policy is not good cause 
for reopening, the provision does not preclude contractors from 
reopening claims to effectuate a decision issued under section 1869(f) 
of the Act, as amended by section 522 of BIPA. The final regulation 
implementing the coverage appeals process was published after the 
notice of proposed rulemaking for this regulation was issued. Thus, we 
have now added language at Sec.  405.980(b)(5) to enable contractors to 
reopen claim determinations at any time in order to effectuate 
favorable coverage appeals decisions issued to a beneficiary. We

[[Page 11451]]

wish to make clear that this provision does not allow retroactive 
application of coverage decisions to payment denials.

a. Reasons and Conditions for Reopenings

    Comment: Several commenters mentioned that the proposed definition 
for a reopening does not acknowledge that the purpose of a reopening is 
to ensure correct payment amounts; and therefore, a reopening may 
result from either an overpayment or an underpayment. They believed 
that CMS should clarify in the regulations that a reopening can be 
initiated for either an overpayment or an underpayment.
    Response: We agree with the commenter that the underlying goal of 
the reopening process is to pay claims appropriately, subject to 
considerations of administrative finality. In the proposed rule (67 FR 
69327), we state that, ``the purpose for conducting a reopening should 
be to change the determinations or decisions that result in either 
overpayments or underpayments.'' To accommodate this concept in the 
regulations, we have added text at Sec.  405.980(a)(1) that makes clear 
that a reopening is an action to change a final determination or 
decision that results in either an overpayment or an underpayment.
    Comment: One commenter requests clarification on the conditions for 
reopening. The commenter seeks further clarification on whether good 
cause is required for reopenings that occur within 1 year from the date 
of the initial determination or redetermination, or whether a 
contractor would grant a request for reopening for any reason within 
the one-year time frame.
    Response: The authority for a contractor to reopen a claim or 
appeal within one year from the date of the initial determination or 
redetermination for any reason exists under Sec.  405.750(b)(1) and 
Sec.  405.841(a). Therefore, we have removed proposed text formerly in 
Sec.  405.980(a)(2)(i) in order to avoid the implication that 
contractor reopenings within one year are premised on good cause. This 
is consistent with Sec.  405.980(b)(1) and Sec.  405.980(c)(1), which 
maintain the authority for contractors to reopen claims or appeals 
within 1 year for any reason. Thus, contractors do not need to 
establish good cause under Sec.  405.986(a) to reopen within 1 year.
    We also note that under Sec.  405.980(b)(3), contractors may reopen 
at any time if there exists reliable evidence that an initial 
determination was procured by fraud or similar fault. In addition, we 
have added Sec.  405.986(c) to provide that if a third party payer 
changes its assessment of whether it has primary payment responsibility 
more than 1 year after the date of Medicare's initial determination, 
the contractor is without authority to find good cause to reopen a 
claim.

b. Distinguishing Between Reopenings and Appeals

    Comment: Two commenters express uncertainty over whether CMS 
intends for contractors to process corrections of clerical errors as 
reopenings or appeals. One commenter contends that CMS provides 
conflicting information by suggesting in one section of the preamble 
that adjustments resulting from clerical errors are handled through the 
reopenings process, while stating in another section of the preamble, 
that either a party would need to exhaust all appeal rights, or the 
time limit to file an appeal would need to expire, in order for the 
contractor to conduct a reopening to correct these errors. Another 
commenter maintains that the proposed rule requires human or mechanical 
errors to go through the appeals process instead.
    Response: As we stated in the proposed rule, ``requests for 
adjustments to claims resulting from clerical errors must be handled 
through the reopenings process. Therefore, when a contractor makes an 
adjustment to a claim, the contractor is not processing an appeal, but 
instead, conducting a reopening'' (67 FR 69327). Moreover, section 937 
of the MMA subsequently amended the Act to specify that in the case of 
minor errors or omissions that are detected in the submission of 
claims, CMS must give a provider or supplier an opportunity to correct 
that error or omission without the need to initiate an appeal. We 
equate the MMA's minor errors or omissions to fall under our definition 
of clerical errors, located in Sec.  405.980(a)(3). We believe that it 
is neither cost efficient nor necessary for contractors to correct 
clerical errors through the appeals process. Thus, Sec.  405.927 and 
Sec.  405.980(a)(3) require that clerical errors be processed as 
reopenings rather than appeals. Consistent with the process that we 
developed in consultation with Medicare contractors, and 
representations of providers and suppliers as required under section 
937 of the MMA, we have made a conforming change at Sec.  405.980(a)(3) 
to specify that contractors must grant reopenings for clerical errors 
or omissions. Section 405.980(a)(4) of this interim final rule states 
that a contractor may reopen and revise its initial determination or 
redetermination on its own motion at any time if the initial 
determination is unfavorable, in whole or in part, to the party 
thereto, but only for the purpose of correcting a clerical error on 
which that determination was based. In the event that a contractor does 
not believe that a clerical error exists, the contractor must dismiss 
the reopening request and advise the party of its ability to pursue to 
the appeals process on the claim denial, provided the timeframe to 
request an appeal has not expired. It should be noted that the party 
would be requesting an appeal of the original denial, not the dismissal 
of the reopening request. Reopenings continue to be discretionary 
actions on the part of the contractors; therefore, their decision not 
to reopen is not subject to appeal.
    Similarly, we believe that improper denials based on duplicate 
claims essentially involve clerical errors that can be best resolved 
through the reopenings process. When a provider or supplier receives a 
denial based on the contractor's determination that the claim is a 
duplicate and the provider or supplier believes the denial is 
incorrect, and the contractor agrees that the denial was incorrect, the 
contractor should reopen the denial. Thus, we added text at Sec.  
405.980(a)(3)(iii) to specify that if a provider or supplier wishes to 
resolve a denial based on a claim being erroneously identified as a 
duplicate, the contractor should process the request as a reopening 
rather than as an appeal. In the event the contractor does not believe 
the denial was improper, the contractor must dismiss the reopening 
request and advise the party of any appeal rights, provided the 
timeframe to request an appeal on the original denial has not expired.
    Comment: One commenter was concerned that the proposed rule would 
limit opportunities for reopenings, because proposed Sec.  
405.980(a)(5) would preclude a reopening when a party has filed an 
appeal request. The commenter asked whether one can assume that a 
reopening will not be granted when a provider requests an appeal of a 
denial or partial payment such as that resulting from a provider 
submitting an incorrect CPT code, diagnosis code, or modifier.
    Response: Under normal circumstances, a valid request for an appeal 
must be processed as an appeal, and once an adjudicator receives a 
valid appeal request, the entity that made the previous determination 
generally no longer has jurisdictional authority to reopen that 
determination. We have revised Sec.  405.980(a)(4) to clarify this 
point.
    Section 405.980(a)(4) ensures that the reopening and appeal 
processes are not engaged at the same time. We recognize,

[[Page 11452]]

however, that in certain situations, it will be apparent that the 
provider that is requesting an appeal is actually bringing a clerical 
error to the attention of the contractor. Under this interim final 
rule, irrespective of the provider's or supplier's request for an 
appeal, a contractor will treat the request for appeal of a clerical 
error as a request for a reopening. Therefore, as a practical matter, 
under Sec.  405.980(a)(4), the contractor must transfer the provider's 
or supplier's appeal request to the reopenings unit for processing. On 
the other hand, if a contractor receives a request for a reopening, but 
disagrees that the issue is a clerical error, then the contractor must 
dismiss the reopening request and advise the party of any appeal 
rights, provided that the timeframe to request an appeal on the 
original denial has not expired.
    CMS understands that educational efforts must be undertaken in 
conjunction with this regulation to make the provider and supplier 
communities aware of their ability, and the contractor's obligation to 
resolve clerical errors through the reopenings process. Until that 
education occurs, many providers and suppliers may continue to believe 
that their only, or best, recourse is to request an appeal.

c. Similar Fault and Reopenings Within 5 Years

    Comment: As noted above, proposed Sec.  405.980(b)(4)(ii) defines 
similar fault as ``to obtain, retain, convert, seek, or receive 
Medicare funds to which a person knows or should reasonably be expected 
to know that he or she or another for whose benefit Medicare funds are 
obtained, retained, converted, sought, or received is not legally 
entitled. This includes, but is not limited to, a failure to 
demonstrate that it filed a proper claim as defined in part 411 of this 
chapter.'' Several commenters believe that this definition is too broad 
and allows contractors to reopen almost any claim, for any reason.
    Response: The definition of similar fault covers situations where a 
contractor identifies an inappropriate billing that does not rise to 
the level of fraud. It is necessary to define similar fault as those 
situations when a contractor has identified inappropriate billing by a 
provider or supplier that knows or could have been reasonably expected 
to know that the claim should not have been paid for items or services, 
but the situation is not one where a law enforcement agency has made a 
determination that the billing is fraudulent. The similar fault 
provision is appropriately used where fraudulent behavior is suspected 
but law enforcement is not proceeding with recovery on the basis of 
fraud. We do not believe this definition is overly broad, given the 
implicit requirement that the fault be ``similar'' to fraud.
    Comment: Several commenters express concern over the provision in 
the proposed rule at Sec.  405.980(b)(3), which allows a contractor to 
reopen initial determinations and redeterminations within 5 years of 
discovering a pattern of billing errors, or identifying an overpayment 
extrapolated from a statistical sample. The commenters point out the 
difficulty and burden in locating documentation on older claims. The 
commenters also argue that CMS does not provide a rationale for the 
proposed 5-year time frame.
    Response: CMS proposed this provision in an effort to accommodate 
overpayments identified by external auditors and law enforcement 
agencies. There were instances where auditors utilized a 5-year 
sampling methodology, identified an overpayment, and instructed the 
Medicare contractor to recoup the overpayment. Since the audit results 
were usually amounts extrapolated from a statistical sample based on 5 
years of records, carriers and intermediaries experienced difficulty 
collecting the overpayments because Sec.  405.750(b)(2) and Sec.  
405.841(b) bound carriers and intermediaries to a 4-year limit for the 
identification and collection of overpayments where a law enforcement 
agency did not make a fraud determination.
    However, we recognize providers' concerns with this proposal and 
consequently have decided to remove it from the final regulation. To 
the extent that law enforcement findings suggest a need for reopenings 
in situations that involve inappropriate billing patterns, but fall 
short of outright fraud, contractors may rely on the similar fault 
provision at Sec.  405.980(b)(3) to reopen claims.
    Comment: One commenter asks whether proposed Sec.  405.980(b)(4), 
which allows contractors to reopen initial determinations procured by 
fraud or similar fault, is limited to initial determinations that have 
not been appealed or reopened.
    Response: Section Sec.  405.980(a)(4) of this interim final rule 
requires that when a party files a valid request for an appeal, the 
adjudicator no longer has jurisdiction to reopen the pending claim or 
appeal at issue. However, in cases of fraud or similar fault, the 
government may be pursuing legal action for claims it suspects are 
fraudulent, an activity which falls outside of the administrative 
appeals process. In the event legal action results in a favorable 
decision for CMS, CMS has the ability to reopen the claims in question 
and recoup any overpayment. Additionally, if a claim has gone through 
the appeals process on a completely separate issue, CMS may reopen the 
claim, but only to address an issue not previously decided on appeal. 
For example, if a claim is denied as not medically necessary and that 
denial on medical necessity is the issue being brought before the 
adjudicator on appeal, yet an issue of fraud is discovered on the same 
claim, the claim may be reopened to address the issue of fraud not 
previously considered on appeal. The reopening action on the fraud 
issue would occur only after the claim had proceeded through the 
appeals process on the medical necessity issue. Any unfavorable 
decision that was issued based on the subsequent reopening would 
generate appeal rights and any party to that determination would be 
able to contest any new denial through the appeals process. A 
previously appealed claim could also be reopened by the adjudicator to 
correct a later discovered clerical error.
    Comment: One commenter asks if it is CMS' intent to revise Sec.  
405.355(b), which allows a reopening for the collection of an 
overpayment within 3 years from the date of the initial determination.
    Response: Section 405.355(b) pertains to the waiver of an 
adjustment or recovery from a provider or other individual who is 
deemed to be without fault. The provision does not address a 
contractor's ability to reopen an initial determination or 
redetermination, and is not affected by this interim final rule.

d. Authority To Reopen

    Comment: One commenter recommends that CMS require in the 
regulation text that a determination or decision can be reopened only 
by the entity that rendered the decision. For example, only a QIC can 
reopen a QIC's decision.
    Response: As originally proposed, Sec. Sec.  405.980(a)(1)(i) 
through 405.980(a)(1)(iv) specify that only the entity that issues a 
determination, reconsideration or other decision can initiate a 
reopening of that decision. Although this remains true in most 
instances, we note that this interim final rule contains an exception 
to this general principle at Sec.  405.980(a)(1)(iv), whereby the MAC 
can reopen an ALJ's hearing decision. It should be noted that this is a 
continuation of CMS' current practice and does not constitute a change 
in policy. We also note that Sec.  405.986(b) specifies that a change 
in

[[Page 11453]]

legal interpretation, regulations, or program instructions (or a 
declaration of what the law means or meant), whether by the judiciary 
or otherwise, does not form a basis for reopening.

e. Time Frames and Notice Requirements

    Comment: One commenter recommends that CMS establish a time frame 
for processing and completing reopenings.
    Response: We agree that, wherever possible, a party must have a 
reasonable expectation as to the administrative finality of a decision 
on a claim or claims in question. However, since an adjudicator can 
reopen at any time for fraud or similar fault, we do not believe that 
CMS can establish meaningful time frames for processing and completing 
reopenings. Instead, CMS will monitor the processing of reopenings by 
contractors during performance reviews and desk audits.
    Comment: One commenter states that an adjudicator must be required 
to send both a reopening notice and a decision notice resulting from 
the reopening. The commenter contends that a reopening notice helps the 
party determine the adjudicator's time frame for issuing a decision. 
Also, the decision notice must provide the basis and evidence 
supporting the reopening.
    Response: We are not requiring adjudicators to provide a notice to 
a party when they reopen claims and appeals, since any action that 
might result from the reopening will result in a party receiving a 
notice of the revision. Section 405.982 provides that adjudicators must 
issue notices of revised determinations or decisions which, in the 
event of an adverse revised determination or decision, must state the 
rationale and basis for the revision, and information about appeal 
rights. In the case of an adverse determination, a party would need 
this information should the party decide to appeal. In addition, if a 
contractor's reopening of an initial determination results in an 
overpayment determination, then the contractor must issue a demand 
letter to the affected party. If the reopening results in a favorable 
determination, then a revised MSN and RA will be generated.

f. Establishing an Evidentiary Burden of Proof To Reopen

    Comment: One commenter recommends that CMS add to the regulation 
text that a contractor has an evidentiary burden of proof, particularly 
with respect to those reopening actions that occur after the 1-year 
limit on reopenings for any reason.
    Response: Our policy that, within 1 year, for any reason, 
contractors may reopen claims and parties may request reopenings, is 
fair and equitable; moreover, no evidentiary standard is needed in the 
those situations. For reopenings after that time, the rules we proposed 
are sufficient; that is, contractors must have good cause for reopening 
claims within 4 years and must have obtained reliable evidence for 
reopening at any time for fraud or similar fault. No matter what the 
outcome of a reopened and revised determination, parties retain the 
right to challenge the new determination at the appropriate appeal 
level.

g. Inability To Appeal a Decision on Whether To Reopen

    Comment: One commenter expresses concern that a party cannot seek 
review of a determination not to grant a request for reopening. The 
commenter argues that not allowing an appeal violates a party's due 
process rights.
    Response: It is our longstanding rule that failure to grant a 
request for reopening is not reviewable. The Supreme Court has upheld 
this concept. See Your Home Visiting Nurses Services, Inc. v. Shalala, 
525 U.S. 449 (1999); Califano v. Sanders, 430 U.S. 99 (1977). This does 
not violate the party's due process rights, because the administrative 
appeals process for Medicare claims already affords ample due process 
to the party. The reopenings process simply offers, but does not 
guarantee, an additional process if a party misses the time frame for 
filing an appeal or if the party has exhausted his or her appeal 
rights. For purposes of administrative finality and efficiency, CMS 
cannot sanction an endless cycle of reopening requests and appeals.

h. Enforcement of the Good Cause Standard

    Comment: One commenter recommends that CMS create enforcement 
provisions for the good cause standard when contractors reopen claims. 
The commenter says that contractors often ignore the guidelines set out 
in regulations and manuals and cite a request for medical records as 
good cause for a reopening, even though the medical records existed at 
the time the contractor initially reviewed the claim.
    Response: The regulations require that contractors abide by the 
good cause standard for reopening actions after one year from the date 
of the initial or revised determination. CMS assesses a contractor's 
compliance with Federal laws, regulations and manual instructions 
during audits and evaluations of the contractors' performance. Thus, 
the necessary monitoring and enforcement mechanisms are already in 
place.

i. Applying Similar Reopening Standards to Adjudicators and Parties

    Comment: One commenter recommends that CMS apply the same reopening 
standards to adjudicators and parties and that a party be able to 
challenge an adjudicator's reopening action.
    Response: As discussed above, an adjudicator's decision on whether 
to reopen a claim or an appeal is discretionary and not subject to an 
appeal. However, the reopening standards that apply to parties and 
adjudicators are very similar in this interim final rule. The only 
provisions that necessitate a difference are those provisions, which 
allow adjudicators to reopen at any time if reliable evidence exists 
that a determination or decision was procured by fraud or similar 
fault, and Sec.  405.980(b)(5), which allows contractors to reopen at 
any time to effectuate a decision issued under the coverage appeals 
process. Clearly, a party that obtains payment through fraudulent or 
other similar means has no use for this provision. Again, if a 
contractor issues a revised determination or decision that is 
unfavorable, the affected party has the right to appeal.
11. Expedited Access to Judicial Review (EAJR) (Sec.  405.990)
[If you choose to comment on issues in this section, please include the 
caption ``Expedited Access to Judicial Review'' at the beginning of 
your comments.]

    In proposed Sec.  405.990, we incorporate the current regulations 
governing the expedited appeals process (EAP) at Sec.  405.718 and 
Sec.  405.853 with only two changes. First, since under BIPA the 
appeals process is the same for both Part A and B claims, we 
consolidated the Part A and B regulations governing expedited review of 
cases involving those claims. Second, under BIPA, ALJs are bound by all 
NCDs rather than only by NCDs based on section 1862(a)(1)(A) of the 
Act. Therefore, the regulations no longer limit expedited review to 
cases involving NCDs based on section 1862(a)(1)(A) of the Act.
    In addition, we establish under proposed Sec.  405.992 the 
standards that apply to ALJs and the MAC for policies that are not 
subject to the expedited appeals process. These standards have been 
moved to Sec.  405.1060 in this interim final rule and are discussed in 
detail in the ALJ section. (See section II.G.5 of this preamble).

[[Page 11454]]

    Comment: One commenter questions the requirement in Sec.  405.990 
for a $1,000 amount in controversy and the requirement for unanimous, 
written concurrence from all parties in order to request use of the 
EAP. The same commenter also requests that we make a number of 
clarifications in Sec.  405.990, including stating explicitly that use 
of the EAP is not automatic, the decision by the review entity is not 
reviewable, and certification from the review entity does not trigger 
an action in Federal district court; the appellant must file a suit.
    Response: As noted above, proposed Sec.  405.990 includes no 
significant changes to the existing EAP process. The policies cited by 
the commenter (decisions to certify a case are not reviewable, a 
certification does not automatically trigger a Federal suit and written 
concurrence from all parties) are longstanding elements of the EAP 
process. Since publication of the proposed rule, however, the MMA has 
revised the applicable statutory requirements. In this interim final 
rule, we intend to maintain the proposed policies, as well as the 
changes necessitated by section 932 of the MMA. Therefore, we are 
revising Sec.  405.990 so that it is consistent with the MMA 
requirements.
    Section 932 of the MMA states that the Secretary must establish a 
process under which a provider or supplier or a beneficiary may obtain 
access to judicial review when a review entity determines that the 
Departmental Appeals Board (DAB) does not have the authority to decide 
the question or law or regulation relevant to the matters in 
controversy and that there is no material issue of fact in dispute. As 
a result, we are modifying proposed Sec.  405.990(f)(1) and Sec.  
405.990(f)(2) to require that requests for expedited access to judicial 
review (EAJR) be evaluated by a review entity. (Note that in this 
interim final rule we have replaced references to the EAP with EAJR in 
order to avoid confusion with the expedited appeals process under Sec.  
405.1200 through Sec.  405.1206, which permits beneficiaries to request 
an expedited appeal of provider service terminations.) Also, in Sec.  
405.990(a), we define a review entity as a decision-making body 
composed of up to three reviewers who are ALJs or members of the DAB, 
as determined by the Secretary. The MMA also establishes a 60-day 
decision-making time frame for EAJR requests. Therefore, we have 
amended Sec.  405.990(f)(2) to implement this change.
    Section 932 of the MMA provides that a review entity's 
determination ``shall be considered a final decision and not subject to 
review by the Secretary.'' This language plainly has two effects--(1) a 
review entity's determination that is favorable to the party requesting 
EAJR is the final agency decision for purposes of judicial review, and 
(2) an ALJ or the MAC may not alter an unfavorable determination in the 
regular appeals process. Therefore, in Sec.  405.990(f)(3), we are 
prohibiting an ALJ or the MAC from reviewing a decision by the review 
entity that either certifies that the requirements for EAJR are met, or 
denies the request. In Sec.  405.990(h)(3), we cross reference to Sec.  
405.1136 since requests for EAJR certified by the review entity must 
also meet the requirements under that section for filing a civil action 
in a Federal district court.
    Finally, as required under the MMA, if a provider, supplier, or 
beneficiary is granted judicial review, Sec.  405.990(j) requires the 
application of interest to the AIC.
12. ALJ Hearings (Sec.  405.1000 Through Sec.  405.1064
[If you choose to comment on issues in this section, please include the 
caption ``ALJ Hearings'' at the beginning of your comments.]

a. Introduction

    In the proposed rule, we included new procedures to both implement 
section 1869 of the Act, as amended by BIPA, and codify in the Medicare 
regulations at 42 CFR, part 405, subpart I, all of the requirements 
that apply to ALJ and MAC proceedings. Most of the previous regulations 
used by the ALJs and the MAC were set forth in 20 CFR, part 404 of 
SSA's regulations, which focuses on SSA's disability appeals 
procedures. We note that we are generally carrying over relevant 
provisions of these rules applicable to Medicare proceedings, but will 
discuss in the preamble any new regulations that make substantive 
changes to the ALJ and MAC processes.
    In addition to receiving comments on the proposed new provisions, 
we received some comments on the carry over of regulations that are 
already in effect for Medicare ALJ hearings and MAC review. Since most 
of these comments were associated with general concerns about changes 
to the ALJ process, we note them, where applicable, in the sections 
below.
    Finally, as noted above, this interim final rule includes some 
straightforward changes to the ALJ and MAC process required by the MMA.

b. Escalation

(1) General Application
    One of the most significant changes required under section 521 of 
BIPA is the introduction of an appellant's right to escalate a case to 
an ALJ if a QIC fails to make a timely reconsideration, or to the MAC 
if an ALJ hearing does not produce a timely decision on an appeal of a 
QIC reconsideration. As we noted in the proposed rule, the statute does 
not allow an appellant to proceed beyond the initial contractor level 
until he or she has received a redetermination from that contractor, 
even if the contractor does not issue the initial determination or 
redetermination within the statutory time frames. This is consistent 
with the pre-BIPA regulations, which require an appellant to complete 
all steps of the appeals process in sequence, except when an appellant 
invokes the expedited appeals process described in Sec. Sec.  405.718 
[Part A appeals] and 405.853 [Part B appeals].
    BIPA, however, adds the option to advance a case to the next level 
of appeal when, in certain circumstances, an adjudicator does not act 
on the appeal within the statutory deadline. In the proposed rule, we 
use the term ``escalation'' to describe this movement of a case to the 
next level of appeal.
    Section 1869(c)(3)(C)(i) of the Act, as amended by section 
940(a)(2) of the MMA, requires the QICs to decide appeals within 60 
days. Sections 1869(c) and 1869(d) of the Act, as amended by the MMA, 
now provide that an appellant may escalate an appeal as follows: (1) By 
requesting an ALJ hearing if the QIC does not decide the appeal within 
60 days; (2) by requesting a review by the MAC if the ALJ does not 
decide the appeal of a QIC reconsideration within 90 days; and (3) by 
requesting judicial review if the MAC does not complete its review of 
an ALJ decision within 90 days. (At the ALJ and MAC levels, the 
statutory time period for completing the action begins on the date the 
appeal is timely filed.) When an appellant does not request escalation 
to the next level, the case remains with the current adjudicator until 
a final action is issued. We have revised proposed Sec. Sec.  405.990 
and 405.1136(c) to conform to these requirements.
    We emphasized in the proposed rule that appellants must consider 
carefully the type of review that is best to resolve their case before 
deciding to escalate an appeal, because the type of proceedings and 
adjudicator varies with each step. For example, appellants who escalate 
a case from the ALJ level to the MAC will ordinarily not have the 
opportunity to

[[Page 11455]]

present their case during an oral hearing, unless they received an oral 
hearing at the ALJ level before escalating their case to the MAC. We 
also indicated that the statutory decision making deadlines apply only 
where there is a decision issued at the prior level. We did not propose 
any alternate deadlines for escalated cases, but encouraged comments on 
whether the final rule must include time frames and, if so, what time 
frames are be appropriate.
    Comment: Most commenters on this point argue that allowing 
unlimited time for escalated cases is contrary to statutory intent; 
they recommended that cases that are escalated to the ALJ and MAC 
levels be subject to a time limit. Commenters varied, however, on how 
to establish appropriate time frames. Recommendations included: (1) 
Requiring escalated cases to be decided within the ``normal'' 90 days; 
(2) adding an additional 30 days to the ``normal'' 90-day time frame; 
and (3) adding the adjudication time frame from the previous level to 
the current level. Under the third recommendation, which preceded the 
enactment of the MMA, a case escalated from the QIC level to the ALJ 
would have a 120-day time frame (the pre-MMA 30-day QIC time frame plus 
the 90-day ALJ time frame) and a case escalated from the ALJ level to 
the MAC would have a 180-day time frame (90-day ALJ time frame plus the 
90-day MAC time frame.) Adjusting this suggestion to reflect the new 
MMA adjudication period for the QICs, the time frame for the ALJ level 
would be 150 days.
    Response: We hold that our original proposal is consistent with the 
language of the statute. Moreover, as we noted in the proposed rule, 
when ALJs and the MAC receive cases that have not completed the process 
below, they will require more time to determine what issues are 
properly before them and how to resolve those issues. As indicated in 
the proposed rule, however, we see value in establishing time limits 
for escalated cases to ensure that appellants do not wait indefinitely 
for a decision. After considering the commenters' suggestions, we have 
decided to establish a 180-day decision deadline for cases escalated to 
the ALJ and MAC levels. (For purposes of this discussion, we call these 
requirements the ``escalated time frames.'') These new time frames are, 
in essence, a modification of the third recommendation described above. 
Given the nature of ALJ proceedings, which includes scheduling and 
conducting a hearing, we do not believe that adding the QIC's 
adjudication time is sufficient.
    As a corollary to the above decision, we are revising the 
regulations to provide that, in certain circumstances, an appellant has 
a right to escalate a case to the next level when the ALJ or MAC does 
not decide that case within its escalated time frame. Thus, Sec.  
405.1016(c) now specifies that for a case escalated to an ALJ, the ALJ 
must issue a decision no later than 180 days after the date that the 
request for escalation is received by the ALJ hearing office. We also 
revised sections 405.1100 and 405.1106(b) to establish a parallel 
deadline for a case that is escalated from the ALJ to the MAC.
(2) Specific Provisions Affected by Escalation
    In the proposed rule, we note that the statute does not provide a 
specific mechanism for appellants to request escalation, nor does it 
indicate the effect of an escalation request on case development or 
other adjudication efforts the QIC, ALJ or MAC may be conducting when 
the escalation request is received. We are particularly concerned about 
the adverse impact on appellants and adjudicators if cases that are 
close to completion are deemed automatically escalated at the end of 
the statutory adjudication period. To alleviate this problem, we 
proposed that, when a QIC, ALJ, or the MAC receives a request for 
escalation after the adjudication period has expired, it will defer 
sending the case to the next level for 5 days after the request is 
received. If possible, the QIC or ALJ will issue its action within the 
5-day period. If fully favorable to all parties, the determination or 
decision will be sent to the appropriate CMS contractor for 
effectuation. If the action is not fully favorable, any party to the 
appeal can file a request for an ALJ hearing or MAC review, as 
applicable, within the 60-day appeals period. If the QIC or ALJ is not 
able to decide the case within the 5-day period, the appellant will be 
notified and the case will be forwarded to the next level of appeal. We 
provide in proposed Sec.  405.1104(b) the procedures an ALJ must follow 
when the ALJ is not able to issue a final action or remand within 5 
days of receipt of the request for escalation.
    We also proposed similar rules for cases in which an appellant 
requests escalation from the MAC level to Federal district court when 
the amount in controversy is $1,000 or more. We proposed that the MAC 
can, if feasible, issue a final action within 5 days of the request for 
escalation. We also provided in proposed Sec.  405.1132(b), that when 
the MAC is not able to issue a final action within 5 days of receipt of 
the request for escalation, it will send a notice to the appellant 
acknowledging receipt of the request for escalation. A party can then 
file an action in Federal district court within 60 days after it 
receives notice of the MAC's decision.
    Comment: One commenter expresses concern that the procedures 
outlined in Sec.  405.1132(b) are not parallel to the procedures 
governing escalation from the QIC and ALJ levels, and are too 
burdensome. The commenter suggests that if the MAC does not issue an 
action within 5 days of the receipt of the request for escalation, the 
appellant must be able to proceed directly to court without issuance of 
a MAC ``decision.''
    Response: Our use of the word ``decision'' in proposed Sec.  
405.1132(b) was an error and did not convey clearly the intention of 
the provision. We are revising the regulation to clarify that when the 
MAC issues its ``notice'' acknowledging that the MAC has not been able 
to complete its action within the statutory period, the appellant can 
file a civil action with the district court within 60 days of receipt 
of the MAC's acknowledgment notice. We recognize that the commenter may 
view the notice as an unnecessary step, since an appellant escalating 
to the ALJ or MAC level need only file the request for escalation and 
wait for a response (either an action from the QIC or ALJ or a notice 
that the case has been forwarded to the next level). However, we 
believe that the notice described in Sec.  405.1132(a)(2) of this final 
rule will benefit appellants in several ways. We anticipate that some 
appellants may file a request for escalation before the MAC's 90-day 
period has expired; prompt notification of when the time period will 
expire and an indication, if possible, of when the MAC anticipates 
issuing its decision, will save appellants unnecessary court costs. We 
also note that BIPA has not changed the mechanism whereby appellants 
who are dissatisfied with the final decision of the Secretary may bring 
a civil action in Federal district court. Section 1869(b)(1)(A) of the 
Act provides that judicial review of the Secretary's final decision 
continues to be governed by section 205(g) of the Act. Under that 
provision, appellants seeking judicial review of the Secretary's action 
must file a civil action within 60 days of the Secretary's decision, or 
within any additional time allowed by the Secretary. We believe that 
the notice we intend to provide under Sec.  405.1132(b) is within our 
authority under section 205(g), and will provide a useful benchmark for 
both appellants and the

[[Page 11456]]

courts to determine when a civil action in an escalated case is timely 
filed. We have revised the regulation text of Sec.  405.1132(b) to make 
the effect of the notice clearer.
    Similarly, we have retained, at Sec.  405.1134, the provision 
carried over from SSA's appeals regulations that allows the MAC to 
extend the time to file a civil action for good cause. This regulation 
is also consistent with the language in section 205(g) quoted above, 
and provides protection for beneficiaries and other appellants who may 
need additional time to file a civil action or who wish to protect 
their right to commence a civil action while a request to the MAC to 
reopen its action is pending. In our experience, the above provisions 
are particularly helpful to beneficiaries proceeding pro se and in no 
way diminish their access to the Federal courts.

c. Conduct of ALJ Hearing--General Rules

    In our November 15, 2002 proposed rule, we discussed how ALJ 
hearings in Medicare cases are currently conducted and how we proposed 
to conduct those hearings in the future. Section 1869(b)(1)(A) of the 
Act, as amended by BIPA, provides that any individual who is 
dissatisfied with an initial determination can request a 
reconsideration, as well as a hearing, provided that the request for 
the hearing is timely filed and that the amount in controversy 
requirements are met, as provided by section 205(b) of the Act. 
Traditionally, the Secretary has granted individuals entitled to a 
205(b) hearing an in-person hearing. Regulations at 20 CFR Sec.  
404.948, which are incorporated into the current regulations governing 
Part A and Part B appeals, allow an appellant to waive an in-person 
hearing and request a decision based on the written record. We stated 
in the proposed rule that we would continue that policy and we did not 
receive any comments on this proposal.
    We also indicated in the proposed rule that we intend to offer 
appellants an opportunity for hearings by telephone or 
videoteleconferencing (VTC), as available. We note at the time the 
proposed rule was published, VTC was available only at selected hearing 
sites throughout the country. We also explained the advantages of 
offering telephone and VTC hearings as alternatives to in-person 
hearings. These advantages include: (1) Providing a hearing in a 
convenient setting for beneficiaries who have trouble traveling even 
short distances; and (2) providing a more convenient site for providers 
and suppliers who may not wish to travel to a more distant hearing 
site. Finally, we stated that we were proposing the above alternatives 
to an in-person hearing because we believed they would enable ALJs to 
complete more cases within the 90-day adjudication period and give some 
appellants, who currently waive their right to a hearing and request an 
on-the-record decision because of traveling or scheduling difficulties, 
an opportunity to present their case orally.
    On January 5, 2001, SSA issued a proposed rule in which it proposed 
to authorize use of VTC in conducting hearings before ALJs. See 66 FR 
1059. SSA's final rule with comment (68 FR 5211), published February 3, 
2003, addressed the public comments on the proposed rule and invited 
comment on the one significant change in the final rule, which provides 
that appellants may object to VTC only with respect to their own 
appearance. Because SSA's ALJs have been conducting Medicare hearings, 
the reasons articulated in the final rule with comment for adopting VTC 
as a alternative to an in-person hearing reflect SSA's experience with 
conducting Medicare hearings, as well as retirement and disability 
hearings. In responding to public comments, the final rule with comment 
identifies the factors that supported including VTC as a means of 
providing a 205(b) hearing. In summary, SSA found that:
     Use of VTC, where available, has decreased the necessity 
of sending ALJs to remote sites to hold in-person hearings. This, in 
turn, has decreased processing times, since to make travel to remote 
hearing sites as effective as possible, ALJ hearing offices ordinarily 
wait until they have a sufficient number of hearing requests to 
schedule a full day of hearings.
     Use of VTC decreases the difficulty of obtaining expert 
witnesses for a hearing, since it can be difficult to find medical 
experts who are available to travel to remote sites.
     The time ALJs have spent traveling to remote sites can be 
used to perform their adjudicatory responsibilities.
     Surveys of appellants, including beneficiaries, rated VTC 
procedures positively. A large percentage has rated the procedures as 
``convenient'' or ``very convenient.'' Test data showed that processing 
time for these hearings was substantially less than for hearings 
conducted at remote sites, and that the ratio of hearings held to 
hearings scheduled was significantly higher for hearings using VTC 
procedures than for hearings scheduled in person.
    Because SSA's regulations at 20 CFR, part 404 subpart J governing 
procedures for ALJ hearings are incorporated by reference in the former 
regulations governing Part A and Part B appeals, SSA's VTC rules, 
codified at 20 CFR Sec. Sec.  404.929, 404.936, 404.938 and 404.950, 
have been effective for Part A and Part B ALJ hearings since March 5, 
2003. Like other relevant SSA rules, we have incorporated certain 
policies regarding the use of VTC into this interim final rule. (On 
December 11, 2003, SSA issued a final rule on VTC, which responded to 
comments on the February 3, 2003, rulemaking, but did not change any of 
the regulation text. See 68 FR 69003). Thus, where available, ALJs have 
been conducting hearings via VTC in Medicare cases for over a year. Our 
knowledge of this new process, as well as our experience with telephone 
and in-person hearings and on-the-record decisions, forms the basis of 
our responses to the comments described below.
    Comment: One commenter states that the proposed rule does not 
indicate whether a party may object to the type of hearing (in-person, 
by VTC, or by telephone) scheduled by the ALJ. The commenter also notes 
that a proposal for Medicare ALJ hearings conducted by telephone was 
rejected after criticism from claimant organizations, legal groups and 
other organizations was received. One of the main concerns at that time 
was a fact finder's potential difficulty in assessing witness 
credibility and demeanor in a telephone hearing.
    Response: This interim final rule makes clear that an appellant can 
object to the type of hearing scheduled by the ALJ, including 
proceedings by telephone or VTC. As noted in our discussion in the 
proposed rule, some appellants waive any type of oral hearing on the 
grounds that they believe that written submissions to the ALJ will 
adequately present their case. In the past, others have waived the 
right to an oral hearing, stating that they are unable to leave their 
homes or cannot travel as far as the ALJ hearing office or other 
designated site. In our experience, telephone and VTC hearings offer an 
opportunity for individuals to present their case orally without the 
burden of extensive travel and, thus, provide an alternative to 
presenting their case solely in writing. Given these advantages and 
benefits, we are convinced of the advantages of incorporating VTC 
procedures into the Medicare hearings process, particularly in view of 
the BIPA time frames. Therefore, we have revised Sec.  405.1020 to 
require ALJ hearings to be conducted by VTC if the VTC technology is 
available, but allow the appellant to request an in-person hearing, 
which will be granted upon a finding of good cause,

[[Page 11457]]

with the understanding that the request constitutes a waiver of the 90-
day time frame for holding a hearing and rendering an opinion.
    ALJs may determine that an in-person hearing should be conducted if 
VTC technology is not available or special or extraordinary 
circumstances exist. For example, an ALJ could find special and 
extraordinary circumstances for holding an in-person hearing when the 
case presents complex, challenging or novel presentation issues that 
necessitate an in-person hearing. Similarly, an appellant's proximity 
to and ability to go to the local hearing office for the hearing may 
constitute special and extraordinary circumstances that warrant the 
scheduling of an in-person hearing.
    Additionally, Sec.  405.1020(e)(4) of this interim final rule 
specifies that a party who objects to either a VTC or telephone hearing 
has a right to request an in-person hearing, which will be granted upon 
a finding of good cause. An ALJ could find good cause to grant a 
request for an in-person hearing when a party demonstrates that the 
case presents complex, challenging or novel presentation issues that 
necessitate an in-person hearing. Similarly, an ALJ may find good cause 
to schedule a hearing based on a party's proximity to and ability to go 
to the local hearing office. Consistent with SSA's current policy, 
Sec.  405.1020(i)(5) provides that a party may object to the use of a 
VTC or telephone hearing only with respect to his or her own testimony, 
but not with respect to the entire hearing.
    We anticipate that providers and suppliers will be particularly 
interested in VTC hearings, because they reduce the amount of 
nonproductive travel time previously associated with in-person 
hearings.
    We believe that VTC and telephone hearings are convenient not only 
for providers and suppliers, but also for beneficiaries and their 
representatives. In particular, we note that many beneficiaries are 
represented by an adult child whose ability to take time off from work 
to attend an in-person hearing is often limited. Use of telephone 
hearings and VTC enables these individuals to pursue their parents' 
appeals without undue disruption of their daily routine. Moreover, 
because the interim final rule makes clear that an in-person hearing 
may be requested by all appellants, appellants who believe that their 
appeal can be presented effectively only in person, will have the right 
to request an in-person hearing, which will be granted upon a finding 
of good cause. In light of the new policy on the use of VTC and 
telephones for ALJ hearings, Sec.  405.1020, Sec.  405.1022, and Sec.  
405.1036 require ALJs to conduct VTC hearings whenever the technology 
is available and allow ALJs to offer to conduct telephone hearings if 
the hearing request or administrative record suggests that a telephone 
hearing may be more convenient for one or more of the parties.

d. Actions That Are Reviewable by an ALJ

    Current regulations governing the Part A and Part B appeals process 
do not provide ALJs jurisdiction to overturn dismissals issued by a 
contractor or a carrier hearing officer. In the proposed rule, we 
proposed giving ALJs the authority to decide or review all final 
actions issued by a QIC, including dismissals for untimely filing, 
failure to exhaust administrative remedies, or res judicata. The 
proposed rule also specifies that if an ALJ decides that the QIC's 
dismissal is improper, the ALJ will remand the case to the QIC for a 
substantive decision.
    Comment: One commenter questions the propriety of allowing an ALJ 
to review a contractor's dismissal order and whether that review 
constitutes a reopening of the contractor's action.
    Response: Under the pre-BIPA appeals process, ALJs have sometimes 
identified contractor dismissals that were inappropriate. Because the 
regulations did not provide appellants a direct right of appeal of 
dismissals, referring those cases to CMS or the contractor was 
cumbersome and delayed the resolution of the appellant's appeal. We 
believe that providing a direct right of appeal will provide both a 
simpler and more cost-effective method to challenge a dismissal the 
party believes is inappropriate. Because we are providing a direct 
appeal right, the ALJ's remand to the contractor is not a reopening of 
the contractor's dismissal order. To clarify the effect of the remand 
order, we have revised Sec.  405.1004(b) to provide that when the ALJ 
determines that the QIC's dismissal was in error, the ALJ will vacate 
the QIC's dismissal and remand the case to the QIC for a 
reconsideration. Consistent with the discussion above regarding appeals 
to QICs of contractor dismissals, appeals of dismissals will be 
permitted only at the next adjudicative level, and we have added Sec.  
405.1004(c) to clarify that an ALJ's decision regarding a QIC's 
dismissal of a reconsideration request is final and there is no 
subsequent appeal right.

e. Authorities That Are Binding on an ALJ

    In the proposed rule, we explain that the Medicare statute, CMS 
regulations, and CMS Rulings bind ALJs. Prior to BIPA, ALJs and the MAC 
were also bound by NCDs, based on section 1862(a)(1) of the Act, but 
not NCDs, based on other statutory provisions. Under BIPA, all NCDs, 
whether based on section 1862(a)(1) of the Act or on other grounds, are 
binding on ALJs and the MAC. This change is reflected in Sec. Sec.  
405.732 and 405.860, as amended at 68 FR 63692, 63715, 63716 (November 
7, 2003), and is also reflected in Sec.  405.1060 of this interim final 
rule.
    We also note a change in this interim final rule to Sec.  401.108, 
which pertains to the binding nature of CMS Rulings on CMS components, 
and SSA to the extent that it adjudicates matters under the 
jurisdiction of CMS. In light of the transfer of responsibility for the 
ALJ hearing function from SSA to HHS, we are amending Sec.  401.108(c) 
and creating a new Sec.  405.1063 to specify that CMS Rulings bind HHS 
components that adjudicate matters under CMS' jurisdiction. We 
recognize that this is an expansion of the current policy, but believe 
this new requirement will help ensure consistency among appeals 
decisions.
    In the proposed rule, we also address the degree to which ALJs and 
the MAC must defer to non-binding CMS and contractor policies such as 
LCDs, LMRPs, manual instructions and program memoranda. As reflected in 
proposed Sec.  405.992, ALJs and the MAC are expected to give deference 
to these policies. The proposed regulations also provide, however, that 
a party can request that an ALJ or MAC disregard a policy, but the 
request must provide a rationale for why the policy should not be 
followed in the particular case.
    Comment: Several commenters disagreed with the proposed regulation, 
because they believed that it placed an undue burden on appellants, 
particularly unrepresented beneficiaries, to identify policies 
applicable to their case and to explain why the policy should not be 
followed.
    Response: New Sec.  405.1060 through Sec.  405.1062 alter the 
regulation text proposed under Sec.  405.992 to clarify the 
applicability of NCDs, LCDs, LMRPS, and CMS program guidance to ALJs 
and the MAC. Section 405.1062 gives ALJs and the MAC the authority to 
consider whether guidance documents (for example, LCDs, LMRPs, and 
manuals) should apply to a specific claim for benefits on their own 
motion, rather than doing so only at the appellant's

[[Page 11458]]

request. This eliminates barriers for those beneficiaries who are not 
able to raise these issues on their own. We note, however, that 
particularly with the advent of the Internet, an increasing number of 
beneficiary appeals contain challenges to medical policies citing 
medical research and other grounds. These appeals will be easier to 
pursue because notices of redetermination under Sec.  405.956 will now 
include more detailed explanations concerning the basis for a claim 
denial, including the application of a LMRP or LCD.
    Comment: Requiring ALJs to defer to CMS and contractor policy 
alters the ALJ's role as an independent fact finder and, thus, changes 
the character of a 205(b) hearing.
    Response: We disagree with the commenter's characterization of the 
proposed hearing process. Under this regulation, ALJs will continue 
their traditional role as independent evaluators of the facts presented 
in an individual case. Requiring an ALJ to consider CMS policy and give 
substantial deference to it, if applicable to a particular case, does 
not alter the ALJ's role as fact finder. Indeed, ALJs have always been 
bound by Medicare policies included in CMS regulations, CMS rulings, 
and NCDs based on section 1862(a)(1) of the Act.
    The Federal courts have considered and applied deference standards 
in considering the validity of various Medicare policies, and have also 
recognized that ALJs and the MAC properly consider issues relating to 
deference as well. For example, in Abiona v. Thompson, 237 F. Supp. 2d 
258 (E.D.N.Y. 2002), the court upheld a decision in which the MAC 
denied anesthesiologists' requests for payment of post-surgical 
administration of patient-controlled analgesia (PCA). In its decision, 
the MAC relied, inter alia, on the preamble to the Medicare physician 
fee schedule and a CMS program memorandum, both of which provided that 
payment for physician services related to PCA was included in the 
global fee paid to the surgeon and, therefore, was not routinely 
payable to anesthesiologists.
    In response to the above comments and to provide a clearer standard 
of review, we have revised the regulation to provide that: (1) ALJs and 
the MAC must give substantial deference to LCDs, LMRPs, CMS manuals or 
other program guidance; (2) the applicability of a CMS manual 
instruction or other non-binding issuance may be raised by either the 
appellant or the MAC or ALJ on their own motion; and (3) the ALJ or MAC 
may decline to follow a policy in a particular case, but must explain 
the reason why the policy was not followed. These decisions apply only 
for purposes of the appeal in question, and do not have precedential 
effect.
    The ALJ or MAC will review the facts of the particular case to 
determine whether and how the policy in question applies to the 
specific claim for benefits. If an ALJ or MAC decision concludes that a 
policy should not be followed, the decision will explain why the policy 
was not followed in light of the facts of the particular case. We 
believe this will provide a useful framework for deciding cases in 
which a particular, non-binding policy is the focus of the appeal.
    Section 522 of BIPA created a new coverage appeals process that 
enables certain beneficiaries to challenge LCDs and NCDs. Because a 
beneficiary can conceivably bring an appeal under both the section 522 
coverage appeals process and the section 521 claims appeal process, we 
are clarifying in this interim final rule how adjudicators will handle 
simultaneous appeals. These clarifications are consistent with CMS' 
final rule that created the new process to allow LCD and NCD 
challenges. See 68 FR 63692 (November 7, 2003). If a party appeals a 
denial that is based on an LCD or NCD by filing only a claim appeal, 
then adjudicators will apply the coverage policy that was in place on 
the date the item or service was received, regardless of whether some 
other beneficiary has filed a coverage appeal based on the same LCD or 
NCD. This policy is consistent with original Medicare policy that 
requires changes to LCD or NCDs to be applied prospectively to requests 
for payment.
    If an appellant files both a claim and a coverage appeal based on 
the same initial determination, both appeals will go forward. The claim 
appeal adjudication time frames will not be impacted because the 
appeals will be conducted simultaneously. In adjudicating the claim 
appeal, adjudicators will apply the coverage policy that was in place 
on the date the item or service was provided, unless the appellant 
receives a favorable coverage appeal decision. If the appellant 
receives the favorable coverage decision prior to a decision being 
issued for the claim appeal, then pursuant to 42 CFR Sec.  426.488 and 
Sec.  426.560, the claim appeal will be adjudicated without 
consideration of the invalidated LCD or NCD provision(s). If an 
appellant receives a favorable decision in the coverage appeal after 
receiving an unfavorable claim appeal decision, then the appellant is 
entitled to have the claim appeal reopened and revised for good cause, 
subject to the provisions in Sec.  405.980 and Sec.  405.986, without 
consideration of the invalid LCD or NCD provision(s). As a result of 
these clarifications, we have added Sec.  405.1034(c) to permit ALJs to 
remand an appeal to a QIC in this situation.

f. Aggregating Claims To Meet the Amount in Controversy

    Prior to the enactment of section 521 of BIPA, the statute and 
regulations provided different amounts in controversy for Part A and 
Part B appeals. Under Part A, an appellant received a reconsideration 
of the initial determination regardless of the monetary value of the 
claim, but had to meet a $100 threshold to receive a hearing before an 
ALJ. Similarly, an appellant contesting an initial determination issued 
on a Part B claim received a review determination regardless of the 
amount in controversy. However, there was a $100 amount in controversy 
requirement for a Part B carrier hearing and a $500 threshold for an 
ALJ hearing with respect to a Part B claim determination (except for 
home health where the threshold for ALJ appeals was $100).
    The pre-BIPA aggregation provisions found at former section 
1869(b)(2) of the Act directed the Secretary to devise a system for 
allowing appellants to combine claims to meet the amount in controversy 
as follows:

    In determining the amount in controversy, the Secretary, under 
regulations, shall allow two or more claims to be aggregated if the 
claims involve the delivery of similar or related services to the 
same individual or involve common issues of law and fact arising 
from services furnished to two or more individuals.

    The Secretary implemented the above provisions in a final 
regulation published March 16, 1994 (the existing regulations can be 
found in Sec.  405.740 and Sec.  405.817). The regulation established 
two methods of aggregation: one for individual appellants and one for 
multiple appellants. Individual appellants appealing either Part A or 
Part B claims were allowed to aggregate two or more claims within a 
specified period, regardless of issue, to meet the jurisdictional 
minimums for a carrier hearing and ALJ hearing. Multiple appellants, 
however, were allowed to aggregate their claims only under the 
statutory requirements; that is, if the claims involved the delivery of 
similar or related services to the same individual or common issues of 
law and fact arising from services furnished to two or more 
individuals.
    BIPA 521 changed the amount in controversy requirements. Section 
1869(b)(1)(E) of the Act provides that the amount in controversy for an 
ALJ

[[Page 11459]]

hearing will be $100 for appeals of both Part A and Part B claims. In 
addition, the aggregation provisions were revised: Two or more appeals 
are allowed to be aggregated when the appeals either involve the 
delivery of similar or related services to the same individual by one 
or more providers and suppliers, or there are common issues of law and 
fact arising from services furnished to two or more individuals by one 
or more providers or suppliers.
    In the proposed rule, we proposed to limit aggregation of claims 
under BIPA to those that meet the statutory requirements for 
aggregation, that is, those that involve the delivery of similar or 
related services to the same individual, or common issues of law and 
fact arising from services furnished to two or more individuals. 
Individual appellants will no longer be allowed to aggregate all timely 
filed claims, regardless of issue. We explained that this change was 
appropriate because under BIPA, unlike the previous appeals system, 
appellants will have a right to appeal to an independent contractor (a 
QIC) regardless of a claim's monetary value. We also proposed the 
following related policies:
     To continue our pre-BIPA policy of restricting claims that 
may be aggregated to those that are appealed within 60 days after 
receipt of all reconsiderations being appealed, because to do otherwise 
would in essence extend the time to file a request for hearing beyond 
the 60-day limit;
     To provide separate rules for claims that are escalated 
from the QIC to the ALJ level to ensure that only appeals that meet the 
amount in controversy requirements are escalated to the ALJ level; and
     To require appellants to explain in their request for 
aggregation why they believe the claims involve common issues of law 
and fact or the delivery of similar or related services.
    Comment: Two commenters believe that the proposed limits on 
aggregation are too restrictive, because some claims with low dollar 
amounts, but involving important issues, will not reach the ALJ level. 
One commenter added that there are some claims, such as therapy 
evaluations, that usually fall below the $100 limit. Another commenter 
recommended that the 60-day deadline to file a request for ALJ hearing 
be tolled to enable an appellant to aggregate the appeal with another 
claim still pending with the QIC.
    Response: The statute requires ALJs and the MAC to apply the 
applicable amount in controversy standard under Sec.  405.1006 for an 
ALJ hearing. Moreover, as we noted in the preamble to the proposed 
rule, with the creation of the QICs, appellants will have access to a 
review by an independent contractor regardless of a claim's monetary 
value. Our experience suggests that the large majority of Part A and 
Part B appeals decided by the QICs will equal or exceed the threshold 
amount in controversy. We also believe that the QIC review will provide 
sufficient due process for claims below the threshold amount in 
controversy. (In addition, as noted below, the Congress has recently 
provided that the amount in controversy be increased annually beginning 
in 2005.) Moreover, as explained in the proposed rule, extending or 
tolling the time for an appellant to aggregate a claim with another 
would in essence extend the statutory deadline to file a request for 
hearing beyond the 60-day deadline and would also prevent ALJs and the 
MAC from completing appeals within the statutory deadlines.
    Comment: Several commenters asked for specific guidance in 
calculating the amount in controversy for services where reimbursement 
is governed by a specific formula or fee schedule.
    Response: The interim final rule does not alter the pre-BIPA 
regulation's instructions for calculating the amount remaining in 
controversy. Regardless of the type of service or payment methodology, 
the amount remaining in controversy for an ALJ hearing is computed as 
the actual amount charged the individual for the items and services in 
question, less any amount for which payment has been made by the 
initial contractor or ordered by the QIC, and less any deductible and 
applicable coinsurance amounts. (Section 405.1006(d)(1)).
    Finally, section 940(b)(1) of the MMA provides that, for requests 
for an ALJ hearing or judicial review made after 2004, the amount in 
controversy thresholds will be increased by the percentage increase in 
the medical care component of the consumer price index for all urban 
consumers (U.S. city average) for July 2003 to the July preceding the 
year involved. Amounts determined under this formula that are not a 
multiple of $10 will be rounded to the nearest multiple of $10. We have 
proposed to revise Sec.  405.1002, Sec.  405.1006, and Sec.  
405.1136(a) to reflect this statutory change. When this formula results 
in revisions to the amount in controversy, CMS will alert the public 
through a Federal Register notice, or other appropriate vehicle.

g. The ALJ Hearing

(1) When CMS or Its Contractors May Participate in an ALJ Hearing
    As we explained in the proposed rule, previous regulations have not 
addressed whether CMS or its contractors can participate in ALJ 
hearings. Occasions have arisen, however, in which an ALJ has 
determined that input from CMS or a contractor will help resolve an 
issue in a case. In some instances, ALJs have requested position 
papers, testimony, or other evidence from CMS or a contractor, but 
these proceedings have been cumbersome, because the regulations did not 
provide specific procedures for input. After reviewing the outcome of 
other cases, CMS, as well as the Department's Office of Inspector 
General (in its report issued in September 1999 (OEI-04-97-00160)), 
concluded that the cases might have been resolved more appropriately if 
CMS or the contractor had been party to the appeal.
    In response to the above concerns, we included several provisions 
in the proposed rule that define the extent to which CMS and its 
contractors may participate in the hearing process. We were also 
mindful that section 1869(c)(3)(J) of the Act specifically provides 
that the new independent contractors, the QICs, will participate in 
hearings to the extent required by the Secretary. Consistent with this 
provision, we proposed to revise our regulations to allow a 
representative of CMS, or a CMS contractor, to participate in an ALJ 
hearing at the request of an ALJ, the QIC or CMS. Participation may 
include filing position papers (within the time frame specified by the 
ALJ) or providing testimony to clarify factual or policy issues in a 
case, but will not include those aspects of full party status (for 
example, the right to call witnesses or to cross-examine the witnesses 
of the appellant or another party to the hearing). Because the role of 
a participant will be non-adversarial, we proposed to allow 
participation of the QIC, CMS, or CMS' contractors in cases brought by 
all appellants, including beneficiaries. We also explained in the 
proposed rule that an ALJ will not have the authority to require CMS or 
a contractor to participate in a case, nor may the ALJ draw any 
inferences if CMS or a contractor decides not to participate. 
Consistent with the practice before an ALJ, we amended Sec.  405.1120 
and Sec.  405.1124 by adding language to clarify that the MAC is 
prohibited from drawing any adverse inferences if CMS or a contractor 
decides not to participate in a MAC review.

[[Page 11460]]

    In addition, we proposed allowing CMS or its contractor to enter an 
appeal at the ALJ level as a party, unless an unrepresented beneficiary 
brings the appeal. In this circumstance, CMS or its contractor will 
have all the rights of a party, including the right to call witnesses 
or cross-examine other witnesses, to submit additional evidence within 
the time frame specified by the ALJ, and to seek MAC review of a 
decision adverse to CMS. Similar to the participation rules, an ALJ 
will not have the authority to require CMS or a contractor to enter a 
case as a party or to draw any inferences if it does not participate in 
the case.
    One reason for these proposals is to allow ALJs and the MAC to 
resolve issues of fact and law more quickly and reduce the need for 
remands for additional development. Another aim is to reduce the number 
of cases referred to the MAC for own motion review because factual 
issues have not been addressed during the ALJ proceedings. In that 
regard, we note that these new regulations link CMS' ability to refer 
certain types of cases to the MAC for own motion review to the extent 
to which CMS has been a party or has participated in the appeal below. 
For example, under Sec.  405.1110(b), if CMS or its contractor does not 
participate as a party or otherwise in a case at the ALJ level, any 
subsequent referral to the MAC for own motion review is limited to ALJ 
decisions or dismissals containing errors of law or a broad policy or 
procedural issue that may affect the public interest. This provision 
affords appellants a measure of administrative finality when CMS 
chooses not to participate as a party or otherwise in a case at the ALJ 
level and the resolution of the case hinges on the weight of the 
evidence rather than the controlling law and policy.
    Comment: Although we received some positive comments concerning 
expanding CMS' role in the appeals process, most of the commenters who 
addressed this aspect of the proposed regulations are opposed or 
suggested modifications to the process. Those opposed are concerned 
that allowing CMS or its contractors to be parties or participate will 
change the nature of the hearing from an informal process to an 
adversarial hearing process not contemplated by the Congress. Some of 
these commenters stated that the change will particularly disadvantage 
beneficiaries.
    Response: We disagree to some extent with the commenters' 
characterization of the nature of the ALJ hearing process under the 
pre-BIPA statutory and regulatory scheme. While CMS or its contractors 
are not explicitly recognized as parties in fee-for service appeals 
under the pre-BIPA statute (former section 1869(b)(2) of the Act), 
appeals brought by enrollees of managed care organizations (MCOs) are, 
by statute and regulation, adversarial at the ALJ, MAC, and Federal 
district court levels. Notably, sections 1852(g)(5) and 1876(c)(5)(B) 
of the Act, which reference the right to a ``205(b) hearing,'' provide 
that the MCO, as well as the enrollee, is a party to the hearing. MCOs 
that receive adverse decisions at the ALJ and MAC levels may appeal 
those decisions to the MAC and Federal district court, as applicable.
    Our experience with these managed care hearings and appeals 
suggests that most beneficiaries, including those who are not 
represented, are able to participate fully in the hearing process even 
when the MCO appears at the hearing. This is due, in part, to the 
control exercised by the ALJ, one of whose roles is to ensure that all 
parties receive a full and fair hearing. We expect that ALJs will 
continue to fulfill this role under these new rules for fee-for-service 
appeals. Neither the existing nor the proposed regulations contemplate 
that the ALJ will conduct a trial-like proceeding with formal rules of 
evidence. (Moreover, as noted above, CMS or its contractors may not 
invoke full party status when the appellant is an unrepresented 
beneficiary.)
    In addition, fee-for-service appeals conducted under 42 CFR part 
405, subparts G and H, are currently adversarial when liability under 
sections 1879 or 1842(l)(1)(C) of the Act is an issue. When a provider 
or supplier has concluded that the service it provided to a beneficiary 
is not covered and asserts that it has informed the beneficiary of 
potential non-coverage before providing the service, the interests of 
the provider or supplier and the beneficiary concerning liability are 
adverse and can be contested during the ALJ hearing.
    We also disagree with the commenters' conclusion that the Congress 
did not envision that CMS or its contractors might, in some instances, 
be represented at a hearing and before the MAC. As noted in the 
proposed rule, section 1869(c)(3)(J) of the Act provides that the new 
independent contractors, the QICs, will participate in hearings to the 
extent required by the Secretary. This is a clear indication that the 
Congress recognized the benefit of agency participation in the appeals 
process. Thus, we continue to believe that limited expansion of CMS 
role in the ALJ hearing process is appropriate, necessary, and 
consistent with the statute.
    Comment: As noted above, several commenters favored the provision 
allowing CMS' and its contractors to invoke party status or otherwise 
participate at the hearing level, stating that participation will 
create a full and fair record. These commenters suggested various 
changes to the regulations to clarify who may participate and how the 
various parties to the hearing would be notified.
    Response: Consistent with the above comments, we expect that 
allowing CMS or a contractor party status or participation, combined 
with the new rules concerning the submission of evidence, will create a 
record that is more complete at an earlier stage in the appeals 
process. These commenters noted the benefit to the Medicare program of 
a fully developed record that clearly conveys the program's coverage 
and payment policies. We believe a fully developed record will benefit 
all participants to the hearing. For example, after the statute was 
amended in 1986 to provide for ALJ hearings for Part B claims, some 
beneficiaries appealed the amount of payment awarded to their 
physicians under the reasonable cost system because they did not 
understand how the amounts had been calculated. In those circumstances, 
the hearing and resulting decision essentially served an informational 
purpose. Similarly, CMS participation at a hearing may assist 
beneficiaries, as well as adjudicators, in understanding concepts (for 
example, the distinction between hospital inpatient and observation 
admissions) that may affect coverage for certain benefits. We also hope 
to alleviate the difficult position that many ALJs currently face in 
adjudicating a case completely and impartially when the appellant 
introduces expert evidence, in the form of testimony, for the first 
time during the ALJ proceedings, and the ALJ does not have a routine 
avenue of obtaining information on the same topic from the agency.
    We also expect that a fully developed record at the ALJ level or 
below will lead to a reduction in MAC remands to the ALJ level, as well 
as CMS referrals to the MAC for own motion review. In order to 
encourage this development, Sec.  405.1110(c)(2) provides that if CMS 
or its contractor does not participate at the ALJ level, the MAC will 
exercise own motion review only if the ALJ's action contains an error 
of law or abuse of discretion material to the outcome of the case, or 
if the case presents a broad policy or procedural issue that may affect 
the general public interest. In other words, cases in which CMS or its

[[Page 11461]]

contractor decide not to participate at the ALJ level as a party or 
otherwise will not be reviewed by the MAC on its own motion if the 
perceived error concerns the ALJ's evaluation of the facts of the case 
rather than an error of law or procedure.
    Proposed section 405.1000 listed the types of contractors that may 
participate as parties in hearings before an ALJ, to include Quality 
Improvement Organizations (QIOs). Therefore, we have amended Sec.  
405.1000 to include this technical change.
    Comment: Several commenters noted that the proposed regulations do 
not address sufficiently how the participation of CMS or its 
contractors will affect ALJ hearing procedures such as the issuance of 
the notice of hearing and the potential for discovery.
    Response: We have modified several of the regulations to clarify 
how a hearing will be handled when CMS or its contractor invokes party 
status or decides to participate in a hearing. For example, in Sec.  
405.1020(c) we require the ALJ to send a copy of the notice of hearing 
to both the QIC and the contractor that issued the initial 
determination. (The QIC or the contractor will be responsible for 
advising CMS of any significant cases in which the agency may decide to 
participate.)
    Comment: Several commenters raised concerns that the proposed 
regulations contain more formal procedures than the previous 
regulations and will, therefore, inhibit the ability of an 
unrepresented beneficiary to pursue an appeal.
    Response: Many of the provisions cited by the commenters are 
identical to those that have been part of the current regulations since 
1980 and, in our experience, have not been difficult for unrepresented 
beneficiaries to follow. For example, a few commenters suggested that 
the requirement that a beneficiary object to the issues in the notice 
of hearing will require the beneficiary to file formal objections or 
pleadings. This is not the intent of the regulation, nor in our 
experience has it inhibited beneficiaries from pursuing their requests 
for hearings. Section 405.1024 of the regulation is a carryover from 20 
CFR Sec.  404.939, which has applied to Social Security retirement, 
disability, and Medicare hearings since August 1980. See 45 FR 52078, 
52081 (August 5, 1980). We decided to maintain this regulation not to 
formalize the proceedings, but rather to give beneficiaries and other 
parties the opportunity to make corrections in those instances, albeit 
rare, in which the ALJ hearing office does not correctly identify the 
issue to be decided or the parties to the hearing. It is in the 
interest of the parties and the adjudicator to correct these mistakes 
at the earliest opportunity so that hearings do not have to be 
postponed or supplemented because necessary parties were not sent the 
notice of hearing or appropriate expert witnesses were not obtained 
because the issues before the ALJ were not properly identified before 
the hearing. Parties may respond to the notice, as they do now, in an 
informal manner. The regulation does not require or anticipate formal 
written submissions.
    Comment: Several commenters indicated that while the proposed rules 
include a provision for issuing subpoenas, they do not require CMS to 
respond to discovery requests or orders.
    Response: BIPA does not explicitly provide for discovery during ALJ 
proceedings, and given the time frames for adjudications under BIPA, we 
do not envision that most hearings will include discovery. However, in 
light of these and other comments relating to discovery, we believe it 
is appropriate to permit discovery when an ALJ hearing is adversarial 
(that is, whenever CMS or its contractor is a party to an ALJ hearing). 
Therefore, we have added Sec.  405.1037 to permit limited discovery 
when CMS participates in an ALJ hearing as a party. Our experience 
indicates that most information that is relevant to issues before an 
ALJ can be obtained by direct request by the ALJ or subpoena. 
Therefore, we anticipate that extensive discovery will not be 
necessary.
    In general, we allow discovery for matters relevant to the specific 
subject matter of the ALJ hearing, but only if they are not privileged 
or otherwise protected from disclosure, and the ALJ determines that the 
discovery request is not unreasonable, unduly burdensome or expensive, 
or otherwise inappropriate. We also limit discovery by permitting a 
party only to (1) request of another party the reasonable production of 
documents for inspection and copying, and (2) take the deposition of 
another party if the proposed deponent agrees to the deposition or the 
ALJ finds that the proposed deposition is necessary and appropriate in 
order to secure the deponent's testimony for an ALJ hearing. An ALJ 
will decide on a case-by-case basis the time frame within which a party 
that seeks discovery must submit its request and when all discovery 
must be concluded.
    Section 405.1037(d) sets forth rules for motions to compel and 
protective orders. A party that files a motion to compel or a 
protective order must also include a self-sworn declaration describing 
the movant's efforts to resolve or narrow the discovery dispute.
    As a general rule, the MAC may review an ALJ discovery or 
disclosure ruling only during the course of its review as specified in 
Sec.  405.1100, Sec.  405.1102, Sec.  405.1104, or Sec.  405.1110. 
However, there may be immediate MAC review where an ALJ's ruling 
authorizes discovery or disclosure of a matter for which an objection 
based on privilege or other protection from disclosure (such as case 
preparation, confidentiality, or undue burden) was made to the ALJ. An 
ALJ must stay all proceedings affected by a ruling for a minimum of 15 
days when the ALJ receives notice that a party intends to seek MAC 
review of the ruling. If the MAC grants a request for review or takes 
own motion review of a ruling, the ALJ ruling will be stayed until the 
MAC issues a written decision that affirms, reverses, or modifies, the 
ALJ's ruling. When CMS requests review of an ALJ ruling, the MAC must 
grant the request, and the ruling is automatically stayed pending the 
MAC's order. With respect to requests from a party other than CMS for 
review of a discovery ruling, if the MAC does not grant review or take 
own motion review within the time allotted for the stay, then the stay 
will be lifted and the ruling will stand.
    If a party requests discovery against another party to the ALJ 
hearing, the ALJ adjudication time frame specified in Sec.  405.1016 
will be tolled. Tolling the ALJ's decision-making time frame pending 
resolution of the discovery dispute will ensure that ALJs have an 
appropriate opportunity to consider the merits of an appeal, while also 
maintaining an appellant's ability to escalate to the MAC if the ALJ is 
unable to issue a decision within the statutory time frame.
    In developing the discovery procedures, we considered their 
potential effects on appellants and other parties to an appeal. We 
believe that reasonable discovery can enhance the fairness of 
proceedings and the accuracy of decisions. We also believe that 
discovery should be limited to hearings where CMS has joined as a party 
because it has not been previously available for ALJ hearings and these 
hearings will be adversarial because of CMS party status. Additionally, 
ALJs will not be able to schedule and hold hearings in an efficient 
manner if broad discovery is permitted. As previously mentioned, we 
expect the number of appeals in which CMS elects to participate as a 
party to be quite low. When CMS does participate as a party, we expect 
the need for discovery to be

[[Page 11462]]

minimal. Also, because we anticipate that the majority of appeals in 
which CMS elects to participate as a party will involve overpayments, 
CMS will not arbitrarily invoke party status, subject itself to 
possible discovery requests, and risk additional interest liability in 
an attempt to delay the proceedings. Therefore, we believe that it is 
unlikely that these procedures regarding discovery will negatively 
impact the appellant and other parties to an appeal.
    When all other discovery efforts have failed, parties may also 
obtain evidence by requesting subpoenas. The Social Security Act 
provides for the use of subpoenas, and the proposed regulations, like 
the current SSA regulations applicable to ALJ hearings, allow an ALJ, 
through independent initiative or at the request of a party, to issue 
subpoenas concerning the attendance and testimony of witnesses and 
production of evidence. The ALJ will rule on whether and to what extent 
a party's requests for subpoenas will be granted, taking into account 
any objections that may be raised. We note that if a party fails to 
comply with a subpoena, neither the ALJ nor a party may seek judicial 
enforcement; instead, the ALJ must make application to the Secretary 
for such enforcement. Similarly, the Administrative Procedure Act and 
the current regulations applicable to Part A and Part B appeals allow 
the MAC to issue subpoenas. Therefore, we have amended Sec.  405.1122 
by adding paragraph (d), which largely mirrors Sec.  405.1036(f) and 
describes the MAC's ability to issue subpoenas and the requirements for 
submitting a subpoena request.
    We recognize that this interim final rule does not fully discuss 
how the discovery and subpoena provisions apply to CMS when it enters 
an ALJ hearing as a party. Therefore, following publication of this 
interim final rule containing the regulatory provisions on subpoena and 
discovery procedures, we will issue a CMS Ruling clarifying the 
application of these provisions to CMS.
(2) Issues Before an ALJ
    In the proposed rule, we generally adopted the provisions from 20 
CFR Sec.  404.946 regarding issues before an ALJ. Section 405.1032(a) 
generally discusses the types of issues that an ALJ may consider at a 
hearing. ALJs may consider all of the issues brought out in the 
previous determinations that were not decided entirely in a party's 
favor. Under certain circumstances, ALJs may also consider issues 
decided favorably.
    Comment: Some commenters objected to Sec.  405.1032(a) allowing an 
ALJ to consider issues decided favorably to a party by a QIC or other 
contractor even if those issues are not raised on appeal. One commenter 
suggested that this regulation places the ALJ ``in an appellate 
position.''
    Response: This regulation is a direct carryover from a currently 
applicable regulation at 20 CFR Sec.  404.946(a). In our experience, it 
is rarely used in the Medicare context. We decided to retain it, 
however, to give the ALJ the authority to remedy clearly inconsistent 
outcomes that sometimes present themselves in a case before an ALJ. For 
example, an ALJ who has been asked to reverse a determination that the 
second week of skilled nursing facility services was not medically 
necessary may discover that the beneficiary did not have a 3-day 
qualifying inpatient hospital stay. Section 405.1032(a) allows the ALJ 
to take jurisdiction of an earlier, fully favorable determination with 
respect to the first week of care, which is also subject to the 3-day 
qualifying stay requirement, but only if: (1) That determination may be 
properly reopened under the reopening regulations; and (2) the ALJ 
gives proper notice to the parties that this issue will be addressed. 
Although we anticipate that this provision will be rarely invoked, we 
have included it in the regulation to address the type of situation 
described above.
    Section 405.1032(c) discusses whether an ALJ can consider a claim 
that is not the subject of a hearing request. This paragraph was added 
to address CMS'' concerns that ALJs not consider claims that have not 
been previously adjudicated. Section 405.1032(c) prohibits an ALJ from 
taking jurisdiction of a claim that has not been adjudicated at the 
lower appeals levels through the QIC level. It is important to note the 
distinction between new claims versus new issues for purposes of 
applying Sec.  405.1032. A new issue is one that is raised for the 
first time at the ALJ level, that is relevant to the dates of service 
that are before the ALJ, but was not previously considered in the 
appeal. For example, if a claim was previously denied for a reason 
other than medical necessity and the appellant raises a medical 
necessity issue at the ALJ hearing level, the medical necessity issue 
is new, since it is relevant to the claim but not the original dispute 
in the appeal. A new claim, however, is a claim that has not completed 
the appeals process at the through the QIC level. A claim can only be 
combined with an appeal at the ALJ level if it has already been 
reconsidered by a QIC.
(3) Parties to an ALJ Hearing
    In proposed Sec.  405.1020(a), we stated that the ALJ must send the 
notice of hearing to ``all parties and the QIC that issued the 
reconsideration determination.'' We received several comments 
concerning whether ALJs are always required to send notices of hearing 
to ``all parties.''
    Comment: ALJs currently encounter significant difficulties in 
determining who receives the notice of hearing when the appeal concerns 
either a large number of initial claims filed by a single provider or 
supplier, or a postpayment audit involving statistical sampling and a 
resulting overpayment assessed against a provider or supplier. Although 
the beneficiaries who received the items or services technically may be 
parties to these appeals, in many instances they have not been involved 
in the proceedings below and, due to the application of the limitation 
of liability and overpayment provisions, may have no financial 
liability for the services at issue. Attempting to locate and send 
notices of hearing to these beneficiaries is extremely time-consuming 
and will hinder the ALJ's efforts to hold a hearing and issue a 
decision within the 90-day adjudication period.
    Response: We have modified the notice of hearings requirements in 
Sec.  405.1020(c) to clarify that an ALJ is not required to send a 
notice of hearing to a party who has not participated in the 
determinations below and whose liability status for the items or 
services in dispute has not been altered since the initial 
determination. We believe that this will ensure that all parties who 
have an interest in the appeal are given an opportunity to participate, 
while at the same time alleviating the ALJ hearing office's obligation 
to contact those individuals who have not pursued their appeals rights 
at the earlier levels, or have no financial interest in the outcome. 
However, the regulation does not prohibit the ALJ from notifying a 
party who has not previously participated in the appeal, if the ALJ's 
pre-hearing development suggests that the party's interests may be 
adversely affected by the outcome of the case.

h. Filing Requests for ALJ Hearing and MAC Review--Time and Place

    Section 1869(b)(1)(D)(ii) of the Act provides that ``[t]he 
Secretary shall establish in regulations time limits for the filing of 
a request for a hearing by the Secretary in accordance with provisions 
in sections 205 and 206.'' In addition, section 1869(d)(1)(A) of the 
Act provides that ``[e]xcept as provided in subparagraph (B), an 
administrative

[[Page 11463]]

law judge shall conduct and conclude a hearing on a decision of a 
qualified independent contractor under subsection (c) and render a 
decision on such hearing by not later than the end of the 90-day period 
beginning on the date a request for hearing has been timely filed.'' 
Similarly, section 1869(d)(2)(A) of the Act provides that the MAC 
``shall conduct and conclude a review of [an ALJ decision] and make a 
decision or remand the case to the administrative law judge for 
reconsideration by not later than the end of the 90-day period 
beginning on the date a request for review has been timely filed.''
    Section 205(b) of the Act gives an appellant 60 days to request a 
hearing. The current regulations governing appeals of Medicare claims 
provide for appealing from the contractor's determination or decision 
to an ALJ and, thereafter, from the ALJ level to the MAC. In the 
proposed rule, we stated that we will continue to require parties to 
file their appeals to the ALJ level and the MAC within 60 days. We also 
stated that ALJs and the MAC will continue to follow most of the 
general principles currently found in 20 CFR Sec.  404.933 and 42 CFR 
Sec.  405.722 when they decide whether an appeal has been timely filed 
for purposes of establishing the appellant's right to appeal. These 
regulations provide that an appeal is considered filed on the day it is 
received by a Social Security office, CMS, including its contractors, 
an ALJ, or, in the case of a request for MAC review, the MAC. We stated 
in the proposed rule that we will continue to calculate the 60-day 
filing period based on the date the appeal is actually received by one 
of the above offices, as reflected in proposed Sec.  405.1014(b). 
However, for purposes of calculating the 90-day adjudication period 
that governs ALJ and MAC actions, we stated that if a request for ALJ 
hearing was not filed directly with the ALJ hearing office or a request 
for MAC review was not filed directly with the MAC, the 90-day 
adjudication period would not begin until the appeal is received by the 
ALJ or MAC, as applicable. Finally, we indicated that in those requests 
for hearing or MAC review in which an appellant does not file an appeal 
within the 60-day filing period but contends that there is good cause 
for filing late, the 90-day adjudication period will begin with the 
date the good-cause explanation is received by the ALJ or MAC, as 
applicable, assuming that the ALJ or MAC determines that the 
explanation provides good cause for filing the appeal late.
    Comment: We did not receive any adverse comments concerning 
starting the calculation of the 90-day adjudication period from the 
date when an adjudicator receives an appellant's good cause explanation 
for filing an appeal late. However, we received several comments 
objecting to tolling the 90-day adjudication period for appeals not 
filed directly with the ALJ hearing office or MAC until the appeal 
reaches the appropriate adjudicator. Commenters objected for 
essentially two reasons: (1) They felt that tolling the adjudication 
period was contrary to the Congress' direction that the appeals be 
completed within 90 days and (2) that beneficiaries and other 
appellants must not be penalized for delays caused by the government 
and its contractors. Suggested solutions included increased 
coordination between SSA and CMS local offices with the appeals 
entities and establishing deemed or presumed dates of receipt for 
appeals whose actual receipt is delayed because the component that 
initially received the appeal does not forward it timely to the 
adjudicator.
    Response: As noted in the proposed rule, and discussed in detail 
above in both the contractor and QIC context, directing appellants to 
only one filing location will reduce confusion and eliminate potential 
delays in transmitting the appeal request. Similarly, in the case of 
ALJ hearings or MAC reviews, requiring appellants to file their appeals 
with a single appeals entity will be the simplest and most efficient 
way of eliminating the delays that concern the commenters. In two 
sections of the proposed rule, SSA was listed as a filing location. As 
mentioned previously, given the reduced role of SSA in the processing 
of Medicare appeals, we believe that an explicit regulatory reference 
to SSA field offices is no longer appropriate. Therefore, we have 
revised Sec.  405.1014(b) and Sec.  405.1106(a) to eliminate the 
references to SSA as an alternative filing location. We intend to 
instruct the QICs to include in their reconsideration notices the 
appropriate entity to whom a subsequent appeal must be directed. We 
will also continue our efforts to make forms for requesting an ALJ 
hearing and MAC review accessible and easy to use. In that regard, we 
note that a specific form for requesting MAC review with directions for 
filing under the current regulations is available on the Departmental 
Appeals Board's Web site at http://www.hhs.gov/dab.
    Consistent with our managed care regulations, Sec. Sec.  
405.1106(a) and 405.1106(b) require that an appellant send a copy of 
the request for review (or escalation) to the other parties involved in 
the appeal. Although the MAC will not dismiss an appeal on the grounds 
that the appellant failed to satisfy this requirement, the adjudication 
deadline will be tolled if the appellant fails to copy the other 
parties. This is one of several provisions we will monitor for 
effectiveness, and we will assess the need for changes as we gain 
experience with the new process.
    Comment: One commenter suggested that the ALJ be required to notify 
the appellant when the request for review is received, so that the 
appellant will know when the 90-day adjudication period begins.
    Response: We agree with the commenter. ALJ hearing offices and the 
MAC routinely send acknowledgment notices to the appellant when they 
receive a request for hearing or MAC review. However, this interim 
final rule requires ALJ hearing requests to be filed with the entity 
specified in the notice of reconsideration. Therefore, the decision-
making time frame begins on the date an appeal is timely filed with 
this entity. Accordingly, Sec.  405.1014(b) has been modified to 
require ALJ hearing offices to send appellants a notice of the date of 
receipt of an appeal request only when a hearing office receives a 
request that was initially filed with an entity other than the one 
specified in the notice of reconsideration. Similarly, Sec.  
405.1016(a) now requires notice of the date of receipt to be sent only 
when a request for MAC review is filed with an entity other than the 
MAC or ALJ hearing office.

i. Adjudication Deadlines

    Section 1869(d)(1)(A) of the Act provides that, unless the 
appellant waives the statutory adjudication deadline, the ALJ ``shall 
conduct and conclude a hearing on a decision of a [QIC]'' and issue a 
decision within 90 days from the date a request for hearing is timely 
filed. As we discussed in the proposed rule, we interpret this 
provision as requiring an ALJ to decide a case within 90 days only when 
the QIC has issued a final action in a case. Therefore, we proposed 
that when an appellant escalates an appeal from the QIC to the ALJ 
level, the proceedings before the ALJ will not be subject to the 90-day 
limit.
    Comment: As noted in our discussion of escalation, we received 
several comments objecting to the above proposal. Some commenters 
stated that cases escalated from the QIC level to the ALJ level be 
subject to the 90-day limit, and others suggested an extended, but 
still limited, time frame.

[[Page 11464]]

    Response: As indicated in our discussion above, this interim final 
rule requires that ALJs complete their action in cases escalated from 
the QIC level to the ALJ level within 180 days of the date of receipt 
of the escalation request.
    We also proposed that the 90-day adjudication period be tolled when 
delays in submitting evidence or requests for postponement of a hearing 
by an appellant, rather than the ALJ's actions, extend the length of 
the proceedings. We received no specific objections to this proposal. 
Because we have now limited cases escalated from the QIC level to the 
ALJ level to a 180-day adjudication period, we have included in the 
final regulation text that an appellant's actions that delay the 
proceedings will similarly toll the 180-day adjudication deadline.
    Comment: One commenter asked us to clarify the effect of the 
statutory provision that allows an appellant to waive the 90-day 
adjudication period. The commenter asked if this provision allows an 
appellant to, in essence, agree to an extension of the adjudication 
period for a limited period.
    Response: We agree with the commenter that in some instances the 
appellant may benefit by agreeing to a limited extension of the 
adjudication period in order to give the ALJ sufficient time to obtain 
additional testimony or evidence, or otherwise consider the appeal and 
issue a decision. Section 405.1036(d), consistent with section 
1869(d)(1)(B) of the Act, allows an appellant to waive the adjudication 
period. We have modified that section to provide that the waiver may be 
for a specific period of time agreed upon by the ALJ and the appellant.
13. Remand Authority (Sec.  405.1034)
    In the proposed rule, we noted that the current regulations 
governing Medicare appeals do not contain clear guidance concerning if 
and when an ALJ can remand a case to a contractor for further 
proceedings. We proposed giving ALJs remand authority for three 
specific reasons: (1) When the ALJ decides that the QIC's dismissal of 
a request for reconsideration was improper; (2) when the record 
provided to an ALJ lacks the technical information needed to resolve 
the case, which only the contractor can provide; and (3) when an 
appellant submits new evidence to the ALJ without providing a good 
reason for not providing it at the QIC level.
    Comment: We did not receive any comments concerning the ALJ's 
authority to remand when the ALJ decides that the QIC's dismissal of a 
request for reconsideration was improper. However, several commenters 
expressed concern that the mandatory remand provisions altered the 
ALJ's role as the trier of fact, as well as the de novo aspect of an 
ALJ hearing. Others contend that it will be unfair to restrict a 
party's right to submit new evidence not considered by the QIC, and at 
the same time allow CMS to submit evidence and position papers if it 
participates in a case. Many others reference specific situations in 
which they said the prohibition concerning the introduction of new 
evidence should not be applied, or, alternatively, in which good cause 
to introduce the evidence should be found.
    Response: As noted earlier in this rule, the MMA amended several of 
BIPA's appeal provisions. Effective October 1, 2004, section 1869(b)(3) 
of the Act, as amended by section 933(a) of the MMA, requires that a 
provider of services or supplier not introduce evidence in any appeal 
that was not presented at the reconsideration conducted by the QIC, 
unless there is good cause that prevented the introduction of that 
evidence at or before the reconsideration.
    This new statutory provision is more restrictive than the proposed 
rule, in which we proposed only to require that evidence specifically 
identified in the notice of redetermination be produced no later than 
the reconsideration level. In accordance with section 933(a) of the 
MMA, we have amended Sec.  405.1028 and Sec.  405.1122(c) to require 
providers and suppliers to submit all evidence at the reconsideration 
level unless there is good cause for not submitting it at, or before, 
that level. Similarly, in Sec.  405.1028, we require beneficiaries who 
are represented by a provider or supplier to submit all evidence at the 
reconsideration level unless there is good cause for not submitting it 
at, or before, that level. Although the statute does not require 
application of this standard to beneficiaries who are represented by 
providers or suppliers, we think it is appropriate to extend the 
requirements of section 933(a) to these beneficiaries. Doing so will 
likely prevent a provider or supplier from subverting the requirement 
for full and early presentation of evidence simply by offering to 
represent a beneficiary, rather than appealing on its own behalf. In 
light of these changes, we have eliminated the portions of proposed 
Sec.  405.1030 and Sec.  405.1034 that would have required an ALJ to 
remand a case to the QIC when an appellant introduced new evidence at 
the ALJ level without good cause. Although an ALJ or the MAC may not 
rely on evidence submitted untimely in deciding the substantive 
issue(s) in an appeal, unless good cause is found for the late 
submission of evidence, Sec.  405.1042(a)(2) ensures that the excluded 
evidence will become a part of the record, and that the ALJ or MAC will 
explain in its action why the evidence has been excluded.
    Comment: Several commenters noted that, while the appellant's right 
to submit new evidence beyond the QIC level is restrained by the good 
cause standard, the regulations do not appear to place similar 
restrictions on CMS or its contractors if they decide to submit 
evidence at the hearing.
    Response: We disagree with the commenters' position that it is 
unfair to prevent providers and suppliers from submitting new evidence 
at the ALJ level, while allowing CMS or its contractors to submit 
evidence at the ALJ level if the agency elects to join the appeal as a 
party. We have also considered these comments in light of the statutory 
change described above that impose a good cause standard on providers 
and suppliers for purposes of submitting evidence beyond the QIC level. 
CMS and its contractors are not permitted to participate in the appeals 
process prior to the ALJ level. Consequently, they are also prohibited 
from submitting evidence in either the redetermination or the 
reconsideration. Therefore, if CMS elects to join an appeal as a party, 
the agency should be afforded an opportunity to present evidence and 
the ALJ level is the earliest opportunity for this to take place. We 
anticipate that there are several scenarios in which an ALJ will need 
to consider whether a provider or supplier appellant's request to 
introduce new evidence at the ALJ level must be granted for good cause.
    While it is not possible to delineate in a regulation all of the 
situations that can constitute good cause, we note that the type of new 
evidence that may be introduced at various levels of appeal will also 
be affected by the number of issues that are considered during the 
course of an appeal. For example, if a QIC disagrees with a 
contractor's denial of a claim on technical grounds, it may still 
determine that the claim is not payable because the service was not 
medically reasonable and necessary. Since the issue of medical 
necessity may not have been addressed until the QIC's determination, 
the ALJ will need to take that into account when determining whether 
the appellant has good cause to produce additional evidence on the 
medical necessity issue at the ALJ level. Similarly, in instances in 
which CMS introduces evidence at the ALJ level that was not part of the

[[Page 11465]]

record below, the ALJ should consider whether the introduction of this 
evidence constitutes good cause for granting an appellant's request to 
introduce new evidence.
    Comment: One commenter objects to the provision that allows an ALJ 
to remand to the QIC when the record provided to the ALJ lacks 
technical information that is material to resolving the case, and only 
the contractor can provide the information. The commenter suggests that 
the ALJ retain the appeal and ask the contractor to forward the 
information to the ALJ.
    Response: We anticipate that most appeal files forwarded to the ALJ 
will have all of the documents necessary to decide the case. In the 
rare instance in which the file lacks necessary technical information, 
we believe that the most effective way of completing the record is to 
return the case, via remand, to the contractor. However, Sec.  405.1034 
will give an ALJ the option of either remanding the case to the 
contractor, or asking the contractor to forward the missing information 
to the ALJ hearing office. In the event that we move to an electronic 
file system, we will consider revising this provision further.
14. When an ALJ Can Consolidate a Hearing (Sec.  405.1044)
[If you choose to comment on issues in this section, please include the 
caption ``ALJ--Consolidation of Hearing'' at the beginning of your 
comments.]

    We have continued the longstanding practice of allowing ALJs to 
consolidate requests for hearing where appropriate. We added in the 
proposed rule, however, a provision requiring an ALJ to notify CMS of 
the intent to consolidate hearings because we believe that the 
consolidation of hearings may affect CMS' decision on whether to 
participate or invoke party status.
    Comment: We received one comment on this provision. The commenter 
recommends that a beneficiary have the right to object to a request for 
consolidation of the beneficiary's appeal with those of another party 
(for example, a provider or supplier appealing numerous appeals on the 
same issue). The commenter's concern is that consolidation of the 
appeal will eliminate the 90-day deadline for resolution of the case. 
The commenter also states that consolidation will complicate the 
hearing and make it more difficult for the beneficiary to assert rights 
in the appeal.
    Response: We expect the situation described by the commenter to 
occur only rarely. In our experience, providers and suppliers make 
requests for consolidation of hearings in cases involving identical 
coverage and payment issues for the same item or service provided to 
multiple beneficiaries. In the majority of these cases, the liability 
of individual beneficiaries has been waived or, if not, the beneficiary 
has not filed an appeal or otherwise participated in the determinations 
below, and has not filed a separate request for ALJ hearing. However, 
if the beneficiary and the provider or supplier, as applicable, both 
file a request for hearing in response to the same QIC reconsideration, 
the provider or supplier may not, in essence, waive the beneficiary's 
right to an ALJ action within 90 days because it wants to consolidate 
that determination with other similar appeals. Beneficiaries who do not 
waive the 90-day adjudication period in order to participate in the 
consolidated proceedings must be mindful, however, that their case will 
be decided without the benefit of any of the testimony that can be 
given at the consolidated hearing, and that their decision may be 
revised if the evidence considered and resulting outcome of the 
consolidated hearing provides a basis for reopening the beneficiary's 
case.
15. When an ALJ Can Dismiss a Request for a Hearing (Sec.  405.1052)
[If you choose to comment on issues in this section, please include the 
caption ``When an ALJ Can Dismiss a Request for a Hearing'' at the 
beginning of your comments.]

    We note that CMS' pre-BIPA regulations did not address this issue; 
rather, ALJs followed the regulations at 20 CFR Sec.  404.957. Those 
regulations were designed to resolve appeals filed by applicants for 
Social Security retirement and disability benefits. Therefore we 
proposed new regulations that address the specific procedural issues 
that arise in Medicare claims appeals. We described an ALJ's authority 
to dismiss a request for hearing on several grounds, including: The 
death of the beneficiary when there is no substitute party with a 
remaining financial interest; dismissals in response to a request for 
withdrawal; dismissals based on a previous determination or decision 
about the appellant's rights on the same facts and on the same issue or 
issues, and dismissals based on abandonment. We received one comment 
concerning dismissals related to the survival of an appeal following 
the death of the beneficiary, and one concerning when, if ever, an ALJ 
may vacate a dismissal.
    Comment: We received a general comment concerning whether ALJs can 
be given the authority to vacate their own dismissal orders.
    Response: SSA's regulations include a provision allowing ALJs to 
vacate their own dismissals. However, in practice, this provision has 
not been an effective remedy in Medicare appeals because the claims 
folder is no longer in the ALJ hearing office and is unavailable to the 
ALJ by the time the request to vacate the order is received in the ALJ 
hearing office. Moreover, resolutions of these requests have been 
delayed or complicated when appellants have simultaneously asked the 
ALJ to vacate the dismissal order and asked the MAC to review the 
dismissal. In light of these problems, we believe that the better 
practice is to provide only for an appeal of the dismissal order to the 
MAC.
    Comment: We proposed that either the ALJ or the MAC could dismiss a 
request for hearing or review, as applicable, when a beneficiary dies 
before an appeal is filed, or during the pendency of the appeal. We did 
not receive any comments concerning the ALJ's right to dismiss the 
request for hearing, but did receive a comment concerning a MAC's 
dismissal on the same grounds. The commenter states that the MAC must 
hold a hearing at the request of the beneficiary's estate on the issue 
of whether there is any remaining financial liability of the estate 
that establishes the estate as a substitute party that can continue the 
appeal.
    Response: In our experience, it is not necessary to hold a hearing 
at either the ALJ or MAC level to resolve whether the beneficiary's 
estate has a right to a hearing or MAC review. The issue in these 
circumstances is whether there remains an interested, substitute party 
who has a remaining financial interest in the outcome of the appeal. As 
indicated in the proposed rule, this remaining financial interest can 
be established if the beneficiary either paid for the service (and, 
thus, the beneficiary's surviving spouse or estate is seeking 
reimbursement on behalf of the beneficiary) or the beneficiary's spouse 
or estate continues to be potentially financially liable to pay for the 
service. Conversely, if the beneficiary's liability for the service was 
waived and that determination was not used as a basis to establish the 
beneficiary's liability for subsequent services, the beneficiary's 
spouse or estate has no remaining financial interest in the appeal. 
Neither the statute nor existing regulations require a hearing before 
an appeal may be dismissed on the above issue, and, in our experience, 
a determination of the estate's remaining financial liability, if any, 
can be established without a

[[Page 11466]]

hearing. We wish to note that when a beneficiary dies and the appeal is 
subsequently dismissed, a party, including the beneficiary's estate, 
may ask the MAC to vacate the dismissal under Sec.  405.1108(b). 
Examples of situations in which a dismissal should be vacated include 
when there is the possibility of Medicaid liability or when there is a 
possibility the State (which pays Medicaid funds) will attempt recovery 
of its payment from the estate.
    We note, however, that section 939 of the MMA now provides that, if 
a beneficiary dies and there is no substitute party available to appeal 
a determination, the provider or supplier who furnished the item or 
service can pursue the appeal. We have amended Sec.  405.1052(a)(5) to 
reflect this change. However, because a beneficiary's estate may have 
an interest in having Medicare cover a service so that a State (which 
pays Medicaid funds) will not attempt to recover its Medicaid payment 
from the estate, adjudicators may only dismiss requests involving 
dually eligible beneficiaries pursuant to the requirements set out in 
Sec.  405.1052.
16. Content of ALJ's Decision (Sec.  405.1046)
[If you choose to comment on issues in this section, please include the 
caption ``Content of ALJ's Decision'' at the beginning of your 
comments.]

    Section 405.1046 of the proposed rule sets forth general rules 
regarding the ALJ's decision notice. We received no comments on these 
provisions. Subsequently, section 933(c)(3) of the MMA amended section 
1869(d) of the Act to provide that an ALJ decision must be written in a 
manner calculated to be understood by the beneficiary and must include:
     The specific reasons for the decision (including, to the 
extent appropriate, a summary of the clinical or scientific evidence 
used in making the decision);
     The procedures for obtaining additional information 
concerning the decision; and
     Notification of the right to appeal the decision and 
instructions on how to initiate such an appeal.
    1. These provisions have now been incorporated in Sec.  405.1046(b) 
of this interim final rule. The new provisions are basically verbatim 
restatements of the statute and are completely compatible with, 
although more detailed than, the proposed provisions.
    2. In addition to changes needed to implement section 933(c)(3) of 
the MMA, we have added paragraph (c) to Sec.  405.1046 to clarify CMS' 
long-standing position that ALJ decisions are not final for purposes of 
determining the actual amount of payment due. ALJ decisions involving 
underpayments often indicate that Medicare must make payment for a 
service, but do not calculate a specific underpayment amount to be 
made. These determinations are not final, because the contractor must 
still calculate the underpayment amount by determining the principal 
amount to be paid. In addition, if the ALJ makes a finding concerning 
payment when the amount of payment was not an issue before the ALJ, the 
contractor may independently determine the payment amount. Therefore, 
the date of the final determination for purposes of determining when 
interest charges on underpayments begin accruing is the date that the 
contractor completes the calculation and makes the written 
determination of the principal amount that Medicare owes.
17. Appeals Involving Overpayments (Sec.  405.1064)
[If you choose to comment on issues in this section, please include the 
caption ``Appeals Involving Overpayments'' at the beginning of your 
comments.]

    A decision that is based on only a portion of a statistical sample 
does not accurately reflect the entire record. Therefore, we have added 
Sec.  405.1064 to set forth a general rule regarding ALJ decisions that 
are based on statistical samples. The effect of this technical change 
is that when an appeal from the QIC involves an overpayment issue and 
the QIC relies on a statistical sample in reaching a decision, the ALJ 
must base his or her decision on a review of all claims in the same 
statistical sample.
18. Review by the MAC and Judicial Review (Sec.  405.1100 Through Sec.  
405.1140)
[If you choose to comment on issues in this section, please include the 
caption ``Review by the MAC and Judicial Review'' at the beginning of 
your comments.]

a. Introduction

    The component of the Departmental Appeals Board (DAB) that decides 
cases brought under section 521 of BIPA is called the Medicare Appeals 
Council (MAC). Prior to this interim final rule, the MAC considered 
requests for review of Medicare cases under the procedures used by 
SSA's Appeals Council. See 20 CFR Sec. Sec.  404.966 through 404.985. 
In the proposed rule, we proposed that some of the regulations 
governing the SSA's Appeals Council be modified to meet the particular 
needs of the Medicare process and proposed adding other regulations to 
effectuate the BIPA provisions governing MAC review.

b. MAC Review of an ALJ's Action/De Novo Review

    Under the regulations governing the pre-BIPA process, the MAC could 
deny or dismiss a request for review, or it could grant the request for 
review and either issue a decision or remand the case to an ALJ. The 
MAC could also review an ALJ's action in order to dismiss a request for 
hearing for any reason for which it could have been dismissed by the 
ALJ. The MAC also had the authority under the pre-BIPA process to 
review an ALJ's action on its own motion, provided that it took review 
of the case within 60 days after the date of the hearing decision or 
dismissal. In the proposed rule, we described the factors the MAC 
considered under the pre-BIPA regulations in deciding whether to grant 
review. We also noted that if the MAC denied review of an ALJ's 
decision under those regulations, the ALJ's action, not the denial of 
review, was the final decision of the Secretary and was reviewable in 
Federal district court on a substantial evidence standard.
    BIPA establishes a new standard for MAC review of an ALJ's action. 
Section 1869(d)(2)(A) of the Act directs the MAC to conduct its review 
of an ALJ decision and make a decision or remand the case to the ALJ 
within 90 days of a request for review. Section 1869(d)(2)(B) of the 
Act specifies that the MAC reviews the case de novo. In addition, 
section 1869(d)(3)(A) of the Act allows parties to request a review by 
the MAC if within 90 days of timely filing a request for an ALJ 
hearing, the ALJ has not issued a decision, ``notwithstanding any 
requirements for a hearing for purposes of the party's right to such a 
review.''
    We proposed under Sec.  405.1100 that when a party requests a MAC 
review, the MAC reviews the ALJ's decision de novo. The party does not 
have the right to a hearing before the MAC, and the MAC considers all 
evidence in the administrative record. If a case requires additional 
evidence or proceedings at the ALJ level, the MAC remands the case to 
the ALJ for further action. Otherwise, the MAC communicates its final 
action on the case by issuing a final decision or order that adopts, 
modifies, or reverses the ALJ's action, as appropriate. We also 
proposed other changes to the MAC's current procedures to accommodate 
the statute's changes to the MAC's standard of review, as well as the 
adjudication deadlines. (Some of the changes concerning time and place 
of filing a review and other changes that affect both the ALJ and MAC 
process are

[[Page 11467]]

discussed earlier in this preamble.) Because an ALJ's decision is not 
final and binding on all parties if the MAC reverses the ALJ's 
decision, we have amended Sec.  405.1048 to make that point clear.
    Consistent with our managed care regulations, Sec. Sec.  
405.1106(a) and 405.1106(b) require that an appellant must send a copy 
of the request for MAC review or escalation to the MAC and to the other 
parties involved in the appeal. Although the MAC will not dismiss an 
appeal on the grounds that the appellant failed to satisfy this 
requirement, the deadline will be tolled if the appellant fails to copy 
the other parties.
    Comment: Most of the comments we received concerning MAC review 
pertained to the MAC's procedures when a case is escalated from the ALJ 
level to the MAC. However, one commenter expressed the concern that the 
MAC's de novo review standard would diminish an ALJ's authority to make 
findings of fact.
    Response: Section 1869(d)(2)(B) of the Act requires the MAC to 
conduct any review of an ALJ's decision under a de novo review 
standard. Therefore, when the MAC reviews an ALJ's decision, the MAC 
will not apply a substantial evidence standard when it considers an 
ALJ's findings of fact. However, an ALJ's findings and conclusions on 
factual issues will still carry weight, particularly with respect to 
the credibility of witnesses, and by no means do the BIPA changes 
diminish an ALJ's authority to make findings of fact.
    As we indicated in the proposed rule, the MAC must carefully 
consider all evidence in the record in conducting its review. It must 
then adopt, modify, or reverse the ALJ's decision, or remand the case 
to an ALJ for further proceedings (the MAC can also dismiss a request 
for review). Note that under Sec.  405.1112, an appellant's request for 
a review must identify the parts of the ALJ decision with which the 
appellant disagrees and explain why the ALJ's findings and conclusions 
are wrong. The MAC will limit its review to those exceptions, unless 
the appellant is an unrepresented beneficiary. Thus, the MAC will 
review an ALJ's findings of fact or conclusion only when specifically 
challenged by an appellant. Under those circumstances, or in the case 
of an unrepresented beneficiary appellant, the de novo review standard 
will apply. Note that the MAC can remand the case to an ALJ if the MAC 
determines that additional evidence is needed or additional action by 
the ALJ is required.

c. Escalation of an Appeal From the ALJ Level to the MAC

    Section 1869(d)(3)(A) of the Act, as amended by section 521 of 
BIPA, provides that if an ALJ does not issue a decision within the 90-
day adjudication period, ``the party requesting the hearing may request 
a review by [the MAC], notwithstanding any requirements for a hearing 
for purposes of the [appellant's] right to such a review.'' We 
originally proposed that cases escalated to the MAC from the ALJ level 
under this provision would not be subject to the 90-day adjudication 
deadline. As discussed earlier in this preamble, we have decided to 
require that the MAC complete its action in an escalated case within 
180 days of the receipt of the request for escalation.
    We also indicated in the proposed rule that we interpret section 
1869(d)(3)(A) of the Act to mean that only the person or entity that 
requests the ALJ hearing can escalate the appeal to the MAC if the ALJ 
does not meet the 90-day adjudication deadline. For example, where CMS 
has entered a case as a party, it may not seek escalation. We did not 
receive any comments concerning this proposal. We also stated that we 
believed that the statute does not require the MAC to hold a hearing 
when a case is escalated from the ALJ to MAC level.
    Comment: We received several comments that the MAC be required to 
hold a hearing when a case is escalated from the ALJ level. Some 
commenters note that proposed Sec.  405.1108(d)(2) allows the MAC to 
hold a hearing.
    Response: As we noted in the proposed rule, the statute describes 
different procedures and standards for adjudication or review for the 
various steps of appeal. Just as some appellants in the pre-BIPA 
process chose different processes at the carrier hearing level (in-
person hearing, telephone hearing, or on-the-record decision) and made 
similar choices at the ALJ level, appellants who consider escalating 
their cases will have to determine how important it is in their case to 
receive the type of process provided at a particular level. As we 
explained in the proposed rule, the statute does not require that the 
MAC hold a hearing if a case is escalated to it; rather, the statute 
allows escalation ``notwithstanding any requirements for a hearing.'' 
Moreover, Sec.  405.1108(d)(2) does not establish an appellant's right 
to a hearing before the MAC; rather, it gives the MAC the option to 
hold a hearing when the MAC concludes that it is necessary. Therefore, 
although an appellant who escalates a case to the MAC can request that 
the MAC hold a hearing, the MAC has the authority to deny the request 
and decide the case on the written record.
    We also explained that when the MAC receives a case escalated from 
the ALJ level, the MAC might issue a decision, dismiss either the 
request for hearing or request for review on procedural grounds, or, if 
the administrative record is insufficient to take any of the above 
actions, remand the case to the ALJ for specific development and a 
decision.
    Comment: Some commenters state that it is inappropriate for the MAC 
to remand a case to an ALJ that has been escalated to the MAC because 
the ALJ has not decided the case within the 90-day period. Instead, the 
MAC must correct any deficiencies in the record itself.
    Response: We do not anticipate that the MAC will routinely remand 
an escalated case to the ALJ. However, we need to retain this option 
for those rare occasions in which the MAC cannot resolve the case at 
its level, or when the request for escalation and the other remedies 
requested by the appellant in the request for review are mutually 
exclusive. For example, where an ALJ fails to issue a decision after a 
hearing that the appellant does not believe was a fair hearing, the 
appellant might escalate at the end of the 90-day adjudication period 
for the purpose of requesting a hearing and decision by a different 
ALJ. Here, if the MAC concludes that the appellant did not receive a 
fair hearing before the first ALJ and determines that the appropriate 
remedy is a hearing before a different ALJ, then the MAC can remand 
that case accordingly.

C. Miscellaneous Comments

    Comment: We received a number of questions about the prioritization 
of appeals once the new BIPA appeals process is implemented. In 
particular, commenters are concerned that at the post-redetermination 
levels of appeal, requests filed on or after the effective date of the 
BIPA changes will receive priority because of the new adjudication 
deadlines and the possibility of escalation. Commenters request that we 
clarify how adjudicators will be expected to prioritize appeal 
requests. They recommended that CMS require that appeal requests be 
adjudicated in the order in which they are received. In a related 
comment, we were asked to clarify what impact, if any, implementation 
of the new appeals process will have on appeals that are already in 
progress.

[[Page 11468]]

    Response: As discussed in section I-E of this preamble, we are 
fully cognizant of these important issues and have taken them into 
consideration in developing an implementation approach for these new 
requirements. In general, we agree with commenters that adjudicators 
can be expected to continue to carry out appeals in the order in which 
appeal requests are received. Thus, CMS intends to work closely with 
the FIs and carriers to ensure that all appeal requests are completed 
on a timely basis. Similarly, CMS, SSA, and HHS are working together to 
reduce the backlog of cases at the ALJ and MAC levels, and thus, 
minimize this problem.
    Comment: In the current appeals process, contractors are required 
to effectuate appeal decisions within 30 days. A commenter asked what 
effectuation time frame(s) FIs and carriers will be required to adhere 
to in the new appeals process.
    Response: The current appeal regulations do not require carriers or 
fiscal intermediaries to effectuate ALJ or MAC decisions within a 
specific time frame. The effectuation time frames that our contractors 
follow in the current appeals process are based on manual requirements. 
Neither BIPA nor MMA impose any statutory requirements for effectuation 
of appeals decisions. Nonetheless, it is our intention to maintain the 
current manual requirements for effectuation of ALJ and MAC decisions 
in the new appeals process. The relevant manual provisions can be found 
in the Internet-only Manual (IOM)(Medicare Claims Processing Manual 
(Pub. 100-4) at Chapter 29 Sections 60.20.2, 60.22, and 60.24. In 
conjunction with implementation of the new appeals process, an 
additional section will be added to the IOM detailing the effectuation 
time frames for QIC decisions.
    Comment: One commenter asks whether the changes implemented by BIPA 
also apply to the Medicare Cost Program.
    Response: The changes to appeal procedures that are required under 
section 521 of BIPA, and Title IX, Subtitle D, of the MMA, apply only 
to claim determinations with respect to Part A and Part B of Medicare. 
However, section 1876(c)(5) of the Act and Sec.  417.600 of the 
Medicare cost plan regulations establish that cost plan enrollees have 
a right to an ALJ hearing and a subsequent right to MAC and judicial 
review. Thus, the new ALJ and MAC regulations will generally apply to 
cost plans. We intend to address this issue in further detail in either 
a CMS Ruling or future rulemaking.
    Comment: Under the proposed rule, CMS has the option of joining 
certain appeals at the ALJ level. A commenter recommends that if CMS 
elects to join an appeal, the agency must be required to hire an 
attorney to represent it.
    Response: In the current claim appeals process, appellants and 
other parties retain almost complete discretion to elect or not to 
elect an appointed representative. With few exceptions, parties can 
choose any person to act as their appointed representative. In the new 
appeals process, as in the old, we believe that all decisions with 
respect to the selection of an appointed representative should be left 
up to the party, regardless of whether the party is a beneficiary or 
CMS. Accordingly, the Appointed Representative provisions found in 
section 405.910 of the interim final rule maintain our current policy 
of giving parties almost complete control over the selection of an 
appointed representative. As a party to an appeal, CMS enjoys the same 
rights and privileges as any other party, including control over its 
selection of an appointed representative.
    Comment: One commenter asks us to clarify what, if any, continuing 
education will be available to QICs and ALJs.
    Response: The new Administrative QIC (AdQIC) will have primary 
responsibility for fulfilling the educational and training needs of the 
QICs.

III. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comments, we are 
not able to acknowledge or respond to them individually. We will 
consider all comments concerning the provisions of the interim final 
rule that we receive by the date and time specified in the DATES 
section of this preamble, and respond to those comments in the preamble 
to the final rule.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment when a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comments on each of these 
issues for the information collection requirements discussed below.
    The PRA exempts most of the information collection activities 
referenced in this Interim Final Rule with Comment. In particular, 5 
CFR 1320.4 excludes collection activities during the conduct of 
administrative actions such as redeterminations, reconsiderations, and/
or appeals. Specifically, these actions are taken after the initial 
determination or a denial of payment. There is, however, one 
requirement contained in this rule that is subject to the PRA because 
the burden is imposed prior to an administrative action or denial of 
payment. This requirement is discussed below.

Section 405.910 Appointed Representatives

    In summary, section 405.910 states an individual or entity may 
appoint a representative to act on their behalf in exercising their 
rights to an initial determination or appeal. This appointment of 
representation must be in writing and must include all of the required 
elements specified in this section.
    The burden associated with this requirement is the time and effort 
of the individual or entity to prepare an appointment of representation 
containing all of the required information of this section. In an 
effort to reduce some of the burden associated with this requirement, 
we have developed a standardized format that the individual/entity may 
opt to use.
    We estimate that approximately 27,277 individuals and entities will 
elect to appoint a representative to act on their behalf each year. 
Because we have developed the optional standardized form, we estimate 
that it should only take approximately 15 minutes to supply the 
required information to comply with the requirements of this section. 
Therefore, we estimate the total burden to be 6,819 hours on an annual 
basis.

[[Page 11469]]

    If you wish to view the proposed standardized notices and the 
supporting documentation, you can download a copy from the CMS Web site 
at http://www.cms.hhs.gov/regulations/pra/.
    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements described above. These 
requirements are not effective until they have been approved by OMB.
    If you comment on any of these information collection and record 
keeping requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Regulations Development and 
Issuances Group, Attn: Dawn Willinghan, CMS-4064-IFC Room C5-14-03, 
7500 Security Boulevard, Baltimore, MD 21244-1850; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Christopher Martin, CMS Desk Officer Comments submitted to 
OMB may also be e-mailed to the following address: e-mail: 
[email protected] or faxed to OMB at (202) 395-6974.

V. Regulatory Impact Analysis

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

A. Introduction

    We have examined the impact of this interim final rule with comment 
under the criteria of Executive Order 12866 (September 1993, Regulatory 
Planning and Review), section 1102(b) of the Social Security Act, the 
Regulatory Flexibility Act (RFA) (Pub. L. 96-354), the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). A regulatory impact analysis (RIA) 
must be prepared for major rules with economically significant effects 
($100 million or more annually). Although we do not expect this interim 
final rule to have a substantial financial impact on beneficiaries, 
providers, or suppliers, we anticipate that Federal costs to implement 
this rule may exceed the $100 million threshold. Therefore, this is a 
major rule and in compliance with Executive Order 12866, we have 
prepared the RIA below. In accordance with the provisions of Executive 
Order 12866, this regulation was reviewed by the Office of Management 
and Budget.
    The RFA requires agencies, in issuing certain rules, 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 $25 million or less annually. For purposes of the RFA, all 
providers and suppliers affected by this regulation are considered to 
be small entities. Individuals and States are not included in the 
definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for a rule that 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 are not preparing analyses for either the RFA or section 1102(b) 
of the Act. As discussed in further detail below, we are uncertain how 
many small entities will be affected by this rule. The purpose of this 
interim final rule is to improve the efficiency of the claims review 
and appeals process, and to the extent that these changes shorten the 
appeals process, these regulations should reduce the associated burden 
on small entities. Similarly, the impact on small rural hospitals is 
likely to be negligible or slightly positive. Therefore, we are 
certifying that the interim final rule will not have a significant 
impact on 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 would include any Federal mandate that may result 
in expenditure in any one year by State, local, or tribal governments, 
in the aggregate, or by the private sector, of $100 million. This rule 
will not have this effect on State, local, or tribal governments, or on 
the private sector.

B. Scope of the Changes

    We did not receive any comments regarding the impact analysis 
provided in the proposed rule. Therefore, this analysis largely repeats 
the proposed rule impact analysis and estimates. This interim final 
rule adopts most of the proposed provisions and adds changes required 
under the MMA. The impact of any changes is discussed below.
    As discussed in detail above in section II of this preamble, this 
interim final rule establishes new regulations concerning appeals 
procedures for Medicare claims determinations, consistent with section 
1869 of the Act as amended by section 521 of BIPA 2000 and sections 
931, 932, 933, 935, 937, 939, and 940 of the MMA.
    Among the significant changes required by the BIPA and MMA 
amendments are:
     Establishing a uniform process for handling Medicare Part 
A and Part B appeals, including the introduction of a new level of 
appeal for Part A claims.
     Revising the time frames for filing a request for a Part A 
and Part B appeal.
     Requiring appeals notices issued at the redetermination, 
reconsideration, and ALJ levels to include specific information.
     Imposing a 60-day time frame for redeterminations made by 
fiscal intermediaries and carriers.
     Requiring the establishment of a new appeals entity, the 
qualified independent contractor (QIC), to conduct ``reconsiderations'' 
of contractors' initial determinations including redeterminations, and 
allowing appellants to escalate the case to an ALJ hearing, if 
reconsiderations are not completed within 60 days.
     Requiring providers and suppliers to present all evidence 
for an appeal no later than the QIC reconsideration level, unless the 
appellant demonstrates good cause as to why that evidence was not 
provided previously.
     Establishing uniform amount in controversy thresholds for 
ALJ hearings and judicial review that will be adjusted annually by the 
medical care component of the Consumer Price Index for all urban 
consumers.
     Establishing a 90-day time limit for conducting ALJ and 
DAB appeals and allowing appellants to escalate a case to the next 
level of appeal if ALJs or the MAC do not meet their deadlines.
     Establishing a requirement for ``de novo'' review when the 
MAC reviews an ALJ decision made after a hearing.
    This interim final rule does not establish new rules, or alter 
existing rules, with respect to the substantive standards for 
determining whether a Medicare claim is payable. Claims that enter the 
administrative appeals process represent an extremely small portion of 
the total number of claims that Medicare processes each year. In FY 
2003, for

[[Page 11470]]

example, Medicare contractors processed 1.05 billion claims; of these 
only about 5.7 million were appealed. Thus, the number of Medicare 
claims that enter the administrative appeals system represents only 
about 0.5 percent of the total number of claims filed with Medicare. 
Moreover, the 5.7 million figure represents the total number of claims 
appealed, not the number of appellants. From our experience, the vast 
majority of appeal requests are filed by a relatively limited group of 
appellants. Therefore, the number of providers, physicians and other 
suppliers, as well as beneficiaries who enter the appeals process is 
far fewer than the 5.7 million claims that are appealed. Given the 
small percentage of claims and appellants involved in the 
administrative appeals process, we believe that this interim final rule 
will have little or no effect on most Medicare providers and suppliers. 
The changes set forth are even less likely to affect beneficiaries, 
whose appeals are estimated to constitute no more than 3 to 5 percent 
of total appeals. As discussed in detail below, however, for those 
providers, suppliers, and beneficiaries who do file appeals of Medicare 
claim determinations, the effects of this interim final rule should be 
positive.

C. Anticipated Effects on Providers, Physicians and Other Suppliers, 
and Beneficiaries

    We expect that the changes set forth in this interim final rule 
will produce substantial improvements in the consistency and efficiency 
of the claims appeal process. For the most part, the anticipated 
positive impact of the interim final rule on providers, physicians and 
other suppliers will be similar to the anticipated effects on 
beneficiary appellants, although again the impact on the provider and 
supplier communities would be more pronounced due to the much greater 
volume of provider and supplier appeals. We include a brief discussion 
of the anticipated impact of major changes below.
    In general, we do not anticipate that the introduction of these new 
appeals procedures will have a substantive impact on the final results 
of claims appeals; that is, there is no reason to believe that the use 
of QICs, or other changes required by BIPA and the MMA, will result in 
any change in the extent to which appeals eventually result in 
favorable decisions for providers, suppliers, or beneficiaries. Thus, 
we do not anticipate that these changes will have a quantifiable impact 
on Medicare claims payments. From an administrative perspective, 
however, the introduction of better notice requirements, new 
independent review entities, and mandatory physician review of medical 
necessity issues should increase appellants' confidence in the Medicare 
appeals process. Thus, we believe that the implementation of 
requirements that ensure appellants of both the fairness of the 
decision-making process and the accuracy and consistency of the 
decisions reached can eventually lead to measurable reductions in the 
need for the elevation of appeals to the slower, more costly levels of 
the appeals system (for example, ALJ hearings and MAC or Federal court 
review).
    In the short term, it will not be surprising if there is an initial 
spike in requests for reconsiderations by QICs given the reduced time 
frame for these second level appeals, the availability of new appeal 
entities, and the introduction of physician review panels. Similarly, 
it is foreseeable that the number of requests for ALJ hearings or MAC 
reviews may increase given the establishment of relatively short 
decision-making time frames for these entities.
    Most of the major changes set forth in this interim final rule (for 
example, as the new time frames for appeals decisions) are mandated by 
the statutes and thus, are not subject to the Secretary's discretion. 
To the extent that we have exercised discretion (for example, in 
establishing procedures for conducting appeals), we have attempted to 
balance the need for accurate, expeditious appeals decisions with our 
responsibilities to implement these changes in a cost-effective manner.
    A discussion of the anticipated impacts of key provisions follows.
1. Decision Making Time Frames and Escalation
    Perhaps the most significant changes set forth are the reductions 
in mandatory time frames for issuing decisions on appeals. In general, 
this means faster receipt of decisions and, for favorable decisions, 
faster payment. For example, under the interim final rule, the time 
frame for a reconsideration (formally called a carrier hearing) has 
been reduced from 120 days to 60 days. If the decision is favorable 
(that is, the appeal results in a reversal of an initial determination 
that a claim could not be paid), effectuation of the favorable decision 
will be initiated as soon as a decision is reached. Given the reduced 
decision-making time frames, payments will be received substantially 
sooner than under the current system. These benefits to appellants will 
extend to all levels of the Medicare administrative appeals process.
    In addition to the new time frames for making decisions, the 
interim final rule will allow appellants the option of escalating an 
appeal to an ALJ if the QIC fails to make a decision timely. Escalation 
is also available at the appellants' option from the ALJ level to the 
MAC if an ALJ fails to issue a hearing decision on a QIC decision 
within 90 days of a request for an appeal of a QIC reconsideration (or 
similarly from the MAC to Federal court). Clearly, these options will 
be a positive change for appellants, who have greater control of their 
appeals and a viable recourse during the appeals process if, during one 
stage of the appeals process, their appeal is not decided timely.
    Overall, these changes will reduce the amount of time that it takes 
for a claim to make its way through the administrative appeals process. 
In the past, it generally took 3 to 5 years for appealed claims to 
reach resolution at the MAC level. We anticipate that a claim will now 
take about 18 months to make its way through the entire administrative 
appeals process.
2. Transfer of ALJ Function
    After the proposed rule was published in the Federal Register, a 
significant development occurred involving the transfer of the ALJ 
function. Section 931 of the MMA requires the responsibility for the 
functions of ALJs for hearing appeals under title XVIII of the Act (and 
related provisions on title XI of the Act) to be transferred from the 
Commissioner of SSA to the Secretary of the DHHS. For the most part, 
organizational responsibility for this function should not have a 
material impact on appellants. To the extent that there is an impact, 
it should be positive since ALJs will now be able to focus solely on 
Medicare issues instead of both SSA and Medicare issues. Note that 
although this rule reflects the transfer of the ALJ function from SSA 
to DHHS, the rule does not implement this change.
3. Review of Claims by a Panel of Health Care Professionals
    Another important change implemented through this interim final 
rule is the requirement that a panel of physicians or other qualified 
health care professionals conduct QIC reconsiderations when the initial 
determination being appealed involves a medical necessity issue. BIPA 
mandates that when an initial determination involves a finding on 
whether an item or service is reasonable and necessary for the 
diagnosis or treatment of an

[[Page 11471]]

illness or injury, a QIC's reconsideration must be based on clinical 
experience and medical, technical, and scientific evidence to the 
extent applicable. MMA further provides that if a claim is for 
treatment, items, or services furnished by a physician, the reviewing 
professional must also be a physician. We believe that this change will 
give appellants more confidence that a fair decision has been reached, 
potentially reducing their need to pursue subsequent appeals. Thus, the 
introduction of routine involvement of physicians and other health care 
professionals into the appeals process should produce administrative 
finality at an earlier level of the process and benefit both appellants 
and the Medicare program.
4. Decision Letters and Documentation Requirements
    An important aspect of the proposed rule concerns the content of 
the notices sent to parties when a contractor upholds its initial 
determination. These requirements include a written summary of the 
rationale for the redetermination decision and the identification of 
any specific missing documentation that contributed to the decision to 
deny the claim in question. Since publication of the proposed rule, 
section 933(c) of the MMA amended sections 1869(a), 1869(c), and 
1869(d) of the Act and established statutory notice requirements that 
are very similar to those we proposed. Those statutory requirements 
have been incorporated into this interim final rule. We believe that 
these policies will provide appellants with the information they need 
to build their case early in the appeals process. We believe the impact 
of these requirements will be to produce more accurate decisions at the 
QIC reconsideration level, based on all the appropriate medical 
information, rather than appeals often needing to be raised to an ALJ 
before needed documentation is produced. This will give beneficiaries, 
providers, and suppliers more detail about why their claim was denied 
and allow them to fashion their appeal accordingly.
    In addition, section 1869(b)(3) of the Act, as amended by section 
933(a)(1) of the MMA, now specifies that providers and suppliers may 
not introduce evidence in any appeal that was not presented at the 
reconsideration conducted by the QIC. As a matter of policy, we also 
have extended this requirement to beneficiaries represented by 
providers and suppliers. This will ensure that providers and suppliers 
do not attempt to circumvent this evidence requirement by offering to 
represent beneficiaries. If the information is not submitted to the 
QIC, but instead is presented later in the appeals process, the 
evidence will not be considered unless the appellant demonstrates good 
cause why the information was not submitted to the QIC. We believe the 
end result of these provisions will be that appeals are resolved at the 
earliest possible administrative level, which is a positive result for 
all appellants.
5. Appeal Rights
    In the past, providers could appeal in their own right only when 
the item or service was not covered because it constituted custodial 
care, was not reasonable and necessary, or in certain other limited 
situations when the determinations involved a finding with respect to 
the limitation of liability provision under section 1879 of the Act. In 
order to appeal in other circumstances, providers must have acted as 
representatives of beneficiaries.
    In the interim final rule, we permit participating providers to 
appeal to the same extent as beneficiaries, or suppliers who take 
assignment. Also, consistent with section 1870(h) of the Act, as 
amended by section 939(a) of the MMA, we permit a provider or supplier 
to appeal a claim denial where that provider or supplier has rendered 
items or services to a beneficiary who subsequently dies and there is 
no other party available to appeal the denial. We believe these changes 
will have several positive impacts on appellants. For example, they 
should eliminate any confusion providers may have in determining 
whether they have standing to appeal an initial determination, and they 
remove the burden for the provider of obtaining an appointment of 
representative from a beneficiary. Thus, this interim final rule 
expands both provider and supplier appeal rights.

D. Effects on the Medicare Program

    In the final analysis, the primary financial impact of implementing 
these changes falls upon the government agencies responsible for 
conducting appeals; that is, CMS and DHHS. Deciding appeals within 
shorter timeframes and establishing new independent review entities to 
conduct these appeals entail significant new costs, as does the 
development of an appeals-specific data system to track the results of 
these appeals. By establishing shorter decisionmaking timeframes and 
improved procedures in the Medicare appeals system, BIPA and the MMA 
created additional opportunities and incentives for providers, 
suppliers, and beneficiaries to request appeals. Also, the statute no 
longer provides for any minimum amount in controversy (AIC) for appeals 
below the ALJ level, and lowers the AIC from $500 to $100 (plus an 
annual increase based on the CPI) for Part B claim determinations that 
are appealed to an ALJ. The AIC for Part A claims remains at $100 (plus 
an annual increase based on the CPI).
    Thus, although we anticipate that the impact of these changes will 
be positive for the provider, physician, supplier, and beneficiary 
communities, implementing these procedures has generated substantial 
costs to the Medicare program. CMS' FY 2004 operating plan included $10 
million for QIC implementation start-up costs and $6 million for the 
Medicare Appeals System (MAS), which will be used to track appeals 
electronically. In addition, CMS plans to spend $6 million from the FY 
2004-2005 Medicare Modernization Act appropriation for MAS. Higher 
spending is likely in FY 2006, as more of the appeals workload is 
transferred over to the QICs, not to mention the additional costs to 
implement necessary changes at the ALJ and MAC appeals levels.

E. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
interim final and final rules) that imposes substantial direct 
requirement costs on State and local governments, preempts State law, 
or otherwise has Federalism implications. This rule does not have a 
substantial effect on State or local governments.

VI. 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 document take effect. However, section 553(b) of the 
Administrative Procedure Act provides for waiver of this procedure, if 
an agency for good cause finds that the notice and comment procedure is 
impracticable, unnecessary, or contrary to the public interest and 
incorporates a statement of the finding and the reasons for it into the 
notice issued.
    Subsequent to the publication of the proposed rule on November 15, 
2002, the Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 (P.L. 108-173) was enacted on December 8, 2003. Title IX of 
the MMA includes a number of essentially nondiscretionary provisions 
that directly affect the Medicare claims appeals process. As discussed 
below, we find good cause to incorporate these

[[Page 11472]]

requirements into this interim final rule, rather than to issue a 
notice of proposed rulemaking to address statutory changes. Due to the 
close relationship between the provisions of the rule that address new 
MMA requirements and the policies that were included in the November 
15, 2002 proposed rule, we are soliciting comments on all provisions 
contained in this interim final rule and, as required under section 902 
of the MMA, will publish a subsequent final rule addressing any 
comments received in response to this interim final rule not later than 
3 years after the publication date of this rule. The BIPA section 521 
provisions have previously been subject to comment in the proposed rule 
of November 15, 2002. The comments received in response to that 
proposed rule are described in this interim final rule, and the 
policies included in this interim final rule reflect those comments.
    As a rule, the MMA appeals provisions are straightforward and self-
explanatory and do not involve significant agency discretion in how 
they should be implemented. For example, section 940 of the MMA 
establishes new decisionmaking timeframes for both redeterminations and 
reconsiderations, and it would be unnecessary and contrary to the 
public interest not to implement these deadlines as soon as possible. 
Similarly, section 939 of the MMA establishes new appeal rights for 
providers when a beneficiary dies and there is no other party available 
to appeal a determination; not implementing this provision as soon as 
practicable would again be contrary to the public interest.
    Not only would proposed rulemaking be unnecessary and contrary to 
the public interest, it would also be impracticable. The BIPA 
provisions that were set forth in our proposed rule are in many cases 
inextricably linked with the subsequent MMA provisions, and it would be 
virtually impossible to finalize the proposed rule without 
incorporating the MMA provisions. Moreover, the MMA legislation 
mandated provisions that were nearly identical to those set forth in 
the proposed rule, such as the requirements concerning the full and 
early presentation of evidence under section 933(a) of the MMA and the 
new notice requirements for Medicare appeals under 933(c) of the MMA. 
Even absent the MMA provisions, the requirements set forth in this 
interim final rule would have constituted logical outgrowths of the 
proposed rule, and it would be both impracticable and illogical not to 
incorporate these requirements into this regulation.
    Thus, we believe there is good cause to include the appeals 
provisions of the MMA along with the appeals provisions of BIPA (which 
were previously addressed in the proposed rule) in this interim final 
rule. Publishing these provisions in an interim final rule will give 
the public ample opportunity to submit comments. Note that given the 
close linkage between many of the proposed requirements and those set 
forth under the MMA, we believe it is appropriate to consider comments 
on all aspects of this rule, including those that have previously been 
subject to notice and comment. Publication of this interim final rule 
will serve the public interest by ensuring that Medicare beneficiaries, 
providers, and suppliers have access to the improved Medicare appeals 
system as expeditiously as possible, consistent with congressional 
intent.

List of Subjects

42 CFR Part 401

    Claims, Freedom of information, Health facilities, Medicare, 
Privacy.

42 CFR Part 405

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


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

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

Subpart B--Confidentiality and Disclosure

0
1. The authority citation for part 401 continues to read as follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh). Subpart F is also issued under the 
authority of the Federal Claims Collection Act (31 U.S.C. 3711).

0
2. Amend Sec.  401.108 by revising paragraph (c) to read as follows:


Sec.  401.108  CMS rulings.

* * * * *
    (c) CMS Rulings are published under the authority of the 
Administrator, CMS. They are binding on all CMS components, on all HHS 
components that adjudicate matters under the jurisdiction of CMS, and 
on the Social Security Administration to the extent that components of 
the Social Security Administration adjudicate matters pertaining to 
Medicare Part A and Medicare Part B under the jurisdiction of CMS.

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

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

    Authority: Secs. 205(a) 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a) 1302, 
1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 1395ww(k)), and 
Sec. 353 of the Public Health Service Act (42 U.S.C. 263a).

0
4. Add a new subpart I, Sec.  405.900 through Sec.  405.1140 to read as 
follows:

Subpart I--Determinations, Redeterminations, Reconsiderations, and 
Appeals Under Original Medicare (Parts A and B)

Sec.
405.900 Basis and scope.
405.902 Definitions.
405.904 Medicare initial determinations, redeterminations and 
appeals: General description.
405.906. Parties to the initial determinations, redeterminations, 
reconsiderations, hearings and reviews.
405.908 Medicaid State agencies.
405.910 Appointed representatives.
405.912 Assignment of appeal rights.

Initial Determinations

405.920 Initial determinations.
405.921 Notice of initial determination.
405.922 Time frame for processing initial determinations.
405.924 Actions that are initial determinations.
405.926 Actions that are not initial determinations.
405.927 Initial determinations subject to the reopenings process.
405.928 Effect of the initial determination.

Redeterminations

405.940 Right to a redetermination.
405.942 Time frame for filing a request for a redetermination.
405.944 Place and method of filing a request for a redetermination.
405.946 Evidence to be submitted with the redetermination request.
405.948 Conduct of a redetermination.
405.950 Time frame for making a redetermination.
405.952 Withdrawal or dismissal of a request for a redetermination.
405.954 Redetermination.
405.956 Notice of a redetermination.
405.958 Effect of a redetermination.

Reconsideration

405.960 Right to a reconsideration.
405.962 Time frame for filing a request for a reconsideration.
405.964 Place and method of filing a request for a reconsideration.
405.966 Evidence to be submitted with the reconsideration request.

[[Page 11473]]

405.968 Conduct of a reconsideration.
405.970 Time frame for making a reconsideration.
405.972 Withdrawal or dismissal of a request for a reconsideration.
405.974 Reconsideration.
405.976 Notice of a reconsideration.
405.978 Effect of a reconsideration.

Reopenings

405.980 Reopenings of initial determinations, redeterminations, and 
reconsiderations, hearings and reviews.
405.982 Notice of a revised determination or decision.
405.984 Effect of a revised determination or decision.
405.986 Good cause for reopening.

Expedited Access to Judicial Review

405.990 Expedited access to judicial review.

ALJ Hearings

405.1000 Hearing before an ALJ: General rule.
405.1002 Right to an ALJ hearing.
405.1004 Right to ALJ review of QIC notice of dismissal.
405.1006 Amount in controversy required to request an ALJ hearing 
and judicial review.
405.1008 Parties to an ALJ hearing.
405.1010 When CMS or its contractors may participate in an ALJ 
hearing.
405.1012 When CMS or its contractors may be a party to a hearing.
405.1014 Request for an ALJ hearing.
405.1016 Time frames for deciding an appeal before an ALJ.
405.1018 Submitting evidence before the ALJ hearing.
405.1020 Time and place for a hearing before an ALJ.
405.1022 Notice of a hearing before an ALJ.
405.1024 Objections to the issues.
405.1026 Disqualification of the ALJ.
405.1028 Prehearing case review of evidence submitted to the ALJ by 
the appellant.
405.1030 ALJ hearing procedures.
405.1032 Issues before an ALJ.
405.1034 When an ALJ may remand a case to the QIC.
405.1036 Description of an ALJ hearing process.
405.1037 Discovery.
405.1038 Deciding a case without a hearing before an ALJ.
405.1040 Prehearing and posthearing conferences.
405.1042 The administrative record.
405.1044 Consolidated hearing before an ALJ.
405.1046 Notice of an ALJ decision.
405.1048 The effect of an ALJ's decision.
405.1050 Removal of a hearing request from an ALJ to the MAC.
405.1052 Dismissal of a request for a hearing before an ALJ.
405.1054 Effect of dismissal of a request for a hearing before an 
ALJ.

Applicability of Medicare Coverage Policies

405.1060 Applicability of nation coverage determinations (NCDs).
405.1062 Applicability of local coverage determinations and other 
policies not binding on the ALJ and MAC.
405.1063 Applicability of CMS rulings.
405.1064 ALJ decisions involving statistical samples.

Medicare Appeals Council Review

405.1100 Medicare Appeals Council review: General.
405.1102 Request for MAC review when an ALJ issues decision or 
dismissal.
405.1104 Request for MAC review when an ALJ does not issue a 
decision timely.
405.1106 Where a request for review or escalation may be filed.
405.1108 MAC actions when request for review or escalation is filed.
405.1110 MAC reviews on its own motion.
405.1112 Content of request for review.
405.1114 Dismissal of request for review.
405.1116 Effect of dismissal of request for MAC review or request 
for hearing.
405.1118 Obtaining evidence from the MAC.
405.1120 Filling briefs with the MAC.
405.1122 What evidence may be submitted to the MAC.
405.1124 Oral argument.
405.1126 Case remanded by the MAC.
405.1128 Action of the MAC.
405.1130 Effect of the MAC's decision.
405.1132 Request for escalation to Federal district court.
405.1134 Extension of time to file action in Federal district court.
405.1136 Judicial review.
405.1138 Case remanded by a Federal district court.
405.1140 MAC review of ALJ decision in a case remanded by a Federal 
district court.

Subpart I--Determinations, Redeterminations, Reconsiderations, and 
Appeals Under Original Medicare (Part A and Part B)


Sec.  405.900  Basis and scope.

    (a) Statutory basis. This subpart is based on the provisions of 
sections 1869 (a) through (e) and (g) of the Act.
    (b) Scope. This subpart establishes the requirements for appeals of 
initial determinations for benefits under Part A or Part B of Medicare, 
including the following:
    (1) The initial determination of whether an individual is entitled 
to benefits under Part A or Part B. (Regulations governing 
reconsiderations of these initial determinations are at 20 CFR, part 
404, subpart J).
    (2) The initial determination of the amount of benefits available 
to an individual under Part A or Part B.
    (3) Any other initial determination relating to a claim for 
benefits under Part A or Part B, including an initial determination 
made by a quality improvement organization under section 1154(a)(2) of 
the Act or by an entity under contract with the Secretary (other than a 
contract under section 1852 of the Act) to administer provisions of 
titles XVIII or XI of the Act.


Sec.  405.902  Definitions.

    For the purposes of this subpart, the term--
    ALJ means an Administrative Law Judge of the Department of Health 
and Human Services.
    Appellant means the beneficiary, assignee or other person or entity 
that has filed and pursued an appeal concerning a particular initial 
determination. Designation as an appellant does not in itself convey 
standing to appeal the determination in question.
    Appointed representative means an individual appointed by a party 
to represent the party in a Medicare claim or claim appeal.
    Assignee means:
    (1) A supplier that furnishes items or services to a beneficiary 
and has accepted a valid assignment of a claim or
    (2) A provider or supplier that furnishes items or services to a 
beneficiary, who is not already a party, and has accepted a valid 
assignment of the right to appeal a claim executed by the beneficiary.
    Assignment of a claim means the transfer by a beneficiary of his or 
her claim for payment to the supplier in return for the latter's 
promise not to charge more for his or her services than what the 
carrier finds to be the Medicare-approved amount, as provided in Sec.  
424.55 and Sec.  424.56 of this chapter.
    Assignment of appeal rights means the transfer by a beneficiary of 
his or her right to appeal under this subpart to a provider or supplier 
who is not already a party, as provided in section 1869(b)(1)(C) of the 
Act.
    Assignor means a beneficiary whose provider of services or supplier 
has taken assignment of a claim or an appeal of a claim.
    Authorized representative means an individual authorized under 
State or other applicable law to act on behalf of a beneficiary or 
other party involved in the appeal. The authorized representative will 
have all of the rights and responsibilities of a beneficiary or party, 
as applicable, throughout the appeals process.
    Beneficiary means an individual who is enrolled to receive benefits 
under Medicare Part A or Part B.
    Carrier means an organization that has entered into a contract with 
the Secretary in accordance to section 1842 of the Act and is 
authorized to make determinations for Part B of title XVIII of the Act.

[[Page 11474]]

    Clean claim means a claim that has no defect or impropriety 
(including any lack of required substantiating documentation) or 
particular circumstance requiring special treatment that prevents 
timely payment from being made on the claim under title XVIII within 
the time periods specified in sections 1816(c) and 1842(c) of the Act.
    Family member means for purposes of the QIC reconsideration panel 
under Sec.  405.968 the following persons as they relate to the 
physician or healthcare provider.
    (1) The spouse (other than a spouse who is legally separated from 
the physician or health care professional under a decree of divorce or 
separate maintenance);
    (2) Children (including stepchildren and legally adopted children);
    (3) Grandchildren;
    (4) Parents; and
    (5) Grandparents.
    Fiscal Intermediary means an organization that has entered into a 
contract with CMS in accordance with section 1816 of the Act and is 
authorized to make determinations and payments for Part A of title 
XVIII of the Act, and Part B provider services as specified in Sec.  
421.5(c) of this chapter.
    MAC stands for the Medicare Appeals Council within the Departmental 
Appeals Board of the U.S. Department of Health and Human Services.
    Party means an individual or entity listed in Sec.  405.906 that 
has standing to appeal an initial determination and/or a subsequent 
administrative appeal determination.
    Provider means a hospital, critical access hospital, skilled 
nursing facility, comprehensive outpatient rehabilitation facility, 
home health agency, or hospice that has in effect an agreement to 
participate in Medicare, or clinic, rehabilitation agency, or public 
health agency that has in effect a similar agreement, but only to 
furnish outpatient physical therapy or speech pathology services, or a 
community mental health center that has in effect a similar agreement 
but only to furnish partial hospitalization services.
    Qualified Independent Contractor (QIC) means an entity which 
contracts with the Secretary in accordance with section 1869 of the Act 
to perform reconsiderations under Sec.  405.960 through Sec.  405.978.
    Quality Improvement Organization (QIO) means an entity that 
contracts with the Secretary in accordance with sections 1152 and 1153 
of the Act and 42 CFR subchapter F, to perform the functions described 
in section 1154 of the Act and 42 CFR subchapter F, including expedited 
determinations as described in Sec.  405.1200 through Sec.  405.1208.
    Reliable evidence means evidence that is relevant, credible, and 
material.
    Remand means to vacate a lower level appeal decision, or a portion 
of the decision, and return the case, or a portion of the case, to that 
level for a new decision.
    Similar fault means to obtain, retain, convert, seek, or receive 
Medicare funds to which a person knows or should reasonably be expected 
to know that he or she or another for whose benefit Medicare funds are 
obtained, retained, converted, sought, or received is not legally 
entitled. This includes, but is not limited to, a failure to 
demonstrate that he or she filed a proper claim as defined in part 411 
of this chapter.
    Supplier means, unless the context otherwise requires, a physician 
or other practitioner, a facility, or other entity (other than a 
provider of services) that furnishes items or services under Medicare.
    Vacate means to set aside a previous action.


Sec.  405.904  Medicare initial determinations, redeterminations and 
appeals: General description.

    (a) General overview. (1) Entitlement appeals. The SSA makes an 
initial determination on an application for Medicare benefits and/or 
entitlement of an individual to receive Medicare benefits. A 
beneficiary who is dissatisfied with the initial determination may 
request, and SSA will perform, a reconsideration in accordance with 20 
CFR part 404, subpart J if the requirements for obtaining a 
reconsideration are met. Following the reconsideration, the beneficiary 
may request a hearing before an Administrative Law Judge (ALJ) under 
this subpart (42 CFR part 405, subpart I). If the beneficiary obtains a 
hearing before an ALJ and is dissatisfied with the decision of the ALJ, 
he or she may request the Medicare Appeals Council (MAC) to review the 
case. Following the action of the MAC, the beneficiary may be entitled 
to file suit in Federal district court.
    (2) Claim appeals. The Medicare contractor makes an initial 
determination when a claim for Medicare benefits under Part A or Part B 
is submitted. A beneficiary who is dissatisfied with the initial 
determination may request that the contractor perform a redetermination 
of the claim if the requirements for obtaining a redetermination are 
met. Following the contractor's redetermination, the beneficiary may 
request, and the Qualified Independent Contractor (QIC) will perform, a 
reconsideration of the claim if the requirements for obtaining a 
reconsideration are met. Following the reconsideration, the beneficiary 
may request, and the ALJ will conduct a hearing if the amount remaining 
in controversy and other requirements for an ALJ hearing are met. If 
the beneficiary is dissatisfied with the decision of the ALJ, he or she 
may request the MAC to review the case. If the MAC reviews the case and 
issues a decision, and the beneficiary is dissatisfied with the 
decision, the beneficiary may file suit in Federal district court if 
the amount remaining in controversy and the other requirements for 
judicial review are met.
    (b) Non-beneficiary appellants. In general, the procedures 
described in paragraph (a) of this section are also available to 
parties other than beneficiaries either directly or through a 
representative acting on a party's behalf, consistent with the 
requirements of this subpart I. A provider generally has the right to 
judicial review only as provided under section 1879(d) of the Act; that 
is, when a determination involves a finding that services are not 
covered because--
    (1) They were custodial care (see Sec.  411.15(g) of this chapter); 
they were not reasonable and necessary (see Sec.  411.15(k) of this 
chapter); they did not qualify as covered home health services because 
the beneficiary was not confined to the home or did not need skilled 
nursing care on an intermittent basis (see Sec.  409.42(a) and (c)(1) 
of this chapter); or they were hospice services provided to a non-
terminally ill individual (see Sec.  418.22 of this chapter); and
    (2) Either the provider or the beneficiary, or both, knew or could 
reasonably be expected to know that those services were not covered 
under Medicare.


Sec.  405.906  Parties to the initial determinations, redeterminations, 
reconsiderations, hearings and reviews.

    (a) Parties to the initial determination. The parties to the 
initial determination are the following individuals and entities:
    (1) A beneficiary who files a claim for payment under Medicare Part 
A or Part B or has had a claim for payment filed on his or her behalf, 
or in the case of a deceased beneficiary, when there is no estate, any 
person obligated to make or entitled to receive payment in accordance 
with part 424, subpart E of this chapter. Payment by a third party 
payer does not entitle that entity to party status.

[[Page 11475]]

    (2) A supplier who has accepted assignment for items or services 
furnished to a beneficiary that are at issue in the claim.
    (3) A provider of services who files a claim for items or services 
furnished to a beneficiary.
    (b) Parties to the redetermination, reconsideration, hearing and 
MAC. The parties to the redetermination, reconsideration, hearing, and 
MAC review are--
    (1) The parties to the initial determination in accordance with 
paragraph (a) of this section, except under paragraph (a)(1) of this 
section where a beneficiary has assigned appeal rights under Sec.  
405.912;
    (2) A State agency in accordance with Sec.  405.908;
    (3) A provider or supplier that has accepted an assignment of 
appeal rights from the beneficiary according to Sec.  405.912;
    (4) A non-participating physician not billing on an assigned basis 
who, in accordance with section 1842(l) of the Act, may be liable to 
refund monies collected for services furnished to the beneficiary 
because those services were denied on the basis of section 1862(a)(1) 
of the Act; and
    (5) A non-participating supplier not billing on an assigned basis 
who, in accordance with sections 1834(a)(18) and 1834(j)(4) of the Act, 
may be liable to refund monies collected for items furnished to the 
beneficiary.
    (c) Appeals by providers and suppliers when there is no other party 
available. If a provider or supplier is not already a party to the 
proceeding in accordance with paragraphs (a) and (b) of this section, a 
provider of services or supplier may appeal an initial determination 
relating to services it rendered to a beneficiary who subsequently dies 
if there is no other party available to appeal the determination.


Sec.  405.908  Medicaid State agencies.

    When a beneficiary is enrolled to receive benefits under both 
Medicare and Medicaid, the Medicaid State agency may file a request for 
an appeal with respect to a claim for items or services furnished to a 
dually eligible beneficiary only for services for which the Medicaid 
State agency has made payment, or for which it may be liable. A 
Medicaid State agency is considered a party only when it files a timely 
redetermination request with respect to a claim for items or services 
furnished to a beneficiary in accordance with 42 CFR parts 940 through 
958. If a State agency files a request for redetermination, it may 
retain party status at the QIC, ALJ, MAC, and judicial review levels.


Sec.  405.910  Appointed representatives.

    (a) Scope of representation. An appointed representative may act on 
behalf of an individual or entity in exercising his or her right to an 
initial determination or appeal. Appointed representatives do not have 
party status and may take action only on behalf of the individual or 
entity that they represent.
    (b) Persons not qualified. A party may not name as an appointed 
representative, an individual who is disqualified, suspended, or 
otherwise prohibited by law from acting as a representative in any 
proceedings before DHHS, or in entitlement appeals, before SSA.
    (c) Completing a valid appointment. For purposes of this subpart, 
an appointment of representation must:
    (1) Be in writing and signed and dated by both the party and 
individual agreeing to be the representative;
    (2) Provide a statement appointing the representative to act on 
behalf of the party, and in the case of a beneficiary, authorizing the 
adjudicator to release identifiable health information to the appointed 
representative.
    (3) Include a written explanation of the purpose and scope of the 
representation;
    (4) Contain both the party's and appointed representative's name, 
phone number, and address;
    (5) Identify the beneficiary's Medicare health insurance claim 
number;
    (6) Include the appointed representative's professional status or 
relationship to the party;
    (7) Be filed with the entity processing the party's initial 
determination or appeal.
    (d) Curing a defective appointment of representative.
    (1) If any one of the seven elements named in paragraph (c) of this 
section is missing from the appointment, the adjudicator should contact 
the party and provide a description of the missing documentation or 
information.
    (2) Unless the defect is cured, the prospective appointed 
representative lacks the authority to act on behalf of the party, and 
is not entitled to obtain or receive any information related to the 
appeal, including the appeal decision.
    (e) Duration of appointment. (1) Unless revoked, an appointment is 
considered valid for 1 year from the date that the Appointment of 
Representative (AOR) form or other conforming written instrument 
contains the signatures of both the party and the appointed 
representative.
    (2) To initiate an appeal within the 1-year time frame, the 
representative must file a copy of the AOR form, or other conforming 
written instrument, with the appeal request. Unless revoked, the 
representation is valid for the duration of an individual's appeal of 
an initial determination.
    (3) For an initial determination of a Medicare Secondary Payer 
recovery claim, an appointment signed in connection with the party's 
efforts to make a claim for third party payment is valid from the date 
that appointment is signed for the duration of any subsequent appeal, 
unless the appointment is specifically revoked.
    (f) Appointed representative fees. (1) General rule. An appointed 
representative for a beneficiary who wishes to charge a fee for 
services rendered in connection with an appeal before the Secretary 
must obtain approval of the fee from the Secretary. Services rendered 
below the ALJ level are not considered proceedings before the 
Secretary.
    (2) No fees or costs against trust funds. No award of attorney or 
any other representative's fees or any costs in connection with an 
appeal may be made against the Medicare trust funds.
    (3) Special rules for providers and suppliers. A provider or 
supplier that furnished the items or services to a beneficiary that are 
the subject of the appeal may represent that beneficiary in an appeal 
under this subpart, but the provider or supplier may not charge the 
beneficiary any fee associated with the representation. If a provider 
or supplier furnishes services or items to a beneficiary, the provider 
or supplier may not represent the beneficiary on the issues described 
in section 1879(a)(2) of the Act, unless the provider or supplier 
waives the right to payment from the beneficiary for the services or 
items involved in the appeal.
    (4) Special rules for purposes of third party payment. The 
Secretary does not review fee arrangements made by a beneficiary for 
purposes of making a claim for third party payment (as defined in 42 
CFR 411.21) even though the representation may ultimately include 
representation for a Medicare Secondary Payer recovery claim.
    (5) Reasonableness of representative fees. In determining the 
reasonableness of a representative's fee, the Secretary will not apply 
the test specified in sections 206(a)(2) and (a)(3) of the Act.
    (g) Responsibilities of an appointed representative. (1) An 
appointed representative has an affirmative duty to--
    (i) Inform the party of the scope and responsibilities of the 
representation;

[[Page 11476]]

    (ii) Inform the party of the status of the appeal and the results 
of actions taken on behalf of the party, including, but not limited to, 
notification of appeal determinations, decisions, and further appeal 
rights;
    (iii) Disclose to a beneficiary any financial risk and liability of 
a non-assigned claim that the beneficiary may have;
    (iv) Not act contrary to the interest of the party; and
    (v) Comply with all laws and CMS regulations, CMS Rulings, and 
instructions.
    (2) An appeal request filed by a provider or supplier described in 
paragraph (f)(3) of this section must also include a statement signed 
by the provider or supplier stating that no financial liability is 
imposed on the beneficiary in connection with that representation. If 
applicable, the appeal request must also include a signed statement 
that the provider or supplier waives the right to payment from the 
beneficiary for services or items regarding issues described in section 
1879(a)(2) of the Act.
    (h) Authority of an appointed representative. An appointed 
representative may, on behalf of the party--
    (1) Obtain appeals information about the claim to the same extent 
as the party;
    (2) Submit evidence;
    (3) Make statements about facts and law; and
    (4) Make any request, or give, or receive, any notice about the 
appeal proceedings.
    (i) Notice or request to an appointed representative.
    (1) Initial determinations. When a contractor takes an action or 
issues an initial determination, it sends the action or notice to the 
party.
    (2) Appeals. When a contractor, QIC, ALJ, or the MAC takes an 
action or issues a redetermination, reconsideration, or appeal 
decision, in connection with an initial determination, it sends notice 
of the action to the appointed representative.
    (3) The contractor, QIC, ALJ or MAC sends any requests for 
information or evidence regarding a claim that is appealed to the 
appointed representative. The contractor sends any requests for 
information or evidence regarding an initial determination to the 
party.
    (4) For initial determinations and appeals involving Medicare 
Secondary Payer recovery claims, the adjudicator sends notices and 
requests to both the beneficiary and the appointed representative.
    (j) Effect of notice or request to an appointed representative. A 
notice or request sent to the appointed representative has the same 
force and effect as if was sent to the party.
    (k) Information available to the appointed representative. An 
appointed representative may obtain any and all appeals information 
applicable to the claim at issue that is available to the party.
    (l) Delegation of appointment by appointed representative. An 
appointed representative may not designate another individual to act as 
the appointed representative of the party unless--
    (1) The appointed representative provides written notice to the 
party of the appointed representative's intent to delegate to another 
individual. The notice must include:
    (i) The name of the designee; and
    (ii) The designee's acceptance to be obligated and comply with the 
requirements of representation under this subpart.
    (2) The party accepts the designation as evidenced by a written 
statement signed by the party. This signed statement is not required 
when the appointed representative and designee are attorneys in the 
same law firm or organization.
    (m) Revoking the appointment of representative. (1) A party may 
revoke an appointment of representative without cause at any time.
    (2) Revocation. Revocation is not effective until the adjudicator 
receives a signed, written statement from the party.
    (3) Death of the party. (i) The death of a party terminates the 
authority of the appointed representative, except as specified in 
paragraph (m)(3)(ii) of this section.
    (ii) A party's death does not terminate an appeal that is in 
progress if another individual or entity may be entitled to receive or 
obligated to make payment for the items or services that are the 
subject of the appeal. The appointment of representative remains in 
effect for the duration of the appeal except for MSP recovery claims.


Sec.  405.912  Assignment of appeal rights.

    (a) Who may be an assignee. Only a provider, or supplier that--
    (1) Is not a party to the initial determination as defined in Sec.  
405.906; and
    (2) Furnished an item or service to the beneficiary may seek 
assignment of appeal rights from the beneficiary for that item or 
service.
    (b) Who may not be an assignee. An individual or entity who is not 
a provider or supplier may not be an assignee. A provider or supplier 
that furnishes an item or service to a beneficiary may not seek 
assignment for that item or service when considered a party to the 
initial determination as defined in Sec.  405.906.
    (c) Requirements for a valid assignment of appeal right. The 
assignment of appeal rights must--
    (1) Be executed using a CMS standard form;
    (2) Be in writing and signed by both the beneficiary assigning his 
or her appeal rights and by the assignee;
    (3) Indicate the item or service for which the assignment of appeal 
rights is authorized;
    (4) Contain a waiver of the assignee's right to collect payment 
from the assignor for the specific item or service that are the subject 
of the appeal except as set forth in paragraph (d)(2) of this section; 
and
    (5) Be submitted at the same time the request for redetermination 
or other appeal is filed.
    (d) Waiver of right to collect payment. (1) Except as specified in 
paragraph (d)(2) of this section, the assignee must waive the right to 
collect payment for the item or service for which the assignment of 
appeal rights is made. If the assignment is revoked under paragraph 
(g)(2) or (g)(3) of this section, the waiver of the right to collect 
payment nevertheless remains valid. A waiver of the right to collect 
payment remains in effect regardless of the outcome of the appeal 
decision.
    (2) The assignee is not prohibited from recovering payment 
associated with coinsurance or deductibles or when an advance 
beneficiary notice is properly executed.
    (e) Duration of a valid assignment of appeal rights. Unless 
revoked, the assignment of appeal rights is valid for all 
administrative and judicial review associated with the item or service 
as indicated on the standard CMS form, even in the event of the death 
of the assignor.
    (f) Rights of the assignee. When a valid assignment of appeal 
rights is executed, the assignor transfers all appeal rights involving 
the particular item or service to the assignee. These include, but are 
not limited to--
    (1) Obtaining information about the claim to the same extent as the 
assignor;
    (2) Submitting evidence;
    (3) Making statements about facts or law; and
    (4) Making any request, or giving, or receiving any notice about 
appeal proceedings.
    (g) Revocation of assignment. When an assignment of appeal rights 
is

[[Page 11477]]

revoked, the rights to appeal revert to the assignee. An assignment of 
appeal rights may be revoked in any of the following ways:
    (1) In writing by the assignor. The revocation of assignment must 
be delivered to the adjudicator and the assignor, and is effective on 
the date of receipt by the adjudicator.
    (2) By abandonment if the assignee does not file an appeal of an 
unfavorable decision.
    (3) By act or omission by the assignee that is determined by an 
adjudicator to be contrary to the financial interests of the assignor.
    (h) Responsibilities of the assignee. Once the assignee files an 
appeal, the assignee becomes a party to the appeal. The assignee must 
meet all requirements for appeals that apply to any other party.

Initial Determinations


Sec.  405.920  Initial determinations.

    After a claim is filed with the appropriate contractor in the 
manner and form described in subpart C of part 424 of this chapter, the 
contractor must--
    (a) Determine if the items and services furnished are covered or 
otherwise reimbursable under title XVIII of the Act;
    (b) Determine any amounts payable and make payment accordingly; and
    (c) Notify the parties to the initial determination of the 
determination in accordance with Sec.  405.921.


Sec.  405.921  Notice of initial determination.

    (a) Notice of initial determination sent to the beneficiary. (1) 
The notice must be written in a manner calculated to be understood by 
the beneficiary, and sent to the last known address of the beneficiary;
    (2) Content of the notice. The notice of initial determination must 
contain--
    (i) The reasons for the determination, including whether a local 
medical review policy, a local coverage determination, or national 
coverage determination was applied;
    (ii) The procedures for obtaining additional information concerning 
the contractor's determination, such as a specific provision of the 
policy, manual, law or regulation used in making the determination;
    (iii) Information on the right to a redetermination if the 
beneficiary is dissatisfied with the outcome of the initial 
determination and instructions on how to request a redetermination; and
    (iv) Any other requirements specified by CMS.
    (b) Notice of initial determination sent to providers and 
suppliers.
    (1) An electronic or paper remittance advice (RA) notice is the 
notice of initial determination sent to providers and suppliers that 
accept assignment. The electronic RA must comply with the format and 
content requirements of the standard adopted for national use by 
covered entities under the Health Insurance Portability and 
Accountability Act (HIPAA) and related CMS manual instructions. When a 
paper RA is mailed, it must comply with CMS manual instructions that 
parallel the HIPAA data content and coding requirements.
    (2) The notice of initial determination must contain:
    (i) The basis for any full or partial denial determination of 
services or items on the claim;
    (ii) Information on the right to a redetermination if the provider 
or supplier is dissatisfied with the outcome of the initial 
determination;
    (iii) All applicable claim adjustment reason and remark codes to 
explain the determination;
    (iv) The source of the RA and who may be contacted if the provider 
or supplier requires further information;
    (v) All content requirements of the standard adopted for national 
use by covered entities under HIPAA; and
    (vi) Any other requirements specified by CMS.


Sec.  405.922  Time frame for processing initial determinations.

    The contractor issues initial determinations on clean claims within 
30 days of receipt if they are submitted by or on behalf of the 
beneficiary who received the items and/or services; otherwise, interest 
must be paid at the rate specified at 31 U.S.C. 3902(a) for the period 
beginning on the day after the required payment date and ending on the 
date payment is made.


Sec.  405.924  Actions that are initial determinations.

    (a) Applications and entitlement of individuals. SSA makes initial 
determinations and processes reconsiderations with respect to an 
individual on the following:
    (1) A determination with respect to entitlement to hospital 
insurance or supplementary medical insurance under Medicare.
    (2) A disallowance of an individual's application for entitlement 
to hospital or supplementary medical insurance, if the individual fails 
to submit evidence requested by SSA to support the application. (SSA 
specifies in the initial determination the conditions of entitlement 
that the applicant failed to establish by not submitting the requested 
evidence).
    (3) A denial of a request for withdrawal of an application for 
hospital or supplementary medical insurance, or a denial of a request 
for cancellation of a request for withdrawal.
    (4) A determination as to whether an individual, previously 
determined as entitled to hospital or supplementary medical insurance, 
is no longer entitled to those benefits, including a determination 
based on nonpayment of premiums.
    (b) Claims made by or on behalf of beneficiaries. The Medicare 
contractor makes initial determinations regarding claims for benefits 
under Medicare Part A and Part B. A finding that a request for payment 
or other submission does not meet the requirements for a Medicare claim 
as defined in Sec.  424.32 of this chapter, is not considered an 
initial determination. An initial determination for purposes of this 
subpart includes, but is not limited to, determinations with respect 
to:
    (1) If the items and/or services furnished are covered under title 
XVIII;
    (2) In the case of determinations on the basis of section 1879(b) 
or (c) of the Act, if the beneficiary, or supplier who accepts 
assignment under Sec.  424.55 of this chapter knew, or could reasonably 
have expected to know at the time the items or services were furnished, 
that the items or services were not covered;
    (3) In the case of determinations on the basis of section 
1842(l)(1) of the Act, if the beneficiary or physician knew, or could 
reasonably have expected to know at the time the services were 
furnished, that the services were not covered;
    (4) Whether the deductible is met;
    (5) The computation of the coinsurance amount;
    (6) The number of days used for inpatient hospital, psychiatric 
hospital, or post-hospital extended care;
    (7) The number of home health visits used;
    (8) Periods of hospice care used;
    (9) Requirements for certification and plan of treatment for 
physician services, durable medical equipment, therapies, inpatient 
hospitalization, skilled nursing care, home health, hospice, and 
partial hospitalization services;
    (10) The beginning and ending of a spell of illness, including a 
determination made under the presumptions established under Sec.  
409.60(c)(2) of this chapter, and as specified in Sec.  409.60(c)(4) of 
this chapter;
    (11) The medical necessity of services, or the reasonableness or 
appropriateness of placement of an individual at an

[[Page 11478]]

acute level of patient care made by the Quality Improvement 
Organization (QIO) on behalf of the contractor in accordance with Sec.  
476.86(c)(1) of this chapter;
    (12) Any other issues having a present or potential effect on the 
amount of benefits to be paid under Part A or Part B of Medicare, 
including a determination as to whether there was an underpayment of 
benefits paid under Part A or Part B, and if so, the amount thereof;
    (13) If a waiver of adjustment or recovery under sections 1870(b) 
and (c) of the Act is appropriate:
    (i) When an overpayment of hospital insurance benefits or 
supplementary medical insurance benefits (including a payment under 
section 1814(e) of the Act) was made for an individual; or
    (ii) For a Medicare Secondary Payer recovery claim against a 
beneficiary or against a provider or supplier.
    (14) If a particular claim is not payable by Medicare based upon 
the application of the Medicare Secondary Payer provisions of section 
1862(b) of the Act.
    (15) Under the Medicare Secondary Payer provisions of sections 
1862(b) of the Act that Medicare has a recovery claim against a 
provider, supplier, or beneficiary for services or items that were 
already paid by the Medicare program, except when the Medicare 
Secondary Payer recovery claim against the provider or supplier is 
based upon failure to file a proper claim as defined in part 411 of 
this chapter because this action is a reopening.
    (c) Determinations by QIOs. An initial determination for purposes 
of this subpart also includes a determination made by a QIO that:
    (1) A provider can terminate services provided to an individual 
when a physician certified that failure to continue the provision of 
those services is likely to place the individual's health at 
significant risk; or
    (2) A provider can discharge an individual from the provider of 
services.


Sec.  405.926  Actions that are not initial determinations.

    Actions that are not initial determinations and are not appealable 
under this subpart include, but are not limited to--
    (a) Any determination for which CMS has sole responsibility, for 
example--
    (1) If an entity meets the conditions for participation in the 
program;
    (2) If an independent laboratory meets the conditions for coverage 
of services;
    (b) The coinsurance amounts prescribed by regulation for outpatient 
services under the prospective payment system;
    (c) Any issue regarding the computation of the payment amount of 
program reimbursement of general applicability for which CMS or a 
carrier has sole responsibility under Part B such as the establishment 
of a fee schedule set forth in part 414 of this chapter, or an inherent 
reasonableness adjustment pursuant to Sec.  405.502(g), and any issue 
regarding the cost report settlement process under Part A;
    (d) Whether an individual's appeal meets the qualifications for 
expedited access to judicial review provided in Sec.  405.990;
    (e) Any determination regarding whether a Medicare overpayment 
claim must be compromised, or collection action terminated or suspended 
under the Federal Claims Collection Act of 1966, as amended;
    (f) Determinations regarding the transfer or discharge of residents 
of skilled nursing facilities in accordance with Sec.  483.12 of this 
chapter;
    (g) Determinations regarding the readmission screening and annual 
resident review processes required by subparts C and E of part 483 of 
this chapter;
    (h) Determinations for a waiver of Medicare Secondary Payer 
recovery under section 1862(b) of the Act;
    (i) Determinations for a waiver of interest;
    (j) Determinations for a finding regarding the general 
applicability of the Medicare Secondary Payer provisions (as opposed to 
the application in a particular case);
    (k) Determinations under the Medicare Secondary Payer provisions of 
section 1862(b) of the Act that Medicare has a recovery against an 
entity that was or is required or responsible (directly, as an insurer 
or self-insurer, as a third party administrator, as an employer that 
sponsors or contributes to a group health plan or a large group health 
plan, or otherwise,) to make payment for services or items that were 
already reimbursed by the Medicare program;
    (l) A contractor's, QIC's, ALJ's, or MAC's determination or 
decision to reopen or not to reopen an initial determination, 
redetermination, reconsideration, hearing decision, or review decision;
    (m) Determinations that CMS or its contractors may participate in 
or act as parties in an ALJ hearing or MAC review;
    (n) Determinations that a provider or supplier failed to submit a 
claim or failed to submit a timely claim despite being requested to do 
so by the beneficiary or the beneficiary's subrogee;
    (o) Determinations with respect to whether an entity qualifies for 
an exception to the electronic claims submission requirement under part 
424 of this chapter;
    (p) Determinations by the Secretary of sustained or high levels of 
payment errors in accordance with section 1893(f)(3)(A) of the Act;
    (q) A contractor's prior determination related to coverage of 
physicians' services;
    (r) Requests for anticipated payment under the home health 
prospective payment system under Sec.  409.43(c)(ii)(2) of this 
chapter; and
    (s) Claim submissions on forms or formats that are incomplete, 
invalid, or do not meet the requirements for a Medicare claim and 
returned or rejected to the provider or supplier.


Sec.  405.927  Initial determinations subject to the reopenings 
process.

    Minor errors or omissions in an initial determination must be 
corrected only through the contractor's reopenings process under Sec.  
405.980(a)(3).


Sec.  405.928  Effect of the initial determination.

    (a) An initial determination described in Sec.  405.924(a) is 
binding unless it is revised or reconsidered in accordance with 20 CFR 
404.907, or revised as a result of a reopening in accordance with 20 
CFR 404.988.
    (b) An initial determination described in Sec.  405.924(b) is 
binding upon all parties to the initial determination unless--
    (1) A redetermination is completed in accordance with Sec.  405.940 
through Sec.  405.958; or
    (2) The initial determination is revised as a result of a reopening 
in accordance with Sec.  405.980.
    (c) An initial determination listed in Sec.  405.924(b) where a 
party submits a timely, valid request for redetermination under Sec.  
405.942 through Sec.  405.944 must be processed as a redetermination 
under Sec.  405.948 through Sec.  405.958 unless the initial 
determination involves a clerical error or other minor error or 
omission.

Redeterminations


Sec.  405.940  Right to a redetermination.

    A person or entity that may be a party to a redetermination in 
accordance with Sec.  405.906(b) and that is dissatisfied with an 
initial determination may request a redetermination by a contractor in 
accordance with Sec.  405.940 through Sec.  405.958, regardless of the 
amount in controversy.

[[Page 11479]]

Sec.  405.942  Time frame for filing a request for a redetermination.

    (a) Time frame for filing a request. Except as provided in 
paragraph (b) of this section, any request for redetermination must be 
filed within 120 calendar days from the date a party receives the 
notice of the initial determination.
    (1) For purposes of this section, the date of receipt of the 
initial determination will be presumed to be 5 days after the date of 
the notice of initial determination, unless there is evidence to the 
contrary.
    (2) The request is considered as filed on the date it is received 
by the contractor.
    (b) Extending the time frame for filing a request. General rule. If 
the 120-day period in which to file a request for a redetermination has 
expired and a party shows good cause, the contractor may extend the 
time frame for filing a request for redetermination.
    (1) How to request an extension. A party may file a request for an 
extension of time for filing a request for a redetermination with the 
contractor. The party should include any evidence supporting the 
request for extension. The request for redetermination extension must--
    (i) Be in writing;
    (ii) State why the request for redetermination was not filed within 
the required time frame; and
    (iii) Meet the requirements of Sec.  405.944.
    (2) How the contractor determines if good cause exists. In 
determining if a party has good cause for missing a deadline to request 
a redetermination, the contractor considers--
    (i) The circumstances that kept the party from making the request 
on time;
    (ii) If the contractor's action(s) misled the party; and
    (iii) If the party had or has any physical, mental, educational, or 
linguistic limitations, including any lack of facility with the English 
language, that prevented the party from filing a timely request or from 
understanding or knowing about the need to file a timely request.
    (3) Examples of good cause. Examples of circumstances when good 
cause may be found to exist include, but are not limited to, the 
following situations:
    (i) The party was prevented by serious illness from contacting the 
contractor in person, in writing, or through a friend, relative, or 
other person; or
    (ii) The party had a death or serious illness in his or her 
immediate family; or
    (iii) Important records of the party were destroyed or damaged by 
fire or other accidental cause; or
    (iv) The contractor gave the party incorrect or incomplete 
information about when and how to request a redetermination; or
    (v) The party did not receive notice of the determination or 
decision; or
    (vi) The party sent the request to a Government agency in good 
faith within the time limit, and the request did not reach the 
appropriate contractor until after the time period to file a request 
expired.


Sec.  405.944  Place and method of filing a request for a 
redetermination.

    (a) Filing location. The request for redetermination must be filed 
with the contractor indicated on the notice of initial determination.
    (b) Content of redetermination request. The request for 
redetermination must be in writing and should be made on a standard CMS 
form. A written request that is not made on a standard CMS form is 
accepted if it contains the same required elements as follows:
    (1) The beneficiary's name;
    (2) The Medicare health insurance claim number;
    (3) Specific service(s) and/or item(s) for which the 
redetermination is being requested and the specific date(s) of the 
service;
    (4) The name and signature of the party or the representative of 
the party.
    (c) Requests for redetermination by more than one party. If more 
than one party timely files a request for redetermination on the same 
claim before a redetermination is made on the first timely filed 
request, the contractor must consolidate the separate requests into one 
proceeding and issue one redetermination.


Sec.  405.946  Evidence to be submitted with the redetermination 
request.

    (a) Evidence submitted with the request. When filing the request 
for redetermination, a party must explain why it disagrees with the 
contractor's determination and should include any evidence that the 
party believes should be considered by the contractor in making its 
redetermination.
    (b) Evidence submitted after the request. When a party submits 
additional evidence after filing the request for redetermination, the 
contractor's 60-day decision-making time frame is automatically 
extended for 14 calendar days for each submission.


Sec.  405.948  Conduct of a redetermination.

    A redetermination consists of an independent review of an initial 
determination. In conducting a redetermination, the contractor reviews 
the evidence and findings upon which the initial determination was 
based, and any additional evidence the parties submit or the contractor 
obtains on its own. An individual who was not involved in making the 
initial determination must make a redetermination. The contractor may 
raise and develop new issues that are relevant to the claims in the 
particular case.


Sec.  405.950  Time frame for making a redetermination.

    (a) General rule. The contractor mails, or otherwise transmits, 
written notice of the redetermination or dismissal to the parties to 
the redetermination at their last known addresses within 60 calendar 
days of the date the contractor receives a timely filed request for 
redetermination.
    (b) Exceptions. (1) If a contractor grants an appellant's request 
for an extension of the 120-day filing deadline made in accordance with 
Sec.  405.942(b), the 60-day decision-making time frame begins on the 
date the contractor receives the late-filed request for 
redetermination, or when the request for an extension is granted, 
whichever is later.
    (2) If a contractor receives from multiple parties timely requests 
for redetermination of a claim determination, consistent with Sec.  
405.944(c), the contractor must issue a redetermination or dismissal 
within 60 days of the latest filed request.
    (3) If a party submits additional evidence after the request for 
redetermination is filed, the contractor's 60-day decision-making time 
frame is extended for 14 calendar days for each submission, consistent 
with Sec.  405.946(b).


Sec.  405.952  Withdrawal or dismissal of a request for a 
redetermination.

    (a) Withdrawing a request. A party that files a request for 
redetermination may withdraw its request by filing a written and signed 
request for withdrawal. The request for withdrawal must contain a clear 
statement that the appellant is withdrawing the request for a 
redetermination and does not intend to proceed further with the appeal. 
The request must be received in the contractor's mailroom before a 
redetermination is issued. The appeal will proceed with respect to any 
other parties that have filed a timely request for redetermination.
    (b) Dismissing a request. A contractor dismisses a redetermination 
request, either entirely or as to any stated issue, under any of the 
following circumstances:

[[Page 11480]]

    (1) When the person or entity requesting a redetermination is not a 
proper party under Sec.  405.906(b) or does not otherwise have a right 
to a redetermination under section 1869(a) of the Act;
    (2) When the contractor determines the party failed to make out a 
valid request for redetermination that substantially complies with 
Sec.  405.944;
    (3) When the party fails to file the redetermination request within 
the proper filing time frame in accordance with Sec.  405.942;
    (4) When a beneficiary or the beneficiary's representative files a 
request for redetermination, but the beneficiary dies while the request 
is pending, and all of the following criteria apply:
    (i) The beneficiary's surviving spouse or estate has no remaining 
financial interest in the case. In deciding this issue, the contractor 
considers if the surviving spouse or estate remains liable for the 
services for which payment was denied or a Medicare contractor held the 
beneficiary liable for subsequent similar services under the limitation 
of liability provisions based on the denial of payment for services at 
issue;
    (ii) No other individual or entity with a financial interest in the 
case wishes to pursue the appeal; and
    (iii) No other party filed a valid and timely redetermination 
request under Sec.  405.942 and Sec.  405.944;
    (5) When a party filing the redetermination request submits a 
timely written request for withdrawal with the contractor; or
    (6) When the contractor has not issued an initial determination on 
the claim or the matter for which a redetermination is sought.
    (c) Notice of dismissal. A contractor mails or otherwise transmits 
a written notice of the dismissal of the redetermination request to the 
parties at their last known addresses. The notice states that there is 
a right to request that the contractor vacate the dismissal action.
    (d) Vacating a dismissal. If good and sufficient cause is 
established, a contractor may vacate its dismissal of a request for 
redetermination within 6 months from the date of the notice of 
dismissal.
    (e) Effect of dismissal. The dismissal of a request for 
redetermination is final and binding, unless it is modified or reversed 
by a QIC under Sec.  405.974(b) or vacated under paragraph (d) of this 
section.


Sec.  405.954  Redetermination.

    Upon the basis of the evidence of record, the contractor 
adjudicates the claim(s), and renders a redetermination affirming or 
reversing, in whole or in part, the initial determination in question.


Sec.  405.956  Notice of a redetermination.

    (a) Notification to parties. (1) General rule. Written notice of a 
redetermination affirming, in whole or in part, the initial 
determination must be mailed or otherwise transmitted to all parties at 
their last known addresses in accordance with the time frames 
established in Sec.  405.950. Written notice of a redetermination fully 
reversing the initial determination must be mailed or otherwise 
transmitted to the appellant in accordance with the time frames 
established in Sec.  405.950. If the redetermination results in 
issuance of supplemental payment to a provider or supplier, the 
Medicare contractor must also issue an electronic or paper RA notice to 
the provider or supplier.
    (2) Overpayment cases involving multiple beneficiaries who have no 
liability. In an overpayment case involving multiple beneficiaries who 
have no liability, the contractor may issue a written notice only to 
the appellant.
    (b) Content of the notice for affirmations, in whole or in part. 
For decisions that are affirmations, in whole or in part, of the 
initial determination, the redetermination must be written in a manner 
calculated to be understood by a beneficiary, and contain--
    (1) A clear statement indicating the extent to which the 
redetermination is favorable or unfavorable;
    (2) A summary of the facts, including, as appropriate, a summary of 
the clinical or scientific evidence used in making the redetermination;
    (3) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies apply to the facts of the case;
    (4) A summary of the rationale for the redetermination in clear, 
understandable language;
    (5) Notification to the parties of their right to a reconsideration 
and a description of the procedures that a party must follow in order 
to request a reconsideration, including the time frame within which a 
reconsideration must be requested;
    (6) A statement of any specific missing documentation that must be 
submitted with a request for a reconsideration, if applicable;
    (7) A statement that all evidence the appellant wishes to introduce 
during the claim appeals process should be submitted with the request 
for a reconsideration;
    (8) Notification that evidence not submitted to the QIC as 
indicated in paragraph (b)(6) of this section, is not considered at an 
ALJ hearing or further appeal, unless the appellant demonstrates good 
cause as to why that evidence was not provided previously; and
    (9) The procedures for obtaining additional information concerning 
the redetermination, such as specific provisions of the policy, manual, 
or regulation used in making the redetermination.
    (10) Any other requirements specified by CMS.
    (c) Content of the notice for a full reversal. For decisions that 
are full reversals of the initial determination, the redetermination 
must be in writing and contain--
    (1) A clear statement indicating that the redetermination is wholly 
favorable;
    (2) Any other requirements specified by CMS.
    (d) Exception for beneficiary appeal requests. (1) The notice must 
inform beneficiary appellants that the requirements of paragraph (b)(8) 
of this section are not applicable for purposes of beneficiary appeals.
    (2) This exception does not apply for appeal requests from 
beneficiaries who are represented by providers or suppliers.


Sec.  405.958  Effect of a redetermination.

    In accordance with section 1869 (a)(3)(D) of the Act, once a 
redetermination is issued, it becomes part of the initial 
determination. The redetermination is final and binding upon all 
parties unless--
    (a) A reconsideration is completed in accordance with Sec.  405.960 
through Sec.  405.978; or
    (b) The redetermination is revised as a result of a reopening in 
accordance with Sec.  405.980.

Reconsideration


Sec.  405.960  Right to a reconsideration.

    A person or entity that is a party to a redetermination made by a 
contractor as described under Sec.  405.940 through Sec.  405.958, and 
is dissatisfied with that determination, may request a reconsideration 
by a QIC in accordance with Sec.  405.962 through Sec.  405.966, 
regardless of the amount in controversy.


Sec.  405.962  Timeframe for filing a request for a reconsideration.

    (a) Timeframe for filing a request. Except as provided in paragraph 
(b) of this section, any request for a reconsideration must be filed 
within 180 calendar days from the date the

[[Page 11481]]

party receives the notice of the redetermination.
    (1) For purposes of this section, the date of receipt of the 
redetermination will be presumed to be 5 days after the date of the 
notice of redetermination, unless there is evidence to the contrary.
    (2) For purposes of meeting the 180-day filing deadline, the 
request is considered as filed on the date it is received by the QIC.
    (b) Extending the time for filing a request. (1) General rule. A 
QIC may extend the 180-day timeframe for filing a request for 
reconsideration for good cause.
    (2) How to request an extension. A party to the redetermination 
must file its request for an extension of the time for filing the 
reconsideration request with its request for reconsideration. A party 
should include evidence to support the request for extension. The 
request for reconsideration and request for extension must--
    (i) Be in writing;
    (ii) State why the request for reconsideration was not filed within 
the required timeframe; and
    (iii) Meet the requirements of Sec.  405.964.
    (3) How the QIC determines whether good cause exists. In 
determining whether a party has good cause for missing a deadline to 
request reconsideration, the QIC applies the good cause provisions 
contained in Sec.  405.942(b)(2) and (b)(3).


Sec.  405.964  Place and method of filing a request for a 
reconsideration.

    (a) Filing location. The request for reconsideration must be filed 
with the QIC indicated on the notice of redetermination.
    (b) Content of reconsideration request. The request for 
reconsideration must be in writing and should be made on a standard CMS 
form. A written request that is not made on a standard CMS form is 
accepted if it contains the same required elements, as follows:
    (1) The beneficiary's name;
    (2) Medicare health insurance claim number;
    (3) Specific service(s) and item(s) for which the reconsideration 
is requested and the specific date(s) of service;
    (4) The name and signature of the party or the representative of 
the party; and
    (5) The name of the contractor that made the redetermination.
    (c) Requests for reconsideration by more than one party. If more 
than one party timely files a request for reconsideration on the same 
claim before a reconsideration is made on the first timely filed 
request, the QIC must consolidate the separate requests into one 
proceeding and issue one reconsideration.


Sec.  405.966  Evidence to be submitted with the reconsideration 
request.

    (a) Evidence submitted with the request. When filing a request for 
reconsideration, a party should present evidence and allegations of 
fact or law related to the issue in dispute and explain why it 
disagrees with the initial determination, including the 
redetermination.
    (1) This evidence must include any missing documentation identified 
in the notice of redetermination, consistent with Sec.  405.956(b)(6).
    (2) Absent good cause, failure to submit all evidence, including 
documentation requested in the notice of redetermination prior to the 
issuance of the notice of reconsideration precludes subsequent 
consideration of that evidence.
    (b) Evidence submitted after the request. Each time a party submits 
additional evidence after filing the request for reconsideration, the 
QIC's 60-day decisionmaking timeframe is automatically extended by up 
to 14 calendar days for each submission. This extension does not apply 
to timely submissions of documentation specifically requested by a QIC, 
unless the documentation was originally requested in the notice of 
redetermination.
    (c) Exception for beneficiaries and State Medicaid Agencies that 
file reconsideration requests. (1) Beneficiaries and State Medicaid 
Agencies that file requests for reconsideration are not required to 
comply with the requirements of paragraph (a) of this section. However, 
the automatic 14-day extension described in paragraph (b) of this 
section applies to each evidence submission made after the request for 
reconsideration is filed.
    (2) Beneficiaries who are represented by providers or suppliers 
must comply with the requirements of paragraph (a) of this section.


Sec.  405.968  Conduct of a reconsideration.

    (a) General rules. (1) A reconsideration consists of an 
independent, on-the-record review of an initial determination, 
including the redetermination and all issues related to payment of the 
claim. In conducting a reconsideration, the QIC reviews the evidence 
and findings upon which the initial determination, including the 
redetermination, was based, and any additional evidence the parties 
submit or that the QIC obtains on its own. If the initial determination 
involves a finding on whether an item or service is reasonable and 
necessary for the diagnosis or treatment of illness or injury (under 
section 1862(a)(1)(A) of the Act), a QIC's reconsideration must involve 
consideration by a panel of physicians or other appropriate health care 
professionals, and be based on clinical experience, the patient's 
medical records, and medical, technical, and scientific evidence of 
record to the extent applicable.
    (b) Authority of the QIC. (1) National coverage determinations 
(NCDs), CMS Rulings, and applicable laws and regulations are binding on 
the QIC.
    (2) QICs are not bound by LCDs, LMRPs, or CMS program guidance, 
such as program memoranda and manual instructions, but give substantial 
deference to these policies if they are applicable to a particular 
case. A QIC may decline to follow a policy, if the QIC determines, 
either at a party's request or at its own discretion, that the policy 
does not apply to the facts of the particular case.
    (3) If a QIC declines to follow a policy in a particular case, the 
QIC's reconsideration explains the reasons why the policy was not 
followed.
    (4) A QIC's decision to decline to follow a policy under this 
section applies only to the specific claim being reconsidered and does 
not have precedential effect.
    (5) A QIC may raise and develop new issues that are relevant to the 
claims in a particular case provided that the contractor rendered a 
redetermination with respect to the claims.
    (c) Qualifications of the QIC's panel members. (1) Members of a 
QIC's panel who conduct reconsiderations must have sufficient medical, 
legal, and other expertise, including knowledge of the Medicare 
program.
    (2) When a redetermination is made with respect to whether an item 
or service is reasonable and necessary (section 1862(a)(1)(A) of the 
Act), the QIC designates a panel of physicians or other appropriate 
health care professionals to consider the facts and circumstances of 
the redetermination.
    (3) Where a claim pertains to the furnishing of treatment by a 
physician, or the provision of items or services by a physician, a 
reviewing professional must be a physician.
    (d) Disqualification of a QIC panel member. No physician or health 
care professional employed by or otherwise working for a QIC may review 
determinations regarding--
    (1) Health care services furnished to a patient if that physician 
or health care

[[Page 11482]]

professional was directly responsible for furnishing those services; or
    (2) Health care services provided in or by an institution, 
organization, or agency, if that physician or health care professional 
or any member of the physician's family or health care professional's 
family has, directly or indirectly, a significant financial interest in 
that institution, organization, or agency (see the term family member 
as defined in Sec.  405.902).


Sec.  405.970  Timeframe for making a reconsideration.

    (a) General rule. Within 60 calendar days of the date the QIC 
receives a timely filed request for reconsideration or any additional 
time provided by paragraph (b) of this section, the QIC mails, or 
otherwise transmits to the parties at their last known addresses, 
written notice of--
    (1) The reconsideration;
    (2) Its inability to complete its review within 60 days in 
accordance with paragraphs (c) through (e) of this section; or
    (3) Dismissal.
    (b) Exceptions. (1) If a QIC grants an appellant's request for an 
extension of the 180-day filing deadline made in accordance with Sec.  
405.962(b), the QIC's 60-day decision-making timeframe begins on the 
date the QIC receives the late filed request for reconsideration, or 
when the request for an extension that meets the requirements of Sec.  
405.962(b) is granted, whichever is later.
    (2) If a QIC receives timely requests for reconsideration from 
multiple parties, consistent with Sec.  405.964(c), the QIC must issue 
a reconsideration, notice that it cannot complete its review, or 
dismissal within 60 days for each submission of the latest filed 
request.
    (3) Each time a party submits additional evidence after the request 
for reconsideration is filed, the QIC's 60-day decisionmaking timeframe 
is extended by up to 14 days for each submission, consistent with Sec.  
405.966(b).
    (c) Responsibilities of the QIC. Within 60 days of receiving a 
request for a reconsideration, or any additional time provided for 
under paragraph (b) of this section, a QIC must take one of the 
following actions:
    (1) Notify all parties of its reconsideration, consistent with 
Sec.  405.976.
    (2) Notify the appellant that it cannot complete the 
reconsideration by the deadline specified in paragraph (b) of this 
section and offer the appellant the opportunity to escalate the appeal 
to an ALJ. The QIC continues to process the reconsideration unless it 
receives a written request from the appellant to escalate the case to 
an ALJ after the adjudication period has expired.
    (3) Notify all parties that it has dismissed the request for 
reconsideration consistent with Sec.  405.972.
    (d) Responsibilities of the appellant. If an appellant wishes to 
exercise the option of escalating the case to an ALJ, the appellant 
must notify the QIC in writing.
    (e) Actions following appellant's notice. (1) If the appellant 
fails to notify the QIC, or notifies the QIC that the appellant does 
not choose to escalate the case, the QIC completes its reconsideration 
and notifies the appellant of its action consistent with Sec.  405.972 
or Sec.  405.976.
    (2) If the appellant notifies the QIC that the appellant wishes to 
escalate the case, the QIC must take one of the following actions 
within 5 days of receipt of the notice or 5 days from the end of the 
applicable adjudication period under paragraph (a) or (b) of this 
section:
    (i) Complete its reconsideration and notify all parties of its 
decision consistent with Sec.  405.972 or Sec.  405.976.
    (ii) Acknowledge the escalation notice in writing and forward the 
case file to the ALJ hearing office.


Sec.  405.972  Withdrawal or dismissal of a request for a 
reconsideration.

    (a) Withdrawing a request. An appellant that files a request for 
reconsideration may withdraw its request by filing a written and signed 
request for withdrawal. The request for withdrawal must--
    (1) Contain a clear statement that the appellant is withdrawing the 
request for reconsideration and does not intend to proceed further with 
the appeal.
    (2) Be received in the QIC's mailroom before the reconsideration is 
issued.
    (b) Dismissing a request. A QIC dismisses a reconsideration 
request, either entirely or as to any stated issue, under any of the 
following circumstances:
    (1) When the person or entity requesting reconsideration is not a 
proper party under Sec.  405.906(b) or does not otherwise have a right 
to a reconsideration under section 1869(b) of the Act;
    (2) When the QIC determines that the party failed to make out a 
valid request for reconsideration that substantially complies with 
Sec.  405.964(a) and (b);
    (3) When the party fails to file the reconsideration request in 
accordance with the timeframes established in Sec.  405.962;
    (4) When a beneficiary or the beneficiary's representative files a 
request for reconsideration, but the beneficiary dies while the request 
is pending, and all of the following criteria apply:
    (i) The beneficiary's surviving spouse or estate has no remaining 
financial interest in the case. In deciding this issue, the QIC 
considers if the surviving spouse or estate remains liable for the 
services for which payment was denied or a Medicare contractor held the 
beneficiary liable for subsequent similar services under the limitation 
of liability provisions based on the denial of payment for services at 
issue;
    (ii) No other individual or entity with a financial interest in the 
case wishes to pursue the appeal; and
    (iii) No other party to the redetermination filed a valid and 
timely request for reconsideration under Sec.  405.962 and Sec.  
405.964.
    (5) When a party filing for the reconsideration submits a written 
request of withdrawal to the QIC and satisfies the criteria set forth 
in paragraph (a) of this section before the reconsideration has been 
issued; or
    (6) When the contractor has not issued a redetermination on the 
initial determination for which a reconsideration is sought.
    (c) Notice of dismissal. A QIC mails or otherwise transmits written 
notice of the dismissal of the reconsideration request to the parties 
at their last known addresses. The notice states that there is a right 
to request that the contractor vacate the dismissal action. The appeal 
will proceed with respect to any other parties that have filed a timely 
request for reconsideration.
    (d) Vacating a dismissal. If good and sufficient cause is 
established, a QIC may vacate its dismissal of a request for 
reconsideration within 6 months of the date of the notice of dismissal.
    (e) Effect of dismissal. The dismissal of a request for 
reconsideration is final and binding, unless it is modified or reversed 
by an ALJ under Sec.  405.1004 or vacated under paragraph (d) of this 
section.


Sec.  405.974  Reconsideration.

    (a) Reconsideration of a contractor determination. Except as 
provided in Sec.  405.972, upon the basis of the evidence of record, 
the QIC must issue a reconsideration affirming or reversing, in whole 
or in part, the initial determination, including the redetermination, 
in question.
    (b) Reconsideration of contractor's dismissal of a redetermination 
request. (1) A party to a contractor's dismissal of a request for 
redetermination has a right to have the dismissal reviewed by a QIC, if 
the party files a written request for

[[Page 11483]]

review of the dismissal with the QIC within 60 days after receipt of 
the contractor's notice of dismissal.
    (2) If the QIC determines that the contractor's dismissal was in 
error, it vacates the dismissal and remands the case to the contractor 
for a redetermination.
    (3) A QIC's reconsideration of a contractor's dismissal of a 
redetermination request is final and not subject to any further review.


Sec.  405.976  Notice of a reconsideration.

    (a) Notification to parties. (1) General rules. (i) Written notice 
of the reconsideration must be mailed or otherwise transmitted to all 
parties at their last known addresses, in accordance with the 
timeframes established in Sec.  405.970(a) or (b).
    (ii) The notice must be written in a manner reasonably calculated 
to be understood by a beneficiary.
    (iii) The QIC must promptly notify the entity responsible for 
payment of claims under Part A or Part B of its reconsideration. If the 
reconsideration results in issuance of supplemental payment to a 
provider or supplier, the Medicare contractor must also issue an 
electronic or paper RA notice to the provider or supplier.
    (2) Overpayment cases involving multiple beneficiaries who have no 
liability. In an overpayment case involving multiple beneficiaries who 
have no liability, the QIC may issue a written notice only to the 
appellant.
    (b) Content of the notice. The reconsideration must be in writing 
and contain--
    (1) A clear statement indicating whether the reconsideration is 
favorable or unfavorable;
    (2) A summary of the facts, including as appropriate, a summary of 
the clinical or scientific evidence used in making the reconsideration;
    (3) An explanation of how pertinent laws, regulations, coverage 
rules, and CMS policies, apply to the facts of the case, including, 
where applicable, the rationale for declining to follow an LCD, LMRP, 
or CMS program guidance;
    (4) In the case of a determination on whether an item or service is 
reasonable or necessary under section 1862(a)(1)(A) of the Act, an 
explanation of the medical and scientific rationale for the decision;
    (5) A summary of the rationale for the reconsideration.
    (i) If the notice of redetermination indicated that specific 
documentation should be submitted with the reconsideration request, and 
the documentation was not submitted with the request for 
reconsideration, the summary must indicate how the missing 
documentation affected the reconsideration; and
    (ii) The summary must also specify that, consistent with Sec.  
405.956(b)(8) and Sec.  405.966(b), all evidence, including evidence 
requested in the notice of redetermination, that is not submitted prior 
to the issuance of the reconsideration will not be considered at an ALJ 
level, or made part of the administrative record, unless the appellant 
demonstrates good cause as to why the evidence was not provided prior 
to the issuance of the QIC's reconsideration. This requirement does not 
apply to beneficiaries, unless the beneficiary is represented by a 
provider or supplier or to State Medicaid Agencies;
    (6) Information concerning to the parties' right to an ALJ hearing, 
including the applicable amount in controversy requirement and 
aggregation provisions;
    (7) A statement of whether the amount in controversy needed for an 
ALJ hearing is met when the reconsideration is partially or fully 
unfavorable;
    (8) A description of the procedures that a party must follow in 
order to obtain an ALJ hearing of an expedited reconsideration, 
including the time frame under which a request for an ALJ hearing must 
be filed;
    (9) If appropriate, advice as to the requirements for use of the 
expedited access to judicial review process set forth in Sec.  405.990;
    (10) The procedures for obtaining additional information concerning 
the reconsideration, such as specific provisions of the policy, manual, 
or regulation used in making the reconsideration; and
    (11) Any other requirements specified by CMS.


Sec.  405.978  Effect of a reconsideration.

    A reconsideration is final and binding on all parties, unless--
    (a) An ALJ decision is issued in accordance to a request for an ALJ 
hearing made in accordance with Sec.  405.1014;
    (b) A review entity issues a decision in accordance to a request 
for expedited access to judicial review under Sec.  405.990; or
    (c) The reconsideration is revised as a result of a reopening in 
accordance with Sec.  405.980.

Reopenings


Sec.  405.980  Reopenings of initial determinations, redeterminations, 
and reconsiderations, hearings and reviews.

    (a) General rules. (1) A reopening is a remedial action taken to 
change a final determination or decision that resulted in either an 
overpayment or underpayment, even though the determination or decision 
was correct based on the evidence of record. That action may be taken 
by--
    (i) A contractor to revise the initial determination or 
redetermination;
    (ii) A QIC to revise the reconsideration;
    (iii) An ALJ to revise the hearing decision; or
    (iv) The MAC to revise the hearing or review decision.
    (2) If a contractor issues a denial of a claim because it did not 
receive requested documentation during medical review and the party 
subsequently requests a redetermination, the contractor must process 
the request as a reopening.
    (3) Notwithstanding paragraph (a)(4) of this section, a contractor 
must process clerical errors (which includes mirror errors and 
omissions) as reopenings, instead of redeterminations as specified in 
Sec.  405.940. If the contractor receives a request for reopening and 
disagrees that the issue is a clerical error, the contractor must 
dismiss the reopening request and advise the party of any appeal 
rights, provided the timeframe to request an appeal on the original 
denial has not expired. For purposes of this section, clerical error 
includes human and mechanical errors on the part of the party or the 
contractor such as--
    (i) Mathematical or computational mistakes;
    (ii) Inaccurate data entry; or
    (iii) Denials of claims as duplicates.
    (4) When a party has filed a valid request for an appeal of an 
initial determination, redetermination, reconsideration, hearing, or 
MAC review, no adjudicator has jurisdiction to reopen a claim at issue 
until all appeal rights are exhausted. Once the appeal rights have been 
exhausted, the contractor, QIC, ALJ, or MAC may reopen as set forth in 
this section.
    (5) The contractor's, QIC's, ALJ's, or MAC's decision on whether to 
reopen is final and not subject to appeal.
    (6) A Medicare secondary payer demand to recover a conditional 
payment, based upon a provider's or supplier's failure to demonstrate 
that it filed a proper claim with a plan, program, or insurer, as 
defined in Sec.  411.21 of this chapter, because this action is a 
reopening.

[[Page 11484]]

    (b) Time frames and requirements for reopening initial 
determinations and redeterminations initiated by a contractor. A 
contractor may reopen and revise its initial determination or 
redetermination on its own motion--
    (1) Within 1 year from the date of the initial determination or 
redetermination for any reason.
    (2) Within 4 years from the date of the initial determination or 
redetermination for good cause as defined in Sec.  405.986.
    (3) At any time if there exists reliable evidence as defined in 
Sec.  405.902 that the initial determination was procured by fraud or 
similar fault as defined in Sec.  405.902.
    (4) At anytime if the initial determination is unfavorable, in 
whole or in part, to the party thereto, but only for the purpose of 
correcting a clerical error on which that determination was based.
    (5) At any time to effectuate a decision issued under the coverage 
appeals process.
    (c) Time frame and requirements for reopening initial 
determinations and redeterminations requested by a party. (1) A party 
may request that a contractor reopen its initial determination or 
redetermination within 1 year from the date of the initial 
determination or redetermination for any reason.
    (2) A party may request that a contractor reopen its initial 
determination or redetermination within 4 years from the date of the 
initial determination or redetermination for good cause in accordance 
with Sec.  405.986.
    (3) A party may request that a contractor reopen its initial 
determination at any time if the initial determination is unfavorable, 
in whole or in part, to the party thereto, but only for the purpose of 
correcting a clerical error on which that determination was based. 
Third party payer error does not constitute clerical error. See Sec.  
405.986(c).
    (d) Time frame and requirements for reopening reconsiderations, 
hearing decisions and reviews initiated by a QIC, ALJ, or the MAC. (1) 
A QIC may reopen its reconsideration on its own motion within 180 days 
from the date of the reconsideration for good cause in accordance with 
Sec.  405.986. If the QIC's reconsideration was procured by fraud or 
similar fault, then the QIC may reopen at any time.
    (2) An ALJ may reopen its hearing decision on its own motion within 
180 days from the date of the decision for good cause in accordance 
with Sec.  405.986. If the ALJ's decision was procured by fraud or 
similar fault, then the ALJ may reopen at any time.
    (3) The MAC may reopen its review decision on its own motion within 
180 days from the date of the review decision for good cause in 
accordance with Sec.  405.986. If the MAC's decision was procured by 
fraud or similar fault, then the MAC may reopen at any time.
    (e) Time frames and requirements for reopening reconsiderations, 
hearing decisions, and reviews requested by a party. (1) A party to a 
reconsideration may request that a QIC reopen its reconsideration 
within 180 days from the date of the reconsideration for good cause in 
accordance with Sec.  405.986.
    (2) A party to a hearing may request that an ALJ reopen his or her 
decision within 180 days from the date of the hearing decision for good 
cause in accordance with Sec.  405.986.
    (3) A party to a review may request that the MAC reopen its 
decision within 180 days from the date of the review decision for good 
cause in accordance with Sec.  405.986.


Sec.  405.982  Notice of a revised determination or decision.

    (a) When adjudicators initiate reopenings. When any determination 
or decision is reopened and revised as provided in Sec.  405.980, the 
contractor, QIC, ALJ, or the MAC must mail its revised determination or 
decision to the parties to that determination or decision at their last 
known address. In the case of a full or partial reversal resulting in 
issuance of a payment to a provider or supplier, a revised electronic 
or paper remittance advice notice must be issued by the Medicare 
contractor. An adverse revised determination or decision must state the 
rationale and basis for the reopening and revision and any right to 
appeal.
    (b) Reopenings initiated at the request of a party. The contractor, 
QIC, ALJ, or the MAC must mail its revised determination or decision to 
the parties to that determination or decision at their last known 
address. In the case of a full or partial reversal resulting in 
issuance of a payment to a provider or supplier, a revised electronic 
or paper remittance advice notice must be issued by the Medicare 
contractor. An adverse revised determination or decision must state the 
rationale and basis for the reopening and revision and any right to 
appeal.


Sec.  405.984  Effect of a revised determination or decision.

    (a) Initial determinations. The revision of an initial 
determination is binding upon all parties unless a party files a 
written request for a redetermination that is accepted and processed in 
accordance with Sec.  405.940 through Sec.  405.958.
    (b) Redeterminations. The revision of a redetermination is binding 
upon all parties unless a party files a written request for a QIC 
reconsideration that is accepted and processed in accordance with Sec.  
405.960 through Sec.  405.978.
    (c) Reconsiderations. The revision of a reconsideration is binding 
upon all parties unless a party files a written request for an ALJ 
hearing that is accepted and processed in accordance with Sec.  
405.1000 through Sec.  405.1064.
    (d) ALJ Hearing decisions. The revision of a hearing decision is 
binding upon all parties unless a party files a written request for a 
MAC review that is accepted and processed in accordance with Sec.  
405.1100 through Sec.  405.1130.
    (e) MAC review. The revision of a MAC review is binding upon all 
parties unless a party files a civil action in which a Federal district 
court accepts jurisdiction and issues a decision.
    (f) Appeal of only the portion of the determination or decision 
revised by the reopening. Only the portion of the initial 
determination, redetermination, reconsideration, or hearing decision 
revised by the reopening may be subsequently appealed.
    (g) Effect of a revised determination or decision. A revised 
determination or decision is binding unless it is appealed or otherwise 
reopened.


Sec.  405.986  Good cause for reopening.

    (a) Establishing good cause. Good cause may be established when--
    (1) There is new and material evidence that--
    (i) Was not available or known at the time of the determination or 
decision; and
    (ii) May result in a different conclusion; or
    (2) The evidence that was considered in making the determination or 
decision clearly shows on its face that an obvious error was made at 
the time of the determination or decision.
    (b) Change in substantive law or interpretative policy. A change of 
legal interpretation or policy by CMS in a regulation, CMS ruling, or 
CMS general instruction, or a change in legal interpretation or policy 
by SSA in a regulation, SSA ruling, or SSA general instruction in 
entitlement appeals, whether made in response to judicial precedent or 
otherwise, is not a basis for reopening a determination or hearing 
decision under this section. This provision does not preclude 
contractors from conducting reopenings to effectuate coverage decisions 
issued under the authority granted by section 1869(f) of the Act.
    (c) Third party payer error. A request to reopen a claim based upon 
a third

[[Page 11485]]

party payer's error in making a primary payment determination when 
Medicare processed the claim in accordance with the information in its 
system of records or on the claim form does not constitute good cause 
for reopening.
    (d) MSP recovery claim. A determination under the Medicare 
Secondary Payer provisions of Section 1862(b) of the Act that Medicare 
has an MSP recovery claim for services or items that were already 
reimbursed by the Medicare program is not a reopening.

Expedited Access to Judicial Review


Sec.  405.990  Expedited access to judicial review.

    (a) Process for expedited access to judicial review. (1) For 
purposes of this section, a ``review entity'' means an entity of up to 
three reviewers who are ALJs or members of the Departmental Appeals 
Board (DAB), as determined by the Secretary.
    (2) In order to obtain expedited access to judicial review (EAJR), 
a review entity must certify that the Medicare Appeals Council (MAC) 
does not have the authority to decide the question of law or regulation 
relevant to the matters in dispute and that there is no material issue 
of fact in dispute.
    (3) A party may make a request for EAJR only once with respect to a 
question of law or regulation for a specific matter in dispute in an 
appeal.
    (b) Conditions for making the expedited appeals request. (1) A 
party may request EAJR in place of an ALJ hearing or MAC review if the 
following conditions are met:
    (i) A QIC has made a reconsideration determination and the party 
has filed a request for--
    (A) an ALJ hearing in accordance with Sec.  405.1002 and a final 
decision of the ALJ has been issued;
    (B) MAC review in accordance with Sec.  405.1102 and a final 
decision of the MAC has not been issued; or
    (ii) The appeal has been escalated from the QIC to the ALJ level 
after the period described in Sec.  405.970(a) and Sec.  405.970(b) has 
expired, and the QIC does not issue a final action within the time 
frame described in Sec.  405.970(e).
    (2) The requestor is a party, as defined in paragraph (e) of this 
section.
    (3) The amount remaining in controversy meets the requirements of 
Sec.  405.1006(b) or (c).
    (4) If there is more than one party to the reconsideration, 
hearing, or MAC review, each party concurs, in writing, with the 
request for the EAJR.
    (5) There are no material issues of fact in dispute.
    (c) Content of the request for EAJR. The request for EAJR must--
    (1) Allege that there are no material issues of fact in dispute and 
identify the facts that the requestor considers material and that are 
not disputed; and
    (2) Assert that the only factor precluding a decision favorable to 
the requestor is--
    (i) A statutory provision that is unconstitutional, or a provision 
of a regulation or national coverage determination and specify the 
statutory provision that the requestor considers unconstitutional or 
the provision of a regulation or a national coverage determination that 
the requestor considers invalid, or
    (ii) A CMS Ruling that the requester considers invalid;
    (3) Include a copy of any QIC reconsideration and of any ALJ 
hearing decision that the requester has received;
    (4) If any QIC reconsideration or ALJ hearing decision was based on 
facts that the requestor is disputing, state why the requestor 
considers those facts to be immaterial; and
    (5) If any QIC reconsideration or ALJ hearing decision was based on 
a provision of a law, regulation, national coverage determination or 
CMS Ruling in addition to the one the requestor considers 
unconstitutional or invalid, a statement as to why further 
administrative review of how that provision applies to the facts is not 
necessary.
    (d) Place and time for an EAJR request. (1) Method and place for 
filing request. The requestor may include an EAJR request in his or her 
request for an ALJ hearing or MAC review, or, if an appeal is already 
pending with an ALJ or the MAC, file a written EAJR request with the 
ALJ hearing office or MAC where the appeal is being considered. The ALJ 
hearing office or MAC forwards the request to the review entity within 
5 calendar days of receipt.
    (2) Time of filing request. The party may file a request for the 
EAJR--
    (i) If the party has requested a hearing, at any time before 
receipt of the notice of the ALJ's decision; or
    (ii) If the party has requested MAC review, at any time before 
receipt of notice of the MAC's decision.
    (e) Parties to the EAJR. The parties to the EAJR are the persons or 
entities who were parties to the QIC's reconsideration determination 
and, if applicable, to the ALJ hearing.
    (f) Determination on EAJR request. (1) The review entity described 
in paragraph (a) of this section will determine whether the request for 
EAJR meets all of the requirements of paragraphs (b), (c), and (d) of 
this section.
    (2) Within 60 days after the date the review entity receives a 
request and accompanying documents and materials meeting the conditions 
in paragraphs (b), (c), and (d) of this section, the review entity will 
issue either a certification in accordance to paragraph (g) of this 
section or a denial of the request.
    (3) A determination by the review entity either certifying that the 
requirements for EAJR are met pursuant to paragraph (g) of this section 
or denying the request is final and not subject to review by the 
Secretary.
    (4) If the review entity fails to make a determination within the 
time frame specified in paragraph (f)(2) of this section, then the 
requestor may bring a civil action in Federal district court within 60 
days of the end of the time frame.
    (g) Certification by the review entity. If a party meets the 
requirements for the EAJR, the review entity certifies in writing 
that--
    (1) The material facts involved in the claim are not in dispute;
    (2) Except as indicated in paragraph (g)(3) of this section, the 
Secretary's interpretation of the law is not in dispute;
    (3) The sole issue(s) in dispute is the constitutionality of a 
statutory provision, or the validity of a provision of a regulation, 
CMS Ruling, or national coverage determination;
    (4) But for the provision challenged, the requestor would receive a 
favorable decision on the ultimate issue (such as whether a claim 
should be paid); and
    (5) The certification by the review entity is the Secretary's final 
action for purposes of seeking expedited judicial review.
    (h) Effect of certification by the review entity. If an EAJR 
request results in a certification described in paragraph (g) of this 
section--
    (1) The party that requested the EAJR is considered to have waived 
any right to completion of the remaining steps of the administrative 
appeals process regarding the matter certified.
    (2) The requestor has 60 days, beginning on the date of the review 
entity's certification within which to bring a civil action in Federal 
district court.
    (3) The requestor must satisfy the requirements for venue under 
section 1869(b)(2)(C)(iii) of the Act, as well as the requirements for 
filing a civil action in a Federal district court under Sec.  
405.1136(a) and Sec.  405.1136(c) through Sec.  405.1136(f).

[[Page 11486]]

    (i) Rejection of EAJR. (1) If a request for EAJR request does not 
meet all the conditions set out in paragraphs (b), (c) and (d) of this 
section, or if the review entity does not certify a request for EAJR, 
the review entity advises in writing all parties that the request has 
been denied, and returns the request to the ALJ hearing office or the 
MAC, which will treat it as a request for hearing or for MAC review, as 
appropriate.
    (2) Whenever a review entity forwards a rejected EAJR request to an 
ALJ hearing office or the MAC, the appeal is considered timely filed 
and the 90-day decision making time frame begins on the day the request 
is received by the hearing office or the MAC.
    (j) Interest on any amounts in controversy. (1) If a provider or 
supplier is granted judicial review in accordance with this section, 
the amount in controversy, if any, is subject to annual interest 
beginning on the first day of the first month beginning after the 60-
day period as determined in accordance with paragraphs (f)(4) or (h)(2) 
of this section, as applicable.
    (2) The interest is awarded by the reviewing court and payable to a 
prevailing party.
    (3) The rate of interest is equal to the rate of interest 
applicable to obligations issued for purchase by the Federal 
Supplementary Medical Insurance Trust Fund for the month in which the 
civil action authorized under this subpart is commenced.
    (4) No interest awarded in accordance with this paragraph shall be 
income or cost for purposes of determining reimbursement due to 
providers or suppliers under Medicare.

ALJ Hearings


Sec.  405.1000  Hearing before an ALJ: General rule.

    (a) If a party is dissatisfied with a QIC's reconsideration or if 
the adjudication period specified in Sec.  405.970 for the QIC to 
complete its reconsideration has elapsed, the party may request a 
hearing.
    (b) A hearing may be conducted in-person, by video-teleconference 
(VTC), or by telephone. At the hearing, the parties may submit evidence 
(subject to the restrictions in Sec.  405.1018 and Sec.  405.1028), 
examine the evidence used in making the determination under review, and 
present and/or question witnesses.
    (c) In some circumstances, a representative of CMS or its 
contractor, including the QIC, QIO, fiscal intermediary or carrier, may 
participate in or join the hearing as a party. (see Sec.  405.1010 and 
Sec.  405.1012).
    (d) The ALJ issues a decision based on the hearing record.
    (e) If all parties to the hearing waive their right to appear at 
the hearing in person or by telephone or video-teleconference, the ALJ 
may make a decision based on the evidence that is in the file and any 
new evidence that is submitted for consideration.
    (f) The ALJ may require the parties to participate in a hearing if 
it is necessary to decide the case. If the ALJ determines that it is 
necessary to obtain testimony from a non-party, he or she may hold a 
hearing to obtain that testimony, even if all of the parties have 
waived the right to appear. In that event, however, the ALJ will give 
the parties the opportunity to appear when the testimony is given, but 
may hold the hearing even if none of the parties decide to appear.
    (g) An ALJ may also issue a decision on the record on his or her 
own initiative if the evidence in the hearing record supports a fully 
favorable finding.


Sec.  405.1002  Right to an ALJ hearing.

    (a) A party to a QIC reconsideration may request a hearing before 
an ALJ if--
    (1) The party files a written request for an ALJ hearing within 60 
days after receipt of the notice of the QIC's reconsideration; and
    (2) The party meets the amount in controversy requirements of Sec.  
405.1006.
    (b) A party who files a timely appeal before a QIC and whose appeal 
continues to be pending before a QIC at the end of the period described 
in Sec.  405.970 has a right to a hearing before an ALJ if--
    (1) The party files a written request with the QIC to escalate the 
appeal to the ALJ level after the period described in Sec.  405.970(a) 
and (b) has expired and the party files the request in accordance with 
Sec.  405.970(d);
    (2) The QIC does not issue a final action within 5 days of 
receiving the request for escalation in accordance with Sec.  
405.970(e)(2); and
    (3) The party has an amount remaining in controversy specified in 
Sec.  405.1006.


Sec.  405.1004  Right to ALJ review of QIC notice of dismissal.

    (a) A party to a QIC's dismissal of a request for reconsideration 
has a right to have the dismissal reviewed by an ALJ if--
    (1) The party files a written request for an ALJ review within 60 
days after receipt of the notice of the QIC's dismissal; and
    (2) The party meets the amount in controversy requirements of Sec.  
405.1006.
    (b) If the ALJ determines that the QIC's dismissal was in error, he 
or she vacates the dismissal and remands the case to the QIC for a 
reconsideration.
    (c) An ALJ's decision regarding a QIC's dismissal of a 
reconsideration request is final and not subject to further review.


Sec.  405.1006  Amount in controversy required to request an ALJ 
hearing and judicial review.

    (a) Definitions. For the purposes of aggregating claims to meet the 
amount in controversy requirement for an ALJ hearing or judicial 
review:
    (1) ``Common issues of law and fact'' means the claims sought to be 
aggregated are denied, or payment is reduced, for similar reasons and 
arise from a similar fact pattern material to the reason the claims are 
denied or payment is reduced.
    (2) ``Delivery of similar or related services'' means like or 
coordinated services or items provided to one or more beneficiaries.
    (b) ALJ review. To be entitled to a hearing before an ALJ, the 
party must meet the amount in controversy requirements of this section.
    (1) For ALJ hearing requests, the required amount remaining in 
controversy must be $100 increased by the percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (U.S. city average) as measured from July 2003 to the July 
preceding the current year involved.
    (2) If the figure in paragraph (b)(1) of this section is not a 
multiple of $10, then it is rounded to the nearest multiple of $10. The 
Secretary will publish changes to the amount in controversy requirement 
in the Federal Register when necessary.
    (c) Judicial review. To be entitled to judicial review, a party 
must meet the amount in controversy requirements of this subpart at the 
time it requests judicial review.
    (1) For review requests, the required amount remaining in 
controversy must be $1,000 or more, adjusted as specified in paragraphs 
(b)(1) and (b)(2) of this section.
    (2) [Reserved]
    (d) Calculating the amount remaining in controversy. (1) The amount 
remaining in controversy is computed as the actual amount charged the 
individual for the items and services in question, reduced by--
    (i) Any Medicare payments already made or awarded for the items or 
services; and
    (ii) Any deductible and coinsurance amounts applicable in the 
particular case.
    (2) Notwithstanding paragraph (d)(1) of this section, when payment 
is made

[[Page 11487]]

for items or services under section 1879 of the Act or Sec.  411.400 of 
this chapter, or the liability of the beneficiary for those services is 
limited under Sec.  411.402 of this chapter, the amount in controversy 
is computed as the amount that the beneficiary would have been charged 
for the items or services in question if those expenses were not paid 
under Sec.  411.400 of this chapter or if that liability was not 
limited under Sec.  411.402 of this chapter, reduced by any deductible 
and coinsurance amounts applicable in the particular case.
    (e) Aggregating claims to meet the amount in controversy--
    (1) Appealing QIC reconsiderations to the ALJ level. Either an 
individual appellant or multiple appellants may aggregate two or more 
claims to meet the amount in controversy for an ALJ hearing if--
    (i) The claims were previously reconsidered by a QIC;
    (ii) The request for ALJ hearing lists all of the claims to be 
aggregated and is filed within 60 days after receipt of all of the 
reconsiderations being appealed; and
    (iii) The ALJ determines that the claims that a single appellant 
seeks to aggregate involve the delivery of similar or related services, 
or the claims that multiple appellants seek to aggregate involve common 
issues of law and fact. Part A and Part B claims may be combined to 
meet the amount in controversy requirements.
    (2) Aggregating claims that are escalated from the QIC level to the 
ALJ level. Either an individual appellant or multiple appellants may 
aggregate two or more claims to meet the amount in controversy for an 
ALJ hearing if--
    (i) The claims were pending before the QIC in conjunction with the 
same request for reconsideration;
    (ii) The appellant(s) requests aggregation of the claims to the ALJ 
level in the same request for escalation; and
    (iii) The ALJ determines that the claims that a single appellant 
seeks to aggregate involve the delivery of similar or related services, 
or the claims that multiple appellants seek to aggregate involve common 
issues of law and fact. Part A and Part B claims may be combined to 
meet the amount in controversy requirements.
    (f) Content of request for aggregation. When an appellant(s) seeks 
to aggregate claims in a request for an ALJ hearing, the appellant(s) 
must--
    (1) Specify all of the claims the appellant(s) seeks to aggregate; 
and
    (2) State why the appellant(s) believes that the claims involve 
common issues of law and fact or delivery of similar or related 
services.


Sec.  405.1008  Parties to an ALJ hearing.

    (a) Who may request a hearing. Any party to the QIC's 
reconsideration may request a hearing before an ALJ. However, only the 
appellant (that is, the party that filed and maintained the request for 
reconsideration by a QIC) may request that the appeal be escalated to 
the ALJ level if the QIC does not complete its action within the time 
frame described in Sec.  405.970.
    (b) Who are parties to the ALJ hearing. The party who filed the 
request for hearing and all other parties to the reconsideration are 
parties to the ALJ hearing. In addition, a representative of CMS or its 
contractor may be a party under the circumstances described in Sec.  
405.1012.


Sec.  405.1010  When CMS or its contractors may participate in an ALJ 
hearing.

    (a) An ALJ may request, but may not require, CMS and/or one or more 
of its contractors, to participate in any proceedings before the ALJ, 
including the oral hearing, if any. CMS and/or one or more of its 
contractors, including a QIC, may also elect to participate in the 
hearing process.
    (b) If CMS or one or more of its contractors elects to participate, 
it advises the ALJ, the appellant, and all other parties identified in 
the notice of hearing of its intent to participate no later than 10 
days after receiving the notice of hearing.
    (c) Participation may include filing position papers or providing 
testimony to clarify factual or policy issues in a case, but it does 
not include calling witnesses or cross-examining the witnesses of a 
party to the hearing.
    (d) When CMS or its contractor participates in an ALJ hearing, the 
agency or its contractor may not be called as a witness during the 
hearing.
    (e) CMS or its contractor must submit any position papers within 
the time frame designated by the ALJ.
    (f) The ALJ cannot draw any adverse inferences if CMS or a 
contractor decides not to participate in any proceedings before an ALJ, 
including the hearing.


Sec.  405.1012  When CMS or its contractors may be a party to a 
hearing.

    (a) CMS and/or one or more of its contractors, including a QIC, may 
be a party to an ALJ hearing unless the request for hearing is filed by 
an unrepresented beneficiary.
    (b) CMS and/or the contractor(s) advises the ALJ, appellant, and 
all other parties identified in the notice of hearing that it intends 
to participate as a party no later than 10 days after receiving the 
notice of hearing.
    (c) When CMS or one or more of its contractors participate in a 
hearing as a party, it may file position papers, provide testimony to 
clarify factual or policy issues, call witnesses or cross-examine the 
witnesses of other parties. CMS or its contractor(s) will submit any 
position papers within the time frame specified by the ALJ. CMS or its 
contractor(s), when acting as parties, may also submit additional 
evidence to the ALJ within the time frame designated by the ALJ.
    (d) The ALJ may not require CMS or a contractor to enter a case as 
a party or draw any adverse inferences if CMS or a contractor decides 
not to enter as a party.


Sec.  405.1014  Request for an ALJ hearing.

    (a) Content of the request. The request for an ALJ hearing must be 
made in writing. The request must include all of the following--
    (1) The name, address, and Medicare health insurance claim number 
of the beneficiary whose claim is being appealed.
    (2) The name and address of the appellant, when the appellant is 
not the beneficiary.
    (3) The name and address of the designated representatives if any.
    (4) The document control number assigned to the appeal by the QIC, 
if any.
    (5) The dates of service.
    (6) The reasons the appellant disagrees with the QIC's 
reconsideration or other determination being appealed.
    (7) A statement of any additional evidence to be submitted and the 
date it will be submitted.
    (b) When and where to file. The request for an ALJ hearing after a 
QIC reconsideration must be filed--
    (1) Within 60 days from the date the party receives notice of the 
QIC's reconsideration;
    (2) With the entity specified in the QIC's reconsideration. The 
appellant must also send a copy of the request for hearing to the other 
parties. Failure to do so will toll the ALJ's 90-day adjudication 
deadline until all parties to the QIC reconsideration receive notice of 
the requested ALJ hearing. If the request for hearing is timely filed 
with an entity other than the entity specified in the QIC's 
reconsideration, the deadline specified in Sec.  405.1016 for deciding 
the appeal begins on the date the entity specified in the QIC's 
reconsideration receives the request for hearing. If the request for 
hearing is filed with an entity, other than the

[[Page 11488]]

entity specified in the QIC's reconsideration, the ALJ hearing office 
must notify the appellant of the date of receipt of the request and the 
commencement of the 90-day adjudication time frame.
    (c) Extension of time to request a hearing. (1) If the request for 
hearing is not filed within 60 calendar days of receipt of the QIC's 
reconsideration, an appellant may request an extension for good cause 
(See Sec. Sec.  405.942(b)(2) and 405.942(b)(3)).
    (2) Any request for an extension of time must be in writing, give 
the reasons why the request for a hearing was not filed within the 
stated time period, and must be filed with the entity specified in the 
notice of reconsideration.
    (3) If the ALJ finds there is good cause for missing the deadline, 
the time period for filing the hearing request will be extended. To 
determine whether good cause for late filing exists, the ALJ uses the 
standards set forth in Sec.  405.942(b)(2) and Sec.  405.942(b)(3).
    (4) If a request for hearing is not timely filed, the adjudication 
period in Sec.  405.1016 begins the date the ALJ hearing office grants 
the request to extend the filing deadline.


Sec.  405.1016  Time frames for deciding an appeal before an ALJ.

    (a) When a request for an ALJ hearing is filed after a QIC has 
issued a reconsideration, the ALJ must issue a decision, dismissal 
order, or remand to the QIC, as appropriate, no later than the end of 
the 90-day period beginning on the date the request for hearing is 
received by the entity specified in the QIC's notice of 
reconsideration, unless the 90-day period has been extended as provided 
in this subpart.
    (b) The adjudication period specified in paragraph (a) of this 
section begins on the date that a timely filed request for hearing is 
received by the entity specified in the QIC's reconsideration, or, if 
it is not timely filed, the date that the ALJ hearing office grants any 
extension to the filing deadline.
    (c) When an appeal is escalated to the ALJ level because the QIC 
has not issued a reconsideration determination within the period 
specified in Sec.  405.970, the ALJ must issue a decision, dismissal 
order, or remand to the QIC, as appropriate, no later than the end of 
the 180-day period beginning on the date that the request for 
escalation is received by the ALJ hearing office, unless the 180-day 
period is extended as provided in this subpart.
    (d) When CMS is a party to an ALJ hearing and a party requests 
discovery under Sec.  405.1037 against another party to the hearing, 
the adjudication periods discussed in paragraph (a) and (c) of this 
section is tolled.


Sec.  405.1018  Submitting evidence before the ALJ hearing.

    (a) Except as provided in this section, parties must submit all 
written evidence they wish to have considered at the hearing with the 
request for hearing (or within 10 days of receiving the notice of 
hearing).
    (b) If a party submits written evidence later than 10 days after 
receiving the notice of hearing, the period between the time the 
evidence was required to have been submitted and the time it is 
received is not counted toward the adjudication deadline specified in 
Sec.  405.1016.
    (c) Any evidence submitted by a provider, supplier, or beneficiary 
represented by a provider or supplier that is not submitted prior to 
the issuance of the QIC's reconsideration determination must be 
accompanied by a statement explaining why the evidence is not 
previously submitted to the QIC, or a prior decision-maker (see Sec.  
405.1028).
    (d) The requirements of this section do not apply to oral testimony 
given at a hearing, or to evidence submitted by an unrepresented 
beneficiary.


Sec.  405.1020  Time and place for a hearing before an ALJ.

    (a) General. The ALJ sets the time and place for the hearing, and 
may change the time and place, if necessary.
    (b) Determining how appearances are made. The ALJ will direct that 
the appearance of an individual be conducted by videoteleconferencing 
(VTC) if the ALJ finds that VTC technology is available to conduct the 
appearance. The ALJ may also offer to conduct a hearing by telephone if 
the request for hearing or administrative record suggests that a 
telephone hearing may be more convenient for one or more of the 
parties. The ALJ, with the concurrence of the Managing Field Office 
ALJ, may determine that an in-person hearing should be conducted if--
    (1) VTC technology is not available; or
    (2) Special or extraordinary circumstances exist.
    (c) Notice of hearing. (1) The ALJ will send a notice of hearing to 
all parties that filed an appeal or otherwise participated in any of 
the determinations in paragraphs (c) through (i) of this section, any 
party who was found liable for the services at issue subsequent to the 
initial determination, the contractor that issued the initial 
determination, and the QIC that issued the reconsideration, advising 
them of the proposed time and place of the hearing.
    (2) The notice of hearing will require all parties to the ALJ 
hearing (and any potential participant from CMS or its contractor who 
wishes to attend the hearing) to reply to the notice by:
    (i) Acknowledging whether they plan to attend the hearing at the 
time and place proposed in the notice of hearing; or
    (ii) Objecting to the proposed time and/or place of the hearing.
    (d) A party's right to waive a hearing. A party may also waive the 
right to a hearing and request that the ALJ issue a decision based on 
the written evidence in the record. As provided in Sec.  405.1000, the 
ALJ may require the parties to attend a hearing if it is necessary to 
decide the case. If the ALJ determines that it is necessary to obtain 
testimony from a non-party, he or she may still hold a hearing to 
obtain that testimony, even if all of the parties have waived the right 
to appear. In those cases, the ALJ will give the parties the 
opportunity to appear when the testimony is given but may hold the 
hearing even if none of the parties decide to appear.
    (e) A party's objection to time and place of hearing. (1) If a 
party objects to the time and place of the hearing, the party must 
notify the ALJ at the earliest possible opportunity before the time set 
for the hearing.
    (2) The party must state the reason for the objection and state the 
time and place he or she wants the hearing to be held.
    (3) The request must be in writing.
    (4) The ALJ may change the time or place of the hearing if the 
party has good cause. (Section 405.1052(a)(2) provides the procedures 
the ALJ follows when a party does not respond to a notice of hearing 
and fails to appear at the time and place of the hearing.)
    (f) Good cause for changing the time or place. The ALJ can find 
good cause for changing the time or place of the scheduled hearing and 
reschedule the hearing if the information available to the ALJ supports 
the party's contention that--
    (1) The party or his or her representative is unable to attend or 
to travel to the scheduled hearing because of a serious physical or 
mental condition, incapacitating injury, or death in the family; or
    (2) Severe weather conditions make it impossible to travel to the 
hearing; or
    (3) Good cause exists as set forth in paragraph (g) of this 
section.
    (g) Good cause in other circumstances. (1) In determining whether 
good cause exists in circumstances other than those set forth in 
paragraph (f) of this section, the ALJ

[[Page 11489]]

considers the party's reason for requesting the change, the facts 
supporting the request, and the impact of the proposed change on the 
efficient administration of the hearing process.
    (2) Factors evaluated to determine the impact of the change 
include, but are not limited to, the effect on processing other 
scheduled hearings, potential delays in rescheduling the hearing, and 
whether any prior changes were granted the party.
    (3) Examples of other circumstances a party might give for 
requesting a change in the time or place of the hearing include, but 
are not limited to, the following:
    (i) The party has attempted to obtain a representative but needs 
additional time.
    (ii) The party's representative was appointed within 10 days of the 
scheduled hearing and needs additional time to prepare for the hearing.
    (iii) The party's representative has a prior commitment to be in 
court or at another administrative hearing on the date scheduled for 
the hearing.
    (iv) A witness who will testify to facts material to a party's case 
is unavailable to attend the scheduled hearing and the evidence cannot 
be otherwise obtained.
    (v) Transportation is not readily available for a party to travel 
to the hearing.
    (vi) The party is unrepresented, and is unable to respond to the 
notice of hearing because of any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language) that he or she has.
    (h) Effect of rescheduling hearing. If a hearing is postponed at 
the request of the appellant for any of the above reasons, the time 
between the originally scheduled hearing date and the new hearing date 
is not counted toward the adjudication deadline specified in Sec.  
405.1016.
    (i) A party request for an in-person hearing. (1) If a party 
objects to a VTC hearing or to the ALJ's offer to conduct a hearing by 
telephone, the party must notify the ALJ at the earliest possible 
opportunity before the time set for the hearing and request an in-
person hearing.
    (2) The party must state the reason for the objection and state the 
time or place he or she wants the hearing to be held.
    (3) The request must be in writing.
    (4) A request for an in-person hearing shall constitute a waiver of 
the 90-day time frame specified in Sec.  405.1016.
    (5) The ALJ may grant the request, with the concurrence of the 
Managing Field Office ALJ, upon a finding of good cause and will 
reschedule the hearing for a time and place when the party may appear 
in person before the ALJ.


Sec.  405.1022  Notice of a hearing before an ALJ.

    (a) Issuing the notice. After the ALJ sets the time and place of 
the hearing, notice of the hearing will be mailed to the parties and 
other potential participants, as provided in Sec.  405.1020(c) at their 
last known addresses, or given by personal service, unless the parties 
have indicated in writing that they do not wish to receive this notice. 
The notice is mailed or served at least 20 days before the hearing.
    (b) Notice information. (1) The notice of hearing contains a 
statement of the specific issues to be decided and will inform the 
parties that they may designate a person to represent them during the 
proceedings.
    (2) The notice must include an explanation of the procedures for 
requesting a change in the time or place of the hearing, a reminder 
that, if the appellant fails to appear at the scheduled hearing without 
good cause, the ALJ may dismiss the hearing request, and other 
information about the scheduling and conduct of the hearing.
    (3) The appellant will also be told if his or her appearance or 
that of any other party or witness is scheduled by VTC, telephone, or 
in person. If the ALJ has scheduled the appellant or other party to 
appear at the hearing by VTC, the notice of hearing will advise that 
the scheduled place for the hearing is a VTC site and explain what it 
means to appear at the hearing by VTC.
    (4) The notice advises the appellant or other parties that if they 
object to appearing by VTC or telephone, and wish instead to have their 
hearing at a time and place where they may appear in person before the 
ALJ, they must follow the procedures set forth at Sec.  405.1020(i) for 
notifying the ALJ of their objections and for requesting an in-person 
hearing.
    (c) Acknowledging the notice of hearing. (1) If the appellant, any 
other party to the reconsideration, or their representative does not 
acknowledge receipt of the notice of hearing, the ALJ hearing office 
attempts to contact the party for an explanation.
    (2) If the party states that he or she did not receive the notice 
of hearing, an amended notice is sent to him or her by certified mail 
or e-mail, if available. (See Sec.  405.1052 for the procedures the ALJ 
follows in deciding if the time or place of a scheduled hearing will be 
changed if a party does not respond to the notice of hearing).


Sec.  405.1024  Objections to the issues.

    (a) If a party objects to the issues described in the notice of 
hearing, he or she must notify the ALJ in writing at the earliest 
possible opportunity before the time set for the hearing, and no later 
than 5 days before the hearing.
    (b) The party must state the reasons for his or her objections and 
send a copy of the objections to all other parties to the appeal.
    (c) The ALJ makes a decision on the objections either in writing or 
at the hearing.


Sec.  405.1026  Disqualification of the ALJ.

    (a) An ALJ cannot conduct a hearing if he or she is prejudiced or 
partial to any party or has any interest in the matter pending for 
decision.
    (b) If a party objects to the ALJ who will conduct the hearing, the 
party must notify the ALJ within 10 calendar days of the date of the 
notice of hearing. The ALJ considers the party's objections and decides 
whether to proceed with the hearing or withdraw.
    (c) If the ALJ withdraws, another ALJ will be appointed to conduct 
the hearing. If the ALJ does not withdraw, the party may, after the ALJ 
has issued an action in the case, present his or her objections to the 
MAC in accordance with Sec.  405.1100 et seq. The MAC will then 
consider whether the hearing decision should be revised or a new 
hearing held before another ALJ. If the case is escalated to the MAC 
after a hearing is held but before the ALJ issues a decision, the MAC 
considers the reasons the party objected to the ALJ during its review 
of the case and, if the MAC deems it necessary, may remand the case to 
another ALJ for a hearing and decision.


Sec.  405.1028  Prehearing case review of evidence submitted to the ALJ 
by the appellant.

    (a) Examination of any new evidence. After a hearing is requested 
but before it is held, the ALJ will examine any new evidence submitted 
with the request for hearing (or within 10 days of receiving the notice 
of hearing) as specified in Sec.  405.1018, by a provider, supplier, or 
beneficiary represented by a provider or supplier to determine whether 
the provider, supplier, or beneficiary represented by a provider or 
supplier had good cause for submitting the evidence for the first time 
at the ALJ level.
    (b) Determining if good cause exists. An ALJ finds good cause, for 
example, when the new evidence is material to an issue addressed in the 
QIC's reconsideration and that issue was not

[[Page 11490]]

identified as a material issue prior to the QIC's reconsideration.
    (c) If good cause does not exist. If the ALJ determines that there 
was not good cause for submitting the evidence for the first time at 
the ALJ level, the ALJ must exclude the evidence from the proceeding 
and may not consider it in reaching a decision.
    (d) Notification to all parties. As soon as possible, but no later 
than the start of the hearing, the ALJ must notify all parties that the 
evidence is excluded from the hearing.


Sec.  405.1030  ALJ hearing procedures.

    (a) General rule. A hearing is open to the parties and to other 
persons the ALJ considers necessary and proper.
    (b) At the hearing. At the hearing, the ALJ fully examines the 
issues, questions the parties and other witnesses, and may accept 
documents that are material to the issues consistent with Sec.  
405.1018 and Sec.  405.1028.
    (c) Missing evidence. The ALJ may also stop the hearing temporarily 
and continue it at a later date if he or she believes that there is 
material evidence missing at the hearing. If the missing evidence is in 
the possession of the appellant, and the appellant is a provider, 
supplier, or a beneficiary represented by a provider or supplier, the 
ALJ must determine if the appellant had good cause for not producing 
the evidence earlier.
    (d) Good cause exists. If good cause exists, the ALJ considers the 
evidence in deciding the case and the adjudication period specified in 
Sec.  405.1016 is tolled from the date of the hearing to the date the 
evidence is submitted.
    (e) Good cause does not exist. If the ALJ determines that there was 
not good cause for not submitting the evidence sooner, the evidence is 
excluded.
    (f) Reopen the hearing. The ALJ may also reopen the hearing at any 
time before he or she mails a notice of the decision in order to 
receive new and material evidence pursuant to Sec.  405.986. The ALJ 
may decide when the evidence is presented and when the issues are 
discussed.


Sec.  405.1032  Issues before an ALJ.

    (a) General rule. The issues before the ALJ include all the issues 
brought out in the initial determination, redetermination, or 
reconsideration that were not decided entirely in a party's favor. (For 
purposes of this provision, the term ``party'' does not include a 
representative of CMS or one of its contractors that may be 
participating in the hearing.) However, if evidence presented before 
the hearing causes the ALJ to question a favorable portion of the 
determination, he or she notifies the parties before the hearing and 
may consider it an issue at the hearing.
    (b) New issues--(1) General. The ALJ may consider a new issue at 
the hearing if he or she notifies all of the parties about the new 
issue any time before the start of the hearing. The new issue may 
include issues resulting from the participation of CMS at the ALJ level 
of adjudication and from any evidence and position papers submitted by 
CMS for the first time to the ALJ. The ALJ or any party may raise a new 
issue; however, the ALJ may only consider a new issue if its 
resolution--
    (i) Could have a material impact on the claim or claims that are 
the subject of the request for hearing; and
    (ii) Is permissible under the rules governing reopening of 
determinations and decisions (see Sec.  405.980).
    (2) [Reserved]
    (c) Adding claims to a pending appeal. An ALJ cannot add any claim, 
including one that is related to an issue that is appropriately before 
an ALJ, to a pending appeal unless it has been adjudicated at the lower 
appeals levels and all parties are notified of the new issue(s) before 
the start of the hearing.


Sec.  405.1034  When an ALJ may remand a case to the QIC.

    (a) General. If an ALJ believes that the written record is missing 
information that is essential to resolving the issues on appeal and 
that information can be provided only by CMS or its contractors, then 
the ALJ may either:
    (1) Remand the case to the QIC that issued the reconsideration or
    (2) Retain jurisdiction of the case and request that the contractor 
forward the missing information to the appropriate hearing office.
    (b) ALJ remands a case to a QIC. Consistent with Sec.  405.1004 
(b), the ALJ will remand a case to the appropriate QIC if the ALJ 
determines that a QIC's dismissal of a request for reconsideration was 
in error.
    (c) Relationship to local and national coverage determination 
appeals process. (1) The ALJ remands an appeal to the QIC that made the 
reconsideration if the appellant is entitled to relief pursuant to 42 
CFR 426.460(b)(1), 426.488(b), or 426.560(b)(1).
    (2) Unless the appellant is entitled to relief pursuant to 42 CFR 
426.460(b)(1), 426.488(b), or 426.560(b)(1), the ALJ applies the LCD or 
NCD in place on the date the item or service was provided.


Sec.  405.1036  Description of an ALJ hearing process.

    (a) The right to appear and present evidence. (1) Any party to a 
hearing has the right to appear before the ALJ to present evidence and 
to state his or her position. A party may appear by video-
teleconferencing (VTC), telephone, or in person as determined under 
Sec.  405.1020.
    (2) A party may also make his or her appearance by means of a 
representative, who may make the appearance by VTC, telephone, or in 
person, as determined under Sec.  405.1020.
    (3) Witness testimony may be given and CMS participation may also 
be accomplished by VTC, telephone, or in person, as determined under 
Sec.  405.1020.
    (b) Waiver of the right to appear. (1) A party may send the ALJ a 
written statement indicating that he or she does not wish to appear at 
the hearing.
    (2) The appellant may subsequently withdraw his or her waiver at 
any time before the notice of the hearing decision is issued; however, 
by withdrawing the waiver the appellant agrees to an extension of the 
adjudication period as specified in Sec.  405.1016 that may be 
necessary to schedule and hold the hearing.
    (3) Other parties may withdraw their waiver up to the date of the 
scheduled hearing, if any. Even if all of the parties waive their right 
to appear at a hearing, the ALJ may require them to attend an oral 
hearing if he or she believes that a personal appearance and testimony 
by the appellant or any other party is necessary to decide the case.
    (c) Presenting written statements and oral arguments. A party or a 
person designated to act as a party's representative may appear before 
the ALJ to state the party's case, to present a written summary of the 
case, or to enter written statements about the facts and law material 
to the case in the record. A copy of any written statements must be 
provided to the other parties to a hearing, if any, at the same time 
they are submitted to the ALJ.
    (d) Waiver of adjudication period. At any time during the hearing 
process, the appellant may waive the adjudication deadline specified in 
Sec.  405.1016 for issuing a hearing decision. The waiver may be for a 
specific period of time agreed upon by the ALJ and the appellant.
    (e) What evidence is admissible at a hearing. The ALJ may receive 
evidence at the hearing even though the evidence is not admissible in 
court under the rules of evidence used by the court.
    (f) Subpoenas. (1) When it is reasonably necessary for the full 
presentation of a case, an ALJ may, on his or her own initiative or at 
the request of a party, issue subpoenas for the appearance and 
testimony of witnesses and for a party to make books, records, 
correspondence, papers, or

[[Page 11491]]

other documents that are material to an issue at the hearing available 
for inspection and copying.
    (2) A party's written request for a subpoena must--
    (i) Give the names of the witnesses or documents to be produced;
    (ii) Describe the address or location of the witnesses or documents 
with sufficient detail to find them;
    (iii) State the important facts that the witness or document is 
expected to prove; and
    (iv) Indicate why these facts cannot be proven without issuing a 
subpoena.
    (3) Parties to a hearing who wish to subpoena documents or 
witnesses must file a written request for the issuance of a subpoena 
with the requirements set out in paragraph (f)(2) of this section with 
the ALJ within 10 calendar days of receipt of the notice of hearing.
    (4) Where a party has requested a subpoena, a subpoena will be 
issued only where a party--
    (i) Has sought discovery;
    (ii) Has filed a motion to compel;
    (iii) Has had that motion granted by the ALJ; and
    (iv) Nevertheless, has not received the requested discovery.
    (5) Reviewability of subpoena rulings--
    (i) General rule. An ALJ ruling on a subpoena request is not 
subject to immediate review by the MAC. The ruling may be reviewed 
solely during the course of the MAC's review specified in Sec.  
405.1102, Sec.  405.1104, or Sec.  405.1110, as applicable. Exception. 
To the extent a subpoena compels disclosure of a matter for which an 
objection based on privilege, or other protection from disclosure such 
as case preparation, confidentiality, or undue burden, was made before 
an ALJ, the MAC may review immediately the subpoena or that portion of 
the subpoena as applicable.
    (ii) Where CMS objects to a discovery ruling, the MAC must take 
review and the discovery ruling at issue is automatically stayed 
pending the MAC's order.
    (iii) Upon notice to the ALJ that a party or non-party, as 
applicable, intends to seek MAC review of the subpoena, the ALJ must 
stay all proceedings affected by the subpoena.
    (iv) The ALJ determines the length of the stay under the 
circumstances of a given case, but in no event is the stay less than 15 
days beginning after the day on which the ALJ received notice of the 
party or non-party's intent to seek MAC review.
    (v) If the MAC grants a request for review of the subpoena, the 
subpoena or portion of the subpoena, as applicable, is stayed until the 
MAC issues a written decision that affirms, reverses, or modifies the 
ALJ's action on the subpoena.
    (vi) If the MAC does not grant review or take own motion review 
within the time allotted for the stay, the stay is lifted and the ALJ's 
action stands.
    (6) Enforcement. (i) If the ALJ determines, whether on his or her 
own motion or at the request of a party, that a party or non-party 
subject to a subpoena issued under this section has refused to comply 
with the subpoena, the ALJ may request the Secretary to seek 
enforcement of the subpoena in accordance with section 205(e) of the 
Act, 42 U.S.C. 405(e).
    (ii) Any enforcement request by an ALJ must consist of a written 
notice to the Secretary describing in detail the ALJ's findings of 
noncompliance and his or her specific request for enforcement, and 
providing a copy of the subpoena and evidence of its receipt by 
certified mail by the party or nonparty subject to the subpoena.
    (iii) The ALJ must promptly mail a copy of the notice and related 
documents to the party subject to the subpoena, and to any other party 
and affected non-party to the appeal.
    (g) Witnesses at a hearing. Witnesses may appear at a hearing. They 
testify under oath or affirmation, unless the ALJ finds an important 
reason to excuse them from taking an oath or affirmation. The ALJ may 
ask the witnesses any questions relevant to the issues and allows the 
parties or their designated representatives to do so.


Sec.  405.1037  Discovery.

    (a) General rules. (1) Discovery is permissible only when CMS 
elects to participate in an ALJ hearing as a party.
    (2) The ALJ may permit discovery of a matter that is relevant to 
the specific subject matter of the ALJ hearing, provided the matter is 
not privileged or otherwise protected from disclosure and the ALJ 
determines that the discovery request is not unreasonable, unduly 
burdensome or expensive, or otherwise inappropriate.
    (3) Any discovery initiated by a party must comply with all 
requirements and limitations of this section, along with any further 
requirements or limitations ordered by the ALJ.
    (b) Limitations on discovery. Any discovery before the ALJ is 
limited.
    (1) A party may request of another party the reasonable production 
of documents for inspection and copying.
    (2) A party may not take the deposition, upon oral or written 
examination, of another party unless the proposed deponent agrees to 
the deposition or the ALJ finds that the proposed deposition is 
necessary and appropriate in order to secure the deponent's testimony 
for an ALJ hearing.
    (3) A party may not request admissions or send interrogatories or 
take any other form of discovery not permitted under this section.
    (c) Time limits. (1) A party's discovery request is timely if the 
date of receipt of a request by another party is no later than the date 
specified by the ALJ hearing.
    (2) A party may not conduct discovery any later than the date 
specified by the ALJ.
    (3) Before ruling on a request to extend the time for requesting 
discovery or for conducting discovery, the ALJ must give the other 
parties to the appeal a reasonable period to respond to the extension 
request.
    (4) The ALJ may extend the time in which to request discovery or 
conduct discovery only if the requesting party establishes that it was 
not dilatory or otherwise at fault in not meeting the original 
discovery deadline.
    (5) If the ALJ grants the extension request, it must impose a new 
discovery deadline and, if necessary, reschedule the hearing date so 
that all discoveries end no later than 45 days before the hearing.
    (d) Motions to compel or for protective order. (1) Each party is 
required to make a good faith effort to resolve or narrow any discovery 
dispute.
    (2) A party may submit to the ALJ a motion to compel discovery that 
is permitted under this section or any ALJ order, and a party may 
submit a motion for a protective order regarding any discovery request 
to the ALJ.
    (3) Any motion to compel or for protective order must include a 
self-sworn declaration describing the movant's efforts to resolve or 
narrow the discovery dispute. The declaration must also be included 
with any response to a motion to compel or for protective order.
    (4) The ALJ must decide any motion in accordance with this section 
and any prior discovery ruling in the appeal.
    (5) The ALJ must issue and mail to each party a discovery ruling 
that grants or denies the motion to compel or for protective order in 
whole or in part; if applicable, the discovery ruling must specifically 
identify any part of the disputed discovery request upheld and any part 
rejected, and impose any limits on discovery the ALJ finds necessary 
and appropriate.
    (e) Reviewability of discovery and disclosure rulings--

[[Page 11492]]

    (1) General rule. An ALJ discovery ruling, or an ALJ disclosure 
ruling such as one issued at a hearing is not subject to immediate 
review by the MAC. The ruling may be reviewed solely during the course 
of the MAC's review specified in Sec.  405.1100, Sec.  405.1102, Sec.  
405.1104, or Sec.  405.1110, as applicable.
    (2) Exception. To the extent a ruling authorizes discovery or 
disclosure of a matter for which an objection based on privilege, or 
other protection from disclosure such as case preparation, 
confidentiality, or undue burden, was made before the ALJ, the MAC may 
review that portion of the discovery or disclosure ruling immediately.
    (i) Where CMS objects to a discovery ruling, the MAC must take 
review and the discovery ruling at issue is automatically stayed 
pending the MAC's order.
    (ii) Upon notice to the ALJ that a party intends to seek MAC review 
of the ruling, the ALJ must stay all proceedings affected by the 
ruling.
    (iii) The ALJ determines the length of the stay under the 
circumstances of a given case, but in no event must the length of the 
stay be less than 15 days beginning after the day on which the ALJ 
received notice of the party or non-party's intent to seek MAC review.
    (iv) Where CMS requests the MAC to take review of a discovery 
ruling or where the MAC grants a request for review made by a party 
other than CMS of a ruling, the ruling is stayed until the time the MAC 
issues a written decision that affirms, reverses, modifies, or remands 
the ALJ's ruling.
    (v) With respect to a request from a party, other than CMS, for 
review of a discovery ruling, if the MAC does not grant review or take 
own motion review within the time allotted for the stay, the stay is 
lifted and the ruling stands.
    (f) Adjudication time frames. If a party requests discovery from 
another party to the ALJ hearing, the ALJ adjudication time frame 
specified in Sec.  405.1016 is tolled until the discovery dispute is 
resolved.


Sec.  405.1038  Deciding a case without a hearing before an ALJ.

    (a) Decision wholly favorable. If the evidence in the hearing 
record supports a finding in favor of appellant(s) on every issue, the 
ALJ may issue a hearing decision without giving the parties prior 
notice and without holding a hearing. The notice of the decision 
informs the parties that they have the right to a hearing and a right 
to examine the evidence on which the decision is based.
    (b) Parties do not wish to appear. (1) The ALJ may decide a case on 
the record and not conduct a hearing if--
    (i) All the parties indicate in writing that they do not wish to 
appear before the ALJ at a hearing, including a hearing conducted by 
telephone or videoconferencing, if available; or
    (ii) The appellant lives outside the United States and does not 
inform the ALJ that he or she wants to appear, and there are no other 
parties who wish to appear.
    (2) When a hearing is not held, the decision of the ALJ must refer 
to the evidence in the record on which the decision was based.


Sec.  405.1040  Prehearing and posthearing conferences.

    (a) The ALJ may decide on his or her own, or at the request of any 
party to the hearing, to hold a prehearing or posthearing conference to 
facilitate the hearing or the hearing decision.
    (b) The ALJ informs the parties of the time, place, and purpose of 
the conference at least 7 calendar days before the conference date, 
unless a party indicates in writing that it does not wish to receive a 
written notice of the conference.
    (c) At the conference, the ALJ may consider matters in addition to 
those stated in the notice of hearing, if the parties consent in 
writing. A record of the conference is made.
    (d) The ALJ issues an order stating all agreements and actions 
resulting from the conference. If the parties do not object, the 
agreements and actions become part of the hearing record and are 
binding on all parties.


Sec.  405.1042  The administrative record.

    (a) Creating the record. (1) The ALJ makes a complete record of the 
evidence, including the hearing proceedings, if any.
    (2) The record will include marked as exhibits, the documents used 
in making the decision under review, including, but not limited to, 
claims, medical records, written statements, certificates, reports, 
affidavits, and any other evidence the ALJ admits. In the record, the 
ALJ must also discuss any evidence excluded under Sec.  405.1028 and 
include a justification for excluding the evidence.
    (3) The appellant may review the record at the hearing, or, if a 
hearing is not held, at any time before the ALJ's notice of decision is 
issued.
    (4) If a request for review is filed or the case is escalated to 
the MAC, the complete record, including any recording of the hearing, 
is forwarded to the MAC.
    (5) A typed transcription of the hearing is prepared if a party 
seeks judicial review of the case in a Federal district court within 
the stated time period and all other jurisdictional criteria are met, 
unless, upon the Secretary's motion prior to the filing of an answer, 
the court remands the case.
    (b) Requesting and receiving copies of the record.
    (1) A party may request and receive a copy of all or part of the 
record, including the exhibits list, documentary evidence, and a copy 
of the tape of the oral proceedings. The party may be asked to pay the 
costs of providing these items.
    (2) If a party requests all or part of the record from the ALJ and 
an opportunity to comment on the record, the time beginning with the 
ALJ's receipt of the request through the expiration of the time granted 
for the party's response does not count toward the 90-day adjudication 
deadline.


Sec.  405.1044  Consolidated hearing before an ALJ.

    (a) A consolidated hearing may be held if one or more of the issues 
to be considered at the hearing are the same issues that are involved 
in another request for hearing or hearings pending before the same ALJ.
    (b) It is within the discretion of the ALJ to grant or deny an 
appellant's request for consolidation. In considering an appellant's 
request, the ALJ may consider factors such as whether the claims at 
issue may be more efficiently decided if the requests for hearing are 
combined. In considering the appellant's request for consolidation, the 
ALJ must take into account the adjudication deadlines for each case and 
may require an appellant to waive the adjudication deadline associated 
with one or more cases if consolidation otherwise prevents the ALJ from 
deciding all of the appeals at issue within their respective deadlines.
    (c) The ALJ may also propose on his or her own motion to 
consolidate two or more cases in one hearing for administrative 
efficiency, but may not require an appellant to waive the adjudication 
deadline for any of the consolidated cases.
    (d) Before consolidating a hearing, the ALJ must notify CMS of his 
or her intention to do so, and CMS may then elect to participate in the 
consolidated hearing, as a party, by sending written notice to the ALJ 
within 10 days after receipt of the ALJ's notice of the consolidation.
    (e) If the ALJ decides to hold a consolidated hearing, he or she 
may make either a consolidated decision and

[[Page 11493]]

record or a separate decision and record on each claim. The ALJ ensures 
that any evidence that is common to all claims and material to the 
common issue to be decided is included in the consolidated record or 
each individual record, as applicable.


Sec.  405.1046  Notice of an ALJ decision.

    (a) General rule. Unless the ALJ dismisses the hearing, the ALJ 
will issue a written decision that gives the findings of fact, 
conclusions of law, and the reasons for the decision. The decision must 
be based on evidence offered at the hearing or otherwise admitted into 
the record. The ALJ mails a copy of the decision to all the parties at 
their last known address, to the QIC that issued the reconsideration 
determination, and to the contractor that issued the initial 
determination. For overpayment cases involving multiple beneficiaries, 
where there is no beneficiary liability, the ALJ may choose to send 
written notice only to the appellant. In the event a payment will be 
made to a provider or supplier in conjunction with this ALJ decision, 
the contractor must also issue a revised electronic or paper remittance 
advice to that provider or supplier.
    (b) Content of the notice. The decision must be written in a manner 
calculated to be understood by a beneficiary and must include--
    (1) The specific reasons for the determination, including, to the 
extent appropriate, a summary of any clinical or scientific evidence 
used in making the determination;
    (2) The procedures for obtaining additional information concerning 
the decision; and
    (3) Notification of the right to appeal the decision to the MAC, 
including instructions on how to initiate an appeal under this section.
    (c) Limitation on decision. When the amount of payment for an item 
or service is an issue before the ALJ, the ALJ may make a finding as to 
the amount of payment due. If the ALJ makes a finding concerning 
payment when the amount of payment was not an issue before the ALJ, the 
contractor may independently determine the payment amount. In either of 
the aforementioned situations, an ALJ's decision is not final for 
purposes of determining the amount of payment due. The amount of 
payment determined by the contractor in effectuating the ALJ's decision 
is a new initial determination under Sec.  405.924.
    (d) Timing of decision. The ALJ issues a decision by the end of the 
90-day period beginning on the date when the request for hearing is 
received in the ALJ hearing office, unless the 90-day period is 
extended as provided in Sec.  405.1016.
    (e) Recommended decision. An ALJ issues a recommended decision if 
he or she is directed to do so in the MAC's remand order. An ALJ may 
not issue a recommended decision on his or her own motion. The ALJ 
mails a copy of the recommended decision to all the parties at their 
last known address.


Sec.  405.1048  The effect of an ALJ's decision.

    The decision of the ALJ is binding on all parties to the hearing 
unless--
    (a) A party to the hearing requests a review of the decision by the 
MAC within the stated time period or the MAC reviews the decision 
issued by an ALJ under the procedures set forth in Sec.  405.1110, and 
the MAC either issues a final action or the appeal is escalated to 
Federal district court under the provisions at Sec.  405.1132 and the 
Federal district court issues a decision.
    (b) The decision is reopened and revised by an ALJ or the MAC under 
the procedures explained in Sec.  405.980;
    (c) The expedited access to judicial review process at Sec.  
405.990 is used;
    (d) The ALJ's decision is a recommended decision directed to the 
MAC and the MAC issues a decision; or
    (e) In a case remanded by a Federal district court, the MAC assumes 
jurisdiction under the procedures in Sec.  405.1138 and the MAC issues 
a decision.


Sec.  405.1050  Removal of a hearing request from an ALJ to the MAC.

    If a request for hearing is pending before an ALJ, the MAC may 
assume responsibility for holding a hearing by requesting that the ALJ 
send the hearing request to it. If the MAC holds a hearing, it conducts 
the hearing according to the rules for hearings before an ALJ. Notice 
is mailed to all parties at their last known address informing them 
that the MAC has assumed responsibility for the case.


Sec.  405.1052  Dismissal of a request for a hearing before an ALJ.

    Dismissal of a request for a hearing is in accordance with the 
following:
    (a) An ALJ dismisses a request for a hearing under any of the 
following conditions:
    (1) At any time before notice of the hearing decision is mailed, if 
only one party requested the hearing and that party asks to withdraw 
the request. This request may be submitted in writing to the ALJ or 
made orally at the hearing. The request for withdrawal must include a 
clear statement that the appellant is withdrawing the request for 
hearing and does not intend to further proceed with the appeal. If an 
attorney, or other legal professional on behalf of a beneficiary or 
other appellant files the request for withdrawal, the ALJ may presume 
that the representative has advised the appellant of the consequences 
of the withdrawal and dismissal.
    (2) Neither the party that requested the hearing nor the party's 
representative appears at the time and place set for the hearing, if--
    (i) The party was notified before the time set for the hearing that 
the request for hearing might be dismissed without further notice for 
failure to appear;
    (ii) The party did not appear at the time and place of hearing and 
does not contact the ALJ hearing office within 10 days and provide good 
cause for not appearing; or
    (iii) The ALJ sends a notice to the party asking why the party did 
not appear; and the party does not respond to the ALJ's notice within 
10 days or does not provide good cause for the failure to appear.
    (iv) In determining whether good cause exists under this paragraph 
(a)(2), the ALJ considers any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language), that the party may have.
    (3) The person or entity requesting a hearing has no right to it 
under Sec.  405.1002.
    (4) The party did not request a hearing within the stated time 
period and the ALJ has not found good cause for extending the deadline, 
as provided in Sec.  405.1014(d).
    (5) The beneficiary whose claim is being appealed died while the 
request for hearing is pending and all of the following criteria apply:
    (i) The request for hearing was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding 
this issue, the ALJ considers if the surviving spouse or estate remains 
liable for the services that were denied or a Medicare contractor held 
the beneficiary liable for subsequent similar services under the 
limitation of liability provisions based on the denial of the services 
at issue.
    (ii) No other individuals or entities that have a financial 
interest in the case wish to pursue an appeal under Sec.  405.1002.
    (iii) No other individual or entity filed a valid and timely 
request for an ALJ hearing in accordance to Sec.  405.1020.
    (6) The ALJ dismisses a hearing request entirely or refuses to 
consider

[[Page 11494]]

any one or more of the issues because a QIC, an ALJ or the MAC has made 
a previous determination or decision under this subpart about the 
appellant's rights on the same facts and on the same issue(s) or 
claim(s), and this previous determination or decision has become final 
by either administrative or judicial action.
    (7) The appellant abandons the request for hearing. An ALJ may 
conclude that an appellant has abandoned a request for hearing when the 
ALJ hearing office attempts to schedule a hearing and is unable to 
contact the appellant after making reasonable efforts to do so.
    (b) Notice of dismissal. The ALJ mails a written notice of the 
dismissal of the hearing request to all parties at their last known 
address. The notice states that there is a right to request that the 
MAC vacate the dismissal action.


Sec.  405.1054  Effect of dismissal of a request for a hearing before 
an ALJ.

    The dismissal of a request for a hearing is binding, unless it is 
vacated by the MAC under Sec.  405.1108(b).

Applicability of Medicare Coverage Policies


Sec.  405.1060  Applicability of national coverage determinations 
(NCDs).

    (a) General rule. (1) An NCD is a determination by the Secretary of 
whether a particular item or service is covered nationally under 
Medicare.
    (2) An NCD does not include a determination of what code, if any, 
is assigned to a particular item or service covered under Medicare or a 
determination of the amount of payment made for a particular item or 
service.
    (3) NCDs are made under section 1862(a)(1) of the Act as well as 
under other applicable provisions of the Act.
    (4) An NCD is binding on all Medicare contractors, including QIOs, 
QICs, Medicare Advantage Organizations, Prescription Drug Plans and 
their sponsors, HMOs, CMPs, HCPPs, ALJs and the MAC.
    (b) Review by an ALJ. (1) An ALJ may not disregard, set aside, or 
otherwise review an NCD.
    (2) An ALJ may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD was applied correctly to the claim.
    (c) Review by the MAC. (1) The MAC may not disregard, set aside, or 
otherwise review an NCD for purposes of a section 1869 claim appeal, 
except that the DAB may review NCDs as provided under part 426 of this 
title.
    (2) The MAC may review the facts of a particular case to determine 
whether an NCD applies to a specific claim for benefits and, if so, 
whether the NCD was applied correctly to the claim.


Sec.  405.1062  Applicability of local coverage determinations and 
other policies not binding on the ALJ and MAC.

    (a) ALJs and the MAC are not bound by LCDs, LMRPs, or CMS program 
guidance, such as program memoranda and manual instructions, but will 
give substantial deference to these policies if they are applicable to 
a particular case.
    (b) If an ALJ or MAC declines to follow a policy in a particular 
case, the ALJ or MAC decision must explain the reasons why the policy 
was not followed. An ALJ or MAC decision to disregard such policy 
applies only to the specific claim being considered and does not have 
precedential effect.
    (c) An ALJ or MAC may not set aside or review the validity of an 
LMRP or LCD for purposes of a claim appeal. An ALJ or the DAB may 
review or set aside an LCD (or any part of an LMRP that constitutes an 
LCD) in accordance with part 426 of this title.


Sec.  405.1063  Applicability of CMS Rulings.

    CMS Rulings are published under the authority of the Administrator, 
CMS. Consistent with Sec.  401.108 of this chapter, rulings are binding 
on all CMS components, on all HHS components that adjudicate matters 
under the jurisdiction of CMS, and on the Social Security 
Administration to the extent that components of the Social Security 
Administration adjudicate matters under the jurisdiction of CMS.


Sec.  405.1064  ALJ decisions involving statistical samples.

    When an appeal from the QIC involves an overpayment issue and the 
QIC used a statistical sample in reaching its reconsideration, the ALJ 
must base his or her decision on a review of the entire statistical 
sample used by the QIC.

Medicare Appeals Council Review


Sec.  405.1100  Medicare Appeals Council review: General.

    (a) The appellant or any other party to the hearing may request 
that the MAC review an ALJ's decision or dismissal.
    (b) Under circumstances set forth in Sec.  405.1104 and 405.1108, 
the appellant may request that a case be escalated to the MAC for a 
decision even if the ALJ has not issued a decision or dismissal in his 
or her case.
    (c) When the MAC reviews an ALJ's decision, it undertakes a de novo 
review. The MAC issues a final action or remands a case to the ALJ 
within 90 days of receipt of the appellant's request for review, unless 
the 90-day period is extended as provided in this subpart.
    (d) When deciding an appeal that was escalated from the ALJ level 
to the MAC, the MAC will issue a final action or remand the case to the 
ALJ within 180 days of receipt of the appellant's request for 
escalation, unless the 180-day period is extended as provided in this 
subpart.


Sec.  405.1102  Request for MAC review when ALJ issues decision or 
dismissal.

    (a) A party to the ALJ hearing may request a MAC review if the 
party files a written request for a MAC review within 60 days after 
receipt of the ALJ's decision or dismissal. A party requesting a review 
may ask that the time for filing a request for MAC review be extended 
if--
    (1) The request for an extension of time is in writing;
    (2) It is filed with the MAC; and
    (3) It explains why the request for review was not filed within the 
stated time period. If the MAC finds that there is good cause for 
missing the deadline, the time period will be extended. To determine 
whether good cause exists, the MAC uses the standards outlined at 
Sec. Sec.  405.942(b)(2) and 405.942(b)(3).
    (b) A party does not have the right to seek MAC review of an ALJ's 
remand to a QIC or an ALJ's affirmation of a QIC's dismissal of a 
request for reconsideration.
    (c) For purposes of requesting MAC review (Sec.  405.1100 through 
Sec.  405.1140), unless specifically excepted the term, ``party,'' 
includes CMS where CMS has entered into a case as a party according to 
Sec.  405.1012. The term, ``appellant,'' does not include CMS, where 
CMS has entered into a case as a party according to Sec.  405.1012.


Sec.  405.1104  Request for MAC review when an ALJ does not issue a 
decision timely.

    (a) Requesting escalation. An appellant who files a timely request 
for hearing before an ALJ and whose appeal continues to be pending 
before the ALJ at the end of the applicable ALJ adjudication period 
under Sec.  405.1016 may request MAC review if--
    (1) The appellant files a written request with the ALJ to escalate 
the appeal to the MAC after the adjudication period has expired; and
    (2) The ALJ does not issue a final action or remand the case to the 
QIC within the latter of 5 days of receiving the request for escalation 
or 5 days from the end of the applicable adjudication period set forth 
in Sec.  405.1016.
    (b) Escalation. (1) If the ALJ is not able to issue a final action 
or remand within the time period set forth in

[[Page 11495]]

paragraph (a)(2) of this section, he or she sends notice to the 
appellant.
    (2) The notice acknowledges receipt of the request for escalation, 
and confirms that the ALJ is not able to issue a final action or remand 
order within the statutory time frame.
    (3) If the ALJ does not act on a request for escalation within the 
time period set forth in paragraph (a)(2) of this section or does not 
send the required notice to the appellant, the QIC decision becomes a 
final administrative decision for purposes of MAC review.
    (c) No escalation. If the ALJ's adjudication period set forth in 
Sec.  405.1016 expires, the case remains with the ALJ until a final 
action is issued and the appellant does not request escalation to the 
MAC or the appellant requests escalation to the MAC.


Sec.  405.1106  Where a request for review or escalation may be filed.

    (a) When a request for a MAC review is filed after an ALJ has 
issued a decision or dismissal, the request for review may be filed 
with the MAC or the hearing office that issued the ALJ's decision or 
dismissal. The appellant must also send a copy of the request for 
review to the other parties to the ALJ decision or dismissal. Failure 
to copy the other parties tolls the MAC's adjudication deadline set 
forth in Sec.  405.1100 until all parties to the hearing receive notice 
of the request for MAC review. If the request for review is timely 
filed with the ALJ hearing office rather than the MAC, the MAC's 
adjudication period to conduct a review begins on the date the request 
for review is received by the MAC. Upon receipt of a request for review 
from an entity other than the ALJ hearing office, the MAC will send 
written notice to the appellant of the date of receipt of the request 
and commencement of the adjudication time frame.
    (b) If an appellant files a request to escalate an appeal to the 
MAC level because the ALJ has not completed his or her action on the 
request for hearing within the adjudication deadline under Sec.  
405.1016, the request for escalation must be filed with both the ALJ 
and the MAC. The appellant must also send a copy of the request for 
escalation to the other parties. Failure to copy the other parties 
tolls the MAC's adjudication deadline set forth in Sec.  405.1100 until 
all parties to the hearing receive notice of the request for MAC 
review. In a case that has been escalated from the ALJ, the MAC's 180-
day period to issue a final action or remand the case to the ALJ begins 
on the date the request for escalation is received by the MAC.


Sec.  405.1108  MAC actions when request for review or escalation is 
filed.

    (a) Except as specified in paragraphs (c) and (d) of this section, 
when a party requests that the MAC review an ALJ's decision, the MAC 
will review the ALJ's decision de novo. The party requesting review 
does not have a right to a hearing before the MAC. The MAC will 
consider all of the evidence in the administrative record. Upon 
completion of its review, the MAC may adopt, modify, or reverse the 
ALJ's decision or remand the case to an ALJ for further proceedings.
    (b) When a party requests that the MAC review an ALJ's dismissal, 
the MAC may deny review or vacate the dismissal and remand the case to 
the ALJ for further proceedings.
    (c) The MAC will dismiss a request for review when the party 
requesting review does not have a right to a review by the MAC, or will 
dismiss the request for a hearing for any reason that the ALJ could 
have dismissed the request for hearing.
    (d) When an appellant requests escalation of a case from the ALJ 
level to the MAC, the MAC may take any of the following actions:
    (1) Issue a decision based on the record constructed at the QIC and 
any additional evidence, including oral testimony, entered in the 
record by the ALJ before the case was escalated.
    (2) Conduct any additional proceedings, including a hearing, that 
the MAC determines are necessary to issue a decision.
    (3) Remand the case to an ALJ for further proceedings, including a 
hearing.
    (4) Dismiss the request for MAC review because the appellant does 
not have the right to escalate the appeal.
    (5) Dismiss the request for a hearing for any reason that the ALJ 
could have dismissed the request.


Sec.  405.1110  MAC reviews on its own motion.

    (a) General rule. The MAC may decide on its own motion to review a 
decision or dismissal issued by an ALJ. CMS or any of its contractors 
may refer a case to the MAC for it to consider reviewing under this 
authority anytime within 60 days after the date of an ALJ's decision or 
dismissal.
    (b) Referral of cases. (1) CMS or any of its contractors may refer 
a case to the MAC if, in their view, the decision or dismissal contains 
an error of law material to the outcome of the claim or presents a 
broad policy or procedural issue that may affect the public interest. 
CMS may also request that the MAC take own motion review of a case if--
    (i) CMS or its contractor participated in the appeal at the ALJ 
level; and
    (ii) In CMS' view, the ALJ's decision or dismissal is not supported 
by the preponderance of evidence in the record or the ALJ abused his or 
her discretion.
    (2) CMS's referral to the MAC is made in writing and must be filed 
with the MAC no later than 60 days after the ALJ's decision or 
dismissal is issued. The written referral will state the reasons why 
CMS believes that the MAC must review the case on its own motion. CMS 
will send a copy of its referral to all parties to the ALJ's action and 
to the ALJ. Parties to the ALJ's action may file exceptions to the 
referral by submitting written comments to the MAC within 20 days of 
the referral notice. A party submitting comments to the MAC must send 
such comments to CMS and all other parties to the ALJ's decision.
    (c) Standard of review. (1) Referral by CMS after participation at 
the ALJ level. If CMS or its contractor participated in an appeal at 
the ALJ level, the MAC exercises its own motion authority if there is 
an error of law material to the outcome of the case, an abuse of 
discretion by the ALJ, the decision is not consistent with the 
preponderance of the evidence of record, or there is a broad policy or 
procedural issue that may affect the general public interest. In 
deciding whether to accept review under this standard, the MAC will 
limit its consideration of the ALJ's action to those exceptions raised 
by CMS.
    (2) Referral by CMS when CMS did not participate in the ALJ 
proceedings or appear as a party. The MAC will accept review if the 
decision or dismissal contains an error of law material to the outcome 
of the case or presents a broad policy or procedural issue that may 
affect the general public interest. In deciding whether to accept 
review, the MAC will limit its consideration of the ALJ's action to 
those exceptions raised by CMS.
    (d) MAC's action. If the MAC decides to review a decision or 
dismissal on its own motion, it will mail the results of its action to 
all the parties to the hearing and to CMS if it is not already a party 
to the hearing. The MAC may adopt, modify, or reverse the decision or 
dismissal, may remand the case to an ALJ for further proceedings or may 
dismiss a hearing request. The MAC must issue its action no later than 
90 days after receipt of the CMS referral, unless the 90-day period has 
been extended as provided in this subpart. The MAC may not, however, 
issue its action before the 20-day comment period has expired, unless 
it determines that the agency's referral does not provide a basis for 
reviewing the case. If the MAC does not act within the applicable 
adjudication deadline, the

[[Page 11496]]

ALJ's decision or dismissal remains the final action in the case.


Sec.  405.1112  Content of request for review.

    (a) The request for MAC review must be filed with the MAC or 
appropriate ALJ hearing office. The request for review must be in 
writing and must be made on a standard form. A written request that is 
not made on a standard form is accepted if it contains the 
beneficiary's name; Medicare health insurance claim number; the 
specific service(s) or item(s) for which the review is requested; the 
specific date(s) of service; the date of the ALJ's final action, if 
any, if the party is requesting escalation from the ALJ to the MAC, the 
hearing office in which the appellant's request for hearing is pending; 
and the name and signature of the party or the representative of the 
party; and any other information CMS may decide.
    (b) The request for review must identify the parts of the ALJ 
action with which the party requesting review disagrees and explain why 
he or she disagrees with the ALJ's decision, dismissal, or other 
determination being appealed. For example, if the party requesting 
review believes that the ALJ's action is inconsistent with a statute, 
regulation, CMS Ruling, or other authority, the request for review 
should explain why the appellant believes the action is inconsistent 
with that authority.
    (c) The MAC will limit its review of an ALJ's actions to those 
exceptions raised by the party in the request for review, unless the 
appellant is an unrepresented beneficiary. For purposes of this section 
only, we define a representative as anyone who has accepted an 
appointment as the beneficiary's representative, except a member of the 
beneficiary's family, a legal guardian, or an individual who routinely 
acts on behalf of the beneficiary, such as a family member or friend 
who has a power of attorney.


Sec.  405.1114  Dismissal of request for review.

    The MAC dismisses a request for review if the party requesting 
review did not file the request within the stated period of time and 
the time for filing has not been extended. The MAC also dismisses the 
request for review if--
    (a) The party asks to withdraw the request for review;
    (b) The party does not have a right to request MAC review; or
    (c) The beneficiary whose claim is being appealed died while the 
request for review is pending and all of the following criteria apply:
    (1) The request for review was filed by the beneficiary or the 
beneficiary's representative, and the beneficiary's surviving spouse or 
estate has no remaining financial interest in the case. In deciding 
this issue, the MAC considers whether the surviving spouse or estate 
remains liable for the services that were denied or a Medicare 
contractor held the beneficiary liable for subsequent similar services 
under the limitation of liability provisions based on the denial of the 
services at issue;
    (2) No other individual or entity with a financial interest in the 
case wishes to pursue an appeal under Sec.  405.1102;
    (3) No other party to the ALJ hearing filed a valid and timely 
review request under Sec.  405.1102 and Sec.  405.1112.


Sec.  405.1116  Effect of dismissal of request for MAC review or 
request for hearing.

    The dismissal of a request for MAC review or denial of a request 
for review of a dismissal issued by an ALJ is binding and not subject 
to further review unless reopened and vacated by the MAC. The MAC's 
dismissal of a request for hearing is also binding and not subject to 
judicial review.


Sec.  405.1118  Obtaining evidence from the MAC.

    A party may request and receive a copy of all or part of the record 
of the ALJ hearing, including the exhibits list, documentary evidence, 
and a copy of the tape of the oral proceedings. However, the party may 
be asked to pay the costs of providing these items. If a party requests 
evidence from the MAC and an opportunity to comment on that evidence, 
the time beginning with the MAC's receipt of the request for evidence 
through the expiration of the time granted for the party's response 
will not be counted toward the 90-day adjudication deadline.


Sec.  405.1120  Filing briefs with the MAC.

    Upon request, the MAC will give the party requesting review, as 
well as all other parties, a reasonable opportunity to file briefs or 
other written statements about the facts and law relevant to the case. 
Any party who submits a brief or statement must send a copy to all of 
the other parties. Unless the party requesting review files the brief 
or other statement with the request for review, the time beginning with 
the date of receipt of the request to submit the brief and ending with 
the date the brief is received by the MAC will not be counted toward 
the adjudication timeframe set forth in Sec.  405.1100. The MAC may 
also request, but not require, CMS or its contractor to file a brief or 
position paper if the MAC determines that it is necessary to resolve 
the issues in the case. The MAC will not draw any adverse inference if 
CMS or a contractor either participates, or decides not to participate 
in MAC review.


Sec.  405.1122  What evidence may be submitted to the MAC.

    (a) Appeal before the MAC on request for review of ALJ's decision. 
(1) If the MAC is reviewing an ALJ's decision, the MAC limits its 
review of the evidence to the evidence contained in the record of the 
proceedings before the ALJ. However, if the hearing decision decides a 
new issue that the parties were not afforded an opportunity to address 
at the ALJ level, the MAC considers any evidence related to that issue 
that is submitted with the request for review.
    (2) If the MAC determines that additional evidence is needed to 
resolve the issues in the case and the hearing record indicates that 
the previous decision-makers have not attempted to obtain the evidence, 
the MAC may remand the case to an ALJ to obtain the evidence and issue 
a new decision.
    (b) Appeal before MAC as a result of appellant's request for 
escalation. (1) If the MAC is reviewing a case that is escalated from 
the ALJ level to the MAC, the MAC will decide the case based on the 
record constructed at the QIC and any additional evidence, including 
oral testimony, entered in the record by the ALJ before the case was 
escalated.
    (2) If the MAC receives additional evidence with the request for 
escalation that is material to the question to be decided, or 
determines that additional evidence is needed to resolve the issues in 
the case, and the record provided to the MAC indicates that the 
previous decision-makers did not attempt to obtain the evidence before 
escalation, the MAC may remand the case to an ALJ to consider or obtain 
the evidence and issue a new decision.
    (c) Evidence related to issues previously considered by the QIC. 
(1) If new evidence related to issues previously considered by the QIC 
is submitted to the MAC by a provider, supplier, or a beneficiary 
represented by a provider or supplier, the MAC must determine if the 
provider, supplier, or the beneficiary represented by a provider or 
supplier had good cause for submitting it for the first time at the MAC 
level.
    (2) If the MAC determines that good cause does not exist, the MAC 
must exclude the evidence from the proceeding, may not consider it in 
reaching a decision, and may not remand the issue to an ALJ.

[[Page 11497]]

    (3) The MAC must notify all parties if it excludes the evidence. 
The MAC may remand to an ALJ if--
    (i) The ALJ did not consider the new evidence submitted by the 
provider, supplier, or beneficiary represented by a provider or 
supplier because good cause did not exist; and
    (ii) The MAC finds that good cause existed under Sec.  405.1028 and 
the ALJ should have reviewed the evidence.
    (iii) The new evidence is submitted by a party that is not a 
provider, supplier, or a beneficiary represented by a provider or 
supplier.
    (d) Subpoenas. (1) When it is reasonably necessary for the full 
presentation of a case, the MAC may, on its own initiative or at the 
request of a party, issue subpoenas requiring a party to make books, 
records, correspondence, papers, or other documents that are material 
to an issue at the hearing available for inspection and copying.
    (2) A party's request for a subpoena must--
    (i) Give a sufficient description of the documents to be produced;
    (ii) State the important facts that the documents are expected to 
prove; and
    (iii) Indicate why these facts could not be proven without issuing 
a subpoena.
    (3) A party to the MAC review on escalation that wishes to subpoena 
documents must file a written request that complies with the 
requirements set out in paragraph (d)(2) of this section within 10 
calendar days of the request for escalation.
    (4) A subpoena will issue only where a party--
    (i) Has sought discovery;
    (ii) Has filed a motion to compel;
    (iii) Has had that motion granted; and
    (iv) Nevertheless, has still not received the requested discovery.
    (e) Reviewability of subpoena rulings--
    (1) General rule. A MAC ruling on a subpoena request is not subject 
to immediate review by the Secretary.
    (2) Exception. (i) To the extent a subpoena compels disclosure of a 
matter for which an objection based on privilege, or other protection 
from disclosure such as case preparation, confidentiality, or undue 
burden, was made before the MAC, the Secretary may review immediately 
that subpoena or portion of the subpoena.
    (ii) Upon notice to the MAC that a party or non-party, as 
applicable, intends to seek Secretary review of the subpoena, the MAC 
must stay all proceedings affected by the subpoena.
    (iii) The MAC determines the length of the stay under the 
circumstances of a given case, but in no event is less than 15 days 
after the day on which the MAC received notice of the party or non-
party's intent to seek Secretary review.
    (iv) If the Secretary grants a request for review, the subpoena or 
portion of the subpoena, as applicable, is stayed until the Secretary 
issues a written decision that affirms, reverses, modifies, or remands 
the MAC's action for the subpoena.
    (v) If the Secretary does not grant review or take own motion 
review within the time allotted for the stay, the stay is lifed and the 
MAC's action stands.
    (f) Enforcement. (1) If the MAC determines, whether on its own 
motion or at the request of a party, that a party or non-party subject 
to a subpoena issued under this section has refused to comply with the 
subpoena, the MAC may request the Secretary to seek enforcement of the 
subpoena in accordance with section 205(c) of the Act, 42 U.S.C. 
405(c).
    (2) Any enforcement request by the MAC must consist of a written 
notice to the Secretary describing in detail the MAC's findings of 
noncompliance and its specific request for enforcement, and providing a 
copy of the subpoena and evidence of its receipt by certified mail by 
the party or nonparty subject to the subpoena.
    (3) The MAC must promptly mail a copy of the notice and related 
documents to the party or non-party subject to the subpoena, and to any 
other party and affected non-party to the appeal.
    (4) If the Secretary does not grant review or take own motion 
review within the time allotted for the stay, the stay is lifted and 
the subpoena stands.


Sec.  405.1124  Oral argument.

    A party may request to appear before the MAC to present oral 
argument.
    (a) The MAC grants a request for oral argument if it decides that 
the case raises an important question of law, policy, or fact that 
cannot be readily decided based on written submissions alone.
    (b) The MAC may decide on its own that oral argument is necessary 
to decide the issues in the case. If the MAC decides to hear oral 
argument, it tells the parties of the time and place of the oral 
argument at least 10 days before the scheduled date.
    (c) In case of a previously unrepresented beneficiary, a newly 
hired representative may request an extension of time for preparation 
of the oral argument and the MAC must consider whether the extension is 
reasonable.
    (d) The MAC may also request, but not require, CMS or its 
contractor to appear before it if the MAC determines that it may be 
helpful in resolving the issues in the case.
    (e) The MAC will not draw any inference if CMS or a contractor 
decides not to participate in the oral argument.


Sec.  405.1126  Case remanded by the MAC.

    (a) When the MAC may remand a case. Except as specified in Sec.  
405.1122(c), the MAC may remand a case in which additional evidence is 
needed or additional action by the ALJ is required. The MAC will 
designate in its remand order whether the ALJ will issue a final 
decision or a recommended decision on remand.
    (b) Action by ALJ on remand. The ALJ will take any action that is 
ordered by the MAC and may take any additional action that is not 
inconsistent with the MAC's remand order.
    (c) Notice when case is returned with a recommended decision. When 
the ALJ sends a case to the MAC with a recommended decision, a notice 
is mailed to the parties at their last known address. The notice tells 
them that the case was sent to the MAC, explains the rules for filing 
briefs or other written statements with the MAC, and includes a copy of 
the recommended decision.
    (d) Filing briefs with the MAC when ALJ issues recommended 
decision. (1) Any party to the recommended decision may file with the 
MAC briefs or other written statements about the facts and law relevant 
to the case within 20 days of the date on the recommended decision. Any 
party may ask the MAC for additional time to file briefs or statements. 
The MAC will extend this period, as appropriate, if the party shows 
that it has good cause for requesting the extension.
    (2) All other rules for filing briefs with and obtaining evidence 
from the MAC follow the procedures explained in this subpart.
    (e) Procedures before the MAC. (1) The MAC, after receiving a 
recommended decision, will conduct proceedings and issue its decision 
or dismissal according to the procedures explained in this subpart.
    (2) If the MAC determines that more evidence is required, it may 
again remand the case to an ALJ for further inquiry into the issues, 
rehearing, receipt of evidence, and another decision or recommended 
decision. However, if the MAC decides that it can get the additional 
evidence more quickly, it will take appropriate action.


Sec.  405.1128  Action of the MAC.

    (a) After it has reviewed all the evidence in the administrative 
record and any additional evidence received,

[[Page 11498]]

subject to the limitations on MAC consideration of additional evidence 
in Sec.  405.1122, the MAC will make a decision or remand the case to 
an ALJ.
    (b) The MAC may adopt, modify, or reverse the ALJ hearing decision 
or recommended decision.
    (c) The MAC mails a copy of its decision to all the parties at 
their last known addresses. For overpayment cases involving multiple 
beneficiaries where there is no beneficiary liability the MAC may 
choose to send written notice only to the appellant. In the event the 
decision will result in a payment to a provider or supplier, the 
Medicare contractor must issue any electronic or paper remittance 
advice notice to that provider or supplier.


Sec.  405.1130  Effect of the MAC's decision.

    The MAC's decision is binding on all parties unless a Federal 
district court issues a decision modifying the MAC's decision or the 
decision is revised as the result of a reopening in accordance with 
Sec.  405.980. A party may file an action in a Federal district court 
within 60 days after the date it receives notice of the MAC's decision.


Sec.  405.1132  Request for escalation to Federal court.

    (a) If the MAC does not issue a decision or dismissal or remand the 
case to an ALJ within the adjudication period specified in Sec.  
405.1100, or as extended as provided in this subpart, the appellant may 
request that the appeal, other than an appeal of an ALJ dismissal, be 
escalated to Federal district court. Upon receipt of a request for 
escalation, the MAC may--
    (1) Issue a decision or dismissal or remand the case to an ALJ, if 
that action is issued within the latter of 5 calendar days of receipt 
of the request for escalation or 5 calendar days from the end of the 
applicable adjudication time period set forth in Sec.  405.1100; or
    (2) If the MAC is not able to issue a decision or dismissal or 
remand as set forth in paragraph (a)(1) of this section, it will send a 
notice to the appellant acknowledging receipt of the request for 
escalation and confirming that it is not able to issue a decision, 
dismissal or remand order within the statutory time frame.
    (b) A party may file an action in a Federal district court within 
60 days after the date it receives the MAC's notice that the MAC is not 
able to issue a final action or remand unless the party is appealing an 
ALJ dismissal.


Sec.  405.1134  Extension of time to file action in Federal district 
court.

    (a) Any party to the MAC's decision or to a request for EAJR that 
has been certified by the review entity other than CMS may request that 
the time for filing an action in a Federal district court be extended.
    (b) The request must--
    (1) Be in writing.
    (2) Give the reasons why the action was not filed within the stated 
time period.
    (3) Be filed with the MAC.
    (c) If the party shows that he or she had good cause for missing 
the deadline, the time period will be extended. To determine whether 
good cause exists, the MAC uses the standards specified in Sec.  
405.942(b)(2) or (b)(3).


Sec.  405.1136  Judicial review.

    (a) General rules. (1) To the extent authorized by sections 1869, 
1876(c)(5)(B), and 1879(d) of the Act, a party to a MAC decision, or an 
appellant who requests escalation to Federal district court if the MAC 
does not complete its review of the ALJ's decision within the 
applicable adjudication period, may obtain a court review if the amount 
remaining in controversy satisfies the requirements of Sec.  
405.1006(c).
    (2) If the MAC's adjudication period set forth in Sec.  405.1100 
expires and the appellant does not request escalation to Federal 
district court, the case remains with the MAC until a final action is 
issued.
    (b) Court in which to file civil action. (1) Any civil action 
described in paragraph (a) of this section must be filed in the 
district court of the United States for the judicial district in which 
the party resides or where such individual, institution, or agency has 
its principal place of business.
    (2) If the party does not reside within any judicial district, or 
if the individual, institution, or agency does not have its principal 
place of business within any such judicial district, the civil action 
must be filed in the District Court of the United States for the 
District of Columbia.
    (c) Time for filing civil action. (1) Any civil action described in 
paragraph (a) of this section must be filed within the time periods 
specified in Sec.  405.1130, Sec.  405.1132, or Sec.  405.1134, as 
applicable.
    (2) For purposes of this section, the date of receipt of the notice 
of the MAC's decision or the MAC's notice that it is not able to issue 
a decision within the statutory timeframe shall be presumed to be 5 
calendar days after the date of the notice, unless there is a 
reasonable showing to the contrary.
    (3) Where a case is certified for judicial review in accordance 
with the expedited access to judicial review process in Sec.  405.990, 
the civil action must be filed within 60 days after receipt of the 
review entity's certification, except where the time is extended by the 
ALJ or MAC, as applicable, upon a showing of good cause.
    (d) Proper defendant. (1) In any civil action described in 
paragraph (a) of this section is filed, the Secretary of HHS, in his or 
her official capacity, is the proper defendant. Any civil action 
properly filed shall survive notwithstanding any change of the person 
holding the Office of the Secretary of HHS or any vacancy in such 
office.
    (2) If the complaint is erroneously filed against the United States 
or against any agency, officer, or employee of the United States other 
than the Secretary, the plaintiff will be notified that he or she has 
named an incorrect defendant and is granted 60 days from the date of 
receipt of the notice in which to commence the action against the 
correct defendant, the Secretary.
    (e) Prohibition against judicial review of certain Part B 
regulations or instructions. Under section 1869(e)(1) of the Act, a 
court may not review a regulation or instruction that relates to a 
method of payment under Medicare Part B if the regulation was 
published, or the instructions issued, before January 1, 1991.
    (f) Standard of review. (1) Under section 205(g) of the Act, the 
findings of the Secretary of HHS as to any fact, if supported by 
substantial evidence, are conclusive.
    (2) When the Secretary's decision is adverse to a party due to a 
party's failure to submit proof in conformity with a regulation 
prescribed under section 205(a) of the Act pertaining to the type of 
proof a party must offer to establish entitlement to payment, the court 
will review only whether the proof conforms with the regulation and the 
validity of the regulation.


Sec.  405.1138  Case remanded by a Federal district court.

    When a Federal district court remands a case to the Secretary for 
further consideration, unless the court order specifies otherwise, the 
MAC, acting on behalf of the Secretary, may make a decision, or it may 
remand the case to an ALJ with instructions to take action and either 
issue a decision, take other action, or return the case to the MAC with 
a recommended decision. If the MAC remands a case, the procedures 
specified in Sec.  405.1140 will be followed.

[[Page 11499]]

Sec.  405.1140  MAC review of ALJ decision in a case remanded by a 
Federal district court.

    (a) General rules. (1) In accordance with Sec.  405.1138, when a 
case is remanded by a Federal district court for further consideration 
and the MAC remands the case to an ALJ, a decision subsequently issued 
by the ALJ becomes the final decision of the Secretary unless the MAC 
assumes jurisdiction.
    (2) The MAC may assume jurisdiction based on written exceptions to 
the decision of the ALJ that a party files with the MAC or based on its 
authority under paragraph (c) of this section.
    (3) The MAC either makes a new, independent decision based on the 
entire record that will be the final decision of the Secretary after 
remand, or remands the case to an ALJ for further proceedings.
    (b) A party files exceptions disagreeing with the decision of the 
ALJ. (1) If a party disagrees with an ALJ decision described in 
paragraph (a) of this section, in whole or in part, he or she may file 
exceptions to the decision with the MAC. Exceptions may be filed by 
submitting a written statement to the MAC setting forth the reasons for 
disagreeing with the decision of the ALJ. The party must file 
exceptions within 30 days of the date the party receives the decision 
of the ALJ or submit a written request for an extension within the 30-
day period. The MAC will grant a timely request for a 30-day extension. 
A request for an extension of more than 30 days must include a 
statement of reasons as to why the party needs the additional time and 
may be granted if the MAC finds good cause under the standard 
established in Sec.  405.942(b)(2) or (b)(3).
    (2) If written exceptions are timely filed, the MAC considers the 
party's reasons for disagreeing with the decision of the ALJ. If the 
MAC concludes that there is no reason to change the decision of the 
ALJ, it will issue a notice addressing the exceptions and explaining 
why no change in the decision of the ALJ is warranted. In this 
instance, the decision of the ALJ is the final decision of the 
Secretary after remand.
    (3) When a party files written exceptions to the decision of the 
ALJ, the MAC may assume jurisdiction at any time. If the MAC assumes 
jurisdiction, it makes a new, independent decision based on its 
consideration of the entire record adopting, modifying, or reversing 
the decision of the ALJ or remanding the case to an ALJ for further 
proceedings, including a new decision. The new decision of the MAC is 
the final decision of the Secretary after remand.
    (c) MAC assumes jurisdiction without exceptions being filed. (1) 
Any time within 60 days after the date of the decision of the ALJ, the 
MAC may decide to assume jurisdiction of the case even though no 
written exceptions have been filed.
    (2) Notice of this action is mailed to all parties at their last 
known address.
    (3) The parties will be provided with the opportunity to file 
briefs or other written statements with the MAC about the facts and law 
relevant to the case.
    (4) After the briefs or other written statements are received or 
the time allowed (usually 30 days) for submitting them has expired, the 
MAC will either issue a final decision of the Secretary affirming, 
modifying, or reversing the decision of the ALJ, or remand the case to 
an ALJ for further proceedings, including a new decision.
    (d) Exceptions are not filed and the MAC does not otherwise assume 
jurisdiction. If no exceptions are filed and the MAC does not assume 
jurisdiction of the cases within 60 days after the date of the ALJ's 
decision, the decision of the ALJ becomes the final decision of the 
Secretary after remand.

    Dated: January 12, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: January 12, 2005.
Tommy G. Thompson,
Secretary.
[FR Doc. 05-4062 Filed 3-1;-05; 2:07 pm]
BILLING CODE 4120-01-P