[Federal Register Volume 71, Number 65 (Wednesday, April 5, 2006)]
[Proposed Rules]
[Pages 17052-17062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-3264]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 422, and 489

[CMS-4105-P]
RIN 0938-AN85


Medicare Program; Notification Procedures for Hospital Discharges

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule sets forth new requirements for hospital 
discharge notices under both original Medicare and the Medicare 
Advantage program. This proposed rule would require hospitals to comply 
with a two-step notice process when discharging patients from the 
hospital level of care that is similar to the notice requirements 
regarding service terminations applicable to home health agencies, 
skilled nursing facilities, comprehensive outpatient rehabilitation 
facilities, and hospices.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 5, 2006.

ADDRESSES: In commenting, please refer to file code CMS-4105-P. 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/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular 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-4105-P, P.O. Box 8010, Baltimore, MD 
21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send 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-4105-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. 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) 786-9994 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.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Eileen Zerhusen, (410) 786-7803, (For 
issues related to Original Medicare).
    Tim Roe, (410) 786-2006, (For issues related to Medicare 
Advantage).

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-4105-P 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. We post all comments

[[Page 17053]]

received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on 
CMS Regulations'' on that Web site to view public comments.
    Comments received timely will also 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 1-800-743-3951.

I. Background

    [If you choose to comment on issues in this section, please include 
the caption ``BACKGROUND'' at the beginning of your comments.]
    On April 4, 2003, we published a final rule (68 FR 16652) in the 
Federal Register implementing changes to the Medicare+Choice (now 
Medicare Advantage (MA)) program in connection with the 1993 Grijalva 
v. Shalala class action lawsuit, which was brought by beneficiaries 
enrolled in Medicare risk-based managed care organizations. That final 
rule requires home health agencies (HHAs), skilled nursing facilities 
(SNFs), and comprehensive outpatient rehabilitation facilities (CORFs) 
to comply with a two-step notice process in connection with the 
termination of Medicare coverage of services to an enrollee in an MA 
plan. HHAs, SNFs, and CORFs must deliver a standardized, largely 
generic notice that informs each MA plan enrollee when Medicare 
coverage ends and explains the enrollee's appeal rights. If the 
enrollee is dissatisfied with the decision to terminate services, the 
MA organization is obligated to deliver a detailed notice providing 
specific information about the organization's decision to terminate 
services.
    On November 26, 2004, as part of our implementation of changes to 
the Medicare appeals process required by the Medicare, Medicaid and 
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), we 
published a final rule in the Federal Register (69 FR 69252), 
establishing a similar, two-step notice process for the termination of 
Medicare coverage of SNF, HHA, CORF, and hospice services to original 
Medicare beneficiaries. As specified under these rules, which took 
effect July 1, 2005, HHAs, SNFs, CORFs, and hospices (and swing beds by 
instruction, see CMS Manual System Pub 100-04 Medicare Claims 
Processing, Transmittal 594, Change Request 3903, and dated June 24, 
2005) must provide a standardized, largely generic notice to each 
beneficiary before a service termination. Similar to the MA notice, the 
standardized notice of non-coverage informs the beneficiary when 
Medicare coverage ends and includes information about the beneficiary's 
appeal rights. In situations where a beneficiary chooses to exercise 
his or her right to an expedited appeal, a detailed notice is furnished 
before the termination of services.
    For both MA enrollees and beneficiaries in original Medicare, 
separate requirements apply for hospital discharges. (Note that in the 
hospital process, we generally use the term ``discharge'' rather than 
the phrase ``termination of services,'' as used in the non-hospital 
process.) In a proposed rule published in the Federal Register on 
January 24, 2001 (66 FR 7593), we had proposed to require hospitals to 
provide a notice of appeal rights and the reasons for the discharge to 
all hospital inpatients (including both original Medicare beneficiaries 
and MA enrollees) at least 1 day before the effective date of 
discharge. Hospitals opposed this proposal and commented that requiring 
hospitals to deliver a second, more detailed notice of appeal rights to 
all patients (the first being the ``Important Message from Medicare,'' 
which is a standard notice issued at or about the time of the patient's 
admission, as required under section 1866(a)(1)(M) of the Social 
Security Act (the Act)) would pose a significant administrative burden. 
In response to those comments, we determined that a detailed notice was 
not necessary in every case. Therefore, in the April 4, 2003 final 
rule, we eliminated the requirement that all patients receive a 
detailed notice.
    Currently, hospitals do not follow the same two-step discharge 
notice process that applies to HHAs, SNFs, CORFs, and hospices. In the 
November 26, 2004 final rule, we left largely unchanged our 
longstanding requirement that, consistent with Sec.  412.42(c)(3), a 
hospital must provide a hospital-issued notice of noncoverage (HINN) to 
any original Medicare beneficiary that expresses dissatisfaction with 
an impending hospital discharge. Hospitals also continue to be required 
to deliver the Important Message from Medicare to all Medicare 
beneficiaries at or about the time of admission. Similar to the policy 
in original Medicare, MA organizations are required to provide 
enrollees with a notice of noncoverage, known as the Notice of 
Discharge and Medicare Appeal Rights (NODMAR), only when a beneficiary 
disagrees with the discharge decision or when the MA organization (or 
hospital, if the MA organization has delegated to it the authority to 
make the discharge decision) is not discharging the enrollee, but no 
longer intends to cover the inpatient stay.

II. Provisions of the Proposed Rule

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

Proposed Two-Step Notice Process

    This proposed rule would establish a two-step notice process for 
hospital discharges that is similar to the process in effect for 
service terminations in HHAs, SNFs, CORFs, and hospices. We propose 
this change because we believe that the two-step notice process, 
including a standardized, largely generic notice of non-coverage, is 
helpful to beneficiaries. We also believe that the new approach we are 
proposing would not be overly burdensome for providers or MA 
organizations. Further, because all Medicare beneficiaries who are 
hospital inpatients have the right to an expedited review, we also 
believe it is preferable that these beneficiaries have the same notice 
of appeal rights to which other beneficiaries are entitled. Extending 
the two-step notice process to inpatient hospitals would provide a more 
consistent approach to communicating appeal rights to beneficiaries in 
both original Medicare and MA and across provider settings.
    For these reasons, we are proposing to require hospitals to 
deliver, prior to discharge, a standardized, largely generic notice of 
non-coverage to each Medicare beneficiary whose physician concurs with 
the discharge decision. The notice would contain substantially the same 
information that is contained in the standardized notices that HHAs, 
SNFs, CORFs, and hospices must provide, including the prospective 
discharge date and a description of appeal rights. The notice processes 
as specified in Sec.  405.1208, addresses the situation where the 
hospital requests a Quality Improvement Organization (QIO) review 
because the physician does not concur with the discharge decision, 
would remain unchanged. However, we are proposing one technical 
correction to Sec.  405.1208(e)(1).
    HHAs, SNFs, and CORFs generally must provide the standardized 
notice to both original Medicare beneficiaries and MA enrollees at 
least 2 days in advance of the service termination. Hospices

[[Page 17054]]

must provide the standardized notice to original Medicare beneficiaries 
in the same general timeframe. (Hospice services are not part of the 
benefits covered by MA plans, so MA rules for the delivery of a 
standardized service termination notice do not apply to hospices.) The 
2-day rule is intended to balance the demands of provider practice 
patterns with potential beneficiary liability in those settings.
    However, section 1869(c)(3)(C)(iii)(III) of the Act provides that 
hospitals generally may not charge beneficiaries for services provided 
before noon of the day after a QIO issues its decision. Therefore 
beneficiary liability is not as significant an issue in this setting. 
Given the greater volatility of hospital discharge patterns, we propose 
that hospitals be required to provide the standardized notice on the 
day before the planned discharge from any inpatient hospital stay. As 
specified in section 1869(c)(3)(C)(iii)(III) of the Act, if a 
beneficiary requests a QIO review no later than noon of the day after 
receiving a notice, he or she is not financially liable (other than for 
cost sharing) until at least noon of the day after the QIO's decision. 
Beneficiaries who do not dispute the discharge decision can be held 
liable as of the date given on the notice.
    In proposing to require a simple, standardized notice for hospital 
discharges, we would maintain the requirement for delivery of a more 
detailed notice in those relatively rare situations where beneficiaries 
wish to dispute the discharge. However, rather than using the NODMAR or 
the HINN as a discharge notice for MA enrollees and original Medicare 
beneficiaries, respectively, the hospitals would issue a single 
detailed notice similar to that used in the HHA, SNF, CORF and hospice 
settings. We also would leave unchanged beneficiaries' claim appeal 
rights (both under original Medicare and MA) with respect to hospital 
discharges.
    Our proposal to require a two-step notice process is intended only 
to provide hospital inpatients with the same two-step notice of appeal 
rights afforded to beneficiaries in other settings. Similar to the 
expedited review procedures for other providers, a beneficiary would be 
instructed to contact the QIO to request an expedited review if he or 
she wishes to dispute the discharge, at which point the beneficiary 
would receive the second, more detailed notice. We welcome suggestions 
on the appropriate interaction between these notices and the QIO review 
process, given the proposed introduction of the new standardized 
notices.
    As noted above, we would require hospitals to deliver the notice on 
the day before discharge. We expect that the hospital would deliver the 
standardized notice as soon as the discharge decision is made (or in 
the case of a discharge decision by an MA organization, as soon as the 
discharge decision is communicated to the hospital). By requiring the 
standardized notice to be delivered on the day before discharge, a 
beneficiary would have at least 1 night to think about the discharge 
decision and decide whether to pursue an expedited review, consistent 
with 1869(c)(3)(C)(iii)(III) of the Act.
    In proposing this approach, our goal is to design hospital notice 
procedures that balance a beneficiary's need to be informed about his 
or her appeal rights in an appropriate manner, and at an appropriate 
time, without imposing unnecessary burdens on hospitals. The 
notification process also needs to accommodate the statutory 
requirements associated with the ``Important Message from Medicare'', 
which now provides much of the same information about appeal rights, 
although earlier in the hospital stay and not in an individualized 
form. We welcome comments on ways to achieve an appropriate balance of 
interests.
    For example, we would appreciate comments on whether there are 
exceptional circumstances under which a hospital should be able to 
deliver the standardized notice on the day of discharge (for example, 
in cases of a 1-day stay). For an anticipated 2 or 3-day stay, would it 
be necessary to deliver both the ``Important Message from Medicare'' at 
admission and the standardized discharge notice just prior to discharge 
given that the notices would be delivered at virtually the same time? 
In addition, we welcome comments on the maximum time before the end of 
Medicare-covered services the discharge notice may be delivered.
    In general, we are interested in obtaining commenters' input on all 
aspects of the hospital discharge notice process, both the process 
proposed here and the current process, in order to establish the most 
efficacious process possible for hospitals, beneficiaries, and MA 
plans.
    Although this proposal bears some resemblance to the provisions set 
forth in our January 24, 2001 proposed rule (66 FR 7593), the new 
proposal incorporates significant advantages. Most notably, this 
proposal would require the delivery of a standardized notice containing 
only three beneficiary-specific elements--(1) the beneficiary's name; 
(2) the date covered services would end; and (3) the date financial 
liability would begin--with all other information standardized. We 
believe that by proposing to require the delivery of a largely generic 
notice in all discharge situations, the notice delivery burden on 
hospitals would be substantially less than under our previous proposal, 
without any adverse effect on patient rights. Only when a beneficiary 
contacts the QIO to request immediate review would a detailed notice 
have to be provided. However, a hospital may provide a detailed notice 
to the beneficiary who requests more information before contacting the 
QIO.

Proposed Sec.  405.1205

    To implement the changes we are proposing, we would add a new Sec.  
405.1205, to require hospitals to deliver a standardized, largely 
generic notice to original Medicare beneficiaries. The provisions of 
proposed Sec.  405.1205 substantially parallel the provisions of Sec.  
405.1200, applicable to HHAs, SNFs, CORFs and hospices, as set forth in 
the November 26, 2004 final rule. We are proposing in Sec.  405.1205 
that hospitals would be required to deliver a standardized notice of 
non-coverage to beneficiaries on the day before discharge from an 
inpatient hospital stay. The notice would include: (1) The date that 
coverage ends; (2) the beneficiary's right to an expedited 
determination including a description of the expedited determination 
process as specified in Sec.  405.1206, and the availability of other 
appeal procedures if the beneficiary fails to meet the deadline for an 
expedited determination; (3) the beneficiary's right to receive more 
information as provided in Sec.  405.1206(e); (4) the date that 
financial liability for continued services begins; and (5) any other 
information required by CMS. Proposed Sec.  405.1205 would specify that 
if a beneficiary refuses to sign the standardized notice to acknowledge 
receipt, the hospital may annotate its notice to indicate the refusal. 
The date of refusal would be considered the date of receipt of the 
notice. The hospital would be required to maintain a copy of the signed 
or annotated notice.
    As with existing notice requirements, hospitals generally must 
determine whether a patient is capable of comprehending and signing the 
notice. Hospitals must comply with applicable State laws and CMS 
guidance regarding the use of representatives and have procedures in 
place to determine an appropriate representative. (See CMS Manual 
System Pub 100-04 Medicare Claims Processing, Transmittal 594, Change 
Request 3903, and dated June 24, 2005.)

[[Page 17055]]

Proposed Sec.  405.1206

    Similarly, we propose to replace existing Sec.  405.1206 with a new 
provision that is more consistent with the expedited process 
requirements for home health, hospice, skilled nursing, and CORF 
settings set forth in Sec.  405.1202. Proposed Sec.  405.1206 contains 
the responsibilities of the hospitals, QIOs, and beneficiaries relative 
to the expedited determination process. We believe that making these 
conforming changes to promote uniformity across provider types would be 
helpful to beneficiaries.
    In proposed Sec.  405.1206, hospitals would be required to deliver 
a detailed notice to beneficiaries if beneficiaries exercise their 
right to an expedited review. The hospital would be required to deliver 
the detailed notice by the close of business of the day of the QIO's 
notification of the beneficiary's request for an expedited review. 
(Note that because hospitals operate 24 hours a day, ``close of 
business'' generally would be considered as the end of the 
administrative business day.)
    The detailed notice would include: (1) A detailed explanation why 
services are either no longer reasonable and necessary or are otherwise 
no longer covered; (2) a description of any applicable Medicare 
coverage rule, instruction, or other Medicare policy, including 
citations to the applicable Medicare policy rules or information about 
how the beneficiary may obtain a copy of the Medicare policy; (3) facts 
specific to the beneficiary and relevant to the coverage determination 
that are sufficient to advise the beneficiary of the applicability of 
the coverage rule or policy to the beneficiary's case; and (4) any 
other information required by CMS. The information that is inserted on 
the detailed notice should be individualized and written in plain 
language to facilitate beneficiary understanding.

Proposed Definitions Pertaining to Sec.  405.1206 and Sec.  405.1206

    For purposes of Sec.  405.1204, Sec.  405.1205, Sec.  405.1206 and 
Sec.  405.1208, we define the term ``hospital'' at proposed Sec.  
405.1205(a)(1) to mean any free-standing facility or unit providing 
services at the inpatient hospital level of care, whether that care is 
short term or long term, acute or non-acute, paid through a prospective 
payment system or other reimbursement basis, limited to specialty care, 
or providing a broader spectrum of services. This means all hospitals 
paid under the Inpatient Acute Prospective Payment System (IPPS), sole 
community hospitals/regional referrals centers or any other type of 
hospital receiving special consideration under IPPS (for example, 
Medicare dependent hospitals, Indian Health Service hospitals); 
hospitals not under IPPS, including, but not limited to: hospitals paid 
under State or United States territory waiver programs, hospitals paid 
under certain demonstration projects cited in regulation (Sec.  
489.34), rehabilitation hospitals, long-term care hospitals, 
psychiatric hospitals, critical access hospitals, children's hospitals, 
and cancer hospitals. Swing beds in hospitals are excluded, because 
they are considered to be a lower level of care. Religious nonmedical 
health care institutions are also excluded.
    We also propose defining the term ``discharge'' at Sec.  
405.1205(a)(2) as a formal release from the hospital level of care. For 
purposes of Sec.  405.1204, Sec.  405.1205, Sec.  405.1206, and Sec.  
405.1208, a discharge from the inpatient hospital level of care is a 
formal release of a beneficiary from the inpatient hospital level of 
care or, a complete cessation of coverage of the inpatient hospital 
level of care. This includes when the patient is physically discharged 
from the hospital as well as when the patient is discharged ``on 
paper''--meaning the patient remains in the hospital but at a lower 
level of care (for example, moved to a swing bed).

Proposed Sec.  422.620 and Sec.  422.622

    To implement these changes for MA enrollees, we propose to replace 
the existing NODMAR notice and review regulations in Sec.  422.620 and 
Sec.  422.622 with new regulations substantially similar to the notice 
and review requirements for HHAs, SNFs, and CORFs under Sec.  422.624 
and Sec.  422.626. In addition, we would reference the same definition 
of hospitals that is in proposed Sec.  405.1205. We believe that the 
hospital is in a better position than the MA organization to carry out 
the routine delivery of the generic discharge notice to enrollees.
    However, we propose that responsibility for delivery of the 
detailed notice would still rest with the MA organization, who may 
delegate the authority for making the discharge decision, but not shift 
liability, to the hospital. For this reason, proposed Sec.  422.620 
would require the hospitals to deliver the generic notice to all 
inpatient enrollees, and Sec.  422.622 would require the MA 
organization to deliver the detailed notice to those patients who 
request an immediate QIO review of the discharge decision.
    As specified in proposed Sec.  422.620, hospitals would be required 
to deliver a standardized notice of non-coverage to MA enrollees on the 
day before discharge from an inpatient hospital stay. The notice would 
include: (1) The date that coverage ends; (2) a description of the 
enrollee's right to an immediate QIO review as specified in Sec.  
422.622, including information about how to contact the QIO, the 
availability of other MA appeal procedures if the enrollee fails to 
meet the deadline for immediate QIO review, and the fact that immediate 
QIO review would not be granted unless the enrollee disagrees with the 
discharge from the inpatient hospital level of care; (3) the enrollee's 
right to receive more information as provided in Sec.  422.622(c); and 
(4) the date that financial liability for continued services begins.
    Proposed Sec.  422.620 also would specify that if an MA enrollee 
refuses to sign the standardized notice to acknowledge receipt, the 
hospital would annotate its notice to indicate the refusal. The date of 
refusal would be considered the date of receipt of the notice. The 
hospital would be required to maintain a copy of the signed or 
annotated notice.
    Again, hospitals should have procedures in place to determine if an 
enrollee is capable of comprehending and signing the notice, and follow 
applicable State law regarding use of a representative. Further 
instructions regarding use of a representative can be found in Chapter 
13, Section 60 of the Medicare Managed Care Manual.
    As specified in proposed Sec.  422.622, MA organizations would be 
required to deliver a detailed notice to enrollees if enrollees choose 
to exercise their right to an immediate QIO review. The detailed notice 
would include: (1) A detailed explanation why services are either no 
longer reasonable and necessary or are otherwise no longer covered; (2) 
a description of any applicable Medicare coverage rule, instruction, or 
other Medicare policy, including citations to the applicable Medicare 
policy rules or information about how the enrollee may obtain a copy of 
the Medicare policy; (3) facts specific to the enrollee and relevant to 
the coverage determination that are sufficient to advise the enrollee 
of the applicability of the coverage rule or policy to the enrollee's 
case; and (4) any other information required by CMS. The MA 
organization would be required to deliver the detailed notice by the 
close of business of the day of the QIO's notification of the 
enrollee's request for an immediate QIO review. The information that is 
inserted on the detailed notice should be individualized and written in 
plain language to facilitate enrollee understanding.

[[Page 17056]]

    Furthermore, we also propose to replace existing Sec.  422.622 with 
a new provision consistent with the expedited process requirements for 
home health, skilled nursing and CORF settings in Sec.  422.626. 
Proposed Sec.  422.622 contains the procedural responsibilities of the 
MA organizations, hospitals, and QIOs as well as any possible liability 
for hospitals and MA organizations during the expedited determination 
process. We believe that making these conforming changes to promote 
uniformity across provider types would be helpful to beneficiaries.
    The notices proposed in this proposed rule would be subject to 
public review and comment through the Office of Management and Budget 
(OMB) Paperwork Reduction Act process before implementation. If you 
wish to comment on these notices see CMS-10066, ``Agency Information 
Collection Activities; Proposed Collection; Comment Request'' published 
elsewhere in this issue.

Conforming Changes Proposed to Sec.  489.27 and Sec.  412.42

    In conjunction with the proposed hospital notice provisions, we are 
proposing to make conforming changes to two related existing regulatory 
provisions. First, we would amend the provider agreement requirements 
in Sec.  489.27(b) to cross-reference the proposed notice requirements. 
Thus, proposed Sec.  489.27(b) would specify that delivery of the 
hospital discharge notices consistent with proposed Sec.  405.1205 and 
Sec.  422.620 is required as part of the Medicare provider agreement. 
This parallels the implementation approach used for expedited review 
notices by other providers, such as HHAs and SNFs. The other conforming 
change would affect Sec.  412.42(c), which involves limitations on 
charges to beneficiaries in hospitals operating under the prospective 
payment system.
    As revised, proposed Sec.  412.42(c)(3) would simply include a 
cross-references to the notice and appeal provisions set forth in Sec.  
405.1205 and Sec.  405.1206. This change would clearly establish that 
the provision of the appropriate expedited review notices would be one 
of the prerequisites before a hospital could charge a beneficiary for 
continued hospital services. We welcome comments on these conforming 
changes.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA 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.
    The information collection requirement associated with 
administering the hospital discharge notice is subject to the PRA.
    We are soliciting public comment on each of the issues for the 
following sections of this document that contain information collection 
requirements.

Section 405.1205 Notifying Beneficiaries of Discharge From Inpatient 
Hospital Level of Care

    For any discharge from the inpatient hospital level of care, the 
hospital must notify the beneficiary in writing of the impending non-
coverage and discharge. The hospital must use a standardized, largely 
generic notice, required by the Secretary, in accordance with the 
requirements and procedures set forth in this section.
    Since we have developed a standardized format for the notice, and 
the notice would be disseminated during the normal course of related 
business activities, we estimate that it would take hospitals 5 minutes 
to deliver each notice. In 2002 there were approximately 10.9 million 
fee-for-service Medicare inpatient hospital discharges. The total 
annual burden associated with this proposed requirement is 908,333 
hours.

Section 405.1206 Expedited Determination Procedures for Inpatient 
Hospital Level of Care

    Section 405.1206(b) requires any beneficiary wishing to exercise 
the right to an expedited determination to submit a request, in writing 
or by telephone, to the QIO that has an agreement with the hospital. We 
project that 2 percent of the 10.9 million fee-for-service 
beneficiaries, (that is, 218,000 beneficiaries) will request an 
expedited determination. (We note that this estimate may be high since 
our experience with the non-hospital expedited determination process in 
both original Medicare and MA has shown that approximately 1 percent of 
patients request an expedited review.)
    The burden associated with this requirement is the time and effort 
it would take for the beneficiary to either write or call the QIO to 
request an expedited determination. We estimate it would take 5 minutes 
per request. Therefore, the total estimated burden hours associated 
with this requirement is 18,166 hours.
    Section 405.1206(e) requires hospitals to deliver a detailed notice 
of discharge to the beneficiary and to make available to the QIO (and 
to the beneficiary upon request) a copy of that notice and any 
necessary supporting documentation. For these 218,000 cases, we 
estimate that it would take providers 60 to 90 minutes to prepare the 
detailed termination notice and to prepare a case file for the QIO. 
Based on 218,000 cases at 90 minutes, the total annual burden 
associated with this proposed requirement is approximately 327,000 
hours.

Section 422.620 Notifying Enrollees of Discharge From Inpatient 
Hospital Level of Care

    For any discharge from an inpatient hospital, the hospital must 
notify the enrollee in writing of the impending non-coverage and 
discharge. The hospital must use a standardized, largely generic 
notice, required by the Secretary, in accordance with the requirements 
and procedures set forth in this section.
    Again, we estimate that it would take hospitals 5 minutes to 
deliver each notice. In 2002 there were approximately 1.6 million MA 
inpatient hospital discharges. The total annual burden associated with 
this proposed requirement is 133,333 hours.

Section 422.622 Requesting Immediate QIO Review of Decision To 
Discharge From Inpatient Hospital Level of Care

    This section states that an enrollee who wishes to appeal a 
determination by an MA organization or hospital that inpatient care is 
no longer necessary, may request QIO review of the determination. On 
the date the QIO receives the enrollee's request, it must notify the MA 
organization that the enrollee has filed a request for immediate 
review. The MA in turn must deliver a detailed notice to the enrollee.
    We project that 2 percent of affected individuals (that is, 32,000 
beneficiaries) will request an expedited determination. We estimate 
that it will take 5 minutes for an enrollee who chooses to exercise his 
or her right to an

[[Page 17057]]

expedited determination to contact the QIO. For these 32,000 cases, the 
total estimated burden hours is 26,666 hours.
    As specified in Sec.  422.622(c) and (d), MA plans would be 
required under this rule to deliver a detailed notice to the 
beneficiary and to make a copy of that notice and any necessary 
supporting documentation available to the QIO (and to the beneficiary 
upon request). We estimate that it would take plans 60 to 90 minutes to 
prepare the detailed notice and to prepare a case file for the QIO. 
Based on 32,000 cases at 90 minutes, the total annual burden associated 
with this proposed requirement is approximately 48,000 hours.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following:
    Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Regulations Development Group, Attn: 
Melissa Musotto, CMS-4105-P, Room C4-26-05, 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: Carolyn Lovett, CMS Desk Officer, CMS-4105-P, [email protected]. Fax (202) 395-6974.

IV. Response to Comments

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

V. Regulatory Impact

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

A. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This rule would not reach the economic threshold and thus is not 
considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small government 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6 million to $29 million in any 1 year. For purposes of this RFA, all 
providers affected by this regulation are considered to be small 
entities.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities. (We estimate a total cost of approximately $7000 a provider 
as discussed below.) Although a regulatory impact analysis is not 
mandatory for this proposed rule, we believe it is appropriate to 
discuss the possible impacts of the new discharge notice on 
beneficiaries, enrollees, and hospitals, regardless of the monetary 
threshold of that impact. Therefore, a brief voluntary discussion of 
the anticipated impact of this proposed rule is presented below.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We do not expect these 
entities to be significantly impacted.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. This proposed rule does 
not require an assessment under the Unfunded Mandates Reform Act.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has federalism 
implications. Since this regulation would not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.

B. Overview of the Changes

    This proposed rule sets forth new requirements for hospital 
discharge notices for all Medicare inpatient hospital discharges. This 
proposed rule specifies that hospitals must issue a standardized, 
largely generic notice of non-coverage to all Medicare beneficiary 
inpatients, prior to discharge from the inpatient hospital level of 
care, followed by a detailed notice if the beneficiary requests QIO 
review of the decision. As discussed in detail above, these notices 
would replace existing notice requirements, under which beneficiaries 
receive detailed notices only when they express dissatisfaction with a 
hospital's discharge decision. We also propose conforming changes to 
the expedited review process for hospitals to promote uniformity among 
requirements applicable to different provider types. In general, we 
believe that these changes would enhance the rights of Medicare 
beneficiaries without imposing any significant or undue financial 
burdens on hospitals.

C. Notifying Beneficiaries and Enrollees of Discharge From the 
Inpatient Hospital Level of Care (Sec.  405.1205 and Sec.  422.620)

    We project that providers would be responsible for delivering a 
standardized, largely generic notice of non-coverage to approximately 
12.5 million Medicare beneficiaries a year. This includes about 10.9 
million fee-for-service beneficiaries and 1.6 million MA enrollees. The 
generic notice of discharge would require only the insertion of the 
beneficiary or enrollee's name, date that coverage ends, and date that 
financial liability for continued hospital services begins. We estimate 
that it would take no more than 5 minutes to deliver a notice, at a 
per-notice cost of no more than $2.50 (based on a $30 per hour rate if 
the notice is delivered by health care personnel). Based on an 
estimated 12.5 million notices annually, we estimate the

[[Page 17058]]

aggregate cost of delivering these new notices to be roughly $31.2 
million. Since there are roughly 6000 affected hospitals, the average 
costs associated with this provision would be about $5,200 per 
provider.

D. Providing Beneficiaries and Enrollees With a Detailed Explanation of 
the Hospital Discharge Decision (Sec.  405.1206 and Sec.  422.622)

    We project that providers would be responsible for delivering 
detailed notices to approximately two percent of the 12.5 million 
Medicare recipients a year or 250,000 beneficiaries and enrollees. The 
detailed notice would require a detailed explanation of why services 
are either no longer reasonable and necessary or are no longer covered; 
a description of any relevant Medicare (and Medicare Advantage as 
applicable) coverage rule, instruction, or other Medicare policy, 
including citations to the applicable Medicare policy rules or 
information about how the beneficiary may obtain a copy of the Medicare 
policy; facts specific to the beneficiary and relevant to the coverage 
determination that are sufficient to advise the beneficiary of the 
applicability of the coverage rule or policy to the beneficiary's case; 
and any other information required by CMS.
    We estimate that it would take approximately 60 to 90 minutes to 
fill out and deliver a detailed notice, and make available to the QIO 
(and to the beneficiary upon request) copies of the notices and any 
necessary supporting documentation. The per-notice cost would be no 
more than $45 and is based on a $30 per hour rate if the notice is 
prepared and delivered by health care personnel. Based on an estimated 
250,000 notices annually, we estimate the aggregate cost of delivering 
these notices to be roughly $11,250,000. This estimate may be high 
since, in many cases, non-professional staff would be asked to make 
copies of medical records. Since there are roughly 6000 affected 
hospitals, the average costs associated with this provision would be 
about $1875 per provider.
    We do not anticipate that the provisions of this proposed rule 
would have a significant financial impact on individual hospitals. We 
note that the actual discharge notices must be approved through OMB's 
Paperwork Reduction Act process and are also subject to public comment. 
We intend to publish the draft standardized notices concurrent with the 
publication of this proposed rule. For more information on the PRA 
process see Section III of this proposed rule.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

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.

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Medicare Advantage, Penalties, 
Privacy, Provider-sponsored organizations (PSO), Reporting and 
recordkeeping requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

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

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

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

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

Subpart J--Expedited Determinations and Reconsiderations of 
Provider Service Terminations, and Procedures for Inpatient 
Hospital Discharges

    2. Section 405.1205 is added to read as follows:


Sec.  405.1205  Notifying beneficiaries of discharge from inpatient 
hospital level of care.

    (a) Applicability and scope. (1) For purposes of Sec. Sec.  
405.1204, 405.1205, 405.1206, and 405.1208, the term hospital is 
defined as any facility providing care at the inpatient hospital level, 
whether that care is short term or long term, acute or non acute, paid 
through a prospective payment system or other reimbursement basis, 
limited to specialty care or providing a broader spectrum of services. 
This definition also includes critical access hospitals.
    (2) For purposes of Sec.  405.1204, Sec.  405.1205, Sec.  405.1206, 
and Sec.  405.1208, a discharge from the inpatient hospital level of 
care is a formal release of a beneficiary from the inpatient hospital 
level of care or, a complete cessation of coverage within the inpatient 
hospital level of care.
    (b) Advance written notice of non-coverage of services at the 
inpatient hospital level of care. Before any discharge from the 
inpatient hospital level of care, in cases where the physician concurs 
with the discharge decision, the hospital must deliver valid written 
notice of non-coverage and the hospital's decision to discharge. The 
hospital must use a standardized, generic notice, as specified by CMS, 
in accordance with the following procedures:
    (1) Timing of notice. A hospital must notify the beneficiary of 
non-coverage and the hospital's decision to discharge the beneficiary 
on the day before the planned discharge.
    (2) Content of the notice. The generic notice of non-coverage must 
include the following information:
    (i) The date that coverage of inpatient hospital services ends.
    (ii) The beneficiary's right to request an expedited determination 
including a description of the process under Sec.  405.1206, and the 
availability of other appeals processes if the beneficiary fails to 
meet the deadline for an expedited determination.
    (iii) A beneficiary's right to receive additional detailed 
information in accordance with Sec.  405.1206(e).
    (iv) The date that the beneficiary's financial liability for 
continued inpatient hospital services begins.
    (v) Any other information required by CMS.
    (3) When delivery of the notice is valid. Delivery of the generic 
notice of non-coverage described in this section is valid if--
    (i) Except as provided in paragraph (b)(4) of this section, the 
beneficiary (or the beneficiary's representative) has signed and dated 
the notice to indicate that he or she has received the notice and can 
comprehend its contents; and
    (ii) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph 
(b)(2) of this section.
    (4) If a beneficiary refuses to sign the notice. The hospital may 
annotate its notice to indicate the refusal, and the date of refusal is 
considered the date of receipt of the notice.

[[Page 17059]]

    3. Section Sec.  405.1206 is revised to read as follows:


Sec.  405.1206  Expedited determination procedures for inpatient 
hospital level of care.

    (a) Beneficiary's right to an expedited determination by the QIO 
for an inpatient hospital discharge. A beneficiary has a right to 
request an expedited determination by the QIO when a hospital (acting 
directly or through its utilization review committee), with physician 
concurrence, determines that inpatient care is no longer necessary.
    (b) Requesting an expedited determination. (1) A beneficiary who 
wishes to exercise the right to an expedited determination must submit 
a request to the QIO that has an agreement with the hospital as 
specified in Sec.  476.78 of this chapter. The request must be in 
writing or by telephone, by no later than noon of the day after receipt 
of the notice of non-coverage as set forth in Sec.  405.1205.
    (2) The beneficiary, or his or her representative, upon request by 
the QIO, must be available to discuss the case.
    (3) The beneficiary may, but is not required to, submit written 
evidence to be considered by a QIO in making its decision.
    (4) A beneficiary who makes a timely request for an expedited QIO 
review in accordance with paragraph (b)(1) of this section is subject 
to the financial liability protections under paragraphs (f)(1) and 
(f)(2) of this section, as applicable.
    (5) A beneficiary who fails to make a timely request for an 
expedited determination by a QIO, as described in paragraph (b)(1) of 
this section, and remains in the hospital without coverage, still may 
request an expedited review at any time during the hospitalization. The 
QIO will issue a decision in accordance with paragraph (d)(6)(ii) of 
this section, however, the financial liability protection under 
paragraph (f)(1) and (f)(2) of this section does not apply.
    (6) A beneficiary who fails to make a timely request for an 
expedited determination in accordance with paragraph (b)(1) of this 
section, and who is no longer an inpatient in the hospital, may request 
QIO review within 30 calendar days after receipt of the generic notice 
of non-coverage, or at any time for good cause. The QIO will issue a 
decision in accordance with paragraph (d)(6)(iii) of this section; 
however, the financial liability protection under paragraph (f)(1) and 
(f)(2) of this section does not apply.
    (c) Burden of proof. When a beneficiary requests an expedited 
determination by a QIO, the burden of proof rests with the hospital to 
demonstrate that discharge is the correct decision, either on the basis 
of medical necessity, or based on other Medicare coverage policies. The 
hospital should supply any and all information that a QIO requires to 
sustain the hospital's discharge decision, consistent with paragraph 
(e)(2) of this section.
    (d) Procedures the QIO must follow. (1) On the day the QIO receives 
the request for an expedited determination under paragraph (b) of this 
section, it must immediately notify the hospital that a request for an 
expedited determination has been made.
    (2) The QIO determines whether the hospital delivered valid notice 
of non-coverage consistent with Sec.  405.1205(b)(3).
    (3) The QIO examines the medical and other records that pertain to 
the services in dispute.
    (4) The QIO must solicit the views of the beneficiary (or the 
beneficiary's representative) who requested the expedited 
determination.
    (5) The QIO must provide an opportunity for the hospital to explain 
why the discharge is appropriate.
    (6) Notification. (i) When the beneficiary requests an expedited 
determination in accordance with paragraph (b)(1) of this section, the 
QIO must make a determination and notify the beneficiary, the hospital, 
and physician of its determination by close of business of the first 
day after it receives all requested pertinent information.
    (ii) When the beneficiary makes an untimely request consistent with 
paragraph (b)(5) of this section, and remains an inpatient in the 
hospital, the QIO will make a determination and notify the beneficiary, 
the hospital, and physician of its determination within 2 calendar days 
following receipt of the request and pertinent information.
    (iii) When the beneficiary makes an untimely request for an 
expedited determination consistent with paragraph (b)(6) of this 
section, and is no longer an inpatient in the hospital, the QIO will 
make a determination and notify the beneficiary, the hospital, and 
physician of its determination within 30 calendar days after receipt of 
the request and pertinent information.
    (7) If the QIO does not receive the information needed to sustain a 
hospital's decision to discharge, it may make its determination based 
on the evidence at hand, or it may defer a decision until it receives 
the necessary information. If this delay results in extended Medicare 
coverage of an individual's hospital services, the hospital may be held 
financially liable for these services, as determined by the QIO.
    (8) When the QIO issues an expedited determination, the QIO must 
notify the beneficiary, the physician, and hospital of its decision by 
telephone, followed by a written notice that must include the following 
information:
    (i) The basis for the determination.
    (ii) A detailed rationale for the determination.
    (iii) An explanation of the Medicare payment consequences of the 
determination and the date a beneficiary becomes fully liable for the 
services.
    (iv) Information about the beneficiary's right to a reconsideration 
of the QIO's determination as set forth in Sec.  405.1204, including 
how to request a reconsideration and the time period for doing so.
    (e) Responsibilities of hospitals. (1) When a QIO notifies a 
hospital that a beneficiary has requested an expedited determination, 
the hospital must deliver a detailed notice to the beneficiary by close 
of business of the day of the QIO's notification. The detailed notice 
must include the following information:
    (i) A detailed explanation why services are either no longer 
reasonable and necessary or are otherwise no longer covered.
    (ii) A description of any applicable Medicare coverage rule, 
instruction, or other Medicare policy, including citations to the 
applicable Medicare policy rules or information about how the 
beneficiary may obtain a copy of the Medicare policy.
    (iii) Facts specific to the beneficiary and relevant to the 
coverage determination that are sufficient to advise the beneficiary of 
the applicability of the coverage rule or policy to the beneficiary's 
case.
    (iv) Any other information required by CMS.
    (2) Upon notification by the QIO of the request for an expedited 
determination, the hospital must supply all information that the QIO 
needs to make its expedited determination, including a copy of the 
notices required as specified in Sec.  405.1205(b) and paragraph (e)(1) 
of this section. The hospital must furnish this information as soon as 
possible, but no later than by close of business of the day the QIO 
notifies the hospital of the request for an expedited determination. At 
the discretion of the QIO, the hospital must make the information 
available by phone or in writing (with a written record of any 
information not transmitted initially in writing).

[[Page 17060]]

    (3) At a beneficiary's request, the hospital must furnish the 
beneficiary with a copy of, or access to, any documentation that it 
sends to the QIO, including written records of any information provided 
by telephone. The hospital may charge the beneficiary a reasonable 
amount to cover the costs of duplicating the documentation and/or 
delivering it to the beneficiary. The hospital must accommodate such a 
request by no later than close of business of the first day after the 
material is requested.
    (f) Coverage during QIO expedited review. (1) General rule and 
liability while QIO review is pending. If the beneficiary remains in 
the hospital past noon of the day after he or she received the generic 
notice of non-coverage, and the hospital, the physician who concurred 
in the hospital's determination on which the generic notice was based, 
or the QIO subsequently finds that the beneficiary requires an acute 
level of inpatient hospital care, the beneficiary is not financially 
responsible for continued care (other than applicable coinsurance and 
deductible) until the hospital once again determines that the 
beneficiary no longer requires inpatient care, secures concurrence from 
the physician responsible for the beneficiary's care or the QIO and 
notifies the beneficiary in accordance with Sec.  405.1205.
    (2) Timely filing and limitation on liability. If a beneficiary 
files a request for an expedited determination by the QIO in accordance 
with paragraph (b)(1) of this section, the beneficiary is not 
financially responsible for inpatient hospital services (other than 
applicable coinsurance and deductible) furnished before noon of the 
calendar day after the date the beneficiary (or his or her 
representative) receives notification (either orally or in writing) of 
the expedited determination by the QIO.
    (3) Untimely filing and limitation on liability. When a beneficiary 
does not file a request for an expedited determination by the QIO in 
accordance with paragraph (b)(1) of this section, that beneficiary may 
be responsible for charges that extend beyond the date specified on the 
generic notice or as otherwise stated by the QIO.
    (4) Hospital requests expedited review. When the hospital requests 
review in accordance with Sec.  405.1208, and the QIO concurs with the 
hospital's decision, a hospital may not charge a beneficiary until the 
date specified by the QIO.
    (g) Effect of an expedited QIO determination. The QIO determination 
is binding upon the beneficiary, physician, and hospital, except in the 
following circumstances:
    (1) When the beneficiary remains in the hospital. If the 
beneficiary is still an inpatient in the hospital and is dissatisfied 
with the determination, he or she may request a reconsideration 
according to the procedures described in Sec.  405.1204.
    (2) When the beneficiary is no longer an inpatient in the hospital. 
If the beneficiary is no longer an inpatient in the hospital and is 
dissatisfied with this determination, the determination is subject to 
the general claims appeal process.


Sec.  405.1208  [Amended]

    4. In Sec.  405.1208(e)(1), after the words ``in accordance with,'' 
remove the words ``paragraph (d)(1) of this section'' and add in their 
place, ``Sec.  405.1204(b)(1)''.

PART 412--PROSPECTIVE PAYMENT SYSTEM FOR INPATIENT HOSPITAL 
SERVICES

    5. The authority citation from part 412 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), Sec. 124 of Pub. L. 106-113, 113 Stat. 
1515, and Sec. 405 of Pub. L. of 108-173, 117 Stat. 2266, 42 U.S.C. 
1305. 1395.

    6. Section 412.42(c) is amended by--
    A. Republishing the introductory text.
    B. Revising paragraphs (c)(2) and (c)(3).
    The revisions read as follows:


Sec.  412.42  Limitations on charges to beneficiaries.

* * * * *
    (c) Custodial care and medical unnecessary inpatient hospital care. 
A hospital may charge a beneficiary for services excluded from coverage 
on the basis of Sec.  411.15(g) of this chapter (custodial care) or 
Sec.  411.15(k) of this chapter (medically unnecessary services) and 
furnished by the hospital after all of the following conditions have 
been met:
* * * * *
    (2) The attending physician agrees with the hospital's 
determination in writing (for example, by issuing a written discharge 
order). If the hospital believes that the beneficiary does not require 
inpatient hospital care but is unable to obtain the agreement of the 
physician, it may request an immediate review of the case by the QIO as 
described in Sec.  405.1208 of this chapter. Concurrence by the QIO in 
the hospital's determination will serve in lieu of the physician's 
agreement.
    (3) The hospital (acting directly or through its utilization review 
committee) notifies the beneficiary (or his or her representative) in 
writing consistent with Sec.  405.1205 and Sec.  405.1206 of this 
chapter (if applicable) that in the hospital's opinion, and with the 
attending physician's concurrence or that of the QIO, the beneficiary 
no longer requires inpatient hospital care.
* * * * *

PART 422--MEDICARE ADVANTAGE PROGRAM

    7. The authority citation for part 422 continues to read as 
follows:


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

    8. Section 422.620 is revised to read as follows:


Sec.  422.620  Notifying enrollees of discharge from inpatient hospital 
level of care.

    (a) Applicability and scope. (1) For purposes of Sec.  422.620 and 
Sec.  422.622, the term hospital is defined as any facility providing 
care at the inpatient hospital level, whether that care is short term 
or long term, acute or non acute, paid through a prospective payment 
system or other reimbursement basis, limited to specialty care or 
providing a broader spectrum of services. This definition also includes 
critical access hospitals.
    (2) For purposes of Sec.  422.620 and Sec.  422.622, a discharge 
from the inpatient hospital level of care is a formal release of a 
beneficiary from the inpatient hospital level of care or, a complete 
cessation of coverage within the inpatient hospital level of care.
    (b) Advance written notification of discharge from inpatient 
hospital level of care. Before any discharge from the inpatient 
hospital level of care, the hospital must deliver valid written notice 
of non-coverage of the MA organization's or hospital's discharge 
decision to the enrollee. A standardized, largely generic notice, as 
specified by CMS, must be used in accordance with the following 
procedures:
    (1) Timing of notice. The hospital must notify the enrollee of non-
coverage and the MA organization's or hospital's decision to discharge 
the enrollee on the day before the planned discharge.
    (2) Content of the notice. The standardized, generic notice of non-
coverage must include the following information:
    (i) The date that coverage of inpatient hospital services ends.
    (ii) A description of the immediate QIO review process as specified 
under Sec.  422.622, including information about how to contact the 
QIO, the availability of other MA appeal procedures if the

[[Page 17061]]

enrollee fails to meet the deadline for immediate QIO review, and the 
fact that immediate QIO review will not be granted unless the enrollee 
disagrees with the discharge decision.
    (iii) The enrollee's right to receive additional information in 
accordance with Sec.  422.622(c).
    (iv) The date that the enrollee's financial liability for continued 
inpatient hospital services begins.
    (v) Any other information required by CMS.
    (3) When delivery of notice is valid. Delivery of the generic 
notice of non-coverage described in this section is valid if--
    (i) Except as provided in paragraph (b)(4) of this section, the 
enrollee (or the enrollee's representative) has signed and dated the 
notice to indicate that he or she has received the notice and can 
comprehend its contents; and
    (ii) The notice is delivered in accordance with paragraph (b)(1) of 
this section and contains all the elements described in paragraph 
(b)(2) of this section.
    (4) If an enrollee refuses to sign the notice. The hospital may 
annotate its notice to indicate the refusal, and the date of refusal is 
considered the date of receipt of the notice.
    (c) Physician concurrence required. Before discharging an enrollee 
from the inpatient hospital level of care, the MA organization must 
obtain concurrence from the physician who is responsible for the 
enrollee's inpatient care.
    9. Section 422.622 is revised to read as follows:


Sec.  422.622  Requesting immediate QIO review of decision to discharge 
from inpatient hospital level of care.

    (a) Enrollee's right to an immediate review. (1) An enrollee who 
wishes to appeal a determination by an MA organization or hospital that 
inpatient care is no longer necessary may request immediate QIO review 
of the determination in accordance with paragraph (b) of this section. 
An enrollee who timely requests immediate QIO review in accordance with 
paragraph (b) of this section may remain in the hospital with no 
additional financial liability (other than applicable cost sharing) as 
described in paragraph (e) of this section.
    (2) When an enrollee fails to make a timely request in accordance 
with paragraph (b) of this section, he or she may request expedited 
reconsideration by the MA organization as described in Sec.  422.584, 
but the financial liability rules of paragraph (e)(1) of this section 
do not apply.
    (b) Procedures enrollee must follow. For the immediate QIO review 
process, the enrollee must submit the request for immediate review to 
the QIO, in writing or by telephone by noon of the first day after he 
or she receives written notice of non-coverage that the MA organization 
or hospital has made a decision to discharge the enrollee.
    (c) Notification responsibilities of the MA organization and the 
QIO. (1) On the date it receives the enrollee's request, the QIO must 
notify the MA organization that the enrollee has filed a request for 
immediate review.
    (2) When the QIO notifies an MA organization that an enrollee has 
requested an immediate QIO review, the MA organization must deliver a 
detailed notice to the enrollee by close of business of the day of the 
QIO's notification of the enrollee's request. The detailed notice must 
include the following information:
    (i) A detailed explanation why services are either no longer 
reasonable and necessary or are no longer covered.
    (ii) A description of any applicable Medicare coverage rule, 
instruction or other Medicare policy including citations, to the 
applicable Medicare policy rules, or the information about how the 
enrollee may obtain a copy of the Medicare policy from the MA 
organization.
    (iii) Any applicable MA organization policy, contract provision, or 
rationale upon which the discharge decision was based.
    (iv) Facts specific to the enrollee and relevant to the coverage 
determination sufficient to advise the enrollee of the applicability of 
the coverage rule or policy to the enrollee's case.
    (v) Any other information required by CMS.
    (3) Upon an enrollee's request, the MA organization must provide 
the enrollee a copy of, or access to, any documentation sent to the QIO 
by the MA organization, including records of any information provided 
by telephone. The MA organization may charge the enrollee a reasonable 
amount to cover the costs of duplicating the information for the 
enrollee and/or delivering the documentation to the enrollee. The MA 
organization must provide the enrollee a copy of, or access to, any 
documentation sent to the QIO no later than close of business of the 
first day after the day the material is requested.
    (4) Upon notification by the QIO of an immediate review, the MA 
organization must supply any and all information, including a copy of 
the notice sent to the enrollee, that the QIO needs to decide on the 
review. The MA organization must supply this information as soon as 
possible, but no later than by close of business of the day that the 
QIO notifies the MA organization that a request for immediate review 
has been received from the enrollee. The MA organization must make the 
information available by phone (with a written record made of any 
information not transmitted initially in writing) and/or in writing, as 
determined by the QIO.
    (5) An MA organization is financially responsible for coverage of 
services as provided in paragraph (e) of this section, regardless of 
whether it has delegated responsibility for authorizing coverage or 
discharge decisions to its providers.
    (6) If the QIO reverses an MA organization's discharge decision, 
the hospital must provide the enrollee with a new notice consistent 
with Sec.  422.620(b).
    (d) Procedural responsibilities of the MA organization, hospital, 
and the QIO. (1) The MA organization must supply any information that 
the QIO requires to conduct its review and must make it available, by 
phone or in writing, by the close of business of the day after the 
enrollee submits the request for review.
    (2) In response to a request from the MA organization, the hospital 
must submit medical records and other pertinent information to the QIO 
by close of business of the first day after the organization makes its 
request.
    (3) The QIO must solicit the views of the enrollee (or his or her 
representative) who requested the immediate QIO review.
    (4) The QIO must make a determination and notify the enrollee, the 
hospital, and the MA organization by close of business of the first day 
after it receives all necessary information from the hospital, or the 
organization, or both.
    (e) Liability for hospital costs. (1) When the MA organization 
determines that hospital services are not, or are no longer, covered.
    (i) Except as provided in paragraph (e)(1)(ii) of this section, if 
the MA organization authorized coverage of the inpatient admission 
directly or by delegation (or the admission constitutes emergency or 
urgently needed care, as described in Sec.  422.2 and Sec.  
422.112(c)), the organization continues to be financially responsible 
for the costs of the hospital stay when a timely appeal is filed under 
paragraph (a)(1) of this section until noon of the day after the QIO 
notifies the enrollee of its review determination. If coverage of the 
hospital admission was never approved by the MA organization or the 
admission does not constitute emergency or urgently needed care as 
described in Sec.  422.2 and Sec.  422.112(c),

[[Page 17062]]

the MA organization is liable for the hospital costs only if it is 
determined on appeal that the hospital stay should have been covered 
under the MA plan.
    (ii) The hospital may not charge the MA organization (or the 
enrollee) if--
    (A) It was the hospital (acting on behalf of the enrollee) that 
filed the request for immediate QIO review; and
    (B) The QIO upholds the non-coverage determination made by the MA 
organization.
    (2) When the hospital determines that hospital services are no 
longer required. If the hospital determines that inpatient hospital 
services are no longer necessary, and the enrollee could not reasonably 
be expected to know that the services would not be covered, the 
hospital may not charge the enrollee for inpatient services received 
before noon of the day after the QIO notifies the enrollee of its 
review determination.
    (f) Effect of an immediate QIO review. The QIO determination is 
binding upon the enrollee, physician, hospital, and MA organization 
except in the following circumstances:
    (1) When the enrollee remains in the hospital. If the enrollee is 
still an inpatient in the hospital and is dissatisfied with the 
determination, he or she may request a reconsideration according to the 
procedures described in Sec.  422.626(f).
    (2) When the enrollee is no longer an inpatient in the hospital. If 
the enrollee is no longer an inpatient in the hospital and is 
dissatisfied with this determination, the enrollee may appeal to an 
ALJ, the MAC, or a federal court, as provided for under this subpart.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

    10. The authority citation for part 489 continues to read as 
follows:


    Authority: Secs. 1102, 1819, 1861, 1864(m), 1866, 1869, and 1871 
of the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 
1395aa(m), 1395cc, and 1395hh).

    11. Section 489.27(b) is revised to read as follows:


Sec.  489.27  Beneficiary notice of discharge rights.

    (a) * * *
    (b) Notification by hospitals and other providers. Hospitals and 
other providers (as identified at 489.2(b)) that participate in the 
Medicare program must furnish each Medicare beneficiary, or 
representative, applicable CMS notices in advance of discharge or 
termination of Medicare services, including the notices required under 
Sec.  405.1205, Sec.  422.620, Sec.  405.1200, and Sec.  422.624 of 
this chapter.

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

    Dated: February 15, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: March 7, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-3264 Filed 3-31-06; 4:02 pm]
BILLING CODE 4120-01-P