[Federal Register Volume 71, Number 77 (Friday, April 21, 2006)]
[Rules and Regulations]
[Pages 20754-20781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-3722]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 420, 424 et al.



Medicare Program; Requirements for Providers and Suppliers To Establish 
and Maintain Medicare Enrollment; Final Rule

  Federal Register / Vol. 71, No. 77 / Friday, April 21, 2006 / Rules 
and Regulations  

[[Page 20754]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 420, 424, 489, and 498

[CMS-6002-F]
RIN 0938-AH73


Medicare Program; Requirements for Providers and Suppliers To 
Establish and Maintain Medicare Enrollment

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

ACTION: Final rule.

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SUMMARY: This final rule requires that all providers and suppliers 
(other than physicians or practitioners who have elected to ``opt-out'' 
of the Medicare program) complete an enrollment form and submit 
specific information to us. This final rule also requires that all 
providers and suppliers periodically update and certify the accuracy of 
their enrollment information to receive and maintain billing privileges 
in the Medicare program. In addition, this final rule implements 
provisions in the statute that require us to ensure that all Medicare 
providers and suppliers are qualified to provide the appropriate health 
care services. These statutory provisions include requirements meant to 
protect beneficiaries and the Medicare Trust Funds by preventing 
unqualified, fraudulent, or excluded providers and suppliers from 
providing items or services to Medicare beneficiaries or billing the 
Medicare program or its beneficiaries.

DATES: Effective Date: These regulations are effective on June 20, 
2006.

FOR FURTHER INFORMATION CONTACT: Michael C. Collett, (410) 786-6121.

SUPPLEMENTARY INFORMATION: 
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I. Background

A. General

    The Medicare program, title XVIII of the Social Security Act (the 
Act), is the primary payer of health care costs for 43 million enrolled 
beneficiaries. Under section 1802 of the Act, a beneficiary may obtain 
health services from any institution, agency, or person qualified to 
participate in the Medicare program. Qualifications to participate are 
specified in statute and in regulations. (See, for example, sections 
1814, 1815, 1819, 1833, 1834, 1842, 1861, 1866, and 1891 of the Act; 
and 42 CFR Chapter IV, subchapter E, which concerns standards and 
certification requirements.)
    Providers and suppliers furnishing services must comply with the 
Medicare requirements stipulated in the Act and in our regulations. 
These requirements are meant to ensure compliance with applicable 
statutes, as well as to promote the furnishing of high quality care. 
CMS, State survey and certification agencies, or both inspect 
facilities when required, for compliance with regulatory and 
operational requirements before we allow them to participate in the 
Medicare program. Thereafter, we will review and re-verify the 
continued adherence to our requirements either as part of a scheduled 
recertification survey, or as a result of a complaint or other 
information received that will directly affect the provider's or 
supplier's business relationship with the Medicare program or indicate 
noncompliance with this regulation. The initial certification and 
subsequent recertification ensure that Medicare requirements are met, 
continue to be met, and promote the appropriate spending of the 
Medicare Trust Funds by helping to ensure that unqualified providers 
and suppliers are not granted billing privileges with the Medicare 
program.
    Historically, a provider or supplier wishing to receive payment 
from Medicare or its beneficiaries would contact a Medicare fiscal 
intermediary (FI), the State survey agency, or a Medicare carrier. In 
compliance with sections 1816, 1842 and 1874 of the Act, as stipulated 
in 42 CFR Part 421, we contract with fee-for-service contractors to 
administer payment for services and to manage other administrative 
responsibilities that the law imposes. Our regional offices, State 
survey agencies, carriers and FIs use statutes, regulations, and 
operating instructions as guidance when assigning appropriate 
identification numbers and determining whether to grant billing 
privileges in the Medicare program to providers and suppliers.
    As Medicare program expenditures have grown, increased attention 
was focused on strategies to curb improper Medicare payments by 
implementing business processes and standards that safeguard the 
Medicare program and its beneficiaries, while ensuring that well 
qualified individuals and health care organizations serve beneficiaries 
as promptly as possible.

B. Specific Authority To Collect Enrollment Information

    1. Various sections of the Act and the Code of Federal Regulations 
require providers and suppliers to furnish information concerning the 
amounts due and the identification of individuals or entities who 
furnish medical services to beneficiaries before payment can be made.
     Sections 1102 and 1871 of the Act provide general 
authority for the Secretary of Health and Human Services (the 
Secretary) to prescribe regulations for the efficient administration of 
the Medicare program. Under this authority, this final rule will 
require the collection of information from providers and suppliers for 
the purpose of enrolling in the Medicare program and granting 
privileges to bill the program for health care services furnished to 
Medicare beneficiaries.
     Sections 1814(a), 1815(a), and 1833(e) of the Act require 
the submission of information necessary to determine the amounts due a 
provider or other person.
     Section 1842(r) of the Act requires us to establish a 
system for furnishing a unique identifier for each physician who 
furnishes services for which payment may be made. To complete this, we 
need to collect information unique to that physician.
     Section 1862(e)(1) of the Act states that no payment may 
be made when an item or service was at the medical direction of an 
individual or entity that is excluded in accordance with sections 1128, 
1128A, 1156, or 1842(j)(2) of the Act.
     Section 1834(j)(1)(A) of the Act states that no payment 
may be made for items furnished by a supplier of durable medical 
equipment, prosthetics, orthotics, and supplies (DMEPOS) unless that 
supplier obtains, and renews

[[Page 20755]]

at intervals as we may require, a billing number.
    Section 4313 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33) amended sections 1124(a)(1) and 1124A of the Act to require 
disclosure of both the Employer Identification Number (EIN) and Social 
Security Number (SSN) of each provider or supplier, each person with 
ownership or control interest in the provider or supplier, any 
subcontractor in which the provider or supplier directly or indirectly 
has a 5 percent or more ownership interest, and any managing employees 
including Directors and Board Members of corporations and non-profit 
organizations and charities. The Secretary signed and sent to the 
Congress a ``Report to Congress on Steps Taken to Assure 
Confidentiality of Social Security Account Numbers as Required by the 
Balanced Budget Act'' on January 26, 1999, with mandatory collection of 
SSNs and EINs effective on or after April 26, 1999.
    2. Section 31001(i)(1) of the Debt Collection Improvement Act of 
1996 (DCIA) (Pub. L. 104-134) amended section 7701 of 31 U.S.C. by 
adding paragraph (c) to require that any person or entity doing 
business with the Federal Government must provide their Tax 
Identification Number (TIN).
    3. We are authorized to collect information on the CMS 855-
Provider/Supplier Enrollment Application, (Office of Management and 
Budget (OMB) approval number 0938-0685) to ensure that correct payments 
are made to providers and suppliers under the Medicare program as 
established by Title XVIII of the Act.

C. Prior Enrollment Initiatives

    For a number of years, concern about easy entry into the Medicare 
program by unqualified or even fraudulent providers or suppliers has 
led us to step up our efforts on a number of fronts to establish more 
stringent controls on provider and supplier entry into the Medicare 
program.
    For example, in 1993 we established the National Supplier 
Clearinghouse (NSC), our contractor for enrolling suppliers of DMEPOS 
in Medicare. We instituted new procedures to use validation software to 
certify the existence of the listed business address for suppliers of 
DMEPOS. The NSC also checked the DMEPOS supplier telephone numbers 
against a national directory. This initial effort resulted in the 
revocation of about 1,500 supplier billing numbers and an estimated 
savings of $7 million per month to the Medicare Trust Funds.
    In fiscal year (FY) 1998, we required site visits for all new 
DMEPOS suppliers. The DMEPOS visits resulted in: 156 denials of new 
applicants out of 159 visits; and 656 revocations of existing suppliers 
out of 2,091 visits.
    In FY 1998 and FY 1999, our carriers and FIs submitted proposals to 
conduct site visits for those provider or supplier types that they 
believed would yield the greatest benefit in their regions. After 
reviewing the submitted proposals, we funded 320 site visits to various 
enrolling and currently enrolled Independent Diagnostic Testing 
Facilities (IDTFs), skilled nursing facilities (SNFs), home health 
agencies (HHAs), rural health clinics, comprehensive outpatient 
rehabilitation facilities, physician groups, clinical psychologists, 
and ambulance companies. The project provided useful information for 
making appropriate determinations for the eligibility to bill Medicare. 
In the course of these reviews--
     219 provider numbers were authorized or maintained;
     30 provider numbers were deactivated;
     37 provider applications were denied; and
     34 providers were referred to contractor fraud units.
    These site visits proved valuable to some providers and suppliers 
by helping them to enroll in the Medicare program properly. The site 
visits were also helpful to us in ensuring that we only conduct 
business with legitimate providers and suppliers. We believe that site 
visits are an important component of successful provider and supplier 
enrollment. We believe that there is ample authority in the statute for 
this approach. The statute confers upon the Secretary the authority to 
seek information he needs to determine the amounts due to providers and 
suppliers of services. Part of that duty is fulfilled by reviewing 
documentation offered by those entities submitting claims, but part of 
that duty may also be performed through the use of on-site reviews that 
enable the Secretary to verify, for example, that he is paying an 
entity that actually exists or that is providing a service that it 
represented it would provide in its enrollment application. Often these 
kinds of determinations cannot be made solely based on the review of 
paper documentation submitted to contractors even though they bear 
heavily on the amounts that may be due to a particular provider or 
supplier. As past experience has demonstrated, in many cases site 
visits are the only method we have to ensure that providers and 
suppliers actually exist and meet the requirements to participate in 
the Medicare program, particularly in the absence of State licensure or 
regulation. Left unchecked, Medicare program resources and the health 
of Medicare beneficiaries may be vulnerable.

II. Provisions of the Proposed Rule

    In the April 25, 2003 Federal Register (68 FR 22064), we published 
a proposed rule that builds on our collective experience and sets forth 
our standard enrollment requirements in new subpart P in part 424 of 
this chapter. We proposed that all providers and suppliers, other than 
the ``opt-out'' physicians and ``opt-out'' practitioners described 
below, must submit an enrollment application with specific information 
to enroll in the Medicare program, obtain a Medicare billing number, 
and receive Medicare billing privileges. The provisions of the proposed 
rule were designed to supplement, but not replace or nullify, existing 
regulations concerning the establishment of provider or supplier 
agreements, the issuance of provider or supplier billing numbers, and 
payment for Medicare covered services or supplies to eligible providers 
or suppliers.
    Specifically, we proposed to require that providers and suppliers 
prove their qualifications and identity and submit specified 
information to us before they are granted billing privileges in the 
Medicare program. If the provider or supplier fails to meet the 
requirements or submit the required information, we would not enroll it 
in the Medicare program or, if it is currently in the program, we would 
revoke its billing privileges. We believe the documentation and 
associated verification methods we use to determine whether to grant a 
provider or supplier billing privileges are necessary to ensure 
compliance with Medicare requirements and to prevent abuse of the 
Medicare program and the inappropriate use of Medicare funds. We also 
believe that the requirements will not hinder qualified individuals and 
organizations from enrolling or maintaining enrollment in the Medicare 
program.

A. Scope and Definitions

    We proposed to establish our standard enrollment requirements in 
part 424, new subpart P. In proposed Sec.  424.500 (Scope), we stated 
that these requirements apply to all providers and suppliers except 
those physicians and other eligible practitioners who have elected to 
``opt-out'' of Medicare as

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described in part 405, subpart D of our regulations.
    In proposed Sec.  400.502 (Definitions), we would establish the 
definitions for several key terms used throughout new subpart P. The 
terms ``provider'' and ``supplier'' are not defined in this subpart 
because their definitions are already established throughout 42 CFR. 
The term ``provider'' is defined in both Sec.  400.202 and Sec.  488.1. 
Together these sections define a provider as including a hospital, a 
critical access hospital, a skilled nursing facility, a nursing 
facility, a comprehensive outpatient rehabilitation facility, a home 
health agency, or a hospice, that has in effect an agreement to 
participate in Medicare; or a provider of outpatient physical therapy 
or speech pathology services; or a community mental health center. The 
term ``supplier,'' as defined in Sec.  400.202, is a physician or other 
practitioner, or an entity other than a provider (as defined in Sec.  
400.202 and Sec.  488.1) that furnishes health care services under 
Medicare. Section 488.1 also defines ``supplier'' to mean independent 
laboratory; portable X-ray services; physical therapist in independent 
practice; ESRD facility; rural health clinic; Federally-qualified 
health center; or chiropractor. The term ``supplier'' also includes 
``indirect suppliers,'' as indicated in 45 CFR 61.3.
    We proposed to define ``managing employee'' to be a general 
manager, business manager, administrator, director, or other individual 
who exercises operational or managerial control over, or who directly 
or indirectly conducts the day-to-day operations of, the institution, 
organization, or agency, either under contract or through some other 
arrangement, regardless of whether the individual is a W-2 employee.
    Section 1124A of the Act and Sec.  420.204 authorize the Secretary 
to collect information about managing employees. Section 1124A of the 
Act incorporates by reference the definition of managing employee, 
contained in section 1126(b) of the Act as an individual, including a 
general manager, business manager, administrator, and director, who 
exercises operational or managerial control over the entity, or who 
directly or indirectly conducts the day-to-day operations of the 
entity. We have found that a number of providers and suppliers are 
managed by individuals that have control over the day-to-day operations 
of the entity and are not employees. Some of these individuals are 
known to bill Medicare fraudulently, and are on the Office of Inspector 
General (OIG) ``List of Excluded Individuals and Entities'' and the 
General Services Administration (GSA) ``List of Parties Excluded from 
Federal Procurement and Non-procurement Programs''. These lists are 
commonly referred to as the ``OIG Sanction List'' for those parties 
excluded by the OIG from participation in any Federal health care 
programs (as defined in section 1128B(f) of the Act), and the ``GSA 
Debarment List'' for those parties debarred, suspended or otherwise 
excluded by other Federal agencies from participation in Federal 
procurement and non-procurement programs and activities, in accordance 
with the Federal Acquisition and Streamlining Act of 1994, and with the 
HHS Common Rule at 45 CFR part 76.
    Extending the term ``managing employee'' to include individuals 
performing managerial duties who are not technically employees would be 
consistent with the legislative intent to require information on those 
individuals that have effective control over a provider's or supplier's 
day-to-day operations.

B. Basic Enrollment Requirement

    Proposed Sec.  424.505 requires a provider or supplier to have a 
valid Medicare billing number for the date a service was rendered in 
order to receive payment for covered Medicare services from either 
Medicare (in the case of assigned claims) or the Medicare beneficiary 
(in the case of unassigned claims).
    Under longstanding policy and operating procedures, any claim 
submitted without an active billing number is incomplete and cannot be 
processed for payment. Providers and suppliers who are not enrolled in 
the Medicare program must adhere to the mandatory claims submission 
rules at Sec.  424.32(a)(1) (Basic requirements for all claims) and 
section 1848(g)(4) of the Act. In addition, a claim submitted without a 
valid Medicare billing number would not be considered a valid claim and 
will be rejected. If the mandatory claims submission requirements are 
not met the provider or supplier could have sanctions imposed as 
outlined in section 1848(g)(4) of the Act for failure to file a claim 
as required.

C. Requirements for Obtaining a Billing Number and Medicare Billing 
Privileges

    To obtain a Medicare billing number and be eligible to receive 
payment for Medicare covered services, providers and suppliers must 
enroll in the Medicare program and meet other applicable Federal 
requirements. The Medicare program, through its contractors, requires 
specific identifying information from a provider or supplier before 
payment is authorized. Our issuance of an identification number to a 
provider or supplier does not automatically convey the privilege to 
bill Medicare. There must be a corresponding approval of the provider 
or supplier as meeting all Federal requirements to bill Medicare for 
the number to be an approved and active Medicare billing number.
    In Sec.  424.510 (CMS 855), we proposed that a provider or supplier 
must submit to us the appropriate completed CMS 855--Provider/Supplier 
Enrollment Application based on the type of provider or supplier 
enrolling. As part of our continuing efforts to improve the enrollment 
process, the series of CMS 855 enrollment forms with proposed revisions 
were submitted with the proposed rule, and were published in the 
Federal Register concurrently for review and public comment. Some of 
the proposed revisions were the removal of certain data collections 
from all forms in the series such as information on clearinghouses used 
in claims submission, practice locations from the CMS 855R, and a 
shortened attachment for ambulance companies in the CMS 855B. We also 
simplified the sections for reporting owners and managers and added 
instructional clarifications. The forms are identified as follows:
     CMS 855A--For providers billing fiscal intermediaries.
     CMS 855B--For supplier organizations billing carriers.
     CMS 855I--For individual health care practitioners billing 
carriers.
     CMS 855R--For individual health care practitioners to 
reassign benefits to an organization.
     CMS 855S--For DMEPOS Suppliers billing the NSC.
    The CMS 855 applications will be used to gather information on 
providers and suppliers for the purpose of authorizing billing numbers 
and establishing eligibility to furnish services to Medicare 
beneficiaries. The information submitted will also uniquely identify 
the providers and suppliers for the purpose of enumeration and payment. 
OMB approved the CMS 855 for these purposes (OMB approval number 0938-
0685).
    In Sec.  424.510(a)(1), we proposed to require that a provider or 
supplier submit the following on its CMS 855:
     Complete and accurate responses to all information 
requested within each section as applicable to the provider or supplier 
type.
     Any documentation currently required by CMS under this or 
other statutory or regulatory authority to

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uniquely identify the provider or supplier (for example, an SSN or a 
TIN).
     Any documentation currently required by CMS under this or 
other statutory or regulatory authority to establish the provider or 
supplier's eligibility to furnish services to beneficiaries in the 
Medicare program (for example, a medical license or business license).
    Under the authorities noted previously in this preamble all 
providers, suppliers, and other health care related individuals and 
entities who would receive Medicare reimbursements, either directly or 
indirectly as a result of enrolling in the Medicare program, must 
furnish their SSN and TIN as a condition of maintaining an active 
enrollment status and billing privileges. We also maintained the right 
to require persons with ownership or control interests (as that term is 
defined in section 1124(a)(3) of the Act) in their providers and 
suppliers, and of all managing employees (as that term is defined in 
section 1126(b) of the Act and in Sec.  420.201 of the regulations) of 
these providers and suppliers to also furnish their SSN and TIN as a 
condition of enrollment.
    We proposed to require that providers and suppliers must certify 
that all the information furnished on the CMS 855 is accurate, 
complete, truthful, and verifiable. Any concealment or 
misrepresentation of material information in these applications would 
constitute violation of this regulation and may result in the 
rejection, denial, or revocation of the provider or supplier's 
enrollment and billing privileges. In addition, the concealment or 
misrepresentation would be referred to the OIG for investigation and 
appropriate criminal, civil or administrative action.
    In Sec.  424.510(a)(2), we proposed to require that the CMS 855 
must be signed by an individual who has the authority to bind the 
provider or supplier both legally and financially to the requirements 
set forth in subpart P. This person must be the individual practitioner 
or have an ownership or control interest in the provider or supplier, 
as that term is defined in section 1124(a)(3) of the Act, such as, be 
the provider's or supplier's general partner, chairman of the board, 
chief financial officer, chief executive officer, president, or hold a 
position of similar status and authority within the provider or 
supplier organization. The signature would attest that the information 
submitted is accurate, complete, and truthful, and the provider or 
supplier is aware of, and will abide by, Medicare rules and 
regulations.
    To ensure that the individual signing the form can bind the 
enrollee from a financial and legal standpoint, we would require the 
following persons to sign the enrollment form:
     In the case of an individual practitioner, the applying 
practitioner.
     In the case of a sole proprietorship, the applying sole 
proprietor.
     In the case of a corporation, partnership, group, limited 
liability company (LLC), or other organization, an authorized official 
as defined in Sec.  424.502.
    When an authorized official signs the application, the signed 
application is considered binding upon the corporation partnership, 
organization, group, or LLC (hereafter referred to in this section as 
an organization), as applicable. This requirement establishes 
accountability for the accuracy of the information on the CMS 855 and 
ensures that the provider or supplier is committed to taking the 
necessary steps to comply with these requirements. In addition to the 
signature requirements, we proposed to establish a delegation of 
authority. As stated in this section, the original and all subsequent 
revalidation CMS 855s submitted by an organization to enroll or 
maintain enrollment in the Medicare program must have certification 
statements signed by the current authorized official(s) on file with 
Medicare. Any subsequent updates or changes made outside the enrollment 
or revalidation process may be signed by a delegated official of the 
enrolled organization.
    The delegated official must be a W-2 managing employee of the 
provider or supplier who is enrolling in, or currently enrolled in, the 
Medicare program, or be an individual with ownership or control 
interest in the provider or supplier.
    The delegation of signature authority would not apply for 
individual practitioners and sole proprietors. All CMS 855s submitted 
by individual practitioners or sole proprietors must be signed by the 
enrolling or enrolled individual.
    As proposed in Sec.  424.510(a)(2)(ii), the delegation of authority 
must be assigned by the authorized official currently on file with us 
or the authorized official who has signed the CMS 855 currently being 
submitted to us. All delegations of authority must be submitted via the 
CMS 855 and must include the title of each person delegated authority 
to update or change the organization's enrollment information. The 
assignment must be signed by both the authorized official currently on 
file with Medicare and the person(s) being delegated as an official of 
the organization. The signature of the delegated official would bind 
the organization both legally and financially, as if the signature was 
that of the authorized official. Once the delegation of authority is 
established, the signatures of the authorized official or the assigned 
delegated official(s) would be the only acceptable signature(s) on 
correspondence to report updates or changes to the enrollment 
information.
    In Sec.  424.510(b), we proposed to verify initial compliance with 
statutes and regulations before providers and suppliers are granted 
billing privileges, as well as on a continuing basis. The verifications 
would be based on information submitted by providers and suppliers on 
the CMS 855.
    We proposed to require in Sec.  424.510(c) that providers and 
suppliers, including those that are deemed to meet Medicare health and 
safety requirements by virtue of their accreditation by a national 
accrediting body, must attest via signature on the CMS 855 that they 
have met all the requirements set forth in this regulation before they 
are granted billing privileges. Those providers for which certification 
is required must meet the provisions of part 488 concerning mandatory 
State survey and certification requirements. Providers also must have 
completed a provider agreement in accordance with part 489, which 
specifies the requirements for provider agreements. In addition, in 
Sec.  424.510(d) and (e), we proposed to require that providers and 
suppliers must be operational as defined in Sec.  424.502 and must meet 
additional requirements that apply to both enrolling and currently 
enrolled providers and suppliers before receiving a Medicare billing 
number and becoming eligible for Medicare payments.
    In recognition of the effectiveness of site visits, we proposed to 
require, at Sec.  424.510(f), a plan for integrating site visits as 
part of our enrollment validation process and general program oversight 
activities. We proposed to reserve the right to perform on-site 
inspections of the provider or supplier when we deem necessary to 
ensure compliance with Medicare enrollment requirements. For certain 
providers and suppliers this practice has always been the case (for 
example, hospitals, SNFs, and HHAs), but we are extending this to all 
providers and suppliers when deemed necessary based on questionable 
enrollment information. Site visits for enrollment purposes will not 
affect those site visits performed for establishing conditions of 
participation.

[[Page 20758]]

    The proposed site visits and on-site inspections to ensure 
compliance with Medicare enrollment requirements are unrelated to the 
compliance-related site visits already being conducted by the OIG. 
After a provider or supplier enters into a corporate integrity 
agreement with the OIG, usually as the result of a Federal False Claims 
Act settlement, the OIG may conduct a site visit as part of its work in 
monitoring the provider or supplier's compliance with the terms of the 
corporate integrity agreement.
    Upon the provider or supplier's successful completion of the 
enrollment process, including State survey and certification, 
accreditation, and approval of the CMS 855, we would grant Medicare 
billing privileges and issue a billing number if one has not already 
been issued. The effective date for reimbursement of Medicare covered 
services would continue to be determined based on current Medicare 
regulations and policy based on the type of provider or supplier 
submitting claims. Currently, the effective dates for reimbursement can 
be found at Sec.  489.13 for providers and suppliers requiring State 
survey or certification or accreditation, Sec.  424.5 and Sec.  424.44 
for nonsurveyed or certified/accredited suppliers, and Sec.  424.57 and 
section 1834(j)(1)(A) of the Act for DMEPOS suppliers. For those 
providers and suppliers seeking accreditation from a CMS-approved 
accreditation organization, the effective date for reimbursement is the 
later of the date accreditation was received or the final approval of 
the CMS 855. Based on the regulations cited previously, we would not 
issue Medicare billing numbers or grant Medicare billing privileges 
retroactive to the date that the provider or supplier received final 
approval of their enrollment application (CMS 855). We proposed to use 
this process because we believe there is a relationship between 
fulfilling the requirements stipulated in the Medicare program statutes 
and related laws, the integrity of the provider and supplier, the 
quality of care furnished to Medicare beneficiaries, and the confidence 
of the public in the Medicare program.
    In the future there will be universal provider and supplier 
numbers, as required by the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA), for uniquely identifying a provider 
or supplier and for purposes of billing all health plans, including 
Medicare and Medicaid. When this universal number is in place, it will 
still be necessary for providers and suppliers to apply for enrollment 
as a Medicare provider or supplier and be granted Medicare billing 
privileges.

D. Requirements for Reporting Changes and Updates to, and the Periodic 
Revalidation of, Medicare Enrollment Information

    In Sec.  424.515, we proposed to require that a provider or 
supplier must update its enrollment information, and recertify as to 
its accuracy when any changes are made. We would also periodically 
require revalidation of the enrollment information by all providers and 
suppliers when enrollment information has aged over 3 years. The 
revalidation process will ensure that we have complete and current 
information on all Medicare providers and suppliers and ensure 
continued compliance with Medicare requirements. In addition, this 
process further ensures that Medicare beneficiaries are receiving 
services furnished only by legitimate providers and suppliers, and 
strengthens our ability to protect the Medicare Trust Funds.
    The accuracy of the data describing the individuals or 
organizations with which we do business is essential to efficient and 
effective operation of the Medicare program. For this reason, we 
proposed to require at Sec.  424.520(b), that individuals and 
organizations are responsible for updating their CMS 855 information to 
reflect any changes in a timely manner. We would define timely as 
meaning within 90 days, with the exception of a change in ownership or 
control of the provider or supplier which must be reported within 30 
days. Failure to do so may result in deactivation or even revocation of 
their billing privileges.
    We would determine, upon receipt of any changes, if continued 
enrollment in the Medicare program is proper. We expect that in the 
vast majority of cases, updates or changes would not affect the status 
of the provider or supplier. Where it does, we would follow the 
revocation procedures outlined later in this rule.
    When no such changes or updates were reported or submitted for a 
period of time, we believe that it is prudent to take steps to confirm 
the continued validity of the information that was previously 
submitted. We believe that this revalidation of enrollment information 
should be accomplished in a way that minimizes the reporting burden to 
the provider or supplier, but also mitigates the risk to the program of 
maintaining incomplete or inaccurate information that materially 
affects the relationship of the program to the provider or supplier. 
For this reason, we proposed to require that we will initiate a 
revalidation process for any individual or organization that has not 
submitted a change or update within the last 3 years. Routine 
revalidations may or may not be accompanied by site visits.
    We will reserve the right to perform non-routine revalidation and 
request the provider or supplier to recertify as to the accuracy of the 
enrollment information when warranted to assess and confirm the 
validity of the enrollment information. Non-routine revalidation may be 
triggered as a result of information indicating local problems, 
national initiatives, fraud investigations, complaints from 
beneficiaries, or other reasons that cause us to question the integrity 
of the provider or supplier in its relationship with the Medicare 
program. Like routine revalidation, non-routine revalidation may or may 
not be accompanied by site visits.
    We proposed to require that the revalidation of enrollment 
information occur no more than once every 3 years. We reserve the right 
to adjust this schedule if we determine that revalidation should occur 
on a more frequent basis due to complaints or evidence we receive 
indicating noncompliance with the statute or regulations by specific 
provider or supplier types. The schedule may also be on a less frequent 
basis if we determine that the integrity of and compliance with the 
statute and regulations by specific provider or supplier types 
indicates that less frequent validation is justified. If such a change 
were to occur, we would notify all affected providers and suppliers in 
writing at least 90 days in advance of implementing the change. We 
would continue to revalidate enrollment information for Ambulance 
Service Suppliers in accordance with regulations set forth at Sec.  
410.41(c)(2) (Requirements for ambulance suppliers), and DMEPOS 
suppliers would continue to renew enrollment in accordance with 
regulations set forth at Sec.  424.57(e) (Special payment rules for 
items furnished by DMEPOS suppliers and issuance of DMEPOS supplier 
billing numbers).
    We proposed to require at new Sec.  424.515(a) that during the 
revalidation or update process all providers and suppliers must attest 
by way of a signed certification statement that the requirements set 
forth in this regulation continue to be met. This requirement would not 
only ensure continued accuracy of the CMS 855 information, but would 
also ensure that the provider or supplier is committed to taking the 
necessary steps to maintain compliance with these requirements. 
However, it should be noted that periodic validation of a provider or 
supplier's Medicare enrollment information is separate from the survey 
requirements for the provider

[[Page 20759]]

or supplier as contained in 42 CFR Chapter IV, subchapter E (Standards 
and certification).
    We proposed to require the information submitted for revalidation 
or update to include any new or changed documentation as required by us 
under this or other statutory or regulatory authority that identifies 
the provider or supplier, and any documentation as required by us under 
this or other statutory or regulatory authority required to verify the 
provider or supplier's continued eligibility to furnish services to 
beneficiaries in the Medicare program. We would also require a 
signature on the completed CMS 855 that meets the requirements proposed 
in Sec.  424.510(a)(3).
    In Sec.  424.515(b), we also proposed to require that a provider or 
supplier must submit a CMS 855 with complete information for 
revalidation within 60 calendar days of our revalidation notification. 
For those providers and suppliers who initially enrolled in the 
Medicare program via the CMS 855, we would furnish a copy of the 
information currently on file for their review, request that they make 
any changes, and certify via their signature that the information is 
accurate, complete, and truthful. We estimate that completion of the 
form would require on average 8 hours. Therefore, we believe 60 days is 
a reasonable timeframe for providers and suppliers to comply.
    As part of the revalidation process, we would verify the accuracy 
of the reported information on the applicable CMS 855. Because survey 
and certification are independent program requirements distinct from 
the revalidation of enrollment information requirements set forth in 
this subpart, we proposed in Sec.  424.515(c) that new surveys or 
certifications are not required for the revalidation process. However, 
providers must continue to meet the provisions of Sec.  488 and Sec.  
489 concerning mandatory State survey and certification requirements. 
When applicable, providers must also have completed a provider 
agreement in accordance with Sec.  489, which specifies the 
requirements for provider agreements. We would also reserve the right, 
at proposed Sec.  424.515(d), to perform on-site inspections, to 
further ensure compliance with Medicare requirements.
    We understand that the resubmission and update of enrollment 
information would place an obligation on providers and suppliers. We 
are considering a variety of ways to minimize the burden of this 
important information collection and verification provision (including 
the use of Internet technology).
    To reduce the burden when reporting updates or changes in the 
future, we would require that all providers and suppliers currently in 
the Medicare program complete, in its entirety, the CMS 855 at least 
once if they have not done so in the past. This would ensure that we 
have the most current and accurate information, and would allow us to 
make full use of electronic data submissions via the Internet. By 
having a complete enrollment record, we would be able to produce and 
transmit or mail the CMS 855, pre-populated with previously reported 
information, to the provider or supplier for their review and signature 
certification as to the continued accuracy of the information and 
require them to update any information that is no longer current.

E. Additional Provider and Supplier Requirements for Enrolling and 
Maintaining Active Enrollment Status in the Medicare Program

    In new Sec.  424.520, we proposed to specify the additional 
requirements that providers and suppliers must meet to enroll or 
maintain enrollment in the Medicare program. The provider or supplier 
must certify that it meets, and continues to meet, the following 
requirements:
     Compliance with title XVIII of the Act (Medicare Statutory 
Provisions) and applicable regulations.
     Compliance with all applicable Federal and State licensure 
and regulatory requirements that apply to the specific provider or 
supplier type that relate to providing health care services.
     Not employing or contracting with individuals or entities 
excluded from participation in Federal Health care programs for the 
provision of items and services reimbursable under these programs in 
violation of section 1128A(a)(6) of the Act.
    The OIG program exclusion regulations were amended effective August 
25, 1995, in accordance with the Federal Acquisition Streamlining Act 
of 1994 (FASA), and with the HHS Common Rule at 45 CFR part 76, to 
explain the scope and effect of an OIG exclusion. In accordance with 
the FASA, government-wide reciprocal effect will be given by all 
Federal agencies to an administrative sanction imposed by any Federal 
agency. Specifically, the statute provides that: ``No agency shall 
allow a party to participate in any procurement and nonprocurement 
activity if any [other] agency has debarred, suspended, or otherwise 
excluded, that party from participation in a procurement or 
nonprocurement activity,'' (FASA, section 2455). Therefore, consistent 
with the FASA, its implementing regulation, and OIG regulations (Sec.  
1001.1901(b)), we would deny or revoke enrollment (revocation effective 
on the date of the exclusion) if the provider or supplier is subject to 
an OIG exclusion, or is debarred, suspended or otherwise excluded by 
any other Federal health care program or agency.

F. Rejection of a Provider's or Supplier's CMS 855 for Medicare 
Enrollment

    In new Sec.  424.525, we proposed that if a provider or supplier 
enrolling in the Medicare program for the first time fails to furnish 
complete information on the CMS 855, or fails to furnish missing 
information or any necessary supporting documentation as required by 
CMS under this or other statutory or regulatory authority within 60 
calendar days of our request to furnish the information, we would 
reject the provider or supplier's CMS 855 application. Rejection would 
not occur if the provider or supplier is actively communicating with us 
to resolve any issues regardless of any timeframes.
    Upon notification of a rejected CMS 855, the provider or supplier 
must again begin the enrollment process by completing and submitting a 
new CMS 855 and all applicable documentation. We proposed to specify in 
Sec.  424.525(b) that the new form must also update any information 
that is different from that originally submitted. This would ensure 
that we have the most recent information about the provider or 
supplier. The enrollment process would culminate in the granting of 
billing privileges or denial or rejection of the application.

G. Denial of Enrollment

    We would deny enrollment in the Medicare program to providers or 
suppliers whom we determine to be ineligible. Providers and suppliers 
who are denied enrollment would not receive Medicare billing 
privileges. In Sec.  424.530(a), we proposed to require that a provider 
or supplier applying for enrollment in the Medicare program may be 
denied enrollment for any of the following reasons:
     Under Sec.  424.530(a)(1), enrollment may be denied if the 
provider or supplier were found not to be in compliance (for example, 
failure to furnish required documentation, lack of qualified practice 
location) with the Medicare enrollment requirements applicable to the 
type of provider or supplier enrolling, unless the reason for 
noncompliance were corrected or the provider or supplier has submitted 
a

[[Page 20760]]

plan of corrective action as outlined in part 488.
     In Sec.  424.530(a)(2), we proposed to require that 
enrollment may also be denied if: a provider, supplier, an owner, 
managing employee, authorized or delegated official an supervising 
physician, medical director, or other health care personnel furnishing 
Medicare reimbursable services who is required to be reported on the 
providers' or suppliers' CMS 855 (for example, an ambulance crew 
member) --
    + Is excluded from the Medicare, Medicaid, or any other Federal 
health care programs, as defined in Sec.  1001.2, in accordance with 
Sec.  1001.1901(a); or
    + Is debarred, suspended, or otherwise excluded from participating 
in any other Federal procurement or nonprocurement activity in 
accordance with FASA, section 2455; (See HHS Common Rule provisions 
that discuss the effect of a program exclusion under title XI of the 
Act, as well as other Federal agency debarments, suspensions, and 
exclusions found at 45 CFR 76.100(c) and (d)).
    We are required to ensure that no payments are made to any 
providers or suppliers who are excluded from participation in the 
Medicare program under authorities found in sections 1128, 1156, 1862, 
1867, and 1892 of the Act, or who are debarred, suspended or otherwise 
excluded as authorized by FASA. This includes any individual, entity, 
or any provider or supplier that arranges or contracts with (by 
employment or otherwise) an individual or entity that the provider or 
supplier knows or should know is excluded from participation in a 
Federal health care program for the provision of items or services for 
which payment may be made under such a program (section 1128A(a)(6) of 
the Act), and any provider or supplier that has been debarred, 
suspended, or otherwise excluded from participation in any other 
Executive Branch procurement or nonprocurement programs or activity 
(FASA, section 2455).
    Therefore, when an individual or entity is excluded by the OIG 
under section 1128 of the Act, the exclusion is applicable to 
participation in all Federal health care programs (including Medicare 
and Medicaid as defined in section 1128B(f) of the Act). In addition, 
section 1862(e) of the Act prohibits the Secretary from paying for 
items and services furnished by excluded individuals. We believe that 
our general authorities, in combination with the prohibition against 
paying for items or services furnished by excluded individuals, 
provides authority for us to deny enrollment unless a provider or 
supplier terminates its relationship with the relevant individual. The 
denial will remain effective until that provider, supplier, managing 
employee, authorized or delegated official, medical director, 
supervising physician, or other health care personnel furnishing 
Medicare reimbursable services, is no longer excluded or sanctioned. 
Section 424.530(b)(3) also would provide that the denial will be 
effective within 30 days of the denial notification.
    In Sec.  424.530(a)(3), we also proposed to require that we may 
deny enrollment in the Medicare program if the provider or supplier, or 
any owner of the provider or supplier, has been convicted of a Federal 
or State felony offense that we determine to be detrimental to the best 
interests of the Medicare program or its beneficiaries. This authority 
is afforded to us in many of the HIPAA fraud and abuse provisions and 
section 4302 of the BBA. In making assessments, we proposed to require 
including any felony convictions from the last 10 years or more. In 
addition, we would consider the severity of the underlying offense.
    Felonies that we determine to be detrimental to the best interests 
of the Medicare program or its beneficiaries include the following:
     Within the last 10 years or more preceding enrollment or 
revalidation of enrollment, crimes against persons, such as rape, 
murder, kidnapping, assault and battery, robbery, and other similar 
crimes for which the individual was convicted, including guilty pleas 
and adjudicated pretrial diversions. We believe it is reasonable for 
the Medicare program to question the ability of the individual or 
entity with such a history to respect the life and property of program 
beneficiaries.
     Within the last 10 years or more preceding enrollment or 
revalidation of enrollment, financial crimes, such as extortion, 
embezzlement, income tax evasion, making false statements, insurance 
fraud, and other similar crimes for which the individual was convicted, 
including guilty pleas and adjudicated pretrial diversions. We believe 
it is reasonable for the Medicare program to question the honesty and 
integrity of the individual or entity with such a history in providing 
services and claiming payment under the Medicare program.
     Within the last 10 years or more preceding enrollment or 
revalidation of enrollment, any felony that placed the Medicare program 
or its beneficiaries at immediate risk, such as a malpractice suit that 
resulted in a conviction of criminal neglect or misconduct.
     Any felonies referred to in section 1128 of the Act.
    Under section 1128(a) of the Act, the Secretary must exclude 
individuals or entities convicted of certain crimes, such as program-
related crimes, crimes related to patient abuse or neglect, and 
conviction of a felony related to health care fraud or controlled 
substances. In addition, the Secretary has authority to exclude 
individuals and entities for other adverse actions including when an 
individual or entity is owned or controlled by a sanctioned or 
convicted individual, in accordance with section 1128(b)(8) of the Act.
    In cases where the provider or supplier is not a convicted 
individual but, rather, has an ownership or management relationship 
with a convicted or excluded individual, that provider or supplier may 
also be subject to civil monetary penalties as stated in section 
1128A(a)(6) of the Act. In addition, we may deny or revoke billing 
privileges if such a relationship exists. However, the denial may be 
reversed if, within 30 days of the denial notification, the provider or 
supplier terminates its ownership or management relationship with the 
convicted or excluded individual or organization.
    In Sec.  424.530(a)(4), we proposed to require that we may deny 
enrollment if the provider or supplier has deliberately submitted false 
or misleading information on their CMS 855 to gain enrollment in the 
Medicare program. Offenders may be subject to fines or imprisonment, or 
both, in accordance with current statute and regulation.
    In Sec.  424.530(a)(5), we proposed possible denial of enrollment 
where there are repeated instances in which, upon on-site review or 
other reliable evidence, we do not find present those licensed medical 
professionals required under the statute or regulations to supervise 
treatment or provide Medicare covered services for Medicare patients; 
or we determine that the provider or supplier is not operational to 
furnish Medicare covered services or supplies.
    As outlined in Sec.  424.530(b), if the denied provider or supplier 
appeals the decision, and the denial is upheld, that provider or 
supplier may submit a new CMS 855 after we notify it that the original 
determination was upheld. If the provider or supplier did not appeal 
the determination, it may submit a new CMS 855 when the timeframe for 
appeal rights has lapsed. We proposed this latter requirement to 
prevent administrative difficulties that might result in processing two 
enrollment forms if a new one is submitted during the time period when 
the provider or supplier may appeal an initial denial.

[[Page 20761]]

    Medicare enrollment denials would impact the provider or supplier 
on a national scale. In proposed Sec.  424.530(c), we stated that when 
a provider or supplier is denied enrollment in Medicare, we would 
review all other related Medicare enrollment files that the denied 
provider or supplier has an association with (for example, as an owner 
or managing employee) to determine if the denial warrants an adverse 
action of the associated Medicare provider or supplier.

H. Revocation of Enrollment and Billing Privileges From the Medicare 
Program

    Revocation occurs when an enrolled provider or supplier's billing 
privileges are terminated. In proposed Sec.  424.535, we outlined the 
causes for revocation and what a provider or supplier would need to do 
to re-enroll in the Medicare program after revocation. In considering 
whether to revoke enrollment and billing privileges in the Medicare 
program, we would consider the severity of the offenses, mitigating 
circumstances, program and beneficiary risk if enrollment was to 
continue, possibility of corrective action plans, beneficiary access to 
care, and any other pertinent factors.
    In general, we proposed to require revocation criteria that are 
similar to our reasons for denial of initial Medicare program 
enrollment. In Sec.  424.535(a)(1), we proposed to require that a 
provider or supplier's enrollment and billing privileges may be revoked 
if, at any time, it is determined to be out of compliance with the 
Medicare enrollment requirements outlined in subpart P including 
failure to report changes to enrollment information timely or failure 
to adhere to corrective action plans, and has not corrected the problem 
within 30 days of notice of noncompliance or submitted a plan of 
corrective action as cited earlier. We may request additional 
documentation from the provider or supplier to determine compliance if 
adverse information is received or otherwise found concerning the 
provider or supplier. If requested documentation we required under this 
or other statutory or regulatory authority is not submitted within 30 
calendar days of our request, we would immediately begin revocation 
proceedings. If the documentation is received timely, we would review 
and verify the information to determine if we should proceed with the 
revocation. Providers requiring State survey and certification would 
continue to receive payment during the data verification review under 
current regulations found at part 488 and under section 1819(h)(2)(c) 
of the Act. Providers and suppliers not subject to State survey and 
certification may have their payments suspended during the data review.
    We also proposed to require that we may revoke a provider or 
supplier's billing privileges if the provider or supplier establishes 
the following:
     Repeated instances in which, upon on-site review or other 
reliable evidence, we do not find present those licensed medical 
professionals required under the statute or regulation to supervise 
treatment of, or to provide Medicare covered service for, Medicare 
patients.
    Additional proposed reasons that may result in the revocation of 
billing privileges in Sec.  424.535(a) includes the following:
     The provider or supplier, any owner, managing employee, 
authorized or delegated official, supervising physician or other health 
care personnel who must be reported on the CMS 855 (for example, 
ambulance crew member) of the provider or supplier, in accordance with 
section 1862(e)(1) and (2) of the Act, becomes excluded from the 
Medicare, Medicaid or any other Federal health care programs, as 
defined in Sec.  1001.2, in accordance with section 1128 or 1156 of the 
Act, or is debarred, suspended or otherwise by any Federal health care 
program or agency.
     The provider or supplier, or any owner of the provider or 
supplier, is convicted of a Federal or State felony offense that we 
determine to be detrimental to the best interests of the program as 
outlined in ``Denial of Enrollment'' above.
     The provider or supplier certified as ``true'' 
deliberately submitted false or misleading information on the CMS 855 
in order to enroll or maintain enrollment in the Medicare program. 
(Offenders may be subject to criminal or civil prosecution, in 
accordance with current laws and regulations).
     Upon on-site review, we determine that the provider or 
supplier is no longer operational to furnish Medicare covered services 
or supplies.
     The provider or supplier fails to furnish complete and 
accurate information on the CMS 855 and any applicable documentation 
within 60 calendar days of our notice to recertify its enrollment 
information.
     The provider or supplier knowingly sells to or allows 
another individual or entity to use its billing number.
    In addition to the revocation of the provider's or supplier's 
billing privileges, we proposed to require at Sec.  424.535(b) that any 
provider agreement in effect at the time of revocation would also be 
terminated effective with the date of revocation. We do not believe it 
would be prudent for us to maintain an active provider agreement for a 
provider or supplier whose business relationship with Medicare was 
adverse enough as to cause the revocation of its billing privileges. 
Section 1866(b)(2)(A) of the Act specifies that the Secretary may 
terminate a provider agreement after the Secretary has determined that 
the provider fails to comply substantially with the provisions of title 
XVIII. We proposed to amend Sec.  489.53 and Sec.  498.3 to reflect 
this proposal.
    In new Sec.  424.535(c), we proposed to require that upon 
notification of the revocation of its billing number, if the provider 
or supplier seeks to re-establish enrollment and billing privileges in 
the Medicare program (either after the appeals process is exhausted or 
in place of the appeals process), then the provider or supplier must 
complete and submit a new CMS 855 as a new provider or supplier and 
applicable documentation. Providers must be resurveyed or recertified 
by the State survey agency as a new provider and must establish a new 
provider agreement with our Regional Office.
    If the billing privileges are revoked due to the adverse activity 
of an individual or organization other than the provider or supplier, 
the revocation may be reversed if the provider or supplier terminates 
its business relationship with the individual or organization that was 
responsible for the revocation within 30 days.
    As with a denial of Medicare enrollment, revocations would impact 
the provider or supplier on a national scale. As proposed in Sec.  
424.535(d), if a provider or supplier's billing privileges are revoked, 
we would review all other related Medicare enrollment files that the 
revoked provider or supplier has an association with (for example, as 
an owner or managing employee) to determine if the revocation warrants 
an adverse action of the associated Medicare provider or supplier.

I. Deactivation of Medicare Billing Privileges

    When a provider or supplier's billing number is deactivated, 
billing privileges are suspended, but can be restored upon the 
submission of updated or recertified information. In new Sec.  424.540, 
we proposed to continue to deactivate a provider or supplier's Medicare 
billing number if no Medicare claims are submitted for 2 consecutive 
calendar quarters (6 months) unless current policy or regulations 
specify otherwise for specific provider or supplier types. Our current 
policy requires deactivation of billing numbers after 4 consecutive

[[Page 20762]]

calendar quarters (12 months) of no claim submissions. We included this 
reduction to the current requirement because we are aware of a number 
of program integrity issues related to inactive Medicare billing 
numbers. We wish to prevent, for example, questionable businesses from 
deliberately obtaining multiple numbers so that they could keep one 
``in reserve'' in the event their practices result in suspension of 
claims payment under their active number. We also wish to prevent 
fraudulent entities from obtaining information about discontinued 
providers or suppliers, for example, using the Medicare billing number 
of a deceased physician.
    We also proposed to require deactivation of a billing number if we 
discover changes to the information provided on the provider or 
supplier's CMS 855 that were not reported within 90 days of the change. 
This includes, but is not limited to, changes to billing services, a 
change in the practice location, or a change of any managing employee. 
A change in ownership or control must be reported within 30 calendar 
days.
    Deactivation of Medicare billing privileges is considered a 
temporary action to protect the provider or supplier from misuse of 
their billing number and to also protect the Medicare Trust Funds from 
unnecessary overpayments. The temporary deactivation of a billing 
number would not have any effect on a provider or supplier's 
participation agreement or conditions of participation.
    In Sec.  424.540(b), we proposed that a provider or supplier whose 
billing number has been deactivated for any reason other than 
nonsubmission of a claim for 6 months and who wants to reactivate its 
Medicare billing number must complete and submit a new CMS 855. Those 
providers and suppliers whose billing number are deactivated after 
nonsubmission of a claim must recertify that the enrollment information 
currently on file with Medicare is correct before the claim would be 
paid. In addition, the provider or supplier must meet all current 
Medicare requirements in place at the time of the reactivation. The 
provider or supplier must also be prepared to submit a valid claim or 
risk subsequent deactivation of their billing number. Once notified, we 
would give all reactivations of Medicare billing numbers priority 
handling to ensure expedient payment of claims. Reactivation of a 
Medicare billing number would not require resurvey or certification by 
State agency, or the establishment of a new provider agreement.

J. Provider and Supplier Appeals

    In new Sec.  424.545, we proposed that a provider or supplier that 
has been denied enrollment in the Medicare program, or whose enrollment 
has been revoked, may appeal our decision in accordance with our 
regulations at part 405, subpart H, for suppliers or part 498, subpart 
A, for providers. We are currently drafting a single regulatory appeals 
process for all providers and suppliers denied or revoked from 
participation in the Medicare program. In keeping with current policy, 
we also proposed that no payments would be made during the appeals 
process. If the provider or supplier is successful in overturning a 
denial or revocation, unpaid claims for services furnished during the 
overturned period may be resubmitted.
    In addition, we proposed in Sec.  424.545(b) that a provider or 
supplier whose billing privilege was deactivated may file a rebuttal 
using procedures found at Sec.  405.74.

K. Prohibitions on the Sale or Transfer of Billing Privileges

    We proposed in new Sec.  424.550 that a provider or supplier would 
be prohibited from selling its Medicare billing number to any 
individual or entity, or allowing another individual or entity to use 
its Medicare billing number. Similarly, we would prohibit a provider or 
supplier from transferring its Medicare billing privileges to any 
individual or entity, except during a change in ownership, as stated 
below. A provider or supplier does not have independent authority to 
sell or transfer any billing number issued or the billing privileges 
granted with the billing number assigned.
    We proposed this policy because only we and our agents have the 
authority to issue Medicare billing numbers and grant Medicare billing 
privileges. These numbers are issued only after the information about 
the provider or supplier collected on the CMS 855 is verified. Because 
it is used to uniquely identify a provider or supplier, the Medicare 
billing number we issue is solely for use by the specific provider or 
supplier to whom it was issued.
    In the case of a provider or supplier undergoing a change of 
ownership as described in part 489 subpart A, we would require at Sec.  
424.550(b) that a CMS 855 be completed and submitted by both the 
current owner and the new owner before the completion of the ownership 
change. Failure of the current owner to submit the CMS 855 prior to the 
change of ownership may result in sanctions and penalties, after the 
date of ownership change, in accordance with Sec.  424.520, Sec.  
424.540, and Sec.  489.53. Failure of the new owner to submit the CMS 
855 prior to the change of ownership may result in the deactivation of 
the Medicare billing number until the CMS 855 has been submitted.
    We may deactivate a Medicare billing number at any time before 
final transference of the provider agreement to the new owner. This may 
occur as a result of the submission of a CMS 855 with material 
omissions, or preliminary information received or determined by us that 
makes us question whether the new owner would ultimately be granted a 
final transference of the provider agreement. This allows us the right 
to ensure that billing privileges are given only to a new owner for 
which we have adequate information to, at a minimum, determine that the 
new owner should have billing privileges prior to the complete 
validation of their CMS 855 and the transfer of the provider agreement.
    We understand that not all enrollment information is available 
before the change of ownership. We will work with the new owner(s) to 
ensure a seamless transition, but it is the provider's or supplier's 
responsibility to report this and any other changes to us to prevent us 
from imposing any adverse action against it.
    For those providers and suppliers not covered by part 489, any 
change in the ownership or control of the provider or supplier must be 
reported on the CMS 855 within 90 days of the change as noted in Sec.  
424.540(a)(2). Generally, a change of ownership that also changes the 
tax identification number would require a new CMS 855 from the new 
owner.

L. Payment Liability

    In new Sec.  424.555, we proposed that any expenses for services 
furnished to a Medicare beneficiary by those categories of suppliers 
covered by section 1834 of the Act (that is, suppliers of DMEPOS) are 
the responsibility of that supplier if the supplier has been denied 
Medicare billing privileges. We further proposed that no payment may be 
made for covered services furnished to a Medicare beneficiary by a 
provider or supplier whose billing privileges were deactivated or 
revoked. The Medicare beneficiary would have no financial 
responsibility for this type of expense, and the provider or supplier 
must refund on a timely basis any amounts collected from the 
beneficiary for those covered services.
    We proposed these provisions because a provider or supplier who 
fails

[[Page 20763]]

to provide valid enrollment information, or who is not a valid provider 
or supplier type under the Medicare program, cannot be verified as a 
legitimate provider or supplier for purposes of this rule. Claims or 
bills submitted for covered Medicare services must have an active 
Medicare billing number. Claims or bills submitted by a provider or 
supplier who is not properly enrolled, and does not have an active 
Medicare billing number, would be considered incomplete and would be 
returned. The provider or supplier would then be in violation of the 
mandatory claims submission requirements and could be fined for each 
occurrence. An incomplete claim returned for this reason would not be 
afforded appeal rights for the provider or supplier. However, a 
provider or supplier may appeal a denial or revocation of enrollment in 
accordance with regulations elsewhere in this subpart.
    Sections 1802(b), 1834(j), 1866, and 1870 of the Act, provide 
Medicare beneficiaries with certain protections against liabilities 
imposed by providers and suppliers. In section 1834(j)(4), for example, 
the statute protects the beneficiary against demands for payment for 
covered Medicare services by certain categories of suppliers that have 
not been granted Medicare billing privileges. Section 1866 of the Act 
prohibits providers that have entered into agreements described in that 
section from charging the beneficiary for covered items or services 
that are not paid by Medicare because the provider has failed to comply 
with certain requirements. Furthermore, section 1802(b) of the Act, 
which sets forth a variety of criteria under which physicians and 
practitioners may enter into private contracts with Medicare 
beneficiaries, provides for additional beneficiary protection. Section 
1870 of the Act provides that, except under certain circumstances, any 
payment to a provider of services for items or services furnished shall 
be considered a payment to the individual, but that the individual will 
not be liable for overpayment to the provider where the individual is 
without fault.
    In addition, section 1128A(a)(6) of the Act provides for criminal 
penalties for providers and suppliers having knowledge of events 
affecting the right to benefit or payment, and concealing or failing to 
disclose such an event with an intent to fraudulently secure benefit or 
payment when it is not authorized.
    The CMS 855 states that the following penalties may be imposed:
     18 U.S.C. 1001 authorizes criminal penalties against an 
individual who in any matter within the jurisdiction of any department 
or agency of the United States knowingly and willfully falsifies, 
conceals or covers up by any trick, scheme or device a material fact, 
or makes or uses any false, fictitious, or fraudulent statements or 
representations, or makes any false writing or document knowing the 
same to contain any false, fictitious or fraudulent statement or entry. 
Individual offenders are subject to fines of up to $250,000 and 
imprisonment for up to 5 years. Offenders that are organizations are 
subject to fines of up to $500,000. 18 U.S.C. 3571(d) also authorizes 
fines of up to twice the gross gain derived by the offender.
     Section 1128B(a)(1) of the Act authorizes criminal 
penalties against an individual who ``knowingly and willfully makes or 
causes to be made any false statement or representation of a material 
fact in any application for any benefit or payment under a Federal 
health care program.'' The offender is subject to fines of up to 
$25,000 or imprisonment for up to 5 years, or both.
     The Civil False Claims Act, 31 U.S.C. 3729, imposes a 
civil penalty of $5,000 to $10,000 per violation, plus three times the 
amount of damages sustained by the Government and imposes civil 
liability, in part, on any person who--
    + Knowingly presents, or causes to be presented, to an officer or 
an employee of the United States Government a false or fraudulent claim 
for payment or approval;
    + Knowingly makes, uses, or causes to be made or used, a false 
record or statement to get a false or fraudulent claim paid or approved 
by the Government; or
    + Conspires to defraud the Government by getting a false or 
fraudulent claim allowed or paid.
     Section 1128A(a)(1) of the Act imposes administrative 
sanctions on a person for the submission to a Federal health care 
program of false or otherwise improper claims.
    These administrative sanctions include a civil monetary penalty of 
up to $10,000 for each item or service falsely or fraudulently claimed 
an assessment of up to triple the amount claimed, and exclusion from 
participation in all Federal health care programs.
    The government may assert common law claims such as ``common law 
fraud,'' ``money paid by mistake,'' and ``unjust enrichment.'' Remedies 
include compensatory and punitive damages, restitution, and recovery of 
the amount of the unjust profit.
    In addition, the following two sanctions were added to the CMS 855 
form:
     18 U.S.C. 1035 authorizes criminal penalties against 
individuals in any matter involving a health care benefit program who 
knowingly and willfully falsifies, conceals, or covers up by any trick, 
scheme, or device a material fact; or makes any materially false, 
fictitious, or fraudulent statements or representations, or makes or 
uses any materially false fictitious, or fraudulent statement or entry, 
in connection with the delivery of or payment for health care benefits, 
items, or services. The individual shall be fined or imprisoned up to 5 
years or both.
     18 U.S.C. 1347 authorizes criminal penalties against 
individuals who knowing and willfully execute, or attempt, to execute a 
scheme or artifice to defraud any health care benefit program, or to 
obtain, by means of false or fraudulent pretenses, representations, or 
promises, any of the money or property owned by or under the control 
of, any health care benefit program in connection with the delivery of 
or payment for health care benefits, items, or services. Individuals 
shall be fined or imprisoned up to 10 years or both. If the violation 
results in serious bodily injury, an individual will be fined or 
imprisoned up to 20 years, or both. If the violation results in death, 
the individual shall be fined or imprisoned for any term of years or 
for life, or both.

III. Analysis and Responses to Public Comments

    We received a total of 152 comments on the April 25, 2003 proposed 
rule. Below is a summary of the comments received and our responses to 
them.
    Comment: Several commenters stated that the language concerning 
``effective billing dates'' was confusing. Commenters stated that they 
thought we were changing the current policy on submitting claims 
retroactively after the enrollment process was complete.
    Response: While we understand these concerns, it was never our 
intent to change our policy on effective billing dates. We have 
clarified and referenced current policy citations in the final 
regulation text. We will continue to pay claims under all current 
reimbursement policies.
    Comment: Several commenters expressed concern about our proposal to 
reduce the period of nonbilling activity to deactivate a Medicare 
billing number. This period is currently 12 months and we proposed 
reducing it to 6 months.
    Response: Based on the expressed concerns, we will maintain the 
current 12-month period. In addition, to avoid

[[Page 20764]]

future misinterpretation, we have defined the 12-month time period as 
beginning the 1st day of the 1st month without the submission of a 
claim through the last day of the 12th consecutive month without 
submitting a claim.
    Comment: Several commenters expressed concern regarding our 
proposal to begin a 3-year revalidation process for all providers and 
suppliers billing Medicare. The concerns were with our ability to 
efficiently handle the additional workload and continue to issue new 
Medicare billing numbers in a timely manner.
    Response: While we appreciate this concern, we will not implement 
this initiative until OMB approves changes to the November 2001 
provider/supplier enrollment applications.
    Comment: Several commenters recommended that we add a number of 
definitions, including provider, supplier, applicant, and managing 
director to this final rule. Moreover one of these commenters 
recommended that all definitions in the enrollment forms be included in 
the regulation and that all definitions included in the final rule be 
included in the instructions to the enrollment forms.
    Response: We decided not to include additional definitions because 
many of the definitions that commenters requested that we include in 
this final rule are already defined in statute. However, to ensure 
consistency in application and clarity for individual and 
organizational applicants, our manuals and the provider enrollment 
applications will include all necessary definitions. We do not believe 
that it is necessary to include all of the definitions included in the 
enrollment applications in this regulation.
    Comment: One commenter recommended that we amend the proposed 
regulation to affirmatively state that a W-2 employee of the applicant 
parent corporation can serve as a delegated official, even though he or 
she may or may not be a W-2 employee of the applicant itself.
    Response: We believe that it is essential that any individual 
assigned as a delegated official has a direct relationship and 
connection with the applicant. We recognize that there are instances 
where an employee of a provider's parent company may exercise a 
tremendous degree of authority over the provider. However, in these 
cases the fact remains that the provider and the parent company are two 
separate legal entities. For obvious legal reasons, we simply cannot 
establish a blanket provision whereby a W-2 employee of one entity can 
sign the CMS 855 on behalf of another entity.
    Comment: Several commenters made comments regarding the provider/
supplier enrollment applications that were published in 2001.
    Response: We considered these changes as we developed the latest 
version of the provider and supplier enrollment applications. These 
fully revised applications were published in the Federal Register in 
July 2005. Some of the changes to the redesigned provider/supplier 
enrollment applications were made in preparation for an electronic 
enrollment process. We will continue to use the approved version 
(November 2001) of the provider and supplier enrollment applications 
until the revised applications are approved by OMB.
    Comment: One commenter requested that we clarify if currently 
enrolled providers and suppliers are required to complete a provider 
enrollment application.
    Response: All providers and suppliers, including those currently 
billing Medicare, will be required to complete and submit an enrollment 
application. We will phase-in the revalidation process for providers 
and suppliers currently participating in the Medicare program.
    Comment: One commenter questioned the need to obtain a national 
provider identifier and also enroll in the Medicare program.
    Response: The National Provider Identifier (NPI) will replace 
healthcare provider identifiers in use today in standard healthcare 
transactions. The application and request for a NPI does not replace 
the enrollment process for Medicare. Enrolling in a particular health 
plan authorizes providers and suppliers to bill and be paid for 
services covered under Medicare.
    Comment: A number of commenters expressed the need for us to have 
an electronic enrollment process, including the ability to update and 
report changes to their enrollment information.
    Response: We are currently developing a web-based electronic 
enrollment process which will also allow for reporting changes 
electronically. We expect this process to be operational in 2007. It is 
expected that this process will reduce the burden on the providers and 
suppliers and speed the approval process for new applications.
    Comment: Several commenters expressed the need for us to establish 
an electronic signature process. Another commenter recommended that 
providers and suppliers be allowed to report changes electronically.
    Response: We appreciate these suggestions and will consider 
adopting as we develop our electronic enrollment process.
    Comment: One commenter recommended that we develop pre-populated 
revalidation applications which list the current information on 
enrolled providers and suppliers. This would allow providers and 
suppliers to simply verify that the information is correct, make 
necessary corrections, and sign the document to attest to the 
correctness of the information provided.
    Response: As we stated in the preamble to the proposed rule, we 
support this approach and appreciate this recommendation. We believe 
that the electronic enrollment process will allow providers and 
suppliers to verify existing information, make necessary corrections, 
and attest to the correctness of the information submitted.
    Comment: One commenter recommended postponing the effective date of 
revalidation until technology is available for electronic submission.
    Response: We understand this commenter's concern. However, we do 
not believe that it is practical to delay implementation of 
revalidation until an electronic process is established. Moreover, 
section 902 of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and 
requires us to publish a final regulation within 3 years of publishing 
proposed or interim final regulation in order to implement the proposed 
or interim final regulation.
    Comment: A number of commenters recommended that CMS phase-in 
requirements to submit an initial enrollment application or respond to 
a revalidation request.
    Response: We agree that a phased-in approach will limit delays in 
the enrollment process. While we note that a provider or supplier may 
voluntarily submit an enrollment application at any time, we will 
instruct our contractors to process new enrollment applications first, 
request and process enrollment applications for providers and suppliers 
currently billing the program second, and initiate revalidation 
activities for most providers and suppliers third. Clearly, we will 
monitor the processing of enrollment applications to ensure that all 
applications are processed within established time frames.
    Comment: A number of commenters expressed concern about individual 
contractors' ability to process the increased workload associated with 
obtaining and validating new enrollment applications for existing 
providers.

[[Page 20765]]

    Response: In addition to processing enrollment applications for 
providers and suppliers seeking entry into the Medicare program, we 
expect that our fee-for-service contractors will request enrollment 
applications from providers and suppliers already billing the Medicare 
program in FY 2006 and FY 2007. In addition, we expect they will 
conduct a limited number of revalidations in FY 2006 and FY 2007, with 
an increased number of revalidations in FY 2008. By focusing on 
processing enrollment applications for new applicants and existing 
Medicare providers and suppliers who have not completed and submitted a 
Medicare enrollment application, we expect to process enrollment 
applications in a timely manner.
    Comment: Several commenters recommended that we establish a 5-year 
cycle rather than a 3-year cycle for revalidation.
    Response: We appreciate these comments and agree that establishing 
a 5-year revalidation cycle rather than a 3-year cycle reduces the 
burden on providers and suppliers. Therefore, we have revised the final 
rule to establish a 5-year revalidation cycle. We believe that 
extending the revalidation cycle by an additional 2 years from our 
proposed approach will lessen the burden on providers and suppliers. 
Moreover, since providers and suppliers are required to update their 
enrollment when changes occur, we believe that we will be able to 
ensure that we maintain correct enrollment information for each 
provider or supplier billing the Medicare program.
    Comment: Several commenters recommend that we describe how 
providers and suppliers would be notified about revalidation.
    Response: We expect that a fee-for-service contractor would notify 
the provider or supplier in writing regarding the need to revalidate 
its enrollment information. Once notified, providers and suppliers 
would be expected to review, update and submit any changes and 
supporting documentation regarding the enrollment record within 60 
days. If no changes have occurred, a provider or supplier would simply 
sign, date, and return the revalidation application.
    Comment: Several commenters raised concerns about our contractors' 
ability to review and validate enrollment applications for the large 
numbers of physicians who are currently billing Medicare but who have 
not completed an enrollment application.
    Response: To mitigate any potential processing delays, we will 
phase-in the enrollment of physicians along with all other providers 
and suppliers who are currently billing Medicare but who have not 
completed and submitted an enrollment application. Moreover, we will 
instruct our contractors to work closely with individual providers and 
suppliers, provider organizations, and State and local associations to 
ensure that enrollment process is implemented in an efficient manner. 
We will closely monitor fee-for-service contractor workloads and 
processing times to ensure that all enrollment applications are 
processed in a timely manner.
    Comment: Several commenters recommended that we allow providers and 
suppliers 90 days to respond to contractor's initial or revalidation 
request.
    Response: We believe that provider and suppliers can routinely 
respond to an initial or revalidation request within 60 days. This is 
especially true for those providers and suppliers who submit changes to 
the fee-for-service contractor as they occur. For those providers or 
suppliers needing additional time to respond to a contractor's request 
for enrollment data, providers and suppliers should notify the 
contractor that additional time is needed. However, if a provider or 
supplier fails to submit the requested application and supporting 
documentation in a timely manner, contractors will need to make a 
decision regarding revocation.
    Comment: Several commenters recommended that we not conduct 
unannounced site visits to verify enrollment information.
    Response: We believe that unannounced site visits are a useful tool 
to ensure that providers and suppliers are meeting their enrollment 
requirements. Therefore, we will continue this practice to verify 
enrollment information.
    Comment: Several commenters recommended that we exclude certain 
provider types (that is, SNFs) from the revalidation site visit 
process.
    Response: While we understand these commenters' concerns, we 
believe that a revalidation site visit is a useful tool to ensure that 
providers and suppliers maintain their practice location and other 
enrollment information on file with Medicare. In addition, we have not 
been able to develop an objective measure that would allow us to 
exclude some provider types from revalidation, but not others. 
Therefore, we will continue to use site visits in the revalidation 
process as we deem appropriate.
    Comment: One commenter recommended that a negative finding from a 
site visit not be used as a basis to immediately deny or revoke 
enrollment in the Medicare program.
    Response: We will consider that nature of the negative finding in 
determining whether to deny or revoke enrollment. We will use the 
criteria established in Sec.  424.515(c)(1) and (2) to conduct on-site 
inspections. In addition, if it is determined to deny or revoke 
enrollment, we will ensure that every provider and supplier is afforded 
the appropriate appeals rights. We believe that providers and suppliers 
must meet the enrollment criteria prior to enrollment. Moreover, 
providers and suppliers have an obligation to notify their fee-for-
service contractor in a timely manner regarding any changes in their 
enrollment application. Therefore, we will not adopt this 
recommendation.
    Comment: One commenter recommended that we provide permissive 
exemption from revalidation for providers that can demonstrate a good 
reporting history or multi-facility providers with a well-developed and 
effective reporting system for reporting changes.
    Response: We believe that an exemption process for revalidation is 
not viable because revalidation is a separate process from provider 
survey and certification procedures.
    Comment: One commenter recommended that we establish a process to 
``grandfather'' providers who already have Medicare billing numbers.
    Response: We believe that it is essential that all providers and 
suppliers who are billing the Medicare program furnish complete and 
accurate enrollment information that can be validated to ensure 
compliance with Medicare requirements. Therefore, we will not establish 
a process to ``grandfather'' providers who already have Medicare 
billing numbers.
    Comment: Several commenters recommended that we provide additional 
information about the provider enrollment appeals process.
    Response: We will establish an appeals process for providers and 
suppliers whose applications for enrollment or revalidation of 
enrollment are denied or revoked in a separate proposed regulation.
    Comment: One commenter recommended that all potential suppliers be 
accredited.
    Response: In implementing section 302 of the MMA, we will publish a 
proposed rule that would implement a competitive bidding program for 
suppliers of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS). This proposed rule would also implement new quality 
and accreditation standards for all suppliers

[[Page 20766]]

of DMEPOS items and services, including suppliers who will participate 
in the DMEPOS competitive bidding program. While we are developing a 
competitive bidding program for DMEPOS suppliers, we do not anticipate 
developing a separate accreditation program for other supplier types.
    Comment: Several commenters recommended that we establish provider 
enrollment processing timeliness standards.
    Response: In implementing section 936(a)(2) of the MMA, we expect 
to publish a proposed rule which specifies the time frames in which the 
Medicare fee-for-service contractors are expected to process all 
provider and supplier enrollment applications.
    Comment: Several commenters recommended that we clarify the 
definition of the term, ``managing employee.''
    Response: We believe that the statutory language at section 1126(b) 
of the Act is clear and places no limits on the number of managing 
employees who must be reported. Accordingly, we are not making any 
changes to this definition.
    Comment: Several commenters recommended that we allow physicians to 
revalidate their enrollment in Medicare through the credentialing 
office of a hospital.
    Response: We believe that this approach would result in an increase 
in the administrative burden on most hospitals and thus are unable to 
adopt this approach.
    Comment: One commenter recommended that we remove the surety bond 
section (Section 11) from the CMS 855S application.
    Response: We concur with this recommendation and will remove the 
surety bond section from all versions of the provider enrollment 
application when we update and republish these applications.
    Comment: One commenter stated that it was unclear whether our 
carriers and FIs, or State agencies would conduct provider enrollment 
site visits.
    Response: Medicare carriers and FIs will conduct provider 
enrollment site visits. State agencies and other accrediting bodies 
will continue to conduct the survey and certification of providers 
separately.
    Comment: One commenter recommended that we provide a site visit 
exemption to selected provider groups, which have exhibited compliance 
with all Medicare guidelines and requirements.
    Response: We understand the commenter's concern, but do not believe 
it would be practical to establish an exception policy at this time. We 
expect that our contractors will prioritize the need for site visits 
for both newly enrolling and existing providers and suppliers.
    Comment: One commenter raised concerns about CMS charging user fees 
to pay for costs associated with enrolling in the Medicare program.
    Response: As part of the rulemaking process, we did not propose 
charging a fee to enroll in the Medicare program.
    Comment: One commenter asked that we clarify language contained in 
Sec.  424.530(a)(3) and Sec.  424.535(a)(3) which refers to reporting 
felony convictions.
    Response: We have clarified that we may deny or revoke a provider 
or supplier's billing privileges if the provider or supplier was 
convicted of certain types of felonies as specified in Sec.  
424.530(a)(3) and Sec.  424.535(a)(3) within the 10 years preceding 
enrollment or revalidation of enrollment.
    Comment: Several commenters recommended that we notify providers 
regarding an upcoming revalidation by sending any request via certified 
mail to the authorized representative listed on the enrollment 
application.
    Response: We do not believe that this level of operational detail 
is required in this final rule. We believe that requiring the use of 
certified mail will significantly increase administrative costs for the 
program. Moreover, we believe that we should be able to maintain a 
level of flexibility regarding our notification procedures.
    Comment: One commenter asked that we clarify the distinction 
between enrolling in the Medicare program and establishing and 
maintaining billing privileges. This commenter also asked that we 
provide an example of the circumstances under which a provider would be 
issued an identification number without activating the corresponding 
billing privileges.
    Response: Providers and suppliers are required to enroll in 
Medicare prior to submitting a claim. The enrollment process allows 
Medicare to determine if the provider or supplier meets all applicable 
Federal and State requirements. Once a provider or supplier is enrolled 
in a Medicare program, it can obtain Medicare billing privileges. These 
privileges continue as long as the provider or supplier continues to 
meet applicable Federal and State requirements. Therefore, we have 
clarified in this final rule the requirements to enroll or remain 
enrolled in the Medicare program.
    Comment: One commenter recommended that we continue the current 
practice of enrolling providers subject to certification surveys as of 
the date of their initial survey.
    Response: We appreciate this comment and have clarified that we are 
maintaining the effective dates for reimbursement that are specified in 
Sec.  489.13 for providers and suppliers requiring State survey or 
certification or accreditation, Sec.  424.5 and Sec.  424.44 for 
nonsurveyed or certified/accredited suppliers, and Sec.  424.57 and 
section 1834(j)(1)(A) of the Act for DMEPOS suppliers.
    Comment: One commenter stated that the proposed rule blurs the 
concepts of ``routine revalidation'' with ``non-routine revalidation'' 
and that we should clarify these concepts.
    Response: We appreciate this comment and have clarified the 
concepts of ``revalidation'' and ``off cycle revalidation.'' We believe 
that revalidation activities would occur on a scheduled basis (for 
example, every 5 years) while off cycle revalidations would occur when 
warranted to assess and confirm the validity of the enrollment 
information provided to CMS.
    Comment: One commenter suggested that the enrollment process be 
national in scope where a provider or supplier need only complete one 
application to be able to render services anywhere in the country 
without completing another application.
    Response: While we have made every effort to reduce the paperwork 
burden associated with enrolling in the Medicare program, we can not 
use a single enrollment application because of the large number of 
different provider and supplier types and specialties, each with 
different eligibility requirements for enrollment in the Medicare 
program. This avenue was attempted in the past and was unsuccessful. 
With the release of the new Medicare enrollment applications, we have 
simplified the enrollment process and combined forms and or sections of 
information collection where possible. CMS will further simplify multi-
State enrollment burdens when the web based forms and submission 
process are implemented. Thus, it is not administratively feasible to 
adopt this comment.
    Comment: One commenter asked that we clarify that this rule only 
applies when a provider or supplier is billing for ``Medicare-covered'' 
services or supplies.
    Response: We agree with this commenter and have added the phrase 
``Medicare covered services or supplies'' to Sec.  424.500.

[[Page 20767]]

    Comment: One commenter requested that a change in the ``control of 
an entity'' not be held to the same stringent requirements as a change 
in ``ownership'' of an entity.
    Response: Because past history has shown this to be a problematic 
enrollment reporting area, we are not able to adopt this request.
    Comment: One commenter asked that we allow flexibility on the 
timeframe to submit additional information when it is missing from the 
enrollment application.
    Response: To assist providers and suppliers in determining what 
documentation must be submitted with an enrollment application, we are 
revising section 17 of the provider/supplier enrollment application to 
clarify what documents must be submitted with the enrollment 
application. The fee-for-service contractor will notify a provider or 
supplier regarding any missing documentation. In addition, Sec.  
424.525 states that a contractor may reject an applicant's enrollment 
application if it fails to furnish all required supporting 
documentation within 60 calendar days of submitting the enrollment 
application. Contractors may extend the 60-day period if the contractor 
determines that the provider or supplier is actively working with CMS 
to resolve any outstanding issues.
    Comment: One commenter stated that current regulations in Sec.  489 
do not allow termination of a provider agreement if billing privileges 
are terminated.
    Response: We are changing the provisions at Sec.  489 which allow 
these terminations to occur.
    Comment: One commenter asked that the requirements for reporting a 
change of ownership be removed or lessened.
    Response: In order to maintain correct provider and supplier 
enrollment information, we believe that it is reasonable for providers 
to provide information regarding changes in ownership in a timely 
manner.
    Comment: A commenter suggested that we could reduce some 
administrative burden if we specified that the payment liability 
provisions only apply after all appeals processes have been rendered.
    Response: We appreciate this comment, but are unable to adopt this 
suggestion because we must comply with the limitation on patient 
liability as specified in section 1834(j)(4) of the Act.
    Comment: One commenter suggested we only revalidate providers that 
are proven to be a potential threat to the Medicare program or the 
beneficiary.
    Response: We will consider this issue in future rulemaking. 
Initially, we believe that it is essential that we obtain valid 
enrollment information on all providers and suppliers who have a 
business relationship with the Medicare program.

IV. Provisions of the Final Rule

    We are adopting the provisions of the proposed rule as final with 
the following changes.
    Section 936(a)(2) of the MMA established section 1866(j)(1)(A) of 
the Act which requires that the Secretary establish a process by 
regulation for the enrollment of providers and suppliers. Therefore, we 
refer to this authority to collect enrollment information.
    In Sec.  424.530 and Sec.  424.535, we revise the regulation text 
to include the authority given to us in sections 1128A and 1842 of the 
Act regarding exclusion authorities.
    In Sec.  424.505, we clarify that we will maintain our practice 
that all providers and suppliers have a valid Medicare billing number 
at the time that a claim is being submitted for Medicare covered items 
or services.
    Under section 1834 (j)(1)(A) of the Act, DMEPOS suppliers must have 
an effective Medicare billing number for the date an item or service 
was rendered in order to receive payment for Medicare covered items or 
services.
    Under longstanding policy and operating procedures any claim 
submitted with an inactive billing number is incomplete and cannot be 
processed for payment. Providers and suppliers who are not enrolled in 
the Medicare program must adhere to the mandatory claims submission 
rules specified in section 1848(g)(4) of the Act and Sec.  424.32(a)(1) 
(Basic requirements for all claims). In addition, a claim submitted 
without a valid Medicare billing number would not be considered a valid 
claim and will be rejected. If the mandatory claims submission 
requirements are not met, the provider or supplier may have sanctions 
imposed as outlined in section 1848(g)(4) of the Act for failure to 
file a claim as required.
    We are adopting a position that the issuance of an identification 
number, including a NPI, to a provider or supplier does not 
automatically convey the privilege to bill Medicare. There must be a 
corresponding approval of the provider or supplier as meeting all 
Federal and State requirements to bill Medicare for the identification 
number to be an approved and active Medicare billing number. The NPI, 
as defined in 45 CFR part 162, subpart D, will be the Medicare billing 
number upon its adoption the Medicare program.
    In Sec.  424.510, we adopted language to clarify that the current 
policy remains the same and that a provider or supplier must submit to 
us the applicable provider/supplier enrollment application based on the 
type of provider or supplier enrolling. Currently, the applicable 
enrollment applications are identified as follows:
     CMS 855A--Medicare Enrollment Application for 
Institutional Providers.
     CMS 855B--Medicare Enrollment Application for clinics, 
Group Practices and Certain Other Suppliers.
     CMS 855I--Medicare Enrollment Application for Physicians 
and Non-Physician Practitioners.
     CMS 855R--Medicare Enrollment Application for Reassignment 
of Medicare Benefits.
     CMS 855S--Medicare Enrollment Application for Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
Suppliers.
     The appropriate CMS Internet web based electronic version 
of the provider/supplier enrollment applications.


    Note:  CMS is currently developing these electronic enrollment 
applications and expects it to be available in 2007.


    The applicable enrollment application is used to gather information 
on providers and suppliers for the purposes of authorizing billing 
numbers and establishing eligibility to furnish services to Medicare 
beneficiaries. The information submitted also allows for the unique 
identification of the providers and suppliers for the purpose of 
enumeration and payment. The CMS 855 forms have been used since 1996 
and were approved by OMB for these purposes (OMB approval number 0938-
0685).
    At Sec.  424.510(d)(2), we are adopting the provisions which 
requires that a provider or supplier submit the following on the 
appropriate enrollment application:
     Complete, accurate and truthful responses to all 
information requested within each section as applicable to the provider 
or supplier type.
     All documentation required by CMS under this or other 
statutory or regulatory authority, or under the Paperwork Reduction Act 
of 1995 to uniquely identify the provider or supplier (for example, an 
NPI, a SSN or a TIN). We are including the NPI because it closely 
resembles other types of information contained in the proposed rule. 
Further, CMS will not be able to finalize the enrollment review process 
after May 23, 2007, unless the provider or supplier furnishes an NPI.
     All documentation required by us under this or other 
statutory or

[[Page 20768]]

regulatory authority, or under the Paperwork Reduction Act of 1995 to 
establish the provider or supplier's eligibility to furnish items or 
services to beneficiaries in the Medicare program (for example, a 
medical license or business license).
    In Sec.  424.515, we are adopting a 5-year revalidation cycle. In 
adopting a 5-year revalidation cycle, we believe that we can address 
the concerns raised during the public comment process about fee-for-
service contractor's ability to continue to process new enrollments 
while also conducting revalidation activities. Moreover, we believe 
that extending the revalidation cycle from 3 years to 5 years will 
significantly decrease the burden on providers and suppliers.
    We will contact all providers and suppliers directly as to when 
their 5-year revalidation cycle starts beginning with those providers 
and suppliers currently enrolled in the Medicare program but that have 
not submitted a completed enrollment application. The revalidation 
process would ensure that we collect and maintain complete and current 
information on all Medicare providers and suppliers and ensure 
continued compliance with Medicare requirements. In addition, this 
process further ensures that Medicare beneficiaries are receiving items 
or services furnished only by legitimate providers and suppliers, and 
strengthens our ability to protect the Medicare Trust Funds.
    We will reserve the right to perform off cycle (non-routine) 
revalidations and request a provider or supplier to recertify as to the 
accuracy of the enrollment information when warranted to assess and 
confirm the validity of the enrollment information. Off cycle 
revalidations may be triggered as a result of information indicating 
local health care fraud problems, national initiatives, fraud 
investigations, complaints from beneficiaries, or other reasons that 
cause us to question the integrity of the provider or supplier in its 
relationship with the Medicare program. Like routine revalidations, off 
cycle revalidations may or may not be accompanied by site visits.
    In Sec.  424.520(b), we are adopting a policy that individuals and 
organizations are responsible for updating their enrollment information 
to reflect any changes in a timely manner. We would define timely as 
meaning within 90 days, with the exception of DMEPOS suppliers which 
are currently required to report changes of enrollment information 
within 30 days, or a change in ownership or control of any provider or 
supplier which also must be reported within 30 days. Failure to do so 
may result in deactivation or even revocation of their billing 
privileges.
    In Sec.  424.525, we are adopting a position that if a provider or 
supplier enrolling in the Medicare program for the first time fails to 
furnish complete information on the enrollment application, or fails to 
furnish missing information or any necessary supporting documentation 
as required by CMS under this or other statutory or regulatory 
authority within 60 calendar days of our request to furnish the 
information, we would reject the provider or supplier's enrollment 
application. Rejection would not occur if the provider or supplier is 
actively communicating with us to resolve any issues regardless of any 
timeframes.
    Upon notification of a rejected enrollment application, if the 
provider or supplier still wishes to enroll in the Medicare program, 
they must begin the enrollment process over by completing and 
submitting a new enrollment application and all applicable 
documentation. Since CMS cannot process an incomplete enrollment 
application, we must reject the application. Further, we clarify that 
applications that are rejected are not afforded appeal rights.
    In Sec.  424.530(a)(2) and Sec.  424.535(a)(2), we clarify that no 
payments will be made to any providers or suppliers who are excluded 
from participation in the Medicare program under authorities found in 
sections 1128, 1128A, 1156, 1862, 1867, and 1892 of the Act, or who are 
debarred, suspended or otherwise excluded as authorized by the FASA. 
This includes any individual, entity, or any provider or supplier that 
arranges or contracts with (by employment or otherwise) an individual 
or entity that the provider or supplier knows or should know is 
excluded from participation in a Federal health care program for the 
provision of items or services for which payment may be made under such 
a program (section 1128A(a)(6) of the Act), and any provider or 
supplier that has been debarred, suspended, or otherwise excluded from 
participation in any other Executive Branch procurement or 
nonprocurement programs or activity (FASA, section 2455).
    In Sec.  424.530(a)(3), we are adopting the position that we may 
deny enrollment in the Medicare program if the provider or supplier, or 
any owner of the provider or supplier has been convicted of a Federal 
or State felony offense that we determine to be detrimental to the best 
interests of the Medicare program or its beneficiaries. This authority 
is afforded to us in many of the HIPAA fraud and abuse provisions and 
section 4302 of the BBA. In making assessments, we are stating that any 
felony convictions within the last 10 years preceding enrollment or 
revalidation of enrollment. In addition, we would consider the severity 
of the underlying offense.
    Felonies that we determine to be detrimental to the best interests 
of the Medicare program or its beneficiaries include the following:
     Within the last 10 years preceding enrollment or 
revalidation of enrollment, crimes against persons, such as murder, 
kidnapping, rape, assault and battery, robbery, and other similar 
crimes for which the individual was convicted, including guilty pleas 
and adjudicated pretrial diversions. We believe it is reasonable for 
the Medicare program to question the ability of the individual or 
entity with such a history to respect the life and property of program 
beneficiaries.
     Within the last 10 years preceding enrollment or 
revalidation of enrollment, financial crimes, such as extortion, 
embezzlement, income tax evasion, making false statements, insurance 
fraud and other similar crimes for which the individual was convicted, 
including guilty pleas and adjudicated pretrial diversions. We believe 
it is reasonable for the Medicare program to question the honesty and 
integrity of the individual or entity with such a history in providing 
services and claiming payment under the Medicare program.
     Within the last 10 years preceding enrollment or 
revalidation of enrollment, any felony that placed the Medicare program 
or its beneficiaries at immediate risk, such as a malpractice suit that 
resulted in a conviction of criminal neglect or misconduct.
     Any felonies referred to in section 1128 of the Act.
    In Sec.  424.530(a)(5), we are adopting a position that we may deny 
enrollment when, upon on-site review or other reliable evidence, we 
determine that the provider or supplier is not operational to furnish 
Medicare covered items or services or is not meeting these Medicare 
enrollment requirements or the requirements set forth in the enrollment 
application.
    As outlined in Sec.  424.530(b), if the denied provider or supplier 
appeals the decision, and the denial is upheld, that provider or 
supplier may submit a new enrollment application after we notify it 
that the original determination was upheld. If the provider or supplier 
did not appeal the determination, it may submit a new enrollment 
application

[[Page 20769]]

when the time frame for appeal rights has lapsed. We are adopting this 
latter requirement to prevent administrative difficulties that might 
result in processing two enrollment forms if a new one is submitted 
during the time period when the provider or supplier may appeal an 
initial denial.
    In Sec.  424.535, we are also adopting a position that we may 
revoke a provider or supplier's billing privileges if we find:
     The provider or supplier, any owner, managing employee, 
authorized or delegated official, supervising physician or other health 
care personnel who must be reported on the enrollment application, of 
the provider or supplier, becomes excluded from the Medicare, Medicaid 
or any other Federal health care programs, as defined in Sec.  1001.2, 
or is debarred, suspended or otherwise excluded from participating in 
any other Federal health care program or agency.
     The provider or supplier, or any owner of the provider or 
supplier, is convicted of a Federal or State felony offense that we 
determine to be detrimental to the best interests of the program as 
outlined in ``Denial of Enrollment'' above.
     The provider or supplier certified as ``true'' 
deliberately submitted false or misleading information in order to 
enroll or maintain enrollment in the Medicare program. (Offenders may 
be subject to criminal or civil prosecution, in accordance with current 
laws and regulations).
     Upon on-site review, we determine that the provider or 
supplier is no longer operational to furnish Medicare covered items or 
services.
     The provider or supplier fails to furnish complete and 
accurate information on the enrollment application and any applicable 
documentation within 60 calendar days of our notice to recertify its 
enrollment information.
     The provider or supplier knowingly sells to or allows 
another individual or entity to use its billing number.
    In addition to the revocation of the provider's or supplier's 
billing privileges, we will require at Sec.  424.535(b) that any 
provider agreement or supplier agreement in effect at the time of 
revocation would also be terminated effective with the date of 
revocation. We do not believe it would be prudent for us to maintain an 
active provider agreement for a provider or supplier whose business 
relationship with Medicare was adverse enough as to cause the 
revocation of its billing privileges. Section 1866(b)(2)(A) of the Act 
specifies that the Secretary may terminate a provider agreement after 
the Secretary has determined that the provider fails to comply 
substantially with the provisions of title XVIII. We proposed to amend 
Sec.  489.53 and Sec.  498.3 to reflect this proposal.
    In new Sec.  424.535(c), we require upon notification of the 
revocation of its billing privileges that the provider or supplier must 
complete and submit a new enrollment application as a new provider or 
supplier and applicable documentation. Providers must be resurveyed or 
recertified by the State survey agency as a new provider and must 
establish a new provider agreement with our Regional Office.
    If the billing privileges are revoked due to the adverse activity 
of an individual or organization other than the provider or supplier, 
the revocation may be reversed if the provider or supplier terminates 
its business relationship with the individual or organization that was 
responsible for the revocation within 30 days.
    As with a denial of Medicare enrollment, revocations would impact 
the provider or supplier on a national scale. In Sec.  424.535(e), we 
added language to clarify that if a provider or supplier's billing 
privileges are revoked, we would review all other related Medicare 
enrollment files and practice locations that the revoked provider or 
supplier has an association with (for example, as an owner or managing 
employee of another enrolled organization, or member of a group 
practice) to determine if the initial revocation warrants additional 
revocations of the other associated Medicare providers or suppliers.
    In Sec.  424.535(f) we added language that the revocation becomes 
effective within 30 days of the initial revocation notification. In 
Sec.  424.540, we add that to continue to deactivate a provider or 
supplier's Medicare billing number if no Medicare claims are submitted 
for 12 consecutive months unless current policy or regulations specify 
otherwise for specific provider or supplier types. The 12 month period 
will begin the 1st day of the 1st month without a claims submission 
through the last day of the 12th month without a submitted claim.
    We are also adopting a position to require deactivation of a 
billing number if we discover changes to the information provided on 
the provider or supplier's enrollment application that were not 
reported within 90 days of the change. This includes, but is not 
limited to, changes to billing services, a change in the practice 
location, or a change of any managing employee. A change in ownership 
or control must be reported within 30 calendar days.
    Deactivation of Medicare billing privileges is considered an 
interim action to protect the provider or supplier from misuse of their 
billing number and to also protect the Medicare Trust Funds from 
unnecessary overpayments. The deactivation of a billing number would 
not have any effect on a provider or supplier's participation agreement 
or conditions of participation.
    In Sec.  424.540(b), we added language to clarify the requirements 
of reactivation of billing privileges when a provider or supplier's 
billing number is deactivated, but can be restored upon the submission 
of updated or recertified information. We are requiring that a provider 
or supplier whose billing number has been deactivated for any reason 
other than nonsubmission of a claim for 12 months and who wants to 
reactivate its Medicare billing number must complete and submit a new 
enrollment application as appropriate. Those providers and suppliers 
whose billing number are deactivated after nonsubmission of a claim 
must recertify that the enrollment information currently on file with 
Medicare is correct before the claim would be paid. In addition, the 
provider or supplier must meet all current Medicare requirements in 
place at the time of the reactivation. The provider or supplier must 
also be prepared to submit a valid claim or risk subsequent 
deactivation of their billing number. Once notified, we would give all 
reactivations of Medicare billing numbers priority handling to ensure 
expedient payment of claims. Reactivation of a Medicare billing number 
would not require resurvey or certification by State agency, or the 
establishment of a new provider agreement.
    In Sec.  424.545(a), we clarify that payment will not be made 
during the appeals process.
    In Sec.  424.545(c),we require that the provider or supplier be 
able to demonstrate that they meet the enrollment requirements and be 
able to make available any documents and records that support the 
provisions of this regulation and the Medicare enrollment application.
    In Sec.  424.550, we state that a provider or supplier would be 
prohibited from selling its Medicare billing number to any individual 
or entity, or allowing another individual or entity to use its Medicare 
billing number. Similarly, we would prohibit a provider or supplier 
from transferring its Medicare billing privileges to any individual or 
entity, except during a change of ownership, as stated below. A 
provider or supplier does not have independent authority to

[[Page 20770]]

sell or transfer any billing number issued or the billing privileges 
granted with the billing number assigned.
    We are adopting this policy because only CMS and its agents can 
enroll providers and suppliers and grant Medicare billing privileges. 
These numbers are issued only after the information about the provider 
or supplier collected on the applicable enrollment application is 
verified. Because it is used to uniquely identify a provider or 
supplier, the Medicare billing number we issue is solely for use by the 
specific provider or supplier to whom it was issued.
    In the case of a provider or supplier undergoing a change of 
ownership as described in part 489 subpart A, we would require at Sec.  
424.550(b) that an enrollment application be completed and submitted by 
both the current owner and new owner before the completion of the 
ownership change. Failure of the current owner to submit an enrollment 
application prior to the change of ownership may result in sanctions 
and penalties, after the date of ownership change, in accordance with 
Sec.  424.520, Sec.  424.540, and Sec.  489.53. Failure of the new 
owner to submit the enrollment application prior to the change of 
ownership may result in the deactivation of the Medicare billing 
privileges until the enrollment application has been submitted.
    We may deactivate a Medicare billing number at any time before 
final transference of the provider agreement to the new owner. This may 
occur as a result of the submission of an enrollment application with 
material omissions, or preliminary information received or determined 
by us that makes us question whether the new owner would ultimately be 
granted a final transference of the provider agreement. This allows us 
the right to ensure that billing privileges are given only to a new 
owner for which we have adequate information to, at a minimum, 
determine that the new owner should have billing privileges prior to 
the complete validation of their enrollment application and the 
transfer of the provider agreement.
    We understand that not all enrollment information is available 
before the change of ownership. We will work with the new owner(s) to 
ensure a seamless transition, but it is the provider's or supplier's 
responsibility to report this and any other changes to us to prevent us 
from imposing any adverse action against it.
    For those providers and suppliers not covered by part 489, and 
change in the ownership of control of the provider or supplier must be 
reported on the enrollment application within 30 days of the change as 
noted in Sec.  424.540(a)(2). Generally, a change of ownership that 
also changes the tax identification number would require a new 
enrollment application from the new owner.
    In Sec.  424.555, we clarify that no payment may be made for 
otherwise covered items or services furnished to a Medicare beneficiary 
by a provider or supplier whose billing privileges were deactivated or 
revoked. The Medicare beneficiary would have no financial 
responsibility for this type of expense, and the provider or supplier 
must, after all appeal processes have been exhausted and if the billing 
privileges have not been restored, refund on a timely basis any amounts 
collected from the beneficiary for those otherwise covered items or 
services.
    We are adopting these provisions because a provider or supplier who 
fails to provide valid enrollment information, or who is not a valid 
provider or supplier type under the Medicare program, cannot be 
verified as a legitimate provider or supplier for purposes of this 
rule. Claims or bills submitted for otherwise Medicare covered items or 
services must have an active Medicare billing number. Claims or bills 
submitted by a provider or supplier who is not properly enrolled, and 
does not have an active Medicare billing number, would be considered 
incomplete and would be returned. The provider or supplier would then 
be in violation of the mandatory claims submission requirements and 
could be fined for each occurrence as set forth in Section 1848(g)(4) 
of the Act. An incomplete claim returned for this reason would not 
afford appeal rights for the provider or supplier. However, as 
described earlier, a provider or supplier may appeal a denial or 
revocation of enrollment in accordance with regulations elsewhere in 
this subpart.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-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 Paperwork Reduction Act 
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.

Section 424.510 Requirements for Obtaining a Billing Number and 
Medicare Billing Privileges

    To enroll in the Medicare program and obtain and activate a 
Medicare provider or supplier billing number, Sec.  424.510(a) requires 
a provider or supplier to complete and submit an enrollment application 
to us, demonstrating that the provider or supplier meets all of the 
requirements set forth in this section. The burden associated with 
these requirements are currently captured in form CMS 855 (OMB Approval 
Number 0938-0685) and shown below in Table 1.

            Table 1.--Current Estimated Hours for Completion of CMS 855 Forms for Initial Enrollment
----------------------------------------------------------------------------------------------------------------
                                                     Estimated time for      Total number of     Total cost in
        CMS form  No.           Estimated number       completion per           hours for           dollars
                                 of respondents          respondent             completion         (millions)
----------------------------------------------------------------------------------------------------------------
855A.........................              5,000  6 hours.................             30,000               $4.5
855B.........................             35,000  6 hours.................            210,000               31.5
855I.........................             75,000  4 hours.................            300,000                  6
855R.........................            100,000  15 minutes..............             25,000                0.5
855S.........................             16,000  6 hours.................             96,000               14.4
----------------------------------------------------------------------------------------------------------------
Total Estimated Hourly and Financial Burden...............................            661,000               56.9
----------------------------------------------------------------------------------------------------------------


[[Page 20771]]

    The estimated number of respondents is based on FY 2004 Medicare 
contractor workload reports. The cost in dollars is based on hourly 
salaries for applicable staff to complete the applications.
    Section 424.510(a)(7) states that we reserve the right to perform 
on-site inspections of a provider or supplier to verify and ensure 
validity of the information submitted to us or our agents and to 
determine compliance with Medicare requirements. We intend to conduct 
on-site visits of all new suppliers of DMEPOS before they can enroll in 
the Medicare program. The burden associated with these requirements are 
currently captured and approved in form HCFA-R-263 (OMB Approval Number 
0938-0749).
    We also intend to conduct approximately 500 on-site visits to 
Community Mental Health Centers. The burden associated with these 
requirements are currently captured and approved in form HCFA-R-273 OMB 
Approval Number 0938-0770). In addition, we intend to conduct 
approximately 2,800 visits to IDTFs on an annual basis. We will seek 
OMB approval for these visits. The burden associated with this 
requirement is the time and effort necessary for a facility to provide 
documentation to verify information provided on their CMS 855 form and 
to demonstrate that they meet other necessary Medicare requirements and 
regulations.

                                                       Table 2.--Estimated Annual Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Average  burden
                            CFR sections                              Annual  number     Frequency       per  reponse    Annual burden     Annual cost
                                                                      of  responses                        (hours)          (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
424.510(d).........................................................           2,800                1                4           11,200               $0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Since these site visits are unannounced and performed to ensure 
proper physical location, equipment, and personnel to meet Medicare 
requirements, we do not expect the provider or supplier to incur any 
financial burden.
    We may also conduct on-site visits of providers or suppliers based 
on any information that leads us or our agents to believe that an 
administrative action, investigation, or audit is warranted. 
Information collected under these situations is exempt from the PRA, as 
stipulated in 5 CFR 1320.4.

Section 424.515 Requirements for Reporting Changes and Updates To, and 
the Periodic Revalidation of, Medicare Enrollment Information

    A provider or supplier must recertify for revalidation its 
enrollment information once every 5 years. Section 424.515(b) states 
that within 60 calendar days of our notice to recertify their 
enrollment information for revalidation, a provider or supplier must 
submit any new or revised form CMS 855 information and documentation 
necessary to demonstrate that they meet the requirements set forth in 
this section.

                                                       Table 3.--Estimated Annual Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Average  burden
                            CFR sections                              Annual  number     Frequency       per  reponse    Annual burden     Annual cost
                                                                      of  responses                       (minutes)         (hours)         (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
424.515(b).........................................................         232,000              * *               90          348,000           $23.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
** Where frequency is once every 5 years. (1.16 million providers and suppliers/5 years x 90 minutes/60 minutes.)

    The burden hours shown above are for the standard 5-year reporting 
period. We are exploring various options on ways of minimizing the 
burden on providers and suppliers during the process of revalidating 
their enrollment information.
    The estimated cost is based on an average cost of $100 per 
application per provider to review and return.

Section 424.520 Additional Provider and Supplier Requirements for 
Enrolling and Maintaining Active Enrollment Status in the Medicare 
Program

    Following enrollment and periodic recertification of enrollment 
information, a provider or supplier must report to us any changes to 
the information furnished on the CMS 855 or supporting documentation 
within 90 calendar days of the change.

                                                       Table 4.--Estimated Annual Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Average  burden
                            CFR section                               Annual  number     Frequency      per  response    Annual burden     Annual cost
                                                                      of  responses                        (hours)          (hours)         (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
424.20.............................................................         100,000                1                1          100,000              $10
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 20772]]

Section 424.525 Rejection of a Provider or Supplier's Medicare 
Enrollment Application

    We will reject a provider or supplier's enrollment application if 
the provider or supplier does not furnish missing or necessary 
information and documentation to us within 60 calendar days of a 
request. We believe that the burden associated with this requirement is 
captured in Sec.  424.515, as we will merely be seeking the information 
initially requested in the CMS 855.
    Section 424.525(c) states that upon notification of a rejected CMS 
855, the provider or supplier must complete and resubmit a new 
enrollment application and all applicable documentation to resume the 
enrollment process and obtain a Medicare billing number and billing 
privileges.

                                                       Table 5.--Estimated Annual Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Average  burden
                            CFR section                               Annual  number     Frequency      per  response    Annual burden     Annual cost
                                                                      of  responses                         (min)           (hours)         (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
424.525(b).........................................................           5,000                1               90            7,500             $0.5
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The annual dollar cost is based on $100 per respondent to update 
and resubmit a previously submitted enrollment application.

Section 424.535 Revocation of Enrollment and Billing Privileges From 
the Medicare Program

    Section 424.535(c) states that upon notification of the revocation 
of its billing privileges, if the provider or supplier seeks to re-
establish enrollment in the Medicare program it must re-enroll in the 
Medicare program through the completion and submission of a new CMS 855 
and applicable documentation.

                                                       Table 6.--Estimated Annual Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Average  burden
                            CFR section                               Annual  number     Frequency      per  response    Annual burden     Annual cost
                                                                      of  responses                        (hours)          (hours)         (millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
424.535(b).........................................................             200                1                6            1,200            $0.12
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The annual dollar cost is based on $600 per respondent to re-enroll 
in the Medicare program.
    Providers must also be resurveyed or recertified by the State 
Survey Agency and must establish a new provider agreement with our 
Regional Office. The burden associated with the survey and 
certification requirement is exempt from the PRA, as provided in 
section 4204(c) of COBRA 87 (Pub. L. 100-203), as amended by the 
Medicare Catastrophic Coverage Act of 1988 (Pub. L. 100-360). The 
burden associated with the requirement to establish a new provider 
agreement (Form HCFA-460) is currently approved under OMB Approval 
Number 0938-0373.

Section 424.540 Deactivation of Medicare Billing Privileges

    Section 424.540(a)(1) states that if no Medicare claims are 
submitted for 12 consecutive calendar months we will deactivate a 
provider or supplier's Medicare billing number. The provider or 
supplier must complete and submit an enrollment application for 
validation to reactivate its Medicare billing number and billing 
privileges.

                                                       Table 7.--Estimated Annual Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Average  burden
                            CFR section                               Annual  number     Frequency      per  response    Annual burden     Annual cost
                                                                      of  responses                         (min)           (hours)
--------------------------------------------------------------------------------------------------------------------------------------------------------
424.540(a)(1)......................................................            1200                1               90            1,800         $120,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The annual cost is based on $100 per respondent to review and 
recertify via signature their previously submitted enrollment 
application/information.
    Table 8 shows the total estimated hourly and financial burden for 
all requirements outlined and proposed in this rule.

                      Table 8.--Estimated Hourly and Financial Burden for All Requirements
----------------------------------------------------------------------------------------------------------------
                                                                                 Annual burden
                         CFR section                            Annual  number       hours         Annual cost
                                                                of  responses      (millions)
----------------------------------------------------------------------------------------------------------------
424.500......................................................         572,200             1.13           $90.84
----------------------------------------------------------------------------------------------------------------


[[Page 20773]]

    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements in Sec.  424.510, Sec.  
424.515, Sec.  424.520, Sec.  424.525, Sec.  424.535, and Sec.  424.540 
and related forms in the addendum. These requirements are not effective 
until they have been approved by OMB.

VI. Regulatory Impact Analysis

    We have examined the impacts of this final rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandate 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 one 
year). This final rule will establish in regulations specific provider 
and supplier initial enrollment procedures and the periodic 
revalidation of eligibility. It is not expected to have an impact that 
will meet the threshold criteria to be considered economically 
significant.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For the purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or having 
revenues of $6 million to $29 million in any 1 year. Because of the 
scope of this final rule, all small entities that participate in the 
Medicare program are considered providers and suppliers and will be 
affected, but we do not expect that effect to be of a significant 
nature. As we show in section B of this impact analysis, the annual 
burden on providers and suppliers for completing the CMS 855 forms will 
not rise to the level of a significant burden.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. This final rule does not 
significantly impact small rural hospitals. As noted above, there is a 
minimum amount of time needed to gather data and provide the 
information requested on the enrollment application when initially 
enrolling or when resubmitting enrollment information to obtain and 
maintain a Medicare billing number. We are not preparing a rural impact 
statement since we have determined, and certify, that we do not expect 
this rule to impose any additional burden or otherwise significantly 
impact the operations of a substantial number of small rural hospitals. 
By default, due to their smaller size, the burden to small rural 
hospitals will actually be less than the average provider.
    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, update annually for inflation. That threshold 
level is currently approximately $120 million. This final rule has no 
consequential adverse impact on State, local, or tribal governments. 
This final rule may reduce some State burdens since they will no longer 
certify providers that are not qualified to participate in the Medicare 
program. The impact on the private sector is well below the threshold.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues 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. This final rule has no substantial direct requirement 
costs or consequential adverse impact on State or local governments. 
This final rule will actually reduce some State burdens since they will 
no longer certify providers that are not qualified to participate in 
the Medicare program.
    The following analysis, together with the rest of this preamble, 
explains the rationale, purpose, and alternatives considered in the 
final rule. This is an administrative initiative that may result in 
Medicare program savings but at this time those savings are 
inestimable. We believe the probable costs providers or suppliers will 
incur as a result of this rule to be negligible.

A. Rationale, Purpose, and Alternatives Considered

    We are responsible for protecting the Medicare Trust Funds by 
ensuring that unqualified, fraudulent, or excluded providers and 
suppliers do not bill the Medicare program. Past experience with a 
number of program integrity efforts has identified that granting 
billing privileges to entities that do not exercise sound business 
practices can result in uncollectible overpayments. The ease of 
obtaining a billing number in the past has paved the way for 
unscrupulous businesses to defraud the government deliberately by 
billing for items or services never furnished or furnished at inflated 
prices.
    The provisions of this final rule supplement, but do not replace or 
nullify, existing regulations concerning the establishment of provider 
or supplier agreements, the issuance of provider or supplier billing 
numbers, and payment for Medicare covered items or services to eligible 
providers and suppliers.
    Basically, this final rule consolidates current regulations found 
throughout the Code of Federal Regulations and more clearly defines 
what Medicare expects from providers and suppliers furnishing items or 
rendering services to the Medicare beneficiaries. We expect this final 
rule to ensure that the Medicare program has adequate information on 
those who seek to bill the program for items or services. Furthermore, 
it assures us that information will be periodically updated and 
reviewed. We believe that establishing the foundation for a sound 
business relationship with providers and suppliers will minimize 
billing problems and otherwise protect the Medicare Trust Funds. 
Similarly, we believe it is necessary for us to impose the requirements 
of this regulation on existing providers and suppliers and to establish 
safeguards that enable us to deny enrollment of unqualified providers 
and suppliers, and to revoke the billing privileges of egregious 
offenders whose actions place the Medicare Trust Funds at risk.
    The primary goal of this final rule, through standard enrollment 
requirements and periodic revalidation of the enrollment information, 
is to allow us to collect and maintain (keep current) a unique and 
equal data set on all current and future providers and suppliers that 
are or will bill the Medicare program for items or services rendered to 
our beneficiaries. By achieving this goal, we will be better positioned 
to combat and reduce the number of fraudulent and abusive

[[Page 20774]]

providers and suppliers in the Medicare program, thereby protecting the 
Trust Funds and the Medicare beneficiaries. This rule will also allow 
us to develop, implement, and enforce national provider and supplier 
enrollment procedures to be administered uniformly by all Medicare 
contractors. Over time, we strongly believe that any current burden 
imposed on the providers and suppliers will be greatly diminished 
through the use of computer storage and web-based internet technology.
    Studies performed by our contractors, the GAO, and OIG have shown 
numerous instances of fictitious applicants being granted Medicare 
billing numbers. This final rule will integrate the request for 
enrollment with sufficient data to substantiate an appropriate level of 
performance on the part of a new or continuing business. In prior 
studies, the OIG has found applicants who had submitted applications 
with nonexistent addresses. In some instances, suppliers had no 
inventory of goods to be sold, lacked business licenses, had no 
financial investment, or lacked any experience in the business venture.
    The GAO report (GAO/T-HEHS-94-124), concluded: ``Weaknesses in CMS' 
current provider enrollment process have made Medicare vulnerable to 
dishonest providers. To protect the integrity of Medicare, CMS and its 
contractors must have effective practices for reviewing applicants to 
verify that they are eligible for enrollment in the program, as well as 
the authority to deny or revoke enrollment to those that are not.'' 
This report also concluded that, ``Periodic revalidation of provider 
enrollment data should be a valuable means of ensuring that we have 
current, useful data on active providers and that providers no longer 
eligible to participate in Medicare are dropped from the program.'' 
Therefore, based on the above recommendation and our own successes with 
our 3-year re-enrollment policy currently in effect for DMEPOS 
suppliers, we are expanding this requirement to all providers and 
suppliers billing the Medicare program.
    We have already increased our efforts to seek more uniformity in 
the enrollment process. However, our experience clearly shows that the 
best means for preventing payment errors and, in worst cases, abuse by 
providers and suppliers, is to discourage and prevent their entry into 
the Medicare program through this rule and the authority to deny 
enrollment or revoke their billing number.
    While some entities may perceive our requirements as a barrier to 
their access to serving Medicare beneficiaries, we do not believe that 
bona fide businesses will experience any difficulty in obtaining or 
maintaining a Medicare billing number. We estimate that furnishing the 
requested information will require no more than 6 hours to complete and 
that most businesses should have the information readily available.

B. Rural Hospital Impact Statement

    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. Such an 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. As noted above, there is 
a minimum amount of time needed to gather data and provide the 
information requested on the enrollment application when initially 
enrolling or when resubmitting enrollment information to obtain and 
maintain a Medicare billing number. We are not preparing a rural impact 
statement since we have determined, and certify, that we do not expect 
this rule to impose any additional burden or otherwise significantly 
impact the operations of a substantial number of small rural hospitals. 
By default, due to their smaller size, the burden to small rural 
hospitals will actually be less than the average provider.
    There are currently about 1.2 million providers (hospitals, HHAs, 
rural health clinics, and SNFs) and suppliers (physicians, nurses, 
ambulance companies, clinical laboratories, and durable medical 
equipment suppliers) enrolled in the Medicare program. In addition, 
about 74,000 new providers and suppliers apply to enroll in Medicare 
each year. Listed below is the current estimated annual burden on the 
affected public in both hours and dollars.
1. Estimated Costs for Completion of CMS 855 Forms for Initial 
Enrollment
    Assumptions:
    a. The monetary cost to the respondents is calculated as follows 
based on the following assumptions:
     The CMS 855I and CMS 855R will be completed by clerical 
staff (secretary).
     The CMS 855A, CMS 855B, and CMS 855S will be completed by 
professional staff (attorney or accountant).
    b. Estimated Cost per Form
    The monetary cost to the respondent to complete and submit the 
necessary CMS 855 form is:
     $900 for the CMS 855A, CMS 855B, and CMS 855S
     $80 for the CMS 855I, and
     $5 for the CMS 855R
    c. Estimated Hourly Wage for Staff Completing Forms
    The cost per respondent per form was determined using the following 
wages:
     $20.00 per hour (administrative wage)
     $150.00 per hour (professional wage)

          Table 9.--Current Estimated Hours for Completion of CMS 855 Forms for Initial New Enrollments
----------------------------------------------------------------------------------------------------------------
                                                     Estimated time for      Total number of     Total cost in
        CMS form  No.           Estimated number       completion per           hours for           dollars
                                 of respondents          respondent             completion         (millions)
----------------------------------------------------------------------------------------------------------------
855A.........................              5,000  6 hours.................             30,000               $4.5
855B.........................             35,000  6 hours.................            210,000               31.5
855I.........................             75,000  4 hours.................            300,000                  6
855R.........................            100,000  15 minutes..............             25,000                0.5
855S.........................             16,000  6 hours.................             96,000               14.4
----------------------------------------------------------------------------------------------------------------
Total Estimated Hourly and Financial Burden...............................            661,000               56.9
----------------------------------------------------------------------------------------------------------------


[[Page 20775]]

    The estimated number of respondents is based on FY 2004 Medicare 
contractor workload reports.
    2. Completing Forms to Report Changes to Enrollment Information
    The hourly burden and monetary cost estimate for this activity for 
all forms is--
    100,000 respondents x 1 hour each = 100,000 hours
    Average cost per respondent = $100
    Total cost for all respondents = $10 million
    3. Completing Forms to Recertify Enrollment Information (5 yr 
cycle)
    The hourly burden and monetary cost estimate for this activity for 
all forms is--
    232,000 respondents x 1.5 hours each = 348,000 hours
    Average cost per respondent = $100
    Total cost for all respondents = $23.2 million
    The estimated current total annual hour burden for all classes of 
providers (hospitals, HHAs, rural health clinics, and SNFs) and 
suppliers (physicians, nurses, ambulance companies, clinical 
laboratories, and durable medical equipment suppliers) is 1.13 million 
hours.
    Based on the above, the estimated current annual monetary burden 
for all classes of providers (for example, hospitals, HHAs, rural 
health clinics, SNFs) and suppliers (for example, physicians, nurses, 
ambulance companies, clinical laboratories durable medical equipment 
suppliers) is $90.84 million. The 1997 revenue receipts for all classes 
of providers and suppliers were $913.7 billion. The cost of obtaining 
and maintaining billing privileges in the Medicare program on average 
is less than 1 percent of the total revenue.
    Although it is possible that a few entities may be significantly 
affected by this final rule, we do not expect that a substantial number 
of affected entities will experience a significant increase in the 
reporting burden; therefore, the Secretary certifies that this rule is 
not expected to impose any additional burden or otherwise significantly 
impact a substantial number of small entities.

C. Alternatives Considered

    Since this final rule is a codification of our current policies on 
provider and supplier enrollment, with the exception of imposing a 
cyclical revalidation process, we did not consider alternatives to this 
process. However, the current process was reviewed and, when possible, 
changes proposed or made that will reduce the current burden, such as 
the time frame for reporting changes.
    Although we do not expect this final rule to have a significant 
economic impact, we are revising the requirements for reporting changes 
to the provider or supplier's enrollment information to reduce the 
current burden. Currently, providers and suppliers must report any 
changes to their enrollment information within 30 days. We are changing 
this requirement to 90 days (or quarterly). We considered retaining the 
current requirement but determined the 30-day timeframe as too 
stringent in light of the rapid changes seen in today's health care 
industry. This change is expected to reduce the administrative burden 
for the providers, suppliers, our contractors, and us.

D. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 10, we have 
prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this final rule. This 
table provides our best estimate of the Medicare payments for providers 
and suppliers to establish and maintain Medicare enrollment. All 
expenditures are classified as transfers to Medicare providers (that 
is, fee for service contractors).

      Table 10.--Accounting Statement--Classification of Estimated
                  Expenditures, From FY 2006 to FY 2007
                              [In millions]
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetary Transfers..........  $90.84.
From Whom to Whom?.....................  Federal Government to Medicare
                                          Providers (that is, Fee for
                                          Service Contractors).
------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by OMB.

List of Subjects

42 CFR Part 420

    Fraud, Health facilities, Health professions, Medicare.

42 CFR Part 424

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

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 498

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

0
For the reasons set forth in this preamble, 42 CFR chapter IV is 
amended as set forth below:

PART 420--PROGRAM INTEGRITY: MEDICARE

0
1. The authority citation for part 420 continues to read as follows:

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

0
2. In Sec.  420.201, the definition for ``managing employee'' is 
revised to read as follows:


Sec.  420.201  Definitions

* * * * *
    Managing employee means a general manager, business manager, 
administrator, director, or other individual that exercises operational 
or managerial control over, or who directly or indirectly conducts, the 
day-to-day operation of the institution, organization, or agency, 
either under contract or through some other arrangement, whether or not 
the individual is a W-2 employee.
* * * * *

PART 424--CONDITIONS FOR MEDICARE PAYMENT

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

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

0
2. Section 424.1(a)(1) is amended by adding in numerical order a 
statutory reference to read as follows:

[[Page 20776]]

Sec.  424.1  Basis and scope.

    (a) * * *
    (1) * * *
* * * * *
    1833(e)--Requirement to furnish information to determine payment.
* * * * *

Subparts N-O--[Reserved]

0
3. Subparts N and O are reserved.

0
4. Subpart P is added to read as follows.

Subpart P--Requirements for Establishing and Maintaining Medicare 
Billing Privileges

Sec.
424.500 Scope.
424.502 Definitions.
424.505 Basic enrollment requirement.
424.510 Requirements for enrolling in the Medicare program.
424.515 Requirements for reporting changes and updates to, and the 
periodic revalidation of Medicare enrollment information.
424.520 Additional provider and supplier requirements for enrolling 
and maintaining active enrollment status in the Medicare program.
424.525 Rejection of a provider or supplier's enrollment application 
for Medicare enrollment.
424.530 Denial of enrollment.
424.535 Revocation of enrollment and billing privileges in the 
Medicare program.
424.540 Deactivation of Medicare billing privileges.
424.545 Provider and supplier appeal rights.
424.550 Prohibitions on the sale or transfer of billing privileges.
424.555 Payment liability.

Subpart P--Requirements for Establishing and Maintaining Medicare 
Billing Privileges


Sec.  424.500  Scope.

    The provisions of this subpart contain the requirements for 
enrollment, periodic resubmission and certification of enrollment 
information for revalidation, and timely reporting of updates and 
changes to enrollment information. These requirements apply to all 
providers and suppliers except for physicians and practitioners who 
have entered into a private contract with a beneficiary as described in 
part 405, subpart D of this chapter. Providers and suppliers must meet 
and maintain these enrollment requirements to bill either the Medicare 
program or its beneficiaries for Medicare covered services or supplies.


Sec.  424.502  Definitions.

    As used in this subpart, unless the context indicates otherwise--
    Approve/Approval means the enrolling provider or supplier has been 
determined to be eligible under Medicare rules and regulations to 
receive a Medicare billing number and be granted Medicare billing 
privileges.
    Authorized official means an appointed official (for example, chief 
executive officer, chief financial officer, general partner, chairman 
of the board, or direct owner) to whom the organization has granted the 
legal authority to enroll it in the Medicare program, to make changes 
or updates to the organization's status in the Medicare program, and to 
commit the organization to fully abide by the statutes, regulations, 
and program instructions of the Medicare program.
    Deactivate means that the provider or supplier's billing privileges 
were stopped, but can be restored upon the submission of updated 
information.
    Delegated official means an individual who is delegated by the 
``Authorized Official,'' the authority to report changes and updates to 
the enrollment record. The delegated official must be an individual 
with ownership or control interest in, or be a W-2 managing employee of 
the provider or supplier.
    Deny/Denial means the enrolling provider or supplier has been 
determined to be ineligible to receive Medicare billing privileges for 
Medicare covered items or services provided to Medicare beneficiaries.
    Enroll/Enrollment means the process that Medicare uses to establish 
eligibility to submit claims for Medicare covered services and 
supplies. The process includes--
    (1) Identification of a provider or supplier;
    (2) Validation of the provider's or supplier's eligibility to 
provide items or services to Medicare beneficiaries;
    (3) Identification and confirmation of the provider or supplier's 
practice location(s) and owner(s); and
    (4) Granting the provider or supplier Medicare billing privileges.
    Enrollment application means a CMS-approved paper enrollment 
application or an electronic Medicare enrollment process approved by 
OMB.
    Managing employee means a general manager, business manager, 
administrator, director, or other individual that exercises operational 
or managerial control over, or who directly or indirectly conducts, the 
day-to-day operation of the provider or supplier, either under contract 
or through some other arrangement, whether or not the individual is a 
W-2 employee of the provider or supplier.
    Operational means the provider or supplier has a qualified physical 
practice location, is open to the public for the purpose of providing 
health care related services, is prepared to submit valid Medicare 
claims, and is properly staffed, equipped, and stocked (as applicable, 
based on the type of facility or organization, provider or supplier 
specialty, or the services or items being rendered), to furnish these 
items or services.
    Owner means any individual or entity that has any partnership 
interest in, or that has 5 percent or more direct or indirect ownership 
of the provider or supplier as defined in sections 1124 and 1124A(A) of 
the Act.
    Reject/Rejected means that the provider or supplier's enrollment 
application was not processed due to incomplete information, or that 
additional information or corrected information was not received from 
the provider or supplier in a timely manner.
    Revoke/Revocation means that the provider or supplier's billing 
privileges are terminated.


Sec.  424.505  Basic enrollment requirement.

    To receive payment for covered Medicare items or services from 
either Medicare (in the case of an assigned claim) or a Medicare 
beneficiary (in the case of an unassigned claim), a provider or 
supplier must be enrolled in the Medicare program. Once enrolled, the 
provider or supplier receives billing privileges and is issued a valid 
billing number effective for the date a claim was submitted for an item 
that was furnished or a service that was rendered. (See 45 CFR Part 162 
for information on the National Provider Identifier and its use as the 
Medicare billing number.)


Sec.  424.510  Requirements for enrolling in the Medicare program.

    (a) Providers and suppliers must submit enrollment information on 
the applicable enrollment application. Once the provider or supplier 
successfully completes the enrollment process, including, if 
applicable, a State survey and certification or accreditation process, 
CMS enrolls the provider or supplier into the Medicare program. To be 
enrolled, a provider or supplier must meet enrollment requirements 
specified in paragraph (c) of this section.
    (b) The effective dates for reimbursement are specified in Sec.  
489.13 of this chapter for providers and suppliers requiring State 
survey or certification or accreditation, Sec.  424.5 and Sec.  424.44 
for non-surveyed or certified/accredited suppliers, and

[[Page 20777]]

Sec.  424.57 and section 1834(j)(1)(A) of the Act for DMEPOS suppliers.
    (c) The effective date for reimbursement for providers and 
suppliers seeking accreditation from a CMS-approved accreditation 
organization as specified in Sec.  489.13(d).
    (d) Providers and suppliers must meet the following enrollment 
requirements:
    (1) Submittal of the enrollment application. A provider or supplier 
must submit a complete enrollment application and supporting 
documentation to the designated Medicare fee-for-service contractor.
    (2) Content of the enrollment application. Each submitted 
enrollment application must include the following:
    (i) Complete, accurate, and truthful responses to all information 
requested within each section as applicable to the provider or supplier 
type.
    (ii) Submission of all documentation required by CMS under this or 
other statutory or regulatory authority, or under the Paperwork 
Reduction Act of 1995, to uniquely identify the provider or supplier. 
This documentation may include, but is not limited to, proof of the 
legal business name, practice location, social security number (SSN), 
tax identification number (TIN), National Provider Identifier (NPI), if 
issued, and owners of the business.
    (iii) Submission of all documentation, including all applicable 
Federal and State licensure and regulatory requirements that apply to 
the specific provider or supplier type that relate to providing health 
care services, required by CMS under this or other statutory or 
regulatory authority, or under the Paperwork Reduction Act of 1995, to 
establish the provider or supplier's eligibility to furnish Medicare 
covered items or services to beneficiaries in the Medicare program.
    (3) Signature(s) required on the enrollment application. The 
certification statement found on the enrollment application must be 
signed by an individual who has the authority to bind the provider or 
supplier, both legally and financially, to the requirements set forth 
in this chapter. This person must also have an ownership or control 
interest in the provider or supplier, as that term is defined in 
section 1124(a)(3) of the Act, such as, the general partner, chairman 
of the board, chief financial officer, chief executive officer, 
president, or hold a position of similar status and authority within 
the provider or supplier organization. The signature attests that the 
information submitted is accurate and that the provider or supplier is 
aware of, and abides by, all applicable statutes, regulations, and 
program instructions.
    (i) Requirements. The signature requirements specified in 
paragraphs (d)(3)(i)(A) through (C) of this section outline who must 
sign the enrollment application for an enrolling provider or supplier. 
In the case of--
    (A) An individual practitioner, the applying practitioner.
    (B) A sole proprietorship, the applying sole proprietor.
    (C) A corporation, partnership, group, limited liability company, 
or other organization (hereafter referred to collectively in this 
section as an organization), an authorized official, as defined in 
Sec.  424.502. When an authorized official signs the certification 
statement on behalf of an organization, the signed statement is 
considered legally binding upon the organization.
    (ii) Delegation of authority. The original enrollment application 
submitted for an organization's initial enrollment and all subsequent 
enrollment applications submitted for periodic revalidation of the 
organization's enrollment data (as required to maintain enrollment in 
the Medicare program) must be signed by an authorized official. Any 
updates or changes reported outside of the initial enrollment or 
periodic revalidation process may be signed by a delegated official(s) 
of the organization. The delegated official's signature binds the 
organization both legally and financially, as if the signature was that 
of the authorized official. Before the delegation of authority is 
established, the only acceptable signature on the enrollment 
application to report updates or changes to the enrollment information 
is that of the authorized official currently on file with Medicare. 
Once the delegation of authority is established, the only acceptable 
signatures on correspondence to report updates or changes to the 
enrollment information are those of the authorized official and the 
person(s) to whom this authority is delegated in accordance with the 
requirements described in this section. Individual practitioners and 
sole proprietors cannot delegate signature authority when submitting an 
enrollment application for any reason. All enrollment applications 
submitted by individual practitioners and sole proprietors must be 
signed by the enrolling or enrolled individual. Each delegation of 
authority to a delegated official must--
    (A) Be assigned by the authorized official currently on file with 
CMS;
    (B) Be submitted to CMS using the appropriate enrollment 
application or CMS established electronic enrollment process;
    (C) Include the title and SSN of each person delegated authority to 
update or change the organization's enrollment information;
    (D) Be an individual that has an ownership or control interest in 
the organization or is a W-2 managing employee as defined in section 
1126(b) of the Act; and
    (E) Be signed by the authorized official and the delegated 
official(s) of the organization.
    (4) Verification of information. The information submitted by the 
provider or supplier on the applicable enrollment application must be 
such that CMS can validate it for accuracy at the time of submission.
    (5) Completion of any applicable State surveys, certifications, and 
provider agreements. The providers or suppliers who are mandated under 
the provision in part 488 of this chapter to be surveyed or certified 
by the State survey and certification agency, and to also enter into 
and sign a provider agreement as outlined in part 489 of this chapter, 
must also meet those requirements as part of the process to obtain 
Medicare billing privileges.
    (6) Ability to furnish Medicare covered items or services. The 
provider or supplier must be operational to furnish Medicare covered 
items or services before being granted Medicare billing privileges.
    (7) Additional requirements. Providers and suppliers must meet the 
provisions of Sec.  424.520 regarding additional compliance and 
reporting requirements.
    (8) On-site review. CMS reserves the right, when deemed necessary, 
to perform on-site inspections of a provider or supplier to verify that 
the enrollment information submitted to CMS or its agents is accurate 
and to determine compliance with Medicare enrollment requirements. Site 
visits for enrollment purposes do not affect those site visits 
performed for establishing compliance with conditions of participation.
    (i) Medicare Part A providers. CMS determines, upon on-site review, 
that the provider is no longer operational to furnish Medicare covered 
items or services, or the provider fails to satisfy any of the Medicare 
enrollment requirements.
    (ii) Medicare Part B suppliers. CMS determines, upon review that 
the supplier is no longer operational to furnish Medicare covered items 
or services, or the supplier has failed to satisfy any or all of the 
Medicare enrollment requirements, or has failed

[[Page 20778]]

to furnish Medicare covered items or services as required by the 
statute or regulations.


Sec.  424.515  Requirements for reporting changes and updates to, and 
the periodic revalidation of Medicare enrollment information.

    To maintain Medicare billing privileges, a provider or supplier 
(other than a DMEPOS supplier) must resubmit and recertify the accuracy 
of its enrollment information every 5 years. All providers and 
suppliers currently billing the Medicare program or initially enrolling 
in the Medicare program are required to complete the applicable 
enrollment application. The provider or supplier then enters a 5-year 
revalidation cycle once a completed enrollment application is submitted 
and validated. (Ambulance service providers must continue to resubmit 
enrollment information in accordance with Sec.  410.41(c)(2) of this 
chapter and DMEPOS suppliers must continue to renew enrollment in 
accordance with Sec.  424.57(e)). The requirements for the 
resubmission, recertification and reverification of enrollment 
information include the following:
    (a) Submission of the enrollment application and supporting 
documentation. The provider or supplier must meet the submission, 
content, signature, verification, operational, inspection, and other 
requirements outlined in Sec.  424.510.
    (1) CMS contacts each provider or supplier directly when it is time 
to revalidate their enrollment information.
    (2) A provider or supplier must submit to CMS the applicable 
enrollment application with complete and accurate information and 
applicable supporting documentation within 60 calendar days of our 
notification to resubmit and certify to the accuracy of its enrollment 
information.
    (b) Completion of any applicable State surveys, certifications and 
provider agreements. A new certification and a new provider agreement 
are not required for the purpose of resubmission and certification for 
revalidation of enrollment information. Providers and suppliers must 
continue to meet the requirements of parts 488 and 489 of this chapter, 
or any currently established supplier agreement, if applicable.
    (c) On-site inspections. CMS reserves the right to perform on-site 
inspections of a provider or supplier to verify that the information 
submitted to CMS or its agents is accurate and to determine compliance 
with Medicare enrollment requirements. Site visits for enrollment 
purposes do not affect those site visits performed for establishing 
compliance with conditions of participation.
    (1) Medicare Part A providers. CMS determines, upon on-site review, 
that the provider is no longer operational to furnish Medicare covered 
items or services, or the provider fails to satisfy any of the Medicare 
enrollment requirements.
    (2) Medicare Part B suppliers. CMS determines, upon review that the 
supplier is no longer operational to furnish Medicare covered items or 
services, or the supplier has failed to satisfy any or all of the 
Medicare enrollment requirements, or has failed to furnish Medicare 
covered items or services as required by the statute or regulations.
    (d) Off Cycle revalidations. (1) CMS reserves the right to perform 
off cycle revalidations in addition to the regular 5-year revalidations 
and may request that a provider or supplier recertify the accuracy of 
the enrollment information when warranted to assess and confirm the 
validity of the enrollment information maintained by CMS. Off cycle 
revalidations may be triggered as a result of random checks, 
information indicating local health care fraud problems, national 
initiatives, complaints, or other reasons that cause CMS to question 
the compliance of the provider or supplier with Medicare enrollment 
requirements. Off cycle revalidations may be accompanied by site 
visits.
    (2) CMS reserve the right to adjust the routine 5-year revalidation 
schedule if we determine that revalidation should occur on a more 
frequent basis due to complaints or evidence we receive indicating 
noncompliance with the statute or regulations by specific provider or 
supplier types. The schedule may also be on a less frequent basis if we 
determine that the integrity of and compliance with the statute and 
regulations by specific provider or supplier types indicates that less 
frequent validation is justified. If a change occurs, CMS notifies all 
affected providers and suppliers at least 90 days in advance of 
implementing the change.
    (3) CMS revalidates enrollment information for ambulance service 
suppliers in accordance with Sec.  410.41(c)(2) of this chapter 
(Requirements for ambulance suppliers), and DMEPOS suppliers renews 
enrollment in accordance with Sec.  424.57(e) (Special payment rules 
for items furnished by DMEPOS suppliers and issuance of DMEPOS supplier 
billing numbers).


Sec.  424.520  Additional provider and supplier requirements for 
enrolling and maintaining active enrollment status in the Medicare 
program.

    (a) Certifying compliance. CMS enrolls and maintains an active 
enrollment status for a provider or supplier when that provider or 
supplier certifies that it meets, and continues to meet, and CMS 
verifies that it meets, and continues to meet, all of the following 
requirements:
    (1) Compliance with title XVIII of the Act and applicable Medicare 
regulations.
    (2) Compliance with Federal and State licensure, certification and 
regulatory requirements, as required, based on the type of services or 
supplies the provider or supplier type will furnish and bill Medicare.
    (3) Not employing or contracting with individuals or entities--
    (i) Excluded from participation in any Federal health care 
programs, for the provision of items and services covered under the 
programs, in violation of section 1128A (a)(6) of the Act; or
    (ii) Debarred by the General Services Administration (GSA) from any 
other Executive Branch procurement or nonprocurement programs or 
activities, in accordance with the Federal Acquisition and Streamlining 
Act of 1994, and with the HHS Common Rule at 45 CFR part 76.
    (b) Reporting requirements. Following enrollment, a provider or 
supplier must report to CMS any changes to the information furnished on 
the enrollment application and furnish supporting documentation within 
90 calendar days of the change, with the exception of DMEPOS suppliers 
which are required to report changes of information within 30 days as 
specified in Sec.  424.57(c)(2), or a change of ownership or control of 
the provider or supplier that must also be reported within 30 calendar 
days. Failure to do so may result in the deactivation or revocation of 
the provider or supplier's Medicare billing privileges.


Sec.  424.525  Rejection of a provider or supplier's enrollment 
application for Medicare enrollment.

    (a) Reasons for rejection. CMS may reject a provider or supplier's 
enrollment application for the following reasons:
    (1) The provider or supplier fails to furnish complete information 
on the provider/supplier enrollment application within 60 calendar days 
from the date of the contractor request for the missing information.
    (2) The provider or supplier fails to furnish all required 
supporting

[[Page 20779]]

documentation within 60 calendar days of submitting the enrollment 
application.
    (b) Extension of 60-day period. CMS, at its discretion, may choose 
to extend the 60-day period if CMS determines that the provider or 
supplier is actively working with CMS to resolve any outstanding 
issues.
    (c) Resubmission after rejection. To enroll in Medicare and obtain 
Medicare billing privileges after notification of a rejected enrollment 
application, the provider or supplier must complete and submit a new 
enrollment application and submit all supporting documentation for CMS 
review and approval.
    (d) Additional review. Enrollment applications that are rejected 
are not afforded appeal rights.


Sec.  424.530  Denial of enrollment.

    (a) Reasons for denial. CMS may deny a provider's or supplier's 
enrollment in the Medicare program for the following reasons:
    (1) Compliance. The provider or supplier at any time is found not 
to be in compliance with the Medicare enrollment requirements described 
in this section or on the applicable enrollment application to the type 
of provider or supplier enrolling, and has not submitted a plan of 
corrective action as outlined in part 488 of this chapter.
    (2) Provider or supplier conduct. A provider, supplier, an owner, 
managing employee, an authorized or delegated official, medical 
director, supervising physician, or other health care personnel 
furnishing Medicare reimbursable services who is required to be 
reported on the enrollment application, in accordance with section 
1862(e)(1) of the Act, is--
    (i) Excluded from the Medicare, Medicaid and any other Federal 
health care programs, as defined in Sec.  1001.2 of this chapter, in 
accordance with section 1128, 1128A, 1156, 1842, 1862, 1867 or 1892 of 
the Act.
    (ii) Debarred, suspended, or otherwise excluded from participating 
in any other Federal procurement or nonprocurement activity in 
accordance with section 2455 of the Federal Acquisition Streamlining 
Act (FASA).
    (3) Felonies. If within the 10 years preceding enrollment or 
revalidation of enrollment, the provider, supplier, or any owner of the 
provider or supplier, was convicted of a Federal or State felony 
offense that CMS has determined to be detrimental to the best interests 
of the program and its beneficiaries. CMS considers the severity of the 
underlying offense.
    (i) Offenses include--(A) Felony crimes against persons, such as 
murder, rape, or assault, and other similar crimes for which the 
individual was convicted, including guilty pleas and adjudicated 
pretrial diversions.
    (B) Financial crimes, such as extortion, embezzlement, income tax 
evasion, insurance fraud and other similar crimes for which the 
individual was convicted, including guilty pleas and adjudicated 
pretrial diversions.
    (C) Any felony that placed the Medicare program or its 
beneficiaries at immediate risk (such as a malpractice suit that 
results in a conviction of criminal neglect or misconduct).
    (D) Any felonies outlined in section 1128 of the Act.
    (ii) Denials based on felony convictions are for a period to be 
determined by the Secretary, but not less than 10 years from the date 
of conviction if the individual has been convicted on one previous 
occasion for one or more offenses.
    (4) False or misleading information. The provider or supplier has 
submitted false or misleading information on the enrollment application 
to gain enrollment in the Medicare program. (Offenders may be referred 
to the Office of Inspector General for investigation and possible 
criminal, civil, or administrative sanctions.)
    (5) On-site review. Upon on-site review or other reliable evidence, 
we determine that the provider or supplier is not operational, or is 
not meeting Medicare enrollment requirements to furnish Medicare 
covered items or services. Upon on-site review, CMS determines that--
    (i) A Medicare Part A provider is no longer operational to furnish 
Medicare covered items or services, or the provider fails to satisfy 
any of the Medicare enrollment requirements.
    (ii) A Medicare Part B supplier is no longer operational to furnish 
Medicare covered items or services, or the supplier has failed to 
satisfy any or all of the Medicare enrollment requirements, or has 
failed to furnish Medicare covered items or services as required by the 
statute or regulations.
    (b) Resubmission after denial. A provider or supplier that is 
denied enrollment in the Medicare program cannot submit a new 
enrollment application until the following has occurred if the denial:
    (1) Was not appealed, the provider or supplier may reapply after 
its appeal rights have lapsed.
    (2) Was appealed, the provider or supplier may reapply after 
notification that the determination was upheld.
    (c) Reversal of denial. If the denial was due to adverse activity 
(sanction, exclusion, debt, felony) of an owner, managing employee, an 
authorized or delegated official, medical director, supervising 
physician, or other health care personnel of the provider or supplier 
furnishing Medicare reimbursable services, the denial may be reversed 
if the provider or supplier terminates and submits proof that it has 
terminated its business relationship with that individual or 
organization within 30 days of the denial notification.
    (d) Additional review. When a provider or supplier is denied 
enrollment in Medicare, CMS automatically reviews all other related 
Medicare enrollment files that the denied provider or supplier has an 
association with (for example, as an owner or managing employee) to 
determine if the denial warrants an adverse action of the associated 
Medicare provider or supplier.
    (e) Effective date of denial. Denial becomes effective within 30 
days of the initial denial notification.


Sec.  424.535  Revocation of enrollment and billing privileges in the 
Medicare program.

    (a) Reasons for revocation. CMS may revoke a currently enrolled 
provider or supplier's Medicare billing privileges and any 
corresponding provider agreement or supplier agreement for the 
following reasons:
    (1) Noncompliance. The provider or supplier is determined not to be 
in compliance with the enrollment requirements described in this 
section or in the enrollment application applicable for its provider or 
supplier type and has not submitted a plan of corrective action as 
outlined in part 488 of this chapter. All providers and suppliers are 
granted an opportunity to correct the deficient compliance requirement 
prior to a final determination to revoke billing privileges.
    (i) CMS may request additional documentation from the provider or 
supplier to determine compliance if adverse information is received or 
otherwise found concerning the provider or supplier.
    (ii) Requested additional documentation must be submitted within 60 
calendar days of request.
    (2) Provider or supplier conduct. The provider or supplier, or any 
owner, managing employee, authorized or delegated official, medical 
director, supervising physician, or other health care personnel of the 
provider or supplier is--

[[Page 20780]]

    (i) Excluded from the Medicare, Medicaid, and any other Federal 
health care program, as defined in Sec.  1001.2 of this chapter, in 
accordance with section 1128, 1128A, 1156, 1842, 1862, 1867 or 1892 of 
the Act.
    (ii) Is debarred, suspended, or otherwise excluded from 
participating in any other Federal procurement or nonprocurement 
program or activity in accordance with the FASA implementing 
regulations and the Department of Health and Human Services 
nonprocurement common rule at 45 CFR part 76.
    (3) Felonies. The provider, supplier, or any owner of the provider 
or supplier, within the 10 years preceding enrollment or revalidation 
of enrollment, was convicted of a Federal or State felony offense that 
CMS has determined to be detrimental to the best interests of the 
program and its beneficiaries.
    (i) Offenses include--
    (A) Felony crimes against persons, such as murder, rape, assault, 
and other similar crimes for which the individual was convicted, 
including guilty pleas and adjudicated pretrial diversions.
    (B) Financial crimes, such as extortion, embezzlement, income tax 
evasion, insurance fraud and other similar crimes for which the 
individual was convicted, including guilty pleas and adjudicated 
pretrial diversions.
    (C) Any felony that placed the Medicare program or its 
beneficiaries at immediate risk, such as a malpractice suit that 
results in a conviction of criminal neglect or misconduct.
    (D) Any felonies that would result in mandatory exclusion under 
section 1128(a) of the Act.
    (ii) Denials based on felony convictions are for a period to be 
determined by the Secretary, but not less than 10 years from the date 
of conviction if the individual has been convicted on one previous 
occasion for one or more offenses.
    (4) False or misleading information. The provider or supplier 
certified as ``true'' misleading or false information on the enrollment 
application to be enrolled or maintain enrollment in the Medicare 
program. (Offenders may be subject to either fines or imprisonment, or 
both, in accordance with current law and regulations.)
    (5) On-site review. CMS determines, upon on-site review, that the 
provider or supplier is no longer operational to furnish Medicare 
covered items or services, or is not meeting Medicare enrollment 
requirements under statute or regulation to supervise treatment of, or 
to provide Medicare covered items or services for, Medicare patients. 
Upon on-site review, CMS determines that--
    (i) A Medicare Part A provider is no longer operational to furnish 
Medicare covered items or services, or the provider fails to satisfy 
any of the Medicare enrollment requirements.
    (ii) A Medicare Part B supplier is no longer operational to furnish 
Medicare covered items or services, or the supplier has failed to 
satisfy any or all of the Medicare enrollment requirements, or has 
failed to furnish Medicare covered items or services as required by the 
statute or regulations.
    (6) Inadequate reverification information. The provider or supplier 
fails to furnish complete and accurate information and all supporting 
documentation within 60 calendar days of the provider or supplier's 
notification from CMS to submit an enrollment application and 
supporting documentation, or resubmit and certify to the accuracy of 
its enrollment information.
    (7) Misuse of billing number. The provider or supplier knowingly 
sells to or allows another individual or entity to use its billing 
number. This does not include those providers or suppliers who enter 
into a valid reassignment of benefits as specified in Sec.  424.80 or a 
change of ownership as outlined in Sec.  489.18 of this chapter.
    (b) Effect of revocation on provider agreements. When a provider's 
or supplier's billing privilege is revoked, any provider agreement in 
effect at the time of revocation is terminated effective with the date 
of revocation.
    (c) Re-enrollment after revocation. If a provider or supplier seeks 
to re-establish enrollment in the Medicare program after notification 
that its billing privileges is revoked (either after the appeals 
process is exhausted or in place of the appeals process), the following 
conditions apply:
    (1) The provider or supplier must re-enroll in the Medicare program 
through the completion and submission of a new applicable enrollment 
application and applicable documentation, as a new provider or 
supplier, for validation by CMS.
    (2) Providers must be resurveyed and recertified by the State 
survey agency as a new provider and must establish a new provider 
agreement with CMS's Regional Office.
    (d) Reversal of revocation. If the revocation was due to adverse 
activity (sanction, exclusion, or felony) against an owner, managing 
employee, or an authorized or delegated official; or a medical 
director, supervising physician, or other personnel of the provider or 
supplier furnishing Medicare reimbursable services, the revocation may 
be reversed if the provider or supplier terminates and submits proof 
that it has terminated its business relationship with that individual 
within 30 days of the revocation notification.
    (e) Additional review. When a provider or supplier is revoked from 
the Medicare program, CMS automatically reviews all other related 
Medicare enrollment files that the revoked provider or supplier has an 
association with (for example, as an owner or managing employee) to 
determine if the revocation warrants an adverse action of the 
associated Medicare provider or supplier.
    (f) Effective date of revocation. Revocation becomes effective 
within 30 days of the initial revocation notification.


Sec.  424.540  Deactivation of Medicare billing privileges.

    (a) Reasons for deactivation. CMS may deactivate a provider or 
supplier's Medicare billing privileges for the following reasons:
    (1) The provider or supplier does not submit any Medicare claims 
for 12 consecutive calendar months. The 12 month period will begin the 
1st day of the 1st month without a claims submission through the last 
day of the 12th month without a submitted claim.
    (2) The provider or supplier does not report a change to the 
information supplied on the enrollment application within 90 calendar 
days of when the change occurred. Changes that must be reported 
include, but are not limited to, a change in practice location, a 
change of any managing employee, and a change in billing services. A 
change in ownership or control must be reported within 30 calendar days 
as specified in Sec.  424.520(b) and Sec.  424.550(b).
    (b) Reactivation of billing privileges. (1) When deactivated for 
any reason other than nonsubmission of a claim, the provider or 
supplier must complete and submit a new enrollment application to 
reactivate its Medicare billing privileges or, when deemed appropriate, 
at a minimum, recertify that the enrollment information currently on 
file with Medicare is correct.
    (2) Providers and suppliers deactivated for nonsubmission of a 
claim are required to recertify that the enrollment information 
currently on file with Medicare is correct and furnish any missing 
information as appropriate. The provider or supplier must meet all 
current Medicare requirements in place at the time of reactivation, and 
be prepared to submit a valid Medicare claim.

[[Page 20781]]

    (3) Reactivation of Medicare billing privileges does not require a 
new certification of the provider or supplier by the State survey 
agency or the establishment of a new provider agreement.
    (c) Effect of deactivation. Deactivation of Medicare billing 
privileges is considered an action to protect the provider or supplier 
from misuse of its billing number and to protect the Medicare Trust 
Funds from unnecessary overpayments. The deactivation of Medicare 
billing privileges does not have any effect on a provider or supplier's 
participation agreement or any conditions of participation.


Sec.  424.545  Provider and supplier appeal rights.

    (a) A provider or supplier that is denied enrollment in the 
Medicare program or whose Medicare enrollment has been revoked may 
appeal CMS' decision in accordance with part 405, subpart H, for 
suppliers, or part 498, subpart A for providers, of this chapter, which 
set forth the appeals process for providers and suppliers. When 
revocation of billing privileges also results in the termination of a 
corresponding provider agreement, the provider may appeal CMS' decision 
in accordance with part 498 of this chapter with the final decision of 
the appeal applying to both the billing privileges and the provider 
agreement. Payment is not made during the appeals process. If the 
provider or supplier is successful in overturning a denial or 
revocation, unpaid claims for services furnished during the overturned 
period may be resubmitted.
    (b) A provider or supplier whose billing privileges are deactivated 
may file a rebuttal in accordance with Sec.  405.374 of this chapter.
    (c) The provider or supplier must be able to demonstrate that it 
meets the enrollment requirements and it must be able to make available 
any documents and records that support the provisions of this 
regulation and the Medicare enrollment application if requested by CMS 
or its agents.


Sec.  424.550  Prohibitions on the sale or transfer of billing 
privileges.

    (a) General rule. A provider or supplier is prohibited from selling 
its Medicare billing number or privileges to any individual or entity, 
or allowing another individual or entity to use its Medicare billing 
number.
    (b) Change of ownership. In the case of a provider undergoing a 
change of ownership in accordance with part 489, subpart A of this 
chapter, the current owner and the prospective new owner must complete 
and submit enrollment applications before completion of the change of 
ownership. If the current owner fails to complete and submit an 
enrollment application to report the change, the current owner may be 
sanctioned or penalized, even after the date of ownership change, in 
accordance with Sec.  424.520, Sec.  424.540, and Sec.  489.53 of this 
chapter. If the prospective new owner fails to submit a new enrollment 
application containing information concerning the new owner within 30 
days of the change of ownership, CMS may deactivate the Medicare 
billing number. If an incomplete enrollment application is submitted, 
CMS may also deactivate the Medicare billing number based upon material 
omissions on the submitted enrollment application, or based on 
preliminary information received or determined by CMS that makes CMS 
question whether the new owner is ultimately granted a final 
transference of the provider agreement.
    (c) Suppliers not covered by part 489 of this chapter. For those 
suppliers not covered by part 489 of this chapter, any change in the 
ownership or control of that supplier must be reported on the 
enrollment application within 30 days of the change as noted in Sec.  
424.540(a)(2). Generally, a change of ownership that also changes the 
tax identification number requires the completion and submission of a 
new enrollment application from the new owner.


Sec.  424.555  Payment liability.

    (a) No payment may be made for otherwise Medicare covered items or 
services furnished to a Medicare beneficiary by suppliers of durable 
medical equipment, prosthetics, orthotics, and other supplies unless 
the supplier obtains (and renews, as set forth in section 1834(j) of 
the Act) Medicare billing privileges.
    (b) No payment may be made for otherwise Medicare covered items or 
services furnished to a Medicare beneficiary by a provider or supplier 
if the billing privileges of the provider or supplier are deactivated, 
denied, or revoked. The Medicare beneficiary has no financial 
responsibility for expenses, and the provider or supplier must refund 
on a timely basis to the Medicare beneficiary any amounts collected 
from the Medicare beneficiary for these otherwise Medicare covered 
items or services.
    (c) If any provider or supplier furnishes an otherwise Medicare 
covered item or service for which payment may not be made by reason of 
paragraph (b) of this section, any expense incurred for such otherwise 
Medicare covered item or service shall be the responsibility of the 
provider or supplier. The provider or supplier may also be criminally 
liable for pursuing payments that may not be made by reason of 
paragraph (b) of this section, in accordance with section 1128B(a)(3) 
of the Act.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
7. 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, 1395ff, and 1395hh).

0
8. Section 489.53 is amended by adding paragraph (a)(15) to read as 
follows:


Sec.  489.53  Termination by CMS.

    (a) * * *
    (15) It had its enrollment in the Medicare program revoked in 
accordance to Sec.  424.535 of this chapter.
* * * * *

PART 498--APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF ICFs/MR AND CERTAIN NFs IN THE MEDICAID 
PROGRAM

0
9. The authority citation for part 498 continues to read as follows:

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

0
10. Section 498.3, is amended by adding paragraph (b)(17) as follows:


Sec.  498.3  Scope and applicability.

    (b) * * *
    (17) The revocation of a provider or supplier's Medicare enrollment 
in accordance to Sec.  424.535 of this chapter.
* * * * *

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

    Dated: August 30, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: February 17, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-3722 Filed 4-20-06; 8:45 am]
BILLING CODE 4120-01-P