[Federal Register Volume 71, Number 227 (Monday, November 27, 2006)]
[Proposed Rules]
[Pages 68519-68524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19960]



[[Page 68519]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 401

[CMS-6032-P]
RIN 0938-AO27


Medicare Program; Use of Repayment Plans

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would modify Medicare regulations to 
implement a provision of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 pertaining to the use of repayment plans 
(also known as extended repayment schedules or ``ERS''). Under this 
provision, we propose to grant a provider or a supplier an extended 
repayment schedule under certain terms and conditions as defined in the 
statute. The proposed rule would establish criteria and procedures to 
apply this requirement and to define the concepts of ``hardship'' and 
``extreme hardship.''

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on January 26, 2007.

ADDRESSES: In commenting, please refer to file code CMS-6032-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-6032-P, P.O. Box 8020, Baltimore, MD 21244-8032.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address only: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-6032-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850. (Because access to the interior of 
the HHH Building is not readily available to persons without Federal 
Government identification, commenters are encouraged to leave their 
comments in the CMS drop slots located in the main lobby of the 
building. A stamp-in clock is available for persons wishing to retain a 
proof of filing by stamping in and retaining an extra copy of the 
comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Tom Noplock, (410) 786-3378.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file 
code, CMS-6032-P, and the specific ``issue identifier'' that precedes 
the section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on 
CMS Regulations'' on that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

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

A. Medicare Overpayment

    Medicare overpayments are Medicare funds an individual, provider, 
or supplier has received that exceed amounts due and payable under the 
Medicare statute and regulations (plus any applicable interest and 
penalties assessed on the overpayment). We note that Medicare 
regulations at 42 CFR 400.202 define a ``supplier'' as ``a physician or 
other practitioner, or an entity other than a provider, that furnishes 
health care services under Medicare.''
    Generally, overpayments result when payment is made by Medicare for 
noncovered items or services that exceeds the amount allowed by 
Medicare for an item or service, or when payment is made for items or 
services that should have been paid by another insurer (Medicare 
secondary payer obligations). Once a determination and any necessary 
adjustments in the amount of the overpayment have been made, the 
remaining amount is a debt owed to the United States Government.
    Section 1870 of the Social Security Act (the Act) provides a 
framework within which liability for such Medicare overpayments is 
determined and recoupment of overpayments is pursued. This framework 
prescribes a decision making process that the agency follows when 
pursuing the recoupment of Medicare overpayments.
    The regulation governing the liability for Medicare overpayments is 
located at 42 CFR part 401 (subpart F).

B. Statutory Authority

    The Federal Claims Collection Act (FCCA) of 1966, Public Law 89-
508, 80 Stat. 308 (1966) (amended by the Debt Collection Improvement 
Act of 1966, Pub. L. 104-134 (1996) (codified at 31 U.S.C. 3711) is the 
Federal government's basic statutory authority for debt management 
practices. The Congress intended the FCCA to reduce the amount of 
litigation previously required to collect claims and to reduce the 
volume of private relief legislation in

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the Congress. The FCCA is independent of the other authorities we use 
to collect debt and was intended by the Congress to add to, rather than 
to supplant, other authorities, including common law authority.
    The FCCA authorizes the head of an agency to collect claims in any 
amount. This statute also provides that the head of an agency may, 
under certain conditions, compromise a claim, or suspend or terminate 
collection action on a claim. Uncollectible claims in excess of 
$100,000, exclusive of interest, must be referred to the Department of 
Justice for compromise.
    On November 2, 1977, the Secretary of the Department of Health and 
Human Services published a rule in the Federal Register (42 FR 57351) 
to delegate authority to the Department Claims Officer generally, and 
the Administrator of the Centers for Medicare & Medicaid Services 
(formerly Health Care Financing Administration (HCFA)) for necessary 
claims collection actions under our programs. The authority delegated 
to the Administrator covers all of our activities in the Medicare 
program (title XVIII) and pertains to claims up to $20,000. (This 
amount has been increased to $100,000; see 31 U.S.C. 3711.)
    On August 29, 1983, we published a final rule with comment period 
titled ``Federal Claims Collection Act; Claims Collection and 
Compromise'' in the Federal Register (48 FR 39060) in accordance with 
the FCCA. In this final rule, the agency adopted the applicable debt 
collection tools made available to it under the FCCA including the 
ability to collect or compromise claims, or suspend or terminate 
collection action, as appropriate. The final rule also set forth the 
requirements we would use to evaluate debtors' requests for extended 
repayment agreements specified in Sec.  401.607.
    As part of the Health Insurance Portability and Accountability Act 
of 1996, the Congress added section 1893 to the Act establishing the 
Medicare integrity program (MIP) to carry out Medicare program 
integrity activities that are funded from the Medicare Trust Fund. 
Section 1893 of the Act expands our contracting authority to allow us 
to contract with ``eligible entities'' to perform Medicare program 
integrity activities. These activities include review of provider and 
supplier activities, including medical, fraud, and utilization review; 
cost report audits; Medicare secondary payer determinations; education 
of providers, suppliers, beneficiaries, and other persons regarding 
payment integrity and benefit quality assurance issues; and developing 
and updating a list of durable medical equipment items that are subject 
to prior authorization (42 U.S.C. 1395ddd). These MIP contractors 
assist us in the identification and collection of provider and supplier 
Medicare overpayments.
Overview of Current Policy
    The current policy CMS and its contractors use for the evaluation 
of extended repayment schedules (ERSs) is based on the existing 
regulations at Sec.  401.607(c)(2) [which we are proposing to 
redesignate as Sec.  401.607(c)(3)] and guidance in the Medicare 
Financial Management Manual, Pub. 100-6 (Chapter 4, Section 50). Under 
our current policy, we determine the frequency and amount of the 
installment payments based on the factors set forth at Sec.  
401.607(c)(2) which include: (i) The amount of the claim; (ii) the 
debtor's ability to pay; and (iii) the cost to CMS of administering an 
installment agreement.
    Under the current ERS review process, we primarily focus on the 
second factor, the debtor's ability to repay the overpayment, by 
conducting a review of the debtor's financial status, similar to how 
banks assess applicants for a loan. In almost all cases, we try to work 
with the provider or supplier to recover the overpayment. In general, 
it has been our experience that it is in both CMS and the debtor's best 
interests to work out a reasonable repayment schedule to recoup an 
overpayment rather than demand immediate collection of the debt, which 
could place a provider or supplier at financial risk or force the 
provider or supplier into bankruptcy.
    Under our existing procedures we review financial documentation 
submitted by the provider or supplier to assess the provider's or 
supplier's ability to repay the Medicare overpayment. This 
documentation must include, at a minimum, a statement of financial 
position (for example, balance sheet), a statement of financial 
performance (for example, income statement), and a statement of future 
viability (for example, projected statement of cash flow). In addition, 
the provider must include a letter from a financial institution proving 
that it cannot obtain financing from an alternative source.

C. Medicare Prescription Drug, Improvement, and Modernization Act of 
2003

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

    On December 8, 2003, the Congress enacted the Medicare Prescription 
Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-
173). This new legislation contained provisions affecting the recovery 
of provider and supplier overpayments under the Medicare program. 
Section 935(a) of the MMA amended title XVIII of the Act by adding a 
new section 1893(f)(1) to the Act to require us to use certain 
statutory criteria in evaluating whether a provider or supplier should 
be granted a repayment schedule of at least 6 months and up to 5 years. 
Under section 1893(f)(1) of the Act, we may grant a provider or a 
supplier upon request, a repayment schedule of at least 6 months, if 
repaying an overpayment within 30 days would constitute a ``hardship'' 
on the provider or supplier, provided that certain criteria are met.
    The new statute at section 1893(f)(1)(B)(i) of the Act defines 
``hardship'' based on the relationship between the amount of the 
overpayment(s) not covered under an existing ERS owed by a provider or 
supplier and the total amount of Medicare payments made to that 
provider or supplier over the most recently submitted cost report or 
for the previous calendar year.
    Under section 1893(f)(1)(B) of the Act, a provider or supplier is 
deemed to be in ``hardship'' when the total amount of all outstanding 
overpayments not included in an approved, existing repayment schedule, 
is 10 percent or greater than the total Medicare payments made for the 
cost reporting period covered by the most recently submitted cost 
report (for a provider filing a cost report), or the previous calendar 
year (for a supplier or non cost-report provider). We propose to 
interpret ``outstanding overpayments'' to include both principal and 
accrued interest. We read the newly added section 1893(f)(1)(B)(iii) of 
the Act to exclude overpayments already being repaid under an approved 
ERS.
    We propose to interpret the new ``hardship'' test under section 
935(a) of the MMA as not to supersede our extended repayment schedule 
regulations currently at Sec.  401.607(c)(2), (which we are proposing 
to redesignate as Sec.  401.607(c)(3) in this proposed rule). Since our 
existing regulations governing ERSs are promulgated under the FCCA, we 
do not plan to eliminate the criteria and procedures currently used to 
grant providers and suppliers ERSs. Instead, we propose adding an 
initial ``hardship'' test to existing regulations and

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procedures for determining a debtor's ERS.
    We are proposing that all requests for an ERS first be evaluated 
under the new ``hardship'' test. Under this MMA provision, if 
``hardship'' is determined and no statutory exception applies under 
Sec.  401.607(c)(2)(iv), then the statute requires that the Secretary 
grant a provider or supplier a repayment period of at least 6 months 
but not longer than 3 years.
    Section 935(a) of the MMA requires that the Secretary establish 
rules for cases when a provider or a supplier was not paid during the 
previous year or paid for only a portion of that year. For these cases, 
we propose using the last 12 months of Medicare payments made to the 
provider or supplier. In cases where there is less than a 12-month 
payment history, we propose that the number of months available be 
annualized to equal an approximate yearly Medicare payment level for 
the provider or supplier.
    Using the new ``hardship'' test provided in section 1893(f)(1) of 
the Act, the contractor would calculate ``hardship'' as described in 
the following examples:
    If the debt is from a provider that files cost reports, then the 
contractor will--
    Step 1: Determine cost reporting year covered by most recently 
filed cost report;
    Step 2: Determine total amount of Medicare dollars paid to provider 
for that cost report year;
    Step 3: Determine amount of all outstanding overpayments (principal 
and accrued interest) not under an existing ERS; and
    Step 4: Divide result in Step 3 by result in Step 2.
    If result in Step 4 is .10 or greater, then the provider meets the 
``hardship'' test.
    We note that Medicare dollars paid for providers that file cost 
reports include all interim payments including tentative settlement 
amounts.

    Example: The provider submits cost report on 05/31/2004 for the 
cost report year from 01/01/2003 through 12/31/2003. For the cost 
report year ending 12/31/2003, the provider was paid a total of 
$1,000,000. On 8/31/2004, a notice of program reimbursement is 
issued as a result of the final settlement for the cost report year 
ending 12/31/2002 showing an overpayment of $105,000. Therefore, the 
provider meets the ``hardship'' test: $105,000 divided by $1,000,000 
= .105. (Calculations should be carried out to three decimal 
points.)

    If the debt is from a provider or supplier that does not file cost 
reports, then the contractor will--
    Divide amount of all outstanding overpayments (principal and 
accrued interest) not under an existing ERS by the Medicare dollars 
paid by the contractor to the provider or supplier for the previous 
calendar year. If result is .10 or greater, the provider or supplier 
meets the ``hardship'' test.

    Example: On 09/01/2004, the provider or supplier is issued a 
demand letter for overpayments resulting from Medical Review of Part 
A Claims that total $110,000. For calendar year 2003, the provider 
or supplier was paid $1,000,000 by Medicare. $110,000 divided by 
$1,000,000 = 11. Based on this calculation, the provider or supplier 
meets the ``hardship'' test.

    If the provider or supplier does not qualify under the ``hardship'' 
test, we would then analyze the ERS request under the existing ERS 
procedures, found at newly redesignated Sec.  401.607(c)(3).
2. Exceptions Under the ``Hardship'' Provision in Section 935(a) of the 
MMA
    As stated above, section 935(a) of the MMA sets out exceptions to 
granting a provider or supplier an extended repayment schedule even if 
the provider or supplier meets the ``hardship'' test. These exceptions 
are when there is reason to suspect the provider or supplier may file 
for bankruptcy, cease to do business, discontinue participation in the 
program, or when there is an indication of fraud or abuse committed 
against the program. We propose that contractors continue to use 
existing procedures and definitions applicable to bankruptcy and fraud 
or abuse.
3. Extreme Hardship Provision
[If you choose to comment on issues in this section, please include the 
caption ``EXTREME HARDSHIP PROVISION'' at the beginning of your 
comments.]

    Under section 935(a) of the MMA, the Secretary may grant a provider 
or a supplier a repayment schedule of 36 months and up to 60 months if 
repaying an overpayment would constitute an ``extreme hardship'' unless 
a statutory exception applies under Sec.  401.607(c)(2)(iv). Since the 
Congress left the definition of ``extreme hardship'' to our discretion, 
we are considering different approaches for defining ``extreme 
hardship'' and seek public comment on this section.
    We considered proposing a new financial threshold to determine if a 
provider or supplier was in extreme financial hardship, such as using a 
15 percent threshold. We rejected this approach because it could result 
in discriminating against providers and suppliers who may be similarly 
financially situated but may attribute more of their total revenue to 
Medicare income. This could occur for example with a home health agency 
(HHA) which may attribute 100 percent of its revenue to Medicare 
business and a skilled nursing facility (SNF) which may only attribute 
20 percent of its business to Medicare. The following example may help 
illustrate the inequitable results that may occur. If a HHA reporting 
$1 million in total revenue (100 percent of which was attributed to 
Medicare income), was subject to a 15 percent extreme hardship test, 
the HHA would need to owe an overpayment of 15 percent of $1 million, 
or at least $150,000, to qualify as being in extreme hardship. However, 
if a SNF reporting $1 million in total revenue had only 20 percent of 
its income attributed to Medicare ($200,000), this SNF would need to 
owe an overpayment of 15 percent of $200,000, or at least $30,000, in 
order to qualify as being in extreme hardship. This example illustrates 
the problems inherent with using a set threshold in defining ``extreme 
hardship'' for purposes of evaluating a provider's or supplier's 
ability to make payment on a Medicare debt. In fact, we believe that 
using any fixed financial variables in this type of evaluation poses 
limitations on CMS's ability to maintain the regulatory flexibility 
needed to properly evaluate a Medicare provider or supplier's request 
for an ERS. Using one fixed set of financial variables to determine the 
length of an ERS would be problematic and inefficient since the ERS 
evaluation is a multi-variable analysis. We need to review several 
variables contained in financial documents that include statements of a 
provider or supplier's financial position, financial performance, and 
future viability in order to properly assess a provider or debtor's 
ability to pay. Moreover, it is difficult for CMS to predict which 
financial variables will be the most useful in its analysis for each 
provider or supplier since this may vary on a case-by-case basis.
    We propose to define ``extreme hardship'' when a provider or 
supplier qualifies under the ``hardship'' provision defined above and 
the provider's or supplier's request for an ERS is approved under newly 
redesignated Sec.  401.607(c)(3). If we determine the request meets the 
criteria in newly redesignated Sec.  401.607(c)(3) and meets the CMS 
manual guidance set forth in the Medicare Financial Management Manual, 
Pub. 100-6, Chapter 4, Section 50, the provider or supplier may be 
granted an ERS between 36 and 60 months. We are also proposing that 
contractors apply the

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statutory exceptions to ``extreme hardship'' cases in a similar manner 
as they do to ``hardship'' cases. We solicit comments on other 
alternative approaches to define ``extreme hardship'' that could 
distinguish between the most extreme cases requiring ERSs between 36 
and 60 months.
4. Extended Repayment Schedules

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

    We propose to initially handle ERS requests differently than we 
have under our current regulations. The proposed rule would allow 
providers or suppliers that meet the ``hardship'' test and request only 
a 6-month ERS period, the opportunity to pay back the Medicare debt in 
6 months without having to submit financial documentation to the 
contractor in accordance with the existing instructions given in the 
Medicare Financial Management Manual, CMS, Pub. 100-6, Chapter 4, 
Section 50. Not requiring financial documentation, such as financial 
statements, a bank denial letter, etc., may provide a provider or 
supplier time to generate or secure the necessary capital to liquidate 
the debt without having to file extensive documentation in order to 
secure a repayment schedule.
    Under the proposed regulation, a provider or supplier that requests 
a 6-month repayment schedule, meets the ``hardship'' test, does not 
fall within an exception, and elects not to submit financial 
documentation would be approved for a 6-month repayment schedule. Any 
provider or supplier qualifying for the 6-month ERS under the 
``hardship'' provision has the choice to turn down the 6-month ERS and 
either pay off the debt within 30 days of the date of determination or 
request a longer than 6-month ERS. In addition, we would not prohibit 
any provider or supplier under the 6-month ``hardship'' provision ERS 
from applying for a longer ERS if it later desires to do so under Sec.  
401.607(c)(3).
    For all ERS requests, with the exception of those 6-month ERSs 
granted without a submission of financial documentation, we propose to 
rely on current regulations and procedures that require the provider or 
supplier to submit financial documentation in accordance with the 
Medicare Financial Management Manual, CMS Pub. 100-6, Chapter 4, 
Section 50. A provider or supplier must continue to submit a written 
request that refers to the specific overpayment for which an ERS is 
being requested, the number of months requested, and include the first 
payment with its request. The contractor would determine the duration 
of the ERS based on its review of the provider or supplier's 
documentation in accordance with CMS manual guidance.
    While the statute permits us to immediately collect on an entire 
overpayment, if a provider or supplier misses one installment payment 
in any ERS granted under section 935(a) of the MMA, we are proposing to 
impose this penalty only on the automatic 6-month repayment schedules. 
With all other ERSs, we propose to continue to use the existing 
procedures that define a default of an ERS as missing two consecutive 
installment payments.

II. Provisions of the Proposed Regulations

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

    We are proposing to revise paragraph (a) in Sec.  401.601, Basis 
and scope, to read as follows: ``This subpart implements for CMS the 
Federal Claims Collection Act (FCCA) of 1966 (amended 1996) (31 U.S.C. 
3711), and conforms to the regulations (31 CFR parts 900-904) issued 
jointly by the Department of the Treasury and the Department of Justice 
that generally prescribe claims collection standards and procedures 
under the FCCA for the Federal government. This subpart also implements 
section 1893(f)(1) of the Act regarding the use of repayment plans.''
    In addition, we are proposing in Sec.  401.603 to add a definition 
for an ``Extended repayment schedule.''
    We are proposing to redesignate Sec.  401.607(c)(2), ``CMS 
decision,'' as Sec.  401.607(c)(3). In addition, we are proposing a new 
Sec.  401.607(c)(2), ``Extended repayment schedule,'' in accordance 
with 1893(f)(1) of the Act. The provisions of section 1893(f)(1) of the 
Act, as amended by section 935(a) of the MMA, would be implemented by 
new Sec.  401.607(c)(2), ``Extended repayment schedule.''

III. Collection of Information Requirements

    This proposed rule does not impose any new information collection 
or recordkeeping requirements. The burden associated with the 
collection activities discussed in the preamble that pertain to the 
extension of repayment schedules is currently approved under Office of 
Management and Budget (OMB) control number 0938-0270, with an 
expiration date of September 30, 2007.
    However, in addition to the requirements discussed in this proposed 
rule, we plan to submit a revised information collection request (ICR) 
to OMB for approval. As discussed in Section I.C.4. of the preamble, 
providers or suppliers that meet the ``hardship'' test and request only 
a 6-month ERS period, will have the opportunity to pay back the 
Medicare debt in 6 months without having to submit financial 
documentation to the contractor. This new requirement reduces the 
information collection burden placed on providers and suppliers. As 
part of the OMB approval process for the revised ICR, the revisions to 
0938-0270 will be announced in Federal Register notices and made 
available to the public for comment.

IV. Response to Comments

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

V. Regulatory Impact Statement

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This rule would not reach the economic threshold and thus is not 
considered a major rule. There would be no additional costs or 
documented savings resulting from the implementation of

[[Page 68523]]

this rule. The RFA requires agencies to analyze options for regulatory 
relief of small businesses. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other providers and 
suppliers are small entities, either by nonprofit status or by having 
revenues of $6 million to $29 million in any 1 year. For purposes of 
the RFA, approximately 95 percent of the health care industry is 
considered small businesses according to the Small Business 
Administration's size standards with total revenues of $6 million to 
$29 million or less in any 1 year. Individuals and States are not 
included in the definition of a small entity. Because there are no 
additional costs or documented savings resulting from the 
implementation of this rule, this rule would not have a significant 
impact on small businesses.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. Because there are no 
additional costs or documented savings resulting from the 
implementation of this rule, this rule would not have a significant 
impact on small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. This rule would not have 
an effect on the governments mentioned and the private sector costs 
would be less than $120 million threshold.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This rule would not have a substantial effect on State or 
local governments.

B. Anticipated Effects

1. Effects on Medicare Providers
    This rule could affect all Medicare provider types with a Medicare 
overpayment. This proposed rule would allow Medicare providers falling 
within these provisions a 6-month period to pay back debt owed to 
Medicare without being required to file extensive financial 
documentation. We believe that this short time period may permit a 
provider to generate or secure the necessary capital to liquidate the 
debt without filing the financial documentation required to secure a 
longer repayment schedule.
2. Effects on Other Providers
    There would be no effect on other providers.
3. Effects on the Medicare and Medicaid Programs
    There would be no additional costs or documented savings resulting 
from the implementation of this rule. There may be savings due to a 
possible reduction in paperwork.

C. Alternatives Considered

    We considered adopting mathematically precise distinctions between 
``hardship'' and ``extreme hardship,'' but rejected this approach. To 
select any type of numerical threshold, for example, defining ``extreme 
hardship'' as 15 percent of total overpayments in an effort to 
distinguish it from the test for ``hardship,'' would result in 
inequitable outcomes for different providers and suppliers as discussed 
in the ``extreme hardship'' section of the preamble. We believe the 
proposed approach will lead to more equitable solutions.
    In implementing section 935 of the MMA, we want to assure providers 
and suppliers that we will be looking closely at the financial picture 
each of them has that has prompted them to seek an ERS. Analyzing these 
financial profiles is a complex undertaking that does not lend itself 
to overly simplified numerical cutoffs that may qualify some for longer 
repayment periods but deny them to others that ought to be just as 
eligible. We seek comment on other alternative ways to distinguish 
between ``hardship'' and ``extreme hardship'' in an effort to establish 
a standardized approach to applying the two definitions.

D. Executive Order 12866 Statement

    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 401

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

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

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

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

    Authority: Secs. 1102, 1871, and 1893 of the Social Security Act 
(42 U.S.C. 1302, 1395hh, and 1395ddd). Subpart F is also issued 
under the authority of the Federal Claims Collection Act (amended 
1996) (31 U.S.C. 3711).

    2. In Sec.  401.601, paragraph (a) is revised to read as follows:


Sec.  401.601  Basis and scope.

    (a) Basis. This subpart implements for CMS the Federal Claims 
Collection Act (FCCA) of 1966 (amended 1996) (31 U.S.C. 3711), and 
conforms to the regulations (31 CFR parts 900-904) issued jointly by 
the Department of the Treasury and the Department of Justice that 
generally prescribe claims collection standards and procedures under 
the FCCA for the Federal government. This subpart also implements 
section 1893(f)(1) of the Act regarding the use of repayment plans.
* * * * *
    3. In Sec.  401.603, add a new definition for ``Extended repayment 
schedule'' to read as follows:


Sec.  401.603  Definitions.

* * * * *
    Extended repayment schedule means installment payments to pay back 
a debt.


Sec.  401.607  [Amended]

    4. In Sec.  401.607--
    A. Redesignate paragraph (c)(2) as paragraph (c)(3).
    B. Add a new paragraph (c)(2).
    The revisions read as follows:


Sec.  401.607  Claims collection.

* * * * *
    (c) * * *
    (2) Extended repayment schedule.
    (i) For purposes of this paragraph (c)(2), the following 
definitions apply:
    Hardship exists when the total amount of all outstanding 
overpayments (principal and interest) not included in an approved, 
existing repayment schedule is 10 percent or greater than the total 
Medicare payments made for the cost reporting period covered by the 
most recently submitted cost report for a provider filing a cost 
report, or for the

[[Page 68524]]

previous calendar year for a supplier or non cost-report provider.
    Extreme hardship exists when a provider or supplier qualifies as 
being in ``hardship'' as defined in this paragraph and the provider's 
or supplier's request for an extended repayment schedule (ERS) is 
approved under paragraph (c)(3) of this section.
    (ii) CMS or its contractor reviews a provider's or supplier's 
request for an ERS. For a provider or a supplier not paid by Medicare 
during the previous year or paid only during a portion of that year, 
the contractor or CMS will use the last 12 months of Medicare payments. 
If less than a 12-month payment history exists, the number of months 
available is annualized to equal an approximate yearly Medicare payment 
level for the provider or supplier.
    (iii) For a provider or supplier requesting an ERS, CMS or its 
contractor evaluates the request based on the definitions and 
information submitted under this paragraph (c)(2). For a provider or 
supplier whose situation does not meet the definitions in paragraph 
(c)(2)(i) of this section, CMS or its contractor evaluates the ERS 
request using the information in paragraph (c)(3) of this section in 
deciding to grant an ERS.
    (iv) CMS or its contractor is not required to grant an ERS to a 
provider or supplier if there is reason to suspect the provider or 
supplier may file for bankruptcy, cease to do business, discontinue 
participation in the Medicare program, or there is an indication of 
fraud or abuse committed against the Medicare program.
    (v) CMS or its contractor may grant a provider or a supplier an ERS 
of at least 6 months if repaying an overpayment within 30 days would 
constitute a ``hardship'' as defined in paragraph (c)(2)(i) of this 
section. If a provider or supplier is granted an ERS for 6 months under 
paragraph (c)(2)(i) of this section, missing one installment payment 
constitutes a default and the total balance of the overpayment will be 
recovered immediately.
    (vi) CMS or its contractor may grant a provider or a supplier an 
ERS of 36 months and up to 60 months if repaying an overpayment would 
constitute an ``extreme hardship'' as defined in paragraph (c)(2)(i) of 
this section.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare-Hospital Insurance; and Program No. 93.774, Medicare-
Supplementary Medical Insurance Program)

    Dated: April 5, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 17, 2006.
Michael O. Leavitt,
Secretary.

    Editorial Note: This document was received at the Office of the 
Federal Register on November 20, 2006.
 [FR Doc. E6-19960 Filed 11-24-06; 8:45 am]
BILLING CODE 4120-01-P