[Federal Register Volume 72, Number 139 (Friday, July 20, 2007)]
[Proposed Rules]
[Pages 39776-39779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-14115]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 455

[CMS-2264-P]
RIN 0938-AO88


Medicaid Integrity Program; Limitation on Contractor Liability

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

ACTION: Proposed rule.

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SUMMARY: Section 6034 of the Deficit Reduction Act of 2005 established 
the Medicaid Integrity Program to promote the integrity of the Medicaid 
program by authorizing the Centers for Medicare and Medicaid Services 
(CMS) to enter into contracts with contractors that will review the 
actions of individuals or entities furnishing items or services 
(whether fee-for-service, risk, or other basis) for which payment may 
be made under an approved State plan and/or any waiver of the plan 
approved under section 1115 of the Social Security Act; audit claims 
for payment of items or services furnished, or administrative services 
furnished, under a State plan; identify overpayments of individuals or 
entities receiving Federal funds; and educate providers of services, 
managed care entities, beneficiaries, and other individuals with 
respect to payment integrity and quality of care. This proposed rule 
would set forth limitations on a contractor's liability while 
performing these services under the Medicaid Integrity Program.
    This proposed rule would provide for limitation of a contractor's 
liability for actions taken to carry out a contract under the Medicaid 
Integrity Program. The proposed rule would, to the extent possible, 
employ the same or comparable standards and other substantive and 
procedural provisions as are contained in section 1157 (Limitation on 
Liability) of the Social Security Act.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on August 20, 2007.

[[Page 39777]]


ADDRESSES: In commenting, please refer to file code CMS-2264-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-2264-P, P.O. Box 8014, Baltimore, MD 21244-8014.
    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-2264-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) 786-8148 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: Barbara Rufo, 410-786-5589 or Crystal 
High, 410-786-8366.

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-2064-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

A. Current Law

    States and the Federal Government share in the responsibility for 
safeguarding Medicaid program integrity. States must comply with 
Federal requirements designed to ensure that Medicaid funds are 
properly spent (or recovered, when necessary). The Centers for Medicare 
and Medicaid Services (CMS) is the primary Federal agency responsible 
for providing oversight of States' activities and facilitating their 
program integrity efforts.

B. Medicaid Integrity Program

    Section 6034 of the Deficit Reduction Act (DRA) of 2005 (Pub. L. 
109-171, enacted on February 8, 2006) established the Medicaid 
Integrity Program (the Program), within CMS to combat Medicaid fraud 
and abuse. For the first time, the Program authorizes the Federal 
government to directly identify, recover, and prevent inappropriate 
Medicaid payments. It would also support the efforts of the State 
Medicaid agencies through a combination of oversight and technical 
assistance.
    Although individual States work to ensure the integrity of their 
respective Medicaid programs, the Program represents our first 
comprehensive national strategy to detect and prevent Medicaid fraud 
and abuse. The Program would provide CMS with the ability to more 
directly ensure the accuracy of Medicaid payments and to deter those 
who would exploit the program.
    Section 6034 of the DRA amended title XIX of the Social Security 
Act (the Act), (42 U.S.C. 1396 et seq.) by redesignating the old 
section 1936 as section 1937; and inserting the new section 1936 
``Medicaid Integrity Program.''
    The new section 1936 of the Act states that the Secretary promote 
the integrity of the Medicaid program by entering into contracts with 
eligible entities to carry out the following activities:
    1. Review of the actions of individuals or entities furnishing 
items or services (whether on a fee-for-service, risk or other basis) 
for which payment may be made under a State plan approved under title 
XIX (or under any waiver of this plan approved under section 1115 of 
the Act) to determine whether fraud, waste, and/or abuse has occurred, 
or is likely to occur, or whether these actions have any potential for 
resulting in an expenditure of funds under title XIX in a manner that 
is not intended under the provisions of title XIX.
    2. Audit of claims for payment for items or services furnished, or 
administrative services rendered, under a State plan under title XIX, 
including cost reports, consulting contracts; and risk contracts under 
section 1903(m) of title XIX.
    3. Identification of overpayments to individuals or entities 
receiving Federal funds under title XIX.
    4. Education of providers of services, managed care entities, 
beneficiaries, and other individuals with respect to payment integrity 
and quality of care.
    Section 6034 of the DRA also mandated that the Secretary will by 
regulation provide for the limitation of a contractor's liability for 
actions taken to carry out a contract under the Medicaid Integrity 
Program.

II. Provisions of the Proposed Rule

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

[[Page 39778]]

Limitations on Contractor Liability

    Contractors that perform activities under the Medicaid Integrity 
Program (the Program), would be reviewing activities of providers and 
others seeking Medicaid payment for providing services to Medicaid 
beneficiaries. In an effort to reduce or eliminate the Program 
contractor's exposure to possible legal action from entities it 
reviews, section 6034 of the DRA requires that we, by regulation, limit 
the Program contractor's liability for actions taken in carrying out 
its contract. We must establish, to the extent we find appropriate, 
standards and other substantive and procedural provisions that are the 
same as, or comparable to, those contained in section 1157 of the Act.
    Section 1157 of the Act states that any organization having a 
contract with the Secretary, its employees, fiduciaries, and anyone who 
furnishes professional services to these organizations are protected 
from civil and criminal liability in performing their duties under the 
Act or their contract, provided these duties are performed with due 
care.
    Following the mandate of section 6034 of the DRA, this proposed 
rule, in Sec.  455.1, Basis and scope, would add a new paragraph (c) 
stating that subpart C implements section 1936 of the Act. Section 1936 
of the Act establishes the Medicaid Integrity Program under which the 
Secretary will promote the integrity of the program by entering into 
contracts with eligible entities to carry out the activities under 
subpart C. In addition, new subpart C, Sec.  455.200(a), would specify 
the statutory basis of proposed new subpart C, which would implement 
section 1936 of the Act, which states that the Secretary will promote 
the integrity of the Medicaid program by entering into contracts with 
eligible entities to carry out the activities under subpart C. Section 
455.200(b) would provide the scope for the limitation on a contractor's 
liability to carry out a contract under the Medicaid Integrity Program 
as proposed under new Sec.  455.202. Section 455.202(a) would protect 
Program contractors from liability in the performance of their 
contracts provided they carry out their contractual duties with due 
care.
    In accordance with section 6034 of the DRA, we propose to employ 
the same standards for payment of legal expenses as are contained in 
section 1157(d) of the Act. Therefore, Sec.  455.202(b) would provide 
that we would make payment to Program contractors, their members, 
employees, and anyone who provides legal counsel or services to them, 
for expenses incurred in the defense of any legal action related to the 
performance of the Program contract. We also propose that any and all 
payment(s) and the amount of each payment(s) if any, would be 
determined exclusively by us, and conditioned upon (1) the 
reasonableness of the expense(s); (2) the amount of government funds 
available for payment(s); and (3) whether the payment(s) is (are) 
allowable under the terms of the contract.
    In drafting Sec.  455.202, we considered employing a standard for 
the limitation of liability other than the due care standard. We 
considered whether it would be appropriate to provide that a contractor 
would not be civilly liable by reason of the performance of any duty, 
function, or activity under its contract provided the contractor was 
not grossly negligent in that performance. However, section 6034 of the 
DRA requires that we employ the same or comparable standards and 
provisions as are contained in section 1157 of the Act. This approach 
is consistent with a similar approach taken in the Medicare Integrity 
Program (see 70 FR 35204), which has virtually identical statutory 
limitations on contractor liability language. Therefore, we do not 
believe that it would be appropriate to expand the scope of immunity to 
a standard of gross negligence, as it would not be a comparable 
standard to that set forth in section 1157(b) of the Act.

III. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995.

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

    [If you wish to comment on issues in this section, please include 
the caption ``Regulatory Impact Statement'' at the beginning of your 
comments.]
    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This rule 
would not reach the economic threshold and thus is not considered a 
major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small 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. Individuals and States are not 
included in the definition of a small entity. We are not preparing an 
analysis for the RFA because we have determined that this rule would 
not have a significant economic impact on a substantial number of small 
entities.
    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 Core-Based 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined that 
this rule would not have a significant impact on the operations of a 
substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule 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 have no 
consequential effect on State, local, or tribal governments or on the 
private sector.

[[Page 39779]]

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation would not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects 42 CFR in Part 455

    Fraud, Grant programs--health, Health facilities, Health 
professions, Investigations, Medicaid, Reporting and recordkeeping 
requirements.

    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 455--PROGRAM INTEGRITY; MEDICAID

    1. The authority citation for part 455 continues to read as 
follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

    2. In Sec.  455.1, add new paragraph (c) to read as follows:


Sec.  455.1  Basis and scope.

* * * * *
    (c) Subpart C implements section 1936 of the Act. It establishes 
the Medicaid Integrity Program under which the Secretary will promote 
the integrity of the program by entering into contracts with eligible 
entities to carry out the activities of subpart C.
    3. New subpart C, consisting of Sec.  455.200 and Sec.  455.202, is 
added to part 455 to read as follows:
Subpart C--Medicaid Integrity Program
Sec.
455.200 Basis and scope.
455.202 Limitation on contractor liability.

Subpart C--Medicaid Integrity Program


Sec.  455.200  Basis and scope.

    (a) Statutory basis. This subpart implements section 1936 of the 
Act that establishes the Medicaid Integrity Program under which the 
Secretary will promote the integrity of the program by entering into 
contracts with eligible entities to carry out the activities under this 
subpart C.
    (b) Scope. This subpart provides for the limitation on a 
contractor's liability to carry out a contract under the Medicaid 
Integrity Program.


Sec.  455.202  Limitation on contractor liability.

    (a) A program contractor, a person, or an entity employed by, or 
having a fiduciary relationship with, or who furnishes professional 
services to a program contractor will not be held to have violated any 
criminal law and will not be held liable in any civil action, under any 
law of the United States or of any State (or political subdivision 
thereof), by reason of the performance of any duty, function, or 
activity required or authorized under this subpart or under a valid 
contract entered into under this subpart, provided due care was 
exercised in that performance and the contractor has a contract with 
CMS under this subpart.
    (b) CMS pays a contractor, a person, or an entity described in 
paragraph (a) of this section, or anyone who furnishes legal counsel or 
services to a contractor or person, a sum equal to the reasonable 
amount of the expenses, as determined by CMS, incurred in connection 
with the defense of a suit, action, or proceeding, if the following 
conditions are met:
    (1) The suit, action, or proceeding was brought against the 
contractor, person or entity by a third party and relates to the 
contractor's, person's or entity's performance of any duty, function, 
or activity under a contract entered into with CMS under this subpart.
    (2) The funds are available.
    (3) The expenses are otherwise allowable under the terms of the 
contract.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: March 15, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 20, 2007.
Michael O. Leavitt,
Secretary.
 [FR Doc. E7-14115 Filed 7-19-07; 8:45 am]
BILLING CODE 4120-01-P