[Federal Register Volume 72, Number 164 (Friday, August 24, 2007)]
[Proposed Rules]
[Pages 48604-48608]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-16172]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 440

[CMS-2234-P]
RIN 0938-A045


Medicaid Program; State Option To Establish Non-Emergency Medical 
Transportation Program

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement section 6083 of the Deficit 
Reduction Act of 2005 which provides States with additional State plan 
flexibility to establish a non-emergency, medical transportation 
brokerage program, and to receive the Federal medical assistance 
percentage rate. This authority supplements the current authority that 
States have to provide non-emergency medical transportation to Medicaid 
beneficiaries who need access to medical care, but have no other means 
of transportation.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on September 24, 
2007.

ADDRESSES: In commenting, please refer to file code CMS-2234-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-2244-P, P.O. Box 8017, Baltimore, MD 
21244-8017.
    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-2234-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.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Donna Schmidt, (410) 786-5532.

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-2234-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. General

    For more than a decade, States have been asking for the tools to 
modernize their Medicaid programs. With the enactment of section 6083 
of the Deficit Reduction Act of 2005 (DRA), Pub. L. 109-171, on 
February 8, 2006, States

[[Page 48605]]

now have new options to create programs that are more aligned with 
today's Medicaid populations and the health care environment. Cost 
sharing, benefit flexibility through benchmark plans, the health 
opportunity accounts (HOA), and the flexibility to design cost-
effective transportation programs provide opportunities to modernize 
Medicaid, make the cost of the program and health care more affordable, 
and expand coverage for the uninsured.

B. Statutory Authority

    Section 6083 of the DRA amended section 1902(a) of the Social 
Security Act (the Act) by adding a new section 1902(a)(70), which 
allows States to amend their Medicaid State plans to establish a non-
emergency medical transportation brokerage program without regard to 
statutory requirements for comparability, state-wideness, and freedom 
of choice. This proposed regulation would provide States with the 
flexibility granted by the statute.

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.]

A. Overview

    The Department of Health and Human Services (DHHS) began issuing 
guidance about the new flexibilities available to States within months 
of the enactment of the DRA. On March 31, 2006, DHHS issued a State 
Medicaid Director letter providing guidance on the implementation of 
section 6083 of the DRA. The proposed regulation would formalize the 
guidance issued on non-emergency medical transportation programs. The 
proposed regulation would add a new paragraph (4) to 42 CFR 440.170(a).

B. Requirements of the Provision for State Plans

    Under Sec.  431.53, States are required in their Title XIX State 
plans to ensure necessary transportation of Medicaid beneficiaries to 
and from providers. Expenditures for transportation may be claimed as 
administrative costs, or a State may elect to include transportation as 
medical assistance under its State Medicaid plan.
    Before enactment of the DRA, if a State wanted to provide 
transportation as medical assistance under the State plan, it could not 
restrict beneficiary choice by selectively contracting with a broker, 
nor could it provide services differently in different areas of the 
State without receiving, under section 1915(b) of the Act, a waiver of 
freedom of choice, comparability, and state-wideness otherwise required 
at section 1902(a) of the Act. These waivers allowed States to 
selectively contract with brokers and to operate their programs 
differently in different areas of the State.
    The DRA gives the States greater flexibility in providing non-
emergency medical transportation. States are no longer required to 
obtain a section 1915(b) waiver in order to provide non-emergency 
transportation as an optional medical service through a competitively 
contracted broker. A State plan amendment for such a brokerage program 
eliminates the administrative burden of the 1915(b) biannual waiver 
renewal. Under new section 1902(a)(70) of the Act, a State may now use 
a non-emergency medical transportation brokerage program when providing 
transportation as medical assistance under the State plan, 
notwithstanding the provisions of sections 1902(a)(1), 1902(a)(10)(B), 
and 1902(a)(23) of the Act, concerning state-wideness, comparability, 
and freedom of choice, respectively.
    Current regulations provide that when a State includes 
transportation in its State plan as medical assistance, it is required 
to use a direct vendor payment system that is consistent with 
applicable regulations at Sec.  440.170(a), and it must also comply 
with all other requirements related to medical services, including 
freedom of choice, comparability, and state-wideness. To implement the 
provisions of section 1902(a)(70) of the Act, we propose revising Sec.  
440.170(a) to add a new paragraph (4), Non-emergency medical 
transportation brokerage program, to reflect the increased flexibility 
allowed by the DRA.
    We propose allowing, at the option of the State, the establishment 
of a non-emergency medical transportation brokerage program. We believe 
that this may prove to be a more cost-effective way of providing 
transportation for individuals eligible for medical assistance under 
the State plan, who need access to medical care or services and have no 
other means of transportation.
    As provided by the statute, we propose specifying in Sec.  
440.170(a)(4) that the broker could provide for transport services that 
include wheelchair vans, taxis, stretcher cars, bus passes and tickets, 
secured transportation. We are interpreting ``secured transportation'' 
in this context to mean a form of transportation containing an occupant 
protection system that addresses the safety needs of disabled or 
special needs individuals.
    The Deficit Reduction Act also provides that other forms of 
transportation may be included as determined by the Secretary to be 
appropriate. At this time, we are not proposing to determine any 
additional transportation services to be generally appropriate. We are 
proposing, however, to allow States to identify additional 
transportation alternatives that are otherwise covered under the State 
plan (and not specific to services available through transportation 
brokers). CMS will review these alternatives in the State plan 
amendment approval process for transportation services generally. In 
that process, we will consider individual circumstances in the State 
and applicable utilization controls. For example, air transportation 
may be appropriate in States with significant rural populations and low 
population density, but not in other States. Even in those States, air 
transportation may only be appropriate with appropriate utilization 
controls. Thus, we are proposing to make this determination in the 
context of our review of State plan amendments based on the information 
furnished by the State.
    At Sec.  440.170(a)(4), we propose that the competitive bidding 
process be consistent with applicable Department regulations at 45 CFR 
92.36, based on the State's evaluation of the broker's experience, 
performance, references, resources, qualifications and cost, and that 
the contract with the broker include oversight procedures to monitor 
beneficiary access and complaints, and ensure that transport personnel 
are licensed, qualified, competent, and courteous. We are proposing 
that State and local bodies that wish to serve as brokers compete on 
the same terms as non-governmental entities.
    We propose in paragraph (a)(4)(iv) to include prohibitions on 
broker self-referrals and conflict of interest, based on the 
prohibitions on physician referrals under section 1877 of the Act (42 
U.S.C. 1395(nn)). Section 1877 of the Act generally prohibits a 
physician from making referrals for certain designated health services 
payable by Medicare to an entity, with which he or she (or an immediate 
family member) has a financial relationship (ownership or compensation) 
unless an exception applies. In addition, to prevent other types of 
fraud and abuse, the anti-kickback provisions in section 1128B(b)of the 
Act (42 U.S.C. 1320a-7b(b)) and the provisions in the civil False 
Claims Act (31 U.S.C. 3729) also apply to this transportation program 
as

[[Page 48606]]

they apply to the Medicaid program generally.
    We believe that the Congress intended that section 1877 of the Act 
and the applicable regulations be used as a model for establishing 
broker prohibitions on referrals, conflicts of interest, and 
impermissible kickbacks, in order to prevent fraud and abuse.
    A financial relationship, as defined in our regulations 
implementing section 1877 of the Act at Sec.  411.354(a), includes any 
direct or indirect ownership or investment interest in the entity that 
furnishes designated health services and any compensation arrangement 
between such an entity and the physician or an immediate family member 
of the physician.
    Section 1877 of the Act includes certain ownership and investment 
exceptions, compensation exceptions, and some exceptions that apply to 
ownership, investment, and compensation relationships. In addition, 
section 1877(b)(4) of the Act allows the Secretary to create an 
exception in the case of any other financial relationship that does not 
pose a risk of program or patient abuse.
    For purposes of new Sec.  440.170(a), we propose that the term 
``transportation broker'' include contractors, owners, investors, 
Boards of Directors, corporate officers, and employees.
    We propose to use the definition of ``financial relationship'' as 
set forth in regulations at Sec.  411.354(a) by means of cross-
reference, with the term ``transportation broker'' substituted for 
``physician'' and ``non-emergency transportation'' substituted for 
``DHS.'' We propose to use the definition of ``immediate family 
member'' or member of a ``physician's immediate family'' as set forth 
in the physician self-referral provisions in Sec.  411.351, with the 
term ``transportation broker'' substituted for ``physician.''
    Based on the prohibitions in section 1877 of the Act, we propose 
that the broker be an independent entity, in that the broker may not 
itself provide transportation under the contract with the State and 
that the broker may not refer or subcontract to a transportation 
service provider with which it has certain financial relationships, 
unless certain exceptions apply. Federal funds may not be used for any 
prohibited referrals.
    Similar to some of the ownership exceptions in section 1877 of the 
Act, we propose including exceptions for a non-governmental broker that 
provides transportation in a rural area when there is no other 
qualified provider available; when the necessary transportation 
provided by the non-governmental broker is so specialized that no other 
qualified provider is available; or when the availability of qualified 
providers other than the non-governmental broker is insufficient to 
meet the existing need.
    For purposes of this regulation we propose that a qualified 
provider would be any Medicaid participating provider or other provider 
determined by the State to be qualified. A ``rural area,'' as defined 
in Sec.  412.62(f)(iii), is any area that is outside an urban area. 
These exceptions address specific circumstances in which there is a 
lack of transportation resources and there is documentation to support 
these exceptions.
Governmental Brokerages
    We did not wish to prevent a government entity that is awarded a 
brokerage contract through the competitive bidding process from 
referring an individual in need of transportation service to a 
government transportation provider that is generally available in the 
community. Therefore, we have included an exception to allow such a 
governmental broker to provide an individual transportation service or 
to arrange for the individual transportation service by referring to or 
subcontracting with another government-owned or -controlled 
transportation provider, when certain conditions have been met that 
will assure an arms-length transaction.
    The broker would first be required to be a distinct governmental 
unit, and the contract could not include payment of costs other than 
those unique to the distinct brokerage function. This means the 
contract could not provide for payment of costs normally shared with or 
paid by other governmental units (such as a regional transportation 
authority). This requirement would ensure that the distinct broker unit 
did not have direct financial conflicts of interest resulting from 
commingling funding with State or local general revenue funds. Second, 
the broker would have to document, after considering the specific 
transportation needs of the individual, that the government provider 
was the most appropriate, effective, and lowest cost alternative for 
each individual transportation service. And third, the broker would 
have to document that for each individual transportation service, the 
Medicaid program was paying no more than the rate charged to the 
general public. Because there could still be conflicts of interest 
resulting from management oversight from a parent or related 
governmental unit, we considered proposing to limit the exception to 
circumstances where the distinct unit governmental broker was 
independent of external review and oversight by the parent entity. 
However, we currently believe that the proposed conditions would be 
sufficient to protect against inappropriate inter-governmental 
referrals.
    We are soliciting comments, suggestions, and examples regarding the 
following exceptions mentioned above: the service area is rural and 
there is no other Medicaid participating or qualified provider 
available except the non-governmental broker; the transportation 
provided by the non-governmental broker is so specialized that no other 
qualified provider is available (including comments on how 
``specialized'' should be defined); available qualified providers other 
than the non-governmental broker are insufficient to meet the need; the 
broker is a distinct government unit and is paid only for costs that 
are unique to the distinct brokerage function and the broker documents 
that services provided by any other governmental entity are the most 
appropriate, least costly alternative, and the Medicaid program is 
paying no more than the rate charged to the public.
    Additionally, we are proposing to include a prohibition on a broker 
accepting any form of remuneration or payment from a transportation 
provider in exchange for influencing a referral or subcontract for 
transportation services. We also propose that in referring or 
subcontracting with transportation providers, the broker be prohibited 
from withholding necessary transportation from a recipient or providing 
transportation that is not the most appropriate and cost-effective 
means of transportation.
    Under section 1905(a)(28) of the Act, the Secretary is given the 
authority to specify any other medical care which can be covered by the 
State. We would therefore use authority to make Federal financial 
participation available at the medical assistance rate for the cost of 
the brokerage contract, providing that such a contract complied with 
the requirements set forth in this regulation.
    In accordance with Federal requirements in sections 1902(a)(2) and 
1903(w) of the Act and applicable Federal regulations described at 
Sec.  433.50 through Sec.  433.74, under the brokerage contract with 
the State Medicaid agency, the non-Federal share of the Medicaid 
payments made for operating a transportation brokerage program could 
only be derived from permissible sources and must comply with the 
applicable statute and regulations cited above. Also, the return of any 
Medicaid payments (directly or

[[Page 48607]]

indirectly) to a State or local government entity under the non-
emergency transportation brokerage program is prohibited.
    We propose that the State, in contracting with the broker, would be 
required to specify that violation of these provisions would be deemed 
to be a breach of contract and that the State could move to terminate 
the contract with the broker.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the 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.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements:
    Section 6083 of the DRA (Non-emergency Medical Transportation 
Brokerage Program) provides States with the option to submit a State 
Plan amendment (SPA) to establish a non-emergency medical 
transportation brokerage program. To effectuate this option, States 
must submit an amendment to their existing State Plan. CMS has provided 
States with a letter providing guidance on this provision and the 
implementation of the DRA, and an associated SPA template for use by 
States to modify their Medicaid State plan if they choose to implement 
this option.
    The template is a total of five pages and we estimate that it will 
take no more than 12 minutes for a State to actually complete and 
submit the template to CMS. The potential number of respondents is 56 
(50 States, DC, and five territories); however, we do not expect the 
territories and/or all 50 states to respond. We estimate that only five 
States will submit annually. Once approved, the State will not need to 
resubmit unless it is materially changing the brokerage program.
    At this rate, it will cost no more than $50 (or $50 x \1/5\ hrs x 5 
states); the national total for the first year could be potentially 
$560 (56 x $10).
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirements described above. 
These requirements are not effective until they have been approved by 
OMB.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following:
    Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Division of Regulations Development, 
Attn: Melissa Musotto, [CMS-2234-P], Room C4-26-05, 7500 Security 
Boulevard, Baltimore, MD 21244-1850; and
    Office of Information and Regulatory Affairs, Office of Management 
and Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Katherine Astrich, CMS Desk Officer, CMS-2244-P, 
[email protected]. Fax (202) 395-6974.

IV. Regulatory Impact Statement

[If you choose 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). We estimate 
that this regulation will have estimated budget savings of $60 million 
between FY 2006 and FY 2010 due to the implementation of section 6083 
of the Deficit Reduction Act of 2005. 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 
$6.5 million to $30.5 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, and the Secretary 
certifies, 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 Metropolitan 
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, and 
the Secretary certifies, 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.
    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 in 42 CFR Part 440

    Grant programs--health, Medicaid.

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

[[Page 48608]]

PART 440--SERVICES: GENERAL PROVISIONS

    1. The authority citation for part 440 continues to read as 
follows:

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

    2. A new authority citation is added in numerical order to Sec.  
440.1 to read as follows:


Sec.  440.1  Basis and purpose.

* * * * *
    1902(a)(70), State option to establish a non-emergency medical 
transportation program.
* * * * *
    3. Section 440.170 is amended by revising paragraph (a)(2) and 
adding new paragraph (a)(4) to read as follows:


Sec.  440.170  Any other medical care or remedial care recognized under 
State law and specified by the Secretary.

    (a) * * *
    (2) Except as provided in paragraph (a)(4), transportation, as 
defined in this section, is furnished only by a provider to whom a 
direct vendor payment can appropriately be made by the agency.
    (3) * * *
    (4) Non-emergency medical transportation brokerage program. At the 
option of the State, and notwithstanding Sec.  431.50 (statewide 
operation) and Sec.  431.51 (freedom of choice of providers) of this 
chapter and Sec.  440.240 (comparability of services for groups), a 
State plan may provide for the establishment of a non-emergency medical 
transportation brokerage program in order to more cost-effectively 
provide non-emergency medical transportation services for individuals 
eligible for medical assistance under the State plan who need access to 
medical care or services, and have no other means of transportation. 
These transportation services include wheelchair vans, taxis, stretcher 
cars, bus passes and tickets, secured transportation containing an 
occupant protection system that addresses safety needs of disabled or 
special needs individuals, and other forms of transportation otherwise 
covered under the state plan.
    (i) Non-emergency medical transportation services may be provided 
under contract with an individual or entity that meets the following 
requirements:
    (A) Is selected through a competitive bidding process that is 
consistent with 45 CFR part 92.36 and is based on the State's 
evaluation of the broker's experience, performance, references, 
resources, qualifications, and costs.
    (B) Has oversight procedures to monitor beneficiary access and 
complaints and ensure that transport personnel are licensed, qualified, 
competent, and courteous.
    (C) Is subject to regular auditing and oversight by the State in 
order to ensure the quality of the transportation services provided and 
the adequacy of beneficiary access to medical care and services.
    (D) Is subject to a written contract that imposes the requirements 
related to prohibitions on referrals and conflicts of interest 
described at Sec.  440.170(a)(4)(ii), and provides for the broker to be 
liable for the full cost of services resulting from a prohibited 
referral or subcontract.
    (ii) Federal financial participation is available at the medical 
assistance rate for the cost of a written brokerage contract that:
    (A) Except as provided in paragraph (a)(4)(ii)(B) of this section, 
prohibits the broker (including contractors, owners, investors, Boards 
of Directors, corporate officers, and employees) from providing non-
emergency medical transportation services or making a referral or 
subcontracting to a transportation service provider if:
    (1) The broker has a financial relationship with the transportation 
provider as defined at Sec.  411.354(a) of this chapter with 
``transportation broker'' substituted for ``physician'' and ``non-
emergency transportation'' substituted for ``DHS''; or
    (2) The broker has an immediate family member, as defined at Sec.  
411.351 of this chapter, that has a direct or indirect financial 
relationship with the transportation provider, with the term 
``transportation broker'' substituted for ``physician.''
    (B) Exceptions: The prohibitions described at clause (A) of this 
paragraph do not apply if there is documentation to support the 
following:
    (1) Transportation is provided in a rural area, as defined at Sec.  
412.62(f), and there is no other available Medicaid participating 
provider or other provider determined by the State to be qualified 
except the non-governmental broker.
    (2) Transportation is so specialized that there is no other 
available Medicaid participating provider or other provider determined 
by the State to be qualified except the non-governmental broker.
    (3) Except for the non-governmental broker, the availability of 
other Medicaid participating providers or other providers determined by 
the State to be qualified is insufficient to meet the need for 
transportation.
    (4) The broker is a distinct government entity and the individual 
service is provided by the broker, or is referred to or subcontracted 
with another government-owned or operated transportation provider 
generally available in the community, if the following conditions are 
met:
    (i) The contract with the broker provides for payment that does not 
exceed actual costs calculated as a distinct unit, excluding personnel 
or other costs shared with or allocated from parent or related 
entities;
    (ii) The broker documents that, with respect to the individual's 
specific transportation needs, the government provider is the most 
appropriate and lowest cost alternative; and
    (iii) The broker documents that the Medicaid program is paying no 
more than the rate charged to the general public.
    (C) Transportation providers may not offer or make any payment or 
other form of remuneration, including any kickback, rebate, cash, 
gifts, or service in kind to the broker in order to influence referrals 
or subcontracting for non-emergency medical transportation provided to 
a Medicaid recipient.
    (D) In referring or subcontracting for non-emergency medical 
transportation with transportation providers, a broker may not withhold 
necessary non-emergency medical transportation from a Medicaid 
recipient or provide non-emergency medical transportation that is not 
the most appropriate and a cost-effective means of transportation for 
that recipient for the purpose of financial gain, or for any other 
purpose.
    (E) The non-Federal share of all Medicaid payments under the 
transportation brokerage program must be in compliance with applicable 
Federal requirements in sections 1902(a)(2) and 1903(w) of the Act, and 
applicable Federal regulations set forth at Sec.  433.50 through Sec.  
433.74 of this chapter.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: August 30, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 10, 2007.
Michael O. Leavitt,
Secretary.

    Editorial Note: This document was received at the Office of the 
Federal Register on August 13, 2007.

 [FR Doc. E7-16172 Filed 8-23-07; 8:45 am]
BILLING CODE 4120-01-P