[Federal Register Volume 73, Number 125 (Friday, June 27, 2008)]
[Rules and Regulations]
[Pages 36443-36448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-13520]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 401

[CMS-6032-F]
RIN 0938-AO27


Medicare Program; Use of Repayment Plans

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

ACTION: Final rule.

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SUMMARY: This final rule modifies Medicare regulations to implement 
section 935(a) 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'') for Medicare 
provider and supplier overpayments. Under this provision, we are 
granting a provider or a supplier an ERS under certain terms and 
conditions as defined in the statute. This final rule establishes 
criteria and procedures to apply this requirement and to define the 
concepts of ``hardship'' and ``extreme hardship.''

DATES: Effective Date: These regulations are effective on July 28, 
2008.

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

SUPPLEMENTARY INFORMATION:

I. Background

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). Section 400.202 defines 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 
items or services that are not covered, exceeds the amount allowed by 
Medicare for an item or service, or is made for items or services that 
should have been paid by another insurer (for example, 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 of 1966 (Pub. L. 89-508) (FCCA), 
80 Stat. 308 (amended by the Debt Collection Improvement Act of 1996 
(Pub. L. 104-134) (DCIA) (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 the Congress. The FCCA was intended to be 
independent of the other authorities we use to collect debt and added 
to, rather than supplanted, our other authorities, including common law 
authority.
    The FCCA authorized the head of an agency to collect claims in any 
amount. This statute also provided 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. The FCCA was amended in 1996 and is now 
referred to as the Debt Collection Improvement Act of 1996 (Pub. L. 
104-134) (DCIA), 110 Stat. 1321, 1358 (April 26, 1996) (codified at 31 
U.S.C. 3711).
    In the November 2, 1977 Federal Register (42 FR 57351), the 
Secretary of the Department of Health and Human Services (the 
Secretary) published a rule to delegate authority to the Department 
Claims Officer generally, and the Administrator of the Centers for 
Medicare & Medicaid Services (the Administrator) 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.)
    In the August 29, 1983 Federal Register (48 FR 39060), we published 
the ``Federal Claims Collection Act; Claims Collection and Compromise'' 
final rule with comment period in accordance with the FCCA. In that 
final rule with comment period, we adopted the applicable debt 
collection tools made available to us under the FCCA including the 
ability to collect or compromise claims, or suspend or terminate 
collection action, as appropriate. The final rule with comment period 
also set forth the requirements we 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 (Pub. L. 104-191) (HIPAA), 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 Funds. Section 1893 of the Act expands our contracting authority 
to allow us to contract with eligible entities to perform MIP 
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 Medicare provider and 
supplier overpayments.

[[Page 36444]]

C. Overview of Current Policy

    The current policy that 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) 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 the current 
Sec.  401.607(c)(2) which include the following: (1) The amount of the 
claim; (2) the debtor's ability to pay; and (3) 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 within 
30 days, which could place a provider or supplier at financial risk or 
bring the provider or supplier a step closer to 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, a balance sheet), a statement of financial 
performance (for example, an income statement), and a statement of 
future viability (for example, a 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.

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

    On December 8, 2003, the Congress enacted the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) 
(MMA). This 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.

II. Provisions of the Proposed Regulations

    The following is an overview of the provisions we proposed in the 
Use of Repayment Plans proposed rule published in the November 27, 2006 
Federal Register (71 FR 68519).

1. Hardship Provision

    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 
Medicare 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's 
repayment of an overpayment within 30 days is deemed to be a 
``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 proposed 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 proposed to interpret the new ``hardship'' test under section 
935(a) of the MMA as not to supersede our ERS regulations currently at 
Sec.  401.607(c)(2), (which we proposed to redesignate as Sec.  
401.607(c)(3)). Since our existing regulations governing ERSs are 
issued under the FCCA, we do not plan to eliminate the criteria and 
procedures currently used to grant providers and suppliers ERSs. 
Instead, we proposed to add an initial ``hardship'' test to existing 
regulations and procedures for determining a debtor's ERS.
    We proposed that all requests for an ERS first be evaluated under 
the new ``hardship'' test. Under section 935(a) of the MMA, 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 proposed to use 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 proposed that the number of months available be 
annualized to equal an approximate yearly Medicare payment level for 
the provider or supplier. (For detailed examples on how to apply the 
new ``hardship'' test provided in section 1893(f)(1) of the Act, please 
see the November 27, 2006 proposed rule, ``Use of Repayment Plans'' (71 
FR 68521).)

2. Exceptions Under the ``Hardship'' Provision in Section 935(a) of the 
MMA

    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 
occur 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 proposed that contractors continue to use 
existing procedures and definitions applicable to bankruptcy and fraud 
or abuse.) In such cases, CMS or its contractors are prohibited from 
granting an ERS.

3. Extreme Hardship Provision

    Under the provisions of Sec.  401.607(c)(2)(vi) of this final rule, 
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 considered different 
approaches for defining ``extreme hardship'' and sought 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

[[Page 36445]]

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.
    We proposed 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 the 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, we proposed that the provider or 
supplier may be granted an ERS between 36 and 60 months. We also 
proposed that contractors apply the statutory exceptions to ``extreme 
hardship'' cases in a similar manner as they do to ``hardship'' cases. 
We solicited 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 (ERSs)

    We proposed to initially handle ERS requests differently than we 
have under our current regulations. We proposed to 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 in the Medicare Financial 
Management Manual, CMS, Pub. 100-6, Chapter 4, Section 50. We believe 
that by waiving the requirement to submit financial documentation (such 
as financial statements or a bank denial letter) for a 6-month ERS, we 
allow 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.
    We therefore proposed that a provider or supplier that requests a 
6-month ERS, meets the ``hardship'' test, does not fall within an 
exception, and elects not to submit financial documentation would be 
approved for a 6-month ERS. 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 proposed not to 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 greater than 6 months, we proposed 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 in the ERS, 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.
    If a provider or supplier misses one installment payment in any ERS 
granted under section 935(a) of the MMA, the statute permits us to 
immediately collect the entire overpayment. However, we proposed to 
impose this penalty only on the ``automatic'' 6-month ERS. With all 
other ERSs, we proposed to continue to use the existing procedures that 
define a default of an ERS as missing two consecutive installment 
payments.
    We proposed to revise Sec.  401.601(a) to read as follows: ``This 
subpart implements the following provisions: (1) For CMS the Debt 
Collection Improvement Act of 1996 (Pub. L. 104-134) (DCIA), 110 Stat. 
1321, 1358 (April 26, 1996) (codified at 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 DCIA for 
the Federal government; (2) section 1893(f)(1) of the Act regarding the 
use of repayment plans.''
    In addition, in Sec.  401.603 we proposed to add a definition for 
an ``extended repayment schedule.''
    We proposed to redesignate Sec.  401.607(c)(2) as Sec.  
401.607(c)(3). In addition, we proposed a new Sec.  401.607(c)(2), 
Extended repayment schedule, in accordance with section 1893(f)(1) of 
the Act. We proposed to implement the provisions of section 1893(f)(1) 
of the Act, as amended by section 935(a) of the MMA, in new Sec.  
401.607(c)(2), Extended repayment schedule.

III. Analysis of and Responses to Public Comments

    We received 6 public comments on the November 27, 2006 proposed 
rule. The following is a summary of the major issues and our responses.
    Comment: One commenter believed that the provisions of the proposed 
rule were not equitable between provider types because 10 percent of 
total Medicare reimbursement for a provider with a 50 percent Medicare 
fee-for-service revenue is a greater threshold to reach than a provider 
with a 5 percent Medicare fee-for-service revenue.
    Response: We agree with the comment that the proposed rule may not 
in all cases treat different provider types similarly. However, the 
statute was written to define hardship as a ratio of Medicare 
overpayments to total Medicare payments/reimbursement in a given time 
period. The statute does not allow CMS to take into account the 
percentage of patient revenue from other sources when defining 
``hardship.'' For all other ERS requests, we proposed 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.
    Comment: Some commenters believed it would be more consistent and 
more fair to providers if we would use the definition of default for 
all ERSs as missing two consecutive installment payments.
    Response: 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 have 
decided to impose the 1-month missed payment rule only for the 6-month 
``hardship-based'' ERS. We chose not to apply the two missed payment 
rule to 6-month ERSs because we do not want a provider or supplier to 
be too far in arrears if they miss payments in such a short ERS. A 
provider or supplier that is behind two payments in a 6-month ERS has a 
greater amount of its payments in arrears than a provider or supplier 
that is behind two payments in a 36-month or 60-month ERS. For example, 
two missed payments on the amortization of an overpayment covered under 
a 6-month ERS (2 divided by 6) is equal to approximately 33.3 percent 
of the total overpayment whereas 2 missed payments under a 36-month ERS 
(2

[[Page 36446]]

divided by 36) is equal to a much lower 5.5 percent of the total 
overpayment. On a 60-month ERS, two missed payments would only equal 
3.3 percent of the total overpayment (2 divided by 60).
    Comment: Some commenters were concerned that we may be 
inadvertently legally binding providers to the ``automatic'' 6-month 
ERS and not offering providers a future opportunity to request a second 
ERS under Sec.  401.607(c).
    Response: In the proposed rule, we stated that 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 ERS under newly redesignated Sec.  401.607(c)(3). In addition, 
we will 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).
    Comment: One commenter believed that there is no practical reason 
for why we have not adopted a parallel numerical threshold approach to 
extreme hardship by using some percentage above the numerical 10 
percent threshold for hardship.
    Response: The 10 percent used in this final rule to define hardship 
is required by statute. As stated in the proposed rule, 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. However, 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. In addition, the ERS review 
process is a multivariable financial analysis and it would not be 
practical or equitable to either the provider/supplier or the Medicare 
program to reduce the ERS process down to a single variable. We believe 
keeping the definition of extreme hardship broader than a single 
variable is in the best interests of the provider and supplier 
community and is the most effective way to ensure that overpayments 
will be collected and returned to the Medicare Trust Fund.
    Comment: One commenter stated that there is confusion as to why the 
burden of producing financial documentation can be removed for the 
``automatic'' 6-month ERS but not for ERS plans longer than 6 months.
    Response: We removed the financial documentation requirement for 6-
month ERSs because the contractor already has the requisite information 
needed to determine if a provider or supplier meets the statutory 
hardship test. However, in order to grant an ERS longer than 6 months, 
we continue to need financial documentation to determine a provider or 
supplier's ability to make future ERS payments. We also need financial 
data to determine the length of the ERS or payback period that should 
be granted to the provider or supplier. While a short ERS may cause a 
provider or supplier to go out of business, the longer the ERS period 
the greater the delay in the overpayment recovery and the greater the 
financial risk to the Medicare program. We believe the increased risk 
associated with a longer repayment or amortization period requires that 
we give an ERS request greater financial scrutiny.
    Comment: We received comments that were outside the scope of the 
proposed rule (for example, regarding the effects on State Medicaid 
programs).
    Response: We are not responding in this final rule to comments that 
are outside of the scope of the proposed rule.

IV. Provisions of the Final Regulations

    As a result of our review of the public comments, we do not find 
any cause to alter the provisions of the proposed rule. Therefore, we 
are finalizing the provisions as proposed.

V. Collection of Information Requirements

    This final rule does not impose any new information collection or 
recordkeeping requirements. The information collection requirements 
discussed in the preamble pertain to the extension of repayment 
schedules. The requirements and associated paperwork burden are 
approved under Office of Management and Budget (OMB) control number 
0938-0270, with a current expiration date of January 31, 2011.
    We plan to submit a revised information collection request (ICR) to 
OMB to address the reduction of burden associated with the ``hardship 
test'' and 6-month ERS period. As discussed in Section I. 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. We 
will announce the revisions to 0938-0270 under separate notice and 
comment periods prior to submitting the revisions for OMB approval.

VI. 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), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Order 13258 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 final rule will not reach the economic threshold 
and thus is not considered a major rule. There will be no additional 
costs or documented savings resulting from the implementation of this 
final 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 $31.5 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 $6.5 million to $31.5 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, the 
Secretary has determined that this final rule will 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

[[Page 36447]]

significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. Because 
there are no additional costs or documented savings resulting from the 
implementation of this final rule, this final rule will 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 $127 million. This final rule will not 
impose spending costs on State, local, or tribal governments in the 
aggregate, or by the private sector, of $127 million.
    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 final rule will not have a substantial effect on 
State or local governments.

B. Anticipated Effects

1. Effects on Medicare Providers and Suppliers
    This final rule could affect all Medicare provider and supplier 
types with a Medicare overpayment. This final rule will allow Medicare 
providers or suppliers 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 repayment 
time period could provide a provider or supplier time to generate or 
secure the necessary capital to liquidate the debt without having to 
file the financial documentation required to secure a longer repayment 
schedule.
2. Effects on Other Providers
    There will be no effect on other providers.
3. Effects on the Medicare and Medicaid Programs
    There will be no additional costs or documented savings resulting 
from the implementation of this final 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,'' will result in 
inequitable outcomes for different providers and suppliers as discussed 
in the ``extreme hardship'' section in section II. of this final rule, 
Provisions of the Proposed Regulations.
    In implementing section 935(a) 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 solicited comments 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. Conclusion

    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.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 401--GENERAL ADMINISTRATIVE REQUIREMENTS

0
1. The authority citation for part 401 is revised to read as follows:

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

Subpart F--Claims Collection and Compromise

0
2. In Sec.  401.601, paragraph (a) is revised to read as follows:


Sec.  401.601  Basis and scope.

    (a) Basis. This subpart implements the following statutory 
provisions:
    (1) For CMS the Debt Collection Improvement Act of 1996 (Pub. L. 
104-134) (DCIA), 110 Stat. 1321, 1358 (April 26, 1996) (codified at 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 DCIA for the Federal government.
    (2) Section 1893(f)(1) of the Act regarding the use of repayment 
plans.
* * * * *

0
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]

0
4. In Sec.  401.607--
0
A. Redesignate paragraph (c)(2) as paragraph (c)(3).
0
B. Add a new paragraph (c)(2).
    The addition reads as follows:


Sec.  401.607  Claims collection.

* * * * *
    (c) * * *
    (2) Extended repayment schedule.
    (i) For purposes of this paragraph (c)(2), the following 
definitions apply:
    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.
    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 previous calendar year for a supplier or non cost-
report provider.
    (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

[[Page 36448]]

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 prohibited from granting 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 will 
constitute a ``hardship'' as defined in paragraph (c)(2)(i) of this 
section. If a provider or supplier is granted an ERS under this 
paragraph, 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 will 
constitute an ``extreme hardship'' as defined in paragraph (c)(2)(i) of 
this section.

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

    Dated: January 22, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: February 27, 2008.
Michael O. Leavitt,
Secretary.

    Editorial Note: This document was received at the Office of the 
Federal Register on June 11, 2008.

 [FR Doc. E8-13520 Filed 6-26-08; 8:45 am]
BILLING CODE 4120-01-P