[Federal Register Volume 74, Number 235 (Wednesday, December 9, 2009)]
[Rules and Regulations]
[Pages 65296-65338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-28707]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 405



Medicare Program: Changes to the Medicare Claims Appeal Procedures; 
Final Rule

  Federal Register / Vol. 74 , No. 235 / Wednesday, December 9, 2009 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405

[CMS-4064-F]
RIN 0938-AM73


Medicare Program: Changes to the Medicare Claims Appeal 
Procedures

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

ACTION: Final rule.

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SUMMARY: Under the procedures in this final rule, Medicare 
beneficiaries and, under certain circumstances, providers and suppliers 
of health care services can appeal adverse determinations regarding 
claims for benefits under Medicare Part A and Part B pursuant to 
sections 1869 and 1879 of the Social Security Act (the Act). Section 
521 of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) amended section 1869 of the Act to 
provide for significant changes to the Medicare claims appeal 
procedures. After publication of a proposed rule implementing the 
section 521 changes, additional new statutory requirements for the 
appeals process were enacted in Title IX of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA). In March 2005, 
we published an interim final rule with comment period to implement 
these statutory changes. This final rule responds to comments on the 
interim final rule regarding changes to these appeal procedures, makes 
revisions where warranted, establishes the final implementing 
regulations, and explains how the new procedures will be put into 
practice.

DATES: Effective Date: These regulations are effective on January 8, 
2010.

FOR FURTHER INFORMATION CONTACT:
    Arrah Tabe-Bedward, (410) 786-7129 (for issues relating to general 
appeal rights).
    David Danek, (617) 565-2682 (for issues relating to 
redeterminations, reconsiderations, reopenings and expedited access to 
judicial review (EAJR) issues).
    Katherine L. Hosna, (410) 786-4993 (for general appeal issues).
    Peggy McFadden-Elmore, (703) 235-0126 (for issues relating to 
Administrative Law Judge (ALJ) hearings).
    Theodore Kim, (202) 565-0200 (for issues relating to Medicare 
Appeals Council (MAC) review).

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Overview of Existing Medicare Program
    B. Appeals Procedures Under Previous Regulations
    C. Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA)
    D. Related Provisions of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA)
    E. Codification of Regulations
II. Analysis of Appeals Procedures and Responses to Public Comments
    A. Overview
    B. Appeals
    1. Statutory Basis and Scope, Definitions and General Procedures 
(Sec.  405.900 Through Sec.  405.904)
    2. Parties to an Appeal, Medicaid State Agencies, and 
Appointment of Representatives (Sec.  405.906 Through Sec.  405.910)
    3. Assignment of Appeal Rights (Sec.  405.912)
    4. Initial Determinations (Sec.  405.920 Through Sec.  405.928)
    a. Initial Determinations, Notice of Initial Determinations, and 
Timeframe for Processing Initial Determinations (Sec.  405.920 
Through Sec.  405.922)
    b. What Constitutes an Initial Determination and Decisions That 
Are Not Considered Initial Determinations (Sec.  405.924 Through 
Sec.  405.926)
    c. Initial Determinations Subject to the Reopenings Process 
(Sec.  405.927) and the Effects of Initial Determinations (Sec.  
405.928)
    5. Redeterminations (Sec.  405.940 Through Sec.  405.958)
    a. Redetermination Requests (Sec.  405.940 Through Sec.  
405.946)
    b. Conduct and Effect of Redeterminations (Sec.  405.948 Through 
Sec.  405.958)
    6. Reconsiderations (Sec.  405.960 Through Sec.  405.978)
    a. Processing Reconsideration Requests (Sec.  405.960 Through 
Sec.  405.964)
    b. Evidence Submitted With the Reconsideration Request--Full and 
Early Presentation of Evidence (Sec.  405.966)
    c. Conduct and Processing of Reconsiderations (Sec.  405.968 
Through Sec.  405.978)
    7. Reopenings of Initial Determinations, Redeterminations, 
Reconsiderations, Hearings and Reviews (Sec.  405.980 Through Sec.  
405.986)
    a. Reopening Actions (Sec.  405.980)
    b. Conduct of Reopenings (Sec.  405.982 through Sec.  405.986)
    8. Expedited Access to Judicial Review (Sec.  405.990)
    9. ALJ Hearings (Sec.  405.1000 Through Sec.  405.1064)
    a. Transfer of the ALJ Function
    b. ALJ Hearings--General Rules (Sec.  405.1000 Through Sec.  
405.1014)
    c. Adjudication Deadlines--ALJ Level (Sec.  405.1016)
    d. Submission of Evidence Before the ALJ Hearing (Sec.  
405.1018)
    e. Time and Place for a Hearing Before an ALJ; Notice of 
Hearing; Objections to the Issues (Sec.  405.1020 Through Sec.  
405.1024)
    f. Disqualification of the ALJ (Sec.  405.1026)
    g. Review of Evidence Submitted to the ALJ, Hearing Procedures, 
and Issues Before an ALJ (Sec.  405.1028 Through Sec.  405.1032)
    h. Remand Authority (Sec.  405.1034)
    i. Description of the ALJ Hearing Process and Discovery (Sec.  
405.1036 and Sec.  405.1037)
    j. Deciding a Case Without an ALJ Hearing, Conferences, the 
Administrative Record, and Consolidated Hearings (Sec.  405.1038 
Through Sec.  405.1044)
    k. Notice and Effect of ALJ's Decision (Sec.  405.1046 Through 
Sec.  405.1048)
    l. Removal of a Hearing Request From the ALJ to the MAC, 
Dismissal of a Request for ALJ Hearing, and the Effect of a 
Dismissal (Sec.  405.1050 Through Sec.  405.1054)
    m. Applicability of Statutes, Regulations, Medicare Coverage 
Policies, CMS Rulings and Other Program Guidance (Sec.  405.1060 
Through Sec.  405.1063)
    n. ALJ Decisions Involving Statistical Samples (Sec.  405.1064)
    10. Review by the Medicare Appeals Council (Sec.  405.1100 
Through Sec.  405.1134)
    a. MAC Review of an ALJ's Action (Sec.  405.1100 Through Sec.  
405.1120)
    b. Evidence That May Be Submitted to the MAC and Subpoenas 
(Sec.  405.1122)
    c. Oral Argument, Cases Remanded by the MAC, the Effect of MAC 
Actions, Escalation to Federal District Court, and Extensions of 
Time To File Actions in Federal District Court (Sec.  405.1124 
Through Sec.  405.1134)
11. Judicial Review (Sec.  405.1136 Through Sec.  405.1140)
III. Provisions of the Final Regulations
IV. Collection of Information Requirements
V. Regulatory Impact Statement

I. Background

A. Overview of Existing Medicare Program

    The original Medicare program consists of two parts: Part A and 
Part B. Part A, known as the hospital insurance program, covers certain 
care provided to inpatients in hospitals, critical access hospitals, 
and skilled nursing facilities, as well as hospice care and some home 
health care. Part B, the supplementary medical insurance program, 
covers certain physician's services, outpatient hospital care, and 
other medical services that are not covered under Part A.
    In addition to the original Medicare program, beneficiaries may 
elect to receive health care coverage under Part C of Medicare, the 
Medicare Advantage (MA) program. Under the MA program, an individual is 
entitled to those items and services (other than hospice care) for 
which benefits are available under Part A and Part B. MA plans may 
provide additional health care items and services that are not covered 
under the original Medicare program. Beneficiaries can also elect to 
receive

[[Page 65297]]

prescription drug coverage under Part D of Medicare, which became 
effective January 1, 2006.
    Under the original Medicare program, a beneficiary can generally 
obtain health services from any institution, agency, or person 
qualified to participate in the Medicare program. After providing an 
item or service, the provider or supplier (or, in some cases, a 
beneficiary) can submit a claim for benefits under the Medicare program 
to the appropriate government contractor: A fiscal intermediary (FI) 
(for all Part A claims and certain Part B claims); a carrier (for most 
claims under Part B); or a Medicare administrative contractor (under 
Medicare contracting reform, a contractor that processes all types of 
Part A and Part B claims). If the claim is for an item or service that 
falls within a Medicare benefit category, is not otherwise excluded by 
statute or rule, and is reasonable and necessary for the individual as 
set forth in Sec.  1862(a) of the Social Security Act, then the item or 
service is covered and the contractor may make payment for the claim. 
However, the Medicare program does not cover all health care expenses. 
Therefore, if the Medicare contractor determines that the medical care 
is not covered under the Medicare program, then it denies the claim.

B. Appeals Procedures Under Previous Regulations

    Generally, when a contractor denies a claim, it notifies the 
provider or supplier, and the beneficiary of the denial and offers the 
opportunity to appeal the denial. The pre-BIPA appeal procedures for 
original Medicare are set forth in regulations at 42 CFR part 405, 
subparts G and H. Separate procedures for appealing determinations made 
under the MA program are set forth at 42 CFR part 422, subpart M. There 
is a similar, separate appeals process for the prescription drug 
program set forth at subpart M of 42 CFR part 423. In addition, we 
published a proposed rule to describe the appeals procedures that would 
apply at the ALJ and MAC levels in deciding appeals brought by 
individuals who have enrolled in the Medicare Part D prescription drug 
benefit program (73 FR 14342, March 17, 2008). After an appellant has 
exhausted the administrative appeal procedures offered under the 
Medicare program, the Medicare statute provides the opportunity for an 
individual who is dissatisfied to seek review in Federal court.
    The regulations in part 405 subpart G beginning at Sec.  405.701 
describe reconsiderations and appeals under Medicare Part A, prior to 
the statutory changes in BIPA and the MMA. As set forth in these 
regulations, when a Medicare contractor made a determination for a Part 
A claim, the beneficiary or, in some circumstances, the provider, could 
appeal the determination. Consistent with sections 1861(u) and 1866(e) 
of the Act and Sec.  400.202, the term ``provider'' includes hospitals, 
skilled nursing facilities (SNFs), home health agencies (HHAs), 
comprehensive outpatient rehabilitation facilities (CORFs), and 
hospices, as well as certain clinics, rehabilitation agencies, and 
public health agencies. Under this process, if a determination was 
appealed, the contractor would reconsider the initial determination. If 
the contractor upheld the original determination, a party could request 
a hearing before an ALJ, provided that the amount in controversy (AIC) 
was at least $100. If a party was dissatisfied with the ALJ's decision, 
it could request review by the Departmental Appeals Board (DAB). Under 
these regulations, the component within the DAB responsible for 
Medicare claim appeals was the MAC. (Although the Medicare appeals 
regulations in part 405, subparts G and H, contain some limited 
provisions regarding ALJ and MAC proceedings, these proceedings were 
generally governed by the Social Security Administration (SSA) 
regulations at 20 CFR part 404, subpart J.) MAC decisions generally 
constituted the final decision of the Secretary and could be appealed 
to a Federal court. With few exceptions, parties had to complete the 
lower level of appeal before the appeal could go on to the next level. 
Pre-BIPA and pre-MMA appeal procedures for Medicare Part B are set 
forth in 42 CFR part 405 subpart H (Sec.  405.801, et. seq.). Under 
these regulations, beneficiaries, and suppliers that accepted 
assignment for Medicare claims could request review of the contractor's 
initial determination that a claim could not be paid, either in full or 
in part. (The term ``supplier'' is defined under section 1861(d) of the 
Act, as amended by section 901(b) of the MMA, and means a physician or 
other practitioner, a facility, or other entity (other than a provider 
of services that furnishes items or services) under Medicare.) 
Suppliers that did not take assignment and providers, in some 
circumstances, had limited appeal rights under these regulations.
    As defined in the pre-BIPA and pre-MMA regulation at Sec.  405.815, 
if a party to the contractor's review determination was dissatisfied 
and the amount in controversy was at least $100, the party was entitled 
to request a second level appeal known as a ``carrier hearing''. If the 
carrier's hearing officer upheld the denial, a party to the carrier 
hearing could request a hearing before an ALJ, provided that the action 
met the amount in controversy requirement. (We published a ruling, CMS 
Ruling No. 02-1, which implemented the $100 amount in controversy 
requirement for Part B ALJ hearings specified in section 521 of BIPA 
for initial determinations made on or after October 1, 2002. See 67 FR 
62478, 62480 (Oct. 7, 2002). For initial determinations made prior to 
October 1, 2002, the amount in controversy threshold was $100 for home 
health services and $500 for all other services.) Subsequent aspects of 
the appeals process for Part B claims are identical to those described 
above for Part A claims.

C. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000 (BIPA)

    Section 521 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) amended 
section 1869 of the Act to require revisions to the Medicare fee-for-
service (Part A and Part B) appeals process. Among the major changes 
required by the BIPA amendments were--
     Establishing a uniform process for handling Medicare Part 
A and Part B appeals, including the introduction of a new level of 
appeal for Part A claims;
     Revising the timeframes for filing a request for Part A 
and Part B appeals;
     Imposing time limits for ``redetermination'' decisions 
made by the contractors;
     Establishing a new appeals entity, the qualified 
independent contractor (QIC), to conduct ``reconsiderations'' of 
contractors' initial determinations (including redeterminations) and 
allowing appellants to escalate cases to the next level of appeal (an 
ALJ hearing) if reconsiderations are not completed within established 
time limits;
     Establishing a uniform amount in controversy threshold for 
appeals at the ALJ level;
     Imposing 90-day time limits for issuing decisions at the 
ALJ and MAC levels of appeal and allowing appellants to escalate cases 
to the next level of appeal if an ALJ or the MAC does not meet the 90-
day deadline; and
     Requiring ``de novo'' review when the MAC reviews an ALJ 
decision made after a hearing.
    On November 15, 2002, we published in the Federal Register a 
comprehensive proposed rule (67 FR 69312) to set forth proposed changes 
needed to implement the provisions of section 521 of the BIPA, as well 
as other complementary

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changes needed to improve the Medicare claims appeal procedures.

D. Related Provisions of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA)

    On December 8, 2003, the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted. The 
MMA includes a number of provisions that made additional changes to the 
Medicare claim appeals process. To the extent the new statutory 
language necessitated revisions or additions to our proposed 
regulations to ensure conformance to the MMA, we have incorporated the 
needed changes into the interim final rule (70 FR 11420, March 8, 
2005), the correcting amendments (70 FR 37700, June 30, 2005 and 70 FR 
50214, August 26, 2005) and this final rule. Among the major changes 
required by MMA are--
     Transferring the ALJ function to the Department of Health 
and Human Services (Section 931 of the MMA).
     Establishing a process for expedited access to judicial 
review (Section 932 of the MMA).
     Requiring the full and early presentation of evidence 
(Section 933(a) of the MMA).
     Requiring the review of a patient's medical records in a 
QIC reconsideration (Section 933(b) of the MMA).
     Establishing content requirements for appeal determination 
notices (Section 933(c) of the MMA).
     Revising eligibility requirements for QICs (Section 933(d) 
of the MMA).
     Precluding administrative or judicial review of a 
determination by the Secretary of sustained or high levels of payment 
errors (Section 934(a) of the MMA).
     Creating a separate process for the correction of minor 
errors or omissions (Section 937 of the MMA).
     Permitting appeals by providers and suppliers when there 
is no other party available (Section 939 of the MMA).
     Revising appeals timeframes and amounts in controversy 
(Section 940 of the MMA).

E. Codification of Regulations

    The BIPA provisions and the subsequent revisions made under MMA 
make possible a largely uniform set of appeals procedures that can be 
applied for both Part A and Part B of Medicare. In the interim final 
rule, we established a new subpart I of part 405 that sets forth in one 
location the requirements for fee-for-service claims appeals processed 
by Medicare carriers, FIs, Medicare administrative contractors, and 
QICs. Also included in subpart I are the provisions needed to govern 
Medicare claims appeals to ALJs and the MAC. Thus, subpart I will 
codify in one location key regulations governing all aspects of 
Medicare claim appeals, beginning with the statutory requirements that 
apply to initial determinations and proceeding through all four levels 
of the administrative appeals process.

II. Analysis of Appeals Procedures and Responses to Public Comments

A. Overview

    Discussed below are the comments and clarifications to the March 
2005 interim final rule with comment period implementing section 521 of 
BIPA and the relevant sections of the MMA. In general, we discuss those 
sections of the interim final rule on which we received comments from 
the public or which required editorial changes to improve the clarity 
and simplicity of the regulations. We include a brief explanation of 
each regulatory provision, provide a summary of, and responses to, the 
comments received, and describe the changes, if any, to be made in 
finalizing the provision in this rulemaking. The changes made in this 
final regulation are summarized in the section of this preamble 
entitled ``Provisions of the Final Regulations.''
    We received 26 timely comments on the 2005 interim final rule with 
comment period from individuals, organizations representing providers 
and suppliers, beneficiary advocacy groups, law offices, health plans, 
and others. The issues most frequently raised by commenters include: 
Beneficiary protections; deadlines for filing appeals and timeframes 
for decision-making; entities entitled to receive notices; differences 
between an assignee and the beneficiary's appointed representative; the 
role of the QICs that will perform reconsiderations; evidentiary 
requirements; the perceived formality of the ALJ procedures, especially 
proceedings where CMS or one of its contractors enters the process, and 
the impact on beneficiaries; and whether the nature of an ALJ hearing 
has changed, how much deference the ALJ gives to CMS' policies and, in 
general, the manner in which the ALJs conduct hearings. These comments 
and our responses are discussed below.

B. Appeals

1. Statutory Basis and Scope, Definitions and General Procedures (Sec.  
405.900 Through Sec.  405.904)
    In Sec.  405.900, we set forth the general statutory authority for 
the ensuing provisions and explain that this subpart establishes the 
requirements for appeals of initial determinations for benefits under 
Part A and Part B of Medicare. Section 405.902 sets forth the 
definitions for terms used in subpart I. Section 405.904 provides a 
general description of the appeals process for entitlement and claims 
appeals. Additional detailed discussion of these provisions is found in 
the interim final rule at 70 FR 11427, 11431 through 11432, and 11434 
through 11435.
    In this final regulation, we are making a technical revision to 
Sec.  405.902 to define the term contractor, as applicable to the 
provisions in subpart I. We believe the meaning of the term contractor 
may have been unclear because, in some instances, we specified the 
entities that are included in the term contractor whereas, in other 
instances, we did not provide such detail. Thus, we believe a technical 
revision to clearly define the term contractor and to ensure that the 
term is used consistently throughout Subpart I is appropriate. 
Contractor means an entity that contracts with the Federal government 
to review and/or adjudicate claims, determinations and/or decisions. 
This includes, but is not limited to, fiscal intermediaries, carriers, 
Medicare administrative contractors, qualified independent contractors, 
and quality improvement organizations (QIOs). Although, based on this 
definition, the term contractor includes many entities, the meaning of 
the term contractor for a particular provision is derived from the 
context. For example, under Sec.  405.920(a), after a claim is filed 
with the appropriate contractor in the manner and form described in 
part 424 subpart C, the contractor must determine if the items and 
services furnished are covered or otherwise reimbursable under title 
XVIII of the Act. Only fiscal intermediaries, carriers and Medicare 
administrative contractors make such determinations, so the term 
contractor means only these three entities in this context. We are also 
making technical revisions to several sections noted below, in order to 
remove references to specific contractors (such as QICs and QIOs) when 
describing the general actions, responsibilities, or authority of 
contractors. However, there are instances where we continue to use the 
term contractor and also separately include a reference to QICs in the 
same provision (for example, Sec.  405.910(i)(2) and Sec.  
405.980(a)(4)). In those situations, we are maintaining the separate 
reference to the QIC in order to highlight the specific 
responsibilities of

[[Page 65299]]

the QIC with respect to reconsiderations.
    We received no comments on these sections. Therefore, we are 
finalizing Sec.  405.900 and Sec.  405.904 without modification. We are 
finalizing Sec.  405.902, Sec.  405.1000, Sec.  405.1010 and Sec.  
405.1012 with modifications, as noted.
2. Parties to an Appeal, Medicaid State Agencies, and Appointment of 
Representatives (Sec.  405.906 Through Sec.  405.910)
    Section 405.906 discusses parties to the appeals process. More 
detail is provided on the role of Medicaid State agencies in the 
appeals process in section 405.908. Section 405.910 describes appointed 
representatives and the process for becoming an appointed 
representative. We received several comments with respect to the rights 
of Medicaid State agencies to file appeals, and the rights and 
responsibilities of representatives. A summary of the comments and our 
responses is included below. Additional detailed discussion of these 
provisions is found in the interim final rule at 70 FR 11423, 11427 
through 11431, 11432, 11434 through 11435, 11441, 11444 through 11445, 
and 11468.
    Comment: Several commenters asked CMS to broaden the definition of 
``party'' at the initial determination level to include Medicaid State 
agencies.
    Response: As set forth in Sec.  405.906(b)(2), a Medicaid State 
agency can be a party to a redetermination, reconsideration, hearing or 
MAC review. Section 405.908 explains the process for a Medicaid State 
agency to join the appeal as a party. Specifically, in Sec.  405.908, 
we allow the State agency to file an appeal with respect to ``a claim 
for items or services furnished to a dually eligible beneficiary only 
for services for which the Medicaid State agency has made payment, or 
for which it may be liable.'' Only after Medicare has issued its 
initial determination on a claim for items or services provided to a 
dually eligible beneficiary can a determination be made about a State 
agency's potential liability for all or part of the associated charges, 
and thus, the Medicaid State agency should not be a party to the 
initial determination. If the Medicaid program is not financially 
responsible for the items or services on a particular claim, it follows 
that the State agency would have no interest in the claim and thus, 
should not be a party to any appeal of the initial determination. 
Accordingly, we believe it is appropriate to offer party status to a 
Medicaid State agency only after there has been a determination on the 
claim by Medicare, and then only if the State agency makes payment or 
may be liable to make payment for the items or services on that claim. 
If these requirements are met, the State agency may file a request for 
a redetermination and will retain party status through the course of 
any subsequent appeals for the particular claim.
    Comment: One commenter stated that although the interim final rule 
calls for an adjudicator to contact the party and provide a description 
of information missing from the appointment of representative form 
(Sec.  405.910(d)(1)), there are no provisions explaining how the need 
to cure a defective appointment affects the time deadline for filing an 
appeal. The commenter recommended amending the rule to indicate that an 
appeal filed within time limits remains timely when the only technical 
flaw is a defective appointment of representative that can be, and is, 
cured.
    Response: Under Sec.  405.910(d)(1), if an appeal request is filed 
by an individual attempting to represent a party, but the submission 
contains a defective appointment of representative (AOR) form, the 
adjudicator will give the party notice of the defect. The adjudicator 
provides the party and the putative representative with a reasonable 
timeframe within which to cure the defect. The adjudicator will not 
dismiss an appeal request filed with a defective AOR provided the 
defect is cured within the timeframe established by the adjudicator. 
Thus, in response to the situation described by the commenter, an 
appeal request filed timely will be considered timely if the party 
submits a corrected and valid appointment instrument within the 
timeframe specified by the adjudicator, even if that period extends 
beyond the time limit for filing the appeal.
    However, if the adjudicator does not receive a valid appointment 
instrument within the timeframe specified by the adjudicator, it may 
dismiss the appeal request because the individual requesting the appeal 
is not a proper party to the appeal or does not otherwise have a right 
to appeal. See Sec.  405.952(b)(1), Sec.  405.972(b)(1), Sec.  
405.1052(a)(3) and Sec.  405.1114(b). If the appeal request is 
dismissed, the party or the representative may re-file the request. If 
the resubmission is untimely, consistent with Sec.  405.942(b), the 
representative must include an explanation of the circumstances leading 
to the late filing and request that the contractor consider whether 
good cause exists to extend the time for filing the appeal.
    Comment: One commenter asked that Sec.  405.910(e)(1) be amended to 
note that an appointment is valid for one year, except as noted in 
Sec.  405.910(e)(3). We were also asked to clarify whether a 
representative may be appointed before the issuance of an initial 
determination. Finally, a commenter asked when an updated appointment 
of representative form (Form CMS-1696) would be available.
    Response: Section 405.910(e)(1) states that once the AOR form is 
executed, it is valid for one year from the effective date. Section 
405.910(e)(2) states that the representative must submit, with each 
appeal request, a copy of the valid, effective AOR or other conforming 
written instrument in order to request a redetermination or other 
appeal on behalf of the party. Thus, a valid, executed AOR will be 
honored for the duration of the initial appeal request for which it is 
filed, and for any subsequent appeal request with which it is 
submitted, provided the initial appeal request is filed within one year 
of the effective date of the AOR.
    In Sec.  405.910(e)(3), we made an exception for appointments 
signed in connection with Medicare Secondary Payer recovery claims, 
because liability, no-fault, and worker's compensation claims often 
take more than one year to resolve. Where an appointment of 
representative is related to these recovery claims, the appointment is 
valid from the date that it is signed through the duration of any 
subsequent appeal. We believe Sec.  405.910(e) is clear on its face 
and, thus, we are not revising this subsection.
    In the interim final rule, we stated that, under Sec.  405.910(a), 
the appointment of representative provisions apply at the initial 
determination level and throughout the appeals process. See 70 FR 
11431. Section 405.910(a) states that ``[a]n appointed representative 
may act on behalf of an individual or entity in exercising his or her 
right to an initial determination or appeal.'' In addition, Sec.  
405.910(c)(7) states that the AOR form may ``[b]e filed with the entity 
processing the party's initial determination or appeal.'' Finally, 
Sec.  405.910(e)(1) states that the effective date of the appointment 
is the date that the AOR form or other conforming written instrument 
contains the signatures of both the party and appointed representative. 
The AOR may be completed prior to the submission of a claim or appeal 
request, and a representative may assist with the preparation or 
submission of a claim. (However, consistent with Sec.  405.910(i)(1), 
notices and other information regarding the initial determination are 
only sent to the party

[[Page 65300]]

to the initial determination, except for Medicare secondary payer 
claims appeals as discussed in Sec.  405.910(i)(4)). We believe these 
provisions convey that a representative may be appointed prior to the 
issuance of an initial determination.
    Finally, the revised appointment of representative form, Form CMS-
1696, is available online, in both English and Spanish, at http://www.cms.hhs.gov/CMSForms/CMSForms/list.asp#TopOfPage Representatives at 
1-800-MEDICARE can also provide information on how to obtain the 
appointment of representative form.
    Comment: One commenter questioned the authority of CMS to impose a 
fee review process when an appointed representative for a beneficiary 
wished to charge a fee for services rendered in connection with an 
appeal before the Secretary. The commenter contended that beneficiary 
representatives should be treated like provider representatives who 
have no fee limitations. The commenter stated that the regulations, 
specifically, the fee review provisions, decrease the likelihood that a 
beneficiary will find an advocate to assist in the appeal. The 
commenter also stated that our regulations increase a beneficiary's 
need to be represented.
    Response: Section 1869(b)(1)(B)(iv) of the Act (captioned, 
``Requirements for Representatives of a Beneficiary'') establishes that 
the provisions of sections 205(j) and 206 (other than subsection 
(a)(4)) of the Act apply to representation of an individual for 
Medicare claim appeals in the same manner as they apply to 
representation of an individual for Social Security claims. By 
incorporating these sections in Sec.  1869(b)(1)(B)(iv) of the Act, the 
Congress mandated that, for appeals before the Secretary, appointed 
representatives, including attorneys, must obtain approval of fees 
before charging a beneficiary. Consistent with these statutory 
provisions and the longstanding practice of fee petitions before ALJs, 
Sec.  405.910(f)(1) requires that an appointed representative for a 
beneficiary, who wishes to charge a fee for services rendered in 
connection with an appeal before the Secretary, must obtain approval of 
the fee from the Secretary.
    As noted in the preamble to the interim final rule (70 FR 11429 
through 11430) and at Sec.  405.910(f)(1), we do not consider 
proceedings before the ALJ hearing level (that is, initial 
determination, redetermination, and reconsideration levels) to be 
proceedings ``before the Secretary''. Section 206(a) of the Act 
authorizes the Commissioner of Social Security to prescribe rules and 
regulations to govern the representation of claimants in proceedings 
before the Commissioner. This provision has long been interpreted to 
include only proceedings at the ALJ level and beyond. Thus, we have 
interpreted appeals before the Secretary of the Department of Health 
and Human Services (DHHS or the Department) to include only the ALJ 
level and above. Therefore, the fee petition provisions in Sec.  
405.910(f) do not apply to administrative proceedings below the ALJ 
hearing level. Furthermore, because the clear intent of the fee 
petition provision of the statute is to protect the interests of 
individual Medicare beneficiaries, we do not interpret them as applying 
to non-beneficiary appellants.
    The fee petition process described in Sec.  405.910(f) specifically 
is designed to protect the interests of Medicare beneficiaries by 
ensuring that the fees charged by a representative are reasonable. This 
process is not new to these regulations. Rather, it has been a 
longstanding requirement in both the Medicare and Social Security 
programs for appeals at the ALJ level. See 42 CFR Sec.  405.701(c) and 
42 CFR Sec.  405.801(c), incorporating by reference the provisions of 
20 CFR part 404, subpart R regarding representation of parties. Thus, 
we do not believe this regulation will affect a beneficiary's ability 
to obtain assistance with an appeal.
    Further, we do not believe the new appeals process increases the 
need for a beneficiary to obtain assistance with an appeal. The new 
appeals process primarily changes certain procedures with respect to 
appeals filed by providers and suppliers, the entities and individuals 
who file the vast majority of appeals (for example, the full and early 
presentation of evidence requirement, and CMS participation as a party 
or participant at the ALJ level). However, most of these changes do not 
affect beneficiary initiated appeals. Throughout the process, we have 
attempted to minimize the impact of the new appeals procedures on 
beneficiaries. Therefore, we do not believe that the new appeals 
process increases the need for a beneficiary to obtain assistance with 
an appeal. Further, where we have made changes to operational 
procedures, we have developed notices and model language for 
contractors to provide to parties that explain the new process in 
clear, plain language. We believe our newly developed notices and forms 
provide clear instructions to parties at each level of the 
administrative appeals process. We have also revised Your Medicare 
Rights and Protections (CMS Publication No. 10112, available to order 
from 1-800-MEDICARE, or available to view on-line at http://www.medicare.gov/Publications/Pubs/pdf/10112.pdf), which explains, in 
detail, the various steps in the appeals process. These notices, forms 
and instructions will provide beneficiaries and their representatives, 
as well as other parties and advocates, with additional information 
about the procedures to be followed in the administrative appeals 
process.
    Comment: Two commenters expressed concern regarding the requirement 
that an appointed representative has an affirmative duty to ``[c]omply 
with all laws and CMS regulations, CMS Rulings, and instructions'' 
(Sec.  405.910(g)(1)(v)). One commenter requested the words ``and 
instructions'' be struck from the regulation, because an appointed 
representative should not be bound to comply with CMS instructions any 
more than a beneficiary, a contractor or an administrative law judge 
should be. Another commenter stated that it is not uncommon for an 
attorney or other representative to challenge the validity of CMS 
rulings, policy instructions and other interpretations, and, as such, 
it is unreasonable to require a representative to defer to all such 
policies to the potential detriment of the provider/appellant.
    Response: Section 405.910(g)(1)(v) states that an appointed 
representative has an affirmative duty to comply with all laws and CMS 
regulations, CMS rulings and instructions. While we appreciate the 
commenters' concerns, we disagree with the commenters' interpretation 
of this provision. Providers and suppliers submitting claims on behalf 
of beneficiaries, and contractors processing claims are, in fact, bound 
to follow all laws, regulations, rulings and CMS operating 
instructions. QICs, ALJs and the MAC are bound to follow laws, 
regulations, rulings, and NCDs, and to afford substantial deference to 
CMS operating instructions and other program guidance. See Sec.  
405.968(b) and Sec.  405.1062. As arbiters of fact in the 
administrative appeals process, QICs, ALJs and the MAC may determine 
that an instruction should not apply to the facts of a particular case. 
However, QICs, ALJs and the MAC cannot rule on the validity of the 
instruction. Similarly, an appointed representative has a duty to 
comply with such laws, regulations, rulings and instructions. However, 
an appointed representative is not precluded from challenging the 
application of that policy or instruction

[[Page 65301]]

during the course of an appeal. Thus, we do not believe a 
representative is unfairly burdened by this requirement, and we believe 
it is unnecessary to revise Sec.  405.910(g)(1)(v).
    Comment: Several commenters asked CMS to reconsider the policy 
prohibiting the issuance of MSNs to a beneficiary's appointed 
representative. One commenter stated that sending the notice of initial 
determination to the appointed representative is necessary to assure 
that beneficiaries can be effectively represented in the new appeals 
process. Another commenter indicated that quicker access to initial 
determination information was needed due to the shorter timeframes for 
requesting redeterminations and reconsiderations.
    Response: Under Sec.  405.910(i)(1), contractors issue initial 
determination notices (that is, Medicare Summary Notices (MSNs) and 
Remittance Advice (RAs)) only to the parties to the initial 
determination, and not to appointed representatives. As we stated in 
the preamble to the interim final rule (70 FR 11434) and in Sec.  
405.910, appointed representatives have the same right as parties to 
receive information on claims being appealed only after an appeal has 
been filed. The information included on MSNs covers the entire range of 
health care services and items billed to Medicare within a 90-day 
period; similarly, an RA contains comprehensive claims information for 
all claims processed for a provider or supplier during a specific 
period. Because the scope of an appointment of representation may vary, 
an appointed representative may not have authority to receive 
information on all such services or items. Accordingly, for privacy and 
confidentiality reasons, contractors must provide MSNs and RAs only to 
the parties to the initial determination. We believe that a beneficiary 
can be effectively represented without contractors directly providing 
the MSNs and RAs to appointed representatives because parties can share 
their respective notices with their representatives.
    We note that our policy with respect to sending the notice of 
initial determination to the party and not the party's representative 
is consistent with the decision in Connecticut Department of Social 
Services v. Leavitt, 428 F.3d 138 (2d Cir. 2005). The court held that 
the due process interests of parties are adequately protected by their 
own receipt of the initial determination notice, and declined to 
require that contractors send these notices to the appointed 
representative of a party.
    After the initial determination, the contractor, QIC, ALJ and the 
MAC will send notice of their action and requests for information or 
evidence to the appointed representative because, unlike the MSN and 
RA, this information is specific to the claim at issue. We also note 
that under Sec.  405.910(i)(4), initial determinations and appeal 
notices that involve Medicare Secondary Payer recovery claims are sent 
to both the party and the appointed representative. Unlike other 
initial determinations, Medicare Secondary Payer recovery claims 
notices of initial determinations are limited to include only 
information related to the claim at issue.
    We believe the current filing timeframes and the quarterly issuance 
of MSNs provide adequate time for representatives to obtain claims 
information from beneficiaries, providers and suppliers. Currently, 
parties have 120 calendar days from the date of an initial 
determination to file for a redetermination and 180 calendar days from 
the date the party receives the notice of the redetermination to file a 
reconsideration. In addition, contractors may extend redetermination 
and reconsideration filing timeframes (consistent with Sec.  405.942(b) 
and Sec.  405.962(b)) if a party shows good cause for not meeting the 
filing timeframe. Coupled with the quarterly issuance of MSNs, we 
believe individuals representing beneficiaries have ample time to 
obtain relevant information in order to submit an appeal of an initial 
determination or redetermination.
    Accordingly, we are finalizing sections 405.906 through 405.910 
without modification.
3. Assignment of Appeal Rights (Sec.  405.912)
    The procedures for assigning appeal rights from a beneficiary to a 
provider or supplier are included in Sec.  405.912. We received several 
comments on the assignment of appeal rights. A summary of the comments 
and our responses is included below. Additional detailed discussion of 
this provision is found in the interim final rule at 70 FR 11427 
through 11428 and 11430 through 11432.
    Comment: We received several comments that requested clarification 
of when an appointment of a representative or assignment of appeal 
rights was appropriate, given that participating providers and 
participating suppliers generally have appeal rights equal to those of 
the beneficiary.
    Response: A number of the comments reflected continued confusion 
between the appointed representative provisions at Sec.  405.910 and 
the assignment of appeal rights provisions at Sec.  405.912. Appointing 
a representative and assigning appeal rights are two different and 
unrelated actions under the new appeals process. Beneficiaries have the 
option of either (1) assigning (transferring) their appeal rights to 
the provider or supplier that provided the item or service at issue, if 
such person or entity is not a party to the initial determination, or 
(2) appointing a representative to act on their behalf during the 
appeal.
    As set forth in Sec.  405.912, an assignment of appeal rights 
constitutes a complete transfer of party status and all appeal rights 
from a beneficiary to the provider or supplier that (1) provided the 
item or service at issue to the beneficiary and (2) does not already 
have party status at the initial determination. Thus, with an 
assignment of appeal rights, the provider or supplier becomes a party 
to the appeal in place of the beneficiary.
    In contrast, a party may choose to appoint an individual as its 
representative to assist with an appeal. See Sec.  405.902, defining 
appointed representative, and Sec.  405.910. For example, a beneficiary 
may appoint his provider or supplier as an appointed representative. 
Appointing a representative does not transfer a party's appeal rights, 
nor does it make the appointed representative a party to the appeal. 
Rather, an appointed representative is simply an individual chosen by a 
party to act on behalf of the party in exercising his or her appeal 
rights.
    In an overwhelming majority of appeals, there is no need for a 
beneficiary to assign appeal rights to his provider or supplier. For 
example, under Sec.  405.906(a)(2) and (a)(3), a supplier who accepts 
assignment for items or services furnished to a beneficiary, and a 
provider who files a claim for items or services furnished to a 
beneficiary, are parties to the initial determination, and thus, may 
appeal that initial determination to the same extent as the 
beneficiary.
    In limited situations, a provider or supplier will not have party 
status. For example, if a claim is filed by a non-participating 
physician who does not accept assignment on the claim, and the claim is 
denied as a statutory exclusion (such as certain cosmetic surgeries 
under section 1862(a)(10) of the Act), the physician submitting the 
claim would not have a direct right to appeal the initial determination 
made by the

[[Page 65302]]

carrier. However, the physician could get party status to file an 
appeal by obtaining an assignment of appeal rights from the beneficiary 
for this service. The assignment of appeal rights must be completed in 
accordance with the procedures set forth in Sec.  405.912.
    Comment: A commenter suggested that certain providers, such as 
clinical laboratories, be exempt from the provision requiring 
beneficiaries to sign an assignment of appeal rights form (Sec.  
405.912(c)(2)).
    Response: In situations where an assignment of appeal rights is 
appropriate, we believe the signature requirement is necessary for the 
protection of both the party and the representative, as well as to 
assist adjudicators in determining the proper parties to the appeal. 
While we acknowledge it may be difficult in some instances for a 
provider or supplier to obtain the signature of the beneficiary, the 
binding nature of the assignment and the effect of the assignment 
(transferring a beneficiary's appeal rights to an assignee and waiving 
the right of the provider or supplier to collect payment) make it 
essential that both parties sign the agreement. This situation, 
however, may not arise frequently because a supplier that is required 
to accept assignment on a claim, such as a clinical laboratory, is a 
party to the initial determination and, therefore, has direct standing 
to file an appeal. Accordingly, it would be inappropriate for a 
supplier, who otherwise has party status, to seek assignment of appeal 
rights from the beneficiary.
    Comment: One commenter stated that the regulations indicate that 
when beneficiaries assign their rights to appeal an individual item or 
service to a provider or supplier, the provider or supplier must list 
all items or services provided on the date of service on the assignment 
form. The commenter recommended that a provider or supplier seeking 
assignment of appeal rights should have to list only those items or 
services for which appeal rights are to be assigned.
    Response: Section 405.912(c)(3) requires that an assignment of 
appeal rights ``indicate the item or service for which the assignment 
of appeal rights is authorized.'' A provider or supplier is not 
required to list all items or services provided on the date of service 
on the assignment agreement--just those for which appeal rights are to 
be assigned. An assignment of appeal rights will only be effective for 
the items or services listed on the assignment form.
    Accordingly, we are finalizing Sec.  405.912 without modification.
4. Initial Determinations (Sec.  405.920 Through Sec.  405.928)
    Sections 405.920 through 405.928 discuss the initial determination 
process, including how contractors make initial determinations on 
claims and what types of determinations are considered or not 
considered initial determinations.
    We received several comments with respect to claims submissions and 
the processing of initial determinations as set forth in the interim 
final rule. A summary of the comments and our responses are included 
below. Additional discussion regarding these provisions is found in the 
interim final rule at 70 FR 11423 through 11424, 11428, and 11432 
through 11436.
a. Initial Determinations, Notice of Initial Determinations, and 
Timeframe for Processing Initial Determinations (Sec.  405.920 Through 
Sec.  405.922)
    Section 405.920 explains the process a contractor must follow in 
making an initial determination. Section 405.921 describes the notice 
of initial determination, including the content of the notice, and 
Sec.  405.922 discusses the timeframe for processing initial 
determinations.
    Comment: Two commenters recommended that the term ``non-clean 
claim'' be defined. Commenters also suggested that if a claim is paid 
at the QIC level or higher, such claims should be considered clean, and 
that interest should accrue from the date of the original denial in 
order to provide incentive to expedite claim determinations and assure 
fairness. Two commenters noted that although contractors must issue an 
initial determination within 45 days of receipt of a ``non-clean'' 
claim, the regulations do not provide for any interest payments if the 
determination is issued after the 45 day time period.
    Response: The term ``clean claim'' is clearly defined in statute at 
sections 1816(c)(2)(B)(i) and 1842(c)(2)(B)(i) of the Act as ``a claim 
that has no defect or impropriety (including any lack of any required 
substantiating documentation) or particular circumstance requiring 
special treatment that prevents timely payment from being made on the 
claim.'' This definition also is set forth in Sec.  405.902. Claims 
that do not meet this definition are considered ``non-clean claims.'' 
Therefore, we do not believe that we need to define non-clean claim 
because the meaning of non-clean claim is sufficiently clear given the 
meaning of clean claim set forth in Sec.  405.902.
    Claims for services that cannot be adjudicated timely at the 
initial determination level because they lack sufficient documentation 
and/or require special handling do not come within the definition of 
clean claims. Claims initially denied and subsequently paid following a 
favorable appeal decision, or revised following a reopening action, 
are, by their nature, claims that require special treatment. Often, 
during an appeal or reopening action, additional substantiating 
documentation is needed to support the coverage and payment decision. 
Thus, claims that are adjusted as a result of the effectuation of an 
appeal decision, and claims that are revised following a reopening 
action do not fall under the definition of ``clean claim'' set forth in 
the statute.
    Section 1869(a)(2)(A) of the Act, in conjunction with sections 
1816(c)(2) and 1842(c)(2) of the Act, establishes that, on all claims 
other than clean claims, the initial determination shall be concluded 
and a notice of such determination must be mailed to the individual 
filing the claim by no later than 45 days after the contractor receives 
the claim. Additionally, section 1869(a)(2)(A) of the Act, in 
conjunction with sections 1816(c)(2) and 1842(c)(2) of the Act, 
requires that interest accrue if clean claims are not processed within 
30 calendar days. Thus, reading these provisions together, no interest 
accrues on non-clean claims, including claims that are adjusted as the 
result of the effectuation of an appeal decision, and claims that are 
revised following a reopening action.
    Finally, neither the statute nor our regulations provide for 
escalation, payment of interest or other remedies when the 45-day 
deadline is missed for non-clean claims. Through various tools used to 
monitor the performance of our contractors, we attempt to ensure that 
claim determinations are both timely and accurate. As we noted in the 
interim final rule, providers and suppliers play a vital role in the 
contractors' ability to meet their decision-making timeframes. If 
providers and suppliers submit clean claims, they can avoid the delays 
that are associated with processing non-clean claims. The more accurate 
the claim is at initial submission, the greater the ability of the 
Medicare contractor to process the claim quickly.
    Accordingly, we are finalizing Sec. Sec.  405.920 and 405.921 
without modification. We are finalizing Sec.  405.922 with modification 
as discussed in section II.B.5.a. of this preamble.

[[Page 65303]]

b. What Constitutes an Initial Determination and Decisions That Are Not 
Considered Initial Determinations (Sec.  405.924 Through Sec.  405.926)
    In Sec.  405.924, we describe actions that are initial 
determinations and are subject to the administrative appeals procedures 
in subpart I. In Sec.  405.926, we list examples of determinations that 
are not considered initial determinations and are not subject to the 
administrative appeals procedures contained in this subpart.
    Comment: One commenter questioned the need to maintain the number 
of home health visits as a determination that constitutes an initial 
determination (Sec.  405.924(b)(7)). The commenter stated that this 
particular item is no longer a relevant factor in determining whether 
the charges were covered under Medicare Part A or Part B, and suggested 
that this item be removed from the list of determinations considered 
initial determinations.
    Response: We agree with the commenter and have revised Sec.  
405.924 to eliminate paragraph (b)(7), which specifically included the 
number of home health visits used as an initial determination.
    Comment: One commenter stated that under Sec.  405.926(c), issues 
regarding the computation of the payment amount of program 
reimbursement of general applicability are not considered initial 
determinations and, therefore, are not subject to appeal under subpart 
I. The commenter questioned whether the payment amount of a specific, 
individual claim is considered an initial determination. The commenter 
suggested amending Sec.  405.924 and Sec.  405.926 to clarify that 
individual determinations with respect to payment amounts are initial 
determinations. In addition, the commenter suggested that we revise 
Sec.  405.924(c) to state that a provider's notice of non-coverage to 
the Medicare beneficiary is not an initial determination. The commenter 
noted that while the provider of service may be the first decision 
maker regarding Medicare coverage of an item or service, its notice of 
non-coverage has not been considered an initial determination subject 
to appeal.
    Response: Section 405.920 provides that, after a claim is filed, a 
contractor must perform certain actions, including determining any 
amounts payable. Such a determination constitutes an initial 
determination subject to the subpart I appeals process. Similarly, 
under Sec.  405.924(b), a payment amount determination with respect to 
a particular item or service on a claim is an initial determination 
that is appealable under subpart I. In contrast, Sec.  405.926(c) 
specifies that ``[a]ny issue regarding the computation of the payment 
amount of program reimbursement of general applicability for which CMS 
or a carrier has sole responsibility under Part B such as the 
establishment of a fee schedule * * *'' is not an initial 
determination, and is not subject to administrative appeal under 
subpart I. For example, section 1848(i)(1) of the Act expressly 
prohibits administrative and judicial review of the components that 
comprise the Medicare physician fee schedule. Thus, in situations where 
payment amounts are determined in accordance with statutorily mandated 
methodologies (such as the physician fee schedule), adjudicators are 
required to follow such methodologies when making a finding regarding a 
payment amount. Therefore, we believe that the regulations at 
Sec. Sec.  405.920, 405.924, and 405.926 clearly provide that the 
payment amount of a specific, individual claim is considered an initial 
determination and also appropriately convey the distinction between a 
direct challenge to the Medicare payment methodology and an appeal that 
raises questions regarding a determination of a payment amount for a 
particular claim. Therefore, we do not believe it is necessary to 
revise Sec.  405.924 or Sec.  405.926 to provide any further 
clarification.
    We agree with the commenter's statement that a provider's notice of 
non-coverage does not constitute an initial determination, because it 
is not a determination made by the Medicare program. Instead, it is an 
opinion of the provider, and the notices clearly state that they are 
conveying the provider's opinion with respect to non-coverage. The 
notices also clearly explain the steps required to obtain a 
determination by Medicare and how to appeal that determination. Thus, 
we do not believe it is necessary to revise Sec.  405.924 or Sec.  
405.926 to include a provision explicitly excluding such notices from 
the definition of initial determination.
    Comment: One commenter requested that we define the phrase 
``sustained or high levels of payment errors'' (Sec.  405.926(p)) and 
requested that we specify how such determinations will be made. The 
commenter also requested that CMS review dismissals on the grounds that 
the claim involves a sustained or high error rate. The commenter 
suggested that CMS provide clarification of the implications of such a 
finding. Finally, the commenter recommended that CMS provide a 
mechanism for providers to be removed from this ``sanction''.
    Response: In section 1893(f)(3) of the Act, added by section 935 of 
the MMA, Congress placed restrictions on the use of extrapolation to 
determine overpayment amounts to be recovered from Medicare providers, 
suppliers or beneficiaries. In order to calculate an overpayment by 
extrapolation, there must be a determination of either: (1) A sustained 
or high level of payment error, or (2) a documented educational 
intervention that has failed to correct the payment error. In addition, 
in section 1874A(h)(2) of the Act, as added by section 934 of the MMA, 
Congress required contractors to identify a likelihood of sustained or 
high level of payment error under section 1893(f)(3)(A) of the Act 
before initiating non-random pre-payment reviews of a provider or 
supplier, and in section 1893(f)(3) of the Act, expressly precluded 
administrative or judicial review of contractor determinations of 
sustained or high levels of payment errors. Accordingly, we included a 
conforming provision at Sec.  405.926(p) of the interim final rule 
providing that determinations of sustained or high levels of payment 
error are not initial determinations that may be appealed under this 
subpart. We note, however, that while the determination of whether a 
provider or supplier has a sustained or high level of payment error is 
not subject to appeal, the initial or revised determinations made on 
the underlying claims for items or services would be subject to appeal.
    CMS issued operating instructions for determining when a provider 
or supplier has a sustained or high level of payment error in June 
2005: (http://www.cms.hhs.gov/transmittals/downloads/R114PI.pdf). 
Furthermore, we issued a final rule on September 26, 2008 (73 FR 55753) 
to address when contractors may terminate the non-random pre-payment 
review of claims submitted by a provider or supplier. The commenter's 
concerns regarding the practical considerations of determinations of a 
provider's or supplier's sustained or high error rates are beyond the 
scope of this regulation. With respect to the suggestion that CMS 
review dismissals on the grounds that the claim involved a sustained or 
high error rate, as noted above, while that determination does not 
constitute an initial determination and is not subject to appeal, any 
claim denials resulting from the review would constitute initial 
determinations that may be appealed. Therefore, we do not anticipate 
any denials of claims solely based on this determination. Rather, the 
determination of a sustained or high

[[Page 65304]]

error rate will be used as the basis for a contractor undertaking 
further review of claims submitted by the provider or supplier. 
Finally, we strongly disagree with the commenter's characterization of 
the determination of a sustained or high error rate as a sanction. This 
determination does not result in an assessment of civil money 
penalties, or any other administrative action. Rather, it serves as the 
basis for a contractor's review of a provider's or supplier's 
subsequent claim submissions.
    Comment: Section 405.926(s) states that claim submissions on forms 
or formats that are incomplete, invalid, or do not otherwise meet the 
requirements for a Medicare claim and, as a result, are rejected or 
returned to the provider or supplier, do not constitute initial 
determinations. A commenter asked whether this section would preclude 
review where a claim is suspended for medical review.
    Response: A claim suspended for development by a contractor's 
medical review staff is not considered a claim that is invalid or 
incomplete as described in Sec.  405.926(s). Thus, Sec.  405.926(s) 
would not preclude review where a claim is suspended for medical review 
because it does not apply to this situation. Rather, a claim that is 
suspended for development is one that appears technically sufficient on 
its face, but requires additional information in order to make a 
coverage and payment decision. At the time the claim is suspended for 
development, an initial determination has not been made, and thus, 
appeal rights have not attached to the claim. In addition, the medical 
review staff's decision to suspend a claim for development does not 
constitute an initial determination that would be subject to appeal. 
Generally, once the contractor makes a decision regarding coverage and 
payment and issues an initial determination in the form of a MSN or RA, 
parties to the initial determination have 120 calendar days to request 
a redetermination. However, if a contractor denies coverage and payment 
of a claim because the documentation requested during the medical 
review of the claim was not submitted within the specified timeframe, 
any subsequent submission of the requested documentation to the 
contractor, or any timely request for a redetermination of that claim 
will be processed under our reopenings policy at Sec.  405.980(a)(2). 
If a revised determination is issued following the reopening of the 
claim, the revised initial determination carries with it appeal rights 
in accordance with Sec.  405.984(a).
    Accordingly, we are finalizing Sec.  405.924 with modification as 
noted above. We are finalizing Sec.  405.926 without modification.
c. Initial Determinations Subject to the Reopenings Process (Sec.  
405.927) and the Effects of Initial Determinations (Sec.  405.928)
    Section 405.927 states that minor errors or omissions in an initial 
determination must be corrected through the contractor's reopening 
process under Sec.  405.980(a)(3). Section 405.928 describes the 
effects of an initial determination. We received no comments on these 
sections. Accordingly, we are finalizing Sec.  405.927 and Sec.  
405.928 without modification.
5. Redeterminations (Sec.  405.940 Through Sec.  405.958)
    Sections 405.940 through 405.958 discuss the redetermination 
process. We received comments with respect to redetermination decision-
making timeframes and other aspects of the redetermination process. A 
brief overview of the relevant regulatory provisions, a summary of the 
comments and our responses follow. Additional detailed discussion of 
the redetermination process is included in the interim final rule at 70 
FR 11423, 11428, 11436 through 11443, and 11458.
a. Redetermination Requests (Sec.  405.940 Through Sec.  405.946)
    Section 405.940 establishes the general rule that a person or 
entity that may be a party to a redetermination under Sec.  405.906(b) 
and that is dissatisfied with an initial determination may request a 
redetermination under subpart I. Sections 405.942 and 405.944 then set 
forth the requirements concerning the timeframes and procedures for 
filing a redetermination request. Section 405.946 describes the 
evidence that should be submitted with a redetermination request.
    Comment: One commenter asked that we specify when a standardized 
redetermination request form will be available.
    Response: A standardized Form 20027, revised May 1, 2005, is 
available to beneficiaries and other interested parties and can be used 
to request a redetermination. Customer service representatives at 1-
800-MEDICARE can provide beneficiaries with information on how they may 
obtain standardized appeal forms. In addition, updated appeal forms 
will continue to be available on the Internet at http://www.cms.hhs.gov/CMSForms/CMSForms/list.asp#TopOfPage and http://www.medicare.gov/Basics/forms/default.asp. In addition, representatives 
at 1-800-MEDICARE can also provide information on how to obtain appeals 
forms.
    Further, as noted previously, beneficiaries receive information on 
the appeals process and instructions for requesting a redetermination 
(first level appeal) as part of the MSN. Beneficiaries can use the MSN 
to request an appeal by circling the item or service with which they 
disagree, explaining why they disagree, signing the MSN, and returning 
it, or a copy, to the contractor address specified on the notice.
    Comment: One commenter suggested that contractors and QICs send an 
acknowledgment letter to all affected parties to an appeal indicating 
receipt of the appeal request. Thus, a provider would know if a 
beneficiary has already appealed a claim denial. The commenter also 
requested that adjudicators assign a reference number to all appeals. 
The commenter suggested that the appeal case number not utilize a 
beneficiary's HIC number, in order to minimize confusion for provider 
appeals involving multiple beneficiaries.
    Response: Due to the volume of redetermination and reconsideration 
requests, it is not feasible to require contractors or the QICs to send 
an acknowledgment letter to all parties for each appeal (although we 
note that QICs send acknowledgment letters to appellants indicating 
receipt of the request for reconsideration). While having more than one 
party file an appeal on a claim may appear to be duplicative, we 
believe it may be in the best interest of a party dissatisfied with the 
outcome of an initial determination or appeal decision to file an 
appeal request and submit relevant evidence with respect to the issues 
in the case because of the full and early presentation of evidence 
rule. Under this rule, as set forth in Sec.  405.966(a)(2), a provider, 
supplier, or beneficiary represented by a provider or supplier that is 
a party to the reconsideration must submit all evidence prior to the 
issuance of the reconsideration. New evidence submitted at the ALJ 
hearing by a provider, supplier, or beneficiary represented by a 
provider or supplier will be excluded from consideration unless the ALJ 
finds good cause to explain why the evidence was not submitted prior to 
the issuance of the reconsideration. See Sec.  405.1018(c) and Sec.  
405.1028. Thus, by filing an appeal, a party can make sure that the 
evidence it wants considered will not be excluded from consideration. 
The

[[Page 65305]]

contractor or QIC will then consolidate timely appeal requests from 
multiple parties into one proceeding, as required under Sec.  
405.944(c) and Sec.  405.964(c), which will prevent possible disparate 
appeal decisions.
    Every appeal request at each level of the appeals process receives 
a unique control number. This number is included on notices sent to 
parties. We acknowledge the commenter's concerns regarding the use of a 
beneficiary's HIC number as the appeal control number for ALJ hearings. 
In the past, certain ALJ hearings processed by the Social Security 
Administration used a beneficiary's HIC number. With the implementation 
of the new Medicare Appeals System (MAS) to control and track appeals 
at the QIC and ALJ levels, beneficiary HIC numbers are no longer used 
for assigning case numbers to an appeal. However, before a new case 
number has been assigned to an appeal request, beneficiary HIC numbers 
are helpful when making status inquiries with the QIC or an ALJ because 
these numbers can be used internally to identify the unique record for 
the appeal.
    In this final regulation, we are making technical revisions to 
several sections that set forth the deadlines and timeframes that apply 
to various actions taken by parties, appellants and adjudicators. 
Throughout subpart I, we use the words ``day'', ``days'' and ``calendar 
days'' when referring to these timeframes and deadlines. Although we 
believe parties and potential participants to the appeals process and 
adjudicators understand these terms are used interchangeably, and that 
``days'' means ``calendar days'' unless otherwise stated, we believe 
technical revisions are necessary to ensure that these terms are used 
consistently throughout subpart I and to clarify the timeframes and 
deadlines set forth in the rule. Further, we believe these revisions 
will reduce potential confusion about the specific date by which an 
action must be taken by a party or adjudicator.
    Therefore, we are revising the following sections to insert the 
word ``calendar'' before the word ``day'' or ``days'': Sec.  405.922, 
Sec.  405.942(a)(1), Sec.  405.942(b), Sec.  405.946(b), Sec.  
405.950(b)(1), Sec.  405.950(b)(2), Sec.  405.950(b)(3), Sec.  
405.962(a)(1), Sec.  405.962(a)(2), Sec.  405.962(b), Sec.  405.966(b), 
Sec.  405.966(c), Sec.  405.970(a)(2), Sec.  405.970(b)(1), Sec.  
405.970(b)(2), Sec.  405.970(b)(3), Sec.  405.970(c), Sec.  
405.970(e)(2), Sec.  405.974(b)(1), Sec.  405.974(b)(1)(i), Sec.  
405.974(b)(1)(ii), Sec.  405.980(d)(1), Sec.  405.980(d)(2), Sec.  
405.980(d)(3), Sec.  405.980(e)(1), Sec.  405.980(e)(2), Sec.  
405.980(e)(3), Sec.  405.990(f)(2), Sec.  405.990(f)(4), Sec.  
405.990(h)(2), Sec.  405.990(i)(2), Sec.  405.990(j)(1), Sec.  
405.1002(a)(1), Sec.  405.1002(a)(3), Sec.  405.1002(a)(4), Sec.  
405.1002(b)(2), Sec.  405.1004(a)(1), Sec.  405.1004(a)(3), Sec.  
405.1004(a)(4), Sec.  405.1006(e)(1)(ii), Sec.  405.1010(b), Sec.  
405.1012(b), Sec.  405.1014(b)(1), Sec.  405.1014(b)(2), Sec.  
405.1016(a), Sec.  405.1016(c), Sec.  405.1018(a), Sec.  405.1018(b), 
Sec.  405.1020(g)(3)(ii), Sec.  405.1022(a), Sec.  405.1024(a), Sec.  
405.1028(a), Sec.  405.1036(f)(5)(iv), Sec.  405.1037(c)(5), Sec.  
405.1037(e)(2)(iii), Sec.  405.1042(b)(2), Sec.  405.1044(d), Sec.  
405.1046(d), Sec.  405.1052(a)(2)(ii), Sec.  405.1052(a)(2)(iii), Sec.  
405.1100(c), Sec.  405.1100(d), Sec.  405.1102(a)(1), Sec.  
405.1102(a)(2), Sec.  405.1104(a)(2), Sec.  405.1106(b), Sec.  
405.1110(a), Sec.  405.1110(b)(2), Sec.  405.1110(d), Sec.  405.1118, 
Sec.  405.1122(e)(4), Sec.  405.1124(b), Sec.  405.1126(d)(1), Sec.  
405.1130, Sec.  405.1132(b), Sec.  405.1136(c)(3), Sec.  
405.1136(d)(2), Sec.  405.1140(b)(1), Sec.  405.1140(c)(1), Sec.  
405.1140(c)(4), Sec.  405.1140(d).
    Finally, to further ensure that beneficiaries and others affected 
by the rule understand the various time frames and deadlines set forth 
in the rule, we note that where the regulations provide for a time 
frame and that time frame ends on a Saturday, Sunday, legal holiday, or 
any other Federal nonwork day, we apply a rollover period that extends 
the time frame within which an act must be done to the first day after 
the Saturday, Sunday, legal holiday, or other Federal nonwork day.
    Accordingly, we are finalizing sections 405.940 and 405.944 without 
modification. We are finalizing sections 405.942 and 405.946 with 
modification as discussed in this section.
    Per the discussion in this section, we also are finalizing the 
following sections to add the word ``calendar'' in front of the word 
``day'' or ``days'': Sec.  405.922, Sec.  405.942(a)(1), Sec.  
405.942(b), Sec.  405.946(b), Sec.  405.950(b)(1), Sec.  405.950(b)(2), 
Sec.  405.950(b)(3), Sec.  405.962(a)(1), Sec.  405.962(a)(2), Sec.  
405.962(b), Sec.  405.966(b), Sec.  405.966(c), Sec.  405.970(a)(2), 
Sec.  405.970(b)(1), Sec.  405.970(b)(2), Sec.  405.970(b)(3), Sec.  
405.970(c), Sec.  405.970(e)(2), Sec.  405.974(b)(1), Sec.  
405.974(b)(1)(i), Sec.  405.974(b)(1)(ii), Sec.  405.980(d)(1), Sec.  
405.980(d)(2), Sec.  405.980(d)(3), Sec.  405.980(e)(1), Sec.  
405.980(e)(2), Sec.  405.980(e)(3), Sec.  405.990(f)(2), Sec.  
405.990(f)(4), Sec.  405.990(h)(2), Sec.  405.990(i)(2), Sec.  
405.990(j)(1), Sec.  405.1002(a)(1), Sec.  405.1002(a)(3), Sec.  
405.1002(a)(4), Sec.  405.1002(b)(2), Sec.  405.1004(a)(1), Sec.  
405.1004(a)(3), Sec.  405.1004(a)(4), Sec.  405.1006(e)(1)(ii), Sec.  
405.1010(b), Sec.  405.1012(b), Sec.  405.1014(b)(1), Sec.  
405.1014(b)(2), Sec.  405.1016(a), Sec.  405.1016(c), Sec.  
405.1018(a), Sec.  405.1018(b), Sec.  405.1020(g)(3)(ii), Sec.  
405.1022(a), Sec.  405.1024(a), Sec.  405.1028(a), Sec.  
405.1036(f)(5)(iv), Sec.  405.1037(c)(5), Sec.  405.1037(e)(2)(iii), 
Sec.  405.1042(b)(2), Sec.  405.1044(d), Sec.  405.1046(d), Sec.  
405.1052(a)(2)(ii), Sec.  405.1052(a)(2)(iii), Sec.  405.1100(c), Sec.  
405.1100(d), Sec.  405.1102(a)(1), Sec.  405.1102(a)(2), Sec.  
405.1104(a)(2), Sec.  405.1106(b), Sec.  405.1110(a), Sec.  
405.1110(b)(2), Sec.  405.1110(d), Sec.  405.1118, Sec.  
405.1122(e)(4), Sec.  405.1124(b), Sec.  405.1126(d)(1), Sec.  
405.1130, Sec.  405.1132(b), Sec.  405.1136(c)(3), Sec.  
405.1136(d)(2), Sec.  405.1140(b)(1), Sec.  405.1140(c)(1), Sec.  
405.1140(c)(4), and Sec.  405.1140(d).
b. Conduct and Effect of Redeterminations (Sec.  405.948 Through Sec.  
405.958)
    Sections 405.948 and 405.950 describe basic procedures contractors 
follow in conducting redeterminations, including the adjudication 
timeframes for issuing redetermination notices and exceptions to the 
timeframes. Section 405.952 contains provisions relating to the 
withdrawal or dismissal of a request for a redetermination. Sections 
405.954 and 405.956 address redetermination decisions and notification 
rules. Section 405.958 discusses the effect of a redetermination 
decision.
    Comment: One commenter expressed concern that the rule does not 
provide a process for notifying an appellant of new issues being 
considered by a contractor during the redetermination. The commenter 
recommended that Sec.  405.948 be amended to require contractor 
notification of the appellant about new issues, and to provide an 
opportunity for the appellant to respond to those issues.
    Response: We understand the commenter's concern about ensuring 
appellants have an opportunity to respond to new issues raised by 
contractors during the redetermination process. Thus, appellants are 
strongly encouraged to submit all relevant evidence at the earliest 
point possible to support their assertion that the initial 
determination is incorrect. This works to enhance the efficiency and 
accuracy of the appeals process and enables adjudicators to make more 
informed decisions at the first level of the appeals process. Given the 
short timeframes for processing redeterminations and the high volume of 
requests, it is not feasible to require contractors to send formal 
notice of new issues raised during the redetermination process.

[[Page 65306]]

However, during the course of the redetermination, if a contractor 
determines that a new issue, distinct from the issues considered at the 
initial determination, warrants consideration, and the pertinent 
documentation necessary to make a decision on that issue is missing 
from the record, it is expected that the contractor will contact the 
appropriate entity to obtain the missing information prior to rendering 
its decision. In addition, the contractor's redetermination notice will 
contain a decision with respect to any new issues, and parties 
dissatisfied with the outcome may file a request for reconsideration.
    Comment: One commenter objected to the provision that where two or 
more parties requested an appeal on the same initial determination, the 
contractor's deadline for processing the appeal would be based on the 
latest filed request (Sec.  405.950(b)(2)). The commenter argued that 
the first appellant was placed at a disadvantage in the decision-making 
timeframe. The commenter suggested that we stipulate in this final 
regulation that the decision-making timeframe starts with the first 
appeal request, extending the decision-making time by no more than 14 
days from the original deadline, applicable only if a later party's 
appeal request contained new, relevant evidence.
    Response: In sections 405.944(c), 405.950(b)(2), 405.964(c) and 
405.970(b)(2) of the interim final rule, we require carriers, FIs, and 
QICs to consolidate multiple requests for a redetermination, or 
multiple requests for a reconsideration, into a single proceeding in 
order to avoid duplication and to issue one appeal decision within 60 
days of the latest appeal request. This policy allows time for the 
adjudicator to carefully review and consider each of the appeal 
requests, including any additional evidence submitted with the 
requests. Instances when more than one party files a request for an 
appeal of the same claim have always been rare, and we do not expect 
any change in this regard. Therefore, we do not believe that 
consolidating the decision-making timeframe for appeals requested by 
multiple parties, such that the decision-making timeframe begins with 
the latest filed request, creates an impediment to the efficient 
resolution of appeals or places the first appellant at a disadvantage. 
To the contrary, we believe that when another party subsequently 
requests an appeal before a decision has been made on the original 
request, fairness and efficiency is enhanced by combining the two 
requests into one case and beginning the decision-making timeframe with 
the latest filed request to allow adequate time to review each request 
and the evidence submitted before a decision is made. Finally, we do 
not believe that extending the decision-making timeframe by no more 
than 14 days from the original deadline of the first appeal request 
received only if the later party's appeal request contained new, 
relevant evidence would allow for careful review and consideration of 
the appeals request.
    Comment: We received several comments objecting to the extension of 
the decision-making timeframes at the redetermination and 
reconsideration levels to allow for the submission of new evidence 
(Sec.  405.950(b)(3), which incorporates Sec.  405.946(b), for 
redeterminations, and Sec.  405.970(b)(3), which incorporates Sec.  
405.966(b), for reconsiderations). Although most commenters recognized 
the need to ensure contractors have adequate time to review new 
evidence, those who objected to this provision believe that the 
unlimited and automatic extensions of the statutory decision-making 
timeframes by up to 14 days upon submission of new evidence are 
contrary to section 1869(a)(3)(C)(ii) of the Act for redeterminations 
and section 1869(c)(3)(C)(iv) of the Act for reconsiderations. One 
commenter added that the automatic extensions of the decision-making 
timeframes contradict the congressional intent behind the establishment 
of timeframes for lower-level reviews: To expedite the appeals process 
and avoid the huge backlogs that have plagued the system. Another 
commenter suggested that only those submissions of evidence initiated 
by a party should extend the decision-making timeframe, and that 
additional evidence submitted by a party in response to a request from 
the Medicare contractor should not result in an extension of the 
decision-making timeframe.
    Response: As stated in the interim final rule, we continue to 
believe allowing extensions of decision-making timeframes under some 
circumstances is consistent with the statute. See 70 FR 11439, 11445 
through 11446. Since the statute imposes decision-making timeframes 
with the assumption that at the time the appeal is filed, all relevant 
evidence will be submitted to the adjudicator, we believe extensions 
that result from late-submitted evidence are consistent with the 
statute. When an appellant submits new information after the appeal is 
filed, the adjudicator should not be penalized for an appellant's late 
submission of evidence. We also believe that appellants should be 
afforded some flexibility to supplement the administrative record if 
needed. Thus, the extensions of the decision-making timeframe in Sec.  
405.950(b)(3) and Sec.  405.970(b)(3) balance the needs of the party 
with the needs of the adjudicator by allowing an appropriate timeframe 
within which the adjudicator can carefully consider additional 
evidence.
    Further, we believe that contractors should be afforded up to an 
additional 14 calendar days to issue a redetermination decision when 
the contractor requests missing documentation from a party that is 
essential to resolving the issues on appeal. We believe the efficiency 
and cost-effectiveness of the appeals process is greatly enhanced by 
allowing this additional time to ensure an accurate decision is made at 
the lowest possible level. The only way to avoid the need for extended 
decision-making timeframes would be to preclude the submission of 
additional evidence by appellants after they file their redetermination 
requests. Although the contractor may extend the deadline when it 
receives additional evidence, this policy does not mean that in all 
cases we expect a contractor to take the maximum time to issue the 
decision.
    Similarly, at the reconsideration level, the QIC's adjudication 
deadline is extended up to 14 days when a party submits additional 
evidence not included with the request for reconsideration. However, 
the extension does not apply to a party's timely submission of evidence 
in response to a request by a QIC (unless the contractor, in its 
redetermination notice, informed the party that (1) the documentation 
was missing from the administrative record, and (2) the documentation 
must be submitted with the request for reconsideration, and then the 
party failed to submit such documentation). See Sec.  405.956(b)(6), 
Sec.  405.966(b); 70 FR 11446. As noted above, we believe the 
adjudication timeframes presuppose a complete record for the 
adjudicator. Where evidence is missing from the record, and the party 
is on notice that the evidence must be submitted with the 
reconsideration request, we believe the extension of the adjudication 
timeframe is both necessary and consistent with the statute.
    Finally, we do not expect an extension of up to 14 days will cause 
backlogs or significant delays in the appeals process. Rather, we 
believe this policy will encourage parties to submit evidence as soon 
as practicable. As stated previously, we urge appellants to submit all 
necessary documentation with their requests in order to avoid delays.

[[Page 65307]]

    Comment: One commenter inquired about the process for handling 
redetermination requests from family members when a beneficiary is 
deceased. The commenter expressed concern about the ability of a 
surviving spouse or relative to provide proof of their status as the 
legally authorized representative of the decedent. The commenter 
related instances where the surviving family member attempting to 
pursue an appeal is unable to produce appropriate documentation to 
prove such status because there is no will or there are no assets to 
distribute by probate. The commenter stated that appeals should not be 
dismissed if requisite documents are not provided by surviving family 
members.
    Response: We appreciate the concerns of the commenter regarding the 
difficulty surviving family members of a deceased beneficiary may have 
in securing proof of their authority to file an appeal on behalf of the 
decedent. We routinely require documentation of an individual's 
authority to file an appeal request on behalf of a party. In part, this 
is because the individually identifiable health care information that 
may be shared during the appeals process, including information with 
respect to a deceased person, cannot be disclosed unless the disclosure 
is authorized by law or authorized by the individual. In order to 
protect against an unauthorized disclosure, contractors must obtain 
documentation of the status of any person attempting to act on behalf 
of a deceased beneficiary by filing an appeal. For example, if the 
person attempting to file an appeal on behalf of a deceased beneficiary 
is authorized under State law to administer the estate, then the 
contractor must obtain documentation of the individual's authority 
(that is, as the executor or administrator of the estate) or 
information regarding the intestate provisions of the relevant State's 
probate law. Similarly, contractors determine whether an individual 
meets the requirements set forth in 42 CFR part 424, subpart E if the 
individual asserts they have assumed a legal obligation to pay for the 
services. Contractors are not prohibited from assisting individuals to 
obtain any necessary information. However, whether the beneficiary is 
living or deceased, absent timely filed evidence that the individual 
attempting to file an appeal has authority to do so, contractors must 
dismiss the redetermination request. See Sec.  405.952(b)(1).
    Comment: We received two comments concerning contractor notices to 
beneficiaries on appeal issues. One commenter agreed with our policy in 
Sec.  405.956(a)(2) that contractors should issue written notice to 
only the appellants when an appeal concerns an overpayment involving 
multiple beneficiaries who have no financial liability. However, 
another commenter thought our policies with respect to beneficiary 
notification could deprive a beneficiary of his or her appeal rights. 
The commenter stated that when a fully favorable decision is issued to 
a non-beneficiary appellant, the beneficiary does not receive a copy of 
the redetermination notice. As a result, the 120 day period to request 
a redetermination may expire without the beneficiary knowing of the 
existing appeal. The commenter further noted that a decision that is 
fully favorable to a provider or supplier may not be fully favorable to 
the beneficiary. The commenter questioned whether a beneficiary still 
has appeal rights if the redetermination is not favorable for the 
beneficiary and what process follows if the evidence submitted by the 
beneficiary and provider conflict.
    Response: We do not believe a beneficiary would be deprived of any 
appeal rights in the scenario described by the commenter. In the case 
of a redetermination that is fully favorable (that is, fully reverses a 
denial of coverage or payment on the initial determination), parties 
will receive a redetermination notice, MSN, or RA, as applicable. See 
Sec.  405.956(a)(1); Internet Only Manual (IOM) Pub. 100-4, Ch. 29, 
section 310.5. The MSN and RA will reflect any adjustment made to the 
claim, including a shift in the financial liability from a provider to 
a beneficiary, and will contain information regarding further appeal 
rights.
    With respect to the commenter's concern about the subsequent appeal 
rights of a beneficiary when another party has requested a 
redetermination, a beneficiary's right to appeal does not depend on his 
or her status as an appellant at previous levels in the appeals 
process. Beneficiaries may request a subsequent appeal even if they did 
not initiate prior appeals (unless they have formally assigned their 
appeal rights to a provider or supplier and have not revoked the 
assignment). In the scenario presented by the commenter, if a 
redetermination request is timely filed by a second party before the 
redetermination decision is issued, the contractor will consolidate the 
multiple redetermination requests consistent with Sec.  405.944(c). If 
a redetermination request from another party is received by the 
contractor after the redetermination decision is issued, the contractor 
would treat the redetermination request as misfiled, and would forward 
the request to the QIC. See CMS IOM, Publication 100-4, Chapter 29, 
Section 320.1.B at (http://www.cms.hhs.gov/manuals/downloads/clm104c29.pdf). Finally, in situations where evidence submitted during 
an appeal conflicts with other evidence in the administrative record, 
the adjudicator, as an arbiter of fact, is responsible for examining 
all of the evidence submitted, and making appropriate findings of fact 
with respect to such evidence.
    In this final regulation, we are making technical revisions to 
several sections that describe the nature and effect of the 
determinations, decisions, and other actions issued by adjudicators. In 
subpart I, we refer to these actions as ``final'', ``final and 
binding'' and ``binding''. Although we believe parties to the appeals 
process understand the meaning of these terms, we believe technical 
revisions are necessary so that these terms are used consistently 
throughout subpart I. These revisions will reduce potential confusion 
regarding the effect of a determination or decision issued by an 
adjudicator.
    We believe referring to certain decisions or actions as ``final'' 
or ``final and binding'' may create confusion as to whether the 
adjudicator's action or decision constitutes a final decision of the 
Secretary for which judicial review may be sought under section 205(g) 
of the Act. As described in Sec.  405.1132 and Sec.  405.1136(a), to 
the extent authorized by sections 1869, 1876(c)(5)(B), and 1879(d) of 
the Act, judicial review is available to a party to a MAC decision, or 
to an appellant who requests escalation to Federal district court if 
the MAC does not complete its review of the ALJ's decision (other than 
MAC review of an ALJ dismissal) within the applicable adjudication 
period. In addition, judicial review is available when a review entity 
certifies that a party has met the expedited access to judicial review 
(EAJR) requirements, or, under Sec.  405.990(f)(4), when the review 
entity fails to make such certification within the applicable timeframe 
specified in Sec.  405.990(f)(2). See section 1869(b)(2) of the Act; 
Sec.  405.990. Judicial review is also available under Sec.  
405.1140(a) when a Federal district court remands a case for further 
consideration, the MAC subsequently remands the case to an ALJ, and the 
ALJ issues a decision that becomes the final decision of the Secretary. 
We are reserving the term ``final'' to describe those actions or 
decisions for which judicial review may be immediately sought. Thus, we 
believe these technical revisions will ensure that parties will be

[[Page 65308]]

able to understand when judicial review is available.
    When we state that an action or decision is ``binding'' on parties, 
we mean that the parties are obligated to abide by the adjudicator's 
action or decision, unless further recourse to challenge the action or 
decision is available, and a party exercises that right (for example, 
obtaining a decision at the next level of appeal, or having the 
adjudicator reopen and vacate the decision or action). When a party may 
take further action on an adjudicator's action or decision, we specify 
those actions that may be taken. If a party chooses not to take further 
action, or further recourse is unavailable to parties, then the 
adjudicator's decision is binding on the parties, and is final in the 
sense that no further review of the decision is available.
    In summary, when we use the term ``final'' in the regulation text, 
we mean those actions or decisions for which judicial review may be 
immediately sought. When we use the term ``binding'' in the regulation 
text, we mean that the parties are obligated to abide by the 
adjudicator's action or decision, unless further recourse to challenge 
the action or decision is available, and a party exercises that right. 
As such, a final decision of the Secretary is always a binding 
decision. However, a binding decision may not be a final decision of 
the Secretary for the purposes of exhausting administrative remedies 
when seeking judicial review.
    We also are making related technical revisions to several sections 
that describe the decisions or actions issued by adjudicators. In 
several instances we use the term ``final action'' or ``final 
decision'' to describe the actions taken or the decisions issued by a 
QIC, an ALJ, and the MAC. We believe that the meaning of these terms 
may, at times, be confusing since some of these ``final actions'' or 
``final decisions'' may not be final as discussed above. We also 
believe describing the specific actions that an adjudicator may take, 
rather than using a generic phrase, such as final action, adds clarity 
and assists parties in understanding both the effect of a specific 
action issued by an adjudicator, and when judicial review may be 
available. Therefore, where we use the terms ``final action'' or 
``final decision'', we are making technical revisions to replace those 
terms, as appropriate, with the specific determinations, decisions or 
actions that the adjudicator may take. For example, we are revising 
Sec.  405.1136(a)(2) to remove the phrase ``final action'' and replace 
it with the phrase ``final decision, dismissal order, or remand 
order''.
    Furthermore, we are making similar technical revisions to Sec.  
405.990(b)(1)(i)(A) to replace the term ``final decision'' with the 
specific actions that, if taken by an ALJ, will preclude a party from 
seeking EAJR in place of an ALJ hearing, and to Sec.  
405.990(b)(1)(i)(B) by adding dismissal orders and remand orders to the 
description of the actions that, if taken by the MAC, will preclude a 
party from seeking EAJR in place of MAC review. We believe that the use 
of the word ``decision'' alone in these subsections does not clearly 
convey the specific actions of the ALJ or MAC that will preclude a 
party from seeking EAJR, and thus we believe it is necessary to clearly 
articulate which actions could preclude such a request. Therefore, we 
are making the following technical revisions, consistent with the 
discussion above:
    We are revising the following sections to remove the terms 
``final'' and ``final and binding'' and replace them with the term 
``binding'': Sec.  405.952(e), Sec.  405.958, Sec.  405.972(e), Sec.  
405.974(b)(3), Sec.  405.978, Sec.  405.980(a)(1), Sec.  405.980(a)(5), 
Sec.  405.1004(c) and Sec.  405.1052(a)(6).
    We are revising Sec.  405.990(b)(1)(i)(A) to remove the phrase 
``final decision'' and replace it with the phrase ``decision, dismissal 
order, or remand order''.
    We are revising Sec.  405.990(b)(1)(i)(B) to add the phrase 
``dismissal order, or remand order'' after ``final decision''.
    We are revising Sec.  405.990(b)(1)(ii) to remove the term ``final 
action'' and replace it with the phrase ``decision or dismissal 
order''.
    We are revising Sec.  405.990(f)(3) to remove the words ``final 
and''.
    We are revising Sec.  405.1002(b)(2) and Sec.  405.1112(a) to 
remove the phrase ``final action'' with replace it with the phrase 
``decision or dismissal order''.
    We are revising Sec.  405.1046(c) to remove the word ``final'' and 
replace it with the phrase ``binding on the contractor''.
    We are revising Sec.  405.1048(a) to remove the phrase ``either 
issues a final action'' and replace it with the phrase ``issues a final 
decision or remand order''.
    We are revising Sec.  405.1100(c) and (d) to remove the phrase 
``final action'' and replace it with the phrase ``final decision or 
dismissal order''.
    We are revising Sec.  405.1104(a)(2) to remove the phrase ``final 
action or remand the case to the QIC'', Sec.  405.1104(b)(1) to remove 
the phrase ``final action or remand'', Sec.  405.1104(b)(2) to remove 
the phrase ``final action or remand order'', and Sec.  405.1104(c) to 
remove the phrase ``final action'' and replace them with the phrase 
``decision, dismissal order, or remand order''.
    We are revising Sec.  405.1104(b)(3) to remove the phrase ``a final 
administrative decision for purposes of MAC review'' and replace it 
with the phrase ``the decision that is subject to MAC review consistent 
with 405.1102(a)''.
    We are revising Sec.  405.1106(b) to remove the phrase ``final 
action or remand the case to the ALJ'', Sec.  405.1132(b) to remove the 
phrase ``final action or remand'', and Sec.  405.1136(a)(2) to remove 
the phrase ``final action'' and replace them with the phrase ``final 
decision, dismissal order, or remand order''.
    We are revising Sec.  405.1110(d) to remove the phrase ``remains 
the final action in the case'' and replace it with the phrase ``is 
binding on the parties to the ALJ decision.''
    We are revising Sec.  405.1126(a) to remove the word ``final''.
    We are revising Sec.  405.1130 to add the words ``final and'' 
before the word ``binding''.
    Accordingly, we are finalizing Sec.  405.948, Sec.  405.954, and 
Sec.  405.956 without modification. We are finalizing Sec.  405.950 
with modification as discussed in section II.B.5.a. of this preamble. 
We are finalizing Sec.  405.952, Sec.  405.958, Sec.  405.972, Sec.  
405.974, Sec.  405.978, Sec.  405.980, Sec.  405.984, Sec.  405.990, 
Sec.  405.1002, Sec.  405.1004, Sec.  405.1046, Sec.  405.1048, Sec.  
405.1052, Sec.  405.1100, Sec.  405.1104, Sec.  405.1106, Sec.  
405.1110, Sec.  405.1112, Sec.  405.1126, Sec.  405.1130, Sec.  
405.1132, and Sec.  405.1136 with modifications, as noted.
6. Reconsiderations (Sec.  405.960 Through Sec.  405.978)
    Sections 405.960 through 405.978 address the reconsideration 
process. We discuss specific sections and summarize and respond to 
comments on the reconsideration process below. Additional detailed 
discussion of the reconsideration process is included in the interim 
final rule at 70 FR 11423, 11428, 11440, 11441, and 11443 through 
11450.
    Comment: One commenter suggested that we establish for chain 
providers an exception to the standard rule requiring reconsiderations 
to be performed by the QIC for the State in which the service was 
rendered. In appeals involving providers that have elected a single FI, 
the commenter recommended that providers have the option of having 
appeals processed by the QIC for the State in which the provider's home 
office is located or the State in which the service was rendered.

[[Page 65309]]

    Response: In determining the workload distribution for appeals 
among the Part A QICs, CMS issued instructions requiring that, for 
chain providers that have elected to have their claims processed by a 
single FI, any related reconsiderations will be processed by the QIC 
with jurisdiction over the State where the FI is located. Since there 
are no in-person reconsiderations, we believe it is unnecessary to 
adjust the jurisdictions to accommodate home office locations. The one 
exception to this general rule applies to claims currently processed by 
one of our contractors. Because this contractor processes claims in all 
50 States, it would be too burdensome to require one QIC to process all 
the reconsiderations for those claims. Thus, we determined it was 
necessary to split that workload among the Part A QICs based on the 
State in which the service is rendered.
a. Processing Reconsideration Requests (Sec.  405.960 Through Sec.  
405.964)
    Section 405.960 states that any person or entity that is a party to 
a redetermination and is dissatisfied with that determination, may 
request a reconsideration of the redetermination by a QIC. Section 
405.962 specifies that appellants who wish to file a request for 
reconsideration must do so within 180 calendar days of the date on 
which the party receives the notice of the redetermination, or within 
such additional time as CMS may allow. In Sec.  405.964, we set forth 
the place and method for filing requests for reconsideration.
    We received no comments on these sections; however, in this 
regulation, we are making a technical revision to Sec.  405.962(a). 
Section 405.962(a) states that requests for reconsideration of a 
contractor's redetermination must be filed within 180 calendar days 
from the date the party receives notice of the redetermination, unless 
the QIC extends the timeframe upon a showing of good cause for the late 
filing consistent with Sec.  405.962(b). We inadvertently omitted a 
reference to the different filing timeframe applicable to requests for 
QIC reconsideration of a contractor's dismissal of a request for 
redetermination under Sec.  405.974(b). In Sec.  405.974(b)(1), we 
specify that a party must file the written request for reconsideration 
of a contractor's dismissal action with the QIC within 60 days after 
receipt of the contractor's notice of dismissal. While the 
reconsideration of a dismissal action under Sec.  405.974(b) differs 
from the reconsideration of a redetermination under Sec.  405.974(a) 
(for example, a QIC's reconsideration of a dismissal action is not 
subject to further review under Sec.  405.974(b)(3)), for clarity, we 
are amending Sec.  405.962(a) to include the reference to the timeframe 
applicable to requests for QIC reconsideration of contractor 
dismissals.
    Accordingly, we are finalizing Sec.  405.960 and Sec.  405.964 
without modification. We are finalizing Sec.  405.962 with modification 
as noted above, and as discussed in section II.B.5.a. of this preamble.
b. Evidence Submitted With the Reconsideration Request--Full and Early 
Presentation of Evidence (Sec.  405.966)
    Section 405.966(a) specifies that a party should present evidence 
and allegations of fact or law related to the issue in dispute and 
explain why it disagrees with the initial determination when filing a 
request for reconsideration. Absent good cause, failure to submit all 
evidence, including documentation requested in the notice of 
redetermination, prior to the issuance of the notice of reconsideration 
precludes subsequent consideration of that evidence. Section 405.966(b) 
explains that submissions of evidence that do not accompany the request 
for reconsideration extend the QIC's 60-day decision-making timeframe 
up to 14 calendar days for each submission. Section 405.966(c) 
establishes an exception to the full and early presentation of evidence 
requirement, and permits Medicaid State agencies and beneficiaries, 
other than those represented by providers or suppliers, to submit 
additional new evidence after the reconsideration level without 
establishing good cause for the delayed submission.
    Comment: We received many comments concerning the provision that 
requires a provider or supplier to submit all evidence prior to the QIC 
reconsideration decision being rendered, unless there is good cause for 
submitting the evidence later. In general, most commenters were in 
favor of expediting the appeals process and recognized the value of 
early evidence submission. However, some commenters argued that this 
provision was too burdensome for providers, suppliers, and 
beneficiaries, particularly when they do not have easy access to 
supporting documentation that may be required, or may not know until 
after the QIC decision that additional evidence may be necessary or 
useful. Several commenters requested that CMS include in the 
regulations a specific list of items, documents or circumstances that 
constitute good cause for late submission of evidence. Some commenters 
objected to the limitations completely. One commenter stated that 
evidence submission should be allowed at any stage of the appeals 
process, as long as the evidence proved relevant and there was no 
prejudice to permitting its submission.
    Response: The requirement in Sec.  405.966 for the early 
presentation of evidence by providers and suppliers is based on the 
statutory requirement contained in section 1869(b)(3) of the Act, as 
added by section 933(a) of the MMA, which states that a provider or 
supplier may not, in any subsequent level of appeal, introduce evidence 
that was not presented at the reconsideration conducted by the QIC, 
unless there is good cause that precluded the introduction of that 
evidence at or before the reconsideration. Section 405.966(c)(2) 
extends the full and early presentation of evidence requirement to 
beneficiaries represented by providers or suppliers. We recognize that 
absent advance notice of what documents are needed to support a claim, 
appellants may have difficulty determining what constitutes relevant 
evidence for their claim appeals. Thus, Sec.  405.956(b)(6) requires 
contractor redetermination notices to identify ``specific missing 
documentation.'' We believe this provision helps appellants, since it 
should enable appellants to better understand the basis for the 
unfavorable redetermination and understand the information missing from 
the record. Ultimately, we believe this can result in a better 
developed record at the reconsideration level, and will allow the QIC 
to make more fully informed reconsideration decisions. We do not 
believe that it is either practical or consistent with the statute to 
limit the requirement for full and early presentation of evidence by 
attempting to distinguish categorically between evidence that is 
readily available to the provider, supplier, or beneficiary and that 
which is obtained from entities not directly involved in the claim 
dispute. Limiting the requirement for full and early presentation of 
evidence to objective medical information would be equally problematic. 
Given the vast amount of medical services and items that could be 
involved in a claim dispute, it would be extremely difficult to draw 
clear distinctions among the numerous types of documentation that might 
be needed. Nevertheless, where it is not feasible to obtain this 
documentation prior to issuance of the reconsideration, as indicated in 
Sec.  405.1028, an ALJ will make a determination on whether good cause

[[Page 65310]]

for failure to submit the evidence to the QIC exists. This applies to 
all documentation, including any items listed in the notice of 
redetermination.
    Finally, Sec.  405.966(c) states that the limitation on the 
presentation of new evidence does not apply to beneficiary appellants 
unless they are represented by a provider or supplier or to Medicaid 
State agencies. Therefore, although contractor redetermination notices 
will uniformly identify any necessary missing documentation, 
beneficiaries, except those represented by providers or suppliers, and 
Medicaid State agencies will still be permitted to introduce evidence 
after the QIC reconsideration level (although for efficiency reasons, 
they would be better served by doing so as soon as possible).
    We are finalizing Sec.  405.966 with modification as discussed in 
section II.B.5.a. of this preamble.
c. Conduct and Processing of Reconsiderations (Sec.  405.968 Through 
Sec.  405.978)
    In Sec.  405.968, we describe the manner in which QICs conduct 
reconsiderations. In Sec.  405.970, we set forth the timeframes for 
issuing reconsideration notices. In Sec.  405.972, we explain the 
process by which a QIC may dismiss, or a party may withdraw, a request 
for reconsideration. Section 405.974 describes the reconsideration by a 
QIC of a contractor's determination and a contractor's dismissal of a 
redetermination request. Section 405.976 discusses the notice 
requirements for QIC reconsiderations. Finally, Sec.  405.978 explains 
the effect of a reconsideration.
    Comment: Several commenters opposed the elimination of the Part B 
fair hearing. These commenters believe that appellants will be deprived 
of an important opportunity to provide adjudicators with clarifications 
and additional information not contained in the record, and that 
adjudicators will not have an opportunity to personally assess a 
beneficiary's physical or mental condition. The commenters suggested 
that having an in-person hearing at the second level of appeal would 
reduce the number of cases appealed to the ALJ level, thus speeding up 
reimbursement to providers and reducing administrative costs. One 
commenter requested that QICs be encouraged to contact beneficiaries, 
providers and suppliers with questions or to request input to obtain 
all relevant evidence.
    Response: We continue to believe that providing for an on-the-
record review at the QIC level of appeal, rather than an in-person 
hearing, is consistent with both BIPA and the MMA. Although it 
certainly could have, the Congress did not provide for hearings by the 
QICs. Instead, under section 1869(c)(3)(B)(i) of the Act, Congress 
required QICs to ``review'' initial determinations. In contrast, under 
section 1869(d)(1) of the Act, the statute specifically provides for a 
``hearing'' at the ALJ level. Furthermore, Congress also significantly 
reduced the decision-making timeframes at all levels of the appeals 
process. As discussed in the interim final rule, the significantly 
shortened decision-making timeframes result in appellants receiving a 
hearing before an ALJ generally within the same timeframe they would 
have received a ``fair hearing'' under the previous Part B appeals 
process. See 70 FR 11448. Finally, the regulatory provisions at Sec.  
405.968(a)(1) regarding QIC reconsiderations continue to allow QICs to 
contact appellants and obtain any necessary information by phone, or 
other means.
    Comment: One commenter expressed concern that the regulation does 
not define ``medical record'', nor does it address specific items and 
services that require physician completion of a Certificate of Medical 
Necessity (CMN). The commenter suggested that we clarify that the CMN 
is a medical record and that Congress established the CMN to enable 
physicians to demonstrate medical necessity.
    Response: We do not agree with the commenter's suggestion that it 
is necessary to define the term ``medical record'' in this regulation. 
The purpose of this regulation is to implement the changes made to the 
Medicare claims appeals process as required by BIPA and the MMA. The 
term ``medical record'' is not a term of art that requires a definition 
in this regulation, and neither BIPA nor the MMA attach special 
significance to the term with respect to the claims appeals process. 
Further, we do not believe it is appropriate to include information 
related to the completion of the CMN in this regulation. Policies that 
relate to the completion of the CMN are outside of the scope of this 
regulation.
    Nevertheless, we disagree with the commenter's assertion that 
completion of the CMN demonstrates definitively that an item or service 
is medically reasonable and necessary for diagnosis or treatment of 
illness or injury or to improve the functioning of a malformed body 
member under section 1862(a)(1)(A) of the Act. CMS' longstanding policy 
has been that even where a CMN has been provided, contractors may 
request supporting medical documentation to demonstrate the ``medical 
necessity'' of items or services. This policy was affirmed in Gulfcoast 
Medical Supply, Inc. v. Sec'y, Health and Human Servs., 468 F.3d 1347 
(11th Cir. 2006) and MacKenzie Medical Supply, Inc v. Leavitt 506 F.3d 
341 (4th Cir. 2007). In Gulfcoast, the Circuit Court stated that the 
Medicare statute ``unambiguously permits carriers and the Secretary to 
require suppliers to submit evidence of medical necessity beyond a 
CMN.'' In MacKenzie, the Circuit Court found that Congress did not 
unambiguously mandate that the CMN is the only document that can be 
required of a supplier to show medical necessity.
    Comment: We received many comments on Sec.  405.968(b)(2), which 
requires QICs to give substantial deference to a local coverage 
determination (LCD), local medical review policy (LMRP), and CMS 
program guidance, unless the QIC determines, either at a party's 
request or at its own discretion that the policy does not apply to the 
facts of the particular case in which case the QIC may decline to 
follow the policy. Commenters raised many of the same concerns voiced 
by commenters to the proposed rule. They believe that CMS exceeded its 
statutory authority by specifying that QICs are bound by LCDs and LMRPs 
and questioned the propriety of requiring QICs to give deference to 
policies that they allege sometimes contradict statutes and 
regulations, are against the intent of BIPA, and are not promulgated 
through notice and comment rulemaking. These commenters suggested that 
deference to these coverage policies should be eliminated to preserve 
fairness and due process. They also noted that QICs are required to 
have extensive medical, legal, and Medicare program knowledge and so 
would be well equipped to make decisions without deferring to these 
policies.
    Response: We continue to believe that it is both appropriate and 
consistent with the statutory intent of BIPA, which added section 
1869(c)(3)(B)(ii)(II) of the Act to require QICs to consider LCDs in 
making their decisions, to require QICs to give substantial deference 
to LCDs and LMRPs and other CMS program guidance in the appeals they 
adjudicate if these policies are applicable to a specific case. See 
Sec.  405.968(b)(2). As noted in the proposed rule, the use of 
consistent review criteria will serve several important purposes, 
including the identification of recurrent problems with CMS policies, 
fostering consistency in appeal decisions, and potentially reducing 
both ALJ appeals volume and the ALJ reversal rate. See 67 FR 69312, 
69325 and 69328. In addition,

[[Page 65311]]

as explained in the interim final rule, Federal courts have considered 
and applied deference standards in considering the validity of various 
Medicare policies and have also recognized that ALJs and the MAC 
properly consider issues relating to deference as well. See Abiona v. 
Thompson, 237 F.Supp.2d 258 (E.D.N.Y. 2002), and 70 FR 11458.
    We note that section 522 of BIPA provides an explicit process for 
contesting LCDs. However, we agree with the commenters' assertion that 
QICs should be able to evaluate whether a particular coverage policy 
applies in a specific appeal. In response to similar comments on the 
proposed rule, in the interim final rule, we revised Sec.  
405.968(b)(2) to allow QICs to decline to follow an LMRP, LCD or other 
CMS program guidance either at the request of a party or at its own 
discretion if a QIC determines that the policy does not apply to the 
facts of the particular case. However, we also believe that it is 
necessary to ensure that the QICs, like other appeals adjudicators, 
give the contractors' coverage policies substantial deference if they 
are applicable to a particular case. Thus, we require QICs to give 
substantial deference to LMRPs, LCDs and other CMS program guidance, 
unless the QIC finds that the policy is not applicable in a particular 
case. This policy acknowledges the extensive medical expertise and 
program knowledge within each QIC, and strikes a balance between the 
need to preserve QIC independence and the need to apply consistent 
review criteria and to ensure that the established coverage policies 
are given appropriate consideration.
    Comment: One commenter inquired about the QIC's ability to raise or 
develop new issues. The commenter did not understand how a new issue 
could develop if the contractor had rendered a redetermination with 
respect to the claim. The commenter requested that we modify the 
language of Sec.  405.968(b)(5) to be consistent with other regulatory 
provisions that reference raising new issues.
    Response: A reconsideration is a new and independent review of an 
initial determination, and we believe adjudicators at the 
reconsideration level should be permitted to raise and develop any 
issues that they believe are relevant to the claim(s) in the case at 
hand. For example, if a claim was denied initially as not medically 
reasonable and necessary because medical records were not submitted to 
the carrier as requested, and during the reconsideration, the review of 
the medical records accompanying the appeal request shows that the 
services would be excluded for a different reason or under a different 
statutory authority, the QIC should be permitted to explore the new 
issues. Furthermore, we note that the policy with regard to raising new 
issues at Sec.  405.968(b)(5) is consistent with the policy with regard 
to raising new issues as part of the redetermination in Sec.  405.948. 
Accordingly, we are not modifying the language in Sec.  405.968(b)(5).
    Comment: A number of commenters asked that the final rule include 
more explicit information about the QICs. In particular, commenters 
wanted the final rule to identify the minimum qualifications for the 
QIC panel members and reviewers, clearly define the role of the QIC 
panel in the reconsideration process, and describe the on-going 
training that would be made available to the panel members and 
reviewers. Several commenters recommended that the regulations list 
specific physician or healthcare specialties that would be included on 
the QIC panel. Commenters also asked that the final rule spell out the 
provisions that would be put in place to ensure the QICs' independence. 
One commenter supported some type of sanction for QICs that failed to 
issue timely decisions under Sec.  405.970. Finally, a commenter stated 
that if the QIC's decision contradicts the treating physician's 
judgment, such as determining an item or service is not medically 
necessary, despite a physician's certification on a CMN, then the 
appeals decision should outline circumstances that would justify this 
finding.
    Response: As noted in the interim final rule (70 FR 11449), the 
requirements for QIC reviewers and the physicians who serve as panel 
members are contained in section 933 of the MMA and section 521 of 
BIPA. Specifically, section 1869(c), (e)(3), and (g) of the Act contain 
provisions regarding the independence of the QICs, qualification 
requirements for QICs, the role of the QIC panel, and continuing 
education for QICs with respect to Medicare coverage of items and 
services. Thus, we do not believe it is appropriate or necessary to 
address these issues, or the specific physician or health care 
specialties that would be included on the QIC panel, in any further 
detail in these regulations. Instead, through the QIC contracting and 
evaluation processes, we ensure that the QICs are fully compliant with 
these statutory requirements, including the appropriateness of the 
members of QIC panels. In fact, we have already taken action to replace 
a QIC that was having difficulty meeting the performance standards 
imposed by the statute.
    In addition, although we are committed to ensuring that QICs are 
meeting the statutory decision-making timeframes, we note that Congress 
has already provided a remedy for those cases in which a QIC fails to 
issue a timely decision. In section 1869(c)(3)(C)(iii) of the Act and 
in Sec.  405.970(c), appellants who do not receive a reconsideration 
within the applicable decision-making timeframe have the right to 
escalate the appeal to an ALJ. Therefore, we do not believe that the 
regulations should contain provisions sanctioning QICs for not meeting 
the applicable decision-making timeframes.
    Finally, in the event a QIC's decision contradicts the treating 
physician's medical judgment, such as determining that an item or 
service is not medically necessary, we note that Sec.  405.976(b) 
requires that the notice of reconsideration include a rationale for the 
decision.
    In this final regulation, we are also making a technical revision 
to Sec.  405.972(b)(3) (discussed below), and further technical 
revisions to Sec.  405.972(e) and Sec.  405.1004(c) (see section 
II.B.5.b. of this preamble for a discussion of our prior revision). In 
Sec.  405.972, we explain the process by which a QIC may dismiss, or a 
party may withdraw, a request for reconsideration. We are revising 
Sec.  405.972(e) to clarify that when a QIC dismisses a request for 
review of a contractor's dismissal action, the dismissal is binding and 
not subject to further review. Similarly, we are revising Sec.  
405.1004(c) to clarify that an ALJ's dismissal of a request for review 
of a QIC's dismissal action is binding and not subject to further 
review.
    In Sec.  405.974(b)(1) and Sec.  405.1004(a), we offer parties an 
opportunity to appeal a dismissal action to the next adjudicative level 
and, under Sec.  405.974(b)(3) and Sec.  405.1004(c), the decision of 
the adjudicator at that subsequent level with respect to the dismissal 
action is binding and not subject to further review. See 70 FR 11444. 
We did not, however, intend to permit additional opportunities for 
review of dismissals where the request for review of a dismissal is 
invalid and thus, subject to dismissal. For example, a contractor 
dismisses a request for a redetermination. The party then requests that 
the QIC review the dismissal but the party, without having good cause, 
does not file this request with the QIC in a timely fashion. In this 
scenario, the QIC would dismiss the

[[Page 65312]]

request for reconsideration of the contractor's dismissal and the party 
would not be entitled to ALJ review of the QIC's decision.
    In allowing review of dismissals at the next adjudicative level, we 
balance a party's need for review and the need for administrative 
finality. If a party does not file a valid request for review for a 
second time, we believe the need for finality in the administrative 
process outweighs the need for further review. Thus, a QIC's dismissal 
of a request for review of a contractor's dismissal action, and an 
ALJ's dismissal of a request for review of a QIC's dismissal are not 
subject to further review. However, while a party may not request 
further review in the administrative appeals process when an 
adjudicator dismisses a request for review of a dismissal, we note that 
a party may still request the dismissal be vacated consistent with the 
provisions of Sec.  405.952(d), Sec.  405.972(d), Sec.  405.1054, and 
Sec.  405.1108(b).
    In addition, we are making a technical revision to Sec.  
405.972(b)(3). In Sec.  405.972(b)(3), when describing the authority of 
the QIC to dismiss an untimely filed request for reconsideration, we 
inadvertently omitted the cross-reference to requests for QIC review of 
a contractor's dismissal of a redetermination request. The timeframes 
for filing such requests, which differ from the timeframes for filing a 
request for reconsideration of a contractor's redetermination decision, 
are found in Sec.  405.974(b)(1). For clarity, we are amending Sec.  
405.972(b)(3) to reference the separate timeframes applicable to 
appeals of contractor dismissal actions at the redetermination level.
    In summary, we are amending Sec.  405.972(b)(3) to include a 
reference to the timeframe for filing a request for QIC review of a 
contractor dismissal action, and we are amending Sec.  405.972(e) and 
Sec.  405.1004(c) to clarify that a QIC's dismissal of a request for a 
reconsideration of a contractor's dismissal of a request for 
redetermination, and an ALJ's dismissal of a request for review of a 
QIC's dismissal of a request for reconsideration is binding and not 
subject to further review.
    Accordingly, we are finalizing Sec. Sec.  405.968 and 405.976 
without modification. We are finalizing Sec. Sec.  405.970 and 405.974 
with modification as discussed in section II.B.5.a. of this preamble. 
We are finalizing Sec. Sec.  405.972 and 405.1004 with modifications as 
noted above, and Sec. Sec.  405.972, 405.974 and 405.978 with 
modification as discussed in section II.B.5.b. of this preamble.
7. Reopenings of Initial Determinations, Redeterminations, 
Reconsiderations, Hearings and Reviews (Sec.  405.980 Through Sec.  
405.986)
    Sections 405.980 through 405.986 set forth the requirements 
regarding the reopenings process, including how parties may request 
reopenings of determinations and decisions, and how contractors, QICs, 
ALJs, and the MAC will conduct reopenings.
    We received several comments with respect to the reopening 
provisions as set forth in the interim final rule. A summary of the 
comments and our responses are included below. Additional detailed 
discussion of the reopening process is included in the interim final 
rule at 70 FR 11423, 11435, 11447, 11450 through 11453, and 11458.
a. Reopening Actions (Sec.  405.980)
    Section 405.980 describes the general rules for reopening initial 
determinations, redeterminations, reconsiderations, hearing decisions 
and MAC review decisions.
    Comment: One commenter recommended that CMS create enforcement 
provisions for the ``good cause'' standard when contractors reopen 
claims. The commenter believed that contractors often ignore the 
guidelines set out in regulations and manuals, and recommended that the 
good cause standard be enforced to ensure fairness and finality for 
Medicare providers and suppliers.
    Response: Contractors are required to follow Federal laws, 
regulations and manual instructions in their business operations. As 
noted in the interim final rule in response to a similar comment on the 
proposed rule (70 FR 11453), our regulations require that contractors 
abide by the good cause standard for reopening actions as set forth in 
Sec.  405.980(b) and Sec.  405.986. CMS conducts audits and evaluations 
of contractor performance in order to assess compliance with Medicare 
policies. Thus, the necessary monitoring and enforcement mechanisms are 
already in place and we do not believe it is necessary to add 
enforcement provisions to these regulations.
    Comment: One commenter believed that CMS Change Request 3622 does 
not comport with Sec.  405.927 and Sec.  405.980(a)(3) with respect to 
the distinction between claim reopenings and appeals of initial 
determinations. The commenter stated that the reopening provisions 
indicate that adjustments resulting from clerical errors are to be 
processed as reopenings. However, CMS instructions in Change Request 
3622, implemented July 5, 2005, state that the Medicare Carrier System 
(MCS) will deny claims resubmitted with new information (such as 
diagnosis codes), requiring the provider or supplier to submit an 
appeal.
    Response: Since the publication of the interim final rule, we have 
issued instructions to carriers to suspend implementation of Change 
Request 3622. See http://www.cms.hhs.gov/transmittals/downloads/R104PI.pdf modified by JSM-05385, dated 06-20-2005. CMS is re-
evaluating the duplicate edit policies to determine how best to address 
the subsequent re-submission of claims in light of the reopening 
policies and will take into consideration the concerns raised by the 
commenter.
    As noted by the commenter and as discussed in the preamble to the 
interim final rule, in accordance with Sec.  405.980(a)(3)(iii), 
contractors will process disputes involving resubmitted claims denied 
as duplicates through the reopening process. See 70 FR 11451. 
Generally, providers and suppliers should avoid resubmitting claims for 
previously denied items or services (this does not apply to providers 
who submit claim adjustments for returned claims). Unless a claim is 
denied as the result of a clerical error, when a denied claim carries 
with it appeal rights, providers and suppliers should file appeal 
requests to dispute the determination that denies items or services on 
the claim. However, if a provider or supplier decides to resubmit a 
claim for items or services previously submitted to Medicare, the 
appeals rights for those items or services flow from the original claim 
submission and not the subsequent claim submission. Resubmissions of 
claims for the same items or services do not extend the appeal rights 
available to a party. Thus, we have instructed contractors to process 
appeal requests for claims denied as duplicates as reopenings, and the 
sole issue to be resolved is whether the claim is in fact a duplicate 
of a previous submission. All other issues not considered clerical 
errors (that is, coverage and payment issues) must be resolved through 
an appeal of the first claim. If an appeal is pending on the original 
submission of the item or service, then the contractor will not process 
the reopening on the resubmitted claim. To do otherwise could result in 
duplicate payment for the items or services.
    Comment: One commenter expressed concern that a party cannot seek 
review of a determination not to grant a request for reopening. See 
Sec.  405.926(l),

[[Page 65313]]

Sec.  405.980(a)(5). The commenter argued that not allowing an appeal 
in this situation places too much authority in the hands of the persons 
making decisions regarding reopenings.
    Response: As noted in our response to a similar comment in the 
interim final rule, it has been a longstanding principle that failure 
to grant a request for reopening is not reviewable. See 70 FR 11453. 
The Supreme Court has upheld this concept. See Your Home Visiting Nurse 
Services, Inc. v. Shalala, 525 U.S. 449 (1999); Califano v. Sanders, 
430 U.S. 99 (1977). This policy does not violate a party's due process 
rights, because the administrative appeals process for Medicare claims 
already affords ample opportunities for a party to challenge claim 
determinations. The reopenings process simply offers, but does not 
guarantee, an additional process if a party believes an error on a 
claim should be corrected, but the party has exhausted his or her 
appeal rights, or the error is one that should not be resolved through 
the appeals process. See Sec.  405.927.
    In Sec.  405.980(a)(3), we indicate that a contractor must refuse 
to process a reopening request when it disagrees that the dispute 
involves a clerical error and must ``dismiss'' the reopening request 
and advise the party of any appeal rights, provided the timeframe to 
request an appeal has not expired. The use of the term ``dismiss'' in 
connection with a reopening request does not confer any right to obtain 
further review of a decision on a reopening request. See Sec.  
405.926(l) and Sec.  405.980(a)(5).
    Comment: Several commenters stated that the definition of ``similar 
fault'' in Sec.  405.902 is too broad and allows contractors to reopen 
almost any claim, for any reason and that it requires providers and 
suppliers to maintain supporting billing records for an indefinite time 
period, at considerable expense. One commenter cited a difference 
between the definition of ``similar fault'' in the interim final rule 
compared to the Medicare Claims Processing Manual, Chapter 29, Appeals 
of Claims Decisions, section 90.9 Unrestricted Reopenings, and urged 
CMS to follow the policy as stated in the claims processing manual.
    Response: The definition of ``similar fault'' contained in Sec.  
405.902 covers situations in which a contractor identifies an 
inappropriate billing that does not rise to the level of fraud. The 
definition covers situations where Medicare payment is obtained by an 
individual or entity with no legal right to the funds, the contractor 
determines that the individual or entity knows or could reasonably be 
expected to know that the claims for items or services should not have 
been paid, and there is no determination by law enforcement that the 
payment was obtained through an act of fraud. The similar fault 
provision is appropriately used where fraudulent behavior is suspected, 
but law enforcement is not proceeding with recovery on the basis of 
fraud.
    With respect to the commenter's concern about indefinite storage of 
records, we do not believe this regulation will significantly impact 
providers and suppliers for several reasons. First, it is a 
longstanding policy in the Medicare program that a claim may be 
reopened at any time if it was procured by fraud or similar fault. 
Thus, this regulation does not impose a new burden on providers or 
suppliers. See Sec.  405.750(b)(3)(ii) and Sec.  405.841(c)(1). In 
addition, State law and Federal conditions of participation have 
longstanding requirements for the retention of records. Finally, 
providers and suppliers who submit claims that are in compliance with 
Medicare program requirements, and do not accept payment for claims 
which they know, or should reasonably be expected to know, they are not 
otherwise entitled, will not have claims reopened for fraud or similar 
fault. Thus, we believe the fraud or similar fault provisions in this 
regulation will not have a significant impact on providers and 
suppliers.
    In Sec.  405.902 of the interim final rule, we codified the 
definition of ``similar fault'' for the purposes of reopening initial 
determinations and appeal decisions. This definition supersedes the 
definition previously found in our claims processing manual. Based on 
our experience with the reopenings process, we determined that the 
previous definition of similar fault did not provide adequate guidance 
to adjudicators. We believe the new definition more accurately conveys 
the meaning of similar fault, and makes clear that the fault must be 
``similar'' to fraud.
    Comment: One commenter asked for clarification on the types of 
errors that could be corrected through reopenings.
    Response: It is not possible to delineate in a regulation all of 
the types of minor clerical and technical errors that can be addressed 
through the reopening process. However, we have issued operating 
instructions to contractors that offer examples of issues that are 
appropriate to handle as reopenings, and those that should be processed 
as appeals. See IOM 100-4 Chapter 34, Reopening and Revision of Claim 
Determinations and Decisions (http://www.cms.hhs.gov/manuals/downloads/clm104c34.pdf).
    Under Sec.  405.980(a)(3), we state that a clerical error includes 
human and mechanical mistakes on the part of the party or the 
contractor (that is, mathematical or computational mistakes, inaccurate 
data entry, or denials of claims as duplicates). Nevertheless, we 
appreciate the difficulty some providers and suppliers may have in 
determining whether a claim should be corrected through the reopenings 
process or the initial determination should be contested through the 
appeals process. We note that consistent with Sec.  405.980(a)(3), if 
the contractor determines that an appeal request involves either the 
correction of a clerical error, or another matter that should be 
handled through the reopenings process, the appeal request will be 
treated as a request for a reopening, and the contractor will transfer 
the appeal request to the reopenings unit for processing. Similarly, if 
the contractor determines that a request for reopening involves an 
issue that must be resolved through the appeals process, the reopening 
request will be denied, and the contractor will advise the party 
accordingly. Although a contractor's refusal to reopen an initial 
determination is not subject to appeal, a party may file an appeal 
request with the contractor, subject to the filing requirements in 
Sec.  405.942 through Sec.  405.946, if they continue to dispute the 
initial determination on the items or services at issue. Thus, if it is 
unclear whether a particular dispute should be resolved as a reopening 
or as an appeal, a party's best recourse may be to file an appeal 
request.
    In this final regulation, we are making two technical corrections 
to the introductory clause of Sec.  405.980(b). First, we are replacing 
the word ``its'' with the word ``an''. This correction ensures that 
Sec.  405.980(b) is consistent with (1) our longstanding policy as set 
forth in the interim final rule which allows certain contractors, other 
than the contractor that issued the initial determination, to reopen an 
initial determination (see 70 FR 11450), and (2) the definition of 
contractor included as a technical revision in this rule. In the 
interim final rule, we explained that for the purposes of reopening, 
the term ``contractors'' includes ``carriers, intermediaries, and 
program safeguard contractors.'' Program safeguard contractors (PSCs) 
do not have authority to issue initial determinations (see section 1893 
of the Act). Thus, PSCs have not issued, and do not issue, initial 
determinations; however, in order to carry out their functions as 
authorized under section 1893(b)(1) of the Act (for

[[Page 65314]]

example, to conduct medical, utilization and fraud review of claims), 
PSCs must be able to reopen initial determinations made by other 
contractors. Including them in this list of ``contractors'' in the 
interim final rule that can conduct reopenings was meant to be 
consistent with 1893(b)(1) of the Act. Furthermore, the technical 
correction discussed above is consistent with our clarification of the 
term ``contractor'' set forth in this rule. As clarified in this rule, 
the term ``contractor'' would include, among other entities, PSCs.
    We note that certain entities that did not exist when the interim 
final rule was published (and thus, were not included in the list of 
entities considered contractors for the purpose of conducting 
reopenings), would be included in the definition of ``contractor'' as 
clarified in this rule and may be authorized to reopen initial 
determinations made by other contractors. For example, recovery audit 
contractors (RACs) (considered contractors as that term is clarified in 
this rule) do not issue initial determinations. However, in order to 
carry out their functions as authorized by section 1893(h)(1) of the 
Act, they must be able to reopen initial determinations made by other 
contractors. Under section 1893(h)(1) of the Act, RACs identify 
underpayments and overpayments and recoup overpayments. In order to 
identify underpayments and overpayments, and prior to initiating 
recoupment of an overpayment, RACs must reopen the initial 
determinations issued by other contractors. Thus, consistent with their 
authority under section 1893 of the Act, RACs would be permitted to 
reopen initial determinations under Sec.  405.980. Accordingly, 
consistent with our policy as set forth in the interim final rule, we 
are replacing the word ``its'' with ``an'' in the introductory clause 
of Sec.  405.980(b) to more clearly convey our policy to permit certain 
contractors, other than those who issue initial determinations, to 
reopen initial determinations when appropriate.
    Second, we are removing the words ``and revise'' from the 
introductory clause of Sec.  405.980(b). Subsections (c), (d), and (e) 
of Sec.  405.980, which are analogous to subsection (b), in that they 
discuss reopening timeframes and requirements for determinations and 
decisions requested by a party or initiated by a QIC, ALJ, or the MAC, 
do not include the words ``and revise'' and we inadvertently included 
these words in subsection (b). The provision, as revised, now reflects 
our longstanding policy that the timeframes for reopening a 
determination or decision are measured by the date of the reopening not 
the date of the revision of the determinations or decisions. See 42 CFR 
Sec.  405.750(b), Sec.  405.841, Sec.  405.842(a); 67 FR 69327; The 
Carriers Manual, Pub. 14-3 (Claims Process Part 3), Chapter XII, 
section 12100.4, and The Intermediary Manual, Pub. 13-3 (Claims Process 
Part 3), Chapter VIII, section 3799.4. With the revisions described 
above, the introductory clause of Sec.  405.980(b) will read as 
follows: ``A contractor may reopen an initial determination or 
redetermination on its own motion --''
    Accordingly, we are finalizing Sec.  405.980 with modifications as 
noted above, with modification as discussed in section II.B.5.b. of 
this preamble and with modification as discussed in section II.B.5.a. 
of this preamble.
b. Conduct of Reopenings (Sec.  405.982 Through Sec.  405.986)
    Section 405.982 discusses the provision of notice of a revised 
determination or decision. Section 405.984 explains the effect of a 
revised determination or decision and Sec.  405.986 sets forth the good 
cause standard for reopening a determination or a decision.
    Comment: We received several comments concerning the reopening 
timeframes. Some commenters requested that CMS establish a response and 
decision-making timeframe for contractors to complete or deny reopening 
requests from a party. One commenter expressed concern about 
uncertainty in the timing of the reopening process. The commenter 
explained that while awaiting a contractor's decision on whether to 
reopen, the deadline for filing for a redetermination could pass. The 
commenter suggested that we require adjudicators to find good cause and 
extend the time limit for filing an appeal if a decision regarding a 
reopening is not made until after the relevant appeal filing time limit 
has passed. One commenter requested that the rule allow for 60 days to 
file an appeal after a contractor denies a reopening request.
    Response: We appreciate the many suggestions regarding the 
processing of reopening requests. With respect to the commenter's 
concern about uncertainty in the timing of the reopening process, we 
acknowledge that there are no regulatory timeframes that apply to the 
processing of the reopening request when a party requests that an 
adjudicator reopen a determination. Since reopenings are a 
discretionary activity, we believe it is more appropriate to establish 
applicable response and decision-making timeframes in our operating 
instructions to ensure the agency has adequate flexibility to make 
necessary changes in order to respond to shifts in contractor workload. 
Current operating instructions to contractors generally require the 
resolution of party initiated reopening requests within 60 days of 
receipt of the reopening request. See IOM 100-4 Chapter 34 Section 10.7 
http://www.cms.hhs.gov/manuals/downloads/clm104c34.pdf. If a party 
misses the filing deadline for an appeal while awaiting a decision on a 
reopening request, the party may request the adjudicator consider 
granting an extension to the filing time limit for good cause 
consistent with Sec.  405.942(b). Thus, we are not amending Sec.  
405.980 or Sec.  405.982 to include a timeframe for resolving requests 
for reopening.
    Furthermore, we do not believe it is appropriate to require 
adjudicators to find good cause to extend filing time limits if an 
adjudicator's decision with respect to a request for reopening is made 
after the party's deadline for filing an appeal request has expired. 
Rather, we believe a decision as to whether good cause exists for 
extending appeals filing time limits should be made on a case by case 
basis. Alternatively, a party may consider filing an appeal request (if 
appeal rights are available) if there is concern that the timeframe for 
filing a subsequent appeal may expire should the reopening request be 
denied. If the issue involves a clerical error, consistent with Sec.  
405.980(a)(3), the contractor will process the request as a reopening.
    We also considered the commenter's suggestion that we allow an 
additional 60 days following a denial of a reopening request, to file 
an appeal on the item or service at issue. While we understand the 
concerns of the commenter regarding the potential effect a denied 
reopening request may have on appeal rights, we believe that allowing 
additional time to file an appeal as suggested would provide an 
inappropriate extension to appeals filing timeframes. Moreover, as we 
noted in the interim final rule, when a party is unsure whether a 
dispute regarding an item or service is to be handled as a reopening or 
an appeal, to ensure that the item or service at issue is reviewed in 
some manner by the adjudicator, it may be in the party's best interest 
to request an appeal, provided appeal rights are available. See 70 FR 
11452. Thus, we are not adopting the commenters' suggestions to extend 
appeals filing time limits or require a finding of good cause for late 
filing when decisions on reopenings occur after the filing deadline has 
passed.

[[Page 65315]]

    Comment: One commenter objected to the new regulatory definition of 
new and material evidence in Sec.  405.986(a)(1), stating that it is 
far more restrictive than prior regulations at 20 CFR Sec.  404.988(b) 
and Sec.  404.989.
    Response: Prior to the issuance of the interim final rule, the 
reopening process for Medicare claims relied on the regulatory 
provisions found in 20 CFR Sec.  404.988(b) and Sec.  404.989 that 
govern the reopening of Social Security disability claims. See 42 CFR 
Sec.  405.750(b) and Sec.  405.841. 20 CFR Sec.  404.988(b) states that 
a determination or decision may be reopened within four years of the 
date of the notice of initial determination upon a finding of good 
cause as defined in 20 CFR Sec.  404.989. In 20 CFR Sec.  404.989, good 
cause to reopen a determination or decision may be established if (1) 
new and material evidence is furnished; (2) a clerical error in the 
computation or recomputation of benefits was made; or (3) the evidence 
that was considered in making the determination or decision clearly 
shows on its face that an error was made. The term ``new and material 
evidence'' was not defined in the regulations used by Social Security, 
nor was it defined in the Medicare's regulations. However, operating 
instructions used by Medicare carriers and fiscal intermediaries in 
processing reopenings have included a definition of new and material 
evidence for more that 15 years, and this definition served as the 
basis for the definition of new and material evidence included in Sec.  
405.986(a)(1). See The Carriers Manual, Pub. 14-3 (Claims Process Part 
3), Chapter XII, section 12100.9 and The Intermediary Manual, Pub. 13-3 
(Claims Process Part 3), Chapter VIII, section 3799.9. Thus, since we 
codified existing operating instructions, we disagree with the 
commenter's assertion that our standard for new and material evidence 
under Sec.  405.986(a)(1) is far more restrictive than it had been 
prior to the interim final rule.
    Comment: One commenter asked for clarification of Sec.  405.986(b) 
regarding changes in substantive law or interpretative policy not 
serving as the basis for reopening a determination. The commenter 
believed the current wording could be construed as giving the 
contractor the ability to reopen a case based on local coverage 
determinations taking effect within one year of the initial 
determination or redetermination and lead to contractors reopening 
decisions when coverage is no longer extended to a certain treatment. 
The commenter stated this could then force providers to repay 
contractors for payments made while the treatment was covered under a 
local or national coverage decision. The commenter recommended that the 
regulation explicitly prohibit the retroactive application of local and 
national coverage determinations.
    Response: While we appreciate the commenter's concern, we note that 
for purposes of making claim payment determinations, contractors apply 
the NCD or LCD in place on the day the item or service was provided by 
the provider or supplier. Furthermore, NCDs and LCDs include effective 
dates that necessarily make their application prospective. The only 
exception relates to effectuation of coverage appeals. As explained in 
Sec.  405.986(b), in order to effectuate a favorable coverage appeal, 
contractors may reopen the specific claim(s) associated with a 
challenge to a local or national coverage determination under section 
1869(f) of the Act and apply the revised coverage policy, but only to 
the specific claims at issue. The revised coverage policy would not 
apply retroactively to any other claims.
    Accordingly, we are finalizing Sec.  405.982 and Sec.  405.986 
without modification. We are finalizing Sec.  405.984 with modification 
as discussed in section II.B.5.b. of this preamble.
8. Expedited Access to Judicial Review (Sec.  405.990)
    Section 405.990 sets forth a process under which a party may obtain 
expedited access to judicial review when a review entity determines 
that the MAC does not have the authority to decide a question of law or 
regulation relevant to the matters in dispute, and that there is no 
material issue of fact in dispute. We received no comments on this 
section. However, as discussed in this preamble at section II.B.5.b. 
above, we are making technical revisions to Sec.  405.990 in regards to 
describing specific determinations, decisions or actions that the 
adjudicator may take. We are also making revisions to Sec.  405.990, 
per our discussion in section II.B.5.a.
    Accordingly, we are finalizing Sec.  405.990 with modification as 
discussed in section II.B.5.b. of this preamble and with modification 
as discussed in section II.B.5.a. of this preamble.
9. ALJ Hearings (Sec.  405.1000 Through Sec.  405.1064)
    Our regulations under Sec.  405.1000 through Sec.  405.1064 
describe the procedures for conducting hearings before ALJs. We 
received several comments regarding these procedures. A brief overview 
of the relevant regulatory provisions, a summary of the comments, and 
our responses to those comments are included below. Further discussion 
regarding the procedures for appeals at the ALJ level is found in the 
interim final rule at 70 FR 11420, 11422, 11445 through 11446, and 
11454 through 11466.
a. Transfer of the ALJ Function
    Section 931 of the MMA required transfer of the ALJ function for 
hearing appeals under title XVIII of the Act (and related provisions of 
title XI of the Act) from the Commissioner of SSA to the Secretary of 
the Department of Health and Human Services (DHHS or the Department). 
The DHHS ALJs are required to be organizationally and functionally 
independent from CMS and must report to, and be under the general 
supervision of, the Secretary of DHHS. The DHHS and SSA jointly 
developed a plan to facilitate the transfer, which was started on July 
1, 2005 and completed on October 1, 2005 as required by section 
931(b)(1) of the MMA.
    Comment: At least one commenter expressed concern about possible 
delays in processing appeals resulting from the transfer of the ALJ 
function from SSA to DHHS. The commenter asked DHHS to ensure that 
during the transition all appeal rights and remedies are available to 
parties in a timely fashion.
    Response: We appreciate the commenter's concern, and note that the 
transfer of the responsibility for the ALJ function from the 
Commissioner of SSA to the Secretary of the DHHS was completed October 
1, 2005. Staff in the DHHS Office of Medicare Hearings and Appeals 
(OMHA), the office responsible for administering ALJ hearings, worked 
closely with staff in the SSA Office of Hearings and Appeals to ensure 
a smooth transition and worked collaboratively to correct problems, to 
protect the rights of parties, and to issue timely decisions.
    Comment: One commenter complained about the loss of Medicare-
experienced SSA ALJs who have not relocated to the new DHHS ALJ 
offices. The commenter felt strongly that the loss of these ALJs would 
adversely impact the parties involved in appeals.
    Response: The Administrative Procedure Act (APA) (5 U.S.C. 1104, 
and 3105) provides that ALJs be selected using a merit system of 
selection administered by the Office of Personnel Management (OPM). 
OMHA's ALJs are recruited from OPM's pool of qualified candidates and 
are provided with significant training in the relevant Medicare 
statutes and regulations. Furthermore, unlike SSA's ALJs, whose

[[Page 65316]]

main responsibility was to adjudicate disability and Medicare cases, 
OMHA's ALJs focus exclusively on Medicare appeals. Therefore, we do not 
think that parties involved in appeals have been or will be adversely 
impacted by this transition.
    Comment: We received several comments concerning the training 
provided to the ALJs. One commenter expressed concern about the 
prospect of having to educate new ALJs about the Medicare regulations 
and questioned whether these judges would be able to address the highly 
complex and technical issues associated with Medicare claims appeals. 
Another commenter asked for more information about how ALJs will be 
trained and requested that all training material be made available to 
the public. The same commenter wanted DHHS to allow beneficiary and 
provider input into ALJ training sessions. Finally, a commenter noted 
that his inquiries to DHHS regarding ALJ training had been referred to 
the Public Affairs Office of CMS, which concerned the commenter because 
DHHS ALJs are required to be independent of CMS.
    Response: As stated in the previous response, OMHA's ALJs are 
provided with significant and comprehensive training. OMHA 
Headquarters, with cooperation and input from its field office Managing 
ALJs, conducts a continuous evaluation of the ALJs' training needs. The 
training provided to the ALJs includes, but is not limited to, a 
comprehensive review of the following: The Medicare FFS, MA, and Part D 
programs and appeals processes; the applicable Medicare substantive 
authorities, such as CMS regulations, rulings, and program guidance; 
and the processes and procedures associated with conducting an 
administrative hearing. This comprehensive training provides ALJs with 
the knowledge and expertise necessary to address the highly complex and 
technical issues associated with Medicare claims appeals.
    It is important for the ALJs to remain independent from the parties 
that may appear before them, including providers, suppliers and 
beneficiaries, and CMS and its contractors. Accordingly, with 
consideration of the statutory requirement at section 931 of the MMA 
that ALJs be functionally and organizationally independent from CMS, 
OMHA evaluates each potential trainer to determine whether the trainer, 
or the training itself, would adversely affect the independence or 
impartiality of the ALJs, or even present the appearance of a lack of 
independence or impartiality. OMHA also would apply this impartiality 
standard in determining whether to permit other individuals or 
entities, such as beneficiaries and providers, to provide input into an 
ALJ training session. Requests for copies of materials provided to ALJs 
during training sessions will be handled in accordance with the DHHS 
rules regarding requests for information under the Freedom of 
Information Act (FOIA). Such requests should be filed with the DHHS 
Freedom of Information Officer following the procedures outlined in 45 
CFR Part 5.
    Finally, we note that at the time of the publication of the interim 
final rule on March 8, 2005, OMHA was not in existence. Therefore, 
inquiries, such as those noted by the commenter concerning ALJ level 
function and received prior to the establishment of OMHA, were 
temporarily directed to the CMS Office of External Affairs. Since the 
establishment of OMHA, such inquiries have been directed to OMHA.
b. ALJ Hearings--General Rules (Sec.  405.1000 Through Sec.  405.1014)
    Section 405.1000 provides an overview of the ALJ hearing process. 
Section 405.1002 describes the requirements for obtaining an ALJ 
hearing and Sec.  405.1004 describes the process for obtaining ALJ 
review of a QIC notice of dismissal. Section 405.1006 sets forth the 
amount in controversy requirements for ALJ hearings and judicial 
review. Section 405.1008 describes who may request an ALJ hearing and 
describes the parties to an ALJ hearing. Section 405.1010 explains the 
process by which CMS or its contractors may participate in an ALJ 
hearing, and Sec.  405.1012 explains the process by which CMS or its 
contractors may choose to become a party to a hearing. Section 405.1014 
sets forth the content and filing requirements for ALJ hearing 
requests.
    Comment: One commenter expressed concern that ALJ hearings were no 
longer considered de novo hearings. The commenter stated that the 
removal of de novo status for ALJ hearings will hamper efforts to 
obtain the optimum amounts of information about each case, and lead to 
unfair and unjustified denials of legitimate Medicare claims for 
reimbursement.
    Response: As stated in the Office of Medicare Hearings and Appeals; 
Statement of Organization, Functions, and Delegations of Authority, 70 
FR 36386 through 36387, ALJs conduct impartial de novo hearings and 
this standard of review has not changed. Although the statute and 
implementing regulations place limitations on the submission of 
evidence, which impacts the scope of review, this limitation does not 
impact the standard of review for ALJ hearings. Rather, consistent with 
Sec.  405.1032(a), the ALJ reviews anew all issues brought out in the 
initial determination, redetermination, or reconsideration that were 
not decided entirely in a party's favor. In addition, if evidence 
presented before the hearing causes an ALJ to question a favorable 
portion of a determination, the ALJ may consider that issue at the 
hearing after providing notice to the parties. See Sec.  405.1032(a). 
However, to further clarify that the ALJ conducts a de novo review and 
to eliminate any potential confusion, we are making a technical 
revision to Sec.  405.1000(d) to state that the ALJ conducts a de novo 
review and issues a decision based on the hearing record.
    Comment: We received many comments regarding CMS' and its 
contractors' participation as a party or as a participant in the 
appeals process as set forth in Sec.  405.1010 and Sec.  405.1012. 
Several commenters generally objected to CMS or its contractors 
participating in ALJ hearings, or becoming a party at the ALJ level of 
appeal. One commenter contended that submission of evidence by CMS or 
its contractor acting as a party or participant should be prohibited if 
CMS or its contractor had the opportunity to submit the evidence at the 
time of the redetermination request. Another commenter objected to 
submission of position papers and clarifying testimony, stating that 
CMS should only be permitted to submit materials which ALJs must adhere 
to, or defer to, pursuant to Sec.  405.1060 through Sec.  405.1063 
(that is, NCDs, LCDs, program guidance or CMS Rulings). Some of these 
commenters felt that CMS participation should be limited only to 
instances where the ALJ required information from CMS or its 
contractors.
    Response: As discussed in detail in the preamble to the interim 
final rule in response to similar comments, we continue to believe that 
limited expansion of CMS' role in the ALJ hearing process is 
appropriate, necessary and consistent with the statute. See 70 FR 11459 
through 11460. As previously noted, section 1869(c)(3)(J) of the Act 
provides that the QIC will not only prepare the record of the 
reconsideration when a hearing before an ALJ is requested, but also 
will ``participate in such hearings as required by the Secretary.'' We 
continue to believe that this provision indicates a recognition of the 
benefit of agency participation in the appeals process.
    Based on our experience and the experience of our contractors, 
there

[[Page 65317]]

have been many instances in which an ALJ has determined that input from 
CMS or a contractor would help resolve a policy issue or clarify 
factual issues in a case. Prior to the interim final rule, the 
regulations did not provide specific procedures for ALJs to obtain 
input from the agency. When ALJs requested position papers, testimony, 
or other evidence from CMS or a contractor, the process was cumbersome 
because the regulations did not provide specific procedures for 
obtaining this input. Thus, consistent with section 1869(c)(3)(J) of 
the Act, we afford CMS and its contractors the discretion to appear as 
a party in appeals other than appeals involving unrepresented 
beneficiaries under Sec.  405.1012. In addition, in Sec.  405.1010, we 
provide CMS and its contractors the discretion to participate in a more 
limited role at the hearing by providing assistance in resolving 
factual or policy issues in a case as a participant in the hearing. 
Moreover, the Office of Inspector General (OIG) report, as we noted in 
the preamble to the IFC (OEI-04-97-00160 issued in September 1999), 
further supports participation by CMS and its contractors in ALJ 
hearings. See 70 FR 11459.
    We disagree with the comment that submission of evidence by CMS or 
its contractors when participating in an ALJ hearing should be 
prohibited if CMS or its contractors had the opportunity to submit the 
evidence at the time of the redetermination request. CMS and its 
contractors are not permitted to participate in the appeals process as 
a party or participant prior to the ALJ level, and thus, are unable to 
submit new evidence into the administrative record at the 
redetermination and reconsideration levels. Therefore, if CMS or its 
contractors elect to join an appeal as a participant or a party, they 
should be afforded an opportunity to present evidence, and the ALJ 
level is the earliest opportunity for this to take place.
    We also disagree with the commenter's suggestions that 
participation by CMS or its contractor should not include the 
submission of position papers or clarifying testimony, and CMS or its 
contractor should be restricted to submitting materials to which ALJs 
must adhere or defer. We continue to believe that CMS or contractor 
participation at a hearing may assist beneficiaries, as well as 
adjudicators, in understanding the complex issues raised during claims 
appeals, and that such participation will assist ALJs and the MAC in 
creating a fully developed record that resolves issues of fact and law. 
Participation, as suggested by one commenter, that is limited to the 
submission of evidence an adjudicator is already required to follow or 
defer to will have limited usefulness because it will not necessarily 
take into account the unique factual situations involved in each case 
before an ALJ. We expect that additional case development resulting 
from the submission of position papers or clarifying testimony from CMS 
or its contractors may result in a reduction in the number of cases 
remanded from the MAC to the ALJ level for additional development, 
yielding faster decisions for parties and administrative cost savings. 
Therefore, we believe it is necessary and appropriate for CMS and its 
contractors to have an opportunity to participate at the ALJ level, and 
that participation should not be restricted to materials to which the 
ALJ must adhere or defer.
    In addition, we disagree with the comment that CMS or contractor 
participation should be limited to instances where the ALJ requires 
information from CMS or its contractor. As noted above, we believe that 
CMS or contractor participation at a hearing may assist beneficiaries 
as well as adjudicators in understanding and resolving complex issues 
raised during appeals. Some appeals may raise factual or policy issues 
of which the ALJ is not aware, and thus, we believe it is necessary and 
appropriate to permit CMS and its contractors to participate in ALJ 
hearings (either as participants or as parties) even if the ALJ does 
not specifically request information from them.
    Thus, for the reasons discussed above, we believe that CMS or 
contractor participation in ALJ hearings under Sec.  405.1010 and Sec.  
405.1012 is necessary and appropriate and should not be limited only to 
instances where the ALJ requires information from CMS or its 
contractors. Furthermore, as discussed above, when participating in a 
hearing as participants or as parties, CMS and its contractors should 
not be restricted to submitting materials to which the ALJ is required 
to adhere or defer, and should not be prohibited from submitting 
position papers and clarifying testimony.
    Comment: One commenter viewed the participation provisions as a 
mechanism for CMS to insert itself as an adversary of the Medicare 
beneficiary, and objected to the use of Program dollars to fund 
adversarial actions against beneficiaries trying to obtain Medicare 
covered benefits. Some commenters objected to the provision prohibiting 
CMS or its contractors from being called as witnesses if they are 
participating in an ALJ hearing. Several commenters felt that this 
provision should be eliminated altogether. Several commenters suggested 
that if CMS' objective in participating in hearings was to allow for a 
more thorough examination of all the issues, that goal was not feasible 
if CMS immunized itself from being called as witness. Finally, one 
commenter suggested that if the provision regarding participation by 
CMS or its contractors is retained, an ALJ should be permitted to draw 
an adverse inference if CMS or its contractors refuse cross examination 
or withdraw evidence.
    Response: We do not believe that participation in a hearing by CMS 
or its contractor causes the hearing to become an adversarial 
proceeding against a beneficiary. When an unrepresented beneficiary 
files a request for hearing, CMS or its contractor may not be a party 
to the hearing and may only choose to act as a participant. See Sec.  
405.1010, Sec.  405.1012(a). In general, the role of a participant 
under Sec.  405.1010 is to provide information that assists the ALJ by 
clarifying factual or policy issues in a case. When compared to the 
rights CMS and its contractors are afforded as a party under Sec.  
405.1012, the scope of a participant's rights under Sec.  405.1010 is 
limited. For example, as a participant, CMS and its contractors do not 
have the right to call witnesses or cross-examine the witnesses of 
parties. See Sec.  405.1010(c). Nor does a participant have a right to 
object to the issues described in the ALJ's notice of hearing. See 
Sec.  405.1024(a), which applies only to parties. These are cornerstone 
elements in an adversarial proceeding. Thus, we believe the non-
adversarial nature of an ALJ hearing is preserved when CMS or its 
contractor acts as a participant under Sec.  405.1010.
    We also disagree with the commenter's assertion that participation 
by CMS or its contractor constitutes an inappropriate use of program 
dollars. As noted above, by conferring authority on the Secretary to 
determine when the QIC's participation in hearings is appropriate, 
Congress recognized the benefit of such participation. See section 
1869(c)(3)(J) of the Act. In addition, as discussed above, we believe 
that CMS or contractor participation may assist ALJs and the MAC in 
creating a fully developed record that resolves issues of fact and law, 
which could result in a reduction in the number of cases remanded from 
the MAC to the ALJ, thereby yielding faster decisions for parties and 
administrative cost savings. Furthermore, participating in a hearing 
reflects one of our agency's top mandates as stewards of the Medicare 
Trust Fund: ensuring accurate

[[Page 65318]]

payments. Thus, we do not believe participation in an ALJ hearing as a 
participant or as a party constitutes an inappropriate use of program 
resources.
    We also do not agree with the commenters who suggested that we 
eliminate the provision in Sec.  405.1010(d) that prohibits calling CMS 
or its contractor as a witness when participating in a hearing under 
Sec.  405.1010. We believe this prohibition is important in maintaining 
the non-adversarial manner for such hearings. As previously noted, a 
participant's role under Sec.  405.1010 is significantly limited when 
compared to the role of a party under Sec.  405.1012. For example, as a 
participant, CMS or its contractor can file position papers or provide 
testimony to help further clarify certain factual or policy issues in 
the appeal. However, as a participant, CMS or its contractor may not 
call witnesses or cross-examine the witnesses of a party, nor may it be 
called as a witness during the hearing. See Sec.  405.1010(c) and Sec.  
405.1010(d). In contrast, as a party under Sec.  405.1012, CMS or its 
contractor may exercise all of the rights available to a party (such 
as, calling witnesses, cross-examining witnesses of other parties, 
requesting the issuance of subpoenas, objecting to the issues to be 
decided at the hearing). The election of party status by CMS or its 
contractor also makes the discovery process available to parties under 
Sec.  405.1037.
    The differences between the role of CMS or its contractor as a 
participant under Sec.  405.1010 and as a party under Sec.  405.1012 
reflect the distinction under our regulations between a less formal, 
non-adversarial style of hearing (when CMS or its contractor 
participates as a non-party) and a more formal, adversarial style of 
hearing (when CMS or its contractor elects party status). (As further 
discussed below, CMS and its contractors have discretion to determine 
whether to participate in a hearing and to determine the manner and 
extent of participation.) Requiring CMS or its contractor to be called 
as a witness when it is a participant in a hearing under Sec.  405.1010 
would blur this distinction and would require CMS or its contractor to 
take on an adversarial role in the hearing when it has chosen the non-
adversarial role of participant under Sec.  405.1010. Thus, in order to 
maintain the non-adversarial nature of the hearing when CMS or its 
contractor is a participant under Sec.  405.1010, we believe it is 
necessary to preclude calling CMS or its contractor as a witness during 
the hearing. We note that the policy prohibiting CMS or its contractor 
from being called as a witness when it has chosen to participate as a 
non-party in the proceeding under Sec.  405.1010 is consistent with the 
Department's Touhy regulations at 45 CFR Part 2, which leaves to agency 
discretion the decision of whether to permit agency officials or 
certain contractors to testify or produce evidence in proceedings in 
which the agency is not a party.
    Furthermore, even though CMS and its contractors cannot be called 
as witnesses when they participate in a proceeding under Sec.  
405.1010, we believe that participation by CMS or its contractors under 
Sec.  405.1010 still allows for a more thorough examination of the 
issues. As discussed above, when CMS or its contractors participate 
under Sec.  405.1010, they may file position papers or provide 
testimony to clarify factual or policy issues in a case, thereby 
assisting ALJs and the MAC in creating a fully developed record that 
resolves issues of fact and law.
    Finally, we disagree with commenters who suggested that we permit 
ALJs to draw an adverse inference if CMS or its contractors refuse 
cross-examination or withdraw evidence when they participate in the 
proceeding under Sec.  405.1010. The limited resources and broad 
programmatic responsibilities facing CMS and its contractors may not 
allow for participation in all hearings. Thus, while an ALJ may request 
that CMS or its contractors participate in a hearing or other 
proceeding, under Sec.  405.1010(a), an ALJ cannot require CMS or its 
contractors to participate in a case. In addition, an ALJ may not 
require CMS or its contractor to appear as a witness under Sec.  
405.1010(d). Thus, CMS and its contractors have discretion to determine 
whether to participate in a hearing and to determine the manner and 
extent of participation. If CMS or its contractor, in exercising this 
discretion, chooses to participate in the proceeding in the limited, 
non-adversarial manner provided in Sec.  405.1010, we do not believe 
that it would be reasonable for the ALJ to draw an adverse inference if 
CMS or its contractor declines to extend this participation beyond the 
limits set forth in Sec.  405.1010 (for example, by refusing cross-
examination). Furthermore, given the discretion provided to CMS and its 
contractors to determine whether and how to participate in a 
proceeding, we do not think it would be reasonable for the ALJ to draw 
an adverse inference if CMS or its contractor chooses to withdraw 
evidence. Therefore, we do not believe it is appropriate to amend Sec.  
405.1010(f) to permit an ALJ to draw an adverse inference if CMS or its 
contractor refuses cross-examination or withdraws evidence.
    Comment: We received several comments concerning the submission of 
evidence by CMS or its contractors when participating at the ALJ or MAC 
levels of the appeals process. These commenters stated that in cases 
where CMS or its contractors submit new evidence, there should be an 
opportunity for the parties to respond, without having to show good 
cause and without delaying the adjudication timeframes.
    Response: We disagree with the recommendation that providers and 
suppliers should not have to show good cause to submit new evidence at 
the ALJ and MAC levels in response to the submission of evidence by CMS 
or its contractors, if the agency elects to join the appeal as a party 
or participant. As noted earlier in this rule, the MMA amended several 
of the appeals provisions contained in BIPA. Section 1869(b)(3) of the 
Act, as added by section 933(a) of the MMA, requires that a provider of 
services or supplier not introduce evidence in any appeal that was not 
presented at the reconsideration conducted by the QIC, unless there is 
good cause that precluded the introduction of such evidence at or 
before the reconsideration. In our regulations at Sec.  405.1018, we 
extended this requirement to beneficiaries represented by providers and 
suppliers. However, section 1869(b)(3) of the Act, and the 
corresponding regulatory provisions, do not apply to CMS or its 
contractors. To the extent participation by CMS or its contractors 
raises new issues in the appeal that were not considered during the 
earlier levels of appeal, this may provide good cause for the 
introduction of new evidence by parties at the ALJ level.
    Finally, in light of the statutory requirement for full and early 
presentation of evidence, our provision requiring parties to submit 
evidence with the request for hearing or within 10 days of receipt of 
the notice of hearing (Sec.  405.1018), and the need for the ALJ to 
evaluate the good cause justification for submission of new evidence 
after the reconsideration as set forth in Sec.  405.1018 and Sec.  
405.1028, it is necessary to allow an ALJ additional time to consider 
whether the new evidence submitted by the appellant or party may be 
considered at the hearing. We believe that Sec.  405.1018(b), which 
tolls the ALJ adjudication timeframe when a party submits evidence 
after the deadline established in Sec.  405.1018(a), is consistent with 
the statute and with Congressional intent. Congress has clearly 
indicated that adjudicators must devise procedures compatible with 
meeting the statutory deadlines.

[[Page 65319]]

Moreover, we do not believe it appropriate for appellants to avail 
themselves of the escalation provisions if the appellant has delayed 
the administrative process by submitting evidence after the deadline. 
In addition, we believe that by tolling the 90-day adjudication period 
as provided in Sec.  405.1018(b) in those instances in which the 
appellant is responsible for the delay, we provide an incentive for 
appellants to submit all relevant evidence as soon as possible 
(preferably with the hearing request), to appear at scheduled hearings, 
and otherwise comply with hearing procedures. We believe that tolling 
the ALJ adjudication timeframe when a party submits evidence after the 
deadline established in Sec.  405.1018(a), balances the party's need to 
submit new evidence in certain circumstances, with the need to provide 
the ALJ with sufficient time to evaluate the good cause justification 
for submitting the new evidence, and to review any such additional 
evidence that is to be admitted into the administrative record. 
Furthermore, we believe it is reasonable to toll the decision-making 
timeframe to allow full and careful consideration of all issues, even 
if the evidence being considered is in response to evidence submitted 
by CMS or its contractors.
    Comment: We received two comments regarding the availability of 
attorney's fees when CMS or its contractors participate in an ALJ 
hearing. Both commenters argued that if CMS or its contractors 
participate as a party it would turn the hearing into an adversarial 
proceeding and, under the Equal Access to Justice Act (EAJA), CMS could 
be obligated to pay attorney's fees and other costs to prevailing 
appellants.
    Response: In our response to an identical question raised on the 
proposed rule, we indicated that the Department would review its EAJA 
provisions to determine what, if any, amendments might be necessary to 
reflect the changes implemented in the interim final rule. See 70 FR 
11429 through 11430. To date, DHHS has not amended its EAJA regulations 
to expressly include administrative appeals under this subpart in the 
list of proceedings in 45 CFR part 13, Appendix A that are considered 
adversary adjudications, and to which the EAJA rules apply.
    In light of the commenter's concern, however, we believe it is 
appropriate to clarify when a hearing involving claim determinations 
becomes an adversary adjudication for the purposes of making an 
application for attorney fees under the Department's EAJA regulations. 
Only those ALJ hearings in which CMS elects party status under Sec.  
405.1012(a) meet the definition of an adversary adjudication as set 
forth in 45 CFR 13.3(a). The Department's EAJA regulations at 45 CFR 
13.3(a) state that the EAJA rules apply only to adversary 
adjudications. An adversary adjudication is defined as ``an 
adjudication required to be under 5 U.S.C. 554, in which the position 
of the Department or one of its components is represented by an 
attorney or other representative (`the agency's litigating party') who 
enters an appearance and participates in the proceeding. * * *'' We 
believe appeals where CMS elects party status fall within this 
definition.
    However, if a non-governmental entity, such as a QIC or other CMS 
contractor, decides to become a party to an appeal at either an ALJ 
hearing or MAC review, it does not constitute an adversary adjudication 
for the purposes of the EAJA, because the Department's position would 
not be represented by an attorney employed by DHHS. DHHS has previously 
indicated its position with respect to a contractor-party in 45 CFR 
part 13, Appendix A, which lists proceedings covered by the 
Department's EAJA regulations. In that appendix, a Provider 
Reimbursement Review Board proceeding is considered an adversary 
adjudication only when DHHS employees appear as counsel for the 
intermediary. In the context of a hearing or MAC review, if a QIC or 
other CMS contractor decides to become a party, DHHS would not be 
represented by its own attorney, and therefore, EAJA would not apply.
    Further, we do not believe the Department's EAJA rules cover ALJ 
hearings or MAC review in which CMS or one of its contractors chooses 
to participate, but does not enter as a party. Our regulations provide 
for two completely separate options for CMS or its contractors to 
participate in an ALJ hearing or MAC review: as a party or as a 
participant. In electing party status, CMS or its contractor enters an 
ALJ hearing with all of the rights and responsibilities of other 
parties as described in Sec.  405.1012, including the right to call 
witnesses, cross-examine witnesses of the appellant or other party, be 
subject to cross-examination, and to submit evidence. In contrast, by 
simply participating in the appeal as a non-party, the agency or its 
contractors have significantly more limited rights as described in 
Sec.  405.1010 (that is, the right to submit position papers or to 
provide testimony to clarify factual or policy issues in the case). 
More importantly, however, a non-party participant does not have the 
right to call witnesses or cross-examine the appellant's or other 
parties' witnesses, and a non-party participant may not be called as a 
witness at the hearing. Thus, as we have stated in the proposed and 
interim final rules, the role of CMS or its contractors as a non-party 
participant is non-adversarial. See 67 FR 69332; 70 FR 11459 through 
11460. Accordingly, we believe an ALJ hearing or MAC review in which 
CMS or its contractor is a participant, but not a party, does not fall 
within the definition of an adversary adjudication for the purposes of 
applying the provisions of the EAJA.
    Finally, we note that the Department's EAJA rules state: ``The 
Department may reimburse parties for expenses incurred in adversary 
adjudications if the party prevails in the proceeding and if the 
Department's position in the proceeding was not substantially 
justified. * * *'' See 45 CFR 13.1. The mere fact that a party prevails 
in the proceeding does not create a presumption that the Department's 
position was not substantially justified. Rather, the agency's 
litigating party is afforded an opportunity to show that the 
Department's position was reasonable in fact and law, thus avoiding an 
award of fees and expenses in connection with the proceeding. See 45 
CFR 13.5(b).
    Accordingly, we are finalizing Sec.  405.1008 without modification. 
We are finalizing Sec.  405.1000 with modification as discussed above, 
and with modification as discussed in section II.B.1. of this preamble. 
We are finalizing Sec. Sec.  405.1002 and 405.1004 with modification as 
discussed in section II.B.5.b. of this preamble and with modification 
as discussed in section II.B.5.a. of this preamble. We are finalizing 
Sec. Sec.  405.1006 and 405.1014 with modification as discussed in 
section II.B.5.a. of this preamble. We are finalizing Sec. Sec.  
405.1010 and 405.1012 with modification as discussed in section II.B.1. 
of this preamble and with modification as discussed in section 
II.B.5.a. of this preamble.
c. Adjudication Deadlines--ALJ Level (Sec.  405.1016)
    Section 405.1016 sets forth the timeframes for an ALJ to issue 
hearing decisions, states that timeframes may be extended as provided 
in subpart I, and also includes provisions to toll timeframes under 
limited circumstances.
    Comment: One commenter objected to the provision that a request for 
an ALJ hearing is considered timely filed when it is received by the 
entity specified on the QIC's notice of reconsideration. The commenter 
noted that the Medicare statute specifies the decisionmaking timeframe 
beginning on the date the

[[Page 65320]]

request for a hearing was timely filed. The commenter felt that many 
beneficiaries, who had typically filed appeals with the SSA, and may 
continue to do so, would not get the benefit of the revised statutory 
timeframes.
    Response: We agree with the commenter that the decision-making 
timeframe begins when a request for hearing is timely filed. However, 
in order to be timely filed, a hearing request must contain all the 
required information and be filed with the entity specified in the 
reconsideration decision within 60 days of receipt of the 
reconsideration decision. See Sec.  405.1014(a) and Sec.  405.1014(b). 
We believe that directing appellants to only one filing location 
reduces confusion and eliminates any potential delay in transmitting 
the request. Thus, all reconsideration decision letters issued by QICs 
contain the specific OMHA field office address where a request for ALJ 
hearing must be filed. Although some beneficiaries may continue to file 
hearing requests with the SSA, we do not believe it is appropriate to 
recognize SSA field offices as filing locations for ALJ hearing 
requests pertaining to claims for benefits under Medicare Part A and 
Part B, because the SSA no longer has a role in the processing of these 
Medicare appeals. (However, we note that parties may file requests for 
ALJ hearings pertaining to Part A and Part B entitlement (see Sec.  
405.924(a)) and Part B Income Related Monthly Adjustment Amounts 
(IRMAA) directly with OMHA or with SSA offices.) To ensure appeals that 
are misfiled with the SSA are promptly forwarded to the correct entity, 
CMS and SSA developed Emergency Message EM-05028 (originally issued on 
June 23, 2005). This instruction directs SSA staff to immediately 
forward misfiled Part A and Part B claims appeals to the appropriate 
OMHA field office and to direct any beneficiaries who attempt to file 
appeals in-person to send the request to the entity specified in their 
reconsideration decision letter. Thus, we believe it is reasonable to 
begin the adjudication timeframe on the date an appeal request is 
timely filed with the entity specified in the QIC's notice of 
reconsideration.
    Pursuant to Sec.  405.1014(b)(2), if a request for hearing is 
timely filed with an entity other than the entity specified in the 
notice of reconsideration, the request is not treated as untimely or 
otherwise rejected. Rather, the deadline for deciding the appeal under 
Sec.  405.1016 begins on the date the entity specified in the QIC's 
reconsideration notice receives the request for hearing. In situations 
such as this, where an appellant's actions do not meet regulatory 
requirements and cause a delay in the adjudication process, we think it 
is both necessary and fair to allow an ALJ the full 90 days afforded by 
statute, beginning the date the correct ALJ office receives the 
request, to issue a decision. Section 405.1014(b)(2) states that if the 
request for hearing is filed with an entity, other than the entity 
specified in the QIC's reconsideration, the ALJ hearing office must 
notify the appellant of the date of receipt of the request and the 
commencement of the 90 day adjudication timeframe.
    Comment: We received two comments regarding the decision-making 
timeframes when cases are escalated. One commenter agreed with the 
provisions in Sec.  405.970(c)(2) and Sec.  405.970(e)(2)(i) which 
provide an adjudicator five additional days to complete a decision when 
an appellant has requested the case to be escalated to the next level. 
Another commenter disagreed with any extension of the decision-making 
timeframe in cases involving escalation, and opined that such an 
extension was not authorized under the statute.
    Response: Section 1869(d)(1)(A) of the Act requires an ALJ to hold 
a hearing on the decision of the QIC, and to render a decision on such 
hearing within 90 days of the adjudicator's receipt of a request for a 
hearing (that is timely filed). Section 1869(c)(3)(C)(ii) of the Act 
provides that a party may escalate an appeal to the ALJ if the QIC 
fails to mail or provide notice (as applicable) of the decision by the 
end of the applicable decision-making timeframe. OMHA's adjudication 
timeframe in case of escalation from a QIC is not explicitly stated in 
statute. The statute provides only a qualified right for an appellant 
to escalate an appeal to the ALJ level if the QIC does not timely issue 
a reconsideration determination. As discussed in the interim final 
rule, we interpret the 90 day adjudication provision as requiring an 
ALJ to decide a case within 90 days only when the QIC has issued a 
final action in a case. See 70 FR 11454 through 11456, and 11463. 
Therefore, we state that, when an appellant escalates an appeal from 
the QIC to the ALJ level, the proceedings before the ALJ will not be 
subject to the 90-day limit. Rather, as specified in Sec.  405.1016(c), 
the ALJ will have up to 180 days to issue a decision, dismissal order, 
or remand order (unless the time period is otherwise extended as 
provided in part 405 subpart I). The absence of an actual 
reconsideration determination and its attendant administrative 
processes imposes a substantial additional burden on OMHA, including 
locating and acquiring relevant information from the QIC, performing 
additional procedural and jurisdictional reviews, and organizing 
evidence in the case file. Setting the adjudication timeframe by 
regulation at 180 days for escalated appeals balances the interests of 
the appellant in timely resolving the disputed appeal and an ALJ's duty 
to collect the evidence and perform the administrative tasks necessary 
to fully and fairly adjudicate an appeal that has not been addressed in 
a reconsideration determination. We note that the 180 day timeframe 
does not preclude OMHA from adjudicating the appeal more expeditiously 
if possible.
    We are finalizing Sec.  405.1016 with modification as discussed in 
section II.B.5.a. of this preamble.
d. Submission of Evidence Before the ALJ Hearing (Sec.  405.1018)
    Section 405.1018 states that a provider, supplier or beneficiary 
represented by a provider or supplier must submit all written evidence 
they wish to have considered at the hearing with the request for 
hearing or within 10 days of receiving notice of the hearing. Any 
evidence that is not submitted prior to the issuance of the QIC 
reconsideration determination must be accompanied by a written 
statement explaining why the evidence was not previously submitted to 
the QIC or a prior decision-maker. We explain in Sec.  405.1018 and 
Sec.  405.1028 the process an ALJ follows in determining whether good 
cause exists to allow the new evidence into the administrative record.
    Comment: One commenter objected to the provision limiting the 
submission of evidence after the QIC level of appeal. The commenter 
stated the appellant should not be penalized by having to draft 
statements showing good cause for the submission of new evidence at the 
ALJ level when many times the later submission is due to circumstances 
that are beyond a party's control.
    Response: Section 933(a) of the MMA amended section 1869(b) of the 
Act to require full and early presentation of evidence by providers and 
suppliers. Absent good cause for not presenting the evidence prior to 
the issuance of a reconsideration by the QIC, a provider or supplier is 
precluded, by statute, from introducing new evidence at the ALJ or MAC 
levels. Sections 405.1018(c) and 405.1028 implement the good cause 
requirement. These provisions help to ensure expeditious adjudication, 
while recognizing that early presentation of evidence is not always 
possible. We also note that this requirement does not

[[Page 65321]]

apply to evidence submitted by beneficiaries, unless they are 
represented by a provider or supplier. See Sec.  405.966(c) and Sec.  
405.1018(d); 70 FR 11446.
    We are finalizing Sec.  405.1018 with modification as discussed in 
section II.B.5.a. of this preamble.
e. Time and Place for a Hearing Before an ALJ; Notice of Hearing; 
Objections to the Issues (Sec.  405.1020 Through Sec.  405.1024)
    In Sec.  405.1020, we set forth the requirements for determining 
how appearances will be made before the ALJ, for providing notice of a 
hearing, for waiving a hearing, for changing the time and place of a 
hearing, and for requesting an in-person hearing. In Sec.  405.1022, we 
describe the content and processing requirements with respect to the 
notice of ALJ hearing sent to the parties and other potential 
participants. In Sec.  405.1024, we explain the procedures parties must 
follow if they object to the issues described in the ALJ's notice of 
hearing.
    Comment: We received many comments concerning the types of hearings 
available at the ALJ level. Several of the commenters stated that an 
appellant should have the right to an in-person hearing before an ALJ. 
One commenter opined that the reliance on videoteleconferencing (VTC) 
hearings may be premature. Another commenter questioned the adequacy of 
hearings by VTC, opining that where credibility and veracity are at 
issue, in-person hearings will provide the decision maker with the 
chance to observe all parties, and allow the appellant to observe the 
reaction of the ALJ to the evidence and tailor presentations 
accordingly. The commenter also noted that many Medicare beneficiaries 
have visual, hearing, or even cognitive impairments which create 
difficulties in viewing VTC screens, hearing telephone conversations or 
participating in other than face-to-face hearings. Many of these 
commenters also objected to the requirement that an appellant show good 
cause before an ALJ will grant an in-person hearing and characterized 
the good cause standard as vague.
    Response: Section 1869(b)(1)(A) of the Social Security Act as 
amended by BIPA provides that any individual dissatisfied with any 
initial determination shall be entitled to a reconsideration and to a 
hearing to the same extent as is provided in section 205(b) of the Act. 
Section 1869(b)(1)(A) of the Act does not specify the manner in which 
hearings must be held. Congress, however, instructed the DHHS to 
explore the possibility of providing hearings using formats other than 
in-person hearings. Specifically, the MMA instructed the DHHS to 
consider the feasibility of conducting Medicare hearings ``using tele- 
or video-conference technologies.'' See section 931(a)(2)(G) of the 
MMA.
    At approximately the same time that MMA was enacted, the SSA 
finalized regulations that provided for VTC hearings in Medicare and 
disability appeals. See 68 FR 5210 (February 3, 2003). Taking into 
account SSA's regulations, the Secretary concluded that the expanded 
use of VTC and telephone hearings for Medicare appeals is appropriate 
for various reasons. First, contrary to the commenters' assertions, and 
unlike Social Security disability hearings, where in-person hearings 
may be needed in order to evaluate an individual's physical ability 
and/or credibility, Medicare hearings are generally less dependent on 
the physical presence of the appellant or other witnesses and are, 
therefore, better suited to VTC hearings. Second, VTC allows ALJs to 
conduct hearings more quickly, which is particularly important in light 
of the timeframes mandated by the statute. For parties who might 
otherwise waive their right to a hearing and request an on-the-record 
decision because of traveling or scheduling difficulties, VTC hearings 
can be scheduled locally in a convenient setting where the party has an 
opportunity to present his/her case orally. Given these benefits, we 
believe VTC is an efficient and effective method of conducting ALJ 
hearings. Despite the advantages of VTC, parties have the opportunity 
to request an in-person hearing, or an ALJ may determine that an in-
person hearing is more appropriate than a hearing by VTC or telephone 
in a particular case. Thus, as explained in the interim final rule, we 
determined it is appropriate to permit ALJ hearings to be conducted by 
VTC. See 70 FR 11456 through 11457.
    Specifically, Sec.  405.1020(b) provides that an ALJ, with the 
concurrence of the Managing Field Office ALJ, may determine that an in-
person hearing should be conducted if either (1) VTC technology is not 
available, or (2) special or extraordinary circumstances exist. The 
preamble to the interim final rule provides guidance for ALJs in 
determining whether special or extraordinary circumstances exist, thus 
warranting the scheduling of an in-person hearing under Sec.  
405.1020(b)(2). See 70 FR 11457. Section 405.1020(i) provides that a 
party may file a written objection to a scheduled VTC or telephone 
hearing, and request an in-person hearing. An ALJ may grant the 
request, with the concurrence of the Managing Field Office ALJ, upon a 
finding of good cause. In the preamble to the interim final rule, we 
provide guidance as to what may constitute good cause for an ALJ to 
grant a request for an in-person hearing. For example, an ALJ could 
find good cause to grant a request for an in-person hearing when a 
party demonstrates that the case presents complex, challenging or novel 
presentation issues that necessitate an in-person hearing. See 70 FR 
11457. Similarly, an ALJ may find good cause to schedule an in-person 
hearing based on a party's proximity to and ability to go to the local 
hearing office. These provisions ensure that appellants or other 
parties who believe it is necessary to have an in-person hearing to 
effectively present and participate in their cases, including parties 
with physical and cognitive impairments, have the option to request an 
in-person hearing.
    Furthermore, given the volume of hearing requests and short 
adjudicative timeframes imposed by BIPA, we believe it is reasonable to 
use a good cause standard in determining when it is appropriate for an 
ALJ to grant a request for an in-person hearing and reschedule the 
hearing for a time and place when the party can appear in person before 
the ALJ, as provided in Sec.  405.1020(i)(5). As explained above, and 
to avoid the backlogs and delays that historically plagued the hearing 
process, we believe it is necessary and appropriate to generally 
conduct hearings by VTC or telephone. However, in Sec.  405.1020(i), we 
acknowledge that, in some circumstances, it may be appropriate to grant 
a request to change the type of hearing scheduled and permit an in-
person hearing. Thus, ALJs will evaluate in-person hearing requests 
made under Sec.  405.1020(i) using the good cause standard established 
in Sec.  405.1020(i)(5), and when appropriate grant a request for an 
in-person hearing.
    Finally, we believe our decision not to provide an exhaustive 
description of the good cause standard in this regulation benefits 
parties by affording an ALJ the flexibility to grant an in-person 
hearing based on factors or circumstances that may be relevant, yet 
unforeseen at this time.
    Comment: Several commenters were concerned about the number of ALJ 
offices available for in-person hearings as well as the ALJ office 
locations. Some commenters were concerned that the number of office 
locations was insufficient, and would impede appellant access to VTC 
and/or in-person hearings and cause delays in holding hearings. One 
commenter stated

[[Page 65322]]

that a system that relies on VTC and phone hearings and places ALJs in 
4 locations around the country does not satisfy the requirements of MMA 
section 931(b)(3), which requires appropriate geographic distribution 
of offices to ensure timely access to judges. One commenter stated that 
since the current ALJ office locations weren't accessible to New York 
residents, DHHS should establish an ALJ office in New York City, as 
well as an ALJ office in upstate New York. A few commenters recognized 
the need to streamline ALJ locations and the ALJ hearing process for 
efficiency, but asked that DHHS monitor the process to ensure appellant 
access is not hindered. Several of the commenters opined that with only 
four ALJ offices, appellants would be forced to use VTC or telephones 
to conduct hearings rather than incur the expense, loss of income, and 
inconvenience of traveling to distant offices. Another commenter asked 
if any provisions would be made to allow travel allowances for 
appellants.
    Response: In determining the number and location of OMHA's field 
offices, the DHHS thoroughly researched and considered, among other 
things, the then-current and projected geographic distribution of 
Medicare claims appeals heard by SSA and Medicare contractor 
jurisdictions. As a result, Arlington, Virginia, Cleveland, Ohio, 
Irvine, California, and Miami, Florida were chosen as the four sites 
for the OMHA field offices. The ALJs in these field offices hold 
hearings by videoteleconference and telephone, and in-person. 
Furthermore, VTC hearings are also held at sites other than the ALJ 
offices. OMHA makes extensive use of VTC to provide appellants with a 
vast nationwide network of access points for hearings close to their 
homes. Based on this research and our experience, we believe that the 
number and distribution of ALJ offices is sufficient and would not 
delay or impede access to in-person or VTC hearings. Thus, we believe 
that the number and locations of ALJs throughout the country satisfy 
the requirements section 931(b)(3) of the MMA, and we do not believe 
that it is necessary at this time to establish ALJ offices in New York 
City or in upstate New York.
    While many appellants prefer the convenience of a telephone hearing 
or videoteleconference hearing, there are instances when an in-person 
hearing is appropriate. OMHA closely monitors appellants' access to the 
process via internal case tracking systems, appellant feedback during 
the scheduling of hearings, and appellant feedback during hearings. 
OMHA's tracking numbers and feedback from appellants reflect an 
overwhelming preference for telephone hearings. Based on the feedback 
and raw data received, OMHA adjusts its internal resources and 
processes accordingly.
    Furthermore, when, in accordance with the regulations, the ALJ 
determines that a hearing will be held in-person, the ALJ will also 
consider whether it is most appropriate to travel to a location close 
to the party or to have the party travel to one of the OMHA field 
offices. In making this determination, the ALJ consults with the party 
requesting the hearing. OMHA has developed a travel reimbursement 
policy that it mails with every notice of hearing. Pursuant to this 
policy, eligible participants are reimbursed for certain expenses 
incurred in traveling to and from a field office or a VTC site. Thus, 
we do not believe that appellants are forced to use VTC or telephones 
to conduct hearings to avoid the expense of in-person hearings. We 
believe that this policy satisfies the mandate of section 931(b)(3) of 
the MMA to ensure timely access to judges.
    Comment: A commenter noted that Sec.  405.1020(c) requires the ALJ 
to send a notice of hearing to the contractor that issued the initial 
determination. The commenter expressed concern that receiving ALJ 
notices of hearing for every case may be cumbersome, and suggests it 
may be more efficient to send a notice of hearing to the contractor 
that processed the initial determination only when the ALJ requests 
that the contractor be a party or participant.
    Response: We agree with the concerns raised by the commenter. We 
believe sending the notice of hearing to the QIC that processed the 
reconsideration provides adequate notice to CMS and its contractors of 
the pending ALJ hearing, and thus it is not necessary to also send 
notice of the hearing to the contractor that issued the initial 
determination. However, we note that, the ALJ would send a notice of 
the hearing to the contractor if an ALJ were to request that the 
contractor that issued the initial determination participate in, or be 
a party to, a hearing. Accordingly, we have revised Sec.  405.1020(c) 
to remove the reference to the ``contractor that issued the initial 
determination'' from the list of entities that receive notice of the 
ALJ hearing.
    Comment: We received several comments concerning Sec.  
405.1020(i)(4), which stipulates that when a request for in-person 
hearing is granted, the party is deemed to have waived the 90 day 
timeframe for ALJ decision-making. One commenter noted that Sec.  
1869(d)(1)(B) of the Act only provides for a waiver of the time period 
upon motion or stipulation of the party, and a request for an in-person 
hearing is not a motion or stipulation to waive the 90 day time period. 
The same commenter also observed that the regulations do not include a 
specific timeframe for making a decision in this situation even though 
Congress legislated set timeframes at every level of appeal. Although 
all of the commenters agreed that there should be a timeframe attached 
to these in-person hearings, they were split when it came to 
recommending a particular timeframe. Some commenters believed strongly 
that the 90 day timeframe that ordinarily applies to ALJ hearings 
should apply to in-person hearings. These commenters opined that the 
intent of BIPA, as amended by the MMA, was to give everyone access to 
an ALJ hearing within the 90 day timeframe. As such, ALJs should be 
held to rendering their decision within the 90 day timeframe for all 
hearing formats. One of these commenters suggested that the reduced 
number of in-person hearings should enable ALJs to meet the 90 day 
decision-making timeframe. In contrast, another commenter recommended 
setting a longer, but still defined, timeframe, such as 120 days, as a 
reasonable time limit for an in-person hearing. Similarly, another 
commenter suggested that in the event of an in-person hearing, the ALJ 
should have 90 days from the date of the hearing (as opposed to 90 days 
from the date the request for hearing is received) within which to 
render the decision.
    Response: As discussed previously, in making revisions to the 
administrative appeals process in both BIPA and MMA, Congress did not 
specify the manner in which ALJ hearings were to be conducted. Thus, 
while hearings may be conducted in-person, by VTC or by telephone, 
parties do not have the right to a specific type of hearing, and ALJs 
are not required to offer an in-person hearing to parties. The Congress 
instructed the DHHS to consider the use of teleconference and video-
teleconference technologies for ALJ hearings. See section 931(a)(2)(G) 
of the MMA. After carefully considering the feasibility of utilizing 
these technologies, the logistical issues in conducting hearings, and 
the need to devise procedures compatible with meeting the statutory 
deadlines, it became clear that VTC and telephone were appropriate 
methods for holding most ALJ hearings. While a hearing may be conducted 
in-person, by VTC or by telephone (Sec.  405.1000(b)), under Sec.  
405.1020(b), an ALJ will conduct the hearing by VTC if the technology 
is

[[Page 65323]]

available, thereby establishing VTC as the default method for 
conducting hearings.
    We are mindful, however, that some parties may prefer or require an 
in-person hearing. Thus, under Sec.  405.1020(b), an ALJ may offer to 
conduct an in-person hearing when VTC is not available, or if special 
or extraordinary circumstances exist making an in-person hearing 
necessary. Additionally, in Sec.  405.1020(i), we afford parties an 
opportunity to object to a hearing scheduled to be conducted by VTC or 
telephone, and request an in-person hearing. If the ALJ grants the 
request for an in-person hearing, in many cases, the ALJ may need 
additional time beyond the standard 90-day adjudication time period 
specified in Sec.  405.1016 in order to schedule, prepare for, and 
conduct an in-person hearing, and issue a decision. Accordingly, Sec.  
405.1020(i)(4), as clarified in our correcting amendment to the interim 
final rule issued June 30, 2005, states that the 90 day adjudication 
timeframe is waived if a party objects to the ALJ's scheduling of a 
hearing by VTC or telephone, and the ALJ, with the concurrence of the 
Managing Field Office ALJ, grants the party's request for an in-person 
hearing. See 70 FR 37700, 37701, 37704.
    We have carefully considered the commenter's assertion that section 
1869(d)(1)(B) of the Act only provides for a waiver of the adjudication 
deadline upon motion or stipulation of the party, and that a request 
for an in-person hearing is not a motion or stipulation to waive the 
90-day time period. While we continue to believe that the statutory 
language is consistent with a reading that a party can be deemed to 
have waived the adjudication deadline when the party requests and is 
granted an in-person hearing, after further consideration, we have 
decided to amend Sec.  405.1020(i) to state that when a party's request 
for an in-person hearing under Sec.  405.1020(i)(1) is granted, the ALJ 
must issue a decision within the adjudication timeframe specified in 
Sec.  405.1016 (including any applicable extensions provided in subpart 
I), unless the party requesting the hearing waives the adjudication 
timeframe in writing. We believe that this revised regulation also is 
consistent with the statutory language.
    Commenters also offered recommendations to impose a specific 
adjudication timeframe for issuing decisions when an ALJ grants a 
request for an in-person hearing in response to an objection to a 
scheduled VTC or telephone hearing under Sec.  405.1020(i). Given the 
revisions to Sec.  405.1020(i) described above, it is no longer 
necessary to consider adopting these alternative timeframes. 
Furthermore, under Sec.  405.1036(d), an appellant who waives the 90 
day adjudication timeframe may work with the ALJ to establish an 
alternative decision making timeframe to ensure they have some 
expectation of when the ALJ will render his or her decision.
    Finally, we are making a technical revision to Sec.  405.1022(a) to 
clarify that even where a party waives receipt of the notice of 
hearing, the ALJ must still send the notice of hearing to all other 
parties and potential participants who have not waived their right to 
receive the notice of hearing, consistent with Sec.  405.1020(c). 
Section 405.1022(a) provides that the ALJ sets the time and place of 
the hearing and mails the notice of hearing to the parties and other 
potential participants as provided in Sec.  405.1020(c) unless the 
parties have indicated in writing that they do not wish to receive this 
notice. In turn, under Sec.  405.1020(c)(2), parties to the hearing 
(and any potential participant from CMS or its contractor who wishes to 
attend the hearing) are required to reply to the notice of hearing to 
acknowledge whether they plan to attend the hearing, or to object to 
the proposed time and/or place of the hearing. In addition, under Sec.  
405.1010 and Sec.  405.1012, CMS or its contractor is required to 
notify the ALJ, appellant, and all other parties identified in the 
notice of hearing of their intent to participate in the hearing or join 
as a party within 10 days after receiving the notice of hearing. In 
order for parties and potential participants from CMS or its contractor 
(who wish to attend the hearing) to comply with Sec.  405.1020(c)(2), 
and for CMS and its contractors to provide the ALJ and all parties 
timely notice of their intent to join as a party or participate in the 
hearing consistent with Sec.  405.1010(b) and Sec.  405.1012(b), the 
ALJ must send the notice of hearing to the appropriate parties and 
potential participants, consistent with Sec.  405.1020(c)(1). Thus, we 
are revising Sec.  405.1022(a) to clarify that even where a party 
waives receipt of the notice of hearing, the ALJ must still send the 
notice of hearing to all other parties and potential participants who 
have not waived their right to receive the notice of hearing, 
consistent with Sec.  405.1020(c).
    We are finalizing Sec.  405.1020 and Sec.  405.1022 with 
modifications as noted above and as discussed in section II.B.5.a. of 
this preamble. We are finalizing Sec.  405.1024 with modification as 
discussed in section II.B.5.a. of this preamble.
f. Disqualification of the ALJ (Sec.  405.1026)
    In Sec.  405.1026, we state that an ALJ cannot conduct a hearing if 
he or she is prejudiced or partial to any party or has any interest in 
the matter pending for decision. We also explain the process that a 
party must follow if they object to the ALJ assigned to conduct the 
hearing.
    Comment: A number of commenters raised concerns about the 
independence of the DHHS ALJs. One commenter stated that, under SSA 
regulations, an ALJ may grant an in-person hearing if the party 
requesting it states they do not wish to appear by VTC. By contrast, 
the commenter noted that under DHHS regulations for Medicare appeals, 
the ALJ must seek the concurrence of the Managing Field Office ALJ in 
order to grant requests for in-person hearings. Another commenter 
questioned how an ALJ can be independent and base a decision on the 
evidence before him or her, if such concurrence is needed in what may 
be the first motion in the case.
    A few commenters also questioned CMS' influence over the ALJs. One 
commenter recommended that safeguards be put in place to avoid any 
undue influence on the ALJs' independence. Another commenter viewed the 
issuance of the new appeals regulation by CMS, and the content of the 
provisions, as a strong indicator of CMS' intent to influence and 
control the ALJs' decision-making process. Finally, a commenter stated 
that formalized procedures in the form of promulgated rules on how the 
new Office of Medicare Hearings and Appeals will function are necessary 
to ensure ALJ independence.
    Response: The Managing Administrative Law Judge (MALJ) is 
responsible for the administration of the field office, and is charged 
with ensuring the just, timely, accurate, and professional adjudication 
of all Medicare claims appeals whether they are heard in-person, via 
VTC, or by telephone. MALJ oversight is not intended to impede the 
judicial independence of the ALJ assigned to the appeal, but rather, 
such oversight will aid in the coordination of resources needed to 
successfully carry out an in-person hearing and will also assist the 
ALJs in fulfilling their responsibility to ensure that appellants 
receive an appropriate hearing and that appeals are decided in a timely 
manner.
    In terms of structural organization, the DHHS is divided into a 
series of operational divisions that are administratively and 
programmatically independent of one another. Each

[[Page 65324]]

operational division has its own personnel, administrative support, and 
programmatic mission. While each operational division is ultimately 
accountable to the Secretary, they are independent of one another. As 
described in the June 23, 2005 Office of Medicare Hearings and Appeals; 
Statement of Organization, Functions, and Delegations of Authority that 
formally established OMHA, OMHA is part of the Office of the Secretary 
and is completely separate from CMS. 70 FR 36386. OMHA is under the 
direction of the Chief Administrative Law Judge who reports directly to 
the Secretary. 70 FR 36386 through 36387. Thus, consistent with section 
931(b)(2) of MMA, Medicare appellants receive hearings before ALJs from 
an office that is organizationally and functionally separate from CMS.
    Section 521 of BIPA amended section 1869 of the Act to 
substantially revise the Medicare claim appeals process. The statute 
mandated a series of structural and procedural changes to the existing 
appeals process, which necessitated the publication of new regulations 
to implement the statutory changes. Since CMS administers the Medicare 
program, and is responsible for safeguarding the interests of Medicare 
beneficiaries, it was the agency's responsibility to issue regulations 
implementing the BIPA provisions that revised the Medicare claims 
appeals process. These regulations were first published by CMS in the 
Federal Register as a proposed rule on November 15, 2002. CMS 
subsequently published an interim final rule with comment period on 
March 8, 2005, which included responses to the comments submitted on 
the proposed rule. The MMA mandated that the transfer of ALJ appeals 
from SSA to DHHS was not to begin earlier than July 1, 2005. 
Consequently, the proposed and interim final regulations were drafted 
and issued at a time when OMHA was not in existence. We note that the 
Medicare Appeals Council has been involved in developing relevant 
provisions of the proposed rule, interim final rule and this final 
rule, and OMHA has been involved in developing responses to comments 
and revisions to relevant regulatory provisions included in this final 
rule.
    Finally, as noted above, the June 23, 2005 Office of Medicare 
Hearings and Appeals; Statement of Organization, Functions, and 
Delegations of Authority established OMHA as a part of the Office of 
the Secretary completely separate from CMS. See 70 FR 36386 through 
36387. Pursuant to this Statement, OMHA is under the direction of the 
Chief Administrative Law Judge who reports directly to the Secretary. 
The Statement further describes the mission, organization and functions 
of OMHA. We do not believe that additional formalized procedures in the 
form of promulgated rules on how OMHA functions are necessary to ensure 
ALJ independence.
    Comment: One commenter inquired about the possibility of 
establishing a complaint mechanism for appellants who feel the ALJ has 
failed to maintain his/her impartiality.
    Response: Section 405.1026(a) establishes that ``[a]n ALJ cannot 
conduct a hearing if he or she is prejudiced or partial to any party or 
has any interest in the matter pending for decision.'' Under Sec.  
405.1026(b), ``[i]f a party objects to the ALJ who will conduct the 
hearing, the party must notify the ALJ within 10 calendar days of the 
date of the notice of hearing. The ALJ considers the party's objections 
and decides whether to proceed with the hearing or withdraw.'' Section 
405.1026(c) provides that ``[i]f the ALJ does not withdraw, the party 
may, after the ALJ has issued an action in the case, present his or her 
objections to the MAC in accordance with Sec.  405.1100 et seq.'' 
Section 405.1026(c) further provides that ``[i]f the case is escalated 
to the MAC after a hearing is held but before the ALJ issues a 
decision, the MAC considers the reasons the party objected to the ALJ 
during its review of the case and, if the MAC deems it necessary, may 
remand the case to another ALJ for a hearing and decision.'' We believe 
that the provisions set forth in Sec.  405.1026 provide sufficient 
procedures by which a party can object to the presiding ALJ for their 
hearing. Given these safeguards, we believe that the regulation as 
written sufficiently addresses the commenter's concerns.
    Accordingly, we are finalizing Sec.  405.1026 without modification.
g. Review of Evidence Submitted to the ALJ, Hearing Procedures, and 
Issues Before an ALJ (Sec.  405.1028 Through Sec.  405.1032)
    In Sec.  405.1028, we explain the process for prehearing review of 
evidence submitted to the ALJ, including the procedures an ALJ follows 
in determining whether good cause exists to allow the submission of new 
evidence at the ALJ hearing by a provider, supplier or beneficiary 
represented by a provider or supplier, and the effect of a finding that 
good cause does not exist. In Sec.  405.1030, we establish general 
procedures for ALJ hearings, including the procedures that apply when 
an ALJ determines that there is material evidence missing at the 
hearing. In section 405.1032, we discuss the types of issues that an 
ALJ may consider at a hearing, the conditions under which an ALJ may 
consider new issues at the hearing, and the restrictions imposed on 
adding new claims to pending appeals.
    Comment: One commenter stated that Sec.  405.1032 appears to allow 
an ALJ to consider new issues at the hearing that result from the 
participation by CMS or its contractors. The commenter indicated that 
this should not be allowed to occur if the matter could not have been 
reopened under the reopening provisions of Sec.  405.980. The commenter 
recommended that Sec.  405.1032 be amended to specify that no new issue 
should be addressed by the ALJ unless the standards for reopening are 
met.
    Response: As noted in Sec.  405.1032(a), ALJs consider the issues 
raised during previous levels of appeal not decided entirely in a 
party's favor (although, if evidence presented before the hearing 
causes the ALJ to question a favorable portion of the determination, 
the ALJ notifies the parties before the hearing and may consider it an 
issue at the hearing). However, there may be instances where the 
evidence presented to the ALJ brings to light a new issue. Accordingly, 
under Sec.  405.1032(b), we allow an ALJ to consider new issues at the 
hearing, subject to the limitations described in Sec.  
405.1032(b)(1)(i) and (ii).
    In the interest of the efficient resolution of claims appeals, we 
have developed procedures that foster the early resolution of disputes 
over claim determinations. With the requirement for the full and early 
presentation of evidence described above, as well as other provisions, 
we are attempting to avoid a prolonged and costly appeals process. 
Thus, we expect under the framework established in subpart I, that 
parties will raise issues as soon as practicable. It is neither 
efficient nor effective for parties to wait until the ALJ hearing to 
raise issues if those issues could have been brought to light and 
potentially resolved at previous levels. Therefore, in Sec.  405.1032, 
we placed restrictions on the ability of a party to raise a new issue 
at the ALJ level. We believe that the restrictions currently set forth 
in Sec.  405.1032(b) strike a reasonable balance between the need for 
efficient resolution of claims appeals and the need to consider new 
issues in certain circumstances.
    We agree with the commenter's general description of the provisions 
of Sec.  405.1032(b). Under Sec.  405.1032(b)(1), an ALJ may raise and 
consider a new issue at the hearing when the conditions set forth in 
Sec.  405.1032(b) are met. Like

[[Page 65325]]

any other party, when CMS and its contractors elect to be a party to an 
ALJ hearing under Sec.  405.1012, CMS and its contractors have the 
right to raise new issues, but the conditions established in Sec.  
405.1032(b) must be satisfied before the ALJ may consider a new issue 
at the hearing. Section 405.1032(b) requires an ALJ to notify all of 
the parties about the new issue prior to the start of the hearing, and 
states that an ALJ may only consider a new issue at the hearing if its 
resolution could have a material impact on the claim(s) that are the 
subject of the request for hearing, and its resolution is permissible 
under the rules governing reopening of determinations and decisions. 
When electing to be a participant under Sec.  405.1010, CMS and its 
contractors do not have the right to raise new issues at the ALJ level 
under Sec.  405.1032. Rather, as a participant under Sec.  405.1010, 
CMS or its contractor may provide evidence to the ALJ, and an ALJ may, 
in response, raise and consider a new issue at the hearing based on 
such evidence, consistent with Sec.  405.1032(b)(1).
    We believe the regulation is sufficiently clear in explaining that 
when an ALJ or a party, including CMS or its contractor when it elects 
party status, raises a new issue, the conditions set forth in Sec.  
405.1032(b) must be satisfied in order to have that new issue 
considered at the hearing. As discussed above, Sec.  405.1032(b) 
requires, in pertinent part, that if a new issue is to be considered at 
the hearing, its resolution must be permissible under the rules 
governing the reopening of determinations and decisions. Thus, we do 
not believe it is necessary to amend Sec.  405.1032, since we believe 
the regulation is already consistent with the commenter's suggested 
amendment regarding the conditions under which an ALJ may consider new 
issues.
    Accordingly, we are finalizing Sec. Sec.  405.1030 and 405.1032 
without modification. We are finalizing Sec.  405.1028 with 
modification as discussed in section II.B.5.a. of this preamble.
h. Remand Authority (Sec.  405.1034)
    Section 405.1034 discusses when the ALJ can remand a case to the 
QIC. Section 405.1034(a) of the interim final rule states that in cases 
where the ALJ believes that the written record is missing information 
essential to resolving the issues on appeal, and such information can 
be provided only by CMS or its contractors, ALJs may either remand the 
case to the QIC that issued the reconsideration, or retain jurisdiction 
and request that the contractor forward the missing information to the 
appropriate hearing office.
    It has come to our attention that there has been much confusion 
regarding what we meant by the phrase set forth in Sec.  405.1034(a), 
``can be provided only by CMS or its contractors.'' Thus, we are 
revising Sec.  405.1034 to clarify that the phrase ``can be provided 
only by CMS or its contractors'' means the information is not publicly 
available, and is not in the possession of, and cannot be requested and 
obtained by any of the parties to the appeal. ``Publicly available'' 
means the information is available to the general public via the 
Internet, or in a printed publication. For example, information 
available on a CMS or contractor Web site or included in an official 
CMS or DHHS publication is publicly available information (for example, 
provisions of NCDs or LCDs, procedure code or modifier descriptions, 
fee schedule data, and contractor operating manual instructions). 
Similarly, medical records and certificates of medical necessity are 
examples of information that is in the possession of, or could be 
requested and obtained by, one or more parties to the appeal, even 
though CMS or its contractors may also possess or be able to request 
such information.
    Furthermore, we are revising Sec.  405.1034(a) to clarify that if 
the missing information is not information that can be provided only by 
CMS or its contractors, as clarified above, the ALJ must retain 
jurisdiction of the case and obtain the missing information on his or 
her own, or directly from one of the parties. We note that Sec.  
405.1028 allows an ALJ, for good cause, to admit new evidence submitted 
by a provider, supplier, or a beneficiary represented by a provider or 
supplier. If there is missing information related to this new evidence 
that is in the possession of, or could be requested and obtained by the 
provider, supplier or beneficiary represented by a provider or 
supplier, a remand pursuant to Sec.  405.1034(a) to obtain this missing 
information would be inappropriate because such information is not 
information that can be provided only by CMS or its contractors.
    Similarly, if information missing from the administrative record 
relates to a new issue raised for the first time at the ALJ level by 
the ALJ or a party under Sec.  405.1032(b), the ALJ determines whether 
the missing information related to the new issue can be provided only 
by CMS or its contractors, consistent with Sec.  405.1034(a), in 
determining whether remanding to the QIC or retaining jurisdiction of 
the case is appropriate.
    Accordingly, we are finalizing Sec.  405.1034 with modifications as 
noted.
i. Description of the ALJ Hearing Process and Discovery (Sec.  405.1036 
and Sec.  405.1037)
    Section 405.1036 provides details regarding the ALJ hearing 
process, including the procedures for the issuance of subpoenas by 
ALJs. In Sec.  405.1037, we describe the discovery process available at 
an ALJ hearing when CMS or its contractor elects to participate in the 
hearing as a party. We received several comments regarding the subpoena 
and discovery provisions. A summary of the comments and our responses 
are included below. Detailed discussion of these provisions is included 
in the interim final rule at 70 FR 11461 through 11462.
    Comment: We received several comments concerning subpoena requests 
at the ALJ level of appeal. The commenters expressed concern that a 
party may only seek ALJ issuance of a subpoena after all of the steps 
outlined in Sec.  405.1036(f)(4) regarding discovery have been taken, 
but the subpoena must be requested within 10 calendar days of the 
receipt of the notice of hearing. See Sec.  405.1036(f)(3). The 
commenters recommended that the provision be amended to state that the 
request for subpoena may be filed at any time before the ALJ issues a 
decision. One commenter suggested that alternatively, a party making a 
subpoena request should be allowed a ``reasonable'' amount of time to 
file the request for a subpoena, after the party has exhausted all 
other required efforts to obtain the records.
    Response: We acknowledge that the rule requiring parties to submit 
subpoena requests within 10 calendar days of receipt of the notice of 
hearing as set forth in Sec.  405.1036(f)(3) may be difficult to comply 
with given the requirements for the issuance of subpoenas described in 
Sec.  405.1036(f)(4). We considered the commenters' suggestions to 
allow for the submission of subpoena requests anytime prior to the 
issuance of the ALJ decision, or alternatively, within a reasonable 
time after exhausting required efforts to obtain the requested 
information. However, we believe allowing subpoena requests to be 
submitted at anytime prior to the decision may negatively impact the 
ability of ALJs to issue hearing decisions within the applicable 
adjudication timeframes once discovery is complete. Although we agree 
that it would be appropriate to allow parties a reasonable time to 
submit subpoena requests after exhausting all other efforts to obtain 
the necessary records, we must

[[Page 65326]]

also consider the need to avoid unnecessary delays in the hearing 
process and the need to define the timeframe during which discovery 
will be completed. During the discovery process, parties to the hearing 
will become aware of any failure to comply with an ALJ's order 
compelling disclosure. Since a party's request for a subpoena must 
follow non-compliance with an order to compel disclosure, we believe it 
is reasonable to require parties to submit a request for subpoena prior 
to the end of the discovery period established by the ALJ in accordance 
with Sec.  405.1037(c). Thus, we are amending Sec.  405.1036(f)(3) 
accordingly. Should an ALJ determine that additional time is necessary 
in order to issue the subpoena and obtain the information requested or 
secure an appearance and/or testimony, the ALJ may extend the discovery 
period in accordance with Sec.  405.1037(c)(4).
    Comment: We received two comments concerning the discovery 
provisions. Both commenters objected to the policy making discovery 
available only when CMS participates in the hearing as a party. See 
Sec.  405.1037(a). One commenter suggested that any documents relied 
upon by the contractors in making previous decisions should be 
discoverable. Another commenter stated that the use of admissions and 
interrogatories should be allowable under Sec.  405.1037 consistent 
with the standards applicable to the use of depositions.
    Response: Neither BIPA nor the MMA explicitly provides for 
discovery during ALJ proceedings, and given the evidence requirements 
and timeframes imposed by BIPA and the MMA, we do not believe that a 
full discovery process is necessary or even feasible at the ALJ level. 
Nevertheless, we decided, in response to comments received on the 
proposed rule, to permit limited discovery in Sec.  405.1037 when CMS 
or its contractors become a party at the ALJ hearing level. See 70 FR 
11461 through 11462. We continue to believe it is appropriate to allow 
only limited discovery in this instance, and that such discovery 
enhances the fairness of proceedings and the accuracy of decisions. We 
also believe that, in general, most information relevant to the issues 
before an ALJ, including documents relied upon by contractors in making 
their decisions, is obtainable by direct request of a party or the ALJ, 
or is already included in the administrative record. With respect to 
our prohibition on the use of interrogatories and admissions, we 
believe such discovery practices are unnecessary because the factual 
information typically obtained through the use of admissions and 
interrogatories is often already included in the administrative record, 
can be established during a pre-hearing conference under Sec.  
405.1040, or can be developed at the hearing. In addition, if an ALJ 
determines evidence is missing from the record, the ALJ may follow the 
procedures set forth in Sec.  405.1030(c) to obtain such evidence. 
Thus, we do not believe it is necessary to include more expansive 
discovery provisions in the final rule.
    Finally, we have determined that it is necessary to make technical 
revisions to Sec.  405.1036(f) in order to clarify our policies, as 
discussed below. Section 405.1036(f)(1) authorizes, when it is 
reasonably necessary for the full presentation of the case, an ALJ to 
issue subpoenas, on his or her own initiative or at the request of a 
party, for the appearance and testimony of witnesses, and for a party 
to make books, records, correspondence, papers, or other documents that 
are material to an issue at the hearing available for inspection and 
copying.
    It has come to our attention that there has been some confusion 
regarding the participation regulations at Sec.  405.1010 and Sec.  
405.1012 and the use of subpoenas under Sec.  405.1036(f). As discussed 
above, an ALJ may not require CMS or its contractors to participate in 
a hearing either as a participant or as a party, and may not draw an 
adverse inference if CMS or its contractors decide not to participate 
or be a party in a proceeding before the ALJ. See Sec. Sec.  
405.1010(a) and (f) and 405.1012(d). Under these regulations, CMS and 
its contractors have discretion to determine whether to participate in 
ALJ proceedings, and to determine the manner and extent of their 
participation. We are clarifying in this final rule that Sec.  
405.1036(f) is not intended to permit the use of subpoenas to 
circumvent or limit the discretion provided to CMS and its contractors 
regarding participation in ALJ hearings. Thus, we are amending Sec.  
405.1036(f)(1) to clarify that an ALJ may not, on his or her own 
initiative or at the request of a party, issue a subpoena to CMS or its 
contractors to compel an appearance, testimony or the production of 
evidence in the context of a Medicare claim appeal under this subpart.
    For similar reasons, we are also amending Sec.  405.1122(d)(1) to 
clarify that the MAC may not issue subpoenas to CMS or its contractors, 
on its own initiative or at the request of a party, to compel the 
production of evidence. Similar to the policies and procedures 
applicable to ALJ proceedings, CMS and its contractors have discretion 
to determine whether to participate, and to determine the manner and 
extent of their participation, in a MAC review. Specifically, in Sec.  
405.1124(d) regarding oral argument, the MAC may request, but not 
require, CMS or its contractor to appear before it if the MAC 
determines that it may be helpful in resolving issues in a case. In 
addition, Sec.  405.1124(e) states that the MAC may not draw any 
inference if CMS or its contractor decides not to participate in an 
oral argument. Furthermore, under Sec.  405.1110, CMS or its 
contractors may refer a case to the MAC for review under the MAC's own 
motion authority. Thus, we are clarifying that Sec.  405.1122(d) is not 
intended to permit the use of subpoenas to circumvent or limit the 
discretion provided to CMS and its contractors regarding participation 
in a MAC review. Finally, we note that the policy prohibiting the 
issuance of subpoenas to CMS by ALJs and the MAC as described above, is 
also supported by the long-settled doctrine of sovereign immunity.
    Accordingly, we are finalizing Sec. Sec.  405.1036 and 405.1122 
with modifications as noted above. We are finalizing Sec. Sec.  
405.1036 and 405.1037 with modification as noted in section II.B.5.a. 
of this preamble.
j. Deciding a Case Without an ALJ Hearing, Conferences, the 
Administrative Record, and Consolidated Hearings (Sec.  405.1038 
Through Sec.  405.1044)
    In Sec. Sec.  405.1038 through 405.1044, we describe various 
procedures established for the conduct of ALJ hearings. In Sec.  
405.1038, we outline the circumstances in which an ALJ may issue a 
decision without holding a hearing. In Sec.  405.1040, we describe the 
process for holding prehearing and posthearing conferences. In Sec.  
405.1042, we explain the requirements applicable to the creation of the 
administrative record of the ALJ proceedings, and for requesting and 
receiving copies of the administrative record. In Sec.  405.1044, we 
describe the requirements applicable to holding a consolidated hearing 
before the ALJ. Additional discussion is included in the interim final 
rule at 70 FR 11464 through 11465.
    We received no comments on these sections. However, in Sec.  
405.1038(b)(1)(i) we made a technical correction, changing the term 
``videoconferencing'' to ``videoteleconferencing'', consistent with the 
use of the term throughout this regulation.
    Accordingly, we are finalizing Sec.  405.1040 without modification. 
We are finalizing Sec.  405.1038 with the

[[Page 65327]]

modification noted above. We are finalizing Sec. Sec.  405.1042 and 
405.1044 with modification as discussed in section II.B.5.a. of this 
preamble.
k. Notice and Effect of ALJ's Decision (Sec.  405.1046 Through Sec.  
405.1048)
    Section 405.1046 sets forth general rules regarding the notice of 
an ALJ's decision and describes certain limitations on an ALJ's 
decision, and Sec.  405.1048 explains the effect of an ALJ decision on 
all parties to the hearing. We received one comment on the effect of an 
ALJ decision. A summary of the comment and our response are included 
below. Additional detailed discussion is included in the interim final 
rule at 70 FR 11466 through 11467.
    Comment: We received a comment concerning the effect of an ALJ 
decision. The commenter urged CMS to state in the regulations that ALJ 
decisions are entitled to substantial deference by other adjudicators 
in the appeals process. The commenter believed that cases that have 
made it to the ALJ level are more likely to be cases concerning issues 
most important to beneficiaries and providers and, since the ALJ has 
fully considered such issues, other levels of appeal should benefit 
from these prior decisions and accord them substantial deference, 
similar to that which a district court would accord to a decision by 
another district court within the same circuit.
    Response: We disagree with the commenter's recommendation, and note 
that, in some instances, it would be inappropriate to require other 
adjudicators to afford substantial deference to ALJ decisions. For 
example, the MAC is responsible for reviewing certain ALJ decisions and 
issuing final decisions on those appeals for the DHHS. Section 521 of 
BIPA added 1869(d)(2)(B) of the Social Security Act to mandate that in 
reviewing an ALJ decision, the MAC shall review the case de novo. See 
Sec.  405.1100(c), Sec.  405.1108(a). This is an expansion of the scope 
of review the MAC previously exercised in pre-BIPA appeals. Granting 
ALJ decisions substantial deference would be inconsistent with the 
DAB's expanded review authority provided by Congress.
    In addition, the coverage and liability determinations made on 
claims submitted for treatment are largely unique to the specific facts 
and circumstances of a given case. Thus, it would prove extremely 
difficult to identify a set of decisions that could be appropriately 
afforded deference.
    Finally, we note that section 931 of the MMA instructed DHHS to 
assess the feasibility of developing a process to give decisions of the 
DAB addressing broad legal issues, binding and precedential authority. 
After thorough consideration, DHHS determined that it is neither 
feasible, nor appropriate at this time to confer binding, precedential 
authority upon decisions of the MAC. Because MAC decisions are not 
given precedential weight, it would be impractical and illogical to 
afford any form of deference to ALJ decisions. Therefore, we do not 
believe it is appropriate to adopt the commenter's suggestion to 
require other adjudicators in the Medicare administrative appeals 
process to afford substantial deference to ALJ decisions.
    We are finalizing Sec. Sec.  405.1046 and 405.1048 with 
modification as discussed in section II.B.5.b. of this preamble. 
Additionally, we are finalizing Sec.  405.1046 with modification as 
discussed in section II.B.5.a. of this preamble.
l. Removal of a Hearing Request From the ALJ to the MAC, Dismissal of a 
Request for ALJ Hearing, and the Effect of a Dismissal (Sec.  405.1050 
Through Sec.  405.1054)
    In Sec.  405.1050, we explain the process for the MAC to assume 
responsibility for holding a hearing if a request for hearing is 
pending before an ALJ. In Sec.  405.1052, we explain the bases under 
which an ALJ dismisses a request for hearing, and, in Sec.  405.1054, 
we explain the effect of a dismissal of a request for ALJ hearing. 
Additional discussion is included in the interim final rule at 70 FR 
11465 through 11466. We received no comments on these provisions.
    We are finalizing Sec. Sec.  405.1050 and 405.1054 without 
modification. We are finalizing Sec.  405.1052 with modification as 
discussed in section II.B.5.b. of this preamble and with modification 
as discussed in section II.B.5.a. of this preamble.
m. Applicability of Statutes, Regulations, Medicare Coverage Policies, 
CMS Rulings and Other Program Guidance (Sec.  405.1060 Through Sec.  
405.1063)
    In Sec.  405.1060, we explain the applicability of national 
coverage determinations (NCDs) to decisions made by fiscal 
intermediaries, carriers, QIOs, QICs, ALJs, and the MAC. In Sec.  
405.1062, we provide that ALJs and the MAC must afford LCDs, LMRPs and 
CMS program guidance (including program memoranda and manual 
instructions) substantial deference if they are applicable to a 
particular case. In Sec.  401.108(c) and Sec.  405.1063, we explain 
that CMS rulings are binding on all CMS components, on all DHHS 
components that adjudicate matters under the jurisdiction of CMS, and 
on the Social Security Administration to the extent that components of 
the Social Security Administration adjudicate matters under the 
jurisdiction of CMS.
    We received several comments with respect to the requirement that 
ALJs and the MAC afford Medicare local coverage determinations and 
program guidance substantial deference. A summary of the comments, and 
our response to those comments are included below. Additional 
discussion is included in the interim final rule at 70 FR 11457 through 
11458.
    Comment: We received several comments concerning the provisions 
requiring ALJs and the MAC to give substantial deference to Medicare 
LCDs, LMRPs and CMS program guidance, if the pertinent policy or 
guidance is applicable to the specific case (Sec.  405.1062). Most of 
these commenters objected to the substantial deference provisions. Some 
commenters objected to the presumption of validity attributed to 
policies and guidance under this provision, and believed it would lead 
to adjudicators ``rubber-stamping'' the previous appeal decision, while 
another commenter noted that ALJs and the MAC currently decide whether 
informal policies are entitled to deference based on Supreme Court 
precedents.
    Response: As noted above and further discussed below, ALJs and the 
MAC are bound by the Medicare statute, CMS regulations, CMS Rulings, 
and NCDs. See sections 405.1060, 405.1063, 401.108; in addition see our 
discussion at 70 FR 11457 through 11458. In Sec.  405.1062, we explain 
the degree to which ALJs and the MAC must defer to non-binding CMS 
program guidance (such as manual instructions and program memoranda), 
LMRPs and LCDs. ALJs and the MAC consider whether guidance documents, 
LMRPs and LCDs should apply to a specific claim for benefits. If it is 
determined that the policy is applicable in the instant case, then the 
adjudicator must grant substantial deference to the policy. However, if 
the adjudicator declines to follow a policy in a particular case, the 
adjudicator must explain why the policy was not followed. The decision 
to disregard a policy in a specific case does not have precedential 
effect. See Sec.  405.1062(a) and (b). Thus, ALJs will continue their 
traditional role as independent evaluators of the facts presented in 
specific, individual cases. Requiring an ALJ to consider CMS policy and 
give substantial deference to it, if applicable to a particular case, 
does not alter the ALJ's role as an independent fact finder. See 70 FR

[[Page 65328]]

11458. Thus we do not believe this regulation will lead to adjudicators 
``rubber-stamping'' the previous appeal decision.
    In this final regulation, we are making a technical correction to 
Sec.  405.1063. In Sec.  405.1063, we did not include a provision that 
expressly stated our longstanding policy, as described in the interim 
final rule, regarding the applicability of the Medicare statute and CMS 
regulations to ALJs and the MAC. See 70 FR 11457. We are making this 
correction by adding paragraph (a) to Sec.  405.1063 to specify that 
ALJs and the MAC are bound by all laws and regulations pertaining to 
the Medicare and Medicaid programs, including, but not limited to 
Titles XI, XVIII, and XIX of the Social Security Act and applicable 
implementing regulations.
    Accordingly, we are finalizing Sec.  405.1060 and Sec.  405.1062 
without modification. We are finalizing Sec.  405.1063 with 
modifications as noted.
n. ALJ Decisions Involving Statistical Samples (Sec.  405.1064)
    In Sec.  405.1064, we explain that when an appeal from the QIC 
involves an overpayment, and the QIC relied on a statistical sample in 
reaching its decision, the ALJ must base his or her decision on a 
review of all claims in the sample. We received two comments regarding 
this provision. A summary of the comments, and our responses are 
provided below. Additional detailed discussion is included in the 
interim final rule at 70 FR 11466.
    Comment: Two commenters expressed concern that the regulation does 
not address the authority of an ALJ to consider challenges to the 
sampling methodology when an overpayment assessment is estimated 
through extrapolation, and requested that we clarify our position on 
this issue in the regulation. One of these commenters also suggested 
that we include a provision requiring that appellants be given all 
documentation concerning the contractor's sampling process.
    Response: Medicare's longstanding policy has been to allow 
appellants a full opportunity to challenge issues related to the 
calculation of overpayments estimated by extrapolation from a sample. 
We outlined in detail the basis for our authority to extrapolate 
overpayments in CMS (HCFA) Ruling 86-1, and since 1986, have included 
procedures for contractors in operating instructions. As explained in 
Ruling 86-1, we agree with the commenter's assertion that appellants 
may challenge, and an ALJ may review, the sampling methodology used to 
calculate the overpayment.

    Sampling does not deprive a provider of its rights to challenge 
the sample, nor of its rights to procedural due process. Sampling 
only creates a presumption of validity as to the amount of an 
overpayment which may be used as the basis for recoupment. The 
burden then shifts to the appellant to take the next step. The 
appellant could attack the statistical validity of the sample, or it 
could challenge the correctness of the determination in specific 
cases identified by the sample (including waiver of liability [under 
section 1879 of the Act] where medical necessity or custodial care 
is at issue). In either case, the appellant is given a full 
opportunity to demonstrate that the overpayment is wrong. If certain 
individual cases within the sample are determined to be decided 
erroneously, the amount of overpayment projected to the universe of 
claims can be modified. If the statistical basis upon which the 
projection was based is successfully challenged, the overpayment 
determination can be corrected. (HCFAR 86-1-9, 10)

    Adjudicators are bound by CMS rulings. Thus, we do not believe it 
is necessary to include further clarification in the regulation.
    Furthermore, parties may request and receive the information 
contained in the case file. See Sec.  405.1042 and Sec.  405.1118. The 
case file should include all documentation regarding the sampling 
methodology used to calculate an overpayment. If such documentation is 
not in the administrative record, a party may request the pertinent 
documentation from the contractor or adjudicator. Thus, we believe that 
appellants already have adequate access to documentation concerning the 
contractor's sampling process, and that it is not necessary to include 
an additional provision in the final rule.
    Accordingly, we are finalizing Sec.  405.1064 without modification.
10. Review by the Medicare Appeals Council (Sec.  405.1100 Through 
Sec.  405.1134)
    Sections 405.1100 through 405.1134 set forth the procedures for MAC 
review of ALJ decisions and dismissals. We received comments with 
respect to the MAC's standard of review and submission of evidence 
during MAC review. A brief description of the pertinent regulatory 
provisions, a summary of the comments, and our responses to the 
comments follow below. Additional discussion regarding MAC review is 
included in the interim final rule at 70 FR 11454 through 11456, 11459 
through 11464, and 11466 through 11467.
a. MAC Review of an ALJ's Action (Sec.  405.1100 Through Sec.  
405.1120)
    Section 405.1100 states that the MAC undertakes a de novo review of 
an ALJ decision, and provides a general description of the MAC review 
process. Section 405.1102 describes the process for requesting MAC 
review of an ALJ decision or dismissal. Section 405.1104 describes an 
appellant's right to request escalation of a case from the ALJ level to 
the MAC. In Sec.  405.1106, we specify the locations where parties must 
file requests for MAC review or escalation. Section 405.1108 sets forth 
the actions a MAC may take upon receipt of a request for review or 
escalation. Section 405.1110 describes the MAC's authority to review 
ALJ decisions or dismissals on its own motion. Section 405.1112 sets 
forth the content requirements for requests for MAC review. Section 
405.1114 describes the circumstances in which the MAC dismisses a 
request for review, and Sec.  405.1116 describes the effect of a 
dismissal by the MAC. Section 405.1118 explains the process by which a 
party may request a copy of the administrative record developed at the 
ALJ hearing and an opportunity to comment on the evidence. Section 
405.1120 discusses filing briefs with the MAC.
    Comment: Two of the comments we received expressed concern about 
the standard of review at the MAC level. One commenter suggested 
modifying Sec.  405.1100 to provide for a ``substantial evidence'' 
standard of review as is applicable in judicial review, or 
alternatively, a ``preponderance of evidence'' standard. However, both 
commenters stated that although Sec.  405.1100 provides for the MAC to 
undertake de novo review of an ALJ decision, the MAC's rules limit the 
opportunity for face-to-face hearings and restrict a party's right to 
submit evidence. The commenters indicated that these restrictions do 
not constitute a de novo review.
    Response: The de novo standard of review that is applicable at the 
MAC level is statutorily required by section 1869(d)(2)(B) of the Act, 
as added by BIPA. Thus, the MAC may not review ALJ decisions under a 
substantial evidence standard as it had under previous rules, nor may 
it utilize a preponderance of evidence standard to adjudicate appeals. 
Similarly, the limitation on the submission of evidence set forth in 
Sec.  405.1122 is required under section 1869(b)(3) of the Act. We note 
that this limitation restricts the scope of the MAC's review, not the 
applicable standard of review.
    Finally, with respect to the commenter's concern about the 
limitations on face-to-face hearings, while most cases before the MAC 
are resolved without oral argument, under Sec.  405.1124, parties may 
request to

[[Page 65329]]

appear before the MAC to present oral argument, or the MAC may 
determine on its own that oral argument is necessary to decide the 
issues in the case. The fact that the MAC may not grant a party's 
request to permit oral argument in a case does not alter the de novo 
standard of review by the MAC.
    In this final rule, we are making certain technical revisions to 
Sec.  405.1106 and Sec.  405.1110, and a technical correction to Sec.  
405.1112(a). In Sec.  405.1106(a), parties seeking MAC review of an ALJ 
hearing decision must send the request for review to the entity 
specified in the notice of the ALJ's decision, and send a copy of the 
request to the other parties to the ALJ decision or dismissal. 
Similarly, when CMS or its contractor refers a case to the MAC for the 
MAC to consider reviewing under its own motion review authority, in 
accordance with Sec.  405.1110(b)(2), CMS sends a copy of the referral 
to the ALJ and to all the parties to the ALJ's action. Furthermore, in 
Sec.  405.1110(b)(2), a party may file exceptions to CMS' referral to 
the MAC by submitting written comments to the MAC, to CMS and to all 
other parties to the ALJ's decision.
    We would like to clarify that, for the purposes of MAC review, when 
an appellant is required to send a copy of the request for review to 
the ``other parties to the ALJ decision or dismissal'' under Sec.  
405.1106(a), this means the appellant must send a copy of the review 
request to the other parties to the ALJ decision or dismissal who 
received a notice of the ALJ's hearing decision under Sec.  
405.1046(a), or a notice of the ALJ's dismissal under Sec.  
405.1052(b). Similarly, if CMS refers a case to the MAC for the MAC to 
consider under its own motion review authority, when CMS sends a copy 
of the referral to ``all parties to the ALJ's action'' under Sec.  
405.1110(b)(2), this means CMS must send a copy of the referral to all 
parties to the ALJ's action who received a copy of the ALJ's hearing 
decision under Sec.  405.1046(a) or a notice of the ALJ's dismissal 
under Sec.  405.1052(b). Finally, when a party submits written comments 
regarding CMS' referral to the MAC to ``all other parties to the ALJ's 
decision'' under Sec.  405.1110(b)(2), this means that the party must 
send a copy of such comments to all other parties to the ALJ's decision 
who received a copy of the hearing decision under Sec.  405.1046(a) or 
a notice of the ALJ's dismissal under Sec.  405.1052(b). We note that 
if the ALJ sends a copy of the ALJ hearing decision or dismissal to a 
person or entity that is not a party to the ALJ's decision or dismissal 
order (for example, a Medicare contractor who has not elected party 
status at the hearing under Sec.  405.1012), the appellant is not 
required under Sec.  405.1106(a) to send a copy of the request for MAC 
review to that person or entity because that person or entity is not a 
party. See Sec.  405.906(b) and Sec.  405.1008(b) for a description of 
the parties to an ALJ hearing. Pursuant to Sec.  405.906, unless a 
beneficiary undertakes an assignment of appeal rights under Sec.  
405.912, the beneficiary is always considered a party to the ALJ 
hearing.
    If the MAC determines that additional parties should receive a copy 
of the request for MAC review, the CMS referral to the MAC, or comments 
regarding CMS' referral to the MAC, the MAC may instruct the party or 
CMS, as appropriate, to send copies to such party or parties. We 
believe this will minimize any confusion regarding the parties an 
appellant or CMS must notify, and will ensure that those parties with 
an interest in the proceedings will be notified of the status of the 
appeal action.
    We are also making a technical correction to Sec.  405.1112(a) to 
replace a comma with a semi-colon following the phrase, ``if any''.
    Accordingly, we are finalizing Sec. Sec.  405.1108, 405.1114, 
405.1116, and 405.1120 without modification. We are finalizing 
Sec. Sec.  405.1102 and 405.1118 with modification as discussed in 
section II.B.5.a. of this preamble. We are finalizing Sec. Sec.  
405.1100, 405.1104, 405.1106, and 405.1110 with modification as 
discussed in section II.B.5.b. of this preamble and with modification 
as discussed in section II.B.5.a. of this preamble. We are finalizing 
Sec.  405.1112 with modification as discussed in section II.B.5.b. of 
this preamble. We are finalizing Sec. Sec.  405.1106, 405.1110, and 
405.1112 with additional modifications as noted above.
b. Evidence That May Be Submitted to the MAC and Subpoenas (Sec.  
405.1122)
    Section 405.1122 describes the evidence that may be submitted to 
and considered by the MAC, the process the MAC follows in issuing 
subpoenas, the reviewability of MAC subpoena rulings, and the process 
for seeking enforcement of subpoenas.
    Comment: One commenter expressed concern about a party's ability to 
submit new evidence for MAC review. The commenter acknowledged the 
value of submitting evidence early in the appeals process. However, the 
commenter believed new evidence should be allowed at the MAC level if 
the evidence becomes pertinent following the ALJ's decision.
    Response: As noted above, the limitation on submission of evidence 
is set forth at section 1869(b)(3) of the Act. However, we believe that 
there are certain circumstances in which submission of new evidence for 
MAC review may be appropriate. We have described these circumstances at 
Sec.  405.1122. As explained in Sec.  405.1122(a)(1), when the MAC 
undertakes review of an ALJ decision, the MAC reviews all of the 
evidence contained in the administrative record. However, as explained 
in Sec.  405.1122(a)(1), if the hearing decision decides a new issue 
that the parties were not afforded an opportunity to address at the ALJ 
level, the MAC considers any evidence related to that issue if it is 
submitted with the request for review. In addition, as set forth in 
Sec.  405.1122(a)(2), if the MAC determines that additional evidence is 
necessary to resolve the issues in the case, and the hearing record 
indicates that there were no attempts to obtain such evidence in the 
proceedings below, the MAC may remand the case to the ALJ to obtain the 
evidence and issue a new decision.
    Consistent with Sec.  405.1122(c), if a provider, supplier, or a 
beneficiary represented by a provider or supplier, submits new evidence 
related to issues previously considered by the QIC, the MAC determines 
whether the party had good cause for submitting the evidence for the 
first time at the MAC level. The MAC must exclude evidence from 
consideration if good cause for late filing is not established, and 
must notify all parties of the exclusion. However, the MAC may remand a 
case to an ALJ if the new evidence was previously submitted by a 
provider, supplier, or beneficiary represented by a provider or 
supplier at the ALJ level, and was excluded from consideration because 
the ALJ determined that good cause did not exist under Sec.  405.1028, 
but the MAC determines that good cause for late filing existed under 
Sec.  405.1028 and the ALJ should have reviewed the evidence. See Sec.  
405.1122(c)(3). As set forth in Sec.  405.1122(c)(3)(iii), the MAC may 
also remand a case to an ALJ if the new evidence is submitted by a 
party that is not a provider, supplier, or beneficiary represented by a 
provider or supplier. Therefore, we believe the regulations provide an 
appropriate balance between the need for appellants to submit evidence 
when the evidence becomes pertinent following the ALJ decision, and the 
need for the full and early presentation of evidence as required by the 
statute.
    Although we received no comments on Sec.  405.1122(d) through (f), 
we have determined that it is necessary to make certain technical 
revisions to these subsections to clarify our policies.

[[Page 65330]]

Sections 405.1122(d) through (f) explain the procedures the MAC follows 
when issuing subpoenas, the review process with respect to MAC rulings 
on subpoena requests, and the enforcement procedures to be followed if 
the MAC determines that either a party or non-party has failed to 
comply with a subpoena. As explained above in section II.B.9.i. of this 
preamble, we are revising Sec.  405.1122(d)(1) to clarify that the MAC 
may not issue subpoenas to CMS or its contractors, on its own 
initiative or at the request of a party, to compel the production of 
evidence.
    In addition, we note that Sec.  405.1122 contains several technical 
errors that were not corrected in our previous technical correction 
notice. First, we are correcting the numbering of Sec.  405.1122(e). 
Second, we are revising paragraph (e)(2)(v) (renumbered in this final 
rule as paragraph (e)(6)) to replace the word ``lifed'' with the word 
``lifted.'' Third, in Sec.  405.1122(f)(1), we are correcting the 
statutory reference to the process followed by the Secretary when 
seeking enforcement of a subpoena issued by the MAC; we incorrectly 
referenced section 205(c) of the Act and 42 U.S.C. 405(c) instead of 
section 205(e) of the Act and 42 U.S.C. 405(e).
    Accordingly, we are finalizing Sec.  405.1122 with modifications as 
noted and with modification as discussed in section II.B.5.a. of this 
preamble.
c. Oral Argument, Cases Remanded By the MAC, the Effect of MAC Actions, 
Escalation to Federal District Court, and Extensions of Time To File 
Actions in Federal District Court (Sec.  405.1124 Through Sec.  
405.1134)
    In Sec.  405.1124, we explain the circumstances in which the MAC 
may hear oral argument and the procedures that apply when the MAC hears 
oral argument. Section 405.1126 explains the MAC's remand authority and 
the procedures that apply when the MAC receives a recommended decision 
from the ALJ. Section 405.1128 describes the actions the MAC may take 
after reviewing the administrative record and any additional evidence 
(subject to the limitations on MAC consideration of additional 
evidence), and Sec.  405.1130 describes the effect of the MAC's 
decision.
    Section 405.1132 explains the process for an appellant to seek 
escalation of an appeal (other than an appeal of an ALJ dismissal) from 
the MAC to Federal district court if the MAC does not issue a decision 
or dismissal or remand the case to an ALJ within the adjudication 
period specified in Sec.  405.1100, or as extended as provided in 
subpart I. Section 405.1134 explains how parties may request an 
extension of time to file an action in Federal district court.
    We received no comments on these provisions. We are finalizing 
Sec. Sec.  405.1128 and 405.1134 without modification. We are 
finalizing Sec.  405.1124 with modification as discussed in section 
II.B.5.a. of this preamble. We are finalizing Sec. Sec.  405.1126, 
405.1130 and 405.1132 with modification as discussed in section 
II.B.5.b. of this preamble and with modification as discussed in 
section II.B.5.a. of this preamble.
11. Judicial Review (Sec.  405.1136 Through Sec.  405.1140)
    Section 405.1136 sets forth the requirements and procedures for 
filing requests for judicial review of a MAC decision in Federal 
district court, specifies the Federal district court in which such 
actions must be filed, and describes the standard of review. Sections 
405.1138 and 405.1140 set forth the procedures that apply to cases that 
are remanded by a Federal district court to the Secretary for further 
consideration. We received two comments on these provisions. A summary 
of these comments, and our responses are included below.
    Comment: One commenter noted that, in Sec.  405.1136(b), we state 
that a party to a MAC decision (or an appellant who requests escalation 
from the MAC to Federal court) must file a civil action in the district 
court of the United States for the judicial district in which the party 
resides or where such individual, institution, or agency has its 
primary place of business. The commenter believed that a party should 
be able to file a civil action in Washington, DC or the judicial 
district in which a regional office of DHHS exists.
    Response: Section 1869(b)(1)(A) of the Act states that any 
individual dissatisfied with any initial determination shall be 
entitled to reconsideration of the determination, a hearing by the 
Secretary to the same extent as is provided in section 205(b) of the 
Act, and to judicial review of the Secretary's final decision after 
such hearing as provided in section 205(g) of the Act. Section 205(g) 
of the Act sets forth the filing requirements for judicial review. Our 
regulation restates these statutory requirements. We do not have the 
authority or discretion to alter the filing procedures established in 
Federal statute.
    Comment: A commenter suggested that the standard of review 
established in Sec.  405.1136(f) restricts Federal judges from applying 
the Administrative Procedure Act and evolving doctrines of judicial 
review of administrative decisions that govern other agencies.
    Response: We appreciate the commenter's concerns regarding the 
standard of review applicable to judicial review of Medicare claim 
determinations. As discussed above, section 1869(b)(1)(A) of the Act 
provides for judicial review of the Secretary's final decision as 
provided in section 205(g) of the Act. Section 205(g) of the Act sets 
forth the standard of review that applies to actions in Federal 
district court, and our regulation implements these statutory 
requirements. We do not have the authority or discretion to alter the 
standard of review established in the statute.
    Accordingly, we are finalizing Sec.  405.1138 without modification. 
We are finalizing Sec.  405.1136 with modification as discussed in 
section II.B.5.b. of this preamble and with modification as discussed 
in section II.B.5.a. of this preamble. We are finalizing Sec.  405.1140 
with modification as discussed in section II.B.5.a. of this preamble.

III. Provisions of the Final Regulations

    In this final rule, we made the following changes to the interim 
final rule published on March 8, 2005:
     In section 405.902, we are adding a definition for the 
term contractor.
     In Sec. Sec.  405.922, 405.942(a)(1), 405.942(b), 
405.946(b), 405.950(b)(1), 405.950(b)(2), 405.950(b)(3), 405.962(a)(1), 
405.962(a)(2), 405.962(b), 405.966(b), 405.966(c), 405.970(a)(2), 
405.970(b)(1), 405.970(b)(2), 405.970(b)(3), 405.970(c), 405.970(e)(2), 
405.974(b)(1), 405.974(b)(1)(i), 405.974(b)(1)(ii), 405.980(d)(1), 
405.980(d)(2), 405.980(d)(3), 405.980(e)(1), 405.980(e)(2), 
405.980(e)(3), 405.990(f)(2), 405.990(f)(4), 405.990(h)(2), 
405.990(i)(2), 405.990(j)(1), 405.1002(a)(1), 405.1002(a)(3), 
405.1002(a)(4), 405.1002(b)(2), 405.1004(a)(1), 405.1004(a)(3), 
405.1004(a)(4), 405.1006(e)(1)(ii), 405.1010(b), 405.1012(b), 
405.1014(b)(1), 405.1014(b)(2), 405.1016(a), 405.1016(c), 405.1018(a), 
405.1018(b), 405.1020(g)(3)(ii), 405.1022(a), 405.1024(a), 405.1028(a), 
405.1036(f)(5)(iv), 405.1037(c)(5), 405.1037(e)(2)(iii), 
405.1042(b)(2), 405.1044(d), 405.1046(d), 405.1052(a)(2)(ii), 
405.1052(a)(2)(iii), 405.1100(c), 405.1100(d), 405.1102(a)(1), 
405.1102(a)(2), 405.1104(a)(2), 405.1106(b), 405.1110(a), 
405.1110(b)(2), 405.1110(d), 405.1118, 405.1122(e)(4), 405.1124(b), 
405.1126(d)(1), 405.1130, 405.1132(b), 405.1136(c)(3), 405.1136(d)(2),

[[Page 65331]]

405.1140(b)(1), 405.1140(c)(1), 405.1140(c)(4), 405.1140(d), we added 
the word ``calendar'' in front of the word ``day'' or ``days'' to 
clarify the timeframes referenced therein.
     In Sec.  405.924, we removed paragraph (b)(7), because a 
determination regarding the number of home health visits used by a 
beneficiary is no longer considered an initial determination. We are 
renumbering the remaining paragraphs accordingly.
     In sections 405.952(e), 405.958, 405.972(e), 
405.974(b)(3), 405.978, 405.980(a)(1), 405.980(a)(5), 405.1004(c), and 
405.1052(a)(6), we made technical corrections by removing the term 
``final'' or ``final and binding'' and replacing it with ``binding'' to 
clarify that the actions taken by an adjudicator described in the above 
sections are not considered final decisions of the Secretary for the 
purposes of exhausting administrative remedies when seeking judicial 
review in Federal court.
     In Sec.  405.962(a) and Sec.  405.972(b)(3), we made a 
technical correction by adding a reference to Sec.  405.974(b)(1), 
which, as amended in this final rule, provides for a 60 calendar day 
filing timeframe to request a reconsideration of a contractor's 
redetermination dismissal action, as an exception to the 180 calendar 
day timeframe for filing a request for reconsideration of a 
contractor's redetermination decision.
     In Sec.  405.972(e), we added a provision to clarify that 
a QIC's dismissal of a request for reconsideration of a contractor's 
dismissal action is binding and not subject to further review.
     In Sec.  405.980(b), we made technical corrections by (1) 
replacing the word ``its'' with the word ``an'', and (2) removing the 
words ``and revise'' from the introductory sentence, so the sentence 
will now read: ``A contractor may reopen an initial determination or 
redetermination on its own motion-- * * *''. We are replacing the word 
``its'' with ``an'' to more clearly convey our longstanding policy to 
permit certain contractors, other than those who issue initial 
determinations, to reopen initial determinations when appropriate. In 
addition, removing the words ``and revise'' reflects our longstanding 
policy that the timeframes for reopening a determination or decision 
are measured by the date of the reopening not the date of the revision 
of the determination or decision.
     In Sec.  405.990(b)(1)(i)(A), we made a technical 
correction to replace the phrase ``final decision'' with ``decision, 
dismissal order, or remand order'' to specify the types of actions 
that, if taken by an ALJ, preclude a request for EAJR and to be 
consistent with our clarification regarding the term ``final''.
     In Sec.  405.990(b)(1)(i)(B), we made a technical 
correction by adding the phrase ``, dismissal order, or remand order'' 
after ``final decision'' to specify the types of actions that, if taken 
by the MAC, preclude a request for EAJR and to be consistent with our 
clarification regarding the term ``final.''
     In Sec.  405.990(b)(1)(ii), we made a technical correction 
by replacing the phrase ``final action'' with ``decision or dismissal 
order'' in order to clarify the nature of the QIC's action and to be 
consistent with our clarification regarding the term ``final.''
     In Sec.  405.990(f)(3), we made a technical correction by 
removing the words ``final and'' to state that the decision of the 
review entity to certify or deny a request for EAJR is not subject to 
further review.
     In Sec.  405.1000(c), we removed the phrase ``, including 
the QIC, QIO, fiscal intermediary or carrier'' consistent with our 
revision to Sec.  405.902 in which we define the term contractor.
     In Sec.  405.1000(d), we made a technical revision to 
clarify that the ALJ conducts a de novo review.
     In Sec.  405.1002(b)(2), we made a technical correction by 
replacing the words ``final action'' with ``decision or dismissal 
order'' in order to state the nature of the QIC's action and to be 
consistent with our clarification regarding the term ``final.''
     In Sec.  405.1004(c), we made a technical correction to 
clarify that an ALJ's dismissal of a request for review of a QIC's 
dismissal action is binding and not subject to further review unless 
vacated by the MAC under Sec.  405.1108(b).
     In Sec.  405.1010(a) and Sec.  405.1012(a), we made 
technical corrections by removing the phrase ``, including a QIC'' 
consistent with our revision to Sec.  405.902 in which we define the 
term contractor.
     In Sec.  405.1020(c)(1), we removed the reference to, 
``the contractor that issued the initial determination'' in specifying 
which entities are to receive notice of the ALJ hearing.
     We revised Sec.  405.1020(i)(4) to state that when a 
party's request for an in-person hearing under Sec.  405.1020(i)(1) is 
granted, the ALJ must issue a decision within the adjudication 
timeframe specified in Sec.  405.1016 (including any applicable 
extensions provided in this subpart) unless the party requesting the 
hearing agrees to waive such adjudication timeframe in writing.
     In Sec.  405.1022(a), we made a technical revision to 
clarify that when a party waives its right to receive the notice of 
hearing, the ALJ must still send the notice of hearing to all other 
parties and potential participants who have not waived their right to 
receive the notice of hearing, consistent with Sec.  405.1020(c).
     In Sec.  405.1034(a), we made several clarifications to 
the provisions allowing an ALJ to remand a case to the QIC. We explain 
that the phrase ``can be provided only by CMS or its contractors'' 
means the information is not publicly available and is not in the 
possession of and cannot be requested and obtained by any of the 
parties to the appeal. We explain that the term ``publicly available'' 
refers to information that is available to the general public via the 
Internet, or in a printed publication. We clarify that if the missing 
information is not information that can be provided only by CMS or its 
contractors (as that phrase is clarified above), the ALJ must retain 
jurisdiction of the case and obtain the missing information on his or 
her own, or directly from one of the parties.
     In Sec.  405.1036(f)(1), we clarified that an ALJ may not 
issue subpoenas to CMS or its contractors, to compel an appearance, 
testimony or the production of evidence.
     In Sec.  405.1036(f)(3), we revised the time period for 
submitting requests for subpoenas to an ALJ, and now require parties to 
submit a request for a subpoena no later than the end of the discovery 
period established by the ALJ under Sec.  405.1037(c).
     In Sec.  405.1038(b)(1)(i), we changed the term 
``videoconferencing'' to ``videoteleconferencing'' consistent with the 
use of the term throughout this regulation.
     In Sec.  405.1046(c), we made a technical correction by 
replacing the term ``final'' with ``binding on the contractor'' 
consistent with our clarification regarding the term ``final.''
     In Sec.  405.1048(a), we made a technical correction by 
replacing the phrase ``either issues a final action'' with ``issues a 
final decision or remand order'' to clarify the types of actions issued 
by the MAC that cause an ALJ decision to not become binding, and to be 
consistent with our clarification regarding the term ``final.''
     Added Sec.  405.1063(a) to clarify the additional 
authorities that are binding on ALJs and the MAC. The original 
paragraph in Sec.  405.1063 is reassigned to subsection (b).
     In Sec.  405.1100(c) and Sec.  405.1100(d), we made 
technical corrections by replacing the phrase ``final action'' with 
``final decision or dismissal order'' to specify the actions taken by 
the MAC

[[Page 65332]]

and to be consistent with our clarification regarding the term 
``final.''
     In Sec.  405.1104(a)(2) we made a technical correction by 
replacing the phrase ``final action or remand the case to the QIC'' 
with ``decision, dismissal order, or remand order'' to specify the 
actions taken by the MAC and to be consistent with our clarification 
regarding the term ``final.''
     In Sec.  405.1104(b)(1), we made a technical correction by 
replacing the phrase ``final action or remand'' with ``decision, 
dismissal order, or remand order'' to specify the actions taken by the 
MAC and to be consistent with our clarification regarding the term 
``final.''
     In Sec.  405.1104(b)(2), we made a technical correction by 
replacing the phrase ``final action or remand order'' with ``decision, 
dismissal order, or remand order'' to specify the actions taken by the 
MAC and to be consistent with our clarification regarding the term 
``final.''
     In Sec.  405.1104(b)(3), we made a technical correction by 
replacing the phrase ``a final administrative decision for purposes of 
MAC review'' with the phrase ``the decision that is subject to MAC 
review consistent with Sec.  405.1102(a)'' in order to clarify the 
effect of the QIC decision and to be consistent with our clarification 
regarding the term ``final.''
     In Sec.  405.1104(c), we made a technical correction by 
replacing the phrase ``final action'' with the phrase ``decision, 
dismissal order, or remand order'' in order to specify the actions 
taken by the MAC and to be consistent with our clarification regarding 
the term ``final.''
     In Sec.  405.1106(a), we clarified the meaning of the 
phrase ``other parties to the ALJ decision or dismissal.''
     In Sec.  405.1106(b), we made a technical correction by 
replacing the phrase ``final action or remand the case to the ALJ'' 
with the phrase ``final decision, dismissal order, or remand order'' in 
order to specify the actions taken by the MAC and to be consistent with 
our clarification regarding the term ``final.''
     In Sec.  405.1110(b)(2), we clarified the meaning of the 
phrases ``all parties to the ALJ's action'' and ``all other parties to 
the ALJ's decision.''
     In Sec.  405.1110(d), we made a technical correction by 
replacing the phrase ``remains the final action in the case'' with the 
phrase ``is binding on the parties to the ALJ decision'' consistent 
with our clarification regarding the term ``final.''
     In Sec.  405.1112(a), we made a technical correction by 
replacing the phrase ``final action'' with the phrase ``decision or 
dismissal order'' in order to specify the actions taken by the ALJ and 
to be consistent with our clarification regarding the term ``final''. 
We also made a technical correction by replacing a comma with a semi-
colon following the phrase ``if any.''
     In Sec.  405.1122(d)(1), we clarified that the MAC may not 
issue subpoenas to CMS or its contractors to compel the production of 
evidence.
     We made a technical correction in paragraph Sec.  
405.1122(e)(2)(v), correcting the word ``lifed'' to read ``lifted.''
     We renumbered the paragraphs in Sec.  405.1122(e).
     In Sec.  405.1122(f)(1), we corrected the reference to the 
Social Security Act regarding the Secretary's authority to seek 
enforcement of subpoenas from ``section 205(c) of the Act, 42 U.S.C. 
405(c)'' to ``section 205(e) of the Act, 42 U.S.C. 405(e).''
     In Sec.  405.1126(a), we made a technical correction by 
removing the word ``final'' consistent with our clarification regarding 
the term ``final.''
     In Sec.  405.1130, we made a technical correction by 
adding the words ``final and'' before the word ``binding'' consistent 
with our clarification regarding the term ``final.''
     In Sec.  405.1132(b), we made a technical correction by 
replacing the phrase ``final action or remand'' with ``final decision, 
dismissal order, or remand order'' to specify the actions taken by the 
MAC and to be consistent with our clarification regarding the term 
``final.''
     In Sec.  405.1136(a)(2), we made a technical correction by 
replacing the phrase ``final action'' with ``final decision, dismissal 
order, or remand order'' to specify the actions taken by the MAC and to 
be consistent with our clarification regarding the term ``final.kathe''

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30 day notice in the Federal Register and solicit public 
comment when 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 PRA 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.
    Therefore, we are soliciting public comments on each of these 
issues for the information collection requirements discussed below.
    The PRA exempts most of the information collection activities 
referenced in this interim final rule. In particular, 5 CFR Sec.  
1320.4 excludes collection activities during the conduct of 
administrative actions such as redeterminations, reconsiderations, and/
or appeals. Specifically, these actions are taken after the initial 
determination or a denial of payment. There is, however, one 
requirement contained in this rule that is subject to the PRA because 
the burden is imposed prior to an administrative action or denial of 
payment. This requirement is discussed below.

Appointed Representatives (Sec.  405.910)

    In summary, Sec.  405.910 states that an individual or entity may 
appoint a representative to act on their behalf in exercising their 
right to receive an initial determination on a request for payment, or 
to pursue an appeal of an initial determination. This appointment of 
representation must be in writing and must include all of the required 
elements specified in this section.
    The burden associated with this requirement is the time and effort 
of the individual or entity to prepare an appointment of representation 
containing all of the required information of this section. In an 
effort to reduce some of the burden associated with this requirement, 
we have developed a standardized form that the individual/entity may 
use. This optional standardized form is currently approved under 
OMB 0938-0950.
    We estimate that approximately 13,413 individuals and entities will 
elect to appoint a representative to act on their behalf each year. 
Because we have developed the optional standardized form, we estimate 
that it should only take approximately 15 minutes to supply the 
required information to comply with the requirements of this section. 
Therefore, we estimate the total burden to be 3,353 hours on an annual 
basis.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this final rule; or

[[Page 65333]]

    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS 4064-F; Fax: (202) 395-6974; or E-mail: [email protected].

V. Regulatory Impact Statement

    We have examined the impact of this final rule under the criteria 
of Executive Order 12866 on Regulatory Planning and Review (September 
30, 1993, as further amended), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism 
(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Orders 13258 and 
13422 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). As detailed above, this final rule 
makes only minimal changes to the existing Medicare claims appeals 
procedures. Thus, this rule will have negligible financial impact on 
beneficiaries, providers or suppliers.
    Therefore, this does not constitute a major rule and, consistent 
with Executive Order 12866, we are not preparing an RIA.
    The RFA requires agencies, in issuing certain rules, to analyze 
options for regulatory relief of small businesses, if a rule has a 
significant impact on a substantial number of small entities. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and government agencies. For purposes of the RFA, all 
providers and suppliers affected by this regulation are considered to 
be small entities. Individuals and States are not included in the 
definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
RIA for a rule that may have a significant impact on the operations of 
a substantial number of small rural hospitals. This analysis must 
conform to the provisions of section 604 of the RFA. For purposes of 
section 1102(b) of the Act, we define a small rural hospital as a 
hospital that is located outside of a Metropolitan Statistical Area and 
has fewer than 100 beds. As noted above, this final rule makes only 
minimal changes to the existing appeals procedures and thus, does not 
have a significant impact on small entities or the operations of a 
substantial number of small rural hospitals. Therefore, we are not 
preparing analyses for either the RFA or section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that would include any Federal mandate that may result 
in expenditure in any one year by State, local, or Tribal governments, 
in the aggregate, or by the private sector, of $100 million (adjusted 
annually for inflation). In 2009, the threshold is approximately $133 
million. This rule will not meet this threshold, in any 1 year, with 
respect to expenditures by State, local, or Tribal governments, in the 
aggregate, or by the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
interim final and final rules) that imposes substantial direct 
requirement costs on State and local governments, preempts State law, 
or otherwise has Federalism implications. This rule does not have a 
substantial effect on State or local governments.
    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 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, X-rays.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR Part 405 as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 is revised to read as follows:

    Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).


0
2. Section 405.902 is amended by adding the definition of contractor in 
alphabetical order to read as follows:


Sec.  405.902  Definitions.

* * * * *
    Contractor means an entity that contracts with the Federal 
government to review and/or adjudicate claims, determinations and/or 
decisions.
* * * * *


Sec.  405.922  [Amended]

0
3. Section 405.922 is amended by removing the phrase ``30 days'' and 
adding in its place the phrase ``30 calendar days.''


Sec.  405.924  [Amended]

0
4. Section 405.924 is amended by--
0
A. Removing paragraph (b)(7).
0
B. Redesignating paragraphs (b)(8) through (b)(15) as paragraphs(b)(7) 
through (b)(14), respectively.


Sec.  405.942  [Amended]

0
5. Section 405.942 is amended by--
0
A. In paragraph (a)(1), removing the phrase ``5 days'' and adding in 
its place the phrase ``5 calendar days''.
0
B. In paragraph (b) introductory text, removing the phrase ``120-day'' 
and adding in its place the phrase ``120 calendar day''.


Sec.  405.946  [Amended]

0
6. Section 405.946(b) is amended by removing the phrase ``60-day'' and 
adding in its place the phrase ``60 calendar day''.


Sec.  405.950  [Amended]

0
7. Section 405.950 is amended by--
0
A. In paragraph (b)(1), removing the phrase ``120-day'' and adding in 
its place the phrase ``120 calendar day'', and removing the phrase 
``60-day'' and adding in its place the phrase ``60 calendar day''.
0
B. In paragraph (b)(2), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
C. In paragraph (b)(3), removing the phrase ``60-day'' and adding in 
its place the phrase ``60 calendar day''.

0
8. Section 405.952 is amended by revising paragraph (e) to read as 
follows:


Sec.  405.952  Withdrawal or dismissal of a request for 
redetermination.

* * * * *
    (e) Effect of dismissal. The dismissal of a request for 
redetermination is binding unless it is modified or reversed by a QIC 
under Sec.  405.974(b) or vacated under paragraph (d) of this section.

0
9. Section 405.958 is amended by revising the introductory text to read 
as follows:


Sec.  405.958  Effect of a redetermination.

    In accordance with section 1869(a)(3)(D) of the Act, once a

[[Page 65334]]

redetermination is issued, it becomes part of the initial 
determination. The redetermination is binding upon all parties unless--
* * * * *

0
10. Section 405.962 is amended by--
0
A. Revising paragraph (a) introductory text.
0
B. In paragraph (a)(1), removing the phrase ``5 days'' and adding in 
its place the phrase ``5 calendar days''.
0
C. In paragraphs (a)(2) and (b)(1), removing the phrase ``180-day'' and 
adding in its place the phrase ``180 calendar day''.
    The revision reads as follows:


Sec.  405.962  Timeframe for filing a request for a reconsideration.

    (a) Timeframe for filing a request. Except as provided in paragraph 
(b) of this section and in Sec.  405.974(b)(1), regarding a request for 
QIC reconsideration of a contractor's dismissal of a redetermination 
request, any request for a reconsideration must be filed within 180 
calendar days from the date the party receives the notice of the 
redetermination.
* * * * *


Sec.  405.966  [Amended]

0
11. Section 405.966 is amended by--
0
A. In paragraph (b), removing the phrase ``60-day'' and adding in its 
place the phrase ``60 calendar day''.
0
B. In paragraph (c), removing the phrase ``14-day'' and adding in its 
place the phrase ``14 calendar day''.


Sec.  405.970  [Amended]

0
12. Section 405.970 is amended by--
0
A. In paragraph (a)(2), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
B. In paragraph (b)(1), removing the phrase ``180-day'' and adding in 
its place the phrase ``180 calendar day'', and removing the phrase 
``60-day'' and adding in its place the phrase ``60 calendar day''.
0
C. In paragraph (b)(2), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
D. In paragraph (b)(3), removing the phrase ``60-day'' and adding in 
its place the phrase ``60 calendar day'', and removing the phrase ``14 
days'' and adding in its place the phrase ``14 calendar days''.
0
E. In paragraph (c) introductory text, removing the phrase ``60 days'' 
and adding in its place the phrase ``60 calendar days''.
0
F. In paragraph (e)(2) introductory text, removing the phrase ``5 
days'' wherever it appears and adding in its place the phrase ``5 
calendar days''.

0
13. Section 405.972 is amended by revising paragraphs (b)(3) and (e) to 
read as follows:


Sec.  405.972  Withdrawal or dismissal of a request for a 
reconsideration.

* * * * *
    (b) * * *
    (3) When the party fails to file the reconsideration request in 
accordance with the timeframes established in Sec.  405.962, or fails 
to file the request for reconsideration of a contractor's dismissal of 
a redetermination request in accordance with the timeframes established 
in Sec.  405.974(b)(1);
* * * * *
    (e) Effect of dismissal. The dismissal of a request for 
reconsideration is binding unless it is modified or reversed by an ALJ 
under Sec.  405.1004 or vacated under paragraph (d) of this section. 
The dismissal of a request for reconsideration of a contractor's 
dismissal of a redetermination request is binding and not subject to 
further review unless vacated under paragraph (d) of this section.

0
14. Section 405.974 is amended by--
0
A. In paragraph (b)(1) introductory text, removing the phrase ``60 
days'' and adding in its place the phrase ``60 calendar days''.
0
B. In paragraph (b)(1)(i), removing the phrase ``5 days'' and adding in 
its place the phrase ``5 calendar days''.
0
C. In paragraph (b)(1)(ii), removing the phrase ``60-day'' and adding 
in its place the phrase ``60 calendar day''.
0
D. Revising paragraph (b)(3).
    The revision reads as follows:


Sec.  405.974  Reconsideration.

* * * * *
    (b) * * *
    (3) A QIC's reconsideration of a contractor's dismissal of a 
redetermination request is binding and not subject to further review.

0
15. Section 405.978 is amended by revising the introductory text to 
read as follows:


Sec.  405.978  Effect of a reconsideration.

    A reconsideration is binding on all parties, unless--
* * * * *
0
16. Section 405.980 is amended by--
0
A. Revising paragraphs (a)(1) introductory text and (a)(5).
0
B. In paragraph (b) introductory text, removing the phrase ``and revise 
its'' and adding in its place the word ``an''.
0
C. In paragraphs (d)(1), (d)(2), and (d)(3), removing the phrase ``180 
days'' wherever it appears and adding in its place the phrase ``180 
calendar days''.
0
D. In paragraphs (e)(1), (e)(2) and (e)(3), removing ``180 days'' and 
adding in its place the phrase ``180 calendar days''.
    The revisions are as follows:


Sec.  405.980  Reopenings of initial determinations, redeterminations, 
and reconsiderations, hearings and reviews.

    (a) * * *
    (1) A reopening is a remedial action taken to change a binding 
determination or decision that resulted in either an overpayment or 
underpayment, even though the binding determination or decision may 
have been correct at the time it was made based on the evidence of 
record. That action may be taken by--
* * * * *
    (5) The contractor's, QIC's, ALJ's, or MAC's decision on whether to 
reopen is binding and not subject to appeal.
* * * * *

0
17. Section 405.990 is amended by--
0
A. Revising paragraphs (b)(1)(i)(A), (b)(1)(i)(B), (b)(1)(ii), and 
(f)(3).
0
B. In paragraphs (f)(2), (f)(4) and (h)(2), removing the phrase ``60 
days'' and adding in its place the phrase ``60 calendar days''.
0
C. In paragraph (i)(2), removing the phrase ``90-day'' and adding in 
its place the phrase ``90 calendar day''.
0
D. In paragraph (j)(1), removing the phrase ``60-day'' and adding in 
its place the phrase ``60 calendar day''.
    The revisions are as follows:


Sec.  405.990  Expedited access to judicial review.

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (A) An ALJ hearing in accordance with Sec.  405.1002 and a 
decision, dismissal order, or remand order of the ALJ has not been 
issued;
    (B) MAC review in accordance with Sec.  405.1102 and a final 
decision, dismissal order, or remand order of the MAC has not been 
issued; or
    (ii) The appeal has been escalated from the QIC to the ALJ level 
after the period described in Sec.  405.970(a) and Sec.  405.970(b) has 
expired, and the QIC does not issue a decision or dismissal order 
within the timeframe described in Sec.  405.970(e).
* * * * *
    (f) * * *
    (3) A determination by the review entity either certifying that the 
requirements for EAJR are met pursuant to paragraph (g) of this section 
or denying the request is not subject to review by the Secretary.
* * * * *

0
18. Section 405.1000 is amended by revising paragraphs (c) and (d) to 
read as follows:

[[Page 65335]]

Sec.  405.1000  Hearing before an ALJ: General rule.

* * * * *
    (c) In some circumstances, a representative of CMS or its 
contractor may participate in or join the hearing as a party. (See, 
Sec.  405.1010 and Sec.  405.1012.)
    (d) The ALJ conducts a de novo review and issues a decision based 
on the hearing record.
* * * * *

0
19. Section 405.1002 is amended by--
0
A. In paragraph (a)(1), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
B. In paragraph (a)(3), removing the phrase ``5 days'' and adding in 
its place the phrase ``5 calendar days''.
0
C. In paragraph (a)(4), removing the phrase ``60-day'' and adding in 
its place the phrase ``60 calendar day''.
0
D. Revising paragraph (b)(2) to read as follows:


Sec.  405.1002  Right to an ALJ hearing.

* * * * *
    (b) * * *
    (2) The QIC does not issue a decision or dismissal order within 5 
calendar days of receiving the request for escalation in accordance 
with Sec.  405.970(e)(2); and
* * * * *

0
20. Section 405.1004 is amended by--
0
A. In paragraph (a)(1), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
B. In paragraph (a)(3), removing the phrase ``5 days'' and adding in 
its place the phrase ``5 calendar days''.
0
C. In paragraph (a)(4), removing the phrase ``60-day'' and adding in 
its place the phrase ``60 calendar day''.
0
D. Revising paragraph (c) to read as follows:


Sec.  405.1004  Right to ALJ review of QIC notice of dismissal.

* * * * *
    (c) An ALJ's decision regarding a QIC's dismissal of a 
reconsideration request is binding and not subject to further review. 
The dismissal of a request for ALJ review of a QIC's dismissal of a 
reconsideration request is binding and not subject to further review, 
unless vacated by the MAC under Sec.  405.1108(b).


Sec.  405.1006  [Amended]

0
21. Section 405.1006(e)(1)(ii) is amended by removing the phrase ``60 
days'' and adding in its place the phrase ``60 calendar days''.

0
22. Section 405.1010 is amended by--
0
A. Revising paragraph (a).
0
B. In paragraph (b), removing the phrase ``10 days'' and adding in its 
place the phrase ``10 calendar days''.
    The revision reads as follows:


Sec.  405.1010  When CMS or its contractors may participate in an ALJ 
hearing.

    (a) An ALJ may request, but may not require, CMS and/or one or more 
of its contractors to participate in any proceedings before the ALJ, 
including the oral hearing, if any. CMS and/or one or more of its 
contractors may also elect to participate in the hearing process.
* * * * *

0
23. Section 405.1012 is amended by--
0
A. Revising paragraph (a).
0
B. In paragraph (b), removing the phrase ``10 days'' and adding in its 
place the phrase ``10 calendar days''.
    The revision reads as follows:


Sec.  405.1012  When CMS or its contractors may be a party to a 
hearing.

    (a) CMS and/or one or more of its contractors may be a party to an 
ALJ hearing unless the request for hearing is filed by an unrepresented 
beneficiary.
* * * * *


Sec.  405.1014  [Amended]

0
24. Section 405.1014 is amended by--
0
A. In paragraph (b)(1), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
B. In paragraph (b)(2), removing the phrase ``90-day'' where it appears 
and adding in its place the phrase ``90 calendar day''.


Sec.  405.1016  [Amended]

0
25. Section 405.1016 is amended by--
0
A. In paragraph (a), removing the phrase ``90-day'' where it appears 
and adding in its place the phrase ``90 calendar day''.
0
B. In paragraph (c), removing the phrase ``180-day'' where it appears 
and adding in its place the phrase ``180 calendar day''.


Sec.  405.1018  [Amended]

0
26. Section 405.1018(a) and (b) is amended by removing the phrase ``10 
days'' and adding in its place the phrase ``10 calendar days''.

0
27. Section 405.1020 is amended by--
0
A. Revising paragraph (c)(1).
0
B. In paragraph (g)(3)(ii), removing the phrase ``10 days'' and adding 
in its place the phrase ``10 calendar days''.
0
C. Revising paragraph (i)(4).
    The revisions read as follows:


Sec.  405.1020  Time and place for a hearing before an ALJ.

* * * * *
    (c) * * *
    (1) The ALJ sends a notice of hearing to all parties that filed an 
appeal or participated in the reconsideration, any party who was found 
liable for the services at issue subsequent to the initial 
determination, and the QIC that issued the reconsideration, advising 
them of the proposed time and place of the hearing.
* * * * *
    (i) * * *
    (4) When a party's request for an in-person hearing as specified 
under paragraph (i)(1) of this section is granted, the ALJ must issue a 
decision within the adjudication timeframe specified in Sec.  405.1016 
(including any applicable extensions provided in this subpart) unless 
the party requesting the hearing agrees to waive such adjudication 
timeframe in writing.
* * * * *

0
28. Section 405.1022 is amended by revising paragraph (a) to read as 
follows:


Sec.  405.1022  Notice of a hearing before an ALJ.

    (a) Issuing the notice. After the ALJ sets the time and place of 
the hearing, notice of the hearing will be mailed to the parties and 
other potential participants, as provided in Sec.  405.1020(c) at their 
last known address, or given by personal service. The ALJ is not 
required to send a notice of hearing to a party who indicates in 
writing that it does not wish to receive this notice. The notice is 
mailed or served at least 20 calendar days before the hearing.
* * * * *


Sec.  405.1024  [Amended]

0
29. Section 405.1024(a) is amended by removing the phrase ``5 days'' 
and adding in its place the phrase ``5 calendar days''.


Sec.  405.1028  [Amended]

0
30. Section 405.1028(a) is amended by removing the phrase ``10 days'' 
and adding in its place the phrase ``10 calendar days''.

0
31. Section 405.1034 is amended by revising paragraph (a) to read as 
follows:


Sec.  405.1034  When an ALJ may remand a case to the QIC.

    (a) General rules. (1) If an ALJ believes that the written record 
is missing information that is essential to resolving the issues on 
appeal and that information can be provided only by CMS or its 
contractors, then the ALJ may either:
    (i) Remand the case to the QIC that issued the reconsideration or
    (ii) Retain jurisdiction of the case and request that the 
contractor forward the missing information to the appropriate hearing 
office.

[[Page 65336]]

    (2) If the information is not information that can be provided only 
by CMS or its contractors, the ALJ must retain jurisdiction of the case 
and obtain the information on his or her own, or directly from one of 
the parties.
    (3) ``Can be provided only by CMS or its contractors'' means the 
information is not publicly available, and is not in the possession of, 
and cannot be requested and obtained by one of the parties. Information 
that is publicly available is information that is available to the 
general public via the Internet or in a printed publication. It 
includes, but is not limited to, information available on a CMS or 
contractor Web site or information in an official CMS or DHHS 
publication (including, but not limited to, provisions of NCDs or LCDs, 
procedure code or modifier descriptions, fee schedule data, and 
contractor operating manual instructions).
* * * * *

0
32. Section 405.1036 is amended by--
0
A. Revising paragraphs (f)(1) and (f)(3).
0
B. In paragraph (f)(5)(iv), removing the phrase ``15 days'' and adding 
in its place the phrase ``15 calendar days''.
    The revisions read as follows:


Sec.  405.1036  Description of an ALJ hearing process.

* * * * *
    (f) * * *
    (1) Except as provided in this section, when it is reasonably 
necessary for the full presentation of a case, an ALJ may, on his or 
her own initiative or at the request of a party, issue subpoenas for 
the appearance and testimony of witnesses and for a party to make 
books, records, correspondence, papers, or other documents that are 
material to an issue at the hearing available for inspection and 
copying. An ALJ may not issue a subpoena to CMS or its contractors, on 
his or her own initiative or at the request of a party, to compel an 
appearance, testimony, or the production of evidence.
* * * * *
    (3) Parties to a hearing who wish to subpoena documents or 
witnesses must file a written request for the issuance of a subpoena 
with the requirements set forth in paragraph (f)(2) of this section 
with the ALJ no later than the end of the discovery period established 
by the ALJ under Sec.  405.1037(c).
* * * * *


Sec.  405.1037  [Amended]

0
33. Section 405.1037 is amended by--
0
A. In paragraph (c)(5), removing the phrase ``45 days'' and adding in 
its place the phrase ``45 calendar days''.
0
B. In paragraph (e)(2)(iii), removing the phrase ``15 days'' and adding 
in its place the phrase ``15 calendar days''.


Sec.  405.1038  [Amended]

0
34. Section 405.1038(b)(1)(i) is amended by removing the word 
``videoconferencing'' and adding in its place the word 
``videoteleconferencing''.


Sec.  405.1042  [Amended]

0
35. Section 405.1042(b)(2) is amended by removing the phrase ``90-day'' 
and adding in its place the phrase ``90 calendar day''.


Sec.  405.1044  [Amended]

0
36. Section 405.1044(d) is amended by removing the phrase ``10 days'' 
and adding in its place the phrase ``10 calendar days''.

0
37. Section 405.1046 is amended by--
0
A. Revising paragraph (c).
0
B. In paragraph (d), removing the phrase ``90-day'' where it appears 
and adding in its place the phrase ``90 calendar day''.
    The revision reads as follows:


Sec.  405.1046  Notice of an ALJ decision.

* * * * *
    (c) Limitation on decision. When the amount of payment for an item 
or service is an issue before the ALJ, the ALJ may make a finding as to 
the amount of payment due. If the ALJ makes a finding concerning 
payment when the amount of payment was not an issue before the ALJ, the 
contractor may independently determine the payment amount. In either of 
the aforementioned situations, an ALJ's decision is not binding on the 
contractor for purposes of determining the amount of payment due. The 
amount of payment determined by the contractor in effectuating the 
ALJ's decision is a new initial determination under Sec.  405.924.
* * * * *
0
38. Section 405.1048 is amended by revising paragraph (a) to read as 
follows:


Sec.  405.1048  The effect of an ALJ's decision.

* * * * *
    (a) A party to the hearing requests a review of the decision by the 
MAC within the stated time period or the MAC reviews the decision 
issued by an ALJ under the procedures set forth in Sec.  405.1110, and 
the MAC issues a final decision or remand order or the appeal is 
escalated to Federal district court under the provisions at Sec.  
405.1132 and the Federal district court issues a decision.
* * * * *


Sec.  405.1052  [Amended]

0
39. Section 405.1052 is amended by--
0
A. In paragraphs (a)(2)(ii) and (a)(2)(iii), removing the phrase ``10 
days'' and adding in its place the phrase ``10 calendar days''.
0
B. In paragraph (a)(6), removing the word ``final'' and adding in its 
place the word ``binding''.

0
40. Section 405.1063 is revised to read as follows:


Sec.  405.1063  Applicability of laws, regulations and CMS Rulings.

    (a) All laws and regulations pertaining to the Medicare and 
Medicaid programs, including, but not limited to Titles XI, XVIII, and 
XIX of the Social Security Act and applicable implementing regulations, 
are binding on ALJs and the MAC.
    (b) CMS Rulings are published under the authority of the 
Administrator, CMS. Consistent with Sec.  401.108 of this chapter, 
rulings are binding on all CMS components, on all HHS components that 
adjudicate matters under the jurisdiction of CMS, and on the Social 
Security Administration to the extent that components of the Social 
Security Administration adjudicate matters under the jurisdiction of 
CMS.


Sec.  405.1100  [Amended]

0
41. Section 405.1100 is amended by revising paragraphs (c) and (d) to 
read as follows:


Sec.  405.1100  Medicare Appeals Council review: General.

* * * * *
    (c) When the MAC reviews an ALJ's decision, it undertakes a de novo 
review. The MAC issues a final decision or dismissal order or remands a 
case to the ALJ within 90 calendar days of receipt of the appellant's 
request for review, unless the 90 calendar day period is extended as 
provided in this subpart.
    (d) When deciding an appeal that was escalated from the ALJ level 
to the MAC, the MAC will issue a final decision or dismissal order or 
remand the case to the ALJ within 180 calendar days of receipt of the 
appellant's request for escalation, unless the 180 calendar day period 
is extended as provided in this subpart.


Sec.  405.1102  [Amended]

0
42. Section 405.1102 is amended by--
0
A. In paragraph (a)(1), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
B. In paragraph (a)(2), removing the phrase ``5 days'' and adding in 
its place ``5 calendar days''.

[[Page 65337]]

0
43. Section 405.1104 is amended by revising paragraphs (a)(2), (b) and 
(c) to read as follows:


Sec.  405.1104  Request for MAC review when an ALJ does not issue a 
decision timely.

    (a) * * *
    (2) The ALJ does not issue a decision, dismissal order, or remand 
order within the later of 5 calendar days of receiving the request for 
escalation or 5 calendar days from the end of the applicable 
adjudication period set forth in Sec.  405.1016.
    (b) Escalation. (1) If the ALJ is not able to issue a decision, 
dismissal order, or remand order within the time period set forth in 
paragraph (a)(2) of this section, he or she sends notice to the 
appellant.
    (2) The notice acknowledges receipt of the request for escalation, 
and confirms that the ALJ is not able to issue a decision, dismissal 
order, or remand order within the statutory timeframe.
    (3) If the ALJ does not act on a request for escalation within the 
time period set forth in paragraph (a)(2) of this section or does not 
send the required notice to the appellant, the QIC decision becomes the 
decision that is subject to MAC review consistent with Sec.  
405.1102(a).
    (c) No escalation. If the ALJ's adjudication period set forth in 
Sec.  405.1016 expires, the case remains with the ALJ until a decision, 
dismissal order, or remand order is issued or the appellant requests 
escalation to the MAC.

0
44. Section 405.1106 is revised to read as follows:


Sec.  405.1106  Where a request for review or escalation may be filed.

    (a) When a request for a MAC review is filed after an ALJ has 
issued a decision or dismissal, the request for review must be filed 
with the entity specified in the notice of the ALJ's action. The 
appellant must also send a copy of the request for review to the other 
parties to the ALJ decision or dismissal who received a copy of the 
hearing decision under Sec.  405.1046(a) or a copy of the notice of 
dismissal under Sec.  405.1052(b). Failure to copy the other parties 
tolls the MAC's adjudication deadline set forth in Sec.  405.1100 until 
all parties to the hearing receive notice of the request for MAC 
review. If the request for review is timely filed with an entity other 
than the entity specified in the notice of the ALJ's action, the MAC's 
adjudication period to conduct a review begins on the date the request 
for review is received by the entity specified in the notice of the 
ALJ's action. Upon receipt of a request for review from an entity other 
than the entity specified in the notice of the ALJ's action, the MAC 
sends written notice to the appellant of the date of receipt of the 
request and commencement of the adjudication timeframe.
    (b) If an appellant files a request to escalate an appeal to the 
MAC level because the ALJ has not completed his or her action on the 
request for hearing within the adjudication deadline under Sec.  
405.1016, the request for escalation must be filed with both the ALJ 
and the MAC. The appellant must also send a copy of the request for 
escalation to the other parties. Failure to copy the other parties 
tolls the MAC's adjudication deadline set forth in Sec.  405.1100 until 
all parties to the hearing receive notice of the request for MAC 
review. In a case that has been escalated from the ALJ, the MAC's 180 
calendar day period to issue a final decision, dismissal order, or 
remand order begins on the date the request for escalation is received 
by the MAC.

0
45. Section 405.1110 is amended by--
0
A. In paragraph (a), removing the phrase ``60 days'' and adding in its 
place the phrase ``60 calendar days''.
0
B. Revising paragraphs (b)(2) and (d) to read as follows:


Sec.  405.1110  MAC reviews on its own motion.

* * * * *
    (b) * * *
    (2) CMS' referral to the MAC is made in writing and must be filed 
with the MAC no later than 60 calendar days after the ALJ's decision or 
dismissal is issued. The written referral will state the reasons why 
CMS believes the MAC must review the case on its own motion. CMS will 
send a copy of its referral to all parties to the ALJ's action who 
received a copy of the hearing decision under Sec.  405.1046(a) or the 
notice of dismissal under Sec.  405.1052(b), and to the ALJ. Parties to 
the ALJ's action may file exceptions to the referral by submitting 
written comments to the MAC within 20 calendar days of the referral 
notice. A party submitting comments to the MAC must send such comments 
to CMS and all other parties to the ALJ's decision who received a copy 
of the hearing decision under Sec.  405.1046(a) or the notice of 
dismissal under Sec.  405.1052(b).
* * * * *
    (d) MAC's action. If the MAC decides to review a decision or 
dismissal on its own motion, it will mail the results of its action to 
all the parties to the hearing and to CMS if it is not already a party 
to the hearing. The MAC may adopt, modify, or reverse the decision or 
dismissal, may remand the case to an ALJ for further proceedings or may 
dismiss a hearing request. The MAC must issue its action no later than 
90 calendar days after receipt of the CMS referral, unless the 90 
calendar day period has been extended as provided in this subpart. The 
MAC may not, however, issue its action before the 20 calendar day 
comment period has expired, unless it determines that the agency's 
referral does not provide a basis for reviewing the case. If the MAC 
does not act within the applicable adjudication deadline, the ALJ's 
decision or dismissal is binding on the parties to the ALJ decision.

0
46. Section 405.1112 is amended by revising paragraph (a) to read as 
follows:


Sec.  405.1112  Content of request for review.

    (a) The request for MAC review must be filed with the MAC or 
appropriate ALJ hearing office. The request for review must be in 
writing and may be made on a standard form. A written request that is 
not made on a standard form is accepted if it contains the 
beneficiary's name; Medicare health insurance claim number; the 
specific service(s) or item(s) for which the review is requested; the 
specific date(s) of service; the date of the ALJ's decision or 
dismissal order, if any; if the party is requesting escalation from the 
ALJ to the MAC, the hearing office in which the appellant's request for 
hearing is pending; and the name and signature of the party or the 
representative of the party; and any other information CMS may decide.
* * * * *


Sec.  405.1118  [Amended]

0
47. Section 405.1118 is amended by removing the phrase ``90-day'' and 
adding in its place the phrase ``90 calendar day''.
0
48. Section 405.1122 is amended by--
0
A. Revising paragraph (d)(1).
0
B. Redesignating paragraph (e)(2)(i) as paragraph (e)(2).
0
C. Redesignating paragraphs (e)(2)(ii) through (e)(2)(v) as paragraphs 
(e)(3) through (e)(6), respectively.
0
D. In new redesignated paragraph (e)(4), removing the phrase ``15 
days'' and adding in its place ``15 calendar days''.
0
E. In new redesignated paragraph (e)(2)(6), removing the word ``lifed'' 
and adding in its place the word ``lifted''.
0
F. In paragraph (f)(1), removing the reference to ``section 205(c) of 
the Act, 42 U.S.C. 405(c).'' and adding in its place the reference 
``section 205(e) of the Act, 42 U.S.C. 405(e).''.
    The revision reads as follows:

[[Page 65338]]

Sec.  405.1122  What evidence may be submitted to the MAC.

* * * * *
    (d) * * *
    (1) Except as provided in this section, when it is reasonably 
necessary for the full presentation of a case, the MAC may, on its own 
initiative or at the request of a party, issue subpoenas requiring a 
party to make books, records, correspondence, papers, or other 
documents that are material to an issue at the hearing available for 
inspection and copying. The MAC may not issue a subpoena to CMS or its 
contractors, on its own initiative or at the request of a party, to 
compel the production of evidence.
* * * * *


Sec.  405.1124  [Amended]

0
49. Section 405.1124(b) is amended by removing the phrase ``10 days'' 
and adding in its place the phrase ``10 calendar days''.


Sec.  405.1126  [Amended]

0
50. Section 405.1126 is amended by--
0
A. In paragraph (a), removing the word ``final'' from the last 
sentence.
0
B. In paragraph (d)(1), removing the phrase ``20 days'' and adding in 
its place the phrase ``20 calendar days''.

0
51. Section 405.1130 is revised to read as follows:


Sec.  405.1130  Effect of the MAC's decision.

    The MAC's decision is final and binding on all parties unless a 
Federal district court issues a decision modifying the MAC's decision 
or the decision is revised as the result of a reopening in accordance 
with Sec.  405.980. A party may file an action in a Federal district 
court within 60 calendar days after the date it receives notice of the 
MAC's decision.

0
52. Section 405.1132 is amended by revising paragraph (b) to read as 
follows:


Sec.  405.1132  Request for escalation to Federal court.

* * * * *
    (b) A party may file an action in a Federal district court within 
60 calendar days after the date it receives the MAC's notice that the 
MAC is not able to issue a final decision, dismissal order, or remand 
order unless the party is appealing an ALJ dismissal.

0
53. Section 405.1136 is amended by--
0
A. Revising paragraph (a)(2).
0
B. In paragraphs (c)(3) and (d)(2), removing the phrase ``60 days'' and 
adding in its place the phrase ``60 calendar days''.
    The revision reads as follows:


Sec.  405.1136  Judicial review.

    (a) * * *
    (2) If the MAC's adjudication period set forth in Sec.  405.1100 
expires and the appellant does not request escalation to Federal 
district court, the case remains with the MAC until a final decision, 
dismissal order, or remand order is issued.
* * * * *


Sec.  405.1140  [Amended]

0
54. Section 405.1140 is amended by--
0
A. In paragraph (b)(1), removing the phrase ``30 days'' wherever it 
appears and adding in its place the phrase ``30 calendar days'', and 
removing the phrase ``30-day'' wherever it appears and adding in its 
place the phrase ``30 calendar day''.
0
B. In paragraph (c)(1), removing the phrase ``60 days'' and adding in 
its place the phrase ``60 calendar days''.
0
C. In paragraph (c)(4), removing the phrase ``30 days'' and adding in 
its place the phrase ``30 calendar days''.
0
D. In paragraph (d), removing the phrase ``60 days'' and adding in its 
place the phrase ``60 calendar days''.

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

    Dated: February 6, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 6, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-28707 Filed 12-8-09; 8:45 am]
BILLING CODE 4120-01-P