[Federal Register Volume 78, Number 184 (Monday, September 23, 2013)]
[Proposed Rules]
[Pages 58386-58414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22821]



[[Page 58385]]

Vol. 78

Monday,

No. 184

September 23, 2013

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





42 CFR Parts 405, 491, and 493





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Medicare Program; Prospective Payment System for Federally Qualified 
Health Centers; Changes to Contracting Policies for Rural Health 
Clinics; and Changes to Clinical Laboratory Improvement Amendments of 
1988 Enforcement Actions for Proficiency Testing Referral; Proposed 
Rule

  Federal Register / Vol. 78 , No. 184 / Monday, September 23, 2013 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 491, and 493

[CMS-1443-P]
RIN 0938-AR62


Medicare Program; Prospective Payment System for Federally 
Qualified Health Centers; Changes to Contracting Policies for Rural 
Health Clinics; and Changes to Clinical Laboratory Improvement 
Amendments of 1988 Enforcement Actions for Proficiency Testing Referral

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish methodology and payment 
rates for a prospective payment system (PPS) for federally qualified 
health center (FQHC) services under Medicare Part B beginning on 
October 1, 2014, in compliance with the statutory requirement of the 
Affordable Care Act. This proposed rule would also establish a policy 
which would allow rural health clinics (RHCs) to contract with 
nonphysician practitioners when statutory requirements for employment 
of nurse practitioners and physician assistants are met, and make other 
technical and conforming changes to the RHC and FQHC regulations. 
Finally, this proposed rule would make changes to the Clinical 
Laboratory Improvement Amendments (CLIA) regulations regarding 
enforcement actions for proficiency testing referral.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on November 18, 
2013.

ADDRESSES: In commenting, please refer to file code CMS-1443-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1443-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1443-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Corinne Axelrod, (410) 786-5620 for 
FQHCs and RHCs.
    Melissa Singer, (410) 786-0365 for CLIA Enforcement Actions for 
Proficiency Testing Referral.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Acronyms

AIR All-Inclusive Rate
APM Alternative Payment Methodology
CCN CMS Certification Number
CCR Cost-To-Charge Ratio
CFR Code of Federal Regulations
CLIA Clinical Laboratory Improvement Amendments of 1988
CMP Civil Money Penalty
CMS Centers for Medicare & Medicaid Services
CNM Certified Nurse Midwife
CP Clinical Psychologist
CSW Clinical Social Worker
CY Calendar Year
DSMT Diabetes Self-Management Training
E/M Evaluation and Management
FQHC Federally Qualified Health Center
FSHCAA Federally Supported Health Centers Assistance Act
GAF Geographic Adjustment Factor
GAO Government Accountability Office
GPCI Geographic Practice Cost Index
HCPCS Healthcare Common Procedure Coding System
HCRIS Healthcare Cost Report Information System
HBV Hepatitis B Vaccines
HRSA Health Resources and Services Administration
IDR Integrated Data Repository
IPPE Initial Preventive Physical Exam
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCO Managed Care Organization
MEI Medicare Economic Index
MIPPA Medicare Improvements for Patients and Providers Act
MNT Medical Nutrition Therapy
MUA Medically Underserved Area
MUP Medically Underserved Population
NP Nurse Practitioner
OBRA Omnibus Budget Reconciliation Act
PA Physician Assistant
PHS Public Health Service
PFS Physician Fee Schedule
PPS Prospective Payment System
PT Proficiency testing
ResDAC Research Data Assistance Center
RIA Regulatory Impact Analysis
RHC Rural Health Clinic
SNF Skilled Nursing Facility
UDS Uniform Data System
USPSTF U.S. Preventive Services Task Force
UPL Upper Payment Limit

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Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    1. Purpose and Legal Authority
    2. Summary of Major Provisions
    a. Basis for Payment Under the FQHC PPS
    b. Addressing Payment for Multiple Visits on the Same Day
    c. Beneficiary Coinsurance
    d. Waiving Coinsurance for Preventive Services
    e. Transition Period and Annual Adjustment
    f. Other FQHC and RHC Provisions
    g. CLIA Enforcement Actions for Proficiency Testing Referral
    3. Summary of Cost and Benefits
    B. Overview and Background
    1. FQHC Description and General Information
    2. Medicare's FQHC Coverage and Payment Benefit
    3. Legislation Pertaining to Medicare and Medicaid Payments for 
FQHC Services
    4. Medicare's Current Cost-Based Reimbursement Methodology
    5. Summary of Requirements Under the Affordable Care Act for the 
FQHC PPS and Other Provisions Pertaining to FQHCs
    6. Approach to the FQHC PPS
II. Establishment of the Federally Qualified Health Center 
Prospective Payment System (FQHC PPS)
    A. Design and Data Sources for the FQHC PPS
    1. Overview of the PPS Design
    2. Medicare FQHC Cost Reports
    3. Medicare FQHC Claims
    4. Linking Cost Reports and Claims To Compute the Average Cost 
per Visit
    B. Policy Considerations for Developing the FQHC PPS Rates and 
Adjustments
    1. Multiple Visits on the Same Day
    2. Preventive Laboratory and Technical Components of Other 
Preventive Services
    3. Vaccine Costs
    C. Risk Adjustments
    1. Alternative Calculations for Average Cost per Visit
    2. Geographic Adjustment Factor
    3. New Patient or Initial Medicare Visit
    4. Other Adjustment Factors Considered
    5. Report on PPS Design and Models
    D. Base Rate Calculation
    E. Implementation
    1. Transition Period and Annual Adjustment
    2. Medicare Claims Payment
    3. Beneficiary Coinsurance
    4. Waiving Coinsurance for Preventive Services
    5. Cost Reporting
    6. Medicare Advantage Organizations
III. Additional Proposed Changes Regarding FQHCs and RHCs
    A Rural Health Clinic Contracting
    B. Technical and Conforming Changes
IV. Clinical Laboratory Improvement Amendments of 1988 (CLIA)--
Enforcement Actions for Proficiency Testing Referral
    A. Background
    B. Proposed Changes
V. Other Required Information
A. Requests for Data From the Public
    B. Collection of Information Requirements
VI. Response to Comments
VII. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Limitations of Our Analysis
    D. Anticipated Effects of FQHCs PPS
    1. Effects on FQHCs
    2. Effects on RHCs
    3. Effects on Other Providers and Suppliers
    4. Effects on Medicare and Medicaid Programs
    5. Effects on Medicare Beneficiaries
    E. Effects of Other Policy Changes
    1. Effects of Policy Changes for FQHCs and RHCs
    2. Effects of CLIA Changes for Enforcement Actions for 
Proficiency Testing Referral
    F. Alternatives Considered
    G. Accounting Table and Statement
    H. Conclusions
Regulations Text
ADDENDUM--Proposed FQHC PPS Geographic Adjustment Factors (GAFs)

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    The Affordable Care Act (Pub. L. 111-148) added section 1834(o) of 
the Social Security Act (the Act) to establish a new system of payment 
for the costs of federally qualified health center (FQHC) services 
under Medicare Part B (Supplemental Medical Insurance) based on 
prospectively set rates. According to section 1834(o)(2)(A) of the Act, 
the FQHC prospective payment system (PPS) is to be effective beginning 
on October 1, 2014. The primary purpose of this rule is to propose a 
methodology and payment rates for the new FQHC PPS.
    This rule also proposes to allow RHCs to contract with non-
physician practitioners, consistent with statutory requirements that 
require at least one nurse practitioner (NP) or physician assistant 
(PA) be employed by the RHC.
    The ``Taking Essential Steps for Testing Act of 2012'' (TEST Act) 
(Pub. L. 112-202) was enacted on December 4, 2012. The TEST Act amended 
section 353 of the Public Health Service Act (PHS Act) to provide the 
Secretary with discretion as to which sanctions may be applied to cases 
of intentional PT referral. The purpose of this proposal is to amend 
the CLIA regulations to be in alignment with the statutory change and 
to propose the regulatory changes needed to fully implement the TEST 
Act.
2. Summary of the Major Provisions
a. Basis for Payment Under the FQHC PPS
    Under the PPS, we are proposing to establish a national, encounter-
based rate for all FQHCs and pay FQHCs a single encounter-based rate 
for professional services furnished per beneficiary per day. The 
encounter-based rate would be calculated based on an average cost per 
visit (that is, total FQHC cost divided by total FQHC encounters) using 
Medicare cost report and claims data. We believe an encounter-based 
payment rate for the FQHC PPS will both provide appropriate payment 
while remaining administratively simple. An encounter-based payment 
rate is consistent with our commitment to greater bundling of services, 
and gives FQHCs the flexibility to implement efficiencies to reduce 
over-utilization of services. FQHCs are accustomed to billing for a 
single encounter and being paid through an all-inclusive rate (AIR). An 
encounter-based payment is also similar to Medicaid payment systems, 
and Medicaid is the predominant payer for FQHCs.
    We are also proposing a few simple adjustments to the encounter-
based payment rate. We are proposing to adjust the encounter-based rate 
for geographic differences in the cost of inputs by applying an 
adaptation of the geographic practice cost indices (GPCI) used to 
adjust payment under the Physician Fee Schedule (PFS). Also, we are 
proposing to adjust the encounter-based rate when a FQHC furnishes care 
to a patient that is new to the FQHC or to a beneficiary receiving a 
comprehensive initial Medicare visit (that is, an initial preventive 
physical examination (IPPE) or an initial annual wellness visit (AWV)). 
We believe this adjustment would account for the greater intensity and 
resource use associated with these types of services. For additional 
information on the design of the FQHC PPS and risk adjustment, see 
section II. of this proposed rule.
b. Addressing Payment for Multiple Visits on the Same Day
    Under the current reasonable cost based payment methodology, FQHCs 
are paid an AIR for all services furnished on the same day to the same 
beneficiary, with the following exceptions: (1) The FQHC can bill for 
an additional visit on the same day when an illness or injury occurs 
subsequent to the initial visit; and (2) the FQHC can bill for 
additional visits when mental health, diabetes self-management/medical 
nutrition therapy (DSMT/MNT), or the IPPE are furnished on the same day 
as the medical visit. However, there are no statutory requirements that 
we pay separately for these services, and an analysis of FQHC claims 
data submitted in 2011 and 2012

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indicates that less than 0.5 percent of all billed visits were for more 
than 1 visit per day for the same beneficiary.
    We understand that there may be many possible reasons why the rate 
of billing for more than one visit per day has been low, and that there 
are many ways that FQHCs are providing integrated, patient-centered 
health care services. Since the option to bill for more than one visit 
per day is rarely utilized by FQHCs and continuation of the exception 
to the single, all-inclusive payment per day requires additional 
complexity to the PPS, we are proposing to eliminate these exceptions 
for payment for multiple visits on the same day and limit FQHCs to 1 
encounter payment per day. We believe this approach is consistent with 
an all-inclusive methodology and reasonable cost principles, and would 
not significantly impact FQHC reimbursement. However, we are interested 
in comments that address whether there are factors that we have not 
considered, particularly in regards to mental health services, and we 
would reconsider this approach if information is presented that this 
may impact on beneficiaries' access to services or the integration of 
services in underserved communities. For additional information on 
billing for multiple visits on the same day, see section B of this 
proposed rule.
c. Beneficiary Coinsurance
    Under the current reasonable cost system, beneficiary coinsurance 
for FQHC services is assessed based on the FQHC's charge, which can 
result in the coinsurance amount being higher than what it would be if 
it was based on the AIR, which is derived from costs. Section 
1833(a)(1)(Z) of the Act requires that Medicare payment under the FQHC 
PPS shall be 80 percent of the lesser of the actual charge or the PPS 
rate, and we are proposing that coinsurance would be 20 percent of the 
lesser of the actual charge or the PPS rate. While the statute makes no 
specific provision to revise the methodology for determining 
coinsurance amounts under the new PPS, we believe that this is 
consistent with statutory language in sections 1866(a)(2)(A) and 
1833(a)(3)(A) of the Act and elsewhere that addresses coinsurance 
amounts and Medicare cost principles.
d. Waiving Coinsurance for Preventive Services
    Effective January 1, 2011, Medicare waives beneficiary coinsurance 
for eligible preventive services furnished by a FQHC. Medicare requires 
detailed Healthcare Common Procedure Coding System (HCPCS) coding on 
FQHC claims to ensure that coinsurance is not applied to the line item 
charges for these preventive services.
    For FQHC claims that include a mix of preventive and non-preventive 
services, we are proposing to use physician office payments under the 
Medicare PFS to determine the proportional amount of coinsurance that 
should be waived for payments based on the PPS encounter rate, and we 
would continue to use provider-reported charges to determine the amount 
of coinsurance that should be waived for payments based on the 
provider's charge. Total payment to the FQHC, including both Medicare 
and beneficiary liability, would not exceed the provider's charge or 
the PPS rate.
e. Transition Period and Annual Adjustment
    The statute requires implementation of the FQHC PPS for FQHCs with 
cost reporting periods beginning on or after October 1, 2014. FQHCs 
would transition into the PPS based on their cost reporting periods. 
The claims processing system would maintain the current system and the 
PPS until all FQHCs have transitioned to the PPS. We are proposing to 
transition the PPS to a calendar year update for all FQHCs, beginning 
January 1, 2016, to be consistent with many of the PFS files that are 
updated on a calendar year basis. The statute also requires us to 
adjust the FQHC PPS by the MEI in the first year after implementation, 
and either the MEI or a FQHC market basket in subsequent years.
f. Other FQHC/RHC Provisions
    In addition to proposing to codify the statutory requirements for 
the FQHC PPS in this proposed rule, we are proposing to allow RHCs to 
contract with non-physician practitioners, consistent with statutory 
requirements that require at least one nurse practitioner (NP) or 
physician assistant (PA) be employed by the RHC. The ability to 
contract with NPs, PAs, certified nurse midwives (CNMs), clinical 
psychologists (CPs), and clinical social workers (CSWs) would provide 
RHCs with additional flexibility with respect to recruiting and 
retaining non-physician practitioners.
    We are also proposing edits to correct terminology, clarify policy, 
delete irrelevant code, and make other conforming changes for existing 
mandates and the new PPS.
g. CLIA Enforcement Actions for Proficiency Testing Referral
    The ``Taking Essential Steps for Testing Act of 2012'' (Pub. L. 
112-202) amended section 353 of the Public Health Service Act to 
provide the Secretary with discretion as to which sanctions may be 
applied to cases of intentional PT referral in lieu of the automatic 
revocation of the CLIA certificate and the subsequent ban preventing 
the owner and operator from owning or operating a CLIA certified 
laboratory for 2 years. Based on this discretion, we would amend the 
CLIA regulations by adding three categories of sanctions for PT 
referral based on the severity and extent of the violation.
3. Summary of Cost and Benefits
a. For the FQHC PPS
    As required by section 1834(o)(2)(B)(i) of the Act, initial 
payments (Medicare and coinsurance) under the FQHC PPS must equal 100 
percent of the estimated amount of reasonable costs, as determined 
without the application of the current system's UPL or productivity 
standards that can reduce a FQHC's per visit rate. The proposed FQHC 
PPS is estimated to have an overall impact of increasing total Medicare 
payments to FQHCs by approximately 30 percent. The annualized cost to 
the federal government associated with the proposed FQHC PPS is 
estimated to be between $183 million and $186 million, based on 5 year 
discounted flows using 3 percent and 7 percent factors.
b. For Other FQHC and RHC Changes
    The ability to contract with NPs, PAs, CNMs, CP, and CSWs would 
provide RHCs with additional flexibility with respect to recruiting and 
retaining non-physician practitioners, which may result in increasing 
access to care in rural areas. There is no cost to the Federal 
government and we are unable to estimate a cost savings for RHCs. In 
addition, we believe that there are no costs associated with the 
technical and conforming regulatory changes that would be made in 
conjunction with the establishment of the FQHC PPS.
c. CLIA Enforcement Actions for Proficiency Testing Referral Changes
    Over a 4-year span, we estimate that an average of 6 cases per year 
may have fit the terms of described in this proposed rule to have 
alternative sanctions applied. We believe that the largest single type 
of cost is the expense to the laboratory or hospital to contract out 
for management of the laboratory, and to pay laboratory director fees, 
due

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to the 2-year ban that prohibits the owner and operator from owning or 
operating a CLIA-certified laboratory in accordance with revocation of 
the CLIA certificate. Estimating the expense of alternative sanctions 
at $150,000 per laboratory, the annual fiscal savings of the proposed 
changes for affected laboratories would be approximately $2.6 million 
($578,400--$150,000 for 6 laboratories). We note that there are a 
number of factors (known and unknown) that could impact this estimate. 
We also note that the total savings may not be large, but the savings 
to the individual laboratory or hospital that would be affected may be 
significant. However, we note that the $2.6 million estimated savings 
to laboratories may overstate or understate the provision's net 
benefits. While we recognize that there are several potential 
inaccuracies in our estimates, we lack data to account for these 
considerations.

B. Overview and Background

1. FQHC Description and General Information
    FQHCs are facilities that provide services that are typically 
furnished in an outpatient clinic setting. They are currently paid an 
AIR per visit for qualified primary and preventive health services 
furnished to Medicare beneficiaries.
    The statutory requirements that FQHCs must meet to qualify for the 
Medicare benefit are in section 1861(aa)(4) of the Act. Based on these 
provisions, the following three types of organizations that are 
eligible to enroll in Medicare as FQHCs:
     Health Center Program grantees: Organizations receiving 
grants under section 330 of the PHS Act (42 U.S.C. 254b).
     Health Center Program ``look-alikes'': Organizations that 
have been identified by the Health Resources and Services 
Administration (HRSA) as meeting the requirements to receive a grant 
under section 330 of the PHS Act, but which do not receive section 330 
grant funding.
     Outpatient health programs/facilities operated by a tribe 
or tribal organization (under the Indian Self-Determination Act) or by 
an urban Indian organization (under Title V of the Indian Health Care 
Improvement Act).
    Section 330 Health Centers are the predominant type of FQHC. 
Originally known as Neighborhood Health Centers, they have evolved over 
the last 45 years to become an integral component of the Nation's 
health care safety net system, with more than 1,100 centers operating 
approximately 8,900 delivery sites that serve more than 21 million 
people each year from medically underserved communities. They include 
community health centers (section 330(e) of the PHS Act), migrant 
health centers (section 330(g) of the PHS Act), health care for the 
homeless (section 330(h) of the PHS Act), and public housing primary 
care (section 330(i) of the PHS Act).
    FQHCs may be either not-for-profit or public organizations. The 
main purpose of the FQHC program is to enhance the provision of primary 
care services in underserved urban, rural and tribal communities. FQHCs 
that are not operated by a tribe or tribal organization are required to 
be located in or treat people from a Federally-designated medically 
underserved area (MUA) or medically underserved population (MUP) and to 
comply with all the requirements of section 330 of the PHS Act. Some of 
these section 330 requirements include offering a sliding fee scale to 
persons with incomes below 200 percent of the federal poverty level, 
and being governed by a board of directors of whom a majority of the 
members receive their care at the FQHC. According to HRSA's Uniform 
Data System (UDS),\1\ approximately 8 percent of FQHC patients were 
Medicare beneficiaries, 41 percent were Medicaid recipients, and 36 
percent were uninsured in 2012. The remainder was privately insured or 
had other public insurance. Medicare and Medicaid accounted for 
approximately 9 percent and 47 percent of their total billing, 
respectively.
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    \1\ The UDS collects and tracks data such as patient 
demographics, services provided, staffing, clinical indicators, 
utilization rates, costs, and revenues from section 330 health 
centers and health center look-alikes.
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    Congress has authorized several programs to assist FQHCs in 
increasing access to care for underserved and special populations. Many 
FQHCs receive section 330 grant funds to offset the costs of 
uncompensated care and provide other services. All FQHCs are eligible 
to participate in the 340B Drug Pricing Program for pharmaceutical 
products. FQHCs that receive section 330 grant funds also are eligible 
to apply for medical malpractice coverage under Federally Supported 
Health Centers Assistance Act (FSHCAA) of 1992 (Pub. L. 102-501) and 
FSHCAA of 1995 (Pub. L. 104-73 amending section 224 of the PHS Act) and 
may be eligible for Federal loan guarantees for capital improvements 
when funds for this purpose are appropriated. Title VIII of the 
American Recovery and Reinvestment Act (Pub. L. 111-5) appropriated $2 
billion for construction, equipment, health information technology, and 
related improvements to existing section 330 grantees and for the 
establishment of new grantees sites. The Affordable Care Act 
appropriated an additional $11 billion over a 5-year period ($1.5 
billion for capital improvements and $9.5 billion for support and 
expansion of the 330 health centers). HRSA administers the 330 grant 
program and other programs that assist FQHCs in increasing access to 
primary and preventive health care in underserved communities.
2. Medicare's FQHC Coverage and Payment Benefit
    The FQHC coverage and payment benefit under Medicare was added 
effective October 1, 1991, when section 1861(aa) of the Act was amended 
by section 4161 of the Omnibus Budget Reconciliation Act (OBRA) of 1990 
(Pub. L. 101-508, enacted on November 5, 1990) and implemented in 
regulations via the June 12, 1992 final rule with comment period (57 FR 
24961) and the April 3, 1996 final rule (61 FR 14640). Regulations 
pertaining to FQHCs are found primarily in 42 CFR Part 405, and 42 CFR 
Part 491.
    FQHC covered services and supplies include the following:
     Physician, NP, PA, CNM, CP, and CSW services.
     Services and supplies furnished incident to a physician, 
NP, PA, CNM, CP, or CSW services.
     FQHC covered drugs that are furnished by, a FQHC 
practitioner.
     Outpatient diabetes self-management training (DSMT) and 
medical nutrition therapy (MNT) for beneficiaries with diabetes or 
renal disease.
     Statutorily-authorized preventive services.
     Visiting nurse services to the homebound in an area where 
CMS has determined that there is a shortage of home health agencies.
3. Legislation Pertaining to Medicare and Medicaid Payments for FQHC 
Services
    FQHCs currently receive cost-based reimbursement, subject to an 
upper payment limit (UPL) and productivity standards, for services 
furnished to Medicare beneficiaries, and PPS payment, based on their 
historical cost data, for services furnished to Medicaid recipients 
(section 1902(bb) of the Act). The UPL for Medicare FQHC services is 
adjusted annually based on the Medicare Economic Index (MEI), as 
described in 1842(i)(3) of the Act. Authority to apply productivity 
standards is found in 1833(a) and 1861(v)(1)(A) of the Act. Section 
151(a)

[[Page 58390]]

of the Medicare Improvements for Patients and Providers Act (MIPPA) of 
2008 (Pub. L. 110-275, enacted on July 15, 2008) increased the UPL for 
FQHC by $5, effective January 1, 2010. Section 151(b) of the MIPPA 
required the Government Accountability Office (GAO) to study and report 
on the effects and adequacy of the Medicare FQHC payment structure.
    Based on a GAO analysis of 2007 Medicare cost report data, about 72 
percent of FQHCs had average costs per visit that exceeded the UPL, and 
the application of productivity standards reduced Medicare payment for 
approximately 7 percent of FQHCs. In 2007, application of the limits 
and adjustments currently in place reduced FQHCs' submitted costs of 
services by approximately $73 million, about 14 percent (Medicare 
Payments to Federal Qualified Health Centers, GAO-10-576R, July 30, 
2010).
    The Benefits Improvement and Protection Act of 2000 (Pub. L. 106-
554, enacted December 21, 2000) created section 1902(bb) of the Act 
which established a PPS for Medicaid reimbursement. The law allowed 
state Medicaid agencies to establish their own reimbursement 
methodology for FQHCs provided that total reimbursement would not be 
less than the payment under the Medicaid PPS, and that the FQHC agreed 
to the alternative payment methodology (APM). For beneficiaries 
enrolled in a managed care organization (MCO), the MCO pays the FQHC an 
agreed upon amount, and the state Medicaid program pays the FQHC a 
wraparound payment equal to the difference, if any, between the PPS 
rate and the payment from the managed care organization.
    The Affordable Care Act established a Medicare PPS for FQHCs. 
Section 10501(i)(3)(A) of the Affordable Care Act added section 1834(o) 
of the Act, requiring the Medicare FQHC PPS to be implemented starting 
October 1, 2014. The new PPS for FQHCs is required to take into account 
the type, intensity, and duration of services furnished by FQHCs and 
may include adjustments, including geographic adjustments, determined 
appropriate by the Secretary. A detailed discussion of the statutory 
requirements for the Medicare FQHC PPS is discussed in section I.B. of 
this proposed rule.
4. Medicare's Current Reasonable Cost-Based Reimbursement Methodology
    FQHCs are paid an AIR per visit for medically-necessary 
professional services that are furnished face-to-face (one practitioner 
and one patient) with a FQHC practitioner (42 CFR 405.2463). Services 
and supplies furnished incident to a FQHC professional service are 
included in the AIR and are not billed as a separate visit. Technical 
components such as x-rays, laboratory tests, and durable medical 
equipment are not part of the AIR and are billed separately to Medicare 
Part B.
    The AIR is calculated by dividing total allowable costs by the 
total number of visits. Allowable costs may include practitioner 
compensation, overhead, equipment, space, supplies, personnel, and 
other costs incident to the delivery of FQHC services. Cost reports are 
filed in order to identify all incurred costs applicable to furnishing 
covered FQHC services. Freestanding FQHCs complete Form CMS-222-92, 
``Independent Rural Health Clinic and Freestanding Federally Qualified 
Health Center Cost Report''. FQHCs based in a hospital complete the 
Worksheet M series of Form CMS-2552-10, ``Hospital and Hospital Care 
Complex Cost Report''. FQHCs based in a skilled nursing facility (SNF) 
complete the Worksheet I series of Form CMS-2540-10, ``Skilled Nursing 
Facility and Skilled Nursing Facility Health Care Complex Cost 
Report''. FQHCs based in a home health agency complete the Worksheet RF 
series of Form CMS-1728-94, ``Home Health Agency Cost Report''. 
Information on these cost report forms is found in Chapters 29, 40, 41 
and 32, respectively, of the ``Provider Reimbursement Manual--Part 2'' 
(Publication 15-2). Per 42 CFR 413.65(n), only FQHCs that were 
operating as provider-based clinics prior to 1995 and either received 
funds under section 330 of the PHS Act or were determined by CMS to 
meet the criteria to be a look-alike clinic are eligible to be 
certified as provider-based FQHCs. FQHCs that do not already have 
provider-based status are no longer permitted to receive the 
designation.
    At the beginning of a FQHC's fiscal year, the Medicare 
Administrative Contractor (MAC) calculates an interim AIR based on 
actual costs and visits from the previous cost reporting period. For 
new FQHCs, the interim AIR is estimated based on a percentage of the 
per-visit limit. FQHCs receive payments throughout the year based on 
their interim rate. After the conclusion of the fiscal year, the cost 
report is reconciled and any necessary adjustments in payments are 
made.
    Allowable costs are subject to tests of reasonableness, 
productivity standards, and an overall payment limit (42 CFR 405.2464, 
405.2466, and 405.2468). The productivity standards require 4,200 
visits per full-time equivalent physician and 2,100 visits per full-
time equivalent non-physician practitioner (NP, PA or CNM) on an annual 
basis. If the FQHC has furnished fewer visits than required by the 
productivity standards, the allowable costs would be divided by the 
productivity standards numbers instead of the actual number of visits.
    The payment limit varies based on whether the FQHC is located in an 
urban or rural area (as defined in section 1886(d)(2)(D) of the Act). 
The 2013 payment limits per visit for urban and rural FQHCs are $128.00 
and $110.78, respectively. FQHCs with multiple sites may elect to file 
a consolidated cost report (CMS Pub. 100-04, Medicare Claims Processing 
Manual, chapter 9, Sec.  30.8), and if the FQHC has both urban and 
rural sites, the MAC applies a weighted UPL based on the percentage of 
urban and rural visits as the percentage of total site visits. The AIR 
is equal to the FQHC's cost per visit (adjusted by the productivity 
standard if appropriate) or the payment limit, whichever is less.
    Medicare beneficiaries receiving services at a FQHC are not subject 
to the annual Medicare deductible for FQHC-covered services (section 
1833(b) of the Act). Medicare beneficiaries pay a copayment based on 20 
percent of the charges (section 1866(a)(2)(A)(ii) of the Act), except 
for: (1) Mental health treatment services, which are subject to the 
outpatient mental health treatment limitation until January 1, 2014, 
when beneficiary coinsurance is reduced to the same level as most other 
Part B services; (2) FQHC-supplied influenza and pneumococcal and 
Hepatitis B vaccines (HBV); and (3) effective January 1, 2011, 
personalized prevention plan services and any Medicare covered 
preventive service that is recommended with a grade of A or B by the 
U.S. Preventive Services Task Force (USPSTF).
    The administration and payment of influenza and pneumococcal 
vaccines is not included in the AIR. They are paid at 100 percent of 
reasonable costs through the cost report. The cost and administration 
of Hepatitis B vaccine (HBV) is covered under the FQHC's AIR.
5. Summary of Requirements Under the Affordable Care Act for the FQHC 
PPS and Other Provisions Pertaining to FQHCs
    Section 10501(i)(3)(A) of the Affordable Care Act amended section 
1834 of the Act by adding a new subsection (o), ``Development and 
Implementation of Prospective Payment System''. Section 1834(o)(1)(A) 
of the Act requires that the system include a process for appropriately 
describing the services furnished by FQHCs. Also, the

[[Page 58391]]

system must establish payment rates based on such descriptions of 
services, taking into account the type, intensity, and duration of 
services furnished by FQHCs. The system may include adjustments (such 
as geographic adjustments) as determined appropriate by the Secretary 
of HHS.
    Section 1834(o)(1)(B) of the Act specifies that, by no later than 
January 1, 2011, FQHCs must begin submitting information as required by 
the Secretary, including the reporting of services using HCPCS codes, 
in order to develop and implement the PPS.
    Section 1834(o)(2)(A) of the Act requires that the FQHC PPS must be 
effective for cost reporting periods beginning on or after October 1, 
2014. For such cost reporting periods, reasonable costs will no longer 
be the basis for Medicare payment for services furnished to 
beneficiaries at FQHCs.
    Section 1834(o)(2)(B)(i) of the Act requires that the initial PPS 
rates must be set so as to equal in the aggregate 100 percent of the 
estimated amount of reasonable costs that would have occurred for the 
year if the PPS had not been implemented. This 100 percent must be 
calculated prior to application of copayments, per visit limits, or 
productivity adjustments.
    Section 1834(o)(2)(B)(ii) of the Act describes the methods for 
determining payments in subsequent years. After the first year of 
implementation, the PPS payment rates must be increased by the 
percentage increase in the MEI. After the second year of 
implementation, PPS rates shall be increased by the percentage increase 
in a market basket of FQHC goods and services as established through 
regulations, or, if not available, the MEI that is published in the 
Physician Fee Schedule (PFS) final rule.
    Section 10501(i)(3)(B) of the Affordable Care Act added section 
1833(a)(1)(Z) to the Act to specify that Medicare payment for FQHC 
services under section 1834(o) of the Act shall be 80 percent of the 
lesser of the actual charge or the PPS amount determined under section 
1834(o).
    Section 10501(i)(3)(C) of the Affordable Care Act added section 
1833(a)(3)(B)(i)(II) of the Act to require that FQHCs that contract 
with Medicare Advantage (MA) organizations be paid at least the same 
amount they would have received for the same service under the FQHC 
PPS.
    Section 10501(i)(2) of the Affordable Care Act amended the 
definition of FQHC services as defined in section 1861(aa)(3)(A) of the 
Act by replacing the specific references to services provided under 
section 1861(qq) and (vv) of the Act (DSMT and MNT services, 
respectively) with preventive services as defined in section 
1861(ddd)(3) of the Act, as established by section 4014(a)(3) of the 
Affordable Care Act. These changes were effective for services provided 
on or after January 1, 2011. Accordingly, in the CY 2011 Medicare PFS 
final rule (75 FR 73417 through 73419, November 29, 2010) we adopted 
conforming regulations by adding a new Sec.  405.2449, which added the 
new preventive services definition to the definition of FQHC services 
effective for services provided on or after January 1, 2011 (see that 
rule for a detailed discussion regarding preventive services covered 
under the FQHC benefit and the requirements for waiving coinsurance for 
such services).
    Section 1833(b)(4) of the Act stipulates that the Medicare Part B 
deductible shall not apply to FQHC services. The Affordable Care Act 
made no change to this provision; therefore Medicare will continue to 
waive the Part B deductible for all FQHC services in the FQHC PPS, 
including preventive services added by the Affordable Care Act.
6. Approach to the FQHC PPS
    To enhance our understanding of the services furnished by FQHCs and 
the unique role of FQHCs in providing services to people from medically 
underserved areas and populations, we worked closely with HRSA in the 
development of this proposed rule. They provided valuable expertise on 
the challenges facing FQHCs in increasing access to health care for 
underserved populations and the importance of Medicare reimbursement to 
the overall financial viability of the health centers. In addition to 
providing patient population and services data from their UDS, HRSA 
also enabled us to gain additional data on insurance coverage among a 
subset of FQHC patients from the Community Health Applied Research 
Network. We believe that the proposals in this proposed rule benefited 
greatly from their assistance.
    Our goal for the FQHC PPS is to create a system in accordance with 
the statute whereby FQHCs are fairly reimbursed for the services they 
provide to Medicare patients in the least burdensome manner possible, 
so that they may continue to provide primary and preventive health 
services to the communities they serve. We will continue to evaluate 
our approach based on the comments we receive to this proposed rule in 
the context of balancing payment requirements, regulatory burden, and 
the need for appropriate accountability and oversight.

II. Establishment of the Federally Qualified Health Center Prospective 
Payment System (FQHC PPS)

A. Design and Data Sources for the FQHC PPS

1. Overview of the PPS Design
    In developing the new PPS for FQHCs, we considered the statutory 
requirements at 1834(o)(1)(A) of the Act requiring that the new PPS 
take into account the type, intensity, and duration of services 
furnished by FQHCs, and allows for adjustments, including geographic 
adjustments, as determined appropriate by the Secretary. We explored 
several approaches to the methodology and modeled options for 
calculating payment rates and adjustments under a PPS based on data 
from Medicare FQHC cost reports and Medicare FQHC claims. Each option 
was evaluated to determine which approach would result in the most 
appropriate payment structure with the least amount of reporting 
requirements and administrative burden for the FQHCs.
    One approach we considered would align payment for FQHCs with 
payment for services typically furnished in physician offices, making 
separate payment for each coded service and adopting the relative 
values from the PFS. While this approach follows established payment 
policy for services furnished in an outpatient clinic setting, it 
unbundles a FQHC encounter-based payment into a fee schedule structure, 
which could encourage excess utilization in the long-term, and would 
increase coding and billing requirements for FQHCs.
    Another approach for the PPS would be to pay a single encounter-
based rate per beneficiary per day. The encounter-based rate would be 
based on an average cost per visit, which would be calculated by 
aggregating the data for all FQHCs and dividing their total costs by 
their total visits incurred during a specified time period. An 
encounter-based payment rate is consistent with the agency's commitment 
to greater bundling of services, which gives FQHCs the flexibility to 
implement efficiencies to reduce over-utilization of services. FQHCs 
are accustomed to billing for a single visit, as they are currently 
paid through an AIR that is based on a FQHC's own average cost per 
visit. An encounter-based payment is also similar to Medicaid payment 
systems, and Medicaid constitutes a large portion of FQHC billing 
(approximately 47 percent, compared to

[[Page 58392]]

approximately 9 percent for Medicare). We believe an encounter-based 
payment rate for the FQHC PPS would provide appropriate payment while 
remaining administratively simple. Therefore, we propose an encounter-
based rate per beneficiary per day as the basis for payment under the 
proposed FQHC PPS. Additional details regarding the encounter-based 
rate setting methodology, including adjustments to the encounter-based 
rate, are discussed in section II. C. of this proposed rule.
2. Medicare FQHC Cost Reports
    As required by section 1834(o)(2)(B)(i) of the Act, initial 
payments (Medicare and coinsurance) under the FQHC PPS must equal 100 
percent of the estimated amount of reasonable costs, as determined 
without the application of the current system's UPLs or productivity 
standards that can reduce a FQHC's per visit rate. In order to estimate 
100 percent of reasonable costs, we obtained Medicare cost report data 
for free-standing FQHCs (Form CMS 222-92) from the March 31, 2013, 
Healthcare Cost Report Information System (HCRIS) quarterly update. We 
included in our analysis FQHC costs reports that had allowable costs 
(excluding pneumococcal and influenza vaccines) and Medicare visits, 
and we used one cost report for each FQHC cost reporting entity. For 69 
percent of cost reporting entities, the only available cost report 
covered 1 full year (with cost reporting periods ending between June 
30, 2011 and June 30, 2012). For the remaining 31 percent of cost 
reporting entities, there were multiple cost reports available or the 
cost reporting period was not exactly 1 year. For cost reporting 
entities with multiple cost reports available, we selected the most 
recent cost report, unless an earlier cost report provided us with a 
better match to the FQHC claims data that was used to model potential 
adjustments. Because FQHCs with multiple sites can file consolidated 
cost reports, we also ensured that we selected only one cost report for 
each delivery site.
    As required by statute, we estimated 100 percent of reasonable 
costs that would have occurred for this period prior to the application 
of copayments, per visit limits, or productivity adjustments (see 
discussion of the baseline for the PPS in section II. D. of this 
proposed rule). We also note that, under section 1833(c) of the Act, 
outpatient mental health services will be paid on the same basis as 
other Part B services as of January 1, 2014. As the FQHC PPS is to be 
implemented for cost reporting periods beginning on or after October 1, 
2014, we adjusted the cost report data to remove the application of the 
outpatient mental health limitations that were in effect when these 
reported services were incurred.
    After eliminating the current payment limits and adjustments, we 
calculated the average cost per visit for each cost reporting entity by 
dividing the total estimated Medicare costs (excluding vaccines) 
reported by the total number of Medicare visits reported. We found that 
the mean cost per visit for all cost reporting entities was about 11 
percent higher than the median cost per visit.
    In developing the FQHC PPS, section 1834(o)(1)(A) of the Act allows 
for adjustments determined appropriate by the Secretary. Consistent 
with this authority, we excluded statistical outliers from the sample. 
We identified all cost reporting entities with an average cost per 
visit that was greater than three standard deviations above or below 
the geometric mean of the overall average cost per visit among cost 
reporting entities, and we excluded their data from our sample. In the 
aggregate, after trimming the data for outliers and before adjustments 
for price inflation, we estimate that eliminating current payment 
limits and adjustments would increase payments to FQHCs by about 28 
percent. For additional information on the impact of the FQHC PPS, see 
section VII. of this proposed rule.
3. Medicare FQHC Claims
    In developing the Medicare FQHC PPS, section 1834(o)(1)(A) of the 
Act requires us to take into account the type, intensity, and duration 
of FQHC services, and allows other adjustments, such as geographic 
adjustments. Section 1834(o)(1)(B) of the Act also granted the 
Secretary of HHS (the Secretary) the authority to require FQHCs to 
submit such information as may be required in order to develop and 
implement the Medicare FQHC PPS, including the reporting of services 
using HCPCS codes. The provision requires that the Secretary impose 
this data collection submission requirement no later than January 1, 
2011.
    Beginning with dates of service on or after January 1, 2011, when 
billing Medicare, FQHCs are required to report all pertinent services 
provided and list the appropriate HCPCS code for each line item along 
with revenue code(s) for each FQHC visit. The additional line item(s) 
and HCPCS code reporting were for informational and data gathering 
purposes to inform development of the PPS rates and potential 
adjustments. Other than for calculating the amount of coinsurance to 
waive for preventive services for which the coinsurance is waived, 
these HCPCS codes are not utilized to determine current Medicare 
payment to FQHCs. We propose to use the HCPCS codes in the FQHC claims 
data to support the development of the FQHC PPS rate and adjustments 
and for making payment under the PPS.
    In order to model potential adjustments, we obtained final action 
Medicare FQHC claims (type of bill 73X and 77X) from the CMS Integrated 
Data Repository (IDR) with dates of service between January 2010 and 
December 2012. We excluded claims that did not list a revenue code or 
HCPCS code that represented a face-to-face encounter, as these services 
would not qualify for an AIR payment. We also excluded claim lines with 
revenue codes that did not correspond to FQHC services or that lacked 
valid HCPCS codes.
    In 2011, approximately 90 percent of FQHC claims listed a single 
HCPCS code that defined the overall type of encounter (for example, a 
mid-level office visit (HCPCS code 99213)). We found similar reporting 
trends in 2012 FQHC claims. We sought to validate the completeness of 
HCPCS reporting by analyzing coding on primary care physician claims 
for PFS data. When compared, the findings from the simulated PFS data 
and actual FQHC data were similar in the type and distribution of the 
reported encounter code (that is, the HCPCS code that represents the 
visit that qualifies the FQHC encounter for an AIR payment). When 
ancillary services (services that are not separately billable in a 
FQHC) were billed with an office visit code, both FQHC and analogous 
primary care physician office claims demonstrated a tendency to include 
only one to two ancillary services in addition to the encounter code 
about 35 percent of the time, and FQHCs billed only a single ancillary 
service about 10 percent of the time.
    We believe that the reporting trends in the FQHC claims are 
consistent with the coding of analogous primary care physician office 
claims, thereby suggesting that the limited number of ancillary 
services listed on FQHC claims appropriately describe the services 
furnished during an encounter.
4. Linking Cost Reports and Claims To Compute the Average Cost per 
Visit
    In order to compute the adjusted charges or ``estimated cost'' for 
determining the average cost per visit, we linked claims to cost 
reports by delivery site, as determined by the CMS Certification Number 
(CCN) reported on the claim. Since the HCPCS code reporting requirement 
on claims did not go into effect until January 1, 2011,

[[Page 58393]]

claims for earlier dates of service did not include the detail required 
to model adjustments based on type, intensity, or duration of services. 
Cost reports with reporting periods that began on or after January 1, 
2011, accounted for 81 percent of the sample, and we linked these cost 
reports to Medicare FQHC claims with service dates that matched their 
respective cost reporting periods. For cost reports that were at least 
1 full year in length and with a cost reporting period that began in 
2010, we linked these cost reports to 2011 Medicare FQHC claims.
    The linked cost report and claims data were then used to calculate 
a cost-to-charge ratio (CCR) for each cost-reporting entity. To 
approximate data not available on the cost report, we developed these 
CCRs to convert each FQHC's charge data, as found on its claims, to 
costs. We calculated an average cost per visit by dividing the total 
allowable costs (excluding pneumococcal and influenza vaccinations) by 
the total number of visits reported on the cost report. We calculated 
an average charge per visit by dividing the total charges of all visits 
for all sites under a cost-reporting entity and dividing that sum by 
the total number of visits for that cost-reporting entity. We 
calculated a cost-reporting entity-specific CCR by dividing the average 
cost per visit (based on cost report data) by the average charge per 
visit (based on claims data). We multiplied the submitted charges for 
each claim by these cost-reporting entity-specific CCRs to estimate 
FQHC costs per visit. We note that other Medicare payment systems 
calculate CCRs based on total costs and total charges reported on 
Medicare cost reports. However, this information is not currently 
available on the free-standing FQHC cost report, Form CMS-222-92.
    We found that the mean estimated cost per visit in the linked 
claims data was about 9 percent higher than the median estimated cost 
per visit. In developing the FQHC PPS, section 1834(o)(1)(A) of the Act 
allows for adjustments determined appropriate by the Secretary. 
Consistent with this authority, we excluded statistical outliers from 
the linked claims sample. We identified visits with estimated costs 
that were greater than three standard deviations above or below the 
geometric mean of the overall average estimated cost per visit, and we 
excluded those visits from our sample.
    After trimming the linked claims data for outliers, the final data 
set included 5,245,961 visits from 5,236,607 distinct claims 
encompassing 6,135,830 claim lines. This included 5,223,512 daily 
visits furnished to 1,244,873 beneficiaries that visited 3,509 delivery 
sites under 1,141 cost-reporting entities.

B. Policy Considerations for Developing the FQHC PPS Rates and 
Adjustments

    In developing the FQHC PPS rates and adjustments, we considered 
existing payment policies to determine potential interactions with the 
implementation of the FQHC PPS. We discuss these policies and our 
proposed changes below.
1. Multiple Visits on the Same Day
    The current all-inclusive payment system was designed to reimburse 
FQHCs for services furnished to Medicare beneficiaries at a rate that 
would take into account all costs associated with the provision of 
services (for example, space, supplies, practitioners, etc.) and 
reflect the aggregate costs of providing services over a period of 
time. In some cases, the per visit rate for a specific service is 
higher than what would be paid based on the PFS, and in some cases it 
is lower than what would be paid based on the PFS, but at the end of 
the reporting year when the cost report is settled, the Medicare 
payment is typically higher for FQHCs than if the services were billed 
separately on the PFS.
    The current payment system was also designed to minimize reporting 
requirements, and as such, the all-inclusive payment reflects all the 
services that a FQHC provides in a single day to an individual 
beneficiary, regardless of the length or complexity of the visit or the 
number or type of practitioners seen. This would include situations 
where a FQHC patient has a medically-necessary face-to-face visit with 
a FQHC practitioner, and is then seen by another FQHC practitioner, 
including a specialist, for further evaluation of the same condition on 
the same day, or is then seen by another FQHC practitioner (including a 
specialist) for evaluation of a different condition on the same day. 
Except for certain preventive services that have coinsurance 
requirements waived, FQHCs have not been required to submit coding of 
each service in order to determine Medicare payment.
    Although the all-inclusive payment system was designed to provide 
enhanced reimbursement that reflects the costs associated with a visit 
in a single day by a Medicare beneficiary, an exception to the one 
encounter payment per day policy was made for situations when a patient 
comes into the FQHC for a medically-necessary visit, and after leaving 
the FQHC, has a medical issue that was not present at the visit earlier 
that day, such as an injury or unexpected onset of illness. In these 
situations, the FQHC has been permitted to be paid separately for two 
visits on the same day for the same beneficiary.
    In response to a comment to the June 12, 1992 final rule with 
comment period (57 FR 24961), in the April 3, 1996 final rule (61 FR 
14640), we revised the regulations to allow separate payment for mental 
health services furnished on the same day as a medical visit. The CY 
2007 PFS final rule (71 FR 69665) subsequently revised the regulations 
to allow FQHCs to receive separate payment for DSMT and MNT. The 
ability to bill separately for Medicare's IPPE is in manuals only and 
not in regulation, with the manual language noting this is a once in a 
lifetime benefit. There are no statutory requirements to pay FQHCs 
separately for these services when they occur on the same day as 
another billable visit.
    In developing the new PPS for FQHCs, we reviewed all existing 
policies for FQHC payments to determine if the policies should remain 
the same as under the current system, or if the policies should be 
updated or in some cases revised. As part of this process, we reviewed 
the existing regulations and policies that allow separate payment for 
subsequent illness or injury, mental health services, DSMT/MNT, or IPPE 
when they occur on the same day as an otherwise billable visit. To do 
this, we examined 2011 Medicare FQHC claims data in order to determine 
the frequency of FQHCs billing for more than one visit per day for a 
beneficiary. We then analyzed the potential financial impact on FQHCs 
and the potential impact on access to care if billing for more than 1 
visit per day for these specific situations was no longer permitted. We 
also considered several alternative options, such as an adjustment of 
the per visit rate when multiple visits occur in the same day, or the 
establishment of a separate per visit rate for subsequent visit due to 
illness or injury, mental health services, DSMT/MNT, or IPPE.
    An analysis of data from Medicare FQHC claims with dates of service 
between January 1, 2011 and June 30, 2012, indicate that it is uncommon 
for FQHCs to bill more than one visit per day for the same beneficiary 
(less than 0.5 percent of all visits), even though the ability to do so 
has been in place since 1992 for subsequent illness/injury, since 1996 
for mental health services, and since 2007 for DSMT/MNT. Even allowing 
for any underreporting in the data, it is clear that billing multiple 
visits on the same day for an individual

[[Page 58394]]

is a rare event, and eliminating the ability to do so would not 
significantly impact either the FQHC payment or a beneficiary's access 
to care. Eliminating this ability to bill for multiple visits on the 
same day would also simplify billing by removing the need for modifier 
59, which signifies that the conditions being treated are totally 
unrelated and services are provided at separate times of the day, and 
the subsequent claims review that occurs when modifier 59 appears on a 
claim.
    Because the data show that multiple visits are infrequently 
occurring on the same day, we determined that the level of effort 
required to develop an adjustment or a separate rate for each of these 
services when furnished on the same day as a medical visit would not be 
justified. Therefore, we are proposing to revise Sec.  405.2463(b) to 
remove the exception to the single encounter payment per day for FQHCs 
paid under the proposed PPS. This policy is consistent with an all-
inclusive methodology and reasonable cost principles and would simplify 
billing and payment procedures. Thus, the proposed PPS encounter rate 
will also reflect a daily (per diem) rate and result in a slightly 
higher payment than one calculated based on multiple encounters on the 
same day.
    Based on the Medicare claims data provided by FQHCs that indicates 
a very low occurrence of multiple visits billed on the same day, we 
believe this proposal would not significantly impact total payment or 
access to care. However, we understand that there may be many possible 
reasons why the rate of billing for more than one visit per day has 
been low (for example. difficulty in scheduling more than one type of 
visit on the same day) and that FQHCs can provide integrated, patient-
centered health care services in a variety of ways. Therefore, we are 
interested in comments that address whether there are factors that we 
have not considered, particularly in regards to the provision of mental 
health services. We invite public comment on whether this change would 
impact access to these services or the integration of services in 
underserved communities. The benefits of retaining the ability to bill 
for more than one visit on the same day should be considered along with 
the proposed increased per diem payment rate under the PPS and the 
complexity of developing a claims processing system to allow for this 
exception in the new PPS.
2. Preventive Laboratory Services and Technical Components of Other 
Preventive Services
    The core services of the FQHC benefit are generally billed under 
the professional component. The benefit categories for laboratory 
services and diagnostic tests generally are not within the scope of the 
FQHC benefit, as defined under section 1861(aa) of the Act. For 
services that can be split into professional and technical components, 
we have instructed FQHCs to bill the professional component as part of 
the AIR, and separately bill the Part B MAC under different 
identification for the technical portion of the service on a Part B 
practitioner claim (for example, Form CMS-1500). If the FQHC operates a 
laboratory, is enrolled under Medicare Part B as a supplier, and meets 
all applicable Medicare requirements related to billing for laboratory 
services, it may be able to bill as a supplier furnishing laboratory 
services under Medicare Part B. When FQHCs separately bill these 
services, they are instructed to adjust their cost reports and carve 
out the cost of associated space, equipment, supplies, facility 
overhead, and personnel for these services.
    As part of the implementation of the FQHC benefit, we used our 
regulatory authority to enumerate preventive primary services, as 
defined in 42 CFR 405.2448, which may be paid for when provided by 
FQHCs (57 FR 24980, June 12, 1992, as amended by 61 FR 14657, April 3, 
1996). These preventive primary services include a number of laboratory 
tests, such as cholesterol screening, stool testing for occult blood, 
dipstick urinalysis, tuberculosis testing for high risk patients, and 
thyroid function tests. The preventive services added to the FQHC 
benefit pursuant to the Affordable Care Act, as defined by section 
1861(ddd)(3) of the Act and codified in 42 CFR 405.2449, include 
laboratory test and diagnostic services, such as screening mammography, 
diabetes screening tests, and cardiovascular screening blood tests.
    Professional services or professional components of primary 
preventive services (as defined in Sec.  405.2448) and preventive 
services (as defined in Sec.  405.2449) are billed as part of the AIR. 
The preventive laboratory tests and technical components of other 
preventive tests are not paid under the AIR and FQHCs are instructed to 
bill separately for these services. We are not proposing a change in 
billing procedures, and we do not intend to include payment for these 
services under the FQHC PPS. We note this payment structure simplifies 
billing procedures as laboratory tests and technical components of 
diagnostic services are always billed separately to Part B and are 
never included as part of the FQHC's encounter rate. (Note that both 
the professional and technical components of FQHC primary preventive 
services and preventive services remain covered under Part B).
    An analysis of FQHC claims indicates that FQHCs are listing some 
preventive laboratory tests and diagnostic services on their claims. In 
2011 through 2012, less than 5 percent of Medicare FQHC claims listed 
HCPCS codes related to laboratory tests or diagnostic services. For 
purposes of modeling adjustments to the FQHC PPS rate, we considered 
excluding these line items from the encounter charge and 
proportionately reducing the cost-reporting entity's related cost 
report data. However, it was not always clear whether the line item 
charges for these laboratory tests or diagnostic services were included 
in the total charge for the claim or were listed for informational 
purposes only. As such, we chose not to adjust the claims or cost 
report data based on the presence of the related HCPCS codes on the 
claims. As part of the implementation of the FQHC PPS, we plan to 
clarify the appropriate billing procedures through program instruction.
3. Vaccine Costs
    Section 1834(o)(2)(B)(i) of the Act requires that the initial PPS 
rates must be set so as to equal in the aggregate 100 percent of the 
estimated amount of reasonable costs that would have occurred for the 
year if the PPS had not been implemented. This 100 percent must be 
calculated prior to application of copayments, per visit limits, or 
productivity adjustments. We believe that this language directed us to 
develop a PPS to pay for items currently affected by the UPL and the 
productivity screen, which would pay for items currently included in 
the calculation of reasonable costs and paid under the AIR.
    The administration and payment of influenza and pneumococcal 
vaccines is not included in the AIR. They are paid at 100 percent of 
reasonable costs through the cost report. The cost and administration 
of HBV is covered under the FQHC's AIR when furnished as part of an 
otherwise qualifying encounter. We are not proposing any changes to 
this payment structure. We would continue to pay for the costs of the 
influenza and pneumococcal vaccines and their administration through 
the cost report, and other Medicare-covered

[[Page 58395]]

vaccines as part of the encounter rate. The costs of hepatitis B 
vaccine and its administration were included in the calculation of 
reasonable costs used to develop the FQHC PPS rates, and we would pay 
for these services under the FQHC PPS when furnished as part of an 
otherwise qualifying encounter.

C. Risk Adjustments

    Section 1834(o)(1)(A) of the Act provides that the FQHC PPS may 
include adjustments, including geographic adjustments, that are 
determined appropriate by the Secretary. We discuss our proposed 
adjustments below.
1. Alternative Calculations for Average Cost per Visit
    As discussed in section II. of this proposed rule, we used the 
claims data to calculate an average cost per visit by dividing the 
total estimated costs ($788,547,531) by the total number of daily 
visits (5,223,512).

Average cost per daily visit = $788,547,531/5,223,512 = $150.96

    We also examined how the average cost per visit would differ under 
current policy, which allows separate payment for subsequent illness or 
injury, mental health services, DSMT/MNT or IPPE when they occur on the 
same day as an otherwise billable visit. While the total estimated cost 
was the same ($788,547,531), the total number of visits in the 
denominator (5,245,961) did not combine multiple visits on the same day 
of service into 1 daily visit.

Average cost per visit = $788,547,531/5,245,961 = $150.32

    We also derived an average cost per visit from the cost reports by 
dividing the total estimated Medicare costs (excluding vaccines) 
reported ($832,387,663) by the total number of Medicare visits reported 
(5,374,217). Unlike the previous calculations based on claims data, the 
variables derived from the cost reports summarize total costs and 
visits by cost reporting entity and could not be trimmed of individual 
visits with outlier values. Also, we note that the total number of 
Medicare visits reported on the cost reports reflects current policy 
which allows for multiple visits on the same day of service, and we 
could not calculate an average cost per daily visit using only cost 
report data.

Average cost per visit from cost report data = $832,387,663/5,374,217 = 
$154.89

    Consistent with our proposal to remove the exception to the single 
encounter payment per day, we propose to use the average cost per daily 
visit of $150.96, as calculated based on adjusted claims data as the 
PPS rate prior to any risk adjustment. We note that the alternative 
calculations yield an average cost per visit that differs from $150.96 
by less than 3 percent. We also note that these calculations were 
derived based on the cost report and claims data available during our 
development of this proposed rule and are subject to change in the 
final rule based on more current data.
2. Geographic Adjustment Factor
    We propose to adjust the FQHC PPS rate for geographic differences. 
This adjustment will be made to the cost of inputs by applying an 
adaptation of the GPCIs used to adjust payment under the PFS. 
Established in 1848(e) of the Act, GPCIs adjust payments for geographic 
variation in the costs of providing services and consist of three 
component GPCIs: the physician work GPCI, the practice expense GPCI, 
and the malpractice insurance GPCI.
    Because FQHCs furnish services that are analogous to those 
furnished by physicians in outpatient clinic settings, we believe it 
would be consistent to apply geographic adjustments similar to those 
applied to services furnished under the PFS. We calculated a geographic 
adjustment factor (GAF) for each encounter based on the delivery site's 
locality using the proposed CY 2014 work and practice expense GPCIs and 
the proposed cost share weights for the CY 2014 GPCI update, as 
published in the CY 2014 PFS proposed rule (July 19, 2013 (78 FR 
43282)).
    For modeling geographic adjustments for this FQHC PPS proposed 
rule, we did not use the proposed CY 2015 work and practice expense 
GPCIs that also were published in the CY 2014 PFS proposed rule. We 
note that the FQHC PPS GAFs are subject to change in the final FQHC PPS 
rule based on more current data, including the finalized PFS GPCI and 
cost share weight values.
    We excluded the PFS malpractice GPCI from the calculation of the 
GAF as FQHCs that receive section 330 grant funds are eligible to apply 
for medical malpractice coverage under FSHCAA of 1992 and FSHCAA of 
1995. Without the cost share weight for the malpractice GPCI, the sum 
of the proposed PFS work and PE cost share weights (0.50866 and 
0.44839, respectively) is less than one. In calculating the FQHC GAFs, 
prior to applying the proposed work and PE cost share weights to the 
GPCIs, we scaled these proposed cost share weights so they would total 
100 percent while still retaining weights relative to each other 
(0.53149 and 0.46851, respectively).
    We calculated each locality's GAF as follows:

Geographic adjustment factor = (0.53149 x Work GPCI) + (0.46851 x PE 
GPCI)

    We included the GAF adjustment when modeling all other potential 
adjustments. The GAF will be applied based on where the services are 
furnished and may vary among FQHCs that are part of the same 
organization. The list of proposed GAFs by locality is in Addendum A of 
this proposed rule and is also available as a downloadable file at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/FQHCPPS/index.html.
3. New Patient or Initial Medicare Visit
    Based on an analysis of claims data, we found that the estimated 
cost per encounter was approximately 33 percent higher when a FQHC 
furnished care to a patient that was new to the FQHC or to a 
beneficiary receiving a comprehensive initial Medicare visit (that is, 
an IPPE or an initial AWV). We propose to adjust the encounter rate to 
reflect the 33 percent increase in costs when FQHCs furnish care to new 
patients or when they furnish a comprehensive initial Medicare visit, 
which could account for the greater intensity and resource use 
associated with these types of services. Our proposed risk adjustment 
factor is 1.3333 (as discussed further in section V. of this proposed 
rule).
4. Other Adjustment Factors Considered
    We considered multiple other adjustments such as demographics (age 
and sex), clinical conditions, duration of the encounter, etc. However, 
we found many of these other adjustments to have limited impact on 
costs or to be too complex and largely unnecessary for the FQHC PPS.
    We modeled whether there were differences in resource use for 
mental health visits and preventive care visits when compared to 
medical care visits. We found that mental health encounters had 
approximately 1 percent lower estimated costs per visit relative to 
medical care visits, and we did not consider this a sufficient basis 
for proposing a payment adjustment. We found that preventive care 
encounters had approximately 18 percent higher estimated costs per 
visit. This difference in resource use declines to an 8 percent higher 
estimated cost per visit after adjusting for the GAF and the proposed 
1.3333 risk adjustment factor for a patient that is new to the FQHC or 
for

[[Page 58396]]

a beneficiary receiving a comprehensive initial Medicare visit (that 
is, an IPPE or an initial AWV), indicating that a significant amount of 
preventive care visits were IPPEs or initial AWVs. We are not proposing 
a payment reduction for preventive care encounters and we note that a 
significant amount of the more costly preventive care encounters would 
otherwise be recognized and paid for with the proposed 1.3333 risk 
adjustment factor for a beneficiary receiving a comprehensive initial 
Medicare visit. We note that an 8 percent adjustment would increase 
payment for preventive visits, and we welcome comments on whether an 
adjustment for preventive care encounters would be appropriate, noting 
that there would be redistributive effect which would result in a 
decrease in the payment rate for other visits.
    We considered patient age and sex as potential adjustment factors 
as these demographic characteristics have the advantage of being 
objectively defined. However, both of these characteristics had a 
limited association with estimated costs, which did not support the use 
of these demographic characteristics as potential adjustment factors.
    We tested for an association between commonly reported clinical 
conditions and the estimated cost per visit. A number of clinical 
conditions were found to be associated with approximately 5 to 10 
percent higher costs per visit, but we are concerned that claims might 
not include all potentially relevant secondary diagnoses. In addition, 
we would need to consider how to minimize the complexity of such an 
adjustment with a limited number of clinically meaningful groupings.
    We considered the duration of encounters (in minutes) as a 
potential adjustment factor. Many of the evaluation and management (E/
M) codes commonly seen on FQHC claims are associated with average or 
typical times, and there was a strong association between these 
associated times and the estimated cost per encounter. However, these 
minutes are guidelines that reflect the face-to-face time between the 
FQHC practitioner and the beneficiary for that E/M service, and they 
would not indicate the total duration of the FQHC encounter. Moreover, 
many of the codes used to describe the face-to-face visit that 
qualifies an encounter, such as a subsequent annual wellness visit, are 
not associated with average or typical times.
    We considered adjusting payment based on the types of services 
furnished during a FQHC encounter. Our analysis of FQHC claims data 
indicates that information regarding ancillary services provided by 
FQHCs appears to be limited. As a result, there is a risk that 
adjustments for the types of services being provided would be based on 
incomplete information and result in payments under the PPS that do not 
accurately reflect the cost of providing those services.
5. Report on PPS Design and Models
    We contracted with Arbor Research for Collaborative Health to 
assist us in designing a PPS for FQHCs. Arbor Research modeled options 
for calculating payment rates and adjustments under a PPS based on data 
from Medicare FQHC cost reports and Medicare FQHC claims. A report 
detailing the options modeled in the development of the PPS will be 
available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/FQHCPPS/index.html.

D. Base Rate Calculation

    We calculated a base rate for the FQHC PPS by adjusting the average 
cost per visit to account for the proposed adjustment factors. We 
calculated an average payment multiplier using the average GAF (0.9944) 
multiplied by the average risk adjustment for non-new patient/initial 
visits (1.0), as weighted by the percent of encounters that represented 
non new patient/initial visits (0.9722), and we added this to the 
average GAF (0.9944) multiplied by the average risk adjustment for new 
patient/initial visits (1.3333), as weighted by the percent of 
encounters that represented new patient/initial visits (0.0278):

Average payment multiplier = 0.9721(1.00)(0.9944) + 
0.0279(1.3333)(0.9944) = 1.0036

    We calculated a base rate amount by multiplying the reciprocal of 
the average payment multiplier by the average cost per visit. Using the 
average cost per daily visit:

Base rate per daily visit = $150.96 x (1/1.0036) = $150.42

    The base rate per daily visit of $150.42 reflects costs through 
June 30, 2012, and does not include an adjustment for price inflation. 
As the FQHC PPS is to be implemented beginning October 1, 2014, we 
propose to update the base rate to account for the price inflation 
through September 30, 2014. We propose to use the MEI as finalized in 
the CY 2011 PFS final rule (75 FR 73262 through 73270). The MEI is an 
index reflecting the weighted-average annual price change for various 
inputs involved in furnishing physicians' services. The MEI is a fixed-
weight input price index, with an adjustment for the change in economy-
wide, private nonfarm business multifactor productivity.
    We propose to inflate the base rate by approximately 1.8 percent, 
reflecting the growth in the MEI from July 1, 2012 through September 
30, 2014. We also propose to use a forecasted MEI update of 1.7 percent 
for the 15-month period of October 1, 2014, through December 31, 2015, 
to calculate the first year's base payment amount under the PPS. The 
15-month update factor is based on the 2013Q2 forecast of the 2006-
based MEI, the most recent forecast available at the time of this 
proposed rule. The adjusted base payment that reflects the MEI 
historical updates and forecasted updates to the MEI is $155.90. This 
payment rate incorporates a combined MEI update factor of 1.0364 that 
trends dollars forward from July 1, 2012 through December 31, 2015. We 
also propose if more recent data became available (for example, a more 
recent estimate of the FY 2006-based MEI), we would use such data, if 
appropriate, to determine the 15-month FQHC PPS update factor for the 
final rule.

                                                           Table 1--Base Rate per Daily Visit
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Estimated base rate
   Total estimated      Daily encounters       Average payment      Average cost per     without  adjustment    MEI update factor     MEI-adjusted base
        costs                                    multiplier            daily visit       for price inflation                            payment rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
     $788,547,531             5,223,512                1.0036               $150.96               $150.42                1.0364               $155.90
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 58397]]

MEI-adjusted base payment rate = $150.96 x (1/1.0036) x 1.0364 = 
$155.90

    Thus, we propose a base payment rate of $155.90 per beneficiary per 
day for the proposed FQHC PPS. We note that this base rate is subject 
to change in the final rule based on more current data. (See the Impact 
Analysis in section VII of this proposed rule for comparisons of the 
PPS rates to payments under the AIR.)
    Payments to FQHCs would be calculated as follows:

Base payment rate x GAF = PPS payment

    In calculating the payment, the proposed base payment rate is 
$155.90, and the GAF would be based on the locality of the delivery 
site. (See section II.C. of this proposed rule for a discussion of the 
GAF and the Addendum to this proposed rule for the list of proposed 
GAFs.)
    If the patient is new to the FQHC, or the FQHC is furnishing an 
initial comprehensive Medicare visit, the payment would be calculated 
as follows:

Base payment rate x GAF x 1.3333 = PPS payment

    In calculating the payment, 1.3333 represents the risk adjustment 
factor applied to the PPS payment when FQHCs furnish care to new 
patients or when they furnish a comprehensive initial Medicare visit. 
(See section II.C. of this proposed rule for a discussion of the risk 
adjustment for new patients or initial comprehensive Medicare visits.)

E. Implementation

1. Transition Period and Annual Adjustment
    Section 1834(o)(2) of the Act requires implementation of the FQHC 
PPS for FQHCs with cost reporting periods beginning on or after October 
1, 2014. Cost reporting periods are typically 12 months, and do not 
usually exceed 13 months. Therefore, we expect that all FQHCs would be 
transitioned to the PPS by the end of 2015, or 15 months after the 
October 1, 2014 implementation date.
    FQHCs would transition into the PPS based on their cost reporting 
periods. We note that a change in cost reporting periods that is made 
primarily to maximize reimbursement would not be acceptable under 
established cost reporting policy (see 42 CFR 413.24(f)(3) and the 
Provider Reimbursement Manual Part I, section 2414, and Part II, 
section 102.3). The claims processing system will maintain the current 
system and the PPS until all FQHCs have transitioned to the PPS.
    We propose to transition the PPS to a calendar year update for all 
FQHCs, beginning January 1, 2016, because many of the PFS files we are 
proposing to use are updated on a calendar year basis. Section 
1834(o)(2)(B)(ii)(I) of the Act requires us to adjust the FQHC PPS rate 
by the percentage increase in the MEI for the first year after 
implementation. However, while transitioning the PPS to a calendar 
year, we propose to defer the first MEI statutory adjustment to the PPS 
rate from October 1, 2015, to December 31, 2015 (we note that our 
proposed base payment rate incorporates a forecasted percentage 
increase in the MEI through December 31, 2015).
2. Medicare Claims Payment
    Claims processing systems would need to be revised through program 
instruction to accommodate the new rate and associated adjustments. 
Medicare currently pays 80 percent of the AIR for all FQHC claims, 
except for mental health services that are subject to the mental health 
payment limit. Section 1833(a)(1)(z) of the Act requires that Medicare 
payment under the FQHC PPS should be 80 percent of the lesser of the 
provider's charge or the PPS rate. We are considering revisions to the 
claims processing system that would reject claims in which the 
qualifying visit describes a service that is outside of the FQHC 
benefit, such as inpatient hospital E/M services or group sessions of 
DSMT and MNT. We are considering revisions that would reject line items 
for technical components such as x-rays, laboratory tests, and durable 
medical equipment which will not be paid as part of the FQHC PPS and 
would be billed separately to Medicare Part B. We also are considering 
revisions that would allow for the informational reporting of influenza 
and pneumococcal vaccines and their administration, while excluding the 
line item charges, as these items would continue to be paid through the 
cost report.
3. Beneficiary Coinsurance
    Section 1833(a)(1)(Z) of the Act requires that FQHCs be paid up to 
80 percent of their reasonable costs by Medicare after subtracting 
beneficiary coinsurance. Under the current reasonable cost payment 
system, beneficiary coinsurance for FQHC services is assessed based on 
the FQHC's charge, which can be more than coinsurance based on the AIR, 
which is based on costs. An analysis of a sample of FQHC claims data 
for dates of service between January 1, 2011 through June 30, 2012 
indicated that beneficiary coinsurance based on 20 percent of the 
FQHCs' charges was approximately $23 million higher, or 18 percent 
more, than if coinsurance had been assessed based on 20 percent of the 
lesser of the FQHC's charge or the applicable all-inclusive rate.
    Section 1833(a)(1)(Z) of the Act requires that Medicare payment 
under the FQHC PPS should be 80 percent of the lesser of the actual 
charge or the PPS rate. The statute makes no specific provision to 
revise the coinsurance. We propose that coinsurance would be 20 percent 
of the lesser of the FQHC's charge or the PPS rate. We believe that the 
proposal to change the method to determine coinsurance is consistent 
with the statutory change to the FQHC Medicare payment and is 
consistent with statutory language in section 1866(a)(2)(A) and 
1833(a)(3)(A) of the Act and elsewhere that addresses coinsurance 
amounts and Medicare cost principles. If finalized, total payment to 
the FQHC, including both Medicare and beneficiary liability, would not 
exceed the FQHC's charge or the PPS rate.
4. Waiving Coinsurance for Preventive Services
    Effective January 1, 2011, Medicare waives beneficiary coinsurance 
for eligible preventive services furnished by a FQHC. Medicare requires 
detailed HCPCS coding on FQHC claims to ensure that coinsurance is not 
applied to the line item charges for these preventive services.
    For FQHC claims that include a mix of preventive and non-preventive 
services, we propose that Medicare contractors compare payment based on 
the FQHC's charge to payments based on the PPS encounter rate and pay 
the lesser amount. However, the current approach to waiving coinsurance 
for preventive services, which relies solely on FQHC reported charges, 
would be insufficient under the FQHC PPS. As Medicare payment under the 
FQHC PPS is required to be 80 percent of the lesser of the FQHCs charge 
or the PPS rate, we also need to determine the coinsurance waiver for 
payments based on the PPS rate.
    We considered using the proportion of the FQHC's line item charges 
for preventive services to total claim charges to determine the 
proportion of the FQHC PPS rate that would not be subject to 
coinsurance. This approach would preserve the encounter-based rate 
while basing the coinsurance reduction on each FQHC's relative 
assessment of resources for preventive services. However, the charge 
structure among

[[Page 58398]]

FQHCs varies, and beneficiary liability for the same mix of FQHC 
services could differ significantly based on the differences in charge 
structures.
    Where preventive services are coded on a claim, we propose to use 
payments under the PFS to determine the proportional amount of 
coinsurance that should be waived for payments based on the PPS 
encounter rate. While physician-administered Part B drugs and routine 
venipuncture will be paid under the FQHC PPS rate, we note that the 
Medicare Part B rates for these items are not included in the PFS 
payment files. Therefore, when determining this proportionality of 
payments, we would also consider PFS payment limits for Part B drugs, 
as listed in the Medicare Part B Drug Pricing File, and the national 
payment amount for routine venipuncture (HCPCS 36415). Although FQHCs 
might list HCPCS for which we do not publish a payment rate in these 
files, a review of 2011 claims data indicated that the vast majority of 
line items with HCPCS representing services that will be paid under the 
FQHC PPS were priced in these sources. As such, we believe that 
referencing only the payment rates listed in these sources would be 
both sufficient and appropriate for determining the amount of 
coinsurance to waive for preventive services provided in FQHCs, without 
changing the total payment (Medicare and coinsurance). Since Medicare 
payment under the FQHC PPS is required to be 80 percent of the lesser 
of the FQHC's charges or the PPS rate, we would continue to use FQHC-
reported charges to determine the amount of coinsurance that should be 
waived for payments based on the FQHC's charge. Total payment to the 
FQHC, including both Medicare and beneficiary liability, would not 
exceed the FQHC's charge or the PPS rate.
    Our proposed approach for waiving coinsurance for preventive 
services preserves an encounter-based rate, and the calculation is 
similar to the current coinsurance calculation based on charges. 
However, this calculation is fairly complex for the claims processing 
systems. It may also be difficult for providers to replicate, and FQHCs 
might not know how much coinsurance would be assessed before the MAC 
issues the remittance advice.
    As an alternative approach, we considered unbundling all services 
when a FQHC claim includes a mix of preventive and non-preventive 
services, and we would exclude these types of claims from calculation 
of the FQHC base encounter rate. We would use payments under the 
Medicare PFS to pay separately for every service listed on the claim. 
While this approach is inconsistent with an all-inclusive payment, it 
would simplify waiving coinsurance for preventive services and pay 
preventive services comparably to PFS settings. However, the vast 
majority of FQHC claims list only one HCPCS, and unbundling all 
services introduces coding complexity that might underpay FQHCs for an 
encounter if they do not code all furnished ancillary services. In 
addition, payment for preventive services under the PFS will be less, 
in many cases, than the PPS encounter rate.
    Instead of unbundling all services when a FQHC claim includes a mix 
of preventive and nonpreventive services, we considered the use of PFS 
payment rates to pay separately for preventive services billed on the 
FQHC claim, while paying for the non-preventive services under the FQHC 
PPS rate. However, this would be problematic when the preventive 
services represent the service that would qualify the claim as a FQHC 
encounter (for example, IPPE, AWV, MNT). Under current payment policy, 
the remaining ancillary services would not be eligible for an encounter 
payment without an additional, qualifying visit on the same claim.
    We also considered using the dollar value of the coinsurance that 
would be waived under the PFS to reduce the FQHC encounter-based 
coinsurance amount when preventive services appear on the claim. 
However, this could lead to anomalous results, such as negative 
coinsurance if the preventive service(s) would have been paid more 
under the PFS than the FQHC PPS rate, and the amount of coinsurance 
waived under the PFS would exceed 20 percent of the FQHC PPS rate. We 
also were concerned that the reduction in coinsurance would seem 
insufficient if the payment rate for the preventive service(s) was very 
low under the PFS.
    We believe that using the proportionality of PFS payments to 
determine the coinsurance waiver would facilitate the waiving of 
coinsurance while preserving the all-inclusive nature of the encounter-
based rate with the least billing complexity. Therefore, we propose 
that where preventive services are coded on a claim, we would use 
payments under the PFS to determine the proportional amount of 
coinsurance that should be waived for payments based on the PPS 
encounter rate. We invite public comment on how this proposal would 
impact FQHCs' administrative procedures and billing practices.
5. Cost Reporting
    Under section 1815(a) of the Act, providers participating in the 
Medicare program are required to submit financial and statistical 
information to achieve settlement of costs relating to health care 
services rendered to Medicare beneficiaries. This information is 
required for determining Medicare payment for FQHC services under 42 
CFR 405, Subpart X.
    The Medicare cost reporting forms show the costs incurred and the 
total number of visits for FQHC services during the cost reporting 
period. Using this information, the MAC determines the total payment 
amount due for covered services furnished to Medicare beneficiaries. 
The MAC compares the total payment due with the total payments made for 
services furnished during the reporting period. If the total payment 
due exceeds the total payments made, the difference is made up by a 
lump sum payment. If the total payment due is less than the total 
payments made, the overpayment is collected.
    Under the FQHC PPS, Medicare payment for FQHC services will be made 
based on a predetermined national rate. For services included in the 
FQHC PPS rate, Medicare cost reports would not be used to reconcile 
Medicare payments with FQHC costs. However, the statute does not exempt 
FQHCs from submitting cost reports. In addition, Medicare payments for 
the reasonable costs of the influenza and pneumococcal vaccines and 
their administration, allowable graduate medical education costs, and 
bad debts would continue to be determined and paid through the cost 
report. We are also considering revisions to the cost reporting forms 
and instructions that would provide us with information that would 
improve the quality of our cost estimates, such as the reporting of a 
FQHC's overall and Medicare specific CCR. We are also considering the 
types of cost data that would facilitate the potential development of a 
FQHC market basket that could be used in base payment updates after the 
second year of the PPS. We also are exploring whether we have audit 
resources to include FQHCs in the pool of institutional providers that 
are subject to periodic cost report audits.
6. Medicare Advantage Organizations
    Section 10501(i)(3)(C) of the Affordable Care Act added section 
1833(a)(3)(B)(i)(II) to the Act to require that FQHCs that contract 
with MA organizations be paid at least the same amount they would have 
received for the same service under the FQHC PPS.

[[Page 58399]]

This provision ensures FQHCs are paid at least the Medicare amount for 
FQHC services, whether such amount is set by section 1833(a)(3) of the 
Act or section 1834(o) of the Act. Consistent with current policy, if 
the MA organization contract rate is lower than the amount Medicare 
would otherwise pay for FQHC services, FQHCs that contract with MA 
organizations would receive a wrap-around payment from Medicare to 
cover the difference. If the MA organization contract rate is higher 
than the amount Medicare would otherwise pay for FQHC services, there 
is no additional payment from Medicare. We propose to revise Sec.  
405.2469 to reflect this provision.

III. Additional Proposed Changes Regarding FQHCs and RHCs

A. Rural Health Clinic Contracting

    Due to the difficulty in recruiting and retaining physicians in 
rural areas, RHCs have had the option of hiring physicians either as 
RHC employees or as contractors. However, in order to promote stability 
and continuity of care, the Rural Health Clinic Services Act of 1977 
required RHCs to employ a physician assistant or nurse practitioner 
(section 1861(aa)(2)(iii) of the Act). We have interpreted the term 
``employ'' to mean that the employer issues a W-2 form to the employee. 
Section 405.2468(b)(1) currently states that RHCs are not paid for 
services furnished by contracted individuals other than physicians, and 
Sec.  491.8(a)(3) does not authorize RHCs to contract with RHC 
practitioners other than physicians.
    In the more than 30 years since this legislation was enacted, the 
health care environment has changed dramatically, and RHCs have 
requested that they be allowed to enter into contractual agreements 
with non-physician RHC practitioners as well as physicians. To provide 
RHCs with greater flexibility in meeting their staffing requirements, 
we propose to revise Sec.  405.2468(b)(1) by removing the parenthetical 
``RHCs are not paid for services furnished by contracted individuals 
other than physicians,'' and revising Sec.  491.8(a)(3) to allow non-
physicians to furnish services under contract in RHCs, when at least 
one NP or PA is employed.
    The ability to contract with NPs, PAs, CNMs, CP, and CSWs would 
provide RHCs with additional flexibility with respect to recruiting and 
retaining non-physician practitioners. Practitioners should be employed 
or contracted to the RHC in a manner that enhances continuity and 
quality of care.
    RHCs would still be required, under section 1861(aa)(2)(iii) of the 
Act, to employ a PA or NP. However, as long as there is at least one PA 
or NP employed at all times (subject to the waiver provision for 
existing RHCs set forth at section 1861(aa)(7) of the Act), an RHC 
would be free to enter into contracts with other PAs, NPs, CNM, CPs or 
CSWs.

B. Technical and Conforming Changes

    In addition to proposing to codify the statutory requirements for 
the FQHC PPS in this proposed rule and proposing to allow RHCs to 
contract with non-physician practitioners, we are proposing edits to 
correct terminology, clarify policy, delete irrelevant code, and make 
conforming changes for existing mandates and the new PPS. Some of these 
changes include the following:
     Removing the terms ``fiscal intermediary and carriers'' 
and replacing them with ``Medicare Administrative Contractor'' or 
``MAC''. Section 911 of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 established the MACs to administer the 
work that was done by fiscal intermediaries and carriers in 
administering Medicare programs.
     Removing the payment limitations for treatment of mental 
psychoneurotic or personality disorders. This payment limitation is 
being phased out and will no longer be in effect beginning January 1, 
2014.
     Updating the regulations to reflect section 410 of the 
Medicare Modernization Act of 2003 to exclude RHC and FQHC services 
furnished by physicians and certain other specified types of 
nonphysician practitioners from consolidated billing under section 
1888(e)(2)(A)(ii) of the Act and allows such services to be separately 
billable under Part B when furnished to a SNF resident of a skilled 
nursing facility (SNF) during a covered Part A stay (see the July 30, 
2004 final rule (69 FR 45818 through 45819). This statutory provision 
was effective with services furnished on or after January 1, 2005 and 
was previously implemented through program instruction (CMS Pub. 100-
04, Medicare Claims Processing Manual, chapter 6, Sec.  20.1.1).

IV. Clinical Laboratory Improvement Amendments of 1988 (CLIA)--
Enforcement Actions for Proficiency Testing Referral

A. Background

    On October 31, 1988, Congress enacted the Clinical Laboratory 
Improvement Amendments of 1988 (CLIA), Pub. L. 100-578. The purpose of 
CLIA is to ensure the accuracy and reliability of laboratory testing 
for all Americans. Under this authority, which was codified at 42 
U.S.C. 263a, the Secretary issued regulations implementing CLIA on 
February 28, 1992 at 42 CFR part 493 (57 FR 7002). The regulations 
specify the standards and specific conditions that must be met to 
achieve and maintain CLIA certification. CLIA certification is required 
for all laboratories, including but not limited to those that 
participate in Medicare and Medicaid, which test human specimens for 
the purpose of providing information for the diagnosis, prevention, or 
treatment of any disease or impairment, or the assessment of health, of 
human beings.
    The regulations require laboratories conducting moderate or high-
complexity testing to enroll in an HHS-approved proficiency testing 
(PT) program that covers all of the specialties and subspecialties for 
which the laboratory is certified and all analyses listed in Subpart I 
of the CLIA regulations. As of June 2013, there were 239,922 CLIA 
certified laboratories. Of these laboratories, 35,035 are required to 
enroll in an HHS-approved PT program and are subject to all PT 
regulations.
    Congress emphasized the importance of PT when it drafted the CLIA 
legislation. For example, in discussing their motivation in enacting 
CLIA, the Committee on Energy and Commerce noted that it ``focused 
particularly on proficiency testing because it is considered one of the 
best measures of laboratory performance'' and that proficiency testing 
``is arguably the most important measure, since it reviews actual test 
results rather than merely gauging the potential for good results.'' 
(See H.R. Rep. No. 100-899, at 15 (1988).) The Committee surmised that, 
left to their own devices, some laboratories would be inclined to treat 
PT samples differently than their patient specimens, as they would know 
that the laboratory would be judged based on its performance in 
analyzing those samples. For example, such laboratories might be 
expected to perform repeated tests on the PT sample, use more highly 
qualified personnel than are routinely used for such testing, or send 
the samples out to another laboratory for analysis. As such practices 
would undermine the purpose of PT, the Committee noted that the CLIA 
statute was drafted to bar laboratories from such practices, and to 
impose significant penalties on those who elect to violate those bars 
(H.R. Rep. No. 100-899, at 16 and 24 (1988)).
    PT is a valuable tool the laboratory can use to verify the accuracy 
and

[[Page 58400]]

reliability of its testing. During PT, an HHS-approved PT program sends 
samples to be tested by a laboratory on a scheduled basis. After 
testing the PT samples, the laboratory reports its results back to the 
PT program for scoring. Review and analysis of PT reports by the 
laboratory director will alert the director to areas of testing that 
are not performing as expected and may also indicate subtle shifts or 
trends that, over time, could affect patient results. As there is no 
on-site, external proctor for PT testing in a laboratory, the testing 
relies in large part on an honor system. The PT program places heavy 
reliance on each laboratory and laboratory director to self-police 
their analysis of PT samples to ensure that the testing is performed in 
accordance with the CLIA requirements. For each PT event, laboratories 
are required to attest that PT samples are tested in the same manner as 
patient specimens are tested. PT samples are to be assessed by 
integrating them into the laboratory's routine patient workload, and 
the testing itself is to be conducted by the personnel who routinely 
perform such testing, using the laboratory's routine methods. The 
laboratory is barred from engaging in interlaboratory communication 
pertaining to results prior to the PT program's event cut-off date and 
must not send the PT samples or any portion of the PT samples to 
another laboratory for testing, even if it would normally send a 
patient specimen to another laboratory for testing.
    Any laboratory that intentionally refers its PT samples to another 
laboratory for analysis risks having its certification revoked for at 
least 1 year, in which case, any owner or operator of the laboratory 
risks being prohibited from owning or operating another laboratory for 
2 years (42 CFR 493.1840(a)(8), (b)). The phrase ``intentionally 
referred'' has not been defined by the statute or regulations, but we 
have consistently interpreted this phrase from the onset of the program 
to mean general intent, as in intention to act. Whether or not acts are 
authorized or even known by the laboratory's management, a laboratory 
is responsible for the acts of its employees. Among other things, 
laboratories need to have procedures in place and train employees on 
those procedures to prevent staff from forwarding PT samples to other 
laboratories even in instances in which they would normally forward a 
patient specimen for testing.
    In the February 7, 2013 Federal Register (78 FR 9216), we published 
a proposed rule titled Part II--Regulatory Provisions to Promote 
Program Efficiency, Transparency and Burden Reduction (hereafter 
referred to as the Burden Reduction proposed rule) to propose reforms 
to the Medicare and CLIA regulations that we had identified as 
unnecessary, obsolete, or excessively burdensome. In that rule, we 
proposed changes to the CLIA PT regulations to establish policies under 
which certain PT referrals by laboratories would generally not be 
subject to revocation of their CLIA certificate or a 2 year prohibition 
on laboratory ownership or operation. To do this, we proposed a narrow 
exception in our longstanding interpretation of what constitutes an 
``intentional'' PT referral.
    While that proposed rule was under development but before its 
publication, Congress enacted the ``Taking Essential Steps for Testing 
Act of 2012'' (Pub. L. 112-202, the ``TEST Act'') on December 4, 2012. 
The TEST Act amended section 353 of the PHS Act to provide the 
Secretary with discretion as to which sanctions she would apply to 
cases of intentional PT referral.
    In the Burden Reduction proposed rule (78 FR 9216), we stated that 
we would address the TEST Act in future rulemaking, except that to 
comply with the TEST Act and begin to align the CLIA regulations with 
the amended CLIA statute, we proposed to revise the second sentence of 
Sec.  493.801(b)(4) to state that a laboratory may (as opposed to 
``must'') have its CLIA certification revoked when CMS determines PT 
samples were intentionally referred to another laboratory.
    The regulatory changes that we are now proposing would add the 
remaining policies and regulatory changes needed to fully implement the 
TEST Act.

B. Proposed Changes

    As noted earlier, the TEST Act provided the Secretary with the 
discretion to substitute intermediate sanctions in lieu of the 2 year 
prohibition on the owner and operator when a CLIA certificate is 
revoked due to intentional PT referral, and to consider imposing 
alternative sanctions in lieu of revocation in such cases as well. The 
TEST Act provides the Secretary with the opportunity to frame policies 
that will achieve a better correlation between the nature and extent of 
intentional PT referrals at a given laboratory, and the scope and type 
of sanctions or corrective actions that are imposed on that laboratory 
and its owners and operators, as well as any consequences to other 
laboratories owned or operated by those owners and operators.
    We are proposing to divide the sanctions for PT referral into three 
categories based on severity and extent of the referrals. The first 
category is for the most serious, egregious violations, encompassing 
cases of repeat PT referral or cases where a laboratory reports another 
laboratory's test results as its own. In such cases, we do not believe 
that alternative sanctions would be appropriate. Therefore, we are 
proposing to revoke the CLIA certificate for at least 1 year in 
instances in which a laboratory has a repeat proficiency testing 
referral, ban the owner and operator from owning or operating a CLIA-
certified laboratory for at least 1 year, and may also impose a civil 
monetary penalty (CMP). In keeping with the February 7, 2013 proposed 
rule (78 FR 9216), we propose to define, at Sec.  493.2, ``a repeat 
proficiency testing referral'' as ``a second instance in which a 
proficiency testing sample, or a portion of a sample, is referred, for 
any reason, to another laboratory for analysis prior to the 
laboratory's proficiency testing program event cut-off date within the 
period of time encompassing the two prior survey cycles (including 
initial certification, recertification, or the equivalent for 
laboratories surveyed by an approved accreditation organization).'' We 
believe that a repeat PT referral warrants revocation of a laboratory's 
CLIA certificate for at least 1 year because such laboratories have 
already been given opportunity to review their policies, correct their 
deficiencies and adhere to regulations, and adherence to the 
laboratory's established policy, and ensure effective training of their 
personnel. As there is no on-site, external proctor for PT testing in a 
laboratory, the testing relies in large part on an honor system. 
Therefore, when a PT referral has previously occurred prior to the 
event cut-off date within the two prior survey cycles, we do not 
believe that laboratories should be given additional opportunities to 
ensure that they are meeting the CLIA PT requirements and believe that 
revocation of the CLIA certificate should consequently occur. We also 
propose, in the first category, that the CLIA certificate be revoked, 
and the owner and operator banned from owning or operating a CLIA-
certified laboratory for at least 1 year, in cases where the PT sample 
was referred to another laboratory, the referring laboratory received 
the results from the other laboratory, and the referring laboratory 
reported to the PT program the other laboratory's results on or before 
the event cut-off date. We note that PT

[[Page 58401]]

programs place heavy reliance on each laboratory and laboratory 
director to self-police their analysis of PT samples to ensure that the 
testing is performed in accordance with the CLIA requirements. PT 
performance and scores must reflect an individual laboratory's 
performance, and as such, reporting results from another laboratory is 
deceptive to the public. We believe these two scenarios are the most 
egregious forms of PT referral and merit the most severe sanctions.
    For example, a laboratory may have two distinct sites, Laboratory A 
and Laboratory B, that operate under different CLIA numbers, where 
Laboratory A has received PT samples to be tested as part of their 
enrollment in PT as required by the CLIA regulations. If Laboratory A 
were to refer PT samples to Laboratory B, receive test results back at 
Laboratory A from Laboratory B prior to the event cutoff date, and 
report to the PT program those results obtained from Laboratory B, the 
scores for the PT event would not reflect the performance of Laboratory 
A, but rather the performance of Laboratory B. Since the PT scores 
would actually be reflective of the accuracy and reliability at 
Laboratory B rather than A, the purpose of the proficiency testing 
would be undermined. Further, as stated in the CLIA regulations at 
Sec.  493.801(4)(ii), the laboratory must make PT results available to 
the public. In this scenario, any member of the public who sought to 
use the reported PT scores to select a high-quality laboratory would be 
deceived by the scores for the results submitted to the PT program, as 
they would expect that they were provided information about the 
performance of Laboratory B when that would not be the case.
    In cases of PT referral where the CLIA certificate is revoked, the 
TEST Act provides the Secretary with discretion to ban the owner and 
operator from owning or operating a CLIA-certified laboratory for less 
than 2 years. Prior to the TEST Act, revocation of a CLIA certificate 
for PT violation always triggered a 2-year ban on the owner and 
operator. We are also proposing that the laboratory owner and operator 
would be banned from owning or operating a CLIA-certified laboratory 
for at least 1 year for any violation within the first category 
involving the revocation of a CLIA certificate.
    We believe that a second category of sanctions should be applied to 
certain PT referral situations in which the CLIA certificate would be 
suspended or limited (rather than revoked), in combination with 
alternative sanctions. We propose to use this approach in those 
instances in which a laboratory refers PT samples to a laboratory that 
operates under a different CLIA number before the PT event close date 
and, while the laboratory reports its own results to the PT program, it 
receives results from the second laboratory prior to the event close 
date. Such a referral situation would allow the referring laboratory an 
opportunity to confirm, check, or change its results prior to reporting 
its results to the PT program. If, upon investigation, surveyors 
determine that the referral does not constitute a repeat PT referral, 
we propose to suspend or limit the CLIA certificate for less than 1 
year rather than revoke the CLIA certificate, and propose that we also 
impose alternative sanctions (as an alternative to revocation of the 
CLIA certificate). Further, an alternative sanction would always 
include required training of staff.
    A suspension of the CLIA certificate means that no testing of human 
specimens for health care purposes may be performed by that laboratory 
during the period of suspension. In such cases, the owner or operator 
typically contracts out for laboratory services, or contracts with 
another operator to operate the laboratory under the contracted 
laboratory's CLIA certificate. In contrast to revocation of the CLIA 
certificate and its accompanying ban on the owner and operator, 
suspension usually applies only to the individual laboratory in 
question rather than all laboratories that are under the control of the 
owner or operator.
    A limitation of the CLIA certificate means that the laboratory is 
not permitted to perform testing or to bill Medicare or Medicaid for 
laboratory work in the specialty or subspecialty that has been limited, 
but may continue to conduct all other testing under its own CLIA 
certificate.
    In determining whether to suspend or limit the CLIA certificate, we 
propose to apply the criteria of Sec.  493.1804(d). For example, we 
would examine the extent of the PT referral practice as well as its 
duration. We propose that if surveyors determine that in the prior two 
survey cycles there were prior PT referrals that occurred but were not 
cited by CMS, then the CLIA certificate would always be suspended 
rather than just limited. The duration of the suspension would reflect 
the number of samples referred, the period of time the referrals had 
been occurring, the extent of the practice, and other criteria 
specified at Sec.  493.1804(d).
    Further, for cases in the second category we propose that when the 
certificate is suspended or limited, alternative sanctions would be 
applied in addition to the principal sanctions of suspension or 
limitation. We propose that, at a minimum, the alternative sanctions 
would include a CMP to be determined using the criteria set forth in 
Sec.  493.1834, as well as a directed plan of correction. Additionally, 
if the CLIA certificate is suspended, we propose to also impose state 
on-site monitoring of the laboratory.
    We believe that a third category of sanctions should be applied to 
those PT referral scenarios in which the referring laboratory does not 
receive test results prior to the event cut-off date from another 
laboratory as a result of the PT referral. We propose that in such 
scenarios, at a minimum, the laboratory will always be required to pay 
a CMP as calculated according to Sec.  493.1834, as well as comply with 
a directed plan of correction. A directed plan of correction would 
always include training of staff.
    For example, a laboratory may place PT samples in an area where 
other patient specimens are picked up by courier to take to a reference 
laboratory. The reference laboratory courier may take the PT samples 
along with the patients' specimens. The laboratory personnel notice 
that the PT samples are missing and contact the reference laboratory to 
inquire if they have received the PT samples along with the patients' 
specimens. The reference laboratory is instructed to discard the PT 
samples and not test them since they were picked up in error. In this 
case, the ``referring'' laboratory realized the error, contacted the 
receiving laboratory, and did not receive results back for any of the 
PT samples. In this scenario, we propose to impose only alternative 
sanctions. We welcome comments about other scenarios in which you 
believe lesser sanctions may also be appropriate.
    In determining whether to impose alternative sanctions, we propose 
to rely on the existing considerations at Sec.  493.1804(c) and (d), 
Sec.  493.1806(c), Sec.  493.1807(b), Sec.  493.1809 and, in the case 
of civil money penalties, Sec.  493.1834(d). These current regulations 
have proven effective as enforcement measures over time for CLIA 
noncompliance for all circumstances other than PT referral. We 
therefore believe these same criteria will be effective in the 
imposition of alternative sanctions for PT referral cases.
    In summary, we propose to amend Sec.  493.1840 by revising 
paragraph (b) to specify three categories for the imposition of 
sanctions for PT referrals. We believe these provisions, as amended, 
would provide the necessary detail to fairly and uniformly apply the 
discretion granted to the Secretary under the TEST Act, without being 
so

[[Page 58402]]

specific as to defeat the intent to provide appropriate flexibility 
when taking punitive or remedial action in the context of a PT referral 
finding.
    We also propose to make three conforming changes to the CLIA 
regulations at the authority citation for Part 493 and at Sec.  493.1 
and Sec.  493.1800(a)(2) to include references to the Public Health 
Service Act as amended by the TEST Act.
    We invite the public to comment on our proposed categorization of 
potential PT referral situations, the criteria we propose for assessing 
the scope and severity of any violation, and the types of sanctions 
that correspond to each category.

V. Other Required Information

A. Requests for Data From the Public

    Commenters can gain access to summarized FQHC data on an expedited 
basis by downloading the files listed in this section, which are 
available on the Internet without charge. For detailed claims data, 
requestors would follow the current research request process which can 
be found on the Research Data Assistance Center (ResDAC) Web site at 
http://www.resdac.org/.
    1. FQHC Summary Data. This file contains data summarized by CCN, 
which can be used to model the proposed methodology and calculate 
projected payments and impacts under the proposed PPS. The data file is 
available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/FQHCPPS/index.html.
    2. FQHC Proposed GAFs. This file contains the listed of proposed 
GAFs by locality, as published in Addendum A of this proposed rule. The 
data file is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/FQHCPPS/index.html.
    3. HCRIS Cost Report Data. The data included in this file was 
reported on Form CMS-222-92. The dataset includes only the most current 
version of each cost report filed with CMS and includes cost reports 
with fiscal year ending dates on or after September 30, 2009. HCRIS 
updates this file on a quarterly basis. The data file is available at 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/CostReports/HealthClinic.html.

B. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on the information collection 
requirements (ICRs) regarding the proposed FQHC rates and adjustments 
in Sec.  405.2470.
    Section II. of this proposed rule discusses the data that are used 
in computing the FQHS PPS rates and adjustments. As discussed, the data 
are derived from the RHC/FQHC cost report form CMS-222-92, and claims 
form UB-04 CMS 1450 (per CMS Pub. 100-04, Medicare Claims Processing 
Manual, Chapter 1). The reporting requirements for FQHCs are inSec.  
405.2470 of the Medicare regulations. We note that, while the preamble 
does not contain any new ICRs, there is currently an OMB approved 
information collection request associated with the RHC/FQHC cost 
report. The OMB control number is 0938-0107, with an expiration date of 
August 31, 2014.
    If you comment on this information collection and recordkeeping 
requirement, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
[CMS-1443-P] Fax: (202) 395-6974; or Email: [email protected].

VI. Response to Comments

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

VII. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule is necessary to establish a methodology and 
payment rates for a PPS for FQHC services under Medicare Part B 
beginning on October 1, 2014, in compliance with the statutory 
requirements of section 10501(i)(3)(A) of the Affordable Care Act. This 
proposed rule also is necessary to make--(1) contracting changes for 
RHCs; (2) conforming changes to other policies related to FQHCs and 
RHCs; (3) changes to enforcement actions for improper proficiency 
testing referrals.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), 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 Orders 12866 and 13563 direct 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). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100

[[Page 58403]]

million or more in any 1 year). This proposed rule is an economically 
significant rule because we estimate that the FQHC PPS will increase 
payments to FQHCs by more than $100 million in 1 year. We believe that 
this regulation would not have a significant financial impact on RHCs. 
We estimate that this rulemaking is ``economically significant'' as 
measured by the $100 million threshold, and hence also a major rule 
under the Congressional Review Act. Accordingly, we have prepared a RIA 
that, to the best of our ability, presents the costs and benefits of 
the rulemaking.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government 
jurisdictions. All RHCs and FQHCs are considered to be small entities. 
The great majority of hospitals and most other health care providers 
and suppliers are small entities, either by being nonprofit 
organizations or by meeting the SBA definition of a small business 
(having revenues of less than $7.0 million to $35.5 million in any 1 
year). The provisions in this proposed rule have an average of 30 
percent increase in Medicare PPS payment to FQHCs and no financial 
impact on RHCs. 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 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. As its measure of 
significant economic impact on a substantial number of small entities, 
HHS uses a change in revenue of more than 3 to 5 percent. We are not 
preparing an analysis for section 1102(b) of the Act, because we have 
determined that this proposed rule would not have a significant impact 
on the operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2013, that 
is approximately $141 million. This proposed rule does not include any 
mandates that would impose spending costs on state, local, or tribal 
governments in the aggregate, or by the private sector, that would 
exceed the threshold of $141 million.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct compliance costs on state 
and local governments, preempts state law, or otherwise has Federalism 
implications. This proposed rule would not have a substantial effect on 
state and local governments, preempt state law, or otherwise have 
Federalism implications.
    This proposed regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.

C. Limitations of Our Analysis

    Our quantitative analysis presents the projected effects of our 
proposed policy changes, as well as statutory changes effective on 
FQHCs for cost reporting periods beginning on or after October 1, 2014. 
We estimated the effects of individual proposed policy changes by 
estimating payments per visit while holding all other payment policies 
constant. We use the best data available, but, generally, we do not 
attempt to make adjustments for future changes in such variables as the 
number of visits or the prevalence of new patients or comprehensive 
initial Medicare visits furnished to Medicare beneficiaries. To the 
extent that there are changes in the volume and mix of services 
furnished by FQHCs, the actual impact on total Medicare revenues will 
be different from those shown in Table 2 (Impact of the PPS on Payments 
to FQHCs).

D. Anticipated Effects of the FQHC PPS

1. Effects on FQHCs
    As required by section 1834(o)(2)(B)(i) of the Act, initial 
payments (Medicare and coinsurance) under the FQHC PPS must equal 100 
percent of the estimated amount of reasonable costs, as determined 
without the application of the current system's UPLs or productivity 
standards that can reduce a FQHC's per visit rate. As discussed in 
sections I and II. of this proposed rule, we propose to pay FQHCs a 
single encounter-based rate per beneficiary per day, adjusting for 
geographic differences in the cost of inputs by applying an adaptation 
of the GPCI used to adjust payment under the PFS, and further adjusting 
the encounter-based rate when a FQHC furnishes care to a patient that 
is new to the FQHC or to a beneficiary receiving a comprehensive 
initial Medicare visit (that is, an IPPE an initial AWV).
    Based on comparisons of the proposed PPS rate to the AIRs (as 
listed on the FQHC cost reports), the proposed FQHC PPS is estimated to 
have an overall impact of increasing total Medicare payments to FQHCs 
by approximately 30 percent. The FQHC PPS is effective for cost reports 
beginning on or after October 1, 2014. This impact is fully implemented 
when all FQHCs are paid under the FQHC PPS and reflects the additional 
payment rate update based on the MEI for all of 2015 (fiscal year 
through the end of the calendar year). (See section II.E. of this 
proposed rule for a discussion of the use of the MEI update to 
calculate the first year's base payment amount under the FQHC PPS.)
    Table 2 shows the impact on cost reporting entities and their 
associated delivery sites of the fully implemented proposed FQHC PPS 
payments compared to current payments to FQHCs. The analysis is based 
on cost reports from freestanding FQHCs with cost reporting periods 
ending between June 30, 2011, and June 30, 2012. A FQHC with multiple 
sites has the option of filing a consolidated cost report, and this 
sample reflects 1,141 cost reporting entities that represent 3,509 
delivery sites. The following is an explanation of the information 
represented in Table 2:
     Column A (Number of cost-reporting entities): This column 
shows the number of cost-reporting entities for each impact category. 
Urban/rural status and census division were determined based on the 
geographic location of the cost reporting entity. Categories for 
Medicare volume were defined from cost report data, based on tertiles 
for the percent of total visits that were identified as Medicare 
visits. Categories for total volume were defined from cost report data, 
based on tertiles for the total number of visits for each cost 
reporting entity.
     Column B (Number of delivery sites): This column shows the 
number of delivery sites associated with the cost reporting entities in 
each impact category. (Note that delivery sites that are part of a 
consolidated cost reporting entity might not fall into the same impact 
category if considered individually. For example, a cost reporting 
entity could include delivery sites in multiple census division, and 
delivery sites were categorized based on the geographic location of the 
cost reporting entity).

[[Page 58404]]

     Column C (Number of Medicare visits): This column shows 
the number of Medicare visits in the final data set that were used to 
model payments under the FQHC PPS.
     Column D (Effect of statutorily required changes): This 
column shows the estimated fully implemented combined impact on 
payments to FQHCs of changes to the payment structure that are required 
by statute. Removing both the UPL and the productivity screen is 
estimated to increase total Medicare payments to FQHCs by about 28 
percent. The combined impact in column D also reflects the FQHC PPS 
requirement to calculate payment based on the costs of all FQHCs, 
rather than on an individual FQHC's costs. We note that the impacts for 
column D through H reflect the growth in the MEI from July 1, 2012 
through September 30, 2014, prior to the application of the forecasted 
MEI update for the 15-month period of October 1, 2014 through December 
31, 2015.
     Columns E through H (Effects of the Proposed Adjustments 
to the Average Cost per Visit): These columns show the estimated fully 
implemented impacts on Medicare payments to FQHCs due to the proposed 
policy changes. In developing the Medicare FQHC PPS, section 
10501(i)(3)(A) of the Affordable Care Act requires CMS to take into 
account the type, intensity, and duration of FQHC services, and allows 
other adjustments, such as geographic adjustments. As discussed in 
section II.C of this proposed rule, the cost report data are 
insufficient for modeling these types of adjustments, and we propose to 
use the HCPCS codes in the FQHC claims data to support the development 
of the FQHC PPS rate and adjustments and for making payment under the 
PPS. As demonstrated in columns E-H, the overall effect of these 
various adjustments is budget neutral.
     Column E (Effect of daily visit (per diem) rate): This 
column shows the estimated fully implemented impact on payments to 
FQHCs of the proposal to pay a single encounter-based rate per 
beneficiary per day, which eliminates the current exceptions that pay 
for more than one visit per beneficiary per day. As it is uncommon for 
FQHCs to bill more than one visit per day for the same beneficiary 
(less than 0.5 percent of visits), this adjustment would have minimal 
effect on most FQHCs.
     Column F (Effect of new patient/initial visit adjustment): 
This column shows the estimated fully implemented impact on payments to 
FQHCs of the proposal to adjust the encounter-based rate by 1.3333 when 
a FQHC furnished care to a patient that was new to the FQHC or to a 
beneficiary receiving a comprehensive initial Medicare visit. As new 
patients and initial Medicare visits accounted for approximately 3 
percent of all FQHC visits, this adjustment would have limited 
reduction on the base encounter rate, after application of budget 
neutrality, and a limited redistribution effect among FQHCs.
     Column G (Effect of the GAF): This column shows the 
estimated fully implemented impact on payments to FQHCs of the proposal 
to adjust payments for geographic differences in costs by applying an 
adaptation of the GPCIs used to adjust payment for physician work and 
practice expense under the PFS.
     Column H (Combined effect of all PPS adjustments): This 
column shows the estimated fully implemented impact on payments to 
FQHCs of the proposed adjustments in columns E through G. Both the 
individual and combined effects of these adjustments on overall 
Medicare payment to FQHCs would be zero percent as the effects of these 
adjustments would be redistributive and would not change Medicare 
payments in the aggregate.
     Column I (Combined effect of all policy changes and MEI 
adjustment): This column shows the estimated fully implemented impact 
on payments to FQHCs of removing the UPL and productivity screen in 
Column D, the adjustments to the PPS rates in the preceding columns, 
and the application of the forecasted MEI update for the 15-month 
period of October 1, 2014 through December 31, 2015.

                                                                         Table 2--Impact of the PPS on Payments to FQHCs
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                            Combined
                                                                                                          Effect of    Effect of    Effect of    Effect of     Combined    effect of
                                                                                Number of    Number of   statutorily  daily visit  new patient/  geographic   effect of    all policy
                         Number of cost[dash]reporting entities                  delivery     Medicare     required    (per diem)    initial     adjustment    all PPS    changes and
                                                                                  sites        visits      changes        rate        visit        factor    adjustments      MEI
                                                                                                          (percent)    (percent)    adjustment     (GAF)      (percent)    adjustment
                                                                                                                                    (percent)    (percent)                 (percent)
           (A)...............................................................          (B)          (C)          (D)          (E)          (F)          (G)          (H)          (I)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All FQHCs  1,141.............................................................        3,509    5,245,961         28.0          0.0          0.0          0.0          0.0         30.2
Urban/
 rural
 Status:
    Urban  647...............................................................        1,756    2,518,395         21.8         -0.2          0.0          3.1          3.0         27.6
    Rural  348...............................................................          820    1,385,116         39.3          0.2         -0.9         -3.1         -3.0         37.4
    Mixed  146...............................................................          933    1,342,450         29.6          0.2          0.0         -2.7         -2.5         28.5
     rura
     l-
     urba
     n...
Medicare
 Volume:
    Low    380...............................................................        1,039      851,771         22.6         -0.1          0.2          3.3          3.4         28.9
     (<6.
     9%
     of
     tota
     l
     visi
     ts).
    Mediu  381...............................................................        1,235    1,751,498         25.5         -0.1          0.1          0.0          0.5         28.2
     m
     (6.9
     %-13
     .2%
     of
     tota
     l
     visi
     ts).
    High   380...............................................................        1,237    2,642,692         31.7          0.1         -0.2         -1.3         -1.4         32.0
     (>13
     .2%
     of
     tota
     l
     visi
     ts).
Total
 Volume:
    Low    380...............................................................          502      426,346         31.8          0.0          0.1         -0.1          0.0         34.1
     (<17
     ,340
     tota
     l
     visi
     ts).
    Mediu  381...............................................................          903    1,253,817         29.6          0.0          0.1         -1.6         -1.5         29.8
     m
     (17,
     340-
     42,7
     11
     tota
     l
     visi
     ts).
    High   380...............................................................        2,123    3,565,798         27.1          0.0         -0.1          0.6          0.5         29.9
     (>42
     ,711
     tota
     l
     visi
     ts).
Census
 Division
 :
    New    92................................................................          236      657,794         25.7         -0.4         -0.2          1.8          1.2         29.3
     Engl
     and.
    Middl  108...............................................................          314      457,798         23.1          0.1          0.0          3.1          3.2         29.1
     e
     Atla
     ntic
    East   143...............................................................          460      603,034         29.2         -0.2          0.1         -2.7         -2.7         27.7
     Nort
     h
     Cent
     ral.
    West   78................................................................          201      248,891         29.2          0.0          0.1         -5.1         -5.1         24.6
     Nort
     h
     Cent
     ral.
    South  187...............................................................          688    1,049,755         31.0          0.2          0.0         -3.0         -2.9         29.3
     Atla
     ntic
    East   83................................................................          317      374,386         36.1          0.1          0.0         -6.8         -6.7         29.2
     Sout
     h
     Cent
     ral.
    West   107...............................................................          287      337,375         29.4          0.1          0.2         -5.3         -5.0         25.0
     Sout
     h
     Cent
     ral.
    Mount  87................................................................          311      368,666         29.2         -0.1          0.3         -2.1         -1.9         28.9
     ain.
    Pacif  252...............................................................          690    1,145,897         24.8          0.1         -0.1          7.5          7.5         36.4
     ic..
    US     4.................................................................            5        2,365         36.7          0.4          1.1         -0.5          1.0         41.2
     Terr
     itor
     ies.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 58405]]

2. Effects on RHCs
    While we expect that removing the restriction on contracting will 
result in cost savings for RHCs that employ an NP or PA and will no 
longer need to conduct employment searches to meet their additional 
staffing needs, the financial impact on RHCs is expected be small and 
cannot be quantified.
    There is no Medicare impact on RHCs as a result of the 
implementation of the FQHC PPS.
3. Effects on Other Providers and Suppliers
    There would be no financial impact on other providers or suppliers 
as a result of the implementation of the FQHC PPS.
4. Effects on the Medicare and Medicaid Programs
    We estimate that annual Medicare spending for FQHCs during the 
first 5 years of implementation would increase as follows:

    Table 3--Estimated Increase in Annual Medicare Payments to FQHCs
------------------------------------------------------------------------
                                                     Estimated increase
                   Calendar year                      in payments ($ in
                                                          millions)
------------------------------------------------------------------------
2014..............................................                    33
2015..............................................                   204
2016..............................................                   226
2017..............................................                   236
2018..............................................                   248
------------------------------------------------------------------------

    We intend for estimated aggregate payments under the proposed FQHC 
PPS to equal 100 percent of the estimated amount of reasonable costs, 
as determined without the application of the current system's UPLs or 
productivity standards. We note that the estimated increase in payments 
for CY 2014 is significantly smaller than for subsequent years, 
primarily due to the implementation date of October 1, 2014, which will 
affect payments for only 3 months of CY 2014. In addition, an analysis 
of 2010 cost reporting data indicates that approximately 6 percent of 
FQHC cost reporting entities had cost reporting periods that began 
between October 1 and December 31, which indicates that we would expect 
a small percentage of cost reporting entities to be paid under the FQHC 
PPS between October 1, 2014 and December 31, 2014.
    After the first year of implementation, the PPS payment rates must 
be increased by the percentage increase in the MEI. After the second 
year of implementation, PPS rates shall be increased by the percentage 
increase in a market basket of FQHC goods and services as established 
through regulations, or, if not available, the MEI. While we will 
consider the merits of estimating a FQHC market basket for use in base 
payment updates after the second year of the PPS, payment estimates 
were updated annually by the MEI for purposes of this analysis.
    There is no financial impact on the Medicaid program as a result of 
the implementation of the Medicare FQHC PPS.
5. Effects on Medicare Beneficiaries
    FQHC PPS: As discussed in section II.E. of this proposed rule, we 
propose that coinsurance under the FQHC PPS would be 20 percent of the 
lesser of the FQHC's charge or the PPS rate. Under the current 
reasonable cost payment system, beneficiary coinsurance for FQHC 
services is assessed based on the FQHC's charge, which can be more than 
coinsurance based on the AIR. An analysis of a sample of FQHC claims 
data for dates of service between January 1, 2011 through June 30, 2012 
indicated that beneficiary coinsurance based on 20 percent of the 
FQHC's charges was approximately $23 million higher, or 18 percent 
more, than if coinsurance had been assessed based on 20 percent of the 
lesser of the FQHC's charge or the applicable all-inclusive rate.
    Based on comparisons of the proposed PPS rate to the AIRs, the 
proposed FQHC PPS is estimated to have an overall impact of increasing 
total Medicare payments to FQHCs by approximately 30 percent. This 
overall 30 percent increase translates to a 30 percent increase to 
beneficiary coinsurance if it were currently assessed based on the 
FQHC's AIR and if, under the PPS, it would always be assessed based on 
the PPS rate. Because the charge structure among FQHCs varies, and 
beneficiary liability for the same mix of FQHC services could differ 
significantly based on the differences in charge structures, we have 
insufficient data to estimate the change to beneficiary coinsurance due 
to the FQHC PPS.

E. Effects of Other Policy Changes

1. Effects of Policy Changes for FQHC's and RHC's
a. Effects of RHC Contracting Changes
    In section III.A. of this proposed rule we discuss our proposal to 
remove the restrictions on RHCs contracting with nonphysician 
practitioners when the statutory requirement to employ an NP or a PA is 
met would provide RHCs with greater flexibility in meeting their 
staffing requirements. The ability to contract with NPs, PAs, CNMs, CP, 
and CSWs would provide RHCs with additional flexibility with respect to 
recruiting and retaining non-physician practitioners, which may result 
in increasing access to care in rural areas. There is no cost to the 
Federal government and we cannot estimate a cost savings for RHCs.
b. Effects of the FQHC and RHC Conforming Changes
    In section III.B. of this proposed rule, we present our proposals 
regarding clarifying, technical, conforming changes to the FQHC and RHC 
regulations that are necessary for implementation of the FQHC PPS. We 
believe that are no costs associated with these changes.
2. Effects of CLIA Changes for Enforcement Actions for Proficiency 
Testing Referral
    As discussed in section IV. of this proposed rule, we would make a 
number of clarifications and changes pertaining to the regulations 
governing adverse actions for PT referral under CLIA to ensure 
conformance between the TEST Act and our regulations. The TEST Act 
provides the Secretary with the discretion to apply alternative 
sanctions in lieu of potential principal sanctions in cases of 
intentional PT referral. Alternative sanctions may include any 
combination of civil money penalties, directed plan of correction (such 
as required remedial training of staff), temporary suspension of 
Medicare or Medicaid payments, or state onsite monitoring. From 2007 
through 2011 there were 41 cases of cited, intentional PT referral. Of 
these 41 cases (averaging 8 per year), we estimate that 28 (or 6 per 
year on average) may have fit the terms of this rule to have 
alternative sanctions applied. Based on discussions with the most 
recently affected laboratories that were cited for PT violations, we 
estimate that the average cost of the sanctions applicable under 
current regulations is approximately $578,400 per laboratory. The 
largest single type of cost is the expense to the laboratory or 
hospital to contract out for management of the laboratory, and to pay 
laboratory director fees, due to the 2-year ban that prohibits the 
owner and operator from owning or operating a CLIA-certified laboratory 
in accordance with revocation of the CLIA certificate. We have not 
included legal expenses in this cost estimate, as it is not possible to 
estimate the extent to which laboratories may still appeal the 
imposition of the alternative sanctions in this proposed

[[Page 58406]]

rule. If the expense of alternative sanctions averaged $150,000 per 
laboratory, we estimate the annual fiscal savings of the changes to 
average $2.6 million ($578,400 minus $150,000 for 6 laboratories). 
While the total savings may not be large, the savings to the individual 
laboratory or hospital that is affected can be significant. However, we 
note that the $2.6 million estimate may overstate or understate the 
provision's savings to laboratories. For example, if under current 
regulations the prior management is fired instead of being reassigned 
to other duties for the 2-year period, some of the costs of paying for 
the new management's salaries, benefits and training may be able to be 
drawn from funding that had previously been earmarked to pay those 
expenses for their predecessors. That is, the costs associated with the 
new employee could be offset by the savings gained when the former 
employee is terminated. Any such offset will result in lower savings 
than is estimated earlier. However, there are also unknowns that may 
result in larger savings than estimated earlier. For example, we have 
no data on whether terminated management historically received 
severance packages. If they did, those savings would have to be added 
to the savings we noted earlier. Such changes in severance payments 
would represent transfer effects of the proposed rule, rather than net 
social costs or benefits. In general, it is only to the extent that new 
laboratory directors put forth more effort than temporarily-banned 
laboratory directors (due, for example, to the need to familiarize 
themselves with laboratories they have not previously operated) or that 
support staff put forth more effort to make the new management 
arrangements than they would addressing alternative sanctions that 
society's resources would be freed for other uses by the proposed 
provision; thus, a comprehensive estimate of laboratory savings would 
represent some combination of transfers and net social benefits. While 
we recognize these potential inaccuracies in our estimates, we lack 
data to account for these considerations.

F. Alternatives Considered

    This proposed rule contains a range of policies, including some 
provisions related to specific statutory provisions. The preceding 
sections of this proposed rule provide descriptions of the statutory 
provisions that are addressed, identifies those policies when 
discretion has been exercised, presents rationale for our final 
policies and, where relevant, alternatives that were considered.

G. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4/), we have prepared an 
accounting statement table showing the classification of the impacts 
associated with implementation of this proposed rule.

       Table 4--Accounting Statement--Classification of Proposed Estimated Expenditures Under the FQHC PPS
----------------------------------------------------------------------------------------------------------------
                                                                                       Units
                                                                 -----------------------------------------------
                    Category                         Estimates                     Discount rate      Period
                                                                   Year  dollar      (percent)        covered
----------------------------------------------------------------------------------------------------------------
Transfers:
    Federal Annualized Monetized Transfers (in               183            2014               7       2014-2018
     millions)..................................             187            2014               3       2014-2018
                                                 ---------------------------------------------------------------
    From Whom to Whom...........................      Federal Government to FQHCs that receive payments under
                                                                             Medicare.
----------------------------------------------------------------------------------------------------------------

H. Conclusion

    The previous analysis, together with the remainder of this 
preamble, provides an initial Regulatory Flexibility Analysis. The 
previous analysis, together with the remainder of this preamble, 
provides a Regulatory Impact Analysis.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

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

42 CFR Part 491

    Grant programs--health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements, Rural areas.

42 CFR Part 493

    Administrative practice and procedure, Grant programs--health, 
Health facilities, Laboratories, Medicaid, Medicare, Penalties, 
Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR parts 405, 491, and 493 as 
set forth below:

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

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

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

0
2. Section 405.2400 is revised to read as follows:


Sec.  405.2400  Basis.

    Subpart X is based on the provisions of the following sections of 
the Act: Section 1833--Amounts of payment for supplementary medical 
insurance services. Section 1861(aa)--Rural health clinic services and 
Federally qualified health center services covered by the Medicare 
program. Section1834(o)--Federally qualified health center prospective 
payment system beginning October 1, 2014.
0
3. In Sec.  405.2401, paragraph (b) is amended as follows:
0
A. Removing the definition of ``Act''.
0
B. Revising the definition of ``Allowable costs''.
0
C. Removing the definition of ``Carrier''.
0
D. Adding the definitions of ``Certified nurse midwife (CNM),'' 
``Clinical psychologist (CP)'', and ``Clinical social worker (CSW)''.
0
E. Revising the definitions of ``Coinsurance'' and ``Deductible''.
0
F. Adding the definition of ``Employee'' and ``HRSA.
0
G. Revising paragraphs (1) through (3) of the definition of ``Federally 
qualified health center''.
0
H. Removing the definition of ``Intermittent nursing care''.

[[Page 58407]]

0
I. Adding the definition of ``Medicare Administrative Contractor 
(MAC)''.
0
J. Removing the definitions of ``Nurse-midwife'', ``Nurse practitioner 
and physician assistant'', and Part-time nursing care''.
0
K. Adding the definitions of ``Physician assistant (PA)'' and 
``Prospective payment system (PPS)''.
0
L. Revising the definitions of ``Reporting period'' and ``Rural health 
clinic''.
0
M. In the definition of ``Visiting nurse services,'' removing the 
phrase ``registered nurse'' and adding in its place the phrase 
``registered professional nurse''.
    The revisions and additions read as follows:


Sec.  405.2401  Scope and definitions.

* * * * *
    (b) * * *
    Allowable costs means costs that are incurred by a RHC or FQHC that 
is authorized to bill based on reasonable costs and are reasonable in 
amount and proper and necessary for the efficient delivery of RHC and 
FQHC services.
* * * * *
    Certified nurse midwife (CNM) means an individual who meets the 
applicable education, training experience and other requirements of 
Sec.  410.77(a) of this chapter.
    Clinical psychologist (CP) means an individual who meet the 
applicable education, training experience and other requirements of 
Sec.  410.71(d) of this chapter.
    Clinical social worker (CSW) means an individual who meet the 
applicable education, training experience and other requirements of 
Sec.  410.73(a) of this chapter.
* * * * *
    Coinsurance means that portion of the RHC's charge for covered 
services or that portion of the FQHC's charge or PPS rate for covered 
services for which the beneficiary is liable (in addition to the 
deductible, where applicable).
* * * * *
    Deductible means the amount incurred by the beneficiary during a 
calendar year as specified in Sec.  410.160 and Sec.  410.161 of this 
chapter.
    Employee means any individual who, under the common law rules that 
apply in determining the employer-employee relationship (as applied for 
purposes of section 3121(d)(2) of the Internal Revenue Code of 1986), 
is considered to be employed by, or an employee of, an entity. 
(Application of these common law rules is discussed in 20 CFR 404.1007 
and 26 CFR 31.3121(d)-1(c).)
    Federally qualified health center (FQHC) * * *
    (1) Is receiving a grant under section 330 of the Public Health 
Service (PHS) Act, or is receiving funding from such a grant under a 
contract with a recipient of such a grant and meets the requirements to 
receive a grant under section 330 of the PHS Act;
    (2) Is determined by the HRSA to meet the requirements for 
receiving such a grant;
    (3) Was treated by CMS, for purposes of part B, as a comprehensive 
federally funded health center as of January 1, 1990; or
* * * * *
    HRSA means the Health Resources and Services Administration.
* * * * *
    Medicare Administrative Contractor (MAC) means an organization that 
has a contract with the Secretary to administer the benefits covered by 
this subpart.
    Nurse practitioner (NP) means individuals who meet the applicable 
education, training experience and other requirements of Sec.  
410.75(b) of this chapter.
* * * * *
    Physician assistant (PA) means an individual who meet the 
applicable education, training experience and other requirements of 
Sec.  410.74(c) of this chapter.
    Prospective payment system (PPS) means a method of payment in which 
Medicare payment is made based on a predetermined, fixed amount.
    Reporting period generally means a period of 12 consecutive months 
specified by the MAC as the period for which a RHC or FQHC must report 
required costs and utilization information. The first and last 
reporting periods may be less than 12 months.
    Rural health clinic means a facility that has--
    (1) Been determined by the Secretary to meet the requirements of 
section 1861(aa)(2) of the Act and part 491 of this chapter concerning 
RHC services and conditions for approval; and
    (2) Filed an agreement with CMS that meets the requirements in 
Sec.  405.2402 to provide RHC services under Medicare.
* * * * *
0
4. Section 405.2402 is amended as follows:
0
A. Revising the section heading.
0
B. Revising paragraphs (b) introductory text and (c) introductory text.
0
C. Revising paragraph (d).
0
D. Removing paragraph (e).
0
E. Redesignating paragraph (f) as paragraph (e).
0
F. Revising newly redesignated paragraph (e).
    The revisions read as follows:


Sec.  405.2402  Rural health clinic basic requirements.

* * * * *
    (b) Acceptance of the clinic as qualified to furnish RHC services. 
If the Secretary, after reviewing the survey agency or accrediting 
organization recommendation, as applicable, and other evidence relating 
to the qualifications of the clinic, determines that the clinic meets 
the requirements of this subpart and of part 491 of this chapter, the 
clinic is provided with--
* * * * *
    (c) Filing of agreement by the clinic. If the clinic wishes to 
participate in the program, it must--
* * * * *
    (d) Acceptance by the Secretary. If the Secretary accepts the 
agreement filed by the clinic, the Secretary returns to the clinic one 
copy of the agreement with a notice of acceptance specifying the 
effective date.
    (e) Appeal rights. If CMS declines to enter into an agreement or if 
CMS terminates an agreement, the clinic is entitled to a hearing in 
accordance with Sec.  498.3(b)(5) and (6) of this chapter.
0
5. Section 405.2403 is amended as follows:
0
A. Revising the section heading.
0
B. Amending paragraphs (a) introductory text and (a)(2) by removing the 
term ``rural health clinic'' and by adding in its place the term 
``RHC''.
0
C. Amending paragraph (a)(3)(ii)(B) by removing the term ``rural health 
clinic's'' and adding in its place the term ``RHC's''.
0
D. Amending paragraphs (a)(1), (a)(2) introductory text, (a)(3)(i), and 
(a)(4)(i) and (ii) by removing the term ``clinic'' and adding in its 
place the term ``RHC''.
    The revision reads as follows:


Sec.  405.2403  Rural health clinic content and terms of the agreement 
with the Secretary.

* * * * *
0
6. Section 405.2404 is amended as follows:
0
A. Revising the section heading.
0
B. Amending paragraphs (a) introductory text, (b)(1) introductory text, 
(b)(2), (b)(3), (c), (e) introductory text, by removing the term 
``rural health clinic'' each time it appears and by adding in its place 
the term ``RHC''.
0
C. Amending paragraph (a)(1), (a)(2)(i), (a)(2)(ii)(A), (a)(3), and 
(d)(1) by removing the term ``clinic'' each time it appears and adding 
in its place the term ``RHC''.
0
D. Amending paragraph (a)(2)(i) by removing the term ``clinic's'' and 
adding in its place the term ``RHC's''.
0
E. In paragraph (a)(2)(ii) introductory text, removing the phrase ``if 
he

[[Page 58408]]

determines'' and adding place ``if the Secretary determines''.
0
F. In paragraph (a)(3), removing the phrase ``that shall be deemed'' 
and adding in its place the phrase ``The Secretary deems it''.
0
G. In paragraph (b)(2), removing the phrase ``The Secretary will give'' 
and adding in its place the phrase ``The Secretary gives''.
    The revisions read as follows:


Sec.  405.2404  Termination of rural health clinic agreements.

* * * * *


Sec.  405.2410  [Amended]

0
7. Section 405.2410 is amended as follows:
0
A. In paragraph (a)(1), removing the term ``rural health clinic'' and 
adding in its place the term ``RHC''.
0
B. In paragraph (a)(2), removing the term ``Federally qualified health 
center'' and adding in its place the term ``FQHC''.
0
C. Revising paragraph (b).
    The revision reads as follows:


Sec.  405.2410  Application of Part B deductible and coinsurance.

* * * * *
    (b) Application of coinsurance. The beneficiary's responsibility is 
based on either of the following:
    (1) For RHCs and FQHCs that are not being paid in accordance with 
section 1834(o) of the Act --
    (i) A coinsurance amount that does not exceed 20 percent of the 
RHC's or FQHC's reasonable customary charge for the covered service; 
and
    (ii)(A) For any one item or service furnished by the RHC, a 
deductible and coinsurance liability that does not exceed twenty 
percent of a reasonable customary charge by the RHC for that particular 
item or service; or
    (ii) For any one item or service furnished by a FQHC, a coinsurance 
liability that does not exceed 20 percent of a reasonable customary 
charge by the FQHC for that particular item or service.
    (2) For FQHCs authorized to bill under the PPS, a coinsurance 
amount which is 20 percent of the lesser of--
    (i) The FQHC's charge; or
    (ii) The PPS rate for the covered service.
0
8. Section 405.2411 is amended as follows:
0
A. Revising paragraph (a) introductory text.
0
B. In paragraphs (a)(1) through (a)(3), removing ``;'' and adding in 
its place ``.''.
0
C. Revising paragraphs (a)(4) and (5).
0
D. Adding a new paragraph (a)(6).
0
E. Revising paragraph (b).
    The revisions and addition read as follows:


Sec.  405.2411  Scope of benefits.

    (a) The following RHC services are reimbursable under this subpart:
* * * * *
    (4) Services and supplies furnished as incident to a nurse 
practitioner, physician assistant, certified nurse midwife, clinical 
psychologist, or clinical social worker service.
    (5) Visiting nurse services when provided in accordance with 
1861(aa)(1) of the Act and Sec.  405.2416.
    (6) Clinical psychologists and clinical social worker services as 
specified in Sec.  405.2450.
    (b) Rural health clinic services are--
    (1) Covered when furnished in a RHC setting or other outpatient 
setting, including a patient's place of residence;
    (2) Covered when furnished during a Part A stay in a skilled 
nursing facility only when provided by a physician, nurse practitioner, 
physician assistant, certified nurse midwife or clinical psychologist 
employed or under contract with the RHC at the time the services are 
furnished; and
    (3) Not covered in a hospital as defined in section 1861(e) of the 
Act; or critical access hospital as defined in 1861(mm)(1) of the Act).
0
9. Section 405.2412 is revised to read as follows:


Sec.  405.2412  Physicians' services.

    Physicians' services are professional services that are furnished 
by either of the following:
    (a) By a physician at the RHC or FQHC.
    (b) Away from the RHC or FQHC by a physician whose agreement with 
the RHC or FQHC provides that he or she will be paid by the RHC or FQHC 
for such services and certification and cost reporting requirements are 
met.


Sec.  405.2413  [Amended]

0
10. Section 405.2413 is amended as follows:
0
A. Amending paragraphs (a)(2) and (a)(5) by removing the term 
``clinic's'' and by adding in its place the term ``RHC's''.
0
B. Amending paragraph (a)(5) by removing the term ``clinic'' and by 
adding in its place the term ``RHC''.
0
11. Section 405.2414 is amended as follows:
0
A. Revising paragraphs (a) introductory text and (a)(1).
0
B. In paragraphs (a)(2) and (3), removing ``;'' and adding in its place 
``.''.
0
C. Revising paragraph (a)(4).
0
D. In paragraph (a)(5), removing the phrase ``They would'' and adding 
in its place the phrase ``The services would''.
0
E. In paragraph (c), removing the phrase ``physician assistants, nurse 
midwives or specialized nurse practitioners'' and adding in its place 
the phrase ``physician assistants or certified nurse midwives''.
    The revisions read as follows:


Sec.  405.2414  Nurse practitioner, physician assistant, and certified 
nurse midwife services.

    (a) Professional services are payable under this subpart if the 
services meet all of the following:
    (1) Furnished by a nurse practitioner, physician assistant, or 
certified nurse midwife who is employed by, or receives compensation 
from, the RHC or FQHC.
* * * * *
    (4) The services are of a type which the nurse practitioner, 
physician assistant, or certified nurse midwife who furnished the 
service is legally permitted to perform by the State in which the 
service is rendered.
0
12. Section 405.2415 is revised to read as follows:


Sec.  405.2415  Services and supplies incident to nurse practitioner, 
physician assistant, certified nurse midwife, clinical psychologist, or 
clinical social worker services.

    (a) Services and supplies incident to a nurse practitioner, 
physician assistant, certified nurse midwife, clinical psychologist, or 
clinical social worker service are payable under this subpart if the 
service or supply is all of the following:
    (1) Of a type commonly furnished in physicians' offices.
    (2) Of a type commonly rendered either without charge or included 
in the RHC's bill.
    (3) Furnished as an incidental, although integral part of 
professional services furnished by a nurse practitioner, physician 
assistant, certified nurse midwife, clinical psychologist, or clinical 
social worker.
    (4) Furnished under the direct, personal supervision of a 
physician, nurse practitioner, physician assistant, certified nurse 
midwife, clinical psychologist, or clinical social worker.
    (5) In the case of a service, furnished by a member of the RHC's 
health care staff who is an employee of the RHC.
    (b) The direct personal supervision requirement is met in the case 
of any of the following persons only if the person is permitted to 
supervise these services under the written policies governing the RHC:

[[Page 58409]]

    (1) Nurse practitioner.
    (2) Physician assistant.
    (3) Certified nurse midwife.
    (4) Clinical psychologist.
    (5) Clinical social worker.
    (c) Only drugs and biologicals which cannot be self-administered 
are included within the scope of this benefit.
0
13. Section 405.2416 is amended as follows:
0
A. Revising paragraphs (a) introductory text and (a)(1).
0
B. In paragraph (a)(2), removing the semicolon and adding a period in 
its place.
0
C. Revising paragraphs (a)(3) and (4).
0
D. Revising paragraphs (b) introductory text and (b)(1).
    The revisions read as follows:


Sec.  405.2416  Visiting nurse services.

    (a) Visiting nurse services are covered if the services meet all of 
the following:
    (1) The RHC or FQHC is located in an area in which the Secretary 
has determined that there is a shortage of home health agencies.
* * * * *
    (3) The services are furnished by a registered professional nurse 
or licensed practical nurse that is employed by, or receives 
compensation for the services from the RHC or FQHC.
    (4) The services are furnished under a written plan of treatment 
that is both of the following:
    (i)(A) Established and reviewed at least every 60 days by a 
supervising physician of the RHC or FQHC; or
    (B) Established by a nurse practitioner, physician assistant, or 
certified nurse midwife and reviewed at least every 60 days by a 
supervising physician.
    (ii) Signed by the supervising physician, nurse practitioner, 
physician assistant or certified nurse midwife of the RHC or FQHC.
    (b) The nursing care covered by this section includes the 
following:
    (1) Services that must be performed by a registered professional 
nurse or licensed practical nurse if the safety of the patient is to be 
assured and the medically desired results achieved.
* * * * *


Sec.  405.2417  [Amended]

0
14. Section 405.2417 is amended as follows:
0
A. In the introductory text, removing the phrase ``rural health 
clinic'' and adding in its place ``RHC or FQHC''.
0
B. In paragraph (a), removing the phrase ``rural health clinic'' and 
adding in its place ``RHC or FQHC''.
0
C. In paragraph (b), removing ``; or'' and adding in its place ``.''.
0
15. Section 405.2430 is amended as follows:
0
A. Revising paragraphs (a)(1) introductory text and (a)(1)(i) and (ii).
0
B. In paragraph (a)(4), removing the phrase ``Federally qualified 
health center'' and adding in its place the term ``FQHC''.
0
C. Revising paragraph (b).
0
D. Removing paragraph (c).
0
E. Redesignating paragraph (d) as paragraph (c).
    The revisions read as follows:


Sec.  405.2430  Basic requirements.

    (a) * * *
    (1) In response to a request from an entity that wishes to 
participate in the Medicare program, CMS enters into an agreement with 
an entity when all of the following occur:
    (i) HRSA approves the entity as meeting the requirements of section 
330 of the PHS Act.
    (ii) The entity assures CMS that it meets the requirements 
specified in this subpart and part 491, as described in Sec.  
405.2434(a).
* * * * *
    (b) Prior HRSA FQHC determination. An entity applying to become a 
FQHC must do the following:
    (1) Be determined by HRSA as meeting the applicable requirements of 
the PHS Act, as specified in Sec.  405.2401(b).
    (2) Receive approval by HRSA as a FQHC under section 330 of the PHS 
Act (42 U.S.C. 254b).
* * * * *
0
16. Section 405.2434 is amended as follows:
0
A. In the introductory text, removing the phrase ``Federally qualified 
health center'' and adding in its place the term ``FQHC''.
0
B. In paragraph (a)(1), removing the phrase ``Federally qualified 
health center'' and adding in its place the term ``FQHC'' each time it 
appears.
0
C. In paragraph (a)(2), removing the term ``Centers'' and adding in its 
place the term ``FQHCs''.
0
D. Revising paragraphs (b) and (c)(1).
0
E. In paragraph (c)(3), removing the phrase ``Federally qualified 
health center'' and adding in its place the term ``FQHC'' each time it 
appears.
0
F. Revising paragraph (c)(4).
0
G. In paragraphs (d)(1), (d)(3) introductory text, and (e)(1) through 
(3) by removing the phrase ``Federally qualified health center'' and 
adding in its place the term ``FQHC''.
0
H. In paragraphs (d)(3)(ii) and (e)(2) by removing the phrase 
``Federally qualified health center's'' and adding in its place the 
term ``FQHC's'' .
    The revisions read as follows:


Sec.  405.2434  Content and terms of the agreement.

* * * * *
    (b) Effective date of agreement. The effective date of the 
agreement is determined in accordance with the provisions of Sec.  
489.13.
    (c) * * *
    (1) For non-FQHC services that are billed to Part B, the 
beneficiary is responsible for payment of a coinsurance amount which is 
20 percent of the amount of Part B payment made to the center for the 
covered services.
* * * * *
    (4) The FQHC may charge the beneficiary for items and services that 
are not FQHC services. If the item or service is covered under Medicare 
Part B, the FQHC may not charge the beneficiary more than 20 percent of 
the Part B payment amount.
* * * * *


Sec.  405.2436  [Amended]

0
17. Section 405.2436 is amended as follows:
0
A. In paragraphs (a) introductory text, (a)(2), (b)(1)(i), (b)(3), 
(c)(1) introductory text, (c)(2), (c)(3), and (d) by removing the 
phrase ``Federally qualified health center'' each time it appears and 
adding in its place the term ``FQHC''.
0
B. In paragraphs (b)(1) introductory text, (b)(1)(ii), (b)(2) 
introductory text, and (d) by removing the phrase ``Federally qualified 
health center's'' and adding in its place the term ``FQHC's''.
0
18. Section 405.2440 is amended by revising the introductory text to 
read as follows.


Sec.  405.2440  Conditions for reinstatement after termination by CMS.

    When CMS has terminated an agreement with a FQHC, CMS does not 
enter into another agreement with the FQHC to participate in the 
Medicare program unless CMS--
* * * * *


Sec.  405.2442  [Amended]

0
19. Section 405.2442 is amended as follows:
0
A. In paragraph (a) introductory text by removing the phrase 
``Federally qualified health center'' and adding in its place the term 
``FQHC''.
0
B. In paragraph (b) by removing the phrase ``Federally qualified health 
center's'' and adding in its place the term ``FQHC's''.


Sec.  405.2444  [Amended]

0
20. Section 405.2444 is amended as follows:

[[Page 58410]]

0
A. In paragraph (c), removing the phrase ``Federally qualified health 
center'' and adding in its place the term ``FQHC'' each time it 
appears.
0
B. In paragraphs (a)(2) and (c) by removing the term ``center'' each 
time it appears, and by adding in its place the term ``FQHC'' .
0
21. Section 405.2446 is amended as follows:
0
A. Revising paragraphs (a), (b)(2), (3), (4), and (6).
0
B. Removing paragraph (b)(8).
0
C. Redesignating paragraphs (b)(9) and (10) as (b)(8) and (9), 
respectively.
0
D. In paragraphs (c) and (d), removing the phrase ``Federally quality 
health center'' and adding in its place the term ``FQHC''.
    The revisions read as follows:


Sec.  405.2446  Scope of services.

    (a) For purposes of this section, the terms rural health clinic and 
RHC when they appear in the cross references in paragraph (b) of this 
section also mean Federally qualified health centers and FQHCs.
    (b) * * *
    (2) Services and supplies furnished as incident to a physician's 
professional service, as specified in Sec.  405.2413.
    (3) Nurse practitioner, physician assistant or certified nurse 
midwife services as specified in Sec.  405.2414.
    (4) Services and supplies furnished as incident to a nurse 
practitioner, physician assistant, or certified nurse midwife service, 
as specified in Sec.  405.2415.
* * * * *
    (6) Services and supplies furnished as incident to a clinical 
psychologist or clinical social worker service, as specified in Sec.  
405.2452.
* * * * *
0
22. Section 405.2448 is amended as follows:
0
A. Revising paragraphs (a) introductory text and (a)(1) through (3).
0
B. In paragraph (b) introductory text, removing the phrase ``Federally 
quality health centers'' and adding in its place the term ``FQHCs''.
0
C. In paragraph (d), removing the phrase ``a Federally qualified health 
center service, but may be provided at a Federally qualified health 
center if the center'' and adding in its place the phrase ``FQHC 
service, but may be provided at a FQHC if the FQHC''.
    The revisions read as follows:


Sec.  405.2448  Preventive primary services.

    (a) Preventive primary services are those health services:
    (1) A FQHC is required to provide as preventive primary health 
services under section 330 of the PHS Act.
    (2) Furnished by or under the direct supervision of a physician, 
nurse practitioner, physician assistant, certified nurse midwife, 
clinical psychologist or clinical social worker.
    (3) In the case of a service, furnished by a member of the FQHC's 
health care staff who is an employee of the FQHC or by a physician 
under arrangements with the FQHC.
* * * * *


Sec.  405.2449  [Amended]

0
23. Section 405.2449 is amended as follows:
0
A. In the introductory text, removing the phrase ``Federally qualified 
health center'' and adding in its place the term ``FQHC''.
0
B. In paragraph (b), removing ``; and'' and adding in its place ``.''.


Sec.  405.2452  [Amended]

0
24. Section 405.2452 is amended as follows:
0
A. In paragraph (a)(2), by removing the phrase ``Federally quality 
health center's'' and adding in its place the term ``FQHC's''.
0
B. In paragraph (b), by removing the phrase ``Federally quality health 
center'' and adding in its place the term ``FQHC''.
0
C. In paragraph (a)(5), removing the term ``center'' and adding in its 
place the term ``FQHC''.
0
25. Section 405.2460 is revised to read as follows:


Sec.  405.2460  Applicability of general payment exclusions.

    The payment conditions, limitations, and exclusions set out in 
subpart C of this part, part 410 and part 411 of this chapter are 
applicable to payment for services provided by RHCs and FQHCs, except 
that preventive primary services, as defined in Sec.  405.2448, are 
statutorily authorized in FQHCs and not excluded by the provisions of 
section 1862(a) of the Act.
0
26. Section 405.2462 is revised to read as follows:


Sec.  405.2462  Payment for RHC and FQHC services.

    (a) Payment to provider-based RHCs and FQHCs that are authorized to 
bill under the reasonable cost system. A RHC or FQHC that is authorized 
to bill under the reasonable cost system is paid in accordance with 
parts 405 and 413 of this subchapter, as applicable, if the RHC or FQHC 
is--
    (1) An integral and subordinate part of a hospital, skilled nursing 
facility or home health agency participating in Medicare (that is, a 
provider of services); and
    (2) Operated with other departments of the provider under common 
licensure, governance and professional supervision.
    (b) Payment to independent RHCs and freestanding FQHCs that are 
authorized to bill under the reasonable cost system. (1) RHCs and FQHCs 
that are authorized to bill under the reasonable cost system are paid 
on the basis of an all-inclusive rate for each beneficiary visit for 
covered services. This rate is determined by the MAC, in accordance 
with this subpart and general instructions issued by CMS.
    (2) The amount payable by the MAC for a visit is determined in 
accordance with paragraphs (e)(1) and (2) of this section.
    (c) Payment to FQHCs that are authorized to bill under the 
prospective payment system. A FQHC that is authorized to bill under the 
prospective payment system is paid a single, per diem rate based on the 
prospectively set rate for each beneficiary visit for covered services. 
This rate is adjusted for the following:
    (1) Geographic differences in cost based on the Geographic Practice 
Cost Indices (GPCIs) in accordance with 1848(e) of the Act and 42 CFR 
414.2 and 414.26 and used to adjust payment under the physician fee 
schedule, limited to only the work and practice expense GPCIs.
    (2) Furnishing of care to a new patient with respect to the FQHC, 
including all sites that are part of the FQHC, or to a beneficiary 
receiving a comprehensive initial Medicare visit (that is an initial 
preventive physical examination or an initial annual wellness visit). A 
new patient is one that has not been seen in the FQHC's organization 
within the previous 3 years.
    (d) For FQHC visits, Medicare pays 80 percent of the all-inclusive 
rate for FQHCs that are authorized to bill under the reasonable cost 
system, and 80 percent of the lesser of the FQHC's charge or the PPS 
encounter rate for FQHCs authorized to bill under the PPS. No 
deductible is applicable to FQHC services.
    (e) For RHCs visits, payment is made in accordance with one of the 
following:
    (1) If the deductible has been fully met by the beneficiary prior 
to the RHC, Medicare pays 80 percent of the all-inclusive rate.
    (2) If the deductible has not been fully met by the beneficiary 
before the visit, and the amount of the RHC's reasonable customary 
charge for the services that is applied to the deductible is less than 
the all-inclusive rate, the amount applied to the deductible is 
subtracted from the all-

[[Page 58411]]

inclusive rate and 80 percent of the remainder, if any, is paid to the 
RHC.
    (3) If the deductible has not been fully met by the beneficiary 
before the visit, and the amount of the RHC's reasonable customary 
charge for the services that is applied to the deductible is equal to 
or exceeds the all-inclusive rate, no payment is made to the RHC.
    (f) To receive payment, the FQHC or RHC must do all of the 
following:
    (1) Furnish services in accordance with the requirements of subpart 
X of part 405 of this chapter and subpart A of part 491 of this 
chapter.
    (2) File a request for payment on the form and manner prescribed by 
CMS.
    27. Section 405.2463 is revised to read as follows:


Sec.  405.2463  What constitutes a visit.

    (a) Visit. (1) General. (i) For RHCs, a visit is a face-to-face 
encounter between a RHC patient and one of the following:
    (A) Physician.
    (B) Physician assistant.
    (C) Nurse practitioner.
    (D) Certified nurse midwife.
    (E) Visiting registered professional or licensed practical nurse.
    (G) Clinical psychologist.
    (H) Clinical social worker.
    (I) Qualified transitional care management service.
    (ii) For FQHCs, a visit is either of the following:
    (A) A face-to-face encounter as described in paragraph (a)(1)(i) of 
this section.
    (B) A face-to-face encounter between a patient and one of the 
following:
    (1) A qualified provider of medical nutrition therapy services as 
defined in part 410 subpart G of this chapter.
    (2) A qualified provider of outpatient diabetes self-management 
training services as defined in part 410 subpart H of this chapter.
    (2) Medical visit. (i) A medical visit is a face-to-face encounter 
between a RHC or FQHC patient and one of the following:
    (A) Physician.
    (B) Physician assistant.
    (C) Nurse practitioner.
    (D) Certified nurse midwife.
    (E) Visiting registered professional or licensed practical nurse.
    (i) A medical visit for FQHCs may also include a--
    (A) Medical nutrition therapy visit; or
    (B) Diabetes outpatient self-management training visit.
    (3) Mental health visit. A mental health visit is a face-to-face 
encounter between a RHC or FQHC patient and one of the following:
    (i) Clinical psychologist.
    (ii) Clinical social worker.
    (iii) Other RHC or FQHC practitioner for mental health services.
    (b) Encounters and Payment for RHCs and FQHCs that are not being 
paid under section 1834(o) of the Act. (1) For RHCs and FQHCs that are 
authorized to bill under the reasonable cost system, encounters with 
more than one health professional and multiple encounters with the same 
health professional that take place on the same day and at a single 
location constitute a single visit, except when one of the following 
conditions exist:
    (i) The patient, subsequent to the first visit, suffers an illness 
or injury that requires additional diagnosis or treatment on the same 
day.
    (ii) The patient has a medical visit and a mental health visit on 
the same day.
    (iii) The patient has an initial preventive physical exam visit and 
a separate medical or mental health visit on the same day.
    (2) For RHCs and FQHCs that are authorized to bill under the 
reasonable cost system. Medicare pays RHCs and FQHCs that are not being 
paid under section 1834(o) of the Act for more than 1 visit per day 
when the conditions in paragraph (b) of this section are met.
0
28. Section 405.2464 is revised to read as follows:


Sec.  405.2464  Payment rate.

    (a) Determination of the payment rate for RHCs and FQHCs that are 
authorized to bill on the basis of reasonable cost. (1) An all-
inclusive rate is determined by the MAC at the beginning of the cost 
reporting period.
    (2) The rate is determined by dividing the estimated total 
allowable costs by estimated total visits for RHC or FQHC services.
    (3) The rate determination is subject to any tests of 
reasonableness that may be established in accordance with this subpart.
    (4) The MAC, during each reporting period, periodically reviews the 
rate to assure that payments approximate actual allowable costs and 
visits and adjusts the rate if:
    (i) There is a significant change in the utilization of services;
    (ii) Actual allowable costs vary materially from allowable costs; 
or
    (iii) Other circumstances arise which warrant an adjustment.
    (5) The RHC or FQHC may request the MAC to review the rate to 
determine whether adjustment is required.
    (b) Determination of the payment rate for FQHCs billing under the 
prospective payment system. (1) An encounter-based rate is calculated 
by CMS by dividing total FQHC costs by total FQHC encounters to 
establish an average cost per encounter.
    (2) The exceptions in Sec.  405.2463(b) do not apply.
    (3) The encounter-based rate is adjusted--
    (i) For geographic differences in the cost of inputs according to 
Sec.  405.2462(c)(1).
    (ii) When the FQHC furnishes services to a new patient, as defined 
in Sec.  405.2462(b)(3)(ii).
    (iii) When a beneficiary receives a comprehensive initial Medicare 
visit (that is, an initial preventive physical examination or an 
initial annual wellness visit).
0
29. Section 405.2466 is amended as follows:
0
A. By revising paragraph (a) and the paragraph (b) heading.
0
B. In paragraph (b)(1) introductory text by removing the term 
``intermediary'' each time it appears and by adding in its place the 
term ``MAC''.
0
C. In paragraphs (b)(1)(i), and (b)(1)(ii) by removing the term ``rural 
health clinic'' each time it appears and by adding in its place the 
term ``RHC''.
0
D. Revising paragraph (b)(1)(iii).
0
E. In paragraph (b)(1)(iv) by removing the term ``rural health 
clinics'' and by adding in its place the term ``RHCs''.
0
F. In paragraphs (b)(1)(i), and (b)(1)(ii) by removing the term 
``Federally qualified health center'' and by adding in its place the 
term ``FQHC''.
0
G. In paragraphs (b)(1) introductory text, (b)(2), (c)(1), and (c)(2) 
by removing the word ``clinic'' each time it appears and by adding in 
its place the term ``RHC''.
0
H. In paragraphs (b)(1) introductory text, (b)(2), (c)(1), (c)(2), and 
(d)(2) by removing the word ``center'' each time it appears and by 
adding in its place the term ``FQHC''.
0
I. Revising paragraphs (c) introductory text, and (d)(1).
0
J. In paragraph (d)(2) by removing the term ``intermediary'' each time 
it appears and by adding in its place the term ``MAC''.
    The revisions read as follows:


Sec.  405.2466  Annual reconciliation.

    (a) General. Payments made to RHCs or FQHCs that are authorized to 
bill under the reasonable cost system during a reporting period are 
subject to annual reconciliation to assure that those payments do not 
exceed or fall short of the allowable costs attributable to covered 
services furnished to Medicare beneficiaries during that period.
    (b) Calculation of reconciliation for RHCs or FQHCs that are 
authorized to bill under the reasonable cost system.
    (1) * * *

[[Page 58412]]

    (iii) The total payment due the RHC is 80 percent of the amount 
calculated by subtracting the amount of deductible incurred by 
beneficiaries that is attributable to RHC services from the cost of 
these services. FQHC services are not subject to a deductible and the 
payment computation for FQHCs does not include a reduction related to 
the deductible.
* * * * *
    (c) Notice of program reimbursement. The MAC notifies the RHC or 
FQHC that is authorized to bill under the reasonable costs system:
* * * * *
    (d) * * *
    (1) Underpayments. If the total reimbursement due the RHC or FQHC 
that is authorized to bill under the reasonable cost system exceeds the 
payments made for the reporting period, the MAC makes a lump-sum 
payment to the RHC or FQHC to bring total payments into agreement with 
total reimbursement due the RHC or FQHC.
* * * * *
0
30. Add Sec.  405.2467 to read as follows:


Sec.  405.2467  Requirements of the FQHC PPS.

    (a) Cost reporting. For cost reporting periods beginning on or 
after October 1, 2014, FQHCs are paid on a PPS basis that does all of 
the following:
    (1) Includes a process for appropriately describing the services 
furnished by FQHCs.
    (2) Establishes payment rates for specific payment codes based on 
such appropriate descriptions of services.
    (3) Takes into account the type, intensity and duration of services 
furnished by FQHCs.
    (4) May include adjustments (such as geographic adjustments) 
determined by the Secretary.
    (b) HCPCS coding. FQHCs are required to submit HCPCS codes in 
reporting services furnished.
    (c) Initial payments. (1) Beginning October 1, 2014, for the first 
fifteen months of the PPS, the estimated aggregate amount of PPS rates 
is equal to 100 percent of the estimated amount of reasonable costs 
that would have occurred for that period if the PPS had not been 
implemented.
    (2) Payment amount is calculated prior to any FQHC payments based 
on the reasonable cost system.
    (d) Payments in subsequent years. (1) Beginning January 1, 2016, 
PPS payment rates will be increased by the percentage increase in the 
Medicare economic index.
    (2) Beginning January 1, 2017, PPS rates will be increased by the 
percentage increase in a market basket of FQHC goods and services as 
established through regulations, or, if not available, the Medicare 
economic index.
0
31. Section 405.2468 is amended:
0
A. In paragraph (a) by removing the word ``intermediary'', and by 
adding in its place the word ``MAC''.
0
B. In paragraphs (b) introductory text and (c) by removing the term 
``rural health clinic'' and by adding in its place the term ``RHC''.
0
C. In paragraph (b) introductory text by removing the term ``Federally 
qualified health center'' and by adding in its place the term ``FQHC''.
0
D. In paragraphs (b)(4), (b)(5), (d)(2)(iv), and (d)(2)(v) by removing 
the word ``clinic'' each time it appears and by adding in its place the 
term ``RHC''.
0
E. In paragraphs (b)(4), (b)(5), (d)(2)(iv), (d)(2)(v) by removing the 
word ``center'' each time it appears and by adding in its place the 
term ``FQHC''.
0
F. Revising paragraphs (b)(1), (c), and (d)(1).
    The revisions read as follows:


Sec.  405.2468  Allowable costs.

* * * * *
    (b) * * *
    (1) Compensation for the services of a physician, physician 
assistant, nurse practitioner, certified nurse-midwife, visiting 
registered professional or licensed practical nurse, clinical 
psychologist, and clinical social worker who owns, is employed by, or 
furnishes services under contract to a FQHC or RHC.
* * * * *
    (c) Tests of reasonableness of cost and utilization. Tests of 
reasonableness authorized by sections 1833(a) and 1861(v)(1)(A) of the 
Act may be established by CMS or the MAC with respect to direct or 
indirect overall costs, costs of specific items and services, or costs 
of groups of items and services. For RHCs and FQHCs that are authorized 
to bill under the reasonable cost system, these tests include, but are 
not limited to, screening guidelines and payment limits.
    (d) Screening guidelines. (1) Costs in excess of amounts 
established by the guidelines are not included unless the RHC or FQHC 
that is authorized to bill under the reasonable cost system provides 
reasonable justification satisfactory to the MAC.
* * * * *
0
32. Section 405.2469 is revised by to read as follows:


Sec.  405.2469  Federally qualified health centers (FQHCs) supplemental 
payments.

    (a) Eligibility for supplemental payments. FQHCs under contract 
(directly or indirectly) with MA organizations are eligible for 
supplemental payments for FQHC services furnished to enrollees in MA 
plans offered by the MA organization to cover the difference, if any, 
between their payments from the MA plan and what they would receive 
either:
    (1) Under the reasonable cost payment system if the FQHC is 
authorized to bill under the reasonable cost payment system, or
    (2) The PPS rate if the FQHC is authorized to bill under the PPS.
    (b) Calculation of supplemental payment. The supplemental payment 
for FQHC covered services provided to Medicare patients enrolled in MA 
plans is based on the difference between--
    (1) Payments received by the FQHC from the MA plan as determined on 
a per visit basis and the FQHCs all-inclusive cost-based per visit rate 
as set forth in this subpart, less any amount the FQHC may charge as 
described in section 1857(e)(3)(B) of the Act, or.
    (2) Payments received by the FQHC from the MA plan as determined on 
a per visit basis and the FQHC PPS rate as set forth in this subpart, 
less any amount the FQHC may charge as described in section 
1857(e)(3)(B) of the Act.
    (c) Financial incentives. Any financial incentives provided to 
FQHCs under their MA contracts, such as risk pool payments, bonuses, or 
withholds, are prohibited from being included in the calculation of 
supplemental payments due to the FQHC.
    (d) Per visit supplemental payment. A supplemental payment required 
under this section is made to the FQHC when a covered face-to-face 
encounter occurs between a MA enrollee and a practitioner as set forth 
in Sec.  405.2463.


Sec.  405.2470  [Amended]

0
33. Section 405.2470 is amended by:
0
A. In paragraphs (a)(1), (b)(1), and (c)(3) through (5) by removing the 
word ``intermediary'', and by adding in its place the word ``MAC''.
0
B. In paragraphs (b)(2), by removing the word ``intermediary's'' and 
adding in its place the word ``MAC's''.
0
C. In paragraphs (a) introductory text, (c)(1), and (c)(2)(i) and (ii) 
by removing the term ``rural health clinic'' and by adding in its place 
the term ``RHC''.
0
D. In paragraphs (a) introductory text, (c)(1), and (c)(2)(i) and (ii) 
by removing the term ``Federally qualified health center'' and by 
adding in its place the term ``FQHC''.
0
E. In paragraphs (b)(1) and (2), (c)(1), (c)(2) introductory text, and 
(c)(3) through (6) by removing the word ``clinic'' and by adding in its 
place the term ``RHC''.

[[Page 58413]]

0
F. In paragraphs (b)(1) and (2), (c)(1), (c)(2) introductory text, and 
(c)(3) through (6) by removing the word ``center'' each time it appears 
and by the term ``FQHC''.
0
34. Section 405.2472 is amended by revising paragraph (a) to read as 
follows:


Sec.  405.2472  Beneficiary appeals.

* * * * *
    (a) The beneficiary is dissatisfied with a MAC's determination 
denying a request for payment made on his or her behalf by a RHC or 
FQHC;
* * * * *

PART 491--CERTIFICATION OF CERTAIN HEALTH FACILITIES

0
35. The authority citation for part 491 continues to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302); and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).

0
36. Section 491.8 is amended by revising paragraph (a)(3).


Sec.  491.8  Staffing and staff responsibilities.

    (a) * * *
    (3) The physician assistant, nurse practitioner, nurse-midwife, 
clinical social worker or clinical psychologist member of the staff may 
be the owner or an employee of the clinic or center, or may furnish 
services under contract to the clinic or center. In the case of a 
clinic, at least one physician assistants or nurse practitioner must be 
an employee of the clinic.
* * * * *

PART 493--LABORATORY REQUIREMENTS

0
37. The authority citation for Part 493 is revised to read as follows:

    Authority:  Sec. 353 of the Public Health Service Act, secs. 
1102, 1861(e), the sentence following sections 1861(s)(11) through 
1861(s)(16) of the Social Security Act (42 U.S.C. 263a, 1302, 
1395x(e), the sentence following 1395x(s)(11) through 1395x(s)(16)), 
and the Public Law 112-202 amendments to 42 U.S.C 263a.

0
38. Section 493.1 is amended by revising the second sentence to read as 
follows:


Sec.  493.1  Basis and scope.

    * * * It implements sections 1861 (e) and (j), the sentence 
following section 1861(s)(13), and 1902(a)(9) of the Social Security 
Act, and section 353 of the Public Health Service Act, as amended by 
section 2 of the Taking Essential Steps for Testing Act of 2012. * * *
0
39. Section 493.2 is revised by adding the definition of ``Repeat 
proficiency testing referral'' in alphabetical order to read as 
follows:


Sec.  493.2  Definitions.

* * * * *
    Repeat proficiency testing referral means a second instance in 
which a proficiency testing sample, or a portion of a sample, is 
referred, for any reason, to another laboratory for analysis prior to 
the laboratory's proficiency testing program event cut-off date within 
the period of time encompassing the two prior survey cycles (including 
initial certification, recertification, or the equivalent for 
laboratories surveyed by an approved accreditation organizations).
* * * * *
0
40. Section 493.1800 is amended by revising paragraph (a)(2) 
introductory text to read as follows:


Sec.  493.1800  Basis and scope.

    (a) * * *
    (2) The Clinical Laboratories Improvement Act of 1967 (section 353 
of the Public Health Service Act) as amended by CLIA 1988, as amended 
by section 2 of the Taking Essential Steps for Testing Act of 2012.
* * * * *
0
41. Section 493.1840 is amended by revising paragraph (b) to read as 
follows:


Sec.  493.1840  Suspension, limitation, or revocation of any type of 
CLIA certificate.

* * * * *
    (b) Adverse action based on improper referrals in proficiency 
testing. If CMS determines that a laboratory has intentionally referred 
its proficiency testing samples to another laboratory for analysis, CMS 
does one of the following:
    (1) Revokes the laboratory's CLIA certificate for at least 1 year, 
prohibits the owner and operator from owning or operating a CLIA-
certified laboratory for at least 1 year, and may also impose a civil 
money penalty in accordance with Sec.  493.1834(d), if CMS determines 
that--
    (i) A proficiency testing referral is a repeat proficiency testing 
referral as defined at Sec.  493.2; or
    (ii) On or before the proficiency testing event close date, a 
laboratory reported proficiency testing results obtained from another 
laboratory to the proficiency testing program.
    (2) Suspends or limits the CLIA certificate for less than 1 year 
based on the criteria in Sec.  493.1804(d), and also impose alternate 
sanctions as appropriate, in accordance with Sec. Sec.  493.1804(c) and 
(d), 493.1806(c), 493.1807(b), 493.1809 and, in the case of civil money 
penalties, Sec.  493.1834(d), when CMS determines that paragraph 
(b)(1)(i) or (ii) of this section does not apply but that the 
laboratory obtained test results for the proficiency testing samples 
from another laboratory on or before the proficiency testing event 
close date. Among other possibilities, alternative sanctions will 
always include a civil money penalty and a directed plan of correction 
that includes required training of staff.
    (3) Imposes alternate sanctions in accordance with Sec. Sec.  
493.1804(c) and (d), 493.1806(c), 493.1807(b), 493.1809 and, in the 
case of civil money penalties, Sec.  493.1834(d), when CMS determines 
that paragraph (b)(1) or (2) of this section do not apply, and a PT 
referral has occurred, but no test results are received prior to the 
event close date by the referring laboratory from the laboratory that 
received the referral. Among other possibilities, alternative sanctions 
will always include a civil money penalty and a directed plan of 
correction that includes required training of staff.
* * * * *
    (Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare 
Supplementary Medical Insurance Program)

    Dated: September 5, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: September 10, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.

    Note:  The following Addendum will not appear in the Code of 
Federal Regulations.

Addendum: Proposed Geographic Adjustment Factors (GAFs) for the FQHC 
PPS

    As described in section II.C.2. of this proposed rule, the 
proposed GAFs for the FQHC PPS are based on the proposed CY 2014 
work and practice expense GPCIs and the proposed cost share weights 
for the CY 2014 GPCI update, as published in the CY 2014 PFS 
proposed rule. These GAFs are subject to change in the final FQHC 
PPS rule based on more current data, including the finalized PFS 
GPCI and cost share weight values.

------------------------------------------------------------------------
                         Locality name                             GAF
------------------------------------------------------------------------
1 Alabama......................................................    0.933
2 Alaska.......................................................    1.306
3 Arizona......................................................    0.984
4 Arkansas.....................................................    0.919
5 Anaheim/Santa Ana, CA........................................    1.122
6 Los Angeles, CA..............................................    1.095
7 Marin/Napa/Solano, CA........................................    1.154
8 Oakland/Berkeley, CA.........................................    1.152
9 San Francisco, CA............................................    1.215
10 San Mateo, CA...............................................    1.209
11 Santa Clara, CA.............................................    1.203
12 Ventura, CA.................................................    1.104
13 Rest of California..........................................    1.053
14 Colorado....................................................    1.002
15 Connecticut.................................................    1.066

[[Page 58414]]

 
16 DC + MD/VA Suburbs..........................................    1.120
17 Delaware....................................................    1.024
18 Fort Lauderdale, FL.........................................    1.013
19 Miami, FL...................................................    1.016
20 Rest of Florida.............................................    0.973
21 Atlanta, GA.................................................    1.005
22 Rest of Georgia.............................................    0.940
23 Hawaii/Guam.................................................    1.075
24 Idaho.......................................................    0.935
25 Chicago, IL.................................................    1.032
26 East St. Louis, IL..........................................    0.962
27 Suburban Chicago, IL........................................    1.040
28 Rest of Illinois............................................    0.944
29 Indiana.....................................................    0.947
30 Iowa........................................................    0.929
31 Kansas......................................................    0.933
32 Kentucky....................................................    0.925
33 New Orleans, LA.............................................    0.983
34 Rest of Louisiana...........................................    0.929
35 Southern Maine..............................................    0.998
36 Rest of Maine...............................................    0.940
37 Baltimore/Surr. Cntys, MD...................................    1.058
38 Rest of Maryland............................................    1.023
39 Metropolitan Boston.........................................    1.081
40 Rest of Massachusetts.......................................    1.037
41 Detroit, MI.................................................    1.009
42 Rest of Michigan............................................    0.957
43 Minnesota...................................................    1.005
44 Mississippi.................................................    0.916
45 Metropolitan Kansas City, MO................................    0.968
46 Metropolitan St Louis, MO...................................    0.974
47 Rest of Missouri............................................    0.905
48 Montana.....................................................    0.974
49 Nebraska....................................................    0.938
50 Nevada......................................................    1.026
51 New Hampshire...............................................    1.021
52 Northern NJ.................................................    1.108
53 Rest of New Jersey..........................................    1.070
54 New Mexico..................................................    0.954
55 Manhattan, NY...............................................    1.107
56 NYC Suburbs/Long I., NY.....................................    1.123
57 Poughkpsie/N NYC Suburbs, NY................................    1.038
58 Queens, NY..................................................    1.122
59 Rest of New York............................................    0.965
60 North Carolina..............................................    0.953
61 North Dakota................................................    0.982
62 Ohio........................................................    0.959
63 Oklahoma....................................................    0.913
64 Portland, OR................................................    1.024
65 Rest of Oregon..............................................    0.975
66 Metropolitan Philadelphia, PA...............................    1.043
67 Rest of Pennsylvania........................................    0.957
68 Puerto Rico.................................................    0.808
69 Rhode Island................................................    1.035
70 South Carolina..............................................    0.945
71 South Dakota................................................    0.974
72 Tennessee...................................................    0.936
73 Austin, TX..................................................    1.001
74 Beaumont, TX................................................    0.941
75 Brazoria, TX................................................    1.002
76 Dallas, TX..................................................    1.013
77 Fort Worth, TX..............................................    0.995
78 Galveston, TX...............................................    1.009
79 Houston, TX.................................................    1.009
80 Rest of Texas...............................................    0.952
81 Utah........................................................    0.945
82 Vermont.....................................................    0.991
83 Virginia....................................................    0.986
84 Virgin Islands..............................................    1.000
85 Seattle (King Cnty), WA.....................................    1.083
86 Rest of Washington..........................................    1.003
87 West Virginia...............................................    0.901
88 Wisconsin...................................................    0.972
89 Wyoming.....................................................    0.989
------------------------------------------------------------------------

[FR Doc. 2013-22821 Filed 9-18-13; 2:00 pm]
BILLING CODE 4120-01-P