[Federal Register Volume 81, Number 54 (Monday, March 21, 2016)]
[Rules and Regulations]
[Pages 14977-14984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06087]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Indian Health Service

42 CFR Part 136

RIN 0917-AA12


Payment for Physician and Other Health Care Professional Services 
Purchased by Indian Health Programs and Medical Charges Associated With 
Non-Hospital-Based Care

AGENCY: Indian Health Service, HHS.

ACTION: Final rule with comment period.

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SUMMARY: The Secretary of the Department of Health and Human Services 
(HHS) hereby issues this final rule with comment period to implement a 
methodology and payment rates for the Indian Health Service (IHS) 
Purchased/Referred Care (PRC), formerly known as the Contract Health 
Services (CHS), to apply Medicare payment methodologies to all 
physician and other health care professional services and non-hospital-
based services. Specifically, it will allow the health programs 
operated by IHS, Tribes, Tribal organizations, and urban Indian 
organizations (collectively, I/T/U programs) to negotiate or pay non-I/
T/U providers based on the applicable Medicare fee schedule, 
prospective payment system, Medicare Rate, or in the event of a 
Medicare waiver, the payment amount will be calculated in accordance 
with such waiver; the amount negotiated by a repricing agent, if 
applicable; or the provider or supplier's most favored customer (MFC) 
rate. This final rule will establish payment rates that are consistent 
across Federal health care programs, align payment with inpatient 
services, and enable the I/T/U to expand beneficiary access to medical 
care. A comment period is included, in part, to address Tribal 
stakeholder concerns about the opportunity for meaningful consultation 
on the rule's impact on Tribal health programs.

DATES: Effective date: These final regulations are effective May 20, 
2016.
    Comment date: IHS will consider comments on this final rule with 
comment period received at one of the addresses provided below, no 
later than May 20, 2016.
    Compliance and applicability dates: A health program operated by 
the IHS or by an urban Indian organization through a contract or grant 
under Title V of the Indian Health Care Improvement Act (IHCIA), Public 
Law 97-437 must implement the rates specified herein no later than 
March 21, 2017. The rule will apply to outpatient services provided 
after May 20, 2016. The rule will apply to inpatient services with an 
admission that falls on or after the effective date of the rule.

ADDRESSES: You may submit comments in one of four ways (please choose 
only one of the ways listed):
     Electronically. You may submit electronic comments on this 
regulation to http://regulations.gov. Follow the ``Submit a Comment'' 
instructions.
     By regular mail. You may mail written comments to the 
following address ONLY: Betty Gould, Regulations Officer, Indian Health 
Service, Office of Management Services, 5600 Fishers Lane, Mailstop 
09E70, Rockville, Maryland 20857. Please allow sufficient time for 
mailed comments to be received before the close of the comment period.
     By express or overnight mail. You may send written 
comments to the above address.
     By hand or courier. If you prefer, you may deliver (by 
hand or courier) your written comments before the close of the comment 
period to the address above.
    If you intend to deliver your comments to the Rockville address, 
please call telephone number (301) 443-1116 in advance to schedule your 
arrival with a staff member. Comments will be made available for public 
inspection at the Rockville address from 8:30 a.m. to 5 p.m., Monday-
Friday, no later than three weeks after publication of this notice.
    Because of staff and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission.

FOR FURTHER INFORMATION CONTACT: Ms. Terri Schmidt, Acting Director, 
Indian Health Service, Office of Resource Access and Partnerships, 5600 
Fishers Lane, Mailstop 10E85-C, Rockville, Maryland 20857, telephone 
(301) 443-2694. (This is not a toll free number.)

SUPPLEMENTARY INFORMATION: The Consolidated Appropriation Act of 2014 
signed by President Obama in January 2014, adopted a new name, 
Purchased/Referred Care (PRC), for the CHS program. The name change was 
official with passage of the Fiscal Year (FY) 2014 appropriation. The 
new name better describes the purpose of the program funding, which is 
for both purchased care and referred care outside of IHS. The name 
change does not change the program, and all current policies and 
practices will continue and is not intended to have any effect on the 
laws that govern or apply to CHS. IHS will administer PRC in accordance 
with

[[Page 14978]]

all laws applicable to CHS. This final rule will use the term PRC.

I. Background

    On December 5, 2014, the Department published proposed regulations 
in a Notice of Proposed Rulemaking (NPRM) in the Federal Register (79 
FR 72160) to amend the IHS medical regulations at 42 CFR part 136 by 
adding a new subpart I to apply Medicare payment methodologies to all 
physician and other health professional services and non-hospital-based 
services provided through CHS, now PRC, or purchased by urban Indian 
organizations. In the NPRM, the Department invited the public to 
comment on the proposed provisions; subsequently, in a Federal Register 
document published on January 14, 2015 (80 FR 1880), the 45-day comment 
period was extended to February 4, 2015. Under 42 CFR 136.23, when 
necessary services are not reasonably accessible or available to IHS 
beneficiaries, the IHS and Tribes are authorized to pay for medical 
care provided to IHS beneficiaries by non-IHS or Tribal, public or 
private health care providers, depending on the availability of funds. 
Similarly, under section 503 of the IHCIA, 25 U.S.C. 1653, urban Indian 
organizations may refer eligible urban Indians, as defined under 
section 4 of the IHCIA, to non-I/T/U public and private health care 
providers and, depending on the availability of funds, may also cover 
the cost of care. The PRC Program is authorized to pay for medical care 
provided to IHS beneficiaries by non-IHS or Tribal, public or private 
health care providers, depending on the availability of funds. I/T/Us 
reimburse for authorized services at the rates provided by contracts 
negotiated at the local level with individual providers or according to 
a provider's billed charges. Given the small market share of individual 
I/T/U programs, I/T/Us historically have paid rates in substantial 
excess of Medicare's allowable rates or rates paid by private insurers 
for the same services. Despite establishing medical priorities to cover 
the most necessary care, IHS is still unable to provide care to all of 
its beneficiaries. The demand for PRC care consistently exceeds 
available funding. IHS recently reported to Congress that IHS and 
tribal PRC programs denied an estimated $760,855,000 for an estimated 
146,928 contract care services needed by eligible beneficiaries in FY 
2013. This rule finalizes the Medicare-like rates NPRM and ensures PRC 
programs reimburse non-hospital services, including physician services, 
at rates comparable to other federal programs; the savings realized by 
adopting and implementing this rule will increase patient access to 
care.

II. Provisions of the Proposed Regulations

a. The Proposed Rule

    HHS proposed to amend the regulations at 42 CFR part 136 by adding 
a new Subpart I to describe the payment methodologies to all physician 
and health care professional services and all non-hospital-based 
services that are not covered currently under 42 CFR part 136 subpart 
D. The final rule would amend the regulation at 42 CFR part 136, by 
adding a new Subpart I to apply the Medicare payment methodologies to 
all physician and other health professional services and non-hospital-
based services purchased by an IHS or Tribal PRC program, or urban 
Indian organizations.

b. Summary of Changes in the Final Rule

    IHS has added an applicability provision in Sec.  136.201. This 
provision specifies that the rule applies to IHS-operated PRC programs, 
urban Indian health programs, and Tribally-operated programs, but only 
to the extent the Tribally-operated programs opt-in to the requirements 
of the rule. IHS has added a definition section to the rule at Sec.  
136.202. In that section, important terms used in the rule are defined, 
including Notification of a Claim, Provider, Supplier, Referral and 
Repricing Agent. In Sec.  136.203 (Sec.  136.201 of the NPRM), 
flexibility to allow PRC programs to negotiate rates that are higher 
than Medicare rates is added. With a narrow exception, the discretion 
to negotiate rates equal to or less than rates accepted by the provider 
or supplier's MFC is limited. In the absence of a negotiated amount, 
the amount the provider or supplier bills the general public is 
eliminated from the methodology and replaced with the amount the 
provider or supplier accepts from its MFC.

III. Analysis of and Responses to Public Comments

    The Agency received 57 comments from Tribes, Tribal organizations, 
medical associations, and individuals. The Agency carefully reviewed 
the submissions by individuals, groups, Indian and non-Indian 
organizations. IHS did not consider three of these comments, because 
they were received after the closing date. Of the 54 timely comments, 
nine commenters supported the proposed regulation; thirty-eight 
commenters support the proposed regulation with changes; three 
commenters did not support the proposed regulation; and four commenters 
provided general comments.
    Comment: The majority of commenters support the rule as a positive 
step toward achieving the goal of expanding PRC rates to non-hospital-
based providers and suppliers. Many commenters stated the rule's 
potential impact on individual providers would be diffuse and de 
minimus and that the proposed rule would provide an enormous benefit to 
the IHS and Tribal health care programs. Commenters noted that IHS and 
Tribal health programs often pay higher payment rates than private 
health insurers and other Federal programs, such as Medicare and the 
Veterans Health Administration. In addition, many commenters suggested 
that implementing rates for non-hospital-based providers will increase 
the volume of services being sought which will result in providers 
achieving more volume to offset the decrease in rates.
    Response: IHS agrees with the commenters that this rule is 
necessary and important towards achieving payment parity with other 
Federal health care programs.
    Comment: There were a number of commenters that support the 
proposed rule, but with changes. Several commenters expressed the view, 
that as drafted, the proposed rule does not provide enough flexibility 
to ensure continued access to care through the PRC program. 
Specifically, many commenters felt that a rigid take-it-or-leave-it 
rate structure would result in many health care providers refusing to 
do business with I/T/Us. Many Tribal stakeholders recommended providing 
Tribal and urban Indian health programs with the option to negotiate 
higher rates, but to limit maximum rates to what the provider or 
supplier would accept from non-governmental payers, including insurers, 
for the same service. Advocates for non-IHS and Tribal providers also 
recommended incorporating flexibility to negotiate rates.
    Response: IHS highlighted concerns about the impact the rule could 
have on access to care in the preamble to the NPRM and was pleased with 
the thoughtful responses received. IHS agrees with commenters that more 
flexibility must be built into the rule. IHS also agrees with Tribal 
stakeholders that Tribes should be provided more flexibility to 
negotiate rates that exceed Medicare rates and agrees that controls 
should be put into place to ensure that negotiated rates remain fair 
and

[[Page 14979]]

reasonable. Section 136.203 provides that if a specific amount has been 
negotiated with a specific provider or supplier or its agent by the I/
T/U, the I/T/U will pay that amount, provided such amount is equal to 
or better than the provider or supplier's MFC rate, as evidenced by 
commercial price lists or paid invoices and other related pricing and 
discount data, to ensure the I/T/U is receiving a fair and reasonable 
pricing arrangement. Further, the MFC rate does not apply if the I/T/U 
determines the prices offered to the I/T/U are fair and reasonable and 
the purchase of the service is otherwise in the best interest of the I/
T/U. It will be incumbent on the provider of services to provide the 
necessary documentation to ensure the rates charged are fair and 
reasonable.
    Comment: In addition to the ability to negotiate rates under the 
rule, several Tribal stakeholders also want an opt-out clause from the 
proposed rule for Tribal and urban Indian health care programs. The 
majority of commenters feel Tribal sovereignty and self-determination 
must also be respected to allow the Tribes the flexibility to negotiate 
with providers and determine how best to meet the needs of their 
community when providing health care. They indicated that flexibility 
is one of the foundational principles underlying the Indian Self-
Determination and Education Assistance Act (ISDEAA) and Tribes and 
Tribal organizations that negotiate agreements under that Act with the 
IHS should have the right to choose not to apply this new rule.
    Response: IHS agrees with Tribal stakeholders that Tribal health 
programs should have the option to administer PRC programs outside of 
the rule. Rather than memorialize this option as an opt-out clause, IHS 
is finalizing the recommendation as an opt-in provision in section 
136.201. The opt-in provision is intended to be consistent with 25 
U.S.C. 458aaa-16(e), which provides, with certain exceptions, that 
Tribes are not subject to rules adopted by the IHS unless they are 
expressly agreed to by the Tribe in their compact, contract or funding 
agreement with IHS. Although 25 U.S.C. 458aaa-16(e) only expressly 
applies to Tribes compacted under Title V of the ISDEAA, IHS is 
extending opt-in flexibility to Tribes contracted under Title I of the 
ISDEAA too. IHS is not incorporating a comparable provision allowing 
urban Indian health programs to opt-in or opt-out of the requirements 
of the rule. Urban Indian health programs are funded through 
procurement contracts or grants with IHS, not ISDEAA contracts, and the 
principles underlying self-determination and the opt-in flexibility do 
not extend to such agreements.
    Comment: One commenter believes that reducing physician payments 
will provide a disincentive to participate in the PRC program and will 
result in less beneficiary access to care.
    Response: IHS acknowledges the implementation of rates could impact 
access to care, and believe sufficient language has been incorporated 
to ensure that beneficiary access to care is not compromised.
    Comment: One commenter believes the rule would magnify the existing 
disparity between the average ambulance provider's total costs and 
their reimbursement.
    Response: The implementation of the rule is not intended to require 
a provider or supplier to incur a financial loss. To the extent the 
Medicare rate structure results in the provider or supplier incurring a 
financial loss, the flexibility added to the final rule should permit 
providers and suppliers to negotiate fair and reasonable rates with I/
T/Us.
    Comment: The majority of commenters stated that IHS should also 
engage in provider outreach and monitoring to ensure the rule is 
effectively implemented. Further, once the final rule is issued, the 
IHS, in collaboration with Tribes, should develop and issue a ``Dear 
provider letter'' for all I/T/Us to educate their network of providers 
regarding this regulation. Commenters believe that education and 
outreach to providers will be a critical component in successfully 
implementing the rule.
    Response: IHS agrees. IHS took similar steps when it promulgated 
the hospital-based rate under 42 CFR part 136 subpart D. IHS intends to 
work with Tribes to educate the providers that participate in IHS and 
Tribal PRC programs.
    Comment: One commenter indicates that some IHS Area Offices utilize 
case management to better monitor the services that are being purchased 
through PRC. The commenter proposed that IHS Area Offices have a 
medical physician on staff for utilization review.
    Response: IHS agrees with the commenter but the proposal offered is 
beyond the scope of this final rule.
    Comment: One commenter is concerned that the amount a provider 
``bills the general public'' for the same service is too vague. The 
term ``general public'' is subject to multiple interpretations. The 
commenter recommended limiting payment to the amount the provider 
``accepts as payment for the same service from nongovernmental 
entities, including insurance providers.''
    Response: IHS agrees with the commenter that the proposed language 
may be open to more than one interpretation. To avoid multiple 
interpretations and to align this subsection with others changes made 
to Sec.  136.203, the reference to ``bills the general public'' has 
been deleted and provisions have been inserted providing for payment 
not to exceed the provider or supplier's MFC rate, as evidenced by 
commercial price lists or paid invoices and other related pricing and 
discount data to ensure that the I/T/U is receiving a fair and 
reasonable pricing arrangement. Additionally, in the event that a 
Medicare rate does not exist for an authorized item or service, and no 
other payment methodology provided by the rule is applicable, IHS has 
included a provision in 136.203(a)(3) that authorizes payment at 65% of 
authorized charges.
    Comment: The majority of commenters believe the rule should not 
imply that professional services are never covered by the existing PRC 
regulations. The current PRC rate regulations apply to ``all Medicare 
participating hospitals, which are defined for purposes of that subpart 
to include all departments and provider-based facilities of 
hospitals.'' The commenters believe this includes physicians and other 
health care professionals if they are employed directly by the hospital 
or even ``under arrangements.''
    Response: The PRC rate regulations at part 136 subpart D apply to 
hospitals and critical access hospitals pursuant to section 
1866(a)(1)(U) of the Social Security Act which requires providers to 
agree to provide services under the Contract Health Services, now PRC, 
program or other programs funded by IHS through the execution of a 
Medicare participating provider agreement. The agreement executed by 
hospitals and critical access hospitals under section 1866 does not 
govern payment for professional services under Medicare, even for 
services provided by physician employees of a hospital or for ``billing 
under arrangements,'' and, accordingly, does not generally govern the 
acceptance of payment for services under Medicare Part B. To eliminate 
any confusion, the terms Supplier and Provider have been defined in 
Sec.  136.201 to only include entities that are not subject to Part 136 
Subpart D. Supplier means a physician or other practitioner, a 
facility, or other entity (other than a provider) not already governed 
by or subject to 42 CFR part 136 subpart D, that furnishes items or 
services under

[[Page 14980]]

this new Subpart. Provider, as used in this subpart only, means a 
provider of services not governed by or subject to 42 CFR part 136 
subpart D, and may include a skilled nursing facility, comprehensive 
outpatient rehabilitation facility, home health agency, or hospice 
program.
    Comment: The majority of commenters requested training for Tribes. 
Many commenters suggested IHS develop a training and technical 
assistance initiative to prepare I/T/U sites to implement the rule. 
Tribes expressed concern about the lack of training and technical 
assistance associated with the implementation of the regulation for 
Payment to Medicare-participating hospitals for authorized CHS (42 CFR 
136.30). IHS should work with several software products the I/T/Us can 
use and commenters recommended that IHS negotiate a volume discount for 
Tribes to purchase the software.
    Response: IHS agrees that training is necessary to ensure that the 
rule is implemented properly and effectively. Many suggestions for 
training, however, are beyond the scope of this final rule and will be 
addressed through subsequent communication with Tribes.
    Comment: Commenters indicated that IHS should also develop and 
implement a process in consultation with Tribes to monitor and report 
on the success of the rule once it is implemented.
    Response: IHS agrees that monitoring the effectiveness of the rule 
is important. Obtaining data from programs that are implementing the 
rule is essential to determining its success; however, reporting 
requirements exceed the scope of this final rule.
    Comment: The majority of commenters stated that the proposed rule 
would have significant Tribal implications and substantial direct 
effects on one or more Indian Tribes. As a result, pursuant to the HHS 
Tribal Consultation Policy, Tribal consultation is required. Tribes 
stated in their comments that they welcomed the opportunity to comment 
on the proposed rule through the notice and public comment process 
required by the Administrative Procedure Act, but they stated that the 
Director of the IHS must also engage in Tribal consultation on the 
proposed rule before any action is taken to finalize this rule.
    Response: IHS consulted with Tribes, during listening sessions and 
other meetings, on whether Tribes thought IHS should pursue applying 
PRC rates for non-hospital-based services. It has been noted that while 
these interactions indicated that regulations may have been a good 
idea, the level of discussion did not get into the complexities of 
developing a regulation and how such regulations would impact Tribes 
given the variation in access to specialty care and the number of 
hospitals across the Indian health system. IHS recognizes that specific 
provisions of the rule were not developed in consultation with Tribes. 
In the development of this final rule, however, IHS has collaborated 
significantly with the Director's PRC Workgroup. The PRC workgroup is 
composed of technical experts who have a deep understanding of the 
complexities of administering PRC programs. The rule has been revised 
to provide the flexibility many Tribal stakeholders have requested, and 
as finalized, will not apply to any Tribally-operated PRC program until 
it elects to opt-in in accordance with Sec.  136.201. IHS recognizes 
that these steps may not relieve all concerns regarding Tribal 
consultation. Accordingly, IHS is also publishing this final rule with 
a comment period in which to receive additional feedback from 
stakeholders, to determine whether any revisions should be made to the 
rule.
    Comment: One commenter recommended IHS pursue legislation, not a 
regulation.
    Response: Regulations (or rules) implement the public policy of 
enacted legislation and establish specific requirements. IHS bases its 
authority on 42 U.S.C. 2003 to establish the methodology and payment 
rates for the IHS PRC.
    Comment: One commenter is concerned that there is nothing explicit 
in the regulation that prevents the provider from avoiding the Medicare 
rate by choosing not to submit a claim at all, and seeking redress from 
the patient directly. Because the Medicare rates may be substantially 
lower than the provider's billed rate, the providers might avoid a PRC 
claim entirely and bill the patient for the full amount. The commenter 
is also concerned that more patients will be taken to collection 
agencies when they cannot afford to pay when the provider bills the 
patients directly.
    Response: IHS recognizes that the rule does require providers to 
accept payment from PRC programs and understands that this may on 
occasion result in patients incurring financial responsibility. IHS 
beneficiaries already incur financial responsibility for care that IHS 
cannot cover. In FY 2013, PRC denied an estimated $760,855,000 for an 
estimated 146,928 services needed by eligible American Indian and 
Alaska Native individuals. Those numbers only account for IHS 
administered programs. IHS notes incurring financial responsibility may 
be avoided by obtaining a PRC authorized referral from IHS prior to 
treatment. If a referral is issued by IHS, it means that the provider 
has accepted IHS payment rates, and the patient may not be charged for 
the service. A definition section was added to the rule at Sec.  
136.202 and defined Referral there to clarify for beneficiaries and 
providers when the requirements for payment acceptance have been 
triggered. IHS also added a definition for Notification of a Claim, as 
it too triggers payment acceptance under the rule. Finally, the 
definition of Repricing Agent was moved to the newly created definition 
section.
    Comment: One commenter stated there needs to be some oversight by 
either Centers for Medicare & Medicaid Services or other appropriate 
agencies written into the regulation that includes a way in which all 
Medicare-participating medical providers have to, by law, accept PRC 
patients and accept the rates established by 42 CFR part 136 subpart D.
    Response: No changes will be made as a result of this comment. IHS 
is promulgating this rule pursuant to its own rulemaking authority, 
under which there is no basis for another agency to enforce compliance.
    Comment: The majority of commenters state that any changes made, or 
proposed in the PRC program, must be careful to not adversely impact 
the effectiveness of the PRC programs. Any change to improve the 
efficiency or financial operations of the PRC program must be carefully 
evaluated to ensure that they do not impose additional administrative 
or financial burdens on the PRC program and the patients they serve. A 
meaningful and well-intentioned change could actually restrict access 
and cost the program more resources than it would save.
    Response: IHS believes these concerns have been addressed through 
the flexibilities which have been added to the final rule, the training 
IHS intends to offer to PRC administrators, and the outreach and 
education IHS intends to provide to PRC-participating providers and 
suppliers.
    Comment: Some commenters expressed serious concern regarding the 
long delay between publication of the proposed rule and issuing the 
final rule on limiting charges for services furnished by Medicare 
participating inpatient hospitals to individuals eligible for care 
purchased by Indian health programs, as provided for by Sec. 506 of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003. 
Once this final rule is adopted,

[[Page 14981]]

they stated, it should be implemented in a reasonable but expedient 
manner.
    Response: IHS acknowledges the concern and provides that the rule 
will be effective 60 days from publication and applicable to services 
provided after the effective date. The rule will apply to outpatient 
services provided after the effective date of the rule. The rule will 
apply to inpatient services with an admission that falls on or after 
the effective date of the rule. However, IHS also recognizes programs 
may not be fully equipped to implement the rule when it becomes 
effective. In accordance with 42 CFR 136.201(c), Tribal health programs 
may choose to opt-in to the rule immediately, or whenever they are able 
to fully implement the rule. A health program operated by the IHS or by 
an urban Indian organization through a contract or grant under Title V 
of the IHCIA, Public Law 94-437 should implement the rule as soon as 
possible, but must implement the rates specified herein no later than 
one year from the date of publication in the Federal Register.

IV. Collection of Information Requirements

    These regulations do not impose any new information collection 
requirements. Specifically, federal acquisition regulations already 
govern the collection of contractor pricing data and agency regulations 
and procedures already govern the collection of information necessary 
to process claims. The IHS will use the IHS purchase order form number 
IHS-843 for collection of information. OMB No. 0917-0002.

V. Regulatory Impact Statement

    The IHS has examined the impact of this final rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any one year). An April 
2013 study released by the Government Accountability Office (GAO) found 
that if Federal PRC programs had paid Medicare rates for physicians' 
services in 2010, they could have realized an estimated $32 million in 
annual savings to pay for additional services.
    The GAO formulated its estimate using actual IHS data, which it 
obtained from the IHS fiscal intermediary. The GAO narrowed those 
claims to payments for physician and other nonhospital services. These 
are the same services at issue in this final rule. Since IHS is the 
payer of last resort, the GAO excluded services where IHS would not 
have had primary responsibility, such as services covered by the 
patient's insurance or another third party payer. The GAO also excluded 
nonhospital services that were not covered by the Medicare Physician 
Fee Schedule, as well as anesthesiologists, based upon lack of 
information to determine comparable Medicare rates.
    Once the GAO had isolated the necessary IHS payment data, the GAO 
compared the IHS payments to the corresponding rate on the 2010 
Medicare Physician Fee Schedule. The GAO adjusted the payment rates 
according to the physician's approximated geographic location and the 
service setting, based upon Medicare practice. The GAO also compared 
the IHS payments to those that would have been made by private insurers 
using a commercial claims and encounters database. The GAO specifically 
compared payments for services occurring in the same county to account 
for any variation in payments due to location, by averaging the rate 
paid by the private insurers for a service in each county and comparing 
that average rate with IHS payments in the same county.
    The GAO evaluated the reliability of the data it had relied upon in 
its estimates, including the IHS claims data, the Medicare Physician 
Fee Schedule data, and the private insurance database. The GAO reviewed 
the documentation and discussed the database with officials it 
considered knowledgeable in this area. The GAO also performed data 
reliability checks to test the internal consistency and reliability of 
the data. The GAO determined that the data was sufficiently reliable 
for its purposes after taking these steps.
    IHS agrees with the methodology utilized by the GAO in its report 
to select, verify, and compare the necessary elements of the GAO 
estimate. While the GAO study did not consider the additional 
flexibility added to this final rule at the request of Tribes or 
payments made to anesthesiologists, IHS anticipates that most PRC 
programs and PRC payments under this final rule will closely follow the 
policy that the GAO considered when developing its study. For this 
reason, the GAO estimate from the April 2013 study is applicable to the 
regulatory impact analysis of the final rule.
    In 2014, IHS performed an analysis similar to the GAO study with 
claims data from the IHS fiscal intermediary for fiscal year (FY) 2012. 
Instead of analyzing the entire IHS system, as GAO had done with data 
from 2010, IHS focused on the potential impact to IHS PRC programs in 
the states of North and South Dakota. IHS was able to closely review 
the specific contracts in place between IHS and physicians in these two 
states by narrowing the geographic focus of its analysis. IHS found 
that North Dakota providers who had an agreement in place with IHS 
during FY 2012 would have received, on average, 31% less if payment 
rates for professional services and non-hospital-based care had been 
capped at the Medicare rate, while South Dakota providers would have 
experienced the opposite and received, on average, 31% more. It is 
important to note that, of those providing PRC services in FY 2012, 
only 15-16% had an agreement with IHS in either of these two states. 
The remaining 84-85% did not have an agreement in place with IHS in FY 
2012 and IHS estimates that these providers would have been paid, on 
average, 35% less in North Dakota and 52% less in South Dakota if the 
payments had been capped at Medicare rates. While most of the providers 
without an agreement would have been paid less under this analysis, IHS 
estimated that 26% in North Dakota and 21% in South Dakota would have 
received higher payments, because their billed charges were less than 
the Medicare rates.
    Overall, IHS estimated that in FY2012, it could have saved 
$2,074,638.28 in North Dakota and $5,498,089.09 in South Dakota if PRC 
payments for professional services and non-hospital-based care had been 
capped at the Medicare rates. IHS noted that referral numbers and 
authorizations for payment are dependent on appropriation levels for 
each year. The estimates provided by the IHS study were based upon the 
specific factors for FY 2012, including rates and funding levels in 
place at that point in time. The IHS analysis looked closely at the 
potential impact on providers in these two states, but it did not 
perform all of the detailed steps taken by the GAO to determine 
potential savings. Based upon its limited analysis, though, IHS 
determined that capping the PRC rates for professional services and 
non-hospital-based care would likely result in savings for IHS PRC 
programs.

[[Page 14982]]

    Both the GAO study and the IHS analysis note the possible 
consequences of this policy change. The GAO study determined that 
providers overall would receive less if the payments for professional 
services and non-hospital-based care are capped at the applicable 
Medicare rates. The IHS analysis acknowledged that most providers, 
especially those without a contract with IHS, would receive less under 
such a policy change, but IHS also found that some providers would 
receive more per individual claim. During the interview portion of its 
study, the GAO spoke with a few providers who already had contracts 
with IHS to be paid at or below Medicare rates. IHS also estimated that 
adverse impacts on providers could be mitigated by the additional 
referrals that would result from the PRC savings. In addition to the 
providers, the GAO study noted possible concerns regarding access to 
care for patients. The IHS analysis did not delve into this particular 
issue. However, neither the GAO study nor the IHS analysis anticipated 
the additional flexibility that would be built into this final rule, as 
part of the policy change. If IHS finds that providers in particular 
areas are choosing not to participate based upon the change in policy 
and the supply of providers in that area is not sufficient to meet 
demand, thereby impacting patient access to care, IHS has certain 
flexibility to negotiate higher rates under this final rule to ensure 
that patients are not negatively impacted. Tribally-operated PRC 
programs will have the same flexibility, if they choose to opt-in to 
this final rule. IHS beneficiaries as a whole will be able to benefit 
from the change in policy, since the savings will allow IHS to provide 
additional PRC services.
    Although the GAO study and the IHS analysis did not include other 
types of non-hospital services or funding that goes to Tribal PRC 
programs, particular Tribes and tribal organizations may decide not to 
opt-in to this final rule. Even if all of the Tribally-operated PRC 
programs choose to participate, IHS estimates that the increase in 
purchasing power brought about by this final rule would be unlikely to 
exceed $100 million annually. Furthermore, if any PRC programs utilize 
the additional flexibility added to this final rule and choose to 
negotiate rates above the applicable Medicare rates, the impact would 
be even less likely to exceed $100 million annually. Office of 
Management and Budget (OMB) has determined that this is a significant 
regulatory action under Executive Order 12866.
    The Secretary has determined this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the RFA, 5 U.S.C. 601-612. The final rule will 
not cause significant economic impact on health care providers, 
suppliers, or entities since only a small portion of the business of 
such entities concern IHS beneficiaries. The April 2013 study released 
by the GAO found that of the physicians sampled, the PRC program 
represented a small portion of their practice and was not a significant 
source of revenue. Although the sampling of physicians was small, all 
of the sampled physicians were in the top 25% in terms of volume of 
paid services covered by PRC. IHS believes the sample to be 
representative of higher volume practitioners currently providing 
services paid for by PRC. Accordingly, pursuant to 5 U.S.C. 605(b), the 
final rule is exempt from the initial and final regulatory flexibility 
analysis requirements of sections 603 and 604.
    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits before issuing any 
rule whose requirements mandate expenditure in any one year by State, 
local, or Tribal governments, in the aggregate, or by the private 
sector, of $141 million. This proposal would not impose substantial 
Federal mandates on State, local or Tribal governments or private 
sector.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by OMB.

List of Subjects in 42 CFR Part 136

    American Indian, Alaska Natives, Health, Medicare.

    Dated: March 11, 2016.
Mary Smith,
Principal Deputy Director, Indian Health Service.

    Dated: March 11, 2016.
Sylvia M. Burwell,
Secretary.
    For the reasons set forth in the preamble, the Indian Health 
Service is amending 42 CFR part 136 as set forth below:

PART 136--INDIAN HEALTH

0
1. The authority citation for part 136 continues to read as follows:

    Authority: 25 U.S.C. 13; sec. 3, 68 Stat. 674 (42 U.S.C., 2001, 
2003); Sec. 1, 42 Stat. 208 (25 U.S.C. 13); 42 U.S.C. 2001, unless 
otherwise noted.


0
2. Add subpart I, consisting of Sec. Sec.  136.201 through 136.204, to 
read as follows:
Subpart I--Limitation on Charges for Health Care Professional Services 
and Non-Hospital-Based Care
Sec.
136.201 Applicability.
136.202 Definitions.
136.203 Payment for provider and supplier services purchased by 
Indian health programs.
136.204 Authorization by urban Indian organizations.

Subpart I--Limitation on Charges for Health Care Professional 
Services and Non-Hospital-Based Care


Sec.  136.201  Applicability.

    The requirements of this Subpart shall apply to:
    (a) Health programs operated by the Indian Health Service (IHS).
    (b) Health programs operated by an urban Indian organization 
through a contract or grant under Title V of the Indian Health Care 
Improvement Act (IHCIA), Public Law 94-437, as amended.
    (c) Health programs operated by an Indian Tribe or Tribal 
organization pursuant to a contract or compact with the IHS under the 
Indian Self-Determination and Education Assistance Act (25 U.S.C. 450 
et seq.), provided that the Indian Tribe or Tribal organization has 
agreed in such contract or compact to be bound by this Subpart pursuant 
to 25 U.S.C. 450l and 458aaa-16(e), as applicable.


Sec.  136.202  Definitions.

    For purposes of this subpart, the following definitions apply.
    Notification of a claim means, for the purposes of part 136, and 
also 25 U.S.C. 1621s and 1646, the submission of a claim that meets the 
requirements of 42 CFR 136.24.
    (1) Such claims must be submitted within the applicable time frame 
specified by 42 CFR 136.24, or if applicable, 25 U.S.C. 1646, and 
include information necessary to determine the relative medical need 
for the services and the individual's eligibility.
    (2) The information submitted with the claim must be sufficient to:
    (i) Identify the patient as eligible for IHS services (e.g., name, 
address, home or referring service unit, Tribal affiliation),
    (ii) Identify the medical care provided (e.g., the date(s) of 
service, description of services), and
    (iii) Verify prior authorization by the IHS for services provided 
(e.g., IHS purchase order number or medical referral form) or exemption 
from prior

[[Page 14983]]

authorization (e.g., copies of pertinent clinical information for 
emergency care that was not prior-authorized).
    (3) To be considered sufficient notification of a claim, claims 
submitted by providers and suppliers for payment must be in a format 
that complies with the format required for submission of claims under 
title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) or 
recognized under section 1175 of such Act (42 U.S.C. 1320d-4).
    Provider, as used in this subpart only, means a provider of 
services not governed by or subject to 42 CFR part 136 subpart D, and 
may include, but not limited to, a skilled nursing facility, 
comprehensive outpatient rehabilitation facility, home health agency, 
or hospice program.
    Referral means an authorization for medical care by the appropriate 
ordering official in accordance with 42 CFR part 136 subpart C.
    Repricing agent means an entity that offers an IHS, Tribe or Tribal 
organization, or urban Indian organization (I/T/U) discounted rates 
from non-I/T/U public and private providers as a result of existing 
contracts that the non-I/T/U public or private provider may have within 
the commercial health care industry.
    Supplier, as used in this subpart only, means a physician or other 
practitioner, a facility, or other entity (other than a provider) not 
already governed by or subject to 42 CFR part 136 subpart D, that 
furnishes items or services under this Subpart.


Sec.  136.203  Payment for provider and supplier services purchased by 
Indian health programs.

    (a) Payment to providers and suppliers not covered by 42 CFR part 
136 subpart D, for any level of care authorized under part 136, subpart 
C by a Purchased/Referred Care (PRC) program of the IHS; or authorized 
by a Tribe or Tribal organization carrying out a PRC program of the IHS 
under the Indian Self-Determination and Education Assistance Act, as 
amended, Public Law 93-638, 25 U.S.C. 450 et seq.; or authorized for 
purchase under Sec.  136.31 by an urban Indian organization (as that 
term is defined in 25 U.S.C. 1603(h)) (hereafter collectively ``I/T/
U''), shall be determined based on the applicable method in this 
section:
    (1) If a specific amount has been negotiated with a specific 
provider or supplier or its agent by the I/T/U, the I/T/U will pay that 
amount, provided that such amount is equal to or better than the 
provider or supplier's Most Favored Customer (MFC) rate, as evidenced 
by commercial price lists or paid invoices and other related pricing 
and discount data to ensure that the I/T/U is receiving a fair and 
reasonable price. The MFC rate limitation shall not apply if:
    (i) The prices offered to the I/T/U are fair and reasonable, as 
determined by the I/T/U, even though comparable discounts were not 
negotiated; and
    (ii) The award is otherwise in the best interest of the I/T/U, as 
determined by the I/T/U.
    (2) If an amount has not been negotiated in accordance with 
paragraph (a)(1) of this section, the I/T/U will pay the lowest of the 
following amounts:
    (i) The applicable Medicare payment amount, including payment 
according to a fee schedule, a prospective payment system or based on 
reasonable cost (``Medicare rate'') for the period in which the service 
was provided, or in the event of a Medicare waiver, the payment amount 
will be calculated in accordance with such waiver.
    (ii) An amount negotiated by a repricing agent if the provider or 
supplier is participating within the repricing agent's network and the 
I/T/U has a pricing arrangement or contract with that repricing agent.
    (iii) An amount not to exceed the provider or supplier's MFC rate, 
as evidenced by commercial price lists or paid invoices and other 
related pricing and discount data to ensure that the I/T/U is receiving 
a fair and reasonable price, but only to the extent such evidence is 
reasonably accessible and available to the I/T/U.
    (3) In the event that a Medicare rate does not exist for an 
authorized item or service, and no other payment methodology provided 
for in paragraph (a)(1) or (2) of this section are accessible or 
available, the allowable amount shall be deemed to be 65% of authorized 
charges.
    (b) Coordination of benefits and limitation on recovery: If an I/T/
U has authorized payment for items and services provided to an 
individual who is eligible for benefits under Medicare, Medicaid, or 
another third party payer--
    (1) The I/T/U is the payer of last resort under 25 U.S.C. 1623(b);
    (2) If there are any third party payers, the I/T/U will pay the 
amount for which the patient is being held responsible after the 
provider or supplier of services has coordinated benefits and all other 
alternate resources have been considered and paid, including applicable 
co-payments, deductibles, and coinsurance that are owed by the patient;
    (3) The maximum payment by the I/T/U will be only that portion of 
the payment amount determined under this section not covered by any 
other payer;
    (4) The I/T/U payment will not exceed the rate calculated in 
accordance with paragraph (a) of this section (plus applicable cost 
sharing); and
    (5) When payment is made by Medicaid it is considered payment in 
full and there will be no additional payment made by the I/T/U to the 
amount paid by Medicaid.
    (c) Authorized services: Payment shall be made only for those items 
and services authorized by an I/T/U consistent with this part 136 or 
section 503(a) of the IHCIA, Public Law 94-437, as amended, 25 U.S.C. 
1653(a).
    (d) No additional charges:
    (1) If an amount has not been negotiated under paragraph (a)(1) of 
this section, the health care provider or supplier shall be deemed to 
have accepted the applicable payment amount under paragraph (a)(2) of 
this section as payment in full if:
    (i) The services were provided based on a Referral, as defined in 
Sec.  136.202; or,
    (ii) The health care provider or supplier submits a Notification of 
a Claim for payment to the I/T/U; or
    (iii) The health care provider or supplier accepts payment for the 
provision of services from the I/T/U.
    (2) A payment made and accepted in accordance with this section 
shall constitute payment in full and the provider or its agent, or 
supplier or its agent, may not impose any additional charge--
    (i) On the individual for I/T/U authorized items and services; or
    (ii) For information requested by the I/T/U or its agent or fiscal 
intermediary for the purposes of payment determinations or quality 
assurance.
    (e) IHS will not adjudicate a notification of a claim that does not 
contain the information required by Sec.  136.24 with an approval or 
denial, except that IHS may request further information from the 
individual, or as applicable, the provider or supplier, necessary to 
make a decision. A notification of a claim meeting the requirements 
specified herein does not guarantee payment.
    (f) No service shall be authorized and no payment shall be issued 
in excess of the rate authorized by this section.


Sec.  136.204  Authorization by an urban Indian organization.

    An urban Indian organization may authorize for purchase items and 
services for an eligible urban Indian as those terms are defined in 25 
U.S.C. 1603(f) and (h) according to section 503 of the IHCIA and 
applicable regulations.

[[Page 14984]]

Services and items furnished by physicians and other health care 
professionals and non-hospital-based entities shall be subject to the 
payment methodology set forth in Sec.  136.203.

[FR Doc. 2016-06087 Filed 3-18-16; 8:45 am]
BILLING CODE 4165-16-P