Medicare Program; Provider Reimbursement Determinations and Appeals, 30190-30267 [E8-11227]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 73, Number 101 (Friday, May 23, 2008)]
[Rules and Regulations]
[Pages 30190-30267]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-11227]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 413, and 417



Medicare Program; Provider Reimbursement Determinations and Appeals; 
Final Rule

Federal Register / Vol. 73, No. 101 / Friday, May 23, 2008 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 413, and 417

[CMS-1727-F]
RIN 0938-AL54


Medicare Program; Provider Reimbursement Determinations and 
Appeals

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

ACTION: Final rule.

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SUMMARY: Subpart R of 42 CFR part 405 consists of regulations governing 
Medicare reimbursement determinations, and appeals of those 
determinations, by health care providers. (For the sake of simplicity, 
throughout this final rule, we use ``reimbursement'' to refer to 
Medicare payment under both the reasonable cost and prospective payment 
systems.) Under section 1878 of the Social Security Act (the Act) and 
the subpart R regulations, the Provider Reimbursement Review Board (the 
Board) has the authority to adjudicate certain substantial 
reimbursement disputes between providers and fiscal intermediaries 
(intermediaries). Board decisions are subject to review by the CMS 
Administrator, and the final agency decision of the Board or the 
Administrator, as applicable, is reviewable in Federal district court. 
In addition, under the subpart R regulations, intermediaries have the 
authority to hold hearings and adjudicate certain other payment and 
reimbursement disputes with providers. This final rule updates, 
clarifies, and revises various provisions of the regulations governing 
provider reimbursement determinations, appeals before the Board, 
appeals before the intermediaries (for lesser disputes), and 
Administrator review of decisions made by the Board.

DATES: Effective Date: These regulations are effective August 21, 2008.
    Applicability Date: These regulations are applicable to all appeals 
pending as of, or filed on or after August 21, 2008, except as noted in 
sections II.Y. and III.Y. of this final rule.

FOR FURTHER INFORMATION CONTACT: Morton Marcus, (410) 786-4477; Donald 
Romano, (410) 786-1401.

SUPPLEMENTARY INFORMATION: To help readers locate information in this 
final rule, we are providing the following Table of Contents.
I. Background
    A. Legislative and Regulatory History and Development
    B. Medicare Modernization Act Requirements for Issuance of 
Regulations
II. Provisions of the Proposed Rule and Public Comments and 
Responses
    A. Definitions of Entities That Review Intermediary 
Determinations or Decisions by Such Entities; Definition of 
Reimbursement (Sec.  405.1801(a))
    B. Calculating Time Periods and Deadlines (Sec.  405.1801(a) and 
Sec.  405.1801(d))
    C. Providers Under Subpart R; Limited Applicability to Non-
Provider Entities (Sec.  405.1801(b))
    D. Provider Hearing Rights (Sec.  405.1803(d), Sec.  405.1811, 
and Sec.  405.1835)
    1. Provider Dissatisfaction With Medicare Reimbursement; Revised 
Self-Disallowance Policy
    2. Audits of Self-Disallowed Items
    3. Determining Timeliness of Hearing Requests (Sec.  405.1811 
and Sec.  405.1835)
    4. Contents of Hearing Request
    E. Provider Requests for Good Cause Extension of Time Period for 
Requesting Hearing (Sec.  405.1813 and Sec.  405.1836)
    F. Intermediary Hearing Officer Jurisdiction (Sec.  405.1814)
    G. CMS Reviewing Official Procedure (Sec.  405.1834)
    H. Group Appeals (Sec.  405.1837)
    I. Amount in Controversy (Sec.  405.1839)
    J. Board Jurisdiction (Sec.  405.1840)
    K. Expedited Judicial Review (Sec.  405.1842)
    L. Parties to Proceedings in a Board Hearing or Intermediary 
Hearing (Sec.  405.1843 and Sec.  405.1815)
    M. Quorum Requirements (Sec.  405.1845)
    N. Board Proceedings Prior to Hearing; Discovery in Board and 
Intermediary Hearing Officer Proceedings (Sec.  405.1853 and Sec.  
405.1821)
    O. Subpoenas (Sec.  405.1857)
    P. Record of Administrative Proceedings (Sec.  405.1865 and 
Sec.  405.1827)
    Q. Board Actions in Response to Failure to Follow Board Rules 
(Sec.  405.1868)
    R. Scope of Board's Authority in a Hearing Decision (Sec.  
405.1869 and Sec.  405.1829)
    S. Board Hearing Decision and Intermediary Hearing Decision 
(Sec.  405.1871, Sec.  405.1831 and Sec.  405.1833)
    T. Administrator Review (Sec.  405.1875)
    U. Judicial Review (Sec.  405.1877)
    V. Reopening Procedures (Sec.  405.1885 through Sec.  405.1889)
    W. Three Additional Proposals Under Consideration
    X. Technical Revisions
    Y. Effective Date
    Z. Children's Health Graduate Medical Education Program (CHGME)
III. Provisions of the Final Rule
IV. Collection of Information Requirements
    A. Information Collection Requirements (ICRs) Introduction 
(Sec.  405.1801)
    B. ICRs Regarding the Right to Intermediary Hearing; Contents 
of, and Adding Issues to, Hearing Request (Sec.  405.1811)
    C. ICRs Regarding Good Cause Extension of the Time Limit for 
Requesting an Intermediary Hearing (Sec.  405.1813)
    D. ICRs Regarding CMS Reviewing Official Procedure (Sec.  
405.1834)
    E. ICRs Right to Board Hearing; Contents of, and Adding Issues 
to, Hearing Request (Sec.  405.1835)
    F. ICRs Regarding Good Cause Extension of Time Limit for 
Requesting a Board Hearing (Sec.  405.1836)
    G. ICRs Regarding Group Appeals (Sec.  405.1837)
    H. ICRs Regarding Amount in Controversy (Sec.  405.1839)
    I. ICRs Regarding Expedited Judicial Review (Sec.  405.1842)
V. Regulatory Impact Statement
VI. Regulation Text

I. Background

A. Legislative and Regulatory History and Development

    Section 1878(a) of the Social Security Act (the Act) allows 
providers to appeal to the Board final determinations made by a fiscal 
intermediary under section 1861(v)(1)(A) of the Act (reasonable cost 
reimbursement), as well as certain determinations by the Secretary 
involving payment under section 1886(d) (inpatient hospital prospective 
payment) and section 1886(b) (commonly known as the Tax Equity and 
Fiscal Responsibility Act of 1982 (TEFRA) payment system) of the Act. 
In addition, by regulation, providers are given the right to appeal to 
the Board or fiscal intermediary certain other determinations. A brief 
discussion of the original cost reimbursement, TEFRA, and prospective 
payment systems (PPS), and some of the types of determinations that are 
appealable, follows.
    For cost reporting years beginning before October 1, 1983, all 
providers were reimbursed for Part A (hospital insurance) covered items 
and services they furnished to Medicare beneficiaries on the basis of 
reasonable cost. (Reasonable cost is defined at section 1861(v)(1)(A) 
of the Act and implementing regulations at 42 CFR, part 413.) In 1982, 
the Congress determined that the reasonable cost reimbursement system 
should be modified to provide hospitals with better incentives to 
render services more efficiently. Accordingly, in TEFRA, Public Law 97-
248, the Congress amended the Act by imposing a ceiling on the rate of 
increase of inpatient operating costs recoverable by a hospital under 
Medicare.
    The Social Security Amendments of 1983, Public Law 98-21, added 
section 1886(d) to the Act, which, effective with cost reporting 
periods beginning on or after October 1, 1983, changed the method of 
payment for inpatient hospital services under Medicare Part A for 
short-term acute care hospitals. The method of payment for these 
hospitals was changed from a cost-based

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retrospective reimbursement system to a system based on prospectively 
set rates; that is, a PPS. Under Medicare's inpatient hospital PPS, 
payment is made at a predetermined specific rate for each hospital 
discharge (classified according to a list of diagnosis-related groups 
(DRGs)), excluding certain costs that continue to be reimbursed under 
the reasonable cost-based system.
    Other statutory changes expanded the types of providers that are 
subject to a PPS. The Balanced Budget Act of 1997 (BBA), Public Law 
105-33, established a PPS for home health agencies (HHAs), for 
rehabilitation hospitals, and for all skilled nursing facilities 
(SNFs). The Balanced Budget Refinement Act of 1999, Public Law 106-113, 
provided for the establishment of a PPS for long term care hospitals 
(LTCHs). Although many types of providers are now paid on a 
prospectively-determined basis, some types of providers (for example, 
hospices, psychiatric hospitals, and children's hospitals) continue to 
be paid on a reasonable cost basis.
    Payments to providers are ordinarily made through private 
organizations, known as fiscal intermediaries, under contracts with the 
Secretary. (The term ``intermediary'' includes both fiscal 
intermediaries and Medicare Administrative Contractors for the purpose 
of this final rule.) For covered items and services reimbursed on a 
reasonable cost basis, the intermediary pays a provider during a cost 
reporting year interim payments that approximate the provider's actual 
costs. Under a PPS, providers are generally paid for each discharge 
after each bill is submitted.
    Regardless of whether the provider is paid under reasonable cost or 
under a PPS, the provider files an annual cost report after the cost 
year is completed. The intermediary then reviews or audits the cost 
report, determines the aggregate amount of payment due the provider, 
and makes any necessary adjustments to the provider's total Medicare 
reimbursement for the cost year. This year-end reconciliation of 
Medicare payment for the provider's cost reporting period constitutes 
an intermediary determination, as defined in Sec.  405.1801(a). Under 
Sec.  405.1801(a)(1), Sec.  405.1801(a)(2), and Sec.  405.1803, the 
intermediary must render the provider with written notice of the 
intermediary determination for the cost period in a notice of amount of 
program reimbursement (NPR). The NPR is an appealable determination.
    In addition to the NPR, other determinations made by the 
intermediary or CMS for hospitals and other providers are appealable to 
the intermediary or Board (depending on the amount in controversy). 
These include: A denial of a hospital's request for an adjustment to, 
or an exemption from, the TEFRA rate of increase ceiling (see Sec.  
413.40); a denial of an HHA's or SNF's request for an adjustment to, or 
an exemption from, the routine cost limits that were in effect prior to 
a PPS for these providers (see Sec.  413.30); a denial of certain 
hospice payments (see Sec.  418.311); or a denial of a PPS hospital's 
request to be classified as a sole community hospital (see Sec.  
412.92) or rural referral center. Also, some health care entities (for 
example, end-stage renal dialysis (ESRD) facilities, rural health 
clinics (RHCs) and Federally qualified health centers (FQHCs)) are 
treated as ``providers'' for purposes of subpart R and have appeal 
rights before the intermediaries and the Board. Thus, for example, a 
renal dialysis facility may appeal to the intermediary or the Board a 
CMS denial of its request for an exception to its composite payment 
rate (see Sec.  413.194(b)).
    If a provider is dissatisfied with some aspect of an appealable 
intermediary or CMS determination, it may request a hearing before the 
intermediary or the Board, depending on the amount in controversy. For 
an amount in controversy that is at least $1,000 but less than $10,000, 
the provider may request an intermediary hearing before the 
intermediary hearing officer(s) under Sec.  405.1811. If the amount in 
controversy is at least $10,000, the provider may request a hearing 
before the Board under section 1878(a) of the Act and Sec.  405.1835 of 
the regulations. Alternatively, the provider may request a Board 
hearing with one or more additional providers under section 1878(b) of 
the Act and Sec.  405.1837, if the amount in controversy is, in the 
aggregate, at least $50,000. (This type of appeal is known as a group 
appeal.) (Note that under section 1878(f)(1) of the Act, any appeal to 
the Board by providers under common ownership or control must be 
brought by these providers as a group regarding any matter involving an 
issue common to these providers. We interpret this provision to apply 
only where the amount in controversy for the common issue is at least 
$50,000.) Decisions by the intermediary hearing officer(s) or the Board 
are subject to further review. Prior to the implementation of this 
final rule, intermediary hearing officers' decisions have been subject 
to review by a CMS reviewing official pursuant to section 2917 of the 
Provider Reimbursement Manual (PRM), Part 1. Now, Sec.  405.1834 
provides for this review. Also, under this final rule, no provisions 
remain for judicial review of a final decision of the intermediary 
hearing officer(s) or CMS reviewing official, as applicable. Board 
decisions are subject to review by the Administrator or the Deputy 
Administrator of CMS, under section 1878(f)(1) of the Act and Sec.  
405.1875. (The Secretary's review authority under section 1878(f)(1) of 
the Act has been delegated to the Administrator, and redelegated to the 
Deputy Administrator, of CMS. For ease of use, throughout this proposed 
rule, we use the term ``Administrator'' to refer to either the 
Administrator or Deputy Administrator, and the term ``Administrator 
review'' to review by either official.) A final decision of the Board, 
or any reversal, affirmance, or modification of a final Board decision 
by the Administrator, is subject to review by a United States District 
Court with venue under section 1878(f)(1) of the Act and Sec.  405.1877 
of the regulations.
    Most of the central provisions of the regulations governing 
provider reimbursement determinations and appeals are more than 30 
years old. On May 27, 1972, we published a final rule (37 FR 10722), 
which provided for the intermediary determination, NPR, intermediary 
hearing, and reopening of both intermediary determinations and 
intermediary hearing decisions. Five months later, the Congress added 
section 1878 to the Act, which established the Board and provided for 
review of Board decisions by the Secretary, as well as for judicial 
review. (See Social Security Amendments of 1972, Pub. L. 92-603, 
section 243(a), 86 Stat. 1420 (October 30, 1972).) We then, on 
September 26, 1974, published a final rule (39 FR 34514) that 
implemented the 1972 amendments to the Act, and revised and 
redesignated the preexisting rules governing the intermediary 
determination, NPR, intermediary hearing, and reopening. These 
regulations were redesignated as Subpart B of Part 405 of Title 42 of 
the CFR (Subpart R) on September 30, 1977 (42 FR 52826). We have 
revised these regulations on several occasions, largely in response to 
various amendments to section 1878 of the Act.
    For several reasons, we believe it is necessary and appropriate to 
revise many of the subpart R regulations governing provider 
reimbursement determinations and appeals. As noted previously, the 
principal provisions of the regulations are more than 30 years old. In 
the intervening period, various issues have arisen regarding provider 
reimbursement determinations and

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appeals. Important parts of the regulations have been the subject of 
extensive litigation, the results of which indicate a need for 
reexamination of the rules. Also important is the development of a huge 
backlog of cases before the Board (which, at the present time, is 
approximately 6,800 cases). Experience gained through long use of the 
regulations indicates that revisions to the regulations would lead to a 
more effective and efficient appeal process. We recognize that the 
Board's inventory of pending cases is dependent in some ways on factors 
outside of its control (for example, the number of hearing requests 
filed). However, we believe that the revisions made in this final rule 
will help the Board reduce the case backlog (or at least forestall 
substantial additions to it), and will also reflect changes in the 
statute, clarify our policy on various issues, and eliminate outdated 
material. The Board's instructions for providers and intermediaries, as 
well as the Board's decisions on specific cases brought before it, are 
available on the CMS Web site, which, as of the date of publication of 
this final rule, is https://www.cms.hhs.gov/PRRBReview.

B. Medicare Modernization Act Requirements for Issuance of Regulations

    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) amended section 
1871(a) of the Act and requires the Secretary, in consultation with the 
Director of the Office of Management and Budget, to establish and 
publish regular timelines for the publication of Medicare final 
regulations based on the previous publication of a Medicare proposed or 
interim final regulation. Section 1871(a)(3)(B) of the Act, as amended 
by section 902 of the MMA, also states that the timelines for these 
regulations may vary but shall not exceed 3 years after publication of 
the preceding proposed or interim final regulation, except under 
exceptional circumstances. Section 1871(a)(3)(B) of the Act further 
provides that if the Secretary intends to vary such a timeline with 
respect to the publication of a final regulation, the Secretary shall 
publish in the Federal Register notice of the different timeline by not 
later than the timeline previously established with respect to such 
regulation. On June 22, 2007, a notice was published in the Federal 
Register extending by one year (or until June 25, 2008) the timeframe 
for publishing this final rule (see 72 FR 34425). Therefore, this final 
rule has been published within the time limit imposed by section 902 of 
the MMA.

II. Provisions of the Proposed Rule and Public Comments and Responses

    On June 25, 2004, we published a proposed rule in the Federal 
Register (69 FR 35716) that set forth proposed regulations seeking to 
update, clarify, and revise various provisions of the regulations 
governing provider reimbursement determinations, appeals before the 
intermediary hearing officers and the Board, and Administrator review 
of decisions made by the Board. For purposes of the summary of the 
proposed provisions and for the comments and responses, we are using 
the same lettering sequence that appeared in the proposed rule. In each 
lettered section, we provide a description of our proposals and a 
summary of the changes from the proposed rule that we have made in this 
final rule. A more extensive description of the proposals is contained 
in the proposed rule, and a brief summary of the changes appears at 
section III.

A. Definitions of Entities That Review Intermediary Determinations or 
Decisions by Such Entities; Definition of Reimbursement (Sec.  
405.1801(a))

    We proposed definitions for ``intermediary hearing officer''; ``CMS 
reviewing official''; ``CMS Reviewing official procedure''; 
``Administrator review''; and ``reviewing entity.'' We received no 
comments on these proposed definitions and we are adopting them without 
change. We note that we incorrectly stated that we were proposing a 
definition for ``reimbursement.''

B. Calculating Time Periods and Deadlines (Sec.  405.1801(a) and Sec.  
405.1801(d))

    We proposed specific provisions to address the timeframes for 
appealing determinations, including those for determining the beginning 
and end of a specific appeal period. Generally, we proposed to 
calculate the beginning period of an appeal as the date a party 
receives a triggering notice, and the end period for an appeal as the 
date by which a reviewing entity must receive the party's submission. 
We proposed a definition for ``date of receipt'' with respect to the 
method we would use to determine the date a document or other material 
is received by: (1) A party or non-party involved in proceedings before 
a reviewing entity and (2) a reviewing entity. Specifically, we 
proposed a rebuttable presumption whereby the receipt date of documents 
sent by a reviewing entity to providers, intermediaries and other 
entities would be 5 days after the postmark date. For materials 
submitted to a reviewing entity, we proposed the establishment of a 
presumption that the receipt date is the date the reviewing entity 
stamps the document ``Received.'' We also proposed that, where a 
reviewing entity could not conduct business due to extraordinary 
circumstances beyond its control, the designated time period would 
resume on the next work day the reviewing entity was again able to 
conduct business. Finally, we proposed that the last day of a 
designated time period would be excluded if it fell on a Saturday, 
Sunday, or Federal legal holiday.
    We are amending our proposed definition of ``Date of Receipt'' in 
Sec.  405.1801(a) to provide that, where a request for an intermediary 
or Board hearing, a request to add issues to a Board or intermediary 
hearing, or any other document or material is transmitted to a 
reviewing entity by a nationally-recognized, next-day courier service 
(for example, the U.S. Postal Service Express Mail, Federal Express, 
UPS, or DHL), the ``Date of Receipt'' is presumed to be the date of 
delivery noted by the courier, unless it can be shown by clear and 
convincing evidence that the materials were received on a different 
date. We are also amending the definition of ``Date of Receipt'' to 
provide that, where a nationally-recognized, next-day courier service 
is not employed to deliver materials to a reviewing entity, the ``Date 
of Receipt'' is presumed to be the date stamped ``Received'' by the 
reviewing entity, unless it can be shown by clear and convincing 
evidence that the materials were received by some other date. The 
reviewing entity's determination of whether the presumption of the 
correctness of the date of delivery, or the date stamp, is overcome by 
clear and convincing evidence is final and binding (that is, it is not 
subject to further administrative or judicial review).
    Comment: One commenter supported our proposal that the timeframe 
for requesting an intermediary hearing or a Board hearing should run 
from the date of receipt of the appealable decision. Another commenter 
agreed that the ``5-day presumption'' gave an accurate determination of 
the date of receipt of a document. One commenter suggested that the 
``5-day presumption'' should be used by a reviewing entity when it 
sends and receives materials.
    Three commenters suggested the rule should offer some reassurance 
that the reviewing entity would, in fact, stamp ``Received'' on the 
document on the day of arrival. One of these commenters also suggested 
using ``date of mailing'' as a

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measure of timeliness. Another commenter stated that date stamps are 
unverifiable and suggested that the Board should consider an electronic 
docket system that would allow parties to view the actual dates of 
receipt of filings and Board actions via the Internet. Another 
commenter suggested the use of a reliable ``intermediary'' (for 
example, the United States Postal Service, because it would provide a 
single source of date verification) instead of relying solely on the 
determination of the Board. This commenter suggested that the current 
``mailbox rule'' be retained.
    Response: After reviewing all of the comments received regarding 
the calculation of the various time periods and deadlines set for 
appealing final determinations, we have decided to adopt our proposals 
as final, with the modifications noted below, regarding the receipt of 
documents by a reviewing entity. We continue to believe that the best 
and most consistent way to establish a beginning and ending date for 
purposes of determining the various appeal periods is through the use 
of ``date of receipt.'' (We also note that employing a ``date of 
mailing'' can present some practical problems, such as unreadable 
postmark dates.) With respect to the situation in which a party (or 
interested non-party) to a proceeding receives a document from a 
reviewing entity or from another party, we have established a 5-day 
presumption for receipt of that document. The presumption may be 
rebutted if a preponderance of the evidence establishes that the 
document was actually received on a later date. The 5-day presumption 
does not apply in the case where the reviewing entity is on the 
receiving end of a document from a party (or non-party) to the 
proceeding. Except as noted below, the receipt date in this instance is 
the date the reviewing entity date stamps the document as ``Received.'' 
We have decided not to include a 5-day presumption for the receipt of 
documents by reviewing entities because there is a presumption of 
administrative regularity in agency action. This doctrine presumes that 
an arm of a Federal agency, such as the Board, will act responsibly, 
fairly, and legally in its duty to provide an appeals forum for 
providers of Medicare services. Thus, it is reasonable to presume that 
the actual receipt date of a document submitted to a reviewing entity 
is the date the reviewing entity stamps ``Received'' on the document. 
Nonetheless, although we believe that materials will be timely and 
accurately stamped ``Received'' by the Office of Hearings, we wish to 
avoid any confusion or possible prejudice to a provider, as well as any 
protracted disputes as to when a document was received. We also 
recognize the importance of the timeframes for both requesting a Board 
or intermediary hearing and for requesting that issues be added prior 
to a Board or intermediary hearing. Therefore, we are amending our 
definition of ``Date of Receipt'' in Sec.  405.1801, to provide that, 
where a request for hearing or a request to add issues prior to a 
hearing, or any other document or material is delivered to a reviewing 
entity by a nationally-recognized next-day courier service, the ``Date 
of Receipt'' shall be presumed to be the date of delivery as noted by 
that courier service, unless it can be shown by clear and convincing 
evidence that the material was received on a different date. Further, 
in order to strongly encourage the use of next-day couriers (especially 
for requests for appeal and for requests to add issues), we are 
amending the definition of ``Date of Receipt'' to provide that, where a 
nationally-recognized next-day courier service is not employed to 
deliver materials to the reviewing entity, the ``Date of Receipt'' 
shall be presumed to be the date stamped ``Received'' by the reviewing 
entity, unless it is established by clear and convincing evidence that 
the materials were actually received on a different date. In order to 
prevent collateral litigation, the reviewing entity's determination as 
to whether clear and convincing evidence exists to establish that the 
materials were received on a date different from the delivery date or 
the date stamped ``Received'' is not subject to further administrative 
or judicial review. (We considered requiring, upon penalty of refusal 
to accept, that any request for a hearing or request to add issues be 
delivered by a next-day courier service.)
    Finally, we note that, although it is not feasible at this time for 
the Office of Hearings to administer an electronic docket system, such 
a system may be implemented in the future.
    Comment: One commenter suggested that the 5-day presumption for 
receipt of documents from a reviewing entity be five business days 
instead of five calendar days because of weekends.
    Response: We believe that five calendar days is a sufficient period 
of time (and we note that mail is picked up and delivered on 
Saturdays).
    Comment: One commenter stated that reviewing entities should accept 
filings via facsimile (fax), with originals to follow, and use the date 
indicated on the fax as the date of receipt.
    Response: The Office of the Attorney Advisor, which assists in the 
Administrator review process, has allowed parties to submit fax copies. 
This practice reflects the short timeframes for Administrator review 
and the small number of appeals that are pending in the office at any 
one time. In contrast, the Office of Hearings, which assists the Board 
in its review, has declined to allow fax transmissions of provider 
requests for Board hearings and other relevant documents. The Office of 
Hearings' practice reflects the voluminous number of appeals pending in 
that office and the large number of documents submitted (several of 
which may be due on the same date), making the acceptance of facsimile 
transmissions impractical. We are not limiting either the Office of the 
Attorney Advisor or the Office of Hearings in determining the best 
office practice for the receipt of documents. Additionally, there may 
be future technological innovations that will make other modes of 
submission feasible, which these offices may wish to have the 
flexibility to adopt. Therefore, we decline to specify in regulations 
whether the Office of Hearings or Office of Attorney Advisor may or 
must accept fax transmissions, or hand delivery, or other modes of 
submission, and, consistent with present practice, will leave it to the 
discretion of these offices as to the additional types of submission 
they will accept.
    Comment: One commenter requested that we clarify the types of 
relevant evidence (for example, a provider date stamp) that would prove 
that materials sent by a reviewing entity were received by a provider 
beyond the 5-day presumption period.
    Response: We decline to specify types of evidence that will 
necessarily establish that a document was received more than five days 
after the postmark date. Rather, whether a piece of evidence (for 
example, an affidavit from the party or a date stamp from the party) is 
persuasive that a document was received more than 5 days after the 
postmark date would be determined in context with any other relevant 
evidence in a particular case.
    Comment: One commenter believed that providers should be allowed to 
request extensions of timeframes for appeal in situations involving 
employee strikes or extended absence due to illness or maternity leave.
    Response: In section II.E. of this final rule, regarding ``Provider 
Requests for Good Cause Extension of Time Period for Requesting 
Hearing,'' we state the rule that an appeal period may be extended for 
``good cause'' only in cases

[[Page 30194]]

where a provider can establish that it could not reasonably have been 
expected to submit a hearing request within 180 days due to 
extraordinary circumstances beyond its control.

C. Providers Under Subpart R; Limited Applicability to Non-Provider 
Entities (Sec.  405.1801(b))

    We proposed to amend Sec.  405.1801(b)(1) to recognize as a 
provider under Subpart R each entity recognized under the Act for 
purposes of provider reimbursement determinations and appeals. In 
accordance with the definition of ``provider of services'' in section 
1861(u) of the Act, we proposed to recognize specifically a hospital, 
critical access hospital, SNF, comprehensive outpatient rehabilitation 
facility, HHA, and hospice program. Also, a RHC and a FQHC would be 
included in accordance with section 1878(j) of the Act, and an ESRD 
facility would be recognized under section 1881(b)(2)(D) of the Act. 
Our proposed revision to Sec.  405.1801(b)(1) would also recognize as a 
provider any other entity treated as a provider under the Act, in order 
to ensure recognition in subpart R of any other entity that may qualify 
as a provider under the Act for purposes of provider reimbursement 
determinations and appeals. We received no comments on this section and 
are adopting our proposals without change.

D. Provider Hearing Rights (Sec.  405.1803(d), Sec.  405.1811, and 
Sec.  405.1835)

    Under section 1878(a) of the Act, and Sec.  405.1835 and Sec.  
405.1841 of the regulations, a provider may obtain a Board hearing if 
it meets three jurisdictional requirements: (1) The provider is 
dissatisfied with its Medicare reimbursement for a cost reporting 
period; (2) the amount in controversy is at least $10,000 (at least 
$50,000 for a group appeal); and (3) the provider files a timely 
request for a hearing to the Board. The same jurisdictional 
requirements govern provider requests for an intermediary hearing under 
Sec.  405.1811, except that the amount in controversy requirement is at 
least $1,000 but less than $10,000. In this section of the proposed 
rule, we proposed changes regarding the first and third jurisdictional 
requirements; that is, provider dissatisfaction with Medicare 
reimbursement and the timeliness of hearing requests. We are making 
several changes to the proposed rule.
    Under Sec.  405.1811(a)(1), and Sec.  405.1835 (a)(1), a provider 
has a right to an intermediary or Board hearing, as a single provider 
appeal, for specific items claimed for a cost reporting period covered 
by an intermediary or Secretary determination, if the provider 
preserves its right to claim dissatisfaction with the amount of 
Medicare payment for the specific item(s) at issue. The provider can 
preserve this right either by claiming the cost on its cost report or, 
if the provider seeks payment that it believes may not be allowable or 
may not be in accordance with Medicare policy (for example, if the 
intermediary lacks discretion to award the reimbursement the provider 
seeks for the item(s)), by ``self-disallowing a specific item(s) by 
following the applicable procedures for filing a cost report under 
protest.'' We have amended Sec.  405.1811(a)(1) and Sec.  
405.1835(a)(1) to be effective for cost reporting periods that end on 
or after December 31, 2008. This revision will be beneficial to both 
providers and intermediaries. The delay in the effect of the 
requirement will benefit providers because they will have additional 
time to evaluate whether they wish to file a cost report item under 
protest. This change will also eliminate the transitional 
administrative burden that intermediaries otherwise would have faced 
under the proposal, which would have necessitated that providers file 
requests to amend previously filed cost reports to explicitly file cost 
report items under protest.
    In response to comments, we have clarified Sec.  405.1811(b) and 
Sec.  405.1835(b) to provide that, where required information is not 
submitted with the hearing request, the intermediary hearing officer or 
Board, as applicable, may dismiss with prejudice the appeal, or take 
any other remedial action that the reviewing entity considers 
appropriate. We believe that this approach is consistent with the 
approach we have taken in section Sec.  405.1868 (``Board Actions in 
Response to Failure to Follow Board Rules'') in which we similarly 
leave to the Board's discretion whether to dismiss an appeal or take 
some other, lesser action.
    We are amending proposed Sec.  405.1835(c)(3) to address possible 
misleading and unnecessary language concerning adding an issue to an 
appeal of a revised NPR. Proposed Sec.  405.1835(c)(3) stated that a 
request to add an issue to an appeal is timely if ``[t]he Board 
receives the request to add issues no later than 60 days after the 
expiration of the applicable 180-day period prescribed in paragraph 
(a)(3) of this section or, for a request to add issue(s) following a 
reopening conducted in accordance with and within the period specified 
in Sec.  405.1885(c)(1).'' We have deleted the language in Sec.  
405.1835(c)(3) pertaining to a request to add issues following a 
reopening. We note that we did not include such language in the 
corresponding proposed intermediary hearing officer regulations at 
Sec.  405.1811(c)(3). Such language is potentially misleading in that 
it may suggest incorrectly that a notice of reopening is the trigger 
point for appealing an issue, whereas, in fact, under our longstanding 
policy (which is reaffirmed in this final rule at Sec.  405.1889), only 
those matters actually revised and specifically contained in a revised 
determination following a notice of reopening are appealable. We also 
believe the language is unnecessary because a revised determination is 
treated the same under our rules as an original determination for 
purposes of the time in which to request a hearing or add an issue. 
Thus, if a revised NPR containing two distinct revisions were issued, 
and a provider timely appealed one of the revisions (that is, within 
180 days after the date of receipt by the provider of the revised NPR), 
it could add the second revision as an issue within 60 days after the 
expiration of the 180-day period for appealing the revised NPR.
    In Sec.  405.1811(b)(2)(i) and Sec.  405.1835(b)(2)(i), we proposed 
that a provider would be required to explain its dissatisfaction with 
the amount of Medicare payment for the specific item(s) at issue by 
stating why Medicare payment is incorrect for each disputed item. We 
acknowledge that there may be instances in which a provider may be 
uncertain as to whether Medicare payment is incorrect because it does 
not have access to underlying data (for example, data from a State 
agency). Accordingly, we have revised Sec.  405.1811(b)(2)(i) and Sec.  
405.1835(b)(2)(i) to allow a provider to explain why it is unable to 
determine whether payment is correct as a result of not having access 
to underlying information.
    Further, in response to a commenter's suggestion that providers be 
required to list their parent corporation at the time of filing a 
single appeal so as to assist the Board in identifying providers under 
common ownership, we are adding new Sec.  405.1835(b)(4) to require a 
provider under common ownership or control to furnish the name and 
address of its parent corporation and to provide a statement that: (1) 
To the best of the provider's knowledge, no other provider to which it 
is related by common ownership or control, has pending a request for a 
Board hearing pursuant to this section or pursuant to

[[Page 30195]]

Sec.  405.1837(b)(1) on any of the same issues contained in the 
provider's hearing request for a cost reporting period that falls 
within the same calendar year as the calendar year covered by the 
provider's hearing request; or (2) a pending appeal(s) exist(s), and 
the provider name(s) and provider number(s), and the case number(s) (if 
assigned), for such appeal(s).
    Finally, in preparing this final rule, we have corrected minor 
wording inconsistencies between Sec.  405.1811, which pertains to 
intermediary hearings, and Sec.  405.1835, which pertains to Board 
hearings, where appropriate.
    Comment: One commenter stated that the section on who is entitled 
to a hearing should be clarified to include those entities that were 
formerly providers or the successor organizations that retained 
responsibility for previously filed cost reports following a change of 
ownership. In recent years, numerous tax-exempt organizations sold 
hospital operations and the proceeds went to local charitable 
foundations. Frequently, those organizations retained responsibility 
for filed cost reports, and the rules should be clarified to grant 
hearing rights to those organizations regarding those cost reports.
    Response: We made no specific proposal concerning the hearing 
rights of former providers or successor organizations following a 
change in ownership. However, we appreciate the concerns raised by the 
commenter and, therefore, we may seek to address this issue in a future 
rulemaking or through other instructions.
1. Provider Dissatisfaction With Medicare Reimbursement; Revised Self-
Disallowance Policy
    We proposed that, in order to preserve its appeal rights, a 
provider must either claim an item on its cost report where it is 
seeking reimbursement that it believes to be in accordance with 
Medicare policy, or self-disallow the item where it is seeking 
reimbursement that it believes may not be in accordance with Medicare 
policy (for example, where the intermediary does not have the 
discretion to award the reimbursement sought by the provider). In order 
to self-disallow an item, the provider would be required to follow the 
applicable procedures, which are contained currently in section 115 of 
the PRM, Part II (CMS Pub. 15-2), for filing a cost report under 
protest. We stated that we believed our proposal was appropriate under 
the Supreme Court's decision in Bethesda Hospital Association v. Bowen, 
485 U.S. 399 (1988). We further stated that we believed that our 
proposed policy was a reasonable response to statements by the Bethesda 
providers and others that it was necessary, for any reimbursement 
request in excess of the amount allowed under program policy, to raise 
the entire payment request before the Board, because it would be 
improper to include a cost report claim for more payment than is 
permitted by Medicare policy. We noted that it has been our 
longstanding policy that a cost report claim at variance with Medicare 
policy is not improper, provided that the claim is not intended to 
procure an intermediary determination (or reviewing entity decision) by 
fraud or similar fault. We are adopting our proposal, effective with 
cost reporting periods ending on or after December 31, 2008.
    Comment: One commenter recommended that the text of section 115 et 
seq. of the PRM, Part II, be placed in the regulations. The commenter 
noted that these sections of the PRM have not changed since 1980. 
Another commenter stated that the protested amount line on the cost 
report is available for situations where a provider is not in agreement 
with Medicare policy and that CMS should be holding that out as the way 
to assert differences of opinion with Medicare policy.
    Response: We are adopting the proposal, which is essentially a 
codification of the protested amount line procedures set forth in 
section 115 et seq. of the PRM, Part II. We are modifying the proposal 
so that the requirement, that a provider self-disallow an item by 
following the applicable procedures for filing a cost report under 
protest, is effective for cost reporting periods ending on or after 
December 31, 2008.
    Comment: One commenter stated that the final rule should require 
that, when a provider self-disallows an item in accordance with the 
proposed policy, the provider should specifically identify the 
regulation or other authority the provider is challenging as invalid, 
and that the appeal should be limited to that challenge. The commenter 
stated that some providers have been misusing the protested line amount 
procedure. Specifically, the commenter said that it was aware of 
instances in which a provider listed a claim related to bad debts in 
the protested line amount. According to the commenter, the provider was 
not challenging any policy related to bad debts, but rather lacked the 
documentation for its bad debts claim and was using the protested 
amount procedure as a way of avoiding a possible reopening denial based 
on Program Memorandum A-01-141 (December 14, 2001). According to the 
commenter, this program memorandum gives intermediaries discretion to 
deny a reopening request where a provider was culpable in not 
adequately documenting its claim and where the claim was reported not 
under protest, but rather was made in the cost report proper.
    Response: Although we encourage providers to identify the specific 
manual provision, CMS Ruling, regulation, or statutory section that 
they believe prevents them from receiving payment for the self-
disallowed item, we are not requiring through these regulations that 
they do so. We are attempting to strike a balance between, on the one 
hand, having providers present enough information so as to put the 
intermediaries on notice as to actual or potential reimbursement 
disputes, and, on the other hand, not making it unduly burdensome for 
providers to file cost reports. For the same reason, we are 
encouraging, but not requiring, providers to identify in the hearing 
request the specific authority they believe prevents them from 
receiving reimbursement for a self-disallowed item. We note, however, 
that where the authority allegedly preventing reimbursement for the 
self-disallowed item is a CMS Ruling, regulation or statute, the 
provider may wish to seek expedited judicial review (EJR) early in the 
appeals process, in accordance with the procedures under Sec.  
405.1842, or the Board may wish to explore granting EJR on its own 
motion. If the provider does seek EJR or the Board initiates own motion 
consideration of EJR, the provider would need to identify at that time 
the specific authority that it believes prevents it from receiving 
reimbursement for the self-disallowed item. We caution that the fact 
that we are not requiring by regulation that providers identify in the 
hearing request the specific authority at issue should not be seen as 
preventing the Board from issuing instructions that would require 
providers to do so. Under section 1878(e) of the Act, the Board has the 
authority to issue instructions governing hearings before it, provided 
that those instructions are not inconsistent with the statute or 
regulations of the Secretary.
    Finally, although some providers may be using the protested line 
amount procedures inappropriately, as alleged by the commenter, we do 
not believe that mischaracterizing a documentation issue (or some other 
issue) as a self-disallowance prevents an intermediary from denying a 
reopening request. Program Memorandum A-01-141

[[Page 30196]]

Chapter 8, section 60.1 of CMS Pub. 100-06, states that intermediaries 
should inform providers that, as a general rule, they will not honor 
reopening requests for audit adjustments based on lack of 
documentation, but it also does not require intermediaries to allow all 
requests for reopening audit adjustments that are not based on (or are 
not characterized by the provider as based on) lack of documentation. 
Moreover, under the self-disallowance policy contained in this rule, 
providers should not self-disallow items for which they do not have a 
good faith belief that the items may not be allowable under Medicare 
payment policy. Under Sec.  405.1835, in order to preserve its appeal 
rights, a provider must either include a claim for the specific item on 
its cost report, or, where it has a good faith belief that the item may 
not be allowable under Medicare policy, list the item on the cost 
report. Therefore, if a provider were to simply list an item as a self-
disallowed item, when the provider is aware that the issue is one of 
documentation and not policy, the provider would run the risk that the 
appeal of that item would be dismissed.
    Comment: Several commenters asserted that the proposal that the 
provider identify an item as a ``protested amount'' was inconsistent 
with the Supreme Court's decision in Bethesda. For example, two 
commenters, using identical language, stated that the Supreme Court 
concluded that providers could claim ``dissatisfaction,'' within the 
meaning of the statute, without incorporating their challenge in the 
cost reports filed with their fiscal intermediaries, and that our 
proposal directly contradicted the Supreme Court's conclusion by 
mandating that a provider had to claim dissatisfaction by incorporating 
a challenge into the cost report through either declaring the item as a 
cost or declaring it as a protested item. One commenter said that the 
Supreme Court concluded in Bethesda that no statute or regulation 
expressly mandated that a challenge to the validity of a regulation be 
submitted first to the intermediary, and that it would be futile to 
submit challenges based on regulations, statutes or CMS's formal 
policies to the intermediary before seeking Board review; therefore, 
the proposed policy was in direct violation of clear statutory 
authority. Another commenter said that rather than reflecting the 
reasoning and findings of Bethesda, the proposed policy appeared to 
have adopted the narrowing of Bethesda in Little Company of Mary 
Hospital and Health Centers v. Shalala, 24 F.3d 984 (7th Cir. 1994). 
According to this commenter, the Little Company of Mary Hospital case 
narrowed the Bethesda decision by providing that in order for a 
provider to be able to self-disallow a cost, there must be a statute, 
regulation or CMS ruling that makes reimbursement of an item 
unallowable. This commenter stated that the Little Company of Mary 
Hospital case was the decision of a single circuit and therefore 
conflicts with the more general proposition of the Supreme Court in 
Bethesda.
    Response: It has been our longstanding view that providers that 
fail to claim on their cost reports costs that are allowable under the 
Medicare law and regulations cannot meet the ``dissatisfaction'' 
requirement. See, for example, Little Co. of Mary Hosp. & Health Care 
Ctrs. v. Shalala, 165 F.3d 1162 (7th Cir. 1999). This proposed change 
would simply codify in our regulations our longstanding interpretation 
of ``dissatisfaction.''
    We continue to believe that our proposed policy that a provider 
must either include a claim for reimbursement of a cost on its cost 
report or self-disallow the cost in order for the Board to obtain 
jurisdiction over an appeal pertaining to that cost is consistent with 
the Supreme Court's decision in Bethesda. We believe the commenters 
that specifically mentioned Bethesda have misunderstood the import of 
Bethesda on our proposal. In Bethesda, providers that submitted their 
cost reports to their intermediary complied with the Secretary's 
regulation by self-disallowing malpractice insurance costs in excess of 
the regulation. The providers then filed a request for a hearing before 
the Board to contest the regulation, and the Board dismissed for lack 
of jurisdiction. Ultimately, the Supreme Court rejected the Secretary's 
position that section 1878(a)(1)(A)(i) of the Act, which requires that 
a provider be dissatisfied with a final determination of its fiscal 
intermediary, ``necessarily incorporates an exhaustion requirement.'' 
The Court found that this ``strained interpretation'' of a statutory 
exhaustion requirement was inconsistent with the express language of 
the statute. (Bethesda, 485 U.S. at 404.) The Court agreed that, under 
section 1878(a)(1)(A)(i) of the Act, a provider's dissatisfaction with 
the amount of its total reimbursement is a condition of the Board's 
jurisdiction, but held that ``it is clear, however, that the submission 
of a cost report in full compliance with the unambiguous dictates of 
the Secretary's rules and regulations does not, by itself, bar the 
provider from claiming dissatisfaction with the amount of reimbursement 
allowed by those regulations. No statute or regulation expressly 
mandates that a challenge to the validity of a regulation be submitted 
first to the fiscal intermediary. * * * Thus, [the providers in this 
case] stand on different ground than do providers who bypass a clearly 
prescribed exhaustion requirement or who fail to request from the 
intermediary reimbursement for all costs to which they are entitled 
under applicable rules. While such defaults might well establish that a 
provider was satisfied with the amounts requested in its cost report 
and awarded by the fiscal intermediary, those circumstances are not 
presented here.'' (Bethesda, 485 U.S. at 404-05 (emphasis added).) In 
sum, although the Supreme Court in Bethesda held that the Secretary may 
not rely on section 1878(a)(1)(A)(i) as explicitly requiring providers 
to present challenges to a regulation to their intermediaries as a 
condition to the Board's jurisdiction, the Court specifically 
recognized that the Secretary could impose an exhaustion requirement by 
regulation, and that a provider who fails to claim all costs to which 
it is entitled may fail to meet the jurisdictional prerequisite of 
dissatisfaction. We note that we are not requiring providers to claim 
costs or items that they believe may not be in accordance with Medicare 
payment policy--rather, we are merely requiring that the provider list 
such items on the cost report by following the protested line amount 
procedures.
    In Bethesda, the providers listed on their cost reports the costs 
at issue, but deliberately did not claim them. As noted by the Ninth 
Circuit in Adams House Health Care v. Bowen, 862 F.2d 1371, 1375 n.3 
(9th Cir. 1988), the question was left open by Bethesda as to whether 
the Board is deprived of jurisdiction to hear an appeal concerning a 
cost that was omitted entirely from the cost report. We interpret 
section 1878(a)(1) of the Act to mean that a provider is not 
``dissatisfied'' with a final determination of the intermediary or the 
Secretary regarding any matter that is omitted from the cost report, 
and that, as a result, the Board does not have jurisdiction to hear an 
appeal regarding the matter. Although the Supreme Court in Bethesda 
indicated that if a provider were to bypass a ``clearly prescribed 
exhaustion requirement'' it ``might well'' be precluded from raising 
the issue before the Board, we believe our proposal to be even less 
than an exhaustion requirement. We believe it to

[[Page 30197]]

be more akin to simply a presentment requirement.
    We do not believe that the Little Company of Mary Hospital decision 
is inconsistent with the Supreme Court's decision in Bethesda. As the 
Seventh Circuit in Little Company of Mary Hospital noted, Bethesda 
``says only that a provider can challenge a rule before the Board even 
after `admitting' that the rule is applicable when submitting its 
expenses to the intermediary,'' and that Bethesda ``strongly suggests 
that a hospital that does not ask its intermediary to reimburse it for 
all the costs for which it is entitled cannot, on appeal to the Board, 
first ask for new costs.'' (24 F.3d at 992-93, emphasis in the 
original.) Thus, Little Co. of Mary was not a narrowing of Bethesda, as 
one commenter asserted. Rather, it was an application of Bethesda to 
the facts before it, facts that mirrored the language quoted above from 
Bethesda.
    We recognize that the First Circuit's majority opinion reached a 
contrary result in Maine General Medical Center v. Shalala, 205 F.3d 
493 (1st Cir. 2000). Because Maine General relied on a pre-Bethesda 
decision that analyzed Board jurisdiction under 42 U.S.C. 1395oo(d), 
and not 42 U.S.C. 1395oo(a), as required by Bethesda, and because it 
failed to recognize the implications of the Bethesda dicta, we believe 
that Maine General was incorrectly decided.
    Although no commenters raised the argument that the 
``dissatisfaction'' requirement applies only to the total amount of 
program reimbursement reflected in the NPR, and that 
``dissatisfaction'' therefore does not need to be expressed with 
respect to each issue challenged on appeal, we note that a provider 
successfully made this argument in Loma Linda University Medical Center 
v. Leavitt, 492 F.3d 1065 (9th Cir. 2007). We respectfully submit that 
the Ninth Circuit erred in its analysis. Although there may be nothing 
in the statute indicating that dissatisfaction must be expressed with 
respect to ``each claim'', there also is nothing in the statute 
indicating that the Secretary cannot interpret the dissatisfaction 
requirement in this manner. The statute thus is ambiguous on this 
point, and the Ninth Circuit should have accorded deference to the 
Secretary's interpretation, particularly in light of the Secretary's 
expertise in how the Medicare provider reimbursement process works.
    Specifically, an intermediary makes distinct reimbursement 
determinations for each expense item and then sums these distinct 
determinations. The ``final determination,'' which here is the NPR, 
thus is not simply one total amount. Rather, it is comprised of many 
individual calculations representing the various items for which the 
provider seeks payment. A provider rarely, if ever, would challenge 
before the Board its payment for every discrete item that goes into the 
total reimbursement figure. Instead, a provider challenges discrete 
elements of the total amount, only some of which may be reviewed by the 
Board. Dissatisfaction with total reimbursement thus is based on 
dissatisfaction with items that result in total reimbursement, and it 
is completely reasonable to interpret 42 U.S.C. 1395oo(a) to require 
dissatisfaction to be shown with respect to each issue being appealed.
    Moreover, Bethesda involved the question of whether the Board had 
jurisdiction over one particular issue, not whether it had jurisdiction 
over an entire NPR. Bethesda thus implicitly assumes that jurisdiction 
must be obtained on an issue-specific basis. Furthermore, the facts of 
Little Co. of Mary make clear that, in that case, the provider was 
dissatisfied with other issues in its NPR. Yet this dissatisfaction 
with the overall total amount of program reimbursement did not affect 
the court's decision in that case.
    We also note that the Secretary's interpretation of the statutory 
language at 42 U.S.C. 1395oo(a) is consistent with court decisions 
related to reopenings. In those cases, the courts refrained from 
similar attempts to exaggerate the significance of the statutory phrase 
at 42 U.S.C. 1395oo(a) ``total program reimbursement due the 
provider.'' Your Home Visiting Nurse Servs. v. Shalala, 525 U.S. 449, 
453 (1999) (Board lacks jurisdiction over intermediary's ``refusal to 
reopen * * * [which] is not a `final determination * * * as to the 
amount,' but rather a refusal to make a new determination''). In HCA 
Health Services of Oklahoma v. Shalala, 27 F.3d 614 (D.C. Cir. 1994), 
the court noted that ``when an intermediary revisits only certain 
specified determinations contained in the original NPR * * * [p]art of 
the final determination is obviously contained in that portion of the 
original NPR which was never revisited, while the remaining elements 
are clearly to be found in the reopening decision.'' 27 F.3d at 617 
(emphasis added). The court thus recognized that the ``final 
determination'' is really comprised of many individual determinations.
    Finally, an issue-specific requirement of ``dissatisfaction'' has a 
sound policy basis. If providers were able to claim items for the first 
time during a Board appeal simply because they had expressed 
dissatisfaction with respect to other cost items, the Board would be 
required to assume responsibilities that are more appropriately borne 
by fiscal intermediaries rather than by a ``review'' board. Such a 
system also would provide an end-run around the deadline for filing an 
accurate cost report, as providers could file ``placeholder'' appeals 
with respect to items claimed on their cost reports with the knowledge 
that they could always make additional claims later.
    In any event, even if the Board has jurisdiction under the statute 
to hear an appeal concerning an item that was omitted entirely from the 
cost report, whether the cost is one that may be allowable or the item 
involves a challenge to a binding regulation, manual instruction or CMS 
Ruling, this jurisdiction is not mandatory. In Maine General Medical 
Center v. Shalala, 205 F.3d 493 (1st Cir. 2000), the majority held that 
the statute did not deprive the Board of jurisdiction to hear a claim 
involving a cost omitted from a cost report, but it adopted the 
Secretary's position that even if the Board had jurisdiction ``it would 
be entirely permissible for the Board to conclude, as a matter of 
policy, not to hear [the] claim.'' (Maine General, 205 F.3d at 501.) 
The court continued: ``All we hold is that Congress did not, in the 
statute, require the Board to reach this result by stripping it of 
jurisdiction. This outcome preserves some flexibility for the agency, 
which may be exactly what Congress intended. It is not our job to 
exercise that flexibility for the agency.'' (Id.) See also Loma Linda, 
492 F.3d at 1072-73 (holding that Board jurisdiction is discretionary).
    Sections 1102(a) and 1871(a) of the Act authorize the Secretary to 
issue regulations for the efficient administration of the Medicare 
program. Irrespective of whether the Board has jurisdiction under the 
statute to hear an appeal concerning an item that was omitted entirely 
from the cost report (and we do not agree with the Maine General or 
Loma Linda cases on this point), the requirement that providers either 
claim an item on their cost reports or, where the item involves a 
challenge to a binding regulation, manual instruction or CMS Ruling, 
list the disputed item in accordance with the longstanding instructions 
contained in section 115 of the PRM, Part II, fits comfortably within 
our statutory authority to issue regulations to administer the Medicare 
program and is a reasonable exercise of that authority. Providers are 
already required, for program integrity reasons, to list ``protested 
items;'' that is, items for

[[Page 30198]]

which they believe they are entitled to receive payment, but for which 
they believe that their intermediaries would disallow, on the basis 
that reimbursement for such items is contrary to regulation or policy 
interpretation. Under section 115 of the PRM, Part II, providers that 
do not wish to risk running afoul of the cost report certification 
process, by including an item on their cost reports that is contrary to 
Medicare regulations or payment policy, are allowed to include these 
items on the ``protested amount'' line on their cost reports. We 
believe it is reasonable to require providers to notify their 
intermediaries, via their cost report submission, of all items for 
which they potentially may be claiming reimbursement. Such a 
requirement allows the Medicare program to estimate better its 
potential liabilities and to issue changes or clarifications to its 
policies, and allows intermediaries to estimate better their workload 
and audit priorities. Also, if we were to adopt a policy that providers 
have to list on their cost reports only those items that they believe 
are in accord with Medicare payment policy, the Board would be required 
to continue adjudicating disputes as to whether an omitted cost is or 
is not in accord with Medicare payment policy (because if the omitted 
cost were in accord with Medicare payment policy, the provider would 
not have the right to a hearing).
    Comment: One commenter stated that it disagreed with the proposed 
policy that would require providers to identify self-disallowed issues 
as protested items. Providers have to trust the information with which 
they are provided when preparing cost reports and follow the directions 
that have been issued. The individuals who prepare cost reports may not 
have the background, time, or ability to evaluate or question whether 
the data provided by government sources or the instructions that have 
been issued should be challenged. This provision may put undue pressure 
on individuals who prepare cost reports, and could increase 
administrative costs as providers seek professional help to identify 
issues of which the providers may not be aware. According to the 
commenter, it can take a considerable amount of research and 
investigation into issues to discover that errors exist in the 
underlying government data used to prepare the cost report. Once this 
discovery is made, it seems appropriate that the error be corrected and 
adjustments made. Providers should not be held responsible for 
discovering errors made by government bodies.
    Another commenter stated that it is impractical to expect providers 
to file under protest every potential item on their cost reports that 
may be disallowed under the applicable regulations or manual 
provisions. Providers are faced with overwhelming numbers of regulatory 
and policy manual issuances covering a complex array of constantly 
changing Medicare billing and documentation requirements. According to 
the commenter, there is no basis in law or equity for CMS's attempt to 
cut off pro