Medicare Program; Changes in Conditions of Participation Requirements and Payment Provisions for Rural Health Clinics and Federally Qualified Health Centers, 36696-36719 [E8-13280]

Agencies

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

[Federal Register Volume 73, Number 125 (Friday, June 27, 2008)]
[Proposed Rules]
[Pages 36696-36719]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-13280]



[[Page 36695]]

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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 410, and 491



Medicare Program; Changes in Conditions of Participation Requirements 
and Payment Provisions for Rural Health Clinics and Federally Qualified 
Health Centers; Proposed Rule

Federal Register / Vol. 73, No. 125 / Friday, June 27, 2008 / 
Proposed Rules

[[Page 36696]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, and 491

[CMS-1910-P2]
RIN 0938-AJ17


Medicare Program; Changes in Conditions of Participation 
Requirements and Payment Provisions for Rural Health Clinics and 
Federally Qualified Health Centers

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish location requirements 
including exception criteria for rural health clinics (RHCs). It would 
also require RHCs to establish a quality assessment and performance 
improvement (QAPI) program. In addition, it would: Clarify our policies 
on ``commingling'' of an RHC with another entity; revise the RHC and 
Federally Qualified Health Centers (FQHC) payment methodology and 
exceptions to the per-visit payment limit to implement statutory 
requirements; revise RHC and FQHC payment requirements for services 
furnished to skilled nursing facility (SNF) patients; allow RHCs to 
contract with RHC nonphysician providers under certain circumstances; 
and update the regulations pertaining to waivers to the staffing 
requirements. This proposed rule would also add requirements for RHCs 
and FQHCs to maintain and document an infection control process and to 
post RHC or FQHC hours of clinical services. In addition, this proposed 
rule would update the requirements under the emergency services 
standard and patient health records condition for certification (CfC) 
to reflect advancements in technology and treatment. Finally, this 
proposed rule solicits comments on payment for high cost drugs and the 
appropriateness of a mental health specialty clinic as an exception to 
the location requirements.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on August 26, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1910-P2. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the CMS-1910-P2 to find the 
document accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1910-P2, P.O. Box 8010, Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1910-P2, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Corinne Axelrod, (410) 786-5620. Rural 
health clinic location requirements and exceptions, staffing and 
payment. Mary Collins, (410) 786-3189 and Scott Cooper (410) 786-9465. 
Quality assessment and performance improvement and health and safety 
standards.

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

Abbreviations and Acronyms

AED--Automated External Defibrillator
BBA--Balanced Budget Act of 1997
BIPA--Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000
CAH--Critical Access Hospital
CDC--Centers for Disease Control and Prevention
CfC--Condition for Certification
CMS--Centers for Medicare & Medicaid Services
CNM--Certified Nurse-Midwife
CNS--Clinical Nurse Specialist
CoP--Condition of Participation
CP--Clinical Psychologist
CSW--Clinical Social Worker
DRA--Deficit Reduction Act
DSMT--Diabetes Self-Management Training
FI--Fiscal Intermediary
FQHC--Federally Qualified Health Center
GAO--Government Accountability Office
GDSC--Governor-Designated and Secretary-Certified Shortage Areas
HHS--Department of Health and Human Services
HPSA--Health Professional Shortage Area
HRSA--Health Resources and Services Administration
MAC--Medicare Administrative Contractor

[[Page 36697]]

MMA--Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003
MUA--Medically Underserved Area
MUP--Medically Underserved Population
NP--Nurse Practitioner
OBRA--Omnibus Budget Reconciliation Act
OIG--Office of the Inspector General
OMB--Office of Management and Budget
PA--Physician Assistant
PHS--Public Health Service
PPS--Prospective Payment System
PRA--Paperwork Reduction Act
QAPI--Quality Assessment and Performance Improvement
RFA--Regulatory Flexibility Act
RHC--Rural Health Clinic
RO--Regional Office
RUCA--Rural Urban Commuting Area
SCHIP--State Children's Health Insurance Program
SNF--Skilled Nursing Facility
UA--Urbanized Area
UIC--Urban Influence Code
USDA--United States Department of Agriculture

Table of Contents

I. Background
    A. Publication and Suspension of the December 24, 2003 Final 
Rule
    B. Summary of Provisions of the December 24, 2003 Final Rule
    C. Origin of the RHC/FQHC Programs
    D. Growth of the RHC Program
    1. Continuing Participation
    2. Medically Underserved/Shortage Area Designations
    3. Expansion of Eligible Designations for RHC Certification
    4. Commingling
    E. Government Reports on RHCs
II. Provisions of This Proposed Rule
    A. RHC Location Requirements and Exceptions
    1. RHC Location Requirements
    2. Essential Provider Requirements
    3. Location Exception Criteria
    4. Process for Essential Providers Status and Timeline
    B. Staffing Requirements, Waivers, and Contracts
    1. Staffing Requirements
    2. Temporary Staffing Waivers
    3. Contractual Arrangements
    C. Payment Issues
    1. Payment Methodology for RHC and FQHCs
    2. Exceptions to the Per Visit Payment Limit
    3. Commingling
    4. Payment for Services to Hospital Patients
    5. Payment for Services to Skilled Nursing Facility (SNF) 
Patients
    6. Payment for Certain Physician Assistant Services
    7. Screening Mammography
    8. Payment for High Cost Drugs
    D. Health and Safety, and Quality
    1. Quality Assessment & Performance Improvement Program (QAPI)
    2. Infection Control
    3. Hours of Operation
    a. Posting of Hours
    b. Use of the RHC Facility
    4. Emergency Services and Training
    5. Patient Health Records
    E. Other Proposed Changes
    1. General
    2. FQHCs
III. Collection of Information Requirements
IV. Regulatory Impact Analysis
Regulation Text

I. Background

A. Publication and Suspension of the December 24, 2003 Final Rule

    On February 28, 2000, we published a proposed rule in the Federal 
Register (65 FR 10450) entitled ``Rural Health Clinics: Amendments to 
Participation Requirements and Payment Provisions; and Establishment of 
a Quality Assessment and Performance Improvement Program.'' This 
proposed rule revised certification and payment requirements for rural 
health clinics (RHCs) as required by the Balanced Budget Act of 1997 
(BBA), Public Law 105-33, enacted on August 5, 1997. We issued the 
final RHC rule on December 24, 2003 (68 FR 74792).
    On December 8, 2003, the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted. 
Section 902 of the MMA amended section 1871(a) of the Social Security 
Act (the Act) and requires the Secretary, in consultation with the 
Director of the Office of Management and Budget (OMB), to establish and 
publish timelines for the publication of Medicare final regulations 
based on the previous publication of a Medicare proposed or interim 
final regulation. Section 902 of the MMA also states that ``[s]uch 
timeline may vary among different regulations based on differences in 
the complexity of the regulation, the number and scope of comments 
received, and other relevant factors, but shall not be longer than 3 
years except under exceptional circumstances.''
    To comply with the MMA requirement to publish a final rule not more 
than 3 years after a proposed rule, we suspended the effectiveness of 
the December 24, 2003 final rule on September 22, 2006 (71 FR 55341). 
The Code of Federal Regulations currently reflects the regulations in 
effect before December 2003.
    While section 902 of the MMA did not explicitly prohibit the 
Secretary from finalizing all proposed rules that were published as an 
interim or proposed rule more than 3 years before December 8, 2003, we 
chose to take this opportunity to propose additional updates and 
clarifications of the provisions published in the previous rule, and 
provide the public with the opportunity to comment on these proposals.

B. Summary of the Provisions of the December 24, 2003 Final Rule

    The December 24, 2003 final rule addressed comments received on the 
February 28, 2000 proposed rule, and finalized policies regarding RHC 
and federally qualified health center (FQHC) payment and participation 
in the Medicare program. It established: (1) Criteria and a process to 
decertify RHCs which no longer serve rural or medically underserved 
areas (MUAs), as required by the BBA; (2) a policy that would have 
prohibited the commingling of RHC resources with another entity's 
resources; and (3) a requirement that RHCs establish a quality 
assessment and performance improvement (QAPI) program.
    The December 24, 2003 final rule also updated payment policies and 
regulations to conform to statutory requirements of the Omnibus Budget 
Reconciliation Acts (OBRA) '86, '87, '89, and '90 and the MMA.
    For the reasons specified in section I.A. of this proposed rule, 
these provisions have been suspended.

C. Origin of the RHC/FQHC Programs

    The Rural Health Clinic Services Act of 1977 (Pub. L. 95-210) 
enacted on December 13, 1977, amended the Act by adding section 
1861(aa) of the Act to extend Medicare and Medicaid entitlement and 
payment for primary and emergency care services furnished at an RHC by 
physicians and certain ``nonphysician practitioners,'' and for services 
and supplies incidental to their services. ``Nonphysician 
practitioners'' included nurse practitioners (NPs) and physician 
assistants (PAs). (Subsequent legislation extended the definition of 
covered RHC services to include the services of clinical psychologists 
(CPs), clinical social workers (CSWs), and certified nurse-midwives 
(CNMs).)
    According to House Report No. 95-548(I), the purpose of the Rural 
Health Clinic Services Act was to address an inadequate supply of 
physicians serving Medicare beneficiaries and Medicaid recipients in 
rural areas. The legislation addressed this problem by authorizing CMS 
and States to pay qualifying clinics on a cost-related basis for 
providing Medicare beneficiaries and Medicaid recipients, respectively, 
with outpatient physician and certain nonphysician services. (The 
Medicare payment provisions for RHCs are in sections 1833(a)(3) and 
1833(f) of the Act and in regulations at Sec.  405.2462 through Sec.  
405.2468.) Payment to RHCs for services furnished to beneficiaries is

[[Page 36698]]

made on the basis of an all-inclusive payment methodology subject to a 
maximum payment per-visit and annual reconciliation.
    Qualifying clinics, among other criteria, must be located in an 
area that is determined to be nonurbanized by the U.S. Census Bureau. 
The clinic also must be located in an area designated as a shortage 
area either by the Health Resources and Services Administration (HRSA) 
or by the chief executive officer of the State and certified by the 
Secretary, Department of Health and Human Services (HHS). (See section 
1861(aa)(2) of the Act, following subparagraph (K).)
    Qualifying clinics also must employ a PA or NP and, to meet 
requirements of the OBRA '89, must have a NP, a PA, or a CNM available 
to furnish patient care services at least 5.0 percent of the time the 
RHC operates.
    The FQHC Medicare coverage and payment benefit was provided for in 
OBRA '90, Public Law 101-508, enacted on November 5, 1990, and 
implemented in the Federal Register (57 FR 24961) on June 12, 1992. On 
April 3, 1996, we published a final regulation (61 FR 14640) that 
addressed the issues raised by commenters on the June 1992 rule.
    OBRA '90 defines an FQHC as an entity that is receiving a grant 
under section 329, section 330, or section 340 of the Public Health 
Service Act (PHS). The definition of an FQHC was expanded by section 
13556(a)(3) of OBRA '93 (Pub. L. 103-66) enacted on August 10, 1993, 
effective as if included in OBRA '90 on October 1, 1991. The expanded 
definition included outpatient programs or facilities operated by a 
tribal organization under the Indian Self-Determination Act, or by an 
urban Indian organization receiving funds under Title V of the Indian 
Health Care Improvement Act.
    The FQHC scope of benefits for core services is similar to the RHC 
benefit, that is, physician, nonphysician practitioner, and mental 
health professional services. The FQHC benefit also includes a number 
of preventive services.
    Each FQHC is reimbursed its reasonable costs based on an all-
inclusive per-visit methodology subject to tests of reasonableness, and 
is subject to an overall payment limit similar to RHCs. The national 
FQHC payment limit is based on the costs of providing primary care 
physician and prevention services. For FQHC services, there are two 
upper payment limits: One limit is for centers located in urban areas 
and the other is for centers located in rural areas.

D. Growth of the RHC Program

    The RHC program has grown from less than 1,000 Medicare-approved 
RHCs in 1992 to more than 3,700 in 2008. However, since 2001, growth in 
the program has leveled off. While part of this increase has improved 
access to primary care services in rural areas for Medicare 
beneficiaries and Medicaid recipients, there are instances in which 
these additional RHCs have not expanded access.
1. Continuing Participation
    A significant factor in the growth of RHCs stems from the original 
(pre-BBA) RHC legislation, which included a ``grandfather clause'' to 
promote the development of RHCs. (See section 1(e) of the Health Clinic 
Services Act of 1977 (Pub. L. 95-210) enacted December 13, 1977, 42 
U.S.C. 1395x note. Also see Sec.  491.5(b)(2) of the regulations.) 
Section 1861(aa)(2) of the Act stated that any RHC that subsequently 
failed to satisfy the requirements pertaining to the rural and 
underserved location requirement still would be deemed to have 
satisfied the requirement of that clause.
    These provisions protected the clinics' RHC status regardless of 
any changes to the rural or underserved status of the service areas. It 
allowed clinics to remain in the RHC program even though the service 
areas no longer were considered rural or medically underserved.
    The Congress established these protections to encourage clinics to 
attract needed health care professionals to underserved rural areas and 
to retain them without being concerned about losing the shortage area 
designation, which would make the clinics ineligible for RHC status and 
its reimbursement incentives. Once the clinic successfully attracted 
the needed health care professionals to the area, the Congress wanted 
to ensure that the service area did not return to its previous 
underserved status because we removed the clinic's RHC status and 
reimbursement incentives.
    Although the grandfather clause provision was an appropriate policy 
at the time, we now have RHC participation in some service areas with 
extensive health care delivery systems that provide adequate access to 
primary care for Medicare beneficiaries and Medicaid recipients. Both 
the Government Accountability Office (GAO) and the HHS Office of the 
Inspector General (OIG) recommended the establishment of a mechanism, 
under the survey and certification process for Medicare facilities, to 
discontinue RHC status and its payment incentives in those service 
areas where they are no longer justified. In section 4205(d)(3) of the 
BBA, the Congress responded to these recommendations by amending the 
grandfather clause provision to provide protection only to clinics 
essential to the delivery of primary care in the respective service 
area.
2. Medically Underserved/Shortage Area Designations
    Another reason for the continued growth of the RHC program was that 
two of the types of shortage area designations that are used for RHC 
certification, the medically underserved area (MUA) and the Governor-
Designated Secretary-Certified Shortage Area (GDSC) designations, did 
not have a statutory requirement for regular review and were not 
reviewed systematically and updated after their initial designation. As 
a result, some RHCs are in areas that no longer would be designated as 
underserved if reviewed with current data. In response, the Congress 
amended the legislation in section 4205(d) of the BBA by requiring that 
only those clinics located in shortage areas that were designated or 
updated within the previous 3 years would qualify for purposes of the 
RHC program.
3. Expansion of Eligible Designations for RHC Certification
    Section 6213 of OBRA '89 amended section 1861(aa)(2) of the Act to 
expand the types of shortage areas eligible for RHC certification. 
Until then, the eligible areas included only those designated by the 
Secretary as areas having a shortage of personal health services under 
section 330(b)(3) of the PHS Act (medically underserved areas (MUAs)) 
and those designated as geographic health professional shortage areas 
(HPSAs) under section 332(a)(1)(A) of the PHS Act. The OBRA '89 
amendment expanded the eligible areas to also include: high impact 
migrant areas designated under section 329(a)(5) of the PHS Act; areas 
containing a population group HPSA designated under section 
332(a)(1)(B) of the PHS Act; and areas designated by the Governor of a 
State and certified by the Secretary as having a shortage of personal 
health services. However, later, the Health Centers Consolidation Act 
of 1996 (Pub. L. 104-299) renumbered section 329 of the PHS Act and 
repealed the requirement for designation of high impact migrant areas.
4. Commingling
    The growth of RHCs may have also been stimulated by the practice of

[[Page 36699]]

``commingling.'' The term ``commingling'' is used to describe the 
sharing of RHC space, staff, supplies, records, or other resources with 
a private Medicare practice or other entity operated by the same 
physician and nonphysician practitioners working for the RHC, during 
RHC hours of operation. We recognize that providing care in rural areas 
that have limited infrastructure and providers requires the 
coordination of scarce resources, and permit the sharing of resources 
in certain situations. In some of these situations, however, it is 
believed that commingling has been used to maximize Medicare payment by 
obtaining RHC status for an integrated practice that submits both RHC 
and non-RHC Medicare claims.

E. Government Reports on RHCs

    The GAO report, ``Rural Health Clinics: Rising Program Expenditures 
Not Focused on Improving Care in Isolated Areas'' (GAO/HHS-97-24, 
November 22, 1996), and the HHS/IG report ``Rural Health Clinics: 
Growth, Access and Payment'' (OEI-05-94-00040, July 1996), both 
concluded that the growth of RHCs is not proportional to community need 
and that many RHCs no longer require cost-based reimbursement as a 
payment incentive. They also concluded that the payment methodology for 
provider-based RHCs lacks sufficient cost controls and recommended 
establishing payment limits and screens on reasonable costs for these 
providers. (A provider-based RHC is an integral and subordinate part of 
a Medicare participating hospital, critical access hospital (CAH), 
skilled nursing facility (SNF), or home health agency (HHA), and is 
operated with other departments of the provider under common 
governance, professional supervision, and usually licensure. All other 
RHCs are considered to be independent.)
    In August 2005, the OIG issued a followup report, ``Status of the 
Rural Health Clinic Program'' (OEI-05-03-00170), which recommended that 
HRSA review shortage designations within the requisite 3-year period 
and publish regulations to revise its shortage designation criteria. 
The report also suggested that CMS issue regulations to: (1) Ensure 
that RHCs determined to be essential providers remain certified as 
RHCs; and (2) require prospective RHCs to document need on access to 
health care in rural underserved areas.

II. Provisions of This Proposed Rule

A. RHC Location Requirements and Exceptions

1. RHC Location Requirements
    In sections 4205(d)(1) and (2) of the BBA, the Congress amended 
section 1861(aa)(2) of the Act. As revised, the statute states that 
RHCs may include only a facility which is located in: (1) A 
nonurbanized area, as defined by the U.S. Census Bureau; (2) an area in 
which there are an insufficient number of needed health care 
practitioners as determined by the Secretary; and (3) an area that has 
been designated or certified by the Secretary within the previous 3 
years as having an insufficient number of needed health care 
practitioners.
    Section 4205(d)(3)(A) of the BBA, which amended the third sentence 
of section 1861(aa)(2) of the Act, revised the ``grandfather clause'' 
that permitted an exception to the termination of RHC status for a 
clinic located in an area that is no longer a rural area or a shortage 
area. This revision specified that an exception was available only if 
the RHC was determined to be essential to the delivery of primary care 
services that would otherwise be unavailable in the geographic area 
served by the RHC. These amendments were made effective upon issuance 
of implementing regulations that the Congress directed CMS to issue by 
January 1, 1999. The BBA requirement that every RHC must have a current 
shortage area designation (made or updated within the previous 3-year 
period), has been implemented for new RHCs through administrative 
instructions.
    To determine if a facility is in a nonurbanized area, we propose 
that the most recently available U.S. Census Bureau list of Urbanized 
Areas (UA) be used. An area that is not in a UA would be considered a 
nonurbanized area. Information on whether an area is urbanized can be 
found at https://factfinder.census.gov or by contacting the appropriate 
CMS Regional Office (RO) at https://www.cms.hhs.gov/RegionalOffices.
    To determine if a facility is in an area that has a current 
designation as an underserved or shortage area, the most current HRSA 
list of these designations would be used. Information on designation 
status, including the date of the most recent designation or update, is 
available on the HRSA Web site at https://hpsafind.hrsa.gov/ and https://
muafind.hrsa.gov or by contacting the appropriate CMS RO.
    Health professional shortage area (HPSA) and MUA designations 
establish initial eligibility for Federal and State programs to improve 
access to health care services. They are based on established criteria 
(42 CFR part 5) to identify geographic areas or population groups with 
a shortage of primary health care services. HPSA designations are based 
primarily on the population to provider ratio in a defined service 
area. MUA designations utilize an Index of Medical Underserviced which 
calculates a score for each area based on a weighted combination of the 
ratio of primary medical care physicians per 1,000 population, infant 
mortality rate, percentage of the population with incomes below the 
poverty level, and percentage of the population age 65 or over.

    (Note: HRSA has proposed a revision of the methodology used for 
determining HPSA and MUA designations. If necessary, this 
description of the designations will be updated in the final rule. 
Any change that HRSA makes to the methodology used to determine 
designations will not alter the requirements for the RHC program.)

    Any of the following types of designations are acceptable for the 
purpose of RHC certification and compliance with this proposed 
requirement:
     Geographic Primary Care HPSAs (section 332(a)(1)(A) of the 
PHS Act)
     Population-group Primary Care HPSAs (section 332(a)(1)(B) 
of the PHS Act)
     MUAs (This does not include population group Medically 
Underserved Population designations) (Section 330(b)(3) of the PHS Act)
     Governor-designated and Secretary-certified shortage 
areas. (section 6213(c) of OBRA '89 (Pub. L. 101-239))
    In section 302(a)(1)(A) of the Health Care Safety Amendments of 
2002 (Pub. L. 107-251, October 26, 2002), the Congress amended section 
332 of the PHS Act to create a new type of HPSA designation for FQHCs 
and RHCs referred to as an ``automatic'' HPSA designation. This type of 
designation is available to any RHC or FQHC irrespective of its 
physical location that utilizes sliding scale fees consistent with 
section 330 of the PHS Act for the purpose of National Health Service 
Corps eligibility. Facilities with these automatic HPSA designations 
are sometimes referred to as ``safety net facilities.'' However, we are 
proposing not to include the automatic HPSA designations as an eligible 
shortage area for purposes of Medicare qualifications as an RHC. 
Section 1861(aa)(2) of the Act specifically requires RHCs to be located 
in one of four specified designation types in which the Secretary has 
determined that there are

[[Page 36700]]

insufficient numbers of needed practitioners. Consequently, we would 
not recognize automatic HPSA designations for purposes of RHC 
certification or protecting a currently participating clinic from RHC 
decertification.
    New and existing RHCs would have to be in a rural area that is 
currently designated as one of the four types of shortage areas listed 
previously. A designation is considered current for not more than 3 
years after the date of the original designation or the date of the 
most recent update to the designation. An existing RHC that no longer 
meets would not be decertified based on the loss of its shortage area 
designation if: (1) A complete designation application has been 
received by HRSA before the end of the 3-year period since the shortage 
area designation date or most recent update; or (2) we have determined 
that the RHC is an essential provider. If either of these conditions is 
not met, the clinic would be terminated from participation in the 
Medicare program as an RHC 180 days after the date that the RHC no 
longer meets the location requirements, effective the last day of the 
month. States are encouraged to submit designation applications and 
updates to HRSA in a timely manner and may apply or reapply for a 
designation at any time.
2. Essential Provider Requirements
    The RHC program was established for the purpose of improving and 
maintaining access to primary care for rural underserved communities. 
RHCs that apply to CMS for an exception to the location requirements 
must be able to show that they satisfy this program objective.
    In accordance with section 1861(aa)(2) of the Act, an existing RHC 
may be considered essential to the delivery of primary care (a so-
called ``essential provider'') if the care otherwise would be 
unavailable in the geographic area served by the clinic. The Secretary 
is directed by the Act to set the criteria by which ``essential 
provider'' status is to be determined. The Secretary has determined 
that an RHC may be considered an essential provider and be granted an 
exception to the location requirements if the clinic is no longer in a 
nonurbanized area or it is no longer in a currently designated shortage 
area, and it meets the criteria of an essential provider. An RHC that 
is neither in a rural area nor a designated area would not be 
considered an essential provider. Proposed criteria for essential 
provider status were published in the February 2000 proposed rule and 
have been revised based on comments that were received and other 
relevant information.
    Under this authority, we are proposing the following requirements 
for essential provider status:
    If an RHC is located in an area that has been classified as a UA by 
the U.S. Census Bureau, it would have to be in a level 4 or higher 
Rural Urban Commuting Area (RUCA) to assure that it is in a rural area. 
Under section 330A of the PHS Act, HRSA's Office of Rural Health Policy 
determines eligibility for its rural grant programs through the use of 
the RUCA code methodology. Under this methodology, any census tract 
that is in a RUCA level 4 or higher is determined to be a rural census 
tract. For the purposes of an exception to the RHC nonurbanized area 
location requirement, we would use the RUCA level 4 as the minimum 
level of rurality to meet this requirement.
    Additionally, an RHC that is located in an area that has been 
classified as a UA by the U.S. Census Bureau would have to demonstrate 
that at least 51 percent of its patients reside in an adjacent nonurban 
area in order to be considered essential for the purposes of an 
exception to the location requirements. We prefer to give RHCs 
flexibility in establishing that at least 51 percent of their patients 
reside in an adjacent nonurban area; however, this could generally 
include the identification of the nonurban area(s) and a retrospective 
review of patient visits to determine residence, or other factors to 
support that the requirement has been met.
3. Location Exception Criteria
    We are proposing to revise Sec.  491.5 to specify that an RHC that 
meets the previously stated requirements may apply for an exception if 
it meets any one of the following criteria:
     Sole Community Provider (proposed Sec.  491.5(c)(1)): The 
RHC is the only participating primary care provider that meets either 
of the following requirements:
    ++ The RHC is at least 25 miles from the nearest participating 
primary care provider; or
    ++ The RHC is at least 15 miles but less than 25 miles from the 
nearest participating primary care provider and can demonstrate that it 
is more than 30 minutes from the nearest primary care provider based on 
local topography, predictable weather conditions, or posted speed 
limits. (These criteria are based on the criteria established for sole 
community hospitals in Sec.  412.92.) For purposes of this exception, a 
participating primary care provider would mean another RHC, FQHC, or 
primary care provider that is actively accepting and treating Medicare 
beneficiaries, Medicaid recipients, low-income patients, and the 
uninsured (regardless of their ability to pay).
     Major Community Provider (proposed Sec.  491.5 (c)(2)): 
The RHC meets the following requirements:
    ++ Has a Medicare, Medicaid, low-income, and uninsured patient 
utilization rate greater than or equal to 51 percent, or a low-income 
patient utilization rate greater than or equal to 31 percent; and
    ++ Is actively accepting and treating a major share of Medicare, 
Medicaid, low-income and uninsured patients (regardless of their 
ability to pay) compared to other participating primary care providers 
that are within 25 miles of the RHC.
     Specialty Clinic: Obstetrics/Gynecology (Ob/Gyn) or 
Pediatrics (proposed Sec.  491.5(c)(3)): The RHC meets the following 
requirements:
    ++ Exclusively provides ob/gyn or pediatric health services (as 
applicable).
    ++ Is the sole or major source of ob/gyn or pediatrics for Medicare 
(where applicable), Medicaid, and uninsured patients (regardless of 
their ability to pay) and is either of the following:

--At least 25 miles from the nearest participating provider of ob/gyn 
or pediatric services.
--At least 15 miles but less than 25 miles from the nearest 
participating provider of ob/gyn or pediatric services, and can 
demonstrate that it is more than 30 minutes from the nearest 
participating primary care provider providing these services based on 
local topography, predictable weather conditions, or posted speed 
limits.

    ++ Is actively accepting and treating Medicare, Medicaid, low-
income, and uninsured patients.
    ++ Has a Medicare, Medicaid, low-income patient and uninsured 
utilization rate greater than or equal to 31 percent.
    ++ Provides ob/gyn (including prenatal care) or pediatric services 
onsite to clinic patients.
     Extremely Rural Community Provider (Proposed Sec.  
491.5(c)(4)): The RHC meets the following requirements:
    ++ Is actively accepting and treating Medicare, Medicaid, low-
income, and uninsured patients (regardless of their ability to pay).
    ++ Is located in a frontier county (a county with 6 or less persons 
per square mile) or in census tract or zip code with a RUCA code 10.
    In the December 2003 final rule, we included RHC's that are mental 
health

[[Page 36701]]

specialty clinics as an acceptable category for an exception to the 
location requirements. However, section 1861(aa)(2)(iv) of the Act 
prohibits RHC status from being applied to clinics which are 
``primarily for the care and treatment of mental diseases.'' We 
interpret ``primarily'' to mean that mental health services provided by 
the RHC cannot constitute more than 50 percent of the total services 
provided by the RHC.
    In order to assure that the regulation and statue are consistent, 
we are asking for comments on--(1) whether it is appropriate to allow 
an exception to the location requirements for RHCs based on the 
provision of mental health services in light of the fact that RHC 
status cannot be granted to a facility providing more than 50 percent 
of its total services in mental health; and (2) if so, what should be 
the minimum level of mental health services provided in order to 
qualify for an exception. This would apply only to existing an RHC that 
no longer meet the location requirements, either because it is no 
longer in a non-urbanized area, or because it is no longer designated 
by HRSA as an underserved or shortage area. Existing RHCs that are in 
compliance with the location requirements may continue to provide 
mental health services as long as the mental health services provided 
do not exceed 50 percent of the total clinic services.
4. Process for Essential Provider Status and Timeline
    An RHC that is located in (a) an area that has not been designated 
or its designation was not been updated for more than 3 years, or (b) 
an urbanized area that is defined by the Census Bureau, would have 90 
calendar days from the effective date of the final rule to apply to CMS 
RO for an exception to the location requirement. The RHC may continue 
to operate as an RHC for an additional 90 days, for a total of 180 
calendar days after the end of the 3-year period. To assist with the 
cost reporting and payment reconciliation process, decertification 
would be effective on the last day of the month in which the 180-day 
limit was met.
    An RHC would have 180 days after the date that it does not meet the 
location requirements to continue operating as an RHC. We expect that 
most RHCs that do not meet the location requirements would want to know 
as soon as possible if they would receive an exception to the location 
requirements and would want as much time as possible to make other 
arrangement for the provision of services after the 180 days, so it is 
in the interest of the RHC to apply for an exception to the location 
requirements as soon as possible.
    An RHC which is located in an area which has been found by HRSA to 
no longer qualify for one of the 4 types of eligible designations would 
have 90 calendar days from the date HRSA determined that the area no 
longer qualified for one of the eligible designations to apply to CMS 
RO for an exception from decertification. This would include 
designations that are proposed for withdrawal, as well as areas whose 
designations type has changed to one that does not meet the RHC 
criteria.
    For example, if HRSA determines on April 1, 2009, that the area no 
longer qualifies for one of the designations required for RHC purposes, 
the RHC would have until June 30, 2009 to submit an application to the 
appropriate RO for a location exception, and would be protected until 
September 30, 2009 from decertification based on not meeting the 
location requirements.
    An RHC which is located in an area whose designation has not been 
updated in a timely manner and which does not apply for a location 
exception may continue to operate as an RHC for 180 calendar days after 
the 3 years from the date of the last designation, effective the last 
day of the month.
    An RHC may be decertified 180 days after the 3-year date of the 
area's designation if it does not provide a complete application for a 
location exception within 90 days from the date it no longer meets the 
location requirements, or if the application for a location exception 
is not approved. In rare circumstances, the RO may request an extension 
from the CMS Central Office if it has not been possible to process the 
location exception request before the RHC would be decertified.
    For example, (see accompanying sample timeline) if an area was 
designated (either a new designation or an update) on January 2, 2006 
(1 on sample timeline), the designation would be considered 
valid for RHC purposes for 3 years, which would be January 2, 2009 
(2). If an application to update the designation is submitted 
to HRSA by January 2, 2009 (3), the RHC would be protected 
from decertification while the HPSA application is under review 
(3.1). If the area qualifies as a HPSA and is updated 
(3.2), then no further action would be needed for purposes of 
the RHC designation for 3 years from the date of the designation update 
(3.3). If a HPSA application is submitted by January 2, 2009 
(3), but is determined to not qualify as a HPSA 
(3.1.1), then the RHC would have 90 days from the date of that 
determination to submit an application for an exception 
(3.1.2).
    If an application to update the designation is not submitted to 
HRSA by January 2, 2009 (4), the RHC would have until April 3, 
2009 (4.1), to submit an application for a location exception. 
If the RHC does not submit an application for a location exception to 
CMS by April 3, 2009 (4.2), it would be decertified on July 
31, 2009 (4.3). (Decertification is effective the final day of 
the month.)
    An RHC that submits an application for a location exception would 
be protected from decertification while the application is under review 
(5). If the application is approved (5.1), then no 
further action would be needed for purposes of the RHC recertification 
for 3 years from the date of the exception (5.1.1). If the 
application is not approved (5.2), the RHC would be 
decertified 90 days from the date of notification that the application 
was not approved (5.2.1).
    The process to appeal a denial of certification is described in 
Sec.  498.3(b)(5). For the purpose of an appeal, RHCs and FQHCs are 
considered suppliers, not providers.
    In the December 24, 2003 final rule, we stated that an RHC would 
have 120 days from the date of notification that it was no longer in a 
designated area and therefore not compliant with the RHC requirements 
to submit an application to update its MUA or HPSA designation. 
Although HRSA regulations do not preclude RHCs from submitting a 
designation application, it is usually the State not the RHC that 
submits the designation application. The State should not wait until a 
designation is more than 3 years old to prepare and submit an update 
for RHC purposes. As noted previously, an existing RHC is protected 
from decertification based on its designation status as long as an 
application has been submitted for an updated designation. We encourage 
RHC to work with the applicable State Primary Care Office to assure 
that any necessary information is provided to HRSA in a timely manner. 
A list of the State Primary Care Offices is available online at https://
hrsa.gov/grants and then by selecting ``HRSA Grantees by Program or 
State'' and then by selecting ``State Primary Care Offices'', or by 
contacting the State's Department of Health.
    An RHC that chooses to apply for an exception to the location 
requirements would send its application with the necessary 
documentation to the appropriate RO. An RHC that applied for an 
exception would not be

[[Page 36702]]

disqualified as an RHC based on not meeting the location requirements 
while its application is under review. If approved, the exception would 
be for a period of 3 years. Every 3 years, an RHC may reapply for an 
exception to the location requirements to continue its RHC eligibility.
    Some provider-based RHCs that do not meet the location requirements 
and do not qualify for an exception may want to continue to operate as 
another type of Medicare provider. In some cases, these entities will 
need to go through the standard Medicare application process, which 
includes an application and, for entities wishing to enroll as a 
``provider of services'' under 1861(u), a state survey. We have been 
informed that the waiting time for a state survey can be several 
months, so we are proposing that provider-based RHCs that do not meet 
the location requirements and do not qualify for an exception and have 
submitted an application to CMS to be another type of Medicare provider 
that requires a State survey for certification may receive an 
additional 120-day extension of their status as an RHCs while their 
application is being processed.
    We propose to revise Sec.  491.2 to redefine ``shortage areas'' as 
geographic and population group HPSAs, MUAs, and areas designated by 
the Governor of the State and certified by the Secretary.
    We propose to amend Sec.  491.3 as follows by adding paragraphs 
(a)(1) through (a)(3) to specify general certification requirements, 
and (b)(1) to specify permanent and mobile unit requirements.
    We propose to amend Sec.  491.5 as follows:
     Adding paragraphs (a)(1) through (a)(3) to specify the 
location requirements for RHCs and FQHCs.
     Adding paragraph (a)(4) to specify when a clinic would be 
terminated from the RHC program.
     Adding paragraphs (a)(5) and (a)(6) to specify the 
requirements for being considered an essential provider.
     Adding paragraph (a)(7) to specify the time period for a 
clinic's essential provider status.
     Adding paragraph (a)(8) to specify the time period that a 
decertified RHC may continue to operate.
     Adding paragraph (a)(9) to specify that conditions for an 
extension of RHC status when the location requirements are not met and 
the clinic does not qualify for an exception.
     Adding paragraphs (b)(1) through (b)(4) to specify the 
criteria for an exception from the location requirements.
     Adding paragraphs (c)(1) and (c)(2) to specify the 
conditions for termination.
     Adding paragraphs (d)(1) through (d)(8) to set forth the 
circumstances and timeline for submitting a request for an exception to 
the location requirements.
BILLING CODE 4120-01-P

[[Page 36703]]

[GRAPHIC] [TIFF OMITTED] TP27JN08.006

BILLING CODE 41210-01-C

[[Page 36704]]

B. Staffing Requirements, Waivers, and Contracts

1. Staffing Requirements
    One of the goals of the RHC program is to encourage the use of 
nonphysician practitioners to provide quality health care in rural 
areas. We propose to amend Sec.  491.8(a)(6) to conform with section 
6213(a)(3) of OBRA '89 (Pub. L. 101-239) which requires that an NP, PA, 
or CNM be available to furnish patient care at least 50 percent of the 
time the RHC operates. An RHC that opens its premises solely to address 
administrative matters or to allow patients shelter from inclement 
weather would not be considered to be in operation as an RHC during 
that period.
2. Temporary Staffing Waivers
    We propose to amend Sec.  491.8(d) to conform with section 
1861(aa)(7) of the Act, which authorizes us to grant a 1-year waiver of 
staffing requirements for nonphysician primary care providers (NPs, 
PAs, or CNMs) upon request from the RHC. The requesting RHC would have 
to demonstrate that it made a good faith effort to recruit and retain 
an adequate number of nonphysician primary care providers, and that it 
has been unable in the 90-day period prior to the request to hire one 
of these providers to meet the staffing requirement. This could include 
activities such as advertising in a newspaper, advertising in a 
professional journal, conducting outreach to an NP, PA, or CNM school, 
or other activities that would demonstrate a good faith effort to 
recruit and retain a nonphysician primary care provider. In accordance 
with section 1861(aa)(7)(B) of the Act, this waiver would be available 
only to existing RHCs that meet the nonphysician primary care 
requirement before seeking the waiver.
    Section 1861(aa)(7) of the Act also specifies that an additional 
waiver cannot be granted until a minimum of 6 months has passed since 
the expiration of the previous waiver.
    We are proposing that an RHC that has not complied with staffing 
requirements for one or more nonphysician primary care providers and 
has not submitted a request for a waiver of this requirement would be 
decertified from the RHC program. The decertification would be 
mandatory, since the noncompliant facility would fail to meet the 
statutory definition of an RHC. An RHC that has submitted a waiver 
request would not be decertified based on this requirement while its 
request was under review. A waiver would be deemed granted after 60 
days, unless written notification is provided that the request has been 
denied. An RHC that is decertified from the RHC program due to failure 
to meet the staffing requirements would no longer be eligible to 
operate as an RHC. However, the RHC could apply to become a physician-
directed clinic, group practice, or a group of individual practitioners 
who would then bill Medicare using the Part B fee-for-service system.
3. Contractual Arrangements
    Due to the difficulty in recruiting and retaining physicians in 
rural areas, RHCs have had the option of hiring physicians either as 
RHC employees or as contractors. However, in order to promote stability 
and continuity of care, the Rural Health Clinic Services Act of 1977 
required RHCs to ``employ a physician assistant or nurse practitioner'' 
(section 1861(aa)(2)(iii) of the Act). We note that the term 
``employee'' is defined in section 3121(d)(2) of the Internal Revenue 
Code of 1986 and is usually evidence by the employer's provision of a 
W-2 form to the employee. Our current regulations at Sec.  
405.2468(b)(1) state that `` * * * (RHCs are not paid for services 
furnished by contracted individuals other than physicians).''
    In the more than 30 years since this legislation was enacted, the 
health care environment has changed dramatically, and RHCs have 
requested that they be allowed to enter into contractual agreements 
with PAs and NPs as well as physicians. To provide RHCs with greater 
flexibility in meeting their staffing requirements, we propose to 
revise Sec.  405.2468(b)(1) by removing the parenthetical ``RHCs are 
not paid for services furnished by contracted individuals other than 
physicians.'' Also, we propose to revise Sec.  491.8(a)(3) to state 
that nonphysician practitioners may furnish services under contract to 
an RHC within the statutory limits.
    RHCs would still be required, under section 1861(aa)(2)(iii) of the 
Act, to employ a PA or NP. However, as long as there is at least one PA 
or NP employed at all times (subject to the waiver provision set forth 
at section 1861(aa)(7) of the Act), an RHC would be free to enter into 
employment contracts with other PAs, NPs, or other nonphysician staff.
    FQHCs already have the option to contract with PAs and NPs. 
Authority to allow contracting for clinical services is provided for in 
the PHS Act. The authority to allow Medicare participating FQHCs to 
contract with any necessary health professional for the purpose of 
treating their patients is further clarified by section 5114 of the 
Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) which amended 
section 1842(b)(6) of the Act to require consolidated billing of 
contracted professional services by adding new subsection (H) with the 
following language: ``in the case of services described in section 
1861(aa)(3) of the Act that are furnished by a health care professional 
under contract with a Federally qualified health center, payment shall 
be made to the center.'' Similar language regarding contracted medical 
professionals was also added to section 1861(aa)(3) of the Act. FQHCs 
and RHCs also have authority to claim the costs of such contracted 
practitioners' services on the Medicare cost report to receive Medicare 
payment.
    A practitioner providing services under contract to the RHC or FQHC 
should have a signed contract that includes his or her responsibilities 
and requirements. All practitioners should be familiar with the clinic 
or center's policies and procedures, and comply with the staffing 
requirements in Sec.  491.8. Practitioners should be employed or 
contracted to the RHC in a manner that enhances continuity and quality 
of care.
    We propose to remove the parenthetical statement at Sec.  
405.2468(b)(1) which states that RHCs are not paid for services 
furnished by contracted individuals other than physicians. We also 
propose to revise Sec.  491.8(a)(3) to state that nonphysician 
practitioners may furnish services under contract to an RHC.

C. Payment Issues

1. Payment Methodology for RHCs and FQHCs
    Payment to RHCs and FQHCs for covered services furnished to 
Medicare beneficiaries is made on the basis of an all-inclusive rate 
per visit, subject to a payment limit. The Medicare Administrative 
Contractor (MAC) or FI determines the all-inclusive rate in accordance 
with this subpart and instructions issued by CMS.
    With the exception of services provided under Medicare Advantage 
plans to RHCs and FQHCs, the statutory payment requirements for RHC and 
FQHC services are set forth at section 1833(a)(3) of the Act, (as 
amended by the MMA), which states that RHCs and FQHCs are paid 
reasonable costs ``* * * less the amount a provider may charge as 
described in clause of section 1866(a)(2)(A), but in no case may the 
payment exceed 80 percent of such costs[.]'' The beneficiary is 
responsible for the Medicare Part B deductible

[[Page 36705]]

(except for services provided in FQHCs, where there is no Part B 
deductible) and coinsurance amounts. Section 1866(a)(2)(A)(ii) of the 
Act and implementing regulations at Sec.  405.2410(b) establish 
beneficiary coinsurance at an amount not to exceed 20 percent of the 
clinic's reasonable charges for covered services.
    Section 237(c) of the MMA which pertains to cost sharing permitted 
under MA organizations, revised section 1857(e) of the Act. These 
changes were addressed in Sec.  405.2469 as part of the CY 2006 
Physician Fee Schedule final rule with comment period (70 FR 70116).
    In general, the statutory payment methodology requires that except 
for services provided under MA plans to FQHCs in accordance with 
section 1833(a)(3)(B) of the Act, RHCs and FQHCs subtract beneficiary 
coinsurance and deductible amounts, as applicable (based on reasonable 
charges) from reasonable costs to determine the Medicare payment. The 
statute further stipulates that Medicare reimbursement may not exceed 
80 percent of reasonable costs.
    Until now, Medicare has been paying RHCs and FQHCs 80 percent of 
the facility's reasonable costs, regardless of deductible and 
coinsurance amounts billed to Medicare beneficiaries. This allowed RHCs 
and FQHCs to receive, in some instances, payment in excess of 100 
percent of reasonable costs.
    Therefore, to conform existing regulations to the statutory payment 
methodology described above, we propose to revise Sec.  405.2410 and 
Sec.  405.2466(b)(1)(iii) by stipulating that, except for services 
provided under MA plans to FQHCs, Medicare payment is equal to 
reasonable costs less aggregate coinsurance and deductible amounts 
billed, but in no case may total Medicare payment exceed 80 percent of 
reasonable costs.

    Note: Payment for the outpatient treatment of mental, 
psychoneurotic, or personality disorders is subject to the 
limitations on payment in Sec.  410.155

).2. Exceptions to the Per Visit Payment Limit
    Prior to the BBA, the payment methodology for an RHC depended on 
whether it was ``provider-based'' or ``independent.'' Payment to 
provider-based RHCs for services furnished to Medicare beneficiaries 
was made on a reasonable cost basis by the provider's FI in accordance 
with our regulations at 42 CFR part 413. Payment to independent RHCs 
for services furnished to Medicare beneficiaries was made on the basis 
of a uniform all-inclusive rate payment methodology in accordance with 
42 CFR part 405, subpart X. Payment to independent RHCs also was 
subject to a maximum payment per visit as set forth in section 1833(f) 
of the Act.
    Section 4205(a) of the BBA amended section 1833(f) of the Act. 
Under the BBA, the independent RHC all-inclusive payment methodology 
and payment limit were applied to provider-based RHCs. This BBA 
provision also provided an exception to the RHC payment limit for those 
RHCs based in small, rural hospitals to help them remain financially 
viable.
    Section 224 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) enacted 
on December 21, 2000, expanded to RHCs based in small, urban hospitals 
the eligibility criteria for receiving an exception to the RHC payment 
limit, effective July 1, 2001. This was implemented through a program 
memorandum on December 6, 2001.
    If an RHC is an integral and subordinate part of a hospital, it can 
receive an exception to the per visit payment limit if the hospital has 
fewer than 50 beds as determined by using one of the following methods:
     The determination of the number of beds at Sec.  
412.105(b); or
     The hospital's average daily patient census count of those 
beds described in Sec.  412.105(b), and the hospital meets all of the 
following conditions:
    ++ It is a sole community hospital as determined in accordance with 
Sec.  412.92 or Sec.  412.109(a).
    ++ It is located in a level 9 or 10 RUCA.
    ++ It has an average daily patient census that does not exceed 40.
    The December 24, 2003 final RHC rule used the 1993 Urban Influence 
Codes (UICs), then a 9-category measure developed by the U.S. 
Department of Agriculture (USDA), to identify hospitals which are 
located in sparsely populated rural areas. Hospitals with a level 8 or 
9-level UIC and which have an average daily census of less than 50 
patients would qualify for an exception to the RHC per visit payment 
limit. The USDA has since changed the UICs to a 12-category measure, 
with levels 9 through 12 comparable to the 1993 levels 8 and 9.
    The UICs are a county-level measurement. Since many counties 
encompass large geographical areas with significant variations in 
population density, demographics, economics, and health care services, 
the UICs do not always provide an accurate assessment of a local area's 
degree of rurality.
    The RUCA system is another method for identifying rural areas. RUCA 
codes classify U.S. census tracts using measures of population density, 
urbanization, and daily commuting. This classification uses 10 numbers 
with subdivisions to reflect commuting flows.
    RUCAs are used by CMS for purposes of determining rurality in the 
hospital and ambulance payment systems. To target the needs of rural 
populations more accurately and to be consistent with other CMS 
programs, we propose to utilize the RUCA methodology instead of the UIC 
methodology. We also propose that RUCA codes 9 and 10 be used for the 
purpose of approving an exception to the per visit payment limit.
    We propose to amend Sec.  405.2462 to provide payment to all RHCs 
and FQHCs on the basis of an all-inclusive rate per visit, subject to 
the per-visit payment limit. For a hospital-based RHC that is the 
primary source of health care in its rural community as defined at 
Sec.  412.92(a) or Sec.  412.109(a), we propose to utilize the 
hospital's average daily census rather than bed count in determining 
whether RHC services are subject to the per-visit payment limit. We 
also propose to utilize RUCAs 9 and 10 to determine eligibility for an 
exception to the per visit payment limit.
3. Commingling
    Commingling refers to the sharing of RHC space, staff (employees or 
contractors), supplies, records, and other resources with an onsite 
Medicare Part B or Medicaid fee-for-service practice operated by the 
same RHC physician(s) or nonphysician practitioner(s) or both. 
Commingling is prohibited when it results in duplicate Medicare or 
Medicaid reimbursement, either due to the inability of the RHC to 
distinguish its actual costs from those that are reimbursed on a fee-
for-service basis, or due to other reasons.
    An RHC and a Medicare fee-for-service practice may not operate 
simultaneously in order to prohibit these shared practices from 
selecting patient encounters for enhanced Medicare Part B billing.
    However, an RHC that is part of a multipurpose clinic may house 
other entities (such as private medical practices, x-ray and lab 
clinics, dental clinics, emergency room) in the non-RHC space. The 
entities occupying the non-RHC space may bill the assigned Medicare 
Administrative Contractor (MAC), Fiscal Intermediary (FI), or carrier 
as appropriate; authority is delegated to the MAC, FI, or carrier to

[[Page 36706]]

determine acceptable accounting methods for allocation of staff costs 
between the RHC and other entities to be used in documenting allocation 
of costs. Since in a multipurpose clinic the RHC may share some 
resources in common with the non-RHC entity (for example, waiting room 
or receptionist), the RHC must maintain accurate records to assure that 
the RHC costs that it claims for Medicare reimbursement are only for 
the staff, space, or other resources that are used for RHC purposes. 
Any shared staff, space, or other resources must be allocated 
appropriately between the RHC and non-RHC usage to avoid duplicate 
reimbursement.
    This commingling policy does not prohibit a hospital-based RHC from 
sharing its health care practitioners with the hospital emergency 
department in an emergency, or prohibit an RHC physician from providing 
on-call services for an emergency room, as long as the RHC continues to 
meet the RHC conditions for certification (CfCs) in the absence of the 
practitioner(s) and the RHC is able to allocate appropriately the 
practitioner's salary between RHC and non-RHC time.
    Facilities are encouraged to work with their MAC, FI, or carrier 
and RO in determining permissible resource-sharing situations and 
proper cost reporting methods.
4. Payment for Services to Hospital Patients
    The hospital inpatient bundling provision was enacted on April 20, 
1983 in section 602(e)(3) of the Social Security Act Amendments of 1983 
(Pub. L. 98-21), by adding paragraph (a)(14) to section 1862 of the 
Act. The hospital outpatient bundling provision was enacted in section 
9343(c) of OBRA '86, Public Law 99-509. Taken together, these two 
provisions require bundling of the costs for all nonprofessional 
services furnished to hospital patients. Consequently, section 
1862(a)(14) of the Act now requires hospitals and CAHs to bundle all 
costs, other than those for the professional services specified in the 
statute.
    Only professionals exempt from the hospital bundling provisions are 
permitted to bill for services furnished to hospital patients. RHCs and 
FQHCs cannot bill for services furnished by RHC practitioners to 
hospital patients because RHC and FQHC services are not exempt from the 
hospital bundling provisions.
    Accordingly, any costs incurred by an RHC or FQHC associated with 
the provision of services to hospital patients must be excluded from 
RHC or FQHC allowable costs on their Medicare cost report. However, a 
practitioner who provides services in an RHC or FQHC may, in some 
cases, also have a private practice and be enrolled and qualified to 
bill Medicare under that practice as a Part B practitioner. In these 
situations, the practitioner may be able to bill Medicare Part B under 
their private practice for covered services provided to hospital 
patients.
    Section 1862(a)(14) of the Act places restrictions on the payment 
for services furnished to hospital and CAH patients. We propose to 
revise Sec.  405.2411(b) and (c) to specify that RHC services