Medicare Program: Changes to the Medicare Claims Appeal Procedures, 65296-65338 [E9-28707]

Agencies

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

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



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 405



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

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

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 405

[CMS-4064-F]
RIN 0938-AM73


Medicare Program: Changes to the Medicare Claims Appeal 
Procedures

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

ACTION: Final rule.

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

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

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

SUPPLEMENTARY INFORMATION:

Table of Contents

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

I. Background

A. Overview of Existing Medicare Program

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

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

B. Appeals Procedures Under Previous Regulations

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

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

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

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changes needed to improve the Medicare claims appeal procedures.

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

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

E. Codification of Regulations

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

II. Analysis of Appeals Procedures and Responses to Public Comments

A. Overview

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

B. Appeals

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

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

[[Page 65300]]

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

[[Page 65301]]

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

[[Page 65302]]

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

[[Page 65303]]

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

[[Page 65304]]

error rate will be used as the basis for a contractor undertaking 
further review of claims submitted by the provider or supplier. 
Finally, we strongly disagree with the commenter's characterization of 
the determination of a sustained or high error rate as a sanction. This 
determination does not result in an assessment of civil money 
penalties, or any other administrative action. Rather, it serves as the 
basis for a contractor's review of a provider's or supplier's 
subsequent claim submissions.
    Comment: Section 405.926(s) states that claim submissions on forms 
or formats that are incomplete, invalid, or do not otherwise meet the 
requirements for a Medicare claim and, as a result, are rejected or 
returned to the provider or supplier, do not constitute initial 
determinations. A commenter asked whether this section would preclude 
review where a claim is suspended for medical review.
    Response: A claim suspended for development by a contractor's 
medical review staff is not considered a claim that is invalid or 
incomplete as described in Sec.  405.926(s). Thus, Sec.  405.926(s) 
would not preclude review where a claim is suspended for medical review 
because it does not apply to this situation. Rather, a claim that is 
suspended for development is one that appears technically sufficient on 
its face, but requires additional information in order to make a 
coverage and payment decision. At the time the claim is suspended for 
development, an initial determination has not been made, and thus, 
appeal rights have not attached to the claim. In addition, the medical 
review staff's decision to suspend a claim for development does not 
constitute an initial determination that would be subject to appeal. 
Generally, once the contractor makes a decision regarding coverage and 
payment and issues an initial determination in the form of a MSN or RA, 
parties to the initial determination have 120 calendar days to request 
a redetermination. However, if a contractor denies coverage and payment 
of a claim because the documentation requested during the medical 
review of the claim was not submitted within the specified timeframe, 
any subsequent submission of the requested documentation to the 
contractor, or any timely request for a redetermination of that claim 
will be processed under our reopenings policy at Sec.  405.980(a)(2). 
If a revised determination is issued following the reopening of the 
claim, the revised initial determination carries with it appeal rights 
in accordance with Sec.  405.984(a).
    Accordingly, we are finalizing Sec.  405.924 with modification as 
noted above. We are finalizing Sec.  405.926 without modification.
c. Initial Determinations Subject to the Reopenings Process (Sec.  
405.927) and the Effects of Initial Determinations (Sec.  405.928)
    Section 405.927 states that minor errors or omissions in an initial 
determination must be corrected through the contractor's reopening 
process under Sec.  405.980(a)(3). Section 405.928 describes the 
effects of an initial determination. We received no comments on these 
sections. Accordingly, we are finalizing Sec.  405.927 and Sec.  
405.928 without modification.
5. Redeterminations (Sec.  405.940 Through Sec.  405.958)
    Sections 405.940 through 405.958 discuss the redetermination 
process. We received comments with respect to redetermination decision-
making timeframes and other aspects of the redetermination process. A 
brief overview of the relevant regulatory provisions, a summary of the 
comments and our responses follow. Additional detailed discussion of 
the redetermination process is included in the interim final rule at 7