Civil Money Penalties and Assessments Under the Military Health Care Fraud and Abuse Prevention Program, 18437-18452 [2019-08858]

Agencies

• DEPARTMENT OF DEFENSE
• Office of the Secretary

[Federal Register Volume 84, Number 84 (Wednesday, May 1, 2019)]
[Proposed Rules]
[Pages 18437-18452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08858]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 199 and 200

[DOD-2018-HA-0059]
RIN 0720-AB74


Civil Money Penalties and Assessments Under the Military Health 
Care Fraud and Abuse Prevention Program

AGENCY: Office of the Secretary, Department of Defense (DoD).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement authority provided to the 
Secretary of Defense under the Social Security Act. This authority 
allows the Secretary of Defense as the administrator of a Federal 
healthcare program to impose civil monetary penalties (CMPs or 
penalties) as described in section 1128A of the Social Security Act 
against providers and suppliers who commit fraud and abuse in the 
TRICARE program. This proposed rule establishes a program within the 
DoD to impose civil monetary penalties for certain such unlawful 
conduct in the TRICARE program. To the extent applicable, we are 
proposing to adopt the Department of Health and Human Service's 
(HHS's), well-established CMP rules and procedures. This will enable 
both TRICARE and TRICARE providers to rely upon Medicare precedents and 
guidance issued by the HHS Office of Inspector General regarding 
conduct that implicates the civil monetary penalty law. The program to 
impose civil monetary penalties in the TRICARE program shall be called 
the Military Health Care Fraud and Abuse Prevention Program.

DATES: To ensure consideration, comments must be received no later than 
July 1, 2019. The Defense Health Agency may not fully consider comments 
received after this date.

ADDRESSES: You may submit comments identified by docket number and/or 
RIN number and title, by any of the following methods:
    Federal eRulemaking Portal: https://www.regulations.gov. Follow the 
instructions for submitting comments.
    Mail: Department of Defense, Office of the Chief Management 
Officer, Directorate for Oversight and Compliance, 4800 Mark Center 
Drive, Suite 08D09, Attn: Mailbox 24, Alexandria, VA 22350-1700.
    Instructions: All submissions received must include the agency name 
and docket number or Regulatory Information Number (RIN) for this 
Federal Register document. The general policy for comments and other 
submissions from members of the public is to make these submissions 
available for public viewing on the internet at https://www.regulations.gov as they are received without change, including any 
personal identifiers or contact information.

FOR FURTHER INFORMATION CONTACT: Michael J. Zleit, at 703-681-6012.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

1. Purpose

A. Need For Regulatory Action
    The Defense Health Agency (DHA), the agency of the Department of 
Defense responsible for administration of the TRICARE Program, has as 
its primary mission the support and delivery of an integrated, 
affordable, and high quality health service to all DoD beneficiaries 
and in doing so, is a responsible steward of taxpayer dollars. In 
recent years, fraud and abuse has been inhibiting DHA's mission. One 
example involves compound drugs. In fiscal year 2004, DoD paid about $5 
million for compound drugs. Ten years later in fiscal year 2014, the 
amount paid had risen over 10,000% exceeding $514 million, and for 
fiscal year 2015, the cost exceeded $1.3 billion in expenditures just 
for compound drugs.

[[Page 18438]]

Significantly, compounded drugs make up only 0.5 percent of the total 
number of prescriptions provided through TRICARE, but in 2015 accounted 
for more than 20 percent of TRICARE's total pharmacy expenditures. The 
astronomical increase in expenditures related to compound drugs was 
almost solely due to fraud and abuse, resulting in many investigations 
and prosecutions by the Department of Justice (DOJ). However, because 
DOJ is responsible for the prosecution of all fraud and abuse in all 
Federal healthcare programs, including Medicare, TRICARE, and the 
Federal Employees Health Benefits Program and does not have unlimited 
resources, DOJ must prioritize cases and is unable to prosecute a large 
portion of those entities who commit fraud and abuse in the TRICARE 
Program. Therefore, the Department of Defense, acting through the DHA, 
seeks to implement its authority under section 1128A(m) of the Social 
Security Act (42 U.S.C. 1320a-7a(m)) to initiate administrative 
proceedings to impose civil monetary penalties against those who commit 
fraud and abuse in the TRICARE Program. Because CMPs may be imposed in 
addition to criminal proceedings, we believe that the establishment of 
a CMP Program within the DoD will serve a complementary function to the 
criminal justice process and provide additional deterrence to 
fraudulent actions against the Federal TRICARE Program and the recovery 
of funds lost to fraud and abuse. The purpose of this proposed rule 
utilizing CMP authority is to ensure the integrity of TRICARE and make 
the government whole for funds lost to fraud and abuse, which is 
necessary to the delivery of an integrated, affordable, and high 
quality health service for all DoD beneficiaries.
B. Costs and Benefits of This Proposed Rule
    This proposed rule would reduce Defense Health Program requirements 
by $74 million from FY 2020-FY 2024. The savings estimates were based 
on recent history of TRICARE fraud and abuse audits and investigations 
that, for a variety of reasons, did not result in criminal or civil 
actions by the Department of Justice under other legal authorities. The 
saving estimates were based on the estimate of 50 cases per year with 
an average penalty of $600,000 per case and a collection rate of 60%. 
Additionally, the estimated recovery amount subtracts out appeal costs, 
full-time equivalent costs, and administrative costs.
    The proposed rule along with additional proposed legislation allows 
the funds collected to be credited to appropriations available for 
expenses of the affected DoD health care program. Based on the results 
of the HHS civil money penalty program, the expectation is that funds 
recovered will more than pay for the activities associated with 
investigating abuses and administering the civil money penalty program, 
producing savings for DoD.
    Because CMPs may be imposed in addition to criminal proceedings, we 
believe that the benefit of the establishment of a CMP Program within 
the DoD will serve a complementary function to the criminal justice 
process and provide additional deterrence to fraudulent actions against 
the Federal TRICARE Program and the recovery of funds lost to fraud and 
abuse. We believe the recovery of funds lost to fraud and abuse will 
make the government whole and will help ensure the continued delivery 
of an integrated, affordable, and high quality health service for all 
DoD beneficiaries.
C. Authority Provided to All Federal Healthcare Programs
    The specific legal authority authorizing the Department of Defense, 
to establish a program to impose CMPs in the TRICARE Program is 
provided in section 1128A(m) of the Social Security Act [42 U.S.C. 
1320a-7a(m)]. This provision of law authorizes Federal Departments 
other than HHS with jurisdiction over a Federal health care program (as 
defined in section 1128B(f)) of the Social Security Act), to impose 
CMPs as enumerated in section 1128A of the Social Security Act. Some of 
the CMPs enumerated in section 1128A of the Social Security Act limit 
the applicability to conduct only involving Medicare and Medicaid; 
therefore, this proposed rule would implement all CMP authorities under 
section 1128A that are not specifically limited to Medicare, Medicaid, 
or other HHS-exclusive authority.
D. Summary of the Major Provisions of the Proposed Rule
    We propose to establish Civil Monetary Penalties (CMP) regulations 
at 32 CFR part 200 to implement authority provided to the Department of 
Defense under section 1128A of the Social Security Act, as amended. The 
proposed rule closely follows the organization and substance of HHS's 
CMP regulations. We propose to follow HHS's process and procedure for 
imposing CMPs, as well as HHS's methodology for calculating the amount 
of penalties and assessments. Additionally, for ease of interpretation 
and transparency, we have adopted HHS's numerical structure for this 
proposed regulation. Accordingly, the numerical provisions of the 
proposed 32 CFR part 200 directly correspond to HHS's numerical 
provisions at 42 CFR part 1003. Following this organizational construct 
and HHS rules and procedures, the proposed rule addresses such matters 
as: Liability for penalties and assessments, determinations regarding 
the amount of penalties and assessments, CMPs and assessments for false 
and fraudulent claims and other similar misconduct, penalties and 
assessments for unlawful kickbacks, CMPs and assessments for 
contracting organization misconduct, procedures for the imposition of 
CMPs and assessments, judicial review, time limitations for CMPs and 
assessments, statistical sampling, and appeals.

II. Provisions of the Proposed Rule

A. Background

    For over 25 years, the HHS Office of Inspector General (OIG) has 
exercised the authority to impose CMPs, assessments, and exclusions in 
furtherance of its mission to protect the Federal health care programs 
and their beneficiaries from fraud and abuse. As those programs have 
changed over the last two decades, HHS-OIG has received new fraud-
fighting CMP authorities in response. Section 231 of HIPAA expanded the 
reach of CMPs to include federal health programs other than those 
funded by HHS. In 1977, Congress first mandated the exclusion of 
physicians and other practitioners convicted of program-related crimes 
from participation in Medicare and Medicaid through the Medicare-
Medicaid Anti-Fraud and Abuse Amendments, Public Law 95-142 (now 
codified at section 1128 of the Social Security Act (the SSA)). This 
was followed in 1981 with Congress enacting the Civil Monetary 
Penalties Law (CMPL), Public Law 97-35, section 1128A of the SSA, 42 
U.S.C. 1320a-7a, to further address health care fraud and abuse. The 
CMPL authorized the Secretary to impose penalties and assessments on a 
person, as defined in 42 CFR part 1003, who defrauded Medicare or 
Medicaid or engaged in certain other wrongful conduct. The CMPL also 
authorized the Secretary of Health and Human Services to exclude 
persons from Medicare and all State health care programs (including 
Medicaid). Congress later expanded the CMPL and the scope of exclusion 
to apply to all Federal health care programs. The Secretary of HHS 
delegated the CMPL's authorities to HHS-OIG. 53 FR 12993 (April 20, 
1988). Since 1981, Congress has created various other CMP authorities 
covering

[[Page 18439]]

numerous types of fraud and abuse. These new authorities were also 
delegated by the Secretary to HHS-OIG and were added to part 1003.
    In 1996, Section 231 of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) expanded the reach of certain CMPs 
to include Federal health programs other than HHS, including specific 
CMPs that may be implemented to prevent fraud and abuse against 
programs such as TRICARE. The CMPL authorizes the Department or agency 
head to impose CMPs, assessments, and program exclusions against 
individuals and entities who submit false or fraudulent, or otherwise 
improper claims for payment under Federal healthcare programs 
administered by that Department of agency. HHS has an active, robust 
process in place to seek CMPs. Additionally, in September 2016, HHS 
substantially increased the amount of the penalty it may collect for 
each act of fraud and abuse. The Office of Personnel Management (OPM) 
also actively seeks civil monetary penalties under the Federal 
Employees Health Benefits (FEHB) Program. Subsequent to HIPAA, Congress 
expanded CMP authorities to reach additional conduct, such as: (1) 
Failure to grant an OIG timely access to records, upon reasonable 
request; (2) ordering or prescribing while excluded when the excluded 
person knows or should know that the item or service may be paid for by 
a Federal health care program; (3) making false statements, omissions, 
or misrepresentations in an enrollment or similar bid or application to 
participate in a Federal health care program; (4) failure to report and 
return an overpayment that is known to the person; and (5) making or 
using a false record or statement that is material to a false or 
fraudulent claim. Most recently, in the Bipartisan Budget Act of 2018, 
Congress doubled the maximum amount of penalties and assessments under 
section 1128A.

B. Imposition of CMPs and Assessments in the TRICARE Program

1. Introduction
    As noted above, section 1128A(m) of the SSA authorizes the 
applicable Department head to impose civil monetary penalties (CMPs), 
assessments, and program exclusions against individuals and entities 
who submit false or fraudulent, or otherwise improper claims for 
payment. To date, DoD has not implemented its authority under this law, 
but proposes to now do so. The Defense Health Agency will utilize this 
authority and create the regulatory framework in this proposed rule to 
initiate a program to impose civil monetary penalties against those who 
commit fraud or abuse against the TRICARE program. The DHA will utilize 
the authority in section 1128A of the SSA to impose civil monetary 
penalties and assessments, but, unlike the HHS CMP Program, TRICARE 
will not utilize authority to impose program exclusions as part of its 
CMP program. Rather, program exclusions in the TRICARE program will 
remain under TRICARE's established authority and process at 32 CFR 
199.9(f). In order to integrate this proposed rule into TRICARE's 
exclusion process under 32 CFR 199.9(f), we propose to amend 32 CFR 
199.9(f)(1)(ii) by adding a sentence at the end of the provision 
stating: ``A final determination of an imposition of a civil monetary 
penalty under 32 CFR part 200 shall constitute an administrative 
determination of fraud and abuse.'' We believe that this amendment will 
clarify that a final determination of an imposition of a CMP, 
implicating conduct under 32 CFR part 200, may subject the respondent 
of the CMP to exclusion as authorized under 32 CFR 199.9(f)(1)(ii).
2. Delegation of Authority
    Section 1128A(m) of the SSA provides the Secretary of Defense with 
CMP authority over claims involving the TRICARE Program. This proposed 
rule reflects a delegation of authority from the Secretary of Defense 
to the DHA Director to impose CMPs and assessments against any person 
who has violated one or more provisions of CMPL as applicable to the 
TRICARE Program. We propose that the authority at 32 CFR 200.150 will 
include all powers to impose and compromise civil monetary penalties 
and assessments under section 1128A of the Social Security Act.
3. Prohibited Acts
    We propose that the following prohibited acts under section 
1128A(a) [42 U.S.C. 1320a-7a(a)] be subject to the imposition of civil 
monetary penalties in the TRICARE Program. These prohibitions include 
(but are not limited to) any person (including an organization, agency, 
or other entity, but excluding a beneficiary, as defined in subsection 
(i)(5) of this section) that--
     knowingly presents or causes to be presented to an 
officer, employee, or agent of the United States, or of any department 
or agency thereof, or of any State agency a claim that--
    [cir] Is for a medical or other item or service that the person 
knows or should know was not provided as claimed, including any person 
who engages in a pattern or practice of presenting or causing to be 
presented a claim for an item or service that is based on a code that 
the person knows or should know will result in a greater payment to the 
person than the code the person knows or should know is applicable to 
the item or service actually provided [1320a-7a(a) (1)(A)];
    [cir] Is for a medical or other item or service and the person 
knows or should know the claim is false or fraudulent [1320a-
7a(a)(1)(B)];
    [cir] Is presented for a physician service by a person who knows or 
should know that the individual who furnished the service--(i) was not 
licensed as a physician, (ii) was licensed as a physician, but such 
license had been obtained through a misrepresentation of material fact 
(including cheating on an examination required for licensing), or (iii) 
represented to the patient at the time the service was furnished that 
the physician was certified in a medical specialty by a medical 
specialty board when the individual was not so certified [1320a-
7a(a)(1)(C)];
    [cir] Is for a medical or other item or service furnished during a 
period in which the person was excluded from the TRICARE program under 
32 CFR 199.9(f) or other Federal health care program (as defined in 
section 1128B(f) of the Social Security Act) under which the claim was 
made pursuant to Federal law [1320a-7a(a)(1)(D)];
    [cir] Is for a pattern of medical or other items or services that 
the person knows or should know are not medically necessary [1320a-
7a(a)(1)(E)].
     arranges or contracts (by employment or otherwise) with an 
individual or entity that the person knows or should know is excluded 
from participation in a Federal health care program (as defined in 
section 1320a-7b(f) of this title), for the provision of items or 
services for which payment may be made under such a program; [1320a-
7a(a)(6)].
     commits an act described in paragraph (1) or (2) of 
section 1320a-7b(b) of title 42; [1320a-7a(a)(7)].
     knowingly makes, uses, or causes to be made or used, a 
false record or statement material to a false or fraudulent claim for 
payment for items and services furnished under a Federal health care 
program; [1320a-7a(a)(8)].
     fails to grant timely access, upon reasonable request (as 
defined by the Secretary in regulations), to the Office of Inspector 
General (OIG), for the purpose of audits, investigations, evaluations, 
or other statutory functions of the OIG; [1320a-7a(a)(9)].

[[Page 18440]]

     orders or prescribes a medical or other item or service 
during a period in which the person was excluded from a Federal health 
care program (as so defined), in the case where the person knows or 
should know that a claim for such medical or other item or service will 
be made under such a program [1320a-7a(a)(8)]; (Note: There are two 
section 1320a-7a(a)(8) provisions enacted into the statute).
     knowingly makes or causes to be made any false statement, 
omission, or misrepresentation of a material fact in any application, 
bid, or contract to participate or enroll as a provider of services or 
a supplier under a Federal health care program (as so defined) [1320a-
7a(a)(9)]; (Note: There are two section 1320a-7a(a)(9) provisions 
enacted into the statute).
     knows of an overpayment (as defined in paragraph (4) of 
section 1128J(d) [42 U.S.C. 1320a-7k(d)]) and does not report and 
return the overpayment in accordance with such section [1320a-
7a(a)(10)].
4. Coordination With HHS and DOJ
    DHA will coordinate with the Department of Justice (DOJ) and 
Defense Criminal Investigative Organizations (DCIOs) in resolving all 
CMP matters. Allegations of fraud will be referred promptly for 
investigation to the appropriate DCIO consistent with the requirements 
of Department of Defense Instruction 5505.02. In cases where DOJ or the 
appropriate DCIO does not participate the case will be governed by 
either DHA's or HHS's CMPL authorities depending on whether the 
relevant claims are primarily TRICARE Claims or Medicare Claims. In 
cases involving mixed Medicare and TRICARE Claims, DHA will seek to 
resolve only those cases which consist of primarily TRICARE claims. 
Medicare will take the lead role in resolving cases which consist of 
primarily Medicare claims. Administrators from both HHS and the DHA 
will coordinate in resolving cases with mixed TRICARE and Medicare 
claims. If claims implicated by CMPL are primarily TRICARE claims, 
those claims will be governed by DHA's applicable CMP authorities. In 
some cases, disclosing parties may request release under the False 
Claims Act (FCA), and in other cases, DOJ may choose to participate in 
the disposition of the matters. DOJ determines the approach in cases in 
which it is involved. If DOJ participates, the matter will be resolved 
as DOJ determines is appropriate consistent with its resolution of FCA 
cases.
5. Amount of Penalties and Assessments
    In order to ensure full compliance with the authority delegated to 
the Secretary of Defense in section 1128A(m), DoD proposes to impose 
penalties and assessments in the amount not to exceed the maximum 
adjusted civil penalty amounts prescribed in 32 CFR part 269. DoD 
proposes to follow annually updated penalty amounts, as adjusted in 
accordance with the Federal Civil Monetary Penalty Inflation Adjustment 
Act of 1990 (Pub. L. 101-140), as amended by the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (section 
701 of Pub. L. 114-74); and the Bipartisan Budget Act of 2018.
6. Exclusion
    The time period and effect of exclusion will follow TRICARE's 
established exclusion process at 32 CFR 199.9(f). A person who has been 
excluded from the TRICARE Program may apply for reinstatement at the 
end of the period of exclusion. The process for reinstatement will be 
in accordance with the pertinent provisions of 32 CFR 199.9(h). Unlike 
HHS's CMP process, whereby HHS imposes penalties, assessments and 
exclusions, DHA will not exercise authority over exclusions in the 
TRICARE Program as part of the CMP implementation. Exclusion actions 
under the TRICARE Program will continue to be governed under the 
established process at 32 CFR 199.9(f). Appeals of exclusions will be 
in accordance with the established process at 32 CFR 199.10 and will 
not be part of the proposed CMP appeals process.
    Additionally, as part of this proposed rule we are proposing an 
amendment to 32 CFR 199.9(f)(1)(ii) that would clarify that a final 
determination of an imposition of a civil monetary penalty under 32 CFR 
part 200 would be considered an administrative determination of fraud 
and abuse. By clarifying that a final determination of an imposition of 
a civil monetary penalty is an administrative determination of fraud 
and abuse, it will allow the TRICARE program an additional, appropriate 
basis for exclusion under the existing exclusion process at Sec.  
199.9(f). Therefore, once a final determination has been made to impose 
a CMP, the claim will be referred for consideration of exclusion 
pursuant to 32 CFR 199.9(f), under the normal TRICARE process where 
there has been a determination of fraud and abuse.
7. Notice of a Proposed Determination
    Where sufficient evidence supports the imposition of a CMP, the DHA 
may serve a notice of proposed determination on the respondent, in any 
manner authorized by Rule 4 of the Federal Rules of Civil Procedure 
detailing the basis and remedy sought. This proposed rule at 32 CFR 
200.1500 mirrors the requirements of 42 CFR 1003.1500, but eliminates 
the requirement in 42 CFR 1003.1500(a)(7) involving a termination of a 
Medicare Provider Agreement pursuant to 1866(b)(2)(C) of the SSA, 
because the provision governing Medicare Provider Agreements is not 
applicable to the TRICARE Program.
8. Factors Relevant To Determining Amount of Penalty and Assessment
    For clarity, to improve transparency in DHA's decision-making 
processes, and for consistency with HHS's CMP process, we propose to 
use the very same factors in determining the amount of penalties and 
assessments for violations as HHS uses codified at 42 CFR 1003.140. As 
codified in the proposed regulation at 32 CFR 200.140, the primary 
factors for determining the amount of penalties and assessments for 
violations that we will consider are: (1) The nature and circumstances 
of the violation, (2) the degree of culpability of the person, (3) the 
history of prior offenses, (4) other wrongful conduct, and (5) other 
matters as justice may require.
9. Statute of Limitations
    In accordance with the authority delegated to the Secretary of 
Defense, the imposition of CMPs in the TRICARE Program will be subject 
to a six year statute of limitations.
10. Statistical Sampling and Extrapolation
    The proposed regulation at Sec.  200.1580 provides that a 
statistical sampling study, if based upon an appropriate sampling and 
computed by valid statistical methods, shall constitute prima facie 
evidence of the number and amount of claims or requests for payment. 
The use of statistical sampling will allow DHA to impose penalties and 
assessments based upon an extrapolated number and amount of claims. 
Additionally, statistical sampling will allow DHA to recover the 
extrapolated amount of overpaid funds through administrative 
recoupment.
11. Appeals of Civil Money Penalties and Assessments
    Administrative review of the imposition of a civil monetary penalty

[[Page 18441]]

under the TRICARE Program will be before an Administrative Law Judge 
(ALJ). We propose entering into an arrangement with the HHS 
Departmental Appeals Board (DAB), pursuant to an interagency agreement 
between DoD and HHS for the DAB to hear TRICARE CMP appeals. However, 
as an alternative, DHA continues to evaluate possibly utilizing ALJ's 
currently assigned to the Department of Defense, and invites public 
comments on this alternative as well as the DAB proposal included in 
the text of the proposed rule.
    The proposed appeals process would involve appeals of civil 
monetary penalties and assessments but not include appeals of 
exclusions, which will be governed by the established process at 32 CFR 
199.9(f). We believe that DAB ALJs, would be good candidates to preside 
over TRICARE CMP appeals. DAB ALJs currently hear CMP appeals for the 
Medicare Program pursuant to HHS regulations at 42 CFR part 1005, which 
provide for a direct appeal to the DAB for CMPs assessed by Medicare. 
During the appeals process, the DHA will have exclusive authority to 
settle any issues or case without consent of the ALJ. If the imposition 
of the CMP is successful on appeal, the determination of the CMP by the 
Secretary of Defense will become final. Once a determination by the 
Secretary has become final, collection of any penalty and assessment 
will be the responsibility of DHA. A penalty or an assessment imposed 
under this program may be compromised by the DHA and may be recovered 
in a civil action brought in the United States district court for the 
district where the claim was presented or where the respondent resides.
    Although we continue to evaluate the use of DoD ALJs, we believe 
that utilization of DAB ALJs and HHS's long established appeals process 
will be the most efficient means to adjudicate appeals under the 
TRICARE Program. The HHS appeals process would not add any additional 
process or burden to those in the industry who might be impacted by CMP 
law, because those entities implicated by the CMP law under TRICARE are 
for the most part the same entities that are already subject to the 
same civil monetary penalties law under Medicare. Additionally, we 
believe the adoption of HHS appeals regulations will assist the 
seamless adjudication of TRICARE Appeals by HHS ALJs with familiarity 
and experience working with the Medicare Appeals regulations.
    We are proposing the adoption of a 120 day deadline, extending the 
60 day deadline established in 42 CFR 1005.20(c) for the ALJ to issue a 
decision following the close of the record. We are also proposing 
extending the 60 day deadline established in 42 CFR 1005.21(i) for the 
Board to issue a decision following the close of the record. After 
consultation with the HHS DAB, the DAB has requested that in order to 
ensure adequate resources necessary to properly adjudicate CMP Appeals, 
including complex statistical sampling cases, that the deadline to 
issue a decision be extended from 60 days to 120 days for the ALJ and 
the Board to issue a decision following the close of the record. We 
believe that the requested extension to 120 days for the issuance of an 
ALJ and Board decision provides appellants with appropriate due 
process. Accordingly, pursuant to the DAB recommendation we propose the 
deadline for decision by the ALJ in 42 CFR 1005.20(c) and the decision 
by the Board Sec.  1005.21(i) to be 120 days from the date the record 
is closed.
    Therefore, with the exception of regulations involving exclusions 
and the extension of deadlines for the ALJ and Board to issue a 
decision, in part for purposes of uniformity with Medicare, we propose 
that the regulations at 42 CFR part 1005, Sec. Sec.  1005.1 through 
1005.23, be adopted in full to the extent applicable to appeals of 
civil momentary penalties and assessments in the TRICARE Civil Monetary 
Penalty Program. These appeals regulations are codified in this 
proposed regulation under 32 CFR 200.2001 through 200.2023.

III. Regulatory Impact Statement

Public Comments Invited

    This is being issued as proposed rule to implement authority 
provided to the Secretary of Defense in section 1128A(m) of the SSA. 
DoD invites public comments on this proposed rule and is committed to 
considering all comments and issuing a final rule as soon as 
practicable.

Executive Order (E.O.) 13771, ``Reducing Regulation and Controlling 
Regulatory Costs''

    E.O. 13771 seeks to control costs associated with the government 
imposition of private expenditures required to comply with Federal 
regulations and to reduce regulations that impose such costs. 
Consistent with the analysis in OMB Circular A-4 and Office of 
Information and Regulatory Affairs guidance on implementing E.O. 13771, 
this proposed rule does not involve regulatory costs subject to E.O. 
13771.

Executive Order 12866, ``Regulatory Planning and Review'' and Executive 
Order 13563, ``Improving Regulation and Regulatory Review''

    Executive Orders 13563 and 12866 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distribute impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. It has been determined that this rule is not a significant 
regulatory action. The rule does not: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy; a section of the economy; productivity; competition; jobs; 
the environment; public health or safety; or State, local, or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another Agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs, or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
these Executive Orders.
    This is not an economically significant rule because it does not 
reach that economic threshold of $100 million or more. This proposed 
rule is designed to implement statutory provisions, authorizing the 
Department of Defense to impose CMPs. The vast majority of providers 
and Federal health care programs would be minimally impacted, if at 
all, by these proposed revisions. Accordingly, the aggregate economic 
effect of these regulations would be significantly less than $100 
million.

Congressional Review Act, 5 U.S.C. 804(2)

    Under the Congressional Review Act, a major rule may not take 
effect until at least 60 days after submission to Congress of a report 
regarding the rule. A major rule is one that would have an annual 
effect on the economy of $100 million or more; or a major increase in 
costs or prices for consumers, individual industries, Federal, State, 
or local government agencies, or geographic regions; or significant 
adverse effects on competition, employment, investment, productivity,

[[Page 18442]]

innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic and export markets. 
This final rule is not a major rule, because it does not reach the 
economic threshold or have other impacts as required under the 
Congressional Review Act.

Public Law 96-354, ``Regulatory Flexibility Act'' (RFA) (5 U.S.C. 601)

    The RFA and the Small Business Regulatory Enforcement and Fairness 
Act of 1996, which amended the RFA, require agencies to analyze options 
for regulatory relief of small businesses. For purposes of the RFA, 
small entities include small businesses, nonprofit organizations, and 
government agencies. Most providers are considered small entities by 
having revenues of $5 million to $25 million or less in any one year. 
For purposes of the RFA, most physicians and suppliers are considered 
small entities. The aggregate effect of implementing a CMP Program 
within the TRICARE Program would be minimal. In summary, we have 
concluded that this proposed rule should not have a significant impact 
on the operations of a substantial number of small providers and that a 
regulatory flexibility analysis is not required for this rulemaking. 
Therefore, this proposed rule is not subject to the requirements of the 
RFA.

Public Law 104-4, Sec. 202, ``Unfunded Mandates Reform Act''

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4, also requires that agencies assess anticipated costs and 
benefits before issuing any rule that may result in expenditures in any 
one year by State, local, or tribal governments, in the aggregate, or 
by the private sector, of $100 million in 1995 dollars, updated 
annually for inflation. That threshold level is currently approximately 
$140 million. As indicated above, these proposed rules implement 
statutory authority to impose CMPs on claims submitted to the TRICARE 
Program is a similar manner as implemented by the Department of Health 
and Human Services in the Medicare Program. It has been determined that 
there are no significant costs associated with the proposed 
implementation of a CMP Program to impose CMPs on claims submitted to 
the TRICARE Program that would impose any mandates on State, local, or 
tribal governments or the private sector that would result in an 
expenditure of $140 million or more (adjusted for inflation) in any 
given year and that a full analysis under the Unfunded Mandates Reform 
Act is not necessary.

Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)

    This rulemaking does not contain a ``collection of information'' 
requirement, and will not impose additional information collection 
requirements on the public under Public Law 96-511, ``Paperwork 
Reduction Act'' (44 U.S.C. chapter 35).

Executive Order 13132, ``Federalism''

    This proposed rule has been examined for its impact under E.O. 
13132, and it does not contain policies that have federalism 
implications that would have substantial direct effects on the States, 
on the relationship between the national Government and the States, or 
on the distribution of powers and responsibilities among the various 
levels of Government. Therefore, consultation with State and local 
officials is not required.

List of Subjects

32 CFR Part 199

    Claims, Dental health, Health care, Health insurance, Individuals 
with disabilities, Mental health, Mental health parity, Military 
personnel.

32 CFR Part 200

    Administrative practice and procedure, Fraud, Health care, Health 
insurance, Penalties.

    For the reasons stated in the preamble, the Department of Defense 
proposes to amend 32 CFR subchapter M as set forth below:

PART 199--CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED 
SERVICES (CHAMPUS)

0
1. The authority citation for part 199 continues to read as follows:

    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.
0
2. Section 199.9 paragraph (f)(1)(ii) is revised to read as follows:


Sec.  199.9  Administrative remedies for fraud, abuse, and conflict of 
interest.

* * * * *
    (f) * * *
    (1) * * *
    (ii) Administrative determination of fraud or abuse under CHAMPUS. 
If the Director, Defense Health Agency determines that a provider has 
committed fraud or abuse as defined in this part, the provider shall be 
excluded or suspended from CHAMPUS/TRICARE for a period of time 
determined by the Director. A final determination of an imposition of a 
civil monetary penalty under 32 CFR part 200 shall constitute an 
administrative determination of fraud and abuse.
* * * * *
0
3. Add part 200 to read as follows:

PART 200--CIVIL MONEY PENALTY AUTHORITIES FOR THE TRICARE PROGRAM

Sec.
Subpart A--General Provisions
200.100 Basis and purpose.
200.110 Definitions.
200.120 Liability for penalties and assessments.
200.130 Assessments.
200.140 Determinations regarding the amount of penalties and 
assessments.
200.150 Delegation of authority.
Subpart B--Civil Money Penalties (CMPs) and Assessments for False or 
Fraudulent Claims and Other Similar Misconduct
200.200 Basis for civil money penalties and assessments.
200.210 Amount of penalties and assessments.
200.220 Determinations regarding the amount of penalties and 
assessments.
Subpart C--CMPs and Assessments for Anti-Kickback Violations
200.300 Basis for civil money penalties and assessments.
200.310 Amount of penalties and assessments.
200.320 Determinations regarding the amount of penalties and 
assessments.
Subpart D--CMPs and Assessments for Contracting Organization Misconduct
200.400 Basis for civil money penalties and assessments.
200.410 Amount of penalties and assessments for contracting 
organization.
200.420 Determinations regarding the amount of penalties and 
assessments.
Subparts E-N [Reserved]
Subpart O--Procedures for the Imposition of CMPs and Assessments
200.1500 Notice of proposed determination.
200.1510 Failure to request a hearing.
200.1520 Collateral estoppel.
200.1530 Settlement.
200.1540 Judicial review.
200.1550 Collection of penalties and assessments.
200.1560 Notice to other agencies.
200.1570 Limitations.
200.1580 Statistical sampling.
200.1590-200.1990 [Reserved]
Subpart P--Appeals of CMPs and Assessments
200.2001 Definitions.
200.2002 Hearing before an ALJ.
200.2003 Rights of parties.
200.2004 Authority of the ALJ.
200.2005 Ex parte contacts.
200.2006 Prehearing conferences.
200.2007 Discovery.
200.2008 Exchange of witness lists, witness statements and exhibits.

[[Page 18443]]

200.2009 Subpoenas for attendance at hearing.
200.2010 Fees.
200.2011 Form, filing and service of papers.
200.2012 Computation of time.
200.2013 Motions.
200.2014 Sanctions.
200.2015 The hearing and burden of proof.
200.2016 Witnesses.
200.2017 Evidence.
200.2018 The record.
200.2019 Post-hearing briefs.
200.2020 Initial decision.
200.2021 Appeal to DAB.
200.2022 Stay of initial decision.
200.2023 Harmless error.

    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55; 42 U.S.C. 1320a-
7a.

Subpart A--General Provisions


Sec.  200.100   Basis and purpose.

    (a) Basis. This part implements section 1128A of the Social 
Security Act (42 U.S.C. 1320a-7a) (the Act).
    (b) Purpose. This part--
    (1) Provides for the imposition of civil money penalties and, as 
applicable, assessments against persons who have committed an act or 
omission that violates one or more provisions of this part; and
    (2) Sets forth the appeal rights of persons subject to a penalty 
and assessment.


Sec.  200.110   Definitions.

    For purposes of this part, with respect to terms not defined in 
this section but defined in 32 CFR 199.2, the definition in such Sec.  
199.2 shall apply. For purposes of this part, the following definitions 
apply:
    Assessment means the amounts described in this part and includes 
the plural of that term.
    Claim means an application for payment for an item or service under 
TRICARE/CHAMPUS.
    Contracting organization means a public or private entity or other 
organization that has contracted with the Department to furnish, or 
otherwise pay for, items and services to TRICARE beneficiaries pursuant 
to chapter 55 of title 10, U.S. Code. The term expressly does not 
include entities with which the Department contracts to provide 
``managed care support'' or ``fiscal intermediary'' services to the 
TRICARE program under Section 1097 of title 10, U.S. Code.
    Defense Health Agency or DHA means the Director of the Defense 
Health Agency or designee.
    Items and services or items or services includes without 
limitation, any item, device, drug, biological, supply, or service 
(including management or administrative services), including, but not 
limited to, those that are listed in an itemized claim for program 
payment or a request for payment; for which payment is included in any 
TRICARE/CHAMPUS reimbursement method, such as a prospective payment 
system or managed care system; or that are, in the case of a claim 
based on costs, required to be entered in a cost report, books of 
account, or other documents supporting the claim (whether or not 
actually entered).
    Knowingly means that a person, with respect to an act, has actual 
knowledge of the act, acts in deliberate ignorance of the act, or acts 
in reckless disregard of the act, and no proof of specific intent to 
defraud is required.
    Material means having a natural tendency to influence, or be 
capable of influencing, the payment or receipt of money or property.
    Non-separately-billable item or service means an item or service 
that is a component of, or otherwise contributes to the provision of, 
an item or a service, but is not itself a separately billable item or 
service.
    Office of Inspector General or OIG means the Office of Inspector 
General of the Department of Defense; the Defense Criminal 
Investigative Service (DCIS); or the Office of Inspector General for 
the Defense Health Agency.
    Overpayment means any funds that a person receives or retains under 
TRICARE/CHAMPUS to which the person, after applicable reconciliation, 
is not entitled under such program.
    Penalty means the amount described in this part and includes the 
plural of that term.
    Person means an individual, trust or estate, partnership, 
corporation, professional association or corporation, or other entity, 
public or private.
    Preventive care, for purposes of the definition of the term 
``remuneration'' as set forth in this section and the preventive care 
exception to section 231(h) of HIPAA, means any service that--
    (1) Is a prenatal service or a post-natal well-baby visit or is a 
specific clinical service covered by TRICARE; and
    (2) Is reimbursable in whole or in part by TRICARE as a preventive 
care service.
    Reasonable request, with respect to Sec.  200.200(b)(6), means a 
written request, signed by a designated representative of the OIG and 
made by a properly identified agent of the OIG during reasonable 
business hours. The request will include: A statement of the authority 
for the request, the person's rights in responding to the request, the 
definition of ``reasonable request'' and ``failure to grant timely 
access'' under this part, the deadline by which the OIG requests 
access, and the amount of the civil money penalty or assessment that 
could be imposed for failure to comply with the request, and the 
earliest date that a request for reinstatement would be considered.
    Remuneration, for the purposes of this part, is consistent with the 
definition in section 1128A(i)(6) of the Social Security Act and 
includes the waiver of copayment, coinsurance and deductible amounts 
(or any part thereof) and transfers of items or services for free or 
for other than fair market value. The term ``remuneration'' does not 
include:
    (1) The waiver of coinsurance and deductible amounts by a person, 
if the waiver is not offered as part of any advertisement or 
solicitation; the person does not routinely waive coinsurance or 
deductible amounts; and the person waives coinsurance and deductible 
amounts after determining in good faith that the individual is in 
financial need or failure by the person to collect coinsurance or 
deductible amounts after making reasonable collection efforts.
    (2) Any permissible practice as specified in section 1128B(b)(3) of 
the Act or in regulations issued by the Secretary.
    (3) Differentials in coinsurance and deductible amounts as part of 
a benefit plan design (as long as the differentials have been disclosed 
in writing to all beneficiaries, third party payers and providers), to 
whom claims are presented.
    (4) Incentives given to individuals to promote the delivery of 
preventive care services where the delivery of such services is not 
tied (directly or indirectly) to the provision of other services 
reimbursed in whole or in part by TRICARE, Medicare or an applicable 
State health care program. Such incentives may include the provision of 
preventive care, but may not include--
    (i) Cash or instruments convertible to cash; or
    (ii) An incentive the value of which is disproportionally large in 
relationship to the value of the preventive care service (i.e., either 
the value of the service itself or the future health care costs 
reasonably expected to be avoided as a result of the preventive care).
    (5) Items or services that improve a beneficiary's ability to 
obtain items and services payable by TRICARE, and pose a low risk of 
harm to TRICARE beneficiaries and the TRICARE program by--
    (i) Being unlikely to interfere with, or skew, clinical decision 
making;
    (ii) Being unlikely to increase costs to Federal health care 
programs or beneficiaries through overutilization or inappropriate 
utilization; and

[[Page 18444]]

    (iii) Not raising patient safety or quality-of-care concerns.
    (6) The offer or transfer of items or services for free or less 
than fair market value by a person if--
    (i) The items or services consist of coupons, rebates, or other 
rewards from a retailer;
    (ii) The items or services are offered or transferred on equal 
terms available to the general public, regardless of health insurance 
status; and
    (iii) The offer or transfer of the items or services is not tied to 
the provision of other items or services reimbursed in whole or in part 
by the program under chapter 55 of title 10, U.S. Code.
    (7) The offer or transfer of items or services for free or less 
than fair market value by a person, if--
    (i) The items or services are not offered as part of any 
advertisement or solicitation;
    (ii) The offer or transfer of the items or services is not tied to 
the provision of other items or services reimbursed in whole or in part 
by the program under chapter 55 of title 10, U.S. Code;
    (iii) There is a reasonable connection between the items or 
services and the medical care of the individual; and
    (iv) The person provides the items or services after determining in 
good faith that the individual is in financial need.
    Request for payment means an application submitted by a person to 
any person for payment for an item or service.
    Respondent means the person upon whom the Department has imposed, 
or proposes to impose, a penalty and/or assessment.
    Separately billable item or service means an item or service for 
which an identifiable payment may be made under a Federal health care 
program, e.g., an itemized claim or a payment under a prospective 
payment system or other reimbursement methodology.
    Should know, or should have known, means that a person, with 
respect to information, either acts in deliberate ignorance of the 
truth or falsity of the information or acts in reckless disregard of 
the truth or falsity of the information. For purposes of this 
definition, no proof of specific intent to defraud is required.
    TRICARE or TRICARE/CHAMPUS or CHAMPUS means any program operated 
under the authority of 32 CFR part 199.


Sec.  200.120   Liability for penalties and assessments.

    (a) In any case in which it is determined that more than one person 
was responsible for a violation described in this part, each such 
person may be held separately liable for the entire penalty prescribed 
by this part.
    (b) In any case in which it is determined that more than one person 
was responsible for a violation described in this part, an assessment 
may be imposed, when authorized, against any one such person or jointly 
and severally against two or more such persons, but the aggregate 
amount of the assessments collected may not exceed the amount that 
could be assessed if only one person was responsible.
    (c) Under this part, a principal is liable for penalties and 
assessments for the actions of his or her agent acting within the scope 
of his or her agency. The provision in this paragraph (c) does not 
limit the underlying liability of the agent.


Sec.  200.130   Assessments.

    The assessment in this part is in lieu of damages sustained by the 
Department because of the violation.


Sec.  200.140   Determinations regarding the amount of penalties and 
assessments.

    (a) Except as otherwise provided in this part, in determining the 
amount of any penalty or assessment in accordance with this part, the 
DHA will consider the following factors--
    (1) The nature and circumstances of the violation;
    (2) The degree of culpability of the person against whom a civil 
money penalty and assessment is proposed. It should be considered an 
aggravating circumstance if the respondent had actual knowledge where a 
lower level of knowledge was required to establish liability (e.g., for 
a provision that establishes liability if the respondent ``knew or 
should have known'' a claim was false or fraudulent, it will be an 
aggravating circumstance if the respondent knew the claim was false or 
fraudulent). It should be a mitigating circumstance if the person took 
appropriate and timely corrective action in response to the violation. 
For purposes of this part, corrective action must include disclosing 
the violation to the DHA by initiating a self-disclosure and fully 
cooperating with the DHA's review and resolution of such disclosure;
    (3) The history of prior offenses. Aggravating circumstances 
include, if at any time prior to the violation, the individual--or in 
the case of an entity, the entity itself; any individual who had a 
direct or indirect ownership or control interest (as defined in section 
1124(a)(3) of the Act) in a sanctioned entity at the time the violation 
occurred and who knew, or should have known, of the violation; or any 
individual who was an officer or a managing employee (as defined in 
section 1126(b) of the Act) of such an entity at the time the violation 
occurred--was held liable for criminal, civil, or administrative 
sanctions in connection with a program covered by this part or in 
connection with the delivery of a health care item or service;
    (4) Other wrongful conduct. Aggravating circumstances include proof 
that the individual--or in the case of an entity, the entity itself; 
any individual who had a direct or indirect ownership or control 
interest (as defined in section 1124(a)(3) of the Act) in a sanctioned 
entity at the time the violation occurred and who knew, or should have 
known, of the violation; or any individual who was an officer or a 
managing employee (as defined in section 1126(b) of the Act) of such an 
entity at the time the violation occurred--engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to a government program or in connection with the delivery of a health 
care item or service. The statute of limitations governing civil money 
penalty proceedings does not apply to proof of other wrongful conduct 
as an aggravating circumstance; and
    (5) Such other matters as justice may require. Other circumstances 
of an aggravating or mitigating nature should be considered if, in the 
interests of justice, they require either a reduction or an increase in 
the penalty or assessment to achieve the purposes of this part.
    (b)(1) After determining the amount of any penalty and assessment 
in accordance with this part, the DHA considers the ability of the 
person to pay the proposed civil money penalty or assessment. The 
person shall provide, in a time and manner requested by the DHA, 
sufficient financial documentation, including, but not limited to, 
audited financial statements, tax returns, and financial disclosure 
statements, deemed necessary by the DHA to determine the person's 
ability to pay the penalty or assessment.
    (2) If the person requests a hearing in accordance with Sec.  
200.2002, the only financial documentation subject to review is that 
which the person provided to the DHA during the administrative process, 
unless the Administrative Law Judge (ALJ) finds that extraordinary 
circumstances prevented the person from providing the financial 
documentation to the DHA in the time and manner requested by the DHA 
prior to the hearing request.
    (c) In determining the amount of any penalty and assessment to be 
imposed under this part the following circumstances are also to be 
considered--

[[Page 18445]]

    (1) If there are substantial or several mitigating circumstances, 
the aggregate amount of the penalty and assessment should be set at an 
amount sufficiently below the maximum permitted by this part to reflect 
that fact.
    (2) If there are substantial or several aggravating circumstances, 
the aggregate amount of the penalty and assessment should be set at an 
amount sufficiently close to or at the maximum permitted by this part 
to reflect that fact.
    (3) Unless there are extraordinary mitigating circumstances, the 
aggregate amount of the penalty and assessment should not be less than 
double the approximate amount of damages and costs (as defined by 
paragraph (e)(2) of this section) sustained by the United States, or 
any State, as a result of the violation.
    (4) The presence of any single aggravating circumstance may justify 
imposing a penalty and assessment at or close to the maximum even when 
one or more mitigating factors is present.
    (d)(1) The standards set forth in this section are binding, except 
to the extent that their application would result in imposition of an 
amount that would exceed limits imposed by the United States 
Constitution.
    (2) The amount imposed will not be less than the approximate amount 
required to fully compensate the United States, for its damages and 
costs, tangible and intangible, including, but not limited to, the 
costs attributable to the investigation, prosecution, and 
administrative review of the case.
    (3) Nothing in this part limits the authority of the Department or 
the DHA to settle any issue or case as provided by Sec.  200.1530 or to 
compromise any penalty and assessment as provided by Sec.  200.1550.
    (4) Penalties and assessments imposed under this part are in 
addition to any other penalties, assessments, or other sanctions 
prescribed by law.


Sec.  200.150   Delegation of authority.

    The DHA is delegated authority from the Secretary to impose civil 
money penalties and, as applicable, assessments against any person who 
has violated one or more provisions of this part. The delegation of 
authority includes all powers to impose and compromise civil monetary 
penalties, assessments under section 1128A of the Act.

Subpart B--Civil Money Penalties (CMPs) and Assessments for False 
or Fraudulent Claims and Other Similar Misconduct


Sec.  200.200   Basis for civil money penalties and assessments.

    (a) The DHA may impose a penalty, assessment against any person who 
it determines has knowingly presented, or caused to be presented, a 
claim that was for--
    (1) An item or service that the person knew, or should have known, 
was not provided as claimed, including a claim that was part of a 
pattern or practice of claims based on codes that the person knew, or 
should have known, would result in greater payment to the person than 
the code applicable to the item or service actually provided;
    (2) An item or service for which the person knew, or should have 
known, that the claim was false or fraudulent;
    (3) An item or service furnished during a period in which the 
person was excluded from participation under 32 CFR 199.9(f) or by 
another Federal health care program (as defined in section 1128B(f) of 
the Act) to which the claim was presented;
    (4) A physician's services (or an item or service) for which the 
person knew, or should have known, that the individual who furnished 
(or supervised the furnishing of) the service--
    (i) Was not licensed as a physician;
    (ii) Was licensed as a physician, but such license had been 
obtained through a misrepresentation of material fact (including 
cheating on an examination required for licensing); or
    (iii) Represented to the patient at the time the service was 
furnished that the physician was certified by a medical specialty board 
when he or she was not so certified; or
    (5) An item or service that a person knew, or should have known was 
not medically necessary, and which is part of a pattern of such claims.
    (b) The DHA may impose a penalty and, where authorized, an 
assessment against any person who it determines--
    (1) Arranges or contracts (by employment or otherwise) with an 
individual or entity that the person knows, or should know, is excluded 
from participation in Federal health care programs for the provision of 
items or services for which payment may be made under such a program;
    (2) Orders or prescribes a medical or other item or service during 
a period in which the person was excluded from a Federal health care 
program, in the case when the person knows, or should know, that a 
claim for such medical or other item or service will be made under such 
a program;
    (3) Knowingly makes, or causes to be made, any false statement, 
omission, or misrepresentation of a material fact in any application, 
bid, or contract to participate or enroll as a provider of services or 
a supplier under a Federal health care program, including contracting 
organizations, and entities that apply to participate as providers of 
services or suppliers in such contracting organizations;
    (4) Knows of an overpayment and does not report and return the 
overpayment in accordance with section 1128J(d) of the Act;
    (5) Knowingly makes, uses, or causes to be made or used, a false 
record or statement material to a false or fraudulent claim for payment 
for items and services furnished under a Federal health care program; 
or
    (6) Fails to grant timely access to records, documents, and other 
material or data in any medium (including electronically stored 
information and any tangible thing), upon reasonable request, to the 
OIG, for the purpose of audits, investigations, evaluations, or other 
OIG statutory functions. Such failure to grant timely access means:
    (i) Except when the OIG reasonably believes that the requested 
material is about to be altered or destroyed, the failure to produce or 
make available for inspection and copying the requested material upon 
reasonable request or to provide a compelling reason why they cannot be 
produced, by the deadline specified in the OIG's written request; and
    (ii) When the OIG has reason to believe that the requested material 
is about to be altered or destroyed, the failure to provide access to 
the requested material at the time the request is made.


Sec.  200.210  Amount of penalties and assessments.

    (a) Penalties.1 (1) Except as provided in this section, 
the DHA may impose a penalty of not more than $20,000 for each 
individual violation that is subject to a determination under this 
subpart.
---------------------------------------------------------------------------

    \1\ The penalty amounts in this section are updated annually, as 
adjusted in accordance with the Federal Civil Monetary Penalty 
Inflation Adjustment Act of 1990 (Pub. L. 101-140), as amended by 
the Federal Civil Penalties Inflation Adjustment Act Improvements 
Act of 2015 (section 701 of Pub. L. 114-74). Annually adjusted 
amounts are published at 32 CFR part 269.
---------------------------------------------------------------------------

    (2) For each individual violation of Sec.  200.200(b)(1), the DHA 
may impose a penalty of not more than $20,000 for each separately 
billable or non-separately-billable item or service

[[Page 18446]]

provided, furnished, ordered, or prescribed by an excluded individual 
or entity.
    (3) The DHA may impose a penalty of not more than $100,000 for each 
false statement, omission, or misrepresentation of a material fact in 
violation of Sec.  200.200(b)(3).
    (4) The DHA may impose a penalty of not more than $100,000 for each 
false record or statement in violation of Sec.  200.200(b)(5).
    (5) The DHA may impose a penalty of not more than $20,000 for each 
item or service related to an overpayment that is not reported and 
returned in accordance with section 1128J(d) of the Act in violation of 
Sec.  200.200(b)(4).
    (6) The DHA may impose a penalty of not more than $30,000 for each 
day of failure to grant timely access in violation of Sec.  
200.200(b)(6).
    (b) Assessments. (1) Except for violations of Sec.  200.200(b)(1) 
and (3), the DHA may impose an assessment for each individual violation 
of Sec.  200.200, of not more than 3 times the amount claimed for each 
item or service.
    (2) For violations of Sec.  200.200(b)(1), the DHA may impose an 
assessment of not more than 3 times--
    (i) The amount claimed for each separately billable item or service 
provided, furnished, ordered, or prescribed by an excluded individual 
or entity; or
    (ii) The total costs (including salary, benefits, taxes, and other 
money or items of value) related to the excluded individual or entity 
incurred by the person that employs, contracts with, or otherwise 
arranges for an excluded individual or entity to provide, furnish, 
order, or prescribe a non-separately-billable item or service.
    (3) For violations of Sec.  200.200(b)(3), the DHA may impose an 
assessment of not more than 3 times the total amount claimed for each 
item or service for which payment was made based upon the application 
containing the false statement, omission, or misrepresentation of 
material fact.


Sec.  200.220   Determinations regarding the amount of penalties and 
assessments.

    In considering the factors listed in Sec.  200.140--
    (a) It should be considered a mitigating circumstance if all the 
items or services or violations included in the action brought under 
this part were of the same type and occurred within a short period of 
time, there were few such items or services or violations, and the 
total amount claimed or requested for such items or services was less 
than $5,000.
    (b) Aggravating circumstances include--
    (1) The violations were of several types or occurred over a lengthy 
period of time;
    (2) There were many such items or services or violations (or the 
nature and circumstances indicate a pattern of claims or requests for 
payment for such items or services or a pattern of violations);
    (3) The amount claimed or requested for such items or services, or 
the amount of the overpayment was $50,000 or more;
    (4) The violation resulted, or could have resulted, in patient 
harm, premature discharge, or a need for additional services or 
subsequent hospital admission; or
    (5) The amount or type of financial, ownership, or control interest 
or the degree of responsibility a person has in an entity was 
substantial with respect to an action brought under Sec.  
200.200(b)(3).

Subpart C--CMPs and Assessments for Anti-Kickback Violations


Sec.  200.300   Basis for civil money penalties and assessments.

    The DHA may impose a penalty and an assessment against any person 
who it determines in accordance with this part has violated section 
1128B(b) of the Act by unlawfully offering, paying, soliciting, or 
receiving remuneration to induce or in return for the referral of 
business paid for, in whole or in part, by TRICARE/CHAMPUS.


Sec.  200.310   Amount of penalties and assessments.

    (a) Penalties.2 The DHA may impose a penalty of not more 
than $100,000 for each offer, payment, solicitation, or receipt of 
remuneration that is subject to a determination under Sec.  200.300.
---------------------------------------------------------------------------

    \2\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 32 CFR part 
269.
---------------------------------------------------------------------------

    (b) Assessments. The DHA may impose an assessment of not more than 
3 times the total remuneration offered, paid, solicited, or received 
that is subject to a determination under Sec.  200.300. Calculation of 
the total remuneration for purposes of an assessment shall be without 
regard to whether a portion of such remuneration was offered, paid, 
solicited, or received for a lawful purpose.


Sec.  200.320   Determinations regarding the amount of penalties and 
assessments.

    In considering the factors listed in Sec.  200.140:
    (a) It should be considered a mitigating circumstance if all the 
items, services, or violations included in the action brought under 
this part were of the same type and occurred within a short period of 
time; there were few such items, services, or violations; and the total 
amount claimed or requested for such items or services was less than 
$5,000.
    (b) Aggravating circumstances include--
    (1) The violations were of several types or occurred over a lengthy 
period of time;
    (2) There were many such items, services, or violations (or the 
nature and circumstances indicate a pattern of claims or requests for 
payment for such items or services or a pattern of violations);
    (3) The amount claimed or requested for such items or services or 
the amount of the remuneration was $50,000 or more; or
    (4) The violation resulted, or could have resulted, in harm to the 
patient, a premature discharge, or a need for additional services or 
subsequent hospital admission.

Subpart D--CMPs and Assessments for Contracting Organization 
Misconduct


Sec.  200.400   Basis for civil money penalties and assessments.

    The DHA may impose a penalty against any contracting organization 
that--
    (a) Fails substantially to provide an enrollee with medically 
necessary items and services that are required (under chapter 55 of 
title 10, U.S. Code, applicable regulations, or contract with the 
Department of Defense) to be provided to such enrollee and the failure 
adversely affects (or has the substantial likelihood of adversely 
affecting) the enrollee;
    (b) Imposes a premium on an enrollee in excess of the amounts 
permitted under chapter 55 of title 10, U.S. Code; and
    (c) Engages in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment by beneficiaries 
whose medical condition or history indicates a need for substantial 
future medical services, except as permitted by chapter 55 of title 10, 
U.S. Code.


Sec.  200.410   Amount of penalties and assessments for contracting 
organization.

    (a) Penalties.\3\ (1) The DHA may impose a penalty of up to $25,000 
for each individual violation under

[[Page 18447]]

Sec.  200.400, except as provided in this section.
---------------------------------------------------------------------------

    \3\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 32 CFR part 
269.
---------------------------------------------------------------------------

    (2) The DHA may impose a penalty of up to $100,000 for each 
individual violation under Sec.  200.400(a)(3).
    (b) Additional penalties. In addition to the penalties described in 
paragraph (a) of this section, the DHA may impose--
    (1) An additional penalty equal to double the amount of excess 
premium charged by the contracting organization for each individual 
violation of Sec.  200.400(a)(2). The excess premium amount will be 
deducted from the penalty and returned to the enrollee.
    (2) An additional $30,000 \4\ penalty for each individual expelled 
or not enrolled in violation of Sec.  200.400(a)(3).
---------------------------------------------------------------------------

    \4\ This penalty amount is adjusted for inflation annually. 
Adjusted amounts are published at 32 CFR part 269.
---------------------------------------------------------------------------


 Sec.  200.420   Determinations regarding the amount of penalties and 
assessments.

    In considering the factors listed in Sec.  200.140, aggravating 
circumstances include--
    (a) Such violations were of several types or occurred over a 
lengthy period of time;
    (b) There were many such violations (or the nature and 
circumstances indicate a pattern of incidents);
    (c) The amount of money, remuneration, damages, or tainted claims 
involved in the violation was $15,000 or more; or
    (d) Patient harm, premature discharge, or a need for additional 
services or subsequent hospital admission resulted, or could have 
resulted, from the incident; and
    (e) The contracting organization knowingly or routinely engaged in 
any prohibited practice that acted as an inducement to reduce or limit 
medically necessary services provided with respect to a specific 
enrollee in the organization.

Subparts E-N [Reserved]

Subpart O--Procedures for the Imposition of CMPs and Assessments


Sec.  200.1500  Notice of proposed determination.

    (a) If the DHA proposes a penalty and, when applicable, an 
assessment, as applicable, in accordance with this part, the DHA must 
serve on the respondent, in any manner authorized by Rule 4 of the 
Federal Rules of Civil Procedure, written notice of the DHA's intent to 
impose a penalty and if applicable an assessment. The notice will 
include--
    (1) Reference to the statutory basis for the penalty and the 
assessment;
    (2) A description of the violation for which the penalty, and 
assessment are proposed (except in cases in which the DHA is relying 
upon statistical sampling in accordance with Sec.  200.1580, in which 
case the notice shall describe those claims and requests for payment 
constituting the sample upon which the DHA is relying and will briefly 
describe the statistical sampling technique used by the DHA);
    (3) The reason why such violation subjects the respondent to a 
penalty, and an assessment;
    (4) The amount of the proposed penalty and assessment (where 
applicable);
    (5) Any factors and circumstances described in this part that were 
considered when determining the amount of the proposed penalty and 
assessment;
    (6) Instructions for responding to the notice, including--
    (i) A specific statement of the respondent's right to a hearing; 
and
    (ii) A statement that failure to request a hearing within 60 days 
permits the imposition of the proposed penalty, assessment, without 
right of appeal; and
    (b) Any person upon whom the DHA has proposed the imposition of a 
penalty, and/or an assessment, may appeal such proposed penalty, and/or 
assessment to the Departmental Appeals Board in accordance with Sec.  
200.2002. The provisions of subpart P of this part govern such appeals.
    (c) If the respondent fails, within the time period permitted, to 
exercise his or her right to a hearing under this section, any penalty, 
and/or assessment becomes final.


Sec.  200.1510   Failure to request a hearing.

    If the respondent does not request a hearing within 60 days after 
the notice prescribed by Sec.  200.1500(a) is received, as determined 
by Sec.  200.2002(c), by the respondent, the DHA may impose the 
proposed penalty and assessment, or any less severe penalty and 
assessment. The DHA shall notify the respondent in any manner 
authorized by Rule 4 of the Federal Rules of Civil Procedure of any 
penalty and assessment that have been imposed and of the means by which 
the respondent may satisfy the judgment. The respondent has no right to 
appeal a penalty, an assessment with respect to which he or she has not 
made a timely request for a hearing under Sec.  200.2002.


Sec.  200.1520   Collateral estoppel.

    (a) Where a final determination pertaining to the respondent's 
liability for acts that violate this part has been rendered in any 
proceeding in which the respondent was a party and had an opportunity 
to be heard, the respondent shall be bound by such determination in any 
proceeding under this part.
    (b) In a proceeding under this part, a person is estopped from 
denying the essential elements of the criminal offense if the 
proceeding--
    (1) Is against a person who has been convicted (whether upon a 
verdict after trial or upon a plea of guilty or nolo contendere) of a 
Federal crime charging fraud or false statements; and
    (2) Involves the same transactions as in the criminal action.


Sec.  200.1530   Settlement.

    The DHA has exclusive authority to settle any issues or case 
without consent of the ALJ.


Sec.  200.1540   Judicial review.

    (a) Section 1128A(e) of the Social Security Act authorizes judicial 
review of a penalty and an assessment that has become final. The only 
matters subject to judicial review are those that the respondent raised 
pursuant to Sec.  200.2021, unless the court finds that extraordinary 
circumstances existed that prevented the respondent from raising the 
issue in the underlying administrative appeal.
    (b) A respondent must exhaust all administrative appeal procedures 
established by the Secretary or required by law before a respondent may 
bring an action in Federal court, as provided in section 1128A(e) of 
the Social Security Act, concerning any penalty and assessment imposed 
pursuant to this part.
    (c) Administrative remedies are exhausted when a decision becomes 
final in accordance with Sec.  200.2021(j).


Sec.  200.1550   Collection of penalties and assessments.

    (a) Once a determination by the Secretary has become final, 
collection of any penalty and assessment will be the responsibility of 
the Defense Health Agency.
    (b) A penalty or an assessment imposed under this part may be 
compromised by the DHA and may be recovered in a civil action brought 
in the United States district court for the district where the claim 
was presented or where the respondent resides.
    (c) The amount of penalty or assessment, when finally determined, 
or the amount agreed upon in compromise, may be deducted from any sum 
then or later owing by the United States Government or a State agency 
to the person against whom the penalty or assessment has been assessed.
    (d) Matters that were raised, or that could have been raised, in a 
hearing

[[Page 18448]]

before an ALJ or in an appeal under section 1128A(e) of the Social 
Security Act may not be raised as a defense in a civil action by the 
United States to collect a penalty or assessment under this part.


Sec.  200.1560   Notice to other agencies.

    Whenever a penalty and/or an assessment becomes final, the 
following organizations and entities will be notified about such action 
and the reasons for it: HHS Office of Inspector General, the 
appropriate State or local medical or professional association; the 
appropriate quality improvement organization; as appropriate, the State 
agency that administers each State health care program; the appropriate 
TRICARE Contractor; the appropriate State or local licensing agency or 
organization (including the Medicare and Medicaid State survey 
agencies); and the long-term-care ombudsman.


Sec.  200.1570   Limitations.

    No action under this part will be entertained unless commenced, in 
accordance with Sec.  200.1500(a), within 6 years from the date on 
which the violation occurred.


Sec.  200.1580   Statistical sampling.

    (a) In meeting the burden of proof in Sec.  200.2015, the DHA may 
introduce the results of a statistical sampling study as evidence of 
the number and amount of claims and/or requests for payment, as 
described in this part, that were presented, or caused to be presented, 
by the respondent. Such a statistical sampling study, if based upon an 
appropriate sampling and computed by valid statistical methods, shall 
constitute prima facie evidence of the number and amount of claims or 
requests for payment, as described in this part.
    (b) Once the DHA has made a prima facie case, as described in 
paragraph (a) of this section, the burden of production shall shift to 
the respondent to produce evidence reasonably calculated to rebut the 
findings of the statistical sampling study. The DHA will then be given 
the opportunity to rebut this evidence.
    (c) Where the DHA establishes a number and amount of claims subject 
to penalties using a statistical sampling study, the DHA may use the 
results of the study to extrapolate a total amount of overpaid funds to 
be collected pursuant to 32 CFR 199.11.


Sec. Sec.  200.1590-200.1990   [Reserved]

Subpart P--Appeals of CMPs and Assessments


Sec.  200.2001   Definitions.

    For purposes of this subpart, the following definitions apply:
    Civil money penalty cases refer to all proceedings arising under 
any of the statutory bases for which the DHA has been delegated 
authority to impose civil money penalties under TRICARE.
    DAB refers to the Department of Health and Human Services, 
Departmental Appeals Board or its delegate, or other administrative 
appeals decision maker designated by the Director, DHA.


Sec.  200.2002   Hearing before an ALJ.

    (a) A party sanctioned under any criteria specified in this part 
may request a hearing before an ALJ.
    (b) In civil money penalty cases, the parties to the proceeding 
will consist of the respondent and the DHA.
    (c) The request for a hearing will be made in writing to the DAB; 
signed by the petitioner or respondent, or by his or her attorney; and 
sent by certified mail. The request must be filed within 60 days after 
the notice, provided in accordance with Sec.  200.1500, is received by 
the petitioner or respondent. For purposes of this section, the date of 
receipt of the notice letter will be presumed to be 5 days after the 
date of such notice unless there is a reasonable showing to the 
contrary.
    (d) The request for a hearing will contain a statement as to the 
specific issues or findings of fact and conclusions of law in the 
notice letter with which the petitioner or respondent disagrees, and 
the basis for his or her contention that the specific issues or 
findings and conclusions were incorrect.
    (e) The ALJ will dismiss a hearing request where--
    (1) The petitioner's or the respondent's hearing request is not 
filed in a timely manner;
    (2) The petitioner or respondent withdraws his or her request for a 
hearing;
    (3) The petitioner or respondent abandons his or her request for a 
hearing; or
    (4) The petitioner's or respondent's hearing request fails to raise 
any issue which may properly be addressed in a hearing.


Sec.  200.2003   Rights of parties.

    (a) Except as otherwise limited by this part, all parties may--
    (1) Be accompanied, represented and advised by an attorney;
    (2) Participate in any conference held by the ALJ;
    (3) Conduct discovery of documents as permitted by this part;
    (4) Agree to stipulations of fact or law which will be made part of 
the record;
    (5) Present evidence relevant to the issues at the hearing;
    (6) Present and cross-examine witnesses;
    (7) Present oral arguments at the hearing as permitted by the ALJ; 
and
    (8) Submit written briefs and proposed findings of fact and 
conclusions of law after the hearing.
    (b) Fees for any services performed on behalf of a party by an 
attorney are not subject to the provisions of section 206 of title II 
of the Act, which authorizes the Secretary to specify or limit these 
fees.


Sec.  200.2004   Authority of the ALJ.

    (a) The ALJ will conduct a fair and impartial hearing, avoid delay, 
maintain order and assure that a record of the proceeding is made.
    (b) The ALJ has the authority to--
    (1) Set and change the date, time and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses at 
hearings and the production of documents at or in relation to hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of documentary discovery as 
permitted by this part;
    (8) Regulate the course of the hearing and the conduct of 
representatives, parties, and witnesses;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude or limit evidence;
    (11) Upon motion of a party, take official notice of facts;
    (12) Upon motion of a party, decide cases, in whole or in part, by 
summary judgment where there is no disputed issue of material fact; and
    (13) Conduct any conference, argument or hearing in person or, upon 
agreement of the parties, by telephone.
    (c) The ALJ does not have the authority to--
    (1) Find invalid or refuse to follow Federal statutes or 
regulations or secretarial delegations of authority;
    (2) Enter an order in the nature of a directed verdict;

[[Page 18449]]

    (3) Compel settlement negotiations;
    (4) Enjoin any act of the Secretary; or
    (5) Review the exercise of discretion by the DHA to impose a CMP or 
assessment under this part.


Sec.  200.2005   Ex parte contacts.

    No party or person (except employees of the ALJ's office) will 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for all parties to participate. This 
provision does not prohibit a person or party from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.


Sec.  200.2006   Prehearing conferences.

    (a) The ALJ will schedule at least one prehearing conference, and 
may schedule additional prehearing conferences as appropriate, upon 
reasonable notice to the parties.
    (b) The ALJ may use prehearing conferences to discuss the 
following--
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleadings, 
including the need for a more definite statement;
    (3) Stipulations and admissions of fact or as to the contents and 
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;
    (5) Whether a party chooses to waive appearance at an oral hearing 
and to submit only documentary evidence (subject to the objection of 
other parties) and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery of documents as permitted by this part;
    (9) The time and place for the hearing;
    (10) Such other matters as may tend to encourage the fair, just and 
expeditious disposition of the proceedings; and
    (11) Potential settlement of the case.
    (c) The ALJ will issue an order containing the matters agreed upon 
by the parties or ordered by the ALJ at a prehearing conference.


Sec.  200.2007   Discovery.

    (a) A party may make a request to another party for production of 
documents for inspection and copying which are relevant and material to 
the issues before the ALJ.
    (b) For the purpose of this section, the term documents includes 
information, reports, answers, records, accounts, papers and other data 
and documentary evidence. Nothing contained in this section will be 
interpreted to require the creation of a document, except that 
requested data stored in an electronic data storage system will be 
produced in a form accessible to the requesting party.
    (c) Requests for documents, requests for admissions, written 
interrogatories, depositions and any forms of discovery, other than 
those permitted under paragraph (a) of this section, are not 
authorized.
    (d) This section will not be construed to require the disclosure of 
interview reports or statements obtained by any party, or on behalf of 
any party, of persons who will not be called as witnesses by that 
party, or analyses and summaries prepared in conjunction with the 
investigation or litigation of the case, or any otherwise privileged 
documents.
    (e)(1) When a request for production of documents has been 
received, within 30 days the party receiving that request will either 
fully respond to the request, or state that the request is being 
objected to and the reasons for that objection. If objection is made to 
part of an item or category, the part will be specified. Upon receiving 
any objections, the party seeking production may then, within 30 days 
or any other time frame set by the ALJ, file a motion for an order 
compelling discovery. (The party receiving a request for production may 
also file a motion for protective order any time prior to the date the 
production is due.)
    (2) The ALJ may grant a motion for protective order or deny a 
motion for an order compelling discovery if the ALJ finds that the 
discovery sought--
    (i) Is irrelevant;
    (ii) Is unduly costly or burdensome;
    (iii) Will unduly delay the proceeding; or
    (iv) Seeks privileged information.
    (3) The ALJ may extend any of the time frames set forth in 
paragraph (e)(1) of this section.
    (4) The burden of showing that discovery should be allowed is on 
the party seeking discovery.


Sec.  200.2008   Exchange of witness lists, witness statements and 
exhibits.

    (a) At least 15 days before the hearing, the ALJ will order the 
parties to exchange witness lists, copies of prior written statements 
of proposed witnesses and copies of proposed hearing exhibits, 
including copies of any written statements that the party intends to 
offer in lieu of live testimony in accordance with Sec.  200.2016.
    (b)(1) If at any time a party objects to the proposed admission of 
evidence not exchanged in accordance with paragraph (a) of this 
section, the ALJ will determine whether the failure to comply with 
paragraph (a) of this section should result in the exclusion of such 
evidence.
    (2) Unless the ALJ finds that extraordinary circumstances justified 
the failure to timely exchange the information listed under paragraph 
(a) of this section, the ALJ must exclude from the party's case-in-
chief:
    (i) The testimony of any witness whose name does not appear on the 
witness list; and
    (ii) Any exhibit not provided to the opposing party as specified in 
paragraph (a) of this section.
    (3) If the ALJ finds that extraordinary circumstances existed, the 
ALJ must then determine whether the admission of such evidence would 
cause substantial prejudice to the objecting party. If the ALJ finds 
that there is no substantial prejudice, the evidence may be admitted. 
If the ALJ finds that there is substantial prejudice, the ALJ may 
exclude the evidence, or at his or her discretion, may postpone the 
hearing for such time as is necessary for the objecting party to 
prepare and respond to the evidence.
    (c) Unless another party objects within a reasonable period of time 
prior to the hearing, documents exchanged in accordance with paragraph 
(a) of this section will be deemed to be authentic for the purpose of 
admissibility at the hearing.


Sec.  200.2009   Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may make a motion requesting the ALJ to issue 
a subpoena if the appearance and testimony are reasonably necessary for 
the presentation of a party's case.
    (b) A subpoena requiring the attendance of an individual in 
accordance with paragraph (a) of this section may also require the 
individual (whether or not the individual is a party) to produce 
evidence authorized under Sec.  200.2007 at or prior to the hearing.
    (c) When a subpoena is served by a respondent or petitioner on a 
particular individual or particular office of the DHA, the DHA may 
comply by designating any of its representatives to appear and testify.
    (d) A party seeking a subpoena will file a written motion not less 
than 30 days before the date fixed for the hearing, unless otherwise 
allowed by the ALJ for good cause shown. Such request will:

[[Page 18450]]

    (1) Specify any evidence to be produced;
    (2) Designate the witnesses; and
    (3) Describe the address and location with sufficient particularity 
to permit such witnesses to be found.
    (e) The subpoena will specify the time and place at which the 
witness is to appear and any evidence the witness is to produce.
    (f) Within 15 days after the written motion requesting issuance of 
a subpoena is served, any party may file an opposition or other 
response.
    (g) If the motion requesting issuance of a subpoena is granted, the 
party seeking the subpoena will serve it by delivery to the individual 
named, or by certified mail addressed to such individual at his or her 
last dwelling place or principal place of business.
    (h) The individual to whom the subpoena is directed may file with 
the ALJ a motion to quash the subpoena within 10 days after service.
    (i) The exclusive remedy for contumacy by, or refusal to obey a 
subpoena duly served upon, any person is specified in section 205(e) of 
the Social Security Act (42 U.S.C. 405(e)).


Sec.  200.2010   Fees.

    The party requesting a subpoena will pay the cost of the fees and 
mileage of any witness subpoenaed in the amounts that would be payable 
to a witness in a proceeding in United States District Court. A check 
for witness fees and mileage will accompany the subpoena when served, 
except that when a subpoena is issued on behalf of the DHA, a check for 
witness fees and mileage need not accompany the subpoena.


Sec.  200.2011   Form, filing and service of papers.

    (a) Forms. (1) Unless the ALJ directs the parties to do otherwise, 
documents filed with the ALJ will include an original and two copies.
    (2) Every pleading and paper filed in the proceeding will contain a 
caption setting forth the title of the action, the case number, and a 
designation of the paper, such as motion to quash subpoena.
    (3) Every pleading and paper will be signed by, and will contain 
the address and telephone number of the party or the person on whose 
behalf the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed.
    (b) Service. A party filing a document with the ALJ or the 
Secretary will, at the time of filing, serve a copy of such document on 
every other party. Service upon any party of any document will be made 
by delivering a copy, or placing a copy of the document in the United 
States mail, postage prepaid and addressed, or with a private delivery 
service, to the party's last known address. When a party is represented 
by an attorney, service will be made upon such attorney in lieu of the 
party.
    (c) Proof of service. A certificate of the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, will be proof of service.


Sec.  200.2012   Computation of time.

    (a) In computing any period of time under this part or in an order 
issued thereunder, the time begins with the day following the act, 
event or default, and includes the last day of the period unless it is 
a Saturday, Sunday or legal holiday observed by the Federal Government, 
in which event it includes the next business day.
    (b) When the period of time allowed is less than 7 days, 
intermediate Saturdays, Sundays and legal holidays observed by the 
Federal Government will be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional 5 days will be added to the time permitted for any 
response. This paragraph (c) does not apply to requests for hearing 
under Sec.  200.2002.


Sec.  200.2013   Motions.

    (a) An application to the ALJ for an order or ruling will be by 
motion. Motions will state the relief sought, the authority relied upon 
and the facts alleged, and will be filed with the ALJ and served on all 
other parties.
    (b) Except for motions made during a prehearing conference or at 
the hearing, all motions will be in writing. The ALJ may require that 
oral motions be reduced to writing.
    (c) Within 10 days after a written motion is served, or such other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses has expired, except upon consent of the parties or 
following a hearing on the motion, but may overrule or deny such motion 
without awaiting a response.
    (e) The ALJ will make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.


Sec.  200.2014   Sanctions.

    (a) The ALJ may sanction a person, including any party or attorney, 
for failing to comply with an order or procedure, for failing to defend 
an action or for other misconduct that interferes with the speedy, 
orderly or fair conduct of the hearing. Such sanctions will reasonably 
relate to the severity and nature of the failure or misconduct. Such 
sanction may include--
    (1) In the case of refusal to provide or permit discovery under the 
terms of this part, drawing negative factual inferences or treating 
such refusal as an admission by deeming the matter, or certain facts, 
to be established;
    (2) Prohibiting a party from introducing certain evidence or 
otherwise supporting a particular claim or defense;
    (3) Striking pleadings, in whole or in part;
    (4) Staying the proceedings;
    (5) Dismissal of the action;
    (6) Entering a decision by default; and
    (7) Refusing to consider any motion or other action that is not 
filed in a timely manner.
    (b) In civil money penalty cases commenced under section 1128A of 
the Social Security Act or under any provision which incorporates 
section 1128A(c)(4) of the Social Security Act, the ALJ may also order 
the party or attorney who has engaged in any of the acts described in 
paragraph (a) of this section to pay attorney's fees and other costs 
caused by the failure or misconduct.


Sec.  200.2015   The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the petitioner or respondent should be found liable 
under this part.
    (b) With regard to the burden of proof in civil money penalty cases 
under this part--
    (1) The respondent or petitioner, as applicable, bears the burden 
of going forward and the burden of persuasion with respect to 
affirmative defenses and any mitigating circumstances; and
    (2) The DHA bears the burden of going forward and the burden of 
persuasion with respect to all other issues.
    (c) The burden of persuasion will be judged by a preponderance of 
the evidence.
    (d) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.
    (e)(1) A hearing under this part is not limited to specific items 
and information set forth in the notice letter to the petitioner or 
respondent. Subject to the 15-day requirement under Sec.  200.2008, 
additional items and information, including aggravating or mitigating 
circumstances that arose or

[[Page 18451]]

became known subsequent to the issuance of the notice letter, may be 
introduced by either party during its case-in-chief unless such 
information or items are--
    (i) Privileged; or
    (ii) Deemed otherwise inadmissible under Sec.  200.2017.
    (2) After both parties have presented their cases, evidence may be 
admitted on rebuttal even if not previously exchanged in accordance 
with Sec.  200.2008.


Sec.  200.2016   Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing will be given orally by witnesses under oath or 
affirmation.
    (b) At the discretion of the ALJ, testimony (other than expert 
testimony) may be admitted in the form of a written statement. The ALJ 
may, at his or her discretion, admit prior sworn testimony of experts 
which has been subject to adverse examination, such as a deposition or 
trial testimony. Any such written statement must be provided to all 
other parties along with the last known address of such witnesses, in a 
manner that allows sufficient time for other parties to subpoena such 
witness for cross-examination at the hearing. Prior written statements 
of witnesses proposed to testify at the hearing will be exchanged as 
provided in Sec.  200.2008.
    (c) The ALJ will exercise reasonable control over the mode and 
order of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (2) Avoid repetition or needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination of witnesses as may be required for a full and true 
disclosure of the facts.
    (e) The ALJ may order witnesses excluded so that they cannot hear 
the testimony of other witnesses. This does not authorize exclusion 
of--
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, an officer or 
employee of the party appearing for the entity pro se or designated as 
the party's representative; or
    (3) An individual whose presence is shown by a party to be 
essential to the presentation of its case, including an individual 
engaged in assisting the attorney for the Inspector General (IG).


Sec.  200.2017   Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ will not be bound by 
the Federal Rules of Evidence. However, the ALJ may apply the Federal 
Rules of Evidence where appropriate, for example, to exclude unreliable 
evidence.
    (c) The ALJ must exclude irrelevant or immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or 
needless presentation of cumulative evidence.
    (e) Although relevant, evidence must be excluded if it is 
privileged under Federal law.
    (f) Evidence concerning offers of compromise or settlement made in 
this action will be inadmissible to the extent provided in Rule 408 of 
the Federal Rules of Evidence.
    (g) Evidence of crimes, wrongs or acts other than those at issue in 
the instant case is admissible in order to show motive, opportunity, 
intent, knowledge, preparation, identity, lack of mistake, or existence 
of a scheme. Such evidence is admissible regardless of whether the 
crimes, wrongs or acts occurred during the statute of limitations 
period applicable to the acts which constitute the basis for liability 
in the case, and regardless of whether they were referenced in the 
DHA's notice sent in accordance with Sec.  200.1500.
    (h) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (i) All documents and other evidence offered or taken for the 
record will be open to examination by all parties, unless otherwise 
ordered by the ALJ for good cause shown.
    (j) The ALJ may not consider evidence regarding the issue of 
willingness and ability to enter into and successfully complete a 
corrective action plan when such evidence pertains to matters occurring 
after the submittal of the case to the Secretary. The determination 
regarding the appropriateness of any corrective action plan is not 
reviewable.


Sec.  200.2018   The record.

    (a) The hearing will be recorded and transcribed. Transcripts may 
be obtained following the hearing from the ALJ.
    (b) The transcript of testimony, exhibits and other evidence 
admitted at the hearing, and all papers and requests filed in the 
proceeding constitute the record for the decision by the ALJ and the 
Secretary.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by any person, unless otherwise ordered by the ALJ for 
good cause shown.
    (d) For good cause, the ALJ may order appropriate redactions made 
to the record.


Sec.  200.2019   Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ will fix the 
time for filing such briefs which are not to exceed 60 days from the 
date the parties receive the transcript of the hearing or, if 
applicable, the stipulated record. Such briefs may be accompanied by 
proposed findings of fact and conclusions of law. The ALJ may permit 
the parties to file reply briefs.


Sec.  200.2020   Initial decision.

    (a) The ALJ will issue an initial decision, based only on the 
record, which will contain findings of fact and conclusions of law.
    (b) The ALJ may affirm, increase or reduce the penalties, 
assessment proposed or imposed by the DHA.
    (c) The ALJ will issue the initial decision to all parties within 
120 days after the time for submission of post-hearing briefs and reply 
briefs, if permitted, has expired. The decision will be accompanied by 
a statement describing the right of any party to file a notice of 
appeal with the DAB and instructions for how to file such appeal. If 
the ALJ fails to meet the deadline contained in this paragraph, he or 
she will notify the parties of the reason for the delay and will set a 
new deadline.
    (d) Except as provided in paragraph (e) of this section, unless the 
initial decision is appealed to the DAB, it will be final and binding 
on the parties 30 days after the ALJ serves the parties with a copy of 
the decision. If service is by mail, the date of service will be deemed 
to be 5 days from the date of mailing.
    (e) If an extension of time within which to appeal the initial 
decision is granted under Sec.  200.2021(a), except as provided in 
Sec.  200.2022(a), the initial decision will become final and binding 
on the day following the end of the extension period.


Sec.  200.2021   Appeal to DAB.

    (a) Any party may appeal the initial decision of the ALJ to the DAB 
by filing a notice of appeal with the DAB within 30 days of the date of 
service of the initial decision. The DAB may extend the initial 30 day 
period for a period of time not to exceed 30 days if a party files with 
the DAB a request for an extension within the initial 30 day period and 
shows good cause.

[[Page 18452]]

    (b) If a party files a timely notice of appeal with the DAB, the 
ALJ will forward the record of the proceeding to the DAB.
    (c) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting 
the exceptions. Any party may file a brief in opposition to exceptions, 
which may raise any relevant issue not addressed in the exceptions, 
within 30 days of receiving the notice of appeal and accompanying 
brief. The DAB may permit the parties to file reply briefs.
    (d) There is no right to appear personally before the DAB or to 
appeal to the DAB any interlocutory ruling by the ALJ, except on the 
timeliness of a filing of the hearing request.
    (e) The DAB will not consider any issue not raised in the parties' 
briefs, nor any issue in the briefs that could have been raised before 
the ALJ but was not.
    (f) If any party demonstrates to the satisfaction of the DAB that 
additional evidence not presented at such hearing is relevant and 
material and that there were reasonable grounds for the failure to 
adduce such evidence at such hearing, the DAB may remand the matter to 
the ALJ for consideration of such additional evidence.
    (g) The DAB may decline to review the case, or may affirm, 
increase, reduce, reverse or remand any penalty or assessment 
determined by the ALJ.
    (h) The standard of review on a disputed issue of fact is whether 
the initial decision is supported by substantial evidence on the whole 
record. The standard of review on a disputed issue of law is whether 
the initial decision is erroneous.
    (i) Within 120 days after the time for submission of briefs and 
reply briefs, if permitted, has expired, the DAB will issue to each 
party to the appeal a copy of the DAB's decision and a statement 
describing the right of any petitioner or respondent who is found 
liable to seek judicial review.
    (j) Except with respect to any penalty or assessment remanded by 
the ALJ, the DAB's decision, including a decision to decline review of 
the initial decision, becomes final and binding 60 days after the date 
on which the DAB serves the parties with a copy of the decision. If 
service is by mail, the date of service will be deemed to be 5 days 
from the date of mailing.
    (k)(1) Any petition for judicial review must be filed within 60 
days after the DAB serves the parties with a copy of the decision. If 
service is by mail, the date of service will be deemed to be 5 days 
from the date of mailing.
    (2) In compliance with 28 U.S.C. 2112(a), a copy of any petition 
for judicial review filed in any U.S. Court of Appeals challenging a 
final action of the DAB will be sent by certified mail, return receipt 
requested, to the General Counsel of the DHA. The petition copy will be 
time-stamped by the clerk of the court when the original is filed with 
the court.
    (3) If the General Counsel of the DHA receives two or more 
petitions within 10 days after the DAB issues its decision, the General 
Counsel of the DHA will notify the U.S. Judicial Panel on Multidistrict 
Litigation of any petitions that were received within the 10-day 
period.


Sec.  200.2022   Stay of initial decision.

    (a) In a CMP case under section 1128A of the Act, the filing of a 
respondent's request for review by the DAB will automatically stay the 
effective date of the ALJ's decision.
    (b)(1) After the DAB renders a decision in a CMP case, pending 
judicial review, the respondent may file a request for stay of the 
effective date of any penalty or assessment with the ALJ. The request 
must be accompanied by a copy of the notice of appeal filed with the 
Federal court. The filing of such a request will automatically act to 
stay the effective date of the penalty or assessment until such time as 
the ALJ rules upon the request.
    (2) The ALJ may not grant a respondent's request for stay of any 
penalty or assessment unless the respondent posts a bond or provides 
other adequate security.
    (3) The ALJ will rule upon a respondent's request for stay within 
10 days of receipt.


Sec.  200.2023   Harmless error.

    No error in either the admission or the exclusion of evidence, and 
no error or defect in any ruling or order or in any act done or omitted 
by the ALJ or by any of the parties, including Federal representatives 
or TRICARE contractors is ground for vacating, modifying or otherwise 
disturbing an otherwise appropriate ruling or order or act, unless 
refusal to take such action appears to the ALJ or the DAB inconsistent 
with substantial justice. The ALJ and the DAB at every stage of the 
proceeding will disregard any error or defect in the proceeding that 
does not affect the substantial rights of the parties.

    Dated: April 26, 2019.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2019-08858 Filed 4-30-19; 8:45 am]
 BILLING CODE 5001-06-P