Civil Money Penalties and Assessments Under the Military Health Care Fraud and Abuse Prevention Program, 60700-60714 [2020-20541]

Agencies

• DEPARTMENT OF DEFENSE
• Office of the Secretary

[Federal Register Volume 85, Number 188 (Monday, September 28, 2020)]
[Rules and Regulations]
[Pages 60700-60714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20541]


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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: Final rule.

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SUMMARY: This final rule implements civil money penalties authority 
provided to all Federal health care programs, including the TRICARE 
program, under the Social Security Act. This authority allows the 
Secretary of Defense as the administrator of a Federal health care 
program to impose civil money 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 
final rule establishes a program within the DoD to impose CMPs for 
certain unlawful conduct in the TRICARE program. To the extent 
applicable, this final rule adopts the Department of Health and Human 
Service's (HHS's) well-established CMP rules and procedures. The 
program to impose CMPs within TRICARE is called the Military Health 
Care Fraud and Abuse Prevention Program. The Defense Health Agency 
(DHA) shall be the agency within the DoD responsible for administering 
the Military Health Care Fraud and Abuse Prevention Program.

DATES: This rule is effective on October 28, 2020.

FOR FURTHER INFORMATION CONTACT: Michael J. Zleit, at 703-681-6012 or 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Overview

A. Purpose of the Final Rule

    The DHA, the agency of the DoD 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 inhibited DHA's 
mission. The Department of Justice (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, but 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. Congress has provided 
Federal departments responsible for a Federal health care program with 
the authority under section 1128A(m) of the Social Security Act (42 
U.S.C. 1320a-7a(m)) to initiate administrative proceedings to impose 
CMPs against those who commit fraud and abuse in their respective 
Federal health care program. The HHS implemented this authority many 
years ago and has a well-developed process for imposition of CMPs 
penalties against those who commit fraud and abuse in the Medicare 
Program.
    This final rule implements the same authority used by HHS under 
section 1128A(m) of the Social Security Act (42 U.S.C. 1320a-7a(m)) to 
establish a program to initiate administrative proceedings to impose 
CMPs against those who commit fraud and abuse in the TRICARE Program.
    The purpose of this final rule implementing CMP authority under 
section 1128A of the Social Security Act 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. Summary of Major Provisions

    For the most part, this final rule incorporates the provisions of 
the May 1, 2019, proposed rule (84 FR 18437). A brief description of 
the provisions of this final rule follow.
    This final rule establishes CMP regulations at 32 CFR part 200 to 
implement authority provided to the DoD under section 1128A of the 
Social Security Act, as amended. The CMP regulations follow HHS's 
process and procedure for imposing CMPs, as well as HHS's methodology 
for calculating the amount of penalties and assessments. Accordingly, 
the numerical provisions of 32 CFR part 200 directly correspond to 
HHS's numerical provisions at 42 CFR part 1003. Following this 
organizational construct, the 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, procedures for the imposition of 
CMPs and assessments, judicial review, time limitations for CMPs and 
assessments, statistical sampling, and appeals.

C. Legal Authority for This Program

    The specific legal authority authorizing the DoD 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 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 applicability to conduct only 
involving Medicare and Medicaid; therefore, this rule implements all 
CMP authorities under section 1128A that are not specifically limited 
to Medicare, Medicaid, or other HHS-exclusive authority.

II. Regulatory History

    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 the Health 
Insurance Portability and Accountability Act of 1996 (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 Money 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 of Health and Human Services

[[Page 60701]]

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). The Secretary of HHS 
delegated the CMPL's authorities to HHS-OIG. 53 FR 12993 (April 20, 
1988). Since 1981, Congress created various other CMP authorities 
covering 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, Congress expanded the CMPL and the scope of exclusion to 
apply to all Federal health care programs. Section 231 of 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 in the TRICARE Program. 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 or agency.
    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.

III. Public Comments

    The proposed rule titled ``Civil Money Penalties and Assessments 
under the Military Health Care Fraud and Abuse Prevention Program'' 
published in the Federal Register on May 1, 2019 (84 FR 18437-18452), 
and provided a 60-day public comment period. DoD received a total of 17 
timely-filed public comments from three responders: A current TRICARE 
Managed Care Support Contractor (MCSC), a professional association of 
firms that sells commercial services and products to the Federal 
Government, and an interested party. The comments included both broad 
concerns about the issuance of these CMP regulations, and more detailed 
concerns on specific aspects of the CMP provisions. Set forth below is 
a synopsis of the comments received, our response to those comments, 
and clarifications being made to the regulations at 32 CFR parts 199 
and 200.
    Comment 1: One commenter argues Congress has not expressly 
authorized the extensive administrative process within DoD to apply CMP 
to TRICARE, as contemplated in the proposed rule's new part 200.
    Response: We disagree. In Section 231 of the HIPAA of 1996, 
Congress expressly made CMP authority applicable to all Federal health 
care programs and expressly authorized all Federal health care programs 
develop their own CMP Programs using the authority it provided.
    Comment 2: One commenter expressed concern the proposed rule, which 
the commenter stated, ``appears to be unnecessary to protect DoD 
against fraud by manufacturers and distributors of drugs and medical 
devices'' could harm beneficiaries' access to critical care. The 
commenter further stated that DoD currently has tools to pursue fraud 
when these products are procured or provided by its contractors and 
those authorities are more simple and less risky, rather than 
implementing a CMP program.
    Response: We disagree. The protection of TRICARE beneficiaries and 
ensuring they are getting services and supplies that are medically 
necessary and appropriate, as well as protecting the program from fraud 
and abuse, is our primary concern and the core intent of this program. 
Current administrative authority includes provider education, 
prepayment and post-payment review, limited overpayment recovery, 
temporary claims payment suspensions, exclusions, and removal from 
network. The DHA is not currently able to impose CMPs against those who 
commit fraud in the TRICARE Program. This authority provided by 
Congress will serve as a strong deterrent against fraud and abuse in 
the TRICARE Program. CMPs are a well-established deterrent against 
healthcare fraud, utilized by HHS for many years. CMPs may be imposed 
in addition to any other penalties that may be prescribed by law and 
will not conflict with current authority.
    Comment 3: A commenter expressed concern the proposed rule is 
unclear as to how DHA will apply the ``knowingly and intentionally'' 
standard, especially as it lacks the experience of HHS to investigate 
and make determinations of health care fraud.
    Response: The TRICARE CMP proposed rule, as well as HHS CMP rules, 
use a ``knowingly'' standard for imposition of CMPs and not a 
``knowingly and intentionally'' standard. The term ``intentionally'' 
does not appear in the TRICARE proposed rule. As we stated in the 
preamble to the proposed rule, we will be following HHS guidance to 
eliminate any confusion. For purposes of this final rule, the term 
``knowingly'' is defined consistent with the definition set forth in 
the Civil False Claims Act (31 U.S.C. 3729(b)) and HHS's CMP final rule 
(65 FR 24416). As stated in the proposed rule, ``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. We 
believe this definition is sufficiently clear and conduct implicating 
CMP law which includes this this requisite intent will be evaluated for 
imposition of a CMP.
    TRICARE does not lack experience regarding fraud and abuse. TRICARE 
has an established, centralized, and well-connected fraud and abuse 
program within the TRICARE Program. See https://health.mil/Military-Health-Topics/Access-Cost-Quality-and-Safety/Quality-And-Safety-of-Healthcare/Program-Integrity. Title 32 CFR 199.9 provides fraud and 
abuse regulations under the TRICARE program.
    Comment 4: One commenter stated that although the preamble to the 
proposed rule indicates DoD may coordinate with DOJ, there is no 
requirement for such coordination, and DoD may proceed with determining 
health care fraud without applying the standards that would govern 
TRICARE claims if handled by DOJ. As noted, it is unclear how DHA would 
interpret knowing and intentional conduct in imposing a civil money 
penalty under the rule.
    Response: The authority provided by Congress at 1128A(c)(1) of the 
Social Security Act (42 U.S.C. 1320a-7a(c)(1)) requires the DoD to 
obtain consent of DOJ prior to imposing a CMP. The DoD will coordinate 
closely with DOJ, Defense Criminal Investigative Service (DCIS), and 
HHS-OIG. Actions will be coordinated with DOJ before an initial 
determination action is made to prevent any concurrent DHA and False 
Claims Act (FCA) cases (including qui tam cases), and avoid 
inconsistent outcomes

[[Page 60702]]

or the occurrence of duplicative penalties, where appropriate.
    Comment 5: One commenter stated that of particular concern is the 
proposed rule does not state whether it would follow an internal DOJ 
memorandum [Memorandum from the Associate Attorney General, Limiting 
Use of Agency Guidance Documents in Affirmative Civil Enforcement 
Cases, January 25, 2018] that prohibits using noncompliance with 
agency, sub-regulatory guidance as a basis for proving knowing 
violations of law in civil enforcement proceedings.
    Response: The memorandum cited by the commenter is an internal DOJ 
memorandum applicable to affirmative civil enforcement actions brought 
by the DOJ. The memorandum states the memorandum ``is not intended to, 
does not, and may not be relied upon to, create any rights, substantive 
or procedural, enforceable at law by any party in any matter civil or 
criminal.'' The memorandum has no effect outside of DOJ components and 
employees. Therefore, any reference to the DOJ memorandum referred to 
by the commenter in the proposed rule would have been inappropriate. 
However, as stated above, the DoD will coordinate closely with DOJ, 
DCIS, and HHS-OIG. Actions will be coordinated with DOJ, as required by 
1128A(c)(1) of the Social Security Act, before an initial determination 
action is made to prevent any concurrent DHA and FCA cases (including 
qui tam cases), and avoid inconsistent outcomes or the occurrence of 
unintended duplicative penalties, where appropriate.
    Comment 6: One commenter objected to the use of a statistical 
sampling study as the basis for proving the number and amount of claims 
subject to assessment of civil money penalties (proposed 32 CFR 
200.1580).
    Response: Statistical sampling is a longstanding proven method for 
calculating overpayments, which has been upheld in the Courts. See 
Chaves County Home Health Servs. v. Sullivan, 931 F.2d 914 (D.C. Cir. 
1991), cert. denied, 402 U.S. 1091 (1992). Statistical sampling is 
generally accepted as a basis of recoupment for Federal health care 
programs. One of the reasons that courts permit parties to use 
statistical sampling in cases regarding fraud against the government is 
that, there is a ``fairly low risk of error,'' if appropriate methods 
are followed. Accordingly, when appropriate methods are followed, we 
believe statistical sampling is a necessary and valid basis to 
establish number and amount of claims subject to assessment of civil 
money penalty cases.
    Comment 7: A commenter stated that in the context of the TRICARE 
Retail Refund Program, the CMP prohibiting a false statement, omission, 
or misrepresentation of material fact in a contract to participate as a 
supplier of under a Federal health care program would overlap with the 
responsibility of the Department of Veterans Affairs (VA) to administer 
the Veterans Health Care Act (VHCA) and would usurp the VA's authority 
if applied to the pricing required by the VHCA. The commenter further 
states the VA is the sole agency responsible for administering the 
Federal Supply Schedule (FSS) contract and ensuring the accuracy of 
statutory and contract prices for covered drugs on behalf of the DoD. 
The commenter states that in their view it is important to not have 
overlapping authority to avoid inconsistent interpretation and 
application of the VHCA.
    Response: A DoD Retail Refund Pricing Agreement is signed and 
executed between the manufacturer and the DHA. Where a manufacturer 
makes false statement, omission, or misrepresentation of material fact 
in a contract to participate as a supplier under a Federal health care 
program, such as an agreement under the TRICARE Retail Refund Program 
pursuant to 10 U.S.C. 1074g(f), that conduct may implicate CMP law 
under 32 CFR 200.200(b)(3). We do not agree an imposition of a CMP 
based on conduct in violation of the law with the consent of DOJ and in 
close coordination with DCIS, VA, and HHS-OIG would usurp any of the 
VA's authority. CMPs may be imposed in addition to any other penalties 
that may be prescribed by law and will not limit VA's authority. 
Additionally, as stated in 32 CFR 199.21(q)(4), ``[i]n the case of the 
failure of a manufacturer of a covered drug to honor a requirement of 
this paragraph (q) or to honor an agreement under this paragraph (q), 
the Director, [TRICARE Management Activity] TMA, in addition to other 
actions referred to in this paragraph (q), may take any other action 
authorized by law.'' We believe CMPs will create a strong deterrent 
against such conduct.
    Comment 8: A commenter expressed concerns TRICARE should not allow 
overpayments associated with the TRICARE Retail Refund Program because 
laws already exist for the return of an overpayment. The commenter also 
notes calculation of the overpayment amount related to the TRICARE 
Retail Refund Program is very complicated and can result in frequent 
and routine restatement of amounts. Therefore, the commenter reiterates 
concern the proposed CMP law will result in overlapping authority 
between the DHA and the VA potentially resulting in inconsistent 
demands for differing overpayment amounts.
    Response: We believe CMPs offer a great deterrent value over 
current authorities. Congress's intent provided under to 1128A(a) of 
the Social Security Act, was that CMPs are ``in addition to any other 
penalties that may be prescribed by law.'' CMPs are complementary to 
existing regulation under 32 CFR 199.21(q)(4), which provides ``[i]n 
the case of the failure of a manufacturer of a covered drug to honor a 
requirement of this paragraph (q) or to honor an agreement under this 
paragraph (q), the Director, TMA, in addition to other actions referred 
to in this paragraph (q), may take any other action authorized by 
law.'' Additionally, refunds related to the TRICARE Retail Refund 
Program are subject to adjustments and reversals of amounts. However, 
once the overpayment is validated by the DHA and payment has not been 
made in accordance with requirements, the manufacturer could be subject 
to a CMP for retaining funds under TRICARE/CHAMPUS to which the 
manufacturer, after applicable reconciliation, is not entitled. The DoD 
will coordinate with DOJ, VA, DCIS, and HHS-OIG, when considering the 
imposition of a CMP. The CMP Program is an enforcement mechanism and 
will not establish the amount to be refunded to the TRICARE Program 
under the TRICARE Retail Refund Program, but rather will rely on 
current processes and procedures to establish a validated overpayment.
    Comment 9: One commenter stated the TRICARE regulation that governs 
the retail refund program, 32 CFR 199.21(q), requires prescription 
rebate amounts invoiced by manufacturers be treated as overpayments 
under 32 CFR 199.11. The commenter argues these rebate amounts, which 
were never paid to the manufacturer by DoD should not qualify as an 
overpayment and should not be refunded. The commenter stated DoD should 
exclude funds pursuant to the TRICARE Retail Refund Program under Sec.  
199.21(q) from the proposed rule.
    Response: Under 32 CFR 199.21(q)(3)(iii), ``a refund due under this 
paragraph (q) is subject to Sec.  199.11 of this part and will be 
treated as an erroneous payment under that section.'' Title 32 CFR 
199.11 governs overpayments. The proposed rule defines overpayments as 
``any funds that a person receives or retains under TRICARE/CHAMPUS to 
which the person, after applicable reconciliation, is not entitled 
under such program.'' Retaining funds subject to rebate under

[[Page 60703]]

the TRICARE Retail Refund Program are overpayments, therefore, the DHA 
does not consider it appropriate to exclude refunds required under 
Sec.  199.21(q) from the jurisdiction of the CMP regulations.
    Comment 10: A commenter stated the proposed rule does not address 
restatements to the VA under the TRICARE Retail Refund Program, nor 
does it clarify when knowledge of an additional refund caused by a 
restated rebate amount would trigger an overpayment. The commenter 
indicated a restated amount requires validation by the VA and seeks 
clarification that knowledge of an overpayment under the TRICARE 
program cannot begin until restated values are established by the VA.
    Response: The TRICARE Retail Refund Program operates independently 
from other Federal Pricing Programs, such that, agreements with or 
participation under other programs has no bearing on a pharmaceutical 
agent's covered status or refund eligibility. Covered drug status is 
determined by VA, they are the lead agency for providing this 
information to DHA. When calculating refunds, DoD uses non-Federal 
Average Manufacturer Price (FAMP) and Federal Ceiling Price (FCP) 
amounts provided by the VA. DHA will request from the VA the current 
annual FCP and the annual non-FAMP from which it was derived prior to 
compiling each quarterly invoice. The pricing data obtained will be 
applicable to all prescriptions filled during each respective quarter. 
If a manufacturer believes the data provided by the VA to DHA are 
erroneous, it is the manufacturer's responsibility to contact the VA to 
address any restatements or corrections.
    The DHA and the TRICARE Program validate overpayments independently 
from the VA. As stated above, the CMP program will not establish the 
amount to be refunded to the TRICARE Program under the TRICARE Retail 
Refund Program, but rather will rely on current processes and 
procedures to establish a final, validated amount. The DHA will provide 
Demand Letters to Manufacturers notifying them of amounts due.
    Comment 11: One commenter stated TRICARE providers do not 
necessarily participate in Centers for Medicare and Medicaid Services 
(CMS) programs. Certain specialties, such as Applied Behavioral 
Analysis, may not even be covered under the programs currently subject 
to CMPs. Imposing such restrictions on specialty providers who have 
historically not participated in CMP programs could be have a 
significant impact on the network and affect access to care.
    Response: All providers who submit claims to the TRICARE program in 
violation of the CMP law shall be subject to penalties. The majority of 
providers have at some point submitted claims to Medicare and have been 
subject to almost identical rules for not submitting claims involving 
fraud or abuse for many years in the Medicare Program. Such 
restrictions on all providers, including specialty providers, are 
standard for submitting claims in a Federal healthcare program. 
Establishment of this program under authority provided by Congress is 
entirely appropriate for the protection of TRICARE beneficiaries and to 
ensure that they receive only medically necessary and appropriate 
services and supplies.
    Comment 12: The commenter also stated current statistical sampling 
methodology under the TRICARE program differs from CMS, which could be 
called into question since there is no precedence for collecting CMP or 
an extrapolated loss. The commenter notes recent draft changes to 
policy rely on the TRICARE Managed Care Support Contractor to determine 
statistical sampling methodology. The commenter states this does not 
follow CMS precedent and questions whether it is DHA's intent to change 
this process to mirror CMS?
    Response: We do not agree current statistical methodology under the 
TRICARE Program differs from CMS. As stated in the proposed rule at 32 
CFR 200.1580, TRICARE's process for conducting a statistical sampling 
case will be ``based upon an appropriate sampling and computed by valid 
statistical methods [.]'' TRICARE will not have its MCSC perform 
statistical sampling involving CMPs. Any changes in policy requirements 
in effect regarding the MCSC's responsibility for statistical sampling 
do not involving statistical sampling under the CMP Program. HHS OIG 
also does not use CMS contractors to perform statistical sampling for 
its CMP cases. As stated above, there is precedence for utilizing 
statistical sampling as evidence of the number and amount of claims 
and/or requests for payment. Use of statistical sampling has been 
upheld in the Courts and is regularly used by HHS within its CMP 
program. TRICARE will follow a similar process to that of CMS and HHS.
    Comment 13: A commenter stated the proposed rule indicates the rule 
would apply to providers and suppliers who commit fraud and abuse, 
which are both criminal and civil violations. The commenter stated this 
would require the justice system to make this determination. The 
commenter asked if the Administrative Law Judge (ALJ) make this 
determination.
    Response: TRICARE's CMP rule implements authority provided in 
section 1128A of the Social Security Act to initiate administrative 
proceedings to impose civil money penalties against those who commit 
fraud and abuse in the Medicare Program. This authority at 1128A(c)(1) 
of the Social Security Act (42 U.S.C. 1320a-7a(c)(1)) requires the DoD 
to obtain consent of DOJ prior to imposing a CMP. The DHA will make 
this determination pursuant to the authority under 1128A in close 
coordination with DOJ, DCIS, and HHS-OIG. Administrative Law Judges are 
required under 1128A(e) of the Social Security Act. The ALJ will make 
the final agency determination on appeals filed with the DHA.
    Comment 14: A commenter questioned whether the MCSC will continue 
to develop and submit cases of potential fraud within current 
thresholds in view of the proposed rule and whether those cases will be 
the basis for the imposition of a CMP.
    Response: The MCSC will continue to develop and submit cases under 
Section C of current contracts and in accordance with TRICARE 
Operations Manual, Chapter 13. The CMP Program will have no impact on 
current contracts with TRICARE's MCSC.
    Comment 15: The commenter also asked whether it is the Government's 
intent to amend MCSC contracts to now include the Military Health Care 
Fraud and Abuse Prevention Program within their scope of services or 
will this be bid separately? If bid separately, the administrator of 
this program would need to work closely with MCSC to ensure both 
entities are prepared to address inquiries, appeals, grievances, 
litigation, customer dissatisfaction, etc. In addition, the data and 
facts from which each CMP case is based on would need to originate from 
the MCSC, who provides the services and process claims for payment. Has 
this been considered? The effort required to handle inquiries, 
establish operations, address legal actions, field calls, respond to 
complaints and other administrative support functions would be 
considerable. CMP actions taken against providers could cause 
reputational impact to the program and its contractors and 
subcontractors, adding reputational risk.
    Response: DHA does not intend to amend its current MCSC contracts 
to incorporate any additional requirements involving CMP authority. The 
DHA will operate its CMP Program independently

[[Page 60704]]

of the MCSC. The CMP program will have no impact on case referral 
requirements with current TRICARE MCSCs.
    Comment 16: A commenter stated that under the current model 
utilized by TRICARE's MCSCs, claim audits reveal overpayments on a 
claim line basis, which can be recovered. Credits are issued to the 
Government with an accompanying TRICARE encounter data (TED) record 
update to ensure proper reconciliation of payments. Extrapolated loss 
collection cannot be credited back to an individual claims and 
therefore would not result in a TED updates either. Will extrapolated 
loss collection be credited to another account?
    Response: The process in which TRICARE/DHA applies settlement 
dollars back to the program will remain the same. They are not applied 
at the claim level line and TED records are not updated.
    Comment 17: One commenter stated they believed the creation of a 
CMP program under TRICARE was a great idea. The commenter stated that 
from the commenter's perspective civilian providers and suppliers try 
to take advantage of the military system and having this regulation in 
place would in their view prevent fraud and abuse in the TRICARE 
program.
    Response: We agree. As stated above, the protection of TRICARE 
beneficiaries and ensuring that they are getting services and supplies 
that are medically necessary and appropriate, and protect the program 
which is funded by taxpayer dollars to deter again fraud and abuse and 
taking advantage of the program is at the core of this program. This 
authority provided by Congress will serve as a strong deterrent against 
fraud and abuse in the TRICARE Program.

IV. Summary of Changes From the Proposed Rule

    We are deleting subpart D of the proposed rule, Sec. Sec.  200.400, 
200.410, and 200.420, involving contract organization misconduct from 
the Military Health Care Fraud and Abuse Prevention Program. TRICARE 
contracting organizations are structured differently than Medicare, and 
therefore, subpart D of the proposed rule is largely inapplicable to 
TRICARE and will not be incorporated into the final rule.

V. Regulatory Analysis

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

    E.O.s 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). E.O. 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 the economic threshold of $100 million or more. This final rule 
is designed to implement statutory provisions, authorizing the DoD to 
impose CMPs. The vast majority of providers and Federal health care 
programs would be minimally impacted, if at all, by this final rule. 
Accordingly, the aggregate economic effect of these regulations would 
be significantly less than $100 million.

Executive Order 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 Office of Management and Budget (OMB) 
Circular A-4 and Office of Information and Regulatory Affairs guidance 
on implementing E.O. 13771, this final rule does not involve regulatory 
costs subject to E.O. 13771.

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, 
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 final 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 final 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 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 final 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 there are no 
significant costs associated with the implementation of a CMP Program 
to impose CMPs on claims submitted to the TRICARE Program that would

[[Page 60705]]

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 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 final 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 
amends 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(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 of the Defense Health Agency determines a provider 
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 money penalty (CMP) 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.
Subparts D-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.
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.
    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

[[Page 60706]]

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 the Health Insurance Portability and 
Accountability Act of 1996 (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
    (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

[[Page 60707]]

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--
    (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 money 
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

[[Page 60708]]

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;
    (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 $20,504 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. The maximum penalty amount 
is based on the most recent statutory adjustment included in the 
Bipartisan Budget Act of 2018 and includes the cost of living 
multiplier for 2019, based on the Consumer Price Index for all Urban 
Consumers (CPI-U) for the month of October 2018, not seasonally 
adjusted, is 1.02522, as indicated in Office of Management and 
Budget (OMB) Memorandum M-19-04.

    (2) For each individual violation of Sec.  200.200(b)(1), the DHA 
may impose a penalty of not more than $20,504 for each separately 
billable or non-separately-billable item or service provided, 
furnished, ordered, or prescribed by an excluded individual or entity.
    (3) The DHA may impose a penalty of not more than $100,522 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 $100,522 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 $20,504 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 $30,757 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

[[Page 60709]]

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 
$100,522 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 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. The maximum penalty amount 
is based on the most recent statutory adjustment included in the 
Bipartisan Budget Act of 2018 and includes the cost of living 
multiplier for 2019, based on the CPI-U for the month of October 
2018, not seasonally adjusted, is 1.02522, as indicated in OMB 
Memorandum M-19-04.

    (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.

Subparts D-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; and
    (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.
    (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

[[Page 60710]]

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 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: Department of Health and Human Service (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--

[[Page 60711]]

    (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;
    (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 
section 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

[[Page 60712]]

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:
    (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 under this part, 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

[[Page 60713]]

Social Security Act or under any provision in this part 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 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.

[[Page 60714]]

    (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 (c), 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.
    (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: September 14, 2020.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2020-20541 Filed 9-25-20; 8:45 am]
BILLING CODE 5001-06-P