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Proposed Rule2023-28152

Medicare Program: Appeal Rights for Certain Changes in Patient Status

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Published

December 27, 2023

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This proposed rule would implement an order from the Federal district court for the District of Connecticut in Alexander v. Azar that requires HHS to establish appeals processes for certain Medicare beneficiaries who are initially admitted as hospital inpatients but are subsequently reclassified as outpatients receiving observation services during their hospital stay and meet other eligibility criteria.

Full Text

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<title>Federal Register, Volume 88 Issue 247 (Wednesday, December 27, 2023)</title>
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[Federal Register Volume 88, Number 247 (Wednesday, December 27, 2023)]
[Proposed Rules]
[Pages 89506-89538]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-28152]

[[Page 89505]]

Vol. 88

Wednesday,

No. 247

December 27, 2023

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 476, and 489

Medicare Program: Appeal Rights for Certain Changes in Patient Status;
Proposed Rule

Federal Register / Vol. 88 , No. 247 / Wednesday, December 27, 2023 /
Proposed Rules

[[Page 89506]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 476, and 489

[CMS-4204-P]
RIN 0938-AV16

Medicare Program: Appeal Rights for Certain Changes in Patient
Status

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement an order from the Federal
district court for the District of Connecticut in Alexander v. Azar
that requires HHS to establish appeals processes for certain Medicare
beneficiaries who are initially admitted as hospital inpatients but are
subsequently reclassified as outpatients receiving observation services
during their hospital stay and meet other eligibility criteria.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by February 26, 2024.

ADDRESSES: In commenting, please refer to file code CMS-4204-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-4204-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-4204-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
David Danek, <a href="/cdn-cgi/l/email-protection#1175706778753f75707f747a51727c623f7979623f767e67">[email&#160;protected]</a>, for issues related to the
retrospective process.
Janet Miller, <a href="/cdn-cgi/l/email-protection#84eee5eae1f0aae9ede8e8e1f6c4e7e9f7aaececf7aae3ebf2">[email&#160;protected]</a>, for issues related to the
prospective process.
Shaheen Halim, <a href="/cdn-cgi/l/email-protection#fd8e959c95989893d3959c919490bd9e908ed395958ed39a928b">[email&#160;protected]</a> for issues related to
Quality Improvement Organization review.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all comments received before the close of the comment period on
the following website as soon as possible after they have been
received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the search instructions on
that website to view public comments. CMS will not post on
<a href="http://Regulations.gov">Regulations.gov</a> public comments that make threats to individuals or
institutions or suggest that the individual will take actions to harm
the individual. CMS continues to encourage individuals not to submit
duplicative comments. We will post acceptable comments from multiple
unique commenters even if the content is identical or nearly identical
to other comments.

I. Executive Summary

The purpose of this proposed rule is to establish appeals processes
to comply with a court order issued in the case Alexander v. Azar, 613
F. Supp. 3d 559 (D. Conn. 2020), aff'd sub nom., Barrows v. Becerra, 24
F.4th 116 (2d Cir. 2022). The proposed processes would apply to certain
Medicare beneficiaries who are initially admitted as hospital
inpatients but are subsequently reclassified as outpatients receiving
observation services during their hospital stay and meet other
eligibility criteria.
The proposed processes would consist of the following:
<bullet<ls-thn-eq> Expedited appeals: We are proposing an expedited
appeals process for certain beneficiaries who disagree with the
hospital's decision to reclassify their status from inpatient to
outpatient receiving observation services (resulting in a denial of
coverage for the hospital stay under Part A). Eligible beneficiaries
would be entitled to request an expedited appeal regarding that
decision prior to discharge from the hospital. Appeals would be
conducted by a Beneficiary & Family Centered Care--Quality Improvement
Organization (BFCC-QIO).
<bullet<ls-thn-eq> Standard appeals: We are proposing that
beneficiaries who do not file an expedited appeal would have the
opportunity to file a standard appeal (that is, an appeal requested by
a beneficiary eligible for an expedited appeal, but filed outside of
the expedited timeframes) regarding the hospital's decision to
reclassify their status from inpatient to outpatient receiving
observation services (resulting in a denial of coverage for the
hospital stay under Part A). Under our proposal, these standard appeals
will follow similar procedures to the expedited appeals process but
without the expedited timeframes to file and for the QIO to make
decisions.
<bullet<ls-thn-eq> Retrospective appeals: We are proposing a
retrospective review process for certain beneficiaries to appeal
denials of Part A coverage of hospital services (and certain SNF
services, as applicable), for specified inpatient admissions involving
status changes that occurred prior to the implementation of the
prospective appeals process, dating back to January 1, 2009. Consistent
with existing claims appeals processes, we are proposing that Medicare
Administrative Contractors (MACs) will perform the first level of
appeal, followed by Qualified Independent Contractor (QIC)
reconsiderations, Administrative Law Judge (ALJ) hearings, review by
the Medicare Appeals Council, and judicial review.

II. Background

This proposed rule sets forth new appeals procedures to implement
the court order in Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn.
2020), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir. 2022).
In this order, the court directed the Department of Health and Human
Services (HHS) to ``permit all members of the . . . class to appeal the
denial of their Part A coverage'' and to establish appeal procedures
for certain beneficiaries in Medicare Part A and B (``Original
Medicare'') who are initially admitted to a hospital as an inpatient by
a physician but whose status during their stay is changed to outpatient
by the hospital, thereby effectively denying Part A coverage for their
hospital stay.\1\ In some cases, the status change also

[[Page 89507]]

affects the availability of Part A coverage for a beneficiary's post-
hospital extended care services furnished in a skilled nursing facility
(SNF). The court imposed additional conditions on the right to appeal
as described in detail in this proposed rule.
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\1\ The terms of the court order refer to denials of Part A
coverage. Consistent with the court order, the appeals processes
proposed in this rule do not extend to enrollees in Medicare
Advantage (MA) plans. Medicare Advantage plan enrollees have
existing rights that afford enrollees the right to appeal a plan
organization determination where the plan refuses to provide or pay
for services, in whole or in part, including the type or level of
services, that the enrollee believes should be furnished or arranged
for by the MA organization. 42 CFR 422.560 through 422.634. For
example, if an MA plan refuses to authorize an inpatient admission,
the enrollee may request a standard or expedited plan
reconsideration of that organization determination. 42 CFR
422.566(b), 422.568 through 422.572.
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The court's order requires new appeal procedures be afforded to the
following class: Medicare beneficiaries who, on or after January 1,
2009--
<bullet> Have been or will have been formally admitted as a
hospital inpatient;
<bullet> Have been or will have been subsequently reclassified by
the hospital as an outpatient receiving ``observation services''; \2\
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\2\ For the purposes of these proposed procedures, a beneficiary
is considered an outpatient receiving observation services when the
hospital changes a beneficiary's status from inpatient to outpatient
while the beneficiary is in the hospital and the beneficiary
subsequently receives observation services following a valid order
for such services. See proposed 42 CFR 405.931(h).
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<bullet> Have received or will have received an initial
determination or Medicare Outpatient Observation Notice (MOON) \3\
indicating that the observation services are not covered under Medicare
Part A; and
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\3\ As explained in 42 CFR 489.21(y), the Medicare Outpatient
Observation Notice (MOON) is a written notice furnished by a
hospital to Medicare beneficiaries who receive observation services
as an outpatient for more than 24 hours. The notice explains why the
beneficiary is not an inpatient and also explains the consequences
of being an outpatient rather than an inpatient. A copy of the
notice is available to download at <a href="https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202212-0938-016">https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202212-0938-016</a>.
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<bullet> Either--(1) were not enrolled in Part B coverage at the
time of their hospitalization; or (2) stayed at the hospital for 3 or
more consecutive days but were designated as inpatients for fewer than
3 days, unless more than 30 days has passed after the hospital stay
without the beneficiary's having been admitted to a skilled nursing
facility. Medicare beneficiaries who meet the requirements of the
foregoing sentence but who pursued an administrative appeal and
received a final decision of the Secretary before September 4, 2011,
are excluded from the class.
The court determined that beneficiaries who are members of the
class described previously have been deprived of due process and
ordered the following:
<bullet> Class members shall have an opportunity to appeal the
denial of their Part A coverage.
<bullet> Class members who have stayed, or will have stayed, at a
hospital for 3 or more consecutive days, but who were designated as
inpatients for fewer than 3 days, shall have the right to an appeal
through an expedited appeals process substantially similar to the
existing expedited process for challenging hospital discharges.
<bullet> Class members shall be permitted to argue that their
inpatient admission satisfied the relevant criteria for Part A
coverage--for example, that the medical record supported a reasonable
expectation of a medically necessary two-midnight stay at the time of
the physician's initial inpatient order, in the case of a post-Two
Midnight Rule hospital stay--and that the hospital utilization review
committee's (URC) determination to the contrary was therefore
erroneous. If a class member prevails, then for the purposes of
determining Part A benefits, including both Part A hospital coverage
and Part A SNF coverage, the beneficiary's reclassification as an
outpatient that resulted from the URC's erroneous determination shall
be disregarded.
<bullet> For class members whose due process rights were violated,
or will have been violated, prior to the availability of the procedural
protections as previously set forth, such beneficiaries shall be
afforded a meaningful opportunity to appeal the denial of their Part A
coverage, as well as effective notice of this right.
In addition, on December 9, 2022, the district court issued an
``Order Clarifying Judgment'' with respect to the claims for outpatient
hospital services received by beneficiaries who were enrolled in Part B
of the program at the time such services were furnished. In this
clarifying order, the judge stated that while he intended to provide a
meaningful opportunity for class members whose due process rights were
violated to appeal the denial of Part A coverage, he also stressed the
need to provide a remedy for class members who endured undercompensated
stays at skilled nursing facilities. He further stated that, since
class members with Part B coverage had much of their past hospital
stays paid for by such coverage, he did not intend to require the
unwinding of previously approved Part B outpatient hospital claims so
they could be reprocessed as Part A claims. The clarification states
that if a class member enrolled in Part B coverage at the time of their
hospitalization prevails in an appeal of a claim, then an adjustment of
payment for the underlying hospital services (including any applicable
deductible and coinsurance amounts) is not required, and Part A payment
for covered SNF services may be made without any adjustment to the
payment for the underlying hospital services.
In section III.A. of this proposed rule, we describe the proposed
procedures that would be available to members of the class described
previously (hereinafter, eligible beneficiaries) to appeal denials of
Part A coverage of hospital services (and certain SNF services, as
applicable), for specified inpatient admissions involving status
changes that occurred prior to the implementation of the prospective
appeals process, dating back to January 1, 2009. We refer to this as
the retrospective appeals process. In section III.B. of this proposed
rule, we describe the expedited and standard appeals procedures that
would be available prospectively (meaning to beneficiaries whose status
is changed after the effective date of this rule and after the
implementation and availability of the procedures established by the
rule) to eligible beneficiaries who, among other things, are admitted
as hospital inpatients and are reclassified by hospitals as outpatients
receiving observation services.
Once we publish a final rule regarding the procedures for these new
appeals, we intend to specify the implementation date for filing appeal
requests for retrospective and prospective appeals. When the
prospective process is fully implemented, eligible beneficiaries who
are hospitalized and receive notice of their appeal rights and wish to
pursue an appeal will be expected to utilize the prospective procedures
(proposed 42 CFR 405.1210 through 405.1212). Eligible beneficiaries who
are hospitalized and entitled to an appeal under these procedures prior
to the implementation date of the prospective process will be able to
utilize the retrospective appeals process, subject to the filing
limitation proposed in Sec. 405.932(a)(2)(i)(B).
Accordingly, we are proposing new retrospective and prospective
appeals processes to implement the court's order as detailed in this
proposed rule.

III. Provisions of the Proposed Regulations

A. Retrospective Appeals

1. Overview
The retrospective appeals required by the court order constitute a
new process under the Medicare program, as the appeals would be based
on alleged entitlement to coverage for services that were not actually
billed to the program on a claim. That is, under existing claims
appeals processes for the Original Medicare program, a beneficiary is
asking for a determination on whether specific items and services
billed on a claim for payment should

[[Page 89508]]

have been covered and paid, not whether items and services should have
been billed or whether there should have been coverage when there is no
claim. Sections 205(a), 1871, and 1872 of the Social Security Act (the
Act) provide the Secretary authority to establish regulations to carry
out the administration of the insurance programs under Title XVIII of
the Act.\4\ The new retrospective appeals procedures required under the
court order do not fit into the existing claims appeals process for
Original Medicare claims established under section 1869 of the Act.
However, in our view, these new procedures would have similarities to
the longstanding claims appeals procedures with which Medicare
beneficiaries are familiar. Accordingly, we are proposing new
procedures to govern the retrospective appeals process in proposed 42
CFR 405.931 through 405.938 that would be based, in large part and to
the extent appropriate, on the existing claims appeals procedures in
the existing provisions in 42 CFR part 405 Subpart I (as authorized
under section 1869 of the Act).
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\4\ Section 205(a) of the Act, incorporated into Title XVIII by
section 1872 of the Act, provides that the Secretary ``shall have
full power and authority to make rules and regulations and to
establish procedures, not inconsistent with the provisions of this
title, which are necessary or appropriate to carry out such
provisions[.]'' Section 1871 of the Act states that the Secretary
shall prescribe such regulations as may be necessary to carry out
the administration of the insurance programs under this title.
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We provide more detail about the proposed procedures at each level
of the administrative appeals process following this overview, and we
have included flowcharts to depict the overall proposed appeals process
for retrospective reviews (in Figure 1) and prospective reviews (in
Figure 2).
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP27DE23.001

[[Page 89510]]

[GRAPHIC] [TIFF OMITTED] TP27DE23.002

BILLING CODE 4120-01-C
In Sec. 405.931(b)(2), we are proposing to define the term
``eligibility contractor'' to mean the contractor that would serve as a
single point of contact for incoming retrospective appeal requests. As
proposed in Sec. 405.932(a) through (e), the eligibility contractor
would determine if the request for appeal is valid, including whether
the request is timely and contains the required elements for an appeal.
In addition, we are proposing that the eligibility contractor would
determine whether the individual submitting the request (or the
individual for whom a request is submitted, in the case of a request
filed by a representative) meets the definition of a class member as
defined by the court, and is, thus, an eligible party entitled to an
appeal under the terms of the court order. The eligibility contractor
would

[[Page 89511]]

then either deny or approve each appeal request received and notify the
individual (or their representative) of the determination. For those
requests that are denied (that is, the beneficiary has not demonstrated
s/he meets the definition of a class member and is not eligible for an
appeal, or the appeal request is not otherwise valid), we are proposing
in Sec. 405.932(e) that the individual filing the request (or their
representative) would have an opportunity to correct any errors and/or
demonstrate why the appeal request should be approved. An individual's
request to review a denial must be received by the eligibility
contractor within 60 calendar days of the individual's receipt of the
denial notice under proposed Sec. 405.932(e)(2). For appeal requests
that are approved (that is, the beneficiary satisfies the requirements
for class membership--and thus, is determined to be an eligible party--
and the request is valid), the eligibility contractor would forward
those requests to the processing contractor to conduct the first level
appeal.
In Sec. 405.931(b)(3), we are proposing that the processing
contractor would perform the first level of appeal. The processing
contractor would be the MAC that currently has jurisdiction over Part A
claims for the hospital at which the beneficiary was initially admitted
prior to being subject to a status change. As proposed in Sec.
405.932(f) through (i), processing contractors would generally follow
existing procedures that govern redeterminations (42 CFR 405.940
through 405.958), as appropriate, except as we have otherwise proposed
in Sec. 405.932.
In Sec. 405.934, we are proposing that eligible parties (or their
representatives) who are dissatisfied with the processing contractor's
appeal decision would have the opportunity to request a reconsideration
to be performed by a QIC. We are proposing that the QICs would
generally utilize existing procedures that govern reconsiderations (42
CFR 405.960 through 405.978), as appropriate, except as we have
otherwise proposed in Sec. 405.934.
Following a reconsideration, in Sec. 405.936 we are proposing that
eligible parties (or their representatives) who are dissatisfied with
the reconsideration would be able to request a hearing before an
Administrative Law Judge (ALJ) (or review by an attorney adjudicator)
if the claims under appeal meet the amount in controversy
requirement.\5\ In Sec. 405.936(c), we are proposing a new method of
calculating the amount in controversy that reflects the differences
between these new appeals and typical claims appeals under existing
procedures. In addition, under proposed Sec. 405.938, eligible parties
(or their representatives), would be able to request review by the
Medicare Appeals Council (hereinafter, Council). As with the first two
levels of appeal, we are proposing that these new appeals before an ALJ
(or attorney adjudicator) and the Council would generally follow
existing procedures in 42 CFR 405.1000 through 1140, as appropriate,
except as we have otherwise proposed in Sec. Sec. 405.936 through
405.938. Eligible parties would also be able to request judicial review
under the existing provisions in 42 CFR 405.1136.
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\5\ The amount in controversy requirement for CY 2024 is $180
for a hearing before an Administrative Law Judge, and $1,840 for
judicial review. See <a href="https://www.govinfo.gov/content/pkg/FR-2023-09-29/pdf/2023-21500.pdf">https://www.govinfo.gov/content/pkg/FR-2023-09-29/pdf/2023-21500.pdf</a>.
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In Sec. 405.932(a)(2), we are proposing to limit the time to file
a request for a retrospective appeal to 365 calendar days following the
implementation date of the final rule. We have provided notice of the
pending appeals process for class members since July 2022 on both
<a href="http://Medicare.gov">Medicare.gov</a> and <a href="http://CMS.gov">CMS.gov</a> and we will continue to update those websites
with information as this rulemaking proceeds and as we begin to
implement the final rule. Thus, when this rulemaking is concluded and
procedures are finalized, effective, and operational, we believe we
would have afforded eligible beneficiaries ample time to gather
necessary documentation in anticipation of filing appeal requests.
2. Party Status, Authorized Representatives, and Appointed
Representatives
The court order instructs HHS to establish new appeals procedures
for certain beneficiaries, specifically, beneficiaries who are members
of the defined class, as previously described in the overview and in
proposed Sec. 405.931(b). The court's decision noted that some class
members suffered financial or other consequences as a result of the
change in their status from inpatient to outpatient receiving
observation services, including having to pay for the costs of post-
hospital extended care services in a SNF out of pocket because they did
not satisfy the statutory requirement for SNF coverage of having a 3
consecutive day qualifying inpatient stay (see section 1861(i) of the
Act). In addition, other class members had to pay for their hospital
services themselves because they lacked Medicare Part B coverage. The
court directed HHS to afford class members a right to appeal certain
denials of Part A coverage which are defined later is this section. The
court ordered an appeal process be made available to those class
members who did not have such a process available if their hospital
stays, dating back to January 1, 2009, met the conditions of the order.
Accordingly, in Sec. 405.931(b)(1) we are proposing to define an
eligible party as an individual who meets the definition of a class
member in Alexander v. Azar. In that case, the court adopted the
following class definition: a Medicare beneficiary who, on or after
January 1, 2009--
<bullet> Was formally admitted as a hospital inpatient;
<bullet> While in the hospital was subsequently reclassified as an
outpatient receiving observation services (as defined in Sec.
405.931(h));
<bullet> Has received an initial determination (as defined in Sec.
405.920) or a Medicare Outpatient Observation Notice (MOON) (as
described in Sec. 489.20(y)) indicating that the observation services
are not covered under Medicare Part A; and
<bullet> Either--
++ Was not enrolled in the Supplementary Medical Insurance program
(that is, Medicare Part B coverage) at the time of beneficiary's
hospitalization; or
++ Stayed at the hospital for 3 or more consecutive days but was
designated as an inpatient for fewer than 3 days, unless more than 30
calendar days has passed after the hospital stay without the
beneficiary's having been admitted to a SNF.
An eligible party would be entitled to request an appeal under the
proposed retrospective process.
In contrast, the court's decision did not include providers as
class members entitled to additional appeals procedures and did not
require HHS to afford new appeal rights to providers in these new
appeals proceedings. Accordingly, in Sec. 405.931(b) and (c), we are
proposing to limit party status in these new appeals to beneficiaries
who meet the definition of a class member as specified in the court
order.
As we believe some beneficiaries who are members of the class may
require assistance with their appeal requests, we are proposing to
apply existing rules regarding appointed representatives and authorized
representatives (see Sec. Sec. 405.902 and 405.910) to these new
appeals.\6\ There may also be some

[[Page 89512]]

situations in which a class member has died since their hospitalization
and, as applicable, admission to a SNF. Our existing rules in Sec.
405.906(a)(1) permit certain successors in interest to file appeals on
behalf of a deceased beneficiary. Thus, in Sec. 405.931(d)(3) we are
proposing to apply those rules to deceased class members who would have
been eligible to request an appeal under the proposed procedures for
retrospective appeals. However, contrary to existing claims appeals
procedures, in Sec. 405.931(d)(1)(i) we are proposing to exclude
providers from representing beneficiaries in these new appeals, and we
are proposing to prohibit the assignment of appeal rights to providers
as well. Since the decision to change a patient's status is made by the
hospital, we have concerns that the interests of a class member could
conflict with the interests of a hospital or SNF, and we are concerned
that a class member's challenge to their denial of Part A coverage
resulting from a change in status from inpatient to outpatient
receiving observation services may not be appropriately represented by
the hospital that initiated that change, determined that outpatient
services were appropriate for the beneficiary, and in most cases,
previously received payment for outpatient services. We have similar
concerns regarding representation by SNFs that already received payment
for the SNF services at issue. Unlike most existing claims appeals,
where the primary issue under review is the denied coverage and payment
for items and/or services billed on a claim, the issue on appeal under
these procedures is whether services meet the relevant criteria for
coverage and payment under the inpatient hospital benefit under Part A
of the program rather than under the Part B outpatient benefit where
payment was, in most cases,\7\ previously made to the hospital, and the
consequences of that decision on coverage of SNF services. Moreover, as
we are implementing procedures required under the court's order under
the Secretary's rulemaking authority in sections 205(a), 1871, and 1872
of the Act, we believe the provisions of section 1869 of the Act guide,
but do not explicitly govern, the appeals procedures for the new
retrospective appeals ordered by the court and proposed in this
proposed rule.
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\6\ Appointed representative means an individual appointed by a
party to represent the party in a Medicare claim or claim appeal.
Authorized representative means an individual authorized under State
or other applicable law to act on behalf of a beneficiary involved
in the appeal (for example, a beneficiary's legal guardian,
surrogate decision-maker for an incapacitated beneficiary, or an
SSA-appointed representative payee). The authorized representative
will have all of the rights and responsibilities of a beneficiary or
party, as applicable, throughout the appeals process and does not
need a further appointment.
\7\ We acknowledge that payment by Medicare would not have been
made in appeals brought by a beneficiary who was not enrolled in
Part B at the time of hospitalization. In those situations, the
beneficiary would have been responsible for payment for outpatient
services furnished by the hospital.
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We are proposing to include a definition of ``unrepresented
beneficiary'' applicable to appeals under proposed Sec. Sec. 405.931
through 405.938. In the existing claims appeals process in 42 CFR part
405 Subpart I, certain procedural requirements do not apply to an
unrepresented beneficiary. However, that term is not defined in
existing regulations. Therefore, in Sec. 405.931(d)(5), we propose to
define an unrepresented beneficiary as a beneficiary who is an eligible
party and: (1) has not appointed a representative under Sec. 405.910;
or (2) has an authorized representative as defined in Sec. 405.902;
\8\ or (3) has appointed as its representative, a member of the
beneficiary's family, a legal guardian, or an individual who routinely
acts on behalf of the beneficiary, such as a family member or friend
who has a power of attorney; or (4) in the case of a deceased
beneficiary, the appeal request is filed by an eligible party who meets
the conditions set forth in Sec. 405.906(a)(1).
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\8\ Typically, an authorized representative will be a legal
guardian, representative payee or someone acting under state law on
behalf of a beneficiary (for example, a family member with a durable
power of attorney). Often these authorized representatives are
family members or other individuals who are unfamiliar with the
technical requirements of the existing claim appeals process. We
believe it is reasonable to treat appeals filed by authorized
representatives under these proposed procedures, like other existing
claim appeals filed by family members (that is, as if the appeal was
filed by an unrepresented beneficiary).
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We are also proposing to incorporate certain existing policies that
would apply in the new appeals procedures for the convenience of
appellants and adjudicators. For example, in Sec. 405.931(f), we
propose that the date of receipt of a notice or decision sent by the
eligibility contractor, processing contractor or other appeals
adjudicator is presumed to be 5 calendar days following the date on the
notice unless there is evidence to the contrary. In addition, in Sec.
405.931(g) we propose that for the purposes of determining whether a
beneficiary has a qualifying inpatient stay for SNF eligibility and for
eligibility as a class member, days are counted consistent with
existing policy in Sec. 409.30 (that is, 3 consecutive calendar days
starting with the admission day but not counting the discharge day).
In proposed Sec. 405.931(h), we explain that for the purposes of
determining eligibility for an appeal under these procedures, a
beneficiary is considered an outpatient receiving observation services
when the hospital changes a beneficiary's status from inpatient to
outpatient while the beneficiary is in the hospital and the beneficiary
subsequently receives observation services following a valid order for
such services.
3. Appeal Requests and Determinations of Eligibility by the Eligibility
Contractor
In Sec. 405.932, we are proposing to channel all retrospective
appeal requests from eligible parties through a single point of
contact, the eligibility contractor. We are proposing, in Sec.
405.932(a)(2) for a retrospective appeal, that the appeal request filed
by an eligible party (or their representative) must be received by the
eligibility contractor within 365 calendar days from the implementation
date specified when this rule is finalized.\9\ Details regarding the
deadline to file an appeal and where such appeals should be filed would
be posted to <a href="http://Medicare.gov">Medicare.gov</a> once the retrospective appeals process is
operational. A single point of contact will relieve beneficiaries of
the burden of determining which contractor is currently responsible for
claims processed many years ago in order to file their appeal request.
In addition, due to the complexity of the requirements for determining
eligibility as a class member for an appeal, we believe having a single
point of contact would promote consistency in such determinations and
would provide a better overall experience for eligible beneficiaries
pursuing their appeal rights.
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\9\ For example, under these proposed procedures, if the final
rule specifies an implementation date of April 1, 2025, an eligible
party who was hospitalized after January 1, 2009 (through the
implementation date of the prospective appeals process) would have
until March 31, 2026, to file a request for appeal with the
eligibility contractor. Details regarding the filing location will
be specified once the retrospective process is operational.
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We anticipate eligible parties (or their representatives) will
provide relevant information to demonstrate their eligibility as a
member of the class afforded appeal rights in the court order as
proposed in Sec. 405.932(a) through (c), including medical records
that may serve to document certain conditions of eligibility under the
court order. Medical records would also assist in determining whether
the beneficiary received observation services following the
reclassification from inpatient to

[[Page 89513]]

outpatient receiving observation services. However, we understand the
challenges beneficiaries and their representatives may face in
obtaining and producing such information in situations where
significant time may have passed since a beneficiary was hospitalized.
Therefore, we are proposing in Sec. 405.932(c)(2), that the
eligibility contractor would work with MACs, eligible parties, and
providers, whenever necessary, to attempt to obtain the information
needed to make such determinations. In our existing claims appeals
process, contractors routinely seek records from providers to assist
beneficiaries filing appeals when the beneficiary is unable to provide
records needed to adjudicate the appeal.
In Sec. 405.932(b), we are proposing that eligible parties (or
their representatives) provide, in writing, certain minimum basic
information in their appeal request, so the eligibility and processing
contractors may identify the prior claims filed for the hospital stay
and SNF services, as applicable, that serve as the basis for the
retrospective appeal. These required elements for an appeal request
(which are similar to existing requirements for requesting a
redetermination under Sec. 405.944) include the beneficiary's name,
Medicare number (the number on the beneficiary's Medicare card), name
of the hospital and the dates of hospitalization, and the name of the
skilled nursing facility and the dates of stay (as applicable). If the
appeal includes SNF services not covered by Medicare, the written
request must also include an attestation to the out-of-pocket
payment(s) made by the beneficiary for such SNF services and must
include documentation of payments made to the SNF for such services.
CMS would prepare a model form that appellants may use to file requests
for a retrospective appeal under these provisions. Once the appeal
process is operational, this notice would be available online at
<a href="http://Medicare.gov">Medicare.gov</a> to download and complete and would be available to request
in printed or accessible form by calling 1-800-MEDICARE.
We are also proposing in Sec. 405.932(b)(2) that eligible parties
attest to their out-of-pocket costs (other than customary cost sharing
paid to a third-party payer or insurer) paid for SNF services not
covered by Medicare because the statutory requisite, 3 consecutive day
inpatient hospital stay, was not met. (We note that for the purposes of
determining coverage of SNF services under section 1861 of the Act,
inpatient hospital days are counted in accordance with longstanding,
existing policy in Sec. 409.30, that is, a patient must have a
qualifying inpatient stay of at least 3 consecutive calendar days
starting with the admission day but not counting the discharge day. See
proposed Sec. 405.931(g).)
In cases where a third-party payer or insurer covered all of the
cost of SNF services of an eligible party, we are proposing that such
services be excluded from consideration in the retrospective appeals
process. (Payments for SNF services made by a family member would not
be considered payment by a third-party payer but would be considered
out-of-pocket payment for the eligible party.) In light of the
clarification to the court order indicating that the new appeal
processes are intended to provide a remedy for class members who
already endured uncompensated or undercompensated stays at skilled
nursing facilities, we do not believe the court order requires the
readjudication of such paid services under a Medicare appeal process if
payment for that care is provided by another insurer.\10\ Moreover,
readjudicating these claims potentially puts Medicare trust fund
dollars at risk for making duplicate payments to providers for
previously compensated care, as Medicare does not have authority to
compel refunds with respect to payments made by third-party payers to
providers. In addition, focusing our efforts on situations involving
payments for denied services made by beneficiaries (or their families)
focuses resources for appeals for beneficiaries (or their families)
that paid out of pocket for the cost of care.
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\10\ However, if an eligible party paid out of pocket for some
or all of the SNF services, including situations where a denial by a
third-party insurer resulted in the beneficiary making out of pocket
payments for some or all of the SNF services, then those SNF
services that resulted in out of pocket payments would be eligible
for an appeal under these proposed processes.
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We are proposing in Sec. 405.932(d) that the eligibility
contractor would be responsible for determining the validity of
requests for appeal under these provisions, that is, whether the
request is filed by an eligible party, is timely filed, and contains
the required elements for a valid request specified in Sec.
405.932(b)(1) and (2). The eligibility contractor would issue a
decision to approve or deny such requests. In proposed Sec.
405.932(d)(1)(ii), we would require the eligibility contractor to issue
a written decision within 60 calendar days of receipt of a valid appeal
request from the eligible party (or their representative). We propose
in Sec. 405.932(d)(2) that approved requests (meaning those meeting
both eligibility and filing requirements), would be forwarded to the
processing contractor (the MAC with jurisdiction over the hospital
claim), and the processing contractor would perform the appeal. Under
proposed Sec. 405.932(d)(3), requests that are not eligible for an
appeal or do not meet the requirements under proposed in Sec. Sec.
405.931 and 405.932 would be denied. However, we are proposing that
individuals receiving a notice of denial of an appeal request would
have an opportunity to request a review of the denial by the
eligibility contractor in order to provide additional clarification, or
correct any deficiencies in the filing, under the provisions proposed
in Sec. 405.932(e). Our proposed approach to handling requests that
are ineligible for an appeal differs slightly from how similar appeal
requests are handled under existing claims appeals procedures in Sec.
405.952. Under existing rules, such requests are dismissed, and
dismissals may be reviewed and vacated by the adjudicator who issued
the dismissal or appealed to the next level adjudicator to determine if
the dismissal was appropriate. However, given the complexity of the
eligibility requirements, the age of the service in question and in
many cases, the lack of a claim to review, in our view the most
effective and efficient approach to resolving eligibility concerns is
to keep these disputes with the eligibility contractor, requiring
review by an individual not involved with the initial denial
determination.
4. Conduct of Appeals by Processing Contractors
Currently, MACs perform the first level of administrative appeal
for Medicare claims (see 42 CFR 405.940 through 405.958). We are
proposing a similar process for these new appeals, utilizing existing
procedures, as appropriate, with MACs performing the first level of
retrospective appeals under this rule. Specifically, we are proposing
that the MAC that currently has jurisdiction over Part A claims from
the relevant hospital would be responsible for conducting the
retrospective appeal as the processing contractor. Where we believe the
procedures for the new retrospective appeals would need to differ from
existing claims appeals procedures, we are proposing new processes. For
example, in Sec. 405.931(b)(1) and (c), we are proposing that party
status for these appeals be limited to the eligible class members (or
their authorized representatives).
In Sec. 405.932(f)(1), we are proposing that if the processing
contractor determines there is necessary information missing from the
appeal

[[Page 89514]]

case file, the processing contractor would attempt to obtain the
information from the provider and/or the eligible party (or their
representative), as applicable. We are proposing that the processing
contractor afford entities up to 60 calendar days to submit requested
information. If the requested information is not submitted in the
specified timeframe, we propose that the processing contractor would
make a decision based on the information available.
In proposed Sec. 405.932(f)(3), we are requiring processing
contractors to issue a written decision within 60 calendar days of
receipt of a valid appeal request from the eligibility contractor.
However, in cases where the processing contractor needs additional
information to conduct the appeal from the eligible party (or their
representative) or a provider, in Sec. 405.932(f)(1), we are proposing
that the time between the request for such information and when it is
received (up to 60 calendar days) would not count towards the 60-day
adjudication timeframe. If the requested information is not sent to the
processing contractor, then we are proposing that the time afforded by
the contractor for submission of the information would not count
towards the adjudication timeframe. In effect, the 60-day timeline on
which the processing contractor must make its decision will be tolled
during the period between the date the processing contractor requests
information from the provider and/or the eligible party and the later
of the date that information is received or the deadline by which the
information is requested has passed.
Under proposed Sec. 405.932(f) and (g), based on the information
available, the processing contractors would determine whether the
hospital admission, and as applicable, SNF services, satisfied the
relevant criteria for Part A coverage at the time of the admission,
notwithstanding subsequent reclassification by the hospital, and
whether the hospital services, and as applicable, SNF services, should
have been covered under Part A. If the processing contractor determines
that the hospital admission and, as applicable, SNF services satisfied
the relevant criteria for Part A coverage at the time services were
furnished, it would render a favorable decision and would send written
notice to the eligible party (or their representative). The notice
would explain the rationale for, and effect of, the decision, similar
to existing notices for redeterminations.
In Sec. 405.932(g)(4), when applicable, we are proposing that
processing contractors would send notice of a favorable decision to the
SNF that furnished services to the beneficiary in order to inform the
SNF of the reason for the decision and the effect of the decision. In
addition, under Sec. 405.932(g)(2) and (6), processing contractors
would send SNFs notice of a partially favorable decision where the
beneficiary's hospital inpatient admission would have met the criteria
for Part A coverage, but the SNF services subsequently received by the
beneficiary do not meet the relevant criteria for Part A coverage (for
example, if the services are determined not medically reasonable and
necessary under Sec. 1862(a)(1)(A) of the Act). The notice of a
partially favorable decision sent to a SNF informs the SNF of the
reason the hospital services were determined to meet the relevant
criteria for Part A coverage, and the reasons the SNF services were
determined not to be covered under Part A. We are proposing that the
processing contractor also explain that the notice is being sent to the
SNF for informational purposes only, and that only the eligible party
(or the eligible party's representative) may appeal the decision to the
QIC under proposed Sec. 405.934. An eligible party may appeal a
partially favorable decision with respect to coverage of SNF services
to the QIC under proposed Sec. 405.934 in the same manner as
unfavorable decisions with respect to Part A coverage of the hospital
services. In addition, in Sec. 405.932(g)(5), with respect to an
appeal filed by a beneficiary not enrolled in Medicare Part B at the
time of hospitalization, we are proposing that processing contractors
would send notice of a favorable decision to the hospital to inform the
hospital of the reason for the decision and the effect of the decision.
Providers are reminded that under sections 1814 and 1866 of the
Act, Sec. Sec. 489.20 and 489.21, and the terms of the provider
agreement, providers may not collect any amounts for covered services
other than applicable coinsurance and deductible. Accordingly, in the
case of a favorable appeal decision that involves SNF services paid for
by the beneficiary, we are proposing in Sec. 405.932(g)(4) and
(h)(2)(i) that SNFs would be required to refund any payments collected
from the beneficiary for the covered SNF services (see 42 CFR part 489
Subpart D regarding the requirements for handling of incorrect
collections). Similarly, in the case of a favorable appeal decision
rendered for a beneficiary who was not enrolled in Medicare Part B at
the time of hospitalization, we are proposing in Sec. 405.932(g)(5)
and (h)(2)(ii) that hospitals would be required to refund any payments
collected for the outpatient hospital services.
Furthermore, we believe that the Medicare statute requires a
provider of services to submit new claims in order to determine the
amount of benefits due for covered services and to receive payment
under Part A of the program. Under section 1814(a)(1) of the Act, and
42 CFR 424.33, and 42 CFR 424.51, payment for Part A services furnished
to an individual may be made only to a provider of services eligible to
receive payment under section 1866 of the Act after a request for
payment (a claim) is filed with Medicare by the provider. The
clarifying order issued by the court stated that the program is not
required to unwind previously filed Part B outpatient hospital claims
in order to make payment for covered SNF services in the case of a
favorable decision (meaning for the purposes of effectuating a
favorable decision, any existing Part B outpatient hospital claim will
not be reopened or revised by the MAC to reflect an appeal decision
that the class member's hospital admission satisfied the relevant
criteria for Part A coverage at the time of the admission, and the
hospital will not be required to submit a claim for inpatient services
under Medicare Part A \11\). However, the clarification only applies to
beneficiary class members who were enrolled in Medicare Part B at the
time of hospitalization. Thus, in the case of a beneficiary class
member who was not enrolled in Medicare Part B at the time of
hospitalization, we are proposing in Sec. 405.932(h)(2)(ii) that
following a favorable appeal decision and making any required refund
for payments received for covered services, the hospital may submit a
new Part A inpatient claim to Medicare in order to determine the
appropriate amount of benefits and for Medicare to make payment for
inpatient hospital services under Part A. We are also proposing in
Sec. 405.932(h)(2)(ii) that the claim must be submitted by the
hospital within 180 calendar days after the hospital receives its
notice of a favorable appeal decision for the eligible party.
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\11\ We note that a previously paid claim is still subject to
reopening under Sec. 405.980 for other reasons unrelated to the
appeal decision (for example, if payment for the claim was procured
by fraud or similar fault).
---------------------------------------------------------------------------

In addition, if a favorable appeal decision includes eligible SNF
services that are covered, in Sec. 405.932(h)(2)(i), we are proposing
that following a refund of amounts collected from the beneficiary, the
SNF may then submit a claim (or claims) for such services to Medicare
in order to determine the

[[Page 89515]]

appropriate amount of benefits, and for Medicare to make payment for
the covered SNF services. The SNF claim, following a favorable appeal
decision (that is, the hospital admission satisfied the relevant
criteria for Part A coverage as an inpatient at the time of admission
and the SNF services met relevant Part A coverage criteria), would be
processed without regard to the hospital's erroneous reclassification
of the beneficiary as an outpatient receiving observation services. We
are also proposing in Sec. 405.932(h)(2)(i) that the SNF submit the
claim within 180 calendar days after receiving the notice of a
favorable appeal decision for the eligible party. CMS would issue
operating instructions related to the submission of new claims by a SNF
and a hospital when this rulemaking is finalized and effective.
If the processing contractor determines that the hospitalization
did not meet applicable Part A inpatient coverage requirements, we are
proposing in Sec. 405.932(g)(3) the MAC would send notice of its
unfavorable decision to the eligible party (or their representative).
If the processing contractor determines that the hospital admission
meets applicable Part A inpatient coverage requirements, but the SNF
services eligible for the appeal do not meet applicable coverage
requirements, we are also proposing in Sec. 405.932(g)(2) that the
processing contractor would send notice of its partially favorable
decision to the eligible party (or their representative). The notice of
an unfavorable or partially favorable decision would inform the
eligible party (or their representative) of the right to request a
reconsideration with a QIC under proposed Sec. 405.934 and would
provide detailed information about the requirements for filing the
request and where the request must be filed.
5. Conduct of Reconsiderations by Qualified Independent Contractors
In Sec. 405.934(a), we are proposing that the second level of
retrospective appeals be performed by QICs. As with the first level of
appeal, we are proposing that the second level of retrospective appeal
generally follow existing procedures for reconsiderations outlined in
Sec. Sec. 405.960 through 405.978, as appropriate, except as specified
in the provisions proposed in this rule. Under proposed Sec.
405.934(a), eligible parties (or their representative) who are
dissatisfied with a MAC's unfavorable decision in proposed Sec.
405.932(g)(2) may file a request for reconsideration with the QIC
within 180 calendar days of receipt of the MAC's notice. The MAC's
decision would specify the elements required for the request for
reconsideration, and we propose that those elements would be the same
as the existing requirements for a reconsideration set forth in Sec.
405.964. Requests for reconsideration under Sec. 405.934 that are
untimely or incomplete would be handled consistent with existing
procedures for dismissals in Sec. 405.972.
Consistent with the conduct of reconsiderations under existing
procedures in Sec. 405.968, the QICs shall review all evidence
furnished during the first level of appeal and any additional evidence
submitted with the request for reconsideration. Under proposed Sec.
405.934(c), the QIC determines if the inpatient admission, and as
applicable, SNF services, satisfied the relevant criteria for Part A
coverage at the time the services were furnished, then the QIC issues
notice of its decision to the eligible party (or their representative).
We are proposing in Sec. 405.934(c)(3) that the QIC mail or
otherwise transmit notice of its decision within 60 calendar days of
receipt of the request for reconsideration. We are also proposing to
apply existing procedures in Sec. 405.970 regarding the calculation of
decision-making timeframes, and the provisions regarding the escalation
of cases for a QIC's failure to meet such timeframes, as appropriate,
to these new appeals. In proposed Sec. 405.934(c)(4), the notice of a
favorable decision sent by the QIC to the eligible party (or their
representative) would include an explanation of the decision and
information regarding the effect of the decision, as well as other
information similar to that found in existing reconsideration notices
under Sec. 405.974.
In Sec. 405.934(c)(5), when applicable, we are proposing that QICs
would send notice of a favorable reconsideration to the SNF that
furnished services to the beneficiary in order to inform the SNF of the
reason for its decision and the effect of the decision. In addition, in
Sec. 405.934(c)(6), with respect to an appeal filed by a beneficiary
not enrolled in Medicare Part B at the time of hospitalization, we are
proposing that the QIC would send notice of a favorable decision to the
hospital to inform the hospital of the reason for its decision and the
effect of the decision. In addition, we are proposing that the QIC
would send the SNF notice of a partially favorable decision where the
inpatient admission meets the criteria for Part A coverage, but the SNF
services do not meet the relevant criteria for Part A coverage (for
example, if the services are determined not medically reasonable and
necessary under section 1862(a)(1)(A) of the Act). The notice of a
partially favorable decision sent to a SNF would inform the SNF of the
reason the hospital services were determined to meet the relevant
criteria for Part A coverage, and the reason the SNF services were
determined not to be covered under Part A. We are proposing that the
QIC also explain that the notice is being sent to the SNF for
informational purposes only, and that only the eligible party may
appeal the decision to an ALJ under Sec. 405.936. An eligible party
would have the right to appeal such a partially favorable decision with
respect to the coverage of SNF services under proposed Sec. 405.936 in
the same manner as unfavorable decisions with respect to Part A
coverage of the hospital services.
Consistent with the processes following a favorable first level of
appeal decision, as previously described, in the case of a beneficiary
who was not enrolled in Medicare Part B at the time of hospitalization,
we are proposing in Sec. 405.934(d)(2)(ii) that following a favorable
appeal decision and making any required refund for payments received
for covered services, the hospital may submit a new Part A inpatient
claim to Medicare in order to determine the appropriate amount of
benefits, and for Medicare to make payment for inpatient hospital
services. We are also proposing in Sec. 405.934(d)(2)(ii) that the
claim must be submitted by the hospital within 180 calendar days after
the hospital receives its notice of favorable reconsideration for the
eligible party.
In addition, if a favorable appeal decision includes eligible SNF
services that are covered, in Sec. 405.934(d)(2)(i), we are proposing
that following a refund of amounts collected from the beneficiary, the
SNF may then submit a claim (or claims) for such services in order to
determine the appropriate amount of benefits, and that Medicare would
make payment for the covered SNF services. We are also proposing in
Sec. 405.934(d)(2)(ii) that the SNF submit the claim within 180
calendar days after receiving the notice of a favorable appeal decision
for the eligible party.
If the QIC determines that the hospitalization did not meet
applicable Part A inpatient coverage requirements, we are proposing in
Sec. 405.934(c)(2) that the QIC would send notice of its unfavorable
decision to the eligible party (or their representative). If the QIC
determines that the hospital admission meets applicable Part A
inpatient coverage requirements, but the SNF services eligible for the
appeal do not meet applicable coverage requirements, we are also
proposing in Sec. 405.934(c)(2)

[[Page 89516]]

that the QIC would send notice of its partially favorable decision to
the eligible party (or their representative). The notice of an
unfavorable or partially favorable decision would inform the eligible
party (or their representative) of the right to request a hearing
before an ALJ (or review by an attorney adjudicator) under proposed
Sec. 405.936 and would provide detailed information about the
requirements for filing the request and where the request must be
filed.
6. Conduct of Hearings Before Administrative Law Judges and Decisions
by Administrative Law Judges or Attorney Adjudicators
Currently, the third level of claims appeals are performed by ALJs
and attorney adjudicators within the HHS Office of Medicare Hearings
and Appeals (OMHA). As with the first two levels of appeal, we are
proposing in Sec. 405.936(b) that the third level of retrospective
appeal generally follow existing procedures for claims appeals in
Sec. Sec. 405.1000 through 405.1063, as appropriate, except as
specified in the provisions proposed in this rule. Under proposed Sec.
405.936(a), eligible parties (or their representative) who are
dissatisfied with either a QIC's dismissal of a request for
reconsideration, or an unfavorable reconsideration in proposed Sec.
405.934(c)(2), may file a request in writing with the OMHA within 60
calendar days of receipt of the QIC's notice. The reconsideration
notice would specify the elements required for the request for hearing,
and we propose that these elements would mirror existing requirements
for appeal requests in Sec. 405.1014(a)(1). We are also proposing that
untimely or incomplete requests would be handled under existing
procedures for dismissals in Sec. 405.1014(e) and Sec. 405.1052.
As we previously noted, in some respects, the nature of the appeals
required by the court order dictate a new implementation approach that
cannot utilize existing procedures. For example, ordinarily under
current claims appeals procedures, adjudicators review claims that
contain denied items or services to determine whether items and/or
services billed on a Medicare claim are covered and whether payment may
be made. In addition, under Sec. 405.1006, billed charges on claims
submitted to Medicare serve as the basis for determining the amount in
controversy required for an appeal at the third level of appeal and for
judicial review in federal district court. However, under this proposed
process, with respect to the relevant hospital stay, there is no
inpatient hospital claim and no denial of billed services.
For retrospective appeals, we are proposing to incorporate the
existing amount in controversy requirement required for a hearing
before an ALJ or judicial review in federal court consistent with
section 1869(b)(1)(E) of the Act and Sec. 405.1006.\12\ However, with
respect to the methodology for calculating the amount in controversy,
we cannot utilize the existing method for claims appeals in Sec.
405.1006(d)(1) to calculate such amount. The procedures in existing
regulations require the use of actual charges from the disputed
claim(s) billed to Medicare, and in the scenario giving rise to appeal
rights in the court order, no Part A inpatient claim will have been
filed. Without a Part A inpatient claim, there are no billed charges
for the denied Part A coverage to serve as the basis for calculating
the amount in controversy. Other methods in Sec. 405.1006(d) for
calculating the amount in controversy are designed for appeals that are
factually different than these new appeals, and thus, we do not believe
it would be appropriate to adopt other existing calculation methods to
apply them here.
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\12\ For calendar year 2024, the minimum amount in controversy
for a hearing at the OMHA level is $180, and for judicial review the
minimum amount in controversy is $1,840. These amounts are
calculated annually in accordance with section1869(b)(1)(E) of the
Act, and notice of the minimum amounts for the following calendar
year is published in the Federal Register and is available on
<a href="https://www.cms.gov/medicare/appeals-grievances/fee-for-service/third-level-appeal">https://www.cms.gov/medicare/appeals-grievances/fee-for-service/third-level-appeal</a>.
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In the case of a beneficiary who was enrolled in Medicare Part B at
the time of hospitalization, we believe it would be appropriate to
utilize the billed charges on a claim filed by the hospital for Part B
outpatient hospital services as the basis for calculating the amount in
controversy for these new appeals. Since we do not have a Part A
inpatient claim for the hospital services furnished to the beneficiary,
we do not have available to us the costs of the denied Part A services
that are at issue in the appeal to serve as the basis for the amount in
controversy. While the billed charges for outpatient services will
differ from those that would have been billed on an inpatient claim, we
believe it is reasonable to use the billed charges on the approved
outpatient claim for the purposes of determining the amount in
controversy, and in Sec. 405.936(c)(2) we propose including those
charges in calculating the amount in controversy for a hearing before
an ALJ and for judicial review in federal district court. We emphasize
that, as explained in section III.A.4 of this proposed rule, for
beneficiaries enrolled in Part B at the time of hospitalization, we
will not make an adjustment of payment related to the previously
submitted Part B outpatient hospital claim (including any deductible
and coinsurance amounts) when effectuating a favorable appeal decision.
Nevertheless, we are proposing that the billed charges for the
outpatient hospital services would be included in determining whether
the amount in controversy requirement is met because we do not have
available to us the costs of the denied Part A hospital services at
issue in the appeal and because we believe that for purposes of
determining the amount in controversy it is appropriate to attribute a
dollar amount to the hospital services at issue, even if ultimately we
would not adjust the payment for the hospital services.
For any billed SNF services that are included in the appeal, the
billed charges on a claim submitted by the SNF would be utilized in
calculating the amount in controversy. However, in cases where a claim
was not submitted by the SNF because the services were not covered, the
amount the beneficiary was charged for SNF services, as reflected in an
itemized statement received by the beneficiary or evidence of payments
made by the beneficiary to the SNF, would be used in determining the
amount in controversy.
Thus, we are proposing in Sec. 405.936(c)(2) that the billed
charges on the Part B outpatient claim and the billed charges for any
SNF claim at issue in the appeal, or the billed charges paid by the
beneficiary in the absence of a claim, would serve as the amount in
controversy for hearings before an ALJ and for judicial review in
federal district court. Furthermore, as the cost sharing for a Part A
inpatient claim will be different than the cost sharing for the Part B
outpatient claim, we are not reducing the amount in controversy by any
applicable cost sharing, or other payments made for the Part B
outpatient hospital claim as we do for existing calculation methods.
Nor are we factoring in any cost sharing or payments made related to
the SNF claim, as applicable, to reduce the amount in controversy.
For beneficiaries who are eligible parties because they were not
enrolled in Medicare Part B at the time of their hospitalization, in
most situations, we do not believe hospitals would have submitted a
claim to the program for Part B outpatient services. Therefore, for
beneficiaries who were not enrolled in Part B at the time of
hospitalization and did not have a claim submitted to Medicare on their
behalf for hospital

[[Page 89517]]

outpatient services, we are proposing in Sec. 405.936(c)(3) to
calculate the amount in controversy by using the hospital's billed
charges to the beneficiary for such outpatient services. We believe the
hospital's charges to the beneficiary, as reflected in an itemized
statement received by the beneficiary, or evidence of payments made to
the hospital, are a reasonable estimation of the financial impact of
the denial of Part A coverage to the beneficiary and the amount at
issue in the appeal. In addition, the billed charges for SNF services,
if any, paid by the beneficiary would also be used in computing the
amount in controversy for appeals involving beneficiaries not enrolled
in Medicare Part B at the time of hospitalization.
Consistent with the conduct of appeals before ALJs and attorney
adjudicators under existing procedures in Sec. Sec. 405.1028 through
405.1030, we are proposing that ALJs and attorney adjudicators review
all evidence furnished during the first two levels of appeal and any
additional evidence submitted by the beneficiary with the request for
hearing or request for review of a dismissal. Under proposed Sec.
405.936(d), the ALJ or attorney adjudicator determines if the inpatient
admission, and as applicable, SNF services, satisfied the relevant
criteria for Part A coverage at the time the services were furnished,
and then issues notice of the decision to the eligible party (or their
representative). In proposed Sec. 405.936(d)(2), we explain that the
notice of an unfavorable decision or partially favorable decision (that
is, a decision where Part A coverage is approved for the hospital
admission, but Part A coverage is not approved for applicable SNF
services that are at issue in the appeal) would be sent to the eligible
party (or their representative). In proposed Sec. 405.936(d)(3), the
notice of a favorable decision sent to the eligible party (or their
representative) would include an explanation of the decision and
information regarding the effect of the decision, as well as other
information similar to that found in existing notices under Sec.
405.1046.
In Sec. 405.936(d)(4), when applicable, we are proposing that the
ALJ or attorney adjudicator would send notice of a favorable
reconsideration to the SNF that furnished services to the beneficiary
in order to inform the SNF of the reason for the decision and the
effect of the decision. In addition, in Sec. 405.936(d)(5), with
respect to an appeal filed by a beneficiary not enrolled in Medicare
Part B at the time of hospitalization, we are proposing that the ALJ or
attorney adjudicator would send notice of a favorable decision to the
hospital to inform the hospital of the reason for the decision and the
effect of the decision. In the case of a partially favorable decision,
we are proposing in Sec. 405.936(d)(2) that notice would be sent to
the SNF as an informational copy, and in proposed Sec. 405.936(d)(6)
we specify the elements included in the notice sent to the SNF. The
notice of a partially favorable decision sent to a SNF would inform the
SNF of the reason the hospital services were determined meet the
relevant criteria for Part A coverage, and the reason the SNF services
were determined not to be covered under Part A. We are proposing that
the ALJ or attorney adjudicator also explain that the notice is being
sent to the SNF for informational purposes only, and that only the
eligible party may appeal the decision to the Council under Sec.
405.938.
In Sec. 405.936(d)(7), we are proposing to utilize the existing
procedures in Sec. 405.1016 regarding the calculation of timeframes
within which ALJs and attorney adjudicators must issue decisions,
including applicable waivers and extensions to the adjudication
timeframe, and the option for an eligible party (or their
representative) to escalate an appeal for failure to issue a decision
in the applicable timeframe.
Consistent with the processes at the first two levels of appeal, as
previously described, in the case of a beneficiary who was not enrolled
in Medicare Part B at the time of hospitalization, we are proposing in
Sec. 405.936(e)(2)(ii) that following a favorable appeal decision and
making any required refund for payments received for covered services,
the hospital may submit a new Part A inpatient claim to Medicare in
order to determine the appropriate amount of benefits, and for Medicare
to make payment for inpatient hospital services. We are also proposing
in Sec. 405.936(e)(2)(ii) that the claim must be submitted by the
hospital within 180 calendar days after the hospital receives its
notice of favorable decision for the eligible party.
In addition, if a favorable appeal decision includes eligible SNF
services that are covered, in Sec. 405.936(e)(2)(i), we are proposing
that following a refund of amounts collected from the beneficiary, the
SNF may then submit a claim (or claims) for such services in order to
determine the appropriate amount of benefits, and for Medicare to make
payment for the covered SNF services. We are also proposing in Sec.
405.936(e)(2)(i) that the SNF submit the claim within 180 calendar days
after receiving the notice of a favorable appeal decision for the
eligible party.
If the ALJ or attorney adjudicator determines that the hospital
admission did not meet applicable Part A inpatient coverage
requirements, we are proposing in Sec. 405.936(d)(2) and (d)(3)(vii)
the ALJ or attorney adjudicator would send notice of the unfavorable
decision to the eligible party (or their representative). If the ALJ or
attorney adjudicator determines that the hospital admission meets
applicable Part A inpatient coverage requirements, but the SNF services
eligible for the appeal do not meet applicable coverage requirements,
we are also proposing in Sec. 405.936(d)(2) that the ALJ or attorney
adjudicator would send notice of its partially favorable decision to
the eligible party (or their representative). The notice of an
unfavorable or partially favorable decision would inform the eligible
party (or their representative) of the right to request review by the
Council under proposed Sec. 405.938 and would provide detailed
information about the requirements for filing the request and where the
request must be filed.
In proposed Sec. 405.936(e) and (f), we explain the effect of an
ALJ or attorney adjudicator decision as binding on the eligible party
unless it is further appealed or reopened. The reopening of an ALJ or
attorney adjudicator decision would be processed under existing
procedures in Sec. 405.980(d) and (e). The effect of an ALJ or
attorney adjudicator decision is consistent with the effect of
decisions at other levels in the appeals process, as previously
described. We are proposing that an eligible party (or their
representative) who is dissatisfied with an unfavorable decision by an
ALJ or attorney adjudicator may request review by the Council under
proposed Sec. 405.938(a), and the ALJ or attorney adjudicator decision
notice would provide detailed information about the process for filing
such a request.
7. Conduct of Review by the Medicare Appeals Council
Under Sec. 405.938, we are proposing that retrospective reviews at
the fourth level of appeal would be conducted by the Council and would
generally follow existing procedures for claims appeals in Sec. Sec.
405.1100 through 405.1130, except as specified in the provisions
proposed in this rule. Under proposed Sec. 405.938(a), eligible
parties (or their representative) who are dissatisfied with either a
dismissal of a request for hearing by an ALJ or attorney adjudicator,
or an unfavorable ALJ or attorney adjudicator decision in proposed
Sec. 405.936(d)(2) may file a request in writing with the Council
within 60 calendar days of receipt of the

[[Page 89518]]

notice from the ALJ or attorney adjudicator. The request must include
the elements specified in the notice issued by the ALJ or attorney
adjudicator, and we propose to use the existing requirements for
requests for Council review in Sec. 405.1112. We are proposing that
untimely or incomplete requests would be handled under existing
procedures in Sec. Sec. 405.1100 through 405.1116.
We are proposing that the Council would review appeal requests and
requests for review of dismissal actions under existing procedures in
Sec. Sec. 405.1100 through 405.1132, as applicable. Under proposed
Sec. 405.938(c)(1), the Council makes a decision or remands the case
to an ALJ or attorney adjudicator. We are proposing in Sec.
405.938(c)(2) that the Council may adopt, modify, or reverse the
decision of an ALJ or attorney adjudicator, consistent with existing
Council procedures. In Sec. 405.938(c)(3), we are proposing the
Council would send notice of its decision, or its remand to an ALJ or
attorney adjudicator, to the eligible party (or their representative),
and we propose that a decision would contain information regarding the
effect of a favorable decision. In the case of an unfavorable or
partially favorable decision, we are proposing that the Council include
information about filing a request for judicial review under existing
procedures in 405.1136. We also explain in proposed Sec. 405.938(c)(3)
that a partially favorable decision issued by the Council refers to a
determination that the inpatient admission satisfied the relevant
criteria for Part A coverage, but the SNF services did not satisfy the
relevant criteria for Part A coverage. Notice of a partially favorable
decision is sent to the eligible party (or their representative), and
to the SNF that furnished services under appeal, but for informational
purposes only.
In addition, we are proposing in Sec. 405.938(c)(4), when
applicable, the Council would send notice of a decision favorable to an
eligible party to the hospital and the SNF that furnished services. The
notice would explain the effect of the decision as specified in
proposed Sec. 405.938(d), including the provider's obligation to
refund payments collected for services determined to be covered
following the appeal. The notice would also explain, as applicable, the
process for a SNF or a hospital to submit a claim for the covered
services to determine the amount of benefits due following the refund
of payments previously collected.
In Sec. 405.938(c)(5), we are proposing to utilize the existing
procedures in Sec. 405.1100 regarding the calculation of timeframes
within which the Council must issue decisions, including applicable
waivers and extensions to the adjudication timeframe,\13\ and the
option for an eligible party (or their representative) to escalate an
appeal for failure to issue a decision in the applicable timeframe.
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\13\ For example, under Sec. 405.1106(a), if a party submits a
timely filed request for Council review with an entity other than
the entity specified in the notice of the ALJ's or attorney
adjudicator's action, the Council's adjudication period to conduct a
review begins on the date the request for review is received by the
entity specified in the notice of the ALJ's or attorney
adjudicator's action. In other words, if an ALJ decision specifies
that a party must submit a request for Council review with the
Council, and the party mistakenly files their request with, for
example, OMHA, then the Council's adjudication time period does not
begin until the Council receives the request for review from OMHA.
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In proposed Sec. 405.938(e) and (f), we explain that a Council
decision is considered final and binding on the eligible party unless
it is reopened and revised, or in the case of an unfavorable decision,
a Federal district court issues a decision modifying the Council
decision. The reopening of a Council decision would be processed under
existing procedures in Sec. 405.980(d) and (e). The effect of a
favorable Council decision is consistent with the effect of decisions
at other levels in the appeals process, as previously described. We are
proposing in Sec. 405.938(e)(1) that an eligible party (or their
representative) who meets the requirements to escalate a case under
Sec. 405.1132 or is dissatisfied with an unfavorable decision by the
Council, may request judicial review consistent with existing
procedures in Sec. Sec. 405.1132 through 405.1136. Based on its
existing procedures, the Council's decision notice would provide
detailed information about the process for filing such a request.
8. Judicial Review
We are proposing in Sec. 405.938(f)(1) that eligible parties
dissatisfied with a final decision of the Council whose claims meet the
amount in controversy requirement in proposed Sec. 405.936(c) may
request judicial review in Federal district court under the existing
procedures in Sec. 405.1136. In addition, under proposed Sec.
405.938(f)(2), an eligible party (or their representative) who
satisfies the amount in controversy requirement in proposed Sec.
405.936(c) and is entitled to escalate a case from the Council to
Federal district court upon satisfying the criteria set forth in Sec.
405.1132, may request judicial review under the existing procedures in
Sec. 405.1136.

B. Prospective Appeal Rights

1. Overview
This proposed rule would also establish and implement a new notice
requirement and an expedited appeals process, on a prospective basis,
for certain beneficiaries whose status was changed from inpatient to
outpatient receiving observation services while they were still in the
hospital. The proposed expedited appeals process parallels the process
in effect for inpatient hospital discharge appeals set forth at 42 CFR
405.1205 through 1206, with some differences. In its order dated March
26, 2020, the court indicated that HHS should use a process for the
expedited appeals that is ``substantially similar'' to the existing
process for expedited hospital discharge appeals at Sec. Sec. 405.1205
through 405.1208; under that hospital discharge appeals process,
beneficiaries receive a notice of their rights and may request an
expedited determination by a Quality Improvement Organization (QIO)
about the hospital's decision to discharge the beneficiary. While the
processes are largely similar, a notable difference is that the issue
under appeal in this proposed process relates to the change of status
from an inpatient to an outpatient receiving observation services. This
change of status may affect cost sharing for the hospital stay as well
as whether any post hospital care in a skilled nursing facility would
be covered by Medicare.
CMS contracts with QIOs, pursuant to Title XI, Part B of the Act
and section 1862(g) of the Act, to perform certain statutorily required
functions and contractual quality improvement and other activities for
the purposes of improving the quality of care furnished to Medicare
beneficiaries with respect to Medicare covered items and services. The
QIO Program is part of the HHS' national quality strategy for providing
quality and patient centered care to Medicare beneficiaries. Section
1154(a)(1) of the Act establishes certain review functions of QIOs,
including that QIOs review the services furnished to Medicare
beneficiaries by physicians, other healthcare practitioners, and
institutional and non-institutional providers of services (as defined
in section 1861(u) of the Act and including hospitals). In addition,
under section 1154(a)(18) of the Act, QIOs must also provide, subject
to the terms of their contract with CMS, such other activities as the
Secretary determines may be necessary for the purposes of improving the
quality of care furnished to individuals with respect to items and
services for which payment may be

[[Page 89519]]

made under Medicare. This flexibility allows CMS to establish and
further define the types of reviews performed by the QIOs in order to
meet evolving needs and issues pertaining to healthcare delivered under
the Medicare program.
As discussed in sections II. and III.A. of this rule, a recent
court decision requires the Secretary to implement an appeal process
for certain Medicare beneficiaries that is substantially similar to the
existing hospital discharge appeals conducted by QIOs under Sec. Sec.
405.1205 through 405.1208. See Alexander v. Azar, 613 F. Supp. 3d 559
(D. Conn. 2020)), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d
Cir. 2022). These new review and appeals activities are within the
scope of the Secretary's authority under section 1154(a)(18) of the Act
to contract with QIOs to perform additional activities that are not
already specified in section 1154 of the Act or other provisions.
Section 1155 of the Act governs appeals of QIO determinations that are
made under Title XI, subpart B, which includes section 1154 of the Act.
Therefore, the proposed new QIO determinations, performed under section
1154(a)(18) of the Act, are subject to the appeal process specified in
section 1155 of the Act.\14\ Based on the QIOs' expertise and
longstanding performance of similar functions, CMS has determined that
the QIOs are the most appropriate entity to perform beneficiary-
initiated appeals of hospital reclassifications of inpatients to
outpatients receiving observation services proposed in Sec. Sec.
405.1211 through 405.1212.
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\14\ Under section 1155 of the Act, a beneficiary who is
entitled to benefits under title XVIII (that is, a Medicare
beneficiary) and who is dissatisfied with a determination made by a
QIO in conducting its review responsibilities shall be entitled to a
reconsideration of such determination by the reviewing organization
(that is, the QIO). For the purposes of these proposed appeals,
section 1155 of the Act authorizes the QIO to conduct a
reconsideration of its expedited determination regarding the
hospital reclassification under proposed Sec. 405.1211 to determine
if an eligible beneficiary is entitled to coverage under Part A of
the program.
---------------------------------------------------------------------------

This proposed expedited appeals process would be available to
beneficiaries \15\ who, after formally being admitted as an inpatient,
have subsequently been reclassified by the hospital as an outpatient
while the beneficiary is still in the hospital, receive observation
services following the reclassification, and met one of the following
two criteria:
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\15\ Since the court order specifically requires the provision
of appeal rights to a defined set of class members, and that
definition does not include the provider of services (that is,
hospitals and SNFs), we are limiting party status for these new
appeals to the defined class members. We note that this limitation
currently exists for hospital discharge appeals procedures in
Sec. Sec. 405.1205 and 405.1206, where a provider of services does
not have party status.
---------------------------------------------------------------------------

<bullet> Their stay in the hospital was at least 3 days.
<bullet> Did not have Medicare Part B coverage (these eligible
beneficiaries would not need to remain in the hospital for at least 3
days to be eligible for an appeal).
We are proposing in new Sec. 405.1210(a)(3) the criteria that must
be met for a beneficiary to be eligible for the new prospective appeal
rights. We are proposing to require hospitals to deliver, as soon as
possible after certain conditions are met and prior to release from the
hospital, a new standardized beneficiary notice, informing eligible
beneficiaries of the change in their status, the resulting effect on
Medicare coverage of their stay, and their appeal rights if they wish
to challenge that change. This new notice will be called the Medicare
Change of Status Notice (MCSN). This new notice follows the format and
structure of the Important Message from Medicare (IM), which is the
notice hospitals are required, by Sec. 405.1205, to provide to
beneficiaries to inform them of their right to appeal an inpatient
hospital discharge. See section IV.D. of this proposed rule for details
on how to obtain a copy of the proposed MCSN form.
We considered alternatives to creating a new notice for this
process. One consideration was standardizing and adding appeals
information to the required written Condition Code 44 notification used
by hospitals to inform beneficiaries when their status is changed from
inpatient to outpatient after review by a hospital utilization review
committee and the entire episode will be billed as outpatient. However,
those eligible for this new process would be a small subset of the
population receiving the existing Condition Code 44 notification.
Specifically, individuals would not only require a change of status
from inpatient to outpatient, they must also meet the criteria set
forth in proposed Sec. 405.1210 (a)(2) and (3) to pursue an appeal
regarding a change in status. The vast majority of beneficiaries
receiving the existing notification of inpatient to outpatient change
will not be eligible for this new appeals process and would likely find
the inclusion of information about an appeals process for which they
are not eligible confusing. We also considered adding appeals
information to the Medicare Outpatient Observation Notice (MOON). The
MOON (42 CFR 489.20(y)) is used to inform beneficiaries who receive
observation services for a certain amount of time that they are not
hospital inpatients, but rather outpatients receiving observation
services. However, like the change in status notice mentioned earlier,
the MOON would be overbroad and the vast majority of beneficiaries
receiving it would not be eligible for an appeal in this new process.
Further, per section 1866(a)(1)(Y) of the Act, the MOON is only
required for beneficiaries who have been outpatients receiving
observation services for more than 24 hours, yet we are proposing that,
for prospective appeals, beneficiaries reclassified from inpatients to
outpatients receiving observation services be eligible for an appeal if
any amount of time is spent in observation following the status change
(in this respect, we are expanding the population of beneficiaries
eligible for an appeal beyond the class as defined by the court, and
not limiting eligibility to those beneficiaries who have received a
MOON). Because the MOON is not required for observation stays shorter
than 24 hours, using the MOON would likely result in not all eligible
beneficiaries receiving notification of their appeal rights under the
proposed new process. We concluded that a targeted appeals notice,
delivered only to those beneficiaries eligible for this specific
appeal, would be the most effective and efficient means of informing
eligible beneficiaries of their appeal rights.
The proposed MCSN contains a similar layout and language to the IM
and includes information on the change in coverage, a description of
appeal rights and how to appeal, and the implications for skilled
nursing facility coverage following the hospital stay. We believe that
by proposing the delivery of this largely generic notice, the notice
delivery burden on hospitals would be as minimal as possible, without
any adverse effect on patient rights. Much of the verbiage in the MCSN
has been used in similar, consumer-tested CMS beneficiary notices which
were subject to multiple comment periods during the PRA renewal process
as language included in the IM and another similar Medicare appeals
notice, the Notice of Medicare Non-Coverage.
We have reviewed the notice delivery procedures for the IM notice
related to inpatient hospital discharges and have mirrored that process
in this new process, wherever possible. In proposing this approach, our
goal is to design notice procedures that balance a beneficiary's need
to be informed about his or her appeal rights in an appropriate and
timely manner, without

[[Page 89520]]

imposing unnecessary burdens on hospitals.
We are proposing to require hospitals to deliver the notice to
eligible beneficiaries as soon as possible after a beneficiary is
eligible for this process per Sec. 405.1210(a)(2) and (3), but no
later than 4 hours prior to discharge. For beneficiaries with Part B,
we propose that the notice must be delivered as soon as possible after
the hospital reclassifies the beneficiary from inpatient to outpatient
receiving observation services and the third day in the hospital is
reached. Beneficiaries will likely not reach this required third day in
the hospital until very close to release from the hospital. This is
because these will be beneficiaries that hospitals have determined do
not need an inpatient level of care and thus, the overall length of the
hospital stay is not expected to exceed a few days. For beneficiaries
without Medicare Part B coverage, we are proposing that hospitals must
deliver the notice as soon as possible after the change in status from
inpatient to outpatient receiving observation services because a 3-day
hospital stay is not required for these beneficiaries to be part of the
class specified in the court order.
We believe the approach we are proposing would not be overly
burdensome for hospitals as the proposed notice is standardized and
requires very little customization by the hospital before delivery. The
proposed notice is modeled after the existing hospital discharge
appeals notice (Important Message from Medicare-IM), and like that
notice, does not require extensive time for hospitals to prepare and
deliver to beneficiaries. We believe that the number of beneficiaries
that are eligible for this proposed appeal process would be
significantly lower than the volume that receive the hospital discharge
appeals notification. (Please see section IV.B. for more information on
assumptions and estimates related to this proposed appeals process.)
Additionally, the delivery of the MCSN notice to the beneficiary would
mimic the process already in place for hospitals delivering the IM, so
implementing this process should not be overly difficult or burdensome.
One notable difference, as compared to that for inpatient hospital
discharge appeals, is that beneficiaries would not have financial
liability protection during this new appeals process. Section
1869(c)(3)(C)(iii)(III) of the Act, which provides beneficiaries with
coverage during the inpatient hospital discharge appeal, only applies
to beneficiaries being discharged from a Medicare covered inpatient
hospital stay, and thus would not be applicable to beneficiaries
pursuing an appeal regarding the change in status from inpatient to
outpatient receiving observation services.
We are proposing that the Quality Improvement Organizations (QIOs)
perform these reviews. The nature of these reviews is consistent with
the mission and functions of the QIO Program. QIOs have contracts with
CMS under section 1862(g) of the Act and Part B of Title XI of the Act
to perform certain statutorily required reviews of the services
furnished to Medicare beneficiaries and to implement quality
improvement initiatives involving Medicare beneficiaries, providers,
and their communities. (See 42 CFR parts 475 through 480.)
Historically, QIOs have performed expedited discharge reviews for
beneficiaries appealing inpatient discharges (42 CFR 405.1205 through
405.1208, 422.620 and 422.622) as well as similar expedited reviews for
termination of provider services in non-hospital settings (42 CFR
405.1202 through 405.1204, 422.624, and 422.626). Currently, these
reviews, as well as other case reviews related to the quality of care
received by Medicare beneficiaries, compliance with certain conditions
of coverage for inpatient services, and reviews of the validity of
certain diagnostic and procedural information supplied by hospitals
among other types of care reviews, are performed by the Beneficiary and
Family Centered Care QIOs (BFCC-QIOs), while quality improvement
initiatives are performed by a different type of QIO. If our proposal
is finalized, we intend to require the BFCC-QIOs to perform this new
type of appeal because their scope of knowledge, expertise and
experience with beneficiary appeals and Medicare coverage ensures an
adequate and reliable review.
Finally, the court order only requires that an expedited appeals
process be made available to class members ``who have stayed, or will
have stayed, at the hospital for 3 or more consecutive days.'' For
class members who lacked Part B and did not stay in the hospital for 3
or more consecutive days, it would appear that a non-expedited appeals
process might be sufficient. Nonetheless, we are proposing to use the
expedited process for all prospective appeals, with minor differences
depending on whether the expedited appeal request is made timely. In
other words, an eligible beneficiary may request the QIO review at or
around the time of receiving the notice in a hospital, or after a claim
is filed, and in both instances, beneficiaries will be afforded a
review and determination by the QIO. An appeal filed outside of the
expedited timeframes may also be referred to herein as a standard
appeal.
2. Notifying Eligible Beneficiaries of Appeal Rights When a Beneficiary
Is Reclassified From an Inpatient to an Outpatient Receiving
Observation Services (Sec. 405.1210)
To implement the changes we are proposing, we would revise Subpart
J of 42 CFR 405 to add new Sec. Sec. 405.1210 through 405.1212. These
new proposed regulations are largely modeled after the existing
regulations at Sec. Sec. 405.1205 through 405.1206 controlling notices
to beneficiaries and the QIO review of hospital discharges.
Proposed new Sec. 405.1210(a) sets forth the applicability and
scope of this new appeals process along with definitions of specific
terms used in the proposed new regulations. Specifically, in Sec.
405.1210(a)(1) we propose to define a hospital as, for purposes of the
new notice requirements and appeals process, any facility providing
care at the inpatient hospital level, to include short term or long
term, acute or non-acute, paid through a prospective payment system or
other reimbursement basis, limited to specialty care or providing a
broader spectrum of services and including critical access hospitals
(CAHs). This broad definition tracks Sec. 405.1205(a).
Paragraphs (a)(2) and (a)(3) of proposed Sec. 405.1210 address the
circumstance and eligibility of beneficiaries for appeals in this new
process. A change in status occurs when a hospital reclassifies a
beneficiary from an inpatient to an outpatient receiving observation
services. The phrase ``outpatient receiving observation services'' used
in Sec. Sec. 405.1210 through 405.1212 is used as defined in proposed
Sec. 405.931(h) to mean when the hospital changes beneficiary's status
from inpatient to outpatient while the beneficiary is in the hospital
and the beneficiary subsequently receives observation services
following a valid order for such services. An eligible beneficiary,
consistent with the court order, would be one who: (1) was formally
admitted as a hospital inpatient; (2) while in the hospital was
subsequently reclassified as an outpatient receiving observation
services; and (3) either (A) was not enrolled in Part B coverage at the
time of the beneficiary's hospitalization, or (B) stayed at the
hospital for 3 or more consecutive days but was classified as an
inpatient for fewer than 3 days. We are also proposing to be explicit
in new Sec. 405.1210(a)(iv)) that the period ``3 or more consecutive
days'' is counted

[[Page 89521]]

using the existing rules for determining coverage of SNF services under
section 1861 of the Act and Sec. 409.30 of this chapter. This means
that the admission day is counted as a day, but the discharge day is
not. For example, if a beneficiary is admitted to a Medicare covered
inpatient hospital stay on a Monday and discharges on the following
Wednesday, Monday and Tuesday are counted towards the ``3 or more
consecutive days'', but Wednesday is not.
The provisions of proposed Sec. 405.1210(b) are designed to track
closely with the provisions of Sec. 405.1205 that require delivery of
a notice to beneficiary about inpatient hospital discharges. We are
proposing in Sec. 405.1210(b)(1) that hospitals would be required to
deliver a standardized, largely generic, notice informing eligible
beneficiaries about the availability of the new appeals process.
We are proposing to require hospitals to deliver the notice to
eligible beneficiaries as soon as possible after a beneficiary is
eligible for this process per Sec. 405.1210(a)(2) and (3) and no later
than 4 hours prior to discharge. For beneficiaries with Part B, we
propose that the notice must be delivered as soon as possible after the
hospital reclassifies the beneficiary from inpatient to outpatient
receiving observation services and the third day in the hospital is
reached. For beneficiaries without Medicare Part B coverage, we propose
that hospitals must deliver the notice as soon as possible after the
change in status from inpatient to outpatient receiving observation
services because a 3-day hospital stay is not required for these
beneficiaries to be eligible for an appeal.
Per proposed Sec. 405.1210(b)(2), the new notice would include (1)
the beneficiary's right to request an expedited determination regarding
the decision to change the beneficiary's status from an inpatient to an
outpatient receiving observation services, including a description of
the process as specified in Sec. 405.1211, and the availability of
possible appeals procedures if the beneficiary's request is untimely;
(2) an explanation of the implications of the decision to change the
status of the eligible beneficiary from an inpatient to an outpatient
receiving observation services, the potential change in beneficiary
hospital charges resulting from a favorable decision, and subsequent
eligibility for Medicare coverage for SNF services; and (3) any other
information required by CMS. As to category (2) (see Sec.
405.1210(b)(2)(ii) of this proposed rule) regarding the implications of
the decision, this notice would describe for eligible beneficiaries the
possible changes in the charges for their hospital stay as well as the
potential for non-coverage if they enter a skilled nursing facility
after the hospital stay.
Proposed new Sec. 405.1210(b)(3) and (4) provide that notice
delivery would be valid when the notice is delivered as required in
Sec. 405.1210(a)(3) and the beneficiary signs and dates the notice to
indicate receipt and that the beneficiary understands the notice.
Further, if a beneficiary refuses to sign the notice to acknowledge
receipt, the hospital may annotate its copy of the beneficiary's notice
to indicate the refusal. The date of refusal would be considered the
date of receipt of the notice. The hospital would be required to
maintain a copy of the signed or annotated notice as part of its
records regarding the stay, per federal or state law.
As with existing beneficiary notice requirements, hospitals
generally would need to determine whether a patient is capable of
comprehending and signing the notice. Hospitals would be required to
comply with applicable State laws and CMS guidance regarding the use of
representatives and have procedures in place to determine an
appropriate representative.
3. Expedited Determination Procedures When a Beneficiary Is
Reclassified From an Inpatient to an Outpatient Receiving Observation
Services (Sec. 405.1211)
Proposed new Sec. 405.1211 sets forth the procedures for the
proposed new expedited QIO review leading up to issuance and effect of
the QIO's determination. Proposed Sec. 405.1211 would establish the
responsibilities of the hospitals, QIOs, and beneficiaries relative to
the process.
Proposed Sec. 405.1211(a) describes a beneficiary's right to
request an expedited determination by a QIO when they are reclassified
by their hospital from an inpatient to an outpatient receiving
observation services, and the beneficiary meets the criteria to be
eligible for an appeal as established in Sec. 405.1210(a)(3). As
previously discussed, QIOs are experienced in performing expedited
appeals for beneficiaries in a hospital setting and thus, are well
prepared to implement and execute this new appeals process in an
effective and expeditious manner. Currently, Beneficiary and Family
Centered QIOs (BFCC-QIOs) perform the case review functions that are
similar to the reviews that would be required by Sec. Sec. 405.1211
and 405.1212, so we intend to assign these new reviews to BFCC-QIOs
under our contracts with them; in the event that CMS reconsiders in the
future how QIO functions are assigned and the categorization of QIOs,
we intend that the type of QIOs that perform case review functions (see
42 CFR 405.1200 through 405.1208, 475.102, 476.1 et. seq.) would also
perform these new reviews of changes in status.
In new Sec. 405.1211(b), we are proposing the process for eligible
beneficiaries to request an expedited determination by the QIO. First,
the eligible beneficiary's request must be by telephone to the QIO, or
in writing. We are not proposing any parameters of what a request in
writing would constitute, but it could be an email or fax transmitted
to the QIO. We are also proposing at Sec. 405.1211(b)(1) the timeframe
for requesting such an appeal: eligible beneficiaries would be required
to request an appeal to the QIO prior to release from the hospital. The
notice required under proposed Sec. 405.1210 would identify the BFCC-
QIO that serves the geographic area that includes the hospital so that
this information is available to the eligible beneficiary.
Proposed sections 405.1211(b)(2) and (b)(3) would explain the
responsibilities of beneficiaries to discuss the case, if requested by
the QIO, and their right to submit written evidence to be considered by
the QIO. Per proposed Sec. 405.1211(b)(4), if an eligible beneficiary
requests an appeal timely, they would not be billed during the QIO
appeals process. However, if the appeal is untimely, the hospital may
bill a beneficiary before this QIO process is complete; proposed
paragraphs (b)(4) and (e) make this clear. Finally, we are also
proposing, in Sec. 405.1211(b)(5), that an eligible beneficiary may
file a request for review by the QIO regarding the change in status
after the deadline established in proposed Sec. 405.1211(b)(1) (that
is, the beneficiary may file the request after release from the
hospital) but that the QIO's determination will be provided on a
different timeframe and the eligible beneficiary will not be entitled
to the billing protection proposed in paragraph (e). Keeping untimely
appeals with the QIO will provide beneficiaries with a decision far
sooner though (two calendar days), than if those beneficiaries were
provided with the timeframes set forth in the standard claims appeals
(60 days at the first level of the claims appeals process). We are
proposing that these untimely requests may be made at any time in order
to afford maximum opportunity for beneficiaries to exercise their
appeal rights. Of most concern is those beneficiaries who may have had
a SNF stay following their change in status

[[Page 89522]]

from an inpatient to an outpatient receiving observation services.
These beneficiaries should have the maximum opportunity to appeal and
potentially obtain coverage for what might have been a costly out-of-
pocket outlay.
Proposed Sec. 405.1211(c)(1) through (c)(5) describe the
procedures that the QIO would be required to follow in performing the
expedited determination. We propose at Sec. 405.1211(c)(1) that the
QIO must immediately notify the hospital that a request for an
expedited appeal has been made. In addition, as proposed in Sec.
405.1211(c)(2) and (3), the QIO would be required to determine whether
valid notice was delivered and examine medical and other relevant
records that pertain to change in status. As proposed at Sec.
405.1211(c)(4) and (5), the QIO would be required to solicit the views
of the beneficiary and provide the hospital an opportunity to explain
why the reclassification of the beneficiary from an inpatient to an
outpatient receiving observations services is appropriate. The QIO will
review the information submitted with the appeal request and any
additional information it obtains to determine if the inpatient
admission satisfied the relevant criteria for Part A coverage at the
time the services were furnished.
Proposed section 405.1211(c)(6) addresses the timing of the QIO's
determination. Per proposed paragraph (c)(6)(i), the QIO must render a
decision and notify all relevant persons and entities within one
calendar day of receiving all requested pertinent information if the
eligible beneficiary requested the expedited determination as specified
in proposed Sec. 405.1211(b)(1) (that is, no later than the day of
release from the hospital). Based on current experience regarding
documentation submitted by hospitals under other expedited beneficiary
appeal timeframes, we do not anticipate that the QIO will encounter
delays in receiving any information necessary from the hospital once
the hospital is notified of the appeal (see proposed Sec.
405.1211(d)(1)). This timeframe is as rapid as possible to minimize
potential liability for beneficiaries as well as to maximize their
potential for coverage in a skilled nursing facility should they obtain
a favorable decision by the QIO. A Medicare covered skilled nursing
facility stay must begin within 30 days of a beneficiary's discharge
from a hospital. To that end, QIOs would make their decisions as
quickly as possible so beneficiaries receiving favorable decisions will
have time to plan for and begin a SNF stay within the 30-day parameter.
Proposed Sec. 405.1211(c)(6)(ii) provides that the 1 calendar day
QIO decision deadline does not apply if a beneficiary makes an untimely
request for an expedited appeal, but that the QIO would still accept
the request and render a decision within two calendar days after the
QIO receives all requested information that the hospital must provide
per proposed Sec. 405.1211(d)(1). This provides a beneficiary with the
maximum ability to exercise their right to an expedited appeal, and the
opportunity to obtain SNF coverage within the Medicare coverage
limitation of 30 days after leaving a hospital, should their appeal to
the QIO be favorable. Both proposed paragraphs (c)(6)(i) and (ii)
require the QIO to provide notice of its expedited determination.
In Sec. 405.1211(c)(7) we propose that if the QIO does not receive
the information needed to make its decision, the QIO may move forward
and make a decision based on the information it has at the time. This
is to protect the interests of the beneficiary by ensuring they receive
their decision within the QIO's required timeframes of 1 calendar day
for a timely request and two calendar days for an untimely request.
The QIO decision, as required by proposed Sec. 405.1211(c)(8),
must be conveyed to the eligible beneficiary, the hospital, and SNF (if
applicable) by telephone followed by a written notice. We are proposing
that the QIO's written notice of its determination must include the
basis for the determination, a detailed rationale for the QIO decision,
an explanation of the Medicare payment consequences of the
determination, and information about the beneficiary's right to an
expedited reconsideration as set forth in Sec. 405.1212, including how
and in what time period a beneficiary may make that reconsideration
request. The basis of a decision is a description of, and citations to,
the Medicare coverage rule, instruction, or other policies applicable
to the review. A detailed rationale is an explanation of why services
do or do not meet the relevant criteria for Part A coverage based on
the facts specific to the beneficiary's situation and the QIO's review
of the pertinent information provided by the hospital (as with other
expedited beneficiary appeals of hospital discharges and service
terminations).
Proposed Sec. 405.1211(d) sets forth the responsibilities of
hospitals in the expedited appeals process. Section 405.1211(d)(1)
provides that the hospital must supply all information that the QIO
needs, no later than noon of the calendar day after the QIO notifies
the hospital of the appeals request. We are also proposing that at the
discretion of the QIO, the hospital must make the information available
by phone or in writing (with a written record of any information not
transmitted initially in writing). Section 405.1211(d)(2) requires that
hospitals, upon request, must provide the beneficiary any
documentation, including written records of any information provided by
telephone, it provides to the QIO. We are proposing that this
obligation work the same way that it does under Sec. 405.1206(d)(3),
specifically that the hospital may charge a reasonable amount to cover
the costs of duplicating and delivering the requested materials and
must accommodate such a request by no later than close of business of
the first day after the material is requested by the beneficiary or the
beneficiary's representative.
In Sec. 405.1211(e), we propose that a hospital may not bill a
beneficiary who has appealed timely for any services at issue in the
appeal until the expedited determination process (and reconsideration
process) is complete. Although there is liability protection in the
inpatient discharge expedited appeals process under section
1869(c)(3)(C)(iii) of the Act (incorporating the financial liability
protection in section 1154(e)(4) of the Act in effect prior to the
enactment of section 1869(c)(3)(C)) of the Act, there is no statutory
provision protecting the beneficiary from financial liability for the
hospital stay and services furnished during the pendency of the QIO's
review proposed here. Therefore, we are proposing only that the
hospital may not bill the beneficiary until after the QIO has issued
its determination. This proposal mirrors existing procedures for the
similar expedited appeals procedures the termination of non-hospital
services found at Sec. 405.1202(g). This process would not extend
coverage available to beneficiaries during an appeal, which is
consistent with Sec. 405.1202(g).
Proposed Sec. 405.1211(f) sets forth that a QIO determination is
binding for payment purposes on the beneficiary, hospital, and MAC,
unless the beneficiary pursues an expedited reconsideration per Sec.
405.1212. The decision is binding for purposes of payment only, such
that if the hospital submits a claim under Part A, CMS will make
payment.

[[Page 89523]]

4. Expedited Reconsideration Procedures When a Beneficiary Is
Reclassified From an Inpatient to an Outpatient Receiving Observation
Services (Sec. 405.1212)
In new Sec. 405.1212 we propose to set forth the procedures for
the new expedited reconsideration process. Proposed Sec. 405.1212
contains the responsibilities of the hospitals, QIOs, and beneficiaries
relative to the reconsideration process.
Proposed Sec. 405.1212(a) describes an eligible beneficiary's
right to request an expedited reconsideration by a QIO when they are
dissatisfied with the expedited determination decision by the QIO.
In Sec. 405.1212(b) we are proposing a process for beneficiaries
to request an expedited reconsideration by a QIO. Proposed paragraph
(b)(1) provides that beneficiaries must request an appeal to the QIO no
later than noon of the calendar day following the initial notification
of the expedited determination by the QIO. Under this proposal, the
earlier of the calendar day of the QIO's notification of the
beneficiary by telephone or in writing of its determination (under
Sec. 405.1211(c)(8)) would start the timeframe for the beneficiary to
request an expedited reconsideration. The beneficiary's request for a
reconsideration may be in writing or by telephone.
Proposed Sec. Sec. 405.1212(b)(2) and (b)(3) also explain the
responsibilities of beneficiaries to discuss the case, if requested by
the QIO, as well as beneficiaries' right to submit written evidence to
be considered by the QIO. Finally, proposed (b)(4) and (b)(5) state
that if a beneficiary requests an appeal timely, they would not be
billed until the QIO makes its reconsideration decision; however, if
the beneficiary's request for an expedited reconsideration is untimely,
the hospital may bill a beneficiary before the reconsideration
determination has been made.
Proposed Sec. Sec. 405.1212(c)(1) through 405.1212(c)(4) describe
the procedures that the QIO must follow in performing the expedited
reconsideration. Specifically, we propose in Sec. 405.1212(c)(1) that
the QIO must immediately notify a hospital that a request for an
expedited reconsideration has been made; this means that the notice to
the hospital must be the day the QIO receives the request for expedited
reconsideration. Per proposed Sec. 405.1212(c)(2), the QIO would be
required to offer both the beneficiary and the hospital an opportunity
to provide further information. An example of further information from
the hospital could include an explanation of why the beneficiary was
reclassified from an inpatient to an outpatient receiving observation
services. Similarly, an example of further information from the
eligible beneficiary could include an explanation of why inpatient
status should have been maintained.
Proposed Sec. 405.1212(c)(3)(i) provides that the QIO must render
a decision and notify all relevant persons and entities within two
calendar days of receiving all information necessary to complete the
appeal if the beneficiary requested the reconsideration by noon of the
day after receiving notice of the QIO's determination under Sec.
405.1211. This timeframe is as rapid as possible to minimize potential
liability for beneficiaries as well as to maximize their potential for
coverage in a SNF should they obtain a favorable reconsideration
decision by the QIO. A Medicare covered skilled nursing facility stay
must begin within 30 days of a beneficiary's discharge from a hospital.
To that end, we are proposing a review process for QIOs to make their
decisions as quickly as possible so beneficiaries receiving favorable
decisions will have time to plan for and begin a SNF stay within the
30-day limit for coverage.
Proposed Sec. 405.1212(c)(3)(ii) provides that if a beneficiary
makes an untimely request for an expedited reconsideration, the QIO
must still accept the request and render a decision within 3 calendar
days. Under this proposal, the two-calendar day QIO decision deadline
does not apply in the case of an untimely request for an expedited
reconsideration. However, the expeditious 3-day untimely timeframe
affords a beneficiary the ability to exercise their right to an
expedited appeal and potentially be entitled to SNF coverage within the
30-calendar day time limit for SNF coverage following hospital release,
should they receive a favorable expedited reconsideration determination
from a QIO.
The QIO decision, as required by proposed Sec. 405.1212(c)(4)(i-
iv), must include the basis and detailed rationale for the QIO
decision. The basis of a decision is a description of, and citations
to, the Medicare coverage rule, instruction, or other policies
applicable to the review. A detailed rationale includes the facts
specific to the beneficiary's situation and a detailed explanation of
why the inpatient admission did or did not satisfy the relevant
criteria for Part A coverage at the time the services were furnished.
The decision must also include the potential financial ramifications,
such as deductibles or coinsurance for the beneficiary, the
beneficiary's right to a hearing by an ALJ, and how a beneficiary may
make a request for an expedited reconsideration.
Proposed Sec. 405.1212(d) sets forth the responsibilities of
hospitals in the expedited appeals process. As proposed, a hospital
may, but is not required to, submit evidence to be considered by a QIO
in making its reconsideration decision. If a hospital does not furnish
a QIO with requested additional information, the QIO may proceed to
make a decision based on the information used in the expedited
determination. This is to protect the interests of the beneficiary by
ensuring they receive their decision within the BFCC-QIO's required
timeframes of two calendar days for a timely request and 3 calendar
days for an untimely request. This proposed policy is consistent with
obligations on hospitals in the second level expedited review of a
hospital discharge and on providers of services in the second level
expedited review of a termination of provider services (Sec.
422.1204(e)).
In Sec. 405.1212(e) we propose that a hospital may not bill a
beneficiary who has appealed timely for any services at issue in the
appeal until the expedited reconsideration process is complete.
Proposed Sec. 405.1212(f) sets forth that a QIO reconsideration is
binding on the beneficiary, hospital, and MAC unless the beneficiary
pursues an appeal with an ALJ in accordance with 42 CFR part 478
subpart B. This concept is consistent with the existing claims appeals
process currently established under Sec. Sec. 405.1000 through
405.1140. The decision is binding for purposes of payment only, such
that if the hospital submits a claim under Part A, CMS will make
payment.
Per section 1155 of the Act, a beneficiary who is dissatisfied by a
QIO's reconsideration of its initial decision may seek additional
administrative review and, ultimately, judicial review, if the amount
in controversy limits are met.\16\ Our proposal follows that process.
---------------------------------------------------------------------------

\16\ Under section 1155 of the Act, for an appeal with an ALJ,
the amount in controversy must be $200 or more, and for judicial
review, the amount in controversy must be $2,000 or more.
---------------------------------------------------------------------------

5. Conforming Changes Beneficiary Notice of Discharge or Change in
Status Rights (Sec. 489.27)
In conjunction with the proposed notice provisions Sec. Sec.
405.1210 through 405.1212, we are proposing to make

[[Page 89524]]

conforming changes to a related existing regulatory provision. We
propose to amend the provider agreement requirements in Sec. 489.27(b)
to cross-reference the proposed notice requirements. Thus, proposed
Sec. 489.27(b) would specify that delivery of the proposed appeals
notice is required as part of the Medicare provider agreement. Lastly,
to account for this conforming change, we are proposing to change the
title of Sec. 489.27 to include ``change in status'' to more
accurately reflect the actions that would require the issuance of a
notice.
6. Conforming Changes to Quality Improvement Organization (QIO) Review
Regulations
We are also proposing to amend the QIO regulations at Sec.
476.71(a) to conform with the proposed changes in review
responsibilities at Sec. Sec. 405.1210 through 405.1212. The proposed
amendment to the QIO regulations would add a new review type to the
currently enumerated list of reviews performed by QIOs, specifically
for beneficiary appeals of hospital reclassifications of a fee-for-
service beneficiary's inpatient status to that of outpatient receiving
observation services. The beneficiary eligibility requirements for
filing expedited appeals and the required processes for those appeals
are proposed in sections III.B.1 through III.B.5 of this proposed rule.
This proposed amendment to the QIO regulation would specify that QIO
perform review functions for these beneficiary appeals in a manner that
is consistent with other QIO review functions while ensuring alignment
with the proposed beneficiary eligibility and process requirements for
such appeals.
The QIO regulations at 42 CFR 476.1(a) define ``QIO review'' as a
review performed in fulfillment of a contract with CMS, either by the
QIO or its subcontractors. Under regulations at Sec. 476.71, the QIO's
review responsibilities currently include: (1) whether services are or
were reasonable and medically necessary for diagnosis or treatment; (2)
whether the quality of the services meets professionally recognized
standards of health care, as determined through the resolution of oral
beneficiary complaints; (3) whether care and services furnished or
proposed on an inpatient basis could be effectively furnished more
economically on an outpatient basis or in another inpatient setting;
(4) diagnostic related group (DRG) validation of diagnosis and
procedure information provided by hospitals; (5) the completeness,
adequacy and quality of hospital care provided; (6) medical necessity,
reasonableness and appropriateness of hospital admissions and
discharges; (7) medical necessity, reasonableness and appropriateness
of inpatient hospital care for which additional outlier payment is
sought; and (8) whether a hospital has misrepresented admission or
discharge information resulting in unnecessary or multiple admissions,
or inappropriate billing.
Our proposed amendment to Sec. 476.71(a) would add paragraph (9)
to this list of QIO review responsibilities to include the new
beneficiary-initiated appeals proposed here for when a hospital
reclassifies certain fee-for-service beneficiaries' admission status
from inpatient to that of outpatient.
In considering the existing hospital discharge appeals process, CMS
determined that the circumstances for these new appeals, and the
potential impact of such appeal decisions on Part A coverage for
subsequent care in other settings, necessitated a new notification
process and review timelines which differ from the processes that
govern the existing hospital discharge appeals process. These new
appeals are proposed in section III.B of this proposed rule and would
be in new appeals regulations at Sec. Sec. 405.1210 through 405.1212.
The proposed amendment to the QIO regulations, as previously
discussed, applies to the processes and timeframes for the new appeals
discussed in section III.B of this proposed rule, which have been
designed to meet the needs of beneficiaries who have had their
inpatient status reclassified to outpatient receiving observation
services.
We welcome public comment on the addition of these appeals.

C. Severability

Finally, we note that while the various provisions of this proposed
rule are intended to implement the District Court order in Alexander v.
Azar, 613 F. Supp. 3d 559 (D. Conn. 2020), aff'd sub nom., Barrows v.
Becerra, 24 F.4th 116 (2d Cir. 2022), the proposals described
previously for retrospective appeals and prospective appeals would be,
if finalized, distinct provisions. We believe these distinct processes
may function independent of each other. To the extent a court may
enjoin any part of a final rule, the Department intends that other
provisions or parts of provisions should remain in effect. Should they
be finalized, we intend that any provision of the proposals described
in this section or in another section held to be invalid or
unenforceable by its terms, or as applied to any person or
circumstance, would be construed so as to continue to give maximum
effect to the provision permitted by law, unless such holding is one of
utter invalidity or unenforceability, in which event we intend that the
provision would be severable from the other finalized provisions
described in this section and in other sections and would not affect
the remainder thereof or the application of the provision to persons
not similarly situated or to dissimilar circumstances.

IV. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et
seq.) we are required to provide 30-day notice in the Federal Register
and solicit public comment before a ``collection of information''
requirement is submitted to the Office of Management and Budget (OMB)
for review and approval. For the purpose of the PRA and this section of
the proposed rule, collection of information is defined under 5 CFR
1320.3(c) of the PRA's implementing regulations.
To fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
<bullet> The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
<bullet> The accuracy of our estimate of the information collection
burden.
<bullet> The quality, utility, and clarity of the information to be
collected.
<bullet> Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment (see section IV.D of this proposed
rule) on each of these issues for the following sections of this
document that contain information collection requirements. Comments, if
received, will be responded to within the subsequent final rule.

A. Wage Estimates

Private Sector: To derive average costs, we used wage data from the
U.S. Bureau of Labor Statistics' (BLS) May 2022 National Occupational
Employment and Wage Estimates (<a href="https://www.bls.gov/oes/2022/may/oes_nat.htm">https://www.bls.gov/oes/2022/may/oes_nat.htm</a>). In this regard, Table 1 presents BLS' mean hourly wage,
our estimated cost of fringe benefits and other indirect costs, and our
adjusted hourly wage.

[[Page 89525]]

Table 1--National Occupational Employment and Wage Estimates
----------------------------------------------------------------------------------------------------------------
Fringe benefits
Mean hourly and other Adjusted
Occupation title Occupation code wage ($/hr) indirect costs hourly wage ($/
($/hr) hr)
----------------------------------------------------------------------------------------------------------------
Registered Nurse............................ 29-1141 39.78 39.78 79.56
----------------------------------------------------------------------------------------------------------------

As indicated, we are adjusting our hourly wage estimate by a factor
of 100 percent. This is necessarily a rough adjustment, both because
fringe benefits and other indirect costs vary significantly from
employer to employer, and because methods of estimating these costs
vary widely from study to study. Nonetheless, we believe that doubling
the hourly wage to estimate the total cost is a reasonably accurate
estimation method.
Beneficiaries: We believe that the cost for beneficiaries
undertaking administrative and other tasks on their own time is a post-
tax wage of $21.98/hr.
The Valuing Time in U.S. Department of Health and Human Services
Regulatory Impact Analyses: Conceptual Framework and Best Practices
\17\ identifies the approach for valuing time when individuals
undertake activities on their own time. To derive the costs for
beneficiaries, a measurement of the usual weekly earnings of wage and
salary workers of $1,059 \18\ for 2022, divided by 40 hours to
calculate an hourly pre-tax wage rate of $26.48/hr. This rate is
adjusted downwards by an estimate of the effective tax rate for median
income households of about 17 percent or $4.50/hr ($26.48/hr x 0.17),
resulting in the post-tax hourly wage rate of $21.98/hr ($26.48/hr-
$4.50/hr). Unlike our State and private sector wage adjustments, we are
not adjusting beneficiary wages for fringe benefits and other indirect
costs since the individuals' activities, if any, would occur outside
the scope of their employment.
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\17\ <a href="https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//176806/VOT.pdf">https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//176806/VOT.pdf</a>.
\18\ <a href="https://fred.stlouisfed.org/series/LEU0252881500A">https://fred.stlouisfed.org/series/LEU0252881500A</a>.
---------------------------------------------------------------------------

B. Proposed Information Collection Requirements (ICRs)

This proposed rule sets forth new appeals procedures as required by
the court order in the case Alexander v. Azar, 613 F. Supp. 3d 559 (D.
Conn. 2020)), aff'd sub nom., Barrows v. Becerra, 24 F.4th 116 (2d Cir.
2022). Certain beneficiaries in Original Medicare, who are initially
admitted to a hospital as an inpatient by a physician but whose status
during their stay was changed to outpatient receiving observation
services by the hospital, thereby effectively denying Part A coverage
for their hospital stay, may pursue an appeal under this proposed rule.
In some cases, the status change also affects coverage of a
beneficiary's post-hospital extended care services furnished in a
skilled nursing facility (SNF). The appeal is filed with Medicare to
decide if the inpatient admission meets the relevant criteria for Part
A coverage.
1. ICRs Regarding Retrospective Appeals Requests (Sec. 405.932)
The proposals in new Sec. 405.932 will be submitted to OMB for
review under control number 0938-TBD (CMS-10885). At this time, the
control number has yet to be determined, but will be assigned by OMB
upon their clearance of this proposed collection of information
request. CMS will include that number in the subsequent CMS-4204-F
final rule. OMB will issue the control number's expiration date upon
their approval of the final rule's collection of information request.
The issuance of that date can be monitored at <a href="http://www.Reginfo.gov">www.Reginfo.gov</a>.
As discussed in section III.A.3, Sec. 405.932 proposes that
eligible parties may file in writing an appeal related to a change in
patient status which resulted in the denial of Part A coverage. A
written appeal request must be received by the eligibility contractor
no later than 365 days after the implementation date of the final rule.
Details regarding the deadline to file an appeal and where such appeals
should be filed would be posted to <a href="http://Medicare.gov">Medicare.gov</a> once the retrospective
appeals process is operational. The written request must include the
following information:
<bullet> Beneficiary name.
<bullet> Beneficiary Medicare number (the number on the
beneficiary's Medicare card).
<bullet> Name of the hospital and dates of hospitalization.
<bullet> Name of the SNF and the dates of stay (as applicable).
If the appeal includes SNF services not covered by Medicare, the
written request must also include an attestation to the out-of-pocket
payment(s) made by the beneficiary for such SNF services and must
include documentation of payments made to the SNF for such services.
We estimate that it would take an individual approximately 30
minutes (0.5 hr) to complete the appeal request including the
attestation and documentation of out-of-pocket payments for SNF
services and submit the completed information to the eligibility
contractor.
Because this is a new appeal right and associated process, CMS does
not have precise data and cannot meaningfully estimate how many
individuals may request an appeal under the new appeals process.
However, we believe that the closest equivalent is using the rate of
individuals who appeal denials of initial claim determinations under
the claim appeals process at the first level of appeal to a MAC (which
is 3 percent), and aligning it with the appeal rates of higher levels
of appeal (ranging from 21 percent to 27 percent) to arrive at an
estimate of 20 percent. This estimate reflects our expectation that
eligible parties in this process will be more motivated than in the
claim appeals process to avail themselves of this unique opportunity
for a retrospective appeal on potentially high dollar claims.
Based on these data, we estimate that the total number of eligible
beneficiaries is 32,894.\19\ Assuming that 20 percent of individuals
(6,579 = 32,894 x 0.20) who are eligible to appeal will file a request,
we estimate a one-time burden of 3,290 hours (6,579 requests x 0.5 hr/
request) at a cost of $72,314 (3,290 hr x $21.98/hr).
---------------------------------------------------------------------------

\19\ The data used in this report came from the 2022 CMS Part B
institutional administrative claims data for 100 percent of Medicare
beneficiaries enrolled in the fee-for-service (FFS) program, which
are available from the Integrated Data Repository (IDR). The IDR
contains a subset of data transmitted by the Common Working File
(CWF), a computerized database maintained by CMS in connection with
its processing and payment of Medicare claims.

---------------------------------------------------------------------------

[[Page 89526]]

2. ICRs Regarding Notifying Beneficiaries of Appeal Rights When
Hospital Inpatient Coverage Is Reclassified to Coverage as an
Outpatient Receiving Observation Services (Sec. 405.1210)
The proposals in new Sec. 405.1210 will be submitted to OMB for
review under control number 0938-TBD (CMS-10868). At this time, the
control number has yet to be determined, but will be assigned by OMB
upon their clearance of this proposed collection of information
request. CMS will include that number in the subsequent CMS-4204-F
final rule. OMB will issue the control number's expiration date upon
their approval of the final rule's collection of information request.
The issuance of that date can be monitored at <a href="http://reginfo.gov">reginfo.gov</a>.
Section 405.1210 proposes to require hospitals to deliver, prior to
discharge, a standardized notice informing eligible beneficiaries of
the change in status from an inpatient to an outpatient receiving
observation services, and their appeal rights if they wish to challenge
that change.
The proposed Medicare Change of Status Notice (MCSN) is new and is
intended to be furnished only to those beneficiaries eligible for this
specific proposed new appeal. The proposed MCSN notice contains only
two fields that hospitals must complete: (1) the beneficiary's name,
and (2) the beneficiary's identifier number. The remaining information
(information on the change in coverage, a description of appeal rights
and how to appeal, and the implications for skilled nursing facility
coverage following the hospital stay) is standardized.
For beneficiaries with Medicare Part B coverage, hospitals would be
required to deliver the notice to eligible beneficiaries as soon as
possible after hospital reclassifies the beneficiary from an inpatient
to an outpatient and the beneficiary has stayed in the hospital for 3
or more consecutive days but was an inpatient for fewer than 3 days.
The notice must be delivered no later than 4 hours before the
beneficiary is released from the hospital.
For beneficiaries without Medicare Part B coverage, hospitals would
be required to deliver the notice to eligible beneficiaries as soon as
possible after the change from inpatient to outpatient with observation
services is made as a 3-day hospital stay is not required for these
beneficiaries. The notice must be delivered no later than 4 hours
before the beneficiary is released from the hospital.
We estimate it would take 10 minutes (0.1667 hr) at $79.56/hr for a
Registered Nurse to complete the two data fields and deliver each
notice to the applicable beneficiary.
The 10-minute estimate is same as that for our Important Message
from Medicare (CMS-10065/10066; OMB 0938-1019), which the proposed MCSN
notice is modeled after.
In 2022 there were approximately 15,655 instances where hospital
stays met the criteria for an appeal.20 21 With regard to
this proposed rule we estimate that hospitals would be required to give
an estimated 15,655 MCSN notices to beneficiaries each year. In
aggregate, we estimate an annual hospital burden of 2,610 hours (15,655
notices x 0.1667 hr/notice) at a cost of $207,652 (2,610 hr x $79.56/
hr).
---------------------------------------------------------------------------

\20\ The data used in this report come from the 2022 CMS Part B
institutional administrative claims data for 100 percent of Medicare
beneficiaries enrolled in the fee-for-service (FFS) program, which
are available from the CMS Chronic Condition Data Warehouse
(<a href="http://www2.ccwdata.org/web/guest/home">www2.ccwdata.org/web/guest/home</a>), accessed August 2023.
\21\ The data used in this report come from the 2022 CMC Part B
institutional administrative claims data for 100 percent of Medicare
beneficiaries enrolled in the fee-for-service (FFS) program, which
are available from the CMS Chronic Condition Data Warehouse
(<a href="http://www2.ccwdata.org/web/guest/home">www2.ccwdata.org/web/guest/home</a>), accessed August 2023.
---------------------------------------------------------------------------

Please note, our data does not permit us to determine whether the
observation services occurred prior to the initial inpatient stay or
followed the change in status from inpatient to outpatient, as required
to qualify for an appeal. As a result, 15,655 MCSN notices likely
overstates the number of beneficiaries eligible for an appeal.
Please see section IV.D. of this proposed rule if you wish to view
the draft standardized notice and supporting documentation.
3. ICRs Regarding Applicable QIO Review Regulations (Sec. 476.71 and
Sec. 476.78)
In section III.B. of this proposed rule, we are proposing that the
QIOs would review the prospective expedited appeals under their
contracts with the Secretary. CMS expects to revise the BFCC-QIO's
contracts under the 13th Statement of Work to include the new
prospective expedited appeals requirements after publication of the
subsequent final rule. The additional costs to the government for the
BFCC-QIOs to review the new appeals would include payment for the
additional level of effort associated with communicating with
beneficiaries and hospitals for the duration of the appeal, collecting
and reviewing patient records, performing reconsiderations if
requested, and providing case files requested for further levels of
review if needed. It also would include the cost of reimbursing
hospitals for the submission of patient records for prospective
expedited appeals. Hospitals would submit patient records and request
reimbursement from the QIO using the process established in the
existing memorandums of agreement (MOAs) under Sec. 476.78(a) between
hospitals and the QIO having jurisdiction over the particular State in
which the hospital stay occurred.
As discussed in section III.B. of this proposed rule, hospitals
would be required to submit patient records to the QIOs for prospective
expedited appeals under proposed Sec. 405.1211(d). Existing QIO
regulations at Sec. 476.78(b)(2) and (c) require providers and
practitioners to electronically submit patient records to the QIOs for
purposes of one or more QIO functions and allow for the reimbursement
of providers and practitioners by the QIO for the electronic submission
of patient records for one or more QIO functions at a rate of $3.00 per
submission under Sec. 476.78(e)(2). Hospitals that have waivers for
the required electronic submission of records under Sec. 476.78(d) may
be reimbursed by the QIO at a rate of $0.15 per page for submission of
the patient records under Sec. 476.78(e)(3).
The estimation methodology used to determine the reimbursement
rates for electronic and non-electronic submission of patient records
for one or more QIO functions is discussed further in section IX.A. of
the Fiscal Year (FY) 2021 Hospital Inpatient Prospective Payment System
(IPPS)/Long-Term Care Prospective Payment System (LTCH PPS) final rule
(85 FR 58977 through 58985). This estimation methodology is appropriate
when applied to the proposed prospective expedited appeals due to the
substantial similarity of its requirements and processes to those of
other QIO functions upon which these rates were determined.
In section III.B.6 of this proposed rule, we are proposing the
addition of a QIO review type at Sec. 476.71(a)(9) making the QIO's
review of the prospective expedited appeals under proposed Sec.
405.1211(d) a QIO function using our authority in section 1154(a)(18)
of the Act. As established earlier in the ICR section, the proposed
prospective appeals process would constitute a CMS administrative
action toward a specific individual or entity. Thus, the preparation
and submission of the appeal, supporting documentation needed for the
appeal, and communications between the QIO and parties to the appeal
are not subject to

[[Page 89527]]

the PRA as stipulated under 5 CFR 1320.4(a)(2).

C. Summary of Annual Burden Estimates for Proposed Changes

Table 2--Proposed Annual Requirements and Burden Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Labor
Regulation section(s) under Title 42 OMB control No. (CMS ID Respondents Total Time per response time cost ($/ Total cost
of the CFR No.) responses (hours) (hours) hr) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 405.932...................... 0938-TBD (CMS-10885)... 32,894 beneficiaries.. 6,579 0.5 (30 min)........... 3,290 21.98 72,314
Sec. 405.1210..................... 0938-TBD (CMS-10868)... 6,162 hospitals....... 15,655 0.1667 (10 min)........ 2,610 79.56 207,652
------------------------------------------------------------------------------------------
Total........................... ....................... 39,056................ 22,234 varies................. 5,900 varies 279,966
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Submission of Comments

We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection requirements. The
requirements are not effective until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed previously, please visit the CMS
website at <a href="https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing">https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing</a>, or call the Reports Clearance
Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the DATES and ADDRESSES section of this
proposed rule and identify the rule (CMS-4204-P), the ICR's CFR
citation, and OMB control number.

V. Regulatory Impact Statement

We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), Executive Order 14094 entitled ``Modernizing
Regulatory Review'' (April 6, 2023), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999).
Executive Orders 12866 and 13563 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, distributive impacts, and equity). The
Executive Order 14094 entitled ``Modernizing Regulatory Review''
(hereinafter, the Modernizing E.O.) amended section 3(f) of Executive
Order 12866 (Regulatory Planning and Review). The amended section
3(f)(1) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule: (1) having an
annual effect on the economy of $200 million or more in any 1 year. A
regulatory impact analysis (RIA) must be prepared for the rules with
significant regulatory action/s as per section 3(f)(1) ($200 million or
more in any 1 year). This rule does not reach the economic threshold
and thus is not considered a significant rule under section 3(f)(1).
We are making the determination that the proposed new appeals
process will not have a significant financial impact on the Medicare
program or interested parties based on our assumption about the overall
number of projected appeals. While it is difficult to project how many
beneficiaries will pursue appeals under this new process, overall, we
anticipate a relatively low volume of retrospective appeals. We
estimate that the total number of eligible beneficiaries is 32,894.\22\
We are projecting approximately 6,600 appeals at the first level of
appeal (MAC level); 5,000 appeals at the second level of appeal (QIC
Level); 2,800 appeals at the third level of appeal (ALJ level); and 150
at the Medicare Appeals Council. There will be administrative costs
associated with tasking a contractor to serve as a point of contact and
clearinghouse for incoming retrospective appeals requests.
---------------------------------------------------------------------------

\22\ The data used in this report came from the 2022 CMS Part B
institutional administrative claims data for 100 percent of Medicare
beneficiaries enrolled in the fee-for-service (FFS) program, which
are available from the Integrated Data Repository (IDR). The IDR
contains a subset of data transmitted by the Common Working File
(CWF), a computerized database maintained by CMS in connection with
its processing and payment of Medicare claims.
---------------------------------------------------------------------------

We also anticipate a very low volume of prospective and standard
appeals on an ongoing basis. We estimate that around 15,000 notices
informing beneficiaries of their change in status and informing them of
their right to appeal will be delivered annually.\23\ We are estimating
an appeal rate of 50 percent, which would result in about 7,500 appeals
per year.
---------------------------------------------------------------------------

\23\ The data used in this report come from the 2022 CMS Part B
institutional administrative claims data for 100 percent of Medicare
beneficiaries enrolled in the fee-for-service (FFS) program, which
are available from the CMS Chronic Condition Data Warehouse
(<a href="http://www2.ccwdata.org/web/guest/home">www2.ccwdata.org/web/guest/home</a>), accessed August 2023.
---------------------------------------------------------------------------

While our estimates reflect a relatively low number of appeals, we
acknowledge that there will be administrative costs for hospitals to
accommodate the new appeals process, as well as costs associated with
modifying contracts for MACs, QICs, and the BFCC-QIOs to perform the
retrospective, prospective and standard appeals. We welcome comment on
these proposed estimates.
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
less than $9.0 million to $47.0 million in any 1 year. Individuals and
states are not included in the definition of a small entity. We are not
preparing an analysis for the RFA because we have determined, and the
Secretary certifies, that this would not have a significant economic
impact on a substantial number of small entities. In addition, section
1102(b) of the Act requires us to

[[Page 89528]]

prepare an RIA if a rule may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital at 42 CFR 412.108 as a hospital that is located outside of a
Metropolitan Statistical Area for Medicare payment regulations and has
fewer than 100 beds. We are not preparing an analysis for section
1102(b) of the Act because we have determined, and the Secretary
certifies, that this proposed regulation would not have a significant
impact on the operations of a substantial number of small rural
hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2023, that
threshold is approximately $177 million. This rule will have no
consequential effect on state, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on state
and local governments, preempts state law, or otherwise has Federalism
implications. Since this regulation does not impose any costs on state
or local governments, the requirements of Executive Order 13132 are not
applicable.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.

VI. Response to Comments

Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on December 18, 2023.

List of Subjects

42 CFR Part 405

Administrative practice and procedure, Diseases, Health facilities,
Health professions, Medical devices, Medicare, Reporting and
recordkeeping requirements, Rural areas, X-rays.

42 CFR Part 476

Grant programs--health, Health care, Health facilities, Health
professions, Health records, Peer Review Organization (PRO), Penalties,
Privacy, Reporting and recordkeeping requirements.

42 CFR Part 489

Health facilities, Medicare, Reporting and recordkeeping
requirements.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority citation for part 405 continues to read as follows:

Authority: 42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x,
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Subpart I is amended by adding an undesignated center heading after
Sec. 405.930 and Sec. Sec. 405.931, 405.932, 405.934, 405.936, and
405.938 to read as follows:
Retrospective Appeals for Changes in Patient Status That
Resulted in Denial of Part A Coverage for Hospital Services.
Sec.
405.931 Scope, basis, and definitions.
405.932 Right to appeal a denial of Part A coverage resulting from a
change in patient status.
405.934 Reconsideration.
405.936 Hearings before an ALJ and decisions by an ALJ or Attorney
Adjudicator.
405.938 Review by the Medicare Appeals Council and judicial review.

Sec. 405.931 Scope, basis, and definitions.

(a) Scope and basis. The provisions in Sec. Sec. 405.931 through
405.938--
(1) Implement a federal district court order requiring appeal
rights for hospital stays on or after January 1, 2009, for a specified
class of beneficiaries under certain conditions (defined in Sec.
405.931(b)(1)) who were admitted to a hospital as inpatients, but were
subsequently reclassified by the hospital as outpatients receiving
observation services; and
(2) Apply to retrospective appeals, that is, appeals for hospital
outpatient services, and as applicable, post-hospital extended care
services in a skilled nursing facility (SNF services), furnished to
eligible parties as defined in paragraph (b) of this section before the
implementation of the prospective appeal process set forth in
Sec. Sec. 405.1210 through 405.1212.
(b) Definitions. For the purposes of the appeals conducted under
Sec. Sec. 405.931 through 405.938, the following definitions apply:
Eligible party means a beneficiary who, on or after January 1,
2009, meets the following criteria, and is, thus, eligible to request
an appeal under Sec. Sec. 405.931 through 405.938:
(i) Was formally admitted as a hospital inpatient.
(ii) While in the hospital was subsequently reclassified as an
outpatient receiving observation services (as defined in Sec.
405.931(h)).
(iii) Has received an initial determination (as defined in Sec.
405.920) or a Medicare Outpatient Observation Notice (MOON) (as
described in Sec. 489.20(y)) indicating that the observation services
are not covered under Medicare Part A.
(iv)(A) Was not enrolled in the Supplementary Medical Insurance
program (that is, Medicare Part B coverage) at the time of
beneficiary's hospitalization; or
(B) Stayed at the hospital for 3 or more consecutive days but was
designated as an inpatient for fewer than 3 days, unless more than 30
calendar days has passed after the hospital stay without the
beneficiary's having been admitted to a SNF.
(v) Medicare beneficiaries who meet the requirements of the
paragraph (iv)(A) or (B) of this definition but who pursued an
administrative appeal and received a final decision of the Secretary
before September 4, 2011, are excluded from the definition of an
eligible party.
Eligibility contractor means the contractor who meets all of the
following:
(i) Is identified on the <a href="http://Medicare.gov">Medicare.gov</a> website for accepting appeal
requests.
(ii) Receives appeal requests and makes determinations regarding
eligibility for the appeal under Sec. Sec. 405.931 through 405.938.
(iii) Issues notices of eligibility.
(iv) Refers valid appeal requests to the processing contractor for
a decision on the merits of the appeal.
Processing contractor means the contractor responsible for
conducting the first-level appeal and issuing a decision on the merits
of the appeal. Appeals under Sec. 405.932 are conducted by the MAC
who, at the time of the referral of the request for appeal under Sec.
405.932(d)(2), has jurisdiction over claims submitted by the hospital
where the eligible party received the services at issue.
(c) Party to an appeal. For the purposes of the appeals conducted

[[Page 89529]]

under Sec. Sec. 405.931 through 405.938, an eligible party is the only
party to the appeal. The provisions of Sec. 405.906 do not apply to
appeals processed under these provisions, and the provider that
furnished services to an eligible party may not file a request for an
appeal and is not considered a party to any appeal decision or
determination.
(d) Authorized representatives, appointed representatives, or
representatives of a deceased eligible party. For the purposes of
appeals conducted under Sec. Sec. 405.931 through 405.938:
(1) The provisions of Sec. 405.910 apply to an eligible party
appointing a representative to assist in such appeal, as appropriate,
except as follows:
(i) A provider of services who furnished items or services to a
beneficiary whose claims are the subject of an appeal under the
provisions of Sec. Sec. 405.931 through 405.938 is prohibited from
representing the beneficiary or eligible party in such appeal.
(ii) [Reserved.]
(2) An authorized representative (as defined in Sec. 405.902) may
act on behalf of an eligible party and has all of the same rights and
responsibilities of an eligible party throughout the appeals process.
(3) The provisions of Sec. 405.906(a)(1) apply to a deceased
eligible party in the same manner in which such provisions apply to a
deceased beneficiary.
(4) The provisions of Sec. 405.906(c) do not apply.
(5) A beneficiary who is an eligible party is considered
unrepresented if the beneficiary meets any of the following:
(i) Has not appointed a representative under Sec. 405.910.
(ii) Has an authorized representative as defined in Sec. 405.902.
(iii) Has appointed as its representative a member of the
beneficiary's family, a legal guardian, or an individual who routinely
acts on behalf of the beneficiary, such as a family member or friend
who has a power of attorney.
(iv) Is deceased but met the conditions for an eligible party in
paragraph (b)(1) of this section and the appeal is filed by an
individual who meets the conditions set forth in Sec. 405.906(a)(1).
(e) Prohibition on assignment of appeal rights. For the purposes of
the appeals conducted under Sec. Sec. 405.931 through 405.938, an
eligible party may not assign appeal rights to a provider under the
provisions of Sec. 405.912.
(f) Date of receipt of a notice or decision. For the purposes of
the appeals conducted under Sec. Sec. 405.931 through 405.938, the
date of receipt of a notice or decision sent by the eligibility
contractor, processing contractor or other appeals adjudicator is
presumed to be 5 calendar days following the date on the notice unless
there is evidence to the contrary.
(g) Three or more consecutive days. For the purposes of the appeals
conducted under Sec. Sec. 405.931 through 405.938, when determining if
a beneficiary is an eligible party and for the purposes of determining
coverage of SNF services under section 1861 of the Act, inpatient
hospital days are counted in accordance with Sec. 409.30, that is, a
patient must have a qualifying inpatient stay of at least 3 consecutive
calendar days starting with the admission day but not counting the
discharge day.
(h) Outpatient receiving observation services. For the purposes of
appeals conducted under Sec. Sec. 405.931 through 405.938 when
determining if a beneficiary is an eligible party, a beneficiary is
considered an outpatient receiving observation services when the
hospital changes beneficiary's status from inpatient to outpatient
while the beneficiary is in the hospital and the beneficiary
subsequently receives observation services following a valid order for
such services.

Sec. 405.932 Right to appeal a denial of Part A coverage resulting
from a change in patient status.

(a) Filing an appeal request related to a change in patient status
which resulted in the denial of Part A coverage. (1) Only an eligible
party, the party's appointed representative, or an authorized
representative of an eligible party may request an appeal at any level
of the appeals process under Sec. Sec. 405.931 through 405.938.
(2) To initiate an appeal under Sec. Sec. 405.931 through 405.938,
an eligible party, the party's appointed representative, or an
authorized representative of an eligible party must meet the following
requirements:
(i) Submit a request for an appeal in writing to the eligibility
contractor.
(ii) The request must be received by the eligibility contractor no
later than 365 days after the implementation date of the final rule.
The eligibility contractor denies the written request if it is not
received by the applicable filing timeframe under Sec. 405.932(d)(3),
unless the eligible party established good cause for late submission as
specified in Sec. 405.942(b)(2) and (3).
(3) If an eligible party (or the party's representative) misfiles a
request for appeal with a contractor or government entity other than
the eligibility contractor, then for the purpose of determining
timeliness of the request for appeal, the date the misfiled request was
received by the contractor or government agency is considered the date
of receipt. The misfiled request and all documentation must be
forwarded to the eligibility contractor within 30 calendar days of
receipt, or as soon as practicable.
(b) Content of the appeal request. (1) The written request filed by
an eligible party, the party's appointed representative, or an
authorized representative of an eligible party may be made on a model
CMS form. If the model form is not used, to be valid, the written
request must include all of the following identifying information:
(i) Beneficiary name.
(ii) Beneficiary Medicare number (the number on the beneficiary's
Medicare card).
(iii) Name of the hospital and dates of hospitalization.
(iv) Name of the SNF and the dates of stay (as applicable).
(2) If the appeal includes SNF services not covered by Medicare,
the written request must also include an attestation to the out-of-
pocket payment(s) made by the beneficiary for such SNF services and
must include documentation of payments made to the SNF for such
services.
(i) Payments for an eligible party's SNF services made by a third-
party payer do not constitute out-of-pocket expenses or payment for an
eligible party. If a third-party payer made payment for the eligible
party's SNF services, then the services are excluded from consideration
in the appeal.
(ii) Payments made for cost sharing (including, but not limited to,
coinsurance and deductible) for SNF services covered by a third-party
payer are not considered an out-of-pocket payment for the purposes of
this provision.
(iii) Payments made by a family member for an eligible party's SNF
services are considered an out-of-pocket payment for the eligible
party.
(3) In the written request for an appeal, an eligible party (or
their representative) may include an explanation of why the hospital
admission satisfied the relevant criteria for Part A coverage and
should have been covered under the Part A hospital insurance benefit
instead of under the Part B supplementary medical insurance benefit.
(c) Evidence and other information to be submitted with the appeal
request. (1) Eligible parties (or their representatives) are encouraged
to submit all available information and documentation, including
medical

[[Page 89530]]

records related to the hospital stay and SNF services, as applicable,
at issue in the appeal with the written request for an appeal.
(2) If the eligibility contractor determines there is information
missing from the request that is needed to establish the beneficiary's
eligibility as a party under Sec. 405.931(b)(1) or satisfy other
conditions for eligibility for an appeal, the eligibility contractor
works with the appropriate MAC and attempts to obtain the information
from the provider or the eligible party (or the party's representative)
or both, as applicable. The eligibility contractor allows up to 60
calendar days for submission of missing information.
(3) If the necessary information cannot be obtained from either the
provider or the eligible party (or the party's representative), the
eligibility contractor makes an eligibility determination based on the
information available.
(d) Determining eligibility for an appeal. (1)(i) The eligibility
contractor reviews the information submitted with the appeal request
and any additional information it obtains to determine if the
individual submitting the appeal request is an eligible party and that
the services previously furnished are eligible for an appeal under
Sec. 405.931.
(ii) The eligibility contractor mails or otherwise transmits the
notice of its determination to the eligible party (or the party's
representative) within 60 calendar days of receipt of the appeal
request.
(iii) The time between the eligibility contractor's request for
missing information and receipt of such information (or in the case of
information that is requested but is not received, the time allowed by
the contractor to submit the information) does not count toward the
timeframe for issuing a notice to the eligible party (or the party's
representative).
(2) If the eligibility contractor determines that the individual is
an eligible party and the services previously furnished are eligible
for an appeal, the eligibility contractor--
(i) Issues a notice of acceptance to the eligible party (or the
party's representative), explaining that the appeal has been accepted
for processing; and
(ii) Refers the appeal to the processing contractor for
adjudication under Sec. 405.932(e).
(3)(i) If the eligibility contractor determines that the request
for appeal is untimely or incomplete, the individual does not satisfy
the requirements for an eligible party, or the services previously
furnished are not eligible for an appeal, the eligibility contractor
issues a denial notice to the individual (or the party's
representative) in writing.
(ii) The denial notice explains that the request is not eligible
for an appeal, the reason(s) for the denial of the appeal request, and
the process for requesting a review of the eligibility denial under
Sec. 405.932(e).
(4) Notices regarding eligibility for an appeal issued by the
eligibility contractor are written in a manner to be understood by the
eligible party or the party's representative.
(e) Review of an eligibility contractor's denial of a request for
an appeal. (1)(i) An individual (or their representative) may request a
review of the eligibility contractor's denial of a request for an
appeal by filing a request in writing with the eligibility contractor.
(ii) The request for review should explain the reason(s) the denial
of the request for an appeal was incorrect, and should include
additional information, as applicable, to support the validity of the
original appeal request.
(2) The request for review, with any additional information, must
be received by the eligibility contractor no later than 60 calendar
days from the date of receipt of the denial notice. If the request for
review is received after this deadline, the individual (or the
individual's representative) must establish good cause for untimely
filing. In determining whether good cause for untimely filing exists,
the eligibility contractor applies the provisions in Sec.
405.942(b)(2) and (3).
(3) The review by the eligibility contractor must be conducted by
individuals not involved in the initial denial of the request for an
appeal.
(4) The eligibility contractor may issue a decision that affirms or
reverses the denial of the request for an appeal or may dismiss the
request for review. The notice of the eligibility contractor's decision
must meet both of the following requirements:
(i) Be written in a manner to be understood by the individual or
the individual's representative.
(ii) Be mailed or otherwise transmitted in writing within 60
calendar days of the date of receipt of the request for review.
(5) If the decision is to affirm the denial, or dismiss the
request, the eligibility contractor must explain the rationale for the
decision.
(6) A denial notice under paragraph (d)(3) of this section issued
due to receipt of an untimely appeal request must be reversed if the
eligible party (or the party's representative) establishes good cause
for late filing under Sec. 405.942(b)(2) and (3).
(7) If the eligibility contractor reverses the initial denial of
the request for appeal, the eligibility contractor forwards the request
for appeal to the processing contractor under Sec. 405.932(f).
(8) The eligibility contractor's decision that affirms the initial
denial of a request for an appeal is binding and not subject to further
review.
(9) If the eligibility contractor determines that the request for
review of the eligibility denial under paragraph (e)(2) of this section
was not submitted timely, and the eligibility contractor did not find
good cause for the untimely submission, then the eligibility contractor
dismisses the request for review, and such dismissal is binding and not
subject to further review.
(f) Processing eligible requests for appeal. (1) If the processing
contractor determines there is necessary information missing from the
appeal case file, the processing contractor attempts to obtain the
information from the provider or the eligible party (or the party's
representative), as applicable.
(i) The processing contractor allows the provider or eligible party
(or the party's representative), or both, up to 60 calendar days to
submit missing information.
(ii) If the provider or eligible party (or the party's
representative) does not submit the missing information within the
allotted time, the processing contractor makes a decision on the
request for appeal based on the information available.
(iii) The time between the processing contractor's request for
information and receipt of such information (or in the case of
information that is requested but is not received, the time allowed by
the contractor to submit the information) does not count toward the
timeframe for issuing the processing contractor's decision.
(2) The processing contractor reviews the information submitted
with the appeal request and any additional information it obtains to
determine if the inpatient admission satisfied the relevant criteria
for Part A coverage at the time services were furnished. If the appeal
request also includes a request to review denied SNF services that are
eligible for an appeal, the processing contractor also determines if
such eligible SNF services satisfied relevant criteria for Part A
coverage at the time the services were furnished.
(3) Subject to the provisions in paragraph (e)(1) of this section,
the processing contractor mails or otherwise transmits its written
decision on the request for appeal within 60 calendar days of receipt
of the request.

[[Page 89531]]

(g) Notice and content of the decision. (1) If the processing
contractor determines that the inpatient admission, and as applicable,
SNF services, satisfied the relevant criteria for Part A coverage at
the time the services were furnished, then the processing contractor
issues notice of the favorable decision to the eligible party (or the
party's representative). The processing contractor also notifies the
hospital and SNF, as applicable, in the case of a favorable
determination for Part A coverage.
(2)(i) If the processing contractor determines that the inpatient
admission, or as applicable, SNF services, did not satisfy the relevant
criteria for Part A coverage at the time the services were furnished,
then the processing contractor issues notice of the unfavorable or
partially favorable decision to the eligible party (or the party's
representative).
(ii) The processing contractor issues a notice of a partially
favorable decision to the SNF if the inpatient admission satisfied the
relevant criteria for Part A coverage, but the SNF services did not
satisfy the relevant criteria for Part A coverage.
(3) The notice issued to the eligible party (or the party's
representative) must be written in a manner calculated to be understood
by the eligible party (or the party's representative) and include all
of the following:
(i) A clear statement of the decision made by the processing
contractor.
(ii) The reason the hospital admission, and as applicable, the SNF
services, satisfied or did not satisfy the relevant criteria for Part A
coverage at the time the services were furnished.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) If a favorable decision, the effect of such decision,
including, as applicable, a statement about the obligation of the SNF
to refund any amounts collected for the covered SNF services, and that
the SNF may then submit a new claim(s) for services covered under Part
A in order to determine the amounts of benefits due.
(vi) If an unfavorable or partially favorable decision, a statement
of any specific missing documentation that should be submitted with a
request for reconsideration, if applicable.
(vii) The procedures for obtaining additional information
concerning the decision, such as specific provisions of the policy,
manual, regulations, or other rules used in making the decision.
(viii) If an unfavorable or partially favorable decision,
information about the procedures for filing a request for
reconsideration under Sec. 405.934.
(ix) Any other requirements specified by CMS.
(4) As applicable, a notice of a favorable decision issued to the
SNF (including a decision for a beneficiary not enrolled in the
Supplementary Medical Insurance program (Medicare Part B) at the time
of beneficiary's hospitalization), includes all of the following:
(i) A clear statement of the decision made by the processing
contractor.
(ii) The reason the SNF services satisfied the relevant criteria
for Part A coverage at the time the services were furnished.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) The effect of such decision, including a statement explaining
that the SNF must refund any payments collected from the beneficiary
for the covered SNF services, and that the SNF may then submit a new
claim(s) to determine the amount of benefits due for covered services.
(vi) Any other requirements specified by CMS.
(5) In the case of a favorable decision for a beneficiary not
enrolled in the Supplementary Medical Insurance program (Medicare Part
B) at the time of the beneficiary's hospitalization, notice is issued
to the hospital that includes all of the following:
(i) A clear statement of the decision made by the processing
contractor.
(ii) The reason the hospital admission satisfied the relevant
criteria for Part A coverage at the time the services were furnished.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) The effect of such decision, including a statement explaining
that the hospital must refund any payments collected for the outpatient
hospital services, and that the hospital may then submit a new Part A
inpatient claim in order to determine the amount of benefits due for
covered services.
(vi) Any other requirements specified by CMS.
(6) In the case of a partially favorable decision issued to a SNF,
the notice includes the following:
(i) A clear statement of the decision made by the processing
contractor.
(ii) The reason the hospital admission satisfied the relevant
criteria for Part A coverage at the time the services were furnished,
and the reason the SNF services did not satisfy the relevant criteria
for Part A coverage.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) The effect of such decision, including a statement explaining
that the decision is being sent for informational purposes only, and
that only the eligible party may appeal the decision to a QIC under
Sec. 405.934.
(vi) Any other requirements specified by CMS.
(h) Effect of a favorable appeal decision. (1)(i) If the processing
contractor issues a decision that the beneficiary's inpatient admission
satisfied the relevant criteria for Part A coverage and the hospital's
decision to change the inpatient admission to outpatient receiving
observation services was therefore erroneous, the beneficiary's
reclassification as an outpatient is disregarded for the purposes of
determining Part A benefits, including Part A SNF coverage, if
applicable.
(ii) For the purposes of effectuating a favorable decision by the
processing contractor, any claims previously submitted for outpatient
hospital services and payments made for such services (including any
applicable deductible and coinsurance amounts) are not reopened or
revised by the MAC, and payment, as applicable, for covered SNF
services may be made by the MAC to the SNF without regard to the
hospital claim.
(2) In order to determine Part A benefits to be paid and to make
payment for covered services as a result of a favorable decision, as
applicable:
(i) The SNF that furnished services to the beneficiary must refund
payments previously collected from the beneficiary for the covered
services and may then submit a Part A claim(s) for such services within
180 calendar days of receipt of the notice of a favorable decision.
(ii) In the case of an appeal for a beneficiary not enrolled in the

[[Page 89532]]

Supplementary Medical Insurance program (Medicare Part B) at the time
of the beneficiary's hospitalization, the hospital that furnished
services must refund any payments collected for the outpatient hospital
services and may then submit a Part A inpatient claim for such services
within 180 calendar days of receipt of the notice of a favorable
decision.
(3) The hospital, and as applicable, the SNF, must comply with all
applicable provisions regarding charges to the beneficiary for covered
services, including but not limited to relevant provisions in part 489
Subparts B through D of this chapter.
(i) A favorable appeal decision is considered binding unless it is
reopened and revised under the provisions of Sec. Sec. 405.980 through
405.986.
(ii) The provisions regarding reopening of a redetermination in
Sec. 405.980(b) and (c) apply in the same manner to favorable
decisions issued under this section.
(4) The notice of a favorable decision issued to a hospital and, as
applicable, a SNF does not convey party status to such provider.
(i) Effect of an unfavorable or partially favorable decision. (1)
An unfavorable or partially favorable appeal decision is considered
binding unless--
(A) It is reopened and revised under the provisions of Sec. Sec.
405.980 through 405.986; or
(B) An eligible party (or the party's representative) files a
request for reconsideration under Sec. 405.934.
(2) The provisions regarding reopening of a redetermination in
Sec. Sec. 405.980(b) and (c) apply in the same manner to unfavorable
or partially favorable decisions issued under this section.

Sec. 405.934 Reconsideration.

(a) Filing a request for reconsideration. An eligible party, the
party's appointed representative, or an authorized representative who
is dissatisfied with the decision rendered by a processing contractor
in Sec. 405.932(g)(2) may request a reconsideration with a QIC within
180 calendar days of receipt of the processing contractor's notice. The
request for reconsideration must include the elements specified in the
processing contractor's notice.
(b) Applicability of other provisions. The provisions in Sec. Sec.
405.960 through 405.978 that apply to reconsiderations of initial
determinations apply to the extent they are appropriate/in the same
manner to reconsiderations performed by a QIC under this section unless
otherwise specified.
(c) Notice and content of a reconsideration. (1) If the QIC
determines that the inpatient admission, and as applicable, eligible
SNF services, satisfied the relevant criteria for Part A coverage at
the time the services were furnished, then the QIC issues notice of the
favorable reconsideration to the eligible party (or the party's
representative). The QIC also notifies the hospital and SNF, as
applicable, in the case of a favorable determination for Part A
coverage.
(2)(i) If the QIC determines that the inpatient admission, or as
applicable, SNF services, did not satisfy the relevant criteria for
Part A coverage at the time the services were furnished, then the QIC
issues notice of the unfavorable or partially favorable reconsideration
to the eligible party (or the party's representative).
(ii) The QIC issues a notice of a partially favorable
reconsideration to the SNF if the inpatient admission satisfied the
relevant criteria for Part A coverage, but the SNF services did not
satisfy the relevant criteria for Part A coverage.
(3) The notice of reconsideration must be mailed or otherwise
transmitted within 60 calendar days of the QIC's receipt of the request
for reconsideration, subject to the exceptions specified in Sec.
405.970.
(4) The notice of reconsideration issued to the eligible party (or
the party's representative) must be written in a manner calculated to
be understood by the eligible party (or the party's representative) and
include all of the following:
(i) A clear statement of the decision made by the QIC.
(ii) The reason the hospital admission, and as applicable, the SNF
services, satisfied or did not satisfy the relevant criteria for Part A
coverage at the time the services were furnished.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) If a favorable decision, the effect of such decision, including
a statement about the obligation of the SNF to refund any amounts
collected for the covered SNF services, and that the SNF may then
submit a new claim(s) for services covered under Part A in order to
determine the amounts of benefits due.
(vi) If the decision in Sec. 405.932(f) indicated that specific
documentation should be submitted with the reconsideration request, and
the documentation was not submitted with the request for
reconsideration, the summary must indicate how the missing
documentation affected the reconsideration.
(vii) The procedures for obtaining additional information
concerning the decision, such as specific provisions of the policy,
manual, regulations, or other rules used in making the decision.
(viii) If an unfavorable or partially favorable decision,
information concerning an eligible parties' right to an ALJ hearing,
including the applicable amount in controversy requirement and
aggregation provisions and other procedures for filing a request for an
ALJ hearing under Sec. 405.936.
(ix) Any other requirements specified by CMS.
(5) As applicable, a notice of a favorable reconsideration issued
to the SNF (including a decision for a beneficiary not enrolled in the
Supplementary Medical Insurance program (Medicare Part B) at the time
of the beneficiary's hospitalization), includes all of the following:
(i) A clear statement of the decision made by the QIC.
(ii) The reason the SNF services, satisfied the relevant criteria
for Part A coverage at the time the services were furnished.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) The effect of such decision, including a statement explaining
the SNF must refund any payments collected from the beneficiary for the
covered SNF services, and that the SNF may then submit a new claim(s)
to determine the amount of benefits due for the covered services.
(vi) Any other requirements specified by CMS.
(6) In the case of a favorable reconsideration for a beneficiary
not enrolled in the Supplementary Medical Insurance program (Medicare
Part B) at the time of the beneficiary's hospitalization, notice is
issued to the hospital that includes all the following:
(i) A clear statement of the decision made by the QIC.
(ii) The reason the hospital admission satisfied the relevant
criteria for Part A coverage at the time the services were furnished.
(iii) A summary of the facts, including as appropriate, a summary
of any

[[Page 89533]]

clinical or scientific evidence used in making the determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) The effect of such decision, including a statement explaining
that the hospital must refund any payments collected for the outpatient
hospital services, and that the hospital may then submit a new Part A
inpatient claim in order to determine the amount of benefits due for
covered services.
(vi) Any other requirements specified by CMS.
(7) In the case of a partially favorable reconsideration issued to
a SNF the notice includes the following:
(i) A clear statement of the decision made by the QIC.
(ii) The reason the hospital admission satisfied the relevant
criteria for Part A coverage at the time the services were furnished,
and the reason the SNF services did not satisfy the relevant criteria
for Part A coverage.
(iii) A summary of the facts, including as appropriate, a summary
of any clinical or scientific evidence used in making the
determination.
(iv) An explanation of how pertinent laws, regulations, coverage
rules, and CMS policies apply to the facts of the case.
(v) The effect of such decision, including a statement explaining
that the decision is being sent for informational purposes only, and
that only the eligible party may appeal the decision to an ALJ under
Sec. 405.936.
(vi) Any other requirements specified by CMS.
(d) Effect of a favorable reconsideration. (1)(i) If the QIC issues
a reconsideration decision that the beneficiary's inpatient admission
satisfied the relevant criteria for Part A coverage and the hospital's
decision to change the inpatient admission to outpatient receiving
observation services was therefore erroneous, the beneficiary's
reclassification as an outpatient is disregarded for the purposes of
determining Part A benefits, including both Part A hospital coverage
and Part A SNF coverage, if applicable.
(ii) For the purposes of effectuating a favorable reconsideration,
any claims previously submitted for outpatient hospital services and
payments made for such services (including any applicable deductible
and coinsurance amounts) are not reopened or revised by the MAC, and
payment, as applicable, for covered SNF services may be made by the MAC
to the SNF without regard to the hospital claim.
(2) In order to determine Part A benefits to be paid and to make
payment for covered services as a result of a favorable decision, as
applicable:
(i) The SNF that furnished services to the beneficiary must refund
payments previously collected from the beneficiary for the covered
services and may then submit a Part A claim(s) for such services within
180 calendar days of receipt of the notice of a favorable decision;
(ii) In the case of an appeal for a beneficiary not enrolled in the
Supplementary Medical Insurance program (Medicare Part B) at the time
of the beneficiary's hospitalization, the hospital that furnished
services must refund any payments collected for the outpatient hospital
services and may then submit a Part A inpatient claim for such services
within 180 calendar days of receipt of the notice of a favorable
decision.
(3) The hospital, and as applicable, the SNF, must comply with all
applicable provisions regarding charges to the beneficiary for covered
services, including but not limited to relevant provisions in part 489
Subparts B through D of this chapter.
(4) A favorable reconsideration is considered binding unless it is
reopened and revised under the provisions of Sec. Sec. 405.980 through
405.986. The provisions regarding reopening of a reconsideration in
Sec. 405.980(d) and (e) apply in the same manner to favorable
reconsiderations issued under this section.
(5) The notice of a favorable reconsideration sent to a hospital
and, as applicable, a favorable or partially favorable reconsideration
sent to a SNF does not convey party status.
(e) Effect of an unfavorable or partially favorable
reconsideration. (1) An unfavorable or partially favorable
reconsideration is considered binding unless--
(i) It is reopened and revised under the provisions of Sec.
405.980(d) or (e); or
(ii) An eligible party (or the party's representative) files a
request for a hearing by an ALJ under Sec. 405.936.
(2) The provisions regarding reopening of a reconsideration in
Sec. 405.980(d) and (e) apply in the same manner to unfavorable and
partially favorable decisions issued under this section.

Sec. 405.936 Hearings before an ALJ and decisions by an ALJ or
Attorney Adjudicator.

(a) Filing a request for hearing. An eligible party, the party's
appointed representative, or an authorized representative who is
dissatisfied with the reconsideration rendered by a QIC in Sec.
405.934(c)(2), or a dismissal of a request for reconsideration, may
request a hearing before an ALJ within 60 calendar days of receipt of
the reconsideration. The request for hearing must include the elements
specified in the QIC's reconsideration.
(b) Applicability of other provisions. The provisions in Sec. Sec.
405.1000 through 405.1064 that apply to ALJ hearings and decisions by
an ALJ or an attorney adjudicator apply to the extent they are
appropriate/in the same manner to ALJ hearings and decisions by an ALJ
or an attorney adjudicator under this section unless otherwise
specified.
(c) Calculating the amount remaining in controversy for an ALJ
hearing or judicial review. (1)(i) A request for ALJ hearing for an
appeal under the provisions of Sec. Sec. 405.931 through 405.938 must
meet the amount in controversy requirement in Sec. 405.1006(b).
(ii) A request for judicial review in federal district court for an
appeal under the provisions of Sec. Sec. 405.931 through 405.938 must
meet the amount in controversy requirement in Sec. 405.1006(c),
subject to the calculation methodology set forth in this paragraph.
(2) For appeals under the provisions of Sec. Sec. 405.931 through
405.938, the amount remaining in controversy for an ALJ hearing or for
judicial review in federal district court under Sec. 405.1136 is
determined by the sum of the billed charges on the Part B outpatient
hospital claim and, as applicable, any billed charges for the SNF claim
at issue, if such claims were submitted to Medicare. If no SNF claim
was submitted for services furnished to the beneficiary, then the
billed charges to the beneficiary as indicated on an itemized statement
or evidence of pay

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