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Rule2024-23195

Medicare Program: Appeal Rights for Certain Changes in Patient Status

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Published

October 15, 2024

Effective

October 11, 2024

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This final rule implements 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 89 Issue 199 (Tuesday, October 15, 2024)</title>
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[Federal Register Volume 89, Number 199 (Tuesday, October 15, 2024)]
[Rules and Regulations]
[Pages 83240-83294]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-23195]

[[Page 83239]]

Vol. 89

Tuesday,

No. 199

October 15, 2024

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 476, and 489

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

Federal Register / Vol. 89, No. 199 / Tuesday, October 15, 2024 /
Rules and Regulations

[[Page 83240]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 476, and 489

[CMS-4204-F]
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: Final rule.

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SUMMARY: This final rule implements 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: These regulations are effective on October 11, 2024.

FOR FURTHER INFORMATION CONTACT:
David Danek, <a href="/cdn-cgi/l/email-protection#680c091e010c460c09060d03280b051b4600001b460f071e">[email&#160;protected]</a>, for issues related to the
retrospective process.
Janet Miller, <a href="/cdn-cgi/l/email-protection#e48e858a8190ca898d88888196a4878997ca8c8c97ca838b92">[email&#160;protected]</a>, for issues related to the
prospective process.
Shaheen Halim, <a href="/cdn-cgi/l/email-protection#13607b727b76767d3d7b727f7a7e53707e603d7b7b603d747c65">[email&#160;protected]</a> for issues related to
Quality Improvement Organization review.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

The purpose of this final 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 processes will 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 processes consist of the following:
<bullet<ls-thn-eq> Expedited appeals: We are establishing 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
will be entitled to request an expedited appeal regarding that decision
prior to release from the hospital. Appeals will be conducted by a
Beneficiary & Family Centered Care--Quality Improvement Organization
(BFCC-QIO).
<bullet<ls-thn-eq> Standard appeals: Beneficiaries who do not file
an expedited appeal will 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). 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 establishing 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, 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. Eligible beneficiaries will have 365 calendar days
from the implementation date of this rule to file a request for a
retrospective appeal. We will announce the implementation date on
<a href="http://CMS.gov">CMS.gov</a> and/or <a href="http://Medicare.gov">Medicare.gov</a>.
In general, as explained in this final rule, we are finalizing the
procedures for these appeals as proposed. However, we are making some
editorial/technical corrections to the regulations text, as well as
several revisions and clarifications to the retrospective appeal
procedures based on the public comments we received. These revisions
include:
<bullet> Extending the timeframe for providers to submit a claim
following a favorable decision from 180 calendar days to 365 calendar
days.
<bullet> Extending the timeframe for providers to submit records as
requested by a contractor from 60 calendar days to 120 calendar days.
<bullet> Clarifying the effect of a favorable appeal decision to
explain that if a hospital chooses to submit a Part A inpatient claim,
the hospital must refund any payments received for the Part B
outpatient claim before submitting the Part A inpatient claim to
Medicare. If a Part A claim is submitted, the previous Part B
outpatient claim will be reopened and canceled, and any Medicare
payments will be recouped to prevent duplicate payment.
<bullet> Clarifying the effect of a favorable decision for a
beneficiary who was not enrolled in Medicare Part B at the time of
hospitalization to explain that the hospital must refund any payments
collected for the outpatient services even if the hospital chooses not
to submit a Part A claim for payment to the program.
<bullet> Clarifying the effect of favorable appeals involving
beneficiaries who were enrolled in Medicare Part B at the time of
hospitalization to explain that hospitals must refund any payments
collected for the outpatient hospital services only if the hospital
chooses to submit a Part A inpatient claim for such services.
<bullet> Clarifying that out-of-pocket payments made by a family
member on behalf of a beneficiary for SNF services (for the purpose of
determining whether those SNF services are eligible for inclusion in an
appeal under these procedures), may include out-of-pocket payments made
by individuals who are not biologically related to the beneficiary (for
example, a close family friend, roommate, or a former spouse).

II. Background

This rule finalizes a proposal issued in December 2023 \1\ and 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 or otherwise
qualified practitioner \2\ but whose status during

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their stay is changed to outpatient by the hospital, thereby
effectively denying Part A coverage for their hospital stay.\3\ In some
cases, the status change also 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 final rule.
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\1\ 88 FR 89506.
\2\ As discussed in section III.A.1. of this final rule in
response to a public comment, we acknowledge that under existing
policies, for purposes of payment under Medicare Part A, an
individual is considered an inpatient of a hospital if formally
admitted as an inpatient pursuant to an order for hospital inpatient
admission by a physician or certain qualified practitioners as
defined in 42 CFR 412.3. We inadvertently omitted other qualified
practitioners when describing the inpatient admission process and
have revised our language in this final rule accordingly, when
referencing persons ordering hospital inpatient admissions.
\3\ The terms of the court order refer to denials of Part A
coverage. Consistent with the court order, the appeals processes in
this rule do not extend to enrollees in MA plans. MA 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 has refused to authorize an
inpatient admission, the enrollee may request a standard or
expedited plan reconsideration of that organization determination
(42 CFR 422.566(b), 422.580 through 422.596, and 422.633).
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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''; \4\
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\4\ For the purposes of 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 (see 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) \5\
indicating that the observation services are not covered under Medicare
Part A; and
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\5\ 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.cms.gov//medicare/forms-notices/beneficiary-notices-initiative/ffs-ma-moon">https://www.cms.gov//medicare/forms-notices/beneficiary-notices-initiative/ffs-ma-moon</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 SNF. 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 or otherwise qualified practitioner'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 court stated that it intended to provide a
meaningful opportunity for class members whose due process rights were
violated to appeal the denial of Part A coverage, but it also stressed
the need to provide a remedy for class members who endured
undercompensated stays at skilled nursing facilities. It further stated
that, since class members with Part B coverage had much of their past
hospital stays paid for by such coverage, it 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 final rule, we describe the procedures
that will 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 final
rule, we describe the expedited and standard appeals procedures that
will 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 (the ``prospective appeals process'').
Eligible beneficiaries who are hospitalized and entitled to an
appeal under these procedures prior to the implementation date of the
prospective appeals process will be able to utilize the retrospective
appeals process, subject to the filing limitation proposed in Sec.
405.932(a)(2)(i)(B).
The flowcharts below depict the overall appeals processes being
finalized in this regulation. With the exception of some editorial
revisions and updating the amount in controversy requirements for
calendar year 2025 ($190 for an Administrative Law Judge hearing and
$1,900 for judicial review), the flowcharts are the same as what was
outlined in the proposed rule (88 FR 59509).
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BILLING CODE 4120-01-C
In the sections that follow, we provide an overview of the
different appeal processes and describe the proposed provisions, the
comments received on those provisions, and our response to those
comments. We then indicate whether we are finalizing the provisions as
proposed or with modifications.

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III. Provisions of the Proposed Rule and Analysis of and Responses to
Public Comments

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 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.\6\ 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 proposed 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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\6\ 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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In Sec. 405.931(b), we proposed 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 proposed 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 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
they meet the definition of a class member and is not eligible for an
appeal, or the appeal request is not otherwise valid), we proposed 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), we proposed 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 otherwise proposed in Sec.
405.932.
In Sec. 405.934, we proposed 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 proposed that the QICs would generally
utilize existing procedures that govern reconsiderations (42 CFR
405.960 through 405.978), as appropriate, except as we otherwise
proposed in Sec. 405.934.
Following a reconsideration, in Sec. 405.936 we proposed 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.\7\ In Sec. 405.936(c), we proposed 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 proposed 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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\7\ The amount in controversy requirement for CY 2025 is $190
for a hearing before an Administrative Law Judge, and $1,900 for
judicial review. Notice of the updated minimum amounts for each
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 Sec. 405.932(a)(2), we proposed 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.
We received many comments in support of the overall process we
proposed for retrospective appeals. In addition, we received several
general comments on the scope and proposed procedures for the
retrospective appeals process and several comments on the outreach
efforts we proposed.
Comment: A commenter expressed concern that due to the length of
the entire retrospective appeal process, eligible parties could
experience delays in receiving coverage decisions for up to a year or
more.
Response: We appreciate the concerns raised by the commenter. We

[[Page 83245]]

understand that beneficiaries and their families, in some cases, have
waited for many years to access an appeals process for the issues
addressed in these procedures. As we explained in the proposed rule,
the new appeals procedures ordered by the court do not fit neatly into
existing processes, but to the extent possible, we are mirroring
existing appeals processes for these new appeals. This relative
consistency in the processes will benefit individuals filing appeals as
well as our contractors who process appeals. In some cases, decisions
can be made in less time than the deadlines prescribed in the
regulations. We believe these timeframes, which have been in place for
existing appeals for 15 years, are reasonable and balance the need to
resolve complex issues with the interests of appellants in receiving
timely decisions.
Comment: A commenter requested that CMS clarify whether these new
appeals procedures apply to persons enrolled in Medicare Advantage (MA)
plans and consider extending these rights to the MA program.
Response: The retrospective appeals process (addressed in section
III.A. of this final rule) and the prospective appeals process
(addressed in section III.B. of this final rule) do not apply to the MA
program and will not be available for MA enrollees. As we explained in
the proposed rule, the terms of the court order refer to denials of
Part A coverage. Consistent with the court order, we are creating a new
appeals process for beneficiaries enrolled in Original Medicare. We
further explained that the appeals processes proposed in this rule do
not extend to enrollees in MA plans because we have determined that the
considerations underlying the protections ordered by the court for
beneficiaries enrolled in Original Medicare do not apply to MA plan
enrollees. MA enrollees have rights and protections as set forth in 42
CFR part 422 Subpart M. Under the MA regulations at 42 CFR
422.566(b)(3), an MA plan's refusal 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 plan is
an organization determination. If an MA plan enrollee disagrees with a
plan's organization determination, the enrollee has the right to
request a reconsideration of that decision under the rules at Sec.
422.578. In the event an MA plan refuses to authorize an inpatient
admission, this is an adverse organization determination and the
enrollee may request a standard or expedited plan reconsideration
(Sec. Sec. 422.580 through 422.590, 422.633). If an MA plan upholds an
adverse decision at the reconsideration level, the case is
automatically sent to the Part C IRE for review (Sec. Sec. 422.592 and
422.594). Additional levels of appeal that may be available to an MA
enrollee include ALJ and Council review and judicial review (Sec. Sec.
422.600 through 422.612). Because of these existing rights and
protections afforded to MA enrollees, we did not propose any new
procedures applicable to MA enrollees. To the extent we identify
additional processes that may be necessary for the MA program, any such
proposals would be subject to full public discussion through notice and
comment rulemaking.
Comment: A commenter requested that we use ``provider-neutral
language'' throughout the rule, for example, instead of using
physician, we should consider using physician or otherwise qualified
practitioner.
Response: We appreciate the suggestion from this commenter. We have
reviewed the language in the proposed rule and found several instances
where it would be more appropriate to use the phrase ``physician or
other qualified practitioner'' consistent with the regulatory
provisions regarding inpatient admissions in 42 CFR 412.3(a). We will
use this terminology going forward.
Comment: A commenter requested that we amend the text of several
sections of the proposed codified regulations text to include the word
``shall'' to strengthen and emphasize required actions.
Response: We appreciate the suggestion by the commenter. We drafted
the regulation text for these new procedures to be consistent with
existing regulation text in 42 CFR part 405 Subpart I. Those provisions
also include required actions for contractors, but generally use
``must'' rather than ``shall'' to indicate a requirement. We reviewed
the proposed regulation text and did not identify language that was
vague or did not clearly indicate a requirement where we intended a
requirement. Thus, we are not adopting the recommendations made by the
commenter.
Comment: Many commenters expressed their support for the outreach
and education that we plan to conduct following the issuance of the
final rule as we implement these procedures. Commenters suggested
additional means of educating beneficiaries and their representatives
on the new appeal rights offered in this rule. For example, commenters
recommended we include information in the Medicare & You handbook and
with Medicare Summary Notices (MSNs) while the filing period is open
and create new materials available to beneficiaries and advocates such
as social workers and State Health Insurance Assistance Program (SHIP)
counselors. Commenters also suggested that we provide translations of
these materials into various languages.
Response: We appreciate the support of these commenters on our
general approach to conducting education and outreach related to these
new appeals procedures. We are committed to providing educational and
training materials on our website for advocates to reference and
provide to beneficiaries. We are also committed to creating new
documents and publications, as well as updating current publications
such as Medicare & You, that may be downloaded from <a href="http://Medicare.gov">Medicare.gov</a> and/or
<a href="http://CMS.gov">CMS.gov</a>. This includes the translation of materials into different
languages as needed. We intend to train and provide information to
customer service representatives at 1-800-MEDICARE to assist and inform
beneficiaries with questions about these procedures. We also intend to
provide information to SHIP counselors and other advocacy groups in
providing updates on new and emerging programs in Medicare, such as
these new appeal rights.
In addition, we will include a message regarding this new appeal
right on beneficiary MSNs. This message will refer beneficiaries to the
detailed information that will be included on <a href="http://Medicare.gov">Medicare.gov</a> and/or
<a href="http://CMS.gov">CMS.gov</a>.
Comment: A commenter suggested that we extend the date of receipt
of notices or decisions sent by the eligibility contractor, processing
contractor or other appeals adjudicators, to 30 calendar days following
receipt of the notice.
Response: We appreciate the comment. Our longstanding policy
presumes receipt of a notice in the appeals process is 5 calendar days
after the date of the notice. We adopted this policy for these new
retrospective appeals as we intended the process for these new appeals
to mirror existing processes as much as possible. This presumption is
rebuttable if the appellant can establish receipt outside of the 5-day
window. The reason for this longstanding presumption is to account for
the time between the printing and mailing of the notice receipt by the
appellant and because filing timeframes at subsequent levels of appeal
begin upon receipt of the decision at the previous level. Our
longstanding experience is that this 5-day window for

[[Page 83246]]

receipt is generally consistent with postal delivery timeframes. We do
not believe the time between mailing the notice and receipt would be as
long as 30 calendar days. Thus, we are not adopting the recommendation
made by the commenter.
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) we proposed 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
proposed 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 proposed to apply
existing rules regarding appointed representatives and authorized
representatives (see Sec. Sec. 405.902 and 405.910) to these new
appeals.\8\ There may also be some 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 proposed to apply those
rules to deceased class members who would have been eligible to request
an appeal under the proposed procedures for retrospective appeals.
---------------------------------------------------------------------------

\8\ 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.
---------------------------------------------------------------------------

However, contrary to existing claims appeals procedures, in Sec.
405.931(d)(1)(i) we proposed to exclude providers from representing
beneficiaries in these new appeals, and we proposed 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 had concerns that
the interests of a class member could conflict with the interests of a
hospital or SNF, and we were 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 had 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,\9\ 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
believed 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.
---------------------------------------------------------------------------

\9\ 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.
---------------------------------------------------------------------------

We proposed 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 proposed 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;
\10\ or (3) has appointed as its representative, a member of the
beneficiary's family, a legal guardian, or

[[Page 83247]]

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).
---------------------------------------------------------------------------

\10\ 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
believed it was reasonable to treat appeals filed by authorized
representatives, like other existing claim appeals filed by family
members (that is, as if the appeal was filed by an unrepresented
beneficiary).
---------------------------------------------------------------------------

We also proposed 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
proposed 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 proposed 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 explained that for the purposes of
determining eligibility for an appeal under these procedures, a
beneficiary would be 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.
We received several comments regarding eligibility requirements for
an appeal under these procedures and several comments regarding the
limitation on provider representation of eligible parties.
Comment: A few commenters questioned the MOON being a determining
factor for eligibility for an appeal under the new procedures. A
commenter noted that the MOON was established in August 2015, but
retroactive appeals are available to eligible beneficiaries with
hospital admissions starting on January 1, 2009. Another commenter
suggested that the proposed regulation in Sec. 405.931(b) defining an
eligible party requires the delivery of the MOON as a condition of
eligibility for a retrospective appeal.
Response: We appreciate the commenter's observations regarding the
implementation date of the MOON and the eligibility criteria under
these appeal procedures. The federal district court order and our
definition of an eligible party states that receipt of either an
initial determination or a MOON would serve to meet one condition of
eligibility for an appeal under these new procedures. For
hospitalizations that predate the effective date of the MOON, a
beneficiary's receipt of an initial determination for their hospital
and/or SNF claim (that is, a Medicare Summary Notice resulting from
processing a claim submitted by a provider) would serve to meet the
requirement.
Comment: A commenter sought clarification on whether a beneficiary
must receive observation services after the change in status from
inpatient to outpatient in order to be eligible for an appeal under
these new procedures.
Response: We appreciate the opportunity to provide this
clarification. A beneficiary must receive observation services after
the change in status from inpatient to outpatient in order to be
eligible for an appeal under these new procedures. As explained in the
proposed rule, consistent with the court order, the class members who
are to be afforded an opportunity to appeal the denial of their Part A
coverage include Medicare beneficiaries who, on or after January 1,
2009, have been or will have been subsequently reclassified by the
hospital as an outpatient receiving observation services, and meet the
other conditions specified in the order (88 FR 89506 (December 27,
2023)). We further stated in the proposed rule that, 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 (88 FR
89506).
Comment: Several commenters stated that the proposed rule does not
address how beneficiaries who are eligible for a retrospective appeal
will be identified and receive notice of the new appeal procedures that
are available. A commenter suggested that CMS utilize claims data,
hospital records, or beneficiary reports to identify eligible parties.
Response: We appreciate the commenter's suggestions. We considered
this issue as we assessed how to implement the court order and
determined that it would not be feasible to proactively identify
eligible parties. Unfortunately, the claims data available to us do not
align precisely with the eligibility criteria for these new appeals
procedures. For example, the outpatient claim submitted by a hospital
would not provide any indication of when observation services were
furnished to a beneficiary. Thus, we could not discern between a
beneficiary who received observation services prior to the inpatient
admission (who would not meet eligibility criteria) and a beneficiary
who received observation services after the change in status from
inpatient to outpatient simply based on claims information. This aspect
of eligibility for an appeal would only be available after a review of
medical records, and we believe it would be inefficient and ineffective
to request and review medical records for all potentially eligible
beneficiaries (estimated to be over 32,000) in order to identify those
beneficiaries who are, in fact, eligible for an appeal. Such attempts
would cause undue burden on the program and would delay appeals due to
the volume of records requests and resources needed to review every
medical record. Instead, we will rely on education and outreach to
alert beneficiaries to the availability of these new appeal procedures
and the eligibility requirements to access these appeals established in
this final rule.
Comment: A commenter questioned whether beneficiaries who were not
enrolled in Medicare Part B at the time of their hospitalization but
had other insurance coverage to cover outpatient services (such as a
group health plan) would be eligible for an appeal.
Response: A beneficiary not enrolled in Medicare Part B who meets
all stated eligibility criteria would be eligible for an appeal under
these new procedures, even if the beneficiary had other insurance
coverage that covered Part B outpatient hospital services. We would
expect such appeals would be rare and would likely focus on noncovered
SNF services that resulted in out-of-pocket expenditures by the
beneficiary.
Comment: A few commenters disagreed with our limitation on provider
representation for these new appeals as proposed in Sec. 405.931.
Generally, these commenters were concerned about the lack of support
for beneficiaries to work through these appeals. A commenter stated
that beneficiaries sometimes rely on provider staff to understand
benefits and available coverage and requested clarification regarding
whether provider staff may provide information and assistance to
beneficiaries filing appeals. A commenter stated that SNFs should be
able to file appeals on behalf of beneficiaries since SNFs have the
motivation to ensure that they receive proper payment for the services
they provide. A commenter expressed support for the definition of an
unrepresented beneficiary and the rights it will extend to
beneficiaries under 42 CFR part 405 subpart I.

[[Page 83248]]

Response: We appreciate the concerns raised by these commenters.
While we generally agree that providers may provide valuable assistance
to beneficiaries seeking appeals of denied services under existing
procedures, we believe that in these new appeals, the circumstances
warrant a different approach to appointed representatives. We note that
beneficiaries entitled to an appeal under these new rules still have
many options for obtaining assistance in their appeal. For example,
friends and family members are eligible to be appointed as a
representative. In each state, state health insurance assistance
programs (SHIPs) are available to explain coverage and benefits and to
represent and assist beneficiaries in appeals. Private advocacy groups
are also available to assist and represent beneficiaries in Medicare
appeals. Staff employed by providers may also assist beneficiaries by
providing them with information and support in their appeals. These are
just a few illustrative examples of persons and groups that may be
available to assist beneficiaries, and we do not believe that
precluding providers from representing beneficiaries for services, in
some cases, furnished many years ago, will have a negative impact on
beneficiary access or representation in these new appeals.
As explained in the proposed rule, we are concerned about a
provider acting as the appointed representative of a beneficiary in
these new appeals. Appointed representatives play a significant role in
a beneficiary's appeal. The representative is responsible for
submitting forms, receiving and submitting information on behalf of the
beneficiary, and making arguments on behalf of the beneficiary. While
an appointed representative is acting on behalf of a beneficiary, the
representative exercises control over most aspects of the appeal. In
many of the appeals we expect under these new procedures, beneficiaries
or family members reimbursed SNFs for the care that was furnished to
the beneficiary. In some of these cases, we believe a SNF's interests
could be at odds with the interest of the beneficiary. For example, a
SNF could be motivated by maintaining the status quo with respect to
payment already received for services in light of the burden associated
with refunding payments and billing the Medicare program for payment
for services furnished as many as 15 years earlier. We believe
restricting formal provider representation in the appeals process,
given the broad availability of other resources, affords beneficiaries
the best opportunity for independent and unbiased assistance, if
needed. While a provider may not act as an appointed representative for
a beneficiary under these procedures, we believe it would be entirely
appropriate for providers to lend assistance to beneficiaries in
providing records, information, and advice about the appeal and the
appeal process. Thus, we are not adopting the recommendation to allow
providers to be appointed as a representative for an eligible party.
We would also like to clarify the scope of our proposal in adding a
definition to the term unrepresented beneficiary in Sec. 405.931(d)(5)
for these new appeal procedures. As proposed in Sec. 405.931(d)(5), a
beneficiary who is an eligible party is considered unrepresented if the
beneficiary meets one of several criteria specified in that section. As
we explained in the introductory paragraph of Sec. 405.931(d), the
policies established in that section are for the limited purposes of
these new appeal procedures, that is, appeals conducted under
Sec. Sec. 405.931 through 405.938. We did not intend to apply the
definition of unrepresented beneficiary in Sec. 405.931(d)(5) to claim
appeals conducted under existing 42 CFR part 405 subpart I. The purpose
in adding this definition is to help eligible parties who are
considered unrepresented understand how certain existing procedural
requirements, adopted for these new procedures, will apply. For
example, in Sec. 405.1018, there are specific requirements regarding
the submission of evidence at an ALJ hearing that do not apply to an
unrepresented beneficiary. For the purposes of appeals conducted under
Sec. Sec. 405.931 through 405.938, those requirements will not apply
to an unrepresented beneficiary as defined in Sec. 405.931(d)(5).
We appreciate the feedback that we received from commenters on
eligibility requirements and policies regarding appointed
representatives. Based on analysis of the public comments, we will be
finalizing the proposals related to such procedures as proposed.
3. Appeal Requests and Determinations of Eligibility by the Eligibility
Contractor
In Sec. 405.932, we proposed to channel all retrospective appeal
requests from eligible parties through a single point of contact, the
eligibility contractor. We proposed, 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 of
these provisions which would be specified when this rule is finalized.
We proposed that details regarding the filing of appeal requests would
be posted to <a href="http://Medicare.gov">Medicare.gov</a> and/or <a href="http://CMS.gov">CMS.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 believed 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.
We anticipated eligible parties (or their representatives) would
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 outpatient receiving observation
services. However, we understood 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 proposed 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 proposed 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

[[Page 83249]]

hospitalization, and the 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. 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 also proposed 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
calendar 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 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 proposed 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 did 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.\11\ 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.
---------------------------------------------------------------------------

\11\ 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.
---------------------------------------------------------------------------

We proposed 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 proposed 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 proposed 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
differed 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 was to keep these disputes with the
eligibility contractor, requiring review by an individual not involved
with the initial denial determination.
We received several comments regarding the proposed filing
timeframes and procedures for retrospective appeals, the procedures for
eligibility determinations, and the submission of medical records in
support of an eligible party's appeal.
Comment: Several commenters recommended CMS extend the filing
timeframes for retrospective appeals beyond the period of 1 year
following the implementation of the final rule proposed by CMS, citing
that beneficiaries may have trouble locating such dated medical records
and that the process to determine eligibility could prove to be
complex. Commenters varied in their recommendations, some suggested 2
years while another suggested 4 years. Commenters also recommended that
CMS apply existing good cause rules that allow for exceptions to appeal
filing deadlines.
Response: We believe the 1-year (that is, 365 calendar day) filing
timeframe from the implementation date of the final rule affords
eligible parties adequate time to submit appeal requests under these
new procedures. The 1-year timeframe is twice as long as any other
existing timeframe to file an appeal. Moreover, we note that general
information regarding the forthcoming right to appeal has been posted
on <a href="http://Medicare.gov">Medicare.gov</a> and <a href="http://CMS.gov">CMS.gov</a> since 2021.\12\ We also anticipate
providing more detailed information regarding the appeals process
online and in Medicare publications, including MSNs, in the time
between publication of the final rule and the actual implementation of
the provisions. Thus, we believe the time between publication of the
final rule and the implementation date, and the 1-year timeframe to
file from the implementation date will give eligible parties a
reasonable amount of time to compile information necessary for their
case, and to file an appeal (and as we explain in this final rule,
Medicare contractors will assist in obtaining medical records if the
records cannot be submitted with the appeal request). Accordingly, we
are not adopting the recommendations made by the commenters to lengthen
the filing timeframe for retrospective appeals. (We note that the
procedures in Sec. 405.932(a)(2)(ii) include an exception that allows
the eligibility contractor to accept an untimely filed appeal request

[[Page 83250]]

if the eligible party establishes good cause under the existing appeal
provisions in Sec. 405.942(b)(2) and (3).)
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\12\ See <a href="https://www.medicare.gov/providers-services/claims-appeals-complaints/appeals/original-medicare">https://www.medicare.gov/providers-services/claims-appeals-complaints/appeals/original-medicare</a> and <a href="https://www.cms.gov/medicare/appeals-grievances/fee-for-service">https://www.cms.gov/medicare/appeals-grievances/fee-for-service</a>.
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Finally, we are making an editorial revision in Sec.
405.932(a)(2)(ii) to insert the word calendar after the number 365 for
clarity and to be consistent with existing language regarding
timeframes being measured in calendar days, both in these procedures
and in our existing appeals procedures.
Comment: A commenter recommended that CMS create an online portal
for the submission of appeal requests and supporting documentation.
Response: We appreciate the recommendation submitted by commenter
to create an online portal for the submission of appeal requests and
supporting documentation. We considered this option as we began to plan
for implementation of this new appeals process, but ultimately found
this approach to be impracticable due to a variety of time, cost, and
security considerations. The length of development time, testing, and
sheer level of effort required to implement a secured beneficiary-
facing portal is at odds with the complex security environment and the
need to implement these new procedures as quickly as possible.
Moreover, we are committed to mirroring existing appeal procedures as
much as possible for these new appeals. Therefore, we are not adopting
the recommendation made by the commenters. We believe it is appropriate
for beneficiary appeal requests to continue to be submitted via mail.
CMS will provide clear instructions to beneficiaries on where to mail
their requests.
Comment: A commenter suggested that we consider having
beneficiaries file appeals with the health plan and have the plan
conduct the initial eligibility determination in addition to the
appeal. Other commenters supported our proposal to use a single point
of contact for receiving appeals and making eligibility determinations.
Response: We appreciate the comments and support for our use of an
eligibility contractor. We considered having MACs conduct the appeal
intake and make eligibility determinations. However, as we explained in
the proposed rule, we are establishing a single point of contact, the
eligibility contractor, to receive these new appeals and to make
eligibility determinations. We believe a single point of contact will
relieve beneficiaries of the burden of determining which MAC would be
responsible for performing an appeal under these new procedures. In
addition, we believe a single contractor making eligibility
determinations will promote consistency in such determinations.
Following the determination of eligibility, the processing contractor
(the MAC) will conduct the appeal. We also note that, as explained in
the proposed rule, these new appeals are limited to beneficiaries in
Medicare Part A and B (``Original Medicare''). Claims processing and
first level appeals in Original Medicare are conducted by MACs and not
health plans. Thus, we are not adopting the recommendation to use a
health plan or the MACs to make eligibility determinations.
Comment: Many commenters supported the availability of a model form
that could be used to file an appeal request. Commenters suggested that
we make the form available in multiple languages, including an ASL
interpretation of the form.
Response: We appreciate the support of the commenters regarding our
proposal for a model form that beneficiaries may use to submit an
appeal request. We plan to translate the form into different languages
as needed.
Comment: Several commenters requested that we provide more
information about the submission of medical records as part of the
retrospective appeal request and what types of records and information
would be needed as part of the appeal. Commenters also suggested that
we provide eligible parties with instruction about how to seek
assistance from the eligibility contractor in obtaining records and
suggested other information that we should consider including in our
instructions for filing appeal requests (for example, the types of
records that would be helpful, the dates spent in the hospital, orders
regarding admission and care, etc.).
Response: We appreciate the recommendations submitted by commenters
for the content of instructions related to filing appeal requests. We
intend to carefully consider these recommendations for the online
educational materials we intend to publish prior to implementation of
the new procedures. We agree that as part of our educational efforts,
it will be helpful to provide beneficiaries with information about the
types of records needed for these new appeals and suggestions for how
to get access to them.
We would like to emphasize, as we did in the proposed rule, that we
strongly encourage beneficiaries or their representatives to submit
with their appeal request all available medical records related to the
hospitalization and, as applicable, SNF services, and documentation of
amounts paid out of pocket for care that was not covered under Part A.
However, in these new appeals, we understand the difficulty some
beneficiaries may have in obtaining records for services furnished many
years ago. For that reason, we will require the eligibility contractor
to work with the appropriate MAC to request all relevant records that
are needed to establish eligibility for an appeal from the appropriate
providers if some, or all, of those records are not submitted with the
appeal request. In addition, as necessary, the eligibility contractor
and MAC will request missing records related to the hospital, and as
applicable, SNF services furnished to the beneficiary to determine
whether coverage under Part A is warranted. Such records should be
comprehensive with respect to the treatment and services received and
would include, but are not limited to, hospital records that document
admission as an inpatient, orders for observation services, diagnosis
and treatment notes, orders and results of testing, discharge planning
notes, as well as records from services furnished by the SNF (as
applicable). In addition, beneficiaries should submit information
related to the out of pocket payments that were made for the services
at issue in the appeal, particularly SNF services for which a provider
refund is sought. Such information could include provider bills and/or
invoices, proof of payment in the form of a copy of a cashed check,
credit card statement, etc.
Comment: A commenter requested clarification on how contractors
will request additional information from providers related to an appeal
request, and who within the provider's organization would be authorized
to share patient information with the contractor.
Response: Providers have a longstanding obligation to provide
requested information related to services furnished to a beneficiary
under section 1815(a) of the Act. MACs will utilize existing methods
for requesting additional documentation and records, that is, the
Additional Documentation Request (ADR) process, where a letter
outlining the requested records and dates of service is mailed to the
provider. Providers that have registered to receive ADRs and submit
records in response electronically may use the existing system (for
example, the Electronic Submission of Medical Documentation (esMD)
system). Providers should follow existing privacy protocols for the
submission of records requested by the MAC for these appeals in the
same manner as they would for

[[Page 83251]]

other records requests by a MAC or other contractor.
Comment: Several commenters recommended that we give individuals
and providers additional time to submit records requested for an
appeal. The commenters stated that the 60-day timeframe in the proposed
rule is inadequate and suggested we allow 120 calendar days for the
submission of missing information. A commenter expressed concern about
the impact of records requests on providers. Some commenters also
recommended that we also allow extensions of the timeframe for good
cause. Commenters also expressed concern about whether providers would
be penalized for being unable to locate records that are older than
existing record retention requirements and urged CMS to ensure
contractors are aware of record retention requirements.
Response: We understand and appreciate the concerns of the
commenters regarding the potential issue some individuals or providers
may have in locating and producing records for services furnished many
years ago, and the burden of these requests on providers. While we are
concerned that extended timeframes to respond to records requests may
cause delays in establishing eligibility of the beneficiary in order to
adjudicate valid appeals, we agree with the commenters that affording
up to 120 calendar days to submit records to the eligibility contractor
is reasonable. Accordingly, we are revising Sec. 405.932(c)(2) to
provide that the eligibility contractor will allow up to 120 calendar
days for submission of missing information.
However, in light of the 365-calendar day filing timeframe to
request an appeal under these procedures and the additional 60 calendar
days we are granting to submit records, we believe it is also
reasonable not to include extensions to the 120-calendar day timeframe
in which records must be submitted to the eligibility contractor. It is
important to balance the interests in affording individuals adequate
time to obtain records with the interests in avoiding extended delays
in processing appeals. We believe the 365-calendar day filing timeframe
to request an appeal provides individuals with adequate time to obtain
the necessary documentation to support their appeal. Should the
eligibility contractor still need additional information, we believe
allowing up to another 120 calendar days is reasonable. If an
individual or provider cannot meet the deadline, the eligibility
contractor will make a decision based on the information in the record.
If the information in the record does not establish the individual's
eligibility, then the eligibility contractor will issue a denial
notice. The individual (or their representative) may request a review
of the eligibility contractor's denial in accordance with the
procedures outlined in Sec. 405.932(e) and may submit any records
subsequently obtained that serve to establish eligibility and/or
coverage of services.
We acknowledge the concerns raised by commenters about the extended
lookback period for retrospective appeals and the ability of providers
to locate medical records for services that were furnished on dates
that are not covered by existing record retention requirements.
Medicare requires records be retained by providers for 7 years from the
date of service (42 CFR 424.516(f)). While providers are not required
to maintain records beyond the 7-year timeframe specified in
regulations, we encourage providers to make reasonable efforts to
search for and furnish any records in their possession, including those
outside the record retention requirements. However, contractors are
aware of existing record retention requirements, and we will not
penalize providers who cannot locate records for dates of service that
are beyond the record retention timeframe.
Comment: Several commenters stated that we should advise
beneficiaries in our instructions for these new appeals that they may
still submit retrospective appeal requests even if their medical
records are unavailable. The commenters also requested that we specify
that in the absence of medical records, acceptable evidence for the
determination of Part A coverage would include written statements from
beneficiaries, family members and providers who are familiar with the
facts giving rise to the appeal.
Response: We agree with these commenters that beneficiaries may
submit a retrospective appeal request without medical records.
Consistent with the proposed rule, under this final rule we will
require the eligibility contractor and the appropriate MAC to
coordinate with providers to obtain necessary medical records to
determine eligibility and to process the appeal regarding the denial of
Part A coverage. Written statements from a beneficiary or family member
regarding hospital services and, as applicable, SNF services furnished
to a beneficiary may be submitted as evidence in the appeal. However,
we believe an adjudicator will need some form of documentary evidence,
such as medical records, to determine whether specific aspects of
eligibility are met (for example, whether the hospital in fact admitted
a patient as an inpatient and subsequently changed their status, or
whether observation services were furnished after such change in status
to outpatient). The adjudicator will also need to determine whether
services meet Part A coverage requirements (for example, with hospital
admissions subject to the original two-midnight rule from 2013, whether
the patient is reasonably expected to require a stay of at least two
midnights, and where the medical record includes information to support
the physician's or otherwise qualified practitioner's expectation that
the patient would require a stay of at least two midnights). Thus,
testimonial evidence, such as statements from a beneficiary or provider
regarding the care or treatment received will be accepted and
considered in an appeal. However, without corresponding medical
documentation, such statements by themselves may be insufficient to
establish eligibility and/or determine if Part A coverage requirements
were met. Thus, we decline to adopt the recommendation made by the
commenters.
Comment: Several commenters recommended that our instructions for
filing appeals and other guidance regarding the new appeals procedures
explain the relevant standard for coverage that beneficiaries will have
to meet in order to demonstrate that their hospital stay met the
relevant Part A coverage criteria for inpatient hospital services.
Response: We appreciate this recommendation, and we agree that
guidance regarding the coverage standards for inpatient admissions will
be important information for beneficiaries eligible for an appeal. We
intend to provide information regarding the relevant standards for
inpatient hospital coverage and the applicable timeframes in materials
we will publish on our websites.
Comment: A few commenters contended that the regulatory text in the
proposed rule did not provide sufficient detail regarding the
information contained in the notice related to a denial of eligibility
for an appeal. The commenters suggested that the eligibility denial
notice should contain specific information to assist beneficiaries in
understanding the reason for the denial as well as what information is
necessary to cure the denial.
Response: We appreciate the suggestions made by the commenters. We
believe the regulatory language regarding the content of the denial
notice in Sec. 405.932(d)(3)(ii) is sufficient

[[Page 83252]]

with respect to specifying the reason for denial of the appeal request
(``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).''). However, we agree that it would be appropriate to
specify that the denial notice include a statement about the
information needed to cure the appeal request to establish eligibility.
We view this as implied in providing the reason(s) for the denial but
also see the value of including this additional requirement in the
denial notice prepared by the eligibility contractor. Therefore, we are
revising Sec. 405.932(d)(3)(ii) to state that the denial notice
explains that the request is not eligible for an appeal, the reason(s)
for the denial of the appeal request, the information needed to cure
the denial, and the process for requesting a review of the eligibility
denial under Sec. 405.932(e). We appreciate the feedback that we
received from commenters on eligibility determinations and filing
appeals under these new procedures. Based on analysis of the public
comments, we will be finalizing the proposals related to such
procedures as proposed with the exception of the amendments to
Sec. Sec. 405.932(c)(2) and 405.932(d)(3)(ii), described previously.
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 proposed 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 proposed 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 believed the procedures for the
new retrospective appeals would need to differ from existing claims
appeals procedures, we proposed new processes. For example, in Sec.
405.931(b) and (c), we proposed that party status for these appeals be
limited to the eligible class members (or their authorized
representatives).
In Sec. 405.932(f)(1), we proposed that if the processing
contractor determines there is necessary information missing from the
appeal 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 proposed 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 proposed that the processing contractor would
make a decision based on the information available.
In proposed Sec. 405.932(f)(3), we required 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 proposed 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-calendar day adjudication
timeframe. If the requested information is not sent to the processing
contractor, then we proposed that the time afforded by the contractor
for submission of the information would not count towards the
adjudication timeframe. In effect, the 60-calendar 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 proposed 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 section 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 proposed 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 proposed 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 of the regulations, 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 proposed 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 proposed 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 believed that the Medicare statute requires a
provider of services to submit new claims in order

[[Page 83253]]

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 \13\). 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 proposed 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 also proposed 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.
---------------------------------------------------------------------------

\13\ 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 proposed 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 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 also proposed 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.
If the processing contractor determines that the hospitalization
did not meet applicable Part A inpatient coverage requirements, we
proposed 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 also proposed 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.
We received several comments regarding the processing of
retrospective appeals and the effectuation of favorable or partially
favorable appeals.
Comment: A commenter requested clarification regarding coordination
among MACs if a hospital claim and SNF claim are processed by different
MACs. The commenter questioned how the MAC processing the appeal would
get information about the SNF. The commenter also inquired about the
process for handling requests from the eligibility contractor that are
sent to the wrong MAC.
Response: We appreciate the commenter's questions about how
contractors will coordinate activities to ensure appropriate
information is available to the eligibility and processing contractors.
We considered the concerns raised by the commenter as we were
developing the procedures in the proposed rule and we intend to include
a process for contractors to coordinate with each other and with CMS in
the rare case of different contractors having responsibility for the
SNF claim and the hospital claim. This will ensure information needed
to request documentation will be made available to the appropriate
contractor. We will also instruct contractors to work with CMS in the
event that the eligibility contractor sends requests to the incorrect
MAC. In turn, CMS will assist the eligibility contractor, as needed, to
determine the appropriate processing contractor so the appeal will be
handled in a timely manner.
Comment: A commenter expressed concern about estate recovery under
the Medicaid program in situations under these new procedures where a
beneficiary could not obtain Medicare coverage of SNF services, but
ultimately received coverage of SNF services from Medicaid. The
commenter suggested that CMS encourage states to use hardship waiver
authority to relieve individuals of estate recovery for portions of SNF
stays that Medicare should have covered.
Response: We appreciate the concerns raised by the commenter. If a
State Medicaid agency determines that a deceased beneficiary may be
subject to estate recovery, it may only make recoveries from the
beneficiary's estate under certain circumstances, including when
recovery would not create an undue hardship for survivors. States are
required by section 1917(b)(3) of the Act to have procedures to waive
estate recovery where it would create an undue hardship for the
deceased Medicaid recipient's heirs. States have flexibility and
discretion to design reasonable criteria for determining what
constitutes an undue hardship and who may be afforded protection from
estate recovery in such instances. The State plan needs only specify
the criteria for waiver of estate recovery claims due to undue
hardship. Individuals will need to work directly with their State
Medicaid Agency to file an undue hardship claim.
Comment: Several commenters suggested CMS clarify that due to the
COVID-19 public health emergency (PHE) and the waivers implemented by
CMS with respect to the 3 consecutive day qualifying hospital stay
(QHS) eligibility requirement for SNF benefits, that there should be no
appealable SNF stays for the period in which the PHE waivers were in
effect.
Response: We appreciate the commenters' suggestions on this issue.
Under the terms of the court order and the proposed rule establishing
eligibility for retrospective appeals (Sec. Sec. 405.931 through
405.938), an eligible party may appeal the denial of Part A coverage.
We anticipate an overwhelming majority of appeals filed under these new
provisions will focus on denials of Part A SNF coverage due to
financial liability for the denied SNF services. We

[[Page 83254]]

agree with the commenter that appeals under these new provisions should
not include SNF services that were paid by Medicare as the result of a
SNF invoking the COVID-19 PHE waiver authority for a QHS (or services
paid by a third-party payer as noted in Sec. 405.932(b)(2)).
Nevertheless, we would like to clarify that we are not restricting an
eligible party's right to appeal the denial of Part A coverage for
hospital services under these procedures even if the SNF services were
covered by Medicare or a third-party payer; we do not believe that such
a restriction is consistent with the court order in Alexander. However,
following the clarifying order by the court which does not require the
unwinding or adjustment of the Part B outpatient hospital claim
following a favorable appeal decision, we do not expect many appeals to
be filed if the beneficiary's SNF services were covered.
Comment: A few commenters suggested that we clarify how the new
appeals process will interact with existing claims appeals processes. A
commenter requested that we address situations where a hospital is
pursuing a claim appeal under the existing claims appeals process and
then an eligible party initiates a retrospective appeal under these new
procedures. The commenter acknowledged there would likely be few such
cases.
Response: We agree with the commenter that we expect very few, if
any, situations where a claim for hospital outpatient services is
pending in the claims appeal process and then an eligible party files
an appeal for Part A coverage under the new process. However, in that
unlikely situation, the determination of coverage under Part A for the
hospital claim would be conclusive with respect to the hospital
services and would be binding for purposes of the beneficiary's
hospitalization.
To illustrate, under existing procedures in Sec. 405.940, et seq.,
if the hospital appealed a denial of coverage of outpatient hospital
services for not being medically reasonable and necessary under section
1862(a)(1)(A) of the Act, that appeal would only address the coverage
and payment of the outpatient services on the hospital's Part B claim
submitted to Medicare. An appeal filed by a hospital under existing
procedures would not address whether coverage under Part A would have
been appropriate. However, if an eligible party filed an appeal for the
denial of Part A coverage under the provisions in Sec. Sec. 405.931
through 405.938, then that determination would be conclusive for the
purposes of coverage for the hospital services. Adjudicators deciding
an appeal of the Part B outpatient claim would be bound by the
determination with respect to Part A coverage as a result of an appeal
under Sec. Sec. 405.931 through 405.938. Similarly, if the appeal
under Sec. Sec. 405.931 through 405.938 involves coverage of SNF
services, the determination would be binding on any pending claims
appeal under existing procedures.
In order to address the issue raised by the commenter, we are
revising Sec. 405.931 to add new paragraph (i) to explain that the
determination of Part A coverage made in an appeal decision under these
procedures is conclusive and binding with respect to coverage of such
services under Part A for any other appeal under Part 405 Subpart I.
Specifically, Sec. 405.931(i) would be added to state that, for the
purposes of appeals under Sec. Sec. 405.931 through 405.938, the
determination with respect to coverage under Part A is conclusive and
binding with respect to the services furnished and shall be applied to
any existing appeals with respect to coverage and payment for hospital
services under Part B and SNF services (as applicable).
Comment: Several commenters expressed support for the process
outlined in the proposed rule regarding applicable refunds to
beneficiaries for out-of-pocket payments made following a favorable or
partially favorable appeal decision. A commenter suggested that CMS
clarify that ``family member'' in the context of out-of-pocket payments
include individuals who are not biologically related to the eligible
party. A commenter requested that CMS state that the application of 42
CFR part 489 Subpart D with respect to handling incorrect collections
means that providers must issue refunds promptly (generally within 60
days of a binding favorable appeal decision) and must comply with
existing legal protections. A commenter also suggested that CMS provide
additional explanation for situations where a provider has changed
ownership or has closed, and a refund is owed to a beneficiary. A
commenter also indicated that CMS should consider how refunds will get
to the appropriate individual, particularly with respect to appeals
filed on behalf of deceased beneficiaries.
Response: We appreciate the commenters' support and suggestions on
this issue. Our goal in creating this new retrospective appeals process
is to implement the court order in a way that provides class members
with a meaningful opportunity to appeal the denial of Part A coverage
that is similar to the existing claim appeal process and provide a
remedy for those class members who endured uncompensated or
undercompensated care at SNFs. At the same time, there are limits on
our authority to fashion remedies in effectuating favorable appeal
decisions. For example, payment for hospital and SNF services may only
be made to providers following submission of a claim by the provider.
Section 1814(a)(1) of the Act; 42 CFR 424.33 and 42 CFR 424.51. In
addition, existing policies for handling incorrect collections of funds
from a beneficiary (42 CFR part 489 Subpart D) do not authorize the
program to reimburse beneficiaries directly except in very limited
circumstances (see Sec. 489.42(a)). For this reason, we must rely on
providers and the terms of their provider agreement to issue refunds to
beneficiaries where applicable.
In the proposed rule, we explained that we are limiting our review
of SNF services in these new appeals to situations where the
beneficiary or a family member paid out-of-pocket for the SNF services
(42 CFR 405.932(b)(2)). We explained that payments, including cost
sharing payments, made by a third-party payer do not constitute out-of-
pocket payments made on behalf of the eligible party. We agree with the
commenter who suggested that for the purposes of determining whether
there were out-of-pocket payments made for SNF services, we consider
payments made by individuals who are not biologically related but who
paid out-of-pocket expenses on behalf of a beneficiary to be considered
as out-of-pocket payments made by a family member. This could include,
for example, close family friends, a former spouse, a roommate, or
other individuals who would not have a legal or contractual obligation
to pay for a beneficiary's care. We are revising Sec.
405.932(b)(2)(iii) to state that payments made by a family member
(including payments made by an individual not biologically related to
the beneficiary) for an eligible party's SNF services are considered an
out-of-pocket payment for the eligible party.
With respect to the comments received about the timing of refunds
that may be required following a favorable or partially favorable
appeal decision, we reiterate our position as explained in the proposed
rule that providers have an obligation to comply with applicable
statutory and regulatory requirements with respect to charging for
covered services. In the proposed rule (88 FR 89514), we stated that
providers are reminded that under sections 1814 and 1866 of the Act, 42
CFR 489.20 and 489.21, and the terms

[[Page 83255]]

of the provider agreement, providers may not collect any amounts for
covered services other than applicable coinsurance and deductible.
Refunding amounts previously paid for services determined to be covered
following an appeal is the responsibility of the provider, and must be
made consistent with the provisions in part 489 Subpart D. We expect
that the provider will promptly refund amounts incorrectly collected,
meaning the refund should be issued within 60 days of receipt of the
decision letter to avoid the set aside requirements in 42 CFR
489.41(b).
With respect to concerns about refunds getting to the appropriate
individual in the case of deceased beneficiaries, we note that an
appellant would need to establish authority to file on behalf of a
deceased beneficiary as they do under existing appeals procedures (see
42 CFR 405.906(a)(1)). Coordination of any refund owed by a provider
following a favorable appeal decision is a private matter between the
provider and the individual entitled to a refund, and state law would
govern in the case of a refund owed to a deceased beneficiary or their
estate, or refunds owed by a provider that is no longer operating. CMS
has limited authority under the statute to intervene. CMS may only make
payment to an individual in situations where the provider invokes the
set aside provision in Sec. 489.41 and fails to issue a refund. CMS
would then determine whether payment of an amount equal to the
incorrect collection should be made under Sec. 489.42. However,
failure to issue a refund and retain funds from sources other than
Medicare for covered services would constitute a violation of section
1866(a)(1)(A) of the Act and the terms of the entity's provider
agreement.
Finally, in situations where there is change of ownership for a
provider, obligations of the previous entity are generally transferred
to the new owners. In rare situations where the new owners do not
accept assignment of the provider agreement, including prior
obligations, or in cases where the provider is no longer in operation,
state law would apply with respect to the entity's obligations to
remedy a debt.
Comment: A commenter indicated that the proposed rule did not
consider the implications for the Medicare Secondary Payer (MSP)
program and the impact on other insurers or payers involved in the
beneficiary's insurance coverage.
Response: We appreciate the concern raised by the commenter. In the
retrospective appeals process, we explained that following a favorable
decision, to prevent duplicate payment, a provider who wishes to submit
a claim for Part A payment would be obligated to refund amounts
previously collected for Part B services determined, on appeal, to be
covered under Part A. Providers would follow existing procedures for
making refunds of amounts previously collected for such Part B services
prior to submitting a Part A claim for payment as the services are
considered non-covered under Part B. Then providers could collect
payment for the covered Part A services based on the beneficiary's
insurance coverage at the time the services were furnished. However,
consistent with the court's clarifying order issued on December 9,
2022, with respect to appeals involving beneficiaries enrolled in both
Medicare Part A and B at the time of hospitalization, we remind
hospitals that they are not required to submit a claim for Part A
hospital services. Absent a Part A claim, we will not reopen or unwind
previous Part B outpatient hospital payments in order to make payment
for any SNF services determined to be covered under Part A.
Comment: A few commenters requested that CMS allow providers up to
1 year, as well as extensions for good cause or hardships, to file a
claim following a favorable appeal decision. Commenters also requested
that CMS consider all options to facilitate the submission of claims
for Part A services following a favorable retrospective appeal
decision. A commenter suggested that the decision itself could be
sufficient to adjudicate a Part A claim for payment. A commenter
questioned whether hospitals could collect the Part A hospital
inpatient deductible following refund of any Part B payments collected
and submission of a Part A claim.
Response: We appreciate the concerns raised by commenters about
billing for services following a favorable or partially favorable
appeal decision. We acknowledge that submitting a claim may be
complicated in situations where services were furnished many years ago,
and in developing the procedures to implement the court order, we
considered options with respect to claims for newly covered Part A
services. As we stated in the proposed rule, under section 1814(a)(1)
of the Act, and Sec. Sec. 424.33 and 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. In addition, under section 1815(a) of the Act, providers must
furnish information as requested in order to determine the amounts due
for Part A services. Thus, while the coverage determination with
respect to the Part A services is conclusive based on the appeal
decision, we would not make payment for covered Part A services solely
based on a favorable or partially favorable appeal decision without a
Part A claim for payment from the provider, in light of section
1814(a)(1) of the Act. Moreover, an existing Part B outpatient claim
cannot be ``adjusted'' into a Part A inpatient claim due to the
different characteristics and requirements of inpatient and outpatient
claims. (See 78 FR 50917, 50926 (August 19, 2013) where we explained
that we could not ``adjust'' a Part A inpatient claim into a Part B
claim for the purposes of Part B inpatient billing.) We are currently
developing instructions for submission of these claims and will have a
process approved and finalized shortly after this final rule is
published.
However, we agree that extending the timeframe for providers to
submit claims in response to a favorable or partially favorable
decision is warranted in light of the complexities that may surround
such submissions. Thus, we are adopting the commenters' suggestion to
extend the deadline for providers to file a claim(s) from 180 calendar
days to 365 calendar days from the date of receipt of the notice of a
favorable or partially favorable appeal decision. Specifically, we are
revising Sec. Sec. 405.932(h)(2)(i), 405.932(h)(2)(ii),
405.934(d)(2)(i), 405.934(d)(2)(ii), 405.936(e)(2)(i),
405.936(e)(2)(ii), 405.938(d)(2)(i), and 405.938(d)(2)(ii) to replace
``180 calendar days'' with ``365 calendar days''. We note that this
365-calendar day timeframe to submit a claim is established solely in
furtherance of implementing operational aspects of the court order in
the Alexander case and is unrelated to existing rules for timely filing
of claims in section 1814(a)(1) of the Act and 42 CFR 424.44. As
suggested by commenters, we will also permit extensions to the claims
filing deadline upon establishment of good cause. In determining
whether a provider has established good cause when requesting an
extension for filing a claim following a favorable or partially
favorable appeal decision under these procedures, we will apply the
provisions in Sec. 405.942(b) and (c) to the provider's request.
We also remind hospitals that submission of a claim for Part A
payment of inpatient hospital services is not required under these
procedures, nor is submission of a claim prohibited. Hospitals may have
received payment for Part B outpatient services at the time these
services were furnished. As a

[[Page 83256]]

result of the clarifying order issued by the court, for beneficiaries
who were enrolled in both Part A and Part B at the time of
hospitalization, Medicare will not immediately unwind previously paid
Part B outpatient claims in the case of a favorable or partially
favorable appeal decision for Part A coverage of the hospital services.
However, if a hospital chooses to submit a Part A inpatient claim for
payment following a favorable or partially favorable decision, in order
to prevent duplicate payment for services, we will unwind the Part B
claim (by canceling the claim) before processing the Part A claim, and
recover any monies paid to the hospital. The hospital would also need
to refund any other payments collected for the outpatient services,
including payments collected from any source related to coinsurance and
deductibles for the outpatient services prior to submitting the Part A
inpatient claim. Hospitals may then collect applicable cost sharing
based on the beneficiary's insurance coverage at the time of
hospitalization in accordance with the processed Part A claim.
In order to clarify these points, we are amending Sec. Sec.
405.932(h)(1)(ii), 405.934(d)(1)(ii), 405.936(e)(1)(ii) and
405.938(d)(1)(ii) to state that following a favorable appeal decision,
a prior Part B outpatient hospital claim will not be reopened and
revised (that is, unwound) unless a hospital submits a Part A claim for
inpatient services. These sections will be revised to read as follows:
For the purposes of effectuating a favorable [decision type], unless a
Part A claim is submitted by a hospital, 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.
We are amending Sec. Sec. 405.932(h)(2)(ii), 405.934(d)(2)(ii),
405.936(e)(2)(ii) and 405.938(d)(2)(ii) and we are adding Sec. Sec.
405.932(h)(2)(iii), 405.934(d)(2)(iii), 405.936(e)(2)(iii) and
405.938(d)(2)(iii) to clarify that if a hospital chooses to submit a
Part A inpatient claim following a favorable appeal decision for any
eligible party, the hospital must refund any payments collected for the
outpatient hospital services prior to submitting a Part A inpatient
claim in order to prevent receipt of duplicate payment, and to clarify
that a refund of payments collected for the outpatient hospital
services is required if the favorable or partially favorable appeal
decision involves a beneficiary who was not enrolled in Medicare Part B
at the time of hospitalization even if the hospital does not submit a
Part A inpatient claim for payment. While we do not anticipate
hospitals will submit Part A claims in situations where they previously
received Part B payment for an outpatient claim, a refund would be
required before the submission of a Part A inpatient claim submitted
for any eligible party, and not limited to situations where a
beneficiary was not enrolled in Part B at the time of hospitalization.
Accordingly, these sections are being revised to state that a
hospital that furnished services to any eligible party (including those
enrolled in both Medicare Part A and Part B at the time of
hospitalization) must refund any payments collected for the outpatient
hospital services prior to submitting a Part A inpatient claim for such
services, and that the claim must be submitted within 365 calendar days
of receipt of the notice of a favorable decision. These revisions also
clarify that if a favorable or partially favorable decision is issued
to a beneficiary who was not enrolled in Medicare Part B at the time of
hospitalization, a refund is required for any amounts collected for the
outpatient hospital services even if a Part A inpatient claim for
payment is not submitted to the program.
Finally, we are adding Sec. Sec. 405.932(h)(2)(iii),
405.934(d)(2)(iii), 405.936(e)(2)(iii) and 405.938(d)(2)(iii) to
differentiate appeals involving beneficiaries who were enrolled in
Medicare Part B at the time of hospitalization in order to clarify that
hospitals must refund any payments collected for the outpatient
hospital services only if the hospital chooses to submit a Part A
inpatient claim for such services following a favorable or partially
favorable decision for these beneficiaries, and the timeframe to submit
such claims (365 calendar days).
Comment: Several commenters raised questions about billing for
services following a favorable or partially favorable appeal decision.
A commenter questioned how a favorable decision with respect to Part A
coverage for both the hospital and SNF services would be effectuated
with respect to the SNF if the SNF had previously submitted and
received payment for Part B services, and now decides to submit a claim
for covered Part A services. Commenters also raised questions about
specific condition codes to be used in billing for services, how Common
Working File (CWF) edits would be implemented to accommodate these new
claims, and how these new claims would be identified by the MAC. The
commenters requested that CMS acknowledge the complexity of billing for
SNF services furnished prior to FY 2020 and that CMS address how this
will be resolved in the final rule.
Response: Following a favorable appeal decision and after issuing a
refund to the beneficiary for any out of pocket payments made for SNF
services, if a SNF decides to submit a claim for covered Part A
services, then in order to avoid duplicate payment, Medicare would
recover the funds paid to the SNF for the Part B services to the extent
such Part B services are included in the payment made for Part A
services. Medicare would then process the Part A claim and make the
appropriate payment to the SNF for covered services.
We appreciate the comments about the complexity of this billing
process and understand the complexity involved not only in billing, but
also in processing these claims manually. We anticipate that each
situation will involve subtle differences that will need to be
addressed on a case-by-case basis. We are currently working to make the
necessary system changes to accommodate these claims and to create
billing instructions that will be approved and finalized shortly after
publication of this final rule. That will give providers some advance
time to work internally and/or with billing agents to be able to submit
claims following a favorable appeal. We will be working to implement
condition codes and remarks codes to be used on claims submitted
following a favorable decision so those claims may be identified by the
MAC. We anticipate the process will be similar to the Part B inpatient
rebilling process (<a href="https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/MM8185.pdf">https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/MM8185.pdf</a>) implemented in response to CMS
Ruling CMS-1455-R and the provisions in the Fiscal Year 2014 Hospital
Inpatient Prospective Payment System final rule (CMS-1599-F, <a href="https://www.govinfo.gov/content/pkg/FR-2013-08-19/pdf/2013-18956.pdf">https://www.govinfo.gov/content/pkg/FR-2013-08-19/pdf/2013-18956.pdf</a>). But we
are unable to incorporate this operational guidance into this
rulemaking.
Finally, we note that we agree with commenters who expressed
similar concerns about the complexity of this process. As explained
earlier, we are extending the time period to submit claims in response
to a favorable or partially favorable decision to 365 calendar days
from the date of receipt of the appeal decision and MACs will provide
support, as needed, to providers who wish to submit Part A claims.
We appreciate the feedback that we received from commenters on the

[[Page 83257]]

procedures for appeals conducted by processing contractors. Based on
analysis of the public comments, we will be finalizing the proposals
related to such procedures as proposed except for the addition of
Sec. Sec. 405.931(i) and 405.932(h)(2)(iii), and the amendments to
Sec. Sec. 405.932(b)(2)(iii), 405.932(h)(1)(ii) and 405.932(h)(2)(i)
and (ii), described previously.
5. Conduct of Reconsiderations by Qualified Independent Contractors
In Sec. 405.934(a), we proposed that the second level of
retrospective appeals be performed by QICs. As with the first level of
appeal, we proposed 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 proposed 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 proposed 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 also proposed 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 proposed 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
proposed 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 proposed 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 proposed 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 proposed 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 also proposed 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 proposed 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 also proposed 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 proposed 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 also proposed
in Sec. 405.934(c)(2) 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.
We did not receive any comments on the proposed policies related to
QIC reconsiderations. We are finalizing our policies as proposed with
the exception of the following modifications, described in section
III.A.4. of this final rule:
<bullet> Amending Sec. 405.934(d)(1)(ii) to clarify that existing
outpatient claims will not be unwound unless the hospital files a Part
A inpatient claim following a favorable appeal decision.
<bullet> Amending Sec. Sec. 405.934(d)(2)(i) and (ii) to extend
the time for providers to file claims following a favorable decision to
365 calendar days.
<bullet> Adding Sec. 405.934(d)(2)(iii) to clarify that hospitals
must refund any payments collected for the outpatient hospital services
only if the hospital chooses to submit a Part A inpatient claim for
such services following a favorable or partially favorable appeal
decision for beneficiaries who were enrolled in Medicare Part B at the
time of hospitalization.

[[Page 83258]]

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 proposed
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 proposed that these
elements would mirror existing requirements for appeal requests in
Sec. 405.1014(a)(1). We also proposed 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 the 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 proposed 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.\14\ 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 did not believe it would
be appropriate to adopt other existing calculation methods to apply
them here.
---------------------------------------------------------------------------

\14\ For calendar year 2025, the minimum amount in controversy
for a hearing at the OMHA level is $190, and for judicial review the
minimum amount in controversy is $1,900. These amounts are
calculated annually in accordance with section1869(b)(1)(E) of the
Act and notice of the updated minimum amounts for each 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>.
---------------------------------------------------------------------------

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
believed it was 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 proposed including those
charges in calculating the amount in controversy for a hearing before
an ALJ and for judicial review in federal district court. We emphasized
that, as explained in section III.A.4. of this 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 proposed 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 proposed 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 did not reduce 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 did we factor 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 did 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 outpatient services, we proposed 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 believed 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, were 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

[[Page 83259]]

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 proposed 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 explained 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 proposed 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 proposed 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 proposed 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
specified 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 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 proposed 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 proposed 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 proposed 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 also proposed 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 proposed 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 also proposed 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 proposed 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 also proposed 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 proposed 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.
We did not receive any comments on the proposed policies related to
ALJ hearings and decisions by ALJs or Attorney Adjudicators. We are
finalizing our policies as proposed with the exception of the following
modifications, described in section III.A.4. of this final rule:
<bullet> Amending Sec. 405.936(e)(1)(ii) to clarify that existing
outpatient claims will not be unwound unless the hospital files a Part
A inpatient claim following a favorable appeal decision.
<bullet> Amending Sec. 405.936(e)(2)(i) and (ii) to extend the
time for providers to file claims following a favorable decision to 365
calendar days.
<bullet> Adding Sec. 405.936(e)(2)(iii) to clarify that hospitals
must refund any payments collected for the outpatient hospital services
only if the hospital chooses to submit a Part A inpatient claim for
such services following a favorable or partially favorable appeal
decision for beneficiaries who were enrolled in Medicare Part B at the
time of hospitalization.
7. Conduct of Review by the Medicare Appeals Council
Under Sec. 405.938, we proposed that retrospective reviews at the
fourth level of appeal would be conducted by the Council and would
generally follow existing procedures for claims appeals

[[Page 83260]]

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 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 proposed to use the existing requirements for requests for Council
review in Sec. 405.1112. We proposed that untimely or incomplete
requests would be handled under existing procedures in Sec. Sec.
405.1100 through 405.1116.
We proposed 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 proposed 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 proposed 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 proposed that a
decision would contain information regarding the effect of a favorable
decision. In the case of an unfavorable or partially favorable
decision, we proposed that the Council include information about filing
a request for judicial review under existing procedures in 405.1136. We
also explained 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 proposed 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 proposed 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,\15\ 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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\15\ 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.
---------------------------------------------------------------------------

In proposed Sec. 405.938(e) and (f), we explained 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
proposed 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.
We did not receive any comments on the proposed policies related to
Appeals Council review. We are finalizing our policies as proposed with
the exception of the following modifications, described in section
III.A.4. of this final rule:
<bullet> Amending Sec. 405.938(d)(1)(ii) to clarify that existing
outpatient claims will not be unwound unless the hospital files a Part
A inpatient claim following a favorable appeal decision.
<bullet> Amending Sec. 405.938(d)(2)(i) and (ii) to extend the
time for providers to file claims following a favorable decision to 365
calendar days.
<bullet> Adding Sec. 405.938(d)(2)(iii) to clarify that hospitals
must refund any payments collected for the outpatient hospital services
only if the hospital chooses to submit a Part A inpatient claim for
such services following a favorable or partially favorable appeal
decision for beneficiaries who were enrolled in Medicare Part B at the
time of hospitalization.
8. Judicial Review
We proposed 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.
We did not receive any comments on the proposed policies related to
judicial review. We are finalizing our policies as proposed.
We appreciate the support and feedback we have received from the
commenters on our proposals related to the retrospective appeals
process. After review and consideration of all comments, we are
finalizing the regulations for the retrospective appeal procedures as
proposed with the following modifications:
<bullet> We are adding Sec. 405.931(i) to clarify that the
coverage decision for a retrospective Part A patient status appeal is
conclusive for any pending claim appeal.
<bullet> At Sec. 405.932(b)(2)(iii) we are clarifying that a
family member may include individuals who are not biologically related
to the beneficiary (solely for the purpose of determining whether out
of pocket payments were made for SNF services, making those services
eligible for an appeal).
<bullet> At Sec. 405.932(c)(2) we are extending the timeframe for
providers to respond to a request for medical records to aid in
establishing a beneficiary's eligibility for an appeal from 60 calendar
days to 120 calendar days.

[[Page 83261]]

<bullet> At Sec. 405.932(d)(3)(ii) we are requiring that the
eligibility contractor's notice of denial of eligibility will also
include an explanation of the information needed to cure the denial.
<bullet> At Sec. Sec. 405.932(h)(1)(ii), 405.932(h)(2)(ii),
405.934(d)(1)(ii), 405.934(d)(2)(ii), 405.936(e)(1)(ii),
405.936(e)(2)(ii), 405.938(d)(1)(ii) and 405.938(d)(2)(ii) we are
revising the regulation text to clarify that in the case of a favorable
appeal decision, a hospital who chooses to submit a Part A inpatient
claim must refund any payments received for the Part B outpatient claim
before submitting the Part A inpatient claim. If a Part A claim is
submitted, the previous Part B outpatient claim will be reopened and
canceled, and any Medicare payments will be recouped to prevent
duplicate payment. In addition, we are revising the regulation text to
clarify that in the case of a favorable decision for a beneficiary who
was not enrolled in Medicare Part B at the time of hospitalization, the
hospital must refund any payments collected for the outpatient services
even if the hospital chooses not to submit a Part A claim for payment
to the program.
<bullet> At Sec. Sec. 405.932(h)(2)(i) and (ii), 405.934(d)(2)(i)
and (ii), 405.936(e)(2)(i) and (ii) and 405.938(d)(2)(i) and (ii) we
are amending the content of decision letters to specify that a
provider's claim filing timeframe will be 365 calendar days following a
favorable or partially favorable decision under the retrospective
appeals process.
<bullet> We are adding Sec. Sec. 405.932(h)(2)(iii),
405.934(d)(2)(iii), 405.936(e)(2)(iii) and 405.938(d)(2)(iii) to
clarify the effect of favorable appeals involving beneficiaries who
were enrolled in Medicare Part B at the time of hospitalization to
explain that hospitals must refund any payments collected for the
outpatient hospital services only if the hospital chooses to submit a
Part A inpatient claim for such services.
In addition, in drafting this final regulation we identified
several erroneous cross-references in the proposed regulations text
that we will be correcting. Specifically--
<bullet> In proposed Sec. 405.931(a)(1), the reference to Sec.
405.931(b)(1) is revised to read Sec. 405.931(b);
<bullet> In proposed Sec. 405.932(c)(2), the reference to Sec.
405.931(b)(1) is revised to read Sec. 405.931(b);
<bullet> In proposed Sec. 405.932(d)(2)(ii), the reference to
Sec. 405.932(e) is revised to read Sec. 405.932(f); and
<bullet> In proposed Sec. 405.932(f)(3), the reference to
paragraph (e)(1) is revised to read (f)(1).
After publication of this 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 Sec. Sec. 405.1210 through 405.1212). We will
announce the implementation dates on cms.gov and/or <a href="http://Medicare.gov">Medicare.gov</a>.

B. Prospective Appeal Rights

1. Overview
This final rule also establishes and implements 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 expedited appeals process parallels the process in effect
for inpatient hospital discharge appeals set forth at Sec. Sec.
405.1205 and 405.1206, 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 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 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.\16\ 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 regarding hospital reclassifications of inpatients to
outpatients receiving observation

[[Page 83262]]

services proposed in Sec. Sec. 405.1211 through 405.1212.
---------------------------------------------------------------------------

\16\ 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 appeals, section 1155
of the Act authorizes the QIO to conduct a reconsideration of its
expedited determination regarding the hospital reclassification
under Sec. 405.1211 to determine if an eligible beneficiary is
entitled to coverage under Part A of the program.
---------------------------------------------------------------------------

We proposed an expedited appeals process that would be available to
beneficiaries \17\ 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, received observation
services following the reclassification, and met one of the following
two criteria:
---------------------------------------------------------------------------

\17\ 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 but they
were an inpatient for fewer than 3 days.
<bullet> They 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 proposed 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 proposed 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).\18\ 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 final rule for details on
how to obtain a copy of the MCSN.\19\
---------------------------------------------------------------------------

\18\ OMB control number 0938-1467.
\19\ Section IV.D. of this final rule states that to obtain
copies of the supporting statement and any related forms,
individuals should 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>.
---------------------------------------------------------------------------

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 proposed 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 SNF coverage
following the hospital stay. We believed 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.
We 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 was 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 imposing unnecessary burdens on hospitals.
We proposed 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 release from the hospital. For beneficiaries with Part
B, we proposed 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 proposed
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 believed the approach we proposed 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 was modeled after the existing hospital discharge appeals notice
(IM), and like that notice, does not require extensive time for
hospitals to prepare and deliver to beneficiaries. We believed 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

[[Page 83263]]

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 under this new appeals process beneficiaries
will not have financial liability protection for hospital services
received while their appeal is adjudicated. 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 proposed that the 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. We
stated that if the proposed rule was finalized, we would 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 proposed 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 be referred to herein as a standard or
untimely appeal.
Comment: The vast majority of commenters supported the proposed
prospective appeals process that would provide eligible beneficiaries
with the right to pursue an appeal regarding a hospital
reclassification from inpatient to outpatient receiving observation
services. Many commenters stated the policy would protect beneficiary
access to medically necessary post-acute care services, specifically
skilled nursing and occupational therapy services. Several commenters
noted appreciation that the prospective appeals process would protect
beneficiaries from the potentially detrimental effects of hospital
status changes. A few commenters believed the appeals process would
increase transparency for beneficiaries receiving hospital care.
Response: We appreciate the commenters' support for the proposed
prospective appeals process.
Comment: Multiple commenters strongly recommended CMS finalize and
implement the proposed prospective appeals process as soon as possible,
with a commenter suggesting beneficiaries have lacked recourse to
hospital reclassifications for too long already. Conversely, several
commenters requested CMS delay implementation of the prospective
appeals process for at least 1 year to allow hospitals to better
understand their responsibilities and have time to integrate the
appeals processes into existing workflows, with a commenter urging CMS
to not finalize the proposed rule without addressing commenters'
concerns and reducing the potential administrative burden the process
would place on hospitals. Lastly, a commenter sought clarification on
the implementation timeline and whether the prospective appeals process
would be permanent.
Response: We appreciate the commenters' perspectives on the
policy's implementation schedule. When considering the implementation
timeline, we are balancing the need to provide beneficiaries access to
the prospective appeals process as soon as possible with the time
needed for finalizing guidance and notices and educating the industry
on the new requirements, as well as the time needed by hospitals to
integrate the new process into their existing workflows. We believe
scheduling implementation as soon as operationally feasible not only
meets the Court's order but strikes the proper balance between ensuring
beneficiaries are adequately protected and providing hospitals
sufficient lead time to prepare for and comply with the new
requirements.
Comment: Multiple commenters strongly recommended CMS monitor
hospital compliance with the prospective appeals process after
implementation and to identify unintended consequences and make updates
to the appeals process as necessary. A commenter suggested specifically
monitoring the impact the prospective appeals process may have on SNF
intake and hospital length of stay statistics. Another commenter
suggested CMS monitor the impact the prospective appeals process may
have on quality improvement reporting programs.
Another commenter suggested CMS coordinate and align the proposed
appeals process with the Medicare Secondary Payer (MSP) program and
ensure beneficiaries rights and benefits are not adversely affected.
Another commenter predicted hospital inpatient admissions would
decrease as a result of the proposed prospective appeals process
because hospitals would want to avoid having their reclassifications
effectively overturned.
Response: We appreciate the input from commenters and the suggested
areas for increased monitoring as we implement the new prospective
appeals process. While we did not propose to establish any oversight
programs specific to the new appeals process, we plan to utilize
existing program oversight authorities related to Medicare provider
agreements to ensure industry compliance. We note, however, as
explained in the proposed rule, the class of beneficiaries eligible to
appeal a denial of Part A coverage relating to a hospital
reclassification from inpatient to outpatient receiving observation
services in any given year is relatively small (we estimated hospitals
will deliver 15,655 beneficiary notices and the QIOs will process
approximately 8,000 appeals, per year). Because of the relative few
numbers of appeals, and proportionally fewer anticipated appeal

[[Page 83264]]

overturns, we do not believe this new appeals process will have a
disruptive effect on other areas of the Medicare program, including the
MSP program operations. Similarly, we do not believe approximately
8,000 annual appeals will meaningfully affect the regimented decision-
making currently used by hospitals when determining the medical
necessity of inpatient admissions for millions of beneficiaries
annually. Nevertheless, if in our monitoring, we identify the new
appeal process having unintended adverse consequences on the Medicare
program, beneficiaries, or the hospital industry, we will respond with
additional rulemaking or guidance, as we deem appropriate.
Comment: Multiple commenters urged CMS to conduct education and
outreach to ensure impacted beneficiaries and their representatives are
aware of the new prospective appeals process. A commenter suggested
outreach efforts should specifically focus on culturally diverse
populations, beneficiaries with limited English-speaking, and
beneficiaries with visual or hearing impairments. The commenter also
suggested CMS educate SHIPs and other beneficiary-assistance programs
on the finalized prospective appeal procedures. In addition, several
commenters suggested CMS also ensure the hospital industry is properly
educated on the requirements of the new appeals process. Lastly, a
commenter suggested CMS provide beneficiaries with educational material
on Medicare inpatient coverage criteria and the reasons hospitals
decide to reclassify them from inpatient to outpatient receiving
observation services.
Response: We appreciate the commenters' suggestions for ensuring
beneficiaries, associated assistance programs, and the hospital
industry are properly informed of their respective rights and
requirements of the prospective appeals process. As we finalize the
prospective appeals requirements, we plan to add information on the
appeals process to Medicare publications, manuals, and websites, as
necessary and appropriate. Through this process we can explore whether
providing information related to criteria for Medicare Part A coverage
of inpatient admissions and common rationales for hospitals
reclassifying certain beneficiaries from inpatient to outpatient
receiving observation services will help beneficiaries understand the
new prospective appeals process. Beneficiaries do not need prior
knowledge of their appeal rights in order to avail themselves of the
prospective appeals process, as relevant appeal submission information
will be included in the Medicare Change of Status Notice (MCSN).
Comment: A commenter sought clarification whether the prospective
appeals process requirements apply to MA enrollees with several
commenters recommending that CMS expand the prospective appeals process
to the MA program.
Response: The retrospective appeals process (addressed in section
III.A. of this final rule) and the prospective appeals process
(addressed in section III.B. of this final rule) do not apply to the MA
program and will not be available for MA plans for MA enrollees. We did
not propose extending application of the prospective appeals
requirements to the MA program. We explained in the proposed rule that
the terms of the court order refer to denials of Part A coverage.
Consistent with the court order, the appeals processes in this rule do
not extend to enrollees in MA plans. MA plan enrollees have existing
rights that afford enrollees the ability 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 (see 42 CFR 422.562(b)(4)). 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 pursuant to Sec. Sec. 422.578 through 422.590, and
422.633. As such, we are declining commenters' suggestions to extend
the prospective appeals processes in this rule to MA enrollees. To the
extent we identify additional processes that may be necessary for the
MA program, any such proposals would be subject to notice and comment
rulemaking. We note that MA enrollees do have access to QIO reviews of
quality of care concerns, hospital discharges, and terminations of
services furnished by home health agencies (HHAs), skilled nursing
facilities (SNFs), and comprehensive outpatient rehabilitation
facilities (CORFs) that is similar to the QIO reviews available for
Original Medicare beneficiaries. See Sec. Sec. 422.562(a)(2)(ii),
422.564(c) and (e)(3), 422.622 through 422.626.\20\
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\20\ The Independent Review Entity (IRE) referenced in
Sec. Sec. 422.624 and 422.626 is the BFCC-QIO.
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Comment: A few commenters requested that CMS define certain terms
related to the prospective appeals process. A commenter requested that
CMS explain ``what is considered a change in patient status'' and how
such a change must be documented. Another commenter requested that CMS
define a ``formal admission.'' The same commenter also requested that
CMS clarify when a beneficiary is considered discharged or released
from the hospital.
Response: We proposed at Sec. 405.1210(a)(2) that, for purposes of
the prospective appeals process, a change of status occurs when a
beneficiary is reclassified from an inpatient to an outpatient
receiving observation services (as defined in Sec. 405.931(h)). As we
discussed in the proposed rule, hospitals are already required to
deliver the written Condition Code 44 notification to enrollees whose
status is changed from inpatient to outpatient after review by a
hospital utilization review committee and the entire episode will be
billed as outpatient. As this process is already in place, we did not
propose any new documentation requirements related to a beneficiary's
change in status and will not be making any modifications in this final
rule.
We did not propose specific definitions for the terms ``formal
admission'' or ``discharge'' since these terms are frequently used in
the healthcare industry and, as used in the preamble of the proposed
rule and at proposed Sec. Sec. 405.1210(a)(3)(i) (for ``formally
admitted'') and 405.1210(a)(3)(iv) (for ``discharge''), their meaning
should be ascribed to their common usage and parlance in the healthcare
context. Therefore, we decline the commenter's suggestion to establish
these definitions in this final rule.
Comment: A commenter disagreed with CMS's proposal to allow
hospitals to bill beneficiaries for reasonable costs associated with
duplicating and delivering documentation provided to the QIO, when
requested by the beneficiary, believing it was extremely burdensome on
the beneficiary.
Response: We proposed at Sec. 405.1211(d)(2) a requirement for
hospitals, upon request, to provide a beneficiary with any
documentation, including written records of any information provided by
telephone, it provides to the QIO. We explained in the proposed rule
that we intended for Sec. 405.1211(d)(2) to operate the same way as
the existing regulation at Sec. 405.1206(e)(3), specifically that the
hospital may charge the beneficiary a reasonable amount to cover the
costs of duplicating and delivering the requested materials. We note
that the proposal mirrors an existing policy that has been in effect
for many years, and from our

[[Page 83265]]

programmatic experience, it has not shown to be burdensome on
beneficiaries. Thus, we do not agree with the commenter that the
proposed regulation is unduly burdensome and are finalizing Sec.
405.1211(d)(2) as proposed.
Comment: A commenter requested the QIOs publish detailed annual
reports on the new appeals process, including data on the number of
appeals, the appeal dispositions, the general geographic location area
of appeal requests, and information confirming whether beneficiaries
are being reimbursed upon a successful appeal. Another commenter
recommended CMS publish statistics on the number of times the ALJ
overturns a QIO decision under the new appeals process. The commenter
suggested to apply the data as a quality measure when considering
renewing the QIO contracts.
Response: We did not propose and are not finalizing a process to
publicly disclose any data related to the new prospective appeals
process. CMS routinely tracks the timeliness of resolving beneficiary
appeals for internal monitoring and evaluation purposes, and will do so
for these new prospective appeals. We appreciate the commenters'
interest in program transparency and may consider requiring such data
disclosures at a later time.
We appreciate the comments received on the general structure of the
proposed prospective appeals process. After consideration of the
comments, we are finalizing these provisions as proposed.
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 discussed previously, we proposed to
revise Subpart J of 42 CFR 405 to add new Sec. Sec. 405.1210 through
405.1212. These new proposed regulations were 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) set 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 proposed 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 addressed
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 was 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 also proposed to be explicit in new
Sec. 405.1210(a)(iv)) that the period ``3 or more consecutive days''
is counted using the existing rules for determining coverage of SNF
services under section 1861 of the Act and Sec. 409.30 of this
chapter. This meant 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 beneficiaries about inpatient hospital discharges. We
proposed 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 proposed 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 release from the hospital. For beneficiaries with Part B, we
proposed 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
proposed 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)) 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 SNF after the hospital stay.
Proposed new Sec. 405.1210(b)(3) and (4) provided 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

[[Page 83266]]

place to determine an appropriate representative.
We received the following comments regarding our proposed
requirements related to notification of appeals rights.
Comment: Multiple commenters were supportive of our proposal to
require hospitals to deliver a standardized notice to eligible
beneficiaries, informing them of the change in their hospital status,
the resulting effect on Medicare coverage of their stay, and their
appeal rights.
Several commenters approved of the proposed requirement for
hospitals to deliver the standardized notice as soon as possible after
a beneficiary becomes eligible for the appeal process. A commenter
agreed that timely notice will provide beneficiaries with an
opportunity to properly evaluate whether they want to pursue an appeal
relating to their status change before leaving the hospital, consider
whether to enter a SNF for post-acute care, and resolve questions about
liability for their hospital stay. Lastly, another commenter agreed
that a targeted appeals notice, delivered only to those eligible to
appeal, would be the most effective and efficient means of informing
eligible beneficiaries of their appeal rights.
Response: We appreciate the commenters' support and agree that it
is imperative eligible beneficiaries receive notice of the change in
their hospital status, the resulting effect on Medicare coverage of
their stay, and information on their appeal rights in a format and
manner that is readily understandable.
Comment: Many commenters urged CMS to apply specific revisions to
the proposed MCSN. A few commenters suggested we ensure the final MCSN
clearly describes, using plain language, the fact that the beneficiary
was reclassified from inpatient to outpatient receiving observation
services and the availability of appeal rights. Other commenters
requested CMS ensure the finalized MCSN accurately describes the
benefits and risks of the proposed appeal process.
A commenter suggested we incorporate check boxes to the list of
ramifications for hospitals to use when completing the MCSN. The
commenter believes the check boxes will assist beneficiaries in
identifying the information that is relevant to them and may reduce
hospital burden when delivering the MCSN by reducing the number of
beneficiary questions. The same commenter suggested we add a new
section explaining that beneficiaries without Part B may be charged for
the full cost of their stay. Another commenter felt the MCSN is
directed to a broader class of beneficiaries than set forth at Sec.
405.1210(a) and suggested all the elements from Sec. 405.1210(a) be
listed on the MCSN.
Several commenters suggested we remove from the beneficiary
acknowledgement and signature block the statement ``I also understand
if I win my appeal, my hospital charges will be different and possibly
higher.'' The commenters found the tone of this language alarming and
believe the statement may act to deter beneficiaries from appealing
their reclassification when, in many cases, the beneficiary's risk of
higher hospital charges is relatively low.
Other commenters recommended we add a disclaimer to the proposed
MCSN explaining beneficiaries do not have financial liability
protection while their appeal is pending. Several commenters requested
we add a statement to the proposed MCSN advising beneficiaries that
leaving the hospital will not impact a pending appeal and they will
still receive notice of the appeal decision. Similarly, a commenter
predicted beneficiaries would be concerned about the impact leaving the
hospital would have on a pending appeal.
A commenter suggested we reorder the list of potential
ramifications from a status reclassification, found in the introductory
paragraph, to have information related to SNF coverage precede, rather
than follow, information related to changes to the beneficiary's
hospital bill. The commenter reasoned SNF eligibility is relevant to
all beneficiaries that receive the MCSN, has a greater financial
impact, and has a more immediate impact on a beneficiary's health than
potential changes to a beneficiary's hospital charges.
Response: We appreciate the commenters' support and wide range of
suggested modifications for the proposed MCSN \21\ and we will be
incorporating several commenters' suggested edits to the proposed MCSN
that we believe will increase beneficiary understanding of the status
change and the potential ramifications.
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\21\ Section IV.D. of this final rule states that to obtain
copies of the supporting statement and any related forms,
individuals should 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>.
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We added check boxes to the list of potential ramifications for the
hospital staff to indicate which items apply to the beneficiary
receiving the notice. We also added an explanation that eligible
beneficiaries without Part B may be charged for the full cost of the
outpatient stay, due to the hospital status change. Further, we
simplified and streamlined language throughout the notice, including in
the list of potential ramifications, to increase readability.
We also revised the MCSN to confirm that a beneficiary may initiate
a standard appeal after leaving the hospital and to clarify that a
beneficiary who requested a timely expedited determination will receive
notice of the QIO decision even if they leave the hospital before the
decision is made. We agree with commenters on the importance of
including these clarifications on the MCSN to enhance beneficiaries
understanding and comfortability with the new appeals process.
In addition, we added text to the MCSN to explain if the
beneficiary remains in the hospital during the appeals process and they
receive an unfavorable appeal decision, the beneficiary could be
responsible for the cost of the Part B coinsurance and applicable
deductible for any covered services and the full cost of any non-
covered services received during the appeals process. We agree with
commenters on the importance of beneficiaries understanding that the
appeals process does not provide the same liability protections
afforded when being

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