Fillable Printable Fed Register 2010 28390

Fed Register 2010 28390

69037

Federal Register/Vol. 75, No. 217/Wednesday, November 10, 2010/Proposed Rules

utilizing approved Federal Equivalent

Methods.

3. How does this information relate to

the Proposed Rule—Ambient Ozone

Monitoring Regulations: Revisions to

Network Design Requirements?

On July 16, 2009, EPA published a

proposed rule (74 FR 34525) to revise

the ozone monitoring network design

requirements. EPA proposed to modify

minimum monitoring requirements in

urban areas, add new minimum

monitoring requirements in non-urban

areas, and to extend the length of the

required ozone monitoring season in

some states.

In its proposal, EPA used ambient

ozone monitoring data obtained from

monitors operating outside (i.e., before

and after) the current required ozone

monitoring season to assess whether

ambient ozone concentrations could

approach or exceed the level of the

primary (8-hour) National Ambient Air

Quality Standards (NAAQS) during

these periods when monitoring is not

currently required. EPA’s analysis

utilized data for the period 2004–2006,

representing data from approximately

530 monitors which were operated on a

year-round basis. These data were

analyzed for two indicators: (1) The

number of exceedences of the NAAQS

(i.e., daily maximum 8-hour ozone

averages above 0.075 ppm) in the

months falling outside the currently

required ozone monitoring season for

each area, and (2) occurrences of daily

maximum 8-hour ozone averages of at

least 0.060 ppm, representing a value of

80 percent of the 0.075 ppm NAAQS. In

the proposal, we noted that the

operation of ozone monitors during

such periods of time when ambient

levels reach at least 80 percent of the

NAAQS ensures that persons unusually

sensitive to ozone are alerted to the

occurrence of elevated ozone

concentrations in their area, and

protects against the potential for

undocumented NAAQS exceedances.

The availability of these additional data

support many objectives including more

comprehensive real-time air quality

reporting to the public, ozone

forecasting programs, and the

verification of real-time air quality

forecast models.

As EPA completes revised analyses to

support the upcoming ozone monitoring

final rule, certain patterns of out-of-

season elevated 8-hour average ozone

concentrations, which were not

recognizable during 2004–2006, have

become apparent in newer data. These

patterns include a greater frequency of

occurrences of daily maximum 8-hour

ozone averages of at least 0.060 ppm

before and after the currently required

ozone monitoring seasons for the

aforementioned states than was

observed in the 2004–2006 dataset.

Accordingly, EPA is making these

newer data available for the specific

states that have such patterns.

4. Where can I get this information?

All of the information can be obtained

through the Air Docket and at //

www.regulations.gov (see

ADDRESSES

section above for docket contact

information).

5. What issue is EPA taking comment

on?

EPA requests comment on the

interpretation of the newer ambient 8-

hour average ozone monitoring data for

the states of Colorado, Kansas, and Utah

in the context of determining the final

ozone monitoring season requirements

for these states. Specifically, do the

patterns of elevated 8-hour average

ozone concentrations that occurred both

before and after the current required

ozone monitoring seasons for these

states support the revised seasons

proposed in the July 16, 2009,

rulemaking for these states? Do these

patterns support alternative required

monitoring seasons different from what

was proposed in the July 16, 2009,

rulemaking for these states? Issues for

consideration with regard to Colorado,

Kansas, and Utah are whether the

current ozone season requirements

should be maintained, whether the

proposed changes to seasons should be

finalized as proposed or revised, and

whether changes should be made for

these states that were not originally

proposed in the July 2009 rule.

6. What should I consider as I prepare

my comments for EPA?

You may find the following

suggestions helpful for preparing your

comments:

1. Explain your views as clearly as

possible.

2. Describe any assumptions that you

used.

3. Provide any technical information

or data you used that support your

views.

4. Provide specific examples to

illustrate your concerns.

5. Offer alternatives.

6. Make sure to submit your

comments by the comment period

deadline identified.

7. To ensure proper receipt by EPA,

identify the appropriate docket

identification number in the subject line

on the first page of your response. It

would also be helpful if you provided

the name, date, and Federal Register

citation related to your comments.

7. Submitting Confidential Business

Information (CBI)

Do not submit information you are

claiming as CBI to EPA through //

www.regulations.gov or e-mail. Clearly

mark the part of the information that

you claim to be CBI. Information so

marked will not be disclosed except in

accordance with procedures set forth in

40 CFR part 2. For CBI information in

a disk or CD–ROM that you mail to EPA,

mark the outside of the disk or CD–ROM

as CBI and then identify electronically

within the disk or CD–ROM the specific

information that is claimed as CBI. In

addition to one complete version of the

comment that includes information

claimed as CBI, a copy of the comment

that does not contain the information

claimed as CBI must be submitted for

inclusion in the public docket.

List of Subjects in 40 CFR Part 58

Air pollution control, Environmental

protection, Intergovernmental relations,

Reporting and recordkeeping

requirements, Ambient air monitoring.

Dated: November 3, 2010.

Mary E. Henigin,

Acting Director, Office of Air Quality Planning

and Standards.

[FR Doc. 2010–28259 Filed 11–9–10; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Centers for Medicare & Medicaid

Services

42 CFR Part 455

[CMS–6034–P]

RIN 0938–AQ19

Medicaid Program; Recovery Audit

Contractors

AGENCY

: Centers for Medicare &

Medicaid Services (CMS), HHS.

ACTION

: Proposed rule.

SUMMARY

: This proposed rule would

provide guidance to States related to

Federal/State funding of State start-up,

operation and maintenance costs of

Medicaid Recovery Audit Contractors

(Medicaid RACs) and the payment

methodology for State payments to

Medicaid RACs in accordance with

section 6411 of the Affordable Care Act.

In addition, this rule proposes

requirements for States to assure that

adequate appeal processes are in place

for providers to dispute adverse

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determinations made by Medicaid

RACs. Finally, the rule proposes that

States and Medicaid RACs coordinate

with other contractors and entities

auditing Medicaid providers and with

State and Federal law enforcement

agencies.

DATES

: To be assured consideration,

comments must be received at one of

the addresses provided below, no later

than 5 p.m. on January 10, 2011.

ADDRESSES

: In commenting, please refer

to file code CMS–6034–P. Because of

staff and resource limitations, we cannot

accept comments by facsimile (FAX)

transmission.

You may submit comments in one of

four ways (please choose only one of the

ways listed):

1. Electronically. You may submit

electronic comments on this regulation

to //www.regulations.gov. Follow

the ‘‘Submit a comment’’ instructions.

2. By regular mail. You may mail

written comments to the following

address ONLY: Centers for Medicare &

Medicaid Services, Department of

Health and Human Services, Attention:

CMS–6034–P, P.O. Box 8016, Baltimore,

MD 21244–8016.

Please allow sufficient time for mailed

comments to be received before the

close of the comment period.

3. By express or overnight mail. You

may send written comments to the

following address ONLY: Centers for

Medicare & Medicaid Services,

Department of Health and Human

Services, Attention: CMS–6034–P, Mail

Stop C4–26–05, 7500 Security

Boulevard, Baltimore, MD 21244–1850.

4. By hand or courier. If you prefer,

you may deliver (by hand or courier)

your written comments before the close

of the comment period to either of the

following addresses:

a. For delivery in Washington, DC—

Centers for Medicare & Medicaid

Services, Department of Health and

Human Services, Room 445–G, Hubert

H. Humphrey Building, 200

Independence Avenue, SW.,

Washington, DC 20201.

(Because access to the interior of the

Hubert H. Humphrey Building is not

readily available to persons without

Federal government identification,

commenters are encouraged to leave

their comments in the CMS drop slots

located in the main lobby of the

building. A stamp-in clock is available

for persons wishing to retain a proof of

filing by stamping in and retaining an

extra copy of the comments being filed.)

b. For delivery in Baltimore, MD—

Centers for Medicare & Medicaid

Services, Department of Health and

Human Services, 7500 Security

Boulevard, Baltimore, MD 21244–1850.

If you intend to deliver your

comments to the Baltimore address,

please call telephone number (410) 786–

7195 in advance to schedule your

arrival with one of our staff members.

Comments mailed to the addresses

indicated as appropriate for hand or

courier delivery may be delayed and

received after the comment period.

FORFURTHERINFORMATIONCONTACT

Joanne Davis, (410) 786–5127.

SUPPLEMENTARYINFORMATION

Inspection of Public Comments: All

comments received before the close of

the comment period are available for

viewing by the public, including any

personally identifiable or confidential

business information that is included in

a comment. We post all comments

received before the close of the

comment period on the following Web

site as soon as possible after they have

been received: //

www.regulations.gov. Follow the search

instructions on that Web site to view

public comments.

Comments received timely will also

be available for public inspection as

they are received, generally beginning

approximately 3 weeks after publication

of a document, at the headquarters of

the Centers for Medicare & Medicaid

Services, 7500 Security Boulevard,

Baltimore, Maryland 21244, Monday

through Friday of each week from

8:30 a.m. to 4 p.m. To schedule an

appointment to view public comments,

phone 1–800–743–3951.

I. Background

A. Current Law

The Medicaid program is a

cooperative Federal/State program

designed to allow States to receive

matching funds from the Federal

government to finance medical

assistance to eligible low income

beneficiaries. Medicaid was enacted in

1965 by the passage of Title XIX of the

Social Security Act (the Act).

States may choose to participate in

the Medicaid program by submitting a

State plan for medical assistance that is

approved by the Secretary. Although

States are not required to participate in

the Medicaid program, all States, the

District of Columbia, and the territories

do participate. Once a State elects to

participate in the program, it is required

to comply with its State plan, as well as

the requirements imposed by the Act

and applicable Federal regulations.

CMS is the primary Federal agency

providing oversight of State Medicaid

activities and facilitating program

integrity efforts. Our administration of

the Medicaid program requires that we

expend billions of dollars in Federal

matching payments to States for

Medicaid expenditures. We also have an

obligation to prevent, identify, and

recover improper payments to

individuals, contractors, and

organizations.

In November 2009, the President

signed Executive Order (E.O.) 13520 in

an effort to reduce improper payments

by increasing transparency in

government and holding agencies

accountable for reducing improper

payments. On March 22, 2010, the

Office of Management and Budget

(OMB) issued guidance for agencies

regarding the implementation of E.O.

13520 entitled Part III to OMB Circular

A–123, Appendix C (Appendix C).

Appendix C outlines the responsibilities

of agencies, determines the programs

subject to E.O. 13520, defines

supplemental measures and targets for

high priority programs, and establishes

reporting requirements under E.O.

13520 and procedures to identify

entities with outstanding payments.

Section 6411 of the Patient Protection

and Affordable Care Act (Pub. L. 111–

148, enacted on March 23, 2010) (the

Affordable Care Act) requires States to

establish programs in which they would

contract with 1 or more Recovery Audit

Contractors (Medicaid RACs) by

December 31, 2010. The Medicaid RACs

would review Medicaid claims

submitted by providers of services for

which payment may be made under

section 1902(a) of the Act or a waiver of

the State plan. Medicaid RACs would

identify underpayments, and identify

and collect overpayments from

providers.

Section 6411(a)(1) of the Affordable

Care Act amends section 1902(a)(42) of

the Act to provide that ‘‘the State shall

establish a program under which the

State contracts (consistent with State

law and in the same manner as the

Secretary enters into contracts with

recovery audit contractors under section

1893(h) ***) with 1 or more recovery

audit contractors for the purpose of

identifying underpayments and

overpayments and recouping

overpayments ***’’ To offer context

for our proposed approach to the

Medicaid RAC program, we provide

background discussion on the Medicare

RAC program.

B. Medicare RACs

Medicare RACs are private entities

with which CMS contracts to identify

and collect improper payments made in

Medicare’s fee-for-service program.

Initially authorized by the Congress as

a 3-year demonstration program by the

Medicare Prescription Drug,

Improvement, and Modernization Act of

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2003 (Pub. L. 108–173, enacted on

December 8, 2003) (MMA), Medicare

RACs were permanently authorized in

the Tax Relief and Health Care Act of

2006 (Pub. L. 109–432, enacted on

December 20, 2006) (TRHCA). The

TRHCA directed CMS to expand the

Medicare RAC program nationwide by

January 1, 2010.

During the Medicare RAC

demonstration period, we contracted

with RACs to review claims from

Medicare participating providers and

suppliers in New York, Florida,

California, Arizona, Massachusetts, and

South Carolina. From 2005 through

2008, the Medicare RACs identified and

collected or corrected over $1 billion in

improper payments. The majority, or 96

percent, of the improper payments were

overpayments, while the remaining 4

percent were underpayments. As a

result of the demonstrated cost

effectiveness of the Medicare RACs, the

TRHCA required CMS to implement a

nationwide Medicare RAC program.

In our evaluation of the Medicare

RAC demonstration, providers surveyed

identified to CMS a number of concerns

and processes needing improvement.

For example, Medicare RACs were

reportedly inconsistent in documenting

their ‘‘good cause’’ for reviewing a claim.

In addition, providers complained that

a lack of physician presence on

Medicare RAC staffs contributed to

Medicare claims incorrectly being

denied. As a result, we met with

stakeholders, including the provider

community, and made a number of

changes to improve the Medicare RAC

program. In the permanent Medicare

RAC program, we directed Medicare

RACs to consistently document their

‘‘good cause’’ for reviewing a claim. We

now require each Medicare RAC to hire

a physician Medical Director to oversee

the medical record review process;

assist nurses, therapists, and certified

coders upon request; manage quality

assurance procedures; and maintain

relationships with provider

associations.

Both the MMA and the TRHCA

authorized CMS to pay Medicare RACs

on a contingency fee basis. Currently,

we pay Medicare RACs a contingency

fee rate ranging between 9 and 12.50

percent. These contingency fees are not

initially fixed by CMS, but are

established by the contractors through a

bidding process with CMS. Providers

may appeal Medicare RAC

determinations through the established

Medicare appeals process. During the

demonstration period, Medicare RACs

were required to return contingency fees

if the claim determination was

overturned on the first level appeal.

However, Medicare RACs were entitled

to retain contingency fees if the

determination was overturned on

subsequent levels of appeal. In the

permanent Medicare RAC program, we

now require Medicare RACs to return

the contingency fee payment if the

determination is overturned at any stage

of the appeals process.

C. Existing State Contingency Fee

Contracts

There is precedent for State Medicaid

contingency fee contracts for purposes

of recovering Medicaid overpayments

subject to third party liability (TPL)

requirements. Section 1902(a)(25) of the

Act requires States to take all reasonable

measures to determine the legal liability

of third parties to pay for medical

assistance furnished to a Medicaid

recipient under the State plan. In

addition, several States currently

contract with contingency fee

contractors to recover Medicaid

overpayments unrelated to TPL. In a

memorandum to CMS’ Regional

Administrators dated November 7, 2002,

we revised our policy prohibiting

Federal financial participation (FFP) for

States to pay costs to contingency fee

contractors, unrelated to TPL. The

revised policy allows contingency fee

payments if the following conditions are

met: (1) The intent of the contingency

fee contract must be to produce savings

or recoveries in the Medicaid program;

(2) the savings upon which the

contingency fee payment is based must

be adequately defined and the

determination of fee payments

documented to CMS’s satisfaction.

D. Medicaid RACs

Section 6411(a) of the Affordable Care

Act amends and expands section

1902(a)(42) of the Act to require States

to establish programs by December 31,

2010, to contract with 1 or more

Medicaid RACs to audit Medicaid

claims and to identify underpayments

and overpayments. While States are

required to establish their Medicaid

RAC programs by December 31, 2010,

via the State plan amendment process,

such programs need not be

implemented by this date. Instead,

absent an exception, States must fully

implement their Medicaid RAC

programs by April 1, 2011. We solicit

comments on the proposed

implementation date. States would be

required to report to CMS certain

elements describing the effectiveness of

their Medicaid RAC programs. These

elements would include, but not be

limited to general program descriptors

(for example, contract periods of

performance, contractors’ names,) and

program metrics (for example, number

of audits conducted, recovery amounts,

number of cases referred for potential

fraud). To implement this provision, we

propose to add a new subpart F to 42

CFR part 455.

Medicaid RACs would review post-

payment claims for improper payments,

overpayments, as well as

underpayments consistent with State

laws and regulations. Medicaid RACs

are a supplemental approach to

Medicaid program integrity efforts

already underway to ensure that States

make proper payments to providers.

Medicaid RACs do not replace any

existing State program integrity or audit

initiatives or programs. States must

maintain their existing program

integrity efforts uninterrupted with

respect to levels of funding and activity.

Should we detect evidence of fraud,

waste, and abuse that goes unreported

by the Medicaid RACs, we would work

closely with States to identify focus

areas for Medicaid RACs to improve

their efficacy.

The Affordable Care Act requires all

States to establish Medicaid RAC

programs, subject to such exceptions

and requirements as the Secretary may

require. This provision enables CMS to

vary the Medicaid RAC program

requirements, or exempt a State from

establishing a Medicaid RAC program if

inconsistent with State law. For

example, we may exempt a State from

the requirement to pay Medicaid RACs

on a contingent basis for collecting

overpayments when State law expressly

prohibits contingency fee contracting.

However, some other fee structure could

be required under any such exception.

Similarly, some State legislatures

must enact legislation before amending

their State plans. Because the

establishment of a Medicaid RAC

program is accomplished by State plan

amendment (SPA), many State

legislatures will not have the

opportunity to convene and enact such

an amendment to their State plans prior

to December 31, 2010, those States

would need to submit justifications to

defer establishing Medicaid RAC

programs until after those State

legislatures have met. For States that

require a State legislative change

granting authority to establish a

Medicaid RAC program, a SPA should

be submitted indicating that the

Medicaid RAC program cannot be

established until legislative authority is

granted.

Finally, there may be circumstances,

unrelated to the examples above, where

a State would seek to be excepted from

some or all of the requirements of the

Medicaid RAC program. Accordingly,

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we propose at §455.516 that States

seeking exceptions from contracting

with Medicaid RACs must submit to

CMS a written justification for the

request. We anticipate granting

complete Medicaid RAC program

exceptions rarely, and only under the

most compelling of circumstances.

Section 6411(a) of the Affordable Care

Act amends section 1902(a)(42) of the

Act, which requires States to make the

following assurances to CMS regarding

Medicaid RAC programs:

•Under section 1902(a)(42)(B)(ii)(I)

of the Act, payments shall be made to

a Medicaid RAC contractor under

contract with a State only from amounts

recovered. As discussed more fully

below, we interpret this to mean that

payments to Medicaid RACs may not

exceed the total amounts recovered.

Additionally, we interpret this to mean

that payments to contractors may not be

made based upon amounts merely

identified but not recovered, or amounts

that may initially be recovered but that

subsequently must be repaid due to

determinations made in appeals

proceedings.

The payment methodology

determination for States, as well as

when Medicaid RACs should be paid by

States for their work are separate, but

closely related issues. The distinction

between amounts recovered and

amounts identified has implications for

how States would structure and

administer payment agreements with

Medicaid RACs, as well as the timing of

Medicaid RACs’ receipt of payments.

The options below illustrate two ways

that States could structure payments,

though they are not exhaustive.

In option one, for example, State A

pays RAC B its fee when RAC B

identifies and recovers an overpayment.

If provider C appeals and wins at any

stage, RAC B would be required to

return any portion of the contingency

fee that corresponds to the amount of an

overpayment that is overturned on

appeal.

In a second option, State D

determines it would pay RAC E its

contingency fee at the point at which

the recovery amount is fully

adjudicated; that is, at the conclusion of

any and all appeals available to provider

F. At that point, State D would pay RAC

E a contingency fee based on the

amount recovered.

•Under section

1902(a)(42)(B)(ii)(II)(aa) of the Act,

payments to a Medicaid RAC contractor

shall be made on a contingent basis for

collecting overpayments from the

amounts recovered. We are aware that

the proposed Medicaid RAC program,

by virtue of the differences between the

Medicare and Medicaid programs,

would not operate identically to the

Medicare RAC program. Recognizing

that each State must tailor its Medicaid

RAC activities to the uniqueness of its

own State, we are not proposing to

prescribe a set contingency fee rate for

States. Instead, we are proposing certain

guidelines based upon section

1902(a)(42)(B) of the Act and our

experience with the Medicare RAC

program, but allowing States the

discretion to set their fees within those

guidelines.

The Medicaid RACs would contract

with States and territories to identify

and collect overpayments, and would be

paid on a contingency fee basis by the

States. In the Medicare RAC program,

CMS contracts with Medicare RACs to

identify and recover overpayments from

Medicare providers, and to identify and

pay underpayments to Medicare

providers. We recognize the differences

among States and territories when it

comes to the issue of coordinating with

RACs the collection of overpayments.

The statute requires Medicaid RACs to

collect overpayments. However, some

States may not be able to delegate the

collection of overpayments to

contractors, while other States may have

other restrictions. In keeping with the

statutory language that States must

establish RAC programs consistent with

State law, we propose to provide States

with the flexibility of coordinating RAC

collections of overpayments.

Currently, there are 4 Medicare RAC

contractors operating. Those RACs are

paid an average contingency fee rate of

10.86 percent by CMS, with the highest

rate being 12.50 percent. We interpret

the statutory language that States must

establish a Medicaid RAC program ‘‘in

the same manner as the Secretary enters

into contracts with’’ Medicare RACs to

mean that some of the provisions of the

Medicare RAC program, generally,

should serve as a model for the

proposed Medicaid RAC program.

Accordingly, in §455.510(b)(3) and

(b)(4), we are proposing that we would

not provide Federal financial

participation (FFP) with respect to any

amount of a State’s contingency fee in

excess of the then highest Medicare

RAC contingency fee rate unless a State

requests an exception from CMS and

provides an acceptable justification.

In the absence of an approved

exception, a State may only pay a RAC

contractor, from the overpayments

collected, a contingency fee up to the

highest Medicare RAC contingency rate.

Any additional payment from the State

to the RAC must be made using State-

only funds. FFP is not available for

administrative expenditure claims for

the marginal difference between the

highest Medicare fee and the State’s

contingency fee. For example, unless an

exception applies, if the highest

Medicare RAC contingency fee is 12.50

percent and the State pays a Medicaid

RAC 14 percent, we would not pay the

Federal match on the 1.50 percent

difference. The State would use State-

only funds to make up the difference

between the State’s 14 percent

contingency fee and the 12.50 percent

contingency fee ceiling.

Currently, the Medicare RAC

contracts have an established period of

performance of up to 5 years, beginning

in 2009. Initially, the maximum

contingency rate for which FFP would

be available for States to pay Medicaid

RACs would be the highest Medicare

RAC contingency fee, which is 12.50

percent. That fee would be the

maximum rate when States implement

their RAC programs no later than April

1, 2011. Subsequently, we would make

States aware of any modifications to

payment methodology for contingency

fees and Medicaid RAC maximum

contingency rates for which FFP would

be available by publishing in a Federal

the maximum Medicare contingency fee

rate, which would apply to FFP

availability for any Medicaid RAC

contracts covering the period of

performance beginning on July 1, 2014.

The established rate would be in place

for 5 years or until we publish a new

maximum rate in the Federal Register.

We solicit public comments on this

approach.

The Medicare RAC program is still a

relatively new program. We will apply

the lessons learned from the Medicare

RAC Demonstration, as well as from the

current program in providing States

technical support and assistance in their

efforts to implement their programs. For

example, States would require Medicaid

RACs to employ trained medical

professionals to review Medicaid

claims, as CMS now requires the

Medicare RACs to do. Additionally,

States may consider establishing

requirements regarding the

documentation of good cause to review

a claim. States should also be cognizant

of potential organizational conflicts of

interest, and should take affirmative

steps to identify and prevent any such

conflicts of interest.

The Office of the Inspector General of

U.S. Department of Health and Human

Services (HHS–OIG) recently reported

that the Medicare RACs identified over

$1 billion in improper payments, but

referred only two cases of potential

fraud to CMS. HHS–OIG opined that

Medicare RACs are disincentivized to

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make referrals because the RACs receive

contingency fees. As we learn from the

lessons of Medicare RACs, we caution

States, in their design of Medicaid RAC

programs, to ensure that the Medicaid

RACs report instances of fraud and/or

criminal activity in addition to the

pursuit of overpayments. At

§455.508(b), we propose that whenever

RACs have reasonable grounds to

believe that fraud or criminal activity

has occurred, they must report it to the

appropriate law enforcement officials.

We solicit comments on these and other

issues that States should consider in the

design of their RAC programs. At

§455.508(c), we propose that Medicaid

RACs must meet the additional

requirements that States may establish.

•Under section

1902(a)(42)(B)(ii)(II)(bb) of the Act,

payment to a Medicaid RAC may be

made in the amounts as the State may

specify for identifying underpayments

from the amounts recovered. Currently,

Medicare RACs are paid a contingency

fee to identify underpayments, similar

to the way in which they are paid to

identify and recover overpayments.

With respect to Medicaid RACs, a State

may elect to use a similar approach, or

elect to establish a set fee or some other

fee structure for the identification of

underpayments. Consistent with a

State’s obligation to ensure that it pays

the right amount to the right provider

for the right service at the right time for

the right recipient, whatever

methodology a State chooses must

adequately incentivize the detection of

underpayments. In §455.510(c), we are

proposing to grant States the flexibility

to specify the underpayment fee for

Medicaid RACs. Additionally, we

would monitor the methodologies and

amounts paid by States to Medicaid

RACs to identify underpayments, and

may consider future additional

regulation depending on what data

reveals over time. We solicit public

comments on the proposal of allowing

States this flexibility.

The Affordable Care Act requires that

payments to a Medicaid RAC can only

come from amounts recovered. Federal

matching payments are not available for

RAC fees paid in excess of the

overpayment amounts collected. The

total fees paid to a Medicaid RAC

include both the amounts associated

with (1) identifying and recovering

overpayments; and (2) identifying

underpayments. Due to the Affordable

Care Act’s requirement that contingency

fees only come from amounts recovered,

total fees must not exceed the amounts

of overpayments collected.

Our experience with Medicare RAC

contractors is that overpayment

recoveries exceed underpayment

identification by more than a 9:1 ratio.

Therefore, it is not anticipated that

States would need to maintain a reserve

of recovered overpayments to fund

Medicaid RAC costs associated with

identifying underpayments. However,

States must maintain an accounting of

amounts recovered and paid. Further,

States must also ensure that they do not

pay in total RAC fees more than the total

amount of overpayments collected.

States must report overpayments to

CMS based on the net amount

remaining after all fees are paid to the

Medicaid RAC. Medicaid RACs may

only receive payments through the

contingency fee arrangement made in

accordance with these requirements and

the limitations discussed relating to the

maximum contingency fee amount. No

additional FFP is available for any other

State payment made to the RACs. This

treatment of the fees and expenditures

is directly linked to the specific

statutory language implementing

Medicaid RAC requirements. It does not

apply to Medicaid overpayment

recoveries in other contexts.

For example, RAC X’s fee for

overpayment identification is 10 percent

of the recovery amount. The fee for

identification of underpayments is 10

percent of the amount identified. If an

overpayment amount is $100, and the

total amount of underpayment is $20,

the total fees paid to the Medicaid RAC

would be $12 ($10 for the identification

of the overpayment and $2 for the

identification of the underpayment).

From the remaining amount of the $88

overpayment, the State would report,

and the Federal share of the identified

overpayment amount would be based

upon, the appropriate State match rate

for FFP. If the State pays a provider

based on the Medicaid RAC-identified

underpayment, and that expenditure is

claimed in accordance with timely filing

requirements, the $20 expenditure

would be matched at the regular FMAP,

or the appropriate FFP rate.

Currently, §433.312 requires States to

refund the Federal share of

overpayments, regardless of whether the

State actually recovers the

overpayments from the provider. This

requirement, and all other requirements

relating to overpayments, would apply

to Medicaid RAC identified

overpayments. Therefore, if a Medicaid

RAC identifies an overpayment to a

provider, the State is required to refund

the Federal share of the overpayment

amount to the Federal government net

of any contingency fee paid, as

discussed above.

•Under section 1902(a)(42)(B)(ii)(III)

of the Act, States must have an adequate

appeals process for entities to challenge

adverse Medicaid RAC determinations.

Each State already has in place an

administrative appeals infrastructure,

whereby a provider may avail itself of

its due process rights in an

administrative or judicial setting,

depending on State law or

administrative rule, with attendant

procedures for notice and an

opportunity to be heard. States may

utilize the existing appeals

infrastructure to adjudicate Medicaid

RAC appeals. States would be required

to submit to CMS a proposal describing

the appeals process, which must be

approved prior to implementing their

RAC programs.

Alternatively, a State may elect to

establish a separate appeals process for

RAC determinations, which must also

ensure providers adequate due process

in pursuing an appeal. Accordingly, at

§455.512 we propose to offer States the

flexibility to determine the appeals

process that would be available to

providers who seek review of adverse

RAC determinations.

Finally, it is important to note that the

potential length of a State’s

administrative appeals process may

have an impact on the methodology/

structure of the payment agreement

between a State and a Medicaid RAC.

For example, in a contract between State

X and RAC Y, where State X’s

administrative appeal process can

extend for 2 years, RAC Y may not

receive payment for an extended period

of time. Accordingly, RAC Y’s

contingency fee rate will most likely

reflect operating, maintenance and legal

costs over that period. Alternatively, in

State Z, completion of the

administrative appeals process takes 9

months. A contract between State Z and

RAC V may reflect a different

contingency fee rate.

•Under section

1902(a)(42)(B)(ii)(IV)(aa) of the Act, for

purposes of section 1903(a)(7) of the

Act, expenditures made by the State to

carry out the Medicaid RAC program are

necessary for the proper and efficient

administration of the State plan or

waiver of the plan. We interpret this

reference to section 1903(a)(7) of the Act

to mean that amounts expended by a

State to establish and operate the

Medicaid RAC program (aside from fee

payments, the treatment of which is

discussed elsewhere in this preamble)

are to be shared by the Federal

government at the 50 percent

administrative rate. We propose in

§455.514(b) that FFP would be available

to States for administrative costs subject

to reporting requirements.

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•Section 1902(a)(42)(B)(ii)(IV)(bb)

and section 1903(d) of the Act applies

to amounts recovered (not merely

identified) under the Medicaid RAC

program. We propose that a State must

refund the Federal share of the net

amount of overpayment recoveries after

deducting a RAC’s fee payments (in

conformance with the restrictions

discussed above, including the

maximum allowed RAC contingency fee

and the exception process). In other

words, a State would take a RAC’s fee

payment ‘‘off the top’’ before calculating

the Federal share of the overpayment

recovery to be returned to CMS. Such

amounts recovered would be subject to

a State’s quarterly expenditure estimates

and the funding of the State’s share.

Additionally, we note that the

territories operate under a separate

funding authority that is statutorily-

capped. Because of the limitations

placed on FFP by section 1108(g) of the

Act, territories must assess the

feasibility of implementing and funding

Medicaid RAC contractors in their

jurisdictions. We would provide

technical assistance to the territories on

how to implement the provisions in

sections 1902(a)(42)(B)(ii)(I), (II), (III)

and (IV) of the Act. We solicit public

comment on the impact and feasibility

of such provisions on the territories.

•Under section

1902(a)(42)(B)(ii)(IV)(cc) of the Act,

States and their Medicaid RACs must

coordinate their efforts with other

contractors or entities performing audits

of entities receiving payments under the

State plan or waiver in the State,

including State and Federal law

enforcement agencies. We emphasize

that Medicaid RACs are not intended to,

and do not, replace any State program

integrity or audit initiatives or

programs. We propose in §455.508(b)

that an entity that wishes to enter a

contract with a State to perform the

functions of a Medicaid RAC must agree

to the coordination efforts.

Although overlapping or multiple

provider audits may be necessary, we

hope to minimize the likelihood of

overlapping audits. The Affordable Care

Act requires that States assure CMS that

they will coordinate Medicaid RAC

audit activity with an array of other

stakeholders that also conduct audits.

We anticipate working systematically,

both internally and with States. We

recognize that providers are currently

subject to audits by the States’ routine

program integrity audits, CMS’

Medicaid Integrity Contractors’ audits,

as well as audits conducted by other

State and Federal entities.

In addition to the obligation to

coordinate auditing efforts to reduce the

overburdening of Medicaid providers,

we also want to ensure coordination

between Medicaid RACs and law

enforcement organizations so that

suspected cases of fraud and abuse are

processed through the appropriate

channels. Law enforcement

organizations that may conduct audits

or investigations include, but are not

limited to, the HHS–OIG, the U.S.

Department of Justice, including the

Federal Bureau of Investigation, State

Medicaid Fraud Control Units, other

Federal and State law enforcement

agencies as appropriate and CMS. One

approach to ensure this coordination is

for States to establish Memoranda of

Understanding (MOUs) with their State

Medicaid Fraud Control Units (MFCUs),

program integrity units or other law

enforcement agencies. Nothing would

preclude a State from agreeing to pay

the Medicaid RAC a contingency fee

from funds ultimately recovered and

returned to the State as the State share

of an overpayment (or restitution) at the

close of the civil or criminal proceeding.

Finally, coordination may be a

challenge because of the number of

other agencies or entities that may be

conducting audits, but States are

obligated to ensure that Medicaid RACs

do not duplicate or compromise the

efforts of other entities performing

audits, including law enforcement that

may be investigating fraud and abuse.

II. Provisions of the Proposed

Regulations

In the section that follows, we discuss

the proposed changes to the regulations

in part 455 governing the Program

Integrity—Medicaid.

We propose to add a new ‘‘Subpart

F—Medicaid Recovery Audit

Contractors Program’’ that would

implement section 1902(a)(42)(B) of the

Act. Section 1902(a)(42)(B) sets forth

provisions relating to States establishing

recovery audit contractor programs in

which States will contract with 1 or

more Medicaid RACs to audit Medicaid

claims and to identify underpayments

and identify and recover overpayments.

We propose to add the following

sections:

A. Purpose (§455.500)

Proposed §455.500 sets forth the

purpose of the new subpart F. The

regulations would implement section

1902(a)(42)(B) of the Act that establishes

the Medicaid RAC program.

B. Establishment of Program (§455.502)

At proposed §455.502, we would

establish the Medicaid RAC program as

a measure for States to promote the

integrity of their Medicaid program, and

require that States enter into contracts

with one or more RACs to carry out the

activities described in §455.506, and

require that States report on certain

elements describing the effectiveness of

their Medicaid RAC program.

C. Definitions (§455.504)

We are proposing to define the

Medicaid RAC program as a recovery

audit contractor administered by a State

to identify overpayments and

underpayments and recoup

overpayments. We are proposing to

define the Medicare RAC program as a

recovery audit contractor program

administered by CMS to identify

overpayments and underpayments and

recoup overpayments.

D. Activities To Be Conducted by

Medicaid RACs (§455.506)

We propose at §455.506(a), to require

States to contract with one or more

RACs to engage in reviews of Medicaid

claims submitted by providers of

services or other individuals furnishing

items and services for which payment

has been made under section 1902(a) of

the Act to determine whether providers

have been underpaid or overpaid, and to

recover any overpayments identified.

We propose at §455.506(b), to leave to

the States’ discretion the manner in

which they will coordinate with

Medicaid RACs’ recoupment of

overpayments.

E. Eligibility Requirements for Medicaid

RACs (§455.508)

We propose at §455.508 to provide

that in order to be eligible to contract

with a State to perform the functions of

a Medicaid RAC, an entity must have

technical capability to carry out the

activities described in §455.506,

including employing trained medical

professionals to review Medicaid

claims. An entity must also agree to

coordinate with State and Federal

agencies, and meet any such other

requirements as the State may establish.

F. Payments to RACs (§455.510)

We propose at §455.510(a) that fees

paid to RACs shall be made only from

amounts recovered. We propose at

§455.510(b)(1) to require that the

contingency fee paid to Medicaid RACs

be based on a percentage of the

recovered overpayment amount. We

propose at §455.510(b)(2), that States

shall determine at what stage of the

audit process Medicaid RACs will

receive their contingency fee. We

propose at §455.510(b)(3) that, except as

provided in paragraph (b)(4), CMS will

not provide FFP for any amount of

contingency fee that exceeds the then

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highest contingency fee rate paid to a

Medicare RAC. We propose at

§455.514(b)(4), that, on a case-by-case

basis, CMS will review and consider

substantially justified requests from

States to pay Medicaid RAC(s) a

contingency fee higher than the highest

Medicare RAC contingency fee. We

propose at §455.510(c) to require that

States determine the fee paid to

Medicaid RACs to identify

underpayments.

G. Medicaid RAC Provider Appeals

(§455.512)

We propose at §455.512 to require

States to provide a process for provider

appeals of adverse Medicaid RAC

determinations.

H. Federal Share of State Expense for

the Medicaid RAC Program (§455.514)

We propose at §455.514(a) that funds

expended by the State to carry out the

Medicaid RAC program shall be

considered necessary for the proper and

efficient administration of the State plan

or a waiver of the plan.

We propose at §455.514(a) that the

Federal share of State expense does not

include fees paid.

We propose at §455.514(b) that FFP is

available to States for administrative

costs of operation and maintenance of

Medicaid RACs, subject to CMS’

reporting requirements.

I. Exceptions From Medicaid RAC

Programs (§455.516)

We propose at §455.516, that States

that seek to be excepted from any of the

requirements of the Medicaid RAC

program must submit to CMS a written

justification for the request and get CMS

approval.

J. Applicability to the Territories

(§455.518)

We propose at §455.518 that the

provisions in §455.500 through

§455.516 are applicable to Guam,

Puerto Rico, U.S. Virgin Islands,

American Samoa and the

Commonwealth of the Northern Mariana

Islands.

III. Collection of Information

Requirements

Under the Paperwork Reduction Act

of 1995, we are required to provide 60-

day notice in the Federal Register and

solicit public comment before a

collection of information requirement is

submitted to the Office of Management

and Budget (OMB) for review and

approval. In order to fairly evaluate

whether an information collection

should be approved by OMB, section

3506(c)(2)(A) of the Paperwork

Reduction Act of 1995 requires that we

solicit comment on the following issues:

•The need for the information

collection and its usefulness in carrying

out the proper functions of our agency.

•The accuracy of our estimate of the

information collection burden.

•The quality, utility, and clarity of

the information to be collected.

•Recommendations to minimize the

information collection burden on the

affected public, including automated

collection techniques.

We are soliciting public comment on

each of these issues for the following

sections of this document that contain

information collection requirements

(ICRs):

A. ICRs Regarding State Submission of

Certain Elements Describing the

Effectiveness of Their Medicaid RAC

Programs (§455.502(c))

Section 455.502(c) would require

States to submit certain elements

describing the effectiveness of their

Medicaid RAC programs. These

elements will include, but not be

limited to general program descriptors

and program metrics evaluating

effectiveness. The burden associated

with this requirement is the time and

effort put forth by the State to aggregate

existing data that will be part of the

process of establishing their RAC

program. We estimate it would take 1

State 2 hours to perform this task. The

total annual burden for this requirement

is 112 hours.

B. ICRs Regarding State Justifications To

Pay Higher Contingency Fees

(§455.510(b)(4))

Section 455.510(b)(4) would require

States to submit justifications to CMS to

pay Medicaid RACs a contingency fee

higher than the highest Medicare RAC.

The burden associated with this

requirement is the time and effort put

forth by the State to prepare and submit

a justification. We estimate it would

take 1 State 60 hours to perform this

task. The total annual burden for this

requirement is 1680 hours.

C. ICRs Regarding Medicaid RAC

Provider Appeals (§455.512)

Section 455.512 would require States

to provide administrative appeal

procedures for Medicaid providers that

seek review of an adverse Medicaid

RAC determination.

The burden associated with this

requirement is the time and effort put

forth by the State to prepare and provide

administrative appeal procedures. We

estimate it would take 1 State 60 hours

to perform these tasks. The total annual

burden for this requirement is 3,360

hours.

D. ICRs Regarding Federal Share of

State Expense for the Medicaid RAC

Program (§455.514(b))

Section 455.514(b), FFP would be

available to States for the Federal share

of State expense for the Medicaid RAC

program subject to CMS’ reporting

requirements. The burden associated

with a State reporting quarterly

expenditure estimates is currently

approved under OMB# 0938–0067 with

an expiration date of August 31, 2011.

E. ICRs Regarding Exceptions From

Medicaid RAC Programs (§455.516)

Section 455.516 would require a State

that is seeking an exception from any of

the requirements of the Medicaid RAC

program to submit a written justification

to CMS.

The burden associated with this

requirement is the time and effort put

forth by the State to prepare and submit

a written justification for the request.

We estimate it would take 1 State 20

hours to meet this requirement. We

estimate approximately 15 States would

request an exception; therefore, the total

annual burden associated with this

requirement is 300 hours.

If you comment on these information

collection and recordkeeping

requirements, please do either of the

following:

1. Submit your comments

electronically as specified in the

ADDRESSES

section of this proposed rule;

2. Submit your comments to the

Office of Information and Regulatory

Affairs, Office of Management and

Budget, Attention: CMS Desk Officer,

[CMS–6034–P] Fax: (202) 395–6974; or

E-mail: OIRA_[email protected].

IV. Response to Comments

Because of the large number of public

comments we normally receive on

Federal Register documents, we are not

able to acknowledge or respond to them

individually. We will consider all

comments we receive by the date and

time specified in the

DATES

section of

this preamble, and, when we proceed

with a subsequent document, we will

respond to the comments in the

preamble to that document.

V. Regulatory Impact Analysis

A. Overall Impact

We have examined the impacts of this

rule as required by Executive Order

12866 on Regulatory Planning and

Review (September 30, 1993), the

Regulatory Flexibility Act (RFA)

(September 19, 1980, Pub. L. 96–354),

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section 1102(b) of the Social Security

Act, section 202 of the Unfunded

Mandates Reform Act of 1995 (Pub. L.

104–4), Executive Order 13132 on

Federalism (August 4, 1999), and the

Congressional Review Act (5 U.S.C.

804(2)).

Executive Order 12866 directs

agencies to assess all costs and benefits

of available regulatory alternatives and,

if regulation is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, environmental, public health

and safety effects, distributive impacts,

and equity). A regulatory impact

analysis (RIA) must be prepared for

major rules with economically

significant effects ($100 million or more

in any 1 year). We tentatively estimate

that this rulemaking may be

‘‘economically significant’’ as measured

by the $100 million threshold, and,

therefore, may be a major rule under the

Congressional Review Act.

This proposed rule applies to States’

requirement to contract with Medicaid

RACs to perform audits of Medicaid

providers on a contingency fee basis.

The majority of anticipated savings, as

a result of the provisions in this rule, are

related to improper payments. However,

as seen in the Medicare RAC

Demonstration period, we expect a

limited financial impact on most

providers, as significant improper

payments are relatively rare. The CMS

Office of the Actuary (OACT) estimated

the potential impact on Federal

Medicaid costs and savings. OACT used

the historical experience from the

Medicare program to estimate potential

savings to Medicaid. As such, these

estimates are highly uncertain, as a

result we offer estimates for FYs 2011

through 2015 to illustrate the potential

effects of this program. As a result,

OACTs estimates for FYs 2011 through

2015 are presented in Table A.

ABLE

A—P

OTENTIAL

AVINGSTO

EDERAL

EDICAID

ROGRAMFROM

THE

XPANSIONOFTHE

ECOVERY

UDIT

ONTRACTOR

ROGRAM

Fiscal year

Estimated savings

(in millions of dollars)

2011..........................$80

2012..........................170

2013..........................250

2014..........................310

2015..........................330

We plan to refine the estimated

impacts in the final rule’s analysis and

we request comment on the potential

underpayments and overpayments

collected by States and the associated

contingency fees.

The RFA requires agencies to analyze

options for regulatory relief of small

businesses, if a rule has a significant

impact on a substantial number of small

entities. For purposes of the RFA, we

estimate that most Medicaid providers

are small entities as that term is used in

the RFA (include small businesses,

nonprofit organizations, and small

governmental jurisdictions). The great

majority of hospitals and most other

health care providers and suppliers are

small entities, either by being nonprofit

organizations or by meeting the SBA

definition of a small business (having

revenues of less than $7.0 million to

$34.5 million in any 1 year). For

purposes of the RFA, approximately 75

percent of Medicaid providers are

considered small businesses according

to the Small Business Administration’s

size standards with total revenues of

$35 million or less in any 1 year and 80

percent are nonprofit organizations.

Individuals and States are not included

in the definition of a small business

entity. Medicaid providers are required,

as a matter of course, to follow the

guidelines and procedures as specified

in State and Federal laws and

regulations. As such, Medicaid

providers must retain accurate billing

records for the requisite period of time.

Additionally, Medicaid providers must

cooperate in audits conducted by the

State and/or Federal governments and

their agents. Therefore, the Secretary

has determined that this proposed rule

will not have a significant economic

impact on a substantial number of small

entities.

In addition, section 1102(b) of the Act

requires us to prepare a regulatory

impact analysis if a rule may have a

significant impact on the operations of

a substantial number of small rural

hospitals. This analysis must conform to

the provisions of section 603 of the

RFA. For purposes of section 1102(b) of

the Act, we define a small rural hospital

as a hospital that is located outside of

a metropolitan statistical area and has

fewer than 100 beds. For the same

reason as stated above, this proposed

rule would not have a significant impact

on the operation of small rural

hospitals.

Section 202 of the Unfunded

Mandates Reform Act of 1995 (UMRA)

also requires that agencies assess

anticipated costs and benefits before

issuing any rule whose mandates

require spending in any 1 year of $100

million in 1995 dollars, updated

annually for inflation. In 2010, that

threshold is approximately $135

million. This proposed rule applies to

the States’ requirement to procure

Medicaid RACs to perform audits of

Medicaid providers on a contingency

fee basis. State expenditure associated

with this proposed rule would initially

involve directing or allocating personnel

resources to procurement activities. Per

the terms of the contracts, States would

not be expending funds over $135

million for RACs to perform the

contracts. Associated costs that may

include the operation of RAC programs,

collateral State personnel costs, and

maintenance of records are not expected

to exceed the $135 million threshold.

Therefore, this proposed rule is not

anticipated to have an effect on State,

local or tribal governments in the

aggregate, or by the private sector of

$135 million or more.

Executive Order 13132 establishes

certain requirements that an agency

must meet when it promulgates a

proposed rule (and subsequent final

rule) that imposes substantial direct

requirement costs on State and local

governments, preempts State law, or

otherwise has Federalism implications.

We have reviewed this proposed rule

under the threshold criteria of Executive

Order 13132, Federalism, and have

determined that it would not have

substantial direct effects on the rights,

roles, and responsibilities of States,

local or tribal governments.

B. Conclusion

We tentatively estimate that this rule

may be ‘‘economically significant’’ as

measured by the $100 million threshold

as set forth by Executive Order 12866,

as well as the Congressional Review

Act. The analysis above provides our

initial Regulatory Impact Analysis. We

have not prepared an analysis for

section 1102(b) of the RFA, section 202

of the UFMA and Executive Order

13132 because the provisions are not

impacted by this rule.

In accordance with the provisions of

Executive Order 12866, this regulation

was reviewed by the Office of

Management and Budget.

List of Subjects in 42 CFR Part 455

Fraud, Grant programs—health,

Health facilities, Health professions,

Investigations, Medicaid, Reporting and

recordkeeping requirements.

For the reasons set forth in the

preamble, the Centers for Medicare &

Medicaid Services proposes to amend

42 CFR chapter IV as set forth below:

PART 455—PROGRAM INTEGRITY—

MEDICAID

1. The authority citation for part 455

continues to read as follows:

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Authority: Section 1102 of the Social

Security Act (42 U.S.C. 1302), section

1902(a)(42)(B) (42 U.S.C. 1396a(a)(42(B)).

2. New subpart F is added to read as

follows:

Subpart F—Medicaid Recovery Audit

Contractors Program

Sec.

455.500Purpose.

455.502Establishment of program.

455.504Definitions.

455.506Activities to be conducted by

Medicaid RACs.

455.508Eligibility requirements for

Medicaid RACs.

455.510Payments to RACs.

455.512Medicaid RAC provider appeals.

455.514Federal share of State expense for

the Medicaid RAC program.

455.516Exceptions from Medicaid RAC

program.

455.518Applicability to the territories.

Subpart F—Medicaid Recovery Audit

Contractors Program

§455.500Purpose.

This subpart implements section

1902(a)(42)(B) of the Social Security Act

that establishes the Medicaid Recovery

Audit Contractor (RAC) program.

§455.502Establishment of program.

(a) The Medicaid Recovery Audit

Contractor program (Medicaid RAC

program) is established as a measure for

States to promote the integrity of the

Medicaid program.

(b) States shall enter into contracts,

consistent with State law and in

accordance with this section, with

eligible Medicaid RACs to carry out the

activities described in §455.506 of this

subpart.

CMS certain elements describing the

effectiveness of their Medicaid RAC

program.

§455.504Definitions.

As used in this subpart—

Medicaid RAC program means a

recovery audit contractor program

administered by a State to identify

overpayments and underpayments and

recoup overpayments.

Medicare RAC program means a

recovery audit contractor program

administered by CMS to identify

underpayments and overpayments and

recoup overpayments, established under

the authority of section 1893(h) of the

Act.

§455.506Activities to be conducted by

Medicaid RACs.

(a) Medicaid RACs will review claims

submitted by providers of items and

services or other individuals furnishing

items and services for which payment

has been made under section 1902(a) of

the Act or under any waiver of the State

plan to identify underpayments and

overpayments and recoup overpayments

for the States.

(b) States shall have the discretion to

coordinate with Medicaid RACs

regarding the recoupment of

overpayments.

§455.508Eligibility requirements for

Medicaid RACs.

An entity that wishes to perform the

functions of a Medicaid RAC may enter

into a contract with a State to carry out

any of the activities described in

§455.506 under the following

conditions:

(a) The entity shall demonstrate to a

State that it has the technical capability

to carry out the activities described in

§455.506 of this subpart. Evaluation of

technical capability must include the

employment of trained medical

professionals to review Medicaid

claims.

(b) In carrying out such activities, the

entity agrees to coordinate its efforts

with the State as well as the Office of

Inspector General of the U.S.

Department of Health and Human

Services, the U.S. Department of Justice,

including the Federal Bureau of

Investigation, State Medicaid Fraud

Control Units, other Federal and State

law enforcement agencies as appropriate

and CMS. Whenever the entity has

reasonable grounds to believe that fraud

or criminal activity has occurred, the

entity must report it immediately to

appropriate law enforcement officials.

other requirements as the State may

require.

§455.510Payments to RACs.

(a) General. Fees paid to RACs shall

be made only from amounts recovered.

(b) Overpayments. A State shall

determine the contingency fee rate to be

paid to a Medicaid RAC for the

identification and recovery of Medicaid

provider overpayments.

(1) The contingency fee paid to a

Medicaid RAC shall be based on a

percentage of the overpayment

recovered.

(2) States shall determine at what

stage in the Medicaid RAC process,

post-recovery, Medicaid RACs will

receive contingency fee payments.

(3) Except as provided in paragraph

(4) of this section, the contingency fee

may not exceed that of the highest

Medicare RAC, as specified by CMS in

the Federal Register, unless the State

submits, and CMS approves, a waiver of

the specified maximum rate. If a State

does not obtain a waiver of the specified

maximum rate, any amount exceeding

the specified maximum rate is not

eligible for Federal financial

participation (FFP), either from the

collected overpayment amounts, or in

the form of any other administrative or

medical assistance claimed expenditure.

(4) CMS will review and consider, on

a case-by-case basis, a State’s well-

justified request that CMS provide FFP

in paying a Medicaid RAC(s) a

contingency fee in excess of the then-

highest contingency fee paid to a

Medicare RAC.

determine the fee paid to a Medicaid

RAC to identify underpayments.

§455.512Medicaid RAC provider appeals.

States shall provide appeal rights

available under State law or

administrative procedures to Medicaid

providers that seek review of an adverse

Medicaid RAC determination.

§455.514Federal share of State expense

of the Medicaid RAC program.

(a) Funds expended by the State for

the operation and maintenance of a

Medicaid RAC program, not including

fees paid to RACs, shall be considered

necessary for the proper and efficient

administration of the State plan or a

waiver of the plan.

(b) FFP is available to States for

administrative costs of operation and

maintenance of Medicaid RACs subject

to CMS’ reporting requirements.

§455.516Exceptions from Medicaid RAC

programs.

A State may seek to be excepted from

some or all Medicaid RAC contracting

requirements by submitting to CMS a

written justification for the request and

getting CMS approval.

§455.518Applicability to the territories.

The aforementioned provisions in

§455.500 through §455.516 of this

subpart are applicable to Guam, Puerto

Rico, U.S. Virgin Islands, American

Samoa, and the Commonwealth of the

Northern Mariana Islands.

Authority: (Catalog of Federal Domestic

Assistance Program No. 93.778, Medical

Assistance Program).

Dated: August 19, 2010.

Donald M. Berwick,

Administrator, Centers for Medicare &

Medicaid Services.

Approved: October 29, 2010.

Kathleen Sebelius,

Secretary, Health and Human Services.

[FR Doc. 2010–28390 Filed 11–5–10; 4:15 pm]

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