Subpart A-Scope, Definitions, and General Provisions

§ 421.1 Basis and scope.

(a) This part is based on sections 1815, 1816 and 1842 of the Social Security Act and 42 U.S.C. 1395b-1 (experimental authority).

(b) The provisions of this part apply to agreements with Part A (Hospital Insurance) intermediaries and contracts with Part B (Supplementary Medical Insurance) carriers. They specify criteria ard standards to be used in selecting intermediaries and evaluating their performance; in assigning or reassigning a provider or providers to particular intermediaries, and in designating regional or national intermediaries for certain classes of providers. The provisions set forth the opportunity for a hearing for intermediaries and carriers affected by certain adverse actions. The adversely affected intermediaries may request a judicial review of hearings decisions on (1) assignment or reassignment of a provider or providers or (2) designation of an intermediary or intermediaries to serve a class of providers.

§ 421.3 Definitions.

As used in this part: "Act" means the Social Security Act.

"Administrator" means the Administrator of the Health Care Financing Administration (HCFA).

"Carrier" means an organization that has entered into a contract with the Administrator to perform designated functions in the administration of Part B of the Medicare program.

“Intermediary” means an organization that has entered into an agreement with the Administrator to perform designated functions in the administration of the Medicare program.

For purposes of applying the performance criteria in § 421.120 and the statistical standards in § 421.122 and any adverse action resulting from such application, the term intermediary also means a Blue Cross Plan which has entered into a subcontract approved by the Administrator with the Blue Cross Association to perform intermediary functions.

"Provider" means a hospital, skilled nursing facility (SNF), home health agency (HHA), or a clinic or agency furnishing outpatient physical therapy or speech pathology services under the Medicare program.

"Secretary" means the Secretary of Health, and Human Services or a delegate.

§ 421.5 General provisions.

(a) Competitive bidding not required for carriers. The Administrator may enter into contracts with carriers, or with intermediaries to act as carriers in certain circumstances, without regard to section 3709 of the U.S. Revised Statutes or any other provision of law that requires competitive bidding.

(b) Indemnification of intermediaries and carriers. Intermediaries and carriers act on behalf of the Administrator in carrying out certain administrative responsibilities that the law imposes. Accordingly, their agreements and contracts contain clauses providing for indemnification with respect to actions taken on behalf of the Administrator and the Administrator is the real party of interest in any litigation involving the administration of the program.

(c) Use of intermediaries to perform carrier functions. The Administrator may contract with an intermediary to perform carrier functions with respect to services for which Part B payment is made to a provider.

(d) Nonrenewal of agreement or contract. Notwithstanding any of the provisions of this part, the Administrator has the authority not to renew an agreement or contract when its term expires.

(e) Intermediary availability in an area. For more effective and efficient administration of the program, the Administrator retains the right to expand or diminish the geographical area in which an intermediary is available to serve providers.

Subpart B-Intermediaries

§ 421.100 Intermediary functions.

An agreement between the Administrator and an intermediary shall pro

vide for the performance of the following functions:

(a) Coverage. The intermediary must assure that it makes payments only for services that are:

(1) Furnished to Medicare beneficiaries;

(2) Covered under Medicare part A or part B;

Medically necessary. When a Professional Standards Review Organization (PSRO) has assumed review responsibility in accordance with the applicable provisions of Part 463 of this chapter, the PSRO shall make final determinations of medical necessity which are binding for purposes of payment.

(b) Fiscal management. The intermediary must receive, disburse, and account for funds in making Medicare payments.

(c) Provider audits. The intermediary must audit the records of providers of services as necessary to assure proper payments.

(d) Utilization patterns. The intermediary must assist providers to:

(1) Develop procedures relating to utilization practices;

(2) Make studies of the effectiveness of those procedures and recommend methods to improve them;

(3) Evaluate the results of utilization review activity; and

(4) Assist in the application of safeguards against unnecessary utilization of services.

(e) Resolution of cost report disputes. The intermediary must establish and maintain procedures approved by the Administrator to consider and resolve any disputes that may result from provider dissatisfaction with an intermediary's determinations concerning provider cost reports.

(f) Review and reconsideration of determinations. The intermediary must establish and maintain procedures approved by the Administrator for the review and reconsideration of determinations that deny payments to an individual or to the provider who furnished services to the individual.

(g) Information and reports. The intermediary must furnish to the Administrator any information and reports that the Administrator requests in order to carry out his or her respon

§ 421.104 Nominations for intermediary.

(a) Nomination by groups or associations of providers. (1) An association of providers may nominate an organization or agency to serve as intermediary for its members.

(2) The nomination is not binding on any member of the association if it notifies the Administrator of its nonconcurrence with the nomination.

(3) The nomination must be made in writing, to the Administrator, and must:

(i) Identify the proposed intermediary by giving complete name and address;

(ii) Include, or furnish as an attachment, the name, address, and bed capacity (or patient care capacity in the case of home health agencies) of each member of the association;

(iii) List the members that have concurred in the nomination of the proposed intermediary; and

(iv) Be signed by an authorized representative of the association.

(b) Nomination by nonmembers or nonconcurring members. Providers that nonconcur in their association's nomination, or are not members of an association, may:

(1) Form a group of 2 or more providers for the specific purpose of nominating an intermediary, in accordance with provisions of paragraph (a) of this section; or

(2) Exercise their right to receive payment directly from the Administrator in accordance with § 421.103.

(c) The Administrator is not required to enter into an agreement with

a proposed intermediary solely because it has been nominated.

§ 421.105 Notification of action on nomination.

(a) The Administrator will send, to each member of a nominating association or group, written notice of a decision to enter into or not enter into an agreement with the nominated organization or agency.

(b) Any member of a group or association having more than one nominated intermediary approved by the Administrator to act on its behalf shall withdraw its nomination from all but one or exercise the option provided in § 421.103 to receive payment directly from the Administrator.

§ 421.106 Change to another intermediary or to direct payment.

(1) Is willing and able to assist providers in the application of safeguards against unnecessary utilization of services;

(2) Meets all solvency and financial responsibility requirements imposed by the statutes and regulatory authorities of the State or States in which it, or any subcontractor performing some or all of its functions, would serve;

(3) Has the overall resources and experience to administer its responsibilities under the Medicare program and has an existing operational, statistical, and recordkeeping capacity to carry out the additional program responsibilities it proposes to assume. The Administrator will presume that an intermediary or prospective intermediary meets this requirement if it has at least 5 years experience in paying for or reimbursing the cost of health services;

(4) Will serve a sufficient number of providers to permit a finding of effective and efficient administration. Under this criterion no intermediary or prospective intermediary shall be found to be not efficient or effective solely on the grounds that it serves only providers located in a single State;

(5) Has acted in good faith to achieve effective cooperation with the providers it will service and with the physicians and medical societies in the area;

(6) Has established a record of integrity and satisfactory service to the public; and

(7) Has an affirmative equal employment opportunity program that complies with the fair employment provisions of the Civil Rights Act of 1964 and Executive Order 11246, as amended.

§ 421.112 Considerations relating to the effective and efficient administration of the program.

(a) In order to accomplish the most effective and efficient administration of the Medicare program, determinations may be made by the Secretary with respect to the termination of an intermediary agreement, or by the Administrator with respect to the:

(1) Renewal of an intermediary agreement (§ 421.110);

(2) Assignment or reassignment of providers to an intermediary

(§ 421.114); or

(3) Designation of a regional or national intermediary to serve a class of providers (§ 421.116).

(b) When taking the actions listed in paragraph (a), the Secretary or the Administrator will consider the performance of the individual intermediary in its Medicare operations using the factors contained in the performance criteria (§ 421.120) and statistical standards (§ 421.122).

(c) In addition, when taking the actions listed in paragraph (a) of this section, the Secretary or the Administrator may consider factors relating to:

(1) Consistency in the administration of program policy;

(2) Development of intermediary expertise in difficult areas of program administration;

(3) Individual capacity of available intermediaries to serve providers as it is affected by such considerations as:

(i) Program emphasis on the number or type of providers to be served, or

(ii) Changes in data processing technology;

(4) Overdependence of the program on the capacity of an intermediary to an extent that services could be interrupted;

(5) Economy in the delivery of intermediary services;

(6) Timeliness in the delivery of intermediary services;

(7) Duplication in the availability of intermediaries;

(8) Conflict of interest between an intermediary and provider; and (9) Any additional pertinent factors.

§ 421.114 Assignment and reassignment of providers by the Administrator.

The Administrator may assign or reassign any provider to any intermediary if he or she determines that the assignment or reassignment will result in more effective and efficient administration of the Medicare program. Before making this determination, the Administrator will consider:

(a) The preferences of the provider; (b) The availability of an intermediary as specified in § 421.5(e); and

§ 421.126 Termination of agreements.

(a) Termination by intermediary. An intermediary may terminate its agreement at any time by:

(1) Giving written notice of its intention to the Administrator and to the providers it services at least 180 days before its intended termination date; and

(2) Giving public notice of its intention by publishing a statement of the effective date of termination at least 60 days before that date. Publication must be in a newspaper of general circulation in each community served by the intermediary.

(b) Termination by the Secretary, and right of appeal. (1) The Secretary may terminate an agreement if:

(i) The intermediary fails to comply with the requirements of this subpart;

(ii) The intermediary fails to meet the criteria or standards specified in §§ 421.120 and 421.122; or

(iii) The Administrator has reassigned, under §§ 421.114 or 421.116, all of the providers assigned to the intermediary.

(2) If the Secretary decides to terminate an agreement, he or she will offer the intermediary an opportunity for a hearing, in accordance with § 421.128.

(3) If the intermediary does not request a hearing, or if the hearing decision affirms the Secretary's decision, the Secretary will provide reasonable notice of the effective date of termination to:

(i) The intermediary;

(ii) The providers served by the intermediary; and

(iii) The general public.

(4) The providers served by the intermediary will be given the opportunity to nominate another intermediary, in accordance with § 421.104.

§ 421.128 Intermediary's opportunity for hearing and right to judicial review. (a) Basis for appeal. An intermediary adversely affected by any of the following actions shall be granted an opportunity for a hearing:

(1) Assignment or reassignment of providers to another intermediary.

(2) Designation of a national or regional intermediary to serve a class of providers.

(3) Termination of the agreement.
(b) Request for hearing. The inter-

mediary shall file the request with the Administrator within 20 days from the date on the notice of intended action.

(c) Hearing procedures. The hearing officer shall be a representative of the secretary and not otherwise a party to the initial administrative decision. The intermediary may be represented by counsel and may present evidence and examine witnesses. A complete recording of the proceedings at the hearing will be made and transcribed.

(d) Judicial review. An adverse hearing decision concerning action under paragraph (a)(1) or (a)(2) of this section is subject to judicial review in accordance with chapter 7 of Title 5, United States Code.

(e) As specified in § 421.118, contracts awarded under the experimental authority of the Administrator are not subject to the provisions of this section.

Subpart C-Carriers

§ 421.200 Carrier functions.

A contract between the Administrator and a carrier shall provide for the performance of the following functions:

(a) Coverage. (1) The carrier must assure that payment is made only for services that are:

(i) Rendered to Medicare beneficiaries;

(ii) Covered under Medicare Part B; and

(iii) Medically necessary. When a Professional Standards Review Organization (PSRO) has assumed review responsibility in accordance with the applicable provisions of Part 463 of this chapter, the PSRO shall make final determinations of medical necessity which are binding for purposes of payment.

(2) If it determines that the services were not medically necessary or the claim does not properly reflect the kind and amount of services furnished, the carrier must take appropriate action to reject or adjust the claim.

(b) Payment on a cost basis. If payment is on a cost basis, the carrier must assure that payments are based on reasonable costs, as determined under Part 405, Subpart D, of this chapter.