100-01 Medicare General Information, Eligibility and Entitlement Manual: Chapter 1 - General Overview

Medicare General Information, Eligibility, and
Entitlement
Chapter 1 - General Overview
Table of Contents
(Rev. 12425; Issued: 12-21-23)
Transmittals for Chapter 1
10 - General Program Benefits
10.1 - Hospital Insurance (Part A) for Inpatient Hospital, Hospice, Home Health, and
Skilled Nursing Facility (SNF) Services - A Brief Description
10.2 - Home Health Services
10.3 - Supplementary Medical Insurance (Part B) - A Brief Description
10.4 - Basis for Payment
20 - Administration of the Medicare Program - Introduction
20.1 - Financing the Program
20.2 - Discrimination Prohibited
20.3 - Fraud and Abuse - General
20.3.1 - Definition and Examples of Fraud
20.3.2 - Definition and Examples of Abuse
30 - Federal Government Administration of the Health Insurance Program
30.1 - CMS Responsibilities
30.2 - Public Health Service Responsibilities
30.3 - State Agencies
30.3.1 - Certification by State Agencies
30.3.2 - Consultation by State Agencies
30.3.3 - Coordination by State Agencies
40 - Role of A/B MACs (A) and (HHH)
40.1 - Assignment of A/B MAC (A) and (HHH)
40.2 - A/B MAC (A) and (HHH) Service to Home Health Agencies (HHAs)
50 - Role of A/B MACs (B)
60 - Background and Responsibilities of the Peer Review Organization (PROs)
60.1 - Purpose of PRO Review for the Individual Medicare Beneficiaries
60.2 - PRO Responsibility for the Overall Approach to Health Care
60.3 - Other PRO Responsibilities
60.4 - Statutory Obligations of Practitioners and Other Persons

60.5 - Responsibilities of Designated Agents Working With PROs; Organizations
Subcontracted for Review
70 - Institutional Planning and Budgeting
80 - CMS Managed Modules for Software Programs and Pricing/Coding Files

10 - General Program Benefits
(Rev. 1, 09-11-02)
The Health Insurance for the Aged and Disabled Act (title XVIII of the Social Security Act),
known as "Medicare," has made available to nearly every American 65 years of age and older a
broad program of health insurance designed to assist the nation's elderly to meet hospital,
medical, and other health costs. Health insurance coverage has also been extended to persons
under age 65 qualifying as disabled and those having end stage renal disease (ESRD) or Lou
Gehrig's disease. The program includes two related health insurance programs--hospital
insurance (HI) (Part A) and supplementary medical insurance (SMI) (Part B).
10.1 - Hospital Insurance (Part A) for Inpatient Hospital, Hospice, Home
Health and Skilled Nursing Facility (SNF) Services - A Brief Description
(Rev. 94, Issued: 10-16-15, Effective: 11-16-15, Implementation: 11-16-15)
Hospital insurance is designed to help patients defray the expenses incurred by hospitalization
and related care. In addition to inpatient hospital benefits, hospital insurance covers posthospital
extended care in SNFs and posthospital care furnished by a home health agency in the patient's
home. Blood clotting factors, for hemophilia patients competent to use such factors to control
bleeding without medical or other supervision, and items related to the administration of such
factors, are also a Part A benefit for beneficiaries in a covered Part A stay. The purpose of these
additional benefits is to provide continued treatment after hospitalization and to encourage the
appropriate use of more economical alternatives to inpatient hospital care. Program payments
for services rendered to beneficiaries by providers (i.e., hospitals, SNFs, and home health
agencies) are generally made to the provider. In each benefit period, payment may be made for
up to 90 inpatient hospital days, and 100 days of posthospital extended care services.
Hospices also provide Part A hospital insurance services such as short-term inpatient care. In
order to be eligible to elect hospice care under Medicare, an individual must be entitled to Part A
of Medicare and be certified as being terminally ill. An individual is considered to be terminally
ill if the individual has a medical prognosis that his or her life expectancy is 6 months or less if
the illness runs its normal course.
The Part A benefit categories of inpatient hospital services and SNF services are each subject to
separate and mutually exclusive day limits, so that the use of benefit days under one of these
benefits does not affect the number of benefit days that remain available under the other.
Accordingly, the 90 days of inpatient hospital benefits (plus 60 nonrenewable lifetime reserve
days -- see Pub. 100-02, Medicare Benefit Policy Manual, chapter 5) that are available to a
beneficiary in a hospital do not count against the 100 days of posthospital extended care benefits
that are available in a SNF, and vice-versa.
10.2 - Home Health Services
(Rev. 28; Issued: 08-12-05; Effective/Implementation: 09-12-05)
To qualify for home health benefits under either Part A or Part B of the program, a beneficiary
must be confined to his/her home, under the care of a physician, and in need of skilled nursing
services on an intermittent basis, physical therapy, or speech-language pathology services.
Being "confined to the home" does not mean a beneficiary can never leave the home. See

chapter 7 of the Benefit Policy publication for the definition of homebound. A beneficiary who
requires one or more of these services in the treatment of his/her illness or injury and otherwise
qualifies for home health benefits is eligible to have payment made on his/her behalf for the
skilled nursing, physical therapy or speech-language pathology services he needs, as well as for
any of the other home health services specified in the law. These services include occupational
therapy, medical social services, the use of medical supplies and medical appliances, and the
part-time or intermittent services of home health aides. Conversely, a patient who does not
require intermittent skilled nursing or physical therapy or speech-language pathology services
cannot qualify to have payment made under the program for any home health services furnished
him. Excluded as home health services are the costs of housekeepers, food service
arrangements, and transportation to outpatient facilities.
To be covered, the home health services must be needed for a condition for which the patient
required inpatient hospital services or extended care services. See the chapter 7 of the Benefit
Policy publication for a description of services covered. Discharge from the hospital must have
occurred in a month in which the patient has attained age 65 or was entitled to health insurance
benefits under the disability or chronic renal disease provisions of the law.
Home health services are services provided by a home health agency or by others under
arrangements with such an agency. A home health agency is a public agency or private
organization which is primarily engaged in providing skilled nursing and other therapeutic
services. Where applicable the agency must be licensed under State or local law, or be approved
by the State or local licensing agency as meeting the licensing standards. Examples of home
health agencies are visiting nurse associations, official health agencies, and hospital-based home
care programs. To participate in the health insurance program, a home health agency must meet
certain other requirements included in the law as well as health and safety conditions prescribed
by the Secretary of the Department of Health and Human Services. It may not qualify under
hospital insurance, however, if it is primarily engaged in the treatment of mental diseases; such
an agency may qualify only under supplementary medical insurance.
Home health services are usually furnished on a visiting basis in a place of residence used as the
individual's home. However, outpatient services in a hospital, SNF, or rehabilitation center are
covered home health services, if arranged for by a home health agency, when equipment is
required that cannot be made available in the patient's home.
The services of an intern or resident-in-training are covered if the agency has an affiliation with
or is under common control of a hospital providing such medical services and the agency bills
for such services.
Prior to July 1, 1981, home health services under hospital insurance included up to 100 home
health visits, after the beginning of one benefit period and before the beginning of the next. The
visits must have been furnished to a patient within 1 year of his/her most recent discharge from a
hospital where he was an inpatient for at least 3 consecutive calendar days (counting the day of
admission, but not the day of discharge). If, after his/her hospitalization, he had a covered stay
in a SNF, the 1 year during which the patient may receive home health services began with the
discharge from the SNF. A plan of treatment must have been established within 14 days after the
hospital or SNF discharge. Home health services were also provided under supplementary
medical insurance where the 100-visit limit under Part A was exceeded.

Effective July 1, 1981, the 100-visit limitation under Parts A and B, and the prior inpatient stay
requirement under Part A were eliminated. In addition, a person could qualify for home health
services based on his or her need for skilled nursing services on an intermittent basis, physical
therapy, speech-language pathology services, or occupational therapy. Effective December 1,
1981, occupational therapy was eliminated as a basis for entitlement to home health services.
However, if a person has otherwise qualified for home health services because of the need for
skilled nursing care, physical therapy or speech-language pathology services, the patient's
eligibility for home health services may be extended solely on the basis of the continuing need
for occupational therapy.
Effective January 1, 1998, the first 100 visits must be paid under Part A if the beneficiary is
entitled under Part A, and the remainder of the visits may be paid under Part B.
10.3 - Supplementary Medical Insurance (Part B) - A Brief Description
(Rev. 12425, Issued: 12-21-23, Effective: 01-01-24, Implementation: 01-02-24)
To obtain SMI, an eligible individual must enroll during an enrollment period and pay the
required premiums. An individual is eligible to enroll if they are entitled to HI or are 65 years
of age and a citizen or resident alien who meets certain residence requirements. SMI provides
for payment to participating providers for furnishing covered services after a yearly cash
deductible is met. The voluntary medical insurance plan is designed to supplement the basic
hospital insurance coverage. It provides coverage for home health visits not available under
hospital insurance (e.g., no Part A entitlement or visits after the first 100 visits) and for medical
and other health services. Payment may not be made under Part B for any service that may be
paid under Part A. However, where payment is not possible under Part A (e.g., no Part A
entitlement or benefits are exhausted) payment may be made under Part B if the service is
covered.
Subject to coverage and limitations described in the Benefit Policy Publication, the following
services are covered under Part B.
• 	Physicians' services;
• 	Services and supplies (including drugs and biologicals which are not usually self-
administered by the patient) furnished as an incident to a physician's professional service,
of kinds which are commonly furnished in physicians' offices and are commonly either
rendered without charge or included in the physicians' bills;
• 	Hospital 	services 	(including 	drugs 	and 	biologicals 	which 	are 	not 	usually 	self-
administered by the patient) incident to physicians' services rendered to outpatients and
partial hospitalization or intensive outpatient services incident to such services;
• 	Diagnostic services which are: 	(i) furnished to an individual as an outpatient by a
hospital or by others under arrangements with them made by a hospital, and (ii)
ordinarily furnished by such hospital (or by others under such arrangements) to its
outpatients for the purpose of diagnostic study;

• 	Outpatient physical therapy services, occupational therapy services, and speech-language
pathology services;
• 	Rural health clinic services and Federally qualified health center services;
• 	Home dialysis supplies and equipment, self-care home dialysis support services, and
institutional dialysis services and supplies;
• 	Antigens (subject to quantity limitations prescribed in regulations by the Secretary)
prepared by a physician, as defined in section 1861(r)(1) of the Act, for a particular
patient, including antigens so prepared which are forwarded to another qualified person
(including a rural health clinic) for administration to such patient, from time to time, by
or under the supervision of another such physician;
• 	Services furnished pursuant to a contract under section 1876 of the Act to a member of
an eligible organization by a physician assistant or by a nurse practitioner and such
services and supplies furnished as an incident to his/her service to such a member as
would otherwise be covered under this part if furnished by a physician or as an incident
to a physician's service; and, services furnished pursuant to a risk-sharing contract under
section 1876(g) of the Act to a member of an eligible organization by a clinical
psychologist (as defined by the Secretary) or by a clinical social worker, and such
services and supplies furnished as an incident to such clinical psychologist's services or
clinical social worker's services to such a member as would otherwise be covered under
this part if furnished by a physician or as an incident to a physician's service;
• 	Blood clotting factors, for hemophilia patients competent to use such factors to control
bleeding without medical or other supervision, and items related to the administration of
such factors, subject to utilization controls deemed necessary by the Secretary for the
efficient use of such factors;
• 	Prescription drugs used in immunosuppressive therapy furnished to an individual who
receives an organ transplant for which payment is made under this title;
• 	Services which would be physicians' services if furnished by a physician and which are
performed by a physician assistant under the supervision of a physician and which the
physician assistant is legally authorized to perform by the State in which the services are
performed, and such services and supplies furnished as incident to such services as
would be covered if furnished incident to a physician's professional service; and but only
if no facility or other provider charges or is paid any amounts with respect to the
furnishing of such services.
• 	Services which would be physicians' services if furnished by a physician and which are
performed by a nurse practitioner or clinical nurse specialist working in collaboration
with a physician which the nurse practitioner or clinical nurse specialist is legally
authorized to perform by the State in which the services are performed, and such services
and supplies furnished as an incident to such services as would be covered if furnished
incident to a physician's professional service, but only if no facility or other provider
charges or is paid any amounts with respect to the furnishing of such services;

• 	Certified nurse-midwife services;
• 	Qualified psychologist services;
• 	Clinical social worker services;
• 	Erythropoietin for dialysis patients competent to use such drug without medical or other
supervision with respect to the administration of such drug, subject to methods and
standards established by the Secretary by regulation for the safe and effective use of such
drug, and items related to the administration of such drug;
• 	Prostate cancer screening tests;
• 	An oral drug (which is approved by the Federal Food and Drug Administration)
prescribed for use as an anticancer chemotherapeutic agent for a given indication, and
containing an active ingredient (or ingredients), which is the same indication and active
ingredient (or ingredients) as a drug which the A/B MAC (B) determines would be
covered if the drug could not be self-administered;
• 	Colorectal cancer screening tests;
• 	Diabetes outpatient self-management training services;
• 	An oral drug (which is approved by the Federal Food and Drug Administration)
prescribed for use as an acute anti-emetic used as part of an anticancer chemotherapeutic
regimen if the drug is administered by a physician (or as prescribed by a physician)-- (i)
for use immediately before, at, or within 48 hours after the time of the administration of
the anticancer chemotherapeutic agent; and (ii) as a full replacement for the anti-emetic
therapy which would otherwise be administered intravenously;
• 	Screening for glaucoma (as defined in subsection (uu)) for individuals determined to be
at high risk for glaucoma, individuals with a family history of glaucoma and individuals
with diabetes;
• 	Medical nutrition therapy services in the case of a beneficiary with diabetes or a renal
disease who-- (i) has not received diabetes outpatient self-management training services
within a time period determined by the Secretary; (ii) is not receiving maintenance
dialysis for which payment is made under section 1881 of the Act; and (iii) meets such
other criteria determined by the Secretary after consideration of protocols established by
dietitian or nutrition professional organizations;
• 	Diagnostic X-ray tests (including tests under the supervision of a physician, furnished in
a place of residence used as the patient's home, if the performance of such tests meets
such conditions relating to health and safety as the Secretary may find necessary and
including diagnostic mammography if conducted by a facility that has a certificate (or
provisional certificate) issued under section 354 of the Public Health Service Act),

diagnostic laboratory tests, and other diagnostic tests; X-ray, radium, and radioactive
isotope therapy, including materials and services of technicians;
• 	Surgical dressings, and splints, casts, and other devices used for reduction of fractures
and dislocations; Durable medical equipment;
• 	Ambulance service where the use of other methods of transportation is contraindicated
by the individual's condition, but only to the extent provided in regulations;
• 	Prosthetic and orthotic devices (other than dental) which replace all or part of an internal
body organ (including colostomy bags and supplies directly related to colostomy care),
including replacement of such devices, and including one pair of conventional eyeglasses
or contact lenses furnished subsequent to each cataract surgery with insertion of an
intraocular lens;
• 	Leg, 	arm, 	back, 	and 	neck 	braces, 	and 	artificial 	legs, 	arms, 	and 	eyes, 	including
replacements if required because of a change in the patient's physical condition;
• 	Vaccines: (1) pneumococcal vaccine and its administration and, subject to section
4071(b) of the Omnibus Budget Reconciliation Act of 1987, (2) influenza vaccine and its
administration; and (3) hepatitis B vaccine and its administration, furnished to an
individual who is at high or intermediate risk of contracting hepatitis B;
NOTE: A charge separate from the ESRD composite rate will be recognized and paid for
administration of the vaccine to ESRD patients.
NOTE: For Medicare program purposes, the hepatitis B vaccine may be administered upon
the order of a doctor of medicine or osteopathy by home health agencies, SNFs,
renal dialysis facilities (RDFs), hospital outpatient departments, persons recognized
under the "incident to physicians' services" provision of law, and, of course,
doctors of medicine and osteopathy.
• 	Services of a certified registered nurse anesthetist;
• 	Subject to section 4072(e) of the Omnibus Budget Reconciliation Act of 1987, extra-
depth shoes with inserts or custom molded shoes with inserts for an individual with
diabetes, if-- (1) the physician who is managing the individual's diabetic condition (a)
documents that the individual has peripheral 	neuropathy with 	evidence of 	callus
formation, a history of pre-ulcerative calluses, a history of previous ulceration, foot
deformity, or previous amputation, or poor circulation, and (b) certifies that the
individual 	needs 	such 	shoes 	under 	a 	comprehensive plan 	of 	care 	related 	to 	the
individual's diabetic condition; (2) the particular type of shoes are prescribed by a
podiatrist or other qualified physician (as established by the Secretary); and (3) the shoes
are fitted and furnished by a podiatrist or other qualified individual (such as a pedorthist
or orthotist, as established by the Secretary) who is not the physician described in (1)
above (unless the Secretary finds that the physician is the only such qualified individual
in the area);

• 	Screening mammography;
• 	Screening pap smear and screening pelvic exam; and
• 	Bone mass measurement.
• 	No diagnostic tests performed in any laboratory, including a laboratory that is part of a
rural health clinic, or a hospital (which, for purposes of this sentence, means an
institution considered a hospital for purposes of section 1814(d)) of the Act shall be
included unless such laboratory-
1. 	Is situated in any State in which State or applicable local law provides for
licensing of establishments of this nature, (1) is licensed pursuant to such law, or
(2) is approved, by the agency of such State or locality responsible for licensing
establishments of this nature, as meeting the standards established for such
licensing;
2. 	Meets the certification requirements under section 353 of the Public Health
Service Act; and
3. 	Meets such other conditions relating to the health and safety of individuals with
respect to whom such tests are performed as the Secretary may find necessary.
There shall be excluded from the diagnostic services specified any item or service which would
not be included if it were furnished to an inpatient of a hospital. None of the items and services
referred to in the preceding paragraphs of this subsection which are furnished to a patient of an
institution which meets the definition of a hospital for purposes of section 1814(d) of the Act
shall be included unless such other conditions are met as the Secretary may find necessary
relating to health and safety of individuals with respect to whom such items and services are
furnished.
10.4 - Basis for Payment
(Rev. 1, 09-11-02)
(See Claims Processing, Pub 100-04 for a description of the basis for payment for the various
services.)
20 - Administration of the Medicare Program - Introduction
(Rev. 1, 09-11-02)
The conduct of the program has been delegated by the Secretary of the Department of Health and
Human Services to the Administrator of the Centers for Medicare & Medicaid Services (CMS).
Congress has also provided substantial administrative roles for the States and for voluntary
insurance organizations in recognition of their experience in the health care and insurance fields.
The law does not permit the Federal Government to exercise supervision or control over the
practice of medicine, the manner in which medical services are provided, and the administration

or operation of medical facilities. The patient is free to choose any qualified institution, agency,
or person offering him/her services. The responsibility for treatment and the control of care
remains with the individual's physician and the hospital or other facility or agency furnishing
services. The individual may keep or obtain any other health insurance he/she desires including
the choice to enroll in a Medicare+Choice plan. More information about Medicare+Choice plans
is in the Medicare Managed Care Manual.
20.1 - Financing the Program
(Rev. 1, 09-11-02)
Part A is financed through separate payroll contributions paid by employees, employers, and
self-employed persons. The proceeds are deposited to the account of the Federal Hospital
Insurance Trust Fund, which is used only for hospital insurance benefits and administrative
expenses. Federal employees and State and local employees who do not pay the full FICA tax
must pay the HI portion; they are not eligible for monthly Social Security or railroad retirement
benefits. The cost of providing Part A benefits to other persons who are not Social Security or
railroad retirement beneficiaries is met by appropriations to the Federal Hospital Insurance Trust
Fund from general revenues or through premium payments.
Part B is financed by monthly premiums of those who voluntarily enroll in the program and by
the Federal Government which makes contributions from general revenues. All premiums and
Government contributions are deposited in a separate account known as the Federal
Supplementary Medical Trust Fund. Money from this fund is used only to pay for Part B
benefits and administrative expenses.
20.2 - Discrimination Prohibited
(Rev. 28; Issued: 08-12-05; Effective/Implementation: 09-12-05)
Participating providers of Part A services under the supplementary medical insurance program
(e.g., hospitals, SNFs, HHAs, hospices, outpatient physical therapy, comprehensive outpatient
rehabilitation facilities (CORFs), occupational therapy and speech-language pathology providers,
and renal dialysis facilities) must comply with the requirements of title VI of the Civil Rights Act
of 1964. Under the provisions of that Act, a participating provider is prohibited from making a
distinction on the grounds of race, color, or national origin, in the treatment of patients, the use
of equipment, other facilities, and the assignment of personnel to provide services.
The DHHS is responsible for investigating complaints of noncompliance.
20.3 - Fraud and Abuse - General
(Rev. 1, 09-11-02)
Providers and suppliers have an obligation, under law, to conform to the requirements of the
Medicare program. Fraud and abuse committed against the program may be prosecuted under
various provisions of the United States Code and could result in the imposition of restitution,
fines, and, in some instances, imprisonment. In addition, there is also a range of administrative
sanctions (such as exclusion from participation in the program) and civil monetary penalties that
may be imposed when facts and circumstances warrant such action.

Following are definitions and examples of fraud and abuse. These definitions and examples give
a better understanding of the types of practices that are forbidden, under law, in the Medicare
program.
20.3.1 - Definition and Examples of Fraud
(Rev. 1, 09-11-02)
Fraud is defined as making false statements or representations of material facts in order to obtain
some benefit or payment for which no entitlement would otherwise exist. These acts may be
committed either for the person's own benefit or for the benefit of some other party. In order to
prove that fraud has been committed against the Government, it is necessary to prove that
fraudulent acts were performed knowingly, willfully, and intentionally.
Examples of fraud include, but are not limited to, the following:
• 	Billing for services that were not furnished and/or supplies not provided. This includes
billing Medicare for appointments that the patient failed to keep;
• 	Altering claims forms and/or receipts in order to receive a higher payment amount;
• 	Duplicating billings that includes billing both the Medicare program and the beneficiary,
Medicaid, or some other insurer in an effort to receive payment greater than allowed;
• 	Offering, paying, soliciting, or receiving bribes, kickbacks, or rebates, directly or
indirectly, in cash or in kind, in order to induce referrals of patients or the purchase of
goods or services that may be paid for by the Medicare program;
• 	Falsely representing the nature of the services furnished. This encompasses describing a
noncovered service in a misleading way that makes it appear as if a covered service was
actually furnished;
• 	Billing a person who has Medicare coverage for services provided to another person not
eligible for Medicare coverage; and
• 	Using another person's Medicare card to obtain medical care.
20.3.2 - Definition and Examples of Abuse
(Rev. 1, 09-11-02)
Abuse describes practices that, either directly or indirectly, result in unnecessary costs to the
Medicare program. Many times abuse appears quite similar to fraud except that it is not possible
to establish that abusive acts were committed knowingly, willfully, and intentionally.
Following are three standards that CMS uses when judging whether abusive acts in billing were
committed against the Medicare program:
• 	Reasonable and necessary;
• 	Conformance to professionally recognized standards; and

• 	Provision at a fair price.
Examples of abuse include, but are not limited to, the following:
• 	Charging in excess for services or supplies;
• 	Providing medically unnecessary services or services that do not meet professionally
recognized standards;
• 	Billing Medicare based on a higher fee schedule than for non-Medicare patients;
• 	Submitting bills to Medicare that are the responsibility of other insurers under the
Medicare secondary payer (MSP) regulation; and
• 	Violating the participating physician/supplier agreement.
Although these types of practices may initially be categorized as abusive in nature, under certain
circumstances they may develop into fraud if there is evidence that the subject was knowingly
and willfully conducting an abusive practice.
30 - Federal Government Administration of the Health Insurance Program
(Rev. 1, 09-11-02)
The DHHS has overall responsibility for administering the hospital insurance and voluntary SMI
programs. Two major agencies - CMS and the Public Health Service - are involved in specified
administrative functions.
30.1 - CMS Responsibilities
(Rev. 1, 09-11-02)
The CMS is responsible for policy formulation. The central and regional offices are responsible
for the general management and operation of the program. In brief, CMS's responsibilities
include the following:
• 	Determining an individual's entitlement to benefits in consultation with the Social
Security Administration (SSA);
• 	Determining the nature and duration of services for which a beneficiary's benefits may be
paid;
• 	Establishing, maintaining, and administering agreements with State agencies, providers
of services, and A/B MACs (A) and (HHH);
• 	Establishing operational policy for contractors;
• 	Developing operational instructions and official interpretations of policy for contractors;

• 	Formulating major policies regarding conditions of participation for providers in
consultation with the Public Health Service;
• 	Developing and maintaining statistical research and actuarial programs; and
• 	Managing general finances of the program; and
• 	Managing the Medicare Premium Collection Operation.
The regional offices are responsible for assuring that contractors meet applicable Federal
requirements under the provisions of their contracts. They also:
• 	Provide liaison, direction, and technical assistance to contractors in the day-to-day
management of their operations;
• 	Interpret CMS guidelines, policies, and procedures applicable to contractor activities;
• 	Analyze contractor budgets and spending patterns to assure that funds are economically
and appropriately utilized;
• 	Conduct assessments of contractor operations;
• 	Review contractor actions; and
• 	Provide feedback to each contractor.
30.2 - Public Health Service Responsibilities
(Rev. 1, 09-11-02)
The Public Health Service is responsible for administering the professional health aspects of the
program. In brief, its responsibilities include the following:
• 	Consulting and recommending to CMS matters concerning the development of health and
safety standards and other guidelines needed for determining whether providers of
services meet the conditions of participation under the program;
• 	Consulting and advising State agencies concerning the application of standards for
providers; and
• 	Coordinating programs and activities necessary in studying the utilization of services
under the program.
30.3 - State Agencies
(Rev. 1, 09-11-02)
The States, by agreement with the Secretary, are assigned significant administrative functions to
the extent that each is willing and capable of discharging such responsibilities.
30.3.1 - Certification by State Agencies

(Rev. 1, 09-11-02)
Facilities desiring to participate in either the Medicare or Medicaid programs must meet
participation conditions for certification. State agencies certify to DHHS whether providers
satisfy, and continue to satisfy, their respective conditions of participation in the Medicare and
Medicaid programs. The Secretary, DHHS, certifies facilities requesting participation in the
Medicare and Medicaid programs. States certify those facilities that request participation in the
Medicaid program only.
The State function of making certifications is intended to be a natural adjunct to ongoing State
activities (such as the licensing of health care facilities and the setting of standards).
30.3.2 - Consultation by State Agencies
(Rev. 1, 09-11-02)
A State consults with providers of services that need and request participation condition
assistance. For Medicare participation, the Secretary, DHHS, must approve the consultation
service rendered by the State certifying agency.
30.3.3 - Coordination by State Agencies
(Rev. 1, 09-11-02)
A State coordinates activities with other State programs that involve payment for health care,
quality of care, and location of health facilities. Coordinating these activities is essential in
assuring effective and economical use of existing State facilities and trained personnel and to
prevent duplication of effort.
40 - Role of A/B MACs (A) and (HHH)
(Rev. 28; Issued: 08-12-05; Effective/Implementation: 09-12-05)
The A/B MAC (A) and (HHH) is a public or private agency or organization that has entered into
an agreement with CMS to enroll legitimate providers into the Medicare program and process
Medicare claims under both Part A and Part B services under the supplementary medical
insurance program (e.g., hospitals, SNFs, HHAs, hospices, CORFs, OPTs, occupational therapy,
and speech-language pathology providers, and ESRD facilities).
A/B MACs (A) and (HHH) make payments to providers. The amount of payment to a provider
is restricted to the lower of the billed charge, the reasonable cost of covered services or the fee
schedule amount. Hospices are paid on a per diem amount that is prospectively set. SNFs and
HHAs are paid based on a Prospective Payment System (PPS). (See Provider Reimbursement
Manual, Part 1, §§2800ff.)
Hospitals are paid based on the PPS. Under this system, Medicare payment is made at a
predetermined, specific rate for each hospital discharge. This statement applies to inpatient for
acute care hospitals and to inpatient rehabilitation hospitals. Whereas inpatient acute and rehab
PPS payment is based on the discharge date, Outpatient PPS (OPPS) payments are based on
Ambulatory Patient Classification payment for the date of service.

The amount of payment to other types of providers is restricted to the lesser of (a) the reasonable
cost of covered services and items; or (b) the billed charges with respect to such services; or (c)
the fee schedule amount.
In addition, A/B MACs (A) and (HHH) assist in applying safeguards against unnecessary use of
covered services, furnish consultative services to serve as a center for communicating with
providers, conduct audits of provider records, assist in the beneficiary appeals process, and
provide information and advice to institutions and organizations that wish to qualify as providers
of services.
(See http://www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-
Contractors/Home-Health-Hospice-Regions.html for a list of A/B MACs (A) and (HHH) and
service areas.)
40.1 - Assignment of A/B MAC (A) and (HHH)
(Rev. )
CMS assigns MACs based upon jurisdictions as described in:
http://www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-
Contractors/MACJurisdictions.html
There are no alternate selections permitted, effective with the implementation of MACs.
40.2 - A/B MAC (A) and (HHH) Service to HHAs
(Rev. )
All HHAs bill the assigned A/B MAC (HHH) and are paid by that MAC.
In the case of HHAs and hospices based in another Medicare provider (e.g., a hospital or SNF),
audit, cost report settlement, and other fiscal functions (such as setting interim payment rates) are
performed by the A/B MAC (A) serving the parent provider.
50 - Role of A/B MACs (B) and DME MACs
(Rev. 1, 09-11-02)
The law requires the Secretary, DHHS, to enter into contracts with A/B MACs (B) and DME
MACs to serve in the operation and administration of the non-provider Part B program. A/B
MACs (B) enroll physicians, non-physician health care practitioners and other entities that will
submit claims to the A/B MAC (B), and process Medicare claims and make payments for
services and supplies covered by Part B. Other major functions include, for example, controlling
over-utilization and communicating with beneficiaries and the health community.
DME MACs have been given the responsibility of processing durable medical equipment,
prosthetic, orthotic, and supply (DMEPOS) claims. See Claims Processing Manual, chapter 1,
for description of jurisdiction.
60 - Background and Responsibilities of the Peer Review Organization (PRO)

(Rev. 1, 09-11-02)
Section 1153 of the Social Security Act (the Act) requires the Secretary to enter into contracts
with physician-approved or physician-access organizations defined as PROs.
The PROs are organizations who are responsible for monitoring the quality of care provided to
Medicare patients by hospitals, SNFs, home health agencies, Medicare+Choice plans, and other
types of health care providers.
PRO review is governed by titles XI and XVIII of the Act as amended, and by regulations
contained in:
• 	42 CFR 411 - Limitation on liability;
• 	42 CFR 412 - Outlier review, diagnosis related group (DRG) validation, and hospital
notices of non coverage;
• 	42 CFR 417.605 - Immediate PRO review of Health Maintenance Organization
(HMO)/Competitive Medical Plan (CMP) notices of discharge;
• 	42 CFR 422.622 - Immediate review of Medicare+Choice discharge notices;
• 	42 CFR 475 - Definition of eligible organizations and area designation;
• 	42 CFR 476 - Assumption and conduct of review;
• 	42 CFR 478 - PRO reconsideration and appeals;
• 	42 CFR 480 - Disclosure of information;
• 	42 CFR 482 - Hospital conditions of participation; and
• 	42 CFR 1004 - PRO recommendations of sanctions.
60.1 - Purpose of PRO Review for the Individual Medicare Beneficiaries
(Rev. 1, 09-11-02)
The PROs review items or services provided to Medicare beneficiaries to determine:
• 	Whether services provided or proposed to be provided are reasonable and medically
necessary for the diagnosis and treatment of illness or injury, or to improve functioning
of a malformed body member, or for prevention of an illness, or for the palliation and
management of terminal illness;
• 	Whether those services furnished or proposed to be furnished on an inpatient basis could
be effectively furnished on an outpatient basis, or in an inpatient health care facility of a
different type;

• 	Medical necessity, reasonableness, and appropriateness of inpatient hospital care for
which additional payment is sought under the outlier provisions of PPS;
• 	Whether a hospital has misrepresented admission or discharge information, or has taken
an action that results in the unnecessary admission of an individual entitled to benefits
under Part A, unnecessary multiple admissions of an individual, or other inappropriate
medical or other practices with respect to beneficiaries, or billing for services furnished to
beneficiaries;
• 	The validity of diagnostic and procedural information supplied by the provider to the A/B
MAC (A) for payment purposes;
• 	The completeness and adequacy of hospital care provided; and
• 	Whether the quality of services meets professionally recognized standards of health care.
These activities enable PROs to determine whether Medicare payment may be made for the
services claimed and to identify and initiate corrective action where appropriate. PROs have the
authority to deny Medicare payment for medically inappropriate and unnecessary admissions.
They also investigate individual beneficiary complaints about the quality of care received.
60.2 - PRO Responsibility for the Overall Approach to Health Care
(Rev. 1, 09-11-02)
In addition to individual case review, PROs also help providers improve the overall approach to
health care for Medicare beneficiaries.
This function includes the following activities:
• 	Using clinical and other data bases to examine patterns of care and outcomes, rather than
focusing on isolated cases;
• 	Identifying systemic variations of concern or interest by monitoring patterns of care and
outcomes;
• 	Working with providers to identify provider-specific root causes of systemic variations;
and
• 	Working cooperatively with the health care community to measurably improve the
processes and outcomes of care for Medicare beneficiaries.
60.3 - Other PRO Responsibilities
(Rev. 1, 09-11-02)
A. 	Responsibilities Prior to Review
The PROs are responsible for:

• 	Specifying in their plan and instructions to practitioners and providers the type of
evidence they require to document the care ordered or furnished to provide medically
necessary, appropriate, and quality health care services; and
• 	Applying professionally developed criteria for providing care, diagnosis, and treatment
based upon typical patterns of practice within their geographic area to evaluate the
medical necessity, quality, or appropriateness of services ordered or furnished.
B. 	Ongoing Review Activities
As a part of their ongoing review activities, PROs must:
• 	Notify the appropriate agency of the State or Federal government when they become
aware of situations which appear to be improper, but which do not fall within their review
responsibilities (e.g., poor quality care in a renal dialysis center);
• 	Use their authority or influence to enlist the support of other professional or Government
agencies to ensure that all providers and practitioners for which they have review
responsibilities comply with their obligations (see §1156 of the Act.); and
• 	Perform beneficiary and physician outreach activities.
C. 	Responsibilities as a Result of PRO Review
To act upon information they obtain as a result of their review activities, PROs must:
• 	Provide information on results of their review (e.g., annual report, periodic meetings with
providers/practitioners);
• 	Identify and seek correction of situations that, if continued, would result in violations
under §1156 of the Act;
• 	Submit reports to the Office of the Inspector General on providers and practitioners found
to have substantially violated an obligation in a substantial number of cases, or to have
grossly and flagrantly violated an obligation in one or more instances. This includes
referring certain cases to State licensing boards.
D. 	Additional Activities
PROs perform all other activities specified in the Scope of Work, including any modifications,
CMS regulations and instructions, and relevant statutory provisions.
E. 	Payment Error Prevention Program (PEPP)
In order to reduce inpatient PPS payment errors, PROs must initiate a program of Payment Error
Prevention Projects (PEPPs). CMS defines the payment error rate as the number of dollars found
to be paid in error out of the total of all dollars paid for inpatient PPS services. CMS provides
State-specific error rates to PROs to evaluate performance.

60.4 - Statutory Obligations of Practitioners and Other Persons
(Rev. 1, 09-11-02)
It is the obligation of any health care practitioner or other person who furnishes or orders health
care items or services that may be reimbursed under Medicare, to ensure that to the extent of his
or her authority, those services are:
• 	Furnished economically and only when and to the extent medically necessary;
• 	Of a quality that meets professionally recognized standards of health care; and
• 	Supported by evidence of the medical necessity and quality of the services in the form
and fashion that the reviewing PRO may reasonably require (including copies of the
necessary documentation) to ensure that the practitioner or other person is meeting the
obligations imposed by Section 1156(a) of the Act.
These obligations apply whether payment is made directly to the provider (i.e., assignment) or to
the beneficiary, or even if payment is not made.
60.5 - Responsibilities of Designated Agents Working With PROs;
Organizations Subcontracted for Review
(Rev. 1, 09-11-02)
The PRO has ultimate responsibility for monitoring the compliance of practitioners and
providers with statutory obligations. It is not relieved of any of the responsibility under the
sanction regulations in the event of non-performance by an organization with which it has
subcontracted for review.
An organization with which the PRO subcontracts to carry out review functions is responsible
for:
• 	Ensuring that practitioners and other persons meet their obligations with respect to the
items and services it reviews; and
• 	Reporting to the PRO (primary contractor) those instances where it appears a violation of
an obligation may have occurred or is occurring.
70 - Institutional Planning and Budgeting
(Rev. 1, 09-11-02)
The Social Security Act requires each provider, as a condition of participation under Medicare,
to have a written overall plan and budget reflecting an annual operating budget and a capital
expenditures plan (that covers at least a 3-year period including the year to which the operating
budget is applicable). For this requirement, provider means hospital, critical access hospital,
SNF, comprehensive outpatient rehabilitation facility, home health agency, or hospice program.
The annual operating budget will include all anticipated income and expenses related to items
which would under generally accepted accounting principles be considered income and expense

items. The capital expenditure plan would be expected to include and identify in detail the
anticipated sources of finance for, the objectives of, each anticipated expenditure in excess of
$l00,000 related to acquisition of land, the improvement of land, buildings, and equipment, and
the replacement, modernization, and expansion of the buildings and equipment which would,
under generally accepted accounting principles, be considered capital items.
The overall budget and plan will be prepared under the direction of the provider's governing
body by a committee consisting of representatives of the governing body, administrative staff
and if any, the medical staff. Further, it will be reviewed and updated at least annually. The
purpose of the requirement is to assure that providers carry on budgeting and substance by the
Government or any of its agents.
80 - CMS Managed Modules for Software Programs and Pricing/Coding Files
(Rev. 2, 2-6-04)
The CMS Managed Modules contains scheduled release dates for software programs and
pricing/coding files.
Medicare contractors will be receiving subsequent quarterly updates of the CMS Managed
Modules via a Recurring Update Notification.

Transmittals Issued for this Chapter
Rev # 	Issue Date 	Subject 	Impl Date 	CR#
R12425GI 12/21/2023 	Enforcing Billing Requirements for Intensive
Outpatient Program (IOP) Services with New
Condition Code 92 - Additional Publication
Update
01/02/2024 	13496
R94GI 	10/16/2015 	Internet Only Manual Updates to Pub. 100-01,
100-02 and 100-04 to Correct Errors and
Omissions (2015)
11/16/2015 	9336
R80GI 	10/26/2012 	Manual Updates to Clarify SNF Claims
Processing
04/01/2013 	8044
R42GI 	11/09/2006 	Swing Bed Hospital Updates 	12/11/2006 	5114
R28GI 	08/12/2005 	Conforming Changes for Change Request 3648 to
Pub. 100-01
09/12/2005 	3912
R02GI 	02/06/2004 	Scheduled Release for April Updates to Software
Programs and Pricing/Coding Files
03/08/2004 	3123
R01GI 	09/11/2002 	Initial Publication of Manual 	NA 	NA
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