100-07 State Operations Manual: Chapter 1 - Program Background and Responsibilities

State Operations Manual
Chapter 1 - Program Background and Responsibilities
Table of Contents
(Rev. 123, 10-03-14)
Transmittals for Chapter 1
1000 - Medicare and Medicaid - Background
1000A - Medicare Provisions
1000B - Medicaid Provisions
1000C - Clinical Laboratory Improvement Amendments (CLIA)
1002 - Basis for State Agency (SA) Activities Under Title XVIII and Title XIX of the Act
1004 - Title XVIII Agreements With States
1006 - CMS’ Role
1008 - Adjudication Authority
1008A - Medicare Approval
1008B - Medicaid Approval
1008C - Compliance With Title VI of the Civil Rights Act of 1964
1008D - Waivers of Standards
1008E - Look-Behind Authority
1008F - Authorization of Certification Expenditures
1008G - Appeals
1008H - Compliance With TRICARE of Uniformed Services and/or Civilian
Health and Medical Program of Veterans Administration (CHAMPVA)
Requirements
1008I - Compliance With Veteran’s Administration (VA) Program Requirements
1010 - Certification Related Functions of SA
1012 - Explanation of Certification and Survey
1012A - Meaning of Certification
1014 - Relationship of Survey Date to Date of Initial Medicare Approval
1016 - Approval and Correction of Deficiencies
1018 - Exceptions to SA Certification

1018A - Federal and Indian Health Institutions
1018B - Religious Nonmedical Health Care Institutions (RNHCIs)
1018C - Deemed Providers/Suppliers (Excluding CLIA Laboratories)s
1018H - Deemed CLIA Laboratories
1018I - Exemption of Laboratories Licensed by States
1018J - Eligibility for Medicaid Facilities
1020 - Effect of Accreditation, Licensure, and Other Approval Programs on Medicare
Standards
1022 – CMS and AO Information Exchange Regarding Deemed Providers/Suppliers
(Excluding CLIA)
1022A - AO Reporting Requirements
1022B - RO Review of AO Communications
1022C - RO Reporting Requirements

Background
1000 - Medicare and Medicaid - Background
(Rev. 1, 05-21-04)
The Social Security Act (the Act) mandates the establishment of minimum health and
safety and CLIA standards that must be met by providers and suppliers participating in
the Medicare and Medicaid programs. The Secretary of the Department of Health and
Human Services (DHHS) has designated CMS to administer the standards compliance
aspects of these programs.
1000A - Medicare Provisions
(Rev. 1, 05-21-04)
Medicare is a Federal insurance program providing a wide range of benefits for specific
periods of time through providers and suppliers participating in the program. Providers,
in Medicare terminology, include patient care institutions such as hospitals, critical access
hospitals (CAHs), hospices, nursing homes, and home health agencies (HHAs).
Suppliers are agencies for diagnosis and therapy rather than sustained patient care, such
as laboratories, clinics, and ambulatory surgery centers (ASCs). The Act designates those
providers and suppliers that are subject to Federal health care quality standards. Benefits
are payable for most people over age 65, Social Security beneficiaries under age 65
entitled to disability benefits, and individuals needing renal dialysis or renal
transplantation. The Federal Government makes payment for services through designated
fiscal intermediaries (FIs) and carriers to the providers and suppliers. Section 1802 of the
Act provides that any individual entitled to Medicare may obtain health services from any
institution, agency, or person qualified to participate in Medicare if that institution,
agency, or person undertakes to provide that individual such services.
1000B - Medicaid Provisions
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
Medicaid and the Children’s Health Insurance Program (CHIP) are Federal-State
partnerships which provide health coverage to millions of Americans, including children,
pregnant women, parents, seniors and individuals with disabilities. In order to
participate in Medicaid, Federal law requires States to cover certain population groups
(mandatory eligibility groups) and gives them the flexibility to cover other population
groups (optional eligibility groups). States establish and administer their own Medicaid
and CHIP programs, and determine the type, amount, duration, and scope of services
within broad federal guidelines. States are required to cover certain “mandatory
benefits,” and can choose to provide other “optional benefits”. States receive federal
matching funds to provide these benefits. Section 1902 (a)(23) of the Act provides
Medicaid beneficiaries a free choice of qualified providers willing to furnish covered
services. Such freedom of choice may be restricted when the beneficiary receives

services through managed care arrangements that are authorized under a number of
statutory provisions or through waiver authority (except that freedom of choice of
qualified family planning providers and access to federally qualified health centers has
special protection).
In general, many types of health care facilities that participate in the Medicaid and CHIP
programs also participate in Medicare, but they are not required to do so. There are,
however, some types of facilities that participate only in Medicaid: these include nursing
facilities (NFs) that are not also dually certified as Medicare skilled nursing facilities
(SNFs), Psychiatric Residential Treatment Facilities (PRTFs), and Intermediate Care
Facilities for Individuals with Intellectual Disabilities (ICF/IIDs). Under Medicaid
regulations, NFs are required to meet virtually the same requirements that SNFs
participating in Medicare must meet. PRTFs and ICF/IIDs must comply with special
Medicaid standards. There are also cases where Medicaid regulations require that
certain healthcare providers that only participate in Medicaid must, among other things,
comply with Medicare participation requirements. For example, under 42 CFR 440.10,
Medicaid-only hospitals must meet requirements at Section 42 CFR 489.10 and 42 CFR
Part 482, and Medicaid-only Home Health Agencies (HHAs) are required under 42 CFR
440.70(d) to meet the requirements at 42 CFR 489.28 and 42 CFR Part 484, in addition
to those at 42 CFR 441.16(c).
1000C - Clinical Laboratory Improvement Amendments (CLIA)
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
Congress passed the Clinical Laboratory Improvement Amendments (CLIA) in 1988
establishing quality standards for all laboratories testing to ensure the accuracy, reliability, and
timeliness of patient test results, regardless of where the test was performed. A laboratory is
defined as any facility that performs laboratory testing on specimens derived from humans for
the purpose of providing information for the diagnosis, prevention, treatment of disease, or
the impairment of, or assessment of health. CLIA is user-fee funded; therefore, all costs of
administering the program must be covered by the regulated facilities, including certificate
and survey costs. The final CLIA regulations are based on the complexity of the test method;
thus, the more complicated the test, the more stringent the requirements. Three categories of
tests have been established: waived complexity, moderate complexity, including the
subcategory of provider-performed microscopy, and high complexity. CLIA specifies quality
standards for laboratories performing moderate and/or high complexity tests. Waived
laboratories must enroll in CLIA, pay the applicable fee and follow manufacturers’
instructions. CMS is charged with the implementation of CLIA, including laboratory
registration, fee collection, surveys, surveyor guidelines and training, enforcement, approvals
of proficiency testing providers, accrediting organizations and exempt States.
(For further details on CLIA, refer to Chapter 6—Special Procedures for Laboratories
and Chapter 5—Complaint Procedures which has a CLIA section.)

1002 - Basis for State Agency (SA) Activities Under Title XVIII and
Title XIX of the Act
(Rev. 1, 05-21-04)
Section 1864(a) of the Act directs the Secretary to use the help of State health agencies or
other appropriate agencies when determining whether health care entities meet Federal
standards. This helping function is termed "certification." See 42 CFR 488.1.
Section 1902(a)(9)(A) of the Act requires that a State use this same agency to set and
maintain additional standards for the State Medicaid program. Section 1902(a)(33)(B)
requires that the State use the agency utilized for Medicare or, if such agency is not the
State agency responsible for licensing health institutions, the State use the agency
responsible for such licensing to determine whether institutions meet all applicable
Federal health standards for Medicaid participation, subject to validation by the Secretary.
The complete Federal requirements are published in the "Federal Register," and they are
further explained in this manual. See 42 CFR Part 488.
1004 - Title XVIII Agreements With States
(Rev. 1, 05-21-04)
Agreements between the Secretary and the various States, territories, and the District of
Columbia stipulate that SAs designated by the Governors are responsible for the
performance of the certification functions created by §1864 of the Act, that the designated
agencies will keep necessary and appropriate records to be furnished as required by
delegates of the Secretary, and that they will employ management methods, personnel
procedures, equal opportunity policies, and merit systems procedures in accordance with
agreed upon or established practices. The Secretary agrees to provide funds for the
reasonable and necessary costs to the States to perform the functions authorized by the
agreements. The lifetime of the agreements is unlimited, but an agreement may be
terminated under specific conditions, by action of either of the parties. The Governors
have the prerogative to propose modification of the agreements to allow for variations in
organizational location of responsibilities within the State for Federal programs and for
State health facilities licensure. The SA's responsibility for evaluation and certification
may not be re-delegated. However, by arrangements that meet the express approval of the
Secretary, subsidiary functions such as the performance of surveys and investigations may
be assigned to other State government units or other agencies. When the reorganization
of a State government affects the responsibilities of the designated agency, or in any way
affects the arrangements previously recognized by the §1864 Agreement, modification or
renegotiation of the agreement may be necessary.
The Secretary may, under §1874 of the Act, contract with State or other agencies for
services included in sections of the Act other than §1864 when the Secretary finds that
such contracts would be in the interest of effective program operations.

Chapter 4 of this manual contains information on the administration of these agreements.
1006 - CMS’ Role
(Rev. 1, 05-21-04)
The primary mission of CMS is to administer the Medicare program and certain related
provisions of the Act in a manner which:
• 	Promotes the timely and economic delivery of appropriate quality of care to
eligible beneficiaries;
• 	Promotes beneficiary awareness of the services for which they are eligible; and
• 	Promotes efficiency and quality within the total health care delivery system.
Overall policy-making responsibility is centralized in CMS' Baltimore headquarters (CO),
where all aspects of the Medicare program, CLIA program, and oversight of the State
Medicaid programs are coordinated. CMS CO is responsible for:
• 	Monitoring, surveillance, and overall administrative control of the certification
process, including its financial and surveyor training aspects;
• 	Establishing operational policy for the certification process;
• 	Conveying operational instructions and official interpretations of policy to the
SAs and CMS’ regional offices (ROs); and
• 	Implementation of the CLIA program.
The CMS ROs have been delegated the authority by the Secretary for assuring that health
care providers and suppliers participating in the Medicare, Medicaid, and CLIA programs
meet applicable Federal requirements. This is accomplished through various activities.
The ROs are responsible for:
• 	Making final determinations of provider and supplier eligibility for participation
in the Medicare and CLIA programs; assembling information on all determinants
of eligibility; approving, denying, or terminating provider agreements and
supplier participation; CLIA certification; imposing nursing home sanctions and
arranging for FI tie-in with new providers;
• 	Evaluating the performance of SAs in interpreting and applying health and safety
standards, their assessments of providers and suppliers for compliance with
standards, and their use of appropriate administrative procedures;
• 	Providing liaison, direction, and technical assistance to SAs in the day-to-day

management of the certification process;
• 	Interpreting CMS guidelines, policies, and procedures applicable to certification
activities;
• 	Analyzing and negotiating State Medicare certification budgets; analyzing State
spending patterns to assure that funds are economically and appropriately used;
and allocating SA funds for conducting certification activities;
• 	Alerting CMS CO to potential or actual health care crises resulting from
terminations, natural disasters, and strikes among other occurrences;
• 	Conducting surveillance and assessments of SA operations and assisting SAs in
developing the capability to provide direct assistance to providers and suppliers;
reviewing SA certification actions; and providing feedback to States;
• 	Preparing data based on SA survey findings for input into CMS' Automated
Survey Processing Environment (ASPEN), Online Data Input and Edit (ODIE)
system, which is a subsystem of the Online Survey Certification and Reporting
(OSCAR) system, a database and retrieval program; analyzing OSCAR data, and
providing feedback to SAs on certification information tracked by the system;
and
• 	Conducting Federal surveys of providers and suppliers to ensure that standards
and procedures are being applied in a uniform and consistent manner.
1008 - Adjudication Authority
(Rev. 1, 05-21-04)
1008A - Medicare Approval
(Rev. 1, 05-21-04)
The authority of the Secretary of DHHS to approve, disapprove, or terminate the
Medicare participation of certified providers and suppliers is delegated to CMS’ ROs.
The authority of the Secretary of DHHS to approve, disapprove, or terminate the CLIA
certification of laboratories is delegated to the CMS ROs.
EXCEPTION
If termination is on the grounds of fraud, program abuse, or noncompliance with peer
review requirements, the authority to terminate or to establish eligibility for reinstatement
reposes with the Office of Inspector General (OIG), DHHS.

1008B - Medicaid Approval
(Rev. 1, 05-21-04)
With the exception of State-operated Medicaid-only NFs, Medicaid law requires that the
same SA that makes the certifications for Medicare provider and supplier eligibility also
makes the determinations for Medicaid eligibility. The law also requires that there be a
designated State Medicaid Agency (SMA) responsible for the overall management of the
Medicaid program. See 42 CFR 431.610. For State-operated Medicaid-only NFs, §1919
of the Act specifies that the Secretary will have enforcement authority. There is in each
State an SMA that is ultimately responsible to CMS for the Medicaid program
administration. Each SMA must enter into an interagency agreement with the certifying
SA to establish the adjudicative function of the certifying SA and provide for the
application of Federal certification standards and procedures. The SMA must accept the
SA's certification decisions as final, but it exercises its own determination as to whether
to enter into agreements with the approved providers. See Subsection E of this manual.
1008C - Compliance With Title VI of the Civil Rights Act of 1964
(Rev. 1, 05-21-04)
Providers are direct recipients of Federal funds and are thus subject to title VI of the Civil
Rights Act of 1964. The U.S. Office for Civil Rights (OCR) has the authority to
determine whether Medicare providers comply with this non-discrimination statute, and
the conditions of participation (CoPs) make OCR approval a requirement for Medicare
approval by CMS. Before OCR will issue its approval, it also determines compliance
with §504 of the Rehabilitation Act of 1973, as amended by the Rehabilitation Act
Amendments of 1974, which includes a cross reference to the Uniformed Federal
Accessibility Standards concerning architectural barriers to the handicapped. The OCR
must also determine compliance with the Age Discrimination Act of 1975, and with title
IX of the Education Amendments of 1972. See 45 CRF Part 84; see also Exhibit 2 of this
manual.
Regarding Medicaid-only providers, the States themselves are considered the direct
recipients of the Federal funds and may be considered to have a direct obligation to assure
OCR of their compliance by assuring that funds go to providers who are in compliance.
As with Medicare, determinations of civil rights compliance of providers are under the
authority of OCR and are preconditions to approving the provider's participation in the
Medicaid program.
1008D - Waivers of Standards
(Rev. 93, Issued: 11-29-13, Effective: 11-29-13, Implementation: 11-29-13)
For a few of the standards, the statute or regulations allow for waivers in the presence of
verified temporary shortages of health personnel or in the presence of equivalent
alternative patient safeguards. Medicare waiver authority is re-delegated to the ROs.
Waivers for NFs to provide licensed personnel on a 24-hour basis repose with the States.

Life safety code waivers for NFs and ICFs/IID are the responsibility of the States [See 42
CFR 483.470(j)(2)(A)].
1008E - Look-Behind Authority
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
The Secretary has authority under §§1902(a)(33), 1919(g)(3), and 1910(b)(1) of the Act
to cancel approval of all Medicaid facilities, including NFs, PRTFs, ICF/IIDs, Medicaid-
only hospitals, and HHAs that do not meet Federal health or safety requirements. Such a
determination is in lieu of, or overrides, a determination by the State and is binding on the
SMA. Section 1902(a)(33) gives CMS the authority to question State determinations
regarding Medicaid facilities' compliance with Federal requirements and authorizes CMS
to make independent and binding determinations concerning the extent to which
individual institutions and agencies meet requirements for participation.
Section 1919(g)(3)(A) states that if the State determines that an individual NF meets
Federal requirements, but CMS determines that the facility does not meet such
requirements, CMS’ determination as to the facility's noncompliance is binding and
supersedes that of the State.
Section 1910(b)(1), the look-behind authority, gives CMS similar authority to terminate
the Medicaid approval of ICFs/IID. The CMS’ decision to cancel the approval or
terminate an ICFs/IID can be made as the result of complaint or Federal validation
surveys or CMS’ review of SA survey findings.
CMS also may, under 42 CFR Part 442.30, invalidate a Medicaid provider agreement
after determining that the agreement does not constitute valid evidence of the provider's
compliance with the Federal regulatory requirements. In the latter situation, the effect is
to deny and recoup all Federal matching funds in the Medicaid payments to the facilities
that were made under the improper agreement. The authority to investigate and either
cancel approval or invalidate improper agreements, called "old" look-behind authority, is
re-delegated to an office in each CMS RO.
1008F - Authorization of Certification Expenditures
(Rev. 1, 05-21-04)
Authority to approve Medicare certification budgets and expenditures is re-delegated to
CMS’ regional administrators (RAs). Authority to approve or disapprove Federal
financial participation (FFP) in Medicaid certification expenses is re-delegated to the RAs
subject to ratification by CMS.
1008G - Appeals
(Rev. 1, 05-21-04)
All of the appeal authorities do not repose with CMS. All CMS RO notices of adverse

determinations include instructions on the proper filing and addressing of the appropriate
appeal.
1008H - Compliance With TRICARE of Uniformed Services and/or
Civilian Health and Medical Program of Veterans Administration
(CHAMPVA) Requirements
(Rev. 1, 05-21-04)
For the provision of inpatient hospital services pursuant to admissions occurring on or
after January 1, 1987, providers are required to participate in the TRICARE/CHAMPVA
programs. As mandated by §1866(a)(1)(J) of the Act, providers are subject to
implementing regulations governing TRICARE/CHAMPVA programs benefits under
title 10, §1079 or §1086 of chapter 55 - Medical and Dental Care of the TRICARE; and
title 38, §613 of chapter 17 - Hospital, Nursing Home, Domiciliary, and Medical Care of
the CHAMPVA. Such regulations are found in 32 CFR Part 199 for TRICARE and
38 CFR 17.54 for CHAMPVA. Inpatient hospital care to TRICARE and/or CHAMPVA
beneficiaries is subject to the specific eligibility and medical service limitations set forth
in the regulations. Hospitals are to accept TRICARE and/or CHAMPVA reimbursement
for such services as payment in full. The Secretary has authority under §1866(b)(2) of the
Act to terminate provider agreements for noncompliance. See 42 CFR 489.25.
NOTE: This requirement relates to individuals whose inpatient care is covered under the
TRICARE and CHAMPVA programs, not to Medicare beneficiaries who, though eligible
for these programs, are using Medicare as the primary payer for their services. (See the
Medicare Benefit Policy Manual, Pub 100-02, Chapter 16, §50.)
1008I - Compliance With Veteran’s Administration (VA) Program
Requirements
(Rev. 1, 05-21-04)
For the provision of inpatient hospital services pursuant to admissions occurring on or
after July 1, 1987, providers must agree to be a participating provider of care to VA
patients. As mandated by §1866(a)(1)(L) of the Act, providers are subject to
implementing regulations governing VA program benefits under title 38, §603. The
provision of inpatient hospital care to veterans is subject to the specific limitations set
forth in 38 CFR 17.50(b). Hospitals must accept VA reimbursement for such services as
payment in full. The Secretary has authority under §1866(b)(2) of the Act to terminate
provider agreements for noncompliance. See 42 CFR 489.26.
NOTE: This requirement relates to veterans, whose inpatient care is covered under the
VA program, not to Medicare beneficiaries who are also eligible for VA coverage. (See
the Medicare Benefit Policy Manual, Pub 100-02, Chapter 16, §50.)

1010 - Certification Related Functions of SA
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
The functions that the SAs perform under the agreements in §1864 of the Act are referred
to collectively as the certification process. This includes, but is not limited to:
A. Identifying Potential Participants - The law guarantees to Medicare
beneficiaries that payment will be made for health services furnished in or by
entities that meet stipulated requirements of the Act. Identification includes those
laboratories seeking to participate in the CLIA program.
B. Conducting Investigations and Fact-Finding Surveys - Verifying how well the
health care entities comply with the applicable requirements for nursing facilities
(NFs) and skilled nursing facilities (SNFs), Conditions of Participation (CoPs) for
providers, Conditions for Coverage (CfCs) for most institutional suppliers, or
Conditions for Certification for rural health clinics (RHCs).
C. Certifying and Recertifying - Certifications are periodically sent to the
appropriate Federal or State agencies regarding whether entities, including CLIA
laboratories, are qualified to participate in the programs.
D. Explaining Requirements - Advising providers and suppliers and potential
providers and suppliers in regard to applicable Federal regulations to enable them
to qualify for participation in the programs and to maintain standards of health
care consistent with the CoPs, requirements, CfCs or Conditions for Certification.
Also, as mandated by §§1819(g)(1)(B) and 1919(g)(1)(B) of the Act, States must
conduct periodic educational programs for the staff and residents, and their
representatives, of SNFs and NFs in order to present current regulations,
procedures, and policies.
E. Operating Toll-Free Home Health Hotline - Maintain a toll-free telephone
hotline to collect, maintain, and continually update information on Medicare-
approved HHAs. The hotline is also used to receive complaints and answer
questions about HHAs in the State or locality. See §1864(b) of the Act.
The SA is also authorized to perform numerous other functions under a blanket clause of
its SA agreement, by special agreement, or by statute. These include:
F. Identifying Prospective Payment System (PPS) Excluded Institutions -
Certification information helps in identifying institutions or components of
institutions that meet special requirements qualifying them to be excluded from
the Medicare PPS.
G. Participating on Validation Surveys of Deemed Providers/Suppliers - These

surveys are intended to furnish DHHS and Congress information on the validity of
the survey process of accrediting organizations with CMS-approved Medicare
accrediting programs under which a provider or supplier may be "deemed" to be
in compliance with the applicable CoPs, CfCs, or Conditions for Certification.
Validation surveys include both representative sample surveys as well as
substantial allegations of non-compliance (complaint) surveys.
H. Proficiency Testing - Monitor programs of proficiency testing in laboratories and
contribute laboratory compliance findings to use in the CLIA Laboratory
Certification Program.
I. 	Direct Data Entry - Enter data from surveys of deemed and non-deemed
providers or suppliers, including revisits, and complaint investigations into CMS
data systems, for example ASPEN Central Office (ACO) or ASPEN Complaint
Incident Tracking System (ACTS). Update information about providers,
suppliers, and CLIA laboratories in the appropriate system when indicated.
J. 	Nurse Aide Training - Specify and review Nurse Aide Training and Competency
Evaluation Programs (NATCEPs) and/or Nurse Aide Competency Evaluation
Programs (NACEPs). (See §§1819(e)(1) and 1919(e)(1) of the Act.)
K. Nurse Aide Registry (NAR) - Establish and maintain a registry for all individuals
who have satisfactorily completed NATCEP or a NACEP. (See Chapter 4, §4145
of this manual and §§1819(e)(2) and 1919(e)(2) of the Act.)
L. Resident Assessment Instrument (RAI) - Specify a RAI for use in the LTC
facilities participating in Medicare and/or Medicaid. (See Chapter 4, §4145.4 of
this manual.)
M. Records and Reports - Maintain pertinent survey, certification, statistical, or
other records for a period of at least 4 years and make reports in the form and
content as the Secretary may require.
N. Ensure that applicants to be certified as Medicare providers/suppliers have
submitted an enrollment application to the appropriate Medicare Administrative
Contractor (MAC) and that the MAC has recommended the applicant for
enrollment prior to conducting an initial survey.
(NOTE: Approval and certification of hospital organ transplantation centers
have unique features. Transplant centers are not separate providers, but
participate in Medicare on the basis of the existing provider agreement between
the Medicare program and the hospital that houses the transplant center.
Therefore, transplant centers are not eligible to enroll separately. Rather, a
hospital is required to submit a Form CMS 855A to the MAC to add a transplant
center. In accordance with Section 15.5.2.5.C of the Program Integrity Manual,

Publication 100-08: “For purposes of Medicare enrollment, a hospital
transplant center is treated similarly to a hospital sub-unit. If the hospital wishes
to add a transplant center, it must check the “other” box in section 2A2 of the
CMS-855A, write “transplant center” on the space provided, and follow the
standard instructions for adding a sub-unit. Unless CMS indicates otherwise, the
contractor shall process the application in the same manner it would the addition
of a hospital sub-unit; however, no separate enrollment in PECOS need be
created for the transplant center).
(Hospital transplant centers are subject not only to all applicable CoPs in 42
CFR Part 482, Subparts A, B, C and D, but are also subject to the special
transplant CoPs in Subpart E. Even though there is a separate CCN number
issued for each approved transplant center program, this is a function of the
operational design of the CCN fields in the data system supporting Federal
surveys; transplant center CCNs, unlike other CCNs, do not correspond to
separate provider agreements or supplier approvals.)
A hospital seeking initial approval to offer organ transplantation services must not
only submit a CMS-855A to add a transplant center, but must also notify CMS
Central Office of its request. Central Office is responsible for advising SAs (or CMS
contract transplant surveyors, as applicable) if and when to conduct initial transplant
program surveys. Based on the survey findings, transplant programs may be
approved.
1012 - Explanation of Certification and Survey
(Rev. 1, 05-21-04)
1012A - Meaning of Certification
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
Certification is when the SA officially recommends its findings regarding whether health
care entities meet the Act's provider or supplier definitions, and whether the entities
comply with standards required by Federal regulations. State agencies do not have
Medicare determination-making functions or authorities; those authorities are delegated
to CMS’ RO. State agency certifications are the crucial evidence relied upon by the ROs
in approving healthcare entities to participate in Medicare.
(When the RO approves participation in Medicare, it issues the entity a Medicare
provider agreement or supplier approval, and the provider or supplier is then considered
“certified.” (Note that in the case of a health care entity seeking to participate in
Medicare on the basis of accreditation by a CMS-approved Medicare accreditation
program, the accrediting organization (AO) does not “certify” its findings to the RO.
Instead, the AO provides a copy of its survey report, indicates the date of accreditation,
and recommends “deemed status” for the entity. When the RO approves participation,
the provider or supplier is “deemed” to have met the applicable CoPs or CfCs and the

RO issues the entity a Medicare provider agreement or supplier approval. The entity is
then considered “certified” on the basis of the entity’s deemed status.)
Recertification surveys are performed periodically by the SAs, and reaccreditation
surveys are performed periodically by the AOs.
Regardless of whether the survey is conducted for Medicare or Medicaid purposes, the
SA surveys a healthcare entity in exactly the same way to ascertain and certify whether it
meets the applicable Federal health and safety requirements for participation. Except for
nursing homes and entities that participate in both Medicare and Medicaid and where
Federal Medicaid regulations require a healthcare provider to satisfy the Medicare
health and safety standards, CMS’ determination is binding for both programs. For
dually participating nursing homes, regardless of whose decision prevails (CMS’ or the
State’s), that decision is adopted by CMS and applied to the entire facility.
Surveys are necessary for the SA to be able to certify its findings. The law provides
Federal funding for these surveys. SAs may survey many institutions simultaneously for
Medicare, Medicaid, and State licensure purposes, and sometimes for other inspection
programs, so when they do so, the costs are equitably allocated among the programs that
rely upon the survey findings. Accurate accounting of allocation of survey resources is
imperative.
Part of a survey may concern a provider's efforts to prevent environmental hazards due to
contagion, fire, contamination, or structural design and maintenance problems. However,
a survey is not a mere building inspection. Surveys include, among other things,
observation of the manner in which health care services are delivered, or laboratory
services are performed, in order to ascertain that the entity is operating in accordance
with Federal requirements to protect health and safety.
Many aspects of the survey also include scrutinizing the provider's/supplier’s records to
determine whether professional healthcare staff members have been properly noting and
evaluating the progress of the care being provided or managing provider operations with
continuing vigilance. Surveys of SNFs, NFs, HHAs, ESRDs, CMHCs, the psychiatric
hospital special conditions, the hospital transplant program conditions and ICFs/IID are
conducted in accordance with outcome-oriented protocols, which were designed to
concentrate on patient/resident outcomes of care in determining the provider's compliance
with the Federal requirements. For other types of providers/suppliers, surveys may focus
more on compliance with “process-oriented” regulatory requirements.
A provider’s/supplier’s certification generally is not invalidated merely on grounds that
the it has moved a short distance or slightly modified the scope of its services. However,
if a provider or supplier relocates to the extent that it no longer serves the same
community, the provider or supplier has voluntarily ceased to do business and its
Medicare provider agreement or supplier approval must be terminated as a voluntary
termination, effective as of the date it ceased to provide services to its original

community. (See 42 CFR 489.52(b)(3)) The healthcare entity must seek to enroll as an
initial applicant in the Medicare program at its new location. (Note that, for certain
types of providers or suppliers such as critical access hospitals, there are specific
location requirements and even a short move may result in failure to meet all Federal
requirements and involuntary termination of its provider agreement or supplier
approval.)
See 42 CFR §§488.26, 488.330 and 489.52.
1014 - Relationship of Survey Date to Date of Initial Medicare Approval
(Rev. 1, 05-21-04)
A provider or supplier cannot begin to have its services covered and reimbursed by
Medicare until the date on which it is found, via the certification process, to be in
compliance with all federal requirements, including compliance with all applicable CoPs
or in substantial compliance with the requirements for SNFs and NFs, or in compliance
with the CfCs if it is a supplier (42 CFR 489.13). A laboratory with a CLIA registration
certificate is an exception to this rule. Other exceptions are CMHC’s and FQHC’s. The
effective date for CMHC and FQHC participation is the date the RO signs the CMHC or
FQHC agreement and determines that all medical requirements, including environmental
requirements, are met. (See SOM, Chapter 2, §2004.) In most cases, it usually is
impossible to schedule and complete a survey, i.e., ascertain actual compliance with all
applicable requirements, on the date a new institution opens its doors. The institution
generally must operate for a short initial period without Medicare payment for its
services.
1016 - Approval and Correction of Deficiencies
(Rev. 1, 05-21-04)
The Medicare CoPs, Requirements for SNFs and NFs, and CfCs are sets of requirements
for acceptable quality in the operation of health care entities. There is a set of Conditions,
or Requirements for SNFs and NFs, for each type of provider or supplier subject to SA
certification. In addition to each Condition, or Requirement for SNFs and NFs, there is a
group of related quality standards, with the Condition or Requirement expressed in a
summary lead sentence or paragraph characterizing the quality or result of operations to
which all the subsidiary standards are directed. The SA ascertains, by a survey conducted
by qualified health professionals, whether and how each standard is met. While an
institution may fail to comply with one or more of the subsidiary standards during any
given survey, it cannot participate in Medicare unless it meets each and every Condition
or attains substantial compliance with requirements for SNFs and NFs.
NOTE: CMHCs have no conditions of participation or coverage to meet. CMHCs do
have to meet certain core public health service requirements prior to Medicare approval.
FQHCs do have conditions of coverage to meet, as found at 42 CFR 491. However,
FQHCs attest to meeting the CfCs, rather than undergo a survey.

Many Condition or Requirement summaries are identical to statements of the statute. The
essence of what the SA certifies to CMS is a finding of whether an institution meets each
of the CoPs or substantially meets each requirement for SNFs and NFs applicable to it,
and whether each supplier of services meets each CfC applicable to it.
The SA prepares its certification for the RO, sends the institution a "Statement of
Deficiencies," Form CMS-2567. The institution is given 10 calendar days in which to
respond with a Plan of Correction (PoC) for each cited deficiency, and enters this
response on the form containing the statement of deficiencies. This form, with written
deficiencies and acceptable PoC, is available for public inspection at the SA office and
the nearest RO, and can be requested through the Freedom of Information Act (FOIA).
If the institution has not come into compliance with all Conditions or Requirements for
SNFs and NFs within the time period accepted as reasonable, the SA certifies
noncompliance notwithstanding a PoC.
The SA's finding constitutes a final determination (except in the case of a State-operated
Medicaid-only NF or a NF subject to a validation survey or a review by CMS when
CMS’ decision is binding), when a Medicaid-only facility is noncompliant. The SMA
must undertake either an action to terminate the non-complying facility's Medicaid
participation or, if a NF, apply one or more of the remedies specified in §1919(h) of the
Act, or it may do both.
1018 - Exceptions to SA Certification
(Rev. 1, 05-21-04)
1018A - Federal and Indian Health Institutions
(Rev. 1, 05-21-04)
Because of questions of intergovernmental jurisdiction, the survey and certification of a
hospital or SNF that is either owned or operated by the Indian Health Service, and
therefore considered to be a Federal provider of services, is handled by the RO. The SA
is responsible, however, for determining whether the facility meets Medicaid certification
requirements. The SA may accept Medicare certification as sufficient evidence of
meeting Medicaid requirements, or the SA may conduct a survey. Since Indian health
tribal facilities may or may not be under Federal jurisdiction the RO determines whether
the RO or the SA has jurisdiction.
1018B - Religious Nonmedical Health Care Institutions (RNHCIs)
(Rev. 1, 05-21-04)
Section 1861(e) of the Act includes in the definition of "hospital" a religious nonmedical
health care institution that is operated or listed and certified by the First Church of Christ,
Scientist, in Boston, Massachusetts, with respect to certain items and hospital services

furnished to inpatients. Section 1861(y) includes sanatoria with respect to items and
services furnished to inpatients in a long-term care setting. All approvals are handled by
the Boston RO. No SA certifications are necessary. The State may also include these
services under the State plan for Medicaid.
1018C - Deemed Providers/Suppliers (Excluding CLIA Laboratories)
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
In order to enter into a provider or supplier agreement with the Medicare program, or in
many cases a provider agreement with the Medicaid program, a health care entity must
satisfy all applicable Federal requirements. For Medicare providers and suppliers
subject to certification, Federal requirements include demonstrating compliance with the
applicable health and safety standards, i.e., SNF requirements, provider CoPs or
supplier CfCs. Generally the prospective provider or supplier demonstrates compliance
with health and safety standards when it is certified by a SA as being in compliance and
recommended to the RO for approval. Thereafter, the provider or supplier is subject to
periodic surveys by the SA to determine whether it continues to meet the applicable long
term care requirements, CoPs, CfCs or Conditions for Certification.
However, there is an alternative to SA surveys, for demonstrating compliance with the
applicable CoPs/CfCs/Conditions for Certification. Accreditation based on a survey by a
CMS-approved Medicare accreditation program may be used by CMS to “deem” a
provider or supplier as complying with the applicable regulatory standards. For certain
types of providers/suppliers, for example hospitals or psychiatric hospitals, Medicaid will
also accept accreditation under a CMS-approved Medicare accreditation program as
evidence of compliance for Medicaid purposes.
Section 1865(a) of the Act provides that CMS may recognize and approve national
accrediting organization (AO) Medicare accreditation programs which demonstrate that
their health and safety standards and survey and oversight processes meet or exceed
those used by CMS to determine a health care provider’s or supplier’s compliance with
applicable Medicare CoPs, CfCs, Conditions for Certification or requirements.
The regulations which govern Medicare survey, certification, and enforcement
procedures are generally found in 42 CFR Part 488, Section 488.1 defines an accredited
provider or supplier as “a provider or supplier that has voluntarily applied for and has
been accredited by a national accreditation program meeting the requirements of, and
approved by, CMS in accordance with §488.5 or §488.6.” Accreditation under a CMS-
approved Medicare accreditation program is voluntary and is not required for Medicare
participation.
Consistent with Section 1865 of the Act, 42 CFR §§488.5 and 488.6 permit deemed status
certification for ambulatory surgical centers; comprehensive outpatient rehabilitation
facilities; critical access hospitals; home health agencies; hospices; hospitals; clinics,
rehabilitation agencies or public health agencies providing outpatient physical therapy,

occupational therapy or speech pathology services; psychiatric hospitals; religious
nonmedical health care institutions; rural health clinics; screening mammography
services; skilled nursing facilities; and transplant centers, except for kidney transplant
centers. However, at this time only certain AOs have requested CMS approval of
Medicare accreditation programs, for only some of these provider/supplier types. A
current list of CMS-approved Medicare accreditation programs may be found at
https://www.cms.gov/Medicare/Provider-Enrollment-and-
Certification/SurveyCertificationGenInfo/Accreditation.html.
In the case of a deemed provider or supplier, the SA does not conduct a survey to
recertify compliance with the applicable Medicare CoPs, CfCs, or requirements. Rather,
such providers or suppliers remain under the jurisdiction of the AO for oversight of their
ongoing compliance. The SA may conduct a validation survey (e.g., representative
sample or substantial allegation survey) of a deemed provider or supplier when directed
to do so by the RO. If the RO determines, based on the findings of such SA validation
survey, that the provider or supplier is out of compliance with one or more CoPs, CfCs,
Conditions for Certification or requirements, the RO removes the provider’s/supplier’s
deemed status and places it under SA jurisdiction for review until it either comes back
into compliance or is terminated.
Note that some AOs offer multiple accreditation programs for a given type of provider or
supplier. However, an AO may offer no more than one Medicare accreditation program
per provider/supplier type and that program must be approved in advance by CMS. In
addition, some AOs may offer only one program for a provider/supplier type, but they
offer this program to their customers with and without the option of the AO
recommending Medicare deemed status to CMS. Thus, it is possible for a provider or
supplier to be “accredited” without being “deemed” to participate in the
Medicare/Medicaid programs. For certification purposes, CMS considers as evidence of
a provider’s or supplier’s compliance with the applicable CoPs, CfCs, or requirements
only accreditation under a CMS-approved Medicare accreditation program, where the
AO has recommended deemed status to CMS.
SAs must enter information on the deemed tab within the certification kit in ASPEN only
for those providers and suppliers that have been deemed on the basis of accreditation
under a CMS-approved Medicare accreditation program. CMS has established a
process for an AO to provide notice to the applicable RO when it has accredited a
provider or supplier under its CMS-approved Medicare accreditation program and is
recommending the provider or supplier for initial or continued deemed status. The RO
forwards these notices to the applicable SA for inclusion in the initial certification packet
that the SA subsequently forwards to the RO for approval or denial of the application for
a provider agreement or supplier approval.
1018H - Deemed CLIA Laboratories
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)

Because each accrediting organization that has received approval under CLIA is
approved for specific laboratory specialties or subspecialties, consult the RO for specific
guidance. Refer to Chapter 6 of this manual for additional information on CLIA
accrediting organizations. For a current list of accrediting organizations approved for
distinct CLIA specialties or subspecialties please go to www.cms.gov/clia/.
1018I - Exemption of Laboratories Licensed by States
(Rev. 1, 05-21-04)
CLIA will exempt laboratories in States that have been determined to have laws and
regulations in effect that are equal to, or more stringent than, CLIA requirements.
Exempt laboratories must hold a valid State license within the exempt State. Oregon and
Washington States have been granted complete exemption. New York State has been
granted a partial exemption. Refer to Chapter 6 for additional information on CLIA
exempt laboratories organizations.
1018J - Eligibility for Medicaid Facilities
(Rev. 1, 05-21-04)
A facility’s eligibility for Medicaid participation can be established through Medicare
deemed status for providers and suppliers that are not required under Medicaid
regulations to comply with any requirements other than Medicare participation
requirements for that provider or supplier type. See 42 CFR 488.6.
1020 - Effect of Accreditation, Licensure, and Other Approval Programs
on Medicare Standards
(Rev. 1, 05-21-04)
Certification builds upon State and national accreditation programs. Certification
requirements, State licensure codes for health facilities, programs for professional
licensure and accreditation, and medical assistance standards are all related; therefore,
certification activities must be coordinated with other programs. It is important that there
be an interchange of information about program standards and institutions that participate
in these programs between the certifying agency, accrediting organizations, State
licensure programs, and State medical assistance programs.
1022 - CMS and AO Information Exchange Regarding Deemed
Providers/Suppliers (Excluding CLIA)
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
Timely, accurate and complete information regarding deemed providers and suppliers
must be shared between CMS and AOs with CMS-approved Medicare accreditation
programs to ensure effective, ongoing oversight of AOs, as well as to ensure deemed
provider/supplier compliance with applicable Medicare requirements. As part of CMS’

oversight of deemed providers and suppliers, AOs with CMS-approved Medicare
accreditation programs are required to submit data and information concerning deemed
facilities to CMS. Likewise, CMS is obligated to share pertinent information concerning
facilities, as outlined in SOM sections 3256 and 5100.3.
1022A – AO Reporting Requirements
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
Under 42 CFR 488.4, AOs with CMS-approved Medicare accreditation programs are
required to submit data concerning deemed Medicare providers/suppliers, including
notices concerning current deemed status providers/suppliers as well as facilities
recommended or not recommended for deemed status.
To facilitate the timely receipt of such information from AOs an electronic process has
been established for the AOs to submit reports and notices containing accreditation
information regarding these facilities to CMS Central Office and the applicable RO.
Eleven electronic mail boxes have been established; one for CMS CO and one for each of
the ten CMS ROs.
The Reports and Notices that AOs are required to forward through the electronic
mailboxes are noted below:
Types of Documents 	Central Office
Email Box
Regional
Office Email
Box
Reports
Monthly Adverse Action Report 	X
Notices
Accreditation Status of Facilities Recommended for
Deemed Status (includes both initial and re-
accreditation surveys)
• 	Full Accreditation
• 	Conditional Accreditation
• 	Provisional Accreditation
• 	Denial of Accreditation
X 	X
Termination/Withdrawals includes
• 	Involuntary (AO-initiated) – as a result of
CoP/CfC deficiencies, AO standard
deficiencies, AO non-payment, closure or
other AO policies.
• 	Voluntary (Facility-Initiated) – change to
State Agency or other AO merger,
acquisition, or closure.
Include reason for involuntary and voluntary
terminations/withdrawals and last deemed
X 	X

Types of Documents 	Central Office
Email Box
Regional
Office Email
Box
survey date
Other Issues
Email boxes may be used to transmit other
documents that CMS requests in specific cases or
that the AO wants to bring to CMS’ attention, e.g.,
resolution of deficiencies notices
X 	X
Required Content of AO Notification Letters to CMS
Purpose:
• 	To recommend or not recommend initial deemed status for the purpose of
Medicare certification;
• 	To recommend continued deemed status for the purpose of Medicare certification;
• 	To provide notice of change in accreditation status, including but not limited to
terminations, withdrawals, and changes resulting from sales or acquisitions;
• 	To provide the status of oversight efforts to correct noncompliance with Medicare
CoPs.
Notice must be sent to CMS, both to CO and the applicable RO, via the electronic mail
box at the same time that the provider/supplier is notified of the AO decision/action.
Scanned copies with signature of the AO’s authorized representative are preferred.
Required Information - All Final Accreditation Decision Letters:
• 	Name of AO;
• 	Date of notice;
• 	Program type (i.e., the type of provider or supplier being accredited, such as
ASC, CAH, HHA, Hospice, Hospital, OPT, Psychiatric Hospital or RHC);
• 	Provider/Supplier name, address, and, if already enrolled in Medicare, CCN;
• 	For providers/suppliers with multiple locations covered under one Medicare
agreement – names and addresses for each location;
• 	AO organization/facility number, if utilized;
• 	Identification of applicable CMS RO (e.g.; RO I – Boston, RO IV – Atlanta, etc.);
• 	Type of survey – initial, re-accreditation, complaint, revisit, extension or other;
• 	Beginning and ending date of survey;
• 	Accreditation decision: conditional, full accreditation, denial, etc.;
• 	Effective date of accreditation, accreditation expiration date;
• 	Whether or not the AO is recommending continuing deemed status;
• 	For other than initial surveys, list only Medicare Condition-level deficiencies and
include the corresponding CFR citation(s) that have been corrected based on
completion of a focused follow up survey;

• 	When applicable, whether an existing accreditation status is being extended to a
newly acquired component of the provider, with time period for which
accreditation is being extended;
• 	Timeframe for plan of correction; and
• 	Method of follow up – (multiple may apply) document review, full or focused
follow up survey
NOTE – An accreditation decision letter may apply only to one certified provider or
supplier. In other words, the AO must make a separate accreditation decision for each
separately certified provider or supplier and may not issue a system-level accreditation
that applies to multiple providers or suppliers. Likewise, an accreditation decision letter
must apply to the whole of a provider or supplier. For example, an AO may not issue an
accreditation decision that applies to only one campus of a multi-campus hospital.
Additional Required Information - Initial Medicare Enrollment Applicants:
• 	The effective date of accreditation;
• 	Whether or not the AO is recommending deemed status for the facility; and
• 	The full, complete survey report containing all survey findings, including the
deficiency(ies) as well as the evidence that supports the deficiency(ies), must be
sent with the decision letter as an attachment.
The RO reviews the AO survey findings as part of the Medicare certification review
process. The RO is not obligated to accept the AO’s recommendation of deemed
status if the RO determines that not all applicable Federal requirements have been
met.
If the RO determines that all Federal requirements have been met by the prospective
provider/supplier, it issues a provider agreement or supplier approval and a CCN to
the applicant, including the effective date of such agreement. The effective date of
Medicare participation is determined by the RO based on the date when all Federal
requirements have been met, which may be later than the effective date of the AO’s
accreditation.
Additional Required Information –Deemed Provider/Supplier Accreditation Renewals:
• 	Whether or not the AO is recommending continued deemed status; and
• 	Effective date of accreditation renewal. There must not be any break between this
date and the expiration date of the previous accreditation.
Additional Required Information – Deemed Provider/Supplier Withdrawals or
Terminations:
• 	Reason(s) for withdrawal or termination;
• 	Withdrawals – reasons could include: acquisition, closure, merger, or withdrawal

to SA authority.
• 	Terminations – reasons could include: nonpayment of AO fees, failure to meet the
accreditation program standards, or failure to satisfy other AO policies and
procedures.
• 	Date of most recent triennial accreditation survey; and
• 	Effective date of termination or withdrawal.
1022B - RO Requirements for Review of AO Reporting
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
Each RO is responsible for review and appropriate follow-up action resulting from AO
notices. To facilitate AO communication regarding Medicare deemed providers and
suppliers, each RO has been assigned a CMS electronic mail (email) box dedicated to
receiving notices from and sending communications to the AOs. Designated RO email
box owners are responsible for maintaining and updating the access rights for the RO
email box.
Each RO develops policies and procedures for the management of its email box to ensure
ongoing, timely review of AO notices, and timely follow-up actions, as necessary.
1022C - RO Reporting Requirements to AOs
(Rev. 123, Issued: 10-03-14, Effective: 10-03-14, Implementation: 10-03-14)
The RO must provide the AOs with copies of every Form CMS 2567 issued to a deemed
facility accredited by the AO(s) in a timely manner, i.e., as soon as possible after
issuance to the provider/supplier. ROs have the option of sending this material to AOs
electronically rather than mailing hard copies. Copies to be provided include all Form
CMS 2567s resulting from a SA validation survey, including both representative sample
and substantial allegation (complaint) surveys, as well as all Form CMS 2567s issued
after the provider’s or supplier’s deemed status has been removed and the facility has
been placed under SA jurisdiction until it can achieve substantial compliance. Copies of
any correspondence sent to the provider or supplier related to a Form CMS 2567 must
also be provided to the applicable AO(s), as well as correspondence concerning the
status of the provider’s supplier’s Medicare provider agreement or supplier approval
(e.g., issuance of an agreement/approval with CCN, notice of potential termination of the
agreement/approval, notice of termination of the agreement/approval, etc.).
Note that a provider or supplier may be accredited under a CMS-approved Medicare-
accreditation program by more than one AO; in such cases all AOs must receive copies.
See also Sections 3256 and 5100.2.

Transmittals Issued for this Chapter
Rev # 	Issue Date 	Subject 	Impl Date CR#
R123SOM 10/03/2014 	Revisions to State Operations Manual (SOM)
Chapters 1, 2 and 3
10/03/2014 N/A
R93SOM 	11/29/2013 	State Operations Manual (SOM) Chapter 1
revisions for Intermediate Care Facilities for
Individuals with Intellectual Disabilities
(ICF/IID)
11/29/2013 N/A
R01SOM 	05/21/2004 	Initial Issuance of Pub 100-07 	N/A 	N/A