divisions (a) and (b) of this subparagraph (4) (i);

(ii) Special and restricted diet menus are kept on file for at least 30 days, notations are made of any substitutions or variations in the meal actually served, and the patients to whom the diets were actually served are identified in the dietary records;

(iii) Procedures are established and regularly followed which assure that the serving of meals to patients for whom special or restricted diets have been medically prescribed is supervised and their acceptance by the patient is observed and recorded in the patient's medical record.

(5) Satisfactory policies and procedures relating to maintenance of medical records. Satisfactory policies and procedures relating to the maintenance of medical records means the standards set forth in 20 CFR 405.1132 pertaining to extended care facilities under title XVIII.

(6) Satisfactory policies and procedures relating to dispensing and administering of drugs and biologicals. Satisfactory policies and procedures relating to dispensing and administering of drugs and biologicals means the standards set forth in 20 CFR 405.1127 pertaining to extended care facilities under title XVIII.

(7) Satisfactory policies and procedures relating to physician coverage. Satisfactory policies and procedures relating to physician coverage and emergency medical attention means the standards set forth in 20 CFR 405.1123 pertaining to extended care facilities under title XVIII.

(8) Arrangements with one or more general hospitals. Arrangements with one or more general hospitals means:

(1) Written agreements providing a basis for effective working arrangements under which inpatient hospital care is available promptly to the skilled nursing home's patients when needed, which include as a minimum:

(a) Procedures for transfer of acutely ill patients to the hospital ensuring timely admission,

(b) Provisions for continuity in the care of the patient and for the transfer of pertinent medical and other information between the skilled nursing home and the hospital.

(ii) Written agreements containing provisions for the prompt availability of diagnostic and other medical services.

(9) Conditions relating to environment and sanitation. Conditions relating to environment and sanitation applicable to extended care facilities under title XVIII means standards set forth in 20 CFR 405.1125 (i), and 405.1134, 405.1135, and 405.1136.

(c) Conditions under which the single State agencies may waive certain requirements. (1) The requirements for arrangements with one or more general hospitals may be waived wholly or in part if by reason of remote location or other good and sufficient reason a skilled nursing home is unable to effect such an arrangement with a hospital. However, this requirement may not be waived in whole if it can be satisfied in part. A finding of remote location or other good and sufficient reason may be made when the single State agency finds that:

(i) There is no general hospital serving the area in which the skilled nursing home is located; or

(ii) There are one or more general hospitals serving the area and the skilled nursing home has attempted in good faith and has exhausted all reasonable possibilities to enter into an agreement with such hospital or hospitals, and

(a) The nursing home has provided copies of letters, records of conferences, or other evidence to support its claim that it has attempted in good faith to enter into an agreement, and

(b) Hospitals in the area have, in fact, refused to enter into an agreement with the skilled nursing home in question.

(2) The single State agency may waive the application to a skilled nursing home of one or more specific provisions of 20 CFR 405.1125 (i), 405.1134, 405.1135, or 405.1136 or one or more specific provisions of the fire and safety code applied pursuant to paragraph (a)(1) (vii) of this section if it finds on the basis of documented evidence derived from a survey that:

(i) Such provision(s), if rigidly applied, would result in unreasonable hardship upon the skilled nursing home;

(ii) The waiver of the specific provision(s) does not adversely affect the health and safety of the patients in the facility and a written justification of such determination is maintained on file;

(iii) Where structural changes in the facility are necessary to meet a provision, the change is of such magnitude as to be infeasible, or economically impracticable; delay in making such

changes would not adversely affect the health and safety of patients; and an explanation of this finding is maintained on file;

and upon assurance that:

(iv) The conditions of waiver in subdivisions (i), (ii), and (iii) of this subparagraph are redetermined at the time of each survey and written evidence of such redetermination is maintained on file;

(v) The waiver of requirements is rescinded at any time any of the conditions of subdivisions (i), (ii), and (iii) of this subparagraph are found no longer to apply.

(d) Federal financial participation. (1) Federal financial participation is available at 75 percentum in expenditures of the single State agency for compensation (or training) of its skilled professional medical personnel and staff directly supporting such personnel, which are necessary to carry out these regulations.

(2) Federal financial participation at applicable rates also is available for the single State agency to enter into a written contract (under the supervision of the Medical Assistance Unit) with the State licensing authority, the agency of the State designated pursuant to section 1864 of the Social Security Act or other appropriate State agencies providing for at least:

(i) On-site surveys and resurveys of skilled nursing homes applying to participate or participating as providers of service under the medical assistance plan to be performed at appropriate intervals by properly qualified personnel,

(ii) Timely furnishing to the single State agency of all information and records herein required, and

(iii) Methods and procedures acceptable to the Secretary for determining an agency's expenditures in which Federal financial participation is available.

Such Federal financial participation is available only for those expenditures of the State licensing authority or other appropriate State agencies which are not attributable to the overall cost of meeting responsibilities under State law and regulations for establishing and maintaining standards but which are necessary and proper for carrying out these regulations. (Sec. 1092 (a) (28), 81 Stat. 906; 42 U.S.C. 1396a (a) (28)) [35 F.R. 6792, Apr. 29, 1970]

§ 249.40

Cost sharing and similar charges; State plan requirements.

A State plan for medical assistance under title XIX of the Social Security Act must:

(a) Provide that no deduction, cost sharing, enrollment fee, premium, or similar charge, with respect to any medical or remedial care and services furnished under the plan, will be imposed on any categorically needy individual.

(b) If any deduction, cost sharing, enrollment fee, premium, or similar charge, with respect to any medical or remedial care and services furnished under the plan, is imposed on any medically needy individual, specify the amount and the method of determining it.

(1) The cost sharing must be reasonably related to the recipient's income or his income and resources.

(2) The cost sharing must be administratively feasible.

(c) Provide that any medical resource of an individual in the form of insurance or other entitlement will be used to reduce the amount, duration and scope of care provided under the plan. However, assistance may be provided subject to the provision in section 1902 (a)(25) of the Act regarding third party liability. Also, care covered by excess income or resources of the individual in accordance with section 1902 (a) (17) of the Act may not reduce the assistance available under the plan.

[34 F.R. 1323, Jan. 28, 1969] § 249.41

Coordination of title XIX with part B of title XVIII, Social Security Act.

(a) Requests for “buy-in” agreements. States have through December 31, 1969, to request a "buy-in" agreement for the following two groups:

(1) Individuals receiving money payments under the plan of the State approved under titles I, X, XIV, and XVI, and part A of title IV of the Social Security Act (under the prior law, States had only through December 31, 1967, to request an agreement for such individuals) and

(2) All individuals who are eligible to receive medical assistance under the State's plan under title XIX of the Act.

(b) Comparability. Payment made by a State of premiums under title XVIII, part B of the Act, whether through a "buy-in" agreement or otherwise, or provision for meeting part or all of the cost of the deductibles, cost sharing, or simi

lar charges under part B, does not impose an obligation on the State to make comparable services available to other title XIX recipients (below age 65). This provision permits the States to enter into agreements to pay the premium charges under part B or to pay the deductibles and other charges under that program without obligating themselves to provide the range of part B benefits to other individuals who are under title XIX of the Act. Any State implementing this provision must amend its plan accordingly.

(c) Federal financial participation. (1) There will be no Federal financial participation in the monthly insurance premium under title XVIII, part B of the Act which the title XIX State pays on behalf of nonmoney payment individuals eligible to receive medical assistance under title XIX of the Act.

(2) There will also be no Federal financial participation for State expenditures for medical assistance after December 31, 1969, under title XIX of the Act, which would not have been so expended if the individuals involved had been enrolled in the insurance program established by part B of title XVIII of the Act. This applies to all persons who could have been covered under such program, whether on an individual basis or through the "buy-in."

[34 F.R. 1324, Jan. 28, 1969]

AUTHORITY: The provisions of this Part 250 issued under sec. 1102, 49 Stat. 647; 42 U.S.C. 1302.

NOTE: For interim policies published under this part, see 34 F.R. 19775, Dec. 17, 1969. § 250.20 Utilization review of care and services.

(a) State plan requirements. A State plan for medical assistance under title XIX of the Social Security Act must:

(1) Provide that a process(es) of utilization review is established for each item of care or service listed in section 1905 (a) of the Act that is included in the State's medical assistance program.

(i) The agency (ies) which monitors utilization review activities on inpatient hospital and extended care services under title XVIII of the Act may be designated by the single State agency to monitor those activities similarly for inpatient hospital and skilled nursing home services under title XIX. Such delegation may incorporate the monitoring of utilization review activities in provider institutions not participating under the XVIII. If such an arrangement is secured, the single State agency and the agency (ies) to which delegation is made should work closely together (in addition to any formal written agreement) in order to accommodate their mutual utilization review requirements. Such delegation is encouraged to avoid duplication of effort and expense and to achieve uniformity of utilization review requirements and methods. Such common effort is a means of striving for efficiency and economy in administration.

(ii) For all items of care or service for which utilization review is not delegated under subdivision (1) of this subparagraph, the medical assistance unit of the single State agency will perform untilization reviews itself and/or monitor those utilization reviews which may be performed by agents for the State government, or by agencies of local governments, or by individual provider organizations or institutions as in subparagraph (2) (i). Review of professional services through existing peer review mechanism is encouraged to the fullest extent possible.

(iii) Utilization review requirements for providers of inpatient hospital and extended care services under title XVIII will be considered to meet the utilization review requirements for providers of in

patient hospital and skilled nursing home services under title XIX, except as in subparagraph (2) (i) (b).

(2) Provide that the medical assistance unit of the single State agency is responsible for all utilization review plans and activities under the medical assistance program. If utilization review is not delegated as in subparagraph (1) (i) of this section, the following will be met in each utilization review plan:

(i) The activities of utilization review will be performed by a utilization review committee with representation appropriate to the medical care or service to be reviewed. Determination of committee composition and selection of committee membership will be made at the point where utilization review will be performed.

(a) A professional practitioner, e.g., physician, dentist, optometrist, etc., may not review cases in which he is the attending practitioner or in which he has (or has had) significant professional responsibility.

(b) The committee may include no member who has an ownership interest in the facility under review, except in the case of committees which conduct review on both title XVIII and XIX patients.

(ii) Utilization review will be based on a statistically significant sample or other reasonable basis of pertinent data as determined appropriate to the medical care or service under scrutiny; for example, admissions, duration of stays, number of visits, number and kind of prescriptions, relation of tests or medications to diagnosis, etc. While some services may lend themselves to review both concurrently with and subsequent to the rendering of care (e.g. institutional care), other services may be best reviewed only subsequently. Since, for many provider services, the measurements will apply to patterns of care rather than to individual episodes of care and because of the difficulties inherent in evaluating medical necessity, a postaudit procedure will be employed. Utilization review will be made within the context of medical necessity (including overutilization and underutilization and appropriateness of care rendered) and availability of facilities and services.

(ii) The utilization review process will not be limited to isolated cases, but

will be considered in the context of overall utilization within an institution, or in a service area, or in a provider's total title XIX workload, etc., as appropriate to the medical care or service under scrutiny.

(iv) A utilization review plan will be developed by the agency, organization, or institution which determines the committee composition as in subparagraph (2) (i). Each plan developed by an agent, organization, or institution other than the single State agency will be submitted to the medical assistance unit of the single State agency for approval. In all cases a utilization review plan will describe:

(a) Objectives.

(b) Authority, responsibility, accountability.

(c) Organization.

(1) Composition of committee and subgroups, if any.

(2) Frequency of meetings. (3) Format and/or description of records and minutes.

(d) Definitions.
(e) Data.

(1) Methods of case selection.

(2) Relationship of utilization review to title XIX claims administration and medical assistance unit of the single State agency.

(f) Arrangements for committee reports, recommendations, and followup.

(g) Responsibilities of related administrative staff in support of utilization review.

(v) A utilization review committee will maintain appropriate records and prepare regular reports of its activities and findings. The State Medical Advisory Committee will advise the responsible medical assistance unit of any recommendations or requirements on utilization review, consolidated reporting, etc. The medical assistance unit of the single State agency will maintain surveillance of the committees' activities and provide appropriate consultation to committees in order to insure adequate functioning.

(b) Federal financial participation. Federal financial participation is available for the costs of utilization review, in accordance with the conditions, and at the rates, applicable under title XIX. [34 F.R. 3745, Mar. 4, 1969]

50-100-71- -7

§ 250.21 State plan requirements; agreements with providers.

A State plan for medical assistance under Title XIX of the Social Security Act must provide for agreements with every person or institution providing services under the State plan under which such person or institution agrees:

(a) To keep such records as are necessary fully to disclose the extent of the services provided to individuals receiving assistance under the State plan; and

(b) To furnish the State agency with such information, regarding any payments claimed by such person or institution for providing services under the State plan, as the State agency may from time to time request.

[34 F.R. 14649, Sept. 20, 1969]

§ 250.30 Reasonable charges.

(a) State plan requirements. A State plan for medical assistance under title XIX of the Social Security Act must:

(1) Include a description of the policy and the methods to be used in establishing payment rates for each type of care or service listed in section 1905 (a) of the Act that is included in the State's medical assistance program.

(2) Provide that payments for care or service are not in excess of the upper limits described in paragraph (b) of this section.

(3) Provide that the single State agency will take whatever measures are necessary to assure appropriate audit of records wherever reimbursement is based on costs of providing care or service, or fee plus costs of materials.

(b) Upper limits. The upper limits for payments for care and services under a medical assistance plan are as follows: The State agency may pay less than the upper limit except for services described in subparagraph (1) of this paragraph.

(1) Inpatient hospital services. (i) For each hospital also participating in the Health Insurance for the Aged program under title XVIII of the Social Security Act, apply the same standards, cost reporting period, cost reimbursement principles, and method of cost apportionment currently used in computing reimbursement to such hospital under title XVIII of the Act.

(ii) For each hospital not participating in the program under title XVIII of the Social Security Act, apply the standards and principles described in sections 1-1 through 1-12 of "Principles of Reimbursement for Provider Costs" (Health Insurance Manual-5 Revised) (Code of Federal Regulations, Title 20, Chapter III, Part 405) and the related §§ 405.415-405.429 in Health Insurance Regulations-4 (9/67) (Code of Federal Regulations, Title 20, Chapter III, Part 405) issued by the Social Security Administration and either (a) one of the acceptable cost apportionment methods in section 2-2 of HIM-5 (Revised) or (b) the "Gross RCC Method" of cost apportionment applied as follows: The total allowable annual inpatient cost of operating a hospital is divided by the total annual charges for inpatients; the resulting percentage is applied to the bill of each inpatient under the medical assistance program.

(2) Drugs. (i) The upper limit for payment for prescribed drugs-whether legend items (for which a prescription is required under Federal law) or nonlegend items-shall be based on the following methods:

(a) Cost as defined by the State agency plus a dispensing fee. The dispensing fee should be ascertained by analysis of pharmacy operational data which includes such components as overhead, professional services, and profit. Indices to be considered should include payment practices of other third-party organizations, including other Federal programs. Both the cost and the dispensing fee may vary according to the size and location of the pharmacy and according to whether the dispensing is done by a physician or by an outpatient drug department of an institution, and according to whether the drug is a legend or a nonlegend item. In evaluating a dispensing fee by analysis of operational data, the objective of the State agency should be to insure that the average prescription price paid by the State agency does not exceed the average prescription price paid by the general public.

(b) The method described for Other Services in subparagraph (3) (i) of this paragraph.