Civil Money Penalties and Assessments Under the Military Health Care Fraud and Abuse Prevention Program

 
CONTENT
Federal Register, Volume 84 Issue 84 (Wednesday, May 1, 2019)
[Federal Register Volume 84, Number 84 (Wednesday, May 1, 2019)]
[Proposed Rules]
[Pages 18437-18452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08858]
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DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Parts 199 and 200
[DOD-2018-HA-0059]
RIN 0720-AB74
Civil Money Penalties and Assessments Under the Military Health
Care Fraud and Abuse Prevention Program
AGENCY: Office of the Secretary, Department of Defense (DoD).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would implement authority provided to the
Secretary of Defense under the Social Security Act. This authority
allows the Secretary of Defense as the administrator of a Federal
healthcare program to impose civil monetary penalties (CMPs or
penalties) as described in section 1128A of the Social Security Act
against providers and suppliers who commit fraud and abuse in the
TRICARE program. This proposed rule establishes a program within the
DoD to impose civil monetary penalties for certain such unlawful
conduct in the TRICARE program. To the extent applicable, we are
proposing to adopt the Department of Health and Human Service's
(HHS's), well-established CMP rules and procedures. This will enable
both TRICARE and TRICARE providers to rely upon Medicare precedents and
guidance issued by the HHS Office of Inspector General regarding
conduct that implicates the civil monetary penalty law. The program to
impose civil monetary penalties in the TRICARE program shall be called
the Military Health Care Fraud and Abuse Prevention Program.
DATES: To ensure consideration, comments must be received no later than
July 1, 2019. The Defense Health Agency may not fully consider comments
received after this date.
ADDRESSES: You may submit comments identified by docket number and/or
RIN number and title, by any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments.
    Mail: Department of Defense, Office of the Chief Management
Officer, Directorate for Oversight and Compliance, 4800 Mark Center
Drive, Suite 08D09, Attn: Mailbox 24, Alexandria, VA 22350-1700.
    Instructions: All submissions received must include the agency name
and docket number or Regulatory Information Number (RIN) for this
Federal Register document. The general policy for comments and other
submissions from members of the public is to make these submissions
available for public viewing on the internet at http://www.regulations.gov as they are received without change, including any
personal identifiers or contact information.
FOR FURTHER INFORMATION CONTACT: Michael J. Zleit, at 703-681-6012.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
1. Purpose
A. Need For Regulatory Action
    The Defense Health Agency (DHA), the agency of the Department of
Defense responsible for administration of the TRICARE Program, has as
its primary mission the support and delivery of an integrated,
affordable, and high quality health service to all DoD beneficiaries
and in doing so, is a responsible steward of taxpayer dollars. In
recent years, fraud and abuse has been inhibiting DHA's mission. One
example involves compound drugs. In fiscal year 2004, DoD paid about $5
million for compound drugs. Ten years later in fiscal year 2014, the
amount paid had risen over 10,000% exceeding $514 million, and for
fiscal year 2015, the cost exceeded $1.3 billion in expenditures just
for compound drugs.
[[Page 18438]]
Significantly, compounded drugs make up only 0.5 percent of the total
number of prescriptions provided through TRICARE, but in 2015 accounted
for more than 20 percent of TRICARE's total pharmacy expenditures. The
astronomical increase in expenditures related to compound drugs was
almost solely due to fraud and abuse, resulting in many investigations
and prosecutions by the Department of Justice (DOJ). However, because
DOJ is responsible for the prosecution of all fraud and abuse in all
Federal healthcare programs, including Medicare, TRICARE, and the
Federal Employees Health Benefits Program and does not have unlimited
resources, DOJ must prioritize cases and is unable to prosecute a large
portion of those entities who commit fraud and abuse in the TRICARE
Program. Therefore, the Department of Defense, acting through the DHA,
seeks to implement its authority under section 1128A(m) of the Social
Security Act (42 U.S.C. 1320a-7a(m)) to initiate administrative
proceedings to impose civil monetary penalties against those who commit
fraud and abuse in the TRICARE Program. Because CMPs may be imposed in
addition to criminal proceedings, we believe that the establishment of
a CMP Program within the DoD will serve a complementary function to the
criminal justice process and provide additional deterrence to
fraudulent actions against the Federal TRICARE Program and the recovery
of funds lost to fraud and abuse. The purpose of this proposed rule
utilizing CMP authority is to ensure the integrity of TRICARE and make
the government whole for funds lost to fraud and abuse, which is
necessary to the delivery of an integrated, affordable, and high
quality health service for all DoD beneficiaries.
B. Costs and Benefits of This Proposed Rule
    This proposed rule would reduce Defense Health Program requirements
by $74 million from FY 2020-FY 2024. The savings estimates were based
on recent history of TRICARE fraud and abuse audits and investigations
that, for a variety of reasons, did not result in criminal or civil
actions by the Department of Justice under other legal authorities. The
saving estimates were based on the estimate of 50 cases per year with
an average penalty of $600,000 per case and a collection rate of 60%.
Additionally, the estimated recovery amount subtracts out appeal costs,
full-time equivalent costs, and administrative costs.
    The proposed rule along with additional proposed legislation allows
the funds collected to be credited to appropriations available for
expenses of the affected DoD health care program. Based on the results
of the HHS civil money penalty program, the expectation is that funds
recovered will more than pay for the activities associated with
investigating abuses and administering the civil money penalty program,
producing savings for DoD.
    Because CMPs may be imposed in addition to criminal proceedings, we
believe that the benefit of the establishment of a CMP Program within
the DoD will serve a complementary function to the criminal justice
process and provide additional deterrence to fraudulent actions against
the Federal TRICARE Program and the recovery of funds lost to fraud and
abuse. We believe the recovery of funds lost to fraud and abuse will
make the government whole and will help ensure the continued delivery
of an integrated, affordable, and high quality health service for all
DoD beneficiaries.
C. Authority Provided to All Federal Healthcare Programs
    The specific legal authority authorizing the Department of Defense,
to establish a program to impose CMPs in the TRICARE Program is
provided in section 1128A(m) of the Social Security Act [42 U.S.C.
1320a-7a(m)]. This provision of law authorizes Federal Departments
other than HHS with jurisdiction over a Federal health care program (as
defined in section 1128B(f)) of the Social Security Act), to impose
CMPs as enumerated in section 1128A of the Social Security Act. Some of
the CMPs enumerated in section 1128A of the Social Security Act limit
the applicability to conduct only involving Medicare and Medicaid;
therefore, this proposed rule would implement all CMP authorities under
section 1128A that are not specifically limited to Medicare, Medicaid,
or other HHS-exclusive authority.
D. Summary of the Major Provisions of the Proposed Rule
    We propose to establish Civil Monetary Penalties (CMP) regulations
at 32 CFR part 200 to implement authority provided to the Department of
Defense under section 1128A of the Social Security Act, as amended. The
proposed rule closely follows the organization and substance of HHS's
CMP regulations. We propose to follow HHS's process and procedure for
imposing CMPs, as well as HHS's methodology for calculating the amount
of penalties and assessments. Additionally, for ease of interpretation
and transparency, we have adopted HHS's numerical structure for this
proposed regulation. Accordingly, the numerical provisions of the
proposed 32 CFR part 200 directly correspond to HHS's numerical
provisions at 42 CFR part 1003. Following this organizational construct
and HHS rules and procedures, the proposed rule addresses such matters
as: Liability for penalties and assessments, determinations regarding
the amount of penalties and assessments, CMPs and assessments for false
and fraudulent claims and other similar misconduct, penalties and
assessments for unlawful kickbacks, CMPs and assessments for
contracting organization misconduct, procedures for the imposition of
CMPs and assessments, judicial review, time limitations for CMPs and
assessments, statistical sampling, and appeals.
II. Provisions of the Proposed Rule
A. Background
    For over 25 years, the HHS Office of Inspector General (OIG) has
exercised the authority to impose CMPs, assessments, and exclusions in
furtherance of its mission to protect the Federal health care programs
and their beneficiaries from fraud and abuse. As those programs have
changed over the last two decades, HHS-OIG has received new fraud-
fighting CMP authorities in response. Section 231 of HIPAA expanded the
reach of CMPs to include federal health programs other than those
funded by HHS. In 1977, Congress first mandated the exclusion of
physicians and other practitioners convicted of program-related crimes
from participation in Medicare and Medicaid through the Medicare-
Medicaid Anti-Fraud and Abuse Amendments, Public Law 95-142 (now
codified at section 1128 of the Social Security Act (the SSA)). This
was followed in 1981 with Congress enacting the Civil Monetary
Penalties Law (CMPL), Public Law 97-35, section 1128A of the SSA, 42
U.S.C. 1320a-7a, to further address health care fraud and abuse. The
CMPL authorized the Secretary to impose penalties and assessments on a
person, as defined in 42 CFR part 1003, who defrauded Medicare or
Medicaid or engaged in certain other wrongful conduct. The CMPL also
authorized the Secretary of Health and Human Services to exclude
persons from Medicare and all State health care programs (including
Medicaid). Congress later expanded the CMPL and the scope of exclusion
to apply to all Federal health care programs. The Secretary of HHS
delegated the CMPL's authorities to HHS-OIG. 53 FR 12993 (April 20,
1988). Since 1981, Congress has created various other CMP authorities
covering
[[Page 18439]]
numerous types of fraud and abuse. These new authorities were also
delegated by the Secretary to HHS-OIG and were added to part 1003.
    In 1996, Section 231 of the Health Insurance Portability and
Accountability Act of 1996 (HIPAA) expanded the reach of certain CMPs
to include Federal health programs other than HHS, including specific
CMPs that may be implemented to prevent fraud and abuse against
programs such as TRICARE. The CMPL authorizes the Department or agency
head to impose CMPs, assessments, and program exclusions against
individuals and entities who submit false or fraudulent, or otherwise
improper claims for payment under Federal healthcare programs
administered by that Department of agency. HHS has an active, robust
process in place to seek CMPs. Additionally, in September 2016, HHS
substantially increased the amount of the penalty it may collect for
each act of fraud and abuse. The Office of Personnel Management (OPM)
also actively seeks civil monetary penalties under the Federal
Employees Health Benefits (FEHB) Program. Subsequent to HIPAA, Congress
expanded CMP authorities to reach additional conduct, such as: (1)
Failure to grant an OIG timely access to records, upon reasonable
request; (2) ordering or prescribing while excluded when the excluded
person knows or should know that the item or service may be paid for by
a Federal health care program; (3) making false statements, omissions,
or misrepresentations in an enrollment or similar bid or application to
participate in a Federal health care program; (4) failure to report and
return an overpayment that is known to the person; and (5) making or
using a false record or statement that is material to a false or
fraudulent claim. Most recently, in the Bipartisan Budget Act of 2018,
Congress doubled the maximum amount of penalties and assessments under
section 1128A.
B. Imposition of CMPs and Assessments in the TRICARE Program
1. Introduction
    As noted above, section 1128A(m) of the SSA authorizes the
applicable Department head to impose civil monetary penalties (CMPs),
assessments, and program exclusions against individuals and entities
who submit false or fraudulent, or otherwise improper claims for
payment. To date, DoD has not implemented its authority under this law,
but proposes to now do so. The Defense Health Agency will utilize this
authority and create the regulatory framework in this proposed rule to
initiate a program to impose civil monetary penalties against those who
commit fraud or abuse against the TRICARE program. The DHA will utilize
the authority in section 1128A of the SSA to impose civil monetary
penalties and assessments, but, unlike the HHS CMP Program, TRICARE
will not utilize authority to impose program exclusions as part of its
CMP program. Rather, program exclusions in the TRICARE program will
remain under TRICARE's established authority and process at 32 CFR
199.9(f). In order to integrate this proposed rule into TRICARE's
exclusion process under 32 CFR 199.9(f), we propose to amend 32 CFR
199.9(f)(1)(ii) by adding a sentence at the end of the provision
stating: ``A final determination of an imposition of a civil monetary
penalty under 32 CFR part 200 shall constitute an administrative
determination of fraud and abuse.'' We believe that this amendment will
clarify that a final determination of an imposition of a CMP,
implicating conduct under 32 CFR part 200, may subject the respondent
of the CMP to exclusion as authorized under 32 CFR 199.9(f)(1)(ii).
2. Delegation of Authority
    Section 1128A(m) of the SSA provides the Secretary of Defense with
CMP authority over claims involving the TRICARE Program. This proposed
rule reflects a delegation of authority from the Secretary of Defense
to the DHA Director to impose CMPs and assessments against any person
who has violated one or more provisions of CMPL as applicable to the
TRICARE Program. We propose that the authority at 32 CFR 200.150 will
include all powers to impose and compromise civil monetary penalties
and assessments under section 1128A of the Social Security Act.
3. Prohibited Acts
    We propose that the following prohibited acts under section
1128A(a) [42 U.S.C. 1320a-7a(a)] be subject to the imposition of civil
monetary penalties in the TRICARE Program. These prohibitions include
(but are not limited to) any person (including an organization, agency,
or other entity, but excluding a beneficiary, as defined in subsection
(i)(5) of this section) that--
     knowingly presents or causes to be presented to an
officer, employee, or agent of the United States, or of any department
or agency thereof, or of any State agency a claim that--
    [cir] Is for a medical or other item or service that the person
knows or should know was not provided as claimed, including any person
who engages in a pattern or practice of presenting or causing to be
presented a claim for an item or service that is based on a code that
the person knows or should know will result in a greater payment to the
person than the code the person knows or should know is applicable to
the item or service actually provided [1320a-7a(a) (1)(A)];
    [cir] Is for a medical or other item or service and the person
knows or should know the claim is false or fraudulent [1320a-
7a(a)(1)(B)];
    [cir] Is presented for a physician service by a person who knows or
should know that the individual who furnished the service--(i) was not
licensed as a physician, (ii) was licensed as a physician, but such
license had been obtained through a misrepresentation of material fact
(including cheating on an examination required for licensing), or (iii)
represented to the patient at the time the service was furnished that
the physician was certified in a medical specialty by a medical
specialty board when the individual was not so certified [1320a-
7a(a)(1)(C)];
    [cir] Is for a medical or other item or service furnished during a
period in which the person was excluded from the TRICARE program under
32 CFR 199.9(f) or other Federal health care program (as defined in
section 1128B(f) of the Social Security Act) under which the claim was
made pursuant to Federal law [1320a-7a(a)(1)(D)];
    [cir] Is for a pattern of medical or other items or services that
the person knows or should know are not medically necessary [1320a-
7a(a)(1)(E)].
     arranges or contracts (by employment or otherwise) with an
individual or entity that the person knows or should know is excluded
from participation in a Federal health care program (as defined in
section 1320a-7b(f) of this title), for the provision of items or
services for which payment may be made under such a program; [1320a-
7a(a)(6)].
     commits an act described in paragraph (1) or (2) of
section 1320a-7b(b) of title 42; [1320a-7a(a)(7)].
     knowingly makes, uses, or causes to be made or used, a
false record or statement material to a false or fraudulent claim for
payment for items and services furnished under a Federal health care
program; [1320a-7a(a)(8)].
     fails to grant timely access, upon reasonable request (as
defined by the Secretary in regulations), to the Office of Inspector
General (OIG), for the purpose of audits, investigations, evaluations,
or other statutory functions of the OIG; [1320a-7a(a)(9)].
[[Page 18440]]
     orders or prescribes a medical or other item or service
during a period in which the person was excluded from a Federal health
care program (as so defined), in the case where the person knows or
should know that a claim for such medical or other item or service will
be made under such a program [1320a-7a(a)(8)]; (Note: There are two
section 1320a-7a(a)(8) provisions enacted into the statute).
     knowingly makes or causes to be made any false statement,
omission, or misrepresentation of a material fact in any application,
bid, or contract to participate or enroll as a provider of services or
a supplier under a Federal health care program (as so defined) [1320a-
7a(a)(9)]; (Note: There are two section 1320a-7a(a)(9) provisions
enacted into the statute).
     knows of an overpayment (as defined in paragraph (4) of
section 1128J(d) [42 U.S.C. 1320a-7k(d)]) and does not report and
return the overpayment in accordance with such section [1320a-
7a(a)(10)].
4. Coordination With HHS and DOJ
    DHA will coordinate with the Department of Justice (DOJ) and
Defense Criminal Investigative Organizations (DCIOs) in resolving all
CMP matters. Allegations of fraud will be referred promptly for
investigation to the appropriate DCIO consistent with the requirements
of Department of Defense Instruction 5505.02. In cases where DOJ or the
appropriate DCIO does not participate the case will be governed by
either DHA's or HHS's CMPL authorities depending on whether the
relevant claims are primarily TRICARE Claims or Medicare Claims. In
cases involving mixed Medicare and TRICARE Claims, DHA will seek to
resolve only those cases which consist of primarily TRICARE claims.
Medicare will take the lead role in resolving cases which consist of
primarily Medicare claims. Administrators from both HHS and the DHA
will coordinate in resolving cases with mixed TRICARE and Medicare
claims. If claims implicated by CMPL are primarily TRICARE claims,
those claims will be governed by DHA's applicable CMP authorities. In
some cases, disclosing parties may request release under the False
Claims Act (FCA), and in other cases, DOJ may choose to participate in
the disposition of the matters. DOJ determines the approach in cases in
which it is involved. If DOJ participates, the matter will be resolved
as DOJ determines is appropriate consistent with its resolution of FCA
cases.
5. Amount of Penalties and Assessments
    In order to ensure full compliance with the authority delegated to
the Secretary of Defense in section 1128A(m), DoD proposes to impose
penalties and assessments in the amount not to exceed the maximum
adjusted civil penalty amounts prescribed in 32 CFR part 269. DoD
proposes to follow annually updated penalty amounts, as adjusted in
accordance with the Federal Civil Monetary Penalty Inflation Adjustment
Act of 1990 (Pub. L. 101-140), as amended by the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (section
701 of Pub. L. 114-74); and the Bipartisan Budget Act of 2018.
6. Exclusion
    The time period and effect of exclusion will follow TRICARE's
established exclusion process at 32 CFR 199.9(f). A person who has been
excluded from the TRICARE Program may apply for reinstatement at the
end of the period of exclusion. The process for reinstatement will be
in accordance with the pertinent provisions of 32 CFR 199.9(h). Unlike
HHS's CMP process, whereby HHS imposes penalties, assessments and
exclusions, DHA will not exercise authority over exclusions in the
TRICARE Program as part of the CMP implementation. Exclusion actions
under the TRICARE Program will continue to be governed under the
established process at 32 CFR 199.9(f). Appeals of exclusions will be
in accordance with the established process at 32 CFR 199.10 and will
not be part of the proposed CMP appeals process.
    Additionally, as part of this proposed rule we are proposing an
amendment to 32 CFR 199.9(f)(1)(ii) that would clarify that a final
determination of an imposition of a civil monetary penalty under 32 CFR
part 200 would be considered an administrative determination of fraud
and abuse. By clarifying that a final determination of an imposition of
a civil monetary penalty is an administrative determination of fraud
and abuse, it will allow the TRICARE program an additional, appropriate
basis for exclusion under the existing exclusion process at Sec.
199.9(f). Therefore, once a final determination has been made to impose
a CMP, the claim will be referred for consideration of exclusion
pursuant to 32 CFR 199.9(f), under the normal TRICARE process where
there has been a determination of fraud and abuse.
7. Notice of a Proposed Determination
    Where sufficient evidence supports the imposition of a CMP, the DHA
may serve a notice of proposed determination on the respondent, in any
manner authorized by Rule 4 of the Federal Rules of Civil Procedure
detailing the basis and remedy sought. This proposed rule at 32 CFR
200.1500 mirrors the requirements of 42 CFR 1003.1500, but eliminates
the requirement in 42 CFR 1003.1500(a)(7) involving a termination of a
Medicare Provider Agreement pursuant to 1866(b)(2)(C) of the SSA,
because the provision governing Medicare Provider Agreements is not
applicable to the TRICARE Program.
8. Factors Relevant To Determining Amount of Penalty and Assessment
    For clarity, to improve transparency in DHA's decision-making
processes, and for consistency with HHS's CMP process, we propose to
use the very same factors in determining the amount of penalties and
assessments for violations as HHS uses codified at 42 CFR 1003.140. As
codified in the proposed regulation at 32 CFR 200.140, the primary
factors for determining the amount of penalties and assessments for
violations that we will consider are: (1) The nature and circumstances
of the violation, (2) the degree of culpability of the person, (3) the
history of prior offenses, (4) other wrongful conduct, and (5) other
matters as justice may require.
9. Statute of Limitations
    In accordance with the authority delegated to the Secretary of
Defense, the imposition of CMPs in the TRICARE Program will be subject
to a six year statute of limitations.
10. Statistical Sampling and Extrapolation
    The proposed regulation at Sec.  200.1580 provides that a
statistical sampling study, if based upon an appropriate sampling and
computed by valid statistical methods, shall constitute prima facie
evidence of the number and amount of claims or requests for payment.
The use of statistical sampling will allow DHA to impose penalties and
assessments based upon an extrapolated number and amount of claims.
Additionally, statistical sampling will allow DHA to recover the
extrapolated amount of overpaid funds through administrative
recoupment.
11. Appeals of Civil Money Penalties and Assessments
    Administrative review of the imposition of a civil monetary penalty
[[Page 18441]]
under the TRICARE Program will be before an Administrative Law Judge
(ALJ). We propose entering into an arrangement with the HHS
Departmental Appeals Board (DAB), pursuant to an interagency agreement
between DoD and HHS for the DAB to hear TRICARE CMP appeals. However,
as an alternative, DHA continues to evaluate possibly utilizing ALJ's
currently assigned to the Department of Defense, and invites public
comments on this alternative as well as the DAB proposal included in
the text of the proposed rule.
    The proposed appeals process would involve appeals of civil
monetary penalties and assessments but not include appeals of
exclusions, which will be governed by the established process at 32 CFR
199.9(f). We believe that DAB ALJs, would be good candidates to preside
over TRICARE CMP appeals. DAB ALJs currently hear CMP appeals for the
Medicare Program pursuant to HHS regulations at 42 CFR part 1005, which
provide for a direct appeal to the DAB for CMPs assessed by Medicare.
During the appeals process, the DHA will have exclusive authority to
settle any issues or case without consent of the ALJ. If the imposition
of the CMP is successful on appeal, the determination of the CMP by the
Secretary of Defense will become final. Once a determination by the
Secretary has become final, collection of any penalty and assessment
will be the responsibility of DHA. A penalty or an assessment imposed
under this program may be compromised by the DHA and may be recovered
in a civil action brought in the United States district court for the
district where the claim was presented or where the respondent resides.
    Although we continue to evaluate the use of DoD ALJs, we believe
that utilization of DAB ALJs and HHS's long established appeals process
will be the most efficient means to adjudicate appeals under the
TRICARE Program. The HHS appeals process would not add any additional
process or burden to those in the industry who might be impacted by CMP
law, because those entities implicated by the CMP law under TRICARE are
for the most part the same entities that are already subject to the
same civil monetary penalties law under Medicare. Additionally, we
believe the adoption of HHS appeals regulations will assist the
seamless adjudication of TRICARE Appeals by HHS ALJs with familiarity
and experience working with the Medicare Appeals regulations.
    We are proposing the adoption of a 120 day deadline, extending the
60 day deadline established in 42 CFR 1005.20(c) for the ALJ to issue a
decision following the close of the record. We are also proposing
extending the 60 day deadline established in 42 CFR 1005.21(i) for the
Board to issue a decision following the close of the record. After
consultation with the HHS DAB, the DAB has requested that in order to
ensure adequate resources necessary to properly adjudicate CMP Appeals,
including complex statistical sampling cases, that the deadline to
issue a decision be extended from 60 days to 120 days for the ALJ and
the Board to issue a decision following the close of the record. We
believe that the requested extension to 120 days for the issuance of an
ALJ and Board decision provides appellants with appropriate due
process. Accordingly, pursuant to the DAB recommendation we propose the
deadline for decision by the ALJ in 42 CFR 1005.20(c) and the decision
by the Board Sec.  1005.21(i) to be 120 days from the date the record
is closed.
    Therefore, with the exception of regulations involving exclusions
and the extension of deadlines for the ALJ and Board to issue a
decision, in part for purposes of uniformity with Medicare, we propose
that the regulations at 42 CFR part 1005, Sec. Sec.  1005.1 through
1005.23, be adopted in full to the extent applicable to appeals of
civil momentary penalties and assessments in the TRICARE Civil Monetary
Penalty Program. These appeals regulations are codified in this
proposed regulation under 32 CFR 200.2001 through 200.2023.
III. Regulatory Impact Statement
Public Comments Invited
    This is being issued as proposed rule to implement authority
provided to the Secretary of Defense in section 1128A(m) of the SSA.
DoD invites public comments on this proposed rule and is committed to
considering all comments and issuing a final rule as soon as
practicable.
Executive Order (E.O.) 13771, ``Reducing Regulation and Controlling
Regulatory Costs''
    E.O. 13771 seeks to control costs associated with the government
imposition of private expenditures required to comply with Federal
regulations and to reduce regulations that impose such costs.
Consistent with the analysis in OMB Circular A-4 and Office of
Information and Regulatory Affairs guidance on implementing E.O. 13771,
this proposed rule does not involve regulatory costs subject to E.O.
13771.
Executive Order 12866, ``Regulatory Planning and Review'' and Executive
Order 13563, ``Improving Regulation and Regulatory Review''
    Executive Orders 13563 and 12866 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distribute impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. It has been determined that this rule is not a significant
regulatory action. The rule does not: (1) Have an annual effect on the
economy of $100 million or more or adversely affect in a material way
the economy; a section of the economy; productivity; competition; jobs;
the environment; public health or safety; or State, local, or tribal
governments or communities; (2) Create a serious inconsistency or
otherwise interfere with an action taken or planned by another Agency;
(3) Materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs, or the rights and obligations of recipients
thereof; or (4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
these Executive Orders.
    This is not an economically significant rule because it does not
reach that economic threshold of $100 million or more. This proposed
rule is designed to implement statutory provisions, authorizing the
Department of Defense to impose CMPs. The vast majority of providers
and Federal health care programs would be minimally impacted, if at
all, by these proposed revisions. Accordingly, the aggregate economic
effect of these regulations would be significantly less than $100
million.
Congressional Review Act, 5 U.S.C. 804(2)
    Under the Congressional Review Act, a major rule may not take
effect until at least 60 days after submission to Congress of a report
regarding the rule. A major rule is one that would have an annual
effect on the economy of $100 million or more; or a major increase in
costs or prices for consumers, individual industries, Federal, State,
or local government agencies, or geographic regions; or significant
adverse effects on competition, employment, investment, productivity,
[[Page 18442]]
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.
This final rule is not a major rule, because it does not reach the
economic threshold or have other impacts as required under the
Congressional Review Act.
Public Law 96-354, ``Regulatory Flexibility Act'' (RFA) (5 U.S.C. 601)
    The RFA and the Small Business Regulatory Enforcement and Fairness
Act of 1996, which amended the RFA, require agencies to analyze options
for regulatory relief of small businesses. For purposes of the RFA,
small entities include small businesses, nonprofit organizations, and
government agencies. Most providers are considered small entities by
having revenues of $5 million to $25 million or less in any one year.
For purposes of the RFA, most physicians and suppliers are considered
small entities. The aggregate effect of implementing a CMP Program
within the TRICARE Program would be minimal. In summary, we have
concluded that this proposed rule should not have a significant impact
on the operations of a substantial number of small providers and that a
regulatory flexibility analysis is not required for this rulemaking.
Therefore, this proposed rule is not subject to the requirements of the
RFA.
Public Law 104-4, Sec. 202, ``Unfunded Mandates Reform Act''
    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4, also requires that agencies assess anticipated costs and
benefits before issuing any rule that may result in expenditures in any
one year by State, local, or tribal governments, in the aggregate, or
by the private sector, of $100 million in 1995 dollars, updated
annually for inflation. That threshold level is currently approximately
$140 million. As indicated above, these proposed rules implement
statutory authority to impose CMPs on claims submitted to the TRICARE
Program is a similar manner as implemented by the Department of Health
and Human Services in the Medicare Program. It has been determined that
there are no significant costs associated with the proposed
implementation of a CMP Program to impose CMPs on claims submitted to
the TRICARE Program that would impose any mandates on State, local, or
tribal governments or the private sector that would result in an
expenditure of $140 million or more (adjusted for inflation) in any
given year and that a full analysis under the Unfunded Mandates Reform
Act is not necessary.
Public Law 96-511, ``Paperwork Reduction Act'' (44 U.S.C. Chapter 35)
    This rulemaking does not contain a ``collection of information''
requirement, and will not impose additional information collection
requirements on the public under Public Law 96-511, ``Paperwork
Reduction Act'' (44 U.S.C. chapter 35).
Executive Order 13132, ``Federalism''
    This proposed rule has been examined for its impact under E.O.
13132, and it does not contain policies that have federalism
implications that would have substantial direct effects on the States,
on the relationship between the national Government and the States, or
on the distribution of powers and responsibilities among the various
levels of Government. Therefore, consultation with State and local
officials is not required.
List of Subjects
32 CFR Part 199
    Claims, Dental health, Health care, Health insurance, Individuals
with disabilities, Mental health, Mental health parity, Military
personnel.
32 CFR Part 200
    Administrative practice and procedure, Fraud, Health care, Health
insurance, Penalties.
    For the reasons stated in the preamble, the Department of Defense
proposes to amend 32 CFR subchapter M as set forth below:
PART 199--CIVILIAN HEALTH AND MEDICAL PROGRAM OF THE UNIFORMED
SERVICES (CHAMPUS)
0
1. The authority citation for part 199 continues to read as follows:
    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55.
0
2. Section 199.9 paragraph (f)(1)(ii) is revised to read as follows:
Sec.  199.9  Administrative remedies for fraud, abuse, and conflict of
interest.
* * * * *
    (f) * * *
    (1) * * *
    (ii) Administrative determination of fraud or abuse under CHAMPUS.
If the Director, Defense Health Agency determines that a provider has
committed fraud or abuse as defined in this part, the provider shall be
excluded or suspended from CHAMPUS/TRICARE for a period of time
determined by the Director. A final determination of an imposition of a
civil monetary penalty under 32 CFR part 200 shall constitute an
administrative determination of fraud and abuse.
* * * * *
0
3. Add part 200 to read as follows:
PART 200--CIVIL MONEY PENALTY AUTHORITIES FOR THE TRICARE PROGRAM
Sec.
Subpart A--General Provisions
200.100 Basis and purpose.
200.110 Definitions.
200.120 Liability for penalties and assessments.
200.130 Assessments.
200.140 Determinations regarding the amount of penalties and
assessments.
200.150 Delegation of authority.
Subpart B--Civil Money Penalties (CMPs) and Assessments for False or
Fraudulent Claims and Other Similar Misconduct
200.200 Basis for civil money penalties and assessments.
200.210 Amount of penalties and assessments.
200.220 Determinations regarding the amount of penalties and
assessments.
Subpart C--CMPs and Assessments for Anti-Kickback Violations
200.300 Basis for civil money penalties and assessments.
200.310 Amount of penalties and assessments.
200.320 Determinations regarding the amount of penalties and
assessments.
Subpart D--CMPs and Assessments for Contracting Organization Misconduct
200.400 Basis for civil money penalties and assessments.
200.410 Amount of penalties and assessments for contracting
organization.
200.420 Determinations regarding the amount of penalties and
assessments.
Subparts E-N [Reserved]
Subpart O--Procedures for the Imposition of CMPs and Assessments
200.1500 Notice of proposed determination.
200.1510 Failure to request a hearing.
200.1520 Collateral estoppel.
200.1530 Settlement.
200.1540 Judicial review.
200.1550 Collection of penalties and assessments.
200.1560 Notice to other agencies.
200.1570 Limitations.
200.1580 Statistical sampling.
200.1590-200.1990 [Reserved]
Subpart P--Appeals of CMPs and Assessments
200.2001 Definitions.
200.2002 Hearing before an ALJ.
200.2003 Rights of parties.
200.2004 Authority of the ALJ.
200.2005 Ex parte contacts.
200.2006 Prehearing conferences.
200.2007 Discovery.
200.2008 Exchange of witness lists, witness statements and exhibits.
[[Page 18443]]
200.2009 Subpoenas for attendance at hearing.
200.2010 Fees.
200.2011 Form, filing and service of papers.
200.2012 Computation of time.
200.2013 Motions.
200.2014 Sanctions.
200.2015 The hearing and burden of proof.
200.2016 Witnesses.
200.2017 Evidence.
200.2018 The record.
200.2019 Post-hearing briefs.
200.2020 Initial decision.
200.2021 Appeal to DAB.
200.2022 Stay of initial decision.
200.2023 Harmless error.
    Authority: 5 U.S.C. 301; 10 U.S.C. chapter 55; 42 U.S.C. 1320a-
7a.
Subpart A--General Provisions
Sec.  200.100   Basis and purpose.
    (a) Basis. This part implements section 1128A of the Social
Security Act (42 U.S.C. 1320a-7a) (the Act).
    (b) Purpose. This part--
    (1) Provides for the imposition of civil money penalties and, as
applicable, assessments against persons who have committed an act or
omission that violates one or more provisions of this part; and
    (2) Sets forth the appeal rights of persons subject to a penalty
and assessment.
Sec.  200.110   Definitions.
    For purposes of this part, with respect to terms not defined in
this section but defined in 32 CFR 199.2, the definition in such Sec.
199.2 shall apply. For purposes of this part, the following definitions
apply:
    Assessment means the amounts described in this part and includes
the plural of that term.
    Claim means an application for payment for an item or service under
TRICARE/CHAMPUS.
    Contracting organization means a public or private entity or other
organization that has contracted with the Department to furnish, or
otherwise pay for, items and services to TRICARE beneficiaries pursuant
to chapter 55 of title 10, U.S. Code. The term expressly does not
include entities with which the Department contracts to provide
``managed care support'' or ``fiscal intermediary'' services to the
TRICARE program under Section 1097 of title 10, U.S. Code.
    Defense Health Agency or DHA means the Director of the Defense
Health Agency or designee.
    Items and services or items or services includes without
limitation, any item, device, drug, biological, supply, or service
(including management or administrative services), including, but not
limited to, those that are listed in an itemized claim for program
payment or a request for payment; for which payment is included in any
TRICARE/CHAMPUS reimbursement method, such as a prospective payment
system or managed care system; or that are, in the case of a claim
based on costs, required to be entered in a cost report, books of
account, or other documents supporting the claim (whether or not
actually entered).
    Knowingly means that a person, with respect to an act, has actual
knowledge of the act, acts in deliberate ignorance of the act, or acts
in reckless disregard of the act, and no proof of specific intent to
defraud is required.
    Material means having a natural tendency to influence, or be
capable of influencing, the payment or receipt of money or property.
    Non-separately-billable item or service means an item or service
that is a component of, or otherwise contributes to the provision of,
an item or a service, but is not itself a separately billable item or
service.
    Office of Inspector General or OIG means the Office of Inspector
General of the Department of Defense; the Defense Criminal
Investigative Service (DCIS); or the Office of Inspector General for
the Defense Health Agency.
    Overpayment means any funds that a person receives or retains under
TRICARE/CHAMPUS to which the person, after applicable reconciliation,
is not entitled under such program.
    Penalty means the amount described in this part and includes the
plural of that term.
    Person means an individual, trust or estate, partnership,
corporation, professional association or corporation, or other entity,
public or private.
    Preventive care, for purposes of the definition of the term
``remuneration'' as set forth in this section and the preventive care
exception to section 231(h) of HIPAA, means any service that--
    (1) Is a prenatal service or a post-natal well-baby visit or is a
specific clinical service covered by TRICARE; and
    (2) Is reimbursable in whole or in part by TRICARE as a preventive
care service.
    Reasonable request, with respect to Sec.  200.200(b)(6), means a
written request, signed by a designated representative of the OIG and
made by a properly identified agent of the OIG during reasonable
business hours. The request will include: A statement of the authority
for the request, the person's rights in responding to the request, the
definition of ``reasonable request'' and ``failure to grant timely
access'' under this part, the deadline by which the OIG requests
access, and the amount of the civil money penalty or assessment that
could be imposed for failure to comply with the request, and the
earliest date that a request for reinstatement would be considered.
    Remuneration, for the purposes of this part, is consistent with the
definition in section 1128A(i)(6) of the Social Security Act and
includes the waiver of copayment, coinsurance and deductible amounts
(or any part thereof) and transfers of items or services for free or
for other than fair market value. The term ``remuneration'' does not
include:
    (1) The waiver of coinsurance and deductible amounts by a person,
if the waiver is not offered as part of any advertisement or
solicitation; the person does not routinely waive coinsurance or
deductible amounts; and the person waives coinsurance and deductible
amounts after determining in good faith that the individual is in
financial need or failure by the person to collect coinsurance or
deductible amounts after making reasonable collection efforts.
    (2) Any permissible practice as specified in section 1128B(b)(3) of
the Act or in regulations issued by the Secretary.
    (3) Differentials in coinsurance and deductible amounts as part of
a benefit plan design (as long as the differentials have been disclosed
in writing to all beneficiaries, third party payers and providers), to
whom claims are presented.
    (4) Incentives given to individuals to promote the delivery of
preventive care services where the delivery of such services is not
tied (directly or indirectly) to the provision of other services
reimbursed in whole or in part by TRICARE, Medicare or an applicable
State health care program. Such incentives may include the provision of
preventive care, but may not include--
    (i) Cash or instruments convertible to cash; or
    (ii) An incentive the value of which is disproportionally large in
relationship to the value of the preventive care service (i.e., either
the value of the service itself or the future health care costs
reasonably expected to be avoided as a result of the preventive care).
    (5) Items or services that improve a beneficiary's ability to
obtain items and services payable by TRICARE, and pose a low risk of
harm to TRICARE beneficiaries and the TRICARE program by--
    (i) Being unlikely to interfere with, or skew, clinical decision
making;
    (ii) Being unlikely to increase costs to Federal health care
programs or beneficiaries through overutilization or inappropriate
utilization; and
[[Page 18444]]
    (iii) Not raising patient safety or quality-of-care concerns.
    (6) The offer or transfer of items or services for free or less
than fair market value by a person if--
    (i) The items or services consist of coupons, rebates, or other
rewards from a retailer;
    (ii) The items or services are offered or transferred on equal
terms available to the general public, regardless of health insurance
status; and
    (iii) The offer or transfer of the items or services is not tied to
the provision of other items or services reimbursed in whole or in part
by the program under chapter 55 of title 10, U.S. Code.
    (7) The offer or transfer of items or services for free or less
than fair market value by a person, if--
    (i) The items or services are not offered as part of any
advertisement or solicitation;
    (ii) The offer or transfer of the items or services is not tied to
the provision of other items or services reimbursed in whole or in part
by the program under chapter 55 of title 10, U.S. Code;
    (iii) There is a reasonable connection between the items or
services and the medical care of the individual; and
    (iv) The person provides the items or services after determining in
good faith that the individual is in financial need.
    Request for payment means an application submitted by a person to
any person for payment for an item or service.
    Respondent means the person upon whom the Department has imposed,
or proposes to impose, a penalty and/or assessment.
    Separately billable item or service means an item or service for
which an identifiable payment may be made under a Federal health care
program, e.g., an itemized claim or a payment under a prospective
payment system or other reimbursement methodology.
    Should know, or should have known, means that a person, with
respect to information, either acts in deliberate ignorance of the
truth or falsity of the information or acts in reckless disregard of
the truth or falsity of the information. For purposes of this
definition, no proof of specific intent to defraud is required.
    TRICARE or TRICARE/CHAMPUS or CHAMPUS means any program operated
under the authority of 32 CFR part 199.
Sec.  200.120   Liability for penalties and assessments.
    (a) In any case in which it is determined that more than one person
was responsible for a violation described in this part, each such
person may be held separately liable for the entire penalty prescribed
by this part.
    (b) In any case in which it is determined that more than one person
was responsible for a violation described in this part, an assessment
may be imposed, when authorized, against any one such person or jointly
and severally against two or more such persons, but the aggregate
amount of the assessments collected may not exceed the amount that
could be assessed if only one person was responsible.
    (c) Under this part, a principal is liable for penalties and
assessments for the actions of his or her agent acting within the scope
of his or her agency. The provision in this paragraph (c) does not
limit the underlying liability of the agent.
Sec.  200.130   Assessments.
    The assessment in this part is in lieu of damages sustained by the
Department because of the violation.
Sec.  200.140   Determinations regarding the amount of penalties and
assessments.
    (a) Except as otherwise provided in this part, in determining the
amount of any penalty or assessment in accordance with this part, the
DHA will consider the following factors--
    (1) The nature and circumstances of the violation;
    (2) The degree of culpability of the person against whom a civil
money penalty and assessment is proposed. It should be considered an
aggravating circumstance if the respondent had actual knowledge where a
lower level of knowledge was required to establish liability (e.g., for
a provision that establishes liability if the respondent ``knew or
should have known'' a claim was false or fraudulent, it will be an
aggravating circumstance if the respondent knew the claim was false or
fraudulent). It should be a mitigating circumstance if the person took
appropriate and timely corrective action in response to the violation.
For purposes of this part, corrective action must include disclosing
the violation to the DHA by initiating a self-disclosure and fully
cooperating with the DHA's review and resolution of such disclosure;
    (3) The history of prior offenses. Aggravating circumstances
include, if at any time prior to the violation, the individual--or in
the case of an entity, the entity itself; any individual who had a
direct or indirect ownership or control interest (as defined in section
1124(a)(3) of the Act) in a sanctioned entity at the time the violation
occurred and who knew, or should have known, of the violation; or any
individual who was an officer or a managing employee (as defined in
section 1126(b) of the Act) of such an entity at the time the violation
occurred--was held liable for criminal, civil, or administrative
sanctions in connection with a program covered by this part or in
connection with the delivery of a health care item or service;
    (4) Other wrongful conduct. Aggravating circumstances include proof
that the individual--or in the case of an entity, the entity itself;
any individual who had a direct or indirect ownership or control
interest (as defined in section 1124(a)(3) of the Act) in a sanctioned
entity at the time the violation occurred and who knew, or should have
known, of the violation; or any individual who was an officer or a
managing employee (as defined in section 1126(b) of the Act) of such an
entity at the time the violation occurred--engaged in wrongful conduct,
other than the specific conduct upon which liability is based, relating
to a government program or in connection with the delivery of a health
care item or service. The statute of limitations governing civil money
penalty proceedings does not apply to proof of other wrongful conduct
as an aggravating circumstance; and
    (5) Such other matters as justice may require. Other circumstances
of an aggravating or mitigating nature should be considered if, in the
interests of justice, they require either a reduction or an increase in
the penalty or assessment to achieve the purposes of this part.
    (b)(1) After determining the amount of any penalty and assessment
in accordance with this part, the DHA considers the ability of the
person to pay the proposed civil money penalty or assessment. The
person shall provide, in a time and manner requested by the DHA,
sufficient financial documentation, including, but not limited to,
audited financial statements, tax returns, and financial disclosure
statements, deemed necessary by the DHA to determine the person's
ability to pay the penalty or assessment.
    (2) If the person requests a hearing in accordance with Sec.
200.2002, the only financial documentation subject to review is that
which the person provided to the DHA during the administrative process,
unless the Administrative Law Judge (ALJ) finds that extraordinary
circumstances prevented the person from providing the financial
documentation to the DHA in the time and manner requested by the DHA
prior to the hearing request.
    (c) In determining the amount of any penalty and assessment to be
imposed under this part the following circumstances are also to be
considered--
[[Page 18445]]
    (1) If there are substantial or several mitigating circumstances,
the aggregate amount of the penalty and assessment should be set at an
amount sufficiently below the maximum permitted by this part to reflect
that fact.
    (2) If there are substantial or several aggravating circumstances,
the aggregate amount of the penalty and assessment should be set at an
amount sufficiently close to or at the maximum permitted by this part
to reflect that fact.
    (3) Unless there are extraordinary mitigating circumstances, the
aggregate amount of the penalty and assessment should not be less than
double the approximate amount of damages and costs (as defined by
paragraph (e)(2) of this section) sustained by the United States, or
any State, as a result of the violation.
    (4) The presence of any single aggravating circumstance may justify
imposing a penalty and assessment at or close to the maximum even when
one or more mitigating factors is present.
    (d)(1) The standards set forth in this section are binding, except
to the extent that their application would result in imposition of an
amount that would exceed limits imposed by the United States
Constitution.
    (2) The amount imposed will not be less than the approximate amount
required to fully compensate the United States, for its damages and
costs, tangible and intangible, including, but not limited to, the
costs attributable to the investigation, prosecution, and
administrative review of the case.
    (3) Nothing in this part limits the authority of the Department or
the DHA to settle any issue or case as provided by Sec.  200.1530 or to
compromise any penalty and assessment as provided by Sec.  200.1550.
    (4) Penalties and assessments imposed under this part are in
addition to any other penalties, assessments, or other sanctions
prescribed by law.
Sec.  200.150   Delegation of authority.
    The DHA is delegated authority from the Secretary to impose civil
money penalties and, as applicable, assessments against any person who
has violated one or more provisions of this part. The delegation of
authority includes all powers to impose and compromise civil monetary
penalties, assessments under section 1128A of the Act.
Subpart B--Civil Money Penalties (CMPs) and Assessments for False
or Fraudulent Claims and Other Similar Misconduct
Sec.  200.200   Basis for civil money penalties and assessments.
    (a) The DHA may impose a penalty, assessment against any person who
it determines has knowingly presented, or caused to be presented, a
claim that was for--
    (1) An item or service that the person knew, or should have known,
was not provided as claimed, including a claim that was part of a
pattern or practice of claims based on codes that the person knew, or
should have known, would result in greater payment to the person than
the code applicable to the item or service actually provided;
    (2) An item or service for which the person knew, or should have
known, that the claim was false or fraudulent;
    (3) An item or service furnished during a period in which the
person was excluded from participation under 32 CFR 199.9(f) or by
another Federal health care program (as defined in section 1128B(f) of
the Act) to which the claim was presented;
    (4) A physician's services (or an item or service) for which the
person knew, or should have known, that the individual who furnished
(or supervised the furnishing of) the service--
    (i) Was not licensed as a physician;
    (ii) Was licensed as a physician, but such license had been
obtained through a misrepresentation of material fact (including
cheating on an examination required for licensing); or
    (iii) Represented to the patient at the time the service was
furnished that the physician was certified by a medical specialty board
when he or she was not so certified; or
    (5) An item or service that a person knew, or should have known was
not medically necessary, and which is part of a pattern of such claims.
    (b) The DHA may impose a penalty and, where authorized, an
assessment against any person who it determines--
    (1) Arranges or contracts (by employment or otherwise) with an
individual or entity that the person knows, or should know, is excluded
from participation in Federal health care programs for the provision of
items or services for which payment may be made under such a program;
    (2) Orders or prescribes a medical or other item or service during
a period in which the person was excluded from a Federal health care
program, in the case when the person knows, or should know, that a
claim for such medical or other item or service will be made under such
a program;
    (3) Knowingly makes, or causes to be made, any false statement,
omission, or misrepresentation of a material fact in any application,
bid, or contract to participate or enroll as a provider of services or
a supplier under a Federal health care program, including contracting
organizations, and entities that apply to participate as providers of
services or suppliers in such contracting organizations;
    (4) Knows of an overpayment and does not report and return the
overpayment in accordance with section 1128J(d) of the Act;
    (5) Knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim for payment
for items and services furnished under a Federal health care program;
or
    (6) Fails to grant timely access to records, documents, and other
material or data in any medium (including electronically stored
information and any tangible thing), upon reasonable request, to the
OIG, for the purpose of audits, investigations, evaluations, or other
OIG statutory functions. Such failure to grant timely access means:
    (i) Except when the OIG reasonably believes that the requested
material is about to be altered or destroyed, the failure to produce or
make available for inspection and copying the requested material upon
reasonable request or to provide a compelling reason why they cannot be
produced, by the deadline specified in the OIG's written request; and
    (ii) When the OIG has reason to believe that the requested material
is about to be altered or destroyed, the failure to provide access to
the requested material at the time the request is made.
Sec.  200.210  Amount of penalties and assessments.
    (a) Penalties.1 (1) Except as provided in this section,
the DHA may impose a penalty of not more than $20,000 for each
individual violation that is subject to a determination under this
subpart.
---------------------------------------------------------------------------
    \1\ The penalty amounts in this section are updated annually, as
adjusted in accordance with the Federal Civil Monetary Penalty
Inflation Adjustment Act of 1990 (Pub. L. 101-140), as amended by
the Federal Civil Penalties Inflation Adjustment Act Improvements
Act of 2015 (section 701 of Pub. L. 114-74). Annually adjusted
amounts are published at 32 CFR part 269.
---------------------------------------------------------------------------
    (2) For each individual violation of Sec.  200.200(b)(1), the DHA
may impose a penalty of not more than $20,000 for each separately
billable or non-separately-billable item or service
[[Page 18446]]
provided, furnished, ordered, or prescribed by an excluded individual
or entity.
    (3) The DHA may impose a penalty of not more than $100,000 for each
false statement, omission, or misrepresentation of a material fact in
violation of Sec.  200.200(b)(3).
    (4) The DHA may impose a penalty of not more than $100,000 for each
false record or statement in violation of Sec.  200.200(b)(5).
    (5) The DHA may impose a penalty of not more than $20,000 for each
item or service related to an overpayment that is not reported and
returned in accordance with section 1128J(d) of the Act in violation of
Sec.  200.200(b)(4).
    (6) The DHA may impose a penalty of not more than $30,000 for each
day of failure to grant timely access in violation of Sec.
200.200(b)(6).
    (b) Assessments. (1) Except for violations of Sec.  200.200(b)(1)
and (3), the DHA may impose an assessment for each individual violation
of Sec.  200.200, of not more than 3 times the amount claimed for each
item or service.
    (2) For violations of Sec.  200.200(b)(1), the DHA may impose an
assessment of not more than 3 times--
    (i) The amount claimed for each separately billable item or service
provided, furnished, ordered, or prescribed by an excluded individual
or entity; or
    (ii) The total costs (including salary, benefits, taxes, and other
money or items of value) related to the excluded individual or entity
incurred by the person that employs, contracts with, or otherwise
arranges for an excluded individual or entity to provide, furnish,
order, or prescribe a non-separately-billable item or service.
    (3) For violations of Sec.  200.200(b)(3), the DHA may impose an
assessment of not more than 3 times the total amount claimed for each
item or service for which payment was made based upon the application
containing the false statement, omission, or misrepresentation of
material fact.
Sec.  200.220   Determinations regarding the amount of penalties and
assessments.
    In considering the factors listed in Sec.  200.140--
    (a) It should be considered a mitigating circumstance if all the
items or services or violations included in the action brought under
this part were of the same type and occurred within a short period of
time, there were few such items or services or violations, and the
total amount claimed or requested for such items or services was less
than $5,000.
    (b) Aggravating circumstances include--
    (1) The violations were of several types or occurred over a lengthy
period of time;
    (2) There were many such items or services or violations (or the
nature and circumstances indicate a pattern of claims or requests for
payment for such items or services or a pattern of violations);
    (3) The amount claimed or requested for such items or services, or
the amount of the overpayment was $50,000 or more;
    (4) The violation resulted, or could have resulted, in patient
harm, premature discharge, or a need for additional services or
subsequent hospital admission; or
    (5) The amount or type of financial, ownership, or control interest
or the degree of responsibility a person has in an entity was
substantial with respect to an action brought under Sec.
200.200(b)(3).
Subpart C--CMPs and Assessments for Anti-Kickback Violations
Sec.  200.300   Basis for civil money penalties and assessments.
    The DHA may impose a penalty and an assessment against any person
who it determines in accordance with this part has violated section
1128B(b) of the Act by unlawfully offering, paying, soliciting, or
receiving remuneration to induce or in return for the referral of
business paid for, in whole or in part, by TRICARE/CHAMPUS.
Sec.  200.310   Amount of penalties and assessments.
    (a) Penalties.2 The DHA may impose a penalty of not more
than $100,000 for each offer, payment, solicitation, or receipt of
remuneration that is subject to a determination under Sec.  200.300.
---------------------------------------------------------------------------
    \2\ The penalty amounts in this section are adjusted for
inflation annually. Adjusted amounts are published at 32 CFR part
269.
---------------------------------------------------------------------------
    (b) Assessments. The DHA may impose an assessment of not more than
3 times the total remuneration offered, paid, solicited, or received
that is subject to a determination under Sec.  200.300. Calculation of
the total remuneration for purposes of an assessment shall be without
regard to whether a portion of such remuneration was offered, paid,
solicited, or received for a lawful purpose.
Sec.  200.320   Determinations regarding the amount of penalties and
assessments.
    In considering the factors listed in Sec.  200.140:
    (a) It should be considered a mitigating circumstance if all the
items, services, or violations included in the action brought under
this part were of the same type and occurred within a short period of
time; there were few such items, services, or violations; and the total
amount claimed or requested for such items or services was less than
$5,000.
    (b) Aggravating circumstances include--
    (1) The violations were of several types or occurred over a lengthy
period of time;
    (2) There were many such items, services, or violations (or the
nature and circumstances indicate a pattern of claims or requests for
payment for such items or services or a pattern of violations);
    (3) The amount claimed or requested for such items or services or
the amount of the remuneration was $50,000 or more; or
    (4) The violation resulted, or could have resulted, in harm to the
patient, a premature discharge, or a need for additional services or
subsequent hospital admission.
Subpart D--CMPs and Assessments for Contracting Organization
Misconduct
Sec.  200.400   Basis for civil money penalties and assessments.
    The DHA may impose a penalty against any contracting organization
that--
    (a) Fails substantially to provide an enrollee with medically
necessary items and services that are required (under chapter 55 of
title 10, U.S. Code, applicable regulations, or contract with the
Department of Defense) to be provided to such enrollee and the failure
adversely affects (or has the substantial likelihood of adversely
affecting) the enrollee;
    (b) Imposes a premium on an enrollee in excess of the amounts
permitted under chapter 55 of title 10, U.S. Code; and
    (c) Engages in any practice that would reasonably be expected to
have the effect of denying or discouraging enrollment by beneficiaries
whose medical condition or history indicates a need for substantial
future medical services, except as permitted by chapter 55 of title 10,
U.S. Code.
Sec.  200.410   Amount of penalties and assessments for contracting
organization.
    (a) Penalties.\3\ (1) The DHA may impose a penalty of up to $25,000
for each individual violation under
[[Page 18447]]
Sec.  200.400, except as provided in this section.
---------------------------------------------------------------------------
    \3\ The penalty amounts in this section are adjusted for
inflation annually. Adjusted amounts are published at 32 CFR part
269.
---------------------------------------------------------------------------
    (2) The DHA may impose a penalty of up to $100,000 for each
individual violation under Sec.  200.400(a)(3).
    (b) Additional penalties. In addition to the penalties described in
paragraph (a) of this section, the DHA may impose--
    (1) An additional penalty equal to double the amount of excess
premium charged by the contracting organization for each individual
violation of Sec.  200.400(a)(2). The excess premium amount will be
deducted from the penalty and returned to the enrollee.
    (2) An additional $30,000 \4\ penalty for each individual expelled
or not enrolled in violation of Sec.  200.400(a)(3).
---------------------------------------------------------------------------
    \4\ This penalty amount is adjusted for inflation annually.
Adjusted amounts are published at 32 CFR part 269.
---------------------------------------------------------------------------
 Sec.  200.420   Determinations regarding the amount of penalties and
assessments.
    In considering the factors listed in Sec.  200.140, aggravating
circumstances include--
    (a) Such violations were of several types or occurred over a
lengthy period of time;
    (b) There were many such violations (or the nature and
circumstances indicate a pattern of incidents);
    (c) The amount of money, remuneration, damages, or tainted claims
involved in the violation was $15,000 or more; or
    (d) Patient harm, premature discharge, or a need for additional
services or subsequent hospital admission resulted, or could have
resulted, from the incident; and
    (e) The contracting organization knowingly or routinely engaged in
any prohibited practice that acted as an inducement to reduce or limit
medically necessary services provided with respect to a specific
enrollee in the organization.
Subparts E-N [Reserved]
Subpart O--Procedures for the Imposition of CMPs and Assessments
Sec.  200.1500  Notice of proposed determination.
    (a) If the DHA proposes a penalty and, when applicable, an
assessment, as applicable, in accordance with this part, the DHA must
serve on the respondent, in any manner authorized by Rule 4 of the
Federal Rules of Civil Procedure, written notice of the DHA's intent to
impose a penalty and if applicable an assessment. The notice will
include--
    (1) Reference to the statutory basis for the penalty and the
assessment;
    (2) A description of the violation for which the penalty, and
assessment are proposed (except in cases in which the DHA is relying
upon statistical sampling in accordance with Sec.  200.1580, in which
case the notice shall describe those claims and requests for payment
constituting the sample upon which the DHA is relying and will briefly
describe the statistical sampling technique used by the DHA);
    (3) The reason why such violation subjects the respondent to a
penalty, and an assessment;
    (4) The amount of the proposed penalty and assessment (where
applicable);
    (5) Any factors and circumstances described in this part that were
considered when determining the amount of the proposed penalty and
assessment;
    (6) Instructions for responding to the notice, including--
    (i) A specific statement of the respondent's right to a hearing;
and
    (ii) A statement that failure to request a hearing within 60 days
permits the imposition of the proposed penalty, assessment, without
right of appeal; and
    (b) Any person upon whom the DHA has proposed the imposition of a
penalty, and/or an assessment, may appeal such proposed penalty, and/or
assessment to the Departmental Appeals Board in accordance with Sec.
200.2002. The provisions of subpart P of this part govern such appeals.
    (c) If the respondent fails, within the time period permitted, to
exercise his or her right to a hearing under this section, any penalty,
and/or assessment becomes final.
Sec.  200.1510   Failure to request a hearing.
    If the respondent does not request a hearing within 60 days after
the notice prescribed by Sec.  200.1500(a) is received, as determined
by Sec.  200.2002(c), by the respondent, the DHA may impose the
proposed penalty and assessment, or any less severe penalty and
assessment. The DHA shall notify the respondent in any manner
authorized by Rule 4 of the Federal Rules of Civil Procedure of any
penalty and assessment that have been imposed and of the means by which
the respondent may satisfy the judgment. The respondent has no right to
appeal a penalty, an assessment with respect to which he or she has not
made a timely request for a hearing under Sec.  200.2002.
Sec.  200.1520   Collateral estoppel.
    (a) Where a final determination pertaining to the respondent's
liability for acts that violate this part has been rendered in any
proceeding in which the respondent was a party and had an opportunity
to be heard, the respondent shall be bound by such determination in any
proceeding under this part.
    (b) In a proceeding under this part, a person is estopped from
denying the essential elements of the criminal offense if the
proceeding--
    (1) Is against a person who has been convicted (whether upon a
verdict after trial or upon a plea of guilty or nolo contendere) of a
Federal crime charging fraud or false statements; and
    (2) Involves the same transactions as in the criminal action.
Sec.  200.1530   Settlement.
    The DHA has exclusive authority to settle any issues or case
without consent of the ALJ.
Sec.  200.1540   Judicial review.
    (a) Section 1128A(e) of the Social Security Act authorizes judicial
review of a penalty and an assessment that has become final. The only
matters subject to judicial review are those that the respondent raised
pursuant to Sec.  200.2021, unless the court finds that extraordinary
circumstances existed that prevented the respondent from raising the
issue in the underlying administrative appeal.
    (b) A respondent must exhaust all administrative appeal procedures
established by the Secretary or required by law before a respondent may
bring an action in Federal court, as provided in section 1128A(e) of
the Social Security Act, concerning any penalty and assessment imposed
pursuant to this part.
    (c) Administrative remedies are exhausted when a decision becomes
final in accordance with Sec.  200.2021(j).
Sec.  200.1550   Collection of penalties and assessments.
    (a) Once a determination by the Secretary has become final,
collection of any penalty and assessment will be the responsibility of
the Defense Health Agency.
    (b) A penalty or an assessment imposed under this part may be
compromised by the DHA and may be recovered in a civil action brought
in the United States district court for the district where the claim
was presented or where the respondent resides.
    (c) The amount of penalty or assessment, when finally determined,
or the amount agreed upon in compromise, may be deducted from any sum
then or later owing by the United States Government or a State agency
to the person against whom the penalty or assessment has been assessed.
    (d) Matters that were raised, or that could have been raised, in a
hearing
[[Page 18448]]
before an ALJ or in an appeal under section 1128A(e) of the Social
Security Act may not be raised as a defense in a civil action by the
United States to collect a penalty or assessment under this part.
Sec.  200.1560   Notice to other agencies.
    Whenever a penalty and/or an assessment becomes final, the
following organizations and entities will be notified about such action
and the reasons for it: HHS Office of Inspector General, the
appropriate State or local medical or professional association; the
appropriate quality improvement organization; as appropriate, the State
agency that administers each State health care program; the appropriate
TRICARE Contractor; the appropriate State or local licensing agency or
organization (including the Medicare and Medicaid State survey
agencies); and the long-term-care ombudsman.
Sec.  200.1570   Limitations.
    No action under this part will be entertained unless commenced, in
accordance with Sec.  200.1500(a), within 6 years from the date on
which the violation occurred.
Sec.  200.1580   Statistical sampling.
    (a) In meeting the burden of proof in Sec.  200.2015, the DHA may
introduce the results of a statistical sampling study as evidence of
the number and amount of claims and/or requests for payment, as
described in this part, that were presented, or caused to be presented,
by the respondent. Such a statistical sampling study, if based upon an
appropriate sampling and computed by valid statistical methods, shall
constitute prima facie evidence of the number and amount of claims or
requests for payment, as described in this part.
    (b) Once the DHA has made a prima facie case, as described in
paragraph (a) of this section, the burden of production shall shift to
the respondent to produce evidence reasonably calculated to rebut the
findings of the statistical sampling study. The DHA will then be given
the opportunity to rebut this evidence.
    (c) Where the DHA establishes a number and amount of claims subject
to penalties using a statistical sampling study, the DHA may use the
results of the study to extrapolate a total amount of overpaid funds to
be collected pursuant to 32 CFR 199.11.
Sec. Sec.  200.1590-200.1990   [Reserved]
Subpart P--Appeals of CMPs and Assessments
Sec.  200.2001   Definitions.
    For purposes of this subpart, the following definitions apply:
    Civil money penalty cases refer to all proceedings arising under
any of the statutory bases for which the DHA has been delegated
authority to impose civil money penalties under TRICARE.
    DAB refers to the Department of Health and Human Services,
Departmental Appeals Board or its delegate, or other administrative
appeals decision maker designated by the Director, DHA.
Sec.  200.2002   Hearing before an ALJ.
    (a) A party sanctioned under any criteria specified in this part
may request a hearing before an ALJ.
    (b) In civil money penalty cases, the parties to the proceeding
will consist of the respondent and the DHA.
    (c) The request for a hearing will be made in writing to the DAB;
signed by the petitioner or respondent, or by his or her attorney; and
sent by certified mail. The request must be filed within 60 days after
the notice, provided in accordance with Sec.  200.1500, is received by
the petitioner or respondent. For purposes of this section, the date of
receipt of the notice letter will be presumed to be 5 days after the
date of such notice unless there is a reasonable showing to the
contrary.
    (d) The request for a hearing will contain a statement as to the
specific issues or findings of fact and conclusions of law in the
notice letter with which the petitioner or respondent disagrees, and
the basis for his or her contention that the specific issues or
findings and conclusions were incorrect.
    (e) The ALJ will dismiss a hearing request where--
    (1) The petitioner's or the respondent's hearing request is not
filed in a timely manner;
    (2) The petitioner or respondent withdraws his or her request for a
hearing;
    (3) The petitioner or respondent abandons his or her request for a
hearing; or
    (4) The petitioner's or respondent's hearing request fails to raise
any issue which may properly be addressed in a hearing.
Sec.  200.2003   Rights of parties.
    (a) Except as otherwise limited by this part, all parties may--
    (1) Be accompanied, represented and advised by an attorney;
    (2) Participate in any conference held by the ALJ;
    (3) Conduct discovery of documents as permitted by this part;
    (4) Agree to stipulations of fact or law which will be made part of
the record;
    (5) Present evidence relevant to the issues at the hearing;
    (6) Present and cross-examine witnesses;
    (7) Present oral arguments at the hearing as permitted by the ALJ;
and
    (8) Submit written briefs and proposed findings of fact and
conclusions of law after the hearing.
    (b) Fees for any services performed on behalf of a party by an
attorney are not subject to the provisions of section 206 of title II
of the Act, which authorizes the Secretary to specify or limit these
fees.
Sec.  200.2004   Authority of the ALJ.
    (a) The ALJ will conduct a fair and impartial hearing, avoid delay,
maintain order and assure that a record of the proceeding is made.
    (b) The ALJ has the authority to--
    (1) Set and change the date, time and place of the hearing upon
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to
consider other matters that may aid in the expeditious disposition of
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses at
hearings and the production of documents at or in relation to hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of documentary discovery as
permitted by this part;
    (8) Regulate the course of the hearing and the conduct of
representatives, parties, and witnesses;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude or limit evidence;
    (11) Upon motion of a party, take official notice of facts;
    (12) Upon motion of a party, decide cases, in whole or in part, by
summary judgment where there is no disputed issue of material fact; and
    (13) Conduct any conference, argument or hearing in person or, upon
agreement of the parties, by telephone.
    (c) The ALJ does not have the authority to--
    (1) Find invalid or refuse to follow Federal statutes or
regulations or secretarial delegations of authority;
    (2) Enter an order in the nature of a directed verdict;
[[Page 18449]]
    (3) Compel settlement negotiations;
    (4) Enjoin any act of the Secretary; or
    (5) Review the exercise of discretion by the DHA to impose a CMP or
assessment under this part.
Sec.  200.2005   Ex parte contacts.
    No party or person (except employees of the ALJ's office) will
communicate in any way with the ALJ on any matter at issue in a case,
unless on notice and opportunity for all parties to participate. This
provision does not prohibit a person or party from inquiring about the
status of a case or asking routine questions concerning administrative
functions or procedures.
Sec.  200.2006   Prehearing conferences.
    (a) The ALJ will schedule at least one prehearing conference, and
may schedule additional prehearing conferences as appropriate, upon
reasonable notice to the parties.
    (b) The ALJ may use prehearing conferences to discuss the
following--
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleadings,
including the need for a more definite statement;
    (3) Stipulations and admissions of fact or as to the contents and
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a
stipulated record;
    (5) Whether a party chooses to waive appearance at an oral hearing
and to submit only documentary evidence (subject to the objection of
other parties) and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of
proposed exhibits;
    (8) Discovery of documents as permitted by this part;
    (9) The time and place for the hearing;
    (10) Such other matters as may tend to encourage the fair, just and
expeditious disposition of the proceedings; and
    (11) Potential settlement of the case.
    (c) The ALJ will issue an order containing the matters agreed upon
by the parties or ordered by the ALJ at a prehearing conference.
Sec.  200.2007   Discovery.
    (a) A party may make a request to another party for production of
documents for inspection and copying which are relevant and material to
the issues before the ALJ.
    (b) For the purpose of this section, the term documents includes
information, reports, answers, records, accounts, papers and other data
and documentary evidence. Nothing contained in this section will be
interpreted to require the creation of a document, except that
requested data stored in an electronic data storage system will be
produced in a form accessible to the requesting party.
    (c) Requests for documents, requests for admissions, written
interrogatories, depositions and any forms of discovery, other than
those permitted under paragraph (a) of this section, are not
authorized.
    (d) This section will not be construed to require the disclosure of
interview reports or statements obtained by any party, or on behalf of
any party, of persons who will not be called as witnesses by that
party, or analyses and summaries prepared in conjunction with the
investigation or litigation of the case, or any otherwise privileged
documents.
    (e)(1) When a request for production of documents has been
received, within 30 days the party receiving that request will either
fully respond to the request, or state that the request is being
objected to and the reasons for that objection. If objection is made to
part of an item or category, the part will be specified. Upon receiving
any objections, the party seeking production may then, within 30 days
or any other time frame set by the ALJ, file a motion for an order
compelling discovery. (The party receiving a request for production may
also file a motion for protective order any time prior to the date the
production is due.)
    (2) The ALJ may grant a motion for protective order or deny a
motion for an order compelling discovery if the ALJ finds that the
discovery sought--
    (i) Is irrelevant;
    (ii) Is unduly costly or burdensome;
    (iii) Will unduly delay the proceeding; or
    (iv) Seeks privileged information.
    (3) The ALJ may extend any of the time frames set forth in
paragraph (e)(1) of this section.
    (4) The burden of showing that discovery should be allowed is on
the party seeking discovery.
Sec.  200.2008   Exchange of witness lists, witness statements and
exhibits.
    (a) At least 15 days before the hearing, the ALJ will order the
parties to exchange witness lists, copies of prior written statements
of proposed witnesses and copies of proposed hearing exhibits,
including copies of any written statements that the party intends to
offer in lieu of live testimony in accordance with Sec.  200.2016.
    (b)(1) If at any time a party objects to the proposed admission of
evidence not exchanged in accordance with paragraph (a) of this
section, the ALJ will determine whether the failure to comply with
paragraph (a) of this section should result in the exclusion of such
evidence.
    (2) Unless the ALJ finds that extraordinary circumstances justified
the failure to timely exchange the information listed under paragraph
(a) of this section, the ALJ must exclude from the party's case-in-
chief:
    (i) The testimony of any witness whose name does not appear on the
witness list; and
    (ii) Any exhibit not provided to the opposing party as specified in
paragraph (a) of this section.
    (3) If the ALJ finds that extraordinary circumstances existed, the
ALJ must then determine whether the admission of such evidence would
cause substantial prejudice to the objecting party. If the ALJ finds
that there is no substantial prejudice, the evidence may be admitted.
If the ALJ finds that there is substantial prejudice, the ALJ may
exclude the evidence, or at his or her discretion, may postpone the
hearing for such time as is necessary for the objecting party to
prepare and respond to the evidence.
    (c) Unless another party objects within a reasonable period of time
prior to the hearing, documents exchanged in accordance with paragraph
(a) of this section will be deemed to be authentic for the purpose of
admissibility at the hearing.
Sec.  200.2009   Subpoenas for attendance at hearing.
    (a) A party wishing to procure the appearance and testimony of any
individual at the hearing may make a motion requesting the ALJ to issue
a subpoena if the appearance and testimony are reasonably necessary for
the presentation of a party's case.
    (b) A subpoena requiring the attendance of an individual in
accordance with paragraph (a) of this section may also require the
individual (whether or not the individual is a party) to produce
evidence authorized under Sec.  200.2007 at or prior to the hearing.
    (c) When a subpoena is served by a respondent or petitioner on a
particular individual or particular office of the DHA, the DHA may
comply by designating any of its representatives to appear and testify.
    (d) A party seeking a subpoena will file a written motion not less
than 30 days before the date fixed for the hearing, unless otherwise
allowed by the ALJ for good cause shown. Such request will:
[[Page 18450]]
    (1) Specify any evidence to be produced;
    (2) Designate the witnesses; and
    (3) Describe the address and location with sufficient particularity
to permit such witnesses to be found.
    (e) The subpoena will specify the time and place at which the
witness is to appear and any evidence the witness is to produce.
    (f) Within 15 days after the written motion requesting issuance of
a subpoena is served, any party may file an opposition or other
response.
    (g) If the motion requesting issuance of a subpoena is granted, the
party seeking the subpoena will serve it by delivery to the individual
named, or by certified mail addressed to such individual at his or her
last dwelling place or principal place of business.
    (h) The individual to whom the subpoena is directed may file with
the ALJ a motion to quash the subpoena within 10 days after service.
    (i) The exclusive remedy for contumacy by, or refusal to obey a
subpoena duly served upon, any person is specified in section 205(e) of
the Social Security Act (42 U.S.C. 405(e)).
Sec.  200.2010   Fees.
    The party requesting a subpoena will pay the cost of the fees and
mileage of any witness subpoenaed in the amounts that would be payable
to a witness in a proceeding in United States District Court. A check
for witness fees and mileage will accompany the subpoena when served,
except that when a subpoena is issued on behalf of the DHA, a check for
witness fees and mileage need not accompany the subpoena.
Sec.  200.2011   Form, filing and service of papers.
    (a) Forms. (1) Unless the ALJ directs the parties to do otherwise,
documents filed with the ALJ will include an original and two copies.
    (2) Every pleading and paper filed in the proceeding will contain a
caption setting forth the title of the action, the case number, and a
designation of the paper, such as motion to quash subpoena.
    (3) Every pleading and paper will be signed by, and will contain
the address and telephone number of the party or the person on whose
behalf the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed.
    (b) Service. A party filing a document with the ALJ or the
Secretary will, at the time of filing, serve a copy of such document on
every other party. Service upon any party of any document will be made
by delivering a copy, or placing a copy of the document in the United
States mail, postage prepaid and addressed, or with a private delivery
service, to the party's last known address. When a party is represented
by an attorney, service will be made upon such attorney in lieu of the
party.
    (c) Proof of service. A certificate of the individual serving the
document by personal delivery or by mail, setting forth the manner of
service, will be proof of service.
Sec.  200.2012   Computation of time.
    (a) In computing any period of time under this part or in an order
issued thereunder, the time begins with the day following the act,
event or default, and includes the last day of the period unless it is
a Saturday, Sunday or legal holiday observed by the Federal Government,
in which event it includes the next business day.
    (b) When the period of time allowed is less than 7 days,
intermediate Saturdays, Sundays and legal holidays observed by the
Federal Government will be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the
mail, an additional 5 days will be added to the time permitted for any
response. This paragraph (c) does not apply to requests for hearing
under Sec.  200.2002.
Sec.  200.2013   Motions.
    (a) An application to the ALJ for an order or ruling will be by
motion. Motions will state the relief sought, the authority relied upon
and the facts alleged, and will be filed with the ALJ and served on all
other parties.
    (b) Except for motions made during a prehearing conference or at
the hearing, all motions will be in writing. The ALJ may require that
oral motions be reduced to writing.
    (c) Within 10 days after a written motion is served, or such other
time as may be fixed by the ALJ, any party may file a response to such
motion.
    (d) The ALJ may not grant a written motion before the time for
filing responses has expired, except upon consent of the parties or
following a hearing on the motion, but may overrule or deny such motion
without awaiting a response.
    (e) The ALJ will make a reasonable effort to dispose of all
outstanding motions prior to the beginning of the hearing.
Sec.  200.2014   Sanctions.
    (a) The ALJ may sanction a person, including any party or attorney,
for failing to comply with an order or procedure, for failing to defend
an action or for other misconduct that interferes with the speedy,
orderly or fair conduct of the hearing. Such sanctions will reasonably
relate to the severity and nature of the failure or misconduct. Such
sanction may include--
    (1) In the case of refusal to provide or permit discovery under the
terms of this part, drawing negative factual inferences or treating
such refusal as an admission by deeming the matter, or certain facts,
to be established;
    (2) Prohibiting a party from introducing certain evidence or
otherwise supporting a particular claim or defense;
    (3) Striking pleadings, in whole or in part;
    (4) Staying the proceedings;
    (5) Dismissal of the action;
    (6) Entering a decision by default; and
    (7) Refusing to consider any motion or other action that is not
filed in a timely manner.
    (b) In civil money penalty cases commenced under section 1128A of
the Social Security Act or under any provision which incorporates
section 1128A(c)(4) of the Social Security Act, the ALJ may also order
the party or attorney who has engaged in any of the acts described in
paragraph (a) of this section to pay attorney's fees and other costs
caused by the failure or misconduct.
Sec.  200.2015   The hearing and burden of proof.
    (a) The ALJ will conduct a hearing on the record in order to
determine whether the petitioner or respondent should be found liable
under this part.
    (b) With regard to the burden of proof in civil money penalty cases
under this part--
    (1) The respondent or petitioner, as applicable, bears the burden
of going forward and the burden of persuasion with respect to
affirmative defenses and any mitigating circumstances; and
    (2) The DHA bears the burden of going forward and the burden of
persuasion with respect to all other issues.
    (c) The burden of persuasion will be judged by a preponderance of
the evidence.
    (d) The hearing will be open to the public unless otherwise ordered
by the ALJ for good cause shown.
    (e)(1) A hearing under this part is not limited to specific items
and information set forth in the notice letter to the petitioner or
respondent. Subject to the 15-day requirement under Sec.  200.2008,
additional items and information, including aggravating or mitigating
circumstances that arose or
[[Page 18451]]
became known subsequent to the issuance of the notice letter, may be
introduced by either party during its case-in-chief unless such
information or items are--
    (i) Privileged; or
    (ii) Deemed otherwise inadmissible under Sec.  200.2017.
    (2) After both parties have presented their cases, evidence may be
admitted on rebuttal even if not previously exchanged in accordance
with Sec.  200.2008.
Sec.  200.2016   Witnesses.
    (a) Except as provided in paragraph (b) of this section, testimony
at the hearing will be given orally by witnesses under oath or
affirmation.
    (b) At the discretion of the ALJ, testimony (other than expert
testimony) may be admitted in the form of a written statement. The ALJ
may, at his or her discretion, admit prior sworn testimony of experts
which has been subject to adverse examination, such as a deposition or
trial testimony. Any such written statement must be provided to all
other parties along with the last known address of such witnesses, in a
manner that allows sufficient time for other parties to subpoena such
witness for cross-examination at the hearing. Prior written statements
of witnesses proposed to testify at the hearing will be exchanged as
provided in Sec.  200.2008.
    (c) The ALJ will exercise reasonable control over the mode and
order of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the
ascertainment of the truth;
    (2) Avoid repetition or needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination of witnesses as may be required for a full and true
disclosure of the facts.
    (e) The ALJ may order witnesses excluded so that they cannot hear
the testimony of other witnesses. This does not authorize exclusion
of--
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, an officer or
employee of the party appearing for the entity pro se or designated as
the party's representative; or
    (3) An individual whose presence is shown by a party to be
essential to the presentation of its case, including an individual
engaged in assisting the attorney for the Inspector General (IG).
Sec.  200.2017   Evidence.
    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this part, the ALJ will not be bound by
the Federal Rules of Evidence. However, the ALJ may apply the Federal
Rules of Evidence where appropriate, for example, to exclude unreliable
evidence.
    (c) The ALJ must exclude irrelevant or immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative
value is substantially outweighed by the danger of unfair prejudice,
confusion of the issues, or by considerations of undue delay or
needless presentation of cumulative evidence.
    (e) Although relevant, evidence must be excluded if it is
privileged under Federal law.
    (f) Evidence concerning offers of compromise or settlement made in
this action will be inadmissible to the extent provided in Rule 408 of
the Federal Rules of Evidence.
    (g) Evidence of crimes, wrongs or acts other than those at issue in
the instant case is admissible in order to show motive, opportunity,
intent, knowledge, preparation, identity, lack of mistake, or existence
of a scheme. Such evidence is admissible regardless of whether the
crimes, wrongs or acts occurred during the statute of limitations
period applicable to the acts which constitute the basis for liability
in the case, and regardless of whether they were referenced in the
DHA's notice sent in accordance with Sec.  200.1500.
    (h) The ALJ will permit the parties to introduce rebuttal witnesses
and evidence.
    (i) All documents and other evidence offered or taken for the
record will be open to examination by all parties, unless otherwise
ordered by the ALJ for good cause shown.
    (j) The ALJ may not consider evidence regarding the issue of
willingness and ability to enter into and successfully complete a
corrective action plan when such evidence pertains to matters occurring
after the submittal of the case to the Secretary. The determination
regarding the appropriateness of any corrective action plan is not
reviewable.
Sec.  200.2018   The record.
    (a) The hearing will be recorded and transcribed. Transcripts may
be obtained following the hearing from the ALJ.
    (b) The transcript of testimony, exhibits and other evidence
admitted at the hearing, and all papers and requests filed in the
proceeding constitute the record for the decision by the ALJ and the
Secretary.
    (c) The record may be inspected and copied (upon payment of a
reasonable fee) by any person, unless otherwise ordered by the ALJ for
good cause shown.
    (d) For good cause, the ALJ may order appropriate redactions made
to the record.
Sec.  200.2019   Post-hearing briefs.
    The ALJ may require the parties to file post-hearing briefs. In any
event, any party may file a post-hearing brief. The ALJ will fix the
time for filing such briefs which are not to exceed 60 days from the
date the parties receive the transcript of the hearing or, if
applicable, the stipulated record. Such briefs may be accompanied by
proposed findings of fact and conclusions of law. The ALJ may permit
the parties to file reply briefs.
Sec.  200.2020   Initial decision.
    (a) The ALJ will issue an initial decision, based only on the
record, which will contain findings of fact and conclusions of law.
    (b) The ALJ may affirm, increase or reduce the penalties,
assessment proposed or imposed by the DHA.
    (c) The ALJ will issue the initial decision to all parties within
120 days after the time for submission of post-hearing briefs and reply
briefs, if permitted, has expired. The decision will be accompanied by
a statement describing the right of any party to file a notice of
appeal with the DAB and instructions for how to file such appeal. If
the ALJ fails to meet the deadline contained in this paragraph, he or
she will notify the parties of the reason for the delay and will set a
new deadline.
    (d) Except as provided in paragraph (e) of this section, unless the
initial decision is appealed to the DAB, it will be final and binding
on the parties 30 days after the ALJ serves the parties with a copy of
the decision. If service is by mail, the date of service will be deemed
to be 5 days from the date of mailing.
    (e) If an extension of time within which to appeal the initial
decision is granted under Sec.  200.2021(a), except as provided in
Sec.  200.2022(a), the initial decision will become final and binding
on the day following the end of the extension period.
Sec.  200.2021   Appeal to DAB.
    (a) Any party may appeal the initial decision of the ALJ to the DAB
by filing a notice of appeal with the DAB within 30 days of the date of
service of the initial decision. The DAB may extend the initial 30 day
period for a period of time not to exceed 30 days if a party files with
the DAB a request for an extension within the initial 30 day period and
shows good cause.
[[Page 18452]]
    (b) If a party files a timely notice of appeal with the DAB, the
ALJ will forward the record of the proceeding to the DAB.
    (c) A notice of appeal will be accompanied by a written brief
specifying exceptions to the initial decision and reasons supporting
the exceptions. Any party may file a brief in opposition to exceptions,
which may raise any relevant issue not addressed in the exceptions,
within 30 days of receiving the notice of appeal and accompanying
brief. The DAB may permit the parties to file reply briefs.
    (d) There is no right to appear personally before the DAB or to
appeal to the DAB any interlocutory ruling by the ALJ, except on the
timeliness of a filing of the hearing request.
    (e) The DAB will not consider any issue not raised in the parties'
briefs, nor any issue in the briefs that could have been raised before
the ALJ but was not.
    (f) If any party demonstrates to the satisfaction of the DAB that
additional evidence not presented at such hearing is relevant and
material and that there were reasonable grounds for the failure to
adduce such evidence at such hearing, the DAB may remand the matter to
the ALJ for consideration of such additional evidence.
    (g) The DAB may decline to review the case, or may affirm,
increase, reduce, reverse or remand any penalty or assessment
determined by the ALJ.
    (h) The standard of review on a disputed issue of fact is whether
the initial decision is supported by substantial evidence on the whole
record. The standard of review on a disputed issue of law is whether
the initial decision is erroneous.
    (i) Within 120 days after the time for submission of briefs and
reply briefs, if permitted, has expired, the DAB will issue to each
party to the appeal a copy of the DAB's decision and a statement
describing the right of any petitioner or respondent who is found
liable to seek judicial review.
    (j) Except with respect to any penalty or assessment remanded by
the ALJ, the DAB's decision, including a decision to decline review of
the initial decision, becomes final and binding 60 days after the date
on which the DAB serves the parties with a copy of the decision. If
service is by mail, the date of service will be deemed to be 5 days
from the date of mailing.
    (k)(1) Any petition for judicial review must be filed within 60
days after the DAB serves the parties with a copy of the decision. If
service is by mail, the date of service will be deemed to be 5 days
from the date of mailing.
    (2) In compliance with 28 U.S.C. 2112(a), a copy of any petition
for judicial review filed in any U.S. Court of Appeals challenging a
final action of the DAB will be sent by certified mail, return receipt
requested, to the General Counsel of the DHA. The petition copy will be
time-stamped by the clerk of the court when the original is filed with
the court.
    (3) If the General Counsel of the DHA receives two or more
petitions within 10 days after the DAB issues its decision, the General
Counsel of the DHA will notify the U.S. Judicial Panel on Multidistrict
Litigation of any petitions that were received within the 10-day
period.
Sec.  200.2022   Stay of initial decision.
    (a) In a CMP case under section 1128A of the Act, the filing of a
respondent's request for review by the DAB will automatically stay the
effective date of the ALJ's decision.
    (b)(1) After the DAB renders a decision in a CMP case, pending
judicial review, the respondent may file a request for stay of the
effective date of any penalty or assessment with the ALJ. The request
must be accompanied by a copy of the notice of appeal filed with the
Federal court. The filing of such a request will automatically act to
stay the effective date of the penalty or assessment until such time as
the ALJ rules upon the request.
    (2) The ALJ may not grant a respondent's request for stay of any
penalty or assessment unless the respondent posts a bond or provides
other adequate security.
    (3) The ALJ will rule upon a respondent's request for stay within
10 days of receipt.
Sec.  200.2023   Harmless error.
    No error in either the admission or the exclusion of evidence, and
no error or defect in any ruling or order or in any act done or omitted
by the ALJ or by any of the parties, including Federal representatives
or TRICARE contractors is ground for vacating, modifying or otherwise
disturbing an otherwise appropriate ruling or order or act, unless
refusal to take such action appears to the ALJ or the DAB inconsistent
with substantial justice. The ALJ and the DAB at every stage of the
proceeding will disregard any error or defect in the proceeding that
does not affect the substantial rights of the parties.
    Dated: April 26, 2019.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2019-08858 Filed 4-30-19; 8:45 am]
 BILLING CODE 5001-06-P