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Federal Register / Vol. 86, No. 177 / Thursday, September 16, 2021 / Proposed Rules requirement, or if CMS randomly selects an issuer or non-Federal governmental plan for examination under 150.303c, CMS may initiate a market conduct examination to ensure the entity is in compliance with applicable PHS Act requirements. CMS may conduct the examination either at the site of the issuer or other responsible entity, or a site CMS selects.
c Appointment of examiners. When CMS identifies an issue that warrants further review or randomly selects an issuer or non-Federal governmental plan for examination, CMS will appoint one or more examiners to perform the examination and instruct them as to the scope of the examination.

e Initiation of examination. CMS
initiates an examination by providing written notice to the responsible entity.
The notice does the following:
1 Describes the information received under 150.303a that served as the basis for CMSs determination that a market conduct examination is warranted, or notifies the responsible entity that it was selected by CMS for examination under 150.303c, as applicable;
2 Describes the scope of the examination;
3 Identifies the examiners;
4 States that a civil money penalty may be assessed; and 5 States that CMS may require a plan of corrective action.
f Documentation requests; extension of time. The responsible entity must forward to the site of examination any documentation CMS identifies as relevant for purposes of the examination. CMS will provide the responsible entity with an opportunity to provide additional information, including documentation of compliance as described in 150.311, that the responsible entity believes will aid CMS
in conducting the examination. This initial request will provide the responsible entity the date by which to forward the specified documentation to the location that CMS identifies. In circumstances in which an entity cannot prepare a response and provide the requested information to CMS by the deadline provided in the initial request, the entity may make a written request for an extension from CMS detailing the reason for the extension request and showing good cause. Examples of what CMS would consider good cause include, but are not limited to, when a responsible entity indicates it has limited staffing resources to prepare a response, or when a responsible entity requests clarification from CMS

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regarding its request for information. If CMS grants the extension, the responsible entity must respond to the documentation request within the time frame specified in CMSs letter granting the extension request. Failure to respond by the deadline provided in the initial request, or within the extended time frame, may result in CMSs imposition of a civil money penalty based upon the complaint or other information alleging or indicating a potential violation of applicable PHS
Act requirements.
g Field work. CMS will review the documentation submitted under paragraph f of this section. During the course of the examination, CMS may request additional information or documentation and will specify in the request the time frame allotted for providing it. In circumstances in which an entity cannot prepare a response and provide the requested information to CMS within the allotted time frame, the entity may submit to CMS a written request for an extension from CMS
detailing the reason for the extension request and showing good cause.
Examples of what CMS would consider good cause include, but are not limited to, when a responsible entity indicates it has limited staffing resources to prepare a response, or when a responsible entity requests clarification from CMS regarding its request for information. If CMS grants the extension, the responsible entity must respond to the documentation request within the time frame specified in CMSs letter granting the extension request. Failure to respond and provide such additional documentation to CMS
within the allotted time frame, or within an extended time frame as granted by CMS, may result in CMSs imposition of a civil money penalty based upon the complaint or other information alleging or indicating a potential violation of applicable PHS Act requirements.
During the course of the examination, upon review of the documentation submitted, CMS may identify and notify the responsible entity of any potential PHS Act violations and provide the responsible entity an opportunity to respond with additional information, including documentation of compliance as described in 150.311, that the responsible entity believes demonstrates compliance or will otherwise aid CMS
in conducting the examination.
h Draft report of market conduct examination1 Contents of report.
CMS will, upon completion of the examination, provide to the responsible entity a draft examination report that will include the scope of the examination, any findings of a PHS Act
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violation, and any proposed actions the responsible entity would need to take to correct such violation.
2 Response from the responsible entity. With respect to each examination issue identified in the draft examination report, the responsible entity may:
i Concur, in whole or in part, with CMSs positions as outlined in the draft examination report, explaining any corrective actions that have been or will be implemented; or ii Dispute, in whole or in part, CMSs positions, clearly outlining the basis for its dispute and submitting illustrative examples where appropriate.
i Final report of market conduct examination. Upon receipt of a response from the responsible entity under paragraph h2 of this section, CMS
will provide to the responsible entity a final examination report containing CMSs findings relevant to each examination issue that will consist of one or more of the following:
1 CMSs concurrence with the responsible entitys position;
2 CMSs disagreement with the responsible entitys position;
3 CMSs determination that any corrective actions implemented by the responsible entity sufficiently addressed the identified PHS Act violation;
4 CMSs determination that the corrective actions implemented by the responsible entity have not sufficiently addressed the identified PHS Act violation, and information on any further corrective actions deemed necessary by CMS; or 5 Notice to the responsible entity that has disagreed with a CMS finding and that has not undertaken corrective actions that there exists a violation of applicable PHS Act requirements and any actions the responsible entity must take prospectively to correct such violation.
34. Section 150.319 is amended by revising paragraph a1 to read as follows:
150.319 Determining the amount of the penaltymitigating circumstances.

a
1 Before receipt of the notice issued under 150.307 or 150.313e, implemented and followed a compliance plan as described in 150.311f.

35. Section 150.321 is amended by adding paragraph d to read as follows:
150.321 Determining the amount of penaltyaggravating circumstances.

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