[Federal Register: December 8, 2006 (Volume 71, Number 236)]
[Rules and Regulations]
[Page 71243-71337]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de06-16]
[[Page 71243]]
-----------------------------------------------------------------------
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
42 CFR Parts 460, 462, 466, 473, and 476
Medicare and Medicaid Programs; Programs of All-Inclusive Care for the
Elderly (PACE); Program Revisions; Final Rule
[[Page 71244]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 460, 462, 466, 473, and 476
[CMS-1201-F]
RIN 0938-AN83
Medicare and Medicaid Programs; Programs of All-Inclusive Care
for the Elderly (PACE); Program Revisions
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule finalizes the interim final rule with comment period
published in the Federal Register November 24, 1999 (64 FR 66234) and
the interim final rule with comment period published in the Federal
Register on October 1, 2002 (67 FR 61496). The November 1999 interim
final rule implemented sections 4801 through 4803 of the Balanced
Budget Act of 1997 (Pub. L. 105-33) and established requirements for
Programs of All-inclusive Care for the Elderly (PACE) under the
Medicare and Medicaid programs. The interim final rule with comment
period published on October 1, 2002 (67 FR 61496) implemented section
903 of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA) (Pub. L. 106-554).
DATES: Effective Date: These regulations are effective on January 8,
2007.
FOR FURTHER INFORMATION CONTACT: Jana Petze, (410) 786-4533, or Carrie
Smith, for State technical assistance, (410) 786-4485.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Program Description
B. Legislative History
1. Demonstration Project
2. Balanced Budget Act (BBA) of 1997 (Pub. L. 105-33)
a. Use of the PACE Protocol
b. Consultation With States
c. Consultation With State Agency on Aging
d. State Medicaid Plan Requirement
e. Interaction with Medicare + Choice (Now Medicare Advantage)
f. Flexibility Under the BBA
3. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
a. Background
b. Contracting for IDT Members and Administrative Staff
c. Contracting With Another Entity to Furnish PACE Center
Services
d. Oversight of Direct Patient Care Services
e. Waiver Process
4. Medicare Prescription Drug Improvement and Modernization Act
of 2003, (MMA)
II. Analysis of Public Comments
A. Summary of Comments on the 1999 Interim Final Rule
B. Summary of Comments on the 2002 Interim Final Rule
III. Provisions of the 1999 Interim Final Rule With Comment and the
2002 Interim Final Rule With Comment, Analysis of and Response to
Public Comments and Final Rule Actions
IV. Provisions of the Final Rule
V. Collection of Information Requirements
VI. Regulatory Impact Statement
Regulation Text
Addendum--PACE Protocol (1999)
ACRONYMS for the PACE Final Rule
ADLs Activities of Daily Living
BBA Balanced Budget Act of 1997
BIPA Medicare, Medicaid and SCHIP Benefits Improvement and Protection
Act of 2000
CAP Corrective Action Plan
CBRR Consumer Bill of Rights and Responsibilities
CMS Centers for Medicare & Medicaid Services
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985
COP Condition of Participation
CHSPR Center for Health Services and Policy Research
CMS-HCC CMS Hierarchical Conditions Category
ESRD End-Stage Renal Disease
FFP Federal Financial Participation
HOS Health Outcomes Survey
HPMS Health Plan Management System
IDT Interdisciplinary Team
IRE Independent Review Entity
LCS Life Safety Code
MA Medicare Advantage (formerly Medicare + Choice(M + C))
MA-PDP Medicare Advantage--Prescription Drug Plan
M + C Medicare + Choice (now Medicare Advantage (MA))
MMA Medicare Prescription Drug[fxsp0]Improvement
and[fxsp0]Modernization Act of 2003
NF Nursing Facility
NPA National PACE Association
OBCQI Outcome-Based Continuous Quality Improvement
PACE Programs of All-inclusive Care for the Elderly
PCA Personal Care Attendant
PCP Primary Care Physician
PHS PACE Health Survey
PO PACE Organization
QAPI Quality Assessment and Performance Improvement
RAI Request for Additional Information
SAA State Administering Agency
SFH State Fair Hearing
SPA State Plan Amendment
SSA Social Security Administration
Requirements for Issuance of Regulations
Section 902 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173 enacted on December 8,
2003, amended section 1871(a) of the Social Security Act (the Act))
requires the Secretary, in consultation with the Director of the Office
of Management and Budget, to establish and publish timelines for the
publication of Medicare final regulations based on the previous
publication of a Medicare proposed or interim final regulation. Section
902 of the MMA states that the timelines for these regulations may vary
among different regulations but shall not exceed 3 years after
publication of the preceding proposed or interim final regulation
except under exceptional circumstances. Section 902 also directs the
Secretary to establish an appropriate period for finalizing those
interim final regulations that were published before the enactment of
MMA on December 8, 2003. Pursuant to this requirement, we published a
notice in the Federal Register (69 FR 78442) establishing a publication
deadline of 3 years from MMA enactment, that is December 8, 2006, for
finalizing interim final rules published prior to MMA enactment.
This final rule finalizes provisions set forth in the November 24,
1999 and October 1, 2002 interim final rules with comment. These
interim final regulations will be finalized within the 3-year period
after MMA enactment that was established under section of the MMA 902.
Therefore, we believe that this final rule is in accordance with the
Congress' intent to ensure timely publication of final regulations.
I. Background
A. Program Description
The Program of All-inclusive Care for the Elderly (PACE) program is
a unique model of managed care service delivery for the frail
community-dwelling elderly, most of whom are dually eligible for
Medicare and Medicaid benefits, and all of whom are assessed as being
eligible for nursing home placement according to the standards
established by their respective States.
B. Legislative History
1. Demonstration Project
Section 603(c) of the Social Security Amendments of 1983 (Pub. L.
98-21), as extended by section 9220 of the Consolidated Omnibus Budget
[[Page 71245]]
Reconciliation Act of 1985 (COBRA) (Pub. L. 99-272) authorized the
original demonstration PACE program for On Lok Senior Health Services
(On Lok) in San Francisco. Section 9412(b) of Pub. L. 99-509, the
Omnibus Budget Reconciliation Act of 1986 (OBRA, 1986), authorized us
to conduct a PACE demonstration program to determine whether the model
of care developed by On Lok could be replicated across the country. The
number of sites was originally limited to 10, but the Omnibus Budget
Reconciliation Act of l990 (Pub. L. 101-508) authorized an increase to
15 PACE demonstration programs.
The PACE model of care includes as core services the provision of
adult day health care and interdisciplinary team (IDT) care management,
through which access to and allocation of all health services is
managed. Physician, therapeutic, ancillary, and social support services
are furnished in the participant's residence or on-site at a PACE
center. Hospital, nursing home, home health, and other specialized
services are generally furnished under contract. Financing of the PACE
demonstration model was accomplished through prospective capitation of
both Medicare and Medicaid. PACE demonstration programs had been
permitted by section 4118(g) of Pub. L. 100-203 (OBRA 1987) to assume
full financial risk progressively over the initial three years. As such
authority was removed by section 4803(b)(1)(B) of the Balanced Budget
Act of 1997 (BBA) (Pub. L. 105-33), PACE demonstration programs
approved after August 5, 1997 had to assume full financial risk at
start-up.
The PACE demonstration program was operated under a Protocol
established and published by On Lok, Inc. on April 4, 1995.
2. Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33)
The BBA built on the success of the PACE demonstration program.
Section 4801 of the BBA, authorized coverage of PACE under the Medicare
program. It amended title XVIII of the Act by adding section 1894,
which addresses Medicare payments and coverage of benefits under PACE.
Section 4802 of the BBA authorized the establishment of PACE as a State
option under Medicaid. It amended title XIX of the Act by adding
section 1934, which directly parallels the provisions of section 1894.
Section 4803 of the BBA addresses implementation of PACE under both
Medicare and Medicaid, the effective date, timely issuance of
regulations, priority and special consideration in processing
applications, and transition from PACE demonstration program status.
As directed by section 4803 of BBA, we published an interim final
rule on November 24, 1999, permitting entities to establish and operate
PACE programs under section 1894 and 1934 of the Act (64 FR 66234).
The 1999 interim final rule was a comprehensive rule that addressed
eligibility, administrative requirements, application procedures,
services, payment, participant rights, and quality assurance.
a. Use of the PACE Protocol
Throughout the 1999 interim final rule, when we referred to ``the
Protocol'' we meant the PACE Protocol, as published by On Lok, Inc.,
the parent company of On Lok Senior Health Services. A copy of the
Protocol was included as an attachment to the 1999 interim final rule
with comment period.
We were directed by sections 1894(f)(2) and 1934(f)(2) of the Act
to incorporate into regulation the requirements applied to PACE
demonstration programs under the Protocol, to the extent consistent
with the provisions of sections 1894 and 1934 of the Act. We also were
authorized to modify or waive certain provisions of the Protocol in the
development of the regulation, if the modification or waiver were not
inconsistent with and would not impair the essential elements,
objectives, and requirements of sections 1894 and 1934 of the Act.
b. Consultation With States
Sections 4801 and 4802 of Pub. L. 105-33 clearly dictate a
cooperative relationship between the Secretary and the States in the
development, implementation and administration of the PACE program. In
order to fulfill these requirements, we utilized the American Public
Human Services (formerly, the American Public Welfare Association) as
the conduit to solicit States for volunteers to consult with CMS staff.
The participating State staff members represented States with a range
of PACE experience. Each State staff volunteer selected a specific
target area to provide information.
In order to efficiently and effectively obtain a large amount of
feedback in a short period of time, CMS staff arranged a series of
conference calls to discuss a wide range of issues pertaining to PACE
including requirements on the application process, enrollment, and
payment and related financial data collection. Each subject area
discussion included CMS staff and two to three State representatives.
The feedback obtained during these meetings was an invaluable source of
information in understanding State operational concerns and in
constructing the regulation. We believed that this approach would
minimize operational barriers that are frequently inherent when new
programs are initiated. For this reason, CMS continues to regularly
consult and receive feedback from States regarding PACE policy by means
of teleconferences and forums.
c. Consultation With State Agency on Aging
Under the Older Americans Act, State Agencies on Aging were charged
with the responsibility of promoting comprehensive and coordinated
service systems for older persons in their States. Consistent with this
responsibility, State Agencies on Aging oversee important programs for
home and community-based services which are funded through title III of
the Older Americans Act, State revenues, and the Medicaid home and
community-based waiver program.
The State agencies also implement and oversee important planning,
referral, case management, and quality assurance functions. In
addition, State agencies are responsible for administering the State
Long Term Care Ombudsman Program through which service quality in
nursing homes and board and care homes are monitored in every State.
Each State agency that administers the PACE program should
regularly consult with their respective State Agency on Aging in order
to avoid service duplication in the PACE service areas and to assure
the delivery and quality of services to PACE participants. In our 1999
interim final rule, we indicated we were considering the extent to
which the State Long Term Care Ombudsman Program would be useful in
promoting the rights of PACE participants and in monitoring the quality
of care provided by PACE organizations (POs). We received a number of
comments on this issue that we discuss in Subpart G ``Participant
Rights'' of this final rule.
d. State Medicaid Plan Requirement
The State Medicaid plan is a comprehensive written statement
submitted by the State and approved by CMS describing the nature and
scope of the Medicaid program and giving assurance that the Medicaid
program will be administered according to Federal law and policy. The
State plan preprint sets forth the scope of the Medicaid program,
including groups covered, services furnished, and
[[Page 71246]]
payment policy. When a State completes a new State plan preprint page
because of changes in its Medicaid program (called a ``State plan
amendment (SPA)''), the preprint page must be approved by CMS in order
for the State to receive Federal matching funds.
Section 1905(a)(26) of the Act, as added by section 4802(a)(1) of
the BBA, provided authority for States to elect PACE as an optional
Medicaid benefit. The State plan electing the optional PACE program
must be approved before CMS and the State enter into a program
agreement with a PO. To aid States in modifying their State plans, the
CMS Center for Medicaid and State Operations developed an interim State
plan preprint for PACE. A State Medicaid letter dated March 23, 1998,
provided information and guidance to State Medicaid agencies on how to
satisfy the State plan amendment requirement. Additional directions for
completing the State plan amendment were provided in a State Medicaid
Director letter that was issued November 9, 2000. The most current
version of the State Plan preprint is available on the CMS PACE
homepage, http://www.cms.hhs.gov/PACE/04_InformationforStateAgencies.asp
.
e. Interaction With Medicare+Choice (Now Medicare Advantage)
The BBA also established the Medicare+Choice (M+C) program, which
expanded the health care options available to Medicare beneficiaries.
Under the M+C program, beneficiaries could elect to receive Medicare
benefits through enrollment in one of several private health plan
choices beyond the original (fee-for-service) Medicare program or
choose a plan previously available through managed care organizations
under section 1876 of the Act.
The BBA set forth the requirements for M+C organizations in a new
Part C of title XVIII of the Act. The interim final rule that
implemented the M+C program was published June 26, 1998 (63 FR 34968).
The final regulation addressing comments was published on February 17,
1999 (64 FR 7968).
Significant changes were made to the M+C program by the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
(Pub. L. 108-173, enacted on December 8, 2003). The two final
regulations that implemented the MMA were published January 28, 2005
(70 FR 4194 and 4588). The first regulation established the Medicare
Prescription Drug Benefit or Medicare Part D and the second regulation
established the Medicare Advantage (MA) program which replaced the M+C
program.
In this final rule, we are finalizing our regulations that
implement the PACE provisions of the BBA and BIPA statutes. We are
limiting our discussion of the effects of MMA provisions to those
issues that have been addressed in other MMA rulemaking. We think our
regulations on Part D and MA provide sufficient and appropriate
guidance to all affected entities, including POs. However, we believe
it is essential to highlight the impact of MMA, particularly with
respect to how Medicare Part D relates to a PO. Specifically, the MMA
provides that POs electing to provide Part D coverage to their
enrollees shall be treated in a manner similar to Medicare Advantage
Prescription Drug Plans (MA-PDPs). A more detailed discussion of the
relevant MMA provisions is provided later in this section.
Although the PACE program has certain fundamental similarities to
M+C (now MA), PACE is not a M+C plan. The BBA established separate and
distinct requirements for the PACE program. PACE is similar to some M+C
options in these ways: it is capitated; it is risk-based; it provides
managed care; and it is an elective option. However, PACE differs
significantly from M+C plans in other ways such as: it is not available
nationwide (only in a limited number of sites); statutory waivers
expand the scope of Medicare covered services; it is not available to
all beneficiaries (only to a defined subset of frail elderly); and it
is a joint Medicare/Medicaid program. However, the BBA directed us to
consider some of the requirements established for the M+C program as we
developed regulations for POs in certain areas common to both programs,
for example, beneficiary protections, payment rates, and sanctions.
f. Flexibility Under the BBA
As noted above, the PACE demonstration program was operated
pursuant to a Protocol developed by On Lok, Inc. The Protocol provided
authority for CMS and the State Administering Agency (SAA) (that is,
the State Agency designated to administer the PACE program) to waive
specific requirements of the Protocol, if, in their judgment, the
following criteria were met:
The intent of the requirements was met by the proposed
alternative and
Safe and quality care would be provided.
In addition, written requests for waivers were required to be approved
by CMS and the SAA before implementation of the proposed alternative.
Flexibility was limited to the requirements in the section on
service coverage and arrangement. That section includes the following
requirements:
POs must provide all Medicare and Medicaid services and
provide care 7 days per week, 365 days per year;
A listing of required and excluded services and minimum
services;
Each participant be assigned to an IDT;
The composition and duties of the IDT;
The assessment and reassessment requirements.
Flexibility was not authorized for other sections of the Protocol,
such as participant rights, enrollment and disenrollment, and
administration.
Sections 1894(f)(2)(B) and 1934(f)(2)(B) of the Act give the
Secretary the authority to waive regulatory provisions as follows:
In order to provide for reasonable flexibility in adapting the
PACE service delivery model to the needs of particular organizations
(such as those in rural areas or those that may determine it
appropriate to use non-staff physicians according to State licensing
law requirements) * * * the Secretary (in close consultation with
State administering agencies) may modify or waive provisions of the
PACE protocol as long as the modification or waiver is consistent
with and would not impair the essential elements, objectives, and
requirements of this section * * *.
The statute also specifies the following essential elements that
may not be waived:
The focus on frail elderly qualifying individuals who
require the level of care provided in a nursing facility.
The delivery of comprehensive, integrated acute and long-
term care services.
The multidisciplinary team approach to care management and
service delivery.
Capitated, integrated financing that allows the provider
to pool payments received from public and private programs and
individuals.
The assumption by the provider of full financial risk.
To implement sections 1894(f)(2)(B) and 1934(f)(2)(B) of the Act,
in the 1999 interim final rule, we identified specific waivers that
were intended to encourage the development of PACE programs in rural
and Tribal areas. The waivers included the following three
requirements:
A prohibition on members of the governing body and their
family members from having a direct or indirect interest in contracts
with the organization (see Sec. 460.68(c));
[[Page 71247]]
A requirement that members of the IDT primarily serve PACE
participants (see Sec. 460.102(g)); and
A requirement that the primary care physician (PCP) must
be employed by the PO (see Sec. 460.102(g)).
The regulation included specific criteria for each waiver related
to whether the PO's service area is rural or Tribal, the accessibility
of individuals who meet the three regulatory requirements listed above,
and a requirement that the proposed alternative does not adversely
affect the availability or quality of care furnished to PACE
participants.
Our rationale for this initial, limited view of the flexibility
provision was based on our belief that all PACE demonstration programs
were in compliance with the Protocol, necessitating only minor changes
in their operations to meet the PACE regulatory requirements. Our
intention was to allow some flexibility to promote PACE in rural and
Tribal areas while maintaining consistency of the requirements for
other PACE programs. We intended to provide more flexibility to all POs
once we had gained sufficient experience in administering the PACE
program.
However, after publication of the 1999 interim final rule, we
learned that although the early PACE demonstration programs initially
complied with the Protocol, most of them modified the Protocol
requirements as they expanded, using the flexibility authorized in the
Protocol. While many of these modifications were related to the
allowable areas of service coverage and arrangement provisions, many
others were not authorized by the flexibility clause in the Protocol.
Furthermore, many of the later PACE demonstration programs also
inappropriately exercised the flexibility clause in the Protocol,
especially with regard to direct employment of staff. Finally, very few
of the waivers were requested in writing or approved by CMS or the SAA
before implementation.
We subsequently revised our regulations on the waiver process in
response to comments on the 1999 interim final rule and in accordance
with the requirements of section 903 of the Medicare, Medicaid, and
SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L.
106-554, enacted on December 21, 2000), as discussed below. A detailed
discussion of waivers and the waiver process is located in section III,
subpart B of this final rule.
3. The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA)
a. Background
BIPA modified the PACE program in the following three ways:
Section 901 extended the transition period for the PACE
demonstration programs to allow an additional year for these
organizations to transition to the permanent PACE program.
Section 902 gave the Secretary the authority to
grandfather in the modifications these programs had implemented as of
July 1, 2000. This provision allowed the PACE demonstration programs to
continue program modifications they had implemented and avoid
disruptions in participant care where these modifications were
determined to be consistent with the PACE model. These sections were
implemented administratively.
Section 903 specifically addressed flexibility in
exercising the waiver authority provided under sections 1894(f)(2)(B)
and 1934(f)(2)(B) of the Act. It authorized CMS to modify or waive PACE
regulatory provisions in a manner that responds promptly to the needs
of POs relating to the areas of employment and the use of community-
based PCPs. Section 903 of BIPA also established a 90-day review period
for waiver requests. As the flexibility language is part of the
statutory section dealing with regulations (sections 1894(f) and
1934(f) of the Act), we believed it was intended that waiver
requirements be incorporated into the PACE regulations. In order to
implement section 903 of BIPA, we published the 2002 PACE interim final
rule.
b. Contracting for IDT Members and Administrative Staff
In the 2002 interim final rule, we amended the PACE regulations to
replace the term ``multidisciplinary'' with ``interdisciplinary'' to
more accurately reflect the interactive and collaborative approach of
the PACE care team.
In the 2002 interim final rule, we responded to public comments
regarding flexibility, including comments on Sec. 460.102(f) of the
1999 interim final rule, which required that the PACE IDT members be
employees of the PO or PACE center. In the 2002 interim final rule, we
deleted Sec. 460.102(f) and revised Sec. 460.60 to allow the PO to
employ or contract with the program director and the medical director.
We also added requirements at Sec. 460.70 that must be met when the PO
is contracting for services.
A more detailed discussion of Sec. 460.60 and Sec. 460.70 is
located in section III, subpart E of this final rule.
c. Contracting With Another Entity To Furnish PACE Center Services
After publication of the 1999 interim final rule, we learned that
in 1995, On Lok, Inc. had changed the Protocol to reflect a contractual
arrangement they entered into with another organization to provide all
PACE center services. Under this arrangement, the IDT was employed and
managed by the contracting organization but On Lok retained
responsibility for all care provided to and all risk entailed in
meeting the healthcare needs of the participants attending the center.
Through this contractual relationship, On Lok was able to expand PACE
services within their service area. As this approach was reflected in
the PACE Protocol, we amended the PACE regulations in the 2002 interim
final rule to allow POs to provide PACE center services through
contractual arrangements. We also revised Sec. 460.70 to identify the
criteria that a PO must meet to contract out PACE center services. A
more detailed discussion of Sec. 460.70 is located in section at IV.B.
of this final rule.
d. Oversight of Direct Patient Care Services
As discussed above, in the 2002 interim final rule, we revised the
requirements of the 1999 interim final rule to allow for the
contracting of IDT members, program director, medical director, and all
PACE center services. For this reason, we believed it was essential to
establish oversight criteria that POs must implement for all employees
and contracted staff who furnish direct patient care. This was
accomplished with the addition of Sec. 460.71. A more detailed
description of Sec. 460.71 is located in section IV, subpart E of this
final rule.
e. Waiver Process
To implement section 903 of BIPA, we established a process for
submission and approval of waiver requests. The 2002 interim final rule
amended the 1999 interim final rule by adding Sec. 460.26, which
specifies the requirements for submission and evaluation of waiver
requests and Sec. 460.28, which addresses requirements related to CMS
review of waiver requests. In the 2002 interim final rule, we also
removed the restrictive waiver provisions for rural and Tribal
[[Page 71248]]
organizations that were included in the 1999 interim final rule.
A more detailed description of Sec. 460.26 and Sec. 460.28 is
located in section III, subpart B of this final rule.
4. Medicare Prescription Drug Improvement and Modernization Act of 2003
(MMA)
On December 8, 2003, the Congress enacted the MMA of 2003 (Pub. L.
108-173). Several sections of the MMA impact POs. Most notably, section
101 of the MMA affected the way in which POs are paid for providing
certain outpatient prescription drugs to any Part D eligible
participant. As specified in sections 1894 and 1934 of the Act, POs
shall provide all medically necessary services including prescription
drugs, without any limitation or condition as to amount, duration, or
scope and without application of deductibles, co-payments, coinsurance,
or other cost sharing that would otherwise apply under Medicare or
Medicaid. Up until January 1, 2006, payment for drugs covered under
Medicare parts A and B was included in the monthly Medicare capitation
rate paid to POs for Medicare beneficiaries, while payment for
outpatient prescription drugs was included in the monthly Medicaid
capitation rate paid to POs for Medicaid recipients, or as a portion of
the amount equal to the Medicaid premium paid by non-Medicaid
recipients.
Consequently, in order for POs to continue to meet the statutory
requirement of providing prescription drug coverage to their enrollees,
and to ensure that they receive adequate payment for the provision of
Part D drugs, beginning January 1, 2006, POs could begin to offer
qualified prescription drug coverage to their enrollees who are Part D
eligible individuals. The MMA did not impact the manner in which POs
are paid for the provision of outpatient prescription drugs to non-part
D eligible PACE participants.
Section 1860D-21(f) of the Act, added by section 101 of the MMA,
provides that POs may elect to provide qualified prescription drug
coverage to enrollees who are Part D eligible individuals.
This section also provides that in the case of a PACE program that
elects to provide qualified Part D prescription drug coverage, the
requirements under Part D apply to the provision of such coverage in a
manner that is similar to the manner in which those requirements apply
to the provision of such coverage under an MA-PD local plan. However,
because we did not believe that Congress intended for the MMA to alter
the way in which PACE services, including outpatient prescription drugs
are provided to PACE enrollees, we indicated in the final rule that
implements Part D (70 FR 4194) that POs would not be deemed to be MA-PD
local plans, but rather, would be treated in a manner similar to an MA-
PD local plan for purposes of payment under Part D. We stated that this
approach is consistent with section 1894(d)(1) of the Act, which
provides that payments will be made to POs ``in the same manner and
from the same sources'' as payments are made to a MA organization.
The MMA allows CMS the flexibility to deem POs as MA-PD plans or to
treat POs that elect to provide qualified drug coverage in a manner
similar to MA-PD plans. Due to inconsistencies in the PACE and MMA
statutes, we chose to treat POs in a similar manner as MA-PD plans
avoiding conflicting requirements. The requirements that apply to POs
that elect to provide qualified prescription drug coverage to Part D
eligible enrollees are set forth in subpart T of the preamble to the
Part D final rule (70 FR 4194). To the extent that we need to address
additional issues regarding Part D as it applies to POs, we will do so
in a future rulemaking.
In addition, section 236 of the MMA amended the Act to extend to
POs the existing statutory Medicare and Medicaid balance billing
protections that had previously applied to POs under PACE demonstration
program authority. Specifically, provisions of the Act that limit
balance billing against MA organizations by non-contract physicians,
providers of service, and other entities with respect to services
covered under title XVIII now include PACE providers. Similarly,
Medicaid billing limitations specified in the Act now apply to
providers participating under the State plan under title XIX that do
not have a contract or other agreement with a PACE provider. Both MMA
provisions apply to services furnished on or after January 1, 2004.
Section 301 of the MMA amends the Medicare Secondary Payer (MSP)
provisions in section 1862(b) of the Act. These amendments clarify the
obligations of primary plans and primary payers, the nature of the
insurance arrangements subject to the MSP rules, the circumstances
under which Medicare may make conditional payments, and the obligations
of primary payers to reimburse Medicare. To implement section 301 of
the MMA, we issued an interim final rule with comment period (71 FR
9466), published on February 24, 2006, revising our MSP regulations at
part 411. Our PACE regulations at Sec. 460.180(d) specify that
Medicare does not pay for PACE services to the extent that Medicare is
not the primary payer under part 411. The MSP interim final rule
establishes our current policies regarding the obligations of other
payers. If there are any provisions specific to PACE organizations that
result from issuance of the final MSP rule, we will address those
provisions in a future PACE rulemaking.
Finally, as discussed above, under the rulemaking requirements of
section 902 of the MMA and our notice in the Federal Register on
December 30, 2004 (69 FR 78442), interim final regulations issued
before enactment of MMA on December 8, 2003 must be finalized within 3
years of the date of enactment or the regulations shall not continue in
effect. This rule finalizes both the PACE interim final rule with
comment period published in the Federal Register November 24, 1999 (64
FR 66234) and the PACE interim final rule with comment period published
in the Federal Register on October 1, 2002 (67 FR 61496).
II. Analysis of and Response to Public Comments
This final rule responds to public comments received on both the
November 24, 1999 interim final rule with comment (64 FR 66234) and the
October 1, 2002 interim final rule with comment (67 FR 61496).
A. Summary of Comments on the 1999 Interim Final Rule
We received 34 items of correspondence containing more than 500
specific comments on the 1999 interim final rule. In this document, we
will refer to this regulation as the 1999 interim final rule.
Commenters included representatives of professional associations, State
and county governments, PACE demonstration programs, potential PACE
programs, various health care providers, and advocacy organizations.
Consistent with the scope of the 1999 interim final rule, most of
the commenters addressed multiple issues, often in great detail. Some
commenters expressed concerns about Medicare and Medicaid issues that
do not pertain to the PACE program.
Numerous commenters disapproved of the limited flexibility provided
in the regulation, stating that the regulation restricts programs from
developing innovatively and responsively to participant preferences,
community needs, and the healthcare marketplace. They asked for
operational and service delivery flexibility, while permitting
[[Page 71249]]
liberal exceptions for established programs that have proven success in
furnishing the PACE benefit. Commenters also noted the regulatory
language was too prescriptive in several key areas (personnel
qualifications) and too vague in others (Medicare rate-setting), saying
that prescriptive language also reduces flexibility in organizational
design and limits innovative strategies for service delivery.
Commenters indicated that the application of M+C requirements was
often made without considering the differences between the PACE program
and M+C plans and that the differences between PACE and nursing
facilities should be recognized in the final requirements.
In addition, commenters indicated that the numerous written notices
required by the 1999 interim final rule were unduly burdensome.
Comments also indicated that in some instances requirements from
other programs (for example, the Outcome Assessment Information Set
(OASIS) for home health agencies) have been applied to PACE, thereby
disregarding the differences between the programs and adding the burden
of information collection.
Finally, commenters opposed the prescriptive language that they
thought limited State discretion and usurped traditional State
regulatory activities rather than optimizing the opportunity to
encourage cooperation with the States. We respond to the particular
comments as they relate to specific provisions discussed in section III
of this final rule.
Listed below are the six areas of the 1999 interim final rule that
generated the most concern:
Subpart D: Sanctions, Enforcement Actions and Termination including
civil money penalties;
Subpart E: PACE Administrative Requirements including
organizational structure, personnel qualifications, contracted services
and marketing;
Subpart F: PACE Services including the interdisciplinary team and
participant assessment;
Subpart G: Participant Rights including the appeals process;
Subpart I: Participant Enrollment and Disenrollment which includes
eligibility to enroll, enrollment process, continuation of enrollment,
and involuntary disenrollment;
Subpart J: Payment including Medicare payment.
B. Summary of Comments on the 2002 Interim Final Rule
We received 4 letters of public comment on the October 1, 2002
interim final rule (67 FR 61496) containing more than 17 specific
comments. Commenters included representatives of professional
associations, a State government, and an advocacy organization. In this
document, we will refer to this regulation as the 2002 interim final
rule.
Commenters expressed opposing opinions on the flexibility permitted
in the 2002 interim final rule. In general, commenters expressed
concerns about flexibility related to all aspects of the program,
including waivers and the waiver process, contracted services including
staff and contractors, and oversight of direct participant care. Listed
below are the three areas that generated the most concern:
Subpart B: PO Application and Waiver Process;
Subpart D: Sanctions, Enforcement Actions and Termination;
Subpart E: Administrative Requirements.
III. Provisions of the 1999 Interim Final Rule With Comment and the
2002 Interim Final Rule With Comment, Analysis of and Responses to
Comments and Final Rule Actions
The purpose of this final rule is to respond to public comments and
finalize the regulations established in the 1999 and 2002 interim final
rules. Below we will list each PACE regulation, note any comments and
responses, and then note our final action.
Subpart A--Basis, Scope, and Purpose
This subpart provides the basis for this regulation, the scope and
purpose, and defines terms specific to the PACE benefit.
Section 460.2 Basis
As stated in the 1999 interim final rule, the regulations set forth
in 42 CFR part 460 are based on Sections 1894, 1905(a), and 1934 of the
Act. Section 1894 of the Act authorizes Medicare payments to and
coverage of benefits under PACE. Sections 1905(a) and 1934 of the Act
authorize the establishment of PACE as an option under the State
Medicaid plan to provide for Medicaid coverage of services furnished by
the PACE program.
No comments were received on this section.
Final rule actions:
This final rule will finalize Sec. 460.2 as published in the 1999
interim final rule.
Section 460.4 Scope and Purpose
We stated in the 1999 interim final rule that the purpose of the
regulation was to set forth the requirements that an entity must meet
in order to be approved as a PO under Medicare and Medicaid. It also
sets forth how individuals may qualify to enroll in PACE, how Medicare
and Medicaid payment will be made for PACE services, provisions for
Federal and State monitoring of PACE programs, and procedures for
sanctions and termination.
We stated the purpose of a PACE program is to provide pre-paid,
capitated, comprehensive health care services that are designed to:
Enhance the quality of life and autonomy for frail, older
adults;
Maximize dignity of and respect for older adults;
Enable frail, older adults to live in their homes and in
the community as long as medically and socially feasible; and
Preserve and support the older adult's family unit.
This philosophy is based on Part I, section A, of the Protocol.
Adopting a mission or philosophy statement that includes these elements
indicates that an entity is guided by a set of values that influence
its structure, planning, and day-to-day operations that is consistent
with the purpose of PACE.
No comments were received on this section.
Final rule actions:
This final rule will finalize Sec. 460.4 as published in the 1999
interim final rule.
Section 460.6 Definitions
This section of the 1999 interim final rule included the following
definitions based on those in sections 1894(a) and 1934(a) of the Act
and other terms determined necessary by CMS.
Contract year means the term of a PACE program agreement, which is
a calendar year, except that a PO's initial contract year may be from
12 to 23 months, as determined by CMS.
Medicare beneficiary means an individual who is entitled to
Medicare Part A benefits or enrolled under Medicare Part B, or both.
Medicaid participant means an individual determined eligible for
Medicaid who is enrolled in a PACE program.
Medicare participant means a Medicare beneficiary who is enrolled
in a PACE program.
PACE stands for Programs of All-inclusive Care for the Elderly.
PACE center means a facility operated by a PO where primary care is
furnished to participants.
[[Page 71250]]
PACE organization (PO) means an entity that has in effect a PACE
program agreement to operate a PACE program under this part.
PACE program agreement means an agreement between a PO, CMS, and
the State administering agency for the operation of a PACE program.
Participant means an individual who is enrolled in a PACE program.
Services include both items and services.
State administering agency means the State agency responsible for
administering the PACE program agreement.
Trial period means the first 3 contract years in which a PO
operates under a PACE program agreement, including any contract year
during which the entity operated under a PACE demonstration program.
In developing the definition of PACE organization, we explained in
the 1999 interim final rule that sections 1894(a)(3) and 1934(a)(3) of
the Act defined a ``PACE provider.'' We changed that term to ``PACE
organization'' (PO) because we believed that the term ``PACE provider''
would be confusing. Medicare regulations (at 42 CFR 400.202) and
Medicaid regulations (at 42 CFR 400.203) define the word ``provider,''
but the definitions are different and neither applies to entities that
operate PACE programs. Those definitions denote individual providers of
individual services under conventional fee-for-service systems. We
selected the alternative term, PO, since ``organization'' is a term
used in both titles XVIII and XIX when referring to managed care
organizations, which are more similar to entities under PACE. In the
few places where we use the term ``provider'' in this regulation, we
are using it in the broad generic sense to refer to an individual or an
entity that furnishes health care services. Our use of the term is not
limited to the narrower Medicare definition in Sec. 400.202.
Also, in defining contract year, we explained that a PO's initial
(start-up) contract year may be from 12 to 23 months, as determined by
CMS, to enable us to adjust the length of the initial (start-up)
contract year so that subsequent years are on a standard annual
calendar year cycle.
Comment: One commenter suggested that we clarify the term
``center'' by replacing it with the term ``PACE center.''
Response: We agree and have replaced the term ``center'' with
``PACE center'' throughout the regulation.
Comment: We received several comments requesting that we clearly
define PACE, what constitutes a PO, and what constitutes a PACE center
including clarification that a PACE provider is considered a PACE
program and may have more than one center.
It was also recommended that we adopt the definition of PACE center
as contained in the Protocol, which explicitly addresses the full range
of services and benefits available at the PACE center.
Response: In response to these comments, in this final rule, we are
redefining ``PACE center'' to be more consistent with the definition
provided in the Protocol and the statute by defining it as a facility
which includes a primary care clinic, areas for therapeutic recreation,
restorative therapies, socialization, personal care, and dining, and
which serves as the focal point for coordination and provision of most
PACE services.
In addition, as noted below we are adding a definition of ``PACE
program''. However, we disagree with the commenter who requested that
we adopt the definition of ``PACE center'' as contained in the Protocol
which explicitly identifies the full range of services and benefits
available at the PACE center. We believe that our modification is more
appropriate and less cumbersome than including every required service
in the definition. We also believe that by expanding the definition of
``PACE center'' that was published in the 1999 interim final rule, we
are clarifying that a PACE center is a facility where most PACE
services are provided, not just primary care.
As noted earlier in this section, in the 1999 interim final rule,
we defined PACE center as ``a facility operated by a PO where primary
care is furnished to participants.'' This definition was based on
section IV. B. 2 of the Protocol, which states: ``The PACE center is
the focal point for coordination and provision of most PACE services.
The PACE center is a facility which includes a primary care clinic, and
areas for therapeutic recreation, restorative therapies, socialization,
personal care and dining.'' The Protocol identified other requirements
for a PACE center, which were included in other sections of the 1999
interim final rule. Those requirements are included in the following
sections: The list of required services is at Sec. 460.98; the
requirement that POs operate at least one PACE center is in Sec.
460.98(d)(1); the requirement that the frequency of attendance is
determined by the IDT based on each participant's needs is at Sec.
460.98(e); and the requirement that the PACE center is designed,
equipped, and maintained to provide for the physical safety of
participants, personnel, or visitors and to ensure a safe and sanitary
environment is at Sec. 460.72.
We believe the list of explicit services and benefits belongs in
Sec. 460.98 which relates to ``Service delivery,'' and in Sec.
460.72, which relates to ``Physical environment.''
Comment: A commenter requested that we add a definition of a ``PACE
program'' and use the following language ``all centers and service
provision by an approved PACE provider in an approved service area.''
Response: ``PACE program'' is defined in the Act at sections
1894(a)(2) and 1934(a)(2) as an entity that meets the statutory
requirements to be a PACE provider and provides comprehensive health
care services to PACE program eligible individuals in accordance with
the PACE program agreement and regulations. We have not included a
definition for ``PACE program'' in our regulations at Sec. 460.6.
However, we agree with the commenter that doing so would help to
clarify and standardize PACE terminology. As noted above, we changed
the term ``PACE provider'' to ``PACE organization'' and defined that
term in the 1999 interim final rule.
Based on sections 1894(a)(2) and 1934(a)(2) of the Act, we are
defining a PACE program as a program of all-inclusive care for the
elderly that is operated by an approved PACE organization and that
provides comprehensive health care services to PACE enrollees in
accordance with a PACE program agreement. As noted above, we are
defining a PACE center as a facility which includes a primary care
clinic, areas for therapeutic recreation, restorative therapies,
socialization, personal care, and dining, and which serves as the focal
point for coordination and provision of most PACE services. We do not
think the commenter's language would be needed to ensure that PACE
centers are included within the definition of a PACE program.
Final rule actions:
In this final rule we are:
Replacing the term ``center'' with the term ``PACE
center'' throughout the regulation.
Redefining the term ``PACE center'' as ``a facility which
includes a primary care clinic, areas for therapeutic recreation,
restorative therapies, socialization, personal care, and dining, and
which serves as the focal point for coordination and provision of most
PACE services.''
Defining ``PACE program'' to mean a program of all-
inclusive care for the elderly that is operated by an approved PACE
organization and that provides
[[Page 71251]]
comprehensive health care services to PACE enrollees in accordance with
a PACE program agreement.
Subpart B--PO Application and Waiver Process
Section 460.10 Purpose
We established in the 1999 interim final rule, that this subpart
sets forth application requirements for an entity that seeks approval
from CMS as a PO. In the 2002 interim final rule, we amended Sec.
460.10 to clarify that subpart B also establishes a process by which a
PO may request a waiver of certain regulatory requirements in order to
provide for reasonable flexibility in adapting the PACE service
delivery model to the needs of particular organizations (such as those
in rural areas).
PACE Under Both Medicare and Medicaid
We require that each PO must enter into a program agreement under
both sections 1894 and 1934 of the Act, that is, that each organization
participate in both Medicare and Medicaid. Most of the text in those
two sections is identical and our analysis indicates that key language
contemplates entities acting as POs under both programs.
Sections 1894(f)(2) and 1934(f)(2) of the Act require that we
incorporate in our regulations the requirements applied to PACE
demonstration programs under the PACE Protocol, to the extent
consistent with the provisions of sections 1894 and 1934 of the Act.
Under the Protocol, PACE demonstration programs operated under both
Medicare and Medicaid. We believe that the directive to incorporate the
requirements in the Protocol reflected an expectation by the Congress
that all POs would participate in both Medicare and Medicaid. This view
is reinforced by paragraph (f)(2)(B) of these sections, which permits
us to modify or waive provisions of the PACE Protocol ``so long as such
modification or waiver is not inconsistent with and would not impair
the essential elements, objectives, and requirements'' of sections 1894
and 1934 of the Act, but which forbids modifying or waiving, among
others, the following provisions:
Capitated, integrated financing that allows the
organization to pool payments received from public and private programs
and individuals; and
The assumption by the organization of full financial risk.
We concluded that both of these provisions preclude the possibility
of a Medicare-only or Medicaid-only PACE program. For example, if a
program could collect capitation payments from Medicare but bill fee-
for-service under Medicaid, not all financing would be capitated, nor
would financing be integrated, nor would the organization assume full
financial risk.
However, the law does not require that States offer the PACE
benefit under Medicaid. As indicated by its title, section 4802 of BBA
provides for the ``Establishment of PACE Program as Medicaid State
Option.'' If an entity attempted to become a PO under Medicare in a
State which has not included PACE program services as an option under
its Medicaid program, it would not be possible for that entity to be
both a Medicare and a Medicaid PO. While this would curtail the
availability of PACE programs in those States, we have concluded that
this result was intended because a Medicare-only program could not meet
the fundamental concept of an all-inclusive, integrated, capitated,
full-risk program.
Moreover, both sections 1894 and 1934 of the Act contemplate the
active collaboration of Federal and State governments in the
administration of PACE. Each State must have a SAA that is responsible
for administering PACE program agreements in their State under sections
1894 and 1934 of the Act. The SAA closely cooperates with CMS in
establishing procedures for entering into, extending, and terminating
PACE program agreements. The SAA cooperates with CMS and the PO in the
development of participant health status and quality of life outcome
measures. The SAA also cooperates with us in conducting oversight
reviews of PACE programs and has the authority to terminate a PACE
program agreement for cause. If Medicare-only programs had been
contemplated in a State that does not elect the PACE option, there
would have been no reason to assign such a significant role to an SAA.
We believe that a State which has not chosen PACE as an optional
service would be ill-prepared or unable to perform this role.
As mentioned earlier, most of the text of section 1894 of the Act
is identical to text in section 1934 of the Act. Portions of both text
reflect the concept of entities acting as POs under both programs. The
scope of Medicare PACE program benefits includes ``all items and
services covered under this title (for individuals enrolled under this
section [section 1894]) and all items and services covered under title
XIX.'' Similarly, section 1934 of the Act, defines the Medicaid benefit
package as ``all items and services covered under title XVIII (for
individuals enrolled under section 1894) and all items and services
covered under this title.'' In addition, to be eligible for PACE, an
individual must require the nursing facility (NF) level of care covered
under the State Medicaid plan.
Section 1894(e) of the Act provides that ``CMS, in close
cooperation with the SAA'' will establish program agreements for
``entities that meet the requirements for a PO under this section,
section 1934, and regulations.'' A corresponding provision is found at
section 1934(e) of the Act, referring to ``entities that meet the
requirements for a PO under this section, section 1894, and
regulations.'' We believe that the use of the correlative ``and''
indicates that PACE entities would have to meet all three sets of
requirements.
A parallel provision provides for termination of PACE program
agreements (see paragraphs (e)(5) of sections 1894 and 1934 of the
Act). Termination of an agreement under both sections 1894 and 1934 of
the Act may be accomplished by either ``CMS or a SAA.''
Nonetheless, it is highly unlikely that any entity could be a
viable PO without approval under both Medicare and Medicaid. The
majority of potential participants are Medicare beneficiaries who also
are eligible for Medicaid. Those who are not currently Medicaid-
eligible may eventually exhaust their financial resources and become
eligible. Medicare participants who are not enrolled in PACE under
Medicaid must pay premiums equal to the Medicaid capitation rate. Aside
from the technicality that there would not be an established Medicaid
capitation rate in a State that does not elect the PACE option, most of
these participants would lack the ability to pay these significant
premiums.
As the above citations illustrate, some provisions of the law are
conflicting and thus ambiguous. We therefore interpreted them to give
effect to many of the provisions and policy objectives that they
advance. Furthermore, in keeping with the congressional intent that the
Protocol guide our implementation of the PACE program, we determined
that POs must be approved under both Medicare and Medicaid.
Based on this interpretation, if a State should choose not to amend
its State Medicaid plan to adopt PACE as an optional Medicaid service,
we would not accept PACE applications from entities in that State.
Also, if a State has elected the optional benefit but declines to
recommend a particular entity as a PO, we would not accept an
application from that entity.
[[Page 71252]]
We stated in the 2002 interim final rule that to implement section
903 of BIPA, we amended the PACE regulation by adding Sec. 460.26 and
Sec. 460.28 to establish a process for a PO to request waiver of
regulatory requirements. This process allows for variations while
achieving the intent of the regulatory provision and responding to the
needs of POs to develop and expand within their States' long-term care
delivery system.
Waivers will be discussed in detail under Sec. 460.26 and Sec.
460.28.
Comment: Another commenter recommended that social support services
and participant care be more clearly defined so beneficiaries and
caregivers may make informed decisions about the type and level of care
to be provided.
Response: In response to the comment regarding a more defined
regulation where social services and participant care is concerned, we
disagree with this commenter, as required services are participant
specific. After the IDT determines a participant requires a service and
it is included in their plan of care, those services become required
for that participant for that specific need. Therefore, it would not
truly represent the PACE model to constrain the benefit by defining it
in regulatory language.
Final rule actions:
This final rule will finalize Sec. 460.10, as published in the
2002 interim final rule.
Section 460.12 Application Requirements
We established Sec. 460.12 to set forth the application
requirements for the PACE program. In order for CMS to determine
whether an entity qualifies as a PO, an individual authorized to act
for the entity must submit an application that describes thoroughly how
the entity meets all the requirements specified in this regulation. In
recognition of the 90-day review timeframe specified in the statute and
described below and the numerical limit on the number of PACE program
agreements, we will review and take action to approve, deny, or request
additional information only on complete applications; those
applications that address all elements of the PACE program agreement.
We will send a letter to each applicant indicating whether or not the
application is complete and specifying when the 90-day review period
ends.
We require in Sec. 460.12(b) that applications for PO status be
accompanied by an assurance from the SAA indicating that it considers
the entity to be qualified to be a PO and that the State is willing to
enter into a PACE program agreement with the entity. We will not accept
applications from entities that have not obtained these assurances.
To enable a SAA to make these assurances, an entity would have
established to the satisfaction of the State that it is committed to
the PACE model of care, that there is sufficient funding for program
development and facilities, that there is adequate demand for PACE
services as shown by demographic analysis.
Entities that are interested in developing a PACE program agreement
should contact their SAA to determine whether the State has submitted
or plans to submit a SPA to elect PACE as an optional benefit under its
State Medicaid plan and if the State has established additional
requirements for POs. Section 1905(a)(26) of the Act provides authority
for States to elect PACE as an optional Medicaid benefit. The State
plan electing the optional PACE program must be approved before we can
approve an application for a PO in that State. We received three
comments related to application requirements.
Comment: Commenters questioned the requirement that POs must be
approved by their SAA. Further, they requested that we specify an
absolute role for SAA, and revise the regulatory language to reflect
the SAAs' responsibility to submit the program application and the
States' role in the application process.
Response: As we explained in the 1999 interim final rule, States
have played a significant role in the development of the PACE
demonstration program as well as other community-based alternatives to
institutionalization. Most States have implemented home and community
based programs that provide comprehensive coordinated services to
various groups of Medicaid recipients. As a result, States have gained
extensive experience in demographic analysis and contracting with
entities that are capable of delivering a specified range of services.
Although the PACE statute does not specify the States' role in the
application approval process, many aspects of implementing PACE in
Medicare and Medicaid will necessitate extensive involvement of the
SAAs and the State Medicaid Agencies. The State must elect to provide
PACE services as an option under the Medicaid State plan and PACE
applications must be accompanied by an assurance from the SAA that the
State considers the entity to be qualified to be a PO and is willing to
enter into a program agreement with them.
With regard to applications, we continue to believe the States are
in the best position to work with potential organizations to develop
programs that meet our requirements and are integrated into the States'
overall long-term care delivery system.
Comment: One commenter asked us to clarify the regulatory provision
related to the hiring requirements of non-operational programs before
submission of their program application. The commenter stated that it
is unreasonable to expect the applicant would have hired core staff
before application submission.
Response: Although hiring requirements for non-operational PACE
programs do not appear in our regulations at Sec. 460.12, we addressed
these requirements in the preamble of the 1999 interim final rule (64
FR 66238). We stated, ``To enable a State to make such assurances, an
entity would have established to the satisfaction of the State that it
is committed to the PACE model of care, that there is sufficient
funding for program development and facilities, that there is adequate
demand for PACE services as shown by demographic analysis, and that the
entity has hired core PACE staff and has developed contracts for
referral arrangements and other program services that the site will not
furnish directly.''
When the 1999 interim final rule was developed, there were several
PACE demonstration programs that needed to transition to permanent
provider status. As they were operational and had key staff members in
place before submitting their PACE provider applications, this
requirement was not an issue.
However, as all PACE demonstration programs have transitioned to
permanent provider status, applications will now be primarily from non-
operational providers. We acknowledge that start-up costs are extensive
and paying salaries for top management staff without a revenue stream
is unrealistic. We do not believe that it is appropriate to hold non-
operational applicants to the same standard as POs that had been fully
operational under the PACE demonstration program. Therefore, we are not
requiring that core staff be hired before application approval.
However, at the time of an organization's Readiness Review, we do
expect documentation that core staff have been chosen and accepted
those specific key positions. Language related to staff contracts of
non-operational organizations has been included on page ix of the
Provider Application, which
[[Page 71253]]
can be found on the PACE Web site under Provider Application and
Appendices at http://www.cms.hhs.gov/pace/. This signed certification
guarantees us, among other things, that the SAA will verify that the PO
has qualified staff employed or under contract before furnishing
services. This document must be signed by the SAA and included as part
the PACE provider application.
In the 2002 interim final rule, we revised Sec. 460.12 by removing
and reserving paragraph (a)(2) to clarify that although we may begin
review of PO applications, we may sign a program agreement only with a
PO located in a State with an approved SPA electing PACE as an optional
benefit under its Medicaid State plan. We are finalizing this provision
by deleting Sec. 460.12(a)(2) entirely. For the sake of continuity we
are redesignating Sec. 460.12(a)(3) as Sec. 460.12(a)(2).
Final rule actions:
In this final rule we are redesignating Sec. 460.12(a)(3) to Sec.
460.12(a)(2).
Section 460.14 Priority Consideration
Section 4803(c) of the BBA directed us to give priority in
processing applications, during the 3-year period following enactment
of the BBA on August 5, 1997, to PACE demonstration programs and then
to entities which had applied to operate a PACE demonstration program
as of May 1, 1997.
In the 1999 interim final rule, we established Sec. 460.14 to
address priority applications and stated that to give priority in
processing applications from entities that met the criteria, we would
accept applications only from those entities beginning on the effective
date of the 1999 interim final rule and continuing for 45 days.
Applications from other entities would not be accepted during this
period. Moreover, during the subsequent 45 days, extending to 90 days
after the effective date of that regulation, we stated we would
continue to accept applications from entities that met the priority
processing criteria and we would also accept applications from entities
that qualify for special consideration as described in the following
section.
We did not receive any requests for priority consideration.
Comments related to Sec. 460.14 also address Sec. 460.16 and will
be addressed at the end of Sec. 460.16.
Section 460.16 Special Consideration
Section 4803(c) of the BBA required that we give special
consideration in the processing of applications during the 3 years
following enactment, to any entity that, as of May 1, 1997, had
indicated specific intent to become a PO through formal activities such
as entering into contracts for feasibility studies.
In Sec. 460.16, we established a process for special consideration
of a PACE application. Similar to the process for priority
consideration, to give special consideration in processing applications
from entities that meet the criteria in the 1999 interim final rule, we
indicated we would accept applications from these entities beginning 45
days after the effective date of the 1999 interim final regulation. We
further noted that during the 45-day period that extends from 45 days
after the effective date to 90 days after the effective date, we would
accept applications only from entities that met the priority processing
criteria or entities that qualified for special consideration.
Applications from other entities would not be accepted during this
period.
Applications from entities that believed they were entitled to
special consideration were to include information regarding the formal
activities they were engaged in towards becoming a PO. If we agreed
that special consideration was appropriate for applications submitted
after the special 45-day window, we would identify those applicants and
factor in the entity's special status in the event that we had a
greater number of applications under review than available capacity for
PACE program agreements.
We did not receive any requests for special consideration.
Comment: Six commenters requested clarification regarding the
criteria and process applied to applications under the BBA mandate
providing priority and special consideration in processing PACE
applications.
Response: We believe the 2002 interim final rule provided
sufficient information as to the criteria and process needed for
priority and special consideration for PACE applications. More
importantly, however, we note that as the authority to provide these
considerations expired on August 5, 2000, it is no longer necessary to
retain these regulations.
Final rule actions:
In this final rule we are deleting Sec. 460.14 and Sec. 460.16.
Section 460.18 CMS Evaluation of Applications
We established the information used to evaluate a PO application in
the 1999 interim final rule. We approve entities based upon a review of
the materials submitted as part of the application, as well as
information obtained from the SAA or through onsite visits.
No comments were received on Sec. 460.18.
Final rule actions:
This final rule will finalize Sec. 460.18 as published in the 1999
interim final rule.
Section 460.20 Notice of CMS Determination
Sections 1894(e)(8) and 1934(e)(8) of the Act require us to approve
or deny an application for PO status within 90 days after the date of
the submission of the application unless additional information is
requested. Applications are deemed approved unless we deny PO status in
writing or request additional information within the 90-day timeframe.
In the 1999 interim final rule, we established procedures for
implementing these requirements at Sec. 460.20. We clarified that, for
purposes of the 90-day time limit described in this section, the date
that an application is considered to be submitted to CMS is the date on
which the application is delivered to the address designated by CMS.
These statutory sections also provide that we may request in
writing additional information as may be required in order to make a
final determination regarding the application and, after the date we
receive that information, the application shall be deemed approved
unless, within 90 days of that date, we deny the request.
Based on this authority, we may take up to 90 days to request
additional information and, once the information is received, may take
an additional 90 days to complete processing of the application. It is
important to note that there is no corresponding requirement that the
SAA or the PO respond to our request for additional information (RAI)
within a specified timeframe.
If the additional information proves insufficient to approve the
application, the application will be denied. We will notify each
applicant of our determination and the basis for the determination in
writing. If the application is denied, we will provide the basis for
the denial and the process for requesting reconsideration of the
application.
No comments were received on Sec. 460.20.
Final rule actions:
This final rule will finalize Sec. 460.20 as published in the 1999
interim final rule.
Section 460.22 Service Area Designation
Sections 1894(e)(2(B) and 1934(e)(2)(B) of the Act permit the
Secretary, in consultation with the SAA, to exclude from a service area
designation an area that is already
[[Page 71254]]
covered under another PACE program agreement. In the 1999 interim final
rule, we specified in Sec. 460.22 that each applicant must designate
the service area of the program. We stated that CMS (in consultation
with the SAA) may exclude from the proposed service area designation
any area that is already covered under another PACE program agreement.
Consistent with the statute, we believe this was required to avoid
unnecessary duplication of services and impairing the financial and
service viability of an existing PO.
No comments were received on Sec. 460.22.
Final rule actions:
This final rule will finalize Sec. 460.22 as published in the 1999
interim final rule.
Section 460.24 Limit on Number of PACE Program Agreements
This provision implements sections 1894(e)(1)(B) and 1934(e)(1)(B)
of the Act establishing a limit on the number of PACE program
agreements that may be in effect on August 5 of each year, that is, the
anniversary of the enactment of the PACE statute. Those sections state
that we shall not permit the number of POs with which agreements are in
effect under those sections or PACE demonstration programs under
section 9412(b) of the OBRA of 1986 to exceed--
Forty as of August 5, 1997, the date of the enactment of
the PACE statute, or
As of each succeeding anniversary of that date, the
numerical limitation for the preceding year plus 20. The annual
increase in the number of PACE program agreements is not tied to the
actual number of agreements in effect as of a previous anniversary
date.
Based on this statutory language, we may enter into up to 80 PACE
program agreements as of August 5, 1999, and the limit on the number of
PACE program agreements increases by 20 each year thereafter.
No comments were received on Sec. 460.24.
Final rule actions:
This final rule will finalize Sec. 460.24 as published in the 1999
interim final rule.
Section 460.26 Submission and Evaluation of Waiver Requests
Section 460.28 Notice of CMS Determination on Waiver Requests
These sections were established in the 2002 interim final rule to
implement section 903 of BIPA. As we explained in that rule, we
considered amending the 1999 interim final rule to identify each
requirement that is eligible for waiver and provide separate waiver
criteria for each requirement. However, we were concerned that amending
the regulation for each waiver would: (1) Create a regulatory level of
specificity that might make it difficult to apply to future requests
for similar but not identical waivers; and (2) cause a significant
delay between when the need for a waiver is identified and when it may
be implemented.
As an alternative, we amended the PACE regulation by adding Sec.
460.26 and Sec. 460.28 to establish a process for a PO to request
waiver of regulatory requirements.
As noted previously, the PACE Protocol and the 1999 interim final
rule have been proven effective as POs grow and reach financial
solvency. We have learned a great deal about variations in the model
through the information we received in processing grandfathering
requests under section 902 of BIPA and numerous discussions with the
National PACE Association (NPA), POs, and States. Allowing for waivers
provides a unique opportunity for POs, the States, and CMS to
experiment with new approaches within the structure of the PACE model.
This process allows for variations while achieving the intent of the
regulatory provision and responding to the needs of POs to develop and
expand their States' long term care delivery system. The POs will serve
as an ongoing laboratory that over time will establish best practices
that may ultimately replace the current regulatory requirements.
We realize that in order to foster innovation and creativity within
the PACE program, POs must be granted some degree of flexibility in
their operation and service delivery. However, we must balance this
need for flexibility with our responsibility to ensure quality, cost
effective care for all beneficiaries.
Based upon our experience and review of grandfathering requests
under section 902 of BIPA, we established two types of waivers in the
2002 interim final rule, that is, general waivers and conditional
waivers subject to evaluation. We discuss the waiver types below:
1. General Waivers
A general waiver may be granted to a PO that has successfully
implemented a specific operating arrangement, for example, an operating
arrangement approved under section 902 of BIPA. General waivers
continue indefinitely; however, approval may be withdrawn for good
cause if periodic monitoring of the organization's operations and
policies indicates participant care is being jeopardized, there is
fiscal instability, or the goals of the PACE model are not maintained.
2. Conditional Waivers
A conditional waiver, subject to evaluation, is a provisional
waiver we would approve for a specific period of time to a new or
experienced organization. During the conditional period, the PO would
need to submit specific data, that we prescribed, that would allow us
to monitor and evaluate the conditional waiver to determine whether the
waiver may become permanent. This category of waiver may include the
following scenarios:
(a) A request for waiver without which a PO would be prevented from
entering the program. For example, if a prospective PO has been unable
to hire or contract with a social worker with a Master's degree, we may
consider approving a conditional waiver request to allow a social
worker with a baccalaureate degree to operate in this capacity until a
qualified social worker is hired. This waiver would only be in effect
until the PO could hire or contract for an appropriate staff member.
(b) A request for approval of an arrangement with which a PO does
not have any experience. We want to encourage creative approaches to
improving the PACE model and view conditional waivers as a responsible
way to balance the need of a PO with protection of participant health
and safety. We need to be cautious in approving arrangements in which
the PO does not have a proven record of success. In approving a
conditional waiver request, we may limit the number of participants
exposed to the waiver or approve the waiver for a limited period of
time or at a specific PACE center until we are assured through
evaluation that (1) the intent of the regulation is met; and (2) the
approach is not inconsistent with nor impairs the essential elements,
objectives, and requirements of PACE. At that time, we may approve a
general waiver so that the PO may expand the arrangement to other PACE
centers it manages without jeopardizing participant care.
Each of the conditional waivers is subject to periodic monitoring.
A PO approved for a conditional waiver must submit any prescribed data
at specified intervals. We have learned that, in most cases, conducting
a detailed review of a waiver request allows us to implement waiver
approvals without having to require data submission. This evaluation
serves a dual purpose. It allows us to monitor the impact on
participant care as well as enable us to determine if any permanent
changes to
[[Page 71255]]
PACE should be implemented through regulations. In addition, it allows
us to provide technical assistance to other POs requesting a similar
waiver.
In the 2002 interim final rule, we discussed the process necessary
to obtain any waiver. To obtain either a conditional or general waiver,
a PO must provide a detailed description of how its proposed
modification differs from the regulatory requirement and how it meets
the intent of the regulatory provision. The burden is on the PO to
explain why a waiver is needed to start up or expand their program.
Where a PO has not completed the trial period, attained financial
solvency, and demonstrated competence with the PACE model as evidenced
by successful CMS and State onsite reviews and monitoring activities,
it will be necessary for the organization to explain how the waiver is
necessary to meet those objectives. For a new organization, it will be
necessary for the organization to explain why a waiver is needed for
the organization to begin serving participants.
Consistent with the process developed for initial PACE provider
applications, all waiver requests must be submitted to the SAA for
initial review. The SAA forwards the waiver request to CMS along with
any concerns or conditions they may have regarding the waiver. We will
not accept waiver requests directly from POs. Waiver requests submitted
with an initial application process must be prepared as a separate
document. These requests are reviewed simultaneously and in conjunction
with the application. Where an existing PO is requesting a waiver, the
request must be submitted through the State to the CMS address for BIPA
903 waiver requests indicated on the PACE home page (http://www.cms.hhs.gov/PACE
). We intend to process waiver requests as
expeditiously as possible in order to be responsive to the needs of new
organizations to develop their programs and to the needs of mature
organizations as they expand.
Section 903 of BIPA directs us to approve or deny a request for a
modification or waiver no later than 90 days after the date of receipt.
We clarified in Sec. 460.28(b) that the date of receipt is the date
the request is delivered to the address designated by CMS. We note that
there is no statutory authority to stop the 90-day clock if additional
information is necessary to make a determination on a waiver request.
Thus, it is in the PO's best interest to provide all pertinent
information relevant to their request. Where additional information is
necessary, the CMS PACE Team Leader will inform the PO as early as
possible in the review process. The PO will then be responsible for
submitting the additional information in a timely enough manner to
allow us to evaluate the additional information and make a
determination on the waiver request within the allotted 90 days. If the
reply from the PO is not received in a timely manner, we would have to
deny the request. The PO may then reapply for the waiver, starting a
new 90-day clock.
Consistent with sections 1894(f)(2)(B) and 1934(f)(2)(B) of the
Act, we specified in Sec. 460.26(c) the following requirements that
would not be waived:
(1) A focus on frail elderly qualifying individuals who require the
level of care provided in a nursing facility;
(2) The delivery of comprehensive, integrated acute and long-term
care services;
(3) The IDT approach to care management and service delivery;
(4) Capitated, integrated financing that allows the provider to
pool payments received from public and private programs and
individuals; and
(5) The assumption by the provider of full financial risk (we note
that assuming full financial risk does not preclude an organization
from utilizing reinsurance, stop-loss protection, or other mechanism to
meet its financial obligations).
In addition to these five provisions, we will not grant waivers
that we believe are inconsistent with or would impair the essential
elements, objectives, and requirements of sections 1894 and 1934 of the
Act.
In addition to the requirements specified in sections 1894(f)(2)(B)
and 1934(f)(2)(B) of the Act, we believe there are other requirements
that must not be waived. For example, health care is focused at a PACE
center; the IDT is composed of certain health care professionals that
manage all of the health care provided to participants; a comprehensive
assessment by the IDT is conducted before admission into the PACE
program; and reassessment occurs at least every 6 months or whenever
there is a significant change in a participant's health status.
Further, we believe that PACE participants are entitled to the same
patient rights' protection available in the Medicare or Medicaid fee-
for-service or managed care programs. Therefore, we will not approve
waiver or significant modification of these requirements.
Two waiver issues specifically mentioned in section 903 of BIPA are
requirements related to employment and the use of community-based
primary care physicians (PCP). In this approach, the PCPs work out of
their offices rather than from the PACE center and do not primarily
serve PACE participants.
The 2002 interim final rule removed the restrictive waiver
provisions at Sec. 460.68(c) regarding direct or indirect interest in
contracts, which was limited to rural and Tribal organizations. In
addition, the 2002 interim final rule also removed the two waivers in
Sec. 460.102(g) related to employment of the PCP and the requirement
that the IDT primarily serve PACE participants. These waivers were
available if CMS and the SAA determined that there was ``insufficient
availability in the PO's service area of individuals who meet the
requirement, or State licensing laws make it inappropriate for the
organization to employ physicians.'' Although we deleted the specific
waivers that were intended to encourage development of PACE in rural or
Tribal or other medically underserved areas, we continue to recognize
the special need for flexibility in these areas and remain committed to
allowing waivers to promote PACE in medically underserved areas.
Deletion of the specific waiver language was intended to provide
greater flexibility within the overall PACE regulatory structure. We
remain committed to working with rural and Tribal communities to help
them address the challenges of developing successful PACE programs.
Organizations that seek waiver of these or any other regulatory
requirements must follow the requirements specified in Sec. 460.26.
We note that a PO requesting a waiver of the prohibition on direct
or indirect interest in contracts must develop policies and procedures
for disclosure of financial interest to the governing body, establish
recusal restrictions, and a process to record recusal actions for
review by CMS and the SAA in its waiver request.
Comment: We received two comments expressing concern about
compromising the integrity of the PACE model by providing expanded
flexibility.
One commenter offered assistance in evaluating PACE policy,
program, and practice on a continuing basis. The second commenter was
concerned that the PACE regulations lack sufficient safeguards to
preserve the model as established by the Protocol. The commenter
indicated that maintaining the PACE center as the focal point for
delivery of services and retaining the central role of the IDT in
managing the health care and other services provided to PACE
participants were critical to the PACE model. The commenter also
emphasized the important role of the PCP in the Protocol, stating,
``the
[[Page 71256]]
ultimate responsibility for managing participant medical care rests
with the PCP; therefore, if this team member is not present during team
meetings the ability to fulfill this obligation will be compromised.''
Response: We share the commenter's concerns regarding the integrity
of the PACE model, and thank the commenter who offered assistance in
evaluating the PACE program. We believe the flexibility permitted by
the 2002 interim final rule has sufficient safeguards to ensure the
integrity of the model. We instituted contracting and oversight
requirements we believe will ensure quality of care for PACE
participants. During the development of the 2002 interim final rule, we
made a concerted effort to develop a waiver process that would allow
modification of the model without excessive controls, while at the same
time not being too burdensome for POs. We believe we achieved that
balance.
The PACE model has been proven successful when the PACE center is
the focal point for delivery of services and when the IDT's central
role of managing the health care and other services provided to PACE
participants is retained. Therefore, we believe there are few
circumstances when it would be appropriate to waive these elements of
the PACE model without substantial justification by a PO or potential
PO, for example, the entity being a rural or Tribal organization.
However, according to sections 1894(f)(2)(B) and 1934(f)(2)(B) of the
Act, we do not have the authority to waive the provision requiring the
IDT's central role managing the health care and other services provided
to PACE participants, since it is statutorily mandated.
Although we have permitted the use of community-based PCPs, we
require that effective and consistent communication be maintained.
Whenever we have received a request for waiver pertaining to use of
community-based PCPs, the PO has had to provide in-depth justification
and meet our conditions for waiver. Among other conditions for waiver
approval, the community-based PCP must perform all the requirements of
the staff PCP including but not limited to participation in IDT
meetings related to their participants' participation in Quality
Assurance and Performance Improvement (QAPI) activities and agree to PO
oversight by the medical director.
Comment: One commenter submitted comments related to the submission
and evaluation of waiver requests. This commenter supported reasonable
waiver requests for community-based PCPs for flexibility and innovation
within PACE which will allow the program to grow. The commenter also
supported conditional waivers, which would allow CMS to monitor the
performance of organizations utilizing community-based PCPs as well as
participant outcomes. The commenter recommended that we focus on
processes for integrating care while utilizing community-based PCPs.
Response: In general, we are not inclined to approve waiver
requests allowing POs to utilize community-based PCPs without
identifying a substantial need. However, we believe there are
circumstances when the use of community-based PCPs may be appropriate.
For example, it is important for a participant to have a physician that
speaks their language and understands their culture's mores and
traditions, which can improve participant compliance with their plans
of care and, therefore, their health outcomes. We have approved a
limited number of waiver requests allowing community-based PCPs
contingent on their compliance with specific requirements. We plan to
monitor and review the impact of the interactions between the
community-based PCPs and the IDT and participant care before we alter
the conditions currently applied to these waiver requests.
Comment: Commenters asked whether PACE programs which are operating
under grandfathering arrangements would be required to request a waiver
in order to continue operations. They believe having to request waiver
of operational arrangements grandfathered under BIPA 902 will be
administratively burdensome, and they recommend POs be allowed to
expand grandfathering arrangements ``organization wide'' provided the
expansion is ``* * * reasonably consistent with the objectives of the
PACE program.'' They suggested the PO could file a notice with CMS
describing the expansion arrangement and how it is consistent with
program objectives.
Response: PACE demonstration program sites were granted BIPA 902
``grandfathering'' of certain operational arrangements that did not
meet the 1999 interim final rule, if the identified practice was in
place before July 1, 2000. As the approved ``grandfathering'' was
effective, only to the extent it existed on July 1, 2000, we believe it
was not intended to cover a new or expanded site. As a result, POs need
to submit BIPA 903 waiver requests of grandfathered practices for
expansion sites.
Based on our experience with the waiver process, we believe there
is value in CMS and SAA review and approval of waivers. The
consultations involved in the waiver process allows CMS and the SAA to
discuss the PO's ability to implement the requested waiver, any
concerns either agency has regarding the waiver request, request
further information or clarification of the PO's operations, and
determine any requirements or conditions that will be included in the
waiver approval. CMS and the SAA collaborate in the review and approval
of waivers. We have found that the SAA generally has a better knowledge
and understanding of the PO and its operations and relevant State laws
and requirements.
Comment: One commenter indicated that the regulatory language fails
to address entities that are not already a PO, saying that prospective
POs (as well as established POs) should be eligible for waivers of
regulatory requirements. The commenter requested clarification
regarding whether PACE demonstration programs transitioning to
permanent provider status, pre-PACE programs, and previously ``non-
operational'' entities are eligible to request waivers of regulatory
requirements.
Response: Any entity submitting a PACE provider application may
submit a request for waiver. The PO demonstration programs had been
operating in some cases for years and the implementation of the 1999
interim final rule could have disrupted operations and care to the
participants as the demonstration programs transitioned to permanent
provider status and were required to be in compliance with the 1999
interim final rule. BIPA provided flexibility for those transitioning
demonstration programs to continue their existing operational
arrangements and a waiver process for those organizations that did not
meet the grandfathering criteria but were unable to comply with the
1999 interim final rule. We believe the intent of the waiver provision
in BIPA was to assist organizations to participate in the Medicare and
Medicaid PACE benefit program.
We believe that there may be circumstances when applicants are not
able to comply with the regulations. The BIPA section 903 waiver
process allows developing organizations to work with CMS and the SAA to
develop an appropriate alternative rather than abandon their efforts to
become a PACE program when they discover they can not meet the
regulatory requirements. Therefore, we have allowed these entities to
submit waiver requests. A waiver request must be submitted as a
[[Page 71257]]
separate document from the provider application and must contain
substantial justification for the request. Pre-PACE organizations are
Medicaid pre-paid health plans that provide Medicare services under
Medicare fee-for-service rules and certain Medicaid services paid by
Medicaid on a capitated basis. These organizations may submit a waiver
request and their PACE provider application simultaneously but as
separate documents.
We will accept waiver requests from non-operational entities and
pre-PACE applicants, in an attempt to assist new organizations that
would otherwise be unable to meet regulatory requirements. All waiver
requests must be submitted through the SAA, who will review and forward
to CMS. Regardless of the prior status of the entity, a request for a
waiver is reviewed on a case-by-case basis.
Comment: Commenters also requested that we make information
regarding approved waiver requests available to current and potential
POs.
Response: At this time, we do not agree that making information on
particular PACE programs available is warranted. We believe it would be
more beneficial for each PO to develop their own unique waiver request
and rationale. Each PO is a unique operational entity that has specific
circumstances and experience that influence the appropriateness for
approving a waiver. Therefore, approving all similar requests for a
waiver of a specific requirement is inappropriate. Our intention is
that all POs comply with the PACE regulations.
Final rule actions:
In this final rule, we are expanding the regulatory requirements of
Sec. 460.26 to permit POs and entities applying to become POs to
submit waiver requests.
Section 460.28 Notice of CMS Determination on Waiver Requests
Comment: One commenter requested clarification as to whether an
entity submitting a PACE application is permitted to submit a waiver
request separate from the provider application, as prompt CMS
determination will be important to the organization's ability to move
forward with PACE development. The commenter also asked whether the CMS
timeframe for responding to waiver requests is affected by the status
of the request, or whether the applicant is an operational or a
prospective PO.
Response: Waiver requests may accompany an application, but must be
prepared and submitted as a separate document. Requests will be
reviewed simultaneously and in conjunction with the application.
Alternatively, waiver requests can be submitted independently of the
application by POs that are currently operational.
The timeframe for our response to a waiver request is the same
regardless of the operational status of the requestor. We have a
statutory 90-day timeframe to approve or deny waiver requests. As a
result, when we request additional information, regarding a waiver
request, it is incumbent upon the organization to respond as
expeditiously as possible to provide CMS and the SAA time to review
their responses. We provide a written approval or denial letter to the
PO or PACE applicant with the determination and any additional
conditions.
Final rule actions:
In this final rule, we are amending paragraph (a)(2) by adding ``or
PACE applicant,'' thereby requiring CMS to notify the PO or PACE
applicant in writing of the decision to deny the submitted waiver
request.
Subpart C--PACE Program Agreement
The purpose of subpart C is to establish requirements for the PACE
program agreement establishing the entity as a provider of PACE
benefits under Medicare and the Medicaid State plan.
Section 460.30 Program Agreement Requirements
In accordance with sections 1894(a)(4) and 1934(a)(4) of the Act,
we established Sec. 460.30 to require that each PO have an agreement
with CMS and the SAA for the operation of a PACE program by the
organization under Medicare and Medicaid. This three-party agreement
must be signed by an authorized official of the organization, as well
as by an authorized CMS official and an authorized State official.
We received no public comments on Sec. 460.30 of the 1999 interim
final rule.
In the 2002 interim final rule, we revised the regulatory language
to reflect that the PACE program agreement is a three-party agreement
that is signed by CMS, the SAA, and the PO. Also, we added regulatory
language to clarify that CMS may sign a program agreement only with a
PO that is located in a State with an approved SPA electing PACE as an
optional benefit under its Medicaid State plan.
We received no comments on this section of the 2002 interim final
rule.
Final rule actions:
This final rule will finalize Sec. 460.30 as published in the 1999
and 2002 interim final rules.
Section 460.32 Content and Terms of PACE Program Agreement
In Sec. 460.32(a), we stipulate the required content of a PACE
program agreement.
We require that each PACE program agreement designate the service
area of the program, specifically identifying the area by county, zip
code, street boundaries, census tract, block, or tribal jurisdictional
area, to the extent that those identifiers are appropriate. Any changes
in the designated service area would require advance approval by CMS
and the SAA. This requirement implements the provisions of sections
1894(e)(2)(A)(i) and 1934(e)(2)(A)(i) of the Act and reflects Part I,
section D of the Protocol.
Each PO must agree to meet all applicable requirements under
Federal, State, and local laws and regulations, including provisions of
the Civil Rights Act, the Age Discrimination Act, and the Americans
with Disabilities Act. These requirements include, but are not limited
to, all requirements contained in the regulations implementing those
Acts. This requirement implements in part the provisions of sections
1894(e)(2)(A)(iv) and 1934(e)(2)(A)(iv) of the Act.
We require that the program agreement indicate the effective date
and term of the agreement as well as information related to:
Organizational structure of the PO; participant rights; processes for
grievances and appeals; eligibility; enrollment and disenrollment
policies; service description; QAPI; capitation rates; names and
numbers of administrative contacts in the organization; and program
agreement termination procedures. These requirements are based on
sections 1894(b)(2) and 1934(b)(2) of the Act and on Part X, section A
of the Protocol.
Each PACE program agreement includes a statement of the levels of
performance that we require the organization to achieve on standard
quality measures and the data and information on participant care that
CMS and the State require the organization to collect. A detailed
discussion of the levels of performance and the standard quality
measures are contained in the preamble discussions for Sec. 460.134
and Sec. 460.202(b) in the 1999 interim final rule.
In Sec. 460.32(b), we specify that a PACE program agreement may
provide additional requirements for individuals to qualify as PACE
program eligible individuals. This provision implements sections
1894(e)(2)(A)(ii) and 1934(e)(2)(A)(ii) of the Act. However,
[[Page 71258]]
the eligibility criteria in Sec. 460.150(b)(1)-(3) cannot be modified.
In addition, a PACE program agreement may contain additional terms and
conditions as the parties agree to, if the terms and conditions are
consistent with sections 1894 and 1934 of the Act and with these
regulations. This provision implements sections 1894(e)(2)(A)(v) and
1934(e)(2)(A)(v) of the Act.
We received five comments on the 1999 interim final rule related to
the program agreement, which are listed below.
Comment: One commenter requested that we clarify whether the
program agreement content is meant as a substitute for all provisions
or only some of the provisions of the State Medicaid contract
requirements in 42 CFR part 434. The commenter also asked whether
additional terms and conditions could be included in the PACE program
agreement to meet specific State law requirements.
Response: The PACE program agreement is a three-way contract
between the PO, the SAA and CMS, and contains the PACE requirements
from the Federal statute and regulations. If the SAA has requirements
beyond those in the three-way PACE program agreement, those
requirements should be addressed in a separate contract between the
State and the PO. The PACE three-way program agreement can be an
attachment to the State-PO contract. As we stated above, each PO must
agree to meet all applicable requirements under Federal, State, and
local laws and regulations.
States may implement additional or more stringent requirements if
they are consistent with sections 1894 and 1934 of the Act and with
Federal laws and regulations. However, if there is a conflict between
the State and Federal requirements, the Federal requirements would
generally take precedence.
Comment: We were asked to describe the mechanism for revising a
signed program agreement.
Response: We will provide the PO and the SAA with written
notification of any revisions and include updated pages of the program
agreement. The PO and the SAA have 30 days to send written notification
to us of any disagreement with the revisions. We have provided
information on the program agreement on the PACE home page, in the PACE
Fact Sheet, which is located at http://www.cms.hhs.gov/PACE/Downloads/PACEFactSheet.pdf
.
Comment: One commenter asked that we define the procedure for
expanding a service area.
Response: The procedure for expanding a service area differs
depending on whether a new PACE center is also being opened. The
abbreviated PACE expansion application and additional information
regarding the procedures for expanding a service area on the PACE home
page, in the PACE Fact Sheet, which is located at http://www.cms.hhs.gov/PACE/Downloads/PACEFactSheet.pdf
.
Comment: Two commenters asked when we would provide the
requirements on standard quality measures, the requirements for
participant care data and information and asked whether the
requirements are the same for all PACE programs. A number of commenters
inquired when the data would be collected and what the specific
measures would be.
Response: The program agreement identifies the data elements for
monitoring that must be submitted quarterly by all POs. A further
discussion on standard quality measures, Outcome-Based Continuous
Quality Improvement (OBCQI), and COCOA-B is in section III subpart H of
this final rule.
Comment: Commenters asked when CMS would provide the Medicare
capitation rates.
Response: Section 1894(d) of the Act directs the Secretary to make
prospective monthly payments of a capitation amount for each PACE
program eligible individual enrolled under the agreement under this
section in the same manner and from the same sources as payments are
made to the Medicare+Choice (formerly M+C, now MA) organizations and to
specify the capitation amount in the PACE program agreement. Therefore,
in the 1999 interim final rule, we required that the Medicare
capitation rates be included in the program agreement. The Balanced
Budget Act of 1997(BBA) mandated that a risk adjustment payment
methodology incorporating information on beneficiaries' health status
be implemented in the M+C program. The resulting PACE payment
methodology that began in 2004 includes a risk adjusted methodology
that results in a unique payment for each participant. As a result, it
is not possible to include the Medicare capitation rates in the program
agreement. Therefore, we are amending our regulation to remove the
requirement that the program agreement include the Medicare capitation
amount and to require, instead, that the program agreement must include
the Medicare payment methodology. This requirement is included in
Appendix ``M'' of the program agreement, which can be found at http://www.cms.hhs.gov/pace/Downloads/programagreement.pdf.
Medicare rates are
annually updated, published, and posted on the CMS Web site. Current
Medicare payment rates can be found at http://www.cms.hhs.gov/healthplans/rates/default.asp
.
Final rule actions:
This final rule will amend Sec. 460.32 to indicate that the
program agreement must include the ``Medicare payment methodology''
which replaces the ``Medicare capitation rate.''
Section 460.34 Duration of PACE Program Agreement
In Sec. 460.34, we specify that each program agreement will be
effective for a contract year, but may be extended for additional
contract years in the absence of a notice by a party to terminate, in
accordance with the requirements of sections 1894(e)(2)(A)(iii) and
1934(e)(2)(A)(iii) of the Act.
Comment: It was recommended that we extend the program agreement's
designated 1-year contract period to a longer period of time with an
automatic extender.
Response: As noted above, the statute specifies a 1-year
contracting period. We provided for a flexible initial contract year
that could be as long as 23 months to allow us to adjust the length of
the initial or start-up contract year so that subsequent years are on a
standard calendar year cycle.
PACE program agreements are considered to be ``evergreen'' meaning
they will be automatically renewed without having to be re-signed. We
believe the term of the program agreement is appropriate and consistent
with overall Medicare policy, as well as in compliance with the
requirements of the Act.
Final rule actions:
This final rule will finalize Sec. 460.34 as published in the 1999
interim final rule.
Subpart D--Sanctions, Enforcement Actions and Termination
In subpart D of the 1999 interim final rule, we specified the
violations identified in sections 1857(g)(1) and 1903(m)(5)(A) of the
Act that could result in the imposition of sanctions under sections
1894(e)(6) and 1934(e)(6) of the Act. We also specified in accordance
with paragraph (e)(5) of section 1894 and 1934 of the Act, that CMS or
the SAA may terminate the PACE program agreement at any time for cause
and that a PO may terminate an agreement after appropriate notice to
CMS, the SAA, and participants. We also specified, in accordance with
paragraphs (e)(5)(C) of sections 1894 and 1934(e)(5)(C) of the Act,
Part IX of the Protocol, the transition procedures that must be
followed by an entity
[[Page 71259]]
whose PACE program agreement is in the process of being terminated.
Those procedures can be found in Sec. 460.50.
Section 460.40 Violations for Which CMS May Impose Sanctions
In Sec. 460.40 we specified, based on paragraph (e)(6)(B) of
sections 1894 and 1934 of the Act, that we can impose, in addition to
any other remedies authorized by law, any of three types of sanctions
if we determine that a PO has committed any of nine listed violations.
The following PO violations specified in this section are based on
provisions of sections 1857(g)(1) and 1903(m)(5)(A) of the Act:
Fails substantially to furnish to a participant medically
necessary items and services that are covered PACE services, if the
failure has adversely affected (or has substantial likelihood of
adversely affecting) the participant.
Involuntarily disenrolls a participant in violation of
Sec. 460.164.
Discriminates in enrollment or disenrollment among
Medicare beneficiaries or Medicaid recipients, or both, who are
eligible to enroll in a PACE program, on the basis of an individual's
health status or need for health care services.
Engages in any practice that would reasonably be expected
to have the effect of denying or discouraging enrollment, except as
permitted by Sec. 460.150, by Medicare beneficiaries or Medicaid
recipients whose medical condition or history indicates a need for
substantial future medical services.
Imposes charges on participants enrolled under Medicare or
Medicaid for premiums in excess of the premiums permitted.
Misrepresents or falsifies information that is furnished
to CMS or the State under this part; or, to an individual or any other
entity under this part.
Prohibits or otherwise restricts a covered health care
professional from advising a participant who is a patient of the
professional about the participant's health status, medical care, or
treatment for the participant's condition or disease, regardless of
whether the PACE program provides benefits for that care or treatment,
if the professional is acting within his or her lawful scope of
practice.
Operates a physician incentive plan that does not meet the
requirements of section 1876(i)(8) of the Act.
Employs or contracts with any individual who is excluded
from participation in Medicare or Medicaid under section 1128 or 1128A
of the Act (or with any entity that employs or contracts with such an
individual) for the provision of health care, utilization review,
medical social work, or administrative services.
We received the following comments on Sec. 460.40.
Comment: A commenter stated that the 1999 interim final rule did
not include sanctions or enforcement actions that would apply if a
program fails to comply with the data collection, record maintenance
and reporting requirements in subpart L. The commenter asked what is
the authority to require the POs to comply with these requirements.
Response: Under the terms of the program agreement (Sec.
460.32(a)(2)) the PO is committed to meet all applicable requirements
under Federal, State and local laws and regulations, which would
include the requirements under subpart L. The reporting requirements in
subpart L impact our ability to calculate Medicare capitation payments.
Lacking the necessary data to compute an appropriate payment, the PO
might receive an inaccurate payment or possibly no payment at all for
the corresponding month(s).
Moreover, failure to submit required reports could be interpreted
as a failure by the PO to comply substantially with conditions for a PO
under this part (Sec. 460.50(b)(1)(ii)) or to comply with the terms of
its PACE program agreement. Therefore, CMS and the SAA have the option
of terminating the PACE program agreement due to uncorrected
deficiencies.
We believe that Sec. 460.40 as published in the 1999 interim final
rule sufficiently addresses the availability of sanctions for
violations of subpart L requirements.
Comment: A commenter indicated it was not clear how CMS intended to
monitor performance in an identified deficient area nor how CMS and the
SAA would cooperate on investigations, agree on findings, and impose
sanctions, enforcement, and termination.
Response: In a cooperative effort, CMS and the SAA jointly perform
onsite monitoring reviews on a regular basis to ensure quality of
participant care as well as to verify clinical and administrative
compliance with the PACE regulations. Both CMS and the SAAs engage in a
collaborative relationship to sustain oversight of the PO. We stress
communications to ensure that each party has the information necessary
to take appropriate actions.
Comment: A commenter also requested we clarify the violation
incorporated into Sec. 460.40(d), which concerns practices that would
have the effect of denying or discouraging enrollment.
Response: Under Sec. 460.40(d), CMS may impose a sanction if the
PO engages in any practice that would deny or discourage a participant
from enrolling in PACE whose medical condition or history indicates a
need for substantial medical service. The exception to this sanction is
if the applicant is otherwise ineligible under Sec. 460.150 (that is,
they are under 55 years of the age, they do not live in the PO's
service area, they do not meet the level of care indicated in the
State's Medicaid plan, living in the community would jeopardize their
health or safety under the criteria as specified in the program
agreement, or any additional eligibility requirements approved by CMS
and included in the PACE provider agreement).
Final rule actions:
This final rule will finalize Sec. 460.40 as published in the 1999
interim final rule.
Section 460.42 Suspension of Enrollment or Payment by CMS
We described the two types of sanctions that we may impose in Sec.
460.42 and Sec. 460.46 (civil money penalties). Each of the sanctions,
or remedies, that are specified in these sections for specific
violations are based on provisions of sections 1857(g)(2), 1857(g)(4),
and 1903(m)(5)(B) of the Act. With respect to suspension of enrollment
in PACE, we may suspend enrollment of Medicare beneficiaries after the
date we notify the organization of the violation. Suspending enrollment
of Medicaid recipients is an action taken by the SAA rather than CMS.
With respect to suspension of payment, we may suspend Medicare payment
to the PO and deny payment to the State of Federal financial
participation (FFP) for medical assistance services furnished under the
PACE program agreement.
Comment: One commenter recommended that a decision to suspend
enrollment should be a collaborative agreement by CMS and the SAA or
the SAA should have the ability to do so on its own. Therefore, the
commenter recommended establishing an expectation of collaboration
between CMS and the SAA, at a minimum.
The commenter also recommended that we revise Sec. 460.42(b)(2) to
prospectively notify the State that FFP will be discontinued 60 days
from receipt of the notice.
Response: In the event of any violation or imposition of sanctions,
we work closely with the SAA of the State in which the PO is located.
The interaction between CMS and the SAA is by nature a collaborative
one and any action decided upon is the result of this
[[Page 71260]]
collaborative effort. We do not believe that adding regulatory language
will enhance the inherent collaborative working relationship between
CMS and the SAAs.
Moreover, should we exercise the sanction option at Sec.
460.42(b)(2), we will use existing procedures and timeframes for the
disallowance of FFP claims. These provisions can be found at 42 CFR
430.42.
Final rule actions:
This final rule will finalize Sec. 460.42 as published in the 1999
interim final rule.
Section 460.46 Civil Money Penalties
In addition to suspension of enrollment, CMS may impose civil money
penalties as specified in Sec. 460.46. These include penalties of
$100,000 plus $15,000 for each individual not enrolled as a result of
the PO's discrimination in enrollment or disenrollment or practice that
would deny or discourage enrollment; $25,000 plus double the excess
amount above the permitted premium charged a participant by the PO;
$100,000 for each misrepresentation or falsification of information;
and $25,000 for any violation specified in Sec. 460.40.
Comment: One commenter requested clarification of CMS' authority to
assess financial penalties for violations to dual eligible individuals
(Medicare beneficiaries that are also Medicaid eligible individuals) as
well as Medicare-only beneficiaries.
Response: Authority to assess monetary penalties is provided in
sections 1894(e)(6) (Medicare provisions) and 1934(e)(6)(Medicaid
provisions) of the Act. If it is determined that a provider has failed
to comply with the requirements of those sections of the Act and the
regulations, CMS has the authority to impose monetary penalties for
violations impacting either dual eligible or Medicare-only
participants.
Comment: Several commenters expressed concern that the civil
monetary penalties for POs are the same or greater than those of
Medicaid managed care and MA organizations. The commenters pointed out
that significant size and revenue differences between MA and POs
warrant lower penalties for POs. In addition POs have a smaller pool of
potential participants than managed care organizations, which must
enroll all individuals regardless of need.
Response: We believe the current requirement as published is
appropriate in that it allows for imposition of a range of penalty
amount from one dollar up to and including the amounts identified in
Sec. 460.48. It is not CMS' intent to close any PACE program. We
believe the imposition of the maximum financial penalty is an option
that would only be used in cases of egregious violations. We believe it
is appropriate to maintain the current regulatory requirements, which
provide CMS the ability to impose a broad range of penalty amounts
including the maximum sanction should the situation warrant.
Comment: Six commenters indicated that the level of penalties is
too severe and recommend the penalties be proportionate to the size of
the PACE program. One commenter recommended penalties be left to the
discretion of the State, while several others indicated that an
appropriate amount would be one-quarter of the amount required for
Medicaid managed care and M+C plans.
Response: As noted in the previous response, the rule permits a
range of amounts to be imposed and provides CMS with the necessary
flexibility to impose an appropriate amount depending upon the nature
of the violation. In addition, we note that statute requires CMS to
make the determination (after consultation with the SAA) to impose any
sanctions.
Comment: One commenter relayed the regulation did not indicate to
whom the fines should be paid. They recommended the fines be shared
equally between the Federal government and the SAA.
Response: Should CMS impose a fine, the PO will be informed in
writing and directed where to send the penalty. The PACE statute and
regulations at Sec. 460.46(b) specify that section 1128A of the Act
governs disposition of civil money penalties. It is not the purpose of
this rule to further address disposition of amounts recovered.
Final rule actions:
This final rule will finalize Sec. 460.46 as published in the 1999
interim final rule.
Section 460.48 Additional Actions by CMS or the State
In Sec. 460.48 we specified, based on paragraph (e)(6)(A) of
sections 1894 and 1934 of the Act, that if CMS, after consultation with
the SAA, determines that a PO is not in substantial compliance with
requirements in these regulations, CMS or the SAA can take one or more
of the following actions: Condition the continuation of the PACE
program agreement upon timely execution of a corrective action plan;
withhold some or all payments under the PACE program agreement until
the organization corrects the deficiency; or terminate the program
agreement.
Comment: One commenter questioned whether CMS and the SAA could
independently take action against a PO for violations providing there
was prior consultation.
Response: The statute allows CMS to take an enforcement action but
only after CMS has consulted with the SAA, and determines that the PACE
provider has failed substantially to comply with the PACE requirements.
While the SAA may take action based on its own regulations, we believe,
that in light of the collaborative relationship between CMS and the
SAA, the SAA would consult with CMS before taking any independent
action.
Final rule actions:
This final rule will finalize Sec. 460.48 as published in the 1999
interim final rule.
Section 460.50 Termination of PACE Program Agreement
In Sec. 460.50 we specified, in accordance with paragraph
(e)(5)(A) of sections 1894 and 1934 of the Act, that CMS or a SAA may
terminate at any time a PACE program agreement for cause and that a PO
may terminate an agreement after appropriate notice to CMS, the SAA,
and its participants. In accordance with paragraph (e)(5)(B) of
sections 1894 and 1934 of the Act, we specified that CMS or a SAA may
terminate a PACE program agreement with a PO if CMS or the SAA
determines that:
Either there are significant deficiencies in the quality
of care furnished to participants, or the PO has failed to comply
substantially with conditions under these regulations or with the terms
of its PACE program agreement; and
The PO has failed to develop and successfully initiate,
within 30 days of the date of the receipt of written notice, a plan to
correct the deficiencies, or has failed to continue implementation of
such a plan.
Based on the Protocol, Part IX, section A.1, we also provided for
termination if CMS or the SAA determines that the PO cannot ensure the
health and safety of its participants. This determination may result
from the identification of deficiencies, which CMS or the SAA
determines cannot be corrected. Based on the Protocol, Part IX, section
A.2, we also required that if the organization terminates the
agreement, a minimum of 90 days' notice must be given to CMS and the
SAA regarding the organization's intent and that participants must be
given a minimum of 60 days notice.
Comment: Termination of the PACE program and transitional care
during transition were topics of several comments and recommendations
we received. Recommendations included
[[Page 71261]]
adding regulatory language requiring CMS and the SAA to agree and
coordinate their actions related to termination of a PACE program
agreement. Another recommendation was to require that CMS and the State
consider the likelihood of institutionalization of community
participants in determining whether termination should be imposed.
Response: Neither CMS nor the State considers termination lightly,
and our primary concern is protecting the health and safety of the
participants. All possible ramifications of terminating a program
agreement, including the likelihood of participants becoming
institutionalized, will be considered before taking such a severe
action. However, we disagree with the commenters and do not believe
revisions to the regulations are warranted. As stated in response to
previous commenters, we believe the cooperative nature of the
relationships between CMS and the SAAs will lead to agreement on a
decision to terminate a program agreement. We note however, the statute
and regulations specify that CMS or the SAA may independently terminate
a PACE program agreement.
Comment: A commenter suggested that the regulations include the
appointment of a temporary manager to supervise the operation of the
PACE program as an alternative to termination of the program agreement.
Response: To date our experience with the POs does not indicate the
necessity of including this remedy in regulation. We will continue to
assess the performance of POs and we may consider this sanction in the
future. We note that Sec. 460.48(a) states that CMS or the SAA may
condition continuation of the PACE program agreement upon timely
execution of a corrective action plan (CAP). The appointment of a
``temporary manager'' could be included within the provisions of a CAP.
As such, it would be unnecessary to specify specific remedies
(including a temporary manager) that CMS might include in the CAP for a
particular PO.
Final rule actions:
This final rule will finalize Sec. 460.50 as published in the 1999
interim final rule.
Section 460.52 Transitional Care During Termination
Based on the Protocol, Part IX, section B, we require that the PO
develop a detailed written plan for phase-down in the event of
termination which includes the following: The process for informing
participants, the community, CMS and the SAA in writing about
termination and transition procedures; and steps that will be taken to
help assist participants to obtain reinstatement of conventional
Medicare and Medicaid benefits, transition their care to other
providers, and terminate marketing and enrollment