[Federal Register: May 25, 2007 (Volume 72, Number 101)]
[Proposed Rules]
[Page 29367-29402]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my07-20]
[[Page 29367]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 422 and 423
Medicare Program; Revisions to the Medicare Advantage and Part D
Prescription Drug Contract Determinations, Appeals, and Intermediate
Sanctions Processes; Proposed Rules
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 422 and 423
[CMS-4124-P]
RIN 0938-AO78
Medicare Program; Revisions to the Medicare Advantage and Part D
Prescription Drug Contract Determinations, Appeals, and Intermediate
Sanctions Processes
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would clarify the Medicare program
provisions relating to contract determinations involving Medicare
Advantage (MA) organizations and Medicare Part D prescription drug plan
sponsors, including eliminating the reconsideration process for review
of contract determinations; revising the provisions related to appeals
of contract determinations and clarifying the process for MA
organizations and Part D plan sponsors to complete corrective action
plans. This proposed rule would also clarify the intermediate sanction
and civil money penalty (CMP) provisions that apply to MA organizations
and Medicare Part D prescription drug plan sponsors, modify elements of
their compliance plans, and revise provisions to ensure HHS has access
to the books and records of MA organizations and Part D plan sponsors'
first tier, downstream, and related entities.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on July 24, 2007.
ADDRESSES: In commenting, please refer to file code CMS-4124-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-4124-P, P.O. Box 8012, Baltimore, MD 21244-8012.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-4124-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-9994 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Christine Perenich, (410) 786-2987.
Kevin Stansbury, (410) 786-2570.
Stephanie Kaisler, (410) 786-0957, for issues regarding access to
records and compliance.
Rita Wurm, (410) 786-1139, for issues regarding access to records
and compliance.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-4124-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking.
Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
Abbreviations
Because of the many terms to which we refer by abbreviation in this
proposed rule, we are listing these abbreviations and their
corresponding terms in alphabetical order below:
ALJ Administrative Law Judge
BBA Balanced Budget Act of 1997
BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999
CAP Corrective Action Plan
CMP Civil Money Penalty
CMS Centers for Medicare & Medicaid Services
DAB Departmental Appeals Board
ESRD End-Stage Renal Disease
FWA Fraud, Waste, and Abuse
HHS Department of Health and Human Services
MA Medicare Advantage
MMA Medicare Prescription Drug, Improvement, and Modernization Act of
2003
M+C Medicare + Choice
OIG Office of the Inspector General
PBM Pharmaceutical Benefit Manager
PDE Prescription Drug Event
PPO Preferred Provider Organization
I. Background
[If you choose to comment on issues in this section, please include
the caption ``BACKGROUND'' at the beginning of your comments.]
[[Page 29369]]
A. Overview of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA)
The President signed the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) into law on
December 8, 2003. The MMA established the Medicare prescription drug
benefit program and renamed the Medicare+Choice program the Medicare
Advantage (MA) program. In accordance with the MMA, we revised the
existing Medicare regulations applicable to the MA program at 42 CFR
part 422 and published regulations governing the prescription drug
benefit program at 42 CFR part 423.
As we have gained more experience with MA organizations and Part D
prescription drug plan sponsors, we are proposing clarifications to the
Medicare program provisions relating to contract determinations
involving Medicare Advantage organizations and Medicare Part D
prescription drug plan sponsors, including eliminating the
reconsideration process for review of contract determinations; revising
the provisions related to appeals of contract determinations and
clarifying the process for MA organizations and Part D plan sponsors to
complete corrective action plans. This proposed rule would clarify the
intermediate sanction and civil money penalty (CMP) provisions that
apply to MA organizations and Medicare Part D prescription drug plan
sponsors. We have also proposed changes to clarify the compliance plan
requirements and our access to the books and records of an MA
organization or Part D sponsor's first tier, downstream, and related
entities.
B. Relevant Legislative History and Overview
The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established
the Medicare+Choice (M+C) program. Under section 1851(a)(1) of the Act,
every individual with Medicare Parts A and B, except for individuals
with end-stage renal disease (ESRD), could elect to receive benefits
either through the original Medicare program or an M+C plan, if one was
offered where the beneficiary lived. The primary goal of the M+C
program was to provide Medicare beneficiaries with a wider range of
health plan choices.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113), amended the M+C provisions of the BBA.
Further amendments were made to the M+C program by the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), enacted December 21, 2000.
The President signed the MMA into law on December 8, 2003. Title I
of the MMA added new sections 1860D-1 through 1860D-42 to the Act
creating the Medicare Prescription Drug Benefit program, a landmark
change to the Medicare program since its inception in 1965.
Sections 201 through 241 of Title II of the MMA made significant
changes to the M+C program. As directed by Title II of the MMA, we
renamed the M+C program the MA program. We also revised our regulations
to include new payment and bidding provisions based largely on risk, to
recognize the addition of regional Preferred Provider Organization
(PPO) plans, to address the provision of prescription drug benefits
under the Medicare Part D regulations, and to make other changes.
The MMA, at section 1860D-12(b)(3) of the Act, directed that
specific aspects of the MA contracting requirements apply to the
prescription drug plan benefit program. Consequently, the processes for
contract determinations and the administrative appeal rights in the two
programs are virtually identical.
We published the regulations implementing the MA and prescription
drug benefit regulations separately, though their development and
publication were closely coordinated. On August 3, 2004, we published
proposed rules for the MA program (69 FR 46866) and prescription drug
benefit program (69 FR 46632). The final regulations implementing both
the MA and prescription drug programs were published on January 28,
2005 (70 FR 4588 and 70 FR 4194, respectively). We revised some of our
proposed provisions in the final rules in response to public comments.
For further discussion of the revisions we made to our proposed rules,
see the final rules cited above. CMS has not issued previous guidance,
other than regulatory requirements regarding contract determinations,
corrective action plans, contract determination appeals, intermediate
sanctions or civil money penalties. However, CMS has published guidance
on how to develop an effective fraud, waste and abuse (FWA) prevention
program. This guidance is found in Chapter 9 of the Prescription Drug
Benefit Manual entitled ``Part D Program to Control Fraud, Waste and
Abuse.'' This rule proposes further revisions to the MA and
prescription drug regulations and we welcome your comments on our
proposed regulations.
II. Provisions of the Proposed Regulations
[If you choose to comment on issues in this section, please include
the caption ``PROVISIONS OF THE PROPOSED REGULATIONS'' at the beginning
of your comments.]
A. Overview of Proposed Changes to the Medicare Advantage Program and
the Prescription Drug Benefit Program
Our experience involving contract determinations, appeals,
intermediate sanctions, and CMPs since the enactment of the Balanced
Budget Act of 1997 have led us to propose changes to our regulations.
In this rule, we propose to simplify the procedures for contract
determinations; to clarify the procedures regarding submission and
review of corrective action plans; to clarify the procedures for
imposition of intermediate sanctions and CMPs; and to clarify the
procedures to appeal CMPs imposed under the MA and Part D programs.
In addition, we propose revisions to the appeal procedures for all
types of contract determinations, which would make these procedures
identical for decisions not to contract, for nonrenewals, and for
terminations. We propose to provide for enhanced beneficiary
protections when we decide to terminate a plan on an expedited basis.
In this rule, we are also proposing changes and making
clarifications to Subpart K, contract requirements under the MA and
Part D programs. We have proposed changes to clarify HHS' access to the
books and records of a MA organization or Part D sponsor's first tier,
downstream, and related entities, including records relating to Part D
rebates and price concessions and any underlying PDE records. We have
also proposed changes to clarify that certain elements of the
compliance plan apply to first tier, downstream, and related entities.
The proposed changes would ensure that both the MA and Medicare
Part D prescription drug benefit programs may operate as efficiently as
possible within the guidelines of the statute.
Below, we set forth the proposed regulation changes and
corresponding proposed implementation dates:
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Proposed
Proposed regulation change implementation
date
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Incorporation of Fraud, Waste, and Abuse Prevention 1/1/2009
Measures into Compliance Plan........................
Requirement to apply Compliance Plan's training and 1/1/2009
communication requirements to first tier, downstream,
and related entities.................................
Mandatory procedures for self-reporting potential 1/1/2009
fraud and misconduct.................................
Requirement to obtain access to Part D sponsor's first 1/1/2009
tier, downstream, and related entity's books and
records through contractual arrangements.............
Elimination of CMS' requirement to inform organization 1/1/2008
of renewal...........................................
Change date of CMS' notification of non-renewal from 1/1/2008
May 1 to September 1.................................
Provide for same administrative appeal rights 1/1/2008
(including CAP) for all contract determinations (non-
renewal, expedited termination, termination).........
Change regarding CAP process may be provided prior to 1/1/2008
notification of termination, and the imposition of
time limits on Corrective Action Plans...............
Change immediate termination to expedited termination 1/1/2008
with CMS setting the effective date of termination...
Elimination of Reconsideration Step for contract 1/1/2008
determination appeals................................
Implementation of Burden of Proof for contract 1/1/2008
determinations.......................................
Ability for a hearing officer to issue summary 1/1/2008
judgment.............................................
Request for Administrator review, submission of 1/1/2008
information, and timeframe associated with
Administrator review.................................
Settlement of Civil Money Penalties................... 1/1/2008
Appeal procedures for Civil Money Penalties........... 1/1/2008
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B. Distribution Table
The following crosswalk table references the changes we propose to
make to the prescription drug and the MA programs. We propose to make
the same changes to 42 CFR Parts 422 and 423 with minimum differences.
The crosswalk lists the section headings, for parts 422 and 423, and
indicates if the section is being deleted.
Table 1.--Crosswalk of Part 422 and Part 423 CFR Sections
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Section heading Section references in part 422 Section references in part 423
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Definitions............................... 422.2.......................... 423.4.
Compliance Plan........................... 422.503(b)(4)(vi).............. 423.504(b)(4)(vi).
Access to Facilities and Records.......... 422.504(e) and 423.505(e).
422.503(d)(2)(iii).
Contract Provisions....................... 422.504(i)..................... 423.505(i).
Effective Date and Term of Contract....... 422.505........................ 423.506.
Non-renewal of contract................... 422.506........................ 423.507.
Termination of contract by CMS............ 422.510........................ 423.509.
Notice of contract determination.......... 422.644........................ 423.642.
Effect of contract determination.......... 422.646........................ 423.643.
Reconsideration: applicability............ 422.648 (delete)............... 423.644 (delete).
Request for reconsideration............... 422.650 (delete)............... 423.645 (delete).
Opportunity to submit evidence............ 422.652 (delete)............... 423.646 (delete).
Reconsidered determination................ 422.654 (delete)............... 423.647 (delete).
Notice of reconsidered determination...... 422.656 (delete)............... 423.648 (delete).
Effect of reconsidered determination...... 422.658 (delete)............... 423.649 (delete).
Right to a hearing and burden of proof.... 422.660........................ 423.650.
Request for hearing....................... 422.662........................ 423.651.
Postponement of effective date of a 422.664........................ 423.652.
contract determination when a request for
a hearing with respect to a contract
determination is filed timely.
Time and Place of Hearing................. 422.670........................ 423.655.
Discovery................................. 422.682........................ 423.661.
Prehearing and Summary Judgment........... 422.684........................ 423.662.
Review by the Administrator............... 422.692........................ 423.666.
Reopening of initial contract 422.696........................ 423.668.
determination or intermediate sanction or
decision of a hearing officer or the
Administrator.
Effect of revised determination........... 422.698 (delete)............... 423.669 (delete).
Types of intermediate sanctions and civil 422.750........................ 423.750.
money penalties.
Basis for imposing intermediate sanctions 422.752........................ 423.752.
and civil money penalties.
Procedures for imposing intermediate 422.756........................ 423.756.
sanctions and civil money penalties.
Collection of civil money penalty imposed 422.758........................ 423.758.
by CMS.
Determinations regarding the amount of 422.760........................ 423.760.
civil money penalties and assessment
imposed by CMS.
Settlement of penalties................... 422.762........................ 423.762.
Other applicable provisions............... 422.764........................ 423.764.
Basis and scope........................... 422.1000....................... 423.1000.
Definitions............................... 422.1002....................... 423.1002.
Scope and applicability................... 422.1004....................... 423.1004.
Appeal rights............................. 422.1006....................... 423.1006.
Appointment of representatives............ 422.1008....................... 423.1008.
[[Page 29371]]
Authority of representatives.............. 422.1010....................... 423.1010.
Fees for services of representatives...... 422.1012....................... 423.1012.
Charge for transcripts.................... 422.1014....................... 423.1014.
Filing of briefs with the Administrative 422.1016....................... 423.1016.
Law Judge or Departmental Appeals Board,
and opportunity for rebuttal.
Notice and effect of initial 422.1018....................... 423.1018.
determinations.
Request for hearing....................... 422.1020....................... 423.1020.
Parties to the hearing.................... 422.1022....................... 423.1022.
Designation of hearing official........... 422.1024....................... 423.1024.
Disqualification of Administrative Law 422.1026....................... 423.1026.
Judge.
Prehearing conference..................... 422.1028....................... 423.1028.
Notice of prehearing conference........... 422.1030....................... 423.1030.
Conduct of prehearing conference.......... 422.1032....................... 423.1032.
Record, order, and effect of prehearing 422.1034....................... 423.1034.
conference.
Time and place of hearing................. 422.1036....................... 423.1036.
Change in time and place of hearing....... 422.1038....................... 423.1038.
Joint hearing............................. 422.1040....................... 423.1040.
Hearing on new issues..................... 422.1042....................... 423.1042.
Subpoenas................................. 422.1044....................... 423.1044.
Conduct of hearing........................ 422.1046....................... 423.1046.
Evidence.................................. 422.1048....................... 423.1048.
Witnesses................................. 422.1050....................... 423.1050.
Oral and written summation................ 422.1052....................... 423.1052.
Record of hearing......................... 422.1054....................... 423.1054.
Waiver of right to appear and present 422.1056....................... 423.1056.
evidence.
Dismissal of request for hearing.......... 422.1058....................... 423.1058.
Dismissal for abandonment................. 422.1060....................... 423.1060.
Dismissal for cause....................... 422.1062....................... 423.1062.
Notice and effect of dismissal and right 422.1064....................... 423.1064.
to request review.
Vacating a dismissal of request for 422.1066....................... 423.1066.
hearing.
Administrative Law Judge's decision....... 422.1068....................... 423.1068.
Removal of hearing to Departmental Appeals 422.1070....................... 423.1070.
Board.
Remand by the Administrative Law Judge.... 422.1072....................... 423.1072.
Right to request Departmental Appeals 422.1074....................... 423.1074.
Board review of Administrative Law
Judge's decision or dismissal.
Request for Departmental Appeals Board 422.1076....................... 423.1076.
review.
Departmental Appeals Board action on 422.1078....................... 423.1078.
request for review.
Procedures before Departmental Appeals 422.1080....................... 423.1080.
Board on review.
Evidence admissible on review............. 422.1082....................... 423.1082.
Decision or remand by the Departmental 422.1084....................... 423.1084.
Appeals Board.
Effect of Departmental Appeals Board 422.1086....................... 423.1086.
decision.
Extension of time for seeking judicial 422.1088....................... 423.1088.
review.
Basis, timing, and authority for reopening 422.1090....................... 423.1090.
an Administrative Law Judge or Board
decision.
Revision of reopened decision............. 422.1092....................... 423.1092.
Notice and effect of revised decision..... 422.1094....................... 423.1094.
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C. Proposed Changes to Part 422--Medicare Advantage Program and Part
423--Medicare Prescription Drug Benefit Program
Sections 422.2 and 423.4--Definitions
We are proposing to correct a technical oversight in both
regulations by including the definitions of ``downstream entity,''
``first tier entity,'' and ``related entity,'' in the overall
definitions sections of both the MA and Part D regulations at Sec.
422.2 and Sec. 423.4 to ensure that these terms are used consistently
throughout both programs. Since these three terms are only defined in
Subpart K of Parts 422 and 423, we are proposing to add them to Subpart
A, General Provisions at Sec. 422.4 and Sec. 423.4. The definitions
are as follows:
First tier entity means any party that enters into a written
arrangement, acceptable to CMS, with a Part D sponsor or an MA
organization or applicant to provide administrative services or health
care services for a Medicare eligible individual under the Part D or MA
program.
Downstream entity means any party that enters into a written
arrangement, acceptable to CMS, below the level of the arrangement
between a Part D sponsor or an MA organization (or applicant) and a
first tier entity. These written arrangements continue down to the
level of the ultimate provider of both health and administrative
services.
Related entity means any entity that is related to the Part D
sponsor or MA organization by common ownership or control and (1)
Performs some of the Part D sponsor or MA organization's management
functions under contract or delegation; (2) Furnishes services to
Medicare enrollees under an oral or written agreement; or (3) Leases
real property or sells materials to the Part D sponsor or MA
organization at a cost of more than $2,500 during a contract period.
Below is a flow chart that provides examples of, and describes the
relationships between, Part D sponsors, and first tier, downstream, and
related entities. In accordance with the proposed changes above, we are
removing the term ``subcontractor'' from this previously published
flowchart. The original flowchart was published in the final version of
Chapter 9 of the Part
[[Page 29372]]
D Manual last year. We will make conforming changes to the manual at a
later date. After the flowchart we have provided examples of first tier
and downstream entities for MA organizations.
[GRAPHIC] [TIFF OMITTED] TP25MY07.000
An example of a first tier entity for MA organizations would be a
provider group that contracts with the MA organization to provide
health care services to MA members. An example of a downstream entity
for MA organizations would be an individual provider who contracts with
a provider group that contracts with the MA organization to provide
health care services to MA members.
Sections 422.503 and 423.504--General Provisions
The current regulations at Sec. 423.504 include a requirement that
a Part D sponsor's compliance plan consist of training and education as
well as effective lines of communication between the compliance
officer, and the organization's employees, contractors, agents,
directors, and managers. The terms ``contractor'' and ``agent'' are not
defined in current regulation, and it has been unclear to the industry
which entities are subject to the training and education, and the
effective lines of communication requirements. In response to industry
concerns and to eliminate the confusion associated with using the term
``contractor'', currently used in those sections, we are proposing to
revise paragraphs (b)(4)(vi)(C) and (b)(4)(vi)(D) of Sec. 423.504 to
clarify that a compliance plan must consist of training, education, and
effective lines of communication between the compliance officer and the
Part D sponsor's employees, managers, and directors, as well as the
Part D sponsor's ``first tier, downstream, and related entities'' which
are defined at 422.500 and 423.501. This proposed change would clarify
that Part D plan sponsors need to apply these training and
communication requirements to all entities they are partnering with to
provide benefits or services in the Part D program, not just their
direct employees within their organizations.
Pursuant to our authority under section 1856(b)(1) of the Act to
establish Medicare Advantage standards by regulation, we are also
proposing to require MA organizations to apply their training and
education and effective lines of communication requirements to their
first tier, downstream, and related entities. Since many MA-PDs, as
Part D sponsors, have already been required to apply these requirements
to the entities they contract with to deliver the Part D benefit, we
are taking this opportunity to make the compliance plan requirements
uniform across MA organizations, MA-PDs, and other Part D sponsors.
Additionally, we propose clarifying paragraph (b)(4)(vi) in Sec.
422.503 and Sec. 423.504 by removing what we believe to be a
duplicative and confusing ``final element'' of the compliance plan-- a
``comprehensive fraud, waste, and abuse plan to detect, correct, and
prevent fraud, waste and abuse'' at paragraph (b)(4)(vi)(H) of both
regulations. We are proposing to remove this element because we
received feedback from many Part D sponsors indicating that it was not
clear whether CMS was requiring a fraud, waste, and abuse (FWA) plan
separate and distinct from a compliance plan. In fact, we believe that
a compliance plan that meets the compliance plan requirements in the
regulations already has a ``comprehensive fraud, waste, and abuse plan
to detect, correct, and prevent fraud, waste, and abuse.''
[[Page 29373]]
In April 2006, we issued Chapter 9 of the Part D Manual (``Part D
Program to Control Fraud, Waste and Abuse'') as ``best practices''
guidance for Part D sponsors to develop a FWA plan. We intended for
Chapter 9 to be similar to the type of best practices guidance issued
by the Office of the Inspector General (OIG) in its Compliance Program
Guidance for drug manufacturers and health care providers. While we
clarified in Chapter 9 that Part D sponsors could choose whether to
incorporate FWA measures in a compliance plan or develop a separate,
stand-alone FWA plan, we believe the final element continues to cause
potential confusion to the industry and therefore, are proposing to
remove this element from (b)(4)(vi) of 422.503 and 422.504.
We continue to believe an effective compliance plan includes
procedures and policies for preventing fraud, waste, and abuse and have
proposed changes to the introductory clause of Sec. 423.504(b)(4)(vi)
that reflect our policy stance. Since Congress mandated that Part D
sponsors have a ``program to control fraud, waste, and abuse'' (section
1860D-4(c)(1)(D) of the Act), we also are clarifying that if Part D
plan sponsors develop an effective compliance plan that incorporates
measures to detect, prevent, and correct fraud, waste, and abuse, this
compliance plan would also satisfy the statutory requirement for
sponsors to have a FWA plan. Part D sponsors should look to Chapter 9
as recommended guidance for the types of measures we recommend in
detecting and preventing fraud, waste, and abuse. Chapter 9 can be
viewed at http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_FWA.pdf
.
Also pursuant to our authority under section 1856(b)(1) of the Act,
we are proposing to make the same change to the introductory clause of
Sec. 422.503(b)(4)(vi) so that the compliance plan requirements for MA
organizations will be identical to those for Part D sponsors. We
propose that MA organizations must include ``measures to detect,
correct, and prevent fraud, waste, and abuse'' throughout the 7
elements of the compliance plan requirement. While the existing MA
compliance plan requirement does not explicitly refer to the prevention
of fraud, waste, and abuse, it has always been our expectation that
fraud, waste, and abuse would be addressed through the implementation
of each of the 7 elements in a compliance plan, enumerated at
paragraphs (A) through (G) of Sec. 422.504(b)(4)(vi). It has been our
longstanding policy that an effective MA compliance plan addresses the
detection, correction, and prevention of fraud, waste, and abuse in the
MA program, and our proposed change would make this policy explicit in
our regulations. We welcome your comments on this proposal.
Since we are proposing to remove Sec. 423.504(b)(4)(vi)(H), we are
proposing to add paragraph (b)(4)(vi)(G)(3) to Sec. 423.504 to include
a provision on self-reporting of potential fraud or misconduct, which
was addressed in Sec. 423.504(b)(4)(vi)(H). Pursuant to our authority
under section 1856(b)(1) of the Act we also propose to add paragraph
(b)(4)(vi)(G)(3) to Sec. 422.503 to add a self-reporting provision to
the MA regulations as well, in order to make the compliance plan
requirements uniform across MA organizations and Part D sponsors.
We note that when the original Part C regulations were issued in a
June 26, 1998 interim final rule establishing a new part 422, they
included a self-reporting requirement at Sec. 423.501(b)(4)(vi)(H).
(See 63 FR 35100.) Unlike the current Part D self-reporting provision,
this original paragraph (H) required that compliance plans have an
``adhered-to-process for reporting to [CMS] and/or the OIG credible
information of violations of law by the [MA] organization * * *.'' In a
June 29, 2000 final rule responding to comments on the June 26, 1998
interim final rule, this mandatory self-reporting requirement was
eliminated. (See 65 FR 40264-40265, 40299.)
We believe that the decision to eliminate a mandatory self-
reporting requirement has contributed to some highly publicized cases
in which we have first found out about a major MA organization
compliance issue when it appeared in the press. We have expressed our
concerns in such situations that the matter was not promptly reported
to us when it came to the attention of the MA organization in question.
We believe that it is important for the government to have information
on possible fraud or misconduct as soon as possible in order to
determine whether any actions would be appropriate. We therefore are
proposing to restore a mandatory self-reporting requirement for MA
organizations, and to make the self-reporting provision that applies to
Part D sponsors mandatory. The language in the new proposed Sec.
423.504(b)(4)(vi)(G)(3) and new proposed Sec. 422.503(b)(4)(vi)(G)(3)
accordingly provides for mandatory self-reporting. We welcome your
comments on all of these changes.
Sections 422.504 and 423.505--General Provisions
We are proposing to clarify which entities under contract to MA
organizations and Part D sponsors are subject to the contract
provisions in the MA and Part D programs. Currently, the contract
provisions at 422.504 and 423.505 refer to such entities as the MA
organization or Part D sponsor's ``contractors'' and
``subcontractors,'' which as we described above, are undefined terms in
the statute and regulations. We are proposing, where applicable, to
delete the term ``contractor'' and replace the term ``subcontractor''
with the terms ``first tier and downstream entity'' in 422.504(e) and
(i) to clarify which entities are subject to the contract provisions at
422.504.
We are also proposing, where applicable, to delete the term
``contractor,'' and replace the term ``subcontractor'' with the terms
``first tier entity'' and ``downstream entity'' in the Part D contract
provisions at 423.505(e) and (i) for the same reasons. We believe using
``first tier and downstream entity'' instead of ``subcontractor'' would
lessen the potential for confusion in the Part D program. To clarify,
under the Part D program, an example of a ``first tier entity'' is a
pharmaceutical benefit manager (PBM) under contract to a Part D sponsor
to provide all or some aspect of the Part D benefit on behalf of the
sponsor. An example of a ``downstream entity'' in the Part D program is
a pharmacy under contract to such a PBM. As discussed above, we are
proposing to use the definitions of ``first tier entity'' and
``downstream entity'' (as well as ``related entity'') set forth at
Sec. 423.501 to lessen any potential confusion in both programs. We
welcome your comments on these proposed changes to the contract
provisions.
We have existing authority under section 1860D-12(b)(3)(c) of the
Act and Sec. 422.504(e) and Sec. 423.505(e) to inspect and audit any
books, contracts, requests, and records of a Part D sponsor or MA
organization relating to the Part D program. In the preamble to the
Part D proposed rule, published on January 28, 2005 (70 FR 4194),
describing these provisions, we clearly stated our inspection and audit
rights with respect to a Part D sponsor and its contractors,
subcontractors, and related entities under the section entitled
``Access to Facilities and Records.'' (69 FR 46632, 46712). These third
party disclosure requirements were finalized in the final MA and Part D
rules and were approved
[[Page 29374]]
under the Paperwork Reduction Act approval under OMB 0938-1004
(Part C) and OMB 0938-1000 (Part D). The information
collection section of this preamble also references the OMB approval
numbers.
In addition, we note that the solicitation for a Part D application
already requires that a Part D sponsor's contract or letter of
agreement with each subcontractor ``contain language ensuring that the
subcontractor will make its books and other records available in
accordance with 42 CFR 423.505(i)(2).''
Under this established legal authority, HHS, the Comptroller
General, or their designees have the right to inspect, evaluate, and
audit the books and other records of Part D sponsors and their first
tier, downstream, and related entities. These rights continue for a
period of 10 years from the final date of the contract period or the
date of audit completion, whichever is later. However, based on
industry feedback and our own varied experience with accessing Medicare
payment-related records from subcontracting entities, we believe we
need to provide clarity to both the Part D sponsors and their first
tier, downstream, and related entities regarding our expectation for
complying with this disclosure requirement. Our expectation is that the
first tier, downstream, and related entities will, upon CMS' or our
designees' request, produce any pertinent contracts, books, documents,
papers, and records relating to the Part D program.
We are proposing in this rule to add a provision to the contracts
and written arrangements between sponsors and their first tier,
downstream, and related entities at Sec. 423.505(i)(3)(iv) to clarify
that this information can be provided to either the Part D sponsor or
directly to CMS or our designees. We do not intend this new contract
provision to explicitly require first tier, downstream, or related
entities to produce their books and records directly to the Part D
sponsor. Instead, we propose to leave it to the contracting parties to
determine during their contract negotiations the process for submitting
the requested information to CMS or our designees. The provision must
be clear as to whether or not the requested documentation is to be
submitted through the Part D sponsor to CMS, or submitted directly to
CMS or our designees. The parties could also decide to have such books
and records made directly available to CMS or our designees through
onsite access. The Part D sponsor should be prepared to submit evidence
of this agreed upon provision in its executed contracts to CMS.
Because of the proposed contract provision, we are also proposing
to redesignate Sec. 423.505(i)(4)(iv) as Sec. 423.505(i)(4)(v).
In accessing Part D-related books and records, HHS, the Comptroller
General, or its designees have the authority to collect any information
from the first tier, downstream, or related entities that is related to
the Medicare Part D prescription drug transaction. Examples of this
type of information include, but are not limited to: Policies and
procedures; compliance plans; statements of conflict of interest; proof
of beneficiary identification; documentation of the quantity and
frequency of drugs being received by the beneficiary; evidence of the
prescriber of the Part D drugs and the individual who signs for the
drugs; and documentation relating to the drug's history and origin.
This information is critical to our ability to effectively oversee and
monitor the Part D benefit, with the ultimate goal of protecting the
Medicare Trust Fund and those beneficiaries enrolled in Part D. The
information provided will be used to conduct investigations and audits
of the Part D sponsors and its first tier, downstream, or related
entities, to ensure compliance with Medicare Part D requirements, and
to address potential fraud, waste, and abuse in the Part D benefit.
CMS or our designees will make information requests as necessary to
support any Part D investigations and audits. There is no continuous
reporting requirement under sections 423.505(e) and (i), but rather
requests are dependent upon the nature and severity of the complaint
and the extent to which the investigation relies on supporting data
from the first tier, downstream, and related entities.
In addition to proposing a new contract provision at Sec.
423.505(i)(4)(iv), we are also proposing minor regulatory changes which
clarify the sponsor's CMS contractual requirements. While we continue
to believe our regulations clearly state our authority to access the
books and records of a sponsor's first tier, downstream, and related
entities, we are proposing to add language about these partnering
entities to Sec. 423.505(b)(10) and proposing to consolidate Sec.
423.505(e)(2) and (3) into one provision at (e)(2). We are proposing
these revisions to make explicit the Part D plan sponsor's contractual
obligation to ensure HHS, the Comptroller General, or their designees
have access to any books and records related to the Part D program,
including those of a sponsor's first tier, downstream, and related
entities. These proposed revisions do not impose any new requirements
on Part D sponsors or its partnering entities.
We are also proposing to clarify, without specific regulatory
change in this rule that HHS, the Comptroller General, or their
designees have the authority under the statute to request records
relating to Part D rebate and any other price concessions information
from Part D sponsors or their first tier, downstream, or related
entities. These records would include, for example, copies of rebate
agreements between PBMs and manufacturers and any records reflecting
discounts, price concessions, chargebacks, rebates, cash discounts,
free goods contingent on a purchase agreement, up-front payments,
coupons, goods in kind, free or reduced price services, grants or other
price concessions or similar benefits offered to some or all
purchasers.
Part D plan sponsors must maintain, as required by Sec.
423.505(d), financial records, books and records pertaining to
``determinations of amounts payable under the contract,'' agreements,
contracts, and subcontracts, and ``all prescription drug claims for the
current period and 10 prior periods.'' Since Part D sponsors have
delegated many Part D functions to their first tier entities, many of
these records reside with first tier entities, such as PBMs. We are
taking this opportunity in this proposed rule to make explicit that we
have the authority to request for verification of payment purposes, any
records relating to rebates and any other price concessions between
PBMs and manufacturers that may impact payments made to sponsors in the
Part D program.
We believe our proposal to obtain rebate and price-concession
related records is supported by the statute. Sections 1860D-15(d)(2)
and 1860D-15(f)(1)(A) of the Act give us authority to request any
information ``necessary'' to carry out the payment provisions in
section 1860D-15 of the Act, which include payments of direct
subsidies, reinsurance, and risk corridor costs to sponsors. While the
rebate and other price concession information reported by the sponsors
may provide some payment information, it may not be enough for us to
determine in all cases whether appropriate payments have been made to
the sponsor. It may be ``necessary'' for us to obtain more detailed
rebate and other price concession information from first tier entities
in order to verify proper payments made to the sponsor. For example, we
must receive accurate and complete rebate and other price concession
information in order to determine what was ``actually paid'' and
[[Page 29375]]
to clearly reflect what was a gross covered cost, which excludes
administrative costs.
As stated in the CMS 2007 Prescription Drug Sponsor Call Letter,
``CMS must assume that if a PBM retains a portion of the manufacturer
rebates it negotiates on behalf of the Part D sponsors then the direct
payment the sponsor pays the PBM for its services will be less, that
is, the sponsor receives a price concession from the PBM.'' If the
rebates are passed completely through to the Plan then the charge from
the PBM to the Plan would be an administrative cost that will need to
be deducted from the ``gross covered prescription drug costs'' which
along with the ``actually paid costs'' are a basis for CMS payment to
the plans.
In addition, such rebate and other price concession information is
critical to our oversight efforts in curbing fraud, waste, and abuse in
the Part D program. Congress granted us, under section 1860D-2(d)(3) of
the Act, the right to conduct periodic audits of a sponsor's financial
statements, books, and records ``to protect against fraud and abuse and
to ensure proper disclosure and accounting'' in the Part D program.
Given the history of rebate reporting problems the government has
encountered with PBMs in administering the Medicaid Drug Rebate Act, we
believe we must have the ability to evaluate and inspect records
relating to Part D rebates and other price concessions in order to
fulfill our statutory duty of protecting beneficiaries from fraud and
abuse and to ensure the financial integrity of the Part D program.
Therefore, we propose when appropriate, to reserve the right to request
records relating to Part D rebates and price concessions from the
sponsor's first tier entities.
To the extent information necessary to verify payment would be
collected under the auspices of section 1860D-15 of the Act, the
restrictions on using such information under 1860D-15(f) and (d) of the
Act would also apply. Thus, the information collected to verify payment
would be used only in carrying out the provisions of section 1860D-15
of the Act, and would not be used for other purposes.
We are also clarifying in this proposed rule that in instances of
suspected improper payment or potential fraud, we may obtain the actual
records used by a Part D sponsor to submit its prescription drug event
(PDE) data for payment, whether such records are with the sponsor or
its first tier, downstream, or related entities. Sections 1860D-
15(d)(2)(A) and 1860D-15(f)(1) of the Act require the sponsor to
disclose or provide ``such information as the Secretary determines is
necessary'' to verify appropriate payments made to the Part D sponsor
and to do so in a ``form and manner'' specified by the Secretary. The
Secretary has also delegated to CMS inspection and audit rights under
section 1860D-15(f)(1)(B) of the Act to ensure proper payments to
sponsors.
Based on these authorities, we are clarifying in the preamble of
this proposed rule that we have the ability to access any records used
by a Part D plan sponsor to calculate and submit its PDE data,
including any records with the sponsor's first tier, downstream, or
related entities, for purposes of verifying payment. In order to verify
accurate payments to the Part D plan sponsor, we may need at times to
evaluate the records which comprised the basis for the PDE submission
to ensure there are no inconsistencies, inaccuracies, or mistakes
contained in these records which could have resulted in inappropriate
or inaccurate determinations of payment. Moreover, we may need to
review the underlying records of the PDE submission for purposes of
investigating allegations of misconduct such as data tampering,
fraudulent misrepresentation, or omissions of data which could have
affected whether appropriate and accurate payments were made to the
sponsor.
In such instances of suspected fraud or improper payment, we may
request from the sponsor, or its first tier, downstream, and related
entities, records that include for example, the prescription drug claim
or transaction record submitted by a pharmacy to a PBM. We are
soliciting comment on what types of records should be subject to this
access requirement. Again, to the extent such information would be
provided under the authority of 1860D-15 of the Act, the restrictions
on use in that section would also apply.
We note that any failure or omission by a first tier, downstream,
or related entity to provide information requested by us, or to allow
HHS access to its books and records relating to payment, would
constitute a violation by the MA organization or Part D plan sponsor of
its contract with us and a violation of the MA and Part D regulations.
Such a failure would provide the basis for any applicable adverse
actions, including potentially, the imposition of intermediate
sanctions, civil money penalties, or contract termination against the
Part D sponsor or MA organization. We welcome comments on these
proposed changes.
Sections 422.505 and 423.506--Effective Date and Term of Contract
We propose removing Sec. 422.505(c)(1) and Sec. 423.506(c)(1),
which state that contracts with MA organizations or Part D plan
sponsors are only renewed if CMS informs the MA organization or Part D
sponsor that it has authorized a renewal. Section 1857(c)(1) of the Act
provides that the contract renews automatically, unless CMS or the
organization notifies the other party of its intent to terminate the
contract at the end of the existing contract term. Therefore, we
propose to revise Sec. 422.505(c) and Sec. 423.506(c) to state that
in accordance with Sec. 422.506 and Sec. 423.507, contracts are
renewed annually only if the MA organization or Part D plan sponsor has
not provided us with a notice of intent not to renew and we have not
provided the MA organization or Part D plan sponsor with a notice of
intent not to renew. This proposed change would better align the
regulations with the statute.
Sections 422.506 and Sec. 423.507--Nonrenewal of a Contract
We propose revising the introductory text for Sec. 422.506(b)(2)
and Sec. 423.507(b)(2). In addition, we propose revising Sec.
422.506(b)(2)(i) and Sec. 423.507 (b)(2)(i). The existing provisions
require us to provide plans with notice of both renewal and nonrenewal
decisions by May 1. We propose that a notice only be provided if we
decide not to renew an MA organization or a Part D plan sponsor's
contract with us. As discussed above, Section 1857(c)(1) of the Act
provides for an automatically renewable contract and does not require
us to provide notice when we decide to renew a plan or sponsor's
contract with us. We propose revising the Sec. 422.506(b)(2)
introductory text and the Sec. 423.507(b)(2) introductory text to
clarify that we must provide notice of our decision not to authorize
renewal of a contract. In addition, we propose to revise Sec.
422.506(b)(2)(i) and Sec. 423.507 (b)(2)(i) to require that we provide
notice by September 1 of the contract year, rather than May 1. If an MA
organization or Part D sponsor receives a non-renewal notice from CMS,
we will not provide information regarding the MA or Part D plans that
the organization or sponsor offers in certain hard copy materials, such
as the ``Medicare & You'' handbook. Information regarding the plans
would continue to be available on the CMS website. For purposes of this
proposed rule, a non-renewal would take effect on January 1 of the
following contract year, whereas a termination may take effect at any
time during the
[[Page 29376]]
contract year. Our proposed provisions would make contract renewal
automatic, without notice, unless we notify the MA organization or
Medicare Part D plan sponsor of our intent to nonrenew the contract by
September 1 of the current contract year. We welcome comments on these
proposed changes.
Changing the notification deadline to September 1 would provide us
with additional time to make a determination as to whether an MA
organization or Part D plan sponsor is in compliance with our
requirements and should have its contract renewed for the following
contract year. It has been our experience that the May 1 deadline does
not provide us with enough time to obtain accurate up-to-date
information in order to make a decision about contract renewals. This
change would provide more time for us to make an accurate determination
concerning contract non-renewals.
We propose redesignating Sec. 422.506(b)(3) as Sec. 422.506(b)(4)
and redesignating Sec. 423.507(b)(3) as Sec. 423.507(b)(4). We
propose adding a new paragraph at Sec. 422.506(b)(3) and Sec.
423.507(b)(3) which would clarify the CAP process for nonrenewals. The
Act requires us to provide MA organizations and Part D plan sponsors
with a reasonable opportunity to develop a CAP prior to terminating a
contract, in this case, a nonrenewal. The CAP process for nonrenewals
would be the same process as we propose for terminations. We propose a
more structured process which outlines the processes and timeframes for
CAPs. Since we have the discretion to provide plans with the
opportunity to develop and implement a CAP either prior to, or after,
sending out a notice of intent to nonrenew, we would provide an MA
organization or Part D plan sponsor with an opportunity to develop and
implement a CAP prior to sending the sponsor or organization a notice
of intent to nonrenew. This proposal marks a divergence from our past
practice with respect to the CAP process as we have previously asked
sponsors or organizations to develop CAPs subsequent to notifying them
of a nonrenewal or termination decision. Our proposal clarifies that,
in the future, once we issue a notice of nonrenewal or a notice of
termination, the MA organization or Part D plan sponsor would not have
an opportunity to submit a CAP. We would provide that opportunity to
organizations and sponsors prior to issuing a notice of intent to
nonrenew or a notice of intent to terminate. MA organizations and Part
D plan sponsors should take very seriously any request from us to
develop and implement a CAP since a failure to comply may result in a
nonrenewal or termination action. We welcome comments on these proposed
changes.
We propose time limits at Sec. 422.506(b)(3) and Sec.
423.507(b)(3) for the development and implementation of a CAP. Our
experience with the CAP process is that plans may attempt to draw out
the process indefinitely in the absence of a time limit. We do not
believe that the statute intends for this process to go on
indefinitely. We propose to provide the MA organization or Part D plan
sponsor 45 days in which to submit a CAP to us. If we find that the CAP
is unacceptable, the MA organization or Part D plan sponsor would have
an additional 30 days to revise and resubmit the CAP. If we then find
the CAP acceptable, we would provide the MA organization or Part D plan
sponsor with a deadline by which the CAP must be implemented. If we
find that the second version of the CAP is unacceptable, we would be
under no obligation to accept further revisions to the CAP and would
have the discretion to proceed directly to issuing a notice of
nonrenewal to the MA organization or Part D plan sponsor. We welcome
comments on these proposed changes.
Sections 422.510 and 423.509--Termination of Contract by CMS
We propose revising Sec. 422.510(a)(1) and Sec. 423.509(a)(1) to
clarify one of the bases for contract termination. The existing
provision states that we may terminate an MA organization or Part D
plan sponsor's contract with us if the MA organization or Part D plan
sponsor ``failed substantially to carry out the terms of its contract
with CMS.'' We propose language to clarify that we may terminate an MA
organization or Part D plan sponsor's contract if the organization
substantially failed to carry out the terms of its contract with us for
the current term or its contract from a previous term. This
clarification would be consistent with section 1857(c)(1) of the Act,
which states that a contract must be for a period of at least 1 year
with the contract being automatically renewable from term to term,
absent notice from either party of an intent to terminate the contract
at the end of the current term. Given that we have already adopted
automatically renewable multi-year contracts, failure to substantially
carry out a contract term necessarily would apply to all years of the
contract.
We propose revising Sec. 422.510(b) and Sec. 423.509(b)
introductory text and revising the paragraph heading for Sec.
422.510(b)(2) and Sec. 423.509(b)(2) to delete the term ``immediate''
and replace it with ``expedited''. In addition, we propose revising
Sec. 422.510(b)(2)(i) and Sec. 423.509(b)(2)(i) to state that an
expedited termination would take effect on a date specified by us.
According to the existing regulations, an immediate termination takes
effect once the MA organization or Part D plan sponsor receives notice
that we intend to immediately terminate the plan's contract with us and
a plan's enrollees are automatically disenrolled from the plan on the
date such notice is received. Our proposed change would provide greater
protection for Medicare beneficiaries because we would have time
between notifying a plan of an expedited termination decision and the
actual date of termination to provide enrollees of the MA or Part D
plan with enough information to enroll in another plan. We welcome
comments on these proposed changes.
These changes are supported by section 1857(h)(2) of the Act which
permits us to terminate a contract with an MA organization or Part D
plan sponsor without providing the plan with an opportunity to submit a
CAP and without notice and opportunity for a hearing, where the notice
and hearing procedures required by section 1857(h)(1) of the Act would
pose an imminent and serious risk to the health of enrollees in the
plan. Section 1857(h)(2) of the Act is silent on the specifics of this
alternate termination process and does not require ``immediate''
termination; merely that the procedures at section 1857(h)(1) of the
Act shall not apply.
We would also clarify that we would be able to invoke the expedited
termination process when a determination regarding an MA organization
is made according to Sec. 422.510(a)(5). The existing regulations
state that we invoke the current immediate termination process when a
determination is made according to Sec. 422.510(a)(4) for the MA
program and Sec. 423.509(a)(4) or (a)(5) for the Medicare Part D
program. By adding (a)(5) as a basis for an expedited termination for
MA organizations, the grounds for expedited terminations would be
identical for the MA and Part D programs. The addition of Sec.
422.510(a)(5) would provide consistency between the Part C regulations
and the Part D regulations.
We propose to amend our procedures at Sec. 422.510(c) and Sec.
423.509(c) to provide more structure to the process for the submission
and review of CAPs. The Act requires us to provide MA organizations and
Part D plan sponsors with a reasonable opportunity to
[[Page 29377]]
develop and implement a CAP before we terminate the organization or
sponsor's contract. The CAP process we are proposing is the same
process for nonrenewals outlined above and which we are proposing at
Sec. 422.506 and Sec. 423.507, providing for a more structured
process and timeframes for the development and implementation of a CAP.
Subpart N--Medicare Contract Determinations and Appeals
We propose revisions to subpart N of 42 CFR part 422 and 42 CFR
part 423 to coordinate and improve the contract determination and
appeals processes for MA organizations and Part D plan sponsors. We
propose removing the reconsideration process for appeals of all types
of contract determinations. We also propose to make the appeals process
consistent for all three types of contract determinations
(terminations, nonrenewals, and decisions by us not to enter into a
contract with an applicant). In addition, we propose that the MA
organization or Part D plan sponsor have the burden of proof in
appealing a contract determination. Below is a more detailed
explanation of our proposals.
We propose removing the provisions regarding the reconsideration
process for appeals of contract determinations at Sec. 422.648, Sec.
422.650, Sec. 422.652, Sec. 422.654, Sec. 422.656, Sec. 422.658,
Sec. 423.644, Sec. 423.645, Sec. 423.646, Sec. 423.647, Sec.
423.648, and Sec. 423.649. Section 1857(h) of the Act requires only
that we provide an organization with notice and an opportunity for a
hearing before terminating a contract. The reconsideration process is
not required by statute. Eliminating the reconsideration process would
expedite the appeals process which would benefit MA organizations and
Part D plan sponsors as well as CMS. We welcome comments on the
proposal to eliminate the reconsideration process for appeals or
contract determinations.
Sections 422.644 and 423.642--Notice of Contract Determination
We are proposing to make conforming changes to Sec. 422.644(b)(2)
and Sec. 423.642(b)(2) as a result of the changes we are making to the
immediate termination process. Consistent with the proposed revisions
we have previously described, we propose to revise Sec. 422.644(c) and
Sec. 423.642(c) to state that we would determine the effective date of
an expedited termination. We also propose adding the reference Sec.
422.510(a)(4) as a basis for which we may undertake an expedited
termination.
We also propose to revise the provisions at Sec. 422.644(d) and
Sec. 423.642(d) to conform to the proposed change previously described
whereby we would provide notice of nonrenewal to MA organizations or
Part D plan sponsors by September 1, rather than the current May 1. We
welcome comments on the proposal to shift the date of the notice of
nonrenewal from May 1 to September 1.
Sections 422.646 and 423.643--Effect of Contract Determination
We propose making conforming changes to the provisions at Sec.
422.646 and Sec. 423.643 to reflect our proposal to eliminate the
reconsideration process. The current regulations state that a contract
determination is final unless an MA organization or Part D plan sponsor
requests reconsideration. Since we have proposed eliminating the
reconsideration process, we are proposing a conforming change to
indicate that a contract determination would be a final decision unless
a timely request for a hearing is filed.
Sections 422.660 and 423.650--Right to a Hearing and Burden of Proof
We also propose making conforming changes to the provisions at
Sec. 422.660(a) and 423.650(a) to reflect our proposal to eliminate
the reconsideration process. These provisions would then state that if
we determine that an applicant is not qualified to enter into a
contract with us and the applicant chooses to appeal the determination,
a hearing before a CMS hearing officer would be the first step in the
appeal process. We propose to make similar conforming changes to Sec.
422.660(b) and Sec. 423.650(b), to indicate that a hearing before a
CMS hearing officer would be the first step in appealing a nonrenewal
determination or a termination decision.
We propose to add a new provision at Sec. 422.660(c) and at Sec.
423.650(c) to clarify that the burden of proof would be on the MA
organization or Part D plan sponsor at a hearing appealing a CMS
contract determination. We believe case law supports our decision to
place the burden of proof on the affected party in an administrative
hearing on a contract determination involving a Part D plan sponsor or
MA organization. The DAB has previously held that in a termination
proceeding by the Secretary, the facility bears the ultimate burden of
proving it is in compliance with program requirements. (See Hillman
Rehabilitation Center, DAB No. 1611 (1990), aff'd Hillman
Rehabilitation Center v. United States, No. 98-3789 (GEB)(D.N.J. May
13,1999).) We require that MA organizations and Part D sponsors are in
compliance with our program requirements during the entire contract
period. When we provide a notice of nonrenewal or termination, the
basis for the notice is noncompliance with contractual and regulatory
provisions. Once we have determined that the MA organization or Part D
plan sponsor is out of compliance, the MA organization or Part D plan
sponsor has the burden to prove it was in compliance. In addition, we
also propose to specify that the MA organization or Part D plan sponsor
must demonstrate substantial compliance with the relevant MA or Part D
plan requirements as of the earliest of the following dates: (1) The
date the organization or sponsor received written notice of the
contract determination; (2) the date of the most recent on-site audit
conducted as the basis of the termination; (3) or the date of the
alleged breach of the current contract or past substantial
noncompliance as determined by CMS. We welcome comments on these
proposed changes.
Based on our experience with appeals of contract determinations, we
have found the current regulations do not provide hearing officers with
a particular ``compliance date'' to use as a reference point in issuing
a ruling. This creates the potential for inconsistency in the decisions
issued by hearing officers. We believe our proposal to provide a
framework for hearing officers to use in establishing a compliance date
as a reference point will lessen the potential for such inconsistency.
By requiring the compliance date to be the earliest of the three
possible dates, the hearing will reflect that circumstances may differ
on a case by case basis. For example, where an onsite audit was
conducted or where a significant breach occurred, we think it is
appropriate for us to base our decision to terminate a plan's contract
on the date of either the audit or the breach. However, where an onsite
audit did not occur, or where the basis of our termination decision is
not one major breach, we think it is appropriate to use the date we
notified the MA organization or Part D sponsor of our intent to
terminate as a reference point. Without a specific date as a reference
point for evaluating compliance, the hearing officer lacks the
information necessary to arrive at a determination. We welcome comments
on these proposed changes.
Sections 422.662 and 423.651--Request for a Hearing
We propose to revise Sec. 422.662(b) and Sec. 423.651(b) to
conform to our proposed
[[Page 29378]]
change to eliminate the reconsideration process. These provisions would
specify that a request for a hearing must be filed within 15 days after
the date of the initial determination.
Sections 422.664 and 423.652--Postponement of Effective Date of a
Contract Determination When a Request for a Hearing is Filed Timely
We propose to revise Sec. 422.664 and Sec. 423.652 to postpone
the effective date of a contract determination when an MA organization
or Part D sponsor timely requests a hearing to appeal the contract
determination. However, the postponement would not override the
requirement that any final decision in favor of the plan or sponsor
must be issued by July 15 for an initial contract to be effective for
the upcoming year. Thus, if an organization's application is not
approved and the hearing officer's decision is not provided until
August, the applicant would not be able to have a contract for the next
year. This is consistent with our current process. We do not currently
postpone the effective date of termination in cases of immediate
termination, and we are not proposing any change in policy with respect
to expedited terminations.
Sections 422.670 and 423.655--Time and Place of Hearing
We propose revising Sec. 422.670(a) and Sec. 423.655(a), to
require the hearing officer to send written notice to the parties
specifying the general and specific issues to be resolved at the
hearing, outlining the burden of proof and providing any information
about the hearing procedures. In addition, the notice would inform the
parties that they may conduct formal discovery.
Sections 422.682 and 423.661--Discovery
We propose revising Sec. 422.682 and Sec. 423.661, to clarify the
scope of permissible discovery, and to require the hearing officer to
conclude discovery and provide all documents to both the hearing
officer and the opposing party at least 10 days prior to the hearing.
It has been our experience that such a deadline, which is not set out
in the existing regulations, is necessary to provide enough time for
the parties or the hearing officer to review documents prior to the
hearing. We welcome comments on these proposed changes.
Sections 422.684 and 423.662--Prehearing and Summary Judgment
We propose to amend the provisions at Sec. 422.684 and Sec.
423.662 (and revise the section heading accordingly) to permit the
hearing officer to rule on a motion for summary judgment filed by
either of the parties to the hearing. In ruling on such a motion, we
propose that the hearing officer would be bound by CMS regulations and
general instructions. Where no factual dispute exists, the hearing
officer may make a decision on the papers, without the need for a
hearing. This would be more efficient and cost effective for both
parties when no factual dispute exists. We welcome comments on these
proposed changes.
Sections 422.692 and 423.666--Review by the Administrator
The existing regulations only explicitly permit Administrator
review of a hearing officer's decision in appeals of a contract
termination. We clarify that this review is available for all appeals
of CMS contract terminations, including decisions not to contract with
an applicant and nonrenewals.
We propose revising the provisions at Sec. 422.692(a) and Sec.
423.666(a) to allow us to request Administrator review of a hearing
officer's decision regarding a contract determination. The existing
regulations permit only the MA organization or Part D sponsor to
request Administrator review. In addition, we propose to amend the same
provisions to permit both the parties to submit written arguments to
the Administrator.
We propose revising the provisions at Sec. 422.692(b) and Sec.
423.666(b), to permit the Administrator, upon receipt of a request for
Administrator review, to accept or decline to review the hearing
decision. The existing regulations require the Administrator to review
the decision when a request for review is received. We believe that
providing the Administrator with the discretion to accept or decline
the request for review would lead to a more expeditious resolution of
appeals of contract determinations.
We propose redesignating Sec. 422.692(c) as Sec. 422.692(e) and
redesignating Sec. 423.666(c) as Sec. 423.666(e).
We propose adding a new Sec. 422.692(c) and Sec. 423.666(c), to
require the Administrator to make a determination as to whether to
accept or decline the request for review within 30 days of the request
of the review. The failure of the Administrator to make a determination
within 30 days of the request would be treated as a decision to decline
the request for review. We believe that providing this timeline would
assist all parties in reaching a final decision in an expeditious
manner. We welcome comments on these proposed changes.
In addition, we propose amending our existing regulations to add a
new paragraph at Sec. 422.692(d) and Sec. 423.666(d) which specifies
that Administrator review is based on the hearing record and any
written arguments submitted by the parties. However, review would not
be based on any new evidence, such as evidence that was not before the
hearing officer. We believe the specified sources provide a sufficient
basis for the Administrator to make a determination.
If the Administrator declines to review the hearing officer's
decision, the decision of the hearing officer would become final and
binding.
Sections 422.696 and 423.668--Reopening of Initial Contract
Determination or Intermediate Sanction or Decision of a Hearing Officer
of the Administrator
We propose to revise the section headings for Sec. 422.696 and
Sec. 423.668 from ``Reopening of a contract or reconsidered
determination or decision of a hearing officer or the Administrator''
to ``Reopening of an initial contract determination or decision of a
hearing officer or the Administrator'' to conform to our proposed
elimination of the reconsideration process described above.
Sections 422.698 and 423.669--Effect of Revised Determination
We propose making a conforming change to reflect our proposed
elimination of the reconsideration process by removing in its entirety
Sec. 422.698 and Sec. 423.669, ``Effect of revised determination.''
Subpart O--Intermediate Sanctions
We are proposing several changes to our regulations in Subpart O--
Intermediate Sanctions in 42 CFR Part 422 and 42 CFR Part 423, to
clarify our policies and procedures for imposing intermediate sanctions
and Civil Money Penalties (CMPs) on MA organizations and Part D
sponsors. Specifically, we propose to modify the appeals procedures for
intermediate sanctions and clarify which set of procedures affected
parties should use to appeal a CMP. We are soliciting public comment on
our proposed changes to subpart O.
Sections 422.750 and 423.750--Types of Intermediate Sanctions and Civil
Monetary Penalties
We propose reorganizing Sec. 422.750 and Sec. 423.750, to
distinguish the three different types of intermediate sanctions from
CMPs. We also propose to clarify that each of the three intermediate
[[Page 29379]]
sanctions, (suspension of enrollment, suspension of payment, and
suspension of marketing) would remain in effect until we are satisfied
that the reasons for the initial suspensions have been corrected and
are not likely to reoccur. This revision reflects our current policy
and practice.
For clarity, we propose specifying at Sec. 422.750(b) and Sec.
423.750(b) that we may impose CMPs in the dollar amounts specified in
Sec. 422.760 and Sec. 423.760. We propose to remove the prior
reference at Sec. 422.750(a)(1) and Sec. 423.750(a)(1) to the range
of CMPs because it is confusing.
Sections 422.752 and 423.752--Basis for Imposing Intermediate Sanctions
and Civil Money Penalties
At Sec. 422.752 and Sec. 423.752, we are proposing to reorganize
the regulation to clarify the breakdown of responsibility between CMS
and the OIG for imposing intermediate sanctions and CMPs based on the
type of violation involved. Specifically, we clarify that CMS may
impose a suspension of enrollment, payment, or marketing on an MA
organization or Part D sponsor for violations specified in Sec.
422.752(a)(1) through (a)(8) and for violations specified in Sec.
423.752(a)(1) through (a)(6).
As part of the reorganization to the regulation, we also are
proposing to add a new Sec. 422.752(c) and Sec. 423.752(c), to
clarify that in addition to the intermediate sanctions, we continue to
have authority to impose CMPs for contract determinations made under
Sec. 422.510(a) and Sec. 423.509(a). However, as specified in Sec.
422.752(c)(2) and Sec. 423.752(c)(2), OIG would continue to have sole
authority to impose CMPs for any determinations concerning the MA
organization or the Part D sponsor committing or participating in
false, fraudulent, or abusive activities affecting the Medicare
program, including the submission of false or fraudulent data, as
stated in Sec. 422.510(a)(4) and Sec. 423.509(a)(4).
Sections 422.756 and 423.756--Procedures for Imposing Intermediate
Sanctions and Civil Money Penalties
At Sec. 422.756 and Sec. 423.756 we propose to eliminate the
existing informal reconsideration process used for review of a decision
by CMS to impose an intermediate sanction, and allow an MA organization
or Part D sponsor to proceed directly to a hearing, pursuant to the
same procedures used to appeal contract determinations in Subpart N.
(See Sec. 422.660 through Sec. 422.698 and Sec. 423.650 through
Sec. 423.669.) We believe it would be more efficient and effective to
allow the MA organization or Part D sponsor to proceed to a hearing in
appealing an intermediate sanction. We note that a request to appeal an
intermediate sanction before a hearing officer does not delay the
intermediate sanction from taking effect on the date specified in the
sanction notice. We welcome comments on these proposed changes.
Because we propose to eliminate the informal reconsideration step,
we propose that an MA organization or Part D sponsor have an
opportunity to present information to us that may affect our decision
to impose an intermediate sanction prior to the sanction taking effect.
We recognize there may be occasions when we receive information that we
previously did not have when making a decision to impose an
intermediate sanction. Therefore, we propose that MA organizations and
Part D sponsors have an opportunity to submit a written rebuttal
statement as specified at Sec. 422.756(a)(2) and Sec. 423.756(a)(2),
and to require the rebuttal statement be provided to us within ten (10)
calendar days after the MA organization or sponsor receives notice of
the intermediate sanction. The 10 calendar days begin the day after the
notice of intermediate sanction is mailed to the plan. A notice of
intermediate sanction is sent by overnight mail and by e-mail or fax.
In some cases we may decide to impose multiple sanctions, for
example, contract termination, intermediate sanction, or CMP, against
an MA organization or Part D sponsor. We propose to have the CMP appeal
process go to an ALJ while the other actions such as an intermediate
sanction or a termination go to a CMS hearing official. Although the
same underlying conduct may be the basis for both actions we believe
that the separate processes would result in more consistent decision
making by hearing officers and ALJs.
Sections 422.758 and 423.758--Collection of Civil Money Penalties
Imposed by CMS
At Sec. 422.758 and Sec. 423.758 we propose to revise the section
heading ``Maximum amount of civil money penalties imposed by CMS'' to
read ``Collection of civil money penalties imposed by CMS.'' In
addition, we propose to revise Sec. 422.758 and Sec. 423.758.
Specifically, we propose that we would initiate collection of the CMPs
if the MA organization or Part D sponsor does not timely request a
hearing, or if our decision to impose a CMP is upheld by an ALJ.
Sections 422.760 and 423.760-- Determinations Regarding the Amount of
Civil Money Penalties and Assessment Imposed by CMS
We propose redesignating the existing Sec. 422.760 as Sec.
422.764 and redesignating the existing Sec. 423.760 as Sec. 423.764
because in this rule we have made explicit which provisions of section
1128A of the Act apply to CMP appeals procedures in proposed subpart T
in parts 422 and 423.
We propose adding a new Sec. 422.760 and Sec. 423.760 to clarify
that we use the statutory factors in section 1128(A) of the Act in
determining the appropriate amount of civil money penalties or
assessments to impose on an MA organization or Part D sponsor. These
factors, if applicable, include the nature of the conduct, the degree
of culpability, the prior history of offenses, the financial condition
of the MA organization or Medicare Part D sponsor presenting the
claims, and other matters as fair administration may require. These
factors are based on the same statutory factors used in other Medicare
enforcement programs, including those in the nursing facility
enforcement context.
We also propose to clarify in Sec. 422.760(b) and Sec.
423.760(b), the amounts that may be assessed for CMPs that we impose.
We welcome comments on these proposed changes.
Sections 422.762 and 423.762--Settlement of Penalties
We propose to add a new Sec. 422.762 and Sec. 423.762 to clarify
that in accordance with section 1128A(f) of the Act, we have the
authority to settle CMPs imposed by us. This provision would make it
explicit what the parties may agree to settle the dispute instead of
litigating an appeal. We welcome comments on these proposed changes.
Sections 422.764 and 423.764--Other Applicable Provisions
We propose to redesignate Sec. 422.760 and Sec. 423.760 as Sec.
422.764 and Sec. 423.764 respectively to conform to the changes
proposed at the new Sec. 422.760 and Sec. 423.760. No substantive
changes to the text have been made.
Subpart T--Appeal Procedures for Civil Money Penalties
We propose to reserve subparts P, Q, R, and S in Part 422. In
addition, we propose to add a new subpart T in Part 422 and Part 423,
respectively. These new subparts would outline the CMP appeal
procedures for MA organizations and Part D sponsors.
Our current MA and Part D regulations do not specify which
[[Page 29380]]
procedures an MA organization or Part D sponsor must use to appeal a
CMS-imposed penalty under either of these two programs. The regulations
at 42 CFR part 422.760 and 42 CFR part 423.760 state only that the
provisions of section 1128A of the Act (except paragraphs (a) and (b))
apply to civil money penalties under this subpart to the same extent
that they apply to a civil money penalty or procedure under section
1128A of the Act. Nor have we issued any guidance directing parties to
the appropriate appeals procedures for MA and Part D CMPs.
Therefore, to ensure a consistent approach in this area, we are
proposing incorporating appeals procedures for parties to use when
appealing a CMP imposed under the MA or Part D program in a new subpart
T in Parts 422 and 423 respectively.
Based on certain statutory requirements and policy considerations,
we are proposing to adopt CMP appeals procedures almost identical to
those in part 498 of Title 42, which are used by certain Medicare
providers and suppliers to challenge adverse agency enforcement
decisions. Part 498 sets forth the rules for administrative and
judicial review of CMS determinations that affect participation in the
Medicare and Medicaid programs for a wide array of medical providers of
services. These rules, issued on June 12, 1987 (52 FR 22446), have been
used by CMS for almost 20 years and provide established appeals
procedures for various types of adverse agency determinations,
including civil money penalties imposed on nursing facilities. We
welcome comments on the proposed changes to adopt most aspects of 42
CFR 498 into the 42 CFR 422 and 42 CFR 423 proposed regulations.
The statute authorizing CMPs in the MA and Part D programs require
the provisions of section 1128A of the Act, (except for subsection (a)
and (b)), to apply to MA and Part D CMP proceedings, in the ``same
manner'' as such provisions apply to other CMPs imposed under section
1128A. (See section 1857(g)(4) of the Act.) CMPs imposed on nursing
facilities are also authorized under section 1128A of the Act. (See
section 1819(h)(2)(B)(ii) of the Act (SNFs) and section
1919(h)(3)(C)(ii) of the Act (NFs), which state that ``[t]he provisions
of the section 1128A (other than subsections (a) and (b)) shall apply
to a civil money penalty[] in the same manner as such provisions apply
to a penalty or proceeding under section 1128A(a).'') Based on this
common statutory basis, we believe using the Part 498 procedures to
hear CMP appeals in the MA and Part D programs is consistent with
Congress' intent.
We also believe that relying on Part 498 appeals procedures for CMP
appeals in the MA and Part D programs make sense for policy reasons. We
have substantial experience using these procedures and they provide an
established infrastructure and well-vetted process for hearing CMP
appeals. The bases on which we may impose CMP in the MA and Part D
programs are also somewhat similar to those used in the nursing
facility context. For example, CMPs can be imposed on MA organization
and Part D sponsors for a wide range of regulatory and/or contractual
violations, which may be brought to the agency's attention based on
audit findings. We believe the part 498 appeals procedures are the most
appropriate procedures to use for hearing disputes involving a wide
range of violations. We welcome your comments on our proposal to adopt
the part 498 procedures as our CMP appeals procedures.
While the statute authorizing CMPs in the MA and Part D programs
requires the provisions of section 1128A of the Act, (except for
subsections (a) and (b)), to apply to MA and Part D CMP proceedings, it
does not require that section 1128A's provisions apply to other CMP
appeals procedures in the exact same manner, or without some
consideration for the MA or Part D program's unique characteristics. In
fact, section 1857(g)'s ``same manner'' language appears throughout the
Act and serves as the statutory basis for several different types of
CMP enforcement and appeals procedures. In the past, we have used our
discretion to tailor certain hearing procedures to the particular type
when developing other CMP appeals proceedings. Since the MA and Part D
programs differ from the nursing facility program, we are proposing
modifying certain sections of part 498 to take into account some of
these differences.
For example, we have proposed removing the reconsideration step in
the MA and Part D CMP appeals procedures since this step in part 498
only applies to initial determinations made for prospective providers
entering the Medicare or Medicaid program and is not applicable to CMP
appeals. Removing the reconsideration step in subpart T would also help
expedite the CMP appeals process.
Since it is not clearly stated in part 498's regulations, we are
proposing to make explicit in our regulations that in a hearing of a
CMP appeal before an ALJ or the Departmental Appeals Board (DAB), the
ultimate burden of persuasion would rest on the MA organization or Part
D sponsor. The DAB has previously held that in a provider termination
proceeding by the Secretary, the facility bears the ultimate burden of
proving it is in compliance with program requirements. (See Hillman
Rehabilitation Center, DAB No. 1611 (1990), aff'd Hillman
Rehabilitation Center v. United States, No. 98-3789 (GEB) (D.N.J. May
13, 1999).) The DAB has also held that the same allocation of the
burden of proof is appropriate where a CMP has been imposed on a
nursing facility participating in Medicare. (See Batavia Nursing and
Convalescent Center, DAB No. 1904 (2004).) We believe the
administrative caselaw supports our decision to place the burden of
proof on the affected party in an administrative hearing on the
imposition of MA and Part D CMPs. As discussed above, noncompliance
with requirements for MA and Part D organizations who participate in
Medicare is analogous to noncompliance by providers (including nursing
facilities) who participate in the program. Moreover, like the
providers in the cited cases, an MA or Part D organization is party in
possession of the most complete evidence of the state of its
compliance. Thus, placing the ultimate burden of persuasion on the
organization is fair.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The following information collection requirements included in this
proposed rule and their associated burdens are subject to the PRA.
We are soliciting public comment on each of the issues for the
following sections of this document that contain
[[Page 29381]]
information collection requirements and are not currently approved by
the OMB.
Section 422.503 General Provisions
Sections 422.503(b)(4)(vi)(C) and (b)(4)(vi)(D) require a MA
organization to have a compliance plan, which includes measures to
detect, correct, and prevent fraud, waste, and abuse. The compliance
plan shall include effective training and education between the
compliance officer and the MA organization's employees, managers and
directors, the MA organization's first tier, downstream, and related
entities; and, effective lines of communication between the compliance
officer, members of the compliance committee, the MA organization's
employees, managers and directors, and the MA organization's first
tier, downstream, and related entities.
The burden associated with this requirement is the time and effort
put forth by the MA organization to prepare a compliance plan that
meets the requirements of this section. While this requirement is
subject to the PRA, it is currently approved under OMB 0938-
1004.
Section 422.503(b)(4)(vi)(G)(3) would require a MA organization to
have procedures in place for mandatory self-reporting of potential
fraud or misconduct related to the MA program to the appropriate
government authority. The MA organization would be required to report
potential fraud or misconduct related to the MA program to the
appropriate government authority.
The burden associated with this requirement is the time and effort
put forth by the MA organization to implement procedures for mandatory
self-reporting. We estimate it would take one MA organization 40 hours
to fulfill this requirement. The total number of MA organizations
affected by this requirement is 393. The total one-time burden for this
requirement would be 15,720 hours. We cannot anticipate how many plans
will need to report any potentially fraudulent activities to CMS.
However, based on historical evidence, we believe that less than 10 MA
organizations would be required to self-report potential fraud or
misconduct related to the MA program. While this burden is subject to
the PRA, we expect that less than 10 entities will be affected.
Therefore, we believe these collection requirements are exempt as
specified at 5 CFR 1320.3(c)(4).
Section 422.504 Contract Provisions
Section 422.504(e)(2) requires MA organizations to agree to allow
HHS, the Comptroller General, or their designees to audit, evaluate, or
inspect any books, contracts, medical records, patient care
documentation, and other records of the MA organization, its first
tier, downstream, related entity, or its transferee that pertain to any
aspect of services performed, reconciliation of benefit liabilities,
and determination of amounts payable under the contract, or as the
Secretary may deem necessary to enforce the contract.
The burden associated with this requirement is the time and effort
put forth by the MA organization to maintain appropriate records and
documentation. While this requirement is subject to the PRA, it is
currently approved under OMB 0938-1004.
Section 422.504(i)(2) requires the MA organization to require all
first tier, downstream, and related entities to agree that HHS, the
Comptroller General, or their designees have the right to inspect,
evaluate, and audit any pertinent contracts, books, documents, papers,
and records of the first tier, downstream, and related entities
involving transactions related to CMS' contract with the MA
organization.
The burden associated with this requirement is the time and effort
put forth by the MA organization's first tier, downstream, and related
entities to maintain appropriate records and documentation. While the
burden associated with this requirement is subject to the PRA, it is
currently approved under OMB 0938-1004.
Section 422.505 Effective Date and Term of Contract
Section 422.505(c) requires MA organizations who wish not to renew
their contract to submit a notice of intent to CMS.
The burden associated with this requirement is the time and effort
put forth by the MA organization to prepare the notice and submit it to
CMS. While this requirement is subject to the PRA, it is currently
approved under OMB 0938-0753.
Section 422.506 Nonrenewal of Contract
Section 422.506 requires an MA organization to develop and submit a
CAP to correct the deficiencies that are the basis of the termination
decision. The MA organization must submit the CAP within 45 days of
receiving notice of termination.
The burden associated with this requirement is the time and effort
it would take for the MA organization to develop and submit a CAP.
While this requirement is subject to the PRA, we expect less than 10
entities will be affected; therefore, we believe these collection
requirements are exempt as specified at 5 CFR 1320.3(c)(4).
Section 423.504 General Provisions
Sections 423.504(b)(4)(vi)(C) and (b)(4)(vi)(D) require Part D
Sponsors to have a compliance plan, which includes measures to detect,
correct, and prevent fraud, waste, and abuse. The compliance plan shall
include effective training and education between the compliance officer
and the Part D sponsor's employees, managers and directors, and the
Part D plan sponsor's first tier, downstream, and related entities; and
effective lines of communication between the compliance officer,
members of the compliance committee, the Part D sponsor's employees,
managers and directors, and the Part D sponsor's first tier,
downstream, and related entities.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to prepare a compliance plan that meets
the requirements of this section. While this requirement is subject to
the PRA, it is currently approved under OMB 0938-1000.
Section 423.504(b)(4)(vi)(G)(3) would require a Part D sponsor to
have procedures in place for mandatory self-reporting of potential
fraud or misconduct related to the Part D program to the appropriate
government authority. The Part D sponsor would be required to report
potential fraud or misconduct related to the Part D program to the
appropriate government authority.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to implement procedures for mandatory
self-reporting. We estimate it would take one Part D sponsor 40 hours
annually to fulfill this requirement. The total number of Part D
sponsors affected by this requirement is 91. The total one-time burden
would be 3,640 hours. We cannot anticipate how many plans will need to
report any potentially fraudulent activities to CMS. However, in the
event a Part D sponsor needed to self-report potential fraud or
misconduct related to the Part D sponsor the total burden would be 5
hours annually. If every sponsor had to report potential fraud or
misconduct, the total burden would be 455 annual hours.
Section 423.505 Contract Provisions
Section 423.505(e)(2) requires Part D sponsors to make available
its premises, physical facilities, equipment, and records that relate
to its Medicare enrollees, and any additional relevant
[[Page 29382]]
information that CMS may require. The Part D sponsor also agrees to
make available any books, contracts, medical records, patient care
documentation, and other records of the Part D sponsor, first tier,
downstream and related entity(s), or its transferee.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to make available records that relate
to its Medicare enrollees. The burden associated with this requirement
is currently approved under OMB 0938-1000.
Section 423.505(i)(2) requires the Part D sponsor to require all
first tier, downstream, and related entities to agree that HHS, the
Comptroller General, or their designees have the right to inspect,
evaluate, and audit any pertinent contracts, books, documents, papers,
and records of the first tier, downstream, and related entities
involving transactions related to CMS' contract with the Part D
sponsor.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor's first tier, downstream, and related
entities to maintain appropriate records and documentation. While this
requirement is subject to the PRA, it is currently approved under OMB
0938-1000. However, we have prepared the following analysis of
the costs and burden associated with our proposal to require sponsors
to include a provision in their contracts requiring their first tier
and downstream entities to produce or make available their books and
records.
In the January 28, 2005 final rule that implemented the Medicare
Prescription Drug Program (70 FR 4194), we noted that ``The
administrative cost estimates are based on taking into account the
normal fixed costs associated with administering a prescription drug
benefit, for example, such functions as claims processing, responding
to customer inquiries, information, dissemination, appeals processes,
pharmacy network negotiations, and contracting. The other factor taken
into account when developing our estimate is that Prescription Drug
Plans (PDPs) and Medicare Advantage Prescription Drug Plans (MA-PDs)
will likely incur slightly higher administrative costs during the
initial few years of the Part D benefit due to start-up costs related
to implementation and initial operation for a new benefit.'' The
narrative explains that the average administrative costs associated
with insurance products are typically expressed as a percentage
relative to net standard benefit expenses and that the administrative
load is expected to decline slightly over time. For purposes of this
analysis, the impact is presented in burden hours and broken out into
requests for purposes of:
1. Provision in Contracts;
2. BI Audit; and
3. Investigation of complaints.
1. Provision in contracts
Ultimately, this additional provision would have to be discussed
like all other provisions of a contract between a Part D sponsor and
its first tier, downstream, and related entities. Since we have the
authority to request this information and the Part D sponsor has
attested to providing this data, we do not believe that this issue
would be contentious or constitute negotiation discussion. We believe
that, at the most, this provision would require 1 hour of attorney time
to draft and discuss the provision.
2. BI Audit
Currently, there are a total of 650 Part D contracts (90 of those
contracts represent PDPs and the remainder, 560 contracts, represents
MA-PDs and employer groups). A further breakdown of those numbers out
to the plan level would be: 4,927 total MA-PDs and PDP plans (including
employer groups). We note that if employer groups are excluded, the
actual number drops to 4,191.
Based on this information, it is believed that 16 percent of the
plans will be audited during the course of a contract year. Of the
plans audited, it is estimated that approximately 10 percent of the
plans will be required to produce evidence or other supporting
documentation related to ``first tier, downstream and other related
entities.'' It is further asserted that the labor hours required to
produce the required documentation for those entities would be
estimated at 10 hours per plan. Therefore, based on the number of Part
D plans, the percentage of organizations that might be required to
produce documentation for ``first tier, downstream, and other related
entities'' and the number of labor hours required to produce this
documentation we expect that the total impact would be 140 hours in
administrative costs. The following table summarizes our calculation of
the burden estimate for Part D plans:
------------------------------------------------------------------------
------------------------------------------------------------------------
Total number of Part D plans (PDP, MA-PD & Employer Groups)... 650
Percentage of plans to be audited (16%)....................... 104
Percentage of plans audited that would be required to produce 10
additional documentation for ``first tier, downstream and
related entities'' (10%).....................................
Burden hours required to assemble documentation and submit to 100
CMS (10 hours/plan)..........................................
------------------------------------------------------------------------
3. Investigation of complaints
Based on the past 18 months, we assume that investigation of
complaints that require contacting a Part D plan to request
documentation from first tier, downstream, and related entities would
be approximately six instances. In the following table, we show our
estimate of burden hours for downstream entities:
------------------------------------------------------------------------
------------------------------------------------------------------------
Total number of Part D plans (PDP, MA-PD & Employer Groups)... 650
Percentage of plans to be audited (16%)....................... 104
Percentage of plans audited that would be required to produce 10
additional documentation for ``first tier, downstream and
related entities'' (10%).....................................
Average number of ``downstream entities'' (e.g. pharmacy
network):
Retail.................................................... 55,000
Mail Order................................................ 1
Home Infusion............................................. 150
Long Term Care............................................ 593
I/T/U..................................................... 329
Total burden hours required for downstream entities to 166,440
assemble and submit documentation to the Part D organizations
(hours/organization) at 3 hrs/downstream entity..............
------------------------------------------------------------------------
[[Page 29383]]
Section 423.506 Effective Date and Term of Contract
This section states that an entity is determined qualified to renew
its contract annually only if the Part D sponsor has not provided CMS
with a notice of intention not to renew and CMS has not provided the
Part D sponsor with a notice of intention not to renew.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to prepare a notice of intent not to
renew and submit it to CMS. While this requirement is subject to the
PRA, it is currently approved under OMB 0938-0964.
Section 423.507 Nonrenewal of Contract
Section 423.507 requires a Part D Plan Sponsor to develop and
submit a corrective action plan (CAP) to correct the deficiencies that
are the basis of the termination decision. The Part D Sponsor must
submit the CAP within 45 days of receiving notice of termination.
The burden associated with this requirement is the time and effort
it would take for the Part D Sponsor to develop and submit a CAP. While
this requirement is subject to the PRA, we expect less than 10 entities
will be affected; therefore, we believe these collection requirements
are exempt as specified at 5 CFR 1320.3(c)(4).
As reflected in the table that follows, the aggregate annual burden
associated with the collection of information section totals 73,236
hours.
----------------------------------------------------------------------------------------------------------------
Number of
OMB No. Requirements respondents Burden hours Total annual burden
----------------------------------------------------------------------------------------------------------------
0938-1004..................... 422.503(b)(4)(vi)(C) 393............. 96 hours........ 12,576 hours (based
and (b)(4)(vi)(D), on 131 responses per
422.504(e)(2) & year).
422.504(i)(2).
None-requesting OMB approval.. 422.503(b)(4)(vi)(G)( 393............. 40 hours........ 15,720 hours (based
3). on every plan
reporting fraud or
misconduct).
0938-0753..................... 422.505(c)........... 5-10............ 2 hours per 20 hours (estimated
notice. using 10
respondents).
None/Exempt................... 422.506.............. Less than 10.... N/A............. N/A.
0938-1000\*\.................. 423.504(b)(4)(vi)(C) 430............. 96 hours........ 41,280 hours.
and (b)(4)(vi)(D),
423.505(e)(2), &
423.505(i)(2).
None-requesting OMB approval.. 423.504(b)(4)(vi)(G)( 91.............. 40 hours........ 3,640 hours.
3).
Exemption mentioned in 0938- 423.506.............. Less than 10.... N/A............. N/A.
0964.
None/Exempt................... 423.507.............. Less than 10.... N/A............. N/A.
Total Annual Burden....... ..................... ................ ................ 73,236 hours.
----------------------------------------------------------------------------------------------------------------
*This package will be revised to reflect new respondent numbers & annual burden, which are previously discussed
in this section (166,440 hours). The total annual burden of 73,236 hours includes 19,360 new hours, which
added to 166,440 gives a total new burden of 185,800 hours which have not previously been approved.
If you comment on any of these information collection and
recordkeeping requirements, please mail copies directly to the
following:
Centers for Medicare & Medicaid Services, Office of Strategic
Operations and Regulatory Affairs, Regulations Development Group,
Attn.: Melissa Musotto, CMS-4124-P, Room C4-26-05, 7500 Security
Boulevard, Baltimore, MD 21244-1850; and
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Carolyn Lovett, CMS Desk Officer, (CMS-4124-P),
carolyn_lovett@omb.eop.gov. Fax (202) 395-6974.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Regulatory Impact Statement
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This rule
does not reach the economic threshold and thus is not considered a
major rule. The provisions of this proposed rule would require MA and
Part D sponsors to spend a total of approximately 186,000 additional
hours on the functions addressed in this proposed rule. This includes
our reestimates of burden. The details behind these estimates are
presented in the preceding Paperwork Reduction Act section.
Assuming an average cost to plans and downstream entities of $37.50
an hour for staff time spent on auditing and related functions covered
by this proposed rule, the total net incremental cost of this proposal
would be approximately $7 million ($37.50 x 185,000 hours), far below
the $100 million threshold for a major rule. This cost would be spread
more or less evenly across participating plans, and hence would impose
negligible burden on any plan in relation to existing administrative
costs.
In the Regulatory Impact Analysis of the January 28, 2005 final
rule that implemented the Medicare Prescription Drug Program (70 FR
4194), we noted that ``The administrative cost estimates are based on
taking into account the normal fixed costs associated with
administering a prescription drug
[[Page 29384]]
benefit, for example, such functions as claims processing, responding
to customer inquiries, information, dissemination, appeals processes,
pharmacy network negotiations, and contracting.'' This estimate
included audit and related costs. The estimate was that administrative
costs would constitute about one tenth of the cost of the program, or
about $5 billion a year. (Similar estimates were prepared for the
Medicare Advantage program's final rule.) Accordingly, the estimated
cost of this proposed rule adds negligibly to the total administrative
costs of these programs.
With respect to economic benefits, we have no reliable basis for
estimating the effects of these proposals. It is important to
understand that MA and Part D sponsors--not the government--bear the
direct consequences of all their program costs, including unnecessary
costs created by downstream entities. These plans are paid on a
capitated basis and the amounts paid are not adjusted for realized
costs. Hence, these plans already have strong incentives to prevent all
forms of waste, including fraud and abuse. Accordingly, we estimate the
benefits of these proposals as likely to be small, though larger than
the costs involved. These benefits will accrue primarily to the plans
themselves and, over time, to the participants who pay lower premiums
as a result of plans' cost-reducing incentives.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
$6 million to $29 million in any 1 year. Individuals and States are not
included in the definition of a small entity. As explained above, this
proposed rule will not impose consequential costs on affected entities.
Accordingly, we have determined that this proposed rule will not have a
significant economic impact on a substantial number of small entities,
and are not preparing an initial regulatory flexibility analysis.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing an
analysis for section 1102(b) of the Act because we have determined that
this rule will not have a significant impact on the operations of a
substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $120 million. This rule will have no
consequential effect on State, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications.
List of Subjects
42 CFR Part 422
Administrative practice and procedure, Grant programs-health,
Health care, Health insurance, Health maintenance organizations (HMO),
Loan programs--health, Medicare, Reporting and recordkeeping
requirements.
42 CFR Part 423
Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMO), Medicare,
Penalties, Privacy, Reporting and recordkeeping.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services would amend 42 CFR chapter IV as set forth below:
PART 422--MEDICARE ADVANTAGE PROGRAM
1. The authority citation for part 422 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Provisions
2. Section 422.2 is amended by adding the definitions ``Downstream
entity'', ``First tier entity'', and ``Related entity'' to read as
follows:
Sec. 422.2 Definitions.
* * * * *
Downstream entity means any party that enters into a written
arrangement, acceptable to CMS, below the level of the arrangement
between an MA organization (or applicant) and a first tier entity.
These written arrangements continue down to the level of the ultimate
provider of both health and administrative services.
First tier entity means any party that enters into a written
arrangement, acceptable to CMS, with an MA organization or applicant to
provide administrative services or health care services for a Medicare
eligible individual under the MA program.
* * * * *
Related entity means any entity that is related to the MA
organization by common ownership or control and
(1) Performs some of the MA organization's management functions
under contract or delegation;
(2) Furnishes services to Medicare enrollees under an oral or
written agreement; or
(3) Leases real property or sells materials to the MA organization
at a cost of more than $2,500 during a contract period.
* * * * *
Subpart K--Contracts With Medicare Advantage Organizations
3. Amend Sec. 422.503 by--
A. Revising paragraph (b)(4)(vi) introductory text.
B. Revising paragraphs (b)(4)(vi)(C) and (b)(4)(vi)(D).
C. Adding paragraph (b)(4)(vi)(G)(3)
D. Removing paragraph (b)(4)(vi)(H).
The revisions and additions read as follows:
Sec. 422.503 General provisions.
* * * * *
(b) * * *
(4) * * *
(vi) A compliance plan, which must include measures to detect,
correct, and prevent fraud, waste, and abuse, shall include the
following elements:
* * * * *
(C) Effective training and education between the compliance officer
and the MA organization's employees, managers and directors, and the MA
organization's first tier, downstream, and related entities.
(D) Effective lines of communication between the compliance
officer, members of the compliance committee, the MA organization's
employees, managers and directors, and the MA organization's first
tier, downstream, and related entities.
* * * * *
(G) * * *
(3) The MA organization must have procedures for mandatory self-
reporting of potential fraud or misconduct related
[[Page 29385]]
to the MA program to the appropriate government authority. The MA
organization is required to report potential fraud or misconduct
related to the MA program to the appropriate government authority.
* * * * *
4. Amend Sec. 422.504 by--
A. Republishing paragraph (e) introductory text.
B. Revising paragraph (e)(1) introductory text
C. Revising paragraph (i) introductory text and (i)(1).
D. Revising paragraph (i)(2) introductory text.
E. Revising paragraph (i)(2)(i).
F. Revising paragraph (i)(3) introductory text.
G. Revising paragraph (i)(3)(ii).
H. Revising paragraph (i)(3)(iii)
I. Revising paragraph (i)(4) introductory text.
The revisions and additions read as follows:
Sec. 422.504 Contract provisions.
* * * * *
(e) Access to facilities and records. The MA organization agrees to
the following:
(1) HHS, the Comptroller General, or their designee may evaluate,
through inspection, audit, or other means--
* * * * *
(2) HHS, the Comptroller General, or their designees may audit,
evaluate, or inspect any books, contracts, medical records, patient
care documentation, and other records of the MA organization, its first
tier, downstream, related entity, or its transferee that pertain to any
aspect of services performed, reconciliation of benefit liabilities,
and determination of amounts payable under the contract, or as the
Secretary may deem necessary to enforce the contract.
* * * * *
(i) MA organization relationship with first tier, downstream, and
related entities. (1) Notwithstanding any relationship(s) that the MA
organization may have with first tier, downstream, and related
entities, the MA organization maintains ultimate responsibility for
adhering to and otherwise fully complying with all terms and conditions
of its contract with CMS.
(2) The MA organization agrees to require all first tier,
downstream, and related entities to agree that--
(i) HHS, the Comptroller General, or their designees have the right
to inspect, evaluate, and audit any pertinent contracts, books,
documents, papers, and records of the first tier, downstream, and
related entities involving transactions related to CMS' contract with
the MA organization.
* * * * *
(3) All contracts or written arrangements between MA organizations
and providers, related entities, first tier and downstream entities
must contain the following:
* * * * *
(ii) Accountability provisions that indicate that the MA
organization may only delegate activities or functions to a provider,
first tier, downstream, or related entity, in a manner consistent with
the requirements set forth at paragraph (i)(4) of this section.
(iii) A provision requiring that any services or other activity
performed by a related entity, first-tier, or downstream entity in
accordance with a contract or written agreement are consistent and
comply with the MA organization's contractual obligations.
(4) If any of the MA organizations' activities or responsibilities
under its contract with CMS are delegated to other parties, the
following requirements apply to any provider or first tier, downstream
and related entity:
* * * * *
5. Amend Sec. 422.505 by revising paragraph (c) to read as
follows:
Sec. 422.505 Effective date and term of contract.
* * * * *
(c) Renewal of contract. In accordance with Sec. 422.506,
contracts are renewed annually only if the MA organization has not
provided CMS with a notice of intention not to renew and CMS has not
provided the MA organization with a notice of intention not to renew.
* * * * *
6. Amend Sec. 422.506 by--
A. Revising paragraph (b)(2) introductory text.
B. Revising paragraph (b)(2)(i).
C. Redesignating paragraph (b)(3) as (b)(4).
D. Adding a new paragraph (b)(3).
The revisions and additions read as follows:
Sec. 422.506 Nonrenewal of contract.
* * * * *
(b) * * *
(2) Notice of non-renewal. CMS provides notice of its decision not
to authorize renewal of a contract as follows:
(i) To the MA organization by September 1 of the contract year.
* * * * *
(3) Corrective action plan. (i) Before nonrenewing a contract, CMS
will provide the MA organization with a reasonable opportunity to
develop and submit a corrective action plan (CAP).
(ii) The MA organization must develop and submit the CAP within 45
days of receiving a request for a CAP.
(iii) If CMS determines the CAP is unacceptable, CMS will provide
the MA organization with an additional 30 days to submit a revised CAP.
(iv) If CMS determines the CAP is acceptable, CMS will notify the
MA organization of a deadline by which the CAP must be fully
implemented. CMS has sole discretion on whether the CAP is fully
implemented.
(v) Failure to develop and implement a CAP within the timeframes
specified in paragraphs (3)(i) through (3)(iii) of this section may
result in the nonrenewal of the MA contract.
* * * * *
7. Amend Sec. 422.510 by--
A. Republishing paragraph (a) introductory text.
B. Revising paragraph (a)(1).
C. Revising paragraph (b) introductory text.
D. Revising paragraph (b)(2) heading.
E. Revising paragraph (b)(2)(i).
F. Revising paragraph (c).
The revisions read as follows:
Sec. 422.510 Termination of contract by CMS.
(a) Termination by CMS. CMS may terminate a contract for any of the
following reasons:
(1) The MA organization has failed substantially to carry out the
terms of--
(i) Its current contract term with CMS, or
(ii) Its contract with CMS from the preceding contract term.
* * * * *
(b) Notice. If CMS decides to terminate a contract for reasons
other than the grounds specified in Sec. 422.510(a)(4) or Sec.
422.510(a)(5), it gives notice of the termination as follows:
* * * * *
(2) Expedited termination of contract by CMS. (i) For terminations
based on violations prescribed in Sec. 422.510(a)(4) or Sec.
422.510(a)(5), CMS notifies the MA organization in writing that its
contract will be terminated on a date specified by CMS. If termination
is effective in the middle of a month, CMS has the right to recover the
prorated share of the capitation payments made to the MA organization
covering the period of the month following the contract termination.
* * * * *
(c) Corrective action plan.--(1) General. Before terminating a
contract for reasons other than the grounds specified in paragraphs
(a)(4) or (a)(5) of
[[Page 29386]]
this section, CMS will provide the MA organization with a reasonable
opportunity to develop and submit a corrective action plan (CAP).
(i) The MA organization must develop and submit the CAP within 45
days of receiving a request for a CAP.
(ii) If CMS determines the CAP is unacceptable, CMS will provide
the MA organization with an additional 30 days to submit a revised CAP.
(iii) If CMS determines the CAP is acceptable, CMS will notify the
MA organization of a deadline by which the CAP must be fully
implemented. CMS has sole discretion on whether the CAP is fully
implemented.
(iv) Failure to develop and implement a CAP within the timeframes
specified in paragraphs (c)(1)(i) through (c)(1)(iii) may result in the
termination of the MA contract.
(2) Exceptions. If a contract is terminated under Sec.
422.510(a)(4) or Sec. 422.510(a)(5), the MA organization will not have
the opportunity to submit a CAP.
* * * * *
Subpart N--Medicare Contract Determinations and Appeals
8. Amend Sec. 422.644 by--
A. Republishing paragraph (b) introductory text.
B. Revising paragraph (b)(2).
C. Revising paragraph (c).
D. Revising paragraph (d).
The revisions read as follows:
Sec. 422.644 Notice of contract determination.
* * * * *
(b) The notice specifies--
(1) * * *
(2) The MA organization's right to request a hearing.
(c) For CMS-initiated terminations, CMS mails