Medicare Program; Criteria and Standards for Evaluating Intermediary and Carrier Performance During Fiscal Year 2007, 57513-57519 [E6-15991]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 71, Number 189 (Friday, September 29, 2006)]
[Notices]
[Pages 57513-57519]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-15991]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1333-GNC]
RIN: 0938-ZA94


Medicare Program; Criteria and Standards for Evaluating 
Intermediary and Carrier Performance During Fiscal Year 2007

AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.

ACTION: General notice with comment period.

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SUMMARY: This general notice with comment period describes the criteria 
and standards to be used for evaluating the performance of fiscal 
intermediaries (FIs) and carriers in the administration of the Medicare 
program.
    The results of these evaluations are considered whenever we enter 
into, renew, or terminate an intermediary agreement, carrier contract, 
or take other contract actions, for example, assigning or reassigning 
providers or services to an intermediary or designating regional or 
national intermediaries. We are requesting public comment on these 
criteria and standards.

DATES: Effective Date: The criteria and standards are effective on 
October 1, 2006.
    Comment Date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on November 28, 2006.

ADDRESSES: In commenting, please refer to file code CMS-1333-GNC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (fax) transmission.

[[Page 57514]]

    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 https://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-1333-GNC, 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-1333-GNC, 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) 786-7195 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: Lee Ann Crochunis, (410) 786-3363.

SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments 
from the public on all issues set forth in this notice to assist us in 
fully considering issues and developing policies. You can assist us by 
referencing the file code CMS-1333-GNC 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: https://
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.

I. Background

A. Medicare Part A--Hospital Insurance

    Under section 1816 of the Social Security Act (the Act), public or 
private organizations and agencies participate in the administration of 
Part A (Hospital Insurance) of the Medicare program under agreements 
with CMS. These agencies or organizations, known as fiscal 
intermediaries (FIs), determine whether medical services are covered 
under Medicare, determine correct payment amounts and then make 
payments to the health care providers (for example, hospitals, skilled 
nursing facilities (SNFs), and community mental health centers) on 
behalf of the beneficiaries. Section 1816(f) of the Act requires us to 
develop criteria, standards, and procedures to evaluate an FI's 
performance of its functions under its agreement.
    Section 1816(e)(4) of the Act requires us to designate regional 
agencies or organizations, which are already Medicare FIs under section 
1816 of the Act, to perform claim processing functions for freestanding 
home health agency (HHA) claims. We refer to these organizations as 
Regional Home Health Intermediaries (RHHIs) (See Sec.  421.117 ).
    The evaluation of intermediary performance is part of our contract 
management process. These evaluations need not be limited to the 
current fiscal year (FY), other fixed term basis, or agreement term.

B. Medicare Part B--Supplementary Medical Insurance

    Under section 1842 of the Act, we are authorized to enter into 
contracts with carriers to fulfill various functions in the 
administration of Part B, Supplementary Medical Insurance of the 
Medicare program. Beneficiaries, physicians, and suppliers of services 
submit claims to these carriers. The carriers determine whether the 
services are covered under Medicare and the amount payable for the 
services or supplies, and then make payment to the appropriate party.
    Under section 1842(b)(2) of the Act, we are required to develop 
criteria, standards, and procedures to evaluate a carrier's performance 
of its functions under its contract. Evaluations of Medicare fee-for-
service (FFS) contractor performance need not be limited to the current 
FFY, other fixed term basis, or contract term. The evaluation of 
carrier performance is part of our contract management process.

C. Development and Publication of Criteria and Standards

    In addition to the statutory requirements, Sec.  421.120, Sec.  
421.122 and Sec.  421.201 of the regulations, provide for publication 
of a Federal Register notice to announce criteria and standards for 
intermediaries and carriers before the beginning of each evaluation 
period. We published the current criteria and standards for 
intermediaries, carriers, and DMEPOS regional carriers in the general 
notice with comment on September 23, 2005 (70 FR 55887).
    To the extent possible, we make every effort to publish the 
criteria and standards before the beginning of the Federal Fiscal Year 
(FFY), which is October 1. If we do not publish a Federal Register 
notice before the new FFY begins, readers may presume that until and 
unless notified otherwise, the criteria and standards that were in 
effect for the previous FFY remain in effect.
    In those instances in which we are unable to meet our goal of 
publishing the subject Federal Register notice before the beginning of 
the FFY, we may publish the criteria and standards notice at any 
subsequent time during the year. If we publish a notice in this manner, 
the evaluation period for the criteria and standards that are the 
subject of the notice will be effective beginning on the first day of 
the first month following

[[Page 57515]]

publication of this notice in the Federal Register. Any revised 
criteria and standards will measure performance prospectively; that is, 
any new criteria and standards in the notice will be applied only to 
performance after the effective date listed on the notice.
    It is not our intention to revise the criteria and standards that 
will be used during the evaluation period once this information is 
published in a Federal Register notice. However, on occasion, either 
because of administrative action or statutory mandate, there may be a 
need for changes that have a direct impact on the criteria and 
standards previously published, or that require the addition of new 
criteria or standards, or that cause the deletion of previously 
published criteria and standards. If we must make these changes, we 
will publish an amended Federal Register notice before implementation 
of the changes. In all instances, necessary manual issuances will be 
published to ensure that the criteria and standards are applied 
uniformly and accurately. Also, as in previous years, this Federal 
Register notice will be republished and the effective date revised if 
changes are warranted as a result of the public comments received on 
the criteria and standards.
    The Medicare Prescription Drug, Improvement and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173) was enacted on December 8, 2003. 
Section 911 of the MMA establishes the Medicare FFS Contracting Reform 
(MCR) initiative that will be implemented over the next several years. 
This provision requires that we use competitive procedures to replace 
our current FIs and carriers with Medicare Administrative Contractors 
(MACs). The MMA requires that we compete and transition all work to 
MACs by October 1, 2011.
    FIs and carriers will continue administering Medicare FFS work 
until the final competitively selected MAC is up and operating. We will 
continue to develop and publish standards and criteria for use in 
evaluating the performance of FIs and carriers as long as these types 
of contractors exist.

II. Analysis of and Response to Public Comments Received on FY 2006 
Criteria and Standards

    We received two comments in response to the September 23, 2005 
Federal Register general notice with comment. All comments were 
reviewed, but none necessitated our reissuance of the FY 2006 Criteria 
and Standards. Comments submitted did not pertain specifically to the 
FY 2006 Criteria and Standards.

III. Criteria and Standards--General

    [If you choose to comment on issues in this section, please include 
the caption ``CRITERIA AND STANDARDS--GENERAL'' at the beginning of 
your comments.]
    Basic principles of the Medicare program are to pay claims promptly 
and accurately, and to foster good beneficiary and provider relations. 
Contractors must administer the Medicare program efficiently and 
economically. The goal of performance evaluation is to ensure that 
contractors meet their contractual obligations. We measure contractor 
performance to ensure that contractors do what is required of them by 
statute, regulation, contract, and our directives.
    We have developed a contractor oversight program for FY 2007 that 
outlines the expectations of the contractor; measures the performance 
of the contractor; evaluates the contractor's performance against those 
expectations; and provides for appropriate contract action based upon 
the evaluation of the contractor's performance.
    As a means to monitor the accuracy of Medicare FFS payments, we 
have established the Comprehensive Error Rate Testing (CERT) program 
that measures and reports error rates for claims payment decisions made 
by carriers and FIs. Beginning in November 2003, the CERT program 
measures and reports claims payment error rates for each individual 
carrier. FI-specific rates became available November 2004. These rates 
measure not only how well contractors are doing at implementing 
automated review edits and identifying which claims to subject to 
manual medical review, but they also measure the impact of the 
contractor's provider outreach/education, as well as the effectiveness 
of the contractor's provider call center(s). We will use these 
contractor-specific error rates as a means to evaluate a contractor's 
performance.
    Several times throughout this notice, we refer to the appropriate 
reading level of letters, decisions, or correspondence that are mailed 
or otherwise transmitted to Medicare beneficiaries from intermediaries 
or carriers. In those instances, appropriate reading level is defined 
as whether the communication is below the eighth grade reading level 
unless it is obvious that an incoming request from the beneficiary 
contains language written at a higher level. In these cases, the 
appropriate reading level is tailored to the capacities and 
circumstances of the intended recipient.
    In addition to evaluating performance based upon our expectations 
for FY 2007, we may also conduct follow-up evaluations throughout FY 
2007 of areas in which contractor performance was out of compliance 
with statute, regulations, and our performance expectations during 
prior review years where contractors were required to submit a 
Performance Improvement Plan (PIP).
    We may also utilize Statement of Auditing Standards-70 (SAS-70) 
reviews as a means to evaluate contractors in some or all business 
functions.
    In FY 2001, we established the Contractor Rebuttal Process as a 
commitment to continual improvement of contractor performance 
evaluation (CPE). We will continue the use of this process in FY 2007. 
The Contractor Rebuttal Process provides the contractors an opportunity 
to submit a written rebuttal of CPE findings of fact. Whenever we 
conduct an evaluation of contractor operations, contractors have 7 
calendar days from the date of the CPE review exit conference to submit 
a written rebuttal. The CPE review team or, if appropriate, the 
individual reviewer considers the contents of the rebuttal before the 
issuance of the final CPE report to the contractor.
    The FY 2007 CPE for intermediaries and carriers is structured into 
five criteria designed to meet the stated objectives. The first 
criterion, claims processing, measures contractual performance against 
claims processing, accuracy and timeliness requirements, as well as 
activities in handling appeals. Within the claims processing criterion, 
we have identified those performance standards that are mandated by 
legislation, regulation, or judicial decision. These standards include 
claims processing timeliness, the accuracy of Medicare Summary Notices 
(MSNs), the timeliness of intermediary and carrier redeterminations, 
and the appropriateness of the reading level and content of 
intermediary and carrier redetermination letters. Further evaluation in 
the claims processing criterion may include, but is not limited to, the 
accuracy of claims processing, the percent of claims paid with 
interest, the accuracy of redeterminations, forwarding to and 
effectuation of Qualified Independent Contractor (QIC) decisions, and 
effectuation of administrative law judge (ALJ) decisions.
    The second criterion, customer service, assesses the adequacy of 
the service provided to customers by the contractor in its 
administration of the Medicare program. The mandated standard in the 
customer service criterion is the need to provide

[[Page 57516]]

beneficiaries with written replies that are responsive, that is, they 
provide in detail the reasons for a determination when a beneficiary 
requests this information, they have a customer-friendly tone and 
clarity, and they are at the appropriate reading level. Further 
evaluation of services under this criterion may include, but will not 
be limited to, the following:
    (1) Timeliness and accuracy of all correspondence both to 
beneficiaries and providers; (2) monitoring of the quality of replies 
provided by the contractor's telephone customer service representatives 
(quality call monitoring);
    (3) beneficiary and provider education, training, and outreach 
activities; and (4) service provided by the contractor's customer 
service representatives to beneficiaries and providers who come to the 
contractor's facility (walk-in inquiry service).
    The third criterion, payment safeguards, evaluates whether the 
Medicare Trust Fund is safeguarded against inappropriate program 
expenditures. Intermediary and carrier performance may be evaluated in 
the areas of Medical Review (MR), Medicare Secondary Payer (MSP), 
Overpayments (OP), and Provider Enrollment (PE). In addition, 
intermediary performance may be evaluated in the area of Audit and 
Reimbursement (A&R).
    In FY 1996, the Congress enacted the Health Insurance Portability 
and Accountability Act (HIPAA), Medicare Integrity Program, giving us 
the authority to contract with entities other than, but not excluding, 
Medicare carriers and intermediaries to perform certain program 
safeguard functions. In situations where one or more program safeguard 
functions are contracted to another entity, we may evaluate the flow of 
communication and information between a Medicare FFS contractor and the 
payment safeguard contractor. All benefit integrity functions have been 
transitioned from the intermediaries and carriers to the program 
safeguard contractors.
    Mandated performance standards for intermediaries in the payment 
safeguards criterion include the accuracy of decisions on SNF demand 
bills and the timeliness of processing Tax Equity and Fiscal 
Responsibility Act (TEFRA) target rate adjustments, exceptions, and 
exemptions. There are no mandated performance standards for carriers in 
the payment safeguards criterion. Intermediaries and carriers may also 
be evaluated on any Medicare Integrity Program (MIP) activities if 
performed under their agreement or contract.
    The fourth criterion, fiscal responsibility, evaluates the 
contractor's efforts to protect the Medicare program and the public 
interest. Contractors must effectively manage Federal funds for both 
the payment of benefits and the costs of administration under the 
Medicare program. Proper financial and budgetary controls, including 
internal controls, must be in place to ensure contractor compliance 
with its agreement with HHS and CMS.
    Additional functions reviewed under this criterion may include, but 
are not limited to, adherence to approved budget, compliance with the 
Budget and Performance Requirements (BPRs), and compliance with 
financial reporting requirements.
    The fifth and final criterion, administrative activities, measures 
a contractor's administrative management of the Medicare program. A 
contractor must efficiently and effectively manage its operations. 
Proper systems security (general and application controls), Automated 
Data Processing (ADP) maintenance, and disaster recovery plans must be 
in place. A contractor's evaluation under the administrative activities 
criterion may include, but is not limited to, establishment, 
application, documentation, and effectiveness of internal controls that 
are essential in all aspects of a contractor's operation, as well as 
the degree to which the contractor cooperates with us in complying with 
the Federal Managers' Financial Integrity Act of 1982 (FMFIA). 
Administrative activities evaluations may also include reviews related 
to contractor implementation of our general instructions and data and 
reporting requirements.
    We have developed separate measures for RHHIs in order to evaluate 
the distinct RHHI functions. These functions include the processing of 
claims from freestanding HHAs, hospital-affiliated HHAs, and hospices. 
Through an evaluation using these criteria and standards, we may 
determine whether the RHHI is effectively and efficiently administering 
the program benefit or whether the functions should be moved from one 
intermediary to another in order to gain that assurance.
    In sections IV through VI of this notice, we list the criteria and 
standards to be used for evaluating the performance of intermediaries, 
RHHIs, and carriers.

IV. Criteria and Standards for Intermediaries

    [If you choose to comment on issues in this section, please include 
the caption ``CRITERIA AND STANDARDS FOR INTERMEDIARIES'' at the 
beginning of your comments.]

A. Claims Processing Criterion

    The claims processing criterion contains the following three 
mandated standards:
    Standard 1. Not less than 95.0 percent of clean electronically 
submitted non-Periodic Interim Payment claims are paid within 
statutorily specified timeframes. Clean claims are defined as claims 
that do not require Medicare intermediaries to investigate or develop 
them outside of their Medicare operations on a prepayment basis. 
Specifically, the statute specifies that clean nonPeriodic Interim 
Payment electronic claims be paid no earlier than the 14th day after 
the date of receipt, and that interest is payable for any clean claims 
if payment is not issued by the 31st day after the date of receipt.
    Standard 2. Redetermination letters prepared in response to 
beneficiary initiated appeal requests are written in a manner 
calculated to be understood by the beneficiary. Letters must contain 
the required elements as specified in Sec.  405.956.
    Standard 3. All redeterminations must be concluded and mailed 
within 60 days of receipt of the request, unless the appellant submits 
documentation after the request, in which case the decision-making 
timeframe is extended for 14 calendar days for each submission.
    Because intermediaries process many claims for benefits under the 
Part B portion of the Medicare Program, we also may evaluate how well 
an intermediary follows the procedures for processing appeals of any 
claims for Part B benefits.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
     Accuracy of claims processing.
     Remittance advice transactions.
     Establishment and maintenance of a relationship with 
Common Working File (CWF) Host.
     Accuracy of redeterminations.
     QIC case file requirements.
     Accuracy and timeliness of processing appeals as set forth 
in part 405, subpart I (Sec.  405.900 et seq.).

B. Customer Service Criterion

    Functions that may be evaluated under this criterion include, but 
are not limited to, the following:
     Maintaining a properly programmed interactive voice 
response system to assist with inquiries.
     Performing quality call monitoring.
     Training customer service representatives.

[[Page 57517]]

     Entering valid call center performance data in the 
customer service assessment and management system.
     Providing timely and accurate written replies to 
beneficiaries and providers that address the concerns raised and are 
written with an appropriate customer-friendly tone and clarity; and 
those written to beneficiaries are at the appropriate reading level.
     Maintaining walk-in inquiry service for beneficiaries and 
providers.
     Conducting beneficiary and provider education, training, 
and outreach activities.
     Effectively maintaining an Internet Web site dedicated to 
furnishing providers and physicians timely, accurate, and useful 
Medicare program information.
     Ensuring written correspondence is evaluated for quality.

C. Payment Safeguards Criterion

    The Payment Safeguard criterion contains the following two mandated 
standards:
    Standard 1. Decisions on SNF demand bills are accurate.
    Standard 2. TEFRA target rate adjustments, exceptions, and 
exemptions are processed within mandated timeframes. Specifically, 
applications must be processed to completion within 75 days after 
receipt by the contractor or returned to the hospitals as incomplete 
within 60 days of receipt.
    Intermediaries may also be evaluated on any MIP activities if 
performed under their Part A contractual agreement. These functions and 
activities include, but are not limited to, the following:
 Audit and Reimbursement
    + Performing the activities specified in our general instructions 
for conducting audit and settlement of Medicare cost reports.
    + Establishing accurate interim payments.
 Medical Review
    + Increasing the effectiveness of medical review activities.
    + Exercising accurate and defensible decision-making on medical 
reviews.
    + Effectively educating and communicating with the provider 
community.
    + Collaborating with other internal components and external 
entities to ensure the effectiveness of medical review activities.
 Medicare Secondary Payer
    + Accurately following MSP claim development and edit procedures.
    + Auditing hospital files and claims to determine that claims are 
being filed to Medicare appropriately.
    + Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
    + Supporting all the Medicare Secondary Payer Recovery functions.
    + Accurately reporting MSP savings.
 Overpayments
    + Collecting and referring Medicare debts timely.
    + Accurately reporting and collecting overpayments.
    + Adhering to our instructions for management of Medicare Trust 
Fund debts.
 Provider Enrollment
    + Complying with assignment of staff to the provider enrollment 
function and training the staff in procedures and verification 
techniques.
    + Complying with the operational standards relevant to the process 
for enrolling providers.

D. Fiscal Responsibility Criterion

    We may review the intermediary's efforts to establish and maintain 
appropriate financial and budgetary internal controls over benefit 
payments and administrative costs. Proper internal controls must be in 
place to ensure that contractors comply with their agreements with us.
    Additional functions that may be reviewed under the fiscal 
responsibility criterion include, but are not limited to, the 
following:
     Adherence to approved program management and MIP budgets.
     Compliance with the BPRs.
     Compliance with financial reporting requirements.
     Control of administrative cost and benefit payments.

E. Administrative Activities Criterion

    We may measure an intermediary's administrative ability to manage 
the Medicare program. We may evaluate the efficiency and effectiveness 
of its operations, its system of internal controls, and its compliance 
with our directives and initiatives.
    We may measure an intermediary's efficiency and effectiveness in 
managing its operations. Proper systems security (general and 
application controls), ADP maintenance, and disaster recovery plans 
must be in place. An intermediary must also test system changes to 
ensure the accurate implementation of our instructions.
    Our evaluation of an intermediary under the administrative 
activities criterion may include, but is not limited to, reviews of the 
following:
     Systems security.
     ADP maintenance (configuration management, testing, change 
management, and security).
     Implementation of the Electronic Data Interchange (EDI) 
standards adopted for use under HIPAA.
     Disaster recovery plan and systems contingency plan.
     Data and reporting requirements implementation.
     Internal controls establishment and use, including the 
degree to which the contractor cooperates with the Secretary in 
complying with the FMFIA.
     Implementation of our general instructions.

V. Criteria and Standards for Regional Home Health Intermediaries 
(RHHIs)

    [If you choose to comment on issues in this section, please include 
the caption ``CRITERIA AND STANDARDS FOR RHHIs'' at the beginning of 
your comments.]
    The following three standards are mandated for the RHHI criterion:
    Standard 1. Not less than 95.0 percent of clean electronically 
submitted non-Periodic Interim Payment home health and hospice claims 
are paid within statutorily specified timeframes. Clean claims are 
defined as claims that do not require Medicare intermediaries to 
investigate or develop them outside of their Medicare operations on a 
prepayment basis. Specifically, the statute specifies that clean non-
Periodic Interim Payment electronic claims be paid no earlier than the 
14th day after the date of receipt, and that interest is payable for 
any clean claims if payment is not issued by the 31st day after the 
date of receipt.
    Standard 2. Redetermination letters prepared in response to 
beneficiary initiated appeal requests are written in a manner 
calculated to be understood by the beneficiary. Letters must contain 
the required elements as specified in Sec.  405.956.
    Standard 3: All redeterminations must be concluded and mailed 
within 60 days of receipt of the request, unless the appellant submits 
documentation after the request, in which case the decision-making 
timeframe is extended for 14 calendar days for each submission.
    We may use this criterion to review an RHHI's performance for 
handling the HHA and hospice workload. This includes processing HHA and 
hospice claims timely and accurately, properly paying and settling HHA 
cost reports,

[[Page 57518]]

and accurately processing redeterminations of initial determinations 
from beneficiaries, HHAs, and hospices.

VI. Criteria and Standards for Carriers

    [If you choose to comment on issues in this section, please include 
the caption ``CRITERIA AND STANDARDS FOR CARRIERS'' at the beginning of 
your comments.]

A. Claims Processing Criterion

    The claims processing criterion contains the following four 
mandated standards:
    Standard 1. Not less than 95.0 percent of clean electronically 
submitted claims are processed within statutorily specified timeframes. 
Clean claims are defined as claims that do not require Medicare 
carriers to investigate or develop them outside of their Medicare 
operations on a prepayment basis. Specifically, the statute specifies 
that clean non-Periodic Interim payment electronic claims be paid no 
earlier than the 14th day after the date of receipt, and that interest 
is payable for any clean claims if payment is not issued by the 31st 
day after the date of receipt.
    Standard 2. Ninety-eight percent of MSNs are properly generated. 
Our expectation is that MSN messages are accurately reflecting the 
services provided.
    Standard 3. Redetermination letters prepared in response to 
beneficiary initiated appeal requests are written in a manner 
calculated to be understood by the beneficiary. Letters must contain 
the required elements as specified in Sec.  405.956.
    Standard 4. All redeterminations must be concluded and mailed 
within 60 days of receipt of the request, unless the appellant submits 
documentation after the request, in which case the decision-making 
timeframe is extended for 14 calendar days for each submission.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
     Accuracy of claims processing.
     Remittance advice transactions.
     Establishment and maintenance of relationship with Common 
Working File (CWF) Host.
     Accuracy of redetermination decisions.
     QIC case file requirements.
     Accuracy and timeliness of processing appeals as set forth 
in part 405, subpart I (Sec.  405.900 et seq.).

B. Customer Service Criterion

    The customer service criterion contains the following mandated 
standard: Replies to beneficiary written correspondence are responsive 
to the beneficiary's concerns; are written with an appropriate 
customer-friendly tone and clarity; and are written at the appropriate 
reading level.
    Contractors must meet our performance expectations that 
beneficiaries and providers are served by prompt and accurate 
administration of the program in accordance with all applicable laws, 
regulations, and our general instructions.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
     Maintaining a properly programmed interactive voice 
response system to assist with inquiries.
     Performing quality call monitoring.
     Training customer service representatives.
     Entering valid call center performance data in the 
customer service assessment and management system.
     Providing timely and accurate written replies to 
beneficiaries and providers.
     Maintaining walk-in inquiry service for beneficiaries and 
providers.
     Conducting beneficiary and provider education, training, 
and outreach activities.
     Effectively maintaining an Internet Web site dedicated to 
furnishing providers timely, accurate, and useful Medicare program 
information.
     Ensuring written correspondence is evaluated for quality.

C. Payment Safeguards Criterion

    Carriers may be evaluated on any MIP activities if performed under 
their contracts. In addition, other carrier functions and activities 
that may be reviewed under this criterion include, but are not limited 
to the following:
 Medical Review
    + Increasing the effectiveness of medical review activities.
    + Exercising accurate and defensible decision-making on medical 
reviews.
    + Effectively educating and communicating with the provider 
community.
    + Collaborating with other internal components and external 
entities to ensure the effectiveness of medical review activities.
 Medicare Secondary Payer
    + Accurately following MSP claim development/edit procedures.
    + Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
    + Supporting all the Medicare Secondary Payer Recovery functions.
    + Accurately reporting MSP savings.
 Overpayments
    + Collecting and referring Medicare debts timely.
    + Accurately reporting and collecting overpayments.
    + Compliance with our instructions for management of Medicare Trust 
Fund debts.
 Provider Enrollment
    + Complying with assignment of staff to the provider enrollment 
function and training staff in procedures and verification techniques.
    + Complying with the operational standards relevant to the process 
for enrolling suppliers.

D. Fiscal Responsibility Criterion

    We may review the carrier's efforts to establish and maintain 
appropriate financial and budgetary internal controls over benefit 
payments and administrative costs. Proper internal controls must be in 
place to ensure that contractors comply with their contracts.
    Additional functions that may be reviewed under the Fiscal 
Responsibility criterion include, but are not limited to, the 
following:
     Adherence to approved program management and MIP budgets.
     Compliance with the BPRs.
     Compliance with financial reporting requirements.
     Control of administrative cost and benefit payments.

E. Administrative Activities Criterion

    We may measure a carrier's administrative ability to manage the 
Medicare program. We may evaluate the efficiency and effectiveness of 
its operations, its system of internal controls, and its compliance 
with our directives and initiatives.
    We may measure a carrier's efficiency and effectiveness in managing 
its operations. Proper systems security (general and application 
controls), ADP maintenance, and disaster recovery plans must be in 
place. Also, a carrier must test system changes to ensure accurate 
implementation of our instructions.
    Our evaluation of a carrier under this criterion may include, but 
is not limited to, reviews of the following:
     Systems security.
     ADP maintenance (configuration management, testing, change 
management, and security).
     Disaster recovery plan/systems contingency plan.
     Data and reporting requirements implementation.
     Internal controls establishment and use, including the 
degree to which the

[[Page 57519]]

contractor cooperates with the Secretary in complying with the FMFIA.
     Implementation of the Electronic Data Interchange (EDI) 
standards adopted for use under the Health Insurance Portability and 
Accountability Act (HIPAA).
     Implementation of our general instructions.

VII. Action Based on Performance Evaluations

    [If you choose to comment on this section, please include the 
caption ``ACTION BASED ON PERFORMANCE EVALUATIONS'' at the beginning of 
your comments.]
    We evaluate a contractor's performance against applicable program 
requirements for each criterion. Each contractor must certify that all 
information submitted to us relating to the contract management 
process, including, without limitation, all files, records, documents 
and data, whether in written, electronic, or other form, is accurate 
and complete to the best of the contractor's knowledge and belief. A 
contractor is required to certify that its files, records, documents, 
and data are not manipulated or falsified in an effort to receive a 
more favorable performance evaluation. A contractor must further 
certify that, to the best of its knowledge and belief, the contractor 
has submitted, without withholding any relevant information, all 
information required to be submitted for the contract management 
process under the authority of applicable law(s), regulation(s), 
contract(s), or our manual provision(s). Any contractor that makes a 
false, fictitious, or fraudulent certification may be subject to 
criminal or civil prosecution, as well as appropriate administrative 
action. This administrative action may include debarment or suspension 
of the contractor, as well as the termination or nonrenewal of a 
contract.
    If a contractor meets the level of performance required by 
operational instructions, it meets the requirements of that criterion. 
When we determine a contractor is not meeting performance requirements, 
we will use the terms ``major nonconformance'' or ``minor 
nonconformance'' to classify our findings. A major nonconformance is a 
nonconformance that is likely to result in failure of the supplies or 
services, or to materially reduce the usability of the supplies or 
services for their intended purpose. A minor nonconformance is a 
nonconformance that is not likely to materially reduce the usability of 
the supplies or services for their intended purpose, or is a departure 
from established standards having little bearing on the effective use 
or operation of the supplies or services. The contractor will be 
required to develop and implement PIPs for findings determined to be 
either a major or minor nonconformance. The contractor will be 
monitored to ensure effective and efficient compliance with the PIP, 
and to ensure improved performance when requirements are not met.
    The results of performance evaluations and assessments under all 
criteria applying to intermediaries, carriers, and RHHIs will be used 
for contract management activities and will be published in the 
contractor's annual Report of Contractor Performance (RCP). We may 
initiate administrative actions as a result of the evaluation of 
contractor performance based on these performance criteria. Under 
sections 1816 and 1842 of the Act, we consider the results of the 
evaluation in our determinations when--
     Entering into, renewing, or terminating agreements or 
contracts with contractors, and
     Deciding other contract actions for intermediaries and 
carriers (such as deletion of an automatic renewal clause). These 
decisions are made on a case-by-case basis and depend primarily on the 
nature and degree of performance. More specifically, these decisions 
depend on the following:
    + Relative overall performance compared to other contractors.
    + Number of criteria in which nonconformance occurs.
    + Extent of each nonconformance.
    + Relative significance of the requirement for which nonconformance 
occurs within the overall evaluation program.
    + Efforts to improve program quality, service, and efficiency.
    + Deciding the assignment or reassignment of providers and 
designation of regional or national intermediaries for classes of 
providers.
    We make individual contract action decisions after considering 
these factors in terms of their relative significance and impact on the 
effective and efficient administration of the Medicare program.
    In addition, if the cost incurred by the intermediary, RHHI, or 
carrier to meet its contractual requirements exceeds the amount that we 
find to be reasonable and adequate to meet the cost that must be 
incurred by an efficiently and economically operated intermediary or 
carrier, these high costs may also be grounds for adverse action.

VIII. Collection of Information Requirements

    This document does not impose information collection and record 
keeping requirements. Consequently, the Office of Management and Budget 
need not review it under the authority of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.).

IX. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are 
unable to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the ``Comment 
Date'' section of this notice, and, if we proceed with a subsequent 
document, we will respond to the comments in the section entitled as 
``Analysis of and Response to Public Comments Received on FY 2007 
Criteria and Standards'' of that document.

    Authority: Sections 1816(f), 1834(a)(12), and 1842(b) of the 
Social Security Act (42 U.S.C. 1395h(f), 1395m(a)(12), and 1395u(b))

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance, and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 22, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. E6-15991 Filed 9-28-06; 8:45 am]
BILLING CODE 4120-01-P