Medicare Program; Revisions to the Medicare Advantage and Part D Prescription Drug Contract Determinations, Appeals, and Intermediate Sanctions Processes, 29368-29402 [07-2579]

Agencies

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

[Federal Register Volume 72, Number 101 (Friday, May 25, 2007)]
[Proposed Rules]
[Pages 29368-29402]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-2579]



[[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

Federal Register / Vol. 72, No. 101 / Friday, May 25, 2007 / Proposed 
Rules

[[Page 29368]]


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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 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-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: 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.

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
------------------------------------------------------------------------

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
----------------------------------------------------------------------------------------------------------------
              Section heading                Section references in part 422     Section references in part 423
----------------------------------------------------------------------------------------------------------------
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.
----------------------------------------------------------------------------------------------------------------

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 https://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 re