Medicaid Integrity Program; Eligible Entity and Contracting Requirements for the Medicaid Integrity Audit Program, 65686-65692 [E7-22773]

Agencies

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

[Federal Register Volume 72, Number 225 (Friday, November 23, 2007)]
[Proposed Rules]
[Pages 65686-65692]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22773]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 455

[CMS-2271-P]
RIN 0938-AO97


Medicaid Integrity Program; Eligible Entity and Contracting 
Requirements for the Medicaid Integrity Audit Program

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

ACTION: Proposed rule.

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[[Page 65687]]

SUMMARY: Section 1936 of the Social Security Act (the Act) (as added by 
section 6034 of the Deficit Reduction Act of 2005 (DRA)) established 
the Medicaid Integrity Program to promote the integrity of the Medicaid 
program by requiring CMS to enter into contracts with eligible entities 
to: Review the actions of individuals or entities furnishing items or 
services (whether on a fee-for-service, risk, or other basis) for which 
payment may be made under an approved State plan and/or any waiver of 
such plan approved under section 1115 of the Act; audit claims for 
payment of items or services furnished, or administrative services 
rendered, under a State plan; identify overpayments to individuals or 
entities receiving Federal funds; and educate providers of services, 
managed care entities, beneficiaries, and other individuals with 
respect to payment integrity and quality of care.
    This proposed rule would provide requirements for an eligible 
entity to enter into a contract under the Medicaid integrity audit 
program. The proposed rule would also establish the contracting 
requirements for eligible entities. The requirements would include 
procedures for identifying, evaluating, and resolving organizational 
conflicts of interest that are generally applicable to Federal 
acquisition and procurement; competitive procedures to be used; and 
procedures under which a contract may be renewed.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on December 24, 
2007.

ADDRESSES: In commenting, please refer to file code CMS-2271-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-2271-P, P.O. Box 8010, Baltimore, MD 21244-1850. 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-2271-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) 786-8148 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.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Barbara Rufo, 410-786-5589 or Crystal 
High, 410-786-8366.

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-2271-P.
    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. Current Law

    States and the Federal government share in the responsibility for 
safeguarding Medicaid program integrity. States must comply with 
Federal requirements designed to ensure that Medicaid funds are 
properly spent (or recovered, when necessary). CMS is the primary 
Federal agency responsible for providing oversight of States' 
activities and facilitating their program integrity efforts.

B. Medicaid Integrity Program

    Section 6034 of the Deficit Reduction Act (DRA) of 2005 (Pub. L. 
109-171, enacted on February 8, 2006) added a new section 1936 to the 
Act that established the Medicaid Integrity Program, referenced as the 
``Program'' hereafter, to combat Medicaid fraud and abuse. The Program 
is intended to identify, recover, and prevent Medicaid overpayments. It 
is also intended to support the efforts of the State Medicaid agencies 
through a combination of oversight and technical assistance.
    Although individual States work to ensure the integrity of their 
respective Medicaid programs, the Program represents CMS' first 
national strategy to detect and prevent Medicaid fraud and abuse. The 
Program would provide CMS with the ability to more directly ensure the 
accuracy of Medicaid payments and to deter those who would exploit the 
program.
    Section 6034 of the DRA amends title XIX of the Act by 
redesignating the former section 1936 as section 1937; and inserting 
the new 1936 ``Medicaid Integrity Program.'' The new section 1936 
states the Secretary will promote the integrity of the Medicaid program 
by entering into contracts with eligible

[[Page 65688]]

entities to carry out the following activities:
    Review of actions of individuals or entities furnishing items or 
services (whether on a fee-for-service, risk, or other basis) for which 
payment may be made under the State plan approved under title XIX (or 
under any waiver of such plan approved under section 1115 of the Act) 
to determine whether fraud, waste, or abuse has occurred, or is likely 
to occur, or whether such actions have a potential for resulting in an 
expenditure of funds under title XIX in a manner which is not intended 
under the provisions of title XIX.
    Audit of claims for payment for items or services furnished, or 
administrative services rendered, under a State plan under title XIX, 
including cost reports, consulting contracts, and risk contracts under 
section 1903(m) of title XIX.
    Identification of overpayments to individuals or entities receiving 
Federal funds under title XIX.
    Education of providers of services, managed care entities, 
beneficiaries, and other individuals with respect to payment integrity 
and quality of care.
    Section 1936 of the Act also mandates that the Secretary will by 
regulation establish procedures which will include the following:
     Procedures for identifying, evaluating, and resolving 
organizational conflicts of interest that are generally applicable to 
Federal acquisition and procurement.
     Competitive procedures to be used when entering into new 
contracts under this section; when entering into contracts that may 
result in the elimination of responsibilities under section 202(b) of 
the Health Insurance Portability and Accountability Act of 1996; and 
any other time considered appropriate by the Secretary.
     Procedures under which a contract under this section may 
be renewed without regard to any provision of law requiring competition 
if the contractor has met or exceeded the performance requirements 
established in the current contract.
    CMS has determined not to address in this proposed rule the above 
bullet that references the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA). We have determined that section 
202(b) of HIPAA addressed certain Medicare contracting issues which, 
because of structural differences between the Medicare and Medicaid 
programs, such as the fact that the Federal government does not utilize 
carriers or fiscal intermediaries in the Federal administration of the 
Medicaid program, do not pertain to the Medicaid contracting 
environment. Moreover, we have also determined that the provisions of 
the Social Security Act established by section 202(b) of HIPAA have 
since been repealed by section 911 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003. We invite public comment on 
this approach.

II. Provisions of the Proposed Regulations

    In accordance with section 1936 of the Act, we would, through this 
proposed rule at new subpart D, Sec.  455.200, define eligible entities 
that may enter into contracts under this Program to carry out 
activities as described above as well as establish contracting 
requirements for such entities. The approach taken in this proposed 
rule is consistent with a similar approach taken in the Medicare 
Integrity Program, which has very similar statutory requirements.

A. Basis and Scope

    Following the mandate of section 1936 of the Act, this proposed 
rule, in subpart C, Sec.  455.200(b), Basis and Scope, would add 
additional language stating that part of the Medicaid Integrity 
Program's scope is to carry out the Medicaid integrity audit functions. 
Subpart C would apply to entities that seek to compete for, or receive 
an award of, a contract under section 1936 of the Act.

B. Definition of Eligible Entity

    In accordance with section 1936 of the Act, the proposed Sec.  
455.230 would describe that an eligible entity may enter into a 
Medicaid integrity audit program contract if it:
     Demonstrates the capability to carry out the contractor 
activities;
     In carrying out such activities, agrees to cooperate with 
the Inspector General of the Department of Health and Human Services, 
the Attorney General, and other law enforcement agencies, as 
appropriate, in the investigation and deterrence of fraud and abuse in 
relation to title XIX and in other cases arising out of such 
activities;
     Maintains an appropriate written code of conduct and 
compliance policies that include, without limitation, an enforced 
policy on employee conflicts of interest;
     Complies with such conflict of interest standards as are 
generally applicable to Federal acquisition and procurement; and,
     Meets other requirements the Secretary may impose.
    It would not be possible to identify in this rule every possible 
contractor requirement that may appear in a future solicitation. In 
order to permit maximum flexibility to tailor our contractor 
eligibility requirements to specific solicitations while satisfying 
section 1936 of the Act, any additional requirements would be contained 
in the applicable solicitation.
    In addition, we propose that a contractor under section 1936 of the 
Act may perform any or all of the contractor functions as are listed 
and described under ``contractor functions.''

C. Contractor Functions

    In accordance with section 1936 of the Act, section 455.232 would 
identify the functions of the Medicaid integrity audit program 
contractor as follows:
     Review of the actions of individuals or entities 
furnishing items or services (whether on a fee-for-service, risk, or 
other basis) for which payment may be made under a State plan approved 
under title XIX (or under any waiver of such plan approved under 
section 1115 of the Act) to determine whether fraud, waste, or abuse 
has occurred, is likely to occur, or whether such actions have the 
potential for resulting in an expenditure of funds under title XIX in a 
manner which is not intended under the provisions of title XIX.
     Audit of claims for payment for items or services 
furnished, or administrative services rendered, under a State plan 
under title XIX, including (a) cost reports; (b) consulting contracts; 
and (c) risk contracts under section 1903(m) of the Act.
     Identification of overpayments to individuals or entities 
receiving Federal funds under title XIX.
     Educating providers of service, managed care entities, 
beneficiaries, and other individuals with respect to payment integrity 
and quality of care.

D. Competitive Procedures and Requirements

    Section 455.234 would specify that a Medicaid integrity audit 
contract will be awarded in accordance with 48 CFR chapters 1 and 3 
(the Federal Acquisition Regulation (FAR) and the Health and Human 
Services Acquisition Regulation, respectively), this subpart, and all 
other applicable laws and regulations. In accordance with section 1936 
of the Act, we would specify that these competitive procedures and 
requirements will be used as follows:
     When entering into new contracts under this section.
     At any other time considered appropriate by the Secretary. 
In addition, we propose to specify in Sec.  455.234 that an entity must 
meet the eligibility requirements established in proposed Sec.  455.230 
to become eligible to

[[Page 65689]]

be awarded a Medicaid integrity audit program contract.

E. Renewal of Contracts

    Renewing a contract, when appropriate, results in continuity for 
both CMS and the contractor and can be in the best interest of the 
Program. If a contract is not renewed, we must ensure that sufficient 
time is provided to transfer and reassign the Medicaid integrity audit 
program functions as described in this subpart. Therefore, in Sec.  
455.236, we would specify that an initial contract term will be defined 
in the Medicaid integrity audit program contract and a renewal clause 
may be included in the contract. We also would specify that we may, but 
are not required to, renew the Medicaid integrity audit program 
contracts without regard to any provision of law requiring competition 
if the contractor has met or exceeded the performance requirements 
established in the current contract.
    In accordance with sections 1936(c)(2) and (3) of the Act, we would 
specify in Sec.  455.236(b) that we may renew a Medicaid integrity 
audit program contract without competition if the contractor continues 
to meet all requirements of the proposed subpart C, the contractor 
meets or exceeds the performance requirements established in its 
current contract, and it is in the best interest of the government.
    At Sec.  455.236(a) we propose that if CMS does not renew a 
contract, the contract will end in accordance with its terms. The 
contractor will not have a right to a hearing or judicial review 
regarding our renewal decision.

F. Conflict of Interest

    This proposed rule would establish at Sec.  455.238 the process for 
identifying, evaluating, and resolving conflicts of interest as 
mandated by sections 1936(c)(2) and (3) of the Act. Establishing such a 
process would ensure that business arrangements of potential 
contractors do not inhibit competition between providers, suppliers, or 
other types of business related to the Medicaid program, or have the 
potential of harming the government's interests.
    We would adhere to the requirements of the FAR's organizational 
conflict of interest requirements found at 48 CFR subpart 9.5 when 
soliciting contracts for the Medicaid integrity audit program. Due to 
the sensitive nature of the work to be performed under the contract, 
the need to preserve public trust, and the history of fraud and abuse 
in the Medicaid program, we would maintain the presumption that each 
prospective contract involves a significant potential organizational 
conflict of interest.
    Prior to awarding a Medicaid integrity audit program contract, the 
contracting officer will draft an organizational conflict of interest 
clause specific to the contractor for inclusion in the contract. In 
general we would not enter into a Medicaid integrity audit program 
contract with an offeror or an existing Medicaid integrity audit 
program contractor that has been determined to have, or that has the 
potential for, an unresolved organizational conflict of interest.
    At Sec.  455.238(a), we would specify that an offeror for a 
Medicaid integrity audit program contract is, and the Medicaid 
integrity audit program contractors are, subject to the conflict of 
interest standards and requirements of the FAR organizational conflict 
of interest guidance found at 48 CFR subpart 9.5, and the requirements 
and standards that are contained in each individual contract awarded to 
perform the functions described under section 1936 of the Act.
    In Sec.  455.238(b), we would include post award discussions. We 
would specify that we consider that a post award conflict of interest 
has developed if, during the term of the contract, the contractor or 
any of its employees, agents, or subcontractors received, solicited, or 
arranged to receive any fee, compensation, gift, payment of expenses, 
offer of employment, or any other thing of value from any entity that 
is reviewed, audited, investigated, or contacted during the normal 
course of performing activities under a Medicaid integrity audit 
program contract. We incorporate the definition of ``gift'' from the 
Standards of Ethical Conduct for Employees of the Executive Branch [5 
CFR 2635.203(b)].
    In addition, in Sec.  455.238(c) we propose that if CMS has 
determined that a contractor's activities are creating a conflict, then 
a conflict of interest has occurred during the term of the contract. If 
such an event has occurred, among other actions, we may, as we deem 
appropriate:
     Not renew the contract for an additional term;
     Modify the contract; or
     Terminate the contract.
    The proposed provisions do not describe all of the information that 
may be required, or the level of detail that would be required. We wish 
to have the flexibility to tailor the requirements to each individual 
procurement. Because potential offerors may have questions about 
whether information submitted in response to a solicitation, including 
information regarding potential conflicts of interest, may be 
redisclosed under the Freedom of Information Act (FOIA), we provide the 
following information.
    To the extent that a proposal containing information is submitted 
to us as a requirement of a competitive solicitation under 41 U.S.C. 
Chapter 4, Subchapter IV, we would withhold the proposal when requested 
under the FOIA. This withholding is based upon 41 U.S.C. 253b(m). 
However, there is one exception to this policy. It involves any 
proposal that is set forth or incorporated by reference in the contract 
awarded to the proposing offeror. Such a proposal may not receive 
categorical protection. Rather, we would withhold, under 5 U.S.C. 
552(b)(4), information within the proposal that is required to be 
submitted that constitutes trade secrets or commercial or financial 
information that is privileged or confidential, provided the criteria 
established by National Parks & Conservation Association v. Morton, 498 
F.2d 765 (D.C. Cir. 1974), as applicable, are met. For any such 
proposal, we would follow pre-disclosure notification procedures set 
forth at 45 CFR 5.65(d).
    Any proposal containing the information submitted to us under an 
authority other than 41 U.S.C. Chapter 4, Subchapter IV, and any 
information submitted independent of a proposal would be evaluated 
solely on the criteria established by National Parks & Conservation 
Association v. Morton and other appropriate authorities to determine if 
the proposal in whole or in part contains trade secrets or commercial 
or financial information that is privileged or confidential and 
protected from disclosure under 5 U.S.C. 552(b)(4). Again, for any such 
proposal, we would follow pre-disclosure notification procedures set 
forth at 45 CFR 5.65(d) and will also invoke 5 U.S.C. 552(b)(6) to 
protect information that is of a highly sensitive personal nature. It 
should be noted that the protection of proposals under FOIA does not 
preclude us from releasing contractor proposals when necessitated by 
law, such as in the case of a lawful subpoena.

G. Conflict of Interest Resolution

    We propose to describe at Sec.  455.240(a) how a conflict of 
interest may be resolved. We would state that a Conflicts of Interest 
Review Board may be established and convened at any time during the 
term of the contract, as well as during the procurement process, to 
evaluate and assist the contracting officer in resolving conflicts of 
interest. We would determine when or if the Board will be convened. We 
would, at Sec.  455.240(b), specify that a resolution of

[[Page 65690]]

an organizational conflict of interest is a determination by the 
contracting officer that:
     The conflict is mitigated;
     The conflict precludes award of a contract to the offeror;
     The conflict requires that we modify an existing contract;
     The conflict requires that we terminate an existing 
contract; or
     It is in the best interest of the government to contract 
with the offeror or contractor even though the conflict of interest 
exists.
    An offeror's or contractor's method of mitigating conflicts of 
interest will be evaluated on a case by case basis. We have provided 
examples of methods an offeror or contractor may use to mitigate 
organizational conflicts of interest. The examples are not an all-
inclusive list of possible methods of mitigation nor are we obligated 
to approve a mitigation method that uses one of the provided examples. 
Possible methods of mitigation include:
     Divestiture, or reduction in the amount, of the financial 
relationship the organization has in another organization to a level 
acceptable to us and appropriate for the situation.
     If shared responsibilities create the conflict, a plan, 
subject to our approval, to separate lines of business and management 
or critical staff from work on the Medicaid integrity audit program 
contract.
     If the conflict exists because of the amount of financial 
dependence upon the Federal Government, negotiating a phasing out of 
other contracts or grants that continue in effect at the start of the 
Medicaid integrity audit program contract.
     If the conflict exists because of the financial 
relationships of individuals within the organization, divestiture of 
the relationships by the individual involved.
     If the conflict exists because of an individual's indirect 
interest, divestiture of the interest to levels acceptable to us or 
removal of the individual from the work under the Medicaid integrity 
audit program contract.
    By providing a process for the identification, evaluation, and 
resolution of conflicts of interest, we not only protect the 
government's interests but help to ensure that the contractors do not 
hinder competition in their service areas by misusing their position as 
a Medicaid integrity audit program contractor.

III. Collection of Information Requirements

    This document does not impose any information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Statement

    [If you wish to comment on issues in this section, please include 
the caption ``Regulatory Impact Statement'' at the beginning of your 
comments.]
    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). A regulatory impact analysis (RIA) 
must be prepared for major rules with economically significant effects 
($100 million or more in any 1 year). This rule would not reach the 
economic threshold and thus is not considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6.5 million to $31.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because we have determined, and the Secretary 
certifies, that this rule would not have a significant economic impact 
on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Core-Based 
Statistical Area and has fewer than 100 beds. We are not preparing an 
analysis for section 1102(b) of the Act because we have determined, and 
the Secretary certifies, that this rule would not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $120 million. This proposed rule would 
not exceed this established threshold level. This rule would have no 
consequential effect on State, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation would not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in Part 455

    Fraud, Grant programs--health, Health facilities, Health 
professions, Investigations, Medicaid, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services would amend 42 CFR chapter IV as set forth below:

PART 455--PROGRAM INTEGRITY; MEDICAID

    1. The authority citation for part 455 continues to read as 
follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

    2. A new Sec.  455.200 is added to read as follows:

[[Page 65691]]

Sec.  455.200  Basis and scope.

    (a) Statutory basis. This subpart implements section 1936 of the 
Act that establishes the Medicaid Integrity Program, under which the 
Secretary will promote the integrity of the program by entering into 
contracts with eligible entities to carry out the activities under this 
subpart C.
    (b) Scope. This subpart provides for the limitation on a 
contractor's liability to carry out a contract under the Medicaid 
Integrity Program and to carry out the Medicaid integrity audit program 
functions.
    3. A new Sec.  455.230 is added to read as follows:


Sec.  455.230  Eligibility requirements.

    CMS may enter into a contract with an entity to perform the 
activities described at Sec.  455.232, if it meets the following 
conditions:
    (a) The entity has demonstrated capability to carry out the 
activities described below.
    (b) In carrying out such activities, the entity agrees to cooperate 
with the Inspector General of the Department of Health and Human 
Services, the Attorney General, and other law enforcement agencies, as 
appropriate, in the investigation and deterrence of fraud and abuse in 
relation to Title XIX of the Social Security Act and in other cases 
arising out of such activities.
    (c) Maintains an appropriate written code of conduct and compliance 
policies that include, without limitation, an enforced policy on 
employee conflicts of interest.
    (d) The entity complies with such conflict of interest standards as 
are generally applicable to Federal acquisition and procurement.
    (e) The entity meets such other requirements the Secretary may 
impose.
    4. A new Sec.  455.232 is added to read as follows:


Sec.  455.232  Medicaid integrity audit program contractor functions.

    The contract between CMS and a Medicaid integrity audit program 
contractor specifies the functions the contractor will perform. The 
contract may include any or all of the following functions:
    (a) Review of the actions of individuals or entities furnishing 
items or services (whether on a fee-for-service, risk, other basis) for 
which payment may be made under a State Plan approved under title XIX 
of the Act (or under any waiver of such plan approved under section 
1115 of the Act) to determine whether fraud, waste, or abuse has 
occurred, is likely to occur, or whether such actions have the 
potential for resulting in an expenditure of funds under title XIX in a 
manner which is not intended under the provisions of title XIX.
    (b) Auditing of claims for payment for items or services furnished, 
or administrative services rendered, under a State Plan under title XIX 
to ensure proper payments were made. This includes: Cost reports, 
consulting contracts, and risk contracts under section 1903(m) of the 
Act.
    (c) Identifying if overpayments have been made to individuals or 
entities receiving Federal funds under title XIX.
    (d) Educating providers of service, managed care entities, 
beneficiaries, and other individuals with respect to payment integrity 
and quality of care.
    5. A new Sec.  455.234 is added to read as follows:


Sec.  455.234  Awarding of a contract.

    (a) CMS awards and administers Medicaid integrity audit program 
contracts in accordance with acquisition regulations set forth at 48 
CFR chapters 1 and 3, this subpart, and all other applicable laws and 
regulations. These competitive procedures and requirements for awarding 
Medicaid integrity audit program contracts are to be used as follows:
    (1) When entering into new contracts under this section.
    (2) At any other time considered appropriate by the Secretary.
    (b) An entity is eligible to be awarded a Medicaid integrity audit 
program contract only if it meets the eligibility requirements 
established in Sec.  455.202, 48 CFR chapter 3, and all other 
applicable laws and requirements.
    6. A new Sec.  455.236 is added to read as follows:


Sec.  455.236  Renewal of a contract.

    (a) CMS specifies the initial contract term in the Medicaid 
integrity audit program contract. CMS may, but is not required to, 
renew a Medicaid integrity audit program contract without regard to any 
provision of law requiring competition if the contractor has met or 
exceeded the performance requirements established in the current 
contract.
    (b) CMS may renew a Medicaid integrity audit program contract 
without competition if all of the following conditions are met:
    (1) The Medicaid integrity audit program contractor continues to 
meet the requirements established in this subpart.
    (2) The Medicaid integrity audit program contractor meets or 
exceeds the performance requirements established in its current 
contract.
    (3) It is in the best interest of the government.
    (c) If CMS does not renew a contract, the contract will end in 
accordance with its terms. The contractor will not have a right to a 
hearing or judicial review regarding CMS' renewal or non-renewal 
decision.
    7. A new Sec.  455.238 is added to read as follows:


Sec.  455.238  Conflict of interest.

    (a) Offerors for Medicaid integrity audit program contracts, and 
Medicaid integrity audit program contractors, are subject to the 
following requirements:
    (1) The conflict of interest standards and requirements of the 
Federal Acquisition Regulation organizational conflict of interest 
guidance, found under 48 CFR subpart 9.5.
    (2) The standards and requirements that are contained in each 
individual contract awarded to perform activities described under 
section 1936 of the Act.
    (b) Post-award conflicts of interest: CMS considers that a post-
award conflict of interest has developed if, during the term of the 
contract, one of the following occurs:
    (1) The contractor or any of its employees, agents, or 
subcontractors received, solicited, or arranged to receive any fee, 
compensation, gift (defined at 5 CFR 2635.203(b)), payment of expenses, 
offer of employment, or any other thing of value from any entity that 
is reviewed, audited, investigated, or contacted during the normal 
course of performing activities under the Medicaid integrity audit 
program contract.
    (2) CMS determines that the contractor's activities are creating a 
conflict of interest.
    (c) If CMS determines that a conflict of interest exists during the 
term of the contract, among other actions, CMS may:
    (1) Not renew the contract for an additional term.
    (2) Modify the contract.
    (3) Terminate the contract.
    8. A new Sec.  455.238 is added to read as follows:


Sec.  435.240  Conflict of interest resolution.

    (a) Review Board: CMS may establish a Conflicts of Interest Review 
Board to assist in resolving organizational conflicts of interest.
    (b) Resolution: Resolution of an organizational conflict of 
interest is a determination by the contracting officer that:
    (1) The conflict is mitigated.
    (2) The conflict precludes award of a contract to the offeror.
    (3) The conflict requires that CMS modify an existing contract.
    (4) The conflict requires that CMS terminate an existing contract.

[[Page 65692]]

    (5) It is in the best interest of the government to contract with 
the offeror or contractor even though the conflict of interest exists 
and a request for waiver is approved in accordance with 48 CFR 9.503.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: June 15, 2007.
Leslie V. Norwalk,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: August 20, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. E7-22773 Filed 11-21-07; 8:45 am]
BILLING CODE 4120-01-P