Medicare Program; Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, 19678-19826 [2010-7966]
Download as PDF
<![CDATA[
19678
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Parts 417, 422, 423, and 480
[CMS–4085–F]
RIN 0938–AP77
Medicare Program; Policy and
Technical Changes to the Medicare
Advantage and the Medicare
Prescription Drug Benefit Programs
sroberts on DSKD5P82C1PROD with RULES
AGENCY: Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule.
SUMMARY: This final rule makes
revisions to the regulations governing
the Medicare Advantage (MA) program
(Part C) and prescription drug benefit
program (Part D) based on our
continued experience in the
administration of the Part C and D
programs. The revisions strengthen
various program participation and exit
requirements; strengthen beneficiary
protections; ensure that plan offerings to
beneficiaries include meaningful
differences; improve plan payment rules
and processes; improve data collection
for oversight and quality assessment,
implement new policies and clarify
existing program policy.
DATES: Effective Date: These regulations
are effective on June 7, 2010. However,
we note that because health and drug
plans under the Part C and D programs
operate under contracts with CMS that
are applicable on a calendar year basis,
the provisions will not be applicable
prior to contract year January 1, 2011,
except where otherwise noted.
FOR FURTHER INFORMATION CONTACT:
Alissa Deboy, (410) 786–6041, General
information and Part D issues.
Sabrina Ahmed, (410) 786–7499, Part C
issues.
Terry Lied, (410) 786–8973, Collection
of information requirements and
regulatory impact analysis issues.
Kristy Nishimoto, (410) 786–8517, Part
C and D enrollment and appeals
issues.
Jennifer Smith, (410) 786–2987, Part C
and D compliance and sanction
issues.
Frank Szeflinski, (303) 844–7119, Part C
payment issues.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Overview of the Medicare Prescription
Drug, Improvement, and Modernization
Act of 2003
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
B. History and Overview
II. Provisions of the Proposed Rule and
Analysis and Responses to Public
Comments
A. Changes to Strengthen Our Ability To
Distinguish for Approval Stronger
Applicants for Part C and D Program
Participation and To Remove
Consistently Poor Performers
1. Require Notice of Intent to Apply Under
Part C and D Within the Application
Requirements (§ 422.501 and § 423.502)
2. Application Requirements (§ 422.501(c)
and § 423.502(c)) and Evaluation and
Determination Procedures for
Determining Whether Applicants are
Qualified for a Contract Under Parts C
and D (§ 422.502 and § 423.503)
3. Deny Contract Qualification
Applications Based on Past Contract
Performance (§ 423.750 and § 422.750)
4. Use of Data to Evaluate Continued
Ability to Act as a Qualified Sponsoring
Organization Under Parts C and D
(§ 422.504, and § 423.505)
5. Compliance Programs Under Part C and
D (§ 422.503(b)(4)(vi) and
§ 423.504(b)(4)(vi))
6. Network Adequacy of Coordinated Care
and Network-Based Private Fee-forService Plans Under Part C (§ 422.112)
7. Deemable Program Requirements Under
Parts C and D (§ 422.156(b) (7), § 422.156
(f), § 423.165(b), and § 423.165(f))
8. Modify the Corrective Action Plan (CAP)
Process as it Relates to Procedures for
Termination and Nonrenewal of a Part C
or D Contract By CMS (§ 422.506(b)(3),
§ 422.510(c)(1), § 423.507(b)(3), and
§ 423.509(c)(1))
9. Procedures for Imposing Intermediate
Sanctions and Civil Money Penalties
Under Part C and D (§ 422.756 and
423.756)
10. Termination of Contracts Under Parts C
and D (§ 422.510(a) and § 423.509(a))
11. Request for Hearing Under Parts C and
D (§ 422.662 and § 423.651)
12. Burden of Proof, Standard of Proof,
Standard of Review and Conduct of
Hearing (§ 422.660, § 423.650, § 422.676,
and § 423.658)
13. Expedited Contract Terminations
Procedures (§ 422.510, § 423.509,
§ 422.664, § 423.652, § 422.644, and
§ 423.642) Under Parts C and D
14. Time and Place of Hearing Under Parts
C and D (§ 422.670 and § 423.655)
15. Discovery Under Parts C and D
(§ 422.682 and § 423.661)
16. Review by the Administrator Under
Parts C and D (§ 422.692(a) and
§ 423.666(a))
17. Reopening of an Initial Contract
Determination or Decision of a Hearing
Officer or the Administrator Under Parts
C and D (§ 422.696 and § 423.668)
18. Prohibition of MA and Part D
Applications for 2 Years after a Mutual
Termination (§ 422.503(b)(6) and
§ 423.504(b)(5))
B. Changes to Strengthen Beneficiary
Protections
1. Broker and Agent Requirements Under
Parts C and D
PO 00000
Frm 00002
Fmt 4701
Sfmt 4700
2. Beneficiary Communications Materials
Under Parts C and D (§ 422.2260,
§ 423.2262, § 423.2260, and § 423.2262)
3. Required Use of Standardized Model
Materials Under Parts C and D
(§ 422.2262 and § 423.2262)
4. Involuntary Disenrollment for Failure to
Pay Plan Premiums Under Parts C and D
(§ 422.74 and § 423.44)
5. Maximum Allowable Out-of-Pocket Cost
Amount for Medicare Parts A and B
Services (§ 422.100)
6. Maximum Allowable Cost Sharing
Amount for Medicare Parts A and B
Services and Prescription Drugs
(§ 422.100 and § 423.104)
7. Prohibition on Prior Notification by
PPO, PFFS, and MSA Plans Under Part
C (§ 422.2, § 422.4, and § 422.105)
8. Requirements for LIS Eligibility Under
Part D (§ 423.773)
9. Enrollment of Full Subsidy Eligible
Individuals and Other Subsidy Eligible
Individuals Under Part D (§ 423.34)
10. Special Enrollment Periods Under Part
D (§ 423.380)
11. Transition Process Under Part D
(§ 423.120(b)(3))
12. Part D Sponsor Responsibility for
Retroactive Claims Adjustment
Reimbursements and Recoveries Under
Part D (§ 423.464)
13. Time Limits for Coordination of
Benefits (§ 423.466)
14. Use of Standardized Technology Under
Part D (§ 423.120)
15. Absence from Service Area for More
Than 12 Months Under Part D (§ 423.44)
16. Prohibition of Mid Year Mass
Enrollment Changes by SPAPS Under
Part D (§ 423.464(e))
17. Non-renewal Beneficiary Notification
Requirement Under Parts C and D
(§ 422.506 and § 423.507)
18. Notice of Alternative Medicare Plans
Available to Replace Non-Renewing
Plans Under Parts C and D
(§ 422.506(a)(2)(ii) and
§ 423.507(a)(2)(ii))
19. Timeframes and Responsibilities for
Making Redeterminations Under Part D
(§ 423.590)
20. Requirements for Requesting
Organization Determinations Under Part
C (§ 422.568)
21. Organization Determinations Under
Part C (§ 422.566 and § 422.568)
22. Representatives (§ 422.561, § 422.574,
and § 422.624)
23. Disclosure Requirements Under Parts C
and D (§ 422.111(g) and § 423.128(f))
24. Definition of MA Plan Service Area
(§ 422.2)
C. Changes to Provide Plan Offerings With
Meaningful Differences
1. Meaningful Differences in Bid
Submissions and Bid Review (§ 422.254,
§ 423.265, § 422.256, and 423.272)
2. Transition Process in Cases of
Acquisitions and Mergers (§ 422.256 and
§ 423.272)
3. Non-renewing Low-enrollment Plans
(§ 422.506(b)(1)(iv) and
§ 423.507(b)(1)(iii))
4. Medicare Options Compare and
Medicare Prescription Drug Plan Finder
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
D. Changes to Improve Payment Rules and
Processes
1. Definitions Related to Risk Adjustment
Data Validation Appeals (§ 422.2) and
Proposed Addition of Medicare
Advantage Organization Risk
Adjustment Data Validation—Dispute
and Appeal Procedures (§ 422.311)
2. Payments to Medicare Advantage
Organizations—Certification of Actuarial
Valuation (§ 422.254)
3. Determination of Acceptable
Administrative Cost by HMO/CMP Cost
Contractors and Health Care Prepayment
Plans (HCPPs) (§ 417.564)
4. Calculation of the Minimum Percentage
Increase Under Part C (§ 422.306)
E. Changes to Improve Data Collection for
Oversight and Quality Assessment
1. Requirements for Quality Improvement
Programs Under Part C (§ 422.152,
§ 422.153, and § 480.140)
a. Quality Improvement Programs
b. New Quality Measures
c. Use of Quality Improvement
Organization Review Information
2. CAHPS Survey Administration Under
Parts C and D (§ 417.472, § 422.152, and
§ 423.156)
3. Validation of Part C and Part D
Reporting Requirements (§ 422.516 and
§ 423.514)
4. Collection of Additional Part D Claims’
Elements for Nonpayment-Related
Purposes (§ 423.505)
F. Changes to Implement New Policy
1. Protected Classes of Concern Under Part
D (§ 423.120(b)(2)(v))
2. Pro-rating the Plan Deductible for Part C
MSA Enrollments Occurring During an
Initial Coverage Election Period
(§ 422.103)
G. Changes to Clarify Various Program
Participation Requirements
1. Uniform Benefits Under Parts C and D
(§ 422.100(d) and § 423.104))
2. Ensuring the Security of Protected
Health Information and Other Personally
Identifiable Information (§ 422.504 and
§ 423.505)
3. Requirement for Sponsoring
Organizations Under Parts C and D to
Report Other Payer Information to the
Coordination of Benefits Contractor
(§ 422.108 and § 423.464)
4. Visitor/Traveler Benefit Under Part C for
the Purpose of Extending Enrollment Up
to 12 Months (§ 422.74)
5. Medication Therapy Management
Programs Under Part D (§ 423.153(d))
6. Formulary Requirements—Development
and Revision by a Pharmacy and
Therapeutics Committee (§ 423.120)
7. Generic Equivalent Disclosure Under
Part D (§ 423.132)
8. Access to Covered Part D drugs
(§ 423.120)
9. Standard Timeframe and Notice
Requirements for Coverage
Determinations Under Part D (§ 423.568)
10. Expediting Certain Coverage
Determinations (§ 423.570)
11. Timeframes and Notice Requirements
for Expedited Coverage Determinations
(§ 423.572)
12. Clarify Novation Agreements Under
Part D (§ 423.551)
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
13. Cost Contract Program Revisions:
Appeals and Marketing Requirements
(§ 417.428, § 417.494, § 417.500, and
§ 417.640)
a. Cost Contract Determinations (§ 417.492
and 417.494), Civil Money Penalties
(§ 417.500), and Intermediate Sanctions
(§ 417.500)
b. Extending MA Marketing Requirements
to Cost Program Plans (§ 417.428)
14. Out of Scope Comments
H. Changes to Implement Corrections and
Other Technical Changes
1. Application of Subpart M to Health Care
Prepayment Plans (§ 417.840)
2. Generic Notice Delivery Requirements
(§ 422.622 and 422.626)
3. Revision to Definition of Gross Covered
Prescription Drug Costs (§ 423.308)
4. Application Evaluation Procedures
(§ 422.502(c and d) and § 423.503(c and
d))
5. Intermediate Sanctions (§ 422.750(a) and
§ 423.750(a))
6. Basis for Imposing Intermediate
Sanctions and Civil Money Penalties
(§ 422.752 and § 423.752)
III. Provisions of the Final Rule
IV. Collection of Information Requirements
A. ICRs Regarding Basic Contract
Requirements (§ 417.472)
B. ICRs Regarding Apportionment and
Allocation of Administrative and
General Costs (§ 417.564)
C. ICRs Regarding Medicare Secondary
Payer (MSP) Procedure (§ 422.108 and
§ 423.462)
D. ICRs Regarding Disclosure Requirements
(§ 422.111)
E. ICRs Regarding Quality Improvement
Program (§ 422.152)
F. ICRs Regarding Application
Requirements (§ 422.501 and § 423.502)
G. ICRs Regarding General Provisions
(§ 422.503 and § 423.504)
H. ICRs Regarding Contract Provisions
(§ 422.504 and 423.505)
I. ICRs Regarding Nonrenewal of Contract
(§ 422.506 and § 423.507)
J. ICRs Regarding Request for Hearing
(§ 422.662 and § 423.651)
K. ICRs Regarding Time and Place of
Hearing (§ 422.670 and § 423.655)
L. ICRs Regarding Review by the
Administrator (§ 422.692 and § 423.666)
M. ICRs Regarding Procedures for Imposing
Intermediate Sanctions and Civil
Monetary Penalties (§ 422.756 and
§ 423.756)
N. ICRs Regarding Disclosure of Part D
Plan Information (§ 423.128)
O. ICRs Regarding Consumer Satisfaction
Surveys (§ 423.156)
P. ICRs Regarding Validation of Part C and
Part D Reporting Requirements
(§ 422.516 and § 423.514)
Q. ICRs Regarding Drug Utilization
Management, Quality Assurance, and
Medication Therapy Management
Programs (MTMPs) (§ 423.153)
R. ICRs Regarding Timeframes and Notice
Requirements for Standard Coverage
Determinations (§ 423.568)
S. ICRs Regarding Timeframes and Notice
Requirements for Expedited Coverage
Determinations (§ 423.572)
PO 00000
Frm 00003
Fmt 4701
Sfmt 4700
19679
T. ICRs Regarding Access to Covered Part
D Drugs (§ 423.120)
U. ICRs Regarding Timeframes and
Responsibility for Making
Redeterminations (§ 423.590)
V. Annual Information Collection Burden
V. Regulatory Impact Analysis
A. Need for Regulatory Action
B. Overall Impact
C. Increase in Costs to MA Organizations
and Part D Sponsors
D. Expected Benefits
E. Anticipated Effects—Effects of Cap on
Out-of-Pocket Costs and Cost Sharing
Amounts
F. Alternatives Considered
1. Strengthening CMS’ Ability to Take
Timely, Effective Contract
Determinations or Intermediate
Sanctions (Part C & D)
2. Changing the Standards of Review,
Clarifying the Standard of Proof and
Burden of Proof for Appeals, and
Modifying the Conduct of Hearing for
Contract Decisions (Including Denials of
Initial Applications to Contract, Service
Area Expansions for Existing Contracts,
Contract Non-Renewals and
Terminations, and Intermediate
Sanctions)
3. Clarify That CMS May Require a ‘‘Test
Period’’ During an Enrollment/Marketing
Sanction
4. Right for CMS to Require an
Independent Audit of Sponsoring
Organizations under Intermediate
Sanction
5. The Ability for CMS to Require Sponsors
to Disclose To Current and Potential
Enrollees Compliance and Performance
Deficiencies
6. Reducing Duplicative and Low
Enrollment Plans (Parts C & D)
7. Validation of Part C and Part D
Reporting Requirements
G. Accounting Statement
H. Conclusion
Regulations Text
Acronyms
AO Accrediting Organization
ADS Dispensing System
AEP Annual Enrollment Period
AHFS American Hospital Formulary
Service
AHFS–DI American Hospital Formulary
Service—Drug Information
AHRQ Agency for Health Care Research
and Quality
ALJ Administrative Law Judge
BBA Balanced Budget Act of 1997 (Pub. L.
105–33)
BBRA [Medicare, Medicaid and State Child
Health Insurance Program] Balanced
Budget Refinement Act of 1999 (Pub. L.
106–113)
BIPA Medicare, Medicaid, and SCHIP
Benefits Improvement Protection Act of
2000 (Pub. L. 106–554)
CAHPS Consumer Assessment Health
Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CCS Certified Coding Specialist
CMR Comprehensive Medical Review
CMP Civil Money Penalties
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19680
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
CMR Comprehensive Medical Review
CMS Centers for Medicare & Medicaid
Services
CMS–HCC CMS Hierarchal Condition
Category
CTM Complaints Tracking Module
COB Coordination of Benefits
CORF Comprehensive Outpatient
Rehabilitation Facility
CPC Certified Professional Coder
CY Calendar year
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005 (Pub. L.
109–171)
EGWP Employer Group/Union-Sponsored
Waiver Plan
EOB Explanation of Benefits
ESRD End-stage renal disease
FACA Federal Advisory Committee Act
FDA Food and Drug Administration (HHS)
FEHBP Federal Employees Health Benefits
Plan
FFS Fee-For-Service
FY Fiscal year
GAO General Accounting Office
HCPP Health Care Prepayment Plans
HEDIS HealthCare Effectiveness Data and
Information Set
HHS [U.S. Department of] Health and
Human Services
HIPAA Health Insurance Portability and
Accountability Act of 1996 (Pub. L. 104–
191)
HMO Health Maintenance Organization
HOS Health Outcome Survey
HPMS Health Plan Management System
ICD–9–CM Internal Classification of
Disease, 9th, Clinical Modification
Guidelines
ICEP Initial Coverage Enrollment Period
ICL Initial Coverage Limit
ICR Information Collection Requirement
IVC Initial Validation Contractor
LEP Late Enrollment Penalty
LIS Low Income Subsidy
LTC Long Term Care
LTCF Long Term Care Facility
MA Medicare Advantage
MAAA American Academy of Actuaries
MAO Medicare Advantage Operations
MA–PD Medicare Advantage-Prescription
Drug Plans
M+C Medicare+Choice program
MPDPF Medicare Prescription Drug Plan
Finder
MIPPA Medicare Improvements for Patients
and Providers Act of 2008
MMA Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (Pub. L. 108–173)
MSA Metropolitan statistical area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management
Programs
NAIC National Association Insurance
Commissioners
NCPDP National Council for Prescription
Drug Programs
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-coverage
OEP Open Enrollment Period
OIG Office of Inspector General
OMB Office of Management and Budget
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
OPM Office of Personnel Management
OTC Over the Counter
PART C Medicare Advantage
PART D Medicare Prescription Drug Benefit
Programs
PPACA Patient Protection and Affordable
Care Act (Pub. L. 111–148)
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription drug plan
PFFS Private Fee For Service Plan
POS Point of service
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QIO Quality Improvement Organization
QRS Quality Review Study
PACE Programs of All Inclusive Care for the
Elderly
RADV Risk Adjustment Data Validation
RAPS Risk Adjustment Payment System
RHIA Registered Health Information
Administrator
RHIT Registered Health Information
Technician
SCHIP State Children’s Health Insurance
Programs
SEP Special Enrollment Periods
SHIP State Health Insurance Assistance
Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SPAP State Pharmaceutical Assistance
Programs
SSI Supplemental Security Income
TrOOP True Out Of Pocket
U&C Usual and Customary
USP U.S. Pharmacopoeia
SUPPLEMENTARY INFORMATION:
I. Background
A. Overview of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003
The Medicare Prescription Drug,
Improvement, and Modernization Act of
2003 (MMA) (Pub. L. 108–173) was
enacted on December 8, 2003. The
MMA established the Part D program
and made revisions to the provisions in
Part C of the Medicare statute governing
the Medicare Advantage (MA) program.
The MMA directed that important
aspects of the new Medicare
prescription drug benefit program under
Part D be similar to and coordinated
with regulations for the MA program.
Generally, the provisions enacted in
the MMA took effect January 1, 2006.
The final rules for the MA and Part D
prescription drug programs appeared in
the Federal Register on January 28,
2005 (70 FR 4588–4741 and 70 FR
4194–4585, respectively). While the
provisions of the final rule did not
govern plan payment or benefits until
January 1, 2006, given the fact that
provisions relating to applications,
marketing, contracts, and the new
bidding process for the MA and Part D
programs, many provisions in these
final rules became effective on March
PO 00000
Frm 00004
Fmt 4701
Sfmt 4700
22, 2005, 60 days after publication of
the rule.
As we have gained experience with
the MA program and the prescription
drug benefit program, we periodically
have revised the Part C and D
regulations to continue to improve or
clarify existing policies and/or codify
current guidance for both programs. For
example, in December 2007, we
published a final rule with comment on
contract determinations involving
Medicare Advantage (MA) organizations
and Medicare Part D prescription drug
plan sponsors (72 FR 68700). In April
2008, we published a final rule to
address policy and technical changes to
the Part D program (73 FR 20486). In
September 2008 and January 2009, we
finalized revisions to both the Medicare
Advantage and prescription drug benefit
programs (73 FR 54226 and 74 FR 1494,
respectively) to implement provisions in
the Medicare Improvement for Patients
and Providers Act (MIPPA) (Pub. L.
110–275), which contained provisions
impacting both the Medicare Part C and
D programs, and make other policy
clarifications based on experience with
both programs (73 FR 54208, 73 FR
54226, and 74 FR 2881).
B. History and Overview
The Balanced Budget Act of 1997
(BBA) (Pub. L. 105–33) established a
new ‘‘Part C’’ in the Medicare statute
(sections 1851 through 1859 of the
Social Security Act (the Act) which
provided for what was then called the
Medicare+Choice (M+C) program.
Under section 1851(a)(1) of the Act,
every individual entitled to Medicare
Part A and enrolled under Medicare Part
B, except for most individuals with endstage renal disease (ESRD), could elect
to receive benefits either through the
original Medicare program or an M+C
plan, if one was offered where he or she
lived. The primary goal of the M+C
program was to provide Medicare
beneficiaries with a wider range of
health plan choices. The M+C
provisions in Part C were amended by
the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106–111), and
further amended by the Medicare,
Medicaid, and State Children’s Health
Insurance Program SCHIP) Benefits
Improvement Act of 2000 (BIPA) (Pub.
L. 106–554).
As discussed above, the MMA,
enacted on December 8, 2003, added a
new ‘‘Part D’’ to the Medicare statute
(sections 1860D–1 through 42 of the
Act) creating the Medicare Prescription
Drug Benefit Program, and made
significant changes to the M+C program.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Also as noted above, MIPPA, enacted
on July 15, 2008, addressed a number of
provisions impacting the Part C and D
programs, including provisions
impacting marketing under both
programs which were implemented in
regulations published in the Federal
Register on September 18, 2008 (73 FR
54208), a final rule effective October 1,
2008, that paralleled provisions in
MIPPA, and in the same issue of the
Federal Register (73 FR 54226), a
separate interim final rule that
addressed the other provisions of
MIPPA affecting the MA and Part D
programs. We also clarified the MIPPA
marketing provisions in a November
2008 interim final rule (73 FR 67407
and issued a separate interim final rule
in January 2009 to address MIPPA
provisions related to Part D plan
formularies (74 FR 2881).
In October 22, 2009 Federal Register
(74 FR 54634), we published a proposed
rule (file code CMS–4085–P),
hereinafter referred to as the October 22,
2009 proposed rule) addressing
additional policy clarifications under
the Part C and D programs. As noted
when issuing this proposed rule, we
believe that additional programmatic
and operational changes are needed in
order to further improve our oversight
and management of the Part C and D
programs and to further improve
beneficiary experience under MA or
Part D plans.
Indeed, one of the primary reasons set
forth in the preamble for issuing the
October 22, 2009 proposed rule was to
address beneficiary concerns associated
with the annual task of selecting one
plan from so many options. We noted
that while it is clear that the Medicare
Part D program has improved access to
drug coverage for elderly and offered
beneficiaries a wide range of plans from
which to choose, some have suggested
that a significant numbers of
beneficiaries are confused by the array
of choices and find it difficult to make
enrollment decisions that are best for
them. Moreover, experience has shown
that organizations submitting bids under
Part C and D to offer multiple plans
have not consistently submitted plan
benefit designs that were significantly
different from each other, which can
add to beneficiary confusion. In this
rule, we finalize a number of proposals
to the way we administer the Part C and
D programs to promote beneficiaries
making the best plan choice that suits
their needs. Although we believe these
provisions will go a long way to further
that goal, we are committed to
additional explorations of ways to
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
structure choices for seniors to aid them
in making better plan choices, and will
continue to evaluate program changes in
this area.
We also proposed additional
provisions aimed at strengthening
existing beneficiary protections,
improving payment rules and processes,
enhancing our ability to pursue data
collection for oversight and quality
assessment, strengthening formulary
policy, and finalizing a number of
clarifications and technical corrections
to existing policy. Except as noted or
otherwise modified, we finalize these
requirements in this rule.
Section 902 of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA)
amended section 1871(a) of the Act and
requires the Secretary, in consultation
with the Director of the Office of
Management and Budget, to establish
and publish timelines for the
publication of Medicare final
regulations based on the previous
publication of a Medicare proposed or
interim final regulation. Section 902 of
the MMA also states that the timelines
for these regulations may vary but shall
not exceed 3 years after publication of
the preceding proposed or interim final
regulation except under exceptional
circumstances.
This final rule has been published
within the 3-year time limit imposed by
section 902 of the MMA, and thus is in
accordance with the Congress’ intent to
ensure timely publication of final
regulations.
On March 23, 2010, the Patient
Protection and Affordable Care Act
(Pub. L. 111–148) was enacted. Several
provisions of this public law affect the
Part C and D programs. In sections II.B.
and II.F. of this final rule, we provide
a discussion of the effects of two of
these provisions on our proposed
policies regarding MA cost sharing and
‘‘protected classes’’ of drugs under Part
D, respectively.
II. Provisions of the Proposed Rule and
Analysis and Responses to Public
Comments
We received approximately 114 items
of timely correspondence containing
comments on the October 22, 2009
proposed rule. Commenters included
health and drug plan organizations,
insurance industry trade groups,
pharmacy associations, pharmaceutical
benefit manager (PBM) organizations,
provider associations, representatives of
hospital and long term care institutions,
drug manufacturers, mental health and
disease specific advocacy groups,
PO 00000
Frm 00005
Fmt 4701
Sfmt 4700
19681
beneficiary advocacy groups,
researchers, and others.
In this final rule, we address all
timely comments and concerns on the
policies included in the proposed rule.
We note that there were several
comments submitted that were outside
the scope of the proposals set forth in
the proposed rule and, as such, we do
not address them within this final rule.
Generally, the commenters supported
our efforts to improve plan offerings by
the same sponsor that are meaningfully
different from each other in order to
support improved beneficiary decision
making and our efforts to clarify and
codify existing policy through
rulemaking.
A. Changes to Strengthen Our Ability To
Distinguish for Approval Strong
Applicants for Part C and D Program
Participation and To Remove
Consistently Poor Performers
This section finalizes a number of
proposed revisions designed to
strengthen our ability to approve strong
applicants and remove poor performers
in the Part C and D programs. Since the
implementation of revisions to the MA
and initial implementation of the
prescription drug programs in January
2006, we have steadily enhanced our
ability to measure MAO and PDP
sponsor performance through efforts
such as the analysis of data provided
routinely by sponsors and by our
contractors, regular review of
beneficiary complaints, marketing
surveillance activities, and routine
audits. This information, combined with
feedback we have received from
beneficiary satisfaction surveys, HEDIS
data, and information from MAOs and
PDP sponsors themselves, has enabled
us to develop a clearer sense of what
constitutes a successful Medicare
organization capable of providing
quality Part C and D services to
beneficiaries. Additionally, this
information has also allowed us to
identify and take appropriate action
against organizations that are not
meeting program requirements and not
meeting the needs of beneficiaries.
As set forth below, we are finalizing
changes and clarifications to our
regulations to make certain that all
current and potential MAOs and PDP
sponsors clearly understand and can
reasonably anticipate how we measure
sponsor performance, determine when
there is noncompliance, and when
enforcement actions are warranted.
These provisions are described in
detail in Table 1.
E:\FR\FM\15APR2.SGM
15APR2
19682
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
TABLE 1—PROVISIONS STRENGTHENING OUR ABILITY TO DISTINGUISH FOR APPROVAL STRONG APPLICANTS AND TO
REMOVE CONSISTENTLY POOR PERFORMERS
Part 422
Part 423
Provision
Subpart
Subpart
Section
K ...
K ...
K ...
K ...
C ..
§ 422.501 ...................
§ 422.502 ...................
§ 422.502 ...................
§ 422.503(b)(4)(vi) .....
§ 422.112 ...................
Subpart K ...
Subpart K ...
Subpart K ...
Subpart K ...
N/A .............
§ 423.502.
§ 423.503.
§ 423.503.
§ 423.504(b)(4)(vi).
N/A.
Subpart D ..
Subpart K ...
Intermediate Sanctions: procedures for imposing civil and money
penalties.
Contract Termination .......................................................................
Proper request for hearings ............................................................
Burden of Proof, Standard of Proof, Standard of Review and
Conduct of Hearing.
Postponement of effective date of determination when a request
is being filed.
Extending timeframe for contract determination hearings ..............
Appeal times: require each party provide witness list and documents 5 calendar days before hearing.
Appeal times: require request for a review by the administrator
must be received with 15 days after receipt of hearing decision.
Contract redeterminations and reopening .......................................
Mutual termination of contract .........................................................
Subpart O ..
§ 422.156(b)(7),
§ 422.156(f).
§ 422.510(c)(1),
§ 422.506(b)(3).
§ 422.756 ...................
Subpart D ..
Procedures for termination and Nonrenewals: Part C and D .........
sroberts on DSKD5P82C1PROD with RULES
Notice of Intent to Apply ..................................................................
Application Standards .....................................................................
Compliance Measures/Analysis ......................................................
Compliance Programs .....................................................................
Network Adequacy of Coordinated Care and Network-Based Private-Fee-For-Service plans under Part C.
Clarify programmatic elements that are ‘‘deemable’’ ......................
§ 423.165(b),
§ 423.165(f).
§ 423.509(c)(1),
§ 423.507(b)(3).
§ 423.756.
Subpart K ...
Subpart N ..
Subpart N ..
Subpart N ..
§ 422.510(a) ..............
§ 422.662 ...................
§ 422.660,
§ 422.676(d).
§ 422.664 ...................
Subpart N ..
§ 423.509(a).
§ 423.651.
§ 423.650,
§ 423.658(d).
§ 423.652.
Subpart N ..
Subpart N ..
§ 422.670 ...................
§ 422.682 ...................
Subpart N ..
Subpart N ..
§ 423.655.
§ 423.661.
Subpart N ..
§ 422.692(a)
Subpart N ..
Subpart K ...
§ 422.692(a) ..............
Subpart N ..
§ 423.666(a).
§ 422.696 ...................
§ 422.503(b)(6) ..........
Subpart N ..
Subpart K ...
§ 423.668.
§ 423.504(b)(6).
1. Require Notice of Intent To Apply
Under Part C and D Within the
Application Requirements (§ 422.501
and § 423.502)
Under the authority of section
1871(a)(1) of the Act, which authorizes
us to prescribe such regulations as may
be necessary to carry out the
administration of the Medicare program,
we proposed an administrative
requirement in the October 22, 2009
proposed rule for both the Part C and D
programs related to the application
submission to qualify as MA and PDP
sponsor contractors. We specifically
proposed in § 422.501 and § 423.502 to
codify our existing guidance that initial
applicants and existing contractors
seeking to expand complete a
nonbinding Notice of Intent to Apply.
We noted that as a result of the fully
electronic submission process and
restrictions on access to the CMS Health
Plan Management System (HPMS),
every applicant must complete a Notice
of Intent to Apply as described in the
HPMS memo dated October 10, 2008.
This includes both initial applicants
and current contractors seeking to
expand their organizations’ service area
and current contractors adding a Special
Needs Plan (SNP) or an Employer
Group/Union-Sponsored Waiver Plan
(EGWP) to their existing contract.
We also noted that submitting a
Notice of Intent to Apply does not bind
that organization to submit an
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Subpart
Subpart
Subpart
Subpart
Subpart
Section
Subpart K ...
Subpart N ..
Subpart N ..
application for the following year.
However, without a pending contract
number and completed CMS User ID
connectivity, an organization will not be
able to access the appropriate modules
in HPMS to complete the application
materials.
In this final rule, we address
comments received and finalize this
provision with modification. As
explained below, we modified
§ 422.503(b)(2) and § 423.502 (b)(2) to
clearly indicate that the decision not to
submit an application after submission
of a notice of intent will not result in
any compliance consequences.
Comment: Several commenters
supported this provision.
Response: We appreciate the
commenters support of our proposal.
Comment: Some commenters were
concerned about the due date of the
Notice of Intent to Apply and wanted
exceptions to allow CMS the flexibility
to accept notice of intent after the due
date. Some commenters were
particularly concerned about special
need plans offered in conjunction with
Medicaid. Commenters also urged CMS
to provide organizations adequate time
to make the decision whether to apply
and stated that some organizations may
not consider submitting an application
at the time notices are due.
Response: As stated in the proposed
regulation at § 422.503(b)(2) and
§ 423.503(b)(2), the Notice of Intent to
PO 00000
Frm 00006
Fmt 4701
Sfmt 4700
Subpart K ...
Subpart O ..
Apply does not bind the organization to
submit an application. For this reason,
we do not believe it is necessary to be
flexible with the due date of the notice
of intent. Organizations are free to
submit a Notice of Intent to Apply and
then consider whether or not to submit
an application without risking any
negative consequences from CMS. We
also believe that the notice of intent
requirement will benefit applicants as it
will serve as a 3-month advance
reminder to begin preparation for their
submission. We anticipate that the
additional lead time will result in more
successful applications.
Comment: One commenter questioned
whether the three month lead time is
necessary, particularly for existing
sponsors, to ensure timely connectivity
to CMS systems.
Response: Our preparation for the
receipt of applications is a process that
can take up to 3 months. We encourage
interested parties to see the October 2,
2009 HPMS memo for an example of the
timeline from submission of the Notice
of Intent to Apply to the application
submission.
Comment: One commenter wanted
CMS to add language indicating that for
those notices of intent that do not result
in the submission of an application, lack
of submission would not be considered
as part of any punitive evaluation.
Response: As we stated in the October
2009 proposed rule, the Notice of Intent
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
to Apply does not bind the organization
to submit an application. We want to
make clear that the submission of a
notice of intent without a subsequent
application submission would present
no risk of reprimand or sanction by us.
For this reason, we are modifying
§ 422.503(b) and § 423.502 (b) to clearly
indicate that the decision not to submit
an application after submission of a
notice of intent will not result in any
compliance consequences.
2. Application Requirements (§ 422.501
(c) and § 423.502 (c)) and Evaluation
and Determination Procedures for
Determining Whether Applicants Are
Qualified for a Contract Under Parts C
and D (§ 422.502 and § 423.503)
In the October 2009 proposed rule, we
proposed a single clarification that
applies to both MA organizations and
Part D sponsors related to our
application evaluation procedures and
appeals of our determinations regarding
applications. At § 422.502 and
§ 423.503, we specifically proposed to
make explicit that we will approve only
those applications that demonstrate that
they meet all (not substantially all) Part
C and D program requirements.
We noted that the application process
under Part C and D requires an
applicant to submit for our review a
combination of attestations that it will
comply with stated program
requirements, as well as submit
contracts with organizations the
applicant has contracted with to
perform key Part C or D functions,
evidence of the applicant’s risk-bearing
licenses, and data documenting that the
applicant can provide its members
access to Part C and D services
consistent with the programs’
requirements. We proposed at
§ 422.501(c)(1) and (2), § 422.502(a)(2),
§ 423.502(c)(1) and (2), and
§ 423.503(a)(2) to require that applicants
demonstrate that they meet all
requirements outlined in the MA
organization and Part D sponsor
applications.
We simplified the application
evaluation process under § 422.502(a)(1)
and § 423.503(a)(1) by limiting the
evaluation of an entity’s application to
information contained in the
application and any additional
information that we obtain through
onsite visits. As we noted in the
proposed rule, limiting our review to
this information ensures that we will
afford all applicants (numbering in the
hundreds each of the last 4 years) a fair
and consistent review of their
qualifications. Organizations can be
assured that we will not consider
additional sources of information
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
regarding one applicant’s qualifications
that we do not consider for others.
We also proposed to clarify our
authority to decline to consider
application materials submitted after the
expiration of the 10-day period
following our issuance of a notice of
intent to deny an organization’s contract
qualification application. We clarified
§ 422.502(c)(2) and § 423.503(c)(2) by
proposing to add a new paragraph (iii)
to establish that if we do not receive a
revised application within 10 days from
the date of the intent to deny notice, or
if after timely submission of a revised
application the applicant still appears
unqualified to contract as an MA
organization or Part D sponsor or has
not provided enough information to
allow us to evaluate the application, we
will deny the application.
Further, we noted that consistent with
the revisions to § 422.650(b)(2) and
§ 423.660(b)(2), which are discussed
elsewhere in this final rule, the
applicant would not be permitted to
submit additional revised application
material to the Hearing Officer for
review should the applicant elect to
appeal the denial of its application.
Allowing for such a submission and
review of such information as part of the
hearing would, in effect, extend the
deadline for submitting an approvable
application. In this final rule, we adopt
these provisions as proposed. Comment:
A number of commenters expressed
support for all areas of this provision.
Response: We appreciate the
commenters support of our proposal.
Comment: Many commenters urged
CMS to be flexible and allow for unique
circumstances. Several commenters
noted that SNPs have only limited
ability to influence the terms and
timelines that State Medicaid agencies
follow in executing the SNP agreements.
Response: We design our solicitations
to ensure that all organizations have a
fair opportunity to demonstrate their
qualifications for an MA or PDP
contract. As noted in the preamble to
the October 2009 proposed rule,
allowing exceptions to requirements to
address unique circumstances would
undermine the need for a uniform
application process applied fairly to all
applicants. With respect to Medicaid
agency contracts, we may require that
organizations submit those documents
as part of an application to qualify to
offer a SNP plan. When we include that
requirement in a particular year’s SNP
application, we have determined that
organizations can reasonably be
expected to obtain the executed
agreements in time for us to determine
that it is qualified to operate a SNP
during the coming contract year. We do
PO 00000
Frm 00007
Fmt 4701
Sfmt 4700
19683
not anticipate the need to provide any
flexibility on this particular matter.
Comment: One commenter stated that
the ‘‘all’’ standard is not practical given
that there is not a narrative of
requirements in the applications, but a
series of attestations and tables (with
detailed requirements stated in
regulations and CMS subregulatory
guidance).
Response: We believe the ‘‘all’’
standard is practical. Applicants receive
enough information to successfully
apply and are given two opportunities
with instructions to cure deficiencies.
While we advise that applicants should
be familiar with Part C and D program
regulations and guidance, in most
instances they are not required to
describe how their organization will
meet a requirement; rather they simply
attest that they will meet the
requirement. Therefore, an explanation
of all the program requirements in the
application is not necessary for
organizations to submit successful Part
C or D applications to us.
Comment: Several commenters stated
that CMS has been unclear in its
previous deficiency responses to
applicants and that it has been difficult
to obtain guidance from CMS.
Commenters urged CMS to provide clear
rules and be consistent. In light of the
inconsistencies with which applications
are reviewed, one commenter
recommended using a standard that
emphasizes the materiality of the
requirements that sponsors must meet.
Response: We agree that in order for
applicants to have a consistent
understanding of the expectations on
which we base our contract approval
and denials, we must ensure the clarity
and transparency of the program
requirements and review criteria.
Applicants receive up to three
communications which explain our
application requirements and provide
clear instructions on how to be a
successful applicant. Organizations that
fail to completely and accurately apply
receive a courtesy e-mail explaining the
deficiencies and are given an
opportunity to cure. Organizations that
are still deficient after the initial
opportunity to cure receive a notice of
intent to deny and are given another
opportunity to cure. All application
communications include contact
information for CMS subject matter
specialists. We are always willing to
work with applicants to ensure a
complete understanding of program and
contracting requirements.
Comment: One commenter stated that
the applicants that have disagreed with
CMS’ network adequacy determinations
have been reluctant to seek re-
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19684
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
evaluation of their network adequacy in
specific counties because of the
possibility that CMS will confirm its
original finding and deny the entire
application. A denial of one county in
one state could result in the denial of an
entire application. To address this
problem, the commenter recommended
that CMS revise its policy to provide
that an applicant for a network-based
plan or service area expansion (SAE)
may drop a county or portion of its
service area that has been identified in
the intent to deny notice after receiving
CMS’ final decision based upon the
additional information submitted by the
organization.
Response: We afford sponsors
multiple opportunities during the
application review process for
applicants to modify their proposed
service area. However, when we
conduct our final review of an
application prior to the issuance of a
notice of intent to deny, we must make
the reasonable assumption, for the sake
of consistency, that the applicant seeks
approval for its entire proposed service
area, not some portion that the applicant
will identify at a later date. Therefore,
we will not allow applicants to modify
their service areas after they have
received a final notice of denial of their
application from us.
Comment: One commenter
recommended that CMS explicitly
provide in the regulation for a process
to permit applicants to cure deficiencies
identified by CMS subsequent to the
issuance of the notice of intent to deny;
and that if such an opportunity is not
provided, CMS should base any denial
notice only on issues raised in the
notice of intent to deny and not on
deficiencies that are identified later in
the application review process.
Response: When we have discovered
a deficiency after we have issued a
notice of intent to deny, we have not
disapproved that application based on
the failure to correct the new deficiency.
Rather, we approve the application
(assuming all corrections have been
made based on deficiencies identified in
the Notice of Intent to Deny), but
communicate to the applicant that the
newly identified deficiency must be
corrected prior to executing a Medicare
contract. If the issue is not so corrected,
it immediately becomes the subject of a
CMS contract compliance action.
Comment: One commenter requested
that we clarify the type of information
gained via the onsite visits and how this
information will be used in evaluation
of applications.
Response: We clarify, that we limit
our application reviews (with the
exception of the past performance
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
analysis) to the materials organizations
submit in response to the annual
solicitations. We would also make clear
that we retain our authority to conduct
site visits to conduct compliance and
monitoring activities.
Comment: One commenter noted that
it would be beneficial to sponsors if
CMS provided a tool that allows
sponsors to self-determine network
adequacy. The commenter stated that
the CMS network adequacy standards
are subject to reviewer discretion and
stated that this ambiguity is unfair when
the sponsor must identify, negotiate,
and complete contract terms, sometimes
with multiple entities, within a 10-day
period.
Response: We have developed
standardized network criteria and an
automated review process that we will
use, starting with the contract year 2011
application cycle, to review network
adequacy. Applicants may request
exceptions where they do not meet the
standardized criteria for individual
provider types in individual counties
under limited, defined circumstances.
We believe these changes will increase
the consistency and transparency of
network reviews.
3. Deny Contract Qualification
Applications Based on Past Contract
Performance (§ 422.750 and § 423.750)
As described in the existing
provisions at § 422.502(b) and
§ 423.503(b), we may deny an
application based on the applicant’s
failure to comply with the terms of a
prior contract with CMS even if the
applicant currently meets all of the
application requirements. In the October
22, 2009 proposed rule, we proposed to
modify these provisions at § 422.502(b)
and § 423.503(b) to clarify that we will
review past performance across any and
all of the contracts held by the
applicant, by specifically revising the
language to refer to ‘‘any current or prior
contract’’ held by the organization,
instead of the current language referring
to a ‘‘previous year’s contract.’’ We also
clarified that the period that will be
examined for past performance
problems will be limited to those
identified by us during the 14 months
prior to the date by which organizations
must submit contract qualification
applications to CMS. Fourteen months
covers the time period from the start of
the previous contract year through the
time that applications are received for
the next contract year.
In making these proposed changes, we
noted that indicia of performance
deficiencies that might lead us to
conclude that an organization has failed
to comply with a current or prior
PO 00000
Frm 00008
Fmt 4701
Sfmt 4700
contract include, but are not limited to,
poor performance ratings as displayed
on the Medicare Options Compare and
MPDPF Web sites; receipt of requests for
corrective action plans (CAPs) unrelated
to an audit (as these types of CAPs
generally involve direct beneficiary
harm); and receipt of one or more other
types of noncompliance notices from
CMS (for example, notices of
noncompliance or warning letters).
Additionally, consistent with the
proposed changes to § 422.503(b),
§ 422.508(c), § 423.504(b), and
§ 423.508(e), we indicated that the
withdrawal of Part C or D operations
from some or all of an organization’s
newly contracted service area prior to
the start of a benefit year (through
mutual termination or otherwise) is an
indication of poor performance. Such a
situation can arise when, for example,
an organization, after it has signed its
Medicare contract for the upcoming
program year, loses a contract with a
significant number or type of providers,
jeopardizing its ability to provide its
members adequate access to services.
Also, an organization may suddenly face
financial difficulties that threaten its
ability to offer the benefit packages
approved by us throughout the
upcoming contract year. In such
instances, we noted that we could
simply leave the contract in place and
take enforcement actions against the
organization. However, under such an
approach, we would knowingly be
permitting beneficiaries to remain
enrolled with an organization that
cannot effectively deliver the benefit.
Instead, we indicated our preference to
act in the best interests of the
beneficiaries by agreeing with the
organization to terminate its contract
and work with the organization to make
certain that beneficiaries receive
uninterrupted access to Medicare
services through another MA
organization, PDP sponsor, or original
Medicare. We are adopting these
proposed changes without further
modification in this final rule.
Comment: Several commenters
expressed their support for our use of
the past performance review authority
to ensure that underperforming
sponsors are not permitted to expand
their participation in the Part C and D
programs.
Response: We appreciate the
commenters’ support.
Comment: Several commenters
requested that CMS more clearly
articulate the methodology it will apply
to past performance reviews conducted
under this regulatory provision. For
example, commenters were interested in
knowing the relative weights CMS will
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
be assigning to different types of
compliance actions (such as, corrective
action plan requests, warning letters)
and whether we will afford
organizations the opportunity to correct
deficiencies before CMS makes past
performance determinations.
Response: We expect to make past
performance methodology available
through publication in our manuals. We
believe that the manuals provide us and
sponsors with the best available avenue
for providing such detailed information
and making updates to it as we continue
to gain more experience with
conducting past performance analysis.
Given that, we note that the information
on which we will base our past
performance analysis has already been
made available to organizations. For
example, at any time an organization
can review its own record of compliance
correspondence received from us to get
a sense of the degree to which the
organization should be concerned about
the likelihood that CMS would deny an
application for a new contract.
We believe that questions regarding
corrective action opportunities are not
relevant to our process for reviewing
past performance in making application
determinations. The purpose of the past
performance review is to determine
whether the sponsor has demonstrated,
over a 14-month period, whether it has
operated its Part C or D contract in a
manner that suggests that it is generally
meeting and capable of meeting program
requirements and that new Medicare
business would not jeopardize that
status. While some organizations take
corrective action to address any and all
compliance issues prior to the
expiration of the 14-month review
period, such corrective action would not
change the fact that during that period
of time, the organization demonstrated a
pattern of noncompliance that may raise
questions about its ability to take on
new Medicare business.
Comment: Some commenters advised
that the 14-month review period is too
long, while others stated that a longer
period (for example, 3 years) would
provide a more comprehensive view of
a sponsor’s contract performance.
Response: We believe that the 14
month look-back provides an adequate
amount of time for us to review an MA
organization’s or Part D sponsor’s
performance and the choice of 14
months as the look-back period was not
arbitrary. As we noted previously, and
in the proposed rule, 14 months covers
the period spanning the start of the
previous contract year to the time we
receive applications for the following
contract year. To shorten that time
period to, say, 12 months would leave
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
a gap in our past performance review.
Similarly, limiting the period to the 14month timeframe gives sponsors and
organizations the opportunity and
incentive to promptly establish a
positive compliance track record so that
the next CMS past performance review
will find them eligible for additional
Part C or Part D business.
Comment: Several commenters asked
that CMS indicate whether the
withdrawal from all or part of a service
area, non-renewal of one or more plans
(on the Part C or Part D sponsor’s
initiative), withdrawal of an application
or bid, or termination of a contract after
it has been executed would be counted
against an organization for purposes of
past performance analysis.
Response: We would not consider a
sponsor-initiated non-renewal of all or a
portion of an MA or PDP sponsor
contract as an indication of poor
contract performance. (However, under
separate regulatory authority sponsors
that non-renew their contracts may not
be permitted to reenter the program for
a period of 2 years.) We would treat
non-renewed plan benefit packages
similarly, assuming the organization
had met the Part C or D requirements for
providing timely notice to us and our
enrollees. We do not consider the
withdrawal of an application for
qualification as Medicare contractor or
of a bid prior to the publication of the
annual benchmark calculation as
relevant to a performance evaluation.
We do look unfavorably on
organizations that withdraw bids after
the benchmark has been announced.
Also, we consider the termination of a
contract for an upcoming benefit year
after the organization has executed the
contract as a failure to meet Part C and
D program requirements. Accordingly,
organizations should expect that these
occurrences would be considered
against them when we evaluate their
past contract performance.
Comment: Several commenters
offered suggestions on factors CMS
should take into consideration when
developing and applying our past
performance review methodology.
These included accounting for
distinctions between national and local
organizations, beneficiary impact of
noncompliance (or lack thereof), unique
characteristics of SNP plans, and
whether difficulties in an organization’s
operation of a contract can be attributed
to an entire organization or are limited
to operation of only one or more of its
contracts.
Response: As noted previously, we
plan to address issues raised by some of
the commenters more fully in guidance
issued through our manual update
PO 00000
Frm 00009
Fmt 4701
Sfmt 4700
19685
process. At this time, we can provide a
general discussion of some of the
principles we intend to apply to the
development of our past performance
methodology. We are cognizant of the
variety of products offered by Medicare
contractors, and when an element of our
past performance evaluation is affected
by the unique feature of a particular
plan type, we will adjust the application
of our methodology as appropriate. We
also want to emphasize that we intend
to be conservative in our
determinations. We expect to use our
authority under this provision to
exclude only those organizations
demonstrating a pattern of poor
performance. Finally, we acknowledge
that not all types of noncompliance will
be given equal weight, and our
methodology will assign weights to
different measures based on factors such
as beneficiary impact or program
stability.
Comment: A number of commenters
suggested that CMS provide the results
of its past performance analysis prior to
the due dates for the submission of
notices of intent to apply or for the
applications for contract qualification.
Response: We will explore the
feasibility of providing a preliminary
analysis in response to sponsors’
requests. However, we note that such a
report would not be final, and in no case
would even a preliminary report be
available before December of each year.
Comment: A number of commenters
requested assurance that the past
performance review described
previously in this final rule and in the
October 2009 proposed rule would not
include information concerning a
sponsor’s performance under contracts
other than those governing Medicare
managed care and prescription drug
plan operations (such as, Medicaid, QIC
contracts).
Response: Absent extraordinary
circumstances, we plan to limit our past
performance review to the operations of
organizations in the performance of
their Part C and D contracts only.
Comment: One commenter objected to
CMS’ use of past performance analysis
asserting that is equivalent to taking a
second punitive action for a single
instance of noncompliance.
Response: In this final rule, we are
clarifying the scope of our existing
authority and we do not believe it is
equivalent to an additional compliance
or enforcement action taken against any
of the organization’s existing Medicare
contracts. Our denial of an application
based on an applicant’s past contract
performance is a reflection of our belief
that an organization demonstrating
significant operational difficulties
E:\FR\FM\15APR2.SGM
15APR2
19686
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
should focus on improving its existing
operations before expanding into new
types of plan offerings or additional
service areas. Such a determination has
no impact, punitive or otherwise, on a
sponsor’s current Medicare contract
rights and obligations.
Comment: One commenter requested
that organizations be permitted to attest
that they will meet all Part C or D
program requirements as of no earlier
than January 1 of the upcoming contract
year, as organizations are focused on
enrollment and readiness activities prior
to that date.
Response: This comment concerns an
aspect of the Part C and D application
and contracting processes unrelated to
our exercise of the past performance
review authority. Thus, it is outside the
scope of our proposal, and we will not
address it here.
4. Use of Data to Evaluate Continued
Ability to Act as a Qualified Sponsoring
Organization Under Parts C and D
(§ 422.504, and § 423.505)
In the October 22, 2009 proposed rule,
we clarified our authority to find
organizations or sponsors out of
compliance with MA and Part D
requirements. We noted that under the
authority of Sections 1857(e)(1) and
1860D–12(b)(3)(D) of the Act, the
Secretary may add terms to the contracts
with MA and Part D sponsors including
terms that require the sponsor to
provide the Secretary ‘‘with such
information * * * as the Secretary may
find necessary and appropriate.’’
Additionally, under that authority, CMS
established § 422.516 and § 423.514,
which support the submission of Part C
and D Reporting Requirements. We
clarified that the data acquired through
the reporting requirements are often
used for the purpose of monitoring an
organization’s or sponsor’s continued
compliance with MA and Part D
requirements. We also explained that in
some instances, we may use an outlier
analysis to determine a MA
organization’s or Part D sponsor’s
performance relative to industry
standards established by the
performance of all the other
organizations and sponsors as described
earlier in the preamble in our discussion
of the development of our policies
concerning the awarding, monitoring,
and enforcement of Medicare contracts.
As part of the proposed rule, we
added paragraphs § 422.504(m)(1) and
(2) and § 423.505(n)(1) and (2) to make
explicit our existing authority to find
organizations or sponsors out of
compliance with MA and Part D
requirements when the organization’s or
sponsor’s performance fails to meet
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
performance standards articulated in
statutes, regulations, and guidance or
when an organization’s or sponsor’s
performance represents an outlier
relative to the performance of other
organizations or sponsors. In this final
rule, we adopt the provisions as
proposed.
Comment: Some commenters
supported this provision, specifically
the development of consistent
performance data evaluation processes.
Response: We appreciate the
comments.
Comment: Many commenters
recommended that CMS not use outlier
data to make compliance determinations
for a variety of reasons. Some
commenters believed that CMS should
only use specific, previously articulated
criteria to determine non-compliance.
Other commenters stated that the outlier
analysis is arbitrary, inconsistent, and
capricious at least in part because it
would result in CMS holding sponsors
to standards that are developed simply
by measuring sponsors’ performance
relative to each other, not what is
actually required to comply with Part C
and D program requirements. One
commenter noted that such an approach
is inconsistent with the operation of a
program where Medicare sponsor
contracts are not awarded on a
competitive basis. Still other
commenters recommended that if an
outlier analysis is used, it should only
be used as a means by which CMS
identifies plans in need of improvement
not as a determination of noncompliance.
Response: We appreciate these
comments, but we maintain our belief
that outlier analysis remains a valid
method for identifying non-compliant
plan sponsors and a valuable tool in our
efforts to monitor hundreds of
contracting organizations in a timely
and effective manner. Technically, the
Part C and D regulations require 100
percent compliance with all program
requirements. We acknowledge that it
can be impractical to hold sponsors to
such an absolute standard. When
attempting to establish an acceptable
level of noncompliance, it makes sense
for us to compare a sponsor’s
performance to that of its peers. Such
outlier analysis gives us a sense of the
general performance capabilities of a set
of sponsors. From such an analysis it is
reasonable, in most instances, for us to
conclude that organizations whose
performance trails that of other similarly
situated sponsors are not making
reasonable efforts to provide an
acceptable level of service to their
enrollees. As we noted in the discussion
of our proposed rule, inherent in the use
PO 00000
Frm 00010
Fmt 4701
Sfmt 4700
of outlier analyses to evaluate
compliance is the application of the
well-accepted principle that we should
look to evolving industry standards to
establish program requirements.
We recognize our obligation, as both
a business partner and a regulatory
agency, to use the outlier analysis tool
in a manner that is fair to sponsors and
is legally supportable. For example, we
want to reassure organizations that we
understand that effective outlier
analysis is concerned not just with
which organizations’ performance
scores are lower than others, but also
with the degree to which some sponsors
may trail their peers. Therefore, an
outlier analysis does not by definition
and in every case result in a finding of
non-compliance. Also, we remind
organizations that we have adopted over
the last several years, a graduated
system of compliance notices, and we
expect that in the large majority of
instances, we will make organizations
aware of their non-compliance with an
outlier-based standard through the
lower-level types of notice. These are
the types of notices issued in the earlier
stages of CMS’ compliance efforts and
would afford organizations reasonable
opportunities to take corrective action.
Finally, we are committed to publishing
regularly outlier-based performance
standards, as they are developed, in
guidance materials, including our
program manuals, HPMS memoranda,
and our annual call letter, and to update
these standards over time. Further,
compliance communications to
sponsors concerning an area of
noncompliance where the basis for the
finding relied on outlier analysis
include an explicit description of the
methodology employed to make such a
determination.
Comment: Many commenters
requested that CMS compare like plans
with respect to several identifiers,
including: plan types (with particular
consideration given to SNPs), size,
market conditions, open vs. closed
formularies, and age of enrollees. Some
commenters noted that meaningful
comparisons across sponsors might be
difficult.
Response: Where appropriate, we
compare like sponsors and frequently
take enrollment (both numbers and
types of beneficiaries, such as, LISeligible) into consideration. Identifiers
that the commenters mentioned are
taken into consideration as part of our
data analysis. Our goal is to do
meaningful analysis that can aid us in
identifying potential weaknesses.
Comment: Several commenters were
concerned with how CMS will conduct
outlier analysis and requested that CMS
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
define and develop standardized
methods for determining outliers. One
commenter recommended that CMS
work with the industry to establish
methods for outlier analysis. Another
commenter recommended that the
methodology should include different
weights assigned to measures based on
the magnitude of beneficiary impact and
program integrity. One commenter
requested that the outlier analysis be
done at the contract level as opposed to
the plan benefit package (PBP) level.
Another commenter recommended that
CMS be specific about whether
compliance action would be taken for
first-time outliers or only for sponsors
with a history of being an outlier.
Response: We understand the
importance of working with the
industry to establish methodologies and
do so where appropriate. For example,
we have and will continue to share
drafted or proposed plan rating (star
ratings) measures and their analyses.
Comments from sponsors are reviewed
and considered as we finalize those
measures. The Part C and D reporting
requirements also undergo similar
public comment periods.
The issue of assigning different
weights to measures is not relevant here
as the proposed change concerns the use
of outlier analysis for particular, not
aggregated, operational requirements.
We incorporate weighting into our
analysis of sponsors’ overall contract
performance. This analysis is typically
done at the contract level at least in part
because we collect data at that level, not
the PBP level.
As discussed previously, we account
for whether a sponsor is a first-time or
repeat outlier when it determines the
type of compliance notice to issue.
Depending on the circumstances,
organizations identified as first-time
outliers may receive only a notice of
noncompliance, while those that are
repeat outliers may receive a CAP
request or be subject to an enforcement
action.
Comment: Several commenters urged
CMS to make the outlier methodology
available to all sponsors through, for
example, the Call Letter or Technical
Specifications. Many of these
commenters requested an opportunity to
review and comment on the
methodology. A couple of commenters
were concerned about CMS’ use of
outlier analysis and being able to
predict how other sponsors will perform
to ensure that their own performance is
aligned and compliant.
Response: Where appropriate, we will
make methodologies available to
sponsors, as we discussed earlier in our
response to comment on this proposal.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
An example of the importance we place
on the need for clarity and transparency
is the fact that we currently make
available our methodologies in the
technical specifications for the
Reporting Requirements and the plan
ratings (star ratings). In another
example, we recently (January 2010)
released an HPMS memo and
incorporated into the Part D manual a
comprehensive description of our
outlier methodology for ensuring
appropriate access to home infusion
pharmacies. In an effort toward
complete transparency, we also
provided the underlying data and
necessary information for Part D
sponsors to conduct their own
independent analyses on this topic.
Comment: Many commenters noted
that there are reasons other than noncompliance that may result in a sponsor
being an outlier. Outlier, by definition,
means that there will always be a
sponsor underperforming.
Response: We acknowledge that
outlier status does not necessarily mean
non-compliance. We review the list of
statistical outliers and set thresholds on
a number of factors for the purposes of
identifying potential compliance
problems. This is consistent with our
goal to do meaningful analysis that can
aid in identifying potential weaknesses.
Most often, a sponsor will receive a
request for information, as opposed to a
compliance letter, to help us better
understand why that particular sponsor
was an outlier. These requests
frequently result in the sponsor gaining
a better understanding of our
requirements and promote program
improvement.
Comment: There were a few
comments on the validity of current
analyses performed by CMS. Some
commenters discussed their observation
that the findings resulting from some of
CMS’ outlier analyses methodology may
penalize some organizations unfairly
because—(1) the underlying data on
which the analysis was based was
flawed; or (2) analyses based on selfreported data may indicate that one
sponsor is reporting data more
accurately data than its peers. A
commenter noted that the compliance
letters that result from outlier analysis
come months after the data has been
collected and that there is little
opportunity for an organization to
correct its performance. A few
commenters requested that CMS give
sponsors the opportunity to appeal or
explain the outlier status to CMS.
Response: We are always open to
information and feedback from sponsors
on our analyses and make corrections to
our compliance determinations where
PO 00000
Frm 00011
Fmt 4701
Sfmt 4700
19687
the new information supports such a
step. We also note that we are
developing requirements concerning
sponsors submitting audited data to
address the concerns about data
accuracy that the commenters raise.
Comment: One commenter believed
that the annual audits and the outlier
analyses appear to be duplicative.
Response: We use audits, outlier
analysis, and other methods to ensure
compliance with program requirements
and to help identify potential
compliance problems. Audits and
outliers analyses are two distinct
monitoring methods that utilize
different sources of information and
apply different types of analyses to
evaluate sponsors’ compliance with
program requirements. Audits represent
an in-depth review of selected sponsor’s
documentation related to the operation
of their Medicare contracts. Outlier
analysis, by contrast, consists of an
agency review of performance data
(generated by CMS or the sponsor)
across all contracting organizations
which results in the identification of
potential noncompliance and the need
for further investigation.
5. Compliance Programs Under Parts C
and D (§ 422.503(b)(4)(vi) and
§ 423.504(b)(4)(vi))
In the October 2009 proposed rule, we
proposed to modify the language at
§ 422.503(b)(4)(vi) and
§ 423.504(b)(4)(vi) to explicitly provide
clarification as to what constitutes an
‘‘effective’’ compliance program. We also
proposed clarifying language for each of
the required elements of an effective
compliance program in order to assist
sponsoring organizations with
implementing more effective
compliance programs and to more
clearly articulate our expectations.
We proposed to add language to the
first element at § 422.503(b)(4)(vi)(A)
and § 423.504(b)(4)(vi)(A) to require that
written policies and procedures must
describe a commitment to comply with
all Federal and State standards,
compliance expectations as embodied in
the standards of conduct, implement the
operations of the compliance program,
provide guidance to others, identify
how to communicate compliance issues
to compliance personnel, describe how
compliance issues are investigated and
resolved and include a policy of nonintimidation and non-retaliation.
The second element requires a
sponsoring organization to have a
compliance officer and committee
accountable to senior management. We
proposed to add language at
§ 422.503(b)(4)(vi)(B) and
§ 423.504(b)(4)(vi)(B) that the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19688
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
compliance officer must be employed by
the sponsoring organization, and the
compliance officer and committee must
periodically report directly to the
governing body and that body must be
knowledgeable about the compliance
program and exercise reasonable
oversight over the implementation and
effectiveness of the program.
The third element requires the
sponsoring organization to have an
effective training and education
program. We proposed to add language
at § 422.503(b)(4)(vi)(C) and
§ 423.504(b)(4)(vi)(C) to specify several
key groups and individuals (the chief
executive or other senior administrator,
managers, and governing body
members) among the sponsoring
organization’s employees who are
required to have compliance training
and education. We also proposed to add
language that this training must occur at
a minimum annually and must be made
a part of the orientation for a new
employee, new first tier, downstream
and related entities, and new
appointments of a chief executive,
manager, or governing body member.
The required compliance training must
include training regarding the
prevention and detection of fraud, waste
and abuse. We proposed to add that
providers who have met the
requirement for fraud, waste and abuse
training and education through
enrollment into the Medicare program
are deemed to have met that portion of
the training and education requirement.
We noted that, in some instances, a
particular pharmacy or other provider
may contract with dozens of MA or PDP
plans, each of which is required by the
existing language at
§ 422.503(b)(4)(vi)(C) and
§ 423.504(b)(4)(vi)(C), read literally, to
provide the required fraud, waste and
abuse prevention and detection training
to the pharmacy, or other provider, and
its staff. Since we did not intend to
require duplicative training, we offered
two options in our proposed rule. One
option was that the sponsoring
organization ‘‘assures’’ or ‘‘obtains an
assurance’’ that the first tier,
downstream, and related entity has
received such training. Another option
was to leave existing language
unchanged, but issue interpretive
guidance on this point. We requested
workable suggestions to assure that our
objective is met, while eliminating
unnecessary duplication.
The fourth element requires a
sponsoring organization to have
effective lines of communication. We
proposed to add language at
§ 422.503(b)(4)(vi)(D) and
§ 423.504(b)(4)(vi)(D) that requires that
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
these lines of communication be
confidential and accessible to all
employees and allow for compliance
issues to be reported anonymously and
in good faith as issues are identified.
The fifth element requires a
sponsoring organization to enforce
standards through well-publicized
disciplinary guidelines. We proposed to
add language at § 422.503(b)(4)(vi)(E)
and § 423.504(b)(4)(vi)(E) that more
specifically described that these
guidelines must be implemented to
include policies that articulate
expectations for reporting issues and
their resolution, identify noncompliance
or unethical behavior, and provide for
timely, consistent and effective
enforcement of the standards when
noncompliance or unethical behavior is
detected.
The sixth element requires a
sponsoring organization to have
procedures for internal monitoring and
auditing. We proposed to add language
at § 422.503(b)(4)(vi)(F) and
§ 423.504(b)(4)(vi)(F) to more
specifically describe that an effective
system for routine monitoring and
identification of compliance risks
includes internal monitoring and audits
and, as appropriate, external audits, in
order to evaluate the sponsoring
organization’s compliance with our
requirements and overall effectiveness
of the compliance program. We also
proposed to add language that these
audits should include the sponsoring
organization’s first tier entities.
The seventh element requires a
sponsoring organization to have
procedures for ensuring prompt
responses to detected offenses. We
proposed to add language at
§ 422.503(b)(4)(vi)(G) and
§ 423.504(b)(4)(vi)(G) to more
specifically describe the
implementation of a system for
promptly responding to compliance
issues as they are raised, investigating
potential compliance problems
identified in the course of selfevaluations and audits, correcting such
problems promptly and thoroughly to
reduce the potential for recurrence and
ensuring ongoing compliance with our
requirements.
We are adopting all of these proposed
changes into the final rule without
further modification with the exception
of changes made to
§ 422.502(b)(4)(vi)(B),
§ 423.504(b)(4)(vi)(B) and
§ 423.504(b)(4)(vi)(C), to provide that
the compliance officer must be an
employee of the sponsoring
organization, parent organization or
corporate affiliate and clarify that he or
she may not be an employee of a first
PO 00000
Frm 00012
Fmt 4701
Sfmt 4700
tier, downstream or related entity of the
sponsoring organization and must be
accountable to the governing board of
the sponsoring organization. In
addition, at § 423.504(b)(4)(vi)(C)(3), we
adopt a new regulation for the Part D
program to specify that first tier,
downstream, and related entities that
have met the fraud, waste, and abuse
certification requirements through
enrollment into the fee-for-service
Medicare program and accreditation as
a durable medical equipment,
prosthetics, orthotics, and supplies
(DMEPOS) supplier are deemed to have
met the fraud, waste and abuse training
and educational requirements.
We received the following comments
on the first element, which requires
written policies and procedures:
Comment: Two commenters raised
concerns about the resources necessary
to satisfy our requirements related to
written policies and procedures. One
commenter stated that sponsoring
organizations are currently spending
significant time and resources drafting
and redrafting policies and procedures
and are still uncertain if these policies
and procedures will cover the items we
expect to be covered in requisite detail.
Both commenters suggested that we
release our audit worksheets which
outline CMS’s expectations for the
contents of policies and procedures,
which would allow sponsoring
organizations to tailor their policies and
procedures accordingly. Additionally,
one commenter suggested that CMS
should not be dictating the scope or
components of such policies and
disagreed with our inclusion of more
‘‘prescriptive standards’’ into the
regulatory text and alternatively
suggested that certain requirements be
issued through subregulatory guidance.
Response: Our proposals are intended
to significantly strengthen our oversight
of compliance programs, and provide
more specificity and clarity to
sponsoring organizations with regard to
what we expect to see when we review
a compliance program. We believe the
proposals we have made are important
changes and are necessary to maintain
consistency and promote appropriate
focus on these requirements and that
going through the rulemaking process is
the best way to promote these goals. We
also believe that the proposed changes
to the first element provide important
information as to what we consider a
framework for an effective compliance
program. We do not intend to be
prescriptive as to the choice of
particular processes or procedures, only
to provide the minimum amount of
information we would expect to see in
a comprehensive set of written policies,
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
procedures and standards of conduct.
With respect to the comment regarding
releasing audit materials, we must
balance the goals of transparency
regarding our audit program with the
goals of conducting an effective
evaluation of whether organizations
have in fact instituted effective
compliance programs (and not just
‘‘paper’’ compliance programs). To the
extent that sponsoring organizations are
looking to tailor their policies and
procedures for compliance programs to
materials released by us, they should be
looking to our regulations, including the
changes made by this final rule, and any
subregulatory guidance issued by CMS,
and not documents related to our audit
program, as these may only be a subset
of CMS’ larger set of requirements.
We received the following comments
regarding our proposed revisions to the
second element, which addresses the
designation of a compliance officer and
a compliance committee who report
directly to the organization’s chief
executive or other senior management:
Comment: Commenters expressed
concern with CMS’ proposal to require
that the compliance officer, vested with
day to day operations of the compliance
program, be an employee of the
sponsoring organization. Commenters
recommended that CMS broaden this
portion of the provision to permit the
compliance officer to be employed by
the sponsoring organization or an
affiliate in its corporate group. These
commenters indicated that ‘‘the entity
who employs the compliance officer is
a corporate structure issue that may
have no effect or bearing on the issues
of accountability and oversight.’’ One
commenter further insisted that in
instances when related entities are MA
organizations and PDP sponsors who
hold separate contracts with CMS,
having one centralized compliance
officer is not only effective and efficient,
but it also promotes consistency with
respect to the implementation of the
compliance program across the
contracting entities. Several commenters
also stated that having the compliance
officer at a parent or affiliated group
level would not lessen the
accountability of the compliance officer
with respect to each entity.
Response: We agree that having a
compliance officer being employed at a
parent company or corporate affiliate
may not necessarily lessen the
accountability of the compliance officer
to the governing body of the sponsoring
organization. Our proposal was
intended to provide further clarity on
how sponsoring organizations can meet
the key requirement of having a
compliance officer and compliance
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
committee that is accountable to the
governing body of the sponsoring
organization. We have issued extensive
subregulatory guidance on this issue,
both in the 2007 call letter and in
Chapter 9 of the Medicare Prescription
Drug Benefit Manual (‘‘Chapter 9’’). This
guidance was issued in part in response
to us learning that sponsoring
organizations were subcontracting the
compliance officer function to their first
tier, downstream and related entities.
We do not view subcontracting that
function as an acceptable alternative for
a number of reasons, including the
potential for conflicts of interest that
would exist by virtue of the compliance
function residing in a subcontracted
entity that is being paid by the entity
whose compliance the subcontractor is
charged with monitoring. As a result of
the comments received, we are
modifying the language in this final rule
to provide that the compliance officer
must be an employee of the sponsoring
organization, parent organization or
corporate affiliate and to provide that
the compliance officer may not be an
employee of a first tier, downstream or
related entity of the sponsoring
organization.
Comment: Proposed sections
§ 422.503(b)(4)(vi)(B)(2) and
§ 423.504(b)(4)(vi)(B)(2) specify that the
compliance officer and committee must
periodically report to the governing
body of the sponsoring organization on
the activities and status of the
compliance program. One commenter
emphatically supported CMS’ proposal
to strengthen the compliance program
by increasing the requirements with
respect to interaction with the executive
leadership and board members. One
commenter recommended that CMS
revise the language of this provision to
state that the compliance officer and
committee, ‘‘or their delegate’’, report
directly to the governing body. Lastly,
one commenter stated that although
they supported CMS’ goal of ensuring
sponsoring organizations’ senior
leadership and governing body are
informed of key developments, the
commenter opposed CMS dictating
internal reporting obligations and
reporting structures.
Response: We disagree with the
suggestion to add ‘‘or their delegate’’ to
the language at § 422.503 (b)(4)(vi)(B)(2)
and § 423.504(b)(4)(vi)(B)(2), which
would expand the scope of individuals
who could provide periodic reports to
the governing body of the sponsoring
organization. The purpose of this
provision is to ensure communication
between the compliance officer,
committee and the governing board. We
do not intend that this reporting
PO 00000
Frm 00013
Fmt 4701
Sfmt 4700
19689
responsibility be delegated to someone
other than the compliance officer as that
would defeat the purpose of the
proposed provision. Therefore, we will
not be incorporating the commenter’s
suggested change into the final rule.
We also do not believe that the
proposed regulatory language in this
section results in CMS dictating to MA
organizations and Part D sponsors their
internal reporting obligations and
reporting structures. The proposed
language does not specify the means or
manner in which the report should be
communicated to the governing body,
nor does it provide specific
requirements as to how often such
reports are made.
We received the following comments
concerning our proposed changes to the
third compliance program element,
which—(1) states that sponsoring
organizations must establish and
implement effective training and
education between the compliance
officer and the sponsoring
organization’s employees, governing
board, first tier, downstream and related
entities; (2) specifies that this training
and education must occur at a minimum
annually and must be made a part of
new employee orientation; and (3)
provides deeming of fraud, waste and
abuse educational requirements to first
tier, downstream and related entities
who have met the fraud, waste and
abuse certification requirements though
Medicare program enrollment:
Comment: Some commenters stated
that organizations should have the
flexibility to modify and tailor the
training for the governing body so that
it is not a replication of the training
needed for front line staff, and
expressed specific concern with CMS
requiring training of the governing body
annually. Additionally, several
commenters stated that requiring
sponsoring organizations to conduct
compliance training at new employee
orientations and annually thereafter is
administratively and financially
burdensome, and may even result in
organizations having to conduct such
training on a weekly basis. Commenters
made numerous recommendations,
including providing sponsoring
organizations with flexibility in
determining the appropriate level and
timing of training depending on the
audience; modifying the education and
training requirements to apply to only
those involved in the administration of
the Medicare Advantage and Part D
lines of business within the
organization; clarifying that the annual
education and training requirement is
limited to general compliance training,
and does not include the specialized
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19690
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
training that sponsoring organizations
have to implement in accordance with
Chapter 9; and the suggestion that CMS
develop a Web-based compliance
training tool or certify an independent
industry entity to provide consistent
and efficient compliance training; and
finally, providing additional
clarification on the required training for
downstream entities.
Response: We believe that the
proposed regulatory language allows
organizations the flexibility to tailor the
content of the training and many aspects
of how the training is provided. We
have not specified the manner in which
the training would be provided at new
employee orientations, or to senior
leadership or members of the governing
body upon their appointment to these
positions. Organizations can decide to
provide new employees with a copy of
the organization’s compliance policies
and procedures and ask new employees
to attest that they have been provided
with a copy and have read the material.
We do not believe that such a
requirement is overly burdensome or
difficult for sponsoring organizations to
implement.
We also do not believe that it is
appropriate to clarify in regulation text
that we are referring to general versus
specific compliance training, as
discussed in Chapter 9. The proposed
language makes no reference to the
training being specialized and we
believe that the regulatory language
should be left general as the level of
training and education will vary
depending on the level and
responsibilities of the person receiving
the training. We believe that the
proposal is sufficiently clear in its
description of what is expected of the
sponsoring organization in the
implementation of its compliance
training and education program and the
requirements are reasonable. If we
determine in the future that further
guidance is necessary, we will issue
subregulatory guidance.
Lastly, in response to those
commenters who suggested that CMS
develop a Web-based compliance
training tool, we have determined that
additional analysis needs to be
undertaken and additional information
sought before providing guidance on
how training of first tier, downstream,
and related entities is to be provided
and the content managed. Additional
clarification will be issued in
subregulatory guidance.
Comment: Some commenters stated
that requiring sponsoring organizations
to conduct compliance training for all
delegated entities (first tier, downstream
and/or related) or insuring that all
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
delegated entities conduct such training
on their own imposes a significant
burden on sponsoring organizations.
Response: In response to those
commenters who stated that requiring
that first tier, downstream and related
entities to receive compliance training is
overly burdensome, we would like to
reiterate that this is an existing
requirement, not a proposed new
requirement. We agree that duplicative
training is inefficient and we believe
that commenters have offered valuable
suggestions. After reviewing these
comments and recommendations, we
have determined that additional
analysis needs to be undertaken and
additional information sought before
providing guidance on how training of
first tier, downstream, and related
entities is to be provided and the
content managed. Additional
clarification will be issued in
subregulatory guidance.
Comment: Commenters also suggested
striking the word ‘‘effective’’ from the
language of this section which specifies
that the sponsoring organization must
establish, implement and provide
‘‘effective’’ training and education.
Alternatively the commenter requested
that CMS at least clarify how we would
determine if training were ‘‘effective’’
and clarify CMS’ definition of sufficient
oversight.
Response: The use of the term
‘‘effective’’ is existing regulatory
language and has already gone through
notice and comment rulemaking.
‘‘Effective’’ is not a new requirement,
therefore, we do not believe it is
necessary to remove the word ‘‘effective’’
from this regulatory provision.
Comment: Commenters suggested that
CMS consider revising the requirement
that fraud, waste, and abuse training
and education occur at least annually
and be a part of the orientation for a
new employee, new first tier,
downstream and related entities, and
new appointments to chief executive,
manager or governing body member.
Commenters believe that CMS should
require that training only at the time of
initial hire or when there are significant
changes in the laws and regulations
related to fraud, waste, and abuse.
Response: We disagree and believe
that annual training is a necessary
component of an effective compliance
program that addresses the detection,
correction, and prevention of fraud,
waste, and abuse in the MA and Part D
programs. The intent of this regulation
is to codify the existing CMS
expectation that fraud, waste and abuse
training be provided at a minimum on
an annual basis, which is contained in
Chapter 9 of the Prescription Drug
PO 00000
Frm 00014
Fmt 4701
Sfmt 4700
Benefit Manual (Part D Program to
Control Fraud, Waste, and Abuse).
Chapter 9 can be viewed at: https://
www.cms.gov/
PrescriptionDrugCovContra/Downloads/
PDBManual_Chapter9_FWA.pdf. We
recognize that Chapter 9 was
specifically developed for Part D
(prescription drug plan) sponsors. In
previous guidance, we have directed
MA organizations to apply the
provisions of Chapter 9 to Part C
(Medicare Advantage) programs as well.
We are in the process of updating this
document to specifically address any
particular Part C measures for detecting
and preventing fraud, waste, and abuse.
Comment: Several commenters
expressed support for our proposed
revisions to § 422.503 (b)(4)(vi)(C)(2),
which clarify that first tier, downstream,
and related entities who have met the
fraud, waste, and abuse certification
requirements through enrollment into
the fee-for-service Medicare program are
deemed to have met the training and
educational requirements for fraud,
waste, and abuse under this rule. One
commenter disagreed with the proposed
revision.
Response: We believe that the
proposed regulatory language eliminates
redundant certification made when
these entities enroll in the Medicare
program. We also wish to clarify that the
reference to deeming in this regulation
is distinct from the MA deeming and
accreditation program described at
§ 422.156, § 422.157, and § 422.158.
Comment: A number of commenters
recommended that CMS extend the
regulatory change proposed for the Part
C program at § 422.503(b)(4)(vi)(C) to
the Part D program at
§ 423.504(b)(4)(vi)(C). The commenters
noted that Part D first tier, downstream,
and related entities that have enrolled in
the Medicare program as a supplier of
Part B covered medications or as a
supplier of durable medical equipment,
prosthetics, orthotics, and supplies
(DMEPOS) go through the same
application and certification process as
MA providers. They contend that
including Part D providers in this
deeming would ensure the requirements
for Part D sponsors will be identical to
those for MA organizations and would
reduce unnecessary additional burden.
Response: We agree with the
commenters and have adopted a new
regulation for the Part D program at
§ 423.504(b)(4)(vi)(C)(3) to specify that
first tier, downstream, and related
entities who have met the fraud, waste,
and abuse certification requirements
through enrollment into the Medicare
program accreditation as a DMEPOS
supplier are deemed to have met the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
training and educational requirements
for fraud, waste, and abuse training. We
wish to clarify that the reference to
deeming in this regulation is distinct
from the Part D deeming and
accreditation program described at
§ 423.165, § 423.168, and § 423.171.
We received the following responses
to our request for comments on whether
or how to best revise the requirement
that first tier, downstream, and related
entities receive training in how to
prevent and identify fraud, waste, and
abuse to address the issue of duplication
of training for providers or entities that
contract with multiple MA
organizations or Part D sponsors:
Comment: Several commenters
recommended requiring MA
organizations and Part D sponsors to
create training materials or approve first
tier, downstream, and related entitycreated materials and require
attestations that the training was
provided to all appropriate parties.
These commenters noted that in order to
avoid duplicative training, all
sponsoring organizations would be
required to accept attestations from their
first tier, downstream, and related
entities that they completed training
provided by any other sponsoring
organization in order to fulfill this
requirement. Commenters also
suggested that another option to ensure
consistent training content and
minimize duplication is for CMS to
create a standardized training and
require all sponsoring organizations to
use it for training their first tier,
downstream, and related entities.
Commenters also recommended that
CMS permit first tier, downstream, and
related entities to create and implement
their own training programs and attest
to their contracting MA organizations
and/or Part D sponsors that they have
fulfilled the training requirement.
Response: We believe the commenters
have offered valuable suggestions. After
reviewing these comments and
recommendations, we have determined
that additional analysis needs to be
undertaken and additional information
sought before providing guidance on
how training of first tier, downstream,
and related entities is to be provided
and the content managed. Additional
clarification will be issued in
subregulatory guidance.
Comment: A few commenters
requested that CMS provide more
specificity regarding which entities
must complete fraud, waste, and abuse
training. These commenters believe that
CMS should limit the training
requirement for first tier, downstream
and related entities to only staff of those
entities that are involved in patient care
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
and/or claims submission, and should
not require administrative or retail
clerk/cashier staff to complete the
training.
Response: The requirement for fraud,
waste, and abuse training applies to all
MA organization and Part D sponsor
employees (including chief executive or
other senior administrator, managers
and governing body members) and first
tier, downstream and related entities.
We will issue additional clarification in
subregulatory guidance.
The fourth element requires a
sponsoring organization to have
effective lines of communication. We
did not receive comments regarding this
element.
We received the following comment
concerning the proposed revisions to
the fifth compliance program element
which details a sponsoring
organization’s obligation to ensure its
compliance program has well
publicized disciplinary standards.
Comment: The commenter requested
that CMS provide guidance regarding its
expectations as to sponsoring
organization’s enforcement of
disciplinary standards, and asked for
clarification as to whether a policy
identifying the different types of
disciplinary actions a sponsoring
organization may impose would be
sufficient to meet the requirement.
Response: We believe that our
proposal is sufficiently detailed to
provide sponsoring organizations with
necessary guidance on how to
implement an effective compliance
program.
We received the following comment
regarding the proposed revisions to the
sixth compliance program element
concerning requirements for sponsoring
organizations monitoring and
identification of compliance risks.
Comment A commenter requested
that CMS specify that its reference to
external audits, especially of first tier
entities, does not require sponsoring
organizations to hire an independent,
external auditor to perform this function
but rather that sponsoring organizations
may undertake the auditing of these
contractors through their internal audit
units.
Response: Our expectation, when
referring to a sponsoring organization
conducting an external audit of itself or
a first tier entity, was that that
sponsoring organization would utilize
an auditor who is external of both the
sponsoring organization and the first
tier entity being audited.
Comment: A commenter
recommended that CMS share its
preamble language that further defines
the expectations for an effective
PO 00000
Frm 00015
Fmt 4701
Sfmt 4700
19691
compliance program with other areas of
the Federal government, such as the
Department of Defense, so that all
government contractors will have the
same compliance program expectations.
Response: We believe that this
comment is outside the scope of this
regulation.
The seventh element requires a
sponsoring organization to have
procedures for ensuring prompt
responses to detected offenses. We did
not receive comments regarding this
element.
6. Network Adequacy of Coordinated
Care and Network-Based Private Fee-forService Plans Under Part C (§ 422.112)
In the October 22, 2009 proposed rule
(74 FR 54644), we requested comments
on proposed criteria for determining
whether an MA plan network meets the
network availability and accessibility
requirement in section 1852(d)(1) of the
Act. As we discussed in the proposed
rule, we have developed an automated
system for reviewing network adequacy
on a continuing basis based on the
elements that we have determined
reasonably reflect community patterns
of health care delivery. As we noted in
the proposed rule, our operational
experience has demonstrated that the
concept of community patterns of health
care delivery provides a useful
benchmark for measuring a proposed
provider network, because it allows for
varying geographical and regional
conditions to be taken into
consideration in determining what
constitutes ‘‘reasonable’’ access in a
given area.
In the proposed rule, we described the
elements of community patterns of
health care delivery that we proposed to
include in our evaluations of provider
networks, and stated that our goal was
to make the standard of community
patterns of care more transparent and
consistent across the country.
Specifically, we proposed adding a new
paragraph (a)(10) to § 422.112 to specify
the factors comprising community
patterns of health care delivery that we
would use as a benchmark in evaluating
a proposed MA plan health care
delivery network. Under proposed
§ 422.112(a)(10), these factors would
include, but not be limited to—
• The number and geographical
distribution of eligible health care
providers available to potentially
contract with an MAO to furnish plan
covered services within the proposed
service area of the MA plans;
• The prevailing market conditions in
the service area of the MA plan—
specifically, the number and
distribution of health care providers
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19692
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
contracting with other health care plans
(both commercial and Medicare)
operating in the service area of the plan;
• Whether the service area is
comprised of rural or urban areas or
some combination of the two;
• Whether the MA plan’s proposed
provider network meets Medicare time
and distance standards for member
access to health care providers
including specialties; and
• Other factors that we determine to
be relevant in setting a standard for an
acceptable health care delivery network
in a particular service area.
We proposed providing more detail
about how we would operationalize
these requirements through
subregulatory guidance (for example,
the annual Call Letter). We solicited
comment on whether our proposed
regulatory provisions are sufficiently
clear and whether clarification should
be provided through regulation or
subregulatory guidance, such as the
annual Call Letter.
After considering all the timely
comments we received on our proposal,
we are adopting § 422.112(a)(10)
without modification in this final rule.
Comment: Many commenters
expressed concern that the proposed
CMS approach to evaluating network
adequacy based on community patterns
of care would be too limiting, and
would not allow organizations sufficient
flexibility to develop networks in rural
areas or areas with unique conditions.
Several commenters were concerned
that CMS’ interpretation of what
constitutes community patterns of care
would result in an approach that would
not adequately take into account special
plan-specific factors, such as the size of
a plan or the quality of its providers.
Also, a number of commenters were
concerned that unique characteristics of
a particular community, such as
provider willingness to contract, would
not be captured in the CMS network
adequacy standards. One commenter
expressed concern that the proposed
requirements for network adequacy
appear to encourage a fee-for-service
and fragmented care model based on
geographic access rather than a defined
network of high quality primary care
practices, supported by a limited
network of sub-specialists. One
commenter was concerned that CMS
would only use the prevailing
community standard of care to evaluate
network adequacy, citing as an example
a plan with a network that did not meet
the prevailing community standard of
care but was nevertheless adequate or
even better in terms of the access it
actually provides health care services to
enrollees.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Response: In developing standards for
network adequacy we chose the
overarching principle of community
patterns of care because it is a robust
model that allows CMS the necessary
flexibility to develop standards that can
be adapted to the significant variations
that exist in health care delivery in the
United States. Our proposed regulation
outlined the broad elements that we
have found from years of experience to
be relevant in evaluating a particular
community pattern of care. However,
we are cognizant of the fact that there
exist a number of unique local
circumstances related to such factors as
geography, market conditions, and
provider availability. Accordingly, this
final rule codifies an approach to
determining network adequacy that
builds on our experience with
evaluating health plan provider
networks but is also flexible enough to
adapt to evolving and unique local
market conditions. The automated
process we have established to assess
network adequacy is likely to be refined
as we gain more experience, and
maintaining flexibility in our regulatory
requirements for network adequacy
supports this goal. We also note that the
automated system we are using does not
specify the providers with which a plan
contracts. Rather, it furnishes a
benchmark so we can determine if a
plan’s provider network is adequate
given the availability of providers in the
area where the plan is being offered and
the expected enrollment in the plan. In
other words, our standards address the
relative size and scope of an acceptable
MA provider network given the
community patterns of care. However,
MA plans still have discretion to select
the providers they contract with as long
as that network is adequate to meet the
health care needs of its enrollees. In
addition, we will have an exceptions
process by which plans can highlight
special circumstances that affect their
ability to meet our access standards.
Comment: Many commenters had
very detailed, specific questions about
our automated system for assessing
network adequacy, and much of this
feedback has already been provided to
CMS through other mechanisms. For
example, one commenter asked for
certain adjustments to the ratio of
providers to beneficiaries. Other
comments questioned how CMS would
implement various features of network
adequacy and whether they would be
codified in regulations text.
Response: As noted previously, we
have developed and implemented
automated systems to evaluate the
network adequacy of MA plans. As part
of that implementation, we have
PO 00000
Frm 00016
Fmt 4701
Sfmt 4700
provided considerable subregulatory
guidance regarding implementation of
community patterns of care through this
automated process. An example of this
subregulatory guidance is the provision
of time and distance standards
(available on the CMS Web site) by
category of health care provider for a
number of rural and metropolitan
counties throughout the United States.
Because we did not propose to
incorporate the technical specifics of
our automated system into regulation
text, we believe it is most appropriate to
address specific technical suggestions in
the context of implementing and finetuning the automated network adequacy
system.
Comment: Several commenters
expressed concern about how CMS
would implement time and distance
standards for determining network
access. One commenter asked that CMS
be mindful of the impact of imposing
time and distance standards equally
among different types of providers. One
commenter stated that the prevailing 30
minute/30 mile access to services
standards need to be fine-tuned
specifically for urban, rural, and other
medically underserved areas. Other
comments included recommendations
to establish separate and distinct
network adequacy standards for Parts A
and Part B services, as well as standard
for measuring network adequacy in
rural areas for services that are only in
hospitals.
Response: As noted in the October 22,
2009 proposed rule, we have
historically used the 30 minute/30 mile
access to services as a rough standard
for evaluating provider networks.
However, we agree that this standard is
not sufficiently nuanced to stand on its
own, and does not fully address our
needs. Our operational experience has
demonstrated that the concept of
community patterns of health care
delivery furnishes a more useful
benchmark for measuring a proposed
provider network because it allows for
varying geographical and regional
conditions to be taken into
consideration.
Comment: One commenter asked
CMS to consider Medicaid provider
networks as part of the assessment of
network adequacy for dual eligible
integrated products. This commenter
also suggested comparing contracting
rates across plans serving duals as an
additional measure of network
adequacy. In addition, the commenter
suggested that a comparison of the
plan’s provider availability to those
actually open to new Original Medicare
enrollees might indicate the value of the
plan to potential enrollees. Another
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
commenter asked that CMS include in
its regulation defining network
adequacy the following factors derived
from the Medicaid access standards
under § 438.206: (1) The mode of
transportation used by Medicare
beneficiaries, particularly those who are
dually eligible and those who rely on
transportation for the disabled; (2)
whether the location furnishes physical
access for enrollees with disabilities;
and (3) delivery of services in a
culturally competent manner.
Response: We recognize that special
needs plans (SNPs) that specifically
serve the dual eligible population have
unique requirements. It is for that
reason that in 2011, SNPs that
exclusively serve the dual eligible
population will be required to have
contracts with State Medicaid agencies
where they operate. While
transportation is not a Medicare covered
benefit, it is our expectation that MA
plans’ facilities are available and
accessible to plan enrollees.
7. Deemable Program Requirements
Under Parts C and D (§ 422.156(b)(7),
§ 422.156(f), § 423.165(b), and
§ 423.165(f))
In the October 2009 proposed rule, we
proposed to clarify what regulatory
requirements are ‘‘deemable’’ for MA
organizations that offer prescription
drug benefit programs by modifying the
language at § 422.156(b)(7) to refer to the
list of deemable requirements for Part D
sponsors set out at § 423.165(b)(1)
through (b)(3). In addition, we proposed
modification to § 422.156(f) and
§ 423.165(f) to add language clarifying
that CMS may use its statutory authority
to impose intermediate sanctions and
civil money penalties (CMPs), initiate
contract terminations, and perform
evaluations and audits of a sponsoring
organization’s records, facilities and
operations, notwithstanding our
deeming provisions. We also proposed
to remove language at § 423.165(b)(4)
regarding programs to protect against
fraud, waste and abuse from the items
listed as deemable program
requirements. After considering the
comments we received in response to
these proposals, we are adopting all of
these proposals without further
modification into this final rule.
Comment: One commenter asked if
CMS will create an avenue for
accrediting organizations who are
currently approved under the Medicare
Advantage program to apply for
deeming under the Prescription Drug
program.
Response: Our proposal did not
address the process for becoming an
accrediting organization. Any
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
organization that wishes to be an
accrediting organization for the
Medicare Prescription Drug program
must first apply and be approved by
CMS in accordance with existing
requirements.
Comment: One commenter asked if
we will define possible roles and
responsibilities for accrediting
organizations under the revised Part D
monitoring and oversight audit program.
Response: Our proposal did not
address the Part D accrediting process
and we do not intend to address this
process in this final rule. We will
evaluate whether or not there is a need
to release more detailed information in
the future through subregulatory
guidance or other appropriate means.
Comment: One commenter indicated
that Part D plan sponsors have not been
given information on accrediting
organizations that could grant plans
deemed status for Part D. The
commenter further recommended that
there be an opportunity to work with us
to identify accredited organizations for
pharmacy benefit manager operations in
order to simplify the audit process.
Response: Our proposal did not
address the Part D accrediting process
and we do not intend to address this
process in this final rule. However, as of
the date of the publication of this
regulation, CMS has not approved any
accrediting organizations to grant
deemed status for Part D sponsors. We
will evaluate whether or not there is a
need to release more detailed
information in the future through
subregulatory guidance or other
appropriate means.
Comment: We received a few
comments indicating that the regulatory
provisions provided in this section
should be further clarified either
through rulemaking or subregulatory
guidance.
Response: We will evaluate whether
or not there is a need to release more
detailed information in the future
through subregulatory guidance or other
appropriate means.
Comment: One commenter suggested
that we provide clarification on the
criteria we would use to determine
whether to perform evaluations,
conduct audits, or impose sanctions or
civil money penalties relative to a
sponsoring organization’s compliance
with deemable requirements.
Response: Our proposal did not
intend to modify or affect the manner in
which CMS conducts compliance
evaluations, audits or the process for
imposing intermediate sanctions. These
processes are not directly affected by
whether the underlying subject of the
deficiency is a deemable requirement.
PO 00000
Frm 00017
Fmt 4701
Sfmt 4700
19693
Comment: One commenter
encouraged us to consider adding
additional deemable requirements based
on differences between the Part D
program and the Part C program.
Response: We have been granted
limited statutory authority regarding
what specific requirements are
deemable. Our proposals reflect our
current statutory authority.
Comment: One commenter requested
that since the fraud, waste and abuse
program was being removed as a
deemable requirement we consider
allowing ‘‘certification’’ from an external
qualified source to serve in the deeming
capacity.
Response: We have been granted
limited statutory authority regarding
what specific requirements are
deemable. We proposed modifications
to our regulations to mirror our current
statutory authority. To the extent the
commenter is proposing that CMS
consider ways of assessing an
organization’s compliance with fraud,
waste, and abuse requirements that
suggestion would be outside the scope
of this proposal.
8. Modify the Corrective Action Plan
(CAP) Process as It Relates to
Procedures for Termination and
Nonrenewal of a Part C or D Contract by
CMS (§ 422.506(b)(3), § 422.510(c)(1),
§ 423.507(b)(3), and § 423.509(c)(1))
In the October 2009 proposed rule, we
proposed eliminating the existing
language contained in regulations at
§ 422.506(b)(3), § 422.510(c)(1),
§ 423.507(b)(3), and § 423.509(c)(1) that
require corrective action plans (CAPs) to
be submitted for our approval prior to
us issuing a notice of intent to terminate
or nonrenew a contract. Instead, we
proposed that the sponsoring
organization be solely responsible for
the identification, development, and
implementation of its CAP and for
demonstrating to us that the underlying
deficiencies have been corrected within
the time period afforded under the
notice and opportunity for corrective
action.
We also proposed amending the
existing language at § 422.506(b)(3),
§ 422.510(c)(1), § 423.507(b)(3), and
§ 423.509(c)(1) which sets forth the
specific timeframes afforded sponsoring
organizations for the development and
implementation of a CAP prior to CMS
issuing a notice of intent to terminate or
nonrenew. Specifically, we proposed to
afford sponsoring organizations with at
least 30 calendar days to develop and
implement a CAP, prior to issuing the
notice of intent to terminate or
nonrenew. CMS is adopting the
proposed language into the final rule
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19694
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
with a few technical changes to
§ 422.506(b)(3)(i) and (ii),
§ 422.510(c)(1)(i) and (ii),
§ 423.507(b)(3)(i) and (ii), and
§ 423.509(c)(1)(i) & (ii). First, we are
deleting the phrase ‘‘that formed the
basis for the determination to nonrenew the contract’’ from the proposed
revised regulations governing nonrenewals at § 422.506(b)(3)(i) and
§ 423.507(b)(3)(i) and deleting the
phrase ‘‘that formed the basis for the
determination to terminate the contract’’
from the proposed revised regulations
governing terminations at
§ 422.510(c)(1)(i) and § 422.509(c)(1)(i).
The reason for this revision is that, upon
further consideration, we have
concluded that this language is
superfluous and has the potential to
cause confusion concerning when CMS
must provide notice and reasonable
opportunity to correct deficiencies.
Next, we are modifying
§ 422.506(b)(3)(i), § 423.507(b)(3)(i),
§ 422.510(c)(1)(i), § 423.509(c)(1)(i) to
state that CMS will provide the
sponsoring organization a ‘‘reasonable
opportunity’’ of ‘‘at least 30 calendar
days’’ to develop and implement a
corrective action plan. This
modification made the propose
provision at § 422.506(b)(3)(ii),
§ 423.507(b)(3)(ii), § 422.510(c)(1)(ii),
and § 423.509(c)(1)(i) duplicative and
unnecessary, therefore we are deleting
that provision.
These revisions do not alter the
meaning and purpose of the proposed
revised regulations and are strictly
editorial changes.
Comment: We received numerous
comments regarding our proposal to
modify the overall approach and
timeframe sponsoring organizations are
afforded for developing and
implementing a CAP prior to CMS
issuing a notice of intent to terminate or
nonrenew. Although almost all
commenters were supportive of CMS’
proposal to move to an outcome
oriented approach for reviewing CAPs,
some commenters believe that 30 days
is not enough time for sponsoring
organizations to develop and implement
a CAP. Commenters provided several
reasons to support this concern,
including the fact that CAPs may
involve complex and time consuming
programming or modification of systems
and that the proposed change could
result in sponsoring organizations
pursuing a more cursory or manual
remediation rather than a fuller
remediation. Other commenters
recommended that rather than
specifying a time period, CMS and
sponsoring organizations should
mutually agree on a time period that is
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
best for completing a CAP. A few
commenters expressed that 30 days was
more than enough time to correct
deficiencies and that the regulations
need to state more clearly that the
corrective action should be completed
within the same 30-day period.
Response: Our proposal specifically
stated that the time period afforded
sponsoring organizations would be ‘‘at
least’’ 30 days, thereby proposing the
minimum amount of time that CMS
would afford a sponsoring organization
to develop and implement a CAP. We
believe our proposal is reasonable and
accounts for those situations where we
determine that longer periods of time
are warranted to demonstrate correction
(for example, when corrections must be
made to electronic information
systems). Our proposal does not intend
to limit the development and
implementation of a CAP to 30 days in
all cases because we agree that there are
some deficiencies of a complex or
technical nature that may require
additional time to rectify.
Comment: A few commenters
requested that CMS clarify how it will
determine if a sponsoring organization
has attained compliance (for example,
what are CMS’ expectations and what
supporting documents would we
require in such situations to
demonstrate compliance).
Response: Our proposal to change to
an outcome based approach is not
making modifications in the current
methodologies for assessing whether an
entity is in (or out of) compliance with
our requirements. For example, CMS
currently conducts validation activities
based on account management data and
information, audit results, beneficiary
complaints, sponsoring organization
reporting requirements and performance
data indicators to determine whether a
sponsoring organization is in
compliance with our requirements. We
will continue to determine if the
sponsoring organization in is in
compliance with our statutory,
regulatory and program requirements by
utilizing these kinds of monitoring and
oversight measures. The proposed
language is only clarifying that for nonrenewal and termination actions, we
will not be requiring the sponsoring
organization to submit its corrective
action plans for approval by us, but
instead the sponsoring organization
must submit proof that identified
deficiencies have been corrected.
Comment: One commenter suggested
that if CMS retains the authority to
reject a CAP based on the process used
to fix the deficiency, the sponsoring
organization should be allowed to
submit its CAP to CMS for approval,
PO 00000
Frm 00018
Fmt 4701
Sfmt 4700
and if not disapproved by CMS within
a specified period, assume that the CAP
is approved from a process perspective.
Response: The commenter has
misunderstood our proposal. We are
proposing to modify the current CAP
process to be entirely outcome oriented
and we will no longer be requiring
sponsoring organizations to submit
corrective action plans for approval
(that is, the process for how the plan
goes about correcting its deficiencies
will not be approved or disapproved by
CMS). Rather, the process will be
independently developed and
implemented by the sponsoring
organization and our focus will be on
determining whether the deficiencies/
problems that created the need for the
CAP have been corrected.
Comment: A commenter requested
that CMS not apply the 30-day CAP
timeframe to ‘‘routine or ad-hoc audits.’’
Response: The procedures governing
the corrective action plan process
associated with routine or ad-hoc audits
are not specified in regulation. To the
extent, however, that we would initiate
a termination or nonrenewal action
against a sponsoring organization based
on a routine or ad-hoc audit CAP, we
would follow the procedures outlined in
this regulation.
Comment: A commenter
recommended that sponsoring
organizations, which are currently
under a CAP, be allowed to engage the
services of an independent auditor to
evaluate whether the sponsoring
organization is in compliance with
CMS’ requirements.
Response: Our proposed language was
not intended to prevent a sponsoring
organization from taking the initiative to
use an independent auditor to help
identify and correct underlying
compliance deficiencies.
9. Procedures for Imposing Intermediate
Sanctions and Civil Money Penalties
Under Parts C and D (§ 422.756 and
§ 423.756)
In the October 2009 proposed rule, we
proposed two changes to the regulations
to provide additional tools to assist us
in making the determination to lift an
intermediate sanction as stated in
§ 422.756(d)(3) and § 423.756(d)(3).
First, we proposed providing CMS with
the discretion to require a sponsoring
organization, under an intermediate
sanction, to hire an independent auditor
to provide us with additional
information that we will use to
determine if the deficiencies upon
which the sanction is based have
actually been corrected and are not
likely to recur. We also proposed an
alternative proposal in which we would
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
grant sponsoring organizations the
discretion to hire an independent
auditor to evaluate the sponsoring
organization’s compliance with our
requirements and would afford the
results of the independent auditor’s
review some weight in our
determination of whether the bases for
the sanction have been corrected and
are not likely to recur. After considering
the comments we received in response
to this proposal, we are adopting the
proposal without modification, which
provides CMS with the discretion to
require a sponsoring organization, under
an intermediate sanction, to hire an
independent auditor.
Second, we proposed changes to
§ 422.756(d)(3) and § 423.756(d)(3) to
provide CMS with the discretion to
require a sponsoring organization,
subject to a marketing and enrollment
sanction, to go through a test period
during which the organization could
market and accept enrollments for a
limited time in order for us to determine
if the sponsoring organization’s
deficiencies have been corrected and are
not likely to recur. Additionally, we
proposed to revise these provisions to
provide that following the test period, if
we determine the deficiencies that
formed the basis for the sanction have
not been corrected and are likely to
recur, the intermediate sanction will
remain in effect until such time that we
are assured the deficiencies have been
corrected and are not likely to recur.
The sponsoring organization, in these
instances, would not have a right to a
hearing to challenge our determination
to keep the sanction in effect. We are
finalizing this proposal without
modification.
We also proposed deleting existing
provisions at § 422.756(c) and
§ 423.756(c) because these provisions
are duplicative of the list of sanctions at
§ 422.750(a) and § 423.750(a) and are
unnecessary. In this final rule, we are
adopting all of these proposals without
further modification.
Comment: CMS received numerous
comments regarding the engagement of
an independent auditor by a sponsoring
organization under sanction by CMS,
with most commenters supporting the
alternative proposal in which CMS may
allow the sponsoring organization the
discretion to hire an independent
auditor. Commenters provided various
rationales for their support of the
alternative proposal, including the
potential financial and operational
burden to sponsoring organizations
when required to engage an outside
auditor; that sponsoring organizations
may already have the internal resources
available to provide the information to
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
CMS; and that absent standards, CMS
could impose this requirement in an
arbitrary and capricious manner. A
commenter opposing both proposals
because the commenter did not believe
it was necessary for CMS to grant the
sponsor the discretion to hire
independent auditors, and that by
allowing discretion to hire an
independent auditor, a sponsoring
organization that did not hire the
auditor would then be viewed in a
negative light. Finally, one commenter
expressed concern with our alternative
proposal that when an independent
auditor was not required by CMS, but
was retained by the sponsoring
organization at their discretion, CMS
would merit only ‘‘some weight’’ in the
decisionmaking process to lift the
sanction. Specially, the commenter
recommended that the independent
auditor’s evaluation should have the
same standard of weight regardless of
whether the independent auditor was
required or was discretionary.
Response: When a sponsoring
organization has been sanctioned, the
organization’s deficiencies have risen to
a serious and significant level. We
believe that we should have the
flexibility to require the sponsoring
organization to hire an independent
auditor for the benefit of both us and the
sponsoring organization. To ensure that
the use of the independent auditor will
be beneficial for the sponsoring
organization and to us, we intend to
consider the sponsoring organization’s
ability to afford an independent auditor
as well as the sponsoring organization’s
ability to demonstrate through its own
resources that it has corrected its
deficiencies and they are not likely to
recur. To determine whether or not we
would require an independent auditor,
we would check to see if the sponsoring
organization was on our financial watch
list as well as on the financial watch list
of any of the States or commonwealths
in which the sponsoring organization
was licensed. Also, whenever a
sponsoring organization is under
sanction, we engage in ongoing
discussions with its senior leaders and
management. If we were considering the
use of an independent auditor, we
would discuss this with the sponsoring
organization and solicit their feedback
in order to fully comprehend the
financial makeup and stability of the
organization.
As the proposed regulatory language
reflected, this authority will not be
exercised in all circumstances because
we recognize that an independent
auditor may not be needed or beneficial
in all circumstances. For these reasons,
we are maintaining the requirement in
PO 00000
Frm 00019
Fmt 4701
Sfmt 4700
19695
the final rule that when a sponsoring
organization has been sanctioned CMS
may require that the sponsoring
organization hire an independent
auditor.
Comment: CMS received a number of
comments requesting that CMS provide
more clarification related to our use of
the term independent auditor in our
proposal, including providing a
definition, minimum qualifications, and
whether conflict of interest rules would
apply. One commenter suggested that
CMS provide a list of auditors for
sponsoring organizations to choose
from. Another commenter seemed to be
concerned that an independent auditor
is generally used in the context of a
financial audit and referred to ‘‘Sarbanes
Oxley’’ stating that it has fairly clear
rules with regard to conflicts of interest.
In that respect, commenters requested
that CMS clarify what context it used
the phrase ‘‘independent auditor.’’
Response: We intend that sponsoring
organizations will choose the
independent auditor. We will work with
sanctioned organizations to determine if
the independent auditor they are
proposing is appropriate. Some basic
examples, however, of standards that we
will require for independent auditors
are knowledge of the Part C and Part D
programmatic requirements and
experience evaluating an organization’s
performance in the areas specific to the
deficiencies. To the extent that one
commenter was referencing financial
audits under the Sarbanes Oxley Act of
2002 (Pub. L. 107–204, 116 Stat. 745,
enacted July 30, 2002), this proposal is
not governed by the standards in
Sarbanes Oxley. The type of audit
contemplated by Sarbanes Oxley is a
financial audit and not a program
compliance audit. The audits proposed
here would involve an independent
evaluation of whether the sponsoring
organization is in compliance with CMS
requirements. We will evaluate whether
or not there is a need to release more
detailed information in the future
through subregulatory guidance or other
appropriate means.
Comment: Several commenters
requested that CMS provide standards
for when an independent auditor would
be needed. Commenters wanted clarity
on when an independent auditor would
be required, what types of issues the
auditor would be called to review, and
the parameters under which an auditor
would perform its work. One
commenter requested that we limit the
focus of the audit to the bases for the
sanction.
Response: During the period of the
sanction, we communicate regularly
with the sponsoring organization and,
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19696
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
therefore, we intend to fully discuss
with the sanctioned organization the
basis for concluding an independent
auditor is necessary prior to requiring
the organization to retain the
independent auditor. We intend to
utilize the requirement in our proposal
when we determine that an independent
auditor would be beneficial, such as in
situations where the deficiencies are
highly technical in nature. Also, if the
sanctioned organization is having
difficulty demonstrating to us that its
deficiencies have been corrected, an
independent auditor can provide us
with assurances that the deficiencies
have in fact been corrected through a
neutral third party evaluation. We
intend to determine what areas the
independent auditor should assess
depending on the nature and extent of
the deficiencies. We do not believe it is
possible or appropriate to provide this
information in regulation since each
sanctioned organization may require a
different assessment based on its
particular deficiencies. With respect to
the comment that the focus of the audit
should be limited to the bases for the
sanction, based on our experience, we
believe the independent auditor would
need the flexibility to broaden the
assessment because new or related
issues may arise in the period after the
sanction is imposed that need to be
evaluated in order to ensure that the
deficiencies have been corrected and are
not likely to recur.
Comment: Several commenters were
concerned with our comparison of the
independent auditor in this requirement
to the Corporate Integrity Agreements
(CIA) used by the HHS Office of
Inspector General (OIG) because
information found under the CIA is not
publicly disclosed, and the commenters
believe that the results should be
publicly disclosed. Commenters also
stated that in the case of nursing homes,
experience has shown that CIAs have
not been effective and that nursing
homes have not improved as a result of
CIAs.
Response: When a sponsoring
organization is subjected to an
intermediate sanction, this information,
along with the bases for the sanction, is
publicly disclosed through the CMS
Web site. Additionally, the public
subsequently is notified as to whether
we have determined that these
deficiencies have been corrected and are
not likely to recur. We do not believe
that there is any significant value in
making the public aware of audit results
related to an internal technical
assessment of the correction of these
deficiencies that may be relied on to
make our ultimate determination.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
However, to the extent these documents
would be required under existing law to
be disclosed we fully intend to comply
with those requirements.
With regard to the commenters who
were concerned about the overall
effectiveness of using independent
auditors to assist us in evaluating
compliance, correcting the deficiencies
is ultimately the responsibility of the
sanctioned organization. Although, the
independent auditor may consult with
the sanctioned organization on the best
way to fix its deficiencies, the main
purpose of the independent auditor is to
provide evidence and additional
assurances which would assist us in
making the determination that those
deficiencies have been corrected. We
intend that independent auditor results
will be weighed with a host of other
validation activities conducted by us
and will not be the sole source of
information concerning whether
deficiencies have been corrected and are
not likely to recur.
Comment: One commenter stated that
the audit findings of an independent
auditor should be subject to attorneyclient privilege and that they would
only be subject to release to CMS if the
sponsoring organization waived the
privilege.
Response: We disagree with the
commenter that results of the
independent auditor are protected by
attorney client privilege. The purpose of
the independent auditor is to provide a
neutral third party evidenced-based
evaluation of whether a sanctioned
organization is in compliance with CMS
requirements. Attorney-client privilege
is a legal concept which protects
communications between an attorney
and his or her client and keeps certain
communications between the parties
confidential. Independent audit findings
are by no means necessarily subject to
the attorney-client privilege and, in this
case, the sole purpose of the audit being
performed is to provide information to
CMS.
Comment: One commenter stated that
CMS’ determination not to lift the
sanction after the results of the
independent audit should be appealable
and such appeal is required by law.
Response: There is no statutory right
to appeal a decision by CMS to keep a
sanction in effect. Appeal rights are
afforded at the time the sanction is
imposed.
Comment: One commenter requested
that we remove the language ‘‘not likely
to recur’’ from the independent auditor
requirement. The commenter stated that
it was not general practice for an auditor
to opine as to whether the deficiencies
were not likely to recur.
PO 00000
Frm 00020
Fmt 4701
Sfmt 4700
Response: We did not propose and do
not intend to require the independent
auditor to opine as to whether the
deficiencies are not likely to recur. The
independent auditor will perform an
assessment to determine if the
sponsoring organization is in
compliance with our requirements and
we would use that evaluation, along
with other information provided by the
sponsoring organization, to make our
determination as to whether the
deficiencies that formed the basis for the
sanction have been corrected and are
not likely to recur. The independent
auditors report is evidentiary and not
dispositive as to whether the
deficiencies have been corrected and are
not likely to recur. We make that
determination.
Comment: We also received a number
of comments on the proposal that in
instances where marketing or
enrollment sanctions have been
imposed, CMS may require a sponsoring
organization to engage in a marketing or
enrollment ‘‘test period’’ in order to
assist CMS in making a determination as
to whether the deficiencies have been
corrected and are not likely to recur.
Most commenters wanted more clarity
regarding the parameters of the ‘‘test
period,’’ including any limitation on
enrollment during the test period, the
duration, when it would be required
and the level of performance required
during the test period.
Response: The details concerning
implementing a test period will vary
from organization to organization
depending on the nature and extent of
the deficiencies that formed the basis for
the sanction and other factors such as
the organization’s size, complexity of
operations, etc. We intend to work
closely with any sanctioned
organization prior to establishing a ‘‘test
period’’ and the organization will
receive specific notice of the standards
the organization must meet to
demonstrate that its deficiencies have
been corrected during the test period.
Comment: Several commenters
asserted that sanctioned organizations
should be afforded appeal rights if, after
the marketing and enrollment ‘‘test
period,’’ CMS determines to keep the
sanction in effect.
Response: Under our proposed
provision, the ‘‘test period’’ is a
validation activity that will help us to
determine that the deficiencies that
formed the basis for the sanction have
been corrected and are not likely to
recur. For example, when we validate a
sponsoring organization’s compliance
with appeals and grievances
requirements, we may perform an audit
to test those areas. If the audit
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
demonstrates that the sponsoring
organization has not corrected its
deficiencies or that they are likely to
recur, the sanction will remain in effect
and the sponsoring organization cannot
appeal that determination. Appeal rights
are afforded at the time the sanction is
imposed.
Comment: Several commenters
expressed concern that sponsoring
organizations subject to a ‘‘test period’’
would be under heightened scrutiny
and that CMS would have sole
discretion to determine the point at
which the sponsoring organization has
corrected the basis for the sanction. One
other commenter questioned the value
of a ‘‘test period’’ as well as the
independent auditor and seemed to
equate these validation activities to a
situation where the sponsoring
organization has been issued a
corrective action plan (CAP).
Response: We intend to use a ‘‘test
period’’ as one of a host of validation
activities and we intend to work closely
with any sanctioned organization prior
to imposing a ‘‘test period’’ to ensure the
sponsoring organization receives
specific notice of the standards it must
meet to demonstrate that its deficiencies
have been corrected and are not likely
to recur. We fully intend to subject all
sponsoring organizations placed under a
sanction to heightened scrutiny both
during the sanction period and for some
period afterwards to ensure that the
deficiencies that formed the basis for the
sanction are corrected and are not likely
to recur. The ‘‘test period’’ requirement
simply provides organizations under
marketing/enrollment sanctions the
same opportunity other organizations
would have to demonstrate compliance
with our standards for releasing the
organization from the sanction during
an established enrollment test period.
The provision is not applicable to an
organization that has been asked to
implement a CAP and has not had a
marketing and enrollment sanction
imposed. This provision is limited to
sponsoring organizations subject to
intermediate sanctions.
Comment: One commenter requested
that CMS adopt alternative approaches
for evaluating whether it is appropriate
to lift a marketing and enrollment
sanction imposed on a sponsoring
organization when the deficiencies that
led to the sanction are ones where CMS
cannot appropriately evaluate the extent
of remediation through a trial
enrollment and marketing period.
Response: We fully intend to continue
to explore other ways to effectively
validate whether deficiencies have been
corrected while a sponsoring
organization is under sanction. The test
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
period proposal was intended to address
the specific dilemma faced by CMS and
the sponsoring organization when a
sanctioned organization cannot market
and enroll during the sanction period so
as to demonstrate that the deficiencies
have been addressed.
Comment: One commenter suggested
that CMS specify that any decision not
to lift an intermediate sanction at the
end of such ‘‘test period’’ is a separate
decision from, and shall not
automatically result in, an action to
terminate a contract.
Response: We do not intend to use the
decision not to approve a sponsoring
organization’s request to release the
sanction, in and of itself, as a basis for
reaching a determination to terminate a
contract. Termination determinations
must always meet our specific statutory
and regulatory requirements.
10. Termination of Contracts Under
Parts C and D (§ 422.510(a) and
§ 423.509(a))
In the October 2009 proposed rule, we
proposed to delete the enumerated bases
for termination contained at
§ 422.510(a)(5) through (12) and
§ 423.509(a)(5) through (11). We
proposed to modify language at
§ 422.510(a) and § 423.509(a) to separate
the language into two paragraphs with
the first paragraph, (a)(1), listing the
statutory bases for termination and the
second paragraph, (a)(2), clarifying that
a sponsoring organizations (i) failure to
comply with our regulations, (ii) failure
to meet performance standards; and/or
(iii) participation in false, fraudulent, or
abusive activities, may constitute a basis
for CMS to determine that the
sponsoring organization meets the
requirements for contract termination in
accordance with paragraph (a)(1).
Based on the comments we received
on the proposed rule, we have decided
not to finalize our proposal and as an
alternative to slightly modify existing
regulations. First, we are finalizing the
proposed modified language in
provisions § 422.510(a)(1)–(3) and
§ 422.509(a)(1)–(3) so that the regulatory
text mirrors the statutory language.
Second, we are finalizing proposed
modified language for § 422.510(a)(4)
and § 423.509(a)(4), which states that
CMS may now terminate under this
provision when Medicare, Medicaid, or
other State or Federal health care
programs are affected. Next we are
finalizing our proposed deletion of
existing § 422.510(a)(5) and
§ 423.509(a)(5) because we believe that
the provision is a basis for expedited
termination and therefore
inappropriately located in this part. We
have decided to retain the remaining
PO 00000
Frm 00021
Fmt 4701
Sfmt 4700
19697
enumerated bases for termination that
we previously proposed to delete at
§ 422.510(a)(6) through (12) and
§ 423.509(a)(6) through (11). We are,
therefore, redesignating § 422.510(a)(6)–
(12) and § 423.509(a)(6)–(11) as
§ 422.510(a)(5)–(11) and § 423.509(a)(5)–
(10) respectively. Finally, we are adding
the two new proposed bases, with
modified language, to the existing
enumerated list at § 422.510(a)(12) and
§ 423.509(a)(11) (failure to comply with
regulatory requirements) and
§ 422.510(a)(13) and § 423.509(a)(12)
(failure to comply with performance
standards). The discussion of these
revisions is set forth in more detail
below.
Comment: A number of commenters
expressed specific concerns about our
proposed changes to § 422.510(a) and
§ 423.509(a), namely our proposal to
remove the enumerated standards for
termination and proposal to mirror the
statutory language. Commenters stated
that the proposed language is too broad
and vague, gives CMS unprecedented
discretion and authority and invites
arbitrary or inconsistently applied
determinations by CMS. One
commenter suggested that CMS
maintain the existing language.
Response: We disagree that the
proposed changes to § 422.510(a)(1)
through (3) and § 423.509(a)(1) through
(3) provide CMS with unprecedented
authority and discretion. The proposed
language merely mirrors the authority
provided to CMS through statute. We
have, however, after considering all of
the comments, decided to retain the
existing provisions from § 422.510(a)(6)
through (12) and § 423.509(a)(6) through
(11) into the final rule. These examples
of substantive bases are now
redesignated as § 422.510(a)(5) through
(11) and § 423.509(a)(5) through (10)
respectively.
Comment: A number of commenters
expressed concern with the proposed
language at § 422.510(a)(12) and
§ 423.509(a)(11) (formerly
§ 422.510(a)(2)(i) and § 423.509(a)(2)(i))
which provided that CMS may
determine that a basis exists to
terminate a sponsoring organization’s
contract if the sponsoring organization
fails to comply with any regulatory
requirement contained in parts 422 or
423. While one commenter strongly
supported the proposed change, many
commenters believed that the revision
removed the ‘‘substantiality’’ or
‘‘materiality’’ tests explicit or inherent in
each of the existing requirements, and
in effect it would allow CMS to
terminate on the basis of a single
instance in which a particular
requirement is not met.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19698
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Response: We have considered the
comments and have decided to remove
the word ‘‘any’’ from the proposal to
avoid confusion and have modified the
regulatory text in the final version of the
regulation to reflect this change.
Adherence to all our regulatory
requirements is important and
necessary, but we acknowledge that in
making a decision to terminate a
contract, we would take into account
the nature and extent of the failure to
meet our regulatory requirements and
the materiality of the requirement as
compared to other requirements.
Comment: A number of commenters
also expressed concern about the
proposed language at § 422.510(a)(13)
and § 423.509(a)(12) (formerly
§ 422.510(a)(2)(ii) and
§ 423.509(a)(2)(ii)) supporting the use of
outlier analysis to reach a termination
decision. These commenters opposed
this proposal and argued that it is
inconsistent with law and unfair to
equate outlier status to noncompliance.
Another commenter stated that it was
improper to make contract termination
decisions based on a determination that
a sponsoring organization is the lowest
performer among a cohort when the
organization may still be performing
adequately. Some commenters stated
that they needed more clarity on the
specifics associated with the outlier
standards and access to the data
underlying these standards.
Additionally, commenters asserted that
the outlier standards are too vague of a
standard to serve as a basis for contract
terminations, particularly when CMS
has not disclosed the relevant standards
or methodology and organizations have
not be notified in advance of these
standards in order to be afforded an
opportunity to improve. Two
commenters recommended that CMS
allow sponsoring organizations to
appeal CMS findings as a result of
outlier analysis.
Response: Outlier analysis is an
oversight mechanism by which we can
more effectively focus our limited
resources in determining which
sponsoring organizations to target for
further compliance analysis and
assessment. We do not intend to use this
analysis in and of itself as a basis to
terminate a contract. Therefore, we have
decided to remove this outlier language
from the final rule, to avoid
misunderstandings and confusion
among sponsoring organizations
concerning the use of this data to take
termination actions.
Comment: CMS proposed to modify
language at § 422.510(a)(4) and
§ 423.509(a)(4) (formerly
§ 422.510(a)(2)(iii) and
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
§ 423.509(a)(2)(iii)) to revise the
agency’s existing regulatory authority to
allow CMS to terminate a sponsoring
organization when there is credible
evidence that shows that the sponsoring
organization has committed or
participated in false, fraudulent or
abusive activities affecting the
Medicare, Medicaid, or other State or
Federal health care programs. Two
commenters on this proposed provision,
one in support and the other opposing
the provision, stated that CMS should
not terminate contracts in cases where
the employees committing the
fraudulent acts have no involvement
with the administration of the Medicare
lines of business offered by the
sponsoring organization.
Response: Our proposal was not
intended to indicate that we will
terminate a contract in the case of
employee fraudulent acts unrelated to
Medicare, Medicaid, or other State or
Federal health care programs.
11. Request for Hearing Under Parts C
and D (§ 422.662 and § 423.651)
In the October 2009 proposed rule, we
proposed to modify the language at
§ 422.662(a) and § 423.651(a) stating that
the sponsoring organization must file a
request for a hearing in accordance with
the requirements specified in the notice
of the contract determination or
intermediate sanction. This proposed
change would ensure that the proper
officials within CMS receive the request
and are able act upon it in a timely
manner. Current regulations at
§ 422.662(a) and § 423.651(a) governing
the hearing procedures require
sponsoring organizations to file a
request for a hearing on contract
determinations with the Hearing Officer
and to also file it with ‘‘any CMS office.’’
As we stated in the preamble to the
proposed rule, we believe this
procedure is ineffective and inefficient
because it is likely to result in a request
for hearing not being received by the
appropriate officials within CMS.
We also proposed a conforming
change at § 422.662(b) and § 423.651(b)
which governs the timeframes for filing
the request for hearing to provide that
the request must be filed within 15
calendar days after receipt of the notice
(versus the existing language which
states 15 calendar days from the ‘‘date
CMS notifies’’ the sponsoring
organization of its determination). This
proposed change was made to ensure
consistency with the way deadlines are
described in other regulatory provisions
of parts 422 and 423 governing contract
determinations or the imposition of
intermediate sanctions (including
related appeals processes).
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
Since we received no comment on
these sections, these changes are
adopted without modification in this
final rule.
12. Burden of Proof, Standard of Proof,
Standards of Review, and Conduct of
Hearing (§ 422.660, § 423.650, § 422.676,
and § 423.658)
In the October 2009 proposed rule, we
proposed to delete the references to
‘‘substantial compliance’’ as a standard
of review at hearing and delete the
existing regulations which provide for
an ‘‘earliest of’’ test from § 422.660 and
§ 423.650. We also proposed to
explicitly state that the preponderance
of the evidence is the standard of proof
that we believe applies during the
appeal of a contract determination or
intermediate sanction. We also
proposed to delete the existing language
contained at § 422.660(b) and
§ 423.650(b) and replace it with
language that provides that the
sponsoring organization has the burden
of proving by a preponderance of the
evidence that our determination was
inconsistent with the requirements of
the applicable part. Additionally, we
specified in our proposal that the
applicable requirements are § 422.501
and § 422.502 for the processes and
standards for applicants for the MA
program, § 423.502 and § 423.503 for
applicants for the Part D program,
§ 422.506 or § 422.510 for MA contract
determinations, § 423.507 or § 423.509
for Part D contract determinations, and
§ 422.752 or § 423.752 for intermediate
sanctions.
We proposed to modify § 422.660(c)
and § 423.650(c), which specified that
the notice of any decision favorable to
a Part C or D applicants appealing a
determination that it is not qualified to
enter into a contract with us must be
issued by July 15th for the contract in
question to be effective on January 1st
of the following year. We proposed a
change from the July 15th deadline to
September 1st.
Finally, we proposed to modify
existing regulations at § 422.676(d) and
§ 423.658(d) governing the conduct of
the hearing to provide that, consistent
with the burden of proof, during the
hearing the sponsoring organization
bears the burden of being the first to
present its argument to the Hearing
Officer according to any briefing
schedule determined by the Hearing
Officer.
We are adopting all of the proposed
changes as the final rule without further
modification.
Comment: Several commenters
opposed CMS’ removal of the
‘‘substantial compliance’’ standard
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
asserting that this standard was well
established and well understood as
opposed to the new language that CMS
proposed, which these commenters
stated was vague and unclear.
Response: We disagree that the
‘‘substantial compliance’’ standard is
clear and easy to apply in making a
determination. As explained in the
preamble to the October 2009 proposed
rule, the ‘‘substantial compliance’’
language has led to confusion among
parties to the hearing, has been difficult
for the Hearing Officer to apply, and
does not reflect the nuances of the
different legal standards provided in the
Act for making contract determinations
and imposing intermediate sanctions.
Our proposal, which provided that the
standard of review is whether CMS’
determination is inconsistent with the
regulatory requirements for taking the
underlying action (for example,
application denial, non-renewal,
termination or intermediation sanction)
provides the requisite specificity to be
applied by the hearing officer and the
parties to these actions. We also believe
the proposal properly focuses the
hearing officer and all parties to the
hearing on the correct standard, and the
pertinent issue under review at the
hearing.
Comment: Several commenters
expressed concern that the proposed
changes result in the sponsoring
organizations bearing the burden of
proof in appeal proceedings and one
commenter added that CMS’ proposal is
inconsistent with the general rule
articulated by the Supreme Court that
the party seeking to take action
ordinarily bears the burden of
persuasion and cited to Schaffer v.
Weast, 546 U.S. 49 (2005).
Response: The commenters have
misunderstood the scope of our
proposals because we did not propose a
change as to which party bears the
burden of proof. Existing regulations
explicitly state that the sponsoring
organization bears the burden of proof.
Also, we believe that the commenter is
mistaken in its reading and
interpretation of the ruling in Shaffer v.
Weast. In that case, the Supreme Court
held that the burden of proof in an
administrative hearing is properly
placed upon the party seeking relief
(‘‘[T]he burdens of pleading and proof
with regard to most facts have been and
should be assigned to the plaintiff who
generally seeks to change the present
state of affairs and who therefore
naturally should be expected to bear the
risk of failure of proof or persuasion.’’)
In our appeal proceedings, the party
seeking relief is the sponsoring
organization, thereby making it
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
appropriate for that party to bear the
burden of proof. Thus, existing
regulations which require that the
sponsoring organization bear the burden
of proof are consistent with the legal
precedent cited by the commenter.
Comment: One commenter requested
that CMS provide a definition for the
‘‘preponderance of the evidence
standard.’’
Response: The preponderance of the
evidence standard is a well established
and defined legal standard. To make a
showing by the preponderance of the
evidence, one must show that it is more
likely than not that the fact that the
claimant seeks to prove is true.
Comment: Some commenters opposed
changing the notification date from July
15th to September 1st. Some
commenters noted that notification by
September 1 of a favorable
determination would not leave a
sponsor with sufficient time to prepare
for the upcoming year given that
sponsors are permitted to start
marketing for the upcoming year on
October 1. One commenter
recommended moving the application
deadline to March to allow for adequate
preparation of the application and
suggested that adequate preparation
may reduce the number of appeals.
Response: In most cases, we do not
believe a favorable determination issued
by the CMS hearing officer will be
rendered as late as September 1st.
However, moving the notification date
of the favorable determination from July
15th to September 1st affords applicants
that receive a favorable decision the
opportunity to be sponsors in the
contract year for which they applied. In
all instances, this regulatory change
works to the benefit of sponsors.
We believe that sponsors are given
adequate time and instruction to
complete the application. We believe
changing the application due date
would not significantly impact the
number of appeals.
13. Expedited Contract Terminations
Procedures (§ 422.510, § 423.509,
§ 422.644, § 423.642, § 422.664, and
§ 423.652) Under Parts C and D
In the October 2009 proposed rule, we
proposed to delete the references to
expedited terminations based on false,
fraudulent or abusive activities and
severe financial difficulties contained in
the termination procedures at
§ 422.510(b)(2)(i), § 423.509(b)(2)(i),
§ 422.510(c)(2) and § 423.509(c)(2) and
in the appeal procedures at
§ 422.644(c)(2), § 423.642(c)(2),
§ 422.664(b)(2) and § 423.652(b)(2). We
proposed to modify these provisions
instead to reflect the more general
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
19699
statutory language concerning our
ability to take an expedited termination
when we determine that a delay in
termination caused by adherence to the
required procedures would pose an
imminent and serious risk to the health
of the individuals enrolled with the
sponsoring organization. We are
adopting our proposal to include this
statutory language, and based on the
comments we have decided to retain
and amend the two existing bases for
expedited termination currently located
at § 422.510(a)(4) & (a)(5) and
§ 423.509(a)(4) &(a)(5).
Comment: We received several
comments on our proposals.
Commenters were concerned that our
proposal was overly broad, lacked
specificity and that there were no
examples of situations where we would
pursue an expedited termination.
Additionally, a few commenters were
concerned that a sponsoring
organization might be subjected to an
expedited termination for a single,
isolated incidence of non-compliance
and that sponsoring organizations
would not be afforded the opportunity
for a hearing before the termination took
effect.
Response: After considering all of the
comments we received, we have
decided to retain the two existing
examples for when CMS may pursue an
expedited termination as well as
incorporate the statutory language into
the final rule.
The existing regulation references
§ 422.510(a)(5) and § 423.509(a)(5) as
one example of a situation where CMS
would pursue and expedited
termination, but it is also listed as a
basis for termination. In the proposed
regulation, we proposed removing this
instance as a basis for termination,
thereby removing its associated
reference in expedited termination. We
believed that this language created some
confusion because it intertwines a basis
for termination (that is, failure to make
services available) with the statutory
standard for making an expedited
termination. Based on the comments we
received, however, we see that the
reference to this basis provided
sponsoring organizations with a clear
example of the instances under which
CMS may decide to take an expedited
termination. In order to resolve this
issue, we have decided to add the
language from § 422.510(a)(5) and
§ 423.509(a)(5) to the regulatory
provisions on expedited terminations in
the final rule. We have decided to
finalize our proposal to delete this
language as a basis for termination
because we maintain that the
circumstances in this provision would
E:\FR\FM\15APR2.SGM
15APR2
19700
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
lead CMS to pursue an expedited
termination.
The second example in the existing
regulation references § 422.510(a)(4) and
§ 423.509(a)(4) which concerns
situations where there is credible
evidence that a sponsoring organization
committed or participated in false,
fraudulent or abusive activities affecting
the Medicare, Medicaid, or other State
or Federal health care programs,
including the submission of false or
fraudulent data. Based on the comments
we received, this reference also
provided sponsoring organizations with
a clear example of the circumstances
under which CMS may decide to take an
expedited termination. Therefore, we
have decided to retain the reference to
§ 422.510(a)(4) and § 423.509(a)(4) as a
basis for expedited termination.
Finally, we are moving forward with
our proposal to incorporate the statutory
language in the revised regulations
governing expedited termination,
thereby permitting CMS to expedite a
termination if we determine that a delay
in termination caused by adherence to
the required procedures would pose an
imminent and serious risk to the health
of the individuals enrolled with the
sponsoring organization. We do not
agree that our proposal to include the
statutory language is overly broad or
vague, and believe that by retaining the
two existing examples, it provides
sponsoring organizations with some
guidance on the types of issues that
might lead CMS to pursue an expedited
termination while still allowing us the
flexibility we need to ensure we can act
quickly in situations where adherence
with the standard termination
procedures would pose an imminent
and serious risk to the health of
Medicare beneficiaries.
14. Time and Place of Hearing Under
Parts C and D (§ 422.670 and § 423.655)
In the October 2009 proposed rule, we
proposed adding new language to
§ 422.670(b) and § 423.655(b) to state
that either the sponsoring organization
or CMS may request that a hearing date
be postponed by filing a written request
no later than 5 calendar days prior to
the scheduled hearing, and that when
either the sponsoring organization or
CMS requests an extension, the Hearing
Officer must provide a one-time 15calendar day postponement, and
additional postponements may be
granted at the discretion of the Hearing
Officer. We also proposed revising the
language in § 422.670(a) and
§ 423.655(a) to provide that the CMS
Hearing Officer schedule a hearing to
review a contract determination or the
imposition of an intermediate sanction
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
within 30 calendar days after the
‘‘receipt of the request for the hearing.’’
This change was made to ensure
consistency with the way deadlines are
described in other regulatory provisions
of parts 422 and 423 governing contract
determinations or the imposition of
intermediate sanctions (including
related appeals processes). We are
adopting all the proposed changes into
the final rule without further
modification with the exception of the
timeframes outlined in § 422.670(b) and
§ 423.655(b) as set forth below.
Comment: Several commenters
questioned CMS’ proposal to allow
sponsoring organizations or CMS to
request an extension for the hearing by
filing a written request no later than 5
calendar days prior to the scheduled
hearing. Most commenters believed that
allowing requests for extensions until 5
days prior to the scheduled hearing
would not allow enough time for
sponsoring organizations to change
travel arrangements and commenters
proposed different timeframes they
thought would be more suitable.
Response: We agree with the
commenters concerns and have decided
to extend the timeframe for requesting
an extension to the hearing date from 5
calendar days to 10 calendar days prior
to the scheduled hearing in our final
rule.
Comment: One commenter raised
concerns that there may be times when
an automatic, 15-day extension may not
be workable due to previous
commitments on the part of the Hearing
Officer or non-requesting party and
suggested CMS add language to the
requirement to allow for an alternate,
mutually agreed upon hearing date if
the Hearing Officer or the nonrequesting party is not available on the
hearing date that would otherwise result
from postponement.
Response: We believe that the
addition of such language is not
necessary because current regulations at
§ 422.670(b)(1) and (2) and
§ 423.670(b)(1) and (2) already provide
that the Hearing Officer has the
authority on his or her own motion, to
change the time and place for the
hearing.
15. Discovery Under Parts C and D
(§ 422.682 and § 423.661)
In the October 2009 proposed rule, we
proposed to delete the formal discovery
process contained in § 422.682 and
§ 423.661. In the December 5, 2007
Federal Register (72 FR 68700), we
published a final rule with comment
period that finalized our revisions to
§ 422.682 and § 423.661 to provide for a
formal discovery process prior to
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
hearing. However, based on our
experience since the promulgation of
this rule, we do not now believe a
formal discovery process is necessary or
appropriate for these kinds of
proceedings. In addition, the existing
timeframe in which the hearing
normally must take place, 30 calendar
days after request for a hearing, does not
easily accommodate a formal discovery
process. We also proposed to amend
§ 422.682 and § 423.661 to require that
witness lists and documents be
identified and exchanged at least 5
calendar days prior to the scheduled
hearing. We are adopting § 422.682 and
§ 423.661 without further modification
into this final rule.
Comment: Several commenters
opposed CMS’ removal of the formal
discovery process from regulations.
Commenters specifically stated that
deleting discovery is a violation of their
due process rights, and would deny
sponsors the only opportunity they have
to obtain the full breadth of information
they are entitled to for a fair hearing.
One commenter stated that the
discovery process is the appropriate
forum for the sponsoring organization to
learn of the criteria CMS used in
reaching its decision and that
sponsoring organizations have a
statutory right under 5 U.S.C. 552 to this
information.
Response: We disagree with the
commenters who stated that the removal
of discovery from regulations is a
violation of their due process rights and
a violation of their statutory right to
obtain information in this manner. Our
hearings are informal administrative
proceedings and as the court held in
Lopez v. U.S., ‘‘[t]here is no general
constitutional right to discovery in
administrative proceedings’’ Lopez v.
U.S., 129 F.Supp.2d 1284 (2000). Also,
we do not believe that finalizing our
proposal to remove discovery will create
unequal or prejudicial treatment that
will lead to a violation of due process.
Both CMS and sponsoring organizations
will be equally limited to producing and
receiving witness lists and documents
that must be exchanged at least 5
calendar days before the hearing. Also,
we do not believe that full discovery for
sponsoring plans is required to receive
the necessary information from us for
adequate and proper preparation for the
hearing. Prior to the hearing, we will
have already provided sponsoring
organizations the specific information
relied upon by CMS in reaching the
determination which they are appealing.
In cases of contract terminations or
intermediate sanctions, we will have
previously provided the specific basis
for the determination within the notice
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
of intent to terminate or impose
intermediate sanctions. Therefore, we
believe that a witness list and
documents are sufficient to meet the
evidentiary needs of the parties.
Additionally, any prior decisions of
hearing officers are public record, and
therefore, obtainable by sponsoring
organizations. Sponsors have numerous
statutory rights under 5 U.S.C. 552
which govern the agency’s disclosure of
public information; agency rules,
opinions, orders, records, and
proceedings. The removal of the
discovery process does not circumvent
the rights provided to the public under
5 U.S.C. 552.
Comment: One commenter also
requested that if CMS moves forward
with the proposal to eliminate the
formal discovery process that we revise
our proposal to include a list of the
specific documents to be shared and to
indicate the action that will result when
the required documents are not shared
prior to the hearing.
Response: Appeal proceedings will
vary dependent on what type of
determination is being appealed and we
cannot possibly specify which
documents would be necessary in each
and every type of case. Also, if
documents are not shared prior to the
hearing, it is within the discretion of the
hearing officer to determine what the
consequences of that action or inaction
for the parties to the hearing.
sroberts on DSKD5P82C1PROD with RULES
16. Review by the Administrator Under
Parts C and D (§ 422.692(a) and
§ 423.666(a))
In the October 2009 proposed rule, we
proposed revisions to the language at
§ 422.692(a) and § 423.666(a) to provide
that the sponsoring organization may
request review by the Administrator
within 15 calendar days after ‘‘receipt of
the hearing decision.’’ In addition, we
revised the language at § 422.692(c) and
§ 423.666(c) governing the notification
of Administrator determination to state
that the Administrator must notify both
parties of his or her determination
regarding review of the hearing decision
within 30 calendar days after ‘‘receipt of
the request for review’’ (versus the
existing language which provides
within 30 calendar days of ‘‘receiving
the request for review’’). These changes
were made to ensure consistency with
the way deadlines are described in other
regulatory provisions of parts 422 and
423 governing contract determinations
or the imposition of intermediate
sanctions (including related appeals
processes). We received no comment on
this section, and are adopting these
changes without modification.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
17. Reopening of an Initial Contract
Determination or Decision of a Hearing
Officer or the Administrator Under Parts
C and D (§ 422.696 and § 423.668)
In the October 22, 2009 proposed rule,
we proposed revising the regulations
governing the reopening of an initial
contract determination or decision of a
Hearing Officer or the Administrator
under Parts C and D by replacing the
language ‘‘initial determination’’ with
‘‘contract determination’’ in the section
headings of § 422.696 and § 423.668 and
in the text of § 422.696(a) and
§ 423.668(a). We noted that the term
‘‘initial determination’’ is not used
elsewhere in Subpart N (Contract
determinations and appeals). We
received no comment on our proposals
and are adopting these changes without
modification.
18. Prohibition of MA and Part D
Applications for 2 Years After a Mutual
Termination (§ 422.503(b)(6) and
§ 423.504(b)(6))
In the October 22, 2009 proposed rule,
we proposed prohibiting an MA
organization or Part D sponsor, as a
condition of the consent to a mutual
termination, from applying for new
contracts or service area expansions for
a period of 2 years, absent
circumstances that warrant special
consideration as provided under section
1857(c)(4)(A) of the Act. Specifically,
under Part D, we proposed modifying
§ 423.508 by adding paragraph (e),
which states that as a condition of the
consent to a mutual termination, CMS
requires as a provision of the
termination agreement language
prohibiting the Part D sponsor from
applying for new contracts or service
area expansions for a period of 2 years,
absent circumstances warranting special
consideration. Similarly, in
§ 423.504(b), we proposed adding a new
paragraph (b)(6) stating that
organizations may be qualified to apply
for new contracts to the extent that they
have not terminated a contract by
mutual consent under which, as a
condition of the consent, the Part D
sponsor agreed that it was not eligible
to apply for new contracts or service
area expansions for a period of 2 years
per § 423.508(e). We also proposed
redesignating the current § 423.504(b)(6)
to § 423.504(b)(7).
Similar modifications were proposed
for the MA regulations. Specifically, we
proposed modifications to § 422.508 by
adding paragraph (c), which states that
as a condition of the consent to a mutual
termination, we require as a provision of
the termination agreement language
prohibiting the MA organization from
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
19701
applying for new contracts or service
area expansions for a period of 2 years,
absent circumstances warranting special
consideration. Similarly, in section
§ 422.503(b), we added a new paragraph
(b)(7), stating that organizations may be
qualified to apply for new contracts to
the extent that they have not terminated
a contract by mutual consent under
which, as a condition of the consent, the
MA organization agreed that it was not
eligible to apply for new contracts or
service area expansions for a period of
2 years per § 422.508(c).
In proposing these changes, we noted
that in practice, a voluntary nonrenewal
of a contract by a Part D sponsor or MA
organization is not dissimilar from an
organization requesting and being
granted a mutual termination of their
contract under § 422.503 and § 423.508.
Under § 422.506(a)(4) and
§ 423.507(a)(3), if a sponsor voluntarily
nonrenews a contract, we cannot enter
into a contract with the organization for
2 years unless there are special
circumstances that warrant special
consideration, as determined by CMS.
The primary difference between a
nonrenewal and a mutual termination is
often timing. For a nonrenewal request
to take effect at the end of the current
contract year, it must be received by us
on or before the first Monday in June
(the bid deadline), as specified in
§ 423.507(a)(2)(i) and § 422.506(a)(2)(i).
However, once an organization submits
a bid, it can no longer voluntarily
nonrenew its contract for the following
year. Rather, the Part D sponsor or MA
organization must request a mutual
contract termination. The later in the
year the organization requests such a
mutual termination for the following
contract year, the more disruptive and
difficult the process becomes. In the
October 2009 proposed rule, we noted
that this is particularly true if a request
for a mutual contract termination occurs
once plan information has become
publicly available, marketed to
beneficiaries, and beneficiaries have
been given the opportunity to enroll.
These late terminations create
significant disruption for beneficiaries
and for us. Similarly, even greater
disruption results from mutual
terminations requested to take effect
during the course of a contract year.
In light of the disruptions that may
occur, we proposed that a termination
by mutual consent, which involves a
termination by an MA organization or a
Part D sponsor as well as by us, be
considered a termination of a contract
for purposes of the 2-year ban on
entering into new contracts under
section 1857(c)(4)(A) of the Act, which
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19702
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
is incorporated for Part D under section
1860D–12(b)(3)(B) of the Act.
After considering the comments we
received in response to these proposals,
in this final rule, we are adopting our
proposals without modification.
Comment: One commenter stated that
it is important to inform beneficiaries
immediately when—(1) their plan is not
in compliance with CMS requirements;
(2) sanctions have been implemented; or
(3) a plan is prohibited from applying
for new contracts or service area
expansions for a 2-year period. By
notifying beneficiaries immediately of
these situations, they will be afforded
more time to plan. Immediate
notification will increase the likelihood
that the information will not be lost in
the extraordinary amount of information
given during the open enrollment
period. The commenter recommended
that CMS strengthen compliance in
general in order to hold plans
accountable through CMS monitoring
and oversight.
Response: Although mutual
terminations are often requested when a
contract is, or will soon be, out of
compliance with CMS requirements, a
mutual termination can occur even
when there is no current or expected
compliance violation. Our proposed
revision to this portion of the regulation
only addresses the period of time during
which a mutually terminated sponsor
would be precluded from applying for a
new or expanded contracts. As a result,
this comment addressing the issue of
beneficiary notice concerning Part C and
D plan performance is outside the scope
of the proposed regulatory change.
Comment: One commenter stated that
it did not support the proposal for a 2year ban because market conditions can
create the need for contract terminations
and service area reductions. The
commenter requested that CMS allow
flexibility on market re-entry based on
environmental conditions and
appropriate negotiations with and
approval by the agency.
Response: Terminations can cause
beneficiary confusion and disruption.
Additionally, if a sponsor responds to
market conditions through the
nonrenewal process, a 2-year
application ban would apply.
Accordingly, we believe it is reasonable
and appropriate to apply the same 2year application ban in situations when
a sponsor terminates a plan after the
nonrenewal deadline. We also note that,
the proposed regulation changes
preserve our authority to permit affected
organizations to submit applications in
less than 2 years when special
consideration is warranted.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Comment: One commenter stated that
it did not oppose the proposed changes,
but requested that CMS clarify that the
2-year moratorium is based on a
sponsoring organization terminating all
of its MA or Part D contracts, not a
subset of each line.
Response: The regulation as proposed
would apply to a licensed legal entity
that mutually terminated any of its MA
or PDP contracts. A complete exit from
either program by an organization is not
required for CMS to invoke the 2-year
application prohibition.
Comment: One commenter requested
additional clarity regarding
‘‘nonrenewal’’ and ‘‘mutual termination.’’
The commenter urged CMS to be
especially cautious about any
presumption by CMS that termination
may be due to some type of poor
performance. The commenter stated that
it is possible that after the first week in
June a plan will determine that it is not
feasible to continue with the contract.
The commenter included the example of
a State-initiated dramatic midyear
reduction in payment for Medicaid
services in a dually integrated product.
The commenter also stated that the
references in § 422.508 to § 422.510
seem to imply some type of failure to
perform. The commenter supported
providing adequate notice of
terminations to beneficiaries, but
suggested that a 60-day timeframe may
be adequate for end-of-year
terminations. The commenter indicated
that the 2-year prohibition against
applying for new contracts or services
areas is reasonable given the language
‘‘absent circumstances warranting
special consideration.’’ The commenter
stated that an example of such a
circumstance should include the
situation of when a plan is trying to be
responsive to state purchasing
initiatives on behalf of dual eligibles.
Response: With this proposal, we
were not addressing whether a sponsor
is a poor performer. Rather, the proposal
was intended to make the consequences
to a sponsor of a mutual contract
termination the same as that for a nonrenewal. Without this change, a plan
might opt for a mutual termination
rather than the less disruptive nonrenewal in order to avoid the 2-year ban.
Additionally, the existing 2-year ban on
non-renewing sponsors is not meant to
address those sponsors’ performance,
although it may help us to identify good
business partners. The 2-year
application ban, as it has been applied
to non-renewing organizations and,
once this proposed change is adopted by
CMS, to mutually terminating
organizations, is intended to ensure
continuity in the Part C and D programs
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
by imposing longer-term consequences
on sponsors that might otherwise make
annual decisions to exit and re-enter the
programs.
Comment: A commenter asked CMS
to clarify that this change applies only
to mid-year mutual terminations and
not to a plan electing to non-renew with
ample notice to CMS (such as at the
time of bid submission or per nonrenewal guidance).
Response: Consistent with
§ 422.506(a)(4) and § 423.507(a)(3), the
2-year ban already applies to sponsors
electing to nonrenew. The proposed
regulatory change is an effort to extend
the application of that rule to the
analogous situation of a mutual contract
termination, regardless of the effective
date of that termination.
Comment: Commenters stated that
while they understood the importance
of the change, they would encourage
CMS to be flexible as there may be
instances where an MAO will conduct
the right level of due diligence on its
providers, yet a provider may
experience a disruption that causes the
organization to withdraw. The
commenters stated that there is
significant merit in those instances of an
MAO acting in the best interest of
Medicare beneficiaries and not
effectuating the new plan or contract.
Response: Regardless of the degree of
due diligence performed prior to
contracting, the sponsor assumes all
risks associated with complying with an
MA or PDP contract, including a 2-year
ban on new contracting resulting from a
mutual termination. Also, as indicated
in the proposed rule, CMS will retain
the authority to accept applications
where special consideration is
warranted.
Comment: A commenter asked how
this provision would be applied if an
acquisition or merger is pending.
Response: The acquiring sponsor
should assume that it is acquiring all the
Medicare contract assets and liabilities
of the selling organization, including a
2-year ban on new applications.
Comment: A commenter stated that
plans should be allowed to terminate
prior to the start of the benefit year if an
adequate network cannot be obtained.
The commenter also stated that if the
termination occurs after the start of
open enrollment, CMS should wait 30
days and allow beneficiaries to make
their own elections before assigning
them to an alternate plan. Additionally,
it was suggested that there should be a
mechanism in place to make sure that
a plan cannot use termination as a tool
to shift beneficiaries into a higher cost
plan offered by the terminating sponsor.
E:\FR\FM\15APR2.SGM
15APR2
19703
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Response: This comment does not
concern the proposed application of the
2-year ban on mutually terminated
sponsors. We will not address the
comment as it is outside the scope of the
proposed change.
Comment: A commenter stated that
there are a variety of circumstances,
including but not limited to the loss of
an adequate network that may be
beyond the control of the plan but force
it to withdraw a contract. Such
withdrawal may be in the best interest
of the beneficiaries. Therefore, overall
plan performance should not be judged
on this one factor. If a plan can remedy
the issue for the following contract year
it should be allowed to re-contract. The
commenter suggests that this issue be
looked at on a case-by-case basis.
Response: This provision does not
address whether a sponsor is a poor
performer. Rather, the provision is
intended to make the consequences of a
mutual contract termination the same as
those for a nonrenewal. The 2-year ban
on nonrenewing sponsors is not meant
to address those sponsors’ performance;
rather, it is intended to ensure
continuity in the Part C and D programs
by imposing longer-term consequences
on sponsors that might otherwise make
annual decisions to exit and re-enter the
programs.
Comment: One commenter asked if
CMS intends to apply this provision to
all types of applications regardless of
plan type or geographic location.
Response: In the context of voluntary
nonrenewals, our policy has been to
apply this prohibition based on plan
type and service area (for example, nonrenewal of a PFFS contract does not
prohibit the same organization from
applying immediately for an MA–HMO
contract for the same service area). We
anticipate applying the same policy to
mutual terminations.
B. Changes To Strengthen Beneficiary
Protections
This section includes provisions
aimed at strengthening beneficiary
protections under Parts C and D. Under
Part D, we address proposals in the area
of eligibility and enrollment policy,
transition period requirements,
coordination of benefits policy,
retroactive claims adjustment
reimbursements and recoveries, and use
of standardized technology. We also
finalize Part D rules regarding
timeframes and responsibility for
making redeterminations. Under Part C,
we finalize rules to—
• Authorize us to annually establish
limits on member cost sharing;
• Prohibit PPO, PFFS, and MSA plans
from using compliance with voluntary
prior notification procedures in
determining cost-sharing amounts;
• Establish new requirements for
organization determinations; and
• Offer two definitional revisions.
We also finalize Part C and D
marketing requirements by
distinguishing marketing materials from
enrollee communications materials and
mandating the use of standardized
marketing material language and format
to ensure clarity and accuracy among
plan documents. We also clarify notice
requirements, and require that
sponsoring organizations disclose
information concerning the
organization’s performance and
compliance deficiencies to enable
beneficiaries to make informed choices.
This information is detailed in Table 2.
TABLE 2—PROVISIONS TO STRENGTHEN BENEFICIARY PROTECTIONS
Part 422
Part 423
Provision
sroberts on DSKD5P82C1PROD with RULES
Subpart
Broker & Agent Requirements under Parts C
and D.
Beneficiary Communications Materials under
Parts C and D.
Required Use of Standardized Model Materials under Parts C and D.
Extend the mandatory minimum grace-period
for failure to pay premiums.
Maximum allowable out-of-pocket cost
amount for Medicare Parts A and B services.
Maximum allowable cost sharing amount for
Medicare Parts A and B services and prescription drugs.
Prohibition on prior notification by PPO,
PFFS, and MSA plans.
Requirements for LIS eligibility: expand the
deeming period for LIS-eligible beneficiaries to cover at least 13 months.
Expand auto-enrollment rules to entire LISeligible population.
Special Enrollment Period (SEP) Policies .....
Transition Process .........................................
Sponsor responsibility for retroactive claims
adjustment reimbursements and recoveries.
Time Limits for Coordination of Benefits .......
Pharmacy use of Standard Technology (ID
cards) under Part D.
Allow members in stand-alone Part D plans
to be temporarily out of area for up to 12
months.
Prohibit mass SPAP reenrollments during
plan year.
Non-Renewal Public Notice 60-day non-renewal beneficiary notification requirement.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Section
Subpart
N/A .............................
N/A .............................
N/A .............................
N/A.
Subpart V ...................
Subpart V ...................
Subpart V ...................
§ 422.2260,
§ 422.2262.
§ 422.2262 .................
Subpart V ...................
§ 423.2260
§ 423.2262.
§ 423.2262.
Subpart B ...................
§ 422.74 .....................
Subpart B ...................
§ 423.44.
Subpart C ...................
§ 422.100 ...................
N/A .............................
N/A.
Subpart C ...................
§ 422.100 ...................
Subpart C ...................
§ 423.104.
Subpart A ...................
N/A .............................
N/A.
N/A .............................
§ 422.2 § 422.4,
§ 422.105.
N/A .............................
Subpart P ...................
§ 422.773(c)(2).
N/A .............................
N/A .............................
Subpart B ...................
§ 423.34.
N/A .............................
N/A .............................
N/A .............................
N/A .............................
N/A .............................
N/A .............................
Subpart B ...................
Subpart C ...................
Subpart J ...................
N/A .............................
N/A .............................
N/A .............................
N/A .............................
Subpart J ...................
Subpart C ...................
§ 423.38.
§ 423.120(b)(3).
§ 423.464.
§ 423.466.
§ 423.800.
§ 423.466.
§ 423.120.
N/A .............................
N/A .............................
Subpart B ...................
§ 423.44.
N/A .............................
N/A .............................
Subpart J ...................
§ 423.464(e).
Subpart K ...................
§ 422.506 ...................
Subpart K ...................
§ 423.507.
PO 00000
Frm 00027
Fmt 4701
Sfmt 4700
E:\FR\FM\15APR2.SGM
15APR2
Section
19704
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
TABLE 2—PROVISIONS TO STRENGTHEN BENEFICIARY PROTECTIONS—Continued
Part 422
Part 423
Provision
Subpart
sroberts on DSKD5P82C1PROD with RULES
Notice of Alternative Medicare Plans .............
Timeframes and Responsibility for making
Redeterminations under Part D.
Requirements for Requesting Organization
Determinations.
Organization Determinations under Parts C ..
Refine/clarify definitions related to authorized
representatives.
Sponsors may be required to disclose to enrollees compliance and performance deficiencies.
Revise definition of ‘‘service area’’ to exclude
facilities in which individuals are incarcerated.
1. Broker and Agent Requirements
Under Parts C and D
In the preamble to our October 22,
2009 proposed rule, we recognized the
important role that agents and brokers
play in assisting beneficiaries with
accessing and understanding plan
information, making informed choices,
and enrolling them in Medicare health
plans. However, we also stated our
continuing concern about the inherent
financial incentives independent agents
and brokers have when selling Medicare
products. For this reason, while not
proposing any specific changes in the
October 2009 proposed rule, we
solicited comments suggesting ideas for
effectively providing Medicare health
plan and drug plan information and
enrollment assistance that ensures
beneficiaries select the plan that best
meets their needs, including whether
additional changes are needed in
recently established requirements
relating to plan sponsors’ use of agents
and brokers. We specifically requested
comments regarding the tools we
currently use (for example, our print
publications and our online resources)
to assist beneficiaries with their health
care decisions; whether State Health
Insurance Assistance Programs (SHIPs)
have the capacity to serve significantly
more Medicare beneficiaries; and the
effectiveness of limiting the use of
independent agents and brokers by MA
organizations and PDP sponsors to
certain times of the year, specifically,
the open enrollment period (OEP) and
annual enrollment period (AEP), or to
selected groups of beneficiaries.
Comment: Several commenters
provided very specific suggestions for
an enrollment broker demonstration.
Comments we received on an
enrollment broker demonstration
included suggestions for guiding
principles that should govern such a
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Section
Subpart
Subpart K ...................
N/A .............................
§ 422.5(a)(2)(ii) ...........
N/A .............................
Subpart K ...................
Subpart M ..................
§ 423.507(2)(ii).
§ 423.590.
Subpart M ..................
§ 422.568 ...................
N/A .............................
N/A.
Subpart M ..................
Subpart M ..................
N/A .............................
N/A .............................
N/A.
N/A.
Subpart C ...................
§ 422.566 & § 422.568
§ 422.561, § 422.574
& § 422.624.
§ 422.111(g) ...............
Subpart C ...................
§ 423.128(f).
Subpart A ...................
§ 422.2 .......................
N/A .............................
N/A.
demonstration as well as
recommendations on specific features
that should be included. Some
commenters expressed the concern the
proposed enrollment broker
demonstration would prevent plans
from continuing to use plan-employed
agents. Other commenters
recommended that independent agents
and brokers be permitted to make
referrals and receive a referral fee, with
the enrollment broker merely assisting
with actual enrollment. One commenter
suggested that the demonstration
initially focus on one State that already
uses a third party enrollment assistance
approach for Medicaid managed care
plan enrollment as a pilot. The same
commenter provided a very detailed
plan for how the commenter believed an
enrollment broker demonstration should
work. Under this suggested plan, the
enrollment broker would receive
applications, record oral scope of
appointment confirmations, conduct
third-party enrollment verification calls,
and conduct general marketing activities
providing high-level, standardized
general information on plan options.
The enrollment brokers would refer
beneficiaries with detailed questions or
needing more tailored plan
presentations to plan-employed agents.
The commenter also expressed concerns
about the enrollment broker
demonstration, suggesting that
coordination and communication
between the enrollment broker, plans,
and beneficiaries would be crucial to
the success of the demonstration; the
ability to assure the quality of
information provided to beneficiaries
would be important; and enrollment
broker training would also be a critical
component of the program. This
commenter suggested that CMS solicit
additional input from MA plans on
operational and information issues
PO 00000
Frm 00028
Fmt 4701
Sfmt 4700
Section
involved with effective communication,
coordination, and training. The
commenter also had concerns about the
role an enrollment broker would play in
the disenrollment process.
Response: We thank the commenters
for this feedback and will consider it as
we continue to improve our tools for
assisting beneficiaries with their health
care decisions and as we continue to
assess the impact of our current rules
regarding independent agents/brokers.
Comment: A number of commenters
provided us with responses to our
request for comments on the idea of
limiting the use of agents and brokers to
the AEP and OEP, or to selected groups
of beneficiaries. The majority of these
commenters expressed concerns that
limiting the use of agents and brokers in
this way could disadvantage age-ins,
dual-eligibles, and those eligible for the
low-income subsidy. They believe
strongly that these limits would
decrease the service and support that
beneficiaries depend on to understand
plan benefits and make enrollment
decisions. They also indicated that
CMS’ current support tools are not
sufficient to replace the function that
agents and brokers serve.
Commenters also indicated that
limiting the use of agents and brokers to
certain times of the year is not feasible
given that plans use agents and brokers
throughout the year and that current
CMS oversight of agents and brokers is
sufficient. Along these same lines, one
commenter supported the view set forth
in the proposed rule preamble that
sufficient time has yet not passed to
fully evaluate the impact of the new
marketing requirements codified by
CMS following enactment of the
Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA). Several
commenters suggested that limiting the
use of agents and brokers to the AEP
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
and OEP or to select beneficiary groups
would, in fact, result in increases of the
marketing abuses we are trying to
eliminate and would force good agents
out of business, leaving behind agents
only interested in short-term gains.
Several commenters provided
alternatives to limiting the use of agents
and brokers to the OEP and AEP or with
selected groups. The suggested
alternatives can be grouped into three
categories—(1) Recommendations to
strengthen current rules, processes, and
oversight of agents and brokers; (2)
Recommendations to require better
collaboration among stakeholders; and
(3) Recommendations that may require
regulatory changes.
Recommendations for strengthening
current rules, processes, and oversight
of agents and brokers included—
• Strengthening agent and broker
education/training;
• Creating a Medicare license and
industry designation that all agents
must have in order to sell Medicare
products; standardizing agent
compensation by geographic area;
• Creating and requiring the use of a
‘‘replacement/suitability’’ form that
agents would use when moving a
beneficiary to a new plan;
• Strengthening CMS surveillance
efforts;
• Stabilizing CMS’ guidance in this
area by limiting the frequency of future
policy changes; and
• Tightening our current rules
regarding the use of independent agents
and brokers.
Commenters’ recommendations for
requiring better collaboration with
stakeholders included—
• Working with plans, advocates, and
associations to develop alternatives;
• Creating a list of agents/brokers
prohibited from selling Medicare plans
that would be shared with all
stakeholders;
• Providing more support to and
coordination with the States; and
• Periodically publishing best
practices.
Additional recommendations that
may require regulatory or statutory
changes included—
• Requiring plans to share
information on agent misconduct and
terminations;
• Creating uniform compensation
rates for MA plans and PDPs;
• Requiring agents and brokers to
register with the National Insurance
Producer Registry (NIPR);
• Precluding agents from selling MA
plans or PDPs or selling to LIS
beneficiaries;
• Allowing a one-time ‘‘new
enrollment payment’’; and
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
• Renewal compensation for all
subsequent moves (regardless of plan
type change).
Commenters also recommended—
• Rescinding ‘‘lock-in’’;
• Limiting agent/broker involvement
in marketing, but not limiting their
involvement to certain periods during
the year;
• Shortening the AEP; and
• Eliminating the additional three
month OEP for MA plans at the
beginning of the year and applying the
enrollment period uniformly to MA
plans and PDPs.
A number of commenters also
provided recommendations with respect
to our question about whether and how
to expand the role of SHIPs. Almost all
of these commenters expressed concerns
about SHIP funding, capacity, and
capability. They expressed concern
about—
• Inadequate funding;
• The fact that SHIPs’ reliance on
volunteers limits their ability to fully
replace the role of independent agents
and brokers;
• The lack of capacity of existing
SHIP networks to service entire States;
and
• The lack of knowledge by SHIP
volunteers about plans in every local
market within a State.
Several commenters suggested that by
limiting plan options and standardizing
benefits, SHIP counselors would be
better able to handle questions from
beneficiaries about plan differences.
Other commenters suggested that by
strengthening SHIP networks, their
capacity could also be expanded.
Response: While we did not propose
any changes to our regulations
governing plans’ use of independent
agents and brokers to sell Medicare
plans in our October 22, 2009 proposed
rule, we appreciate the thoughtful ideas
and recommendations commenters
offered. We recognize the important role
agents and brokers play in assisting
beneficiaries with accessing and
understanding plan information, making
informed choices, and enrolling them in
Medicare health plans. However, we
still have concerns about the inherent
financial incentives independent agents
and broker have when selling Medicare
products. We recently implemented
regulations (§ 422.2274 and § 423.2274)
intended to reduce agent and broker
incentives to enroll beneficiaries in
plans inappropriately. We continue to
agree with the commenter that
suggested it is still too soon at this time
to fully evaluate whether these new
rules have achieved MIPPA’s goal of
creating incentives for agents and
brokers to assist beneficiaries with
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
19705
selecting plans based on their health
care needs. As we continue to monitor
and evaluate our marketing rules and
oversight activities, we will evaluate the
need for any future notice and comment
rule making.
2. Beneficiary Communications
Materials Under Parts C and D
(§ 422.2260, § 422.2262, § 423.2260, and
§ 423.2262)
In the October 22, 2009 proposed rule,
in implementing sections 1851(h) and
1860D–1(b)(1)(vi) of the Act, we
proposed narrowing the definition of
the term ‘‘marketing materials’’ at
§ 422.2260 and § 423.2260 to exclude a
new proposed category of ‘‘current
enrollee communications materials,’’
which we proposed defining to include
either situational materials or
beneficiary specific customized
communications. We proposed this
change in order to streamline the review
and approval of beneficiary
communication notices to current
members.
Specifically, we proposed revising
§ 422.2260 and § 423.2260 to exclude
from the definition of marketing
materials communications targeted to
current enrollees that are customized or
limited to a subset of enrollees or a
specific situation, or that involve claims
processing or other operational issues.
In the preamble to the proposed rule, we
cited the following examples of the
types of materials that would be
excluded from our proposed revised
definition of ‘‘marketing materials’’: Part
D explanations of benefits (EOBs);
notifications about claims processing
changes or errors; and other one-time or
situational, beneficiary specific letters to
current enrollees.
In addition, we proposed to revise
§ 422.2262 and § 423.2262 to specify
that, while the current enrollee
communications excepted from the
definition of marketing materials would
not be subject to the statutory
requirement that they be submitted to
CMS for review and approval prior to
use, we retained the right to review such
materials, and their use could be
disapproved (or disapproved subject to
modification) by CMS.
In this final rule, we adopt these
provisions with some modification. For
reasons discussed below, we have in
this final rule revised paragraph
§ 422.2260(5) (vii) to retain materials
about membership rules and
procedures, which we are calling
‘‘membership activities’’ (for example,
materials on rules involving
nonpayment of premiums, confirmation
of enrollment or disenrollment, or nonclaim specific notification materials) in
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19706
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
the definition of marketing materials
subject to CMS prior approval. In
addition, we have added a new
paragraph § 422.2260(6) to expressly
exclude from the definition of marketing
materials ad hoc customized or
situational enrollee communications.
Comment: A number of commenters
supported our proposal to modify the
definition of the term ‘‘marketing
materials’’ to distinguish materials used
to market to new potential enrollees
from current enrollee communication
materials. However, these commenters
raised an ambiguity in our proposed
revision to the definition of marketing
materials at § 422.2260(5)(vii) and
§ 423.2260(5)(vii). These commenters
noted that, as written, the revised
paragraph (5)(vii) merely defines
‘‘current enrollee communications
materials’’ without making it clear that
such materials are excluded from the
revised definition of marketing
materials.
Response: We agree that, as written,
the proposed revisions to the definition
of marketing materials did not make it
sufficiently clear that we were
excluding customized or situational
current enrollee communications from
the definition of marketing materials,
and that certain materials directed at
current members should still be
included in the definition. Accordingly,
as noted above, in response to these
comments, we have revised paragraph
§ 422.2260(5) (vii) to retain materials
about ‘‘membership activities’’ (such as,
materials on rules involving nonpayment of premiums, confirmation of
enrollment or disenrollment, or nonclaim specific notification materials) in
the definition of marketing materials. In
addition, we have added a new
paragraph § 422.2260(6) to specifically
exclude from the definition of marketing
ad hoc customized or situational
enrollee communications from the
definition of marketing materials.
Comment: Several commenters
suggested that, in the absence of a clear
definition of claims processing or
operational issues, we should define the
terms ‘‘situational’’ and ‘‘beneficiary
specific’’ narrowly. Several commenters
requested that we specify those
situations where beneficiary
communications would be considered
current enrollee communications
materials and be excluded from the
proposed revision to the definition of
marketing materials. These commenters
also suggested that we allow operational
letters that pertain to enrollment,
disenrollment and appeals issues to be
excluded from the definition of
marketing materials. Some commenters
suggested that we specify that any
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
materials excluded from the definition
of marketing materials are not subject to
the Medicare Marketing Guidelines’
requirements that plans include certain
plan mailing statements on envelopes
regarding the contents of the materials
enclosed within. In addition, these
commenters requested additional
guidance regarding how we intend to
operationalize the process for review
and approval of situational enrollee
communications that would, if the
proposed provisions were finalized as
proposed, be outside CMS’s current
marketing review and approval
processes.
Response: We disagree that it is
necessary, and do not believe it would
be appropriate, to attempt to specify in
the regulations text an exhaustive listing
of enrollee communications that are not
considered marketing materials per our
revised definition of the term
‘‘marketing.’’ Our intent is to define
these exclusions from the definition of
marketing materials narrowly to include
communications that are either
customized or intended for a subset of
current enrollees and which deal with
specific situations or cover memberspecific claims processing or other
operational issues. Our intent was not to
exclude from the definition of marketing
materials communications that are used
more broadly or that convey information
about plan benefit structures. As noted
previously, in response to earlier
comments and this comment, we have
revised our proposed definition of
current enrollee communications
materials in the final rule to add a new
§ 422.2260(6) to better describe our
intent in the proposed rule, and now
refer to these materials as ‘‘ad hoc
enrollee communications materials.’’
The final definition encompasses
materials that are targeted to current
enrollees; are customized or limited to
a subset of enrollees; do not include
information about the plan’s benefit
structure; and apply to a specific
situation or cover member-specific
claims processing or other operational
issues. We envision that ad hoc enrollee
communications materials could
include the following types of materials;
• Communications about a shortage
of formulary drugs due to a
manufacturer recall letter.
• Letters to communicate that a
beneficiary is receiving a refund or is
being billed for underpayments.
• Letters describing member-specific
claims processing issues.
Although we mentioned the Part D
EOB in the preamble to the October
2009 proposed rule as an example of a
customized current enrollee
communications material in the
PO 00000
Frm 00030
Fmt 4701
Sfmt 4700
preamble to our proposed rule, in light
of the comments we received on the
scope of the exemption from the
marketing definition, we no longer
believe that example was appropriate,
particularly given the importance of our
review of EOB templates. Thus, under
this final rule, we will continue to
require submission and approval of EOB
templates through the CMS marketing
review and approval process as part of
the new definition of marketing
materials, and distinguish this general,
regularly issued notice from documents
pertaining to the processing of an
individual claim. We intend to provide
further guidance on the types of
marketing materials that would be
considered ad hoc enrollee
communications materials, as well as
any alternate processes for their review
and approval, in the Medicare
Marketing Guidelines.
Comment: One commenter suggested
that all prospective and current member
materials be submitted to CMS as file
and use materials so that there is a
centralized and consistent place for
beneficiary communication to be
housed within CMS. This commenter
suggested, as an alternative, that the
plan develop internal processes to
monitor materials for consistency with
CMS requirements rather than filing
those materials with CMS. We note that
MA organizations and PDP sponsors
already have the responsibility to
ensure, from a monitoring and
compliance perspective, that their
marketing materials are complete,
accurate, and consistent with marketing
rules. A few commenters suggested that
we require plans to submit a report on
beneficiary communications and audit
these communications periodically to
ensure that plans are not engaging in
inappropriate beneficiary marketing
practices, and that we retain oversight
responsibilities for these materials.
Response: As stated previously, we
have revised the definition of
‘‘customized current enrollee
communications materials’’ in this final
rule such that it covers a narrow class
of ad hoc, customized beneficiary
communications materials. We will
provide more information about
alternative review and approval
processes for customized current
enrollee communications materials in
the Medicare Marketing Guidelines. We
note that we periodically audit
marketing materials. We will also
ensure that ad hoc enrollee
communications materials meet all
relevant requirements and are reviewed,
approved, and used appropriately.
Comment: One commenter
recommended that we extend our
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
current waivers of marketing review and
approval requirements for employer
group waiver plan marketing materials
to employer group waiver plan
enrollment materials. Some other
commenters requested that our current
regulations concerning review and
approval of marketing materials be
expanded to apply to third party
entities, as these commenters believe
third party entities tend to send
inaccurate or incorrect information to
beneficiaries.
Response: These comments address
our exercise of employer group waiver
authority, and accordingly are outside
the scope of this rulemaking, and not
addressed in this final rule.
3. Required Use of Standardized Model
Materials Under Parts C and D
(§ 422.2262 and § 423.2262)
In order to reduce variability of
marketing materials and to ensure
documents are more accurate and
understandable to beneficiaries, we
proposed, under the authority of
sections 1851(h) and 1860D–1(b)(1)(vi)
of the Act, to move toward greater
standardization of the information
provided in plan marketing materials.
Specifically, we proposed revising
§ 422.2262 and § 423.2262 to require
that MAOs and PDP sponsors use
standardized marketing material
language and format, without
modification, in every instance in which
we provide standardized language and
formatting. We noted that we will
provide MAOs and PDP sponsors with
standardized marketing materials
through the annual Call Letter, Health
Plan Management System (HPMS)
memoranda, or other guidance
documents. We believe this change will
ensure beneficiaries receive more
accurate and comparable information to
make informed decisions about their
health care options, as well as lead to
increased efficiencies and greater
consistency in our marketing material
review protocols and processes. In this
final rule, we adopt these provisions as
proposed. For the upcoming 2011 plan
year, we plan to update some of our
current standardized documents later
this spring through guidance, but we are
unlikely to standardize new types of
documents. For 2012 and future years,
we will consider and explore
standardizing additional forms and
materials.
Comment: Several commenters
strongly supported our proposed rule to
require MAOs and PDP sponsors to use
standardized language and formats in
marketing materials in instances where
we provide them. Other commenters
supported this proposal but urged CMS
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
to use consumer research and testing to
determine the terms and features
consumers want and the best ways to
disclose that information to assist
beneficiaries with making informed
decisions about their health care
options.
Several commenters suggested we
collaborate with the industry, advocates,
and State agencies to develop
standardized models, or convene a
workgroup to explore ways of
improving the wording of model
materials. In addition, some of these
commenters suggested, as an alternative,
that we solicit document examples and
suggestions from plans regarding the
creation of standardized materials and
establish from these examples best
practices for model language, content,
and format.
Response: Given the support for our
proposed requirement, we are adopting
it as set forth in the proposed rule. We
agree with the commenters’
recommendations that CMS should
research and consumer test
standardized model marketing
materials, when practical, as well as
engage in dialogue with the industry,
advocates and State agencies as part of
our efforts to standardize more
marketing model materials. As we did
when we reissued the standardized
annual notice of change/evidence of
coverage (ANOC/EOC) models for
contract year 2010, we intend to
continue to consumer test our marketing
materials, as practical, to ensure that
they accurately describe plan benefits
and assist beneficiaries with making the
best health care decisions for their
particular needs. As part of the process
of revising the standardizing ANOC/
EOC models, we also conducted
listening sessions with the industry to
solicit input on improving standardized
documents. We received a great deal of
useful information as a result of those
sessions, which we believe was critical
to improving the consumer friendliness
of those models. In addition, we will
continue to provide opportunities for
external stakeholders to comment on
draft versions of model documents prior
to finalizing them.
Comment: Many commenters
requested clarification on whether, in
developing standardized model
marketing materials, we will continue to
allow plans the flexibility to modify
model documents to accurately convey
specific or unique plan information.
Many commenters argued that our
existing models do not adequately
capture the range of variation in plan
types and benefits and that
standardizing additional models could
impede effective communications with
PO 00000
Frm 00031
Fmt 4701
Sfmt 4700
19707
members and potentially lead to
beneficiary confusion.
These commenters also expressed
concern that without such flexibility
and space for free form text, plans will
be unable to adequately capture the
nuances and unique features of the
various plan types. Commenters
specifically indicated that it was
imperative for us to allow flexibility
within standardized models for special
needs plans (SNPs), cost plans, point-ofservice (POS) plans and employer group
plans. A few commenters requested the
option to waive standardized language
for SNPs, or to develop separate
standardized documents for these plans
if we do not provide sufficient
flexibility within standardized models.
A commenter suggested that CMS
develop documents specifically for lowincome subsidy (LIS) eligible
beneficiaries and that we provide
documents translated into non-English
languages, as well as documents in
Braille.
Response: We agree that standardized
materials should be sufficiently tailored
to the intended recipients to relay plan
information as clearly as possible.
Accordingly, we intend to continue to
allow plans flexibility to accurately
convey specific plan information. As
with the current ANOC/EOC
standardized models, we will permit
plans to capture the unique features and
nuances of their various plan types and
plan benefits through variable text, as
appropriate. Our requirement to use
standardized models when we make
them available does not change this
practice; we are simply moving toward
standardizing more marketing
documents.
We will consider how best to provide
information to LIS-eligible individuals
as we standardize models. With regard
to providing translated materials, our
Medicare Marketing Guidelines
currently require plans to provide
translated and alternative format
documents to beneficiaries. Specifically,
plans are required to translate materials
in service areas where at least ten
percent of the population speaks a nonEnglish language as its primary
language. In addition, plans must make
basic enrollee information available to
individuals with disabilities (for
example, visually impaired
beneficiaries) and must ensure that
information about their benefits is
accessible and appropriate for Medicare
beneficiaries who have disabilities.
To ensure that beneficiaries
understand materials translated into a
non-English language, we require that
plans translating their marketing
materials into other languages use
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19708
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
standardized language. For example,
plans translating materials into Spanish
or Cantonese should use a standard
Spanish or Cantonese language resource
˜
(such as, ‘‘Real Academia Espanola’’
[Royal Spanish Academy], the most
widely-recognized institution
responsible for regulating the Spanish
language).
Comment: Several commenters
suggested we clearly identify the
documents we intend to standardize,
while two commenters suggested we
limit the documents we intend to
standardize. One commenter wanted
clarification on what ‘‘when specified by
CMS’’ means. In addition, many
commenters urged us to release
standardized documents to plans early
in the year to allow plans sufficient time
to disseminate plan information to
beneficiaries.
Response: In addition to the ANOC/
EOC, we indicated in the 2009 Call
Letter that we intended to standardize
the Part D explanation of benefits (EOB),
pharmacy directory, provider directory,
plan formulary, and transition notice.
We are currently in the process of
consumer testing and revising some of
these models to include plain language.
With regard to the comment about
what ‘‘when specified by CMS’’ means,
as with the ANOC/EOC, CMS will
specify which documents must be used
without modification through guidance
documents such as the annual Call
Letter or HPMS memoranda. Finally, we
are committed to releasing final
standardized models as early as possible
in the year in order to permit plans
sufficient time to prepare and
disseminate those documents to
beneficiaries for the following contract
year.
Comment: A commenter suggested
that, as an alternative to our proposed
requirement that plans use standardized
documents as specified by CMS, we
should allow for review of requested
changes to standardized language
similar to our review of hard copy
change requests for the Summary of
Benefits.
Response: We disagree with the
commenter’s suggestion. As stated
elsewhere in this preamble, we believe
standardization leads to improvements
in accuracy, comparability, and
understandability, as well as increased
efficiencies and greater consistency in
our marketing material review protocols
and processes. Permitting hard copy
changes would undermine our efforts to
reduce variability in marketing
materials. In addition, we believe that
we can address the commenter’s
concerns by permitting plans to use
variable text fields throughout
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
standardized documents so that they
accurately reflect unique plan
information.
Comment: One commenter
understood and appreciated the need to
standardize models but was concerned
that requiring a standardized format
limits options, may expand the length of
current model documents, and could
potentially drive up costs of printed
materials.
Response: We believe the benefits of
increased standardization outweigh the
commenter’s concerns. The move
toward standardizing more documents
will reduce the variability and errors in
marketing materials, and will ensure
that standardized documents provide
more accurate, understandable, and
comparable information across plans,
thereby helping beneficiaries to make
the best possible health care decisions
for their particular needs.
4. Involuntary Disenrollment for Failure
To Pay Plan Premiums Under Parts C
and D (§ 422.74 and § 423.44)
We proposed to amend the
regulations at § 422.74(d)(1) and
§ 423.44(d)(1) regarding disenrollment
for nonpayment of premiums to require
a minimum grace period of 2 months
before any involuntary disenrollment
occurs, in order to provide adequate
time for organizations to respond to
instances in which individuals fail to
pay their premiums, and for affected
enrollees to take steps to remedy the
situation and avoid disenrollment.
Furthermore, we proposed to codify
existing subregulatory guidance
regarding the beginning of the grace
period for Part D. In this final rule, we
adopt these provisions as proposed.
Comment: Several commenters
supported our proposed regulatory
revision to increase the length of the
minimum grace period and further
requested that CMS exempt
beneficiaries from having to pay plan
premiums if the organization fails to
request payment of the premiums in a
timely manner. Another commenter
supported this change and further
recommended that CMS also require
plans to provide for exceptions in cases
of financial hardship or other special
circumstances.
Response: We appreciate the support
for this proposal and are adopting it as
proposed. Although we do not believe
that it is appropriate to exempt
beneficiaries from paying premiums for
periods of coverage based on late
notification, we strongly encourage
plans to work with such individuals to
implement payment plans where
financial hardship could be involved.
Also, we note that a change in policy
PO 00000
Frm 00032
Fmt 4701
Sfmt 4700
with respect to an individual’s eventual
obligation to pay his or her premiums is
not within the scope of this rulemaking.
Comment: Another commenter who
supported the proposed regulatory
revision further requested that CMS
develop a method for beneficiaries to
engage CMS in resolving premium
payment disputes, such as whether
individuals who qualify for the Part D
low income subsidy or are enrolled in
a state pharmaceutical assistance
program (SPAP) owe plan premiums, in
addition to disputes regarding
individuals who experience problems
with premium withhold from their
Social Security benefits.
Response: Although there is no formal
CMS administrative process for dealing
with these issues, we do play an
important role in resolving premium
payment disputes through our existing
casework procedures. CMS caseworkers
often deal directly with individuals who
have their premiums withheld from
their SSA benefit payment, and we also
work with plans to resolve both
premium issues involving individuals
or groups of enrollees, such as the LIS
population in a plan. We also facilitate
discussions between plans and SPAPs
about such payment issues. We will
continue to look at ways to better
address these issues.
Comment: One commenter supported
the change and recommended that the
2-month grace period begin the first of
the month for which the enrollee is
delinquent and not from the point of
notification.
Response: Current regulations state
that the grace period begins the first day
of the month for which the premium is
unpaid. Subregulatory guidance
(§ 50.3.1 of Chapter 2 of the Medicare
Managed Care Manual and § 40.3.1 of
Chapter 3 of the Medicare Prescription
Drug Benefit Manual) further clarifies
that the premium is ‘‘unpaid’’ only after
the member is notified of, or billed for,
the actual premium amount due. We
clarified that the grace period not begin
prior to the member being notified of
the delinquency was established to
ensure that members have the full grace
period in which to resolve the premium
payment issue. We agree with the
commenter that the grace period should
begin the first day of the month for
which the enrollee is delinquent, but
only if the organization has previously
requested payment of the premium and
has provided the member an
opportunity to pay. Accordingly, in this
final rule, we are revising § 422.74(d)(1)
and § 423.33(d)(1) to include the
requirement that the grace period begin
on the first day of the month for which
the premium is unpaid or the first day
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
of the month following the date on
which premium payment is requested,
whichever is later.
Comment: Several commenters
representing plans opposed the
proposed change. One commenter
contended that the change would not
result in a reduction in disenrollments
and requested that CMS instead
maintain the minimum 1-month grace
period and allow organizations to offer
a longer grace period at their discretion.
Another commenter cited the potential
costs that may be incurred by
organizations to make systems
enhancements and to modify current
administrative processes, policies, and
procedures. Another commenter feared
lengthening the minimum grace period
from 1 month to 2 months would
potentially expose the organization to
increased financial liability.
Response: We believe that providing
additional time for individuals to pay
their premiums will assist a great
number of individuals in meeting their
financial obligations and avoid
disenrollment. As discussed in the
preamble to the October 22, 2009
proposed rule (74 FR 54657), under
current rules, individuals may have less
than a month a resolve payment
delinquencies. Thus, we believe this
proposal will provide a valuable
beneficiary protection, particularly in
view of the significant potential gap in
coverage that could result from such a
disenrollment, given that in many cases
an individual may not be able to reenroll until the following annual
election period. It will also help to
reduce the number of situations where
individuals pay their premiums shortly
after their disenrollments take effect but
the plan has already submitted a
disenrollment transaction.
Many organizations currently offer a
grace period in excess of the one month
minimum that is currently required. As
such, the impact of the proposed change
is limited to those organizations that
have chosen to implement the minimum
requirement. For these organizations,
we believe any administrative costs that
may result from changing from a one
month to a two month grace period are
fully justified by the benefits to be
gained by both the organization and its
members by providing a more
reasonable time frame for all parties to
resolve premium payment issues and
avoid disenrollment. With respect to the
financial liability issue, we also note
that the proposed change would not
affect an organization’s ability to pursue
collection of past due premium
payments from current and former
members.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Comment: One commenter requests
that CMS change the requirement for
issuing disenrollment notices, stating
that a timeliness standard of 5 or 7 days
would be more manageable than the
current three business day requirement.
Response: The 3-day requirement
referred to by the commenter is not for
provision of the disenrollment notice;
rather, it is the deadline for
organizations to submit the ensuing
disenrollment transaction to CMS. This
timeframe was established to provide
adequate time for data to be transmitted
to CMS to ensure the timely processing
of any necessary auto-enrollments for
those individuals who receive the Part
D low income subsidy. Therefore, we
are not adopting this suggestion.
Comment: One commenter requested
that CMS clarify that the grace period
applies only to members for whom CMS
makes payment to the organization.
Response: Our interpretation of this
comment was that it was intended to
address situations where a plan’s
enrollment records may not
immediately match CMS records, and
thus there is some question as to
whether an individual is enrolled in the
plan. Given that the plan has
determined the beneficiary eligible for
the plan, has notified the beneficiary of
the enrollment, has submitted the
enrollment to CMS and the discrepancy
in the enrollment record is not caused
by any action of the beneficiary but
instead is an issue to be resolved
between CMS and the plan, we believe
it would be appropriate for the same
grace period policies to apply to such a
beneficiary as to a confirmed plan
enrollee.
5. Maximum Allowable Out-of-Pocket
Cost Amount for Medicare Parts A and
B Services (§ 422.100)
In our October 22, 2009 proposed
rule, under the authority of sections
1852(b)(1)(A), 1856(b)(1), and 1857(e)(1)
of the Act, we proposed to amend
§ 422.100(f)(3) by adding a new
paragraph (f)(4) to specify that all local
MA plans must establish a maximum
out-of-pocket (MOOP) liability amount
inclusive of all Medicare Parts A and B
services, the amount of which would be
set annually by CMS. We also noted
that, under our proposal to require that
a MOOP amount be established for local
MA plans, the MOOP limit for local
preferred provider organization (PPO)
plans would be inclusive of all innetwork and out-of-network beneficiary
cost sharing. As discussed in the
proposed rule, we believe that requiring
the inclusion of such a limit in plan
design is necessary in order not to
discourage enrollment by individuals
PO 00000
Frm 00033
Fmt 4701
Sfmt 4700
19709
who utilize higher than average levels of
health care services (that is, in order for
a plan not to be discriminatory in
violation of section 1852(b)(1) of the
Act).
In the preamble to our October 22,
2009 proposed rule, we generally
described the process we have
established to comprehensively review
the proposed cost sharing of each plan
benefit package and determine if MA
plans’ cost sharing designs—both in
terms of aggregate expected out-ofpocket cost-sharing and particular costsharing amounts for certain health care
services—discriminate against those
beneficiaries with higher than average
health care needs. We noted in the
preamble to the proposed rule that we
have annually established, through
subregulatory guidance, a voluntary
maximum out-of-pocket limit on Parts A
and B services that, if adopted by an MA
plan, would allow the plan greater cost
sharing flexibility than it would
otherwise receive absent the voluntary
MOOP. We also noted that we have
identified certain health care services
that beneficiaries with higher than
average health care needs are likely to
need (for example, in-patient hospital,
dialysis, skilled nursing facility (SNF),
mental health services, Part B drugs and
home health care) and described our
process for conducting outlier analyses
by which we consider the distribution
of cost sharing levels submitted by MA
organizations to identify levels in the
upper end of the range for the purpose
of reviewing whether cost sharing levels
for submitted benefit designs are
discriminatory. We believe these efforts
have resulted in reduced discriminatory
cost sharing and improved the
transparency of plan design. For
example, in contract year 2010, about
39.2 percent of all non-employer MA
plans representing about 3 million MA
enrollees adopted the voluntary MOOP
limit on beneficiary cost sharing.
In the preamble to the proposed rule,
we stated our intent to use a similar
method for establishing a mandatory
MOOP amount for Parts A and Part B
services for all local MA plans as we
used to establish the voluntary MOOP
limit for contract year 2010. Therefore,
the MOOP would be set by CMS at a
certain percentile of fee-for-service
(FFS) beneficiary out-of-pocket
spending. We also noted that we set the
voluntary MOOP limit at the 85th
percentile of FFS spending for contract
year 2010 but could set the limit at a
different percentile or through a
modified approach as determined by us
in future years. We also proposed to
continue to furnish information to MA
organizations on our methodology and
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19710
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
the amounts for acceptable MOOP
amounts on a timely basis through the
annual Call Letter or Health Plan
Management System (HPMS)
memoranda. We solicited comments on
this approach.
After considering the comments we
received on this issue, we are finalizing
§ 422.100(f)(4) largely as proposed but,
as discussed in greater detail below, are
adding a new paragraph (f)(5) to address
concerns raised by commenters about
applying our proposed MOOP amount
to PPO out-of-network services.
Specifically, we are specifying in
paragraph (f)(5) that the mandatory
MOOP amount under paragraph (f)(4)
would only apply to PPO network
services, while a higher catastrophic
maximum would apply to both in- and
out-of-network liability. In setting a
higher catastrophic maximum, we will
take into consideration standard
practices in commercial benefit design
as well as protecting beneficiaries who
use out-of-network providers.
Comment: Several commenters noted
that a MOOP amount protects
beneficiaries from catastrophic medical
costs and supported our proposal.
Another commenter noted that it was
important that all Parts A and B services
be included in the MOOP amount.
Another commenter supported our
proposal on the grounds that it will
bring an element of standardization to
the MA program.
A number of Medicare Advantage
organizations (MAOs) expressed
concern that Original Medicare does not
have a MOOP and argued that it would
therefore not be equitable to require one
for MA plans. These commenters were
also concerned that a mandatory MOOP
would increase plans’ costs and result
in increased premiums for beneficiaries,
particularly if the dollar limit is too low.
Some commenters were also concerned
that a mandatory MOOP amount would
result in adverse selection, with ‘‘sicker’’
Medicare beneficiaries dropping out of
Original Medicare and selecting MA
plans. One commenter advocated that
we continue our current process of
allowing voluntary MOOP limits with a
more stringent review for plans that do
not adopt the voluntary MOOP limit.
Response: As discussed in the
proposed rule, we believe that requiring
the inclusion of a MOOP limit is an
important step to ensure that
individuals who utilize higher than
average levels of health care services are
not discouraged from enrolling in MA
plans that do not have such a limit in
place. Given that regional PPO plans are
required by statute to have such a
liability limit in place, and a substantial
number of local plans have adopted one
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
voluntarily, we were concerned that
high cost enrollees would be
discouraged from enrolling in MA plans
that did not include a MOOP limit. We
believe that requiring a mandatory
MOOP limit does not unduly
disadvantage MA plans relative to
original Medicare. We note that
beneficiaries in original Medicare have
the option of selecting between two
Medigap policies, K and L, that afford
them an annual cap on out-of-pocket
expenses (currently at $4,600). In
addition, enrollees in the original
Medicare program can select among
other Medigap polices that limit their
cost-sharing liability for Parts A and B
services. As noted previously, a
significant number of MA plans have
already successfully designed benefit
packages that include MOOP limits and
have continued to effectively compete
in the marketplace.
We agree, however, that retaining a
voluntary MOOP amount that is lower
than the mandatory maximum we have
proposed would preserve current
incentives for further reducing enrollee
out-of pocket liability. Therefore, in
addition to establishing a mandatory
MOOP amount, we also plan to
continue our current policy of offering
MA plans the option of establishing a
lower voluntary MOOP amount in
exchange for more flexibility in costsharing thresholds than available for
plans that adopt the higher mandatory
MOOP for contract year 2011. Under
this approach, the voluntary MOOP
amount would be set at an amount
lower than the mandatory MOOP, and
would therefore not disadvantage those
MA plans that have adopted the
voluntary MOOP in previous contract
years. We would in effect establish two
sets of Parts A and B service costsharing thresholds under this approach,
one applicable to plans selecting the
higher, mandatory MOOP amount, and
the other applicable to those choosing
the lower, voluntary MOOP. To incent
plans to adopt the lower MOOP amount,
we would allow plans greater cost
sharing flexibility for Parts A and B
services if they adopt the lower,
voluntary MOOP. We plan to articulate
this voluntary MOOP policy through
subregulatory guidance such as the
annual Call Letter or a similar
document.
Comment: Several commenters were
concerned that a mandatory MOOP
amount should not be set so high as to
discourage low income individuals from
joining MA plans. Other commenters
recommended that we ensure that the
MOOP amount is low enough to benefit
low income individuals. One
commenter also expressed concern that
PO 00000
Frm 00034
Fmt 4701
Sfmt 4700
a MOOP limit may disadvantage smaller
local plans compared to larger plans,
potentially resulting in those smaller
plans being priced out of the MA
market. One commenter recommended
that we use a fixed benchmark for the
MOOP amount, rather than the 85th
percentile of expected FFS spending
cited in the preamble to our proposed
rule, as the cut-off established for
contract year 2010, which they believe
would still be too high an amount for
low income enrollees. Another
commenter supported a cut-off at a
higher percentile of FFS to ensure that
plans do not have to increase their
premiums or, alternatively, that the
MOOP amount be set no lower than
$7,500 in order not to affect the
sustainability of the MA program.
Another commenter supported a
mandatory MOOP amount, but argued
that plans should be allowed to
establish their own MOOP amounts.
Response: In establishing the
mandatory MOOP amount, we will be
cognizant of the balance we must strike
between affording beneficiaries
reasonable protection from high out-ofpocket expenses and our desire that the
MA program remain viable for health
plans and beneficiaries. We will
carefully assess the impacts of the
MOOPs we establish, annually adjusting
the limit as necessary based on the
previous year’s experience, as well as
other factors as appropriate, to ensure
that this balance is maintained. As
noted previously, we believe the
approach of establishing a higher,
mandatory MOOP amount and a lower,
voluntary MOOP amount will allow us
to better strike this balance.
Comment: A couple of commenters
did not believe their systems would
support tracking of out-of-pocket
expenses relative to a mandatory MOOP
limit, and that the imposition of one
would therefore introduce a significant
new administrative burden. One
commenter argued that we should
furnish additional funding to MA plans
due to the costs of implementing a
mandatory MOOP amount.
Response: We recognize that those
plans that have not already voluntarily
introduced a MOOP may need to invest
resources in ensuring their systems are
designed to implement this
requirement. We believe, however, these
costs need to be weighed against the
benefits of ensuring that MA plan
designs without a MOOP limit do not
discourage enrollment by high cost
individuals.
Comment: Several commenters
requested clarification regarding the
applicability of our proposed
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
requirement to establish a mandatory
MOOP amount to MA plans.
Response: Because a statutory MOOP
requirement is already in place with
respect to regional PPO plans, we
proposed applying the new mandatory
MOOP requirement only to local MA
plans in our proposed rule. While we
now believe regional PPOs should be
subject to the same requirements with
respect to a MOOP as local MA plans,
since our proposed rule did not give MA
organizations offering regional PPOs an
opportunity to comment on such a
proposal, we will need to address this
discrepancy in future notice-andcomment rulemaking. However, we note
that regional PPOs will have the option
of implementing any mandatory or
voluntary MOOP amounts we establish
for local MA plans.
Comment: A number of commenters
recommended that we announce the
mandatory MOOP amount, and the
methodology we use to set it, as early as
possible in the year preceding the
contract year in which we will apply
that amount (for example, in the
Advance Notice of Methodological
Changes). Another commenter
recommended that this information be
provided in our annual Call Letter.
Response: As specified in the
preamble to the proposed rule, we
intend to continue to furnish
information to MA organizations on our
methodology and the amounts for
acceptable out-of-pocket caps on a
timely basis through the annual Call
Letter or a similar guidance docunent.
Comment: Two commenters were
concerned that the mandatory MOOP
would apply to all in- and out-ofnetwork PPO services, and contended
that such an arrangement could lead to
a reduction in the number of PPOs
offered given the potential increase in
plan costs that would result. One of
these commenters believed including
cost-sharing applicable to out-ofnetwork plan covered services will
undermine incentives to use preferred
providers that are central to the design
of a PPO.
Response: As stated in the proposed
rule, we believe that some protection
against out-of-pocket liability should
apply to enrollee cost-sharing for both
in- and out-of-network services covered
by PPOs. However, we agree with the
concerns of the commenter highlighting
the effect a single MOOP applying to all
services would have on incentives to
use preferred providers. In addition, for
reasons of beneficiary transparency and
consistency, we believe that local PPOs
should be subject to the same type of
MOOP requirements as regional PPOs,
which have a different MOOP for out-
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
of-network cost-sharing than that which
applies to use of PPO in-network
services. Therefore, we are revising
§ 422.100 by adding a new paragraph (5)
that specifies that, in addition to the
MOOP for Medicare Parts A and B
services that all local MA plans will be
subject to—which would apply only to
the use of network providers—all local
PPO plans must also establish a total
catastrophic limit on beneficiary out-ofpocket expenditures for both in-network
and out-of-network Parts A and B
services consistent with the
requirements applicable to regional
PPOs at § 422.101(d)(3). This total
catastrophic limit will be no greater
than an annual limit set by CMS. In
addition, we will also offer local PPO
plans the option of implementing any
voluntary MOOP amount CMS
establishes for local MA plans.
Comment: One commenter requested
clarification regarding whether all
Medicare Parts A and B services would
be included in the MOOP amount.
Response: As noted in the preamble to
our proposed rule, cost-sharing for all
Parts A and B services would be
included in the MOOP amount. Such
cost-sharing includes any plan
deductibles applicable to Parts A and B
services, but excludes monthly plan
premiums.
Comment: A commenter argued that
since States pay cost sharing for
members of dual-eligible special needs
plans (SNPs), there is no need to apply
a MOOP to these plans. Another
commenter contended that dual-eligible
SNPs cannot charge their enrollees a
premium as a practical matter, which
would further disadvantage this plan
type if they were required to implement
our MOOP limit. Another commenter
recommended that we provide guidance
on how the MOOP will apply to SNP
enrollees, particularly those in dualeligible SNPs. This commenter was
specifically interested in guidance
regarding what States’ obligation would
be with respect to premiums and cost
sharing, as well as the actual out-ofpocket liability for a dual-eligible SNP
enrollee. Additionally, this commenter
was concerned that dual-eligibles may
experience an unnecessary reduction in
supplemental benefits if our final
requirement does not clearly distinguish
what these individuals actually pay as
out-of-pocket costs versus what
Medicaid should pay.
Response: We disagree with
comments recommending that SNPs be
exempted from MOOP requirements.
Dual-eligible individuals entitled to
have their cost sharing paid by the State
and enrolled in a SNP may experience
midyear changes in their Medicaid
PO 00000
Frm 00035
Fmt 4701
Sfmt 4700
19711
eligibility. In those cases, these
individuals may be required to directly
pay the plan cost sharing that otherwise
would be the obligation of the State.
Accordingly, we will not exempt SNPs
from the requirement that they
implement a MOOP amount as
established annually by CMS.
Comment: Another commenter
recommended exempting employer
plans from our MOOP requirements
because such a benefit design would be
inconsistent with the benefits employer
plans currently offer.
Response: We disagree with this
commenter that such a regulatory
exception is warranted. The same
considerations involving discrimination
against high cost enrollees could also
apply in the employer plan context,
particularly if the employer allows more
than one plan option. In exceptional
cases in which CMS agrees that a waiver
of this rule would be in the interest of
Medicare beneficiaries served by an
employer group, CMS could consider
waiving the regulations through the
employer group waiver authority under
section 1857(i) of the Act. Employer
plans will therefore be subject to the
regulatory MOOP requirement finalized
in § 422.100(f)(4) that applies to all MA
plans.
6. Maximum Allowable Cost Sharing
Amount for Medicare Parts A and B
Services and Prescription Drugs
(§ 422.100, and § 423.104)
In our October 22, 2009 proposed
rule, we proposed to amend our
regulations on the general requirements
related to Medicare Advantage (MA)
benefits and qualified prescription drug
coverage to expressly authorize us to
establish cost sharing thresholds for
individual services below which cost
sharing will be considered nondiscriminatory.
For Part C plans, we proposed to
annually review bid data to determine
specific cost sharing levels for Medicare
A and B services below which we
would not consider there to be a
discriminatory effect, and therefore may
be approved in an MA benefit package.
Specifically, we proposed amending
§ 422.100 by adding a new paragraph
(f)(5) to specify that cost sharing for
Medicare A and B services may not
exceed levels annually determined by
us to be discriminatory.
Similarly, for Part D plans, we
proposed to annually review bid data to
determine acceptable cost sharing tiers
for benefit packages offering nondefined standard prescription drug
coverage. To this end, we proposed
revising § 423.104(d)(2) by adding a new
paragraph (iii) to specify that tiered cost
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19712
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sharing for non-defined standard benefit
designs may not exceed levels annually
determined by us to be discriminatory.
We also explained in the preamble to
the proposed rule that we would furnish
information to MA organizations and
Part D sponsors on our methodology
and the cost sharing thresholds for the
following contract year based on the
prior year’s bids, and on a timely basis
either through the annual Call Letter or
Health Plan Management System
(HPMS) memoranda. We solicited
comments on this approach, including
the extent to which we provided
sufficient clarity on how we would
determine whether cost-sharing levels
are discriminatory.
After considering comments we
received on this issue, we are adopting
proposed § 422.100(f)(5) (which, in light
of the new subparagraph (f)(5) discussed
above, is recodified as subparagraph
(f)(6)) and § 423.104(d)(2) with minor
revisions made in response to comments
discussed below that are intended to
clarify that limits will only be
established for those Parts A and B
services specified by CMS. We note that
section 3202 of the Patient Protection
and Affordable Care Act (PPACA) (Pub.
L. 111–148) ‘‘Benefit Protection and
Simplification’’ will apply to MA plans
offered in 2011. Section 3202 of PPACA
specifies that, unless a specified
exception applies, the cost sharing
charged by MA plans for chemotherapy
administration services, renal dialysis
services, and skilled nursing care may
not exceed the cost sharing for those
services under Parts A and B. Where
these new limits apply, they will
constitute an absolute limit on costsharing for the service in question by
operation of statute, and we will not set
limits under this final rule. After the
publication of this rule, we will issue
clarifying guidance concerning section
3202 and other provisions of PPACA
that impact this regulation.
Comment: A number of commenters
supported our proposed requirement to
specify that cost sharing for Medicare A
and B services may not exceed levels
annually determined by us to be
discriminatory. One of these
commenters supported us in continuing
our current approach to applying a
discrimination test.
A number of commenters opposed our
proposed requirement to establish
individual Parts A and B service
category cost-sharing thresholds,
suggesting that individual service
category thresholds would result in
higher premiums. Other commenters
believed that cost-sharing limits would
present significant additional
administrative costs for plans. A
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
number of commenters contended that
individual service category thresholds
would limit the availability of unique
benefit designs and, consequently, limit
beneficiary choice. One commenter
argued that we should not limit plans’
ability to use cost sharing as a tool to
encourage beneficiary choice of cost
effective and clinically appropriate
services. Another commenter
recommended that, rather than adopting
cost-sharing thresholds, we should
evaluate other options for identifying
and preventing discriminatory benefit
designs, such as evaluating the
prevalence of utilization control
mechanisms (for example, prior
authorization) on services frequently
used by patients with a particular highcost conditions.
Response: We believe establishing
individual service cost-sharing
thresholds is necessary to ensure that
beneficiaries who utilize higher than
average levels of health care services
will not be discouraged from enrolling
in MA plans with cost-sharing in excess
of thresholds set by CMS and that our
proposal to set specific amounts in
advance improves the transparency of,
and comparability between, plan
choices for beneficiaries.
We are therefore finalizing our
proposal to allow us to annually set cost
sharing thresholds for Medicare Parts A
and B services.
In establishing service category costsharing thresholds, we will be cognizant
of the balance we must strike between
affording beneficiaries reasonable
protection from high out-of-pocket
expenses that could discourage
enrollment and our desire that the MA
program remain viable for health plans
and beneficiaries. We will carefully
assess the impacts of the cost-sharing
thresholds we establish, annually
adjusting the limits and the particular
Parts A and B services that are subject
to such limits as necessary based on the
previous year’s experience and other
factors as needed, to ensure that this
balance is maintained. As we have in
previous years, we plan initially to
establish cost-sharing thresholds for
those Parts A and B services that we
have, through a number of years of
experience with plan benefit reviews,
identified as particularly likely to have
a discriminatory impact on sicker
beneficiaries. Specifically, under our
current cost sharing review process
which has developed from our past
experience in reviewing benefit
packages we focus our review on 14
service categories we have identified a
particularly likely to have
discriminatory impact on ‘‘sicker’’
beneficiaries: inpatient catastrophic (90)
PO 00000
Frm 00036
Fmt 4701
Sfmt 4700
days, inpatient short stay (10 days),
inpatient mental health (15 days), SNF
(42) days, home health (37) days,
physician mental health visits, renal
dialysis (156) visits, Part B drugs,
chemotherapy, radiation, DME,
equipment, prosthetics, supplies and
diabetes tests.
As discussed elsewhere in this
preamble, in addition to establishing a
mandatory maximum out-of-pocket
(MOOP) limit on overall cost-sharing for
Parts A and B services, we also plan to
continue our current policy of offering
MA organizations the option of adopting
a lower voluntary MOOP with greater
flexibility in Parts A and B cost sharing
than available for MA plans that meet
only the higher mandatory MOOP.
Under this approach, the voluntary
MOOP would be set at an amount lower
than the mandatory MOOP and would
therefore not disadvantage those MA
plans that have adopted the voluntary
MOOP in previous contract years. In
implementing thresholds for
discriminatory cost-sharing for
individual services, we plan to establish
two sets of Parts A and B service costsharing thresholds, one applicable to
plans choosing the higher, mandatory
MOOP, and the other applicable to
those choosing the lower, voluntary
MOOP. We plan to articulate the costsharing thresholds associated with the
lower, voluntary MOOP through
subregulatory guidance such the annual
Call Letter or similar guidance
document.
In establishing cost-sharing
thresholds, we will consider an MA
organization’s need to use cost-sharing
as a tool for preventing overutilization
of services. While we have not been
provided evidence that this requirement
would increase plans’ administrative
costs, we also note that MA
organizations will be able to account for
any increased administrative costs in
their annual bids. Finally, with respect
to the comment about reviewing prior
authorization, we believe that
establishing cost-sharing thresholds is a
more efficient and effective method for
eliminating discriminatory MA plan
designs.
Comment: One commenter questioned
our authority to impose individual
service category thresholds, and urged
us to withdraw our proposal.
Response: We disagree with this
commenter. As discussed in the
preamble to the October 22, 2009
proposed rule, our proposal relies upon
the authority in section 1852(b)(1) to
ensure that an MA plan would not
substantially discourage enrollment by
certain MA eligible individuals and our
authority under section 1857(e)(1) of the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Act, under which we may add
‘‘necessary and appropriate’’ contract
terms; and, with respect to MA plan cost
sharing, the authority in section
1856(b)(1) of the Act, under which we
may establish MA standards by
regulation.
Comment: Some commenters sought
clarification on how we will address
cost sharing thresholds with regard to
dual-eligible special needs plans (SNPs).
These commenters specifically asked
whether we would exempt dual-eligible
SNPs from our proposed establishment
of mandatory Parts A and B service
thresholds, since States pay dualeligibles’ cost sharing. These
commenters argued that our proposed
requirement could force dual-eligible
and chronic care SNPs to charge a
premium, thus making their plans
unattractive to dual-eligibles and other
low-income enrollees.
Response: We disagree with
commenters recommending that dual or
chronic care SNPs should be exempted
from our service category cost-sharing
thresholds. As long as a plan has at least
some enrollees subject to all of a plan’s
cost-sharing amount, those enrollees
could still be discouraged from
enrolling or continuing their enrollment
in the plan given particularly high costsharing for specific services. Even those
SNPs that exclusively serve dualeligible enrollees entitled to have their
cost sharing paid by the Medicaid
program can include some individuals
who lose their Medicaid status midyear
and become subject to plan cost sharing
which would no longer be paid by the
Medicaid program. Plans should not
establish excessive cost-sharing
regardless of whether the State is
responsible for beneficiaries’ costsharing. We are therefore not exempting
SNPs from the mandatory MOOP and
cost sharing limits that apply to other
MA plans.
Comment: One commenter asked us
to consider exempting employer plans
from our cost-sharing threshold
requirements, arguing that such a
requirement would complicate their
efforts to offer their current and retired
employees parallel coverage.
Response: We disagree with this
commenter. The nature of employer
arrangements varies greatly. In some
cases, an employer may offer more than
one MA plan option, and one or more
of those plans may still discourage
enrollment by certain beneficiaries
through their benefit design. Also, in the
case of an employer plan, if a
compelling reason exists for an
exemption from the limits in this final
rule, and if we determine an exemption
would be in the best interests of
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
beneficiaries, employers could request a
waiver of these limits under the
employer waiver authority.
Comment: Some commenters
recommended that we establish cost
sharing thresholds for Parts A and B
services as soon as possible prior to the
bid submission deadline (for example,
in the Call Letter or Advance Notice of
Methodological Changes) and provide
stakeholders with an opportunity to
provide comments regarding the
thresholds and the methodology used to
arrive at those thresholds. Some
commenters representing non-plan
stakeholders also requested that we
provide this information via means
other than the HPMS, since only plans
have access to HPMS and advocates and
other non-plan entities would like to
receive the information we share with
plans via HPMS. Another commenter
recommended that we permit MA
organizations to resubmit a bid and
benefit package if the initial bid is
rejected due to a finding by CMS of
discriminatory cost sharing.
Response: As stated in the preamble
to the proposed rule, we intend to
furnish information to MA organizations
and Part D sponsors on our
methodology and the cost sharing
thresholds for the following contract
year on a timely basis either through the
annual Call Letter or similar guidance
document. We will consider ways of
disseminating this information through
other means to ensure that all
stakeholders have an opportunity to
comment and note that we generally
post draft Call Letters to the CMS Web
site to ensure broad public availability.
With regard to opportunities to resubmit
bids and benefit packages, given that we
expect to provide guidance regarding
cost-sharing thresholds prior to bid
submission, we do not anticipate the
need to allow plans to resubmit bids or
benefit packages if their submissions are
inconsistent with published guidance.
As part of our review of submitted bids
and benefit packages, we may contact
plans to give them the option of
modifying their bids and benefit
packages if we have made a
determination that the proposed plan
benefit package or cost sharing contains
discriminatory amounts not outlined in
published guidance.
Comment: One commenter
recommends that cost-sharing limits,
and the service categories to which they
apply, remain stable from year-to-year.
Response: We intend to implement
cost-sharing thresholds carefully to
ensure the right balance of ensuring
against discriminatory effects of high
cost-sharing and continued viability of
the MA program. While we believe
PO 00000
Frm 00037
Fmt 4701
Sfmt 4700
19713
stability in the thresholds and the
particular services to which those
thresholds are applied is important, we
also believe it is necessary to allow
ourselves the flexibility to build on
‘‘lessons learned’’ each year, and to
reevaluate both the thresholds and the
Parts A and B service categories to
which they apply, to account for any
statutory changes in Original Medicare
cost-sharing limits as well as other
changes to the MA program, and refine
our approach accordingly to maintain
such a balance.
Comment: Some commenters believed
that we were not clear in the proposed
rule regarding whether we would set
cost sharing thresholds for all Parts A
and B service categories, or only for
selected categories identified as
potentially discriminatory. These
commenters requested further
clarification on our intended approach.
Response: As we have done in the
context of benefits review in previous
years, we intend to focus on service
categories particularly likely to have a
discriminatory impact on sicker
beneficiaries. Initially, we will focus on
the service categories we have targeted
historically in our benefit review. We
expect to refine our approach over time
in order to achieve the right balance
between plan choice and protection
from high out-of-pocket costs. We
intend to build on our experience, and
potentially make modifications to the
list of Parts A and B service categories
to which we would apply cost-sharing
thresholds.
Comment: A couple of commenters
recommended that, in setting costsharing limits, CMS consider enrollees’
cost-sharing both before and after
members reach any deductible that may
apply.
Response: We will consider whether
to take plan deductibles into account as
part of our methodology to establish
cost-sharing thresholds.
Comment: One commenter requested
clarification on how we will establish
cost sharing thresholds based on the
previous year’s experience. One
commenter urged that the thresholds
not be adjusted based on current year
data.
Response: As described in the
preamble to our proposed rule, we
intend to review the prior year’s bid
data, as well as actuarial equivalency
relative to Original Medicare, to identify
cost sharing outliers and establish a
reasonable threshold. With this
information, and other factors we may
identify as we gain experience in
establishing these thresholds, we will
annually set cost-sharing thresholds as
described in this preamble. We do not
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19714
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
anticipate that these levels will need to
be changed after bids have been
submitted. However, as previously
noted, we will conduct a review of
submitted bids and we reserve the right
to address discriminatory cost sharing
or benefit design we identify in these
post bid reviews by asking the plan to
either modify or withdraw its bid to
resolve discriminatory cost sharing.
Comment: One commenter
recommended that service category
thresholds be set at fixed dollar
amounts.
Response: We understand that
copayment amounts are more
transparent and predictable for
beneficiaries than coinsurance, and will
attempt to establish thresholds as
copayment amounts rather than
coinsurance percentages where
appropriate. Given the fact that original
Medicare employs coinsurance
percentages in its cost-sharing, there
may be cases, in which we may limit the
coinsurance percentage that can be
imposed.
Comment: One commenter
recommended that we not set a cost
sharing maximum for routine services,
such as physician visits and lab
services, where there is limited financial
liability, or for durable medical
equipment (DME), where they argue that
any particular cost-sharing maximum
would invariably penalize one subset of
enrollees. One commenter
recommended that we establish
thresholds on a per day, per stay, and
per benefit period basis for SNF and
inpatient services. Another commenter
recommended that any threshold for
Part B drugs apply to all Part B covered
drugs.
Response: We disagree that physician
visits and lab services should
necessarily be exempt from cost-sharing
maximums, though we currently do not
contemplate imposing limits in such
cases, and would only do so to the
extent that we saw cost-sharing imposed
that had a discriminatory effect. As
stated previously, we initially will focus
on those service categories we have
historically identified as particularly
likely to have a discriminatory impact
on sicker beneficiaries and will refine
our approach as needed and in line with
our ultimate goal of eliminating
discriminatory benefit designs. We
welcome the feedback provided by other
commenters with regard to DME, SNF
and Part B drug copayments and will
consider these recommendations as we
finalize our methodology and
thresholds.
Comment: Several commenters
supported the proposal to review Part D
plan bids to determine acceptable cost-
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
sharing tiers for benefit designs that
deviate from the standard benefit
package. One commenter indicated that
this would bring a level of
standardization to plans and make it
easier for them to compare out-of-pocket
expenses.
Response: We appreciate the
comments.
Comment: Several commenters
wanted to limit Part D cost sharing to a
total maximum out-of-pocket amount.
Response: We do not believe that a
regulatory overall liability limit for Part
D would be practical or appropriate
given the current design of Part D
benefits (such as, the coverage gap). We
also note that, under the Part D benefit,
there is protection afforded to a
beneficiary once they enter into the
catastrophic phase of the benefit where
there is nominal cost sharing.
Comment: One commenter wanted us
to establish clear and definitive limits
on cost sharing. Another commenter
wanted us to consider the overall
affordability of cost sharing that is
imposed on non-low-income (LIS)
Medicare beneficiaries. The commenter
argues that this is particularly important
when considering a plan design in
which preferred formulary tiers do not
include equally safe and effective drugs
for the beneficiary’s medical condition.
Another commenter wanted us to take
into account separate rules for cost
contracts with HMOs under section
1876. Additionally, another commenter
wanted clarification on how we will
review plans with more than or fewer
than a three tier benefit design. This
commenter suggested that all tiers may
not exceed levels determined by CMS to
be discriminatory.
Response: We appreciate these
comments. It is important to note that
we review both formularies and benefit
designs to ensure that a sponsor’s
prescription drug offering under Part D
is not discriminatory. We have designed
our yearly formulary reviews to ensure
that all Part D plan formularies include
a wide representation of drugs used to
treat the Medicare population. As part
of this review, we focus on identifying
formularies with drug categories that
may substantially discourage enrollment
of certain beneficiaries, for example if
the formulary places drugs in
nonpreferred tiers without including
commonly used therapeutically similar
drugs in more preferred positions. As
part of our yearly review of submitted
benefit designs, we compare like plans
to each other for the purpose of ensuring
non-discriminatory cost-sharing.
Specifically, we perform an analysis of
cost sharing at the tier level, to look for
outliers. The outlier analysis considers
PO 00000
Frm 00038
Fmt 4701
Sfmt 4700
plan type (basic versus enhanced),
tiering structure (for example, the
number and type of tiers), and any
differences among MA–PDs (including
cost plans) and between MA–PDs and
PDPs. When outliers are identified, we
conduct negotiation calls with the
relevant plan sponsors to ensure the
cost sharing outliers are reduced prior to
bid approval. We also require cost
sharing levels for preferred tiers to be
lower than cost sharing levels for
nonpreferred tiers.
Comment: A commenter expressed
concern that when coverage of a
nonformulary drug is secured on appeal,
the cost sharing under the nonpreferred
tier can approximate, or even exceed,
the negotiated price of the drug.
Response: The price charged to the
beneficiary cannot exceed the
negotiated price. The requirements
related to qualified prescription drug
coverage at § 423.104(g)(1) make clear
that Part D sponsors are required to
charge beneficiaries the lesser of a
drug’s negotiated price or applicable
copayment amount.
Comment: Several commenters
opposed setting cost sharing maximums,
claiming that this will result in higher
premiums for beneficiaries. One
commenter asserted that CMS’ proposal
will limit the ability of Part D sponsors
to design plans that provide choices for
additional or richer benefits in other
areas important to beneficiaries. For
example, they argue that establishing
maximum Part D brand cost-sharing
levels will impact the ability to offer $0
copayment for generic drugs; therefore,
ultimately inhibiting the greater
affordability and access. A commenter
contended that our proposal fails to
consider a plan design that is associated
with a robust formulary. The commenter
believes that such a plan should have
the flexibility to impose higher member
cost sharing, particularly for
nonpreferred drugs, compared to a
formulary that meets minimum
requirements and, coupled with low
premium which may be attractive to
those with minimal drug utilization
who seek protection from potential
future changes in health status.
Response: In determining a maximum
cost sharing amount for a tier above
which we will view the plan’s benefit
design as discriminatory, we attempt to
strike a balance between appropriate
coverage under the benefit and the
potential affect on the premium. As part
of our benefit design review, and
consistent with previous reviews, we
consider all beneficiaries under the
plan, and not just those beneficiaries
expected to have limited utilization.
Therefore, any actuarially-equivalent
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
cost sharing arrangement is reviewed,
along with the rest of a plan’s benefit
design, to ensure that it does not
discriminate against certain Part D
eligible individuals. This sometimes
results in a sponsor not being able to
support higher member cost sharing
amount under a robust formulary design
for nonpreferred drugs or being able to
support zero dollar generics. However,
these cases are usually the exception
since our review is designed to ensure
the maximum utility of the benefit
design for potential enrollees.
Comment: One commenter wanted
CMS to prohibit the use of both
copayment and coinsurance tiers under
nonstandard Part D benefit designs.
Response: We disagree with the
commenter and believe such a
prohibition would unnecessarily limit
plan design. Moreover, we believe that
such a proposal is beyond the scope of
this proposed rule, which addresses the
authority of CMS to establish limits on
cost sharing for purposes of determining
whether or not such cost sharing is
discriminatory. Our proposal did not
address whether nonstandard benefit
designs utilizing coinsurance are
discriminatory.
Comment: One commenter wanted us
to require that at least one drug within
each therapeutic class be on each tier.
Response: We believe that such a
proposal is beyond the scope of this
proposed rule, which only addresses the
authority of CMS to establish limits on
cost sharing for purposes of determining
whether or not such cost sharing is
discriminatory. We also note that due to
the varying number of drugs that may be
available in a therapeutic class, this
proposal may require many exceptions
and be impractical to implement.
Comment: Several commenters
expressed concern about our specialty
tier policy. A few commenters want us
to eliminate the exemption from tiering
exceptions for specialty tiers. Another
commenter asserted that drugs in the
specialty tier are so expensive, an
argument could be made that specialty
tier coinsurance above 25 percent is
excessive. Another commenter argues
that the use of specialty tiers is a
discriminatory practice that targets
individuals who have medical
conditions that necessitate use of
expensive medications.
Response: We appreciate the
commenters’ concern in this area, which
is one we will continue to study. Any
revisions to the specialty tier policy will
be done in future rulemaking. We note
specifically that the commenters’
request for us to eliminate the
exemption from tiering exceptions for
specialty tiers is outside of the scope of
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
this proposal. We also note that we have
only allowed a higher coinsurance
percentage greater than 25 percent for
specialty tiers under alternative
prescription drug coverage designs with
decreased or no deductibles. Thus,
overall, consistent with statutory and
regulatory requirements, a basic
alternative design must be actuarially
equivalent to the defined standard
benefit design.
Comment: One commenter wanted us
to study the effects of high out-of-pocket
costs, improve drug pricing disclosure,
prohibit plans from changing the price
of drugs, notify beneficiaries when a
drug price is going to increase, ensure
that Part D plan sponsors inform
beneficiaries how to get medications
free or at lower prices, and end
discriminatory practice cost sharing.
Response: We appreciate the
commenter’s concerns over price
fluctuations that may result in changes
in cost sharing under a Part D plan
benefit design that includes coinsurance
and the effects that these changes may
have on beneficiaries enrolled in these
plans. However, several of these
comments are outside of the scope of
the proposed rule, which addresses our
ability to establish threshold levels for
cost sharing above which we would
determine such cost sharing to be
discriminatory. Moreover, we note that
under section 1860D–11(i) of the Act,
commonly known as the ‘‘Noninterference provision,’’ we are
prohibited from interfering in the
negotiations among drug manufacturers,
pharmacies, and sponsors of
prescription drug plans (PDPs), and
from requiring a particular formulary or
price structure for the reimbursement of
a covered Part D drug. Therefore, we do
not have the authority to prohibit plans
from changing the price of drugs.
Comment: Several commenters
wanted information on discriminatory
cost sharing made available through Call
Letter and other public means, and want
such information to be made available
timely so that it can be taken into
account prior to bidding.
Response: We appreciate the
commenters’ concern that we be as
transparent and timely as possible with
our guidance in this area. We will strive
to make this information available as
early as possible for sponsors to begin
constructing their bids for the 2011
contract year.
Comment: One commenter stated that
if a plan sponsor offers a plan design
with zero co-payment amounts for
certain mail order prescription drugs, it
should be required to offer the same cost
sharing at retail pharmacies.
PO 00000
Frm 00039
Fmt 4701
Sfmt 4700
19715
Response: This comment is outside
the scope of the proposed rule, which
does not revise our level playing field
policy between mail and retail drug
offerings. We refer the commenter to
section 50.2 of Chapter 5 of the
Medicare Prescription Drug Benefit
Manual at https://www.cms.hhs.gov/
PrescriptionDrugCovContra/Downloads/
Chapter5.pdf for our current policy in
this area.
7. Prohibition on Prior Notification by
PPO, PFFS and MSA Plans Under Part
C (§ 422.2, § 422.4, and § 422.105)
In our October 22, 2009 proposed
rule, we stated that we have become
increasingly concerned about the use of
prior notification by PPO and PFFS
plans as a condition for lower cost
sharing. Program experience has
demonstrated that such prior
notification provisions are confusing to
beneficiaries, misleading in terms of
cost-sharing transparency, and in some
instances, are used inappropriately as a
form of prior authorization. In the GAO
report titled ‘‘Medicare Advantage:
Characteristics, Financial Risks, and
Disenrollment Rates of Beneficiaries in
Private Fee-for-Service Plans (GAO–09–
25),’’ the GAO stated that some PFFS
plans it reviewed ‘‘inappropriately used
the term prior authorization rather than
pre-notification in the informational
materials they distributed to
beneficiaries, which may have caused
confusion about beneficiaries’ financial
risks.’’ We have determined that the
complexity of cost-sharing designs using
prior notification has made it more
difficult for both enrollees and
providers to understand the enrollee’s
cost sharing obligation in advance of
receiving services. Therefore, in order to
reduce the complexity of MA plans’ cost
sharing designs and improve
transparency for both enrollees and
providers, we proposed to prohibit PPO
plans (for out-of-network services) and
PFFS plans from providing for lower
cost sharing where prior notification
rules have been satisfied. Specifically,
we proposed to revise § 422.4(a)(1)(v)
and (a)(3) to provide that PPO and PFFS
plans will be prohibited from
establishing prior notification rules
under which an enrollee is charged
lower cost sharing when either the
enrollee or the provider notifies the plan
before a service is furnished. We are
adopting § 422.4(a)(1)(v) and (a)(3)
without further modification in this
final rule.
In our October 22, 2009 proposed
rule, we also proposed to prohibit MSA
plans from establishing prior
notification rules. We believe that prior
notification rules established by MSA
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19716
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
plans are also confusing to enrollees of
those plans and have similar negative
effects as those described above for PPO
and PFFS plans. Accordingly, we
proposed to modify § 422.4(a)(2) such
that MSA plans will also be prohibited
from establishing prior notification rules
under which an enrollee is charged
lower cost sharing when either the
enrollee or the provider notifies the plan
before a service is furnished. We are
also adopting § 422.4(a)(2) without
further modification in this final rule.
Finally, the October 22, 2009
proposed rule discussed similar
concerns about beneficiary confusion in
connection with PPO plans that
included a POS-like benefit. As we
noted in the October 22, 2009 proposed
rule and the Medicare Program entitled
Establishment of the Medicare
Advantage Program, published in the
January 28, 2005 Federal Register (70
FR 4617 through 4619), we had stated
that PPOs could offer a POS-like benefit
under which beneficiary cost sharing
would be less than it would otherwise
be for non-network provider services,
but still might be greater than it would
be for in-network provider services,
provided an enrollee follows
preauthorization, pre-certification, or
prenotification rules before receiving
out-of-network services. For the same
reasons discussed above, we determined
that this approach is confusing, and is
subject to abuse as a prior authorization
mechanism for non-network services.
Therefore, in order to reduce the
complexity of PPO plans’ cost sharing
designs and improve transparency for
both enrollees and providers, we
proposed in our October 22, 2009
proposed rule to prohibit PPO plans
from offering such a POS-like benefit.
Specifically, we proposed to revise the
definition of POS in § 422.2 and
§ 422.105(b), (c), and (f) to indicate that
only HMOs may offer a POS benefit.
The proposed change is consistent with
section 1851(a)(2)(A)(i) of the Act,
which states that an HMO may include
a POS option. We are adopting
§ 422.105 without further modification
in this final rule and revising § 422.2 as
described below.
Comment: Several commenters
supported our proposals to prohibit PPO
plans (for out-of-network services), MSA
plans, and PFFS plans from establishing
prior notification rules and prohibit
PPO plans from offering a POS-like
benefit. Some of the commenters
indicated that these practices are
confusing and misleading and penalize
members who are not able to give prior
notification or who were unaware of the
option. Some commenters also
indicated that they found several plans
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
that charge exorbitant cost-sharing (up
to 75 percent) for expensive items such
as durable medical equipment when
prior notification requirements have not
been met. A number of commenters
opposed our proposals to prohibit PPO
plans (for out-of-network services), MSA
plans, and PFFS plans from establishing
prior notification rules and prohibit
PPO plans from offering a POS-like
benefit. Other commenters stated that
these practices permit plans to alert the
enrollee in advance of receiving a
service that it may not be covered;
reduce enrollees’ cost sharing
obligations when obtaining covered
services from out-of-network providers;
enable plans to better monitor and
oversee members’ use of out-of-network
providers, thus allowing plans to assess
and expand their provider networks;
and identify those plan members who
may qualify for plan disease
management and case management
programs. One commenter indicated
that MA plan premiums likely would
increase if this cost control technique
were eliminated. Commenters opposed
to CMS’ proposals provided several
recommendations for addressing our
concerns about prior notification rules
and POS-like benefits. Commenters’
recommendations included retaining
existing policies; enforcing the existing
requirement (for example, requiring
greater clarity in enrollee materials) to
address concerns raised in the proposed
rule; requiring PPO plans with POS-like
benefit to better describe the costsharing amounts under each set of
circumstances that may arise; requiring
plans to more clearly describe the
distinction between prior authorization
and prior notification, and expressly
identify those covered services subject
to each process; and encouraging
providers’ outreach to plans to confirm
prior authorization/notification
provisions and members’ cost sharing
obligations.
Response: We agree with the
commenters supporting our proposals to
prohibit PPO plans (for out-of-network
services), MSA plans, and PFFS plans
from establishing prior notification rules
and prohibit PPO plans from offering a
POS-like benefit. As we stated in the
October 2009 proposed rule, we believe
that prior notification is confusing to
beneficiaries, misleading in terms of
disclosure of cost-sharing, and in some
instances, used inappropriately as a
form of prior authorization. Also, the
complexity of cost sharing designs using
prior notification and POS-like benefits
has made it more difficult for both
enrollees and providers to understand
PO 00000
Frm 00040
Fmt 4701
Sfmt 4700
the enrollee’s cost sharing obligation in
advance of receiving services.
We acknowledge the concerns raised
by commenters who opposed our
proposals. However, we believe that
most of these concerns can be addressed
if the plan takes an active role to
educate enrollees and providers about
their right to request a written advance
coverage determination from the plan,
in accordance with Subpart M of Part
422, before an enrollee receives a
service in order to confirm that the
service is medically necessary and will
be covered by the plan. These MA plans
should clearly explain the process for
requesting a written advance
determination in member materials and
respond to requests from enrollees and
providers on a timely basis. Plans may
also encourage enrollees and providers
to request advance coverage
determinations prior to receiving costly
services. These MA plans can also use
requests for advance coverage
determinations as a tool to identify
enrollees who may qualify for disease
management and case management
programs or who require further care
coordination. Plans can use the claims
data submitted by non-network
providers to expand their provider
networks as well as identify those
enrollees who would benefit from
disease management and case
management. We do not believe that
prohibiting prior notification rules and
POS-like benefits will lead to higher MA
plan premiums. We believe that
prohibiting PPO plans (for out-ofnetwork services), MSA plans, and
PFFS plans from creating prior
notification rules and PPO plans from
offering a POS-like benefit will reduce
the complexity of these plans’ costsharing designs and improve
transparency for both enrollees and
providers. Accordingly, we are adopting
the proposals as set forth in the October
2009 proposed rule.
We are making a technical correction
to the definition of point-of-service
(POS) in § 422.2 in this final rule. We
are deleting the word ‘‘additional’’ from
the definition since it no longer applies
to the definition of a POS benefit option.
8. Requirements for LIS Eligibility
Under Part D (§ 423.773)
In the October 22, 2009 rule, we
proposed amending the length of the
period for which individuals are redeemed eligible for the full low income
subsidy to conform § 423.773(c)(2), with
guidance we issued in section 40.2.2 of
Chapter 13 of the Medicare Prescription
Drug Benefit Manual. As we noted in
the October 2009 proposed rule, we
review data from State Medicaid
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Agencies and the Social Security
Administration (SSA) every year to
determine whether individuals
currently deemed eligible for the
subsidy should continue to be deemed
(that is, ‘‘re-deemed’’) eligible for the
subsidy. These data, which are sent in
July and August every year, allow us
sufficient time to update individuals’
records in our systems, if necessary, and
to make appropriate notifications if an
individual is losing deemed status for
the subsequent calendar year.
We also noted that when we review
data in July and August, we also
identify individuals who are newly
eligible for Medicaid, a Medicare
Savings Program, or SSI, and deem them
eligible for LIS for the remainder of the
current calendar year. In addition, we
also re-deem these individuals for the
subsidy for the next calendar year,
because we do not have sufficient time
in the final months of the year to
conduct a separate re-deeming process
for them. Moreover, if we waited to redeem these beneficiaries after the start
of the next calendar year, they could
incur greatly increased premium
liability and cost sharing amounts at the
start of the new calendar year than they
would have otherwise.
To address these issues, we proposed
to amend § 423.773(c)(2) to indicate that
the deeming will be, at a minimum, for
the following periods: If deemed status
is determined between January 1st and
June 30th of a calendar year, the
individual is deemed subsidy eligible
for the remainder of the calendar year.
If deemed status is determined between
July 1st and December 31st of a calendar
year, the individual is deemed subsidy
eligible for the remainder of the
calendar year and the next calendar
year. We have found that this policy
promotes effective administration of the
LIS benefit and decreases the
administrative burden on CMS, the
Social Security Agency, and State
Medicaid agencies, as well as on
subsidy eligible individuals. In this final
rule, we adopt this provision as
proposed.
Comment: Several commenters
expressed support for our intent to put
in regulation the minimum time periods
for which beneficiaries are deemed
eligible for the LIS.
Response: We appreciate this support
for our intent to outline the minimum
time periods of LIS eligibility.
Comment: One commenter urged us
to consider making LIS deemed status
permanent, or granting a 3-year period
of presumptive eligibility. The
commenter noted that while income and
assets may fluctuate, most low-income
Medicare beneficiaries are unlikely to
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
experience increases that are enough to
affect their eligibility. The commenter
also noted that making eligibility
permanent would eliminate the need for
redeterminations of eligibility, thus
reducing administrative costs for the
program and inconvenience and stress
for beneficiaries.
Response: We understand the
potential benefits to the LIS population
of extending or making permanent their
eligibility for the subsidy, and reducing
the inconvenience and stress to
beneficiaries is an ongoing goal of our
administrative processes. Currently,
approximately 95 percent of LIS-eligible
beneficiaries are re-deemed for the
following year prior to the end of the
current calendar year, and half of those
who are not initially re-deemed (that is,
another 2.5 percent) are re-deemed
within next 6 months. In addition to
this, the number of beneficiaries who
actually receive the annual Loss of
Subsidy Letter, also known as the gray
notice, has been decreasing over the last
4 years. This suggests that CMS and
State efforts to improve the
administrative process are working, and
that individuals who continue to qualify
for the low income subsidy are being
identified appropriately, while the small
proportion of individuals who may no
longer qualify for the subsidy also are
being identified. We believe that the
approach being adopted here strikes a
balance between making the re-deeming
process as efficient as possible while
still ensuring that beneficiaries
receiving the subsidy are truly LISeligible. For these reasons, we are not
adopting the suggested modifications.
Comment: A few commenters
recommended that we require States to
continue providing Medicaid coverage
to a dual-eligible until the individual’s
Part D enrollment actually takes effect.
Response: Section 1935(d) of the Act
specifically precludes Federal medical
assistance for Medicaid payments for
prescription drugs for those Medicaideligible individuals who are also eligible
for Part D, regardless of whether the
person is enrolled in a Part D plan.
Therefore, no modification to the
regulations will be made.
Comment: One commenter requested
additional regulatory changes to require
improvements to the way we administer
the LIS benefit, including improving the
Web site, notices to encourage
appropriate actions, and putting in
place better ‘‘Best Available Evidence’’
policies and procedures to ensure that
LIS status discrepancies are corrected.
Response: As noted previously, we
continually consider ways to improve
the administration of the LIS benefit and
beneficiaries’ understanding of it. We
PO 00000
Frm 00041
Fmt 4701
Sfmt 4700
19717
believe we have the authority to make
the additional improvements the
commenter suggested, as appropriate,
without further modifying the
regulation.
9. Enrollment of Full Subsidy Eligible
Individuals and Other Subsidy Eligible
Individuals Under Part D (§ 423.34)
We proposed to codify in regulation
the enrollment procedures that we use
for LIS individuals, which are similar to
those specified in the regulation for the
dual-eligible population. We believe
that our regulations would be more
accurate and complete if they
specifically addressed this population.
Therefore, we proposed to include
information on how we enroll all LISeligible individuals, including full
benefit dual-eligible individuals,
through the following changes:
• In § 423.34(a), we expanded the
general rule to refer to all LIS-eligible
individuals, so that the rest of that
section applies not only to full benefit
dual-eligible individuals, but also to all
LIS-eligible individuals.
• In § 423.34(b), we retained the
definition of full benefit dual-eligible
individual, and added a definition for
‘‘low-income subsidy eligible
individual.’’ We have identified the
need for a technical correction to the
definition of ‘‘low-income subsidy
eligible individual.’’ The proposed
definition could be read to specify that
the definition of full-benefit dual
eligible—who are identified as a specific
group of LIS eligibles—is that in
§ 423.722, which is limited to such
individuals already enrolled in a Part D
plan. However, the enrollment rules in
§ 423.34(b) applies to full-benefit dual
eligibles not yet enrolled in a Part D
plan. We made a technical correction to
the regulation text to specify that the
definition of full dual eligible
individual is that in § 423.34.
• We amended the paragraph heading
of § 423.34(c) to indicate that this
paragraph describes the process we use
to reassign LIS-eligible individuals
during the annual coordinated election
period. We indicate that the
reassignment process applies to certain
LIS eligible individuals (that is, not just
full-benefit dual-eligible-individuals).
• We revised the paragraph heading
of § 423.34(d) from ‘‘Automatic
Enrollment Rules’’ to ‘‘Enrollment
Rules.’’ We made this change to reflect
the inclusion of full subsidy and other
subsidy eligible groups in the
enrollment process, in addition to full
benefit dual-eligible individuals. In our
guidance, we refer to the process of
enrolling full benefit dual-eligible
individuals as ‘‘automatic enrollment,’’
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19718
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
and the process for other LIS eligibles as
‘‘facilitated enrollment.’’ (See section
30.1.4 of Chapter 3 of the Medicare
Prescription Drug Benefit Manual.)
• We amended § 423.34(e) to indicate
that the rules regarding declining
enrollment and disenrollment also
apply to all LIS-eligible individuals.
• In § 423.34(f), we clarified that the
paragraph heading and contents of this
paragraph are limited to the effective
date of enrollment for full benefit dualeligible individuals. We also amended
§ 423.34 (f)(3) to specify that, for
individuals who are eligible for Part D
and subsequently become eligible for
Medicaid on or after January 1, 2006,
the effective date of enrollment would
be the first day of the month the
individual becomes eligible for both
Medicaid and Medicare Part D.
• In § 423.34(g), we added a new
paragraph to specify that the effective
date for LIS eligibles who are not full
benefit dual-eligibles would be no later
than the first day of the second month
after we determine that the individual
meets the criteria for enrollment into a
PDP under this section. This change
conforms to section 30.1.4 of Chapter 3
of the Medicare Prescription Drug
Benefit Manual. Unlike full benefit
dual-eligible individuals who may have
retroactive Part D coverage, these
individuals have only prospective Part
D coverage.
In the proposed rule, we also
acknowledged concern expressed by
some commenters about auto-enrolling
beneficiaries on a random basis. For
example, focus groups of seniors suggest
the possibility that some auto-enrolled
beneficiaries may not realize they have
been enrolled in a drug plan or that they
have been reassigned to a different drug
plan. We noted that we are committed
to taking appropriate steps to improve
this process and welcomed comments
related to all aspects of these
procedures. In this final rule, we adopt
these provisions as proposed.
Comment: Several commenters
expressed support for expansion of
auto-enrollment and reassignment to all
individuals with LIS.
Response: We appreciate the support
for this policy and are adopting the
proposal without change.
Comment: Commenters urged us to
shorten the time period for a plan
enrollment so that it would take effect
as of the date the person becomes
subsidy eligible. The current time
period can leave an individual who has
applied and qualified for the subsidy
with a gap of over 2 months between the
time they express an interest in getting
help with drug costs (via the application
for the LIS) and the time they are
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
actually enrolled into a plan and receive
that assistance. This timeframe may
have made sense initially, since it was
not clear that nondually eligible LIS
recipients would have an ongoing SEP.
Now that they have been extended that
protection, there is less of a need to wait
for their selection. Instead, the
enrollment should happen quickly to
ensure access to prescription drugs.
Response: Facilitated enrollment
constitutes a passive enrollment process
that requires advance notice of the
opportunity to make an active election
before the enrollment is effective. We
have been unable to find a way to
ensure that individuals who are
facilitated at the end of the month can
receive the required advance notice and
have an opportunity to make an election
on their own before that enrollment
takes effect (though it is possible to do
so for those at the beginning of the
month). It is important to keep in mind
that this population consists of
individuals who have applied for LIS,
are notified of their approved LIS
eligibility, and informed via their LIS
approval notice that they need to elect
a plan in order to avail themselves of
the subsidy. Thus, we believe they are
likely to follow through on their
previous actions and choose a plan on
their own, leading to possible confusion
if they receive a facilitated enrollment
notice after they have already made an
active election. Finally, we note that all
individuals whose facilitated
enrollment into a PDP has not yet taken
effect may obtain coverage for
immediate drug needs through the
Limited Income NET demonstration.
We are committed to continue
exploring ways of shortening the
facilitated enrollment process without
infringing on an individual’s ability to
make a choice, or adding to the
possibility of beneficiary confusion.
However, it is important to note that
proposed regulation text that we are
now finalizing specifies that the
enrollment effective date is ‘‘no later
than’’ the first day of the second month’’
after we determine that they meet the
necessary enrollment criteria. Therefore,
although we are declining to amend the
regulation as requested while we
continue to address a number of
operational issues that remain
unresolved, the regulation language
does provide the flexibility to shorten
the timeframe if warranted and feasible.
Comment: One commenter noted that
plans and beneficiaries would benefit
from us specifying for both plans and
beneficiaries any premium liability in
instances when the beneficiary has a 25,
50, or 75 percent premium subsidy, in
the process of conducting facilitated
PO 00000
Frm 00042
Fmt 4701
Sfmt 4700
enrollment. As part of this, the
commenter suggested revising of the
facilitated assignment letter to include
that portion of premium for which the
beneficiary is liable.
Response: When we notify plans of
new facilitated enrollees, we do identify
those beneficiaries who are partial
versus full subsidy beneficiaries, both
on the Transaction Reply Report
confirming enrollments, as well as on
the LIS History report. In addition, the
individuals’ subsidy level is fully
explained in the LIS approval letter
from the Social Security
Administration. However, we appreciate
the suggestion for modifying the
facilitated enrollment letter to reference
a partial subsidy beneficiary’s premium
liability, and will explore whether this
is feasible. We believe the latter does
not necessitate a regulation change since
notification details are generally an
operational issue, so we will not modify
the regulation to reference this.
Comment: A few commenters
requested that we require that plans
notify dual-eligibles in advance of
potential involuntary disenrollments.
They noted that we conduct a special
auto-enrollment early each month—
• To identify full benefit dualeligibles who are disenrolled from their
previous plan;
• Who have not chosen a new one;
and
• Where there continues to be a risk
of a coverage gap if the plan submits the
disenrollment request to CMS after the
special auto-enrollment occurs.
Response: Section 423.36(b) of the
regulation and section 40.2 of Chapter 3
of the Medicare Prescription Drug
Manual already require plans to provide
advance notice of potential
disenrollment, so there is no need for a
regulation change to that effect. The
special process we run each month to
capture recently disenrolled individuals
already represents a significant advance
in our auto-enrollment procedures.
However, we will continue to look at
ways to modify auto-enrollment to more
quickly place auto-enrolled
beneficiaries in a new plan. Note that
under any circumstances, full benefit
dual-eligibles who are disenrolled will
not encounter any coverage gap—
instead their subsequent enrollment will
be made retroactive to the date of the
loss of coverage from the preceding
plan.
Comment: One commenter suggested
adding in § 423.34(f)(3) the phrase
‘‘unless the individual is not a full
benefit dual-eligible as identified in
§ 423.34(g)’’ to the end of the sentence
that comprises this subsection. The
commenter believes this addition would
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
clarify that § 423.34(f)(3) does not apply
to non-full benefit dual-eligibles who
have LIS.
Response: Section 423.34(f), including
subparagraph (f)(3), is already limited to
full benefit dual-eligibles by virtue of
the introductory regulation text before
subparagraph (f)(1). Given this, we see
no need to further specify that
§ 423.34(f)(3) does not apply to non-full
benefit dual-eligibles, so we decline to
amend the regulation as suggested by
the commenter.
Comment: Several commenters
suggested that we expand the PDPs to
which it assigns or reassigns LIS
beneficiaries to include enhanced
benefit plans. One commenter further
clarified that reassignments should
include enhanced plans whose portion
of the basic premium falls below the LIS
benchmark, as this would be no more
costly to the government and would
give LIS beneficiaries the same options
as available to other beneficiaries to
enroll in enhanced benefit plans.
Response: While enhanced benefit
plans may offer supplemental benefits,
they always create a premium liability
for the beneficiary, including those who
are eligible for the 100 percent premium
subsidy. This is because, by statute, the
LIS does not cover the portion of the
premium attributable to the enhanced
benefit, even if the total premium is
under benchmark, meaning that the
beneficiary is liable for the enhanced
portion of the premium. The statute
clearly limits initial auto enrollments to
plans where an individual has zero
premium liability, and we have adopted
the same policy approach for purposes
of reassignments. Therefore, we decline
to modify the regulation as requested.
We note that LIS beneficiaries are
always free to elect an enhanced benefit
plan if they wish to access the enhanced
benefits, but they would incur some
premium liability.
Comment: Several commenters urged
us to move away from random
reassignment of LIS eligible individuals
to a system of beneficiary-specific
reassignment in which beneficiaries are
matched with plans that include their
current drugs and preferred pharmacy.
They believe this would result in less
disruption to beneficiaries, and
increased adherence to currentlyprescribed drug regimens, while
potentially providing the LIS benefit at
the lowest total cost to beneficiaries.
Response: We continue to explore
alternatives to random reassignment
that would minimize the potential for
disruptions to continuity of care, and
appreciate the commenters’ support for
a beneficiary-specific process. While we
believe there is merit to beneficiary-
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
specific reassignment, we decline to
amend the regulation to require it, given
that § 423.34(c) currently provides CMS
the discretion to implement such
changes if our ongoing exploration of
such an approach indicates that
revisions to the current reassignment
methodology are warranted.
Comment: A few commenters
suggested that instead of reassigning LIS
beneficiaries from plans whose
premiums are going above the LIS
benchmark, we should permit them to
stay in the plan and be held harmless.
They recommended a number of ways
to do so, including giving affected
beneficiaries a grace period of one year
to remain in the plan, with no
additional premium payment; letting
the plan ‘‘absorb’’ any premium
difference between the benchmark and
the bid amount (up to $2.00 per one
commenter); or waiving the requirement
that plans attempt to collect delinquent
premiums.
Response: While we have discretion
to determine which beneficiaries are
subject to reassignment, we believe that
section 1860D–13(a)(1)(F) of the Act,
which requires uniform premiums,
precludes us from adopting these
recommendations (absent a
demonstration such as the 2006–2008
‘‘de minimis’’ demonstration, where
premiums of ‘‘de minimis’’ amounts
were waived). We note that we have
already implemented a demonstration
for the 2010 plan year that increased the
LIS benchmark, which had the effect of
substantially decreasing the number of
beneficiaries who needed to be
reassigned.
Comment: One commenter suggested
that CMS should allow the plan (rather
than CMS) to move the LIS members in
to a zero-dollar premium plan offered by
the same sponsoring organization.
Response: As outlined in section
30.1.5 of the PDP Eligibility,
Enrollment, and Disenrollment
Guidance, when we reassign a
beneficiary, we first attempt to reassign
to a PDP offered by the same
organization. Only when that is not
possible do we reassign to plans outside
of the organization. Our experience has
been that CMS-initiated actions are
much easier to implement on a timely
basis, and to monitor for accuracy and
completion, than are actions that
depend on sponsors to identify and
submit enrollment transactions for the
affected population. Therefore, we
believe there is little or no benefit to
delegating this responsibility to PDP
Sponsors, and we decline to make the
requested change.
Comment: One commenter urged us
to let plans communicate sooner with
PO 00000
Frm 00043
Fmt 4701
Sfmt 4700
19719
LIS enrollees they may lose to
reassignment. The commenter suggested
such communication be permitted
earlier than is currently permitted in the
reassignment process, to ensure affected
beneficiaries understand their options.
Response: Plan sponsors are already
permitted to communicate with current
enrollees, subject to Part D marketing
guidelines; the reassignment regulations
under discussion here do not contain
additional constraints on these rules,
and we make every effort to involve
sponsors in the reassignment
communications process as early as
possible. Thus, we believe there is no
need for changes to the regulation to
address this issue.
Comment: One commenter
recommended that we include LIS
recipients with partial premium subsidy
as opposed to only full premium
subsidy recipients in the annual
reassignment process. The commenter
noted that while it is true that recipients
with partial premium subsidy will pay
some premium no matter which plan
they select, the amount they pay is
lower if they are enrolled in a plan with
the premium at or below the
benchmark.
Response: We acknowledge that a
partial subsidy beneficiary’s premium
would be somewhat lower in a zeropremium plan versus a plan with a
premium over the benchmark, but in
either case, these beneficiaries would
still have to pay some portion of the
premium. As always, our policies with
respect to reassignment are intended to
strike a fair balance between our dual
goals of limiting beneficiary exposure to
premium costs and also avoiding any
potential negative impact on an
individual’s prescription drug coverage
(such as changes to a pharmacy network
or drug regimen). Since reassignment
cannot eliminate the premium liability
for such individuals under any
circumstances, in this situation, we
believe that potential for disruption to
the prescription drug coverage
outweighs the potential financial risks
associated with paying a higher
premium. Therefore, we do not believe
that there is sufficient benefit to
reassigning these beneficiaries, and we
decline to adopt the commenter’s
suggested change to our existing
approach.
Comment: A few commenters asked
us to reconsider our decision not to
include beneficiaries who elect their
current plan (‘‘choosers’’) in the
reassignment process. Our
reconsideration of this issue should
begin with an evaluation of how
choosers have been affected by the
current process. In particular, the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19720
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Agency should identify the number of
choosers who—
• Affirmatively switch plans every
fall;
• Affirmatively switch plans during
the year; and
• Are involuntarily disenrolled due to
nonpayment of premium.
Response: We share the commenter’s
interest in this issue, and recently
solicited input on whether we should
reassign choosers who will face a
premium liability of $10.00 or more in
the following year (please see page 84 of
the Advance Notice of Methodological
Changes for Calendar Year 2011 for
Medicare Advantage (MA) Capitation
Rates, Part C and Part D Payment
Policies and 2011 Call Letter, issued
February 19, 2010). We will continue to
assess choosers’ experience in Part D
plans above the benchmark, including
the extent to which they subsequently
elect another plan and the extent to
which they experience problems with
premium payments. As noted
previously, the regulations do provide
the flexibility to change the existing
process should our reconsideration of
our approach show it to be warranted.
Comment: Two commenters
recommended that we send a notice to
LIS choosers who have chosen to join or
remain in plans in which they would
incur a premium liability. The
commenters suggested notifying them of
their zero-premium options (including
an analysis of drug utilization to
determine most appropriate plan). The
beneficiary would be permitted to
respond to the mailing in an efficient
manner (for example, via postcard,
telephone call, or online) to indicate his
or her choice.
Response: We continue to assess the
experience of LIS choosers who face
premium liability, and as noted above,
have solicited input on whether we
should reassign choosers who have a
premium liability of $10.00 or greater
for the following year. We remain
committed to reaching out to choosers
whom we do not reassign to let them
know about their options for zero
premium prescription drug plans.
Comment: A few commenters urged
us to require State Medicaid Agencies to
increase the frequency of state
submission of MMA data exchange files,
which is the primary vehicle for
notifying CMS of new dual-eligible
beneficiaries. This would further
minimize enrollment delays for new
dual-eligibles.
Response: We believe this comment is
outside the scope of this regulation, so
we decline to amend the regulation in
this manner. However, we continue to
encourage states to submit these files
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
more frequently, and provide technical
assistance on how to do so.
Comment: One commenter urged us
to ensure that dual beneficiaries receive
clearer information about all the options
available to them, including information
about Medicare Special Needs Plans
that can provide their Part D benefits.
The commenter was especially
concerned about the new Limited
Income NET demonstration, which will
automatically enroll LIS-eligible
individuals who fail to elect a plan and
are in immediate need of drugs in one
Part D plan. This could create obstacles
to seamless conversion from a
Medicaid-only managed care plan to a
Medicare Special Needs Plan offered by
the same organization. The commenter
encouraged us to establish more
effective procedures to find and
transition new duals into their Medicare
benefits, especially those who are
becoming Medicare-eligible because
they are reaching the end of their 24month disability waiting period.
Response: We appreciate the
commenter’s concern about ensuring
dual-eligible beneficiaries receive
information about all their options, and
the need for ensuring a smooth
transition for these beneficiaries
between Medicaid and Medicare drug
coverage. We have taken several steps to
do so, and believe the Limited Income
NET demonstration is an important step
in further improving that transition.
With respect to the concerns about the
Limited Income NET demonstration, we
note that the Limited Income NET
process only involves auto enrollment
to a single Part D plan for a short,
retroactive period. For all prospective
periods, the long-standing process of
random enrollment among all PDPs
with a premium at or below the LIS
benchmark would continue to apply.
Further, we do not believe the Limited
Income NET demonstration specifically,
or auto enrollment generally, creates
obstacles to seamless conversion. In
both cases, our processes are designed
to ensure that new dual-eligibles have
access to Medicare drug coverage on the
first day of their eligibility for it.
However, both those processes are also
designed to ensure that any beneficiary
election will trump a CMS-generated
auto enrollment.
Comment: One commenter expressed
support for the Limited Income NET
demonstration program, but raised other
concerns that the commenter believes
the demonstration will not address:
enrollment delays, LIS recipients in
non-benchmark plans, and the need for
accurate, LIS-specific information in
plan mailings.
PO 00000
Frm 00044
Fmt 4701
Sfmt 4700
Response: We appreciate the support
for the Limited Income NET program,
and will continue to work on improving
other areas of the program referenced by
the commenter.
10. Special Enrollment Periods Under
Part D (§ 423.380)
In the October 22, 2009 rule, we
proposed to expand the SEP described
in § 423.38(c)(4), which currently
applies to full benefit dual-eligible
individuals, to all LIS-eligible
individuals. This proposed change is
consistent with our authority in section
1860D–1(b)(3)(C) of the Act and will
conform our regulations to current
practice as reflected in CMS guidance in
section 20.3.8, item 7, of chapter 3 of the
Medicare Prescription Drug Benefit
Manual. In this final rule, we adopt the
provision as proposed.
Comment: Several commenters
expressed support for putting the
continuous Special Enrollment Period
(SEP) for non-full benefit dual-eligible
beneficiaries that is currently in
operational guidance into regulation.
Response: We appreciate the
comments that support placing the SEP
for non-full benefit dual-eligibles into
the regulation.
11. Transition Process Under Part D
(§ 423.120(b)(3))
In the October 22, 2009 proposed rule,
under the authority of section 1860D–
11(d)(2)(B) of the Act, we proposed to
codify in regulation certain plan
transition policies at § 423.120(b)(3)
previously established through
subregulatory guidance. We specifically
proposed to codify in regulation that a
Part D sponsor must provide for a
transition for the following—
• New enrollees into PDPs following
the annual coordinated election period;
• Newly eligible Medicare enrollees
from other coverage;
• Individuals who switch from one
plan to another after the start of the
contract year; and
• Current enrollees remaining in the
plan who are affected by formulary
changes from one contract year to the
next.
We also proposed, consistent with our
current guidance, that a Part D sponsor’s
transition process be applicable to
nonformulary drugs, meaning both—
(1) Part D drugs that are not on a
sponsor’s formulary; and
(2) Part D drugs that are on a
sponsor’s formulary but require prior
authorization or step therapy under a
plan’s utilization management rules.
Additionally, consistent with our
current guidance, we proposed to codify
the timeframes for the transition process
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
and the days’ supply limit for a
transition fill of an enrollee’s
medication. Specifically, we proposed
to codify the transition process
timeframe to apply during the first 90
days of coverage under a new plan.
In addition, noting that our existing
guidance directs Part D sponsors to
provide a temporary supply we
proposed that Part D plan sponsors be
required to ensure that the one-time
temporary supply of nonformulary Part
D drugs requested during the first 90
days of coverage in an outpatient setting
be for at least 30 days of medication,
unless the prescription is written by a
prescriber for less than 30 days, in
which case the Part D sponsor must
allow multiple fills to provide up to a
total of 30 days of medication. For a
new enrollee in a LTC facility, the
temporary supply may be for up to 31
days (unless the prescription is written
for less than 31 days), consistent with
the dispensing practices in the LTC
industry. In addition, due to the often
complex needs of LTC residents that
often involve multiple drugs and
necessitate longer periods in order to
successfully transition to new drug
regimens. For these reasons, we
proposed to require sponsors to honor
multiple fills of nonformulary Part D
drugs, as necessary during the entire
length of the 90-day transition period.
Further, we proposed requiring up to a
31-day transition supply for enrollees in
an LTC facility given that many LTC
pharmacies and facilities dispense
medication in 31-day increments. Thus,
a Part D sponsor would be required to
provide a LTC resident enrolled in its
Part D plan at least a 31 day supply of
a prescription when presenting in the
first 90 days of enrollment (unless the
prescription is written for less) with
refills provided, if needed, up to a 93
day supply.
In addition to proposing to codify the
preceding requirements, we also
clarified our expectations of sponsors
with respect to providing transition
notices. Consistent with our guidance
that specifies that Part D sponsors send
a written notice, via U.S. First Class
mail, to each enrollee who receives a
transition fill, we proposed to codify the
guidance that directs sponsors to send
this notice to each affected enrollee
within 3 business days of the temporary
fill. In addition to this codification, we
also proposed requiring plan sponsors
to make reasonable efforts to notify
prescribers, via mail, electronic or
verbal communication, that the affected
enrollees’ prescription cannot be
refilled, either because of utilization
management requirements such as prior
authorization or step therapy, or
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
because the prescribed medication is
not on the plan sponsor’s formulary. All
of these proposals were addressed by
adding paragraphs (i) to (v) to our
general transition policy requirement at
§ 423.120(b)(3). We are adopting
paragraphs (i), (ii), and (v) as proposed
without further modification. As
explained below, we are modifying
proposed paragraph (iii) by clarifying
the existing language to state that the
temporary supply of nonformulary Part
D drugs (including Part D drugs that are
on a sponsor’s formulary but require
prior authorization or step therapy
under a sponsor’s utilization
management rules) must be for up to 93
days in 31 day supply increments, with
refills provided, if needed, unless a
lesser amount is actually prescribed by
the physician, and paragraph (iv) by
clarifying that transition notices must be
sent to beneficiaries within 3 business
days after adjudication of a temporary
fill.
Comment: A number of commenters
supported our proposal of requiring an
extended transition supply be given to
enrollees residing in a LTC facilities.
However, commenters requested that
CMS provide the same protections to
individuals requiring LTC in
community-based settings as provided
to those in institutions.
Response: While we appreciate that
there are community-based enrollees
who have nursing facility level of care
and may experience access to multiple
pharmacies, we are not persuaded that
we should extend the LTC extended
transition requirement to such
individuals. We believe that residents of
LTC institutions are more limited in
access to prescribing physicians hired
by LTC facilities due to a limited
visitation schedule and more likely to
require extended transition timeframes
in order for the physician to work with
the facility and LTC pharmacies on
transitioning residents to formulary
products. We believe that communitybased enrollees, in contrast, are less
limited in their access to prescribing
physicians and do not require an
extended transition period to work with
their physicians to successfully
transition to a formulary product.
Comment: Several commenters
disagreed with the proposed timeframe
in which to send out the transition
notice of 3 business-days and
recommended 3 calendar days. The
commenters argue that a requirement of
3 calendar days is clearer and easier to
enforce, particularly during holiday
periods, when holidays delaying U.S.
mail combined with the normal delays
in mail delivery can severely cut into
the time a beneficiary needs to try a
PO 00000
Frm 00045
Fmt 4701
Sfmt 4700
19721
different drug and request a formulary
exception.
Response: We disagree with these
commenters that the proposed
timeframe be changed to 3 calendar
days, which includes weekends and
holidays when standard businesses are
closed. We do not believe that a
calendar day timeframe will allow
sponsors an acceptable period in which
to mail out a transition notice. Rather,
we believe that the 3 business day
turnaround time for notice to be sent is
consistent with current transition policy
and it permits a beneficiary sufficient
time to work with his/her prescriber to
change to a therapeutically equivalent
drug on a plan’s formulary or begin the
exceptions process.
Comment: Several commenters
supported the proposed requirement
that sponsors notify the prescriber when
a transition fill has been made. One
commenter stated that the proposal is a
positive that allows consistency across
the MA population and it provides
protection of certain vulnerable
populations. Many commenters
requested that we develop a
standardized transition format for
notices and explanations to be provided
to plans. Another commenter requested
our review notices that sponsors
provide to ensure that beneficiaries are
not unknowingly being steered to mail
order pharmacies.
Response: We appreciate the
comments. We note that we have
developed a model transition notice for
plans to send beneficiaries and are
considering for the future whether or
not to make that model standardized. In
addition, we have prepared model
notices for sponsors to ensure that
beneficiaries are not unknowingly being
transferred to mail order pharmacies.
Model transition notices may be found
at Part D Marketing Model Materials.
Comment: Many commenters opposed
the requirement to send the transition
notice within 3 business days of the
temporary fill being dispensed. These
commenters requested changing the
proposal to notice being sent within 3
business days after a temporary fill is
processed. The commenters argue that
this is consistent with the current
language in Section 30.4.10 of Chapter
7 of the Prescription Drug Benefit
Manual, where the phrase ‘‘within 3
business days of the temporary fill’’ has
been understood by the industry to refer
to the date the temporary fill is
processed, since it is only when the
claim is processed that a plan learns
about it and can act on it.
Response: We agree and note that
industry practice standards have
interpreted the language to mean within
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19722
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
3 business days of a temporary fill being
processed. Therefore, we are revising
the language of § 423.120(b)(3)(iv) to
read ‘‘within 3 business days of
adjudication of a temporary fill.’’
Comment: Some commenters
expressed concerns with our proposal
that Part D plan sponsors make
reasonable efforts to notify the
prescriber of the transition fill, with
some commenters recommending that
we make the prescriber notice
requirement optional so that plans may
exercise discretion to determine
whether it is warranted. Another
commenter stated that for the
notification to be successful their master
DEA file would need constant updating
and that the requirement does not take
into account emergency room or urgent
care physicians covered by a blanket
DEA number from the hospital. Another
commenter suggested we should
dialogue with the industry to review
operational challenges to the prescriber
notification. Yet another commenter
suggested that we not implement the
requirement unless we provides plan
sponsors with access to databases with
complete and accurate physician
contact information cross-referenced
with physician identifiers.
Response: We disagree with the
commenters’ request to make the
prescriber notice optional and leave it to
the plan’s discretion whether such
notification is warranted. The prescriber
notification is a means of further
strengthening beneficiary protections
when dealing with formulary changes or
utilization management protocols for
necessary medications because the
prescriber is in the best position to
advise the beneficiary on the benefits or
risks of switching to a different
medication. Prescriber notification is an
additional step to ensure a beneficiary is
receiving optimal medication therapy
outcomes with little to no delay in their
drug regimen. As a result of this
provision, sponsors and network
pharmacies will need to ensure that
they update their databases on a more
consistent basis. We intend to provide
additional guidance on what constitutes
‘‘reasonable notification efforts’’ in the
future, but we do not envision providing
plans with a comprehensive database of
physician contact information as this is
not information that we keep track of,
and therefore it is not feasible for plans
to rely on us to completely and
accurately maintain such a database.
Comment: Several commenters stated
that notification via U.S. mail occurs
after the fact and suggests an alternative
of beneficiary notification at the site of
service.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Response: We continue to work with
the industry to work on automated
methods whereby beneficiaries are
notified at point of sale that a drug
dispensed is non-formulary. Until such
time as these notifications are
automated, plan sponsors must send
written notice of transition fills through
the U.S. mail.
Comment: One commenter requested
CMS to define ‘‘other coverage’’ related
to the requirement to provide a
transition period for ‘‘newly eligible
Medicare enrollees from other coverage’’
questioning whether this means that
newly eligible Medicare enrollees who
do not have ‘‘other coverage’’ should not
qualify for a transition period. The
commenter requests that we clarify that
‘‘newly eligible Medicare enrollee’’
would not include anyone who had
been eligible for Medicare as a result of
a disabling condition and moves to
being eligible for Medicare as a result of
reaching the specified age (such as, 65).
Response: We agree and clarify that
‘‘newly eligible Medicare enrollee’’
would include anyone who had been
eligible for Medicare as a result of a
disabling condition and moves to being
eligible for Medicare as a result of
reaching the specified age (such as, 65),
including enrollees who do not have
‘‘other coverage’’ but who may be paying
out of pocket for drugs they are
currently taking.
Comment: One commenter supported
the transition proposal but requests that
CMS further revise § 423.120(b)(3) to
standardize the amount of the
temporary supplies that PDP sponsors
are required to provide in the LTC
setting. Some PDP sponsors have
interpreted this element of CMS’
transition policy that temporary
supplies ‘‘may be for up to’’ 31 days to
enable them to authorize fills of less
than 31 days, even when physicians
have prescribed a 31-day fill. The
commenter recommends that we revise
its proposed regulation to require PDP
sponsors to provide transition supplies
of at least 31 days unless a lesser
amount is actually prescribed by the
physician.
Response: We agree and are clarifying
the existing language to state that the
temporary supply of nonformulary Part
D drugs (including Part D drugs that are
on a sponsor’s formulary but require
prior authorization or step therapy
under a sponsor’s utilization
management rules) must be for up to 90
days in 31-day supply increments
unless a lesser amount is actually
prescribed by the physician. We believe
this clarification is necessary to protect
beneficiaries residing in LTC facilities
from unnecessary delays in obtaining
PO 00000
Frm 00046
Fmt 4701
Sfmt 4700
the full amount of a temporary fill or
from uneven interpretation among plan
sponsors.
Comment: Many commenters
suggested that we articulate in
regulation the extension of transition
fills through the completion of any
requested exception, even if that process
takes longer than 30 days. Moreover,
commenters suggested that we also
require a transition fill whenever a
member encounters formulary
difficulties obtaining current
prescriptions. A few commenters urged
us to codify in regulation the
requirement that Part D plans cover an
emergency supply of nonformulary
drugs outside of the initial 90-day
transition period. One commenter
suggested that the regulations should be
strengthened to provide that without
evidence of timely written notice to the
affected enrollee, the enrollee should be
entitled to continue to receive the
relevant medication(s). Other
commenters requested we codify
current guidance encouraging Part D
sponsors to incorporate processes in
their transition plans that allow for
transition supplies to be provided to
current enrollees with level of care
changes.
Response: We note that current policy
directs Part D sponsors to provide for a
transition extension on a case-by-case
basis when enrollees have not been
successfully transitioned to the
sponsor’s formulary requirements. We
do not believe that it is appropriate to
codify this ‘‘case-by-case’’ directive into
the existing rule. Our guidance already
addresses that sponsors need to review
an enrollee’s request for an extension
and the circumstances requiring such a
request on an individual basis.
We also disagree with the comments
that the regulation should be
strengthened to provide that without
evidence of timely written notice, the
enrollee should be entitled to continue
to receive the relevant medication(s).
We believe that this situation would be
more appropriately be handled through
the complaint process given the level of
scrunity that would be required to verify
whether evidence exists that notice was
provided to the enrollee by the plan
sponsor.
We also disagree with the comment
requesting that we codify into regulation
at this time our current guidance
encouraging transition supplies to be
provided to current enrollees with level
of care changes. As we have not
encountered large number of
complaints, we will continue to
examine this issue. If we decide to
mandate transition in this area, we will
do so through future rulemaking.
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Finally, we will consider codifying
our emergency supply policy for LTC
enrollees in future rulemaking.
Comment: Some commenters urged us
to adopt the GAO recommendation to
make the ANOC sent prior to each open
season more individualized and thus
more valuable to plan enrollees.
Response: We appreciate commenters
recommending a more individualized
ANOC being sent out prior to each open
season. We believe that this is outside
the scope of this proposal, which is to
strengthen beneficiary protections
during the transition process.
sroberts on DSKD5P82C1PROD with RULES
12. Part D Sponsor Responsibility for
Retroactive Claims Adjustment
Reimbursements and Recoveries Under
Part D (§ 423.464, § 423.466, and
§ 423.800)
In the October 22, 2009 proposed rule,
under the authority of sections 1860D–
23 and 1860D–24 of the Act, we
proposed that sponsors make retroactive
claim adjustments and take other payer
contributions into account as part of the
coordination of benefits. In making
these proposed changes, we noted that
some beneficiary changes (such as LIS
status changes or midyear Part D
enrollment changes), LTC pharmacy
billing practices for dual-eligible
beneficiaries, and the presence of
secondary, tertiary, and even quartenary
payers have contributed to a higher than
expected volume of retroactive claims
adjustments requiring Part D sponsor
reimbursements and recoveries, as well
as a greater than anticipated complexity
of calculating these amounts. While we
previously anticipated that beneficiaries
would be owed reimbursements due to
changes in LIS status, and that plan
sponsors would be required to make
such reimbursements under
§ 423.800(c), we did not believe our
current regulations addressed the other
entities that may sometimes need to be
taken into account in reimbursement or
recovery transactions. Moreover, we
noted that no industry standard
electronic process exists to explicitly
handle underpayment recoveries or
overpayment reimbursements created by
these adjustments, and that the current
Health Insurance Portability and
Accountability Act (HIPAA) standard
for coordination of benefits for
pharmacy claims only partly supports
these activities when the pharmacy
initiates ‘‘reverse and rebill’’
transactions. As a result, Part D
sponsors sometimes struggle with how
to manage these retroactive adjustments
and those sponsors that are refunding
overpayments or seeking underpayment
recovery are each doing it differently.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
We also noted in the October 22, 2009
proposed rule that, since our current
regulations do not address retroactive
adjustments and the complexities
associated with coordination of benefit
activities that cannot be accomplished
between the Part D sponsor and the
pharmacy through reversal and
rebilling, we have issued general
guidance to direct sponsor coordination
of benefit activities. As part of our
implementation guidance on the
automated process for the transfer of
TrOOP-related data, we established a
45-day maximum time limit for the
sponsor to take adjustment action, make
a refund, and initiate recovery. We
established this time limit after an
informal survey and discussions with
Part D sponsors and their processors.
We noted in the October 22, 2009
proposed rule (74 FR 54663) that many
of the post-adjudication adjustments,
such as those that are due to enrollment
changes, are changes that affect
beneficiary cost sharing, premiums and
plan benefit phase. Establishing a
reasonable time limit for all Part D
adjustment, refund, and recovery
activity is in the beneficiaries’ best
interests because it ensures that
required changes are effectuated on a
timely basis, thus correcting retroactive
and prospective beneficiary premium
and cost-sharing amounts. Moreover, it
is in the best interest of others who have
paid a claim on the beneficiary’s behalf
because it ensures that these amounts
are resolved timely.
For these reasons, we proposed at
§ 423.464 and § 423.466 to codify our
previous policy guidance by proposing
that sponsors must make retroactive
claim adjustments and take other payer
contributions into account as part of the
coordination of benefits. Further, we
proposed adding a new timeliness
standard at § 423.466 to require
adjustment and issuance of refunds or
recovery notices within 45 days of the
sponsor’s receipt of the information
necessitating the adjustment.
As part of making these proposed
changes, we noted that, to date, most
Part D coordination of benefits activity
has been performed at point-of-sale or
soon after, so pharmacy reversal and
rebilling of claims can be accomplished
within the payers’ timely filing
windows. For Part D, this window must
be a minimum of 90 days, but for other
(non-Part D) providers of prescription
drug coverage the filing window could
be as short as 30 days. However, we
acknowledged that with the volatility of
LIS data and Part D enrollments creating
a significant volume of retroactive
adjustments, Part D sponsors are facing
more claims adjustments than current
PO 00000
Frm 00047
Fmt 4701
Sfmt 4700
19723
pharmacy claim reversal and rebilling
approaches can adequately address.
In addition, we acknowledged issues
regarding proprietary pricing
information and the chilling effect that
disclosure of this information might
have upon the ability of pharmacies to
negotiate with payors. To ensure the
confidentiality of pricing information,
coordination of benefits on the initial
claim is accomplished without reporting
complete information on negotiated
pricing. The amount then reported in
the (Nx) transaction to the Part D plan
is the amount of the beneficiary
payment after the supplemental
payment. As a result, a Part D sponsor
attempting to determine refund or
recovery amounts without having the
pharmacy reverse and rebill the original
claim can generally only impute the
amount of any supplemental payment
made by another payer by determining
the difference between the Part D costsharing and the beneficiary amount paid
after the supplemental payment. The
only alternative is to ask the pharmacy
to reverse and rebill the claim to all
payers. However, such a procedure
would be generally impractical after the
industry standard 30-day window
because many supplemental payers will
not accept the late claim.
In the absence of legal authority to
compel supplemental payer cooperation
and to avoid pharmacy underpayment,
imposing a requirement on sponsors to
nonetheless calculate a precise
reimbursement or recovery liability
would require the creation of a new
payer-to-payer transaction that would
both enable reprocessing and address
pharmacies’ concerns about revealing
their proprietary pricing. However, as
we noted in the proposed rule (74 FR
54663), it is not clear that both goals can
be achieved. Nor is it clear that even if
this conflict could be resolved, that the
cost of doing so would be justified by
the benefits.
Therefore, while simple adjustments
involving just the Part D sponsor and
the pharmacy are relatively
straightforward (and can and should be
promptly transacted), those involving
other payers are not. We solicited
comments on alternative approaches to
improving post-adjudication
coordination of benefits necessitated by
retroactive Medicare enrollment and
low-income subsidy changes when
multiple payers are involved, as well as
our assessment that the costs of
achieving precision in such transactions
may outweigh the benefits.
Our specific proposals to modify
§ 423.464 included the following
changes:
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19724
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
• Revising paragraph (a) to clarify
that all Part D sponsors must comply
with administrative processes and
requirements established by CMS to
ensure effective coordination between
Part D plans and other providers of
prescription drug coverage for
retroactive claims adjustments,
underpayment reimbursements and
overpayment recoveries; and
• Adding a new paragraph (g)(7) to
address the sponsors’ responsibility to
account for payments by SPAPs and
other providers of prescription drug
coverage in reconciling retroactive
claims adjustments that create
overpayments and underpayments, as
well as to account for payments made,
and for amounts being held for
payment, by other individuals or
entities. The new paragraph would also
specify that Part D sponsors must have
systems to track and report adjustment
transactions and to demonstrate that—
(1) Adjustments involving payments
by other plans and programs providing
prescription drug coverage have been
made,
(2) Reimbursements for excess costsharing and premiums for LIS eligible
individuals have been processed in
accordance with the requirements in
§ 423.800(c), and
(3) Recoveries of erroneous payments
for enrollees have been sought as
specified in § 423.464(f)(4).
Except as otherwise provided below,
after considering the comments received
in response to the proposed rule, this
final rule adopts the proposed changes
to the retroactive claims adjustment
reimbursement and recovery provisions
in § 423.464 and § 423.466.
Comment: Multiple commenters
agreed that the costs of achieving
precision in retroactive COB
transactions outweigh the benefits of
creating specialized electronic
transactions for calculating payer-topayer claims adjustments. A number of
these commenters offered
recommendations to CMS in response to
our request for alternative approaches to
improving post-adjudication
coordination of benefits, including
establishing a process to notify
supplemental payers when an Nx
transaction was not generated and the
Part D sponsor is making a retroactive
adjustment to the primary amount paid.
Response: We appreciate the
commenters’ concurrence with our
assessment that the costs to create a
specialized transaction for retroactive
claims adjustments outweigh the
benefits and their recommendations for
improving post-point-of-sale
adjudication coordination of benefits.
Until such time as any cost effective
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
alternative approaches are identified,
we will not require the development of
payer-to-payer coordination of benefit
transactions for retroactive claims
adjustments. Instead, we will work with
the industry to develop work-around
solutions, such as imputing amounts to
be reimbursed based on best available
information, and will take the
commenters’ recommended approaches
into consideration during that effort.
In the interim, the existing
coordination of benefit requirements
require sponsors to coordinate not only
with beneficiaries, but also with SPAPs,
other plans or programs providing
prescription drug coverage and
beneficiaries and other individuals or
entities that have made payment on the
beneficiaries’ behalf. These
requirements include coordination of
benefits at point-of-sale, as well as
retroactive claims adjustments
necessitated by not only beneficiary
changes, such as retroactive LIS
eligibility determinations, LIS status
changes or mid-year Part D enrollment
changes, but also other payer changes,
beneficiary submission of paper claims,
etc. In addition, as discussed elsewhere
in this rule, sponsors must have systems
to track and report adjustment
transactions and to process adjustments
and issue refunds or recovery notices
within 45 days of the sponsor’s receipt
of information necessitating a
retroactive claims adjustment.
As specified in subregulatory
guidance in the Medicare Prescription
Drug Benefit Manual chapters on
Coordination of Benefits and Premium
and Cost-Sharing Subsidies for LowIncome Individuals, Part D sponsors
should also: work with other providers
of prescription drug coverage to resolve
payment issues; have a process in place
to handle payment resolution that is not
restricted by implementation of timely
filing requirements; make retroactive
adjustments and promptly refund
monies owed to the correct party
(including, but not limited to, the
beneficiary); and generally limit
requests for pharmacy reprocessing to
those situations where the total payment
to the pharmacy changes. Coordination
of benefits guidance also includes the
need to transfer TrOOP and gross
covered drug cost balances to the new
plan whenever a beneficiary transfers
enrollment between Part D sponsors
during the coverage year. As discussed
elsewhere in this final rule, sponsors
have a 45-day maximum time limit from
receipt of changes in the reported
transfer data to make an adjustment and
issue a refund or initiate recovery.
Comment: One commenter suggested
that CMS establish an exception that
PO 00000
Frm 00048
Fmt 4701
Sfmt 4700
would permit a Part D sponsor to refund
the beneficiary directly without
accounting for other payers if the net
claims adjustment is $10 or less and
there is no N transaction reporting
another payer amount paid on the
claim.
Response: We disagree with this
suggestion. Although individual claims
adjustments may not exceed the
suggested threshold, cumulative
amounts due to other payers (such as
SPAPs) could be substantial.
Additionally, the other payers would be
unaware that a claim had been
retroactively adjusted and that a refund
was issued to the beneficiary. As a
result, the other payers would not know
to seek recovery from the beneficiary.
Therefore, we continue to believe that
sponsors must comply with the
coordination of benefits requirements
without regard to the monetary amount
of the adjustment.
Comment: One commenter asked that
we clarify in § 423.464 that pharmacies
holding copayments are exempt from
the coordination of benefits
requirements since they do not meet the
definition of a plan or program
providing prescription drug coverage.
The commenter noted that this
clarification will ensure that pharmacies
recognize they are not a provider of
prescription drug coverage, and are only
entitled to reimbursement if the member
should receive reimbursement and the
pharmacy has attested that it is holding
the member’s cost-sharing amounts due
and has not billed the member. Several
other commenters requested that
specific language be added to the
regulations at either § 423.800(c), or
§ 423.464(g) and § 423.466(a), to clarify
that the requirements, including the 45day time period for issuing refunds or
initiating recoveries due to retroactive
adjustments, apply not only when a
supplemental payer is involved, but also
when a pharmacy is owed for costsharing initially withheld by the
sponsor for LIS beneficiary claims.
Response: We agree that pharmacies
are not providers of prescription drug
coverage and, therefore, are not covered
under § 423.464(g). However, it was our
intention to apply the 45-day time limit
to all retroactive adjustment regardless
of whether a pharmacy alone, a
pharmacy and the beneficiary, or a
pharmacy, the beneficiary and another
payer are involved. As a result, we are
finalizing § 423.464(g) as proposed. In
response to the concerns raised by the
commenters regarding the application of
the 45-day timeframe to pharmacies, in
this final rule we are also amending
§ 423.800 to add a new paragraph (e) to
make it clear that the 45-day timeframe
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
applies to adjustments involving
pharmacies and beneficiaries, including
LTC pharmacies holding cost-sharing
amounts due. Generally, sponsors will
reimburse the beneficiary for
adjustments made to retail claims, but
for full benefit dual-eligible individuals,
in the absence of other information
indicating the cost-sharing has been
waived, the sponsor will reimburse the
LTC pharmacy.
Comment: Several commenters argued
that the 45-day time period for issuing
reimbursement or initiating recovery
should be changed to 90 days because
of the various research and coordination
issues that may need to be resolved with
other stakeholders in the industry.
Response: We disagree with these
commenters. We believe a 45-day period
is more than sufficient to resolve any
coordination of benefits issues and
refund overpayments or institute
recovery of underpayments resulting
from the retroactive claims adjustments.
As we stated in the proposed rule, we
considered a 90-day time limit, but
concluded that this longer timeframe
was not in the best interests of
beneficiaries because it would delay the
payment of refunds and notification of
the need for payment recovery.
Moreover, we noted that as part of the
automated transfer of TrOOP-related
data, we established a 45-day maximum
time limit for sponsors to take
adjustment action, make a refund and
initiate recovery. We further explained
that we established this time limit after
an informal survey and discussions with
Part D sponsors and their processors.
For these reasons, we continue to
believe that a 45-day time limit
represents a reasonable compromise.
Therefore, we are finalizing the
requirement as proposed.
13. Time Limits for Coordination of
Benefits (§ 423.466)
In the October 22, 2009 proposed rule
(74 FR 54664), we proposed to revise
§ 423.466 by adding a new paragraph (b)
that would establish a 3-year time limit
on Part D coordination of benefits. In
making this proposed change, we noted
that currently, there is no statutory or
regulatory time limit for Part D sponsor
coordination of benefits with SPAPs,
other providers of prescription drug
coverage, or other payers. Current CMS
guidance as set forth in the
Coordination of Benefits (COB) chapter
of the Medicare Prescription Drug
Benefit Manual only directs Part D
sponsors to establish at least a 90-day
timely claims filing window and to
make appropriate allowances for COB
claims on a case-by-case basis. The COB
chapter also directs sponsors, in
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
retroactive enrollment situations, to
coordinate benefits with other payers as
required by the regulations at
§ 423.464(f), as well as to accept claims
from the beneficiary without imposing
time limits. This chapter further states
that sponsors, even in those situations
when retroactive enrollment is not an
issue, are liable for claims received after
the end of the coverage year as defined
in § 423.308 and that, while contract
provisions regarding timely claims filing
may limit claims from network
pharmacies, non-network pharmacies
and beneficiaries must still have the
opportunity to submit claims for
reimbursement without the imposition
of time limits by the Part D sponsor.
We also noted the benefits to be
derived from this proposed change. In
addition to limiting sponsors’ financial
liability, a specified time limit would
strengthen the ability of SPAPs, other
providers of prescription drug coverage
and other payers, including
beneficiaries, to obtain payment for
covered Part D drugs within that time
frame. Moreover, we would benefit from
a COB time limit because it would
enable us to conduct reopening
efficiently and on a predictable
schedule.
In considering whether to establish
time limits on the submission of claims
to Part D sponsors by beneficiaries and
other payers of prescription drug
coverage for proper coordination of
benefits, we noted that the Medicare
FFS time limit for filing claims, as
specified in § 424.44, is 15 to 27 months
depending on the date that the item or
service was furnished and that under
certain circumstances these time limits
may be extended an additional 6
months. We also noted that the Deficit
Reduction Act of 2005 (Pub. L. 109–171)
(DRA) amended section 1902(a)(25) of
the Act, to provide for a 3-year time
limit for States to seek recovery of
Medicaid claims payments when the
State is not the primary payer. Although
this DRA provision does not address
SPAPs and, therefore, does not impose
a time limit on the requirement for Part
D sponsors to coordinate benefits with
SPAPs, it does establish the time limit
for State Medicaid programs to recover
from Part D plans.
Having considered these filing limit
precedents, we proposed to establish a
3-year filing limit for Part D
coordination of benefits with SPAPs,
other entities providing prescription
drug coverage, and all other payers,
including beneficiaries or other
individuals or (non-network) entities
paying, or holding amounts for
payment, on the beneficiaries’ behalf.
Specifically, we proposed to revise new
PO 00000
Frm 00049
Fmt 4701
Sfmt 4700
19725
§ 423.466 by adding a new paragraph (b)
that would establish a 3-year time limit
on Part D coordination of benefits. Part
D sponsors would be required to
coordinate benefits with SPAPs, other
entities providing prescription drug
coverage, and other (non-network)
payers for a period not to exceed 3 years
from the date on which the prescription
for the covered Part D drug was filled.
Adding this provision to the regulation
would clarify timely filing
responsibilities and deadlines for all
beneficiaries and payers, as well as
place a limit on Part D sponsors’ claims
payment liabilities and coordination of
benefits responsibilities.
As noted in our response to the
comments below, after considering the
comments received in response to this
proposal, we continue to believe a 3year time limit on Part D coordination
of benefits is reasonable, and in this
final rule, we are adopting the provision
as proposed.
Comment: Two commenters
expressed support for the establishment
of a clear timeframe for coordination of
benefits, and two others expressed
agreement with the proposed 3-year
time limit. A number of other
commenters suggested alternative time
limits of 2 years, 18 months or 1 year.
The rationale cited by commenters for a
shorter time period was that it would
more closely align the COB time limit
with the regulatory deadline for
submission of Part D cost data, thereby
reducing the number of payment
reconciliation reopenings and curtailing
the costs associated with maintaining
open claims databases.
Response: We disagree that we should
shorten the proposed coordination of
benefits time limit. Other payers need
time to seek reimbursement and
sponsors need a clear limit in order to
resolve claims for which they are
responsible. We believe that a 3-year
limit would permit CMS to address both
needs. A timeframe that aligned with
the regulatory deadline for submission
of PDE data would allow only 6 months
for submission of claims incurred late in
the coverage year, a timeframe that we
believe Part D experience to-date has
demonstrated would not allow
sufficient time for claim identification
and subrogation. As we noted in the
proposed rule, the 3-year limit is also
aligned with the DRA timeframe,
providing a uniform period for
coordination of benefits for all payers,
rather than creating different timeframes
based on payer type (for example,
SPAPs or other entities providing
prescription drug coverage). This
alignment will, in our view, ease
administration for all parties.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19726
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Therefore, in the final rule, we adopt
the requirement for Part D sponsors to
coordinate benefits with SPAPs, other
entities providing prescription drug
coverage, and other (non-network)
payers for a period not to exceed 3 years
from the date on which the prescription
for the covered Part D drug was filled.
By the effective date of this final rule,
the timeframe for coordination will have
ended for claims for prescriptions filled
any time in 2006, as well as for
prescriptions filled in the early months
of 2007. For example, a Part D sponsor
would be responsible for coordinating
benefits on a claim for a covered Part D
drug filled on March 3, 2008 until
March 3, 2011.
It is important to note that this final
rule establishes a time limit for Part D
sponsor liability for coordination of
benefits with other payers and does not
affect the timeframes for Part D sponsors
to pursue Medicare secondary payer
(MSP) claims and to recover amounts
paid by the sponsor as primary when an
MSP payer is identified. Such
timeframes are separately identified in
42 CFR part 411.
Comment: One commenter stated the
application of the DRA’s health claim
reimbursement rules and standards to
prescription drugs is inequitable,
because Part D claims processing, unlike
health claims processing, is
predominantly real-time. As a result, a
3-year submission window is not
necessary.
Response: We disagree. Although no
interpretive guidance has been issued
on this provision, the plain reading of
section 1902(a)(25)(J) of the Act
encompasses all Medicaid claims,
including claims for prescription drugs.
As a result, we believe the application
of this standard for Part D is
appropriate.
Comment: One commenter
recommended that CMS impose time
limits for the payment of COB claims
once filed with the Part D sponsor.
Response: This suggestion is outside
the scope of the proposed rule. We can
consider whether such a time limit is
warranted and address the issue as
appropriate in future rulemaking.
However, we note that once a COB
claim has been submitted, we expect
Part D sponsors will make good faith
efforts to promptly coordinate benefits
with the submitter of the claim, whether
an SPAP, another entity providing
prescription drug coverage, a
beneficiary or someone acting on his or
her behalf, or another payer. Any payer
that does not believe a Part D sponsor
is making good faith efforts to
coordinate claims on a timely basis
should report the complaint to CMS.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
14. Use of Standardized Technology
Under Part D (§ 423.120)
Under the authority of section 1860D–
4(b)(2)(A) of the Act, we proposed to
revise our regulations at § 423.120(c)(3)
to require Part D sponsors to
contractually mandate that their
network pharmacies submit claims
electronically to the Part D sponsor or
its intermediary on behalf of the
beneficiary whenever feasible unless the
enrollee expressly requests that a
particular claim not be submitted to the
Part D sponsor or its intermediary.
As we noted in the October 22, 2009
proposed rule (74 FR 54665), the only
way that an enrollee can be assured
access to the negotiated price at the
point of sale is through online
adjudication of the prescription drug
claim. Any other price available to the
beneficiary at the point of sale cannot be
deemed to be the negotiated price
mandated under section 1860D–2(d) of
the Act. Therefore, to ensure access to
these negotiated prices, billing
information on the NCPDP ‘‘Pharmacy
ID Card Standard’’, which is the
standard for identification cards for the
Part D program, must be used by the
pharmacies filling the beneficiaries’
prescriptions to submit claims to the
Part D sponsor (or its intermediary).
We noted that CMS guidance set forth
in the Coordination of Benefits Chapter
of the Prescription Drug Plan Manual (in
section 50.4 entitled, ‘‘Processing Claims
and Tracking TrOOP’’), instructs plan
sponsors to process all claims online
real-time. The requirements of accurate
TrOOP accumulations, Part D benefit
administration of multiple coverage
intervals, and coordination of benefits
with other payers all necessitate online
real-time adjudication of individual
pharmacy claims. This guidance states
further that we expect that Part D plan
sponsors will establish policies and
procedures appropriately restricting the
use of paper claims to those situations
in which on-line claims processing is
not available to the beneficiary at the
point of sale in order to promote
accurate TrOOP accounting, as well as
to minimize administrative costs to the
Part D plans and the Medicare program
and reduce opportunities for fraudulent
duplicative claim reimbursements. We
proposed to revise § 423.120(c)(3) to
require Part D sponsors to contractually
mandate that their network pharmacies
submit claims electronically to the Part
D sponsor or its intermediary on behalf
of the beneficiary whenever feasible
unless the enrollee expressly requests
that a particular claim not be submitted
to the Part D sponsor or its
intermediary.
PO 00000
Frm 00050
Fmt 4701
Sfmt 4700
We proposed to codify this guidance
in regulation because we have been
made aware of an increasing number of
instances in which network pharmacies
are not submitting pharmacy claims to
Part D Sponsors on behalf of Part D
enrollees. Generally, we believe it is in
the best interest of Part D enrollees to
have their claims consistently processed
through the Part D sponsor (or its
intermediary). Not only does processing
claims through the Part D sponsor
ensure access to Part D negotiated
prices, but it also ensures that proper
concurrent drug utilization review
(including safety checks) is performed.
In addition, online, real-time processing
facilitates accurate accounting for
enrollees’ true out-of-pocket (TrOOP)
and total drug costs by the Part D
sponsor so that each claim is processed
in the appropriate phase of the benefit
and accurate cost sharing assessed.
We also proposed to add a new
paragraph (c)(2) to § 423.120 to codify
our existing guidance that Part D
sponsors utilize standard electronic
transactions established by 45 CFR
162.1102 for processing Part D claims.
We noted that we would issue guidance
on the use of optional or conditional
fields in the HIPAA standard
transactions through the Call Letter and
Prescription Drug Benefit Manual
instructions. We noted further that we
routinely work with NCPDP and
industry representatives in arriving at
recommendations for standardized use
of such fields when necessary to
improve administration of the Part D
benefit.
Finally, noting that pharmacies
cannot routinely distinguish Medicare
Part D claims from other types of
prescription drug coverage when the
same routing information (‘‘RxBIN and
RxPCN’’) is used for all lines of business
managed by a single processor, we also
proposed to add a new paragraph (c)(4)
in § 423.120 to require that sponsors and
their intermediary processors establish
and exclusively utilize unique RxBIN or
‘‘RxBIN/RxPCN combinations’’ to
identify all Medicare Part D member
claims, as well as to assign unique
‘‘RxID’’ identifiers to individual Part D
beneficiaries. We solicited comments on
the operational issues and timelines that
would be involved in making these
proposed technical changes to claims
processing systems.
After reviewing the comments
received in response to these proposals,
we are adopting these provisions with
some modification. Specifically, we
revised § 423.120(c)(4) to specify that
effective on January 1, 2012 sponsors
assign and exclusively use unique Part
D identifiers. Exclusive use of these
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
identifiers requires that claims will only
be paid if these specific numbers are
submitted in the claims transaction.
Comment: Many commenters
concurred with our proposal that Part D
sponsors mandate that pharmacies
electronically submit all claims to the
Part D sponsor or intermediary unless
the beneficiary expressly requests
otherwise. Several commenters offered
recommendations related to
implementation of this new
requirement, including that CMS
modify standard beneficiary
communications (such as the EOB) to
include language that helps the
beneficiary understand that they should
review their EOBs to confirm that all of
their claims are being submitted and,
permit either home infusion providers
to attest to the plan, or the plan to
validate on audit, the beneficiary’s
claims submission election, since it is
impractical for small home infusion
providers to bill electronically.
Response: We appreciate the support
expressed for the proposed new
provision and the commenters’
recommendations. However, we believe
the clarifications associated with the
recommendations, since these are
related to implementation, are better
addressed in subregulatory guidance. As
we develop our implementation
guidance, we expect to consider the
clarifications and to continue to seek
input from the industry and NCPDP.
Comment: One commenter asked how
the requirement that pharmacies
electronically submit all claims to Part
D unless the beneficiary expressly
requests otherwise would be enforced if
members do not show their ID card.
Response: The requirement applies to
pharmacies and not the beneficiary.
Therefore, we will undertake no
enforcement action against the
beneficiary if the claim is not submitted
to the Part D sponsor. However, even if
the member does not show his or her ID
card, pharmacies will be able to identify
Part D claims based on the unique
RxBIN/PCN identifiers already in the
pharmacy system or in the response to
an eligibility query from the TrOOP
Facilitator, and will generally be
expected to submit claims whenever
such data are on file.
Comment: One commenter urged us
to allow 6 months for plan sponsors to
implement the required network
pharmacy contract change and noted
that sponsor experience suggests that
contract language alone will not ensure
pharmacy compliance.
Response: We agree that this
provision will require time for Part D
sponsors to implement. Therefore, we
will implement the requirement
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
effective January 1, 2011. We likewise
agree that contract language alone may
not guarantee pharmacy compliance,
but we expect other contract provisions
will address the procedures the Part D
sponsor will follow in the event a
pharmacy fails to comply with this
requirement.
Comment: One commenter requested
that CMS clarify that notifying
beneficiaries or discussing their options
does not constitute ‘‘solicit[ation]’’ as
mentioned in the preamble, that our
lower cash price policy is still in place,
and that any voluntary request to waive
claim submission to the plan survives
the entire life of the prescription and
there would be no need to expect the
beneficiary to make a request each time
they refill that prescription.
Response: We agree with the
commenter that discussing options per
se does not constitute solicitation or
steering. However, this must be a bonafide discussion of options initiated by
the beneficiary; that is, the discussion
should not be initiated by the pharmacy
with the intent to encourage the
beneficiary to request his or her claims
not be submitted to Part D in order for
the pharmacy to avoid transactions fees.
With regard to our lower cash price
policy, we have not altered this policy.
Finally, we intend to confirm in
subregulatory guidance that any
voluntary request to waive claim
submission to the plan survives the
entire life of the prescription and there
would be no need to expect the
beneficiary to make a request each time
the prescription is refilled.
Comment: One commenter
encouraged us to ensure that Part D
sponsors’ contracts with network
pharmacies charge the beneficiary and
the plan sponsor the lesser of the usual
and customary price (U&C) or
contracted rate without regard to special
programs offered by the pharmacy.
Response: We believe that this
comment is outside the scope of this
proposal, which would only require that
pharmacies submit all claims to Part D
sponsors, unless the beneficiary
requests otherwise. When a pharmacy’s
U&C prices are lower than the plan’s
negotiated price, we agree it is in the
best interests of beneficiaries and
taxpayers for the pharmacy to extend
those U&C prices to Part D enrollees.
However, because we do not directly
regulate pharmacies, we have no
authority to require them to do so.
Comment: Several commenters agreed
with our proposed requirement related
to unique payer/processor and enrollee
identification, with several commenters
suggesting that implementation be no
sooner than January 1, 2011 or January
PO 00000
Frm 00051
Fmt 4701
Sfmt 4700
19727
1, 2012 and not mid-plan year. One
commenter stated that we should
accommodate the continued use of
unique identifiers already established
by Part D sponsors, without regard to
length or combination of characters.
Other commenters were opposed to the
requirement for Part D sponsors to
create, and exclusively use, an RxBIN or
an Rx BIN/PCN combination for Part D
enrollees as well as to assign an Rx
identifier to a Part D enrollee, because
of the costs associated with
implementation and potential
disruption for pharmacies and
beneficiaries. One commenter stated
that CMS should emphasize that the
RxBIN and RxPCN numbers should be
assigned and differentiated at the
sponsor level, and another commenter
specifically requested clarification of
the reference to ‘‘individual’’ Part D
beneficiaries.
Response: We appreciate the general
support for this provision and agree
with the suggestions related to the
timing of implementation, particularly
in light of industry wide programming
for HIPPA version D.0 conversion. Thus,
the effective date for the requirement for
a unique RxBIN or RxBIN/RxPCN
combination and a unique Part D Rx
identifier for each individual Part D
member will be January 1, 2012. We
believe this date will provide sufficient
time for sponsors to implement
necessary systems changes. Currently
established unique identifiers may
continue to be used. With regard to the
level of assignment of the unique RxBIN
or RX BIN/RxPCN combination, the
appropriate level of assignment is at the
Part D sponsor’s parent organization
rather than at the contract.
The assignment and exclusive use of
these unique Part D Rx identifiers have
a number of advantages for Part D. The
primary advantage is the use of these
identifiers enables pharmacies to
recognize Part D beneficiaries, which is
possible only with the level of
identification supported by unique
identifiers. Distinguishing Part D
enrollees from the commercial insured
permits the pharmacy to comply with
any Part D-specific processing
requirements, such as the requirement
to submit claims electronically to the
Part D sponsor or its intermediary, on
behalf of the beneficiary unless the
beneficiary makes an explicit request to
do otherwise.
Other advantages to the use of unique
Part D identifiers relate to the
coordination of benefits. Currently, the
TrOOP Facilitator and other switches
that relay electronic pharmacy claims
are unable to accurately determine
whether an initial claim was paid by
E:\FR\FM\15APR2.SGM
15APR2
19728
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
Part D. As a result, the TrOOP
facilitation process receives and
processes coordination of benefits
claims transactions even when the
initial claims were not paid by Part D.
This results in added processing costs
for us and added workload for Part D
sponsors receiving N transactions that
cannot be matched to an initial claim
because no Part D payment was made.
Unique Part D Rx identifiers permit Part
D claims to be processed independently
and easily segregated for reporting and
other purposes.
Comment: One commenter noted that
the proposed requirements may have to
be modified to conform to the new
privacy provisions included in the
Health Information Technology for
Economic and Clinical Health (HITECH)
Act that allow an individual to request
that a covered entity restrict the
disclosure of his or her protected health
information.
Response: Our proposal would
require Part D sponsors to require their
network pharmacies to submit claims
electronically to the Part D sponsor or
its intermediary on behalf of the
beneficiary ‘‘whenever feasible.’’ Federal
regulations implementing the privacy
provisions of the HITECH Act have not
yet been published. Upon publication of
those regulations, we will review the
provisions to determine if modifications
of this requirement are necessary.
15. Absence from Service Area for More
Than 12 Months Under Part D (§ 423.44)
We proposed to amend § 423.44 to
allow a temporary absence from the PDP
plan service area for up to 12 months
before disenrollment would be
mandatory, consistent with the time
frame provided under the MA visitor/
traveler policy, the nature of the Part D
benefit and the strong likelihood that a
PDP enrollee can access the full range
of PDP benefits while temporarily out of
the service area. In this final rule, we
adopt this provision as proposed.
Comment: Most commenters
supported our proposal. One commenter
opposed the proposed change and
preferred that we either make no change
or revise the PDP rules to permit the
offering of a visitor/traveler benefit,
similar to the policy applicable to MA
organizations.
Response: Although the permissibility
of visitor/traveler benefits under the
Part D program is not strictly within the
scope of this proposed rule, we
recognize that these types of policies
serve an important function in the MA
program. However, for the Part D
program we believe that delivery of the
drug benefit is much more easily
accomplished through out-of-area access
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
rather than a visitor/traveler benefit,
given the national pharmacy networks
that are generally involved in providing
enrollees with their prescription drugs.
Thus, we continue to believe, as did
most commenters, that this population
is better served by extending plans’
flexibility to deliver services on an outof-area basis, rather than by requiring
the establishment and approval of
formal visitor/traveler policies
whenever an enrollee is out of the
service area for more than 6 months.
Comment: One commenter wanted us
to further codify that PDP enrollees
temporarily absent from the plan service
area and residing in a LTC facility be
disenrolled after an absence of 6
months.
Response: We disagree with the
commenter that an individual residing
in a LTC facility while temporarily
absent from the plan service area should
be considered to have a permanent
residence outside the plan service area
and disenrolled on an involuntary basis
due to his or her out-of-area status.
Current subregulatory guidance (§ 50.2.1
of Chapter 2 of the Medicare Managed
Care Manual and § 40.2.1 of Chapter 3
of the Medicare Prescription Drug
Benefit Manual) instructs PDP sponsors
to determine whether an enrollee’s outof-area status is temporary or
permanent, such that involuntary
disenrollment would occur prior to the
expiration of the 6-month period only if
it is confirmed that the enrollee has
permanently relocated outside the plan
service area. Under our proposed
revision, PDP sponsors would effectuate
an involuntary disenrollment upon
confirmation of an enrollee’s permanent
residence outside the plan service area
or expiration of a 12-month period,
whichever occurs first. We believe this
addresses the concern raised by the
commenter with respect to ensuring a
beneficiary’s continued access to the
Medicare prescription drug benefit
while residing in an out-of-area long
term care facility. Accordingly, we are
adopting without change the revision as
set forth in the proposed rule.
Comment: One commenter requested
that we not extend the period of
permissible temporary out-of-area
residence for individuals enrolled in
MA–PD plans.
Response: Since our proposed
revision applies only to stand-alone PDP
plans, we believe that this clarification
is not necessary. The current 6-month
rule for MA plans under
§ 422.74(d)(4)(B)(ii) will remain in
effect.
PO 00000
Frm 00052
Fmt 4701
Sfmt 4700
16. Prohibition of Midyear Mass
Enrollment Changes by SPAPS Under
Part D (§ 423.464(e)
Consistent with the authority of
sections 1860D–23(a)(1) and (b) of the
Act, we proposed to add a requirement
to § 423.464(e) to prohibit midyear mass
enrollment changes by SPAPs. In
making this proposed change we noted
that most SPAPs perform mass
enrollments on a calendar year basis for
all its members who have not chosen a
Part D plan. However, some SPAPs have
chosen to perform these enrollments on
a noncalendar year basis. In these
situations, Part D sponsors have found
that substantial disenrollment of large
numbers of SPAP members from one
plan, followed by mass enrollment into
another during the calendar year
significantly affects their financial
operations. We also stated our belief
that mass re-enrollment into a new plan
midyear disrupts any continuity of care
the beneficiary has established with his
other current Part D plan, and
introduces transition risks such as drugs
not being covered by the member’s new
plan, or requiring the member to change
his or her pharmacy that are not
outweighed by any administrative
convenience to the SPAP. In this final
rule, we adopt these provisions as
proposed.
Comment: A few commenters were
concerned that SPAPs may need to
change Part D enrollment midyear for
their SPAP enrollees because the SPAP
determines that its members are not
being adequately served by the Part D
plan (for example, the plan does not
adequately cover the drugs needed by
the individual SPAP member), or the
Part D plan fails in its obligation to
coordinate benefits with the SPAP. One
commenter in particular suggested we
change the regulation text to indicate
that SPAPs not ‘‘routinely’’ engage in
midyear plan or non-calendar year plan
enrollment changes, but allow
nonroutine mass re-enrollment when an
SPAP has determined that such
enrollment changes would better serve
the needs of its members and has
provided CMS with the appropriate
prior notification.
Response: We disagree with the
commenters that SPAPs should be
allowed to mass re-enroll its members
during the calendar year, even when it
is nonroutine. There are currently two
actions the SPAP can take when it finds
that its members are not being
adequately served by a Part D plan.
First, if an individual SPAP member is
not being adequately served by the Part
D plan (for example, the SPAP
member’s drugs are not covered or
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
pharmacy access is impeded under the
plan), the SPAP may, using its
authorized representative status, reenroll that individual into another Part
D plan. This one-time special
enrollment period for individual SPAP
members is allowed and further
discussed in our current enrollment
guidance (Chapter 3 of the Medicare
Prescription Drug Benefit Program
Manual). If an SPAP finds that the Part
D plan is not serving its members
because the Part D sponsor is in
violation of Federal statute or
regulation, the SPAP should contact us
to report the plan’s violation(s). We will
then take the appropriate action in
accordance with its compliance rules.
Actions by CMS may include
developing a corrective action plan with
the Part D sponsor, suspending
enrollment into the Part D sponsor’s
plan, or, if necessary, termination of the
Part D sponsor’s contract. We believe
that both of these actions will
adequately address problematic plans
and that an exception for nonroutine
mass midyear enrollments will not be
necessary.
17. Nonrenewal Beneficiary Notification
Requirement Under Parts C and D
(§ 422.506, and § 423.507)
In the October 22, 2009 proposed rule,
under the authority of sections 1857(a)
and (c) and 1860D–12(b)(1) and (b)(3)(B)
of the Act, we proposed revisions to the
nonrenewal beneficiary notification
requirements at § 422.506(a)(2)(ii) and
(b)(2)(ii) of the MA regulations and
§ 423.507(a)(2)(ii) and (b)(2)(ii) of the
Part D regulations to change the
beneficiary notice requirement from at
least 60 days to at least 90 days.
We noted that the existing regulations
required notification 60 days prior to
the effective date of the nonrenewal for
both enrollees and the general public.
Changing the requirement for the
personalized beneficiary specific CMSapproved notice to at least 90 days
provides beneficiaries with an increased
notice period giving beneficiaries more
time to choose a new Medicare plan
prior to the start of the new benefit year.
We also noted that when we previously
changed the required notice period to 60
days, we did so primarily to provide
adequate time for the appeals process to
conclude prior to the start of the next
calendar year; however, our recent
experience has indicated that the vast
number of nonrenewals are voluntarily
elected by the PDP sponsor or MA
organization, so there is rarely a need to
accommodate the appeals process. For
this reason, we proposed at
§ 422.506(a)(2)(ii) and (b)(2)(ii) of the
MA regulations and § 423.507(a)(2)(ii)
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
and (b)(2)(ii) of the Part D regulations to
change the beneficiary notice
requirement from at least 60 days back
to at least 90 days.
We also proposed removing the
requirement for nonrenewing plans (in
voluntary nonrenewal situations) and
for us (in CMS-initiated nonrenewal
situations) to provide notice of the
nonrenewal to the general public by
publishing a notice in one or more
newspapers of general circulation. This
change was motivated by the cost of
newspaper advertisements and the
declining rate of newspaper circulation,
weighed against the very limited benefit
gained from notice to the general public
who is minimally, if at all, affected by
the nonrenewal. Also, nonrenewal
information is now easily available to
the general public through Internet Web
sites maintained by us (for example,
https://www.Medicarsuch asov), a
resource not available to the public
when the newspaper notice requirement
was first adopted. We believe that this
information, in conjunction with the
requirement to provide personalized
nonrenewal information to plan
enrollees is sufficient to ensure
adequate notice of the plan’s
nonrenewal. Therefore, we proposed
deleting § 422.506(a)(2)(iii) and
(b)(2)(iii) of the MA regulations and
§ 423.507(a)(2)(iii) and (b)(2)(iii) of the
Part D regulations to remove the
requirement that the general public be
informed of the impending nonrenewal
through the publication of newspaper
notices.
Comment: One commenter stated that
in order to improve the member
experience and make the requirements
consistent, the ‘‘90 day prior to the
effective date of nonrenewal’’
notification deadline should only apply
to enrollees whose coverage is being
terminated, and not to enrollees that are
being mapped to another plan (such as
Consolidated Renewal or Renewal Plan
with SAR/Modified ANOC scenarios)
because they are not losing coverage.
Response: The change to the
nonrenewal regulation only applies to
beneficiaries who are losing coverage for
the upcoming benefit year. It does not,
as the commenter suggests, apply to
beneficiaries who are involved in a plan
consolidation, as their coverage will
continue without interruption in the
upcoming benefit year.
Comment: Many commenters support
the change in the notice requirement
from 60 to 90 days. Commenters agreed
that beneficiaries should be given more
time to choose a new Medicare plan
prior to the start of the new benefit year.
Response: CMS appreciates these
comments.
PO 00000
Frm 00053
Fmt 4701
Sfmt 4700
19729
Comment: Many commenters agreed
that the publication of a nonrenewal
notice in newspapers is no longer an
effective means of communication, and
support removing this requirement for
nonrenewing plans.
Response: CMS appreciates these
comments.
Comment: Several commenters
stressed the importance of CMS issuing
its model nonrenewal notice in time for
plans to meet the 90 day requirement.
Response: CMS agrees with these
comments and plans to issue the model
notice during the summer of each year,
as it has in the past, to ensure that plans
have enough time to fulfill this
requirement.
Comment: One commenter asked if
the 90-day period runs from the start of
open enrollment.
Response: The regulation clearly
indicates that the notice must be sent ‘‘at
least 90 calendar days before the date on
which the nonrenewal is effective.’’
Comment: One commenter suggested
that the CMS approved nonrenewal
letter which provides information about
sources for help in comparing Medicare
plans is a good means to provide
information in the case of mutual
terminations.
Response: We believe that the topic of
notices for plans that are undergoing a
mutual termination is outside of the
scope of this proposed regulatory
change. We note, however, that
§ 423.508 of the regulation requires that
when a contract is terminated by mutual
consent, the Part D plan sponsor must
notify its Medicare enrollees of the
termination ‘‘within timeframes
specified by CMS.’’
18. Notice of Alternative Medicare Plans
Available To Replace Nonrenewing
Plans Under Parts C and D
(§ 422.506(a)(2)(ii) and
§ 423.507(a)(2)(ii))
To allow additional operational
flexibility, in the October 22, 2009
proposed rule, we suggested changing
the requirement for PDP sponsors and
MA organizations to provide written
notification of the alternative Medicare
plans available to replace the
nonrenewing plan. We proposed
changing the existing requirement to
permit the option of either providing a
written list of alternatives available, or
placing outbound calls to all affected
enrollees to ensure beneficiaries know
whom to contact to learn about their
enrollment options. We believe this
change is advantageous for beneficiaries
because, depending on where the
beneficiary resides, a listing of available
plan options is often very long and may
be too overwhelming for the beneficiary
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19730
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
to use appropriately. We noted that a
much more useful approach would be to
provide beneficiaries with contact
information and resources for
identifying the most appropriate option
given their unique, individual
circumstances. For this reason, we
proposed revising § 422.506(a)(2)(ii) of
the MA regulations and
§ 423.507(a)(2)(ii) of the Part D
regulations, to provide the option of
sending written notices of all available
alternatives or placing outbound
beneficiary calls to ensure beneficiaries
know whom to contact to learn about
their enrollment options. As discussed
above, in either case, a personalized,
CMS- approved beneficiary notice
regarding the nonrenewal must still be
sent to each beneficiary.
After reviewing the comments
received in response to these proposals,
we adopt the proposed changes into this
final rule with some modification.
Specifically, we revised the regulation
at § 423.507 to require that both Part C
and Part D organizations inform
beneficiaries of all MA and PDP
available options. We also revised the
regulation at § 422.506(a)(2)(ii)(A) to
require that Part C organizations inform
beneficiaries of all MA, MA–PD, and
PDP options.
Comment: One commenter suggested
that instead of providing alternative
plan information in the nonrenewal
letter, organizations should have the
voluntary option of calling beneficiaries.
Additionally, the commenter believed
that organizations should provide a
letter that contains language that directs
impacted members to the Medicare Web
site for the most current Medicare plan
information available in their service
area.
Response: The requirement to list
alternative plans is independent of the
requirement to provide a personalized
beneficiary notice. The required
personalized beneficiary notice already
contains information about using the
Medicare Web site to obtain information
about available plans. We disagree with
the commenter’s recommendation that
organizations should not be required to
provide alternative plan information
and that the phone calls to notify
beneficiaries be voluntary. Some
beneficiaries may not be comfortable
with, or do not have access to the
Internet. Therefore, we believe it is in
the best interest of the beneficiaries to
be provided with either a written list of
alternative plans or to receive a phone
call informing them of whom to contact
to learn about their enrollment options.
Comment: Several commenters
supported the proposed change that
provides nonrenewing plans with the
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
option to choose to give advance
information to enrollees about
alternative Medicare plan options in
writing or to make outbound calls to all
affected enrollees to ensure beneficiaries
know whom to contact to learn about
their enrollment options. It was stated
that this approach also provides plan
sponsors with the flexibility to vary the
outreach methods used in order to
accommodate different segments of their
membership on a timely basis.
Response: We appreciate the
commenters support of our proposed
changes.
Comment: One commenter suggested
that in the event of a nonrenewing MA
plan, CMS should require that the
written notification include Original
Medicare and stand-alone PDPs among
the alternative options available to the
affected beneficiary. (Under the
proposed rule change, the MAO would
only be required to ‘‘provide a CMSapproved written description of
alternative MA plan options available
for obtaining qualified Medicare
services within the beneficiaries’
region.’’) Should the information be
communicated via telephone by the
MAO, then the person responsible for
informing the beneficiary of his or her
enrollment options should similarly be
required to tell the beneficiary about
Original Medicare and stand-alone PDPs
in addition to other relevant plan
options.
Response: The list of available options
is accompanied by the required
personalized beneficiary nonrenewal
notice that provides information about
the beneficiary’s various options
including, when applicable, Original
Medicare. We do agree with the
commenter’s suggestion to include
additional alternative available
Medicare plans; and therefore, have
revised the regulation to require that
both Part C and Part D organizations
inform beneficiaries of both MA and
PDP available options.
Comment: Several commenters
requested that the notification
requirements mandate different
personalized notices with more
specialized information for different
populations, particularly dual eligible
and SNP beneficiaries.
Response: We believe this comment is
outside of the scope of the proposed
regulatory changes because these
changes did not address the information
required within the personalized
beneficiary notification. Rather, the
proposed changes only discussed the
list of alternative plans that must be
provided with the personalized notice.
Comment: Multiple commenters
raised strenuous objections to the
PO 00000
Frm 00054
Fmt 4701
Sfmt 4700
change that allows plan sponsors and
organizations to place outbound calls to
enrollees in plans that they are
terminating to tell them who to call to
learn about enrollment options.
Commenters believed that allowing
telephone calls invites the possibility of
marketing abuses. Specifically, the
commenters stated that this change
‘‘creates a major marketing loophole,
and allows plans to steer enrollees to
other plans offered by the same
sponsors and organizations, regardless
of whether those plans are best for
them.’’ The commenters believed that
beneficiaries need to be provided with
all of the information about alternative
plans, and all other options including
returning to traditional Medicare. They
stated that the information should be
provided by CMS or by a neutral,
trained counselor. In addition, they
believed once plans have been told that
their contracts will not be renewed,
there is no incentive for the plans to act
appropriately and according to
Medicare marketing guidelines when
interacting with beneficiaries.
Commenters suggested that the
proposed regulation authorizing calls to
beneficiaries should be clarified to
include strict plan communication
restrictions that properly protect
beneficiaries who are especially
vulnerable as a result of plan
terminations. Furthermore, CMS should
make clear that any sponsor that
markets plans when notifying
beneficiaries of plan terminations will
be considered to be violating Medicare
marketing rules.
Response: We do ensure that
beneficiaries are informed of all of their
options by requiring all nonrenewing
plans to provide a personalized
beneficiary notice which is separate
from the plan’s requirement to provide
a list of alternative plans or make
outbound call to inform beneficiaries of
whom to contact to learn about their
enrollment options. The required
personalized notice includes
information about all of the
beneficiaries’ choices and provides
contact information for CMS and SHIP
offices so that beneficiaries can contact
‘‘neutral’’ parties to obtain additional
information about enrollment options.
CMS does not believe that plans should
be prohibited from contacting
beneficiaries by phone, especially in
light of the fact that plans regularly
speak to beneficiaries by phone as part
of the normal course of administering
Medicare benefits. Furthermore, we
believe that phone calls can provide
beneficial individualized beneficiary
service. Additionally, CMS will issue
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
guidance that instructs plans to submit
all nonrenewal related scripts for CMS
approval so that plans are providing
appropriate and accurate information
about the beneficiary’s plan choices.
Comment: One commenter stated that
when plans map beneficiaries to an
alternative plan offered by the sponsor
rather than nonrenewing, the
beneficiaries are not afforded
nonrenewal rights that include a special
election period and the personalized
beneficiary nonrenewal notice. The
commenter believed that the rights of
members should be the same, and they
should all default to Original Medicare
with the option of enrolling in a PDP.
Response: This comment concerns
Part C and D enrollment policy and is
outside the scope of the proposed
regulatory changes related to beneficiary
notification included in the proposed
rule. CMS will consider this comment
when we prepare the annual
nonrenewal guidance.
Comment: Several commenters
proposed allowing plans to provide the
alternative list of plans available via
electronic format for beneficiaries who
have chosen to ‘‘opt-in’’ to receiving
communications by electronic means.
Response: We believe that for the
purposes of ensuring consistency in the
application of the notification
requirements, the list of alternative
plans should be provided only in hard
copy at this time. Also, CMS believes
that beneficiaries’ access to and use of
on-line resources is not yet widespread
enough to justify the adoption of
regulations that allow for notification
exclusively (even on an opt-in basis)
through electronic communication.
Should Medicare beneficiaries’ Internet
use patterns change in the coming years,
CMS may make appropriate revisions to
this policy.
Comment: One commenter asked
what number of attempts would be
required of sponsors that elect the
option to make calls to beneficiaries.
Response: We believe that it is
appropriate to address this question
through the issuance of nonrenewal or
marketing sub-regulatory guidance
which provides more flexibility for
changes than the rulemaking process.
Comment: One commenter asked
what to do if the list of alternative plans
that is sent in the mail to the beneficiary
is returned.
Response: We believe that the
standard practices organizations have
presently adopted for handling
beneficiary mail that is returned should
be applied by the nonrenewing sponsor
in such instances.
Comment: One commenter stated that
the rules for consolidation that map
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
beneficiaries to another plan for the
following benefit year results in
disparate treatment of beneficiaries. For
example, if one Plan Benefit Package
(PBP) is entirely mapped into another
PBP (so only one PBP continues in the
upcoming year), all members in both
original PBPs receive a standard Annual
Notice of Change (ANOC). However, if
some counties are mapped into another
PBP but others remain (so both PBPs
exist in both the current and upcoming
years), members in the mapped counties
receive a modified ANOC. The
commenter stated that from the member
standpoint, it doesn’t matter which
situation they are in, in either case they
are mapped into a new plan. This
disparate treatment of members in
similar situations can lead to confusion
among members and creates difficulties
for customer service staff attempting to
explain the contents of ANOC packets.
Response: This comment is outside of
the scope of the proposed regulatory
change.
Comment: One commenter stated that
CMS must issue alternative plan
information far enough in advance for
plans to meet the requirement to
include alternative plan information in
the beneficiary specific letters that are
due on October 1.
Response: We have an HPMS module
that provides plan option information to
nonrenewing sponsors. We
acknowledge that we cannot hold
sponsors accountable for meeting the
October 1 deadline unless we provide
timely plan option information through
HPMS to the sponsors, and CMS intends
to make every effort to ensure that
sponsors receive this information in a
timely manner.
Comment: One commenter proposed
that if a plan chooses to call
beneficiaries instead of sending a list,
the plan should be obligated to
document that the beneficiary was
reached and that a message left on an
answering machine in not sufficient.
Response: We believe that the issue of
call documentation is better addressed
through the issuance of nonrenewal
guidance which provides more
flexibility for changes than the
rulemaking process.
19. Timeframes and Responsibility for
Making Redeterminations Under Part D
(§ 423.590)
In the October 22, 2009 proposed rule,
we proposed to reconcile a discrepancy
with respect to notice of completely
favorable expedited redeterminations by
adding new paragraph (d)(2) to
§ 423.590. The proposed change would
allow Part D plan sponsors to make the
initial notice of a completely favorable
PO 00000
Frm 00055
Fmt 4701
Sfmt 4700
19731
expedited redetermination orally, so
long as a written confirmation of the
fully favorable decision is mailed to the
enrollee within three calendar days of
the oral notice. As noted in the
preamble to the proposed rule, the
change is consistent with the
requirements in § 422.590(d)(3) of the
MA regulations.
We also proposed in § 423.590(d)(2) to
allow Part D plan sponsors to make the
initial notice of an adverse expedited
redetermination orally, so long as a
written confirmation of the decision is
mailed to the enrollee within 3 calendar
days of the oral notice. In addition, we
proposed to revise paragraph (g) by
adding cross references to paragraphs
§ 423.590(d)(1) and (d)(2) in order to
apply the written notice requirements in
paragraph (g) to adverse expedited
redetermination decisions. As noted in
the preamble to the proposed rule, we
believe adding these two notice
requirements to the Part D expedited
redetermination process is in the
enrollee’s best interests given the
expedited status of these requests, and
is consistent with our subregulatory
guidance and the process for notifying
enrollees of adverse expedited coverage
determination decisions in § 423.572(b).
Similarly, we proposed adding
§ 423.590(h) to establish the form and
content requirements for fully favorable
redetermination decisions, and
proposed making those notice
requirements applicable to
redeterminations issued under
paragraph (a)(1). We also proposed to
reference paragraphs (d)(1) and (d)(2) in
paragraph (h), so that the form and
notice requirements in paragraph (h)
would also apply to fully favorable
expedited redetermination decisions. As
we noted in the proposed rule,
incorporating these Part D standard
redetermination notice requirements
will provide an important beneficiary
protection by ensuring continuity of
care for Medicare beneficiaries who are
obtaining refills of prescription drugs
under Part D, and doing so does not
conflict with the related MA provisions.
After considering the comments
received in response to these proposals,
we adopt these provisions without
modification in this final rule.
Comment: We received a number of
comments supporting the proposal
allowing Part D plan sponsors to make
the initial notice of a fully favorable
expedited redetermination orally, so
long as a written confirmation of the
fully favorable decision is mailed to the
enrollee within three calendar days of
the oral notice. However, one
commenter suggested revising the 3
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19732
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
calendar day requirement to 3 business
days.
Response: We appreciate the
comments we received in support of
this provision. With respect to the
comment recommending that we revise
the calendar day requirement to
business days, we have consistently
used the calendar-day timeframe for all
Medicare appeals processes, and we do
not believe there is a compelling reason
to depart from that standard for written
notice of favorable decisions. We note
that plan sponsors are required to mail
(not deliver) the notice within 3
calendar days.
Comment: We also received many
comments favoring our proposal giving
Part D plan sponsors the option of
making the initial notice of an adverse
expedited reconsideration orally and
then following up with written
confirmation of the decision.
Commenters also supported applying
the written notice requirements in
paragraph (g) to adverse expedited
redetermination decisions. However, a
number of commenters expressed
concern about starting the 60-day
timeframe for requesting an appeal on
the date an enrollee receives oral notice
of an adverse decision. The commenters
noted that it may be very difficult for an
enrollee to keep track of the deadline for
filing an appeal if the 60-day timeframe
begins on the date they receive oral
notice of a plan’s decision. The
commenters suggested starting the 60day timeframe on the date printed on
the written denial notice.
Response: We agree and believe the
60-day timeframe for requesting an
appeal of an adverse decision should
begin on the date printed on the written
denial notice. However, we believe the
appropriate place to make this
clarification is in our subregulatory
guidance. Therefore, we will make this
clarification in Chapter 18 of the
Prescription Drug Benefit Manual.
Comment: A commenter requested
that CMS develop a model letter for
fully favorable redetermination
decisions and written redetermination
decisions that follow oral notice under
§ 423.590.
Response: We agree that it would be
helpful to provide plan sponsors with
either model language or standardized
notices for use in issuing fully favorable
redetermination decisions and written
redetermination decisions that follow
oral notice, and will explore the
feasibility of implementing these
options. Any notice(s) we develop will
be published in Chapter 18 of the
Medicare Prescription Drug Benefit
Manual.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Comment: Numerous commenters
supported the proposal requiring plan
sponsors to include specific information
(such as, the conditions of approval) in
favorable decision notices. However,
one commenter opposed the proposed
requirement and suggested instead that
we allow plan sponsors to provide the
approval conditions on request.
Response: Currently, plan sponsors
must provide the conditions of approval
to enrollees upon request. Thus, the
commenter’s suggestion would not
address the issue we were trying to
resolve in the proposed rule. As noted
in the preamble to the proposed rule, we
believe it is important to include the
conditions of approval in favorable
notices to help ensure continuity of care
for Medicare beneficiaries who receive
prescription drugs under Part D.
Prescription drugs are often provided to
beneficiaries on a recurring basis.
Therefore, it is important for an enrollee
to know the conditions of the approval
(such as, duration, limitations, and
coverage rules for refills) before a refill
is needed, so that, if necessary, the
enrollee can work with his or her
prescriber to secure prior approval for
additional refills, obtain an exception,
or switch to an appropriate alternative
prescription.
20. Requirements for Requesting
Organization Determinations Under Part
C (§ 422.568)
We proposed specific language related
to oral requests for organization
determinations, except for paymentrelated requests. As we noted in the
October 22, 2009 proposed rule, section
1852(g)(3) of the Act allows an enrollee
to request an expedited organization
determination either orally or in
writing. However, the method for
requesting a standard determination is
not addressed in either the Act or the
implementing regulations at § 422.568.
Both beneficiary advocates and MA
plans have voiced concern about the
absence of express regulatory authority
that would allow enrollees to request
standard organization determinations
both orally and in writing. Therefore,
we added specific language in § 422.568
to allow oral requests for organization
determinations, except where the
request is for payment.
Comment: Although one commenter
opposed allowing oral requests because
of concerns about proving that a request
was made, we received several
comments in support of our proposed
revision. Many of those who supported
our proposal also suggested that we
require plans to develop a confirmation
and tracking system for oral requests.
PO 00000
Frm 00056
Fmt 4701
Sfmt 4700
Response: For several years, we have,
without difficulty, allowed enrollees
and physicians to orally request
expedited organization determinations.
Thus, we believe allowing enrollees to
also request standard organization
determinations orally will not pose any
issues regarding tracking such requests.
Currently, Chapter 13 of the Medicare
Managed Care Manual (section 50.2)
instructs plans to maintain a process for
tracking expedited organization
determinations, and we agree with the
commenters’ recommendation to place a
similar requirement on plans regarding
oral requests for standard organization
determinations. Accordingly, we are
revising § 422.568 as proposed without
change. We will also add this
requirement to Chapter 13 of the
Medicare Managed Care Manual to
ensure compliance.
21. Organization Determinations Under
Part C (§§ 422.566 and 422.568)
We proposed to remove the language
from § 422.566(b)(4) and § 422.568(c)
that an enrollee must disagree with the
plan’s discontinuation or reduction of a
service for the plan’s decision to be
considered an organization
determination. Section 1852(g)(1)(A) of
the Act requires MA organizations to
have a procedure for making
determinations regarding whether an
enrollee is entitled to receive health
services or payment under the program.
In accordance with section 1852(g)(1)(A)
of the Act, § 422.566 and § 422.568
establish the requirements related to
organization determinations and
notices. Existing § 422.566(b)(4)
specifies that an organization
determination includes a decision
resulting in ‘‘[d]iscontinuation or
reduction of a service if the enrollee
believes that continuation of the
services is medically necessary’’
(emphasis added). Similarly, under
§ 422.568(c), a plan must give an
enrollee a written notice of the
determination ‘‘if an enrollee disagrees
with the MA organization’s decision to
discontinue or reduce an ongoing course
of treatment’’(emphasis added). We
indicated that we no longer believe that
it is necessary to require an enrollee’s
‘‘belief’’ that the services in question are
medically necessary in order to consider
these reductions or discontinuations to
be organization determinations, nor did
we believe that it is appropriate to
condition the delivery of a notice on an
enrollee’s ‘‘disagreement’’ with the
discontinuation or reduction of an
ongoing course of treatment. Therefore,
we proposed to change this language by
removing the phrases ‘‘if the enrollee
believes that continuation of the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
services is medically necessary’’ and ‘‘if
an enrollee disagrees with an MA
organization’s decision.’’ We noted that
§ 422.620 through § 422.626 already
provide enrollees who are receiving care
in an inpatient hospital, skilled nursing
facility, home health, or comprehensive
outpatient rehabilitation facility (CORF)
setting with the right to receive a notice
and expedited review of service
terminations for ongoing courses of
treatment in these settings. Thus, our
intention was to ensure that enrollees
who are receiving previously authorized
ongoing courses of treatment outside the
settings covered by § 422.620 through
§ 422.626 would automatically receive
notice and appeal rights if such services
were terminated, and enrollees in all
settings would automatically receive
notice and appeal rights if the level of
care or amount of such services was
reduced.
Comment: Most commenters
supported our proposed revisions.
However, a few commenters requested
further clarification about whether and
how this revision altered plan or
provider notice requirements. One of
these commenters also requested
clarification that the changes proposed
would not create a new requirement for
plans to notify enrollees each time a
participating provider discontinues
treatment under § 422.566 and 422.568.
This commenter noted that the clauses
proposed for deletion were originally
added as part of the notice and
comment process when the
requirements for an enrollee’s
expression of dissatisfaction were first
adopted.
Response: As we note previously,
§ 422.620 through § 422.626
automatically trigger the requirement for
plans and providers to give a notice
with appeal rights whenever enrollees
experience service terminations while
they are receiving care in the inpatient
hospital, skilled nursing facility, home
health, or CORF settings. Conversely,
§ 422.566 and § 422.568 currently
require an enrollee to express
dissatisfaction about a termination or
reduction of services in order to receive
notice and appeal rights. Therefore, our
goal in no longer requiring an enrollee’s
disagreement was to ensure that plans
would be required to provide notices
whenever they discontinued or reduced
a previously authorized ongoing course
of treatment, regardless of the setting.
However, as we considered these
comments, we recognized that some
additional restructuring of the provision
would be needed to ensure a clear and
consistent understanding of the policy.
Enrollees who are receiving care in
settings governed by § 422.620 through
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
§ 422.626 receive notices with appeal
rights only when services are being
terminated. However, enrollees do not
automatically receive notices when
previously authorized ongoing courses
of treatment are reduced in these
settings. Consistent with our proposal,
we are establishing the policy to require
notice and appeal rights, in all settings,
for previously authorized ongoing
courses of treatment that either end or
are reduced prematurely. We note that
the phrase ‘‘previously authorized
ongoing course of treatment’’ means a
series of services or treatments that have
been approved in writing (such as
through a plan of care). Accordingly, a
reduction in the level of care of a
previously authorized ongoing course of
treatment may include a change in the
mix or range of services/sessions, a
decrease in the intensity of the care, or
a reduction in the amount of services/
sessions provided relative to the original
authorization.
Unlike the provider settings under
§ 422.620 through § 422.626, when a
course of treatment ends in other
settings under § 422.568(c), it will not
result in automatic notice and appeal
rights if the enrollee received all of the
services as planned in the original
authorization. In these cases, if an
enrollee believes that those services
should continue, he or she must request
a new organization determination from
the health plan. Accordingly, we are
finalizing § 422.566(b)(4) and
§ 422.568(c) to include the revisions
noted previously.
22. Representatives (§ 422.561,
§ 422.566, § 422.574, and § 422.624)
We proposed to amend § 422.561 to
clarify that a representative may act on
an enrollee’s behalf with respect to the
grievance process. As we explained in
the preamble to the October 22, 2009
proposed rule, for various reasons,
enrollees may choose or need to have
someone represent them in order to
protect their interests. Presently, under
sections 1852(f) and (g) of the Act, a
representative may act on behalf of an
enrollee or other party when filing a
grievance. However, unlike the
corresponding Part D regulation,
existing § 422.561 does not explicitly
permit representatives to file grievances
on behalf of an enrollee. In order to
rectify this and be consistent with the
Part D definition of representative at
§ 423.560, we proposed to amend the
definition of representative under
§ 422.561. Similarly, we proposed to
remove the term ‘‘authorized’’ before
‘‘representative’’ in § 422.574 and
§ 422.624, so that the definition is
consistent throughout subpart M.
PO 00000
Frm 00057
Fmt 4701
Sfmt 4700
19733
Comment: Several commenters
supported removing the word
‘‘authorized’’ before ‘‘representative’’ in
order to be consistent with the
definition of the term ‘‘representative’’
and less limiting in the application of
the term. However, a perceptive
commenter noted that we overlooked
making this revision in two places
under § 422.566(c).
Response: We intended to make this
change throughout all of subpart M, and
as such, will finalize § 422.566(c) in the
final rule to include these additional
revisions.
Comment: A few commenters
requested that we restructure all of
subpart M of part 422 so that the general
provisions section (§ 422.562) includes
provisions about enrollee rights and MA
provider notice responsibilities for
services rendered by skilled nursing
facilities (SNFs), home health agencies,
(HHAs), and comprehensive outpatient
rehabilitation facilities (CORFs) and
services provided in the inpatient
hospital setting. These commenters also
recommended creating new sections to
describe provider notice requirements
for all settings and the notice
requirements and appeal rights
specifically related to Part B services.
This restructuring, the commenters
suggested, would provide a more
thorough overview of beneficiary rights
under subpart M, and place the notice
and appeal language in a more
appropriate place in the regulatory
scheme.
Response: This comment is beyond
the scope of the proposed rule.
However, we note that subpart M, like
subpart I of part 405 and subpart M of
Part 423, describes the various levels of
the MA appeals process, including the
associated beneficiary rights and
provider notice requirements, in the
order in which they occur. We believe
this structuring of the appeals
provisions makes it easier to follow the
process. We do not agree with the
suggestion that the current order of the
regulatory provisions prevents enrollees
from appealing adverse decisions about
Part B (or any other Medicare) services
and believe that restructuring subpart M
as recommended, would not result in
additional notice or appeal rights for
enrollees. Finally, to make certain that
beneficiaries understand the MA
appeals process and their rights under
this process, we ensure that beneficiary
materials and notices, such as the
Evidence of Coverage and Notice of
Medicare Noncoverage are
comprehensive, clear, and easy for
enrollees to understand.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19734
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
23. Disclosure Requirements Under
Parts C and D (§ 422.111(g) and
§ 423.128(f))
In the October 2009 proposed rule, we
proposed adding new provisions
(§ 422.111(g) and § 423.128(f)) to the
existing regulations that govern the
information that must be disclosed to
enrollees and potential enrollees.
Specifically, we proposed to add that
CMS may require a sponsoring
organization to disclose to its enrollees
and potential enrollees information
concerning the sponsoring
organization’s performance and contract
compliance deficiencies in a manner
specified by CMS. While a number of
commenters opposed this proposal, an
equal number of commenters supported
it. The latter noted that they support the
goals of this proposal to provide
beneficiaries with the information they
need to assess the quality of care they
are receiving and to make sponsoring
organizations accountable for their
performance deficiencies, which should
improve compliance with the rules and
requirements of the Medicare program.
We also solicited comments on whether
these disclosure requirements should be
imposed only in those circumstances
where a beneficiary would be afforded
the opportunity to act on them (for
example, requiring disclosure during
the particular times of the year when
beneficiaries would ordinarily be able to
make change or elections, except in
those situations where the compliance
deficiency is so significant that a
beneficiary may be afforded a special
enrollment opportunity).
We are finalizing the proposed
changes to § 422.111(g) and § 423.128(f))
with a modification to § 422.111(g)
discussed in detail below.
Comment: A number of commenters
were concerned that we have not
provided enough detail about the
proposal, including what compliance
and performance deficiencies would
rise to a level to trigger the disclosure
requirement, as well as the types, format
and timing of these disclosures. These
commenters were concerned that the
proposed regulations allow CMS too
much discretion, could be
inconsistently applied and may lead to
unnecessary confusion and alarm for
beneficiaries. Also, commenters stated
that the existing performance ratings,
through the Medicare Web site,
currently provide adequate disclosure to
beneficiaries.
Response: As we clarified in the
proposal, our intent is to invoke this
disclosure authority when we become
aware that a sponsoring organization
has serious compliance or performance
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
deficiencies such as those that may lead
to an intermediate sanction or require
immediate correction and where we
believe beneficiaries should be
specifically notified. One example of a
situation where enrollees should be
notified of performance or compliance
deficiencies would be when a
sponsoring organization fails to provide
beneficiaries with the proper premium
notices to collect premium amounts in
arrears. Another example would be if a
sponsoring organization failed to
provide access to services and we
instructed the sponsor to contact
enrollees regarding this issue and assist
them with obtaining needed services or
medications. In each of these situations
we would require a sponsoring
organization to disclose the deficiency
to its enrollees and take affirmative
steps to alleviate any problems for
enrollees, such as providing enrollees
with options to fix the issue.
The performance ratings routinely
available to beneficiaries, while equally
important for the promotion of
transparency and informed choice,
generally will not include information
about the type of performance
deficiencies that will be the subject of
these disclosure requirements. Also, we
intend to use the normal account
management oversight processes to
review and approve any disclosures
before they are made to beneficiaries to
ensure that information disclosed is
clear, and unambiguous and to lessen
the potential for confusion, alarm or
other potential negative impacts on
beneficiaries.
Comment: Several commenters raised
concerns that this requirement would be
administratively and financially
burdensome on some sponsoring
organizations either because these
disclosures could lead to a significant
increase in grievances and expenditures
responding to beneficiary concerns over
the disclosures or could unnecessarily
alarm beneficiaries and lead to requests
for disenrollment. These commenters
also were concerned about the utility of
these kinds of disclosures based on their
experience that Medicare beneficiaries
rarely request information about
compliance and performance and have
demonstrated no interest in information
about sanctions taken by CMS.
Response: As we stated in our October
22, 2009 proposed rule, the primary
purpose of this requirement is to
promote transparency and informed
choice especially in those situations
where we believe beneficiaries need or
should have access to this information.
We intend to exercise our authority
judiciously in those situations where we
believe that the information being
PO 00000
Frm 00058
Fmt 4701
Sfmt 4700
required to be disclosed will have a
positive effect on transparency and
informed choice. Similarly, we intend to
use our normal account management
oversight processes of review and
approval of materials disclosed to
beneficiaries to lessen the prospect for
beneficiary confusion or concern which
could lead to unnecessary grievances
and requests for disenrollment. Finally,
we believe that beneficiaries would be
interested in receiving information
about serious or significant compliance
or performance deficiencies which
potentially could affect them.
Comment: Several commenters
provided suggestions concerning how
we should make this information
available to enrollees. One commenter
stated that we should require that
sponsoring organizations make
information available upon request or
on the Medicare Web site and another
commenter requested that we consider
alternative means of supplementing
existing performance information
available to beneficiaries through the
CMS Web site.
Response: We do not agree with the
suggestion that sponsoring organizations
should only make such information
available upon request or on the
Medicare Web site. We intend to require
that enrollees receive this information
from sponsoring organizations in those
circumstances where we believe
beneficiaries must be affirmatively made
aware of these deficiencies. Providing
information upon request or merely
posting on a Web site which enrollees
may or may not access does not promote
the degree of transparency and
accountability by sponsoring
organizations, for their deficiencies, that
was contemplated by our proposal.
Also, not all beneficiaries have access to
the Medicare Web site and we believe
beneficiaries may not be aware that they
can request this information.
Comment: One other commenter
suggested that sponsoring organizations
should not be required to disclose
deficiencies that occurred in the past
because those issues may have been
corrected and are not relevant to the
current status of the plan.
Response: We intend to conduct our
oversight responsibilities in a manner
such that the kinds of compliance and
performance deficiencies contemplated
by these disclosures come to our
attention as quickly as possible and are
similarly disclosed to enrollees in a
timely manner. However, it is not
always possible for us to be aware of
situations contemporaneous with their
occurrence. We intend to take into
account whether the deficiencies have
been corrected and the utility of making
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
such disclosures to beneficiaries in
these instances when making a decision
as to whether disclosure will be
required.
Comment: A number of commenters
expressed concern with the timing of
these required disclosures and the
related issue of whether beneficiaries
may elect other options once they
receive one of these disclosures. Several
commenters requested that disclosure
be imposed only in those circumstances
where a beneficiary would be afforded
the opportunity to elect another plan
option, some requested that disclosure
of performance deficiencies be
immediate so that beneficiaries would
have more time to plan their health care
decisions and several commenters
believe that disclosures throughout the
plan year would decrease the likelihood
that information would get lost during
the annual coordinated election period
(AEP) or open enrollment period (OEP).
Response: We agree with the
commenters who recommended that
disclosure of these compliance and
performance deficiencies be made as
expeditiously as possible to
beneficiaries and therefore we also agree
that these disclosures may be required
throughout the plan year. Also, with
respect to the comments relating to
allowing beneficiaries to elect other
options, based on the nature and extent
of the deficiencies that necessitated the
disclosure, we intend to exercise our
authority to grant a special election
period for beneficiaries affected by the
plan’s compliance or performance
deficiencies as permitted in § 422.64
and § 423.38. Our intention is to provide
actionable information to beneficiaries.
In some cases, the appropriate action
may be to afford beneficiaries an
opportunity to elect another plan
option. In other cases, it may be
sufficient to require plans to disclose
the deficiency to its enrollees and
provide enrollees with options to fix the
issue.
Comment: We received one comment
that questioned CMS’ authority to
require a sponsoring organization to
disclose to its beneficiaries its
compliance or performance deficiencies.
The commenter provided no specifics
for the assertion and merely stated that
they have expressed to us on numerous
occasions the ‘‘well-founded legal and
policy objections’’ to self-disclosure.
Response: We currently have both
statutory authority pursuant to sections
1851(d) and 1860D–1(c) of the Act and
existing regulatory authority under
§ 422.111(f)(8)(v) and § 423.128(c)(1)(vii)
to require sponsoring organizations to
disclose information to its enrollees to
help them make informed choices about
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
their healthcare. We note that the
commenter did not provide a further
description or citation to the ‘‘well
founded legal and policy objectives’’
that they stated had been previously
submitted to us. To the extent that the
commenter is referring to a prior
proposal related to the mandatory selfdisclosure of fraud, waste, and abuse
issues, the disclosures that are the
subject of these proposals are entirely
distinguishable and this proposal is
completely unrelated to any past
proposals involving the mandatory selfdisclosure of fraud, waste, and abuse
issues. The current provision, for which
there is explicit statutory authority,
involves disclosures of compliance and
performance deficiencies that we are
already aware of and has determined
involve an issue that enrollees should
be notified of expeditiously. However,
we are modifying the language in
§ 422.111(g) to replace the term ‘‘selfdisclosure’’ with ‘‘disclosure’’ to avoid
any confusion.
Comment: One commenter questioned
how CMS intends for sponsoring
organizations to disclose to their
enrollees that they have resolved the
disclosed compliance/performance
issues after the required disclosure is
made.
Response: We recognize that
sponsoring organizations will want to
correct any underlying compliance or
performance deficiencies that led to
these kinds of disclosures quickly. Our
proposal was specifically intended to
utilize transparency to incentivize and
promote sponsoring organizations’
compliance with CMS requirements. As
with the required disclosure notice, we
intend to use the normal account
management oversight processes to
review and approve any notices that
sponsoring organizations wish to
provide to enrollees concerning a
correction of the underlying compliance
or performance deficiencies that led to
the disclosure.
Comment: One commenter requested
that we issue a written warning to
sponsoring organizations before sending
the actual notice requiring disclosure.
Response: We do not believe issuing
a written warning to sponsoring
organizations prior to requiring
disclosure furthers any particular
compliance or oversight objectives and
additionally may not always be feasible,
especially if the deficiency has just
occurred and beneficiaries need to be
notified immediately. We retain the
discretion to issue a compliance action
(including a written warning), separate
and apart from the requirement to have
sponsoring organization’s disclose
deficiencies to enrollees, based on the
PO 00000
Frm 00059
Fmt 4701
Sfmt 4700
19735
underlying associated compliance or
performance deficiency. Therefore we
are not incorporating this commenter’s
suggestion.
Comment: One commenter expressed
concern that sponsoring organizations
do not have the opportunity to
challenge or appeal the application of
this requirement.
Response: These disclosure
provisions merely require sponsoring
organizations to provide beneficiaries
with access to information. There is no
statutory or regulatory right to challenge
or appeal a CMS requirement to disclose
information to enrollees. However, to
the extent we take a contract or
enforcement action (for example, an
intermediate sanction or a civil money
penalty) against the sponsoring
organization for an associated
underlying compliance or performance
deficiency, the sponsoring organization
would be afforded any appeal rights
associated with the action taken.
Comment: One commenter was
concerned that sponsoring organizations
would not comply with the
requirement.
Response: We have established
mechanisms for ensuring compliance
and fully intend to enforce these
requirements and to take appropriate
corrective and enforcement action
should sponsoring organizations fail to
comply with this requirement.
Comment: One commenter
recommended that defined timeframes
be issued in which CMS should respond
to a beneficiary’s inquiry related to the
disclosure of a plan’s performance or
compliance deficiencies.
Response: We have established
mechanisms for ensuring we respond to
all beneficiary inquiries and these
established mechanisms would apply
equally to any inquiries received from
beneficiaries concerning these kinds of
disclosures.
Comment: One commenter suggested
that we make public the information on
its Web site in a manner that is more
detailed and easier to find.
Response: Our proposal was not
intended to solicit comments about the
information on our Web site and
therefore we are not specifically
addressing this comment.
Comment: One commenter requested
that we modify the plan ratings for
special needs plans (SNPs) because they
do not accurately measure plan
performance.
Response: Our proposal was not
intended to address the methodology for
plan ratings and therefore we are not
specifically addressing this comment.
E:\FR\FM\15APR2.SGM
15APR2
19736
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
24. Definition of MA Plan Service Area
(§ 422.2)
to the definition of MA plan ‘‘service
area’’ without modification.
We proposed to amend the definition
of an MA plan ‘‘service area’’ at § 422.2
to exclude facilities in which
individuals are incarcerated, consistent
with the definition of service area for a
Part D plan and in light of the fact that
incarcerated beneficiaries are unlikely
to have access to MA plan services, as
required under § 422.112. We received
several comments on this provision, all
of which supported our proposal. We
appreciate the support for the changes
and are finalizing the proposed revision
C. Changes To Provide Plan Offerings
With Meaningful Differences
This section addresses proposals in
our October 22, 2009 proposed rule that
were designed to promote plan offerings
with meaningful differences, and ensure
plan viability. We discuss below
proposed revisions that would help
ensure that plans offered by the same
organization in the same area have
meaningful differences from each other,
provide for a transition to the
applicability of such rules when an
existing organization is acquired by or
merged with another organization, and
provide that plans that have failed to
attract enrollees over a period of time
without justification may be nonrenewed. We believe that these
revisions will help us accomplish the
balance we wish to strike between
encouraging robust competition and
providing health plan and PDP choices
to beneficiaries that do not create
confusion for beneficiaries because
there are meaningful differences in
benefit packages among the plans
offered. We discuss these provisions in
connection with comments we received
in response to the proposals outlined in
Table 3.
TABLE 3—PROVISIONS TO ENSURE MEANINGFUL DIFFERENCES IN PLAN OFFERINGS
Part 422
Part 423
Provision
Subpart
Bid Submissions: Ensuring Significant Differences.
Bid Review Process ...................................
Transition Process in Cases of Acquisitions and Mergers).
Non-renewing Low-enrollment Plans .........
Section
Subpart
Subpart F ................
§ 422.254 .................................
Subpart F ................
§ 423.265
Subpart F ................
Subpart F ................
§ 422.256 .................................
§ 422.256 .................................
Subpart F ................
Subpart F ................
§ 423.272
§ 423.272
Subpart K ................
§ 422.506(b)(1)(iv) ...................
Subpart K ................
§ 423.507(b)(1)(iii)
sroberts on DSKD5P82C1PROD with RULES
1. Meaningful Differences in Bid
Submissions and Bid Review (§ 422.254,
§ 423.265; § 422.256, and § 423.272)
Under our authority in section
1857(e)(1) of the Act, incorporated for
Part D by section 1860D–12(b)(3)(D) of
the Act, to establish additional contract
terms that CMS finds ‘‘necessary and
appropriate’’ and with respect to Part D,
our authority under section 1860D–
11(d)(2)(B) of the Act to propose
regulations imposing ‘‘reasonable
minimum standards’’ for Part D
sponsors, our October 22, 2009
proposed rule proposed changes to our
regulations to ensure that plan offerings
by MA organizations and Part D
sponsors represent meaningful
differences to beneficiaries with respect
to benefit packages and plan cost
structures. Specifically, we proposed to
revise § 422.256(b)(4)(i) and
§ 423.272(b)(3)(i) to specify that we
would only approve a bid submitted by
an MA organization or Part D sponsor if
its plan benefit package or plan cost
structures were substantially different
from those of other plans offered by the
organization or sponsor in the area with
respect to key plan characteristics such
as premiums, cost-sharing, formulary
structure, or benefits offered. We also
proposed to make related changes to
§ 422.254(a)(5) and § 423.265(b)(3)(i) to
require that MA organizations and Part
D sponsors must ensure that multiple
bids submitted for plans in the same
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
area are submitted only if the plans
meet the foregoing test of being
substantially different from each other.
After reviewing the comments we are
finalizing our proposals with the
technical changes to § 422.254(a)(4),
§ 423.265(b)(2), § 422.256(b)(4)(i) and
§ 423.272(b)(3)(i), explained below.
Comment: Most commenters
supported our proposal to require
meaningful differences in bids but asked
for greater specificity about how the
new rules would apply. Several
commenters requested that CMS
identify the specific thresholds and
criteria to be used in determining that
meaningful differences between plans
exist, and several others requested that
CMS annually publish the standards
early in the year preceding the contract
year to which the thresholds and criteria
apply. A few commenters requested that
criteria for meaningful differences be
published annually and be subject to
public comment. One commenter
requested that CMS include public
notice of areas with limited plans.
Response: We agree with the
commenters that it is important to
provide more information and greater
specificity concerning standards that we
will use in assessing meaningful
differences, and agree that MA
organizations and Part D sponsors
should have this information early in
the year preceding the contract year to
which the standards would apply in
PO 00000
Frm 00060
Fmt 4701
Sfmt 4700
Section
order to assist them in developing their
plan offerings for the contract year.
However, we also believe it is important
to retain flexibility when considering
meaningful differences. Therefore, as
specified in our October 2009 proposed
rule, our final regulations at
§ 422.256(b)(4) and § 423.272(b)(3)
continue to include the general
substantive standard we will use when
assessing plan bids, with the
expectation that greater specificity in
how this standard will be applied will
be provided, with an opportunity for
comment on our more detailed criteria,
through guidance such as our annual
call letter. We do not agree that it is
necessary to provide a separate public
notice of areas with limited plan
choices, as the number of choices
available in an area is already provided
to beneficiaries in that area in the
Medicare & You Handbook, and on the
Medicare Web site.
Comment: One commenter opposed
the proposed changes and
recommended that CMS reevaluate its
policy on differences that are
meaningful to beneficiaries, which the
commenter believed was based purely
on actuarial policies. The commenter
argued that CMS’ policy could be
considered discriminatory because
geography would be a factor in whether
multiple plans had to be different from
each other.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Response: We believe our proposed
policies would require differences in
criteria that beneficiaries, not actuaries,
would find meaningful, while still
providing MA organizations and Part D
sponsors with flexibility in offering
different plan options. We disagree with
the commenter who believes that
considering the geographical region of a
plan could be considered
discriminatory, since the beneficiary
confusion issue we are addressing in
this rule only applies when duplicative
plans are offered by the same
organization in the same area. Moreover,
we believe that greater scrutiny of
differences between an organization’s
plan offerings in an area where more
plans are offered is justified in that the
higher the total number of plans offered
in an area, the greater is the potential for
beneficiaries to be confused and
overwhelmed.
Comment: Several commenters had
specific questions, concerns, or
suggestions about how to best assess
meaningful differences. Several
commenters wrote that CMS should not
place so much focus on Part D
formularies as a means of determining
meaningful differences. In connection
with this issue, several commenters
believed that focus on the plan
formulary could lead to sponsors
offering at least one plan with a ‘‘bare
bones’’ formulary. Such ‘‘baseline’’ or
‘‘benchmark’’ plans could harm LIS
enrollees, as such enrollees would likely
be disproportionately enrolled in such
plans and are least able to navigate
barriers such as utilization management
restrictions. Concerning other specific
issues, a commenter wrote that MA–PD
plans offered by the same organization
should be assessed for meaningful
differences based on the health care
benefits offered by each plan and not
the Part D benefits of each, as
standardization of the Part D benefit is
generally helpful for beneficiaries.
Response: With respect to focusing on
plan formularies as a criterion for
assessing meaningful differences in Part
D plans, we note that while we believe
differences in formularies to be a
fundamental area for assessing plan
differences, this was not the only
element of Part D plan offerings we
proposed to assess. Indeed, we proposed
to look at premiums and cost-sharing, as
well. With respect to the concerns that
focusing on the formulary could lead to
‘‘bare bones’’ plans in which LIS
beneficiaries could be
disproportionately enrolled, the Part D
program requirements clearly specify
the minimum requirements for basic
prescription drug coverage, and plans’
formularies are reviewed and approved
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
only if they are determined to provide
adequate access consistent with those
requirements. As explained in 30.2.7 of
Chapter 6 of the Medicare Prescription
Drug Manual (see https://
www.cms.hhs.gov/
PrescriptionDrugCovContra/
12_PartDManuals.asp#TopOfPage), we
review submitted drug lists to ensure
that they are consistent with best
practice formularies currently in
widespread use today. Our goal is to
ensure that all Part D formularies are
sufficiently broad in scope so as to
contain the drugs most commonly used
to treat the conditions faced by
Medicare beneficiaries. Nothing in our
proposed regulations would permit a
sponsor to offer anything less than the
current standard for the basic Part D
benefit.
Comment: A commenter asked if five
SNP plans offered by the same MA
organization would be considered
meaningfully different, even if the
formulary offered by each resulted in
similar out-of-pocket costs, simply
because the plans offered were SNPs.
Another commenter cautioned that
coverage in the gap may be little
different than no coverage in the gap if
such coverage consists solely of generic
drugs. The commenter suggested that a
plan’s initial coverage limit is a better
indicator of meaningful differences
between plans. A commenter noted that
that his studies indicate that enhanced
Part D benefits are increasingly
meaningless, and that genuine coverage
in the gap is the primary indicator
between enhanced and standard plans,
given that cost-sharing and premiums
are often no different between enhanced
and basic prescription drug coverage.
According to this commenter, his
studies show that gap coverage is also
often not meaningfully different because
such coverage is: (1) Almost always
accomplished through generic drugs; (2)
many generic drugs are not normally
covered by plans claiming to offer such
coverage; and (3) copayment amounts in
the gap are higher than copayments
before reaching the initial coverage
limit. The commenter suggested that a
plan should be required to cover all
formulary drugs in the gap if the plan
wants to offer gap coverage and, if this
is not feasible, plans offering gap
coverage for generics should be required
to offer the same coverage in the gap for
generics that they offer in the initial
coverage period. Another commenter
wrote that its experience was that
utilization of generic drugs is one of the
best ways that a member can delay onset
of the coverage gap.
Response: With respect to the
comment on multiple SNPs offered by
PO 00000
Frm 00061
Fmt 4701
Sfmt 4700
19737
the same organization, we would not
consider five SNPs offered by the same
organization to be meaningfully
different simply because the plans
offered are SNPs. As is also the case in
our provision to non-renew low
enrollment plans, we believe that SNPs
may warrant special attention when
assessing meaningful differences
because of such factors as the enrollee
population served and differences in
benefits (Medicare and Medicaid in the
case of dual-eligible SNPs). However,
we do not believe that such plans
should receive exemptions from either
the requirements concerning low
enrollment or meaningfully different
plans simply because they are SNPs.
Half of all Medicare beneficiaries have
over 40 MA plan choices (this figure
does not include special needs plans or
employer group health plans which
have additional criteria for enrollment),
and many states offer 50 or more stand
alone Part D plans, a number that can
double when one includes Medicare
Advantage plans with a Part D benefit.
Several studies suggest that the MA and
Part D program offerings are so
numerous that they can be confusing. In
a report by Marsha Gold of Mathematica
Policy Research, Inc., for example, Gold
writes of the MA program that ‘‘Existing
research suggests that simplification
may have advantages for beneficiaries,’’
and that one such advantage is
preventing competitors from taking
advantage of the system ‘‘through
product design.’’ 1 Gold continues by
identifying the sheer array of plan types
with their different characteristics, such
as access to services or cost structures,
as confusing to beneficiaries to the point
that they may not choose the plan that
is best for them in terms of costs or
benefits. In his study, ‘‘How Much
Choice is too Much? The Case of the
Medicare Prescription Drug Benefit, T.
Rice argues, based on Part D beneficiary
studies that he and others in the field
have conducted, that ‘‘The results show
that decision quality [of seniors’ ability
to choose plans with the lowest annual
total cost] deteriorated as the number of
plans increases.’’ 2 In another study of
Part D plan offerings, published in a
2009 paper by Jason T. Abaluck and
Jonathan Gruber, the authors determine
that ‘‘elders place much more weight on
plan premiums than they do on the
expected out of pocket costs that they
will incur under the plan’’ and that
1 Gold, Marsha. Strategies for Simplifying the
Medicare Advantage Market. Publication prepared
for the Kaiser Family Foundation. July, 2009.
2 Rice, T. Reducing the Number of Drug Plans for
Seniors: A Proposal and Analysis of three Case
Studies. Presentation at Academy Health Annual
Research Meeting: Washington, DC. June 9, 2008.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19738
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
‘‘they substantially under-value variance
reducing aspects of alternative plans,’’
confirming that the array of Part D plan
offerings can often lead to inconsistent
choices among seniors with respect to
determining costs, and plan features
most beneficial to them.3
We agree with the commenter who
wrote that coverage in the gap may not
always be meaningfully different if such
coverage consists solely of a subset of
formulary generic drugs but we disagree
that an enhanced alternative plan
should be required to cover all
formulary drugs in the gap if the plan
wishes to claim to offer gap coverage.
Rather, we believe that a meaningful
difference with respect to an enhanced
plan must be represented by a
significant increase in benefits over
basic coverage. Similarly, if two
enhanced plans are offered by the same
sponsor in a service area, a meaningful
difference among those two plan
offerings must be represented by a
significant difference in benefits offered.
Comment: One commenter
recommended that we permit an MA
organization to offer three plans of each
plan type in a service area, while
another wrote that CMS should not
arbitrarily limit the number of plans
offered by an MA organization in a
service area.
Response: Although permitting an
MA organization to offer three plans of
each plan type may be reasonable in
some circumstances, we do not agree
with the commenter that this should
necessarily be the case. To the extent
that the three plans have meaningful
differences from each other that avoid
beneficiary confusion, we believe that
three plans of the same type (for
example, coordinated care plan) would
be permissible. Because the number of
plans of the same type that would be
permitted under this rule would depend
on the plan design, and on ensuring that
beneficiaries are not confused, we
disagree with the commenter that we are
imposing an ‘‘arbitrary’’ limit on plan
offerings.
Comment: A commenter suggested
that CMS require all health care plans
to have at least one basic, standardized
plan that would be transparent and
understandable to beneficiaries no
matter where or by which organization
the plan was offered.
Response: We do not agree with the
commenter that all MAOs offer at least
one standardized plan no matter where
3 Abaluck, Jason T, and Jonathan Gruber. Choice
Inconsistencies among the Elderly: Evidence from
Plan Choice in the Medicare Part D Program. NBER
Working Paper Series. Working paper 14759.
February, 2009. https://www.nber.org/papers/
w14759.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
or by which organization the plan is
offered. While it is important to ensure
that plan options are meaningfully
different, we also believe MAOs should
have the flexibility to craft distinct plan
options for beneficiaries.
Comment: One commenter implied
that CMS was not aware that plan
benefit designs with low or no
premiums and higher cost-sharing may
be attractive to some beneficiaries, and
plans with no deductibles and higher
premium attractive to others and, as a
result, both structures should remain a
viable choice in the marketplace. A
commenter urged CMS to look at an
organization or sponsor’s plans
‘‘holistically’’ when assessing
meaningful differences. Another
commenter cautioned that while
establishing meaningful differences
among plans offered by an MAO or
sponsor is important, CMS must watch
for complexities in plans’ cost-sharing
structures, as these various structures
make it far more difficult for
beneficiaries to evaluate differences
between or among benefit packages.
Response: Contrary to the
commenter’s suggestion, we are well
aware that some beneficiaries prefer
plan benefit designs with low or no
premiums and higher cost-sharing while
others may prefer high deductible/high
premium plans, and we have no
intention of prohibiting these as ‘‘a
viable choice’’ for beneficiaries. To the
contrary, our requirement that plans
have meaningful differences from one
another is designed to promote such
differences in plan design. CMS’
concern is with MAOs and Part D
sponsors that offer several plans in the
same service area that have few
distinctions, not with plans with benefit
or cost structures which are clearly
quite different.
Comment: A commenter requested
that we consider premiums, the
provision of health and wellness
programs, and dental or vision coverage
in our assessment of meaningful
differences between MA plans. Another
commenter took exception to our
example in the proposed rule that an
HMO with a point of service (POS)
option and local PPO can sometimes be
similar, that is, may not be meaningfully
different, and wrote that local PPOs are,
in fact, different by virtue of offering
out-of-network coverage. Another
commenter agreed that HMOs with a
POS option are largely indistinguishable
from local PPO plans.
Response: The focus of our review for
meaningful differences is primarily on
cost differentials between plans for Parts
A and B services, the presence of a Part
D benefit, the ways beneficiaries access
PO 00000
Frm 00062
Fmt 4701
Sfmt 4700
services (that is, through a network, as
in an HMO or in a non-network context
such as a PPO) and overall plan costs.
The addition of individual
supplemental benefits may not trigger
the annual thresholds we have used to
establish significant differences in
overall plan costs among an MA
organization’s plan offerings in a service
area. That said, our recent experience in
reviewing plan benefit packages
suggests that the addition of some
supplemental benefits can result in
significant differences in out-of-pocket
costs. Therefore, it is possible that an
individual supplemental benefit or
group of supplemental benefits could
result in plans being meaningfully
different from one another. With respect
to the comments concerning our
example that PPOs and HMOs with a
POS option could be considered similar
if offered by the same MAO even though
they technically are different plan types,
we cited this example to illustrate that
even though these are different plan
types it is possible that such plans, if
offered by the same MAO, could be
considered similar under some
circumstances. For example, if access to
care in-network, and coverage of
services out-of-network is essentially
the same in both plans, and there are no
other significant differences between the
two in benefits or costs, there would not
be ‘‘meaningful’’ differences between the
two plans.
Comment: A commenter cautioned
that CMS should be aware that an MA
organization offering several dual SNP
plans might have several similar benefit
packages for Medicare benefits, but the
same plans could have quite different
Medicaid benefits. Another commenter
supported our intention, as expressed in
the proposed rule, to permit multiple
plan filings by the same MA
organization in certain circumstances
and wrote that CMS should formally
recognize the ‘‘Medicaid agency’s
purchasing strategy’’ ’ in any assessment
of meaningful differences among dual
eligible SNP plans.
Response: We do not consider
differences in Medicaid benefits among
dual eligible SNPs offered by the same
MA organization as significant
differences for purpose of our review,
since we are reviewing differences in
MA plan offerings, not Medicaid
benefits. We would consider Medicare
premiums (as part of a plan’s cost
structure) as part of its review of bids.
In short, as an earlier commenter urged,
CMS intends to look ‘‘holistically’’ at an
organization or plan sponsor’s offering
in a service area when determining
whether or not an organization’s or
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sponsor’s offerings are meaningfully
different.
Comment: A commenter wrote that
CMS should ensure that CMS’ policies
do not inadvertently remove meaningful
choices in areas where choices may be
comparatively limited (Barrow County,
Alaska v. Dade County, Florida, for
example). Another commenter wrote
that CMS should consider limiting an
organization’s or sponsor’s plan
offerings in a geographic area similar to
the Federal Employee Health Benefits
Program or plans offered by some other
employers.
Response: We do not intend to
prevent plan choice in rural areas
through implementation of the
requirement for meaningfully different
plans. The intent of the provisions is to
ensure genuine choices for beneficiaries
as well as transparency in plan offerings
so that beneficiaries can make informed
decisions about their health care plan
choices. For this reason, we do not agree
with the commenter who suggests that
we limit an organization/sponsor’s plan
offerings in a geographical area to an
arbitrary number of plans, since this
could actually limit additional
meaningful choices.
Comment: Two commenters cited
discrepancies in the preamble and
regulations text for Parts C and D
concerning bid submissions
(§ 422.254(a)(4) and § 423.265(b)(2)) and
asked that we ensure the final
regulations text reflects the language of
the preamble by specifying that
meaningful differences include
differences in ‘‘cost-sharing or benefits
offered, (MA regulations)’’ and
‘‘premiums, cost-sharing, formulary
structure, or benefits offered’’ (Part D
regulations) instead of the proposed
regulations text for these sections,
which was more general ‘‘benefit
packages and plan costs’’ (MA
regulations), ‘‘beneficiary out-of-pocket
costs, and formulary structures’’ (Part D
regulations). In addition the
commenters asked that the list of
meaningfully different elements cited in
the bid submission and review sections
be connected with the coordinating
conjunction ‘‘or’’ instead of ‘‘and.’’ One
of the commenters recommended that
the bid review sections for both the Part
C and D regulations at § 422.256(b)(4)(i)
and § 423.272(b)(3)(i) cross reference the
criteria for meaningful differences in the
bid submission sections for both
programs (§ 422.254(a)(4) and
§ 423.265(b)(2)).
Response: We agree with the
comments suggesting that the
regulations text for the bid submission
and review sections specifying the
criteria we will use in assessing if an
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
MA organization’s or Part D sponsor’s
bids are meaningfully different should
be connected with ‘‘or’’ instead of the
coordinating conjunction ‘‘and.’’ As a
result, we are revising our regulations at
§ 422.254(a)(4), § 422.256(b)(4)(i),
§ 423.265(b)(2), and § 423.272(b)(3) to
state that an [MA or Part D]
organization’s bids must reflect
differences in ‘‘benefit packages or plan
costs.’’ We also are making conforming
changes to § 422.256(b)(4)(ii) and
§ 423.272(b)(3)(ii) which concern
acquisitions and mergers, as these
sections use similar language. However,
we disagree with the commenter who
urged that the preamble language
referencing ‘‘plan characteristics such as
premiums or cost-sharing’’ (MA
program) or ‘‘premiums, cost-sharing,
formulary structure,’’ (Part D program)
should be reflected in the regulations
text. Although these are certainly
elements that may result in
meaningfully different plans, we believe
the current language captures these
elements while providing the necessary
flexibility to view plans ‘‘holistically.’’
In addition, the commenter correctly
points out that in order to make the Part
C and D regulations consistent,
§ 422.256(b)(4)(i), which concerns MA
bid reviews, should cross reference
§ 422.254(b)(4), which concerns
submission of MA bids.
With the exception of the revisions
noted previously, we are finalizing the
provisions as proposed.
2. Transition Period in Cases of Mergers
and Acquisitions (§ 422.256, § 423.272)
In connection with our proposal to
ensure that plan offerings represent
meaningful differences, we proposed to
add § 422.256(b)(4)(i) and
§ 423.272(b)(3)(ii) to provide MA
organizations and Part D sponsors
involved in mergers or acquisitions a 2year transition period from the merger
or acquisition to ensure that plans
offered by the MA organization or Part
D sponsor are significantly different
from each other. After a transition
period of 2 years, we would only
approve a bid submitted by an MA
organization or Part D sponsor, or a
parent organization to that entity, if the
benefits or plan cost structure
represented by that bid were
substantially different from any other
bid submitted by the same MA
organization or Part D sponsor (or
parent organization of that entity). We
requested comments regarding the
adequacy of our proposed transition
period length of 2 years in both the MA
and Part D contexts, particularly since
we had previously, as articulated in the
2008 Call Letter for Medicare health
PO 00000
Frm 00063
Fmt 4701
Sfmt 4700
19739
plans and PDPs, that PDP sponsors
affected by mergers or acquisitions
would be afforded a 3-year transition
period. After reviewing the comments
received in response to this proposal,
we are finalizing the proposed
provisions without modification.
Comment: Several commenters agreed
with our proposal to require
organizations and sponsors acquiring or
merging with existing entities to offer
plans with meaningful differences
within two years of the merger or
acquisition. One of the commenters
wrote that 2 years was ‘‘more than
adequate’’ for affected organizations and
sponsors to offer meaningfully different
plans. Another wrote that while 2 years
was sufficient, CMS should consider
notifying beneficiaries 1 year in advance
of a plan’s non-renewal so that they
have clear notice of any changes.
Several commenters disagreed with
the proposal to permit 2 years for
transition, recommending, instead, that
CMS maintain the current 3-year
requirement articulated in the 2008 Call
Letter. A few commenters believed that
the language in the proposed rule could
be interpreted to permit as little as one
bidding cycle/bidding year between an
acquisition or merger and the offering of
meaningfully different plans. One
commenter said that a 2-year transition
period would be disruptive to
beneficiaries and would not permit
plans to develop adequate benefit
packages. This commenter requested
that CMS permit a 3-year transition
period. Another commenter contended
that organizations/sponsors need 3 years
after a merger or acquisition in order to
adapt their benefit packages to comply
with the meaningful differences rule,
and to implement a robust
communications plan for implementing
required changes.
Another commenter argued that CMS
should not state that the transition
period will be ‘‘as determined by CMS,’’
but rather specify how the transition
period will be measured. The same
commenter wrote that if CMS does
finalize the proposed requirement, we
should not apply it to any acquisition
prior to issuance of the rule, as the
organization would have already taken
action based on transition-related
guidance in the 2008 and 2009 call
letters.
Response: As stated in the preamble
to the proposed rule, based on our
experience, we believe that our
proposed timeline for transitions
provides ample time for organizations
and sponsors to ensure that benefit
packages are sufficiently different and to
notify enrollees of any changes. Because
the transition period actually applies for
E:\FR\FM\15APR2.SGM
15APR2
19740
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
the two contract years following the
year of the acquisition or merger, that is,
if a merger takes place in 2010, the
MAO or sponsor would have until 2013
to offer meaningfully different plans, we
believe this period is disruptive neither
to plans nor to beneficiaries, and thus
disagree with the commenter who
asserted that a 3-year transition was
needed to allow MA organizations and
Part D plan sponsors to adapt their
benefit structures and communicate to
beneficiaries about the changes being
made.
We clarify that only organizations or
sponsors that merge or are acquired after
the effective date of this final rule will
be subject to the requirement at
§ 422.256(b)(4)(ii) and § 423.272(b)(3)(ii)
that their offerings are meaningfully
different after a 2-year transition period.
In the case of plans offered by
organizations or sponsors that merge or
acquire other plans prior to the effective
date of this regulation, the previously
articulated 3-year transition period
would apply.
3. Non-Renewing Low-Enrollment Plans
(§ 422.506(b)(1)(iv), § 423.507(b)(1)(iii))
As part of our process to streamline
and simplify the plan selection process
for beneficiaries, and ensure that
beneficiaries are only offered plans with
long-term viability, we proposed in
§ 422.506(b)(1)(iv) and
§ 423.507(b)(1)(iii) to include, as a
specific ground for non-renewal of a
contract, a finding that a Part C or Part
D plan has failed to attract a significant
number of enrollees over a sustained
period of time. We justified this
requirement on the grounds that, as a
general matter, continuing such a low
enrollment plan was not consistent with
effective and efficient administration of
the Medicare program for purposes of
section 1857(c)(2)(B) of the Act
(incorporated for Part D under section
1860D–12(b)(3)(B) of the Act), which
provides authority to terminate a
contract under such circumstances. In
the preamble to the proposed rule, we
acknowledged that there may be
instances in which low enrollment over
a sustained period of time is a function
of the type of beneficiaries served,
geographic location, or other
circumstances, and that we would
consider continuing to renew a low
enrollment plan in such situations
including, but not limited to, chronic
care SNPs offering health care services
especially tailored to this category of
beneficiaries and not available
elsewhere or employer group health
plans offering benefits augmenting those
of an MA plan to employees of a small
business. We further stated that, if a
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
case could be made that low enrollment
is justified, and the absence of such a
plan would significantly limit
beneficiary health care options in a
service area, consistent with effective
and efficient administration of the Part
C or Part D benefit, we would not nonrenew that plan. Similarly, we also
stated that the threshold for low
enrollment could fluctuate, although we
noted that we used a threshold of 100
enrollees for purposes of reducing the
number of low enrollment plans for
contract year 2010. Therefore, we did
not propose to revise our regulations to
specify a specific threshold. We
solicited comments on this approach
and whether we had provided sufficient
clarity on how we would determine
whether a low-enrollment plan would
be non-renewed.
Comment: Several commenters
supported the proposal to non-renew
low enrollment plans, but
recommended that the threshold and
guidelines we would use to apply this
requirement (including such factors as
the number of plans in a market, plan
enrollment, and the number of years of
operation with low enrollment
numbers) be clear and transparent, and
that they be made available publicly
early in the year preceding the contract
year to which they will apply. One
commenter wrote that CMS should
convene a working group prior to
enacting our proposed policy to nonrenew low enrollment plans. Another
commenter wrote that CMS should
consider low enrollment to be in the 250
to 500 enrollee range rather than 100
enrollees (the number used in our
efforts to reduce low-enrollment plans
for contract year 2010, as detailed in the
preamble to our proposed rule). Another
recommended a low enrollment
threshold of 1000 enrollees because it
believes that plans serving fewer than
1000 people in a service area would be
unable to offer negotiated savings,
quality managed care, or popular plan
features. A commenter asked CMS to
clarify what is meant by ‘‘a small
number of enrollees over a period of
time.’’
Response: We agree that guidelines
concerning minimum enrollment
thresholds and criteria should be
published annually and as early as
possible in the year preceding the
contract year to which they will apply.
While we disagree that we should
specify thresholds in regulations, we
intend to provide opportunities for the
public to review and comment on our
proposed thresholds and criteria for
assessing low enrollment for the
following contract year (for example,
through our annual call letter). We
PO 00000
Frm 00064
Fmt 4701
Sfmt 4700
recognize that we must be flexible in
assessing minimum enrollment to
ensure that plans with legitimate
reasons for low enrollments, such as
lack of other health care plan options,
specialized plan offering (such as, a
chronic care SNP), or recent
establishment of the plan, may continue
to operate and that beneficiaries who
might not otherwise have access to
health care options offered by a lowenrollment plan will continue to have
such access. Because we intend to
provide for public input annually on
our implementation guidance and will
consider the suggestions for specific
threshold amounts submitted by the
commenters in that context, we do not
believe the suggested ‘‘workgroup’’ to be
necessary. With respect to the question
of what constitutes ‘‘a small number of
enrollees’’ over a period of time, the
process described above may also be
used to determine the number of
enrollees that would trigger application
of this regulation, as well as the period
of time for which the small number
would have to be sustained.
Comment: Another commenter
recommended that CMS make clear that
the length of time a plan has had low
enrollment will be a primary factor in
determining whether a plan is nonrenewed, and that we should modify
our regulations language to explicitly
provide for ‘‘waivers’’ of the proposed
requirement at § 422.506(b)(1)(iv)
(§ 423.507(b)(1)(iii) for Part D plans)
when special circumstances such as the
type of beneficiaries served, geographic
location, and absence of the plan would
significantly limit beneficiary health
care options in a service area.
Response: The length of time in
which a plan has had low enrollment is
only one of the factors that we will
consider in determining whether it is
consistent with effective and efficient
administration of the Part C or Part D
benefit. We will also consider the type
of benefits being offered under the plan
and the nature of the enrollment in the
plan. As stated above, we recognize that
we must be flexible in applying any
minimum enrollment requirement to
ensure that plans with legitimate
reasons for low enrollments, such as
lack of other health care plan options,
specialized plan offering or recent
establishment of the plan, may continue
to operate. This flexibility will ensure
that beneficiaries who might not
otherwise have access to health care
options offered by a low-enrollment
plan will continue to have such access.
Because we intend to apply this
requirement in a flexible manner that
considers the particular circumstances
of each low enrollment plan, we do not
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
believe it is necessary to modify the
proposed regulations at
§ 422.506(b)(1)(iv) and
§ 423.507(b)(1)(iii) to provide explicitly
for ‘‘waivers’’ of this requirement.
Comment: A commenter
recommended that non-renewed plans
be permitted to passively enroll affected
enrollees into another plan offered by
the MA organization or Part D sponsor.
Response: With respect to the
recommendation to provide for passive
enrollment of beneficiaries in a nonrenewed plan into another plan offered
by that organization, we believe this is
appropriate only in limited
circumstances when a compelling case
can be made that such passive
enrollment is in beneficiaries’ best
interests. In making such
determinations, we take into
consideration criteria such as benefits,
cost sharing, the provider network, and
premiums to ensure a comparable plan
offering. In all other cases, we believe it
is most appropriate to leave enrollment
decisions to beneficiaries, who will
have an opportunity during the annual
coordinated election period to select
another MA plan or Part D plan offered
by the MA organization or Part D
sponsor offering the plan being
terminated. If a plan is terminated or
nonrenewed, the affected organization
or sponsor must follow all beneficiary
and CMS advance notification
requirements as specified in §§ 422.506,
422.508, 422.510, and 422.512 (MA
program regulations), §§ 423.507,
423.508, 423.509, and 423.510 (Part D
program regulations) and related
guidance for both programs. In addition,
passive enrollment initiated by an
organization or sponsor in the absence
of CMS approval is not among the
transactions permitted by us in our
annual renewal/non-renewal guidance.
Because of these requirements and
policies, an MA organization or Part D
sponsor wishing to enroll members from
the terminating or non-renewing plan
into another of their plans could not do
this without prior CMS review and
consent. If we were to determine that
such a transaction was in beneficiaries’
best interests, we would, as is our
practice, facilitate and closely monitor
the process. We note as well that
beneficiaries in terminated or nonrenewed plans have guaranteed issue
Medigap rights, access to information
about other available health care
options, and other information that will
assist them in finding plans most suited
to their needs.
Comment: Several commenters
supported our proposal but asked that
we make exceptions for SNPs. One
commenter requesting the SNP
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
exception wrote that ‘‘status as a SNP
should be prima facie evidence that low
enrollment is justified.’’ A few of these
commenters specifically requested that
such exceptions be codified in the final
regulations text. One commenter
requested an exception be made for
employer group plans. One commenter
requested an exception for MA-only
plans, stating that enrollees who get
their prescription drugs through some
means other an MA–PD should still
have the option of remaining in an MAonly plan, and another commenter
requested that ‘‘national’’ plans be
exempted from these requirements.
Response: While we will consider
exceptions on a case-by-case basis to
any low-enrollment thresholds we
establish, we do not believe it is
necessary to exempt any specific plan
type a priority. As we stated in the
preamble to the proposed rule, there
may be reasons for exceptions based on
plan type, geography, or special health
conditions of enrollees served that
warrant a waiver of the requirements.
However, a specific plan type, for
example, a SNP or employer group plan,
will not automatically be exempt from
the minimum enrollment standard for
renewal due to plan type alone. While
sustained low enrollment may well be
justified in the case of certain SNPs
serving individuals with a relatively
rare condition, a SNP serving an
individual with a more common disease
such as diabetes, or serving dual
eligibles, should be able to attract
enrollees. Similarly, we do not believe
there is justification for exempting MAonly plans or ‘‘national’’ plans from the
requirements unless there are other
reasons to exempt them (for example,
lack of other health care plan options,
the specialized nature of the plan, or the
recent establishment of the plan).
4. Medicare Options Compare and
Medicare Prescription Drug Plan Finder
In the proposed rule we asked for
comments on ways to improve the web
tools, Medicare Options Compare
(MOC), and the Medicare Prescription
Drug Plan Finder (MDPF). We
summarize and respond to these
comments below.
Comment: One commenter requested
that CMS add a function to limit the
information that can be seen in the MOC
so that users of the tool can focus on
information they need most.
Response: The 2011 contract year
update will include functions that
expand and collapse which will help
users of the MOC better focus on
specific information.
Comment: Another commenter asked
that the MOC contain direct links to the
PO 00000
Frm 00065
Fmt 4701
Sfmt 4700
19741
plan(s) discussed, not just the
organization’s Web site as is now often
the case.
Response: We are not making the
suggested change at this time as we
believe that MOC already includes
sufficient information to contact plans.
Comment: Another commenter
requested that the tool clearly indicate
what is meant by an ‘‘enhanced plan,’’
even if this is just a general description
in the tool of the typical features of an
enhanced plan.
Response: We do not believe that
revisions are necessary as information
on enhanced plans is currently available
in the glossary and at https://
www.medicare.gov/medicarereform/
howtoread.asp.
Comment: A commenter requested
that CMS add back the search function
in MPDPF notifying the user of the
number of drugs covered by a particular
plan. The same commenter requested
that information be included about
when a plan last updated its drug
pricing information and that the tool
includes information about coverage of
drugs traditionally covered under Part
B, for example, infused and injectable
drugs for MA–PD plans.
Response: Currently the drugs an
individual beneficiary takes may be
entered and displayed to determine
coverage, but the MPDPF does not
permit display a list of all the drugs a
plan covers as this would take a very
long time for the tool to display. CMS
reviews drug pricing on a regular basis
and the data is updated monthly to
reflect any changes. We believe the
compare function best permits users to
tailor their searches for the specific
drugs in the specific forms that they
need.
Comment: Another commenter wrote
that the MOC is relatively thorough but
inconsistent in that some plans in the
tool do not include information about
health care costs and that saved
searches often yield different results
when retrieved later. The commenter
recommended that the tool be refined to
allow the user to move easily back and
forth between information for MA and
Part D plans, that the conditions
required for enrollment in a chronic
care SNP be specified, and that the
function concerning costs for tiers of
drugs is ‘‘incredibly unfriendly and
confusing.’’
Response: We are considering how
best to streamline and make the use of
these comparative functions easier.
E:\FR\FM\15APR2.SGM
15APR2
19742
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
D. Changes To Improve Payment Rules
and Processes
This section addresses three payment
issues under Part C. These provisions
are outlined in Table 4.
TABLE 4—IMPROVING PAYMENT RULES AND PROCESSES
Part 417/422
Part 417/422
Part 423
Part 423
Subpart
Section
Subpart
Section
Provision
sroberts on DSKD5P82C1PROD with RULES
Risk Adjustment Data Validation .........................................................
Dispute and Appeals Process .............................................................
Payments to Medicare Advantage Organizations-Actuarial Valuation
Determination of Acceptable Administrative Costs by HMO/CMP
Cost Contract and Health Care Prepayment Plans (HCPPs).
Calculation of the Minimum Percentage Increase under Part C .........
1. Definitions Related to Risk
Adjustment Data Validation Appeals
(§ 422.2) and Addition of Medicare
Advantage Organization Risk
Adjustment Data Validation—Dispute
and Appeal Procedures (§ 422.311)
In the October 22, 2009 proposed rule,
we proposed regulations establishing an
appeals process to be used by MA
organizations to appeal the error
calculation resulting from Risk
Adjustment Data Validation (RADV)
audits. As explained in the preamble of
that proposed rule, under RADV audits
and medical records are reviewed to
determine whether they support
diagnosis codes (known as Hierarchical
Condition Codes, or HCCs) submitted to
us under the MA risk adjustment
methodology. Under this methodology,
certain diagnosis codes are considered
to signify higher costs for the enrollee,
and therefore, we pay a higher amount
to the MA organization for an enrollee
to reflect these higher costs. If, in fact,
a diagnosis code was not justified by the
enrollee’s medical condition, the higher
payment amount associated with that
diagnosis code would have been an
overpayment. Under the RADV audit
process we plan to recover the
overpayments identified during the
RADV audit. The appeals process we
proposed in the October 22, 2009
proposed rule was intended to provide
a mechanism for MA organizations to
appeal the error calculation associated
with the overpayments identified under
RADV audits. We invited and received
a large number of comments from health
plans, managed care industry trade
associations, and other interested
parties regarding not only the proposed
appeals process, but on the RADV audit
process and underlying MA payment
policy producing the overpayment
findings and our definitions proposed at
§ 422.2. Since neither the statute nor
existing MA program regulations
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Subpart
Subpart
Subpart
Subpart
F
G
F
O
..................
..................
..................
..................
§ 422.2
§ 422.311
§ 422.254
§ 417.564
N/A
........................
N/A
N/A
N/A.
........................
N/A.
N/A.
Subpart G ..................
§ 422.306
N/A
N/A.
currently specify a process for appealing
overpayments resulting from RADV
audits, the appeals process we proposed
was based on our authority to establish
MA program standards by regulation at
section 1856(b)(1) of the Act.
Specifically, we proposed adding a new
§ 422.311 to part 422, subpart G, to
specify RADV dispute and appeal rights
for MA organizations. We proposed
regulatory provisions allowing MA
organizations that undergo RADV
audit(s) to—(1) submit physician and
other practitioner signed attestations
relating to physician and other
outpatient medical records that had a
missing signature, or credentials that
resulted in a payment error finding; (2)
dispute certain other types of medical
record review-related findings through
the use of a documentation dispute
process; and (3) appeal our RADV
payment error calculation. By availing
themselves of these RADV dispute and
appeal processes, we noted that MA
organizations would be able to reduce
their RADV payment error and thereby,
reduce their overall estimated MA
payment error. Therefore, we proposed
the following provisions under part 422:
• To revise § 422.2 to add definitions
of six terms that pertain to RADV
activities, and thus to our proposals for
implementing a RADV dispute and
appeal processes.
• A new § 422.311 describing
procedures that we would implement to
afford MA organizations facing a
potential overpayment determination
resulting from RADV audits the
opportunity to have certain potential
RADV payment errors addressed in
advance of RADV-audit-related payment
error determinations, and to have other
types of confirmed payment errors
overturned. At § 422.311(a) and (b), we
summarized the RADV audit
procedures. Beginning with
§ 422.311(c), we proposed implementing
PO 00000
Frm 00066
Fmt 4701
Sfmt 4700
a three-pronged RADV dispute and
appeal procedure that MA organizations
could employ to reduce their RADV
payment error rate, including—
• Physician/practitioner
attestation(s);
• Documentation dispute; and
• RADV payment error calculation
appeal.
We noted that analysis of data
originating from medical records
submitted by MA organizations that
have undergone RADV audit indicates
that a substantial percentage of medical
record-related payment error
determinations are due to missing
signatures or credentials on medical
records. Medicare program rules dictate
the necessity of physician signatures on
medical records, and MA risk
adjustment requirements dictate that
risk adjustment diagnosis data be
accepted only for health services that
were provided by certain physician
specialties. Therefore, RADV audit
procedures require that, in addition to
finding diagnosis information that
would support the HCCs submitted by
the MA organization for risk adjustment
purposes, physician signatures, and
appropriate credentials must be present
on medical records. Medical records
with missing signatures or credentials
are scored as errors under RADV audit
procedures. We estimated that if given
the opportunity to do so, many
physicians and other practitioners that
provided the diagnosis information on
RADV-reviewed medical records would
in fact attest that they documented the
information in these medical records,
even though signatures and credentials
were missing from those records.
Moreover, the presence of a signature or
credential attestation to accompany
these medical records would in our
opinion, provide justification for
preventing both contract-level and
national-level RADV payment errors
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
that would otherwise originate from
medical record signature, or credentialrelated discrepancies.
Therefore, in proposed
§ 422.311(c)(1), we proposed to
implement a process that would allow
MA organizations to voluntarily submit
CMS attestations (that is, attestations
developed and pre-populated by CMS).
These attestations would be signed by
physicians/practitioners who would
attest responsibility for providing and
documenting the health services in the
physician and outpatient medical
record(s) that were submitted for RADV
audit. We specified at proposed
§ 422.311(c)(1)(ii) and (iii) that MA
organizations would be eligible to use
attestations to address signature or
credential-related discrepancies only
from physician or outpatient medical
records; attestations would not be
allowed to address signature or
credential-related discrepancies found
on inpatient medical records. The
proposed use of an attestation would
not in any way supplant the medical
record, nor would it permit attesting
physicians/practitioners to alter the
existing medical record. Attestations
would not be acceptable to address any
issues outside of the RADV-audit
process.
At proposed § 422.311(c)(1)(C)(iv), we
indicated that we would prospectively
notify MA organizations that if the ‘‘one
best’’ medical record used to validate an
audited HCC were missing a physician/
practitioner signature or credential, the
MA organization would be permitted to
submit a CMS–RADV attestation along
with the medical record, to fulfill the
requirement that medical records
contain physician/practitioner
signatures and credentials.
We described the proposed process
that we would jointly undertake to
review attestations submitted for our
review at proposed § 422.311(c)(1)(iv)
and (v), noting the following:
• Only CMS-generated attestations
that meet certain requirements
described at § 422.311(c)(1) and (d)
would be eligible for consideration.
Failure to meet these requirements
would result in us not reviewing or
accepting submitted attestations.
• CMS attestations that have been
altered or amended (for example,
striking out prepopulated words and
replacing them with hand-written
replacement words) without instruction
or written concurrence from us would
not be accepted.
• Attestations would need to
accompany the medical record at the
same time that the medical record was
submitted to us for RADV audit. MA
organizations would not be permitted to
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
submit attestations before or after
submission of their RADV medical
records.
• Attestations would need to
originate from the physician/
practitioner whose medical record
accompanies and corresponds to the
attestation. We would not accept
attestations or medical records from any
party other than the MA organization.
• Organizations would not be
permitted to submit attestations during
the documentation dispute or RADV
reconsideration processes described at
§ 422.311(c)(2) and § 422.311(c)(3).
At proposed § 422.311(c)(1)(iv), we
described the process that we would
undertake to review attestations and
notify appellant MA organizations of the
results of these attestation reviews. Our
attestation review determinations would
be final and binding upon both parties
and would not be eligible for further
appeal.
We further proposed affording MA
organizations the option of disputing
other nonsignature or credential-types
of RADV-related medical record
diagnosis coding discrepancies via a
proposed documentation dispute
process that we described in new
paragraph § 422.311(c)(2). Under our
proposal, in order to be eligible for
documentation dispute, MA
organizations would need to submit
their ‘‘one best’’ medical record in
accordance with RADV medical record
submission deadlines established by us
during the RADV medical record
request process.
At proposed § 422.311(c)(2)(a), we
specified the types of RADV-related
errors that would be eligible for the
proposed documentation dispute
process. The documentation dispute
process would apply only to the errors
that arise out of operational processing
of medical records selected for RADV
audits and submitted to us by
established deadlines. In this context,
errors that arise from operational
processing mean errors that arise from
the collection and processing of medical
records for a RADV audit.
At § 422.311(c)(2)(ii), we proposed
limitations that we would impose upon
the documentation dispute process;
namely that MA organizations would
not be permitted to dispute any medical
record coding discrepancies, nor would
MA organizations be permitted to
submit altogether new medical records
in place of previously submitted
medical records. Payment errors that
resulted from missing medical records
would not be eligible for documentation
dispute. At proposed § 422.311(c)(2)(iii)
and (iv), we indicated that we would
prospectively notify MA organizations
PO 00000
Frm 00067
Fmt 4701
Sfmt 4700
19743
of RADV payment errors that would be
eligible for documentation dispute,
describe the documentation dispute
process that we would undertake, along
with the process that we would
undertake to notify MA organizations of
the results of documentation dispute
reviews. As described at proposed
§ 422.311(c)(2)(v), our documentation
dispute review determination would be
final and binding upon both parties and
would not otherwise be eligible for
further administrative appeal.
Proposed § 422.311(c)(3) would
establish an appeals process under
which RADV payment error calculations
would be subject to appeal. Unlike our
proposed attestation process described
at § 422.311(c)(1), and proposed
documentation dispute process describe
at § 422.311(c)(2), which would afford
MA organizations the opportunity to
dispute aspects of our medical record
review process, the proposed RADV
payment error calculation appeal
process was specifically designed to
afford MA organizations the opportunity
to appeal our contract-level RADV
payment error calculation. Under the
proposed RADV payment error
calculation appeal process, we proposed
establishing a three-level appeal process
whereby MA organizations may—
• Seek reconsideration;
• Appeal the reconsideration decision
to an independent CMS Hearing Officer;
and
• Appeal the decision of the
independent CMS Hearing Officer to the
CMS Administrator.
Given the complexity of RADV audits
in general, and the calculation of RADVrelated error rates in particular, we
stated our belief that it was prudent to
afford appellant MA organizations
multiple-layers of RADV-related
payment error appeal.
At proposed § 422.311(c)(3)(ii), we
also specified that MA organizations
would not, under the proposed RADV
payment error calculation appeal
process, be permitted to appeal medical
record review errors, nor would MA
organizations be permitted to seek
formal appeal of physician or
practitioner signature or credentialrelated review errors. We believed that
medical record review-related issues
would be addressed as a result of the
rigorous medical record review process,
and the attestation and documentation
dispute processes described earlier in
the proposed regulation. In accordance
with our proposed regulation at
§ 422.311(c)(3)(i), the RADV payment
error calculation appeals process would
only apply to errors identified in the
RADV payment error calculation. MA
organizations would not be permitted to
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19744
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
utilize the payment error calculation
appeal process as a method for
submitting any medical records for
consideration in the calculation of the
payment error. In order to be eligible for
RADV payment error calculation appeal,
MA organizations would need to adhere
to established RADV audit
requirements, including the submission
of medical records in the manner and by
the deadlines specified by CMS.
Furthermore, we noted that MA
organizations would not be permitted to
appeal our RADV payment error
calculation methodology. Our
justification for excluding
methodological appeals was two-fold.
First, we said the methodology that we
planned to employ to calculate RADV
payment errors was methodologically
sound and academically defensible. We
stated that we intended to ensure that
all MA organizations understand the
RADV payment error calculation
methodology by providing annual
notice to all MA organizations of the
methodology that will be employed for
calculating Part C payment errors. MA
organizations that object to CMS’ RADV
payment error calculation methodology
would be given an opportunity to
provide comment to us under ours
annual notice of RADV audit
methodology. Second, in addition to
providing an annual notice of RADV
audit methodology, we stated that we
would provide an expanded explanation
of methodology as part of each RDV
audit report that we send to MA
organizations that undergo RADV audit.
Included in this expanded explanation
of methodology would be RADV
payment error calculation factors
unique to each audited MA organization
that would enable the MA organization
to independently calculate its own
RADV payment error.
At proposed § 422.311(c)(3)(iii) and
(v), we specified that MA organizations
would be notified of their RADV
payment error calculation appeal rights
at the time we issue a RADV audit
report to that organization. MA
organizations would have 30 calendar
days from the date of this notice to
submit a written request for
reconsideration of its RADV payment
error calculation. A request for
reconsideration would need to specify
the issues with which the MA
organization disagrees, the reasons for
the disagreements and explain why the
organization believes the issues are
eligible for reconsideration. The request
for reconsideration would need to
include additional documentary
evidence that the MA organization
considers material to the
reconsideration, though MA
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
organizations would be prohibited from
submitting medical record-related
evidence such as new or previously
submitted medical records or physician
or practitioner attestations and from
appealing any issues pertaining to the
methodology applied in any part of the
RADV audit. At proposed
§ 422.311(c)(3)(iv), we further specified
that the MA organization would bear the
burden of proof to demonstrate that our
RADV payment error calculation was
clearly incorrect.
We described our proposal regarding
the conduct of a RADV payment error
calculation reconsideration, the
decision of the reconsideration official
and the effect of the CMS
reconsideration decision official at
proposed § 422.311(c)(3)(e) and (f).
At proposed § 422.311(c)(3)(v) and
(vi), we described the first level of
RADV payment error calculation appeal,
the request for reconsideration of our
RADV payment error calculation. Under
this process a CMS official or our
contractor not otherwise involved in
error-rate calculation activity would
review our RADV payment error
calculation and any written evidence
submitted by the MA organization that
pertains to CMS’ RADV payment error
calculation, recalculate the payment
error utilizing our RADV payment error
calculation methodology (as specified in
our standard operating procedures), and
render a determination whether the
RADV payment error calculation was
accurate. This CMS official or CMS
contractor not otherwise involved in
RADV error-rate calculation activity
would recalculate and arrive at an
independent RADV payment error.
Whether the official or contractor agreed
with our payment error calculation, or
overturned the calculation and
established a new RADV payment error,
this party’s RADV payment error
calculation determination would be
issued to a CMS reconsideration official.
The CMS reconsideration official would
review their analysis and make a
determination whether to accept or
reject the findings of the CMS official or
CMS contractor that recalculated the
RADV payment error. In instances when
the CMS official or contractor
recommended overturning CMS’ RADV
payment error calculation and the
reviewing CMS reconsideration official
agreed with the newly calculated RADV
payment error, we would issue a
reconsideration decision which
informed the appealing MA
organization in writing of its
reconsideration decision, in effect,
notifying the MA organization of its new
RADV payment error. If the
reconsideration official upheld the
PO 00000
Frm 00068
Fmt 4701
Sfmt 4700
decision of the CMS official or
contractor to sustain our initial RADV
payment error calculation, the
reconsideration official similarly would
notify the appellant MA organization of
its determination. In either instance, the
decision of the reconsideration official
would be final and binding, unless a
request for hearing was filed by CMS or
the appellant MA organization.
At proposed § 422.311(c)(4), we
clarified that if CMS or an MA
organization were dissatisfied with the
decision of the CMS reconsideration
official described at § 422.311(c)(3),
CMS or the MA organization would be
permitted to request a second-level
RADV payment error calculation appeal,
which is a hearing on the RADV
payment error calculation
determination. CMS or MA organization
choosing to pursue a hearing would be
required to file a request for hearing
within 30 calendar days of the date the
MA organization received the written
RADV payment error calculation
reconsideration decision, as described at
proposed § 422.311(c)(3)(vi).
We noted that CMS or MA
organizations requesting a hearing
would need to do so in writing,
including a copy of the CMS
reconsideration official’s decision to
either uphold or overturn the initial
RADV payment error calculation, and
specify the findings or issues in that
reconsideration decision that they
disagreed with and why they disagreed
with them. The hearing would be
conducted by the CMS Office of
Hearings and presided over by a CMS
Hearing Officer who neither receives
testimony nor accepts any new evidence
that was not presented with the request
for reconsideration of the RADV
payment error calculation. The hearing
would be held on the record, unless the
parties requested, subject to the Hearing
Officer’s discretion, a live or telephonic
hearing. The Hearing Officer would also
be permitted to schedule a live or
telephonic hearing upon their own
motion. The CMS Hearing Officer would
be limited to a review of the record that
was used for the initial RADV payment
error calculation and the reconsidered
RADV payment error calculation.
Additionally, we noted that the
Hearing Officer would have full power
to make rules and establish procedures,
consistent with the law, regulations, and
CMS rulings. These powers would
include the authority to take appropriate
action in response to failure of an
organization to comply with such
procedures.
At proposed § 422.311(c)(4)(iv), we
also indicated that the CMS Hearing
Officer would review and decide
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
whether the reconsideration official’s
decision was correct and to notify CMS
and the MA organization in writing of
his/her decision, explaining the basis
for the decision, which would be final
and binding, unless the decision was
reversed or modified by the CMS
Administrator in accordance with
§ 422.311(c)(5).
We explained that the third level of
RADV payment error calculation appeal
that MA organizations can request
would be discretionary review by the
CMS Administrator. We described this
proposed process at § 422.311(c)(5). At
this level of appeal, CMS or the MA
organization would be permitted to
appeal the decision of the CMS Hearing
Officer by requesting that the CMS
Administrator review the CMS Hearing
Officer’s determination. Parties
requesting CMS Administrator review
would have to request the review within
30 calendar days of receipt of the CMS
Hearing Officer’s determination. If the
Administrator agreed to review the case,
the Administrator would review the
Hearing Officer’s decision as well as any
other information included in the record
of the Hearing Officer’s decision and
would determine whether to uphold,
reverse, or modify the CMS Hearing
Officer’s decision. The Administrator’s
determination would be final and
binding.
We also noted that, based on our
experience with appeals of MA and
Medicare Part D program contract
determinations, we have determined
that it would be necessary for us to
establish a ‘‘compliance date’’ to use as
a reference point in issuing a ruling
regarding RADV audit findings.
Therefore, we proposed at
§ 422.311(b)(2), to require that the
compliance date for meeting Federal
regulations requiring MA organizations
to submit medical records for the
validation of risk adjustment data
(§ 422.310(e)) also be the due date when
MA organizations (or their contractor(s))
selected for RADV audit would need to
submit medical records to us. We stated
we would inform an MA organization in
writing regarding selection for RADV
audit, including the due date for
submission of medical records.
We invited and received a large
number of comments from health plans,
managed care industry trade
associations, and other interested
parties regarding not only the proposed
appeals process described in proposed
§ 422.311—but also the RADV audit
process and underlying Medicare
Advantage payment policy. These
comments have resulted in changes to
our above-described proposals as
discussed below.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
While many comments that we
received relate to the underlying RADV
audit process and risk adjustment
methodology and may not directly
address the RADV appeals process
specifically, we are responding to these
comments, because they appear to be
relevant to the RADV appeals process
that we had proposed in our Notice of
Proposed Rulemaking. Certain
comments were outside the scope of our
proposed rule and we have not included
responses to those comments.
Comment: A comment alleged that it
was premature for CMS to propose rules
related to the RADV appeals process
because the commenter stated that the
Administrative Procedure Act (APA)
required that the underlying RADV
audit process giving rise to the
overpayments that would be appealed
under our proposed regulations be
subjected to notice and comment
rulemaking.
Response: We disagree and believe
that the RADV audit process does not
establish any substantive rules within
the meaning of the APA or section 1871
of the Act, but rather is a means for
ensuring that payments made to MA
organizations comply with substantive
rules governing MA payments that are
set forth in the statute, and in
regulations that have been subjected to
notice and comment procedures.
Regulations specifying that payment
amounts are subject to audit (for
example, § 422.504(d)(1)(i) have been
subjected to notice and comment
procedures, and provide ample notice of
the fact that we have the right (and,
indeed, the duty) to ensure that MA
payment amounts are accurate. See also,
§ 422.310(e), which states that MA
organizations and their providers and
practitioners will be required to submit
a sample of medical records for the
validation of risk adjustment data, as
required by CMS, and that there may be
penalties for submission of inaccurate
data.
Indeed, we would point out that
throughout the Medicare program, and
government programs generally, audit
policies and procedures intended to
ensure or verify payment accuracy assist
in the enforcement of rules, and are not
themselves substantive rules subject to
APA notice and comment procedures.
Therefore, to the extent we are
providing a RADV appeals process, we
are providing an opportunity that does
not currently exist for MA organizations
to appeal audit findings that they would
otherwise not have been permitted to
question.
Comment: Some commenters stated
that CMS did not follow proper
procedures and stated that procedures
PO 00000
Frm 00069
Fmt 4701
Sfmt 4700
19745
set forth in our proposed regulations,
such as our ‘‘one best medical record’’
and other documentation requirements,
established a substantive legal standard
governing the payment to MA
organizations, and therefore, they had to
be included in the annual notice of
changes to payment methods required
under section 1853(b)(2) of the Act,
which requires that MA organizations
be afforded an opportunity to comment
on changes in the methodology for
determining MA payments.
Response: We disagree. The
requirement in section 1853(b)(2) of the
Act to provide an advance notice of
methodological changes to MA
organizations of proposed changes to
the methodology and assumptions used
to compute annual MA capitation rates
pertains to the methodology for
determining the proper amount of
payment. All substantive changes to the
risk adjustment methodology at issue in
the RADV audit process have been
described in the annual advance notice.
The RADV audit process and appeals
procedures proposed in the October 22,
2009 proposed rule do not make any
substantive changes in the methodology
for determining MA payment amounts.
Rather, they are designed to ensure that
this payment methodology has been
applied correctly, and the MA
organization has received the amount to
which it was entitled under this
methodology. The risk adjustment
methodology provides that a specific
amount be paid if an enrollee has a
particular condition. The RADV audits
and appeals process are designed to
ensure that the enrollee in fact has that
condition, and that the MA organization
is thus entitled to the amount that has
been paid for that condition. The fact
that audits might determine that an MA
organization was not, in fact, paid
correctly, is not a change in
methodology or assumptions related to
how the payment amount is to be
determined and therefore is not subject
to the advance notice requirements
under section 1853(b)(2) of the Act.
Nonetheless, in our October 22, 2009
proposed rule, we proposed to provide
notice of RADV audit methodology to
the public, as well as a summary of
RADV methodology issues for each
audited MA organization at the time we
issue our audit finding pursuant to an
actual RADV audit. We offered to
provide details of our RADV audit
methodology in an attempt to provide
additional transparency related to the
process. We anticipate providing
additional notice of RADV audit
methodology to the public by
publishing the methodology in some
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19746
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
type of Medicare program document—
most likely in a Medicare manual later
this year (2010).
Comment: A commenter stated that
CMS was not complying with
requirements in section 1871(a)(2) of the
Act, which states that ‘‘No rule,
requirement, or other statement of
policy (other than a national coverage
determination) that establishes or
changes a substantive legal standard
governing the scope of benefits, the
payment for services, * * * shall take
effect unless it is promulgated by the
Secretary by regulation* * *’’
Response: As discussed previously,
the RADV audit process, and the
appeals procedures addressed in this
rulemaking, do not ‘‘establish’’ or
‘‘change’’ any ‘‘substantive legal standard
governing * * * payment.’’ To the
contrary, they are designed to ensure
that the substantive legal standards for
payment set forth in the statute and
regulations are correctly applied. The
substantive rules governing the amount
of payment to which the MA
organization is entitled are unchanged
as governed by statute and
implementing regulations.
Comment: A commenter urged that
CMS suspend RADV audits until such
time as CMS subjects the rules to notice
and comment rulemaking.
Response: As discussed previously,
we do not believe subjecting the RADV
audit process to rulemaking is required
or appropriate, there would be no basis
for suspending the audit process.
Comment: One commenter noted that
when the risk adjustment system was
initially established, the Secretary was
required to submit a report to Congress
in accordance with section 1853(a)(3)(A)
of the Act that documented the
proposed method of risk adjustment of
MA payment rates, and that included an
evaluation of the method by an outside,
independent actuary of the actuarial
soundness of the proposal. The
commenter believed that such an
evaluation was required in the case of
the RADV audit process.
Response: We disagree that RADV
audits impact the risk adjustment
system in any manner. As indicated
earlier, RADV audits are solely to verify
that the risk adjustment methodology is
being correctly applied.
We also received a large number of
comments from MA organizations,
managed care trade associations and a
law firm regarding RADV
methodological-related issues. While
some comments were not relevant to the
rules that CMS proposed regarding the
RADV appeals process, there were a
number of comments that we believe
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
should be addressed, and as such, we do
so as follows.
Comment: Many commenters
recommended that CMS independently
test and validate its RADV methodology
before CMS implements it. The
commenters indicated that CMS failed
to provide any record of submitting its
methodologies to an academic review
and that if CMS has done so, we should
have included such studies with the
proposed rule so that interested parties
could review and comment on any of
these academic studies. The
commenters recommended that CMS
provide a process that permits thorough
review and comment by plans of RADV
audit methodology issues before
undertaking further RADV audits.
Several commenters further
recommended that all methodological
issues pertaining to RADV audits be
appealable.
Response: Previously in this preamble
we indicate that the process of
independently reviewing medical
records to validate risk adjustment data
submitted by MA organizations for
payment purposes has been established
and operational for more than 10 years.
Over the course of this timeframe, we
have been advised on the RADV process
by statisticians, senior analysts, expert
medical record coders, physicians,
managed care professionals, and other
health care providers. From a medical
record coding perspective, we have
secured expert direction from Peer
Review Organizations (PROs) (in the
past) and Quality Improvement
Organizations (QIOs) (currently) by
incorporating them into the RADV team.
From an analytic design and
implementation perspective, we have in
the past and continue to employ senior
level expert analysts from different
academic fields as independent
contributors to the RADV operations
team to review and validate the
accuracy of the findings across the
RADV process, including peer review of
statistical sampling and payment error
calculation methodologies. The
independent expert analysis and review
is similar to that conducted in an
academic setting in that the
participating parties are credentialed in
a specific field of study, such as
statistics, and possess substantial years
of expertise conducting similar
processes and analyses. The
independent methodology review
processes also involve the use of
internal controls, and tests for
consistency and accuracy. RADV
procedures are subject to the evaluation
requirements of the CMS Annual
Financial Audit.
PO 00000
Frm 00070
Fmt 4701
Sfmt 4700
In addition, the RADV methodology
that we employ in the process of
reporting a component of the national
Part C payment error is similar to the
methodological approach that we
employ in conducting contract-specific
RADV audits and error calculations.
This methodology has been reviewed
and approved by officials at the HHS.
This notwithstanding, in considering
the commenters’ questions, where
necessary, we will incorporate
additional independent third party
review for purposes of validating RADV
error-calculation methodology. As
indicated in our proposed rule and cited
elsewhere in the preamble to this final
rule, we intend to publish its RADV
methodology in some type of public
document–most likely, a Medicare
Manual, so that the public can review
and provide comment as it deems
necessary. Finally, to ensure that
audited organizations understand how
their RADV error rate was calculated, as
indicated in our proposed rule, we
further intend to describe our RADV
methodology in each audited
organization’s RADV audit report.
Given these efforts to ensure that the
RADV process is transparent to audited
MA organizations and the public, and
that the methodology used under that
process is reasonable, consistent, and
accurate, we do not believe any further
action is required.
Comment: Several commenters argued
that CMS should include Medicare plan
enrollees for whom no diagnosis code
was submitted under the risk
adjustment methodology as part of its
RADV error testing samples. These
commenters also recommended that
CMS include ‘‘under-coding’’ findings in
the audit error estimates in order to
more accurately account for members’
health status.
Response: Our RADV audit policy
does account for both underpayments
and overpayments. The RADV process
addresses under-coding through the
application of rules for crediting a
sampled enrollee with additional HCCs
that are identified incidentally, during
medical record review. We emphasize
that these ‘‘additional’’ diagnoses were
not originally submitted for payment for
enrollees selected in the sample, and yet
we provide audited organizations credit
through our RADV medical record
review process.
However, we have not and do not
expect to sample enrollees for whom no
HCCs were submitted. This is because
the RADV is an audit process that is
intended to validate the HCCs that were
submitted by MA organizations in order
to determine whether the additional
payment amounts associated with these
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
diagnosis codes were properly made.
Under our separate Risk Adjustment
Data Submission Process, the data
submission period for any given
payment year is lengthy and extends
beyond the actual payment year,
providing a substantial amount of time
for organizations to submit and/or
correct enrollee HCC risk adjustment
data for any given payment year—to
reflect of enrollee health status. This is
sufficient time for plans to submit data
on all their enrollees, including those
with no HCCs. The RADV audit process
is not intended to serve as a de facto
mechanism for extending the HCC data
submission deadlines under which MA
organizations operate.
We received a number of comments
from MA organizations and a law firm
regarding the financial impact of RADV
audits. While these comments did not
pertain directly to our proposed RADV
appeals procedures, some comments
nevertheless indirectly impact the
RADV appeals rules. Therefore, we
respond to several of these comments
here.
Comment: Several commenters
suggested that CMS’s proposed
methodology to calculate and apply
error rates and payment adjustments
across contract years after payments
were made undermines the actuariallybased risk assumptions inherent in
Plans’ bid submissions.
Response: Regarding the assertion that
RADV audits undermine the Part C
bidding process, beginning with the
introduction of the HCC risk adjustment
model for CY 2004, we have published
clear guidelines to be followed by MA
organizations in the collection and
support of diagnosis codes underlying
risk scores for plan enrollees. In their
preparation of a MA bid, certifying
actuaries are expected to ensure that the
underlying data are reasonable and
appropriate for the circumstance,
including the base year risk scores. If
the ultimate risk scores for a plan’s
population are lower than initially
forecast by the certifying actuary, then
the plan is likely to experience lower
than expected margin. Conversely, if the
ultimate risk scores for a plan’s
population are higher than initially
forecast by the certifying actuary, then
the plan is likely to experience greater
than expected margin. These results
illustrate the nature of health plan
capitation and the risk borne by MA
organizations.
Comment: Commenters stated that the
establishment of an audit methodology
that involves retrospective contractlevel payment adjustments creates the
potential for unpredictable retroactive
liability that MA organizations could
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
not have considered in developing bids
for affected prior years. Commenters
suggested that CMS’ sampling
methodology undercuts the mandate in
section 1854(b)(6)(B)(iv) of the Act that
MA organizations’ rates reflect the
revenue needs of the organization. The
commenters assert that MA
organizations did not develop bid
submissions for calendar years 2006
through 2009 with an expectation that
CMS would implement contract-wide
payment adjustments based on provider
documentation issues outside of the MA
organizations’ control. As a result, if
payments effectively are reduced
retroactively as the result of RADV
audits, the bid submissions (and
resulting payments) arguably would not
adequately reflect Plans’ risks, and MA
organizations may be forced to dip into
their reserves to repay dollars that were
not anticipated to be at risk.
Response: We disagree. If plan bids
are developed based on faulty data, such
as inappropriate claim costs or risk
score data, there is a greater likelihood
of error in the bid projection. There are
many factors that influence the accuracy
of bid projection, and data quality is just
one such factor. There is no legal
authority to change a bid amount after
it has been accepted regardless if
additional information suggests that the
bid is too high or too low.
In general, it is our belief that health
plans are confusing actuarial
equivalence in payment amount—
which demographic adjustments, risk
adjustment methodology, and coding
intensity adjustment are all designed to
achieve— with differences in the way
costs are documented. Because MA
organizations are paid on a capitation
basis, costs are not covered for a specific
service provided. Rather, they are based
on the actuarial value of such costs. The
risk adjustment methodology uses
diagnosis codes as a proxy for higher
costs associated with a particular
diagnosis. Because, under original
Medicare, costs of specific services
received are reimbursed, the diagnoses
leading to such costs being incurred
have a different relevance under original
Medicare than they do under the
Medicare Part C payment system. The
risk adjustment methodology and RADV
audit process that we employ to ensure
accuracy under Medicare Part C actually
further actuarial equivalence, rather
than conflicting with it. The differences
between MA and original Medicare are
simply attributable to differences in
how payment is made. It is these
differences that necessitate the actuarial
equivalence standard in the first place.
Comment: Several commenters
questioned whether CMS’s RADV
PO 00000
Frm 00071
Fmt 4701
Sfmt 4700
19747
medical record review coders have the
qualifications and experience necessary
to code RADV-related medical records.
Commenters specifically questioned
whether RADV coders were equipped to
code accurately in situations in which
clinical training may be required in
order to recognize all extractable ICD–9
codes. They inquired into the
certification and coding experience
qualifications for the RADV coders.
Response: The coders that CMS uses
to review RADV medical records are
fully qualified to code RADV-related
medical records. All coders are
professionally certified for example,
Certified Professional Coder (CPC),
Certified Coding Specialist (CCS),
Registered Health Information
Administrator, (RHIA) and Registered
Health Information Technician (RHIT),
and must have prior experience coding
medical records. Coders have access to
physician consultation as needed.
Coders also have access to our
Independent Coding Consultant—a
coding expert with more than 10 years
of professional coding experience,
which we require to be RHIA, coding
certified and to have at least 5 years of
experience in RADV-specific coding.
Comment: Several commenters
objected to what they contend is a
burden that RADV audits impose upon
the physicians and physician practices
who must produce medical records
necessary to conduct audits. These
commenters recommended that CMS
take into account the potential impacts
of more aggressive program integrity
efforts on the medical practices that
provide care to MA plan enrollees.
Outside of the proposed rule, we have
also received letters arguing that the
burden associated with RADV audits is
not limited to the CMS’ audits but also
extends to internal audit activity
undertaken by Medicare health plans
that mimics the RADV audits that we
undertake for Medicare payment
validation. These commenters raised
concerns that Medicare health plans
were misrepresenting their internal
audit activity as official CMS RADV
audits.
Response: Section 422.310(e) requires
that providers who voluntarily enter
into contracts with MA organizations
submit data to CMS contractors/IVCs for
RADV audits. In an effort to minimize
the burden associated with this activity,
we have developed best practices that
we encourage health plans to employ in
their efforts to gather medical records
from providers and hospitals. To the
extent MA organizations employ these
practices, it is our belief that the impact
of RADV audits on providers can be
minimized.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19748
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
We also understand the increasing
need for providers to be able to
distinguish when they are being asked
for medical records in association with
an MA plan’s own audit or in
accordance with an official Medicare
program RADV audit which is subject to
legislative requirements. Therefore, we
issue letters on our letterhead that MA
organizations must use when requesting
medical records from providers when
the request is specifically related to an
official CMS RADV audit. Providers
may rely upon these letters as an
indicator that a given medical record
request is for CMS’ RADV, and
providers may request this authorizing
letter before responding to requests by
the MA plan.
We received a large number of
comments from MA organizations,
managed care trade associations and a
law firm regarding the ‘‘one best medical
record’’ policy that CMS proposed to
apply to the RADV program. By way of
explanation, the ‘‘one best medical
record’’ policy specifies that for any one
sampled beneficiary—with any one
HCC—the MA organization is allowed
to select and submit supporting medical
record documentation of a face-to-face
encounter for a physician or outpatient
visit (one date of service) or an inpatient
stay (range of dates from admit to
discharge). The face-to-face encounter
would have needed to occur at some
point during the data collection year
(from January 1st to December 31st).
Comment: Commenters contended
that the one best medical record policy
forces plans to omit relevant data that
could be supported through
documentation that CMS does not
permit—such as prescription drug data
and lab results.
Response: The RADV risk adjustment
model is based upon FFS claims data
from specific risk adjustment provider
types, and not alternative data sources,
such as, prescription drug data or lab
results. Therefore, the RADV audit
process is based upon supporting
medical record documentation from
provider data sources that are used to
calibrate the model. As for the one best
medical record policy, while MA
organizations that voluntarily submit
HCCs for Medicare payment are
prospectively paid based on these
unaudited and unvalidated HCCs
submissions, we, upon the
recommendation of MA organizations,
agreed to allow any one medical record
from across an entire data collection
period to validate an HCC incorporated
into the payment to the MA
organization.
Comment: Some commenters contend
that if CMS is going to rely on the one
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
best medical record policy to the
exclusion of other sources of
information that might confirm an HCC,
the RADV appeals process should allow
for HCC medical record review findings
to be appealed.
Response: To address these comments
as described in § 422.311(c)(2) of this
final rule, we have revised the process
so that MA organizations may appeal
medical record review determinations
in accordance with the procedures
specified in § 422.311(c)(2).
Comment: A number of commenters
argued that the one best medical record
policy is flawed in that it provides an
insufficient basis for confirming an HCC
for members with chronic diseases
when a collection of several records,
perhaps from various providers,
considered in the aggregate might better
verify a patient’s condition.
Response: We disagree. In the case of
a chronic disease such as congestive
heart failure, all that is required is
medical record documentation from one
visit to a physician or a hospital, over
the course of the data collection year, to
validate the audited HCC.
Comment: We received several
comments comparing the RADV audit
and appeals process to varying program
attributes of the Medicare FFS program.
For example, some commenters argued
that CMS’ one best medical record rule
conflicts with Medicare FFS standards
since there is no one best medical
record rule applied to Medicare
payment error-rate testing for FFS
providers.
Response: Payment error-testing
under original Medicare is different
than payment error testing under
Medicare Part C. Under original
Medicare, much of what comprises the
error testing regimen is aimed at
validating that a particular level of
service was provided and therefore
justifies a given level of Medicare
payment. Under RADV, the payment
error testing focuses on validating HCCs
by examining medical records to
determine whether they contain
supporting diagnostic codes. This error
testing is aimed at validating that a
particular Medicare beneficiary indeed
has the medical condition for which the
MA organization has been paid for, and
not whether a particular level of service
(for example, level 1 office visit vs. level
2 office visits) was provided. Moreover,
there is no evidence to support the
notion that the Congress, in establishing
the Part C payment process, ever
intended the Part C payment process to
mimic payment processes under
Original Medicare. Indeed, they are
fundamentally different.
PO 00000
Frm 00072
Fmt 4701
Sfmt 4700
Moreover, we believe that the one best
medical record policy and the
operational process associated with it
are far less restrictive than Medicare
FFS. MA organizations are not limited
to the specified date(s) of service they
reported to us with regard to selecting
a medical record as supporting
documentation for a specific HCC. We
continue to believe that the one best
medical record policy is appropriate for
the Medicare Part C risk adjusted
payment system which is distinct from
a FFS payment system where payment
is determined on a claim-by-claim basis.
Under Part C, we only require that plans
send one HCC for payment for an entire
year; it therefore logically follows that
we would only require one medical
record to validate this HCC.
Comment: Some commenters stated
that the one best medical record rule
was inconsistent with the mandate that
MA payment adjustments be actuarially
equivalent to the FFS sector.
Response: It is our belief that health
plans are confusing actuarial
equivalence in payment amount—
which demographic adjustments, risk
adjustment methodology, and coding
intensity adjustment are all designed to
achieve—with differences in the way
costs are documented. Because MA
organizations are paid on a capitation
basis, costs are not covered for a specific
service provided. Rather, they are based
on the actuarial value of such costs. The
risk adjustment methodology uses
diagnosis codes as a proxy for higher
costs associated with a particular
diagnosis. Because, under original
Medicare, costs of specific services
received are reimbursed, the diagnosis
leading to such costs being incurred has
a different relevance under original
Medicare than they do under the
Medicare Part C payment system. The
risk adjustment methodology and RADV
audit process that we employs to ensure
accuracy under Medicare Part C we
believe furthers actuarial equivalence,
rather than conflicts with it. The
differences between MA and original
Medicare are simply attributable to
differences in how payment is made. It
is these differences that necessitate the
actuarial equivalence standard in the
first place.
Comment: A commenter noted that in
Medicare Part A and B appeal contexts,
supplemental information and
testimony are considered, and given
such weight as the fact finder
determines is appropriate.
Response: Under our proposed
appeals procedures that affords MA
organizations the ability to appeal the
Part C error calculation specifiedat
§ 422.311(c)(3), the CMS Hearing Officer
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
has the discretion to conduct the
hearing in alternative ways beyond
conducting the hearing on the record.
For example, the Hearing Officer can
choose to conduct the hearing by way of
teleconference or in person. The CMS
Hearing Officer also has the discretion
to request supplemental information or
to accept testimony, as he or she deems
necessary. Also, under the medical
record review appeal processes that we
specify at § 422.311(c)(2), we afford MA
organizations the ability to submit
supplemental information—the
attestation reviewed by the IVC— to
validate the same HCC that the Initial
Validation Contractor (IVC) initially
determined to be in error.
Comment: Several commenters,
focusing on the relationship between
MA organizations and their providers,
noted that errors in documentation are
ultimately attributable to providers, not
MA organizations. These commenters
argued that, due to the nature of the MA
program, while CMS makes a capitated
payment to organizations that have
relationships with providers, these
providers may not have an incentive to
document the HCCs which affect
payment to the MA organization. The
commenters also stated that contractlevel payment adjustments penalize MA
organizations, while it is providers who
are responsible for maintaining
adequate records. A commenter also
suggested that we accept ‘‘other data’’ to
supplement, or substitute, a medical
record.
Response: Section 422.504(i)(1)
clarifies for MA organizations that they
are ultimately responsible for the risk
adjustment information submitted to
CMS. This section of the regulations
states, ‘‘Notwithstanding any
relationship(s) that the MA organization
may have with first tier, downstream,
and related entities, the MA
organization maintains ultimate
responsibility for adhering to and
otherwise fully complying with all
terms and conditions of its contract with
CMS.’’ MA organizations are further
directed in § 422.504(i)(2) that all their
‘‘first tier, downstream, and related
entities are required to agree that HHS,
the Comptroller General, or their
designees have the right to audit,
evaluate, and inspect * * * medical
records.’’ Therefore, while we
acknowledge the comments, we
maintain that it is the responsibility of
MA organizations to ensure that they
submit accurate risk adjustment
information, and that the providers with
whom they contract are aware that we
have authority to audit medical records
to verify this information.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
We do not require MA organizations
to submit HCCs for beneficiaries; MA
organizations choose whether or not to
do so. For risk adjustment diagnoses
that are submitted, it is the
responsibility of the MA organization to
obtain appropriate documentation. If
MA organizations are not confident in
the information they obtain from their
providers, they may wish to initiate
education efforts, or include provisions
in their contracts that ensure providers
appropriately document diagnoses and
provide medical record documentation
to the plan upon request.
In regards to supplemental
information, we have determined, and
MA plans have been informed multiple
times, that the appropriate format for
obtaining risk adjustment information is
a medical record. For validation
purposes, plans are asked to submit the
one best medical record documenting
the HCC. We carefully determined the
one best medical record policy, after
consultation and input from the
industry supporting this policy. We do
not believe that supplemental
information would be sufficient, or add
value to a record that does not support
an HCC for which the plan had been
paid.
Comment: Many commenters from the
MA industry recommended that before
CMS audit MA organizations under
RADV, the agency first account for any
error rates inherent in Medicare FFS
data that affect MA error rates. These
commenters stated that through the
proposed RADV audit appeal process,
CMS is imposing a set of rules regarding
physician recordkeeping that were not
anticipated in the ICD–9CM coding
guidelines, is not consistent with
standard practices and is not enforced
on original Medicare claims. The result,
they allege, is de facto MA payment
adjustments based on recordkeeping
discrepancies without an adjustment to
original FFS Medicare risk scores for the
same recordkeeping discrepancies.
Response: We recognize that there
may be potential merit in further
refining the error rate calculation. We
are currently studying this issue.
Comment: A number of commenters
stated that the CMS-defined attestation
process was overly narrow and should
be expanded to provide for more
widespread use of attestations in the
RADV audit process. Commenters
contended that attestations should be
expanded to provide MA organizations
with a greater ability to correct medical
record coding-related errors or
deficiencies in submitted medical
records. Commenters requested that
CMS permit MA organizations to submit
attestations that attest to the presence of
PO 00000
Frm 00073
Fmt 4701
Sfmt 4700
19749
medical conditions not fully supported
in the medical record submitted to CMS.
The commenters further argued that
CMS should permit attestations to be
used to validate not only the physician
signature and credentials that are
missing from a medical record, but also
for patient name, identifier, date of
service, and other documentation
inadequacies that can result in a RADV
medical record coding error.
Response: Taken in the aggregate,
commenters’ recommendations
regarding an expanded use of
attestations in the RADV audit process
reflect a misunderstanding of what
attestations are intended to accomplish.
Many of the comments submitted
suggest that we adopt a policy that in
effect, allows attestations to stand in the
place of the medical records that are
required to validate the HCCs that have
resulted in higher payments already
made to MA organizations. For example,
permitting physicians to use attestations
to ‘‘correct’ medical record codingrelated deficiencies determined
pursuant to medical record review; or
allowing attestations to be an acceptable
vehicle for the submission of new HCCs
that were not otherwise already
submitted to CMS for payment.
We believe that we must validate the
HCCs that result in additional payment
through the existence of clear,
unambiguous diagnostic information in
a beneficiary’s medical record. A
medical record provides the written
support for the diagnosis that was made
and must meet certain well recognized
documentation requirements. Consistent
with the Medicare FFS program,
medical record documentation, rather
than other alternative documentation,
such as attestations, is required to
validate information provided to us for
the purpose of making provider
payments. The existence of an
accompanying attestation simply
provides a mechanism for the physician
to validate that the medical record that
is missing a signature or credential is in
fact his or her patient’s medical record.
That is, attestations are intended to
complement medical records, not stand
in the place of them.
We continue to believe that the
Medicare program is best served by
limiting the applicability of attestations
to instances in which the original
diagnosing physician submits a signed
and dated attestation to validate that the
medical record in question is theirs. We
see no justifiable reason for CMS to
expand the applicability of attestations
beyond this intended purpose and
therefore, we are not accepting these
comments.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19750
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Comment: Several commenters
objected to CMS’ prohibition on using
attestations for inpatient medicalrecord-related RADV coding errors, and
noted that CMS did not provide
sufficient explanation why CMS would
not permit them. The commenters
recommended that CMS permit
attestations to be submitted with respect
to inpatient records.
Response: We do not believe that
permitting attestations for inpatient
medical records is justifiable. The
decision to permit attestations for RADV
was in response to industry concerns
about the lack of signatures in medical
records that are generated out of
physician-office settings and not
hospital settings. Upon preliminary
evaluation of RADV findings, our data
corroborates industry concerns in that it
clearly shows that the majority of
RADV-identified payment errors
associated with lack of provider
signatures were derived from medical
records submitted and reviewed under
the guidelines for physician/outpatients
settings. Indeed, the data further
corroborates that payment errors related
to the lack of signature in inpatient
medical records is minuscule.
Note that, with respect to the ongoing
use of attestations within the RADV
audit context, we reserve the right to
continue to evaluate payment error
related to physician/practitioner
signatures, and the impact that
attestations have upon these types of
errors. We further reserve the right to
amend the regulations in the future
regarding the use of attestations should
experience under the program justify
this change.
Comment: Several commenters
recommended that CMS implement an
administrative appeals process for
reviewing attestation determinations
made by CMS.
Response: We understand the
commenters’ concerns, but do not
believe this additional appeals process
is necessary. As noted in section
§ 422.311(c), in light of the changes we
are making in this final rule to the
proposed RADV appeal procedures that
permit MA organizations to appeal
medical record review determinations
made at the RADV IVC review-level,
MA organizations will be permitted to
appeal medical record review-related
determinations whose outcome was
determined by the existence or absence
of an attestation.
Comment: Some commenters
recommended that CMS allow
attestations to be used as acceptable
vehicles for introducing new HCCs to
the Medicare Part C payment process.
Several commenters suggested that MA
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
organizations be allowed to submit a
letter from a provider group or other
responsible party, along with an
attestation in instances where the
diagnosing physician is no longer able
to sign and date an attestation—for
example, in instances in which the
diagnosing physician has died, moved
or is no longer working for the medical
practice.
Response: As stated previously in our
response to earlier commenters’
recommendations that we expand the
applicability of attestations, we do not
agree that attestations are acceptable
vehicles for submitting new risk
adjustment data and enrollee HCCs for
payment to CMS. The data submission
period for any given payment year
opens 12 to 18 months before the start
of payment year, and closes 3 months
after the actual payment year ends,
providing in total, at least 27 months for
MA organizations to submit or correct
enrollee HCC data for any given
payment year. This provides ample time
for MA organizations to voluntarily
submit HCCs to CMS for Medicare
payment.
Furthermore, a fundamental tenet of
RADV is validating the existence of
diagnoses information in a medical
record. Consistent with Medicare FFS,
medical record documentation rather
than other documentation, such as
attestations, is required to validate
information provided to us for the
purpose of making Medicare payments.
Therefore, we see no justifiable reason
to abandon this principle by allowing
the submission of unsubstantiated HCCs
via attestations, and therefore, reject the
commenters’ recommendations.
Under our RADV audit policy, to the
extent we discover acceptable diagnoses
codes contained in the one best medical
record that plans submit for purposes of
HCC validation that were not earlier
submitted to CMS for payment via the
Risk Adjustment Payment System
(RAPS) system (what are known as
‘‘additional HCCs’’) —we credit these
diagnoses codes to the submitting MA
organization. Our reason for giving
health plans credit for these additional
diagnoses is precisely because they
existed in beneficiaries’ medical
record(s)—and not in other types of
documentation that would not be
acceptable in any Medicare venue for
justifying Medicare payment.
Comment: Several commenters stated
that the 12-week timeframe for
submitting attestations was
unreasonably short. These commenters
recommended that CMS afford plans
additional time to gather and submit
attestations.
PO 00000
Frm 00074
Fmt 4701
Sfmt 4700
Response: We do not agree. We
proposed that the submission timeframe
for attestations line-up with the
deadline for submitting medical records
in order to simplify the medical record
and attestation submission process for
plans. Under the proposed process the
medical record and associated
attestation are submitted together. We
strongly believe that 3 months is
sufficient time for MA organizations to
obtain and submit to us the medical
records and attestations necessary to
validate audited HCCs. To provide
additional time beyond the 12 weeks
afforded to MA organizations to submit
the requested medical records would
split-up and unnecessarily complicate
the medical record and attestation
submission process. Since the
attestation is intended to in effect—
make the medical record ‘‘whole’’ by
way of the signature and/or credential
attestation—we believe it is
unreasonable to set up a submission
system that separates the attestation
from the submission of the medical
record. Therefore, we are not accepting
this recommendation and instead are
finalizing the requirement that
attestations be submitted to us by the
medical record submission deadline.
Comment: Several commenters
recommended that CMS permit health
plan officials to amend the CMS
attestation form through hand-written
annotations or to submit MA
organization or provider-developed (that
is, attestation forms that were not
generated by CMS) attestation forms to
CMS. A more limited number of
commenters recommended that CMS
allow physicians not involved in the
diagnostic face-to-face encounter to
attest to medical records in instances
where the diagnosing physician is either
dead or no longer at the medical
practice or facility from which the
medical record originated. These
commenters reasoned that in
extenuating circumstances such as the
death of a provider or a provider having
relocated, another provider within the
medical practice could be permitted to
sign the attestation on behalf of the
treating provider. Under this scenario,
the signing provider would annotate the
CMS attestation form explaining the
situation—for example, ‘‘Due to the
expiration of Dr. Smith on June 1, 20xx,
I am signing this attestation on his
behalf.’’
Response: We believe opening the
door to allowing modifications to a CMS
payment-related document raises
serious program integrity-related
concerns and could result in fraud to
the Medicare program. The extent to
which one provider can reliably and
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
validly attest to a medical record
prepared by another provider is
questionable. We consulted with other
Medicare program components within
CMS that are or will be utilizing
attestations or similar-like documents
(for example, certificates of medical
necessity, attestations used in
conjunction with Comprehensive Error
Rate Testing (CERT)) that have some
bearing on Medicare payment and
confirmed that there are very limited
circumstances under which we permit
external modification to any paymentrelated documents. Given these program
integrity-related concerns, we are
rejecting these recommendations.
We received a large number of
comments regarding our proposed
RADV documentation dispute
procedures.
Comment: A commenter noted that
the proposed definition of
‘‘Documentation Dispute Process’’ in
§ 422.2 indicates that MA organizations
can ‘‘dispute medical record
discrepancies that pertain to incorrect
ICD–9–CM coding * * *’’ and appeared
to conflict with language in proposed
§ 422.311(c)(2)(ii)(A) stating that
medical record coding discrepancies are
ineligible for the documentation dispute
process. Another commenter contended
that the term ‘‘operational processing’’ as
described in the regulation, was vague
and needed to be further defined. One
commenter recommended that CMS
allow MA organizations 60 days to
request documentation dispute instead
of the proposed 30 days. Several
commenters recommended that MA
organizations be permitted to appeal
documentation dispute review
determinations.
Many other commenters asserted that
the proposed documentation dispute
process was too limited in scope, and
effectively amounted to nothing more
than a mechanism for rectifying clerical
errors that provided no meaningful way
to contest the accuracy of the auditors’
interpretation of the medical records
submitted, or to supplement the record
being audited.
Response: As noted in § 422.311(c) of
this final rule, in light of the changes to
the proposed RADV appeal procedures
that we are making in this final rule that
permit MA organizations to appeal
medical record review determinations
made at the RADV IVC review-level, we
are withdrawing the proposed
documentation dispute procedures
described in the proposed rule. By way
of this final rule, MA organizations that
wish to dispute RADV medical record
review determinations that arise out of
operational processing of medical
records selected for RADV audit (that is,
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
determinations that arise from the
collection and processing of medical
records by CMS’ RADV IVC) will now
be permitted to do so via the medical
record appeals process described in this
final rule at § 422.311(c).
We received many comments from
MA organizations and a managed care
industry trade association regarding the
proposed RADV appeals process at
§ 422.311(c)(3).
Comment: Many commenters stated
that the proposed RADV appeals
process was too narrow, and failed to
allow for all relevant evidence to be
considered as part of the appeal process.
Of particular interest to many
commenters was the fact that MA
organizations were prohibited from
appealing the substance of medical
record coding determinations, as
described in our proposed regulation at
§ 422.411(c)(3). With regard to the
RADV appeals process, these
commenters specifically recommended
that CMS:
• Expand the scope of issues that may
be raised in the appeals process to
include, at minimum, challenges to
medical record coding decisions and
challenges to methodology—audit
methodology, sampling methodology,
and error-calculation methodology.
• Permit MA organizations to appeal
HCC findings from the medical record
review process.
• Permit MA organizations to submit
coding corrections along with the
additional medical records necessary to
validate audited HCCs that CMS
determines are in error.
• Incorporate diagnoses identified in
medical records, but not previously
submitted nor assigned to a member (so
called ‘‘additional’’) in its RADV-related
payment adjustment calculations.
Response: At proposed
§ 422.311(c)(3)(ii) we specified that MA
organizations would not be permitted to
appeal medical record review because
medical record review-related issues
would be resolved as a result of the
medical record review process and the
attestation and documentation dispute
processes described earlier in the
proposed regulation. However, based on
the public comments we received, we
have reconsidered this proposed
restriction, and are for purposes of this
final rule, changing our policy to now
allow MA organizations to appeal
medical record review that occurs at the
IVC level.
Therefore, under a new final
§ 422.311(c)(2), we are implementing a
process that would allow MA
organizations to appeal medical record
review that occurs at the IVC level of
medical record review.
PO 00000
Frm 00075
Fmt 4701
Sfmt 4700
19751
In order to be eligible for RADV
medical record review appeal, MA
organizations must adhere to
established RADV audit and RADV
appeals requirements, including the
submission of medical records and
documents in the manner and by the
deadlines specified by CMS. Failure to
do so will render the MA organization
ineligible for RADV medical record
review appeal. At § 422.311(c)(2)(i)(1) of
this final rule, we specify that in order
to be eligible for medical record review
determination appeal, MA organizations
must adhere to established RADV audit
procedures and RADV appeals
requirements. Failure to follow our rules
regarding the RADV medical record
review audit procedures and RADV
appeals requirements may render the
MA organization’s request for appeal
invalid.
At § 422.311(c)(2)(i)(2) of this final
rule, we provide that the medical record
review determination appeal process
applies only to error determinations
from review of the one best medical
record submitted by the MA
organization and audited by the RADV
IVC.
MA organizations must submit the
original, IVC-audited medical record
and any attestation reviewed by the IVC
to CMS for consideration under the
appeals process. MA organizations’
request for appeal may include the
attestation reviewed by the IVC in
accordance with § 422.311(c)(1) but may
not include any additional documentary
evidence.
At § 422.311(c)(2)(ii), we specify that
MA organizations may not appeal errors
that resulted because MA organizations
failed to adhere to established RADV
audit procedures and RADV appeals
requirements. This includes failure by
the MA organization to meet the
medical record submission deadline
established by CMS. We also specify
that any other documentation submitted
to us beyond the one best medical
record and attestation submitted to and
audited by the IVC will not be reviewed
by us under the medical record review
determination appeal process. MA
organizations’ written requests for
medical record review determination
appeal must specify the audited HCC(s)
that we identified as being in error and
eligible for medical record review
determination appeal, and that the MA
organization wishes to appeal. A request
for medical record review determination
appeal must specify the issues with
which the MA organization disagrees
and the reasons for the request for
appeal.
We describe the manner and timing of
a request for medical record appeal at
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19752
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
§ 422.311(c)(2)(iii). We will issue each
audited MA organization an IVC-level
RADV audit report that provides details
on the results of the medical record
review findings. This RADV audit report
will clearly specify the HCC
determinations that are eligible for
appeal. MA organizations will have 30
calendar days from the date of the
issuance of the RADV audit report to
submit a written request for medical
record review determination appeal. A
request for RADV medical record review
appeal must specify the HCCs that we
have identified as being eligible for
medical record review appeal and that
the MA organization wishes to appeal.
The request for appeal must also
include the IVC-audited one best
medical record and may include an
attestation form in accordance with the
rules at § 422.311(c)(1), but may not
include additional documentary
evidence. Please note that MA
organizations are not obligated to appeal
HCCs that we have identified as being
eligible for medical record review
determination appeal.
At § 422.311(c)(2)(iv), we describe the
process that we will undertake to
conduct the medical record review
appeal. We designate a Hearing Officer
to conduct the medical record review
determination appeal. The Hearing
Officer need not be an ALJ. We also
describe procedures for disqualifying a
Hearing Officer in the event either party
objects to the designation of a Hearing
Officer. We provide written notice of the
time and place of the hearing at least 30
calendar days before the schedule date.
The hearing is conducted by a CMS
Hearing Officer who neither receives
testimony nor accepts any new evidence
that was not presented to the IVC. The
CMS Hearing Officer is limited to the
review of the record that was before the
IVC.
The CMS Hearing Officer reviews the
IVC-audited one best medical record
and any attestation submitted by MA
organizations to determine whether it
supports overturning medical record
determination errors listed in the MA
organization’s IVC RADV audit report.
As soon as practical after the hearing,
the Hearing Officer issues a decision
which provides written notice of the
Hearing Officer’s review of the appeal of
medical record review determination(s)
to the MA organization and to CMS.
Pursuant to the Hearing Officer’s
decision, we recalculate the MA
organization’s RADV payment error and
issue a new RADV audit report to the
appellant MA organization.
As described at § 422.311(c)(2)(v), the
decision of the CMS Hearing Officer
regarding RADV medical record review
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
appeal will be final and binding upon
the MA organization unless the MA
organization requests review by the
CMS Administrator. At
§ 422.311(c)(2)(vi), we indicate that the
MA organization has 30 calendar days
to request a review of the CMS Hearing
Officer’s determinations and that the
CMS Administrator has discretionary
authority whether to review the
determination of the Hearing Officer.
After receiving a request for review, the
Administrator has the discretion to elect
to review the Hearing Officer’s decision
or to decline to review the hearing
decision. If the Administrator elects to
review the hearing decision, the
Administrator must review the CMS
Hearing Officer’s decision and
determine, based upon this decision, the
hearing record, and any written
arguments submitted by the MA
organization or CMS, whether the
determination should be upheld,
reversed, or modified. The
Administrator notifies both parties of
his or her determination regarding
review of the hearing decision within 30
calendar days of receiving the request
for review. If the Administrator declines
to review the hearing decision or the
Administrator does not make a
determination regarding review within
30 calendar days, the decision of the
CMS Hearing Officer is final. It is
important to note that notwithstanding
our implementing procedures that
permit MA organizations to appeal HCC
determinations at the IVC level of
medical record review that we have
identified as being eligible for medical
record review appeal and that the MA
organization wishes to appeal, the
ability of MA organizations to appeal
these IVC-level medical record review
determinations does not otherwise alter
MA organizations’ ability to appeal
RADV payment error calculations
described at § 422.311(c)(3). However,
MA organizations cannot appeal RADV
payment error calculations until all
RADV medical record review-related
appeals are finalized.
Comment: Several commenters
suggested that CMS afford MA
organizations a reasonable amount of
time after the medical record
submission deadline to submit
additional documentation that
corroborates an already-submitted
medical record.
Response: We do not agree that the
amount of time provided to MA
organizations to submit medical records
under existing RADV audit policy is
unreasonable. We provide MA
organizations 3 months to obtain and
submit to CMS the medical records
necessary to validate the HCCs that MA
PO 00000
Frm 00076
Fmt 4701
Sfmt 4700
organizations voluntarily submitted to
CMS for Medicare payment. Moreover,
a policy that supports submitting
corroborating evidence to accompany an
already-submitted medical record
violates CMS’ one best medical record
policy. Therefore we are not accepting
the commenters’ suggestion.
Comment: Several commenters
recommended that CMS afford MA
organizations 60 days, rather than 30
days, to submit a written request for
reconsideration of its RADV payment
error calculation to provide sufficient
time to prepare for the request.
Response: We do not agree. We
continue to believe that 30 calendar
days is sufficient time for any MA
organization considering appealing its
RADV payment error calculation to
prepare and submit such a request. We
are therefore, rejecting this
recommendation.
Comment: Several commenters
objected to the fact that all RADVrelated appeals tasks are conducted by
either CMS employees or agents
employed by CMS. The commenters
suggest that to ensure impartiality and
an independent review of plan appeals,
the appeals process should allow for
independent reviewers outside of CMS.
Plans should be allowed to choose and
pay for a third party review of the errorrate calculation under reconsideration—
rather than use the CMS contractor.
Response: As described in our
proposed rule at § 422.311(c)(3)(v) and
(vi), the CMS officials and/or
contractors that will adjudicate
individual appeal cases will be fully
independent of the initial RADV error
determinations. One important attribute
in constructing an independent appeal
structure for the RADV program is
ensuring that the review officials or
contractors called upon to perform these
tasks have the necessary expertise to
serve in the capacity of an independent
appeal official. It would be altogether
unreasonable for us to assume that plans
would select appeal officials that meet
our standards, not would we be able to
validate this process in a timely manner.
We cannot be put in the position of
having to review the qualifications of
plan-selected appeal officials and still
be able to effectively administer the
appeals process in a timely manner. As
such, we are rejecting the suggestion
that plans be allowed to choose and pay
for their own independent review
officials.
Comment: A commenter stated that
the CMS’ RADV appeal rules should
provide for a meaningful way to appeal
payment determinations.
Response: We believe that the
commenter means that our ability to
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
adjust payments once RADV audit
results are finalized should likewise be
subject to appeal. We agree and for this
reason, as explained in the proposed
regulation, we are providing multiple
avenues for MA organizations to appeal
the RADV findings, including the ability
to appeal mistakes in the contract
specific payment error estimate as
determined by our payment error
estimate calculation methodology.
These opportunities to appeal provide
ample recourse to MA organizations to
have RADV findings fairly readdressed.
As part of this process, at § 422.311(c)(3)
(vi)(B) and (D), we specified that we
would hire an independent RADV
payment error appeals contractor to
replicate and validate the payment
determinations that result in our errorcalculation. Therefore, MA
organizations that seek to appeal their
error rate calculation can rest assured
that the payment determinations that
result in our error calculation are
reviewed by an independent contractor.
Comment: Several commenters noted
that, although the proposed rule
provides for the review of the RADV
calculation by a neutral third party, the
proposed rule did not specify the
criteria that the independent third party
will utilize in determining whether the
error rate calculations are correct. These
commenters recommend that CMS be
required to accept the third-party’s
findings or that CMS otherwise ensure
that the decision on the findings is not
made by an official who has a role in the
RADV payment error calculation that is
under review.
Response: The independent third
party will utilize the same errorcalculation criteria that will be
employed by us in calculating its initial
error calculation. This methodology will
be known to audited MA organizations.
In the preamble to our proposed rule
and as stated previously in this
preamble, we state that we intended to
ensure that all MA organizations
understand the RADV payment error
calculation methodology by providing
notice to all MA organizations of the
methodology that will be employed for
calculating Part C payment errors. We
anticipate publishing the RADV error
calculation methodology in some type
of CMS document—most likely some
type of Medicare manual—and annually
providing notice of any changes that
will be made to this manual. In addition
to providing an annual notice of RADV
audit methodology, we indicated we
would provide an expanded explanation
of methodology as part of each RADV
audit report that we send to MA
organizations that undergo RADV audit.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
At proposed § 422.311(c)(3)(v) and
(vi), we specified that a CMS official or
contractor not otherwise involved in
error-rate calculation activity would
review the written request for
reconsideration, the RADV payment
error calculation and any written
evidence submitted by the MA
organization that pertains to CMS’
RADV payment error calculation. We
are finalizing that proposal in this rule.
Comment: A commenter believed that
the level of detail proposed for the
RADV appeals process was too specific.
This commenter indicated that because
MA organizations’ and CMS’ experience
with data validation is relatively new,
CMS should avoid putting a high level
of detail into the regulation and should
instead, maintain the flexibility
necessary to do what makes sense in the
context of the data validation.
Response: We do not agree that our
experience with data validation is
relatively new, since we have been
performing RADV audits for over 10
years. The expertise and experience
brought to the development of this
function in that timeframe has enabled
us to present a balanced level of detail
with regard to the proposed regulation.
While we certainly appreciate the
commenters’ concerns regarding the
level of specificity proposed—and now
finalized—in the regulation, we contend
that this level of detail is necessary in
order for the public to fully understand
how the RADV appeals process will
operate. We concur with the
recommendation that we remain flexible
as we take further steps to implement
these rules.
Comment: One commenter stated that
the compliance date proposed by CMS
is unduly restrictive. This commenter
recommended that CMS consider
additional evidence and testimony after
the compliance date has passed.
Response: We disagree. Based on our
experience with appeals of MA and
Medicare Part D program contract
determinations, it is absolutely essential
for us to establish a compliance date to
use as a reference point in issuing a
ruling regarding RADV audit findings.
In proposed § 422.311(b)(2), we
specified that the compliance date be
the date that MA organizations are
required to submit medical records for
the validation of risk adjustment data
(§ 422.310(e)). By way of this final rule,
we are extending the compliance date to
include the date that MA organizations
that choose to appeal IVC medical
record review in accordance with
§ 422.311(c)(2) must submit medical
records for review by the date we
determine for the appeal process.
PO 00000
Frm 00077
Fmt 4701
Sfmt 4700
19753
Without a specific date as a reference
point for evaluating compliance, MA
organizations could choose to assert that
while they were unable to meet RADV
audit requirements on the date we
specified as the due date for medical
record submission, they were later able
to do so. Under this scenario,
organizations would be free to assert the
right to submit medical records in place
of, or in addition to, records that were
or were not, as the case may be,
submitted to us by the RADV audit due
date. The medical record review process
could continue ad-infinitum, preventing
us from closing out RADV audits and
collecting any identified overpayments.
The notion of considering additional
evidence and testimony after the
compliance date has passed negates the
intended purpose of establishing a
compliance date in the first place, and
is therefore rejected.
2. Payments to Medicare Advantage
Organizations—Actuarial Valuation
(§ 422.254)
We proposed amendments to
§ 422.254 to expressly require an
actuarial certification for Part C bids. As
we noted in the preamble to the
proposed rule, operationally we require
an actuarial certification to accompany
every bid, for both Parts C and D. A
qualified actuary who is a Member of
the American Academy of Actuaries
(MAAA) must complete the
certification. The objective of obtaining
an actuarial certification is to place
greater responsibility on the actuary’s
professional judgment and to hold him/
her accountable for the reasonableness
of the assumptions and projections. This
requirement is already set forth in the
Part D regulations at § 423.265(c)(3). We
noted that our change in the Part C
regulation text will bring the Part C
regulation at § 422.254(b)(5) in line with
current operational requirements and
Part D. We are adopting § 422.254(b)(5)
as proposed into this final rule.
Comment: We received three
comments supporting the addition of
this operational requirement to
regulatory text. We also received one
comment asking us if this requirement
would apply to 2011 Part C bids.
Response: The 2011 Part C bids are
due on June 7, 2010, the first Monday
of June. Regardless of whether this
regulation is final by that date, we will
expect MA organizations to submit Part
C bids in accordance with current
operational guidance, which guidance is
consistent with the regulatory language
we are finalizing in this rule.
E:\FR\FM\15APR2.SGM
15APR2
19754
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
3. Determination of Acceptable
Administrative Costs by HMO/CMP
Cost Contractors and Health Care
Prepayment Plans (HCPPs) (§ 417.564)
We proposed revising the regulations
governing payments to health care
prepayment plans (HCPPs) authorized
under section 1833(a)(1)(A) of the Act
and cost HMOs/CMPs authorized under
section 1876 of the Act to clarify how
we believe the reasonable cost
principles in section 1861(v) should
apply to HCPPs and HMOs/CMPs by
specifying the methodologies that must
be used in determining the different
allowable administrative costs for both
such entities.
Specifically, we proposed revising
§ 417.564(b)(2) to clarify how HCPP and
cost contractors authorized under
section 1876 of the Act must determine
‘‘reasonable’’ administrative costs. At
§ 417.564(b)(2)(iii), we proposed that
personnel costs claimed for
administrative costs in both HCPP and
cost contracts authorized under section
1876 of the Act must be linked to the
specific administrative function
performed by persons, at a specific rate
of pay, for a specified period of time.
We also clarified in the proposed rule
that this level of information must be
available to us upon request or in the
course of a review. Additionally, we
proposed revising § 417.564 by adding a
new paragraph (c) that specifies that, in
order for costs to be considered
‘‘reasonable costs’’ within the meaning
of section 1861(v) of the Act, which
expressly excludes ‘‘incurred cost found
to be unnecessary in the efficient
delivery of needed health services,’’ the
following costs must be excluded when
computing reimbursable administrative
costs:
• Donations.
• Fines and penalties.
• Political and lobbying activities.
• Charity and courtesy allowances.
• Spousal education.
• Entertainment.
• Return on equity.
In the proposed rule we specifically
asked for comments on our clarification
of reimbursable administrative costs. As
indicated below, after considering the
comments we received, we are adopting
our proposed § 417.564(b)(2)(iii) and
§ 417.564(c) without further
modification in this final rule.
Comment: We received two comments
that supported the list of costs that we
proposed must be excluded by HCPPs
and HMO/CMP cost contractors when
computing reimbursable administrative
costs. The commenters agreed that these
costs should not be included in cost
reports and that the new provision
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
codifies what they understood to be
CMS’ existing policy regarding the
exclusion of these costs.
Response: We agree with the
commenters supporting our proposal to
exclude the costs described in
§ 417.564(c) when reimbursable
administrative costs are computed by
HCPPs and HMO/CMP cost contractors.
Accordingly, we are adopting
§ 417.564(c) without further
modification in this final rule.
Comment: Two commenters agreed
with our proposals to clarify how
HCPPs and HMO/CMP cost contractors
must determine reasonable
administrative costs, and the
requirement that this information be
available to CMS upon request.
However, these commenters wanted
CMS to consider the following
recommendations with respect to the
proposed requirements—(1) providing
guidance that would further clarify
CMS’ expectations about how cost
contractors will document this
information, including examples of how
time should be tracked and how to
evaluate the match between skill level
and tasks performed; (2) ensuring that
the documentation requirements will be
reasonable and structured in a manner
that is not unduly burdensome to cost
contractors; (3) providing cost
contractors an opportunity to comment
on this guidance before it is finalized to
ensure that operational issues can be
fully considered; and (4) applying the
requirements to cost years following the
year in which the regulation is effective.
One of the commenters also
recommended that CMS consider
modifying this proposal to clarify the
meaning of the term ‘‘task,’’ and limit the
tracking of time for the performance of
separate tasks performed by a single
individual to circumstances when it is
necessary to achieve the objectives of
the rule (for example, when the tasks,
consistent with CMS rules and policy,
have different apportionment statistics).
The commenter also suggested that CMS
clarify in the final rule that when
personnel perform some administrative
functions that are included in the
administrative and general specified
cost areas while performing some
administrative functions that are viewed
as plan administration, only the time
spent on the administrative and general
functions should be tracked and
documented.
Response: We believe that it is
important for HCPPs and HMO/CMP
cost contractors to have the flexibility to
establish their own methodology for
determining reasonable administrative
costs in order to meet the requirement
described in § 417.564(b)(2)(iii);
PO 00000
Frm 00078
Fmt 4701
Sfmt 4700
therefore, we are not providing the
specific guidance that was requested by
these commenters at this time. We
intend to provide further sub-regulatory
guidance to HCPPs and HMO/CMP cost
contractors on issues that would
generally impact all HCPPs and cost
contractors. We will also provide
assistance to individual HCPPs and cost
contractors on a case-by-case basis.
4. Calculation of the Minimum
Percentage Increase Under Part C
(§ 422.306)
In the October 22, 2009, proposed
rule, we proposed to revise § 422.306 to
eliminate the 2 percent minimum
update for all rate calculations other
than ESRD. As we noted in the
preamble to the proposed rule, section
5301 of the DRA added section 1853(k)
of the Act to create a single rate book for
calculating MA payments and
applicable adjustments. Section 5301 of
DRA also modified the methodology for
updating the MA payment rates by
adding section 1853(k)(1)(B) of the Act.
Beginning in 2007, the statute requires,
for purposes of calculating the
minimum percentage increase rate, that
the previous year’s benchmarks be
updated annually using only the
national per capita MA growth
percentage for the year—as described in
section 1853(c)(6) of the Act. Prior to
2007 the minimum percentage increase
rate was the greater of 102 percent of the
MA capitation rate for the preceding
year, or the MA capitation rate for the
preceding year increased by the national
per capita MA growth percentage for the
year.
We noted that since the statute, as
revised by the DRA, no longer provides
for the 2 percent minimum update, we
can no longer apply it to the MA rates.
The 2 percent minimum update still
applies to the end stage renal disease
MA update because the statute at
section 1853(a)(1)(H) of the Act provides
that ESRD rates are to be calculated in
a manner consistent with the way those
rates were calculated ‘‘under the
provisions of [section 1853 of the Act]
as in effect before the date of enactment
of the MMA.’’ The pre-2003 version of
section 1853 of the Act included the 2
percent minimum update. Therefore, we
proposed to revise § 422.306 to
eliminate the 2 percent minimum
update for all rate calculations other
than ESRD. We are adopting
§ 422.306(a) as proposed into this final
rule.
Comment: A few commenters
supported CMS’s proposed requirement.
A commenter believed CMS’
interpretation of section 1853(k) of the
Act was incorrect and suggested that
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
CMS retain the 2 percent minimum
update requirement and recalculate (and
pay) any retroactive payment from prior
years (where the 2 percent minimum
update would have caused payments to
be higher than they would have been in
its absence). The commenter contended
that section 1853(k)(1)(B) of the Act
only removes the minimum percentage
increase for years prior to 2004.
Response: We disagree with the
commenter. Section 1853(k)(1)(B) of the
Act is clear in saying that it applies to
years subsequent to 2007, in other
words, to payment years beginning with
calendar year 2008. Section
1853(k)(1)(B)(i) of the Act applies to all
payment years other than years in
which rebasing is done in accordance
with section 1853(c)(1)(D)(ii) of the Act.
In rebasing years, the calculation of MA
payment rates is determined by section
1853(k)(1)(B)(ii) of the Act where the
amount payable is the greater of: Either
the amount calculated under section
1853(k)(1)(B)(i) of the Act, the MA
payment amount for the previous year
increased by the national per capita MA
growth percentage; or the amount
calculated under section 1853(c)(1)(D)
of the Act, which is 100 percent of feefor-service costs. Further, in section
1853(k)(1)(B)(i) of the Act, we are also
required to ignore any adjustment under
section 1853(c)(6)(C) of the Act for any
year before 2004 when calculating the
national per capita MA growth
percentage. This adjustment, called the
‘‘adjustment for over or under projection
of national per capita MA growth
percentage,’’ also did not include such
an adjustment for years before 2004
when the minimum percentage increase
was calculated per section
1853(c)(1)(C)(v) of the Act for years
between 2004 and 2006. Finally, the
calculation of MA payment increases
based on the national per capita MA
growth percentage beginning with
payment year 2007 were never less than
2 percent. However we note that even if
it were, there would be no additional
payment due MA organizations on this
basis because the 2 percent minimum
increase was eliminated beginning with
2007.
19755
E. Changes To Improve Data Collection
for Oversight and Quality Assessment
This section discusses and finalizes
four proposals in our October 22, 2009
proposed rule intended to improve Part
C and D data collection and use for
oversight and quality assessment. The
first proposal would address quality
improvement programs and data on
quality and outcomes measures under
Part C. As part of this proposal, we
proposed to address data collected by
Quality Improvement Organizations for
MA quality improvement and
performance assessment purposes.
The second and third proposals
would address payment for beneficiary
surveys and independent yearly audits
of Part C and Part D measures (collected
pursuant to our reporting requirements)
to determine their reliability, validity,
completeness, and comparability in
accordance with specifications
developed by us. The last proposal
would amend our rules on the
collection and use of prescription drug
event data for nonpayment-related
purposes.
TABLE 5—IMPROVE DATA COLLECTION FOR OVERSIGHT AND QUALITY ASSESSMENT
Part 422
Part 423
Provision
Part 480
Subpart
Requirements for Quality Improvement
Programs under Part C.
Require that Sponsors pay for the Consumer Assessment Health Plan Survey (CAHPS).
Require validation of reporting requirements.
Allow collection of all PDE data elements to be collected for non-payment
purposes.
Subpart D ..............
Subpart D ..............
sroberts on DSKD5P82C1PROD with RULES
18:07 Apr 14, 2010
Jkt 220001
N/A
§ 480.140
Subpart D ..............
§ 423.156
N/A
§ 422.516
§ 423.514
N/A
Subpart D ..............
§ 423.514
N/A
Subpart D ..............
§ 423.505
N/A
of care provided to enrollees in each
MA plan offered by the MA
organization. Section 1852(e)(3)(A) of
the Act requires that, as part of this
quality improvement program, MA
organizations collect, analyze, and
report data that permits the
measurement of health outcomes and
other indices of quality as part of their
quality improvement program for their
coordinated care plans. To the extent
that local PPO, regional PPO, PFFS, and
MSA plans have a network of contracted
providers, these plan types must meet
the same quality improvement
requirements as other coordinated care
plans. Section 1852(e)(3)(B)(i) of the Act
generally limits the collection of data on
quality, outcomes, and beneficiary
satisfaction under section 1852(e)(3)(A)
to facilitate consumer choice and
program administration to ‘‘the types of
PO 00000
Frm 00079
Section
N/A .........................
N/A .........................
In our October 22, 2009 proposed
rule, under the authority in sections
1851(d)(4)(D), 1852(e)(1) and
1852(e)(3)(A) of the Act, we proposed
several new requirements related to
quality improvement programs and data
on quality and outcomes measures
under Part C.
Section 1851(d)(4)(D) of the Act
requires us to make available to MA
eligible individuals information
comparing MA plan options, including
information on plan quality and
performance indicators to the extent this
information is available. Separately,
section 1852(e)(1) of the Act requires
that each MA organization have an
ongoing quality improvement program
for the purpose of improving the quality
Subpart
§ 422.152
§ 422.153
§ 422.152(b)(5)
Subpart D ..............
1. Requirements for Quality
Improvement Programs Under Part C
(§ 422.152, § 422.153, and § 480.140)
VerDate Nov<24>2008
Section
Fmt 4701
Sfmt 4700
data’’ that were collected as of
November 1, 2003.
a. Quality Improvement Programs
In our October 22, 2009 proposed
rule, we noted that under our current
regulations at § 422.152(c) and
§ 422.152(d), MA organizations have
flexibility to develop criteria for chronic
care improvement programs (CCIPs) and
initiate any quality improvement
projects that focus on clinical and nonclinical areas based on the needs of their
enrolled population. However, based on
our experience with MA organizations
employing inconsistent methods in
developing criteria for their CCIPs and
quality improvement projects, we
expressed concerns in the proposed rule
that giving MA organizations complete
discretion to establish their own CCIPs
and quality improvement projects does
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19756
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
not allow beneficiaries to effectively
compare plans and organizations to
manage and report projects. More
importantly, we expressed concerns that
these projects are not addressing quality
improvement areas that we believe best
reflects beneficiary needs. For example,
some projects may be designed to
improve processes only, without linking
the processes to clinical outcomes. We
are interested in MA organizations
focusing on individual as well as
population-specific health risk needs,
such as MA organizations’ use of
internal data sources to identify clinical
outcomes that not only fail to meet
national averages, but also may
jeopardize the overall health and quality
of life of the beneficiary.
As a result of our concerns, we
proposed to revise § 422.152(a)(1) and
§ 422.152(a)(2) to require that MA
organizations conduct CCIPs in patient
populations, and conduct their required
quality improvement projects, in areas
identified by CMS based on our review
of data collected from MA
organizations. Specifically, we proposed
to determine what areas would most
benefit from quality improvement, and
to provide guidance on specific quality
improvement projects for MA
organizations to implement, either
based on those organizations’ specific
quality improvement needs, or quality
improvement needs for MA plans
generally. We also proposed suggesting
methods and processes by which to
manage a quality improvement project
as appropriate.
We proposed in the preamble to our
October 22, 2009 proposed rule to
annually inform MA organizations
individually and/or generally which
patient populations and areas we have
determined would benefit most from a
CCIP and quality improvement project,
respectively. We would convey
generally applicable information via the
Medicare Managed Care Manual and the
Health Plan Management System
(HPMS), and convey information that is
plan specific directly to the
organizations offering the MA plans in
question. We are adopting
§ 422.152(a)(1) and § 422.152(a)(2)
without further modification in this
final rule and are clarifying, in our
responses to comments below, that MA
organizations will continue to have the
flexibility to develop criteria for CCIPs
and quality improvement projects based
on the needs of their enrolled
population.
Comment: We received many
comments that supported our proposals
to require that MA organizations
conduct CCIPs in patient populations,
and quality improvement projects in
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
areas, identified by CMS. Some of these
commenters wanted CMS to consider
additional recommendations with
respect to our proposed requirements,
including: (1) Providing an opportunity
for public comments as CMS develops
priority areas for MA organizations and
on the process that CMS will use to
identify specific areas for quality
improvement with respect to particular
MA organizations; and (2) establishing a
fixed time period after CMS establishes
its CCIP goals during which CMS could
not establish new CCIP goals.
Response: As we develop our
requirements, we will offer
opportunities for the industry and other
interested parties to offer
recommendations. While our goal is to
keep any such requirements stable, we
note that it may be important for us to
modify our requirements in keeping
with our goal of ensuring that CCIPs and
quality improvement projects address
those quality improvement areas we
believe reflect beneficiary needs.
Comment: Many commenters opposed
our proposals to require that MA
organizations conduct CCIPs in patient
populations, and quality improvement
projects in areas, identified by CMS.
Some of the concerns commenters
raised were: (1) CMS’ requirements may
not be aligned with MA organizations’
identified priorities for benefiting their
enrollees; (2) systemic inequities would
develop among competing MA plans
that would undermine the competitive
structure of the MA program; and (3)
organizations would lose the flexibility
to pursue projects of special clinical and
operational value to their enrollees.
Response: We agree that CCIPs and
quality improvement projects should be
based on the needs of the plan’s
enrolled population, and in line with
the organizations’ identified priorities
for benefiting their enrollees. We will
continue to provide MA organizations
generally with the flexibility to identify
topics for the development of CCIPs and
quality improvement projects based on
the particular needs of their members.
However, we are finalizing the revisions
to § 422.152(a)(1) and § 422.152(a)(2) to
require that, under certain
circumstances, some MA organizations
conduct CCIPs in patient populations
and quality improvement projects in
areas identified by CMS based on our
review of data collected from MA
organizations and the populations
served by the plans.
To date, we have communicated with
MA organizations about specific
operational areas and member
populations for which we believe, based
on data collected through HEDIS, audit
findings, member complaints, and other
PO 00000
Frm 00080
Fmt 4701
Sfmt 4700
survey data, there is a need for CCIP or
quality improvement projects
development due to performance and/or
clinical outcomes. We have offered MA
organizations identified through this
targeted methodology assistance during
our initial communication regarding the
need for CCIP or quality improvement
project development. Technical
assistance for the development of CCIPs
and quality improvement projects is
also available to all MA organizations
on an as needed basis.
Using the HPMS, the Medicare
Managed Care Manual, and other means
of communication that we determine to
be appropriate, we will annually inform
MA organizations individually and/or
generally of the process by which CCIPs
and quality improvement projects must
be conducted, which tools to use to
report activities, and the time frame for
submitting data and reports. We will
also use these communication methods
to identify the patient populations and
areas we have determined would benefit
most from CCIPs and quality
improvement projects. However, as
noted previously, this does not preclude
MA organizations from developing
CCIPs and quality improvement projects
that they independently determine to be
needed for their population.
Comment: Many commenters
suggested alternatives for CMS to
consider to its proposed requirements
for CCIPs and quality improvement
projects. These recommendations
generally fell into three groups—(1)
CMS should not adopt the proposed
policies and should allow MA
organizations to develop their own
CCIPs and quality improvement
projects; (2) CMS should provide
general guidance to MA plans on CCIPs
and quality improvement projects and
develop a process for approving a plan’s
CCIPs and quality improvement projects
prior to the plan implementing them;
and (3) CMS should consult industry
before making changes to CCIP and
quality improvement project
requirements.
Some commenters specifically
recommended that CMS impose CCIP or
quality improvement project obligations
on all MA organizations operating
within a given geographic area rather
than on an MA plan-specific basis and
that CMS provide a list of programs and
projects for MA plans to choose from
and allow plans to select the programs,
projects, and populations to which they
should apply in order to maximize the
benefit to beneficiaries. One commenter
suggested that, to address CMS’ concern
that some plans focus on process, rather
than outcomes, CMS focus on those
plans, and work with them to identify
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
more appropriate programs and projects.
Another commenter believed that CMS
could provide more generalized
guidance on the types of measures that
are acceptable (for example, the
commenter suggested that CMS consider
requiring that CCIPs and quality
improvement projects link processes to
clinical outcomes). Several commenters
suggested that CMS consult with experts
in the industry to before imposing
specific CCIP and quality improvement
project requirements on MA plans. One
commenter recommended that CMS
hold MA organizations accountable for
choosing a CCIP based on their own
population and data, and prior approve
quality improvement project topics and
methodologies based on specific quality
improvement needs identified by MA
organizations. This commenter further
indicated that a prior approval process
would allow CMS to assist MA
organizations in focusing on quality
improvement areas that reflect
beneficiary needs and include sound
methodologies that address clinical as
well as process outcomes.
Response: As discussed previously,
MA organizations will continue to have
the flexibility to choose CCIP and
quality improvement project topics that
meet the needs of their population and
operational processes, and we will offer
opportunities for the industry to offer
recommendations for fine-tuning our
CCIP and quality improvement project
requirements. We will take into
consideration the specific
recommendations offered by
commenters as we develop future
guidance related to CCIPs and quality
improvement projects.
Comment: Several commenters were
concerned that the proposed
requirements could impinge on the
efforts of MA organizations to satisfy
accreditation standards for National
Committee for Quality Assurance
(NCQA) or other accrediting bodies.
Response: MA organizations that
participate in the quality improvement
deeming program will be subject to the
standards of their accreditation
organization. We will continue to
ensure that standards applied by
deeming organizations are at least as
stringent as those applied by us.
Comment: Several commenters were
concerned about special needs plans
(SNPs) meeting the proposed
requirements. Commenters
recommended allowing MA
organizations to customize overall
quality improvement programs for their
specialized populations in chronic care
special needs plans (C–SNPs), deeming
all the individual model of care and
quality improvement initiatives
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
required of C–SNPs to fulfill this
requirement, and allowing dual-eligible
SNPs (D–SNPs) to implement specific
projects for the dual-eligible population.
Several commenters were concerned
that the CCIP and quality improvement
project models that CMS develops may
not be appropriate for special needs
plans (SNPs) and that some SNPs will
face significant challenges meeting State
as well as MA requirements in the event
that CMS requirements for specific
quality improvement topics that differ
from State requirements.
Response: As discussed previously,
MA organizations will continue to have
the flexibility to choose CCIP and
quality improvement project topics that
meet the needs of their population and
operational processes. When MA
organizations are required to conduct
CCIPs in patient populations and
quality improvement projects in areas
that we identify which are appropriate
for SNPs, SNPs will follow the same
quality improvement project and CCIP
processes identified for other types of
MA plans. We will not expect SNPs to
employ quality improvement project or
CCIP programs that are not appropriate
for their population. We note that CMS
may use data collected from SNPs to
determine if there are populationspecific topics that require targeted
monitoring in the future.
Comment: A few commenters were
concerned about the challenges MA
organizations would face in allocating
additional resources to meet the
proposed requirements as well as the
potential for increased administrative
costs.
Response: With respect to
commenters’ concerns about the
additional cost of implementing these
requirements, we do not believe that
MA organizations will experience
significant additional financial burdens
as a result of these requirements.
b. New Quality Measures
In our October 22, 2009 proposed
rule, we stated that as we strengthen our
oversight of quality improvement
programs implemented by MA
organizations, we believe it is necessary
to collect additional data on quality and
outcomes measures in order to better
track plan performance. We currently
collect from MA organizations data on
quality, outcomes, and beneficiary
satisfaction under the Healthcare
Effectiveness Data and Information Set
(HEDIS®), the Health Outcome Survey
(HOS), and the Consumer Assessment
Health Providers Survey (CAHPS). We
stated in the proposed rule that we
anticipated additional collection and
reporting of the same types of data on
PO 00000
Frm 00081
Fmt 4701
Sfmt 4700
19757
health outcomes and quality measures
that we currently collect as part of these
processes.
We also noted that we believed the
collection of these data to be consistent
with our authority under section
1852(e)(3)(A) of the Act, and that we do
not believe that the limitation described
under section 1852(e)(3)(B) of the Act
limits this proposed additional data
collection because the data collected
would be of the same ‘‘type’’ of data that
we currently collect as part of the
HEDIS®, HOS, and CAHPS® processes.
In the preamble to the proposed rule, we
noted post-surgical infections or patient
falls as examples of additional areas on
which we planned to collect data.
Therefore, we proposed to modify
§ 422.152(b)(3) and § 422.152(e)(2) to
require MA plans to collect, analyze,
and report quality performance data
identified by CMS that are of the same
type of data that plans are currently
required to collect and report to CMS.
We also proposed that, consistent with
the Paperwork Reduction Act (PRA), we
would provide the public at least two
opportunities for public comment before
imposing additional quality-related
collection and reporting requirements.
We are finalizing our proposal to
require MA plans to collect, analyze,
and report quality performance data
identified by CMS as described in the
proposed rule and adopting
§ 422.152(b)(3) and § 422.152(e)(2)
without further modification in this
final rule.
Comment: A number of commenters
supported CMS’ proposal to require MA
plans to collect, analyze, and report
quality performance data identified by
CMS that are of the same type of data
that plans are currently required to
collect and report to CMS. Commenters
also supported CMS’ proposal to
provide the public at least two
opportunities for public comment before
imposing additional quality-related
collection and reporting requirements,
consistent with the PRA.
Response: We agree with the
commenters supporting our proposal to
require MA plans to collect, analyze,
and report quality performance data of
the same type of data that plans are
currently required to collect and report,
that we identify. Accordingly, we have
finalized our proposed § 422.152(b)(3)
and § 422.152(e)(2) in this final rule.
Comment: A few commenters did not
support our proposal to require MA
plans to collect data on additional
quality performance measures.
Commenters were concerned about the
administrative burden and costs
associated with additional data
collection and recommended that CMS
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19758
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
use existing quality measures rather
than require new measures. One
commenter questioned whether
additional quality measures beyond the
HEDIS, HOS, and CAHPS would be
useful since these measures are
accepted industry standards. One
commenter questioned CMS’ efforts to
use quality measures to ‘‘score’’ plans,
indicating that plans with lower
enrollment and more direct control over
patient care, for example a closed model
HMO, could achieve better measures
through more intensive interventions.
Response: As the MA program has
evolved, attracting an increased number
of beneficiaries that present with
specialized health concerns, it has
become increasingly important for us to
focus on developing measures that meet
the MA population’s needs. We believe
that collection of additional data on
quality outcomes measures is necessary
to better track plan performance in this
area. As noted previously, we disagree
with commenters that MA plans will
experience significant additional
financial burden as a result of these
requirements.
Comment: Commenters provided
suggestions on how to identify the
measures for which additional
collection of quality performance data
will be required. Several commenters
recommended that we use existing
nationally endorsed, clearly specified
measures for any new reporting
requirements we place on MA
organizations, and that the measures be
those of national standard setting
organizations. One commenter indicated
that it would like to work with CMS to
see if any of the new measures should
be incorporated into HEDIS. Two
commenters requested that the new
quality measures be measurable through
administrative data instead of chart
reviews. One commenter supported the
examples we provided of new quality
reporting requirements we indicated in
our proposed rule, specifically, postsurgical infections or patient falls and
recommended that the reporting be
expanded to all health care acquired
conditions (the Medicare ‘‘never
events’’) and all infections. Another
commenter indicated that additional
broad based measures, such as
readmission rates, also could provide
critical insights on performance.
Additionally, one commenter suggested
that CMS consult with the Medicare
Payment Advisory Commission, which
recently finalized recommendations
related to quality in the MA program
and the measures that could be adopted
to compare MA plans to one another as
well as to Original Medicare. Some
commenters suggested that CMS involve
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
the industry in the development of the
new measures for which additional
collection of quality performance data
will be required.
Response: We will identify measures
and standards using internal CMS
methods as well as nationally
recognized methodologies. These
measures and standards will be based
on the information that is currently
collected, as well as any additional data
we find to be necessary to collect for
this purpose. We have begun a year-long
project to research and analyze
population specific health outcomes
and plan operations data. As an
important part of this project, industry
leaders, researchers, and individuals
with expert knowledge of the Medicare
population will be involved in the
discussions as we identify appropriate
quality measures and standards for the
MA program. We plan to use this
information to further develop and
analyze the effectiveness of the current
and future measures associated with
health outcomes, operational
procedures and processes, and member
experience. As indicated in the
proposed rule, we will provide the
public at least two opportunities for
public comment through the PRA
process before imposing additional
quality-related collection and reporting
requirements.
Comment: One commenter
encouraged us to explore ways to
release timely, plan-specific data to
third parties to allow them to
experiment with different ways to
analyze claims data, and underlying
plan performance data, to assist
consumers with the identification,
selection, and use of their MA plans or
PDPs based on plan performance or
quality attributes.
Response: We do not collect claims
data from MA and Part D plans.
However, we do collect Part D
prescription drug event (PDE) data,
which is based on claims data submitted
by pharmacies to Part D sponsors. These
data are available for research purposes,
consistent with § 423.505. We are
working to provide additional public
use files based on PDE data in the
future. More information on PDE data
for research purposes may be found at
https://www.resdac.umn.edu/
Available_CMS_Data.asp. For the
quality and performance data for Part C
and Part D plans, we release a database
with all of the contract-level individual
measures that make up the Part C and
Part D plan ratings. These data are
available on the CMS Web site at
https://www.cms.hhs.gov/
PrescriptionDrugCovGenIn/
06_PerformanceData.asp.
PO 00000
Frm 00082
Fmt 4701
Sfmt 4700
c. Use of Quality Improvement
Organization Review Information
In our October 2009 proposed rule,
we asserted that data collected by
Quality Improvement Organizations
(QIOs) to accomplish their mission
represent an important data resource for
CMS in our efforts to improve quality
under the MA program. QIOs collect
survey, administrative, and medical
records data in order to monitor and
assess provider performance. These data
are frequently required by scope of work
contracts administered by CMS to assess
whether or not QIOs are meeting
performance goals.
We discussed several proposed uses
of the data collected by the QIOs. For
example, certain QIO data could be used
to develop a standardized core set of
clinical and non-clinical quality and
performance measures that could be
applied to all MA plans in order to
allow beneficiaries to make better
comparisons across all MA plan types
and make an informed decision when
selecting a plan. These measures could
also be used to rate plans according to
their performance.
We also outlined our plan to develop
minimum performance levels and
requirements that address clinical and
nonclinical areas from the data collected
by QIOs, as part of our efforts to provide
meaningful information to beneficiaries
when selecting an MA plan. In addition
to tracking plan performance, these data
could also be used to monitor plan
compliance with MA contract
requirements and support compliance
or enforcement actions against plans
that are poor performers on certain
quality and performance measures.
These data would also be appropriate
for use in a competitive value-based
purchasing program based on quality of
care.
Finally, we explained our intent to
use one particular type of information
already collected by QIOs, that is,
quality review study (QRS) information
(defined in 42 CFR 480.101(b)) and
retool the data elements to make them
specific to beneficiaries enrolled in MA
plans. A QRS is ‘‘an assessment,
conducted by or for a QIO, of a patient
care problem for the purpose of
improving patient care through peer
analysis, intervention, resolution of the
problem and follow-up.’’ By QRS
information, we mean all
documentation related to the QRS
process. We proposed to obtain from the
QIO only the data that relate to MA plan
beneficiaries, providers, practitioners,
and services and to then aggregate the
data applicable to each MA plan based
on beneficiary enrollment.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Accordingly, we proposed adding a
new § 422.153 to indicate that we would
obtain and use quality review study
information that is generated, collected,
or acquired by QIOs under 42 CFR part
480. We stated our intent to use these
data for the following functions:
• Enabling beneficiaries to compare
health coverage options and select
among them, measuring performance
under the plan.
• Ensuring compliance with plan
requirements under Part 422.
• Other purposes related specifically
to MA plans, as specified by CMS.
We also clarified that we did not plan
to disclose any beneficiary identifiable
information.
In addition, we proposed amending
§ 480.140 to add a new paragraph (g),
authorizing our use of quality review
study information solely for the
purposes specified in § 422.153. As
described below, we are modifying
§ 422.153 and § 480.140(g) in this final
rule.
Comment: A number of commenters
were concerned about the use of data
collected from QIOs to measure plan
performance and recommended that
CMS reconsider its proposal. One
commenter recommended that CMS
discuss current MA experience with
QIO studies and the potential future
uses of QRS information with plans.
Some of the concerns cited by
commenters are that—
• There may be inconsistencies
among QIOs on their assessments and
findings, which may disadvantage some
plans. Individual QIOs may offer
consistent and reliable data sources, but
aggregating data from multiple Statespecific entities may dilute the
consistency and reliability that would
be required to accomplish CMS’
proposed uses;
• Some MA organizations have
experienced delays in the receipt of QIO
study findings; therefore, the
organizations do not have timely notice
of any deficiencies and are not able to
use the findings in their quality
improvement activities. The delay in
dissemination of findings may not be
sufficiently timely for CMS’ intended
purpose;
• Depending on the QIO, there is
often a substantial lag in the availability
of QIO data. Current MA performance
assessment should not be assessed
based on data that are 2 or 3 years old;
and
• There may be additional burden
placed on deemed plans that do not
submit to the QIOs so that the data
could be all inclusive from the QIOs.
Commenters recommended that CMS
clarify whether plans that are already
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
deemed by NCQA would also be
required to send additional information
to their QIO to comply with the
proposed regulation. One commenter
indicated that the use of QIO review
information would be administratively
burdensome and duplicative of current
reporting measures such as HEDIS.
Response: We share the concerns
raised by commenters about the
inconsistency and timeliness of the data
collected by QIOs. These concerns relate
to QIO review of beneficiary quality of
care concerns, medical necessity
reviews, appeals, and other case
reviews.
After reviewing these comments, we
have discovered that the data that will
be needed to meet the functions
described in § 422.153 is not collected
from QIO case reviews. Instead,
hospitals report this information to us as
part of the Reporting Hospital Quality
Data for Annual Payment Update
(RHQDAPU) program, which is
authorized under section
1886(b)(3)(B)(viii) of the Act. Much of
this data is self-reported by hospitals on
a quarterly basis, and some is validated
for accuracy. Further, the data does not
possess any of the timeliness and
reliability issues cited by the
commenters. Hospitals self-report
patient-level quality measure data for
patients covered by MA plans, Original
Medicare, and other payors to CMS for
the RHQDAPU program.
In response to the comments we
received, we are narrowing the scope of
our proposed § 480.140(g) to provide
that QIOs must disclose to us QRS
information collected as part of the
RHQDAPU program following hospital
review of the data (with identifiers of
MA plan beneficiaries, hospitals,
practitioners, and services) when we
request this information for the sole
purpose of conducting activities related
to MA organizations as described in
§ 422.153. We believe that restricting
our access to include only RHQDAPU
hospital quality data that we may use
for the functions described in § 422.153
will address the concerns about the
timeliness and reliability of this data.
We are also modifying § 422.153 to
indicate that we will acquire RHQDAPU
data from QIOs and may use it for the
limited functions described in
§ 422.153. As proposed, we do not plan
to disclose any beneficiary identifiable
information. We also do not plan to
disclose any provider or practitioner
identifiable information.
Comment: Many comments supported
our proposal to obtain and use QRS
information that is generated, collected,
or acquired by QIOs. Commenters also
supported CMS’s proposal to use these
PO 00000
Frm 00083
Fmt 4701
Sfmt 4700
19759
data to enable beneficiaries to compare
health coverage options and select
among them, measure performance
under the plan, and ensure compliance
with plan requirements under Part 422,
and other purposes related specifically
to MA plans as specified by CMS.
Commenters agreed that CMS should
not plan to disclose any beneficiary
identifiable information.
Some of these commenters asked CMS
to consider additional recommendations
with respect to our proposals. Some of
the recommendations were that CMS
should ensure that an adequate sample
of QIO data for dual eligibles is
reviewed; allow plans to review the
information the QIO intends to submit
to CMS in order to give plans the
opportunity to correct errors; ensure
appropriate procedures are available for
plans that may dispute the data that
CMS intends to make available to
beneficiaries before those data are
released; provide ample notice to plans
of the specific data that CMS intends to
collect to allow for programming and
testing of data collection tools prior to
submission to CMS; and make Original
Medicare data available to beneficiaries,
where available, along with MA plan
data.
One commenter indicated that CMS
should develop a methodology to
stratify the data so that MA
organizations would be grouped by local
or regional MA organizations, and
defined by statewide or selected
geographic areas such as number of
counties within a State, benefit design,
and plan type. This commenter also
indicated that data provided to
beneficiaries would be misleading if
CMS compared all MA organizations in
a State without classifying these
organizations by type and service area.
Response: As we refine our work plan
for using the data collected under
section 1886(b)(3)(B)(viii) of the Act
(RHQDAPU data) for the functions
described in § 422.153, we will consider
these commenters’ recommendations to
ensure we achieve our goals of
providing meaningful information to
beneficiaries, developing minimum
performance levels and requirements
that address clinical and non-clinical
areas from the data collected by QIOs,
and ensuring plan compliance with MA
contract requirements.
Comment: Commenters recommended
that CMS ensure that the measures it
develops are based on nationally
endorsed measures, are collected in a
uniform fashion, and have large enough
sample sizes to support public reporting
as well as any value based purchasing
decisions. One commenter
recommended that CMS specify that
E:\FR\FM\15APR2.SGM
15APR2
19760
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
plans will have multiple opportunities
to comment on any performance
measures proposed for the MA program.
Response: We will identify measures
and standards using internal CMS
methods as well as nationally
recognized methodologies. The process
for developing measures based on data
collected by the QIOs is not subject to
the PRA review process since it does not
represent a new data collection
requirement for MA plans.
2. CAHPS Survey Administration Under
Parts C and D (§ 417.472, § 422.152, and
§ 423.156)
In the October 22, 2009 proposed rule,
under the authority of sections
1857(e)(1), 1860D–12, and 1876(i)(3)(D)
of the Act to impose additional contract
requirements that the Secretary finds
‘‘necessary and appropriate,’’ we
proposed to revise the regulations to
require that MA organizations, Part D
sponsors, and section 1876 cost
contractors would pay for the data
collection costs of the annual CAHPS
survey beginning in 2011. As we noted
in the preamble to the proposed rule, in
the 2010 Call Letter to Part C and D
sponsoring organizations, we informed
all MA and Part D contracts with at least
600 enrollees as of July 1 of the prior
calendar year that they would be
expected to pay for the data collection
costs of the CAHPS survey starting with
the administration of the 2011 annual
CAHPS survey. The proposed rule set
forth this requirement in regulations at
§ 422.152 for Part C, § 417.472 for
section 1876 cost contracts, and
§ 423.156 for Part D.
The proposed rule would require only
MA organizations, Part D sponsors, and
section 1876 cost contractors with 600
or more enrollees to pay for the data
collection costs of the CAHPS survey.
For reasons of statistical precision, a
target minimum of 300 or more
completed Medicare CAHPS Surveys
must be received for each contract. In
order to obtain 300 or more completed
surveys, we determined that plans
would need to have 600 or more
enrollees because some enrollees will
not be eligible to receive the survey,
such as institutionalized enrollees, and
not all enrollees selected to be surveyed
will respond to the survey.
In making this proposal, we noted
that we conduct other Medicare quality
surveys, such as the Hospital CAHPS
and the Medicare Health Outcomes
Survey (HOS) for which the MAOs are
responsible for the cost of the data
collection, and that this model for data
collection is standard industry practice.
For example, Federal Employees Health
Benefit (FEHB) plans pay for the
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
administration of the CAHPS survey to
their members. Under our proposal, Part
C & D contractors and section 1876 cost
contractors would select a vendor from
a CMS list of approved vendors to
conduct the survey on their behalf. We
also noted that this change would
provide the sponsoring organizations
with the flexibility of adding their own
questions to the Medicare CAHPS
survey.
We also noted that the first survey
using the new model of data collection
would be conducted in early 2011.
Contracts that were in effect on or before
January 1, 2010, would use the number
of enrollees in a plan as of July 1, 2010
to determine whether they are required
to conduct the 2011 CAHPS survey. In
late 2010, all MA and Part D contracts
that are subject to the CAHPS survey
requirement in 2011 would need to
select an approved Medicare CAHPS
survey vendor to administer the survey.
Finally, we noted that, in addition to
approving a list of survey vendors to
conduct the survey on behalf of all MA
and Part D contracts, we would select
the sample of enrollees to be surveyed
for each contract, approve survey
vendors, provide oversight of survey
vendor activities, analyze the CAHPS
data for plan ratings, and produce
individual-level reports for quality
improvement use by MA and Part D
contracts. Vendors will be trained by
CMS to collect and submit data within
specified timeframes.
After reviewing the comments
received in response to this proposal,
we are adopting the proposed CAHPS
data collection requirements as final.
However, we are revising § 417.472 and
§ 422.152 to clarify the distinction
between cost contracts under section
1876 and coordinated care plans.
Specifically, the revised wording is: ‘‘All
coordinated care contracts (including
local and regional PPOs, contracts with
exclusively SNP benefit packages,
private fee-for-service contracts, and
MSA contracts), and all cost contracts
under section 1876 of the Act, with 600
or more enrollees in July of the prior
year must contract with approved
Medicare Consumer Assessment of
Healthcare Providers and Systems
(CAHPS) survey vendors to conduct the
Medicare CAHPS satisfaction survey of
Medicare plan enrollees in accordance
with specifications and submit the
survey data to CMS.’’
Comment: CMS received comments
concerning the proposed requirements
for Part C and D contracts regarding the
CAHPS survey. A few commenters
noted that CMS did not provide any
estimate of, or other information related
to, the costs associated with collection
PO 00000
Frm 00084
Fmt 4701
Sfmt 4700
of data for the CAHPS survey, asserting
that this information is necessary in
order to appropriately account for the
costs in their annual bid submissions.
Response: We respectfully disagree.
Both the estimated CAHPS costs and
burden were addressed in the proposed
rule. As stated therein, the estimated
mean annual cost per contract is
approximately $5,000 for MA
organizations, cost contracts, and Part D
sponsors with more than 600 enrollees
for the CAHPS annual survey. (74 FR
54711). Data collection is to be
performed by a contractor hired by the
MAO or Part D sponsor.
Comment: A few commenters noted
that proposed § 422.472(i) would
require section 1876 cost contractors to
contract with approved CAHPS survey
vendors to conduct the Medicare
CAHPS satisfaction survey for ‘‘MA plan
enrollees.’’ However, they assert that
cost plans do not have MA plan
enrollees. Moreover, cost plans are not
‘‘coordinated care plans,’’ which is a
term that describes certain MA plans.
The commenters recommend that CMS
delete the references to coordinated care
plans and other MA references.
Response: We appreciate the
commenters’ suggestions and are
revising § 417.472 and § 422.172 as
follows: ‘‘All coordinated care contracts
(including local and regional PPOs,
contracts with exclusively SNP benefit
packages, private fee-for-service
contracts, and MSA contracts), and all
cost contracts under section 1876 of the
Act, with 600 or more enrollees in July
of the prior year must contract with
approved Medicare Consumer
Assessment of Healthcare Providers and
Systems (CAHPS) survey vendors to
conduct the Medicare CAHPS
satisfaction survey of Medicare plan
enrollees in accordance with
specifications and submit the survey
data to CMS.’’
Comment: Several commenters
expressed approval and support for
CAHPS, applauding CMS’s efforts to
provide enrollees with consumer-tested,
standardized information about plan
choices. The commenters also support
changes that will increase data
collection, provide beneficiaries with
additional information with which to
make plan comparisons, and overall
improve quality of plans.
Response: We appreciate these
commenters’ support of our quality
efforts.
3. Validation of Part C and Part D
Reporting Requirements (§ 422.516 and
§ 423.514)
In the October 22, 2009 proposed rule,
under the authority of sections 1857(e)
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
and 1860D–12 of the Act, we proposed
to amend § 422.516 and § 423.514 to
state that each Part C and Part D sponsor
be subject to an independent yearly
audit of Part C and Part D measures
(collected pursuant to our reporting
requirements) to determine their
reliability, validity, completeness, and
comparability in accordance with
specifications developed by us.
Additionally, in the preamble we
noted that our rationale for making this
proposed change, which was also
announced in the 2010 Call Letter to
Part C and D sponsoring organizations,
was that only an independent data
validation audit conducted by an
external entity under contract to the
MAO or PDP sponsoring organization
would ensure that the results of the
audit are in accordance with CMS
specifications, that data used to develop
plan performance measures are credible
to other stakeholders, and that
information used to respond to
Congressional and public inquiries are
reliable. We noted that we were working
with a contractor to develop data
validation specifications to ensure that
the goals of reliability, validity,
completeness, and comparability are
met at the conclusion of the data
validation audit. We intend that these
specifications will focus on how
organizations and sponsors compile
numerators and denominators, take into
account appropriate data exclusions,
and verify the sponsor’s calculations,
computer code, and algorithms. In
addition, the specifications will be used
to inform CMS as to how the MAOs,
cost plans, and Part D sponsors collect,
store, and report data. We expect that
these specifications will be utilized by
the auditors hired by MAOs and Part D
sponsors to conduct the data validation
audits, the results of which will be
forwarded to us. We indicated that we
expected to make these specifications
available on our Web site for public
comment early in 2010. We solicited
comment on this approach.
Subsequent to publication of the
proposed rule, in an HPMS
memorandum dated December 23, 2009,
we noted that after careful review of the
reporting requirements and CMS’
continued data needs, the amount of
data required to be reported to CMS for
CY 2010 and contract years contract
beyond was to be reduced. We noted
that the reason for the reduction in
reporting was that some of the data
could be derived from other means (that
is, through analyses of prescription drug
event data already collected by CMS).
We believe these adjustments reduce the
overall burden on sponsoring
organizations while maintaining the
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
integrity of the CMS data collection,
plan reporting, and plan validation
processes so that needed data for
monitoring and public reporting are
timely, reliable, valid, and comparable
among organizations. Specifically, the
following changes became effective
January 1, 2010:
• Part C Reporting Requirements
++ Reporting of the Agent
Compensation and Agent Training and
Testing measures will be suspended.
++ The frequency of reporting of two
Part C measures will be reduced.
— Only annual reporting for Plan
Oversight of Agents will be required; the
quarterly reporting will be suspended.
— Only annual reporting for
Employer Group Plan Sponsors will be
required; the semiannual reporting will
be suspended.
++ Validation of PFFS Provider
Payment Dispute Resolution and PFFS
Plan Enrollment verification calls will
not be required.
• Part D Reporting Requirements
++ Reporting of five sections will be
suspended: Vaccines, Generic Drug
Utilization, Transition, Drug Benefit
Analyses, and Agent Training and
Testing.
++ The frequency of reporting of six
Part D sections will be reduced as
follows:
— Only annual reporting for
Employer/Union-sponsored Group
Health Plan Sponsors, Fraud, Waste and
Abuse Compliance Programs, Long
Term Care (LTC) Utilization, and
Medication Therapy Management
Program (MTMP) will be required; the
semi-annual reporting will be
suspended.
— Only annual reporting for Plan
Oversight of Agents and P & T
Committees/Provision of Part D
Functions will be required; the quarterly
reporting will be suspended.
++ Validation of eight sections will
not be required: Enrollment, Access to
Extended Days.
— Supply, Prompt Payment by Part D
Sponsors, Pharmacy Support of
Electronic Prescribing, P&T
Committees/Provision of Part D
Functions, Pharmaceutical Rebates,
Discounts and Other Price Concessions,
Licensure & Solvency, and Fraud, Waste
and Abuse Compliance Programs.
We are also excluding PACE
organizations from CY 2010 Part D
Reporting Requirements, which is
consistent with Part C Reporting
Requirements.
These changes will be incorporated in
the final CY 2010 Part D Reporting
Requirements document and the Part C
PO 00000
Frm 00085
Fmt 4701
Sfmt 4700
19761
and D Reporting Requirement Technical
Specifications documents, which will
be updated and posted to our Web site.
The data validation standards will also
be updated and provided for comment
as part of a PRA package in 2010. We
note that these changes do not affect our
proposal to require an annual
independent audit of Part C and Part D
measures. Rather, because these changes
reduce the amount of data that must be
submitted by plan sponsors, they will
make the data validation audits
somewhat less time-consuming.
After considering the comments
received in response to the proposed
rule, in this final rule, we adopt the
requirements as proposed.
Comment: Several commenters argued
that plans need information regarding
the data validation requirement in a
timelier manner to allow for
consideration during preparation of the
2011 bids. They also noted that CMS
should provide plans with sufficient
information and time to modify their
operations to incorporate any new
requirements prior to the data validation
mandates taking effect.
Response: With this final rule, we
believe that we are providing plans with
information in sufficient time to allow
for consideration in their 2011 bids. A
regulatory impact analysis for this
proposed requirement was included in
the October 22, 2009 proposed rule. The
proposed rule also contained the
information collection requirements.
Plans should be able to use the burden
and cost estimate information to
develop an estimate of any increase in
resources and costs associated with the
implementation of these provisions.
Additionally, two HPMS memoranda
were released this fall: Part C and Part
D reporting requirements and data
validation dated November 23, 2009 and
Implementation changes in the
Medicare Part C and Part D Reporting
Requirements and Data Validation dated
December 23, 2009. These memoranda
contain detailed, updated information
on changes in implementation of the
data validation requirement. The first
memorandum clarified the timing of
implementation (that is, the data
validation needs to occur in the spring
of 2011 for reported 2010 data), while
the second memorandum reduced the
overall data validation and reporting
requirements for Part C and Part D
measures.
Comment: While one commenter
supported the implementation of the
data validation audit requirements for
2011, others recommended we delay
codifying the data validation audit
requirement. They argued that codifying
the requirement before the process has
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19762
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
been evaluated and finalized is
premature and will take away CMS’
flexibility to refine the requirements as
it gains experience with the process.
The commenters were also concerned
that the validation mechanisms are very
preliminary and should be vetted
through the subregulatory process. They
noted that the validation approach
stipulated in the proposed regulation
places the full cost burden of the audit
on the health plan. One commenter
specifically recommended that the
proposed new paragraphs (g) be revised
by striking Each Part C [Part D] sponsor
must and inserting instead, CMS may
require each Part C [Part D] sponsor to
* * * and strike independent audit and
insert audit.
Response: We disagree with the
recommendation to delay codifying the
data validation audit. We have begun
evaluating the data validation audit
process and will have completed a pilot
evaluation by May 2010, that is,
approximately 10 months before the
implementation of the data validation
audits. Therefore, we believe we will
have sufficient time to perform any
needed refinements of the requirements
well before actual implementation of the
data validation process. We strongly
believe that it is important to have the
data validation audit process in place by
2011 since there is a need to monitor the
Part C and D programs effectively and
to respond to questions from Congress,
oversight agencies, and the public with
data that are timely, reliable, valid, and
allow for comparisons among plans.
We also disagree that the data
validation audit requirements should be
provided only in subregulatory
guidance. We proposed to implement
these requirements through notice-andcomment rulemaking in order to ensure
that, if they were adopted, they would
be enforceable with the full force and
effect of law. Detailed procedures for
meeting the regulatory requirements
will be provided through sub-regulatory
guidance and will also undergo the PRA
process. As a result, we believe we will
retain sufficient flexibility to make
necessary changes before the
requirements are implemented as well
as to update the procedures in the future
as necessary. We further believe that it
is necessary to conduct the data
validation audit on all plans so that
there is assurance that all the data are
reliable, valid, and can be used to
compare health plan performance. If we
find through the data validation audit
process that some plans are not
reporting accurate data, then it will be
possible to take this factor into account
when reporting plan performance and in
comparing performance among plans.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Comment: Several plans expressed
concern that the cost of implementing
the data validation audit will be high or
excessive.
Response: We do not agree that the
costs of implementing the data
validation audit will be excessive. In the
October 22, 2009 proposed rule (74 FR
54711), we estimated that the costs of
these independent audits would be
approximately $5,200 per plan. Because
the costs on a per plan basis are not
excessive, they will likely be reflected
in only minimally higher bid prices
across the board.
Comment: Two commenters stated
that plans should have the option of
using their own internal auditing staff.
Response: We disagree that plans
should have the option of using their
own internal auditing staff in lieu of an
independent, external auditor. The data
validation needs to be credible to
stakeholders, including Congress and
the American public. We believe that
only an external independently
conducted audit can establish this
credibility.
Comment: One commenter requested
clarification as to whether CMS intends
to issue a list of certified contractors
from which an organization may select
a vendor. This commenter also
recommended that the validation and
testing of a plan’s compliance with
Fraud, Waste, and Abuse (FWA)
programs regulations include the use of
a certified fraud investigator.
Response: At this time, we do not
expect to issue a list of certified
contractors from which an organization
may select a vendor to conduct data
validation audits. Instead, we will be
issuing standards for selected vendors.
A draft of these standards was issued for
informal comments last fall and a
revised version will be issued with the
PRA package associated with the data
validation specifications that will be
available for public comment. We also
note that the commenter’s second
recommendation is likely in reference to
a CMS program audit. Because this
proposal relates to a data validation
audit, we do not believe that plans
should be required to use a certified
fraud investigator.
Comment: One commenter stated that
flexible criteria should be considered in
the data validation audit’s report
specifications, that is, CMS should
consider using flexible criteria in
developing the specifications for the
data validation report.
Response: We agree that the criteria
used in developing the specifications for
the data validation report should
accommodate different types of
reportable data that a plan collects for
PO 00000
Frm 00086
Fmt 4701
Sfmt 4700
each Part C and D measure. We believe
that the standards and procedures under
development for the data validation
effort provide sufficient flexibility to
accommodate different types of
available reportable data.
Comment: One commenter states that
any final rule on data validation
requirements should take into
consideration the plan’s state regulatory
requirements and the plan’s processes
required to comply with state mandates,
laws, and regulations and consider
deeming in areas of overlap.
Response: We appreciate that plans
may also have state reporting
requirements with respect to licensure
and solvency. We believe, however, that
deeming with respect to issues subject
to state reporting requirements is
outside the scope of this proposal,
which is to require an independent data
validation audit of information reported
to CMS.
Comment: One commenter questioned
whether CMS needed to define
performance benchmarks so plans can
manage and monitor data before they
are submitted to CMS.
Response: We will be defining the
data validation standards prior to the
data validation audit. Performance
benchmarks relevant to these standards
will be made available prior to the data
validation audit.
Comment: One commenter offered to
review the measures on behalf of CMS
and explore ways for including them in
the HEDIS measurement set and audit
program.
Response: Although we appreciate the
commenter’s interest in this issue, we
are not committing to the inclusion of
the new Part C and D measures as part
of the HEDIS measurement set and audit
program at this time.
4. Collection of Additional Part D
Claims Elements for NonpaymentRelated Purposes (§ 423.505)
In the October 22, 2009 proposed rule,
we proposed to use the authority under
section 1860D–12(b)(3)(D) of the Act to
collect all additional elements added to
the prescription drug event (PDE) record
beyond the original 37 elements
currently collected under section
1860D–12(b)(3)(D) of the Act. As a
result, we would be able to use these
data elements for nonpayment-related
purposes.
As we explained in the preamble to
the proposed rule, section 1860D–
12(b)(3)(D) of the Act, which
incorporates section 1857(e) of the Act,
provides the Secretary with authority to
include in Part D sponsor contracts any
terms or conditions the Secretary deems
necessary and appropriate, including
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
requiring the organization to provide the
Secretary with such information as the
Secretary may find necessary and
appropriate. We noted that under this
authority, in the May 28, 2008 Federal
Register (73 FR 30664), we published a
final rule that allowed the Secretary to
collect Part D ‘‘claims’’ data from the
prescription drug event (PDE) record
and use the information gathered for
non-payment purposes. However, this
rule limited what data (hereinafter
referred to as PDE elements) we may
collect and use for nonpayment
purposes to the original 37 elements
reported on the PDE record. The rule
also described circumstances under
which we may disclose the data to other
government and external entities, and
the limitations associated with any such
release.
In the October 2009 proposed rule, we
also noted that in 2008 the number of
PDE elements collected was expanded
from the original 37 elements to 39
elements. The additional PDE elements
are ‘‘Rebate Amount Applied to the
Point-of-Sale Price’’ and ‘‘Vaccine
Administration Fee.’’ The ‘‘Rebate
Amount applied to the Point-of-Sale
Price’’ is generally the standard amount
of a rebate that the plan sponsor has
elected to apply to the negotiated price
as a reduction in the drug price made
available to the beneficiary at the point
of sale. The ‘‘Vaccine Administration
Fee’’ is the amount charged for the
administration of a vaccine separate
from the actual vaccine.
In the 2010 Call Letter to Part C and
D sponsoring organizations, we noted
that we were planning to make
mandatory the collection of a new (40th)
element to the PDE record, referred to as
the ‘‘Prescription Origin Code.’’ (at
https://www.cms.hhs.gov/
PrescriptionDrugCovContra/Downloads/
CallLetter.pdf). The prescription origin
code is designed to capture the
frequency with which providers use eprescribing.
Under our proposal, we would be able
to utilize these data for non-payment
related purposes. Similarly, we would
be able to release these elements to
governmental and external entities,
under the authority of section 1106 of
the Act, using the same process that we
now use to release the original 37
elements, namely our minimum
necessary data policy, our data sharing
procedures, and the encryption of
certain identifiers and aggregation of
cost data to protect beneficiary
confidentiality and commercially
sensitive data of Part D sponsors.
Our proposal would allow us to
collect and use for non-payment-related
purposes any data obtained as a result
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
of the addition of new elements to the
PDE record without undertaking
rulemaking for each additional element
added in the future. We believe that the
May 28, 2008 Part D Claims Data final
rule (73 FR 30664) resolved any
statutory ambiguity surrounding our
broad authority to collect PDE data
under section 1860D–12(b)(3)(D) of the
Act. Accordingly, we may use this same
authority to collect additional elements
that have been added to the PDE record
since 2007. Once data have been
collected under section 1860D–
12(b)(3)(D) of the Act, we may use these
data for nonpayment-related purposes
and may release PDE data consistent
with our minimum necessary policy and
our data sharing procedures.
We also noted in the preamble to the
proposed rule that we believe the ability
to analyze new claims-related elements
added to the PDE record will increase
both specific and general knowledge of
Medicare beneficiaries’ healthcare and
the operation of the Part D program and
would aid our ability to conduct
program oversight, support operational
tasks, and provide more information for
use in internal and external healthcare
research studies. Moreover, as a result of
the proposal, we would not be required
to undertake a separate rulemaking and
public comment process each time new
elements are added to the PDE record,
but rather would automatically begin
collecting for nonpayment purposes
elements added to the PDE record using
our authority under section 1860D–
12(b)(3)(D) of the Act and § 423.505(f)(3)
of the regulations. However, because we
did not propose any change to our data
sharing procedures or our minimum
data necessary policy, we will continue
to—
• Ensure that beneficiary, prescriber,
or pharmacy identifiers are not released
unless absolutely necessary for a project
(for example, to link to another
database);
• Encrypt Part D plan identifiers and
aggregate cost data elements (ingredient
cost, dispensing fee, and sales tax) when
sharing PDE data with external
requesters; and
• Subject each request to our data
sharing procedures which includes
ensuring that requestors have the
appropriate experience and are working
for, or on behalf of, a reputable
institution and that, when appropriate,
make their project results public.
External requests concerning beneficiary
identifiable data would continue to be
reviewed by the CMS Privacy Board,
and would require the requestor to sign
a data use agreement.
We also noted our current policy of
protecting various Part D elements when
PO 00000
Frm 00087
Fmt 4701
Sfmt 4700
19763
responding to external research
requests. Thus, the beneficiary ID, plan
ID, prescriber ID, and pharmacy ID are
encrypted prior to release to external
entities. However, in the case of
beneficiary ID, prescriber ID, and
pharmacy ID, this information may be
provided in an unencrypted format
when needed to link to another data set.
In contrast, under the current rule, there
is no exception to the requirement that
plan identifiers be encrypted for all
external research requests. Under the
current regulation, grantees of HHS
agencies are treated as external entities
and may not access plan identifiers.
However, contractors acting on behalf of
HHS are not considered to be external
entities and may receive unencrypted
plan identifiers when necessary for a
particular project.
Because some HHS agencies
accomplish their mission through
grants, rather than contracts, and hence
cannot rely on the access that is
provided to HHS contractors and the
fact that research performed by HHS
grantees will advance the interests of
Medicare beneficiaries, who may also be
served by other HHS programs, we
proposed to revise § 423.505(m)(iii)(C)
to permit CMS disclosure to HHS
grantees of unencrypted plan identifiers
when certain conditions are met. The
conditions we proposed to be met
include—
• The plan identifier is essential to
the study and there is no other source
of CMS data that would substitute for
plan identifiers in order to carry out the
study;
• The study is key to the mission of
the sponsoring agency;
• The study provides a benefit to the
Medicare program; and
• The requestor attests that any
public findings or publications will not
identify plans or plan sponsors.
In evaluating requestors’ proposals to
determine whether these conditions are
met, we propose the following
evaluation standards:
• Plan identifier, we will evaluate the
requestor’s rationale to determine
whether an encrypted plan identifier
would be sufficient for the study design
or if the real identifier is necessary for
the study.
• Agency mission, we will review the
requestor’s agency’s rationale for the
study and how the study would help the
agency achieve its mission.
• Medicare program benefit, we will
review the requestor’s rationale for the
importance of study findings to the
Medicare program.
• Public reporting, we require an
attestation from the requestor that the
requestor will not identify specific plans
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19764
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
or plan sponsors in any public
reporting.
In the proposed rule, we indicated
that we believed that these conditions
would mitigate the risk of unauthorized
use or disclosure of commercially
sensitive plan information. We also
solicited comments on whether it would
be appropriate to extend the proposal to
permit grantees of other Federal
agencies to have access to plan
identifiers when this access may be
necessary for a particular research
project and that project otherwise meets
the conditions described above. After
considering the comments received in
response to our proposals, we are
finalizing the proposed changes to
§ 423.505(f) and (m) without
modification.
Comment: Some commenters
questioned CMS’ authority to share PDE
data for non-payment purposes given
the limiting language in section 1860D–
15 of Act. One commenter alleges the
approach outlined in the proposed rule
would result in a potential violation of
the Trade Secrets Act. Another
commenter mentioned that section
1927(b)(3)(D) of the Act protects pricing,
rebates and other financial information
from disclosure except to very specific
recipients (such as CBO or the
Comptroller), which does not extend to
HHS grantees. One commenter does not
want the release of rebate data,
estimated or otherwise, stating that
rebates at point of sale reflect
proprietary business information.
Response: We respectfully disagree
with the commenters’ assertions. In the
May 28, 2008 Federal Register (73 FR
30664), we published a final rule
regarding the collection and use of Part
D claims data. This regulation resolved
the statutory ambiguity between
sections 1860D–12(b)(3)(D) and 1860D–
15 of the Act, noting that section
1860D–12(b)(3)(D) of the Act (and its
incorporation of section 1857(e)(1)) of
the Act) provide broad authority to the
Secretary to require Part D sponsors to
provide the Secretary with ‘‘such
information as the Secretary may find
necessary and appropriate’’ and that
when information is collected through a
statutory authority independent of
section 1860D–15 of the Act, the
restrictions of section 1860D–15 of the
Act would not apply. Following the
issuance of this Part D claims data final
rule, Congress enacted the Medicare
Improvements for Patients and
Providers Act of 2008 (MIPPA). Section
181 of MIPPA added clause (ii) to
section 1860D–12(b)(3)(D) to provide
that any Part D data collected under the
authority of section 1860D–12(b)(3)(D)
‘‘shall be made available to
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Congressional support agencies (in
accordance with their obligations to
support Congress as set out in their
authorizing statutes) for the purposes of
conducting Congressional oversight,
monitoring, making recommendations,
and analysis of the program under this
title.’’ While section 181 of MIPPA did
not directly address the issues of
statutory ambiguity associated with Part
D claims data collected by CMS, it can
be read as an implicit Congressional
ratification of the arguments presented
by CMS, in the Part D claims rule, as the
legislation only overrides one provision
of that rule. Specifically, under section
181 of MIPPA the Secretary must make
data collected under section 1860D–
12(b)(3)(D) available to Congressional
support agencies, without regard to
CMS’ minimum data necessary
standard. Accordingly, for reasons
detailed in our May 29, 2008 final rule,
we believe the restrictions of section
1860D–15 of the Act do not apply to
PDE data collected under the authority
of 1860D–12(b)(3)(D) of the Act. As a
result, these data may be used for
purposes other than payment.
In response to concerns about
releasing proprietary data to external
entities, we note that this rule pertains
to additional elements added to
prescription drug event data and does
not extend to plan bid or reconciliation
payment data provided outside of the
PDE. Because PDE data are collected
under section 1860D–12(b)(3)(D), rather
than section 1860D–2(d)(2), they are not
subject to the limitations on disclosure
under section 1927(b)(3)(d). In addition,
as we explained in the May 28, 2008
final rule (73 FR 30680), because
§ 423.505(m) was issued under the
authority of section 1106 of the Act, any
release of potentially proprietary data
pursuant to this provision would be also
be authorized by law under the Trade
Secrets Act. Furthermore, we also note
that rebates applied at point of sale are
not the same as aggregate rebates
estimated by plans as part of their bid
or actual rebates received from
manufactures that are submitted outside
of the claim for payment reconciliation
purposes. Rather, they most often reflect
a standard amount that the
manufacturer is providing to a
particular sponsor for a specific drug
that is then passed through to
consumers as part of the plans’ price at
point of sale, the net amount of which
is available to beneficiaries as an
estimate on the drug plan finder tool.
We also remind commenters that we
place certain limitations on PDE data
when released outside of CMS. Through
the application of our ‘‘minimum data
PO 00000
Frm 00088
Fmt 4701
Sfmt 4700
necessary policy,’’ additional
restrictions to protect beneficiary
confidentiality and commercially
sensitive data of Part D sponsors, and
our data sharing procedures (which
ensure the agency’s compliance with the
Health Insurance Portability and
Accountability Act of 1996 (HIPAA), the
Privacy Act of 1974, and other
applicable laws), we limit the use and
disclosure of Part D claims data to
ensure that the data are only used or
disclosed as permitted or required by
applicable law, and not inappropriately
disclosed in a manner which could
undermine the competitive nature of the
Part D program.
Comment: We received a number of
varied comments on the sharing of PDE
data. Several commenters provided
recommendations related to the sharing
of Part D PDE information for nonpayment purposes, suggesting that
CMS—
• Use only non-identifiable
information for any public analysis,
arguing that research can be done
without an actual plan ID;
• Exclude data elements that could
because of geographic information, and/
or other aggregated information
indirectly identify plan sponsors; and
• Share information (especially plan
IDs, or PHI) only with written approval
from the sponsor and publish guidance
well before adding another element to
the PDE format.
Another commenter stated that
despite the restrictions in sharing plan
IDs, certain plans could easily be
identified. A few other commenters
stated that CMS has no specific
restrictions in the regulation protecting
price information.
Response: We believe these comments
are outside of the scope of the proposed
rule, which was issued not to reopen
our May 28, 2008 final rule on Part D
claims data but rather to address the use
and disclosure of additional PDE data
elements beyond the original 37
elements that were the subject of the
May 28, 2008 final rule. To the extent
the comments are applicable, we
disagree with the recommendations on
using only aggregate data and obtaining
written plan approval prior to use of the
PDE data. Our rationale is the same as
the one we expressed in response to a
similar comment to the May 28, 2008
final rule on Part D claims data: if PDE
data are collected only under the
authority of section 1860D–15 of the Act
CMS, HHS and external entities can
never use the data for evaluations,
analyses, and research important to
public health, and vital to program
oversight. In the Part D claims data final
rule we provided a detailed description
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
of the potential purposes for which
these data might be used, including
evaluating the effectiveness of the
prescription drug benefit and its impact
on health outcomes, performing
Congressionally mandated or other
demonstration and pilot projects and
studies, reporting to Congress and the
public regarding expenditures and other
statistics involving the Medicare
prescription drug benefit, studying and
reporting on the Medicare program as a
whole, and creating a research resource
for the evaluation of utilization and
outcomes associated with the use of
prescription drugs. Balancing these
important objectives with the potential
sensitivity of PDE data, we implemented
a rule that ensures that, subject to many
safeguards put in place to guard against
inappropriate use and disclosure of
commercially sensitive and beneficiary
identifiable information, Part D PDE
data are available for research purposes
under similar data sharing processes to
those used for sharing Parts A and B
claims data. While we agree with the
commenter that in some situations, even
if we provide samples of PDE data with
masked plan identifiers, public
information may be added to the PDE
record to identify the particular plan,
we believe that our data sharing
procedures mitigate against any
inappropriate use or disclosure. Under
these procedures, we require each
researcher to sign a Data Use Agreement
(DUA) that spells out the multiple
restrictions on the use of the data and
the penalties for any failure to comply
with the terms of the agreement. In
addition, we require research using
beneficiary identifiable data to be
conducted by an experienced entity at a
reputable organization, with an
appropriate research design, and with
assurances to protect beneficiary
confidentiality. Research is to be made
available to the public and identifiable
data is not released for commercial
purposes. Further we will only release
beneficiary identifiable data for research
purposes if the CMS privacy board
approves the data release and then, will
only release the minimum data
necessary for the study. We believe
these procedures allow us to safely
balance the need to support legitimate
research while at the same time
guarding against the misuse or
inappropriate disclosure of data that is
sensitive in nature.
Comment: A commenter asked to
what extent are PDE data uses and
disclosures subject to requests under the
Freedom of Information Act (FOIA).
Response: Requests for Part D PDE
data should be directed through our
contractor, the Research Data Assistance
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Center, at https://www.resdac.umn.edu/,
as opposed to FOIA. However, as noted
in our May 28, 2008 final rule on Part
D claims data, if a FOIA request is
received for PDE data used for nonpayment purposes, we will follow our
ordinary FOIA procedures and not
release under FOIA data the agency
determines are trade secrets, or
commercial or financial information
protected by FOIA Exemption 4 (5
U.S.C. 552(b)(4).
Comment: Commenters opposing the
rule pointed out that it does not place
any perimeters on the type of additional
data CMS may classify as claims data,
and thereby make available for
disclosure. The commenters expressed
concern that nothing in the proposed
regulation would require confidentiality
of rebate and pricing information if it
were collected under section 1860D–12
of the Act.
One commenter also questioned CMS’
conclusion that we could use section
1860D–12(b)(3)(D) of the Act to collect
new elements to the PDE record without
undertaking rulemaking for each
additional element added in the future.
Response: We reiterate that our
authority to collect PDE elements for
non-payment purposes has already been
decided with the clarification of our
authority under 1860D–12(b)(3)(D) of
the Act, as set forth in Medicare Part D
Claims Data rule published on May 28,
2008. Because that final rule was
expressly limited to the 37 original
elements of the PDE claim, it was
necessary for us to undertake further
rulemaking in order to collect new
elements that have been added to the
PDE record. Rather than proposing to
collect only the 3 new elements that
have been added to the PDE record
since 2007, we concluded that it was
appropriate to propose to collect all
elements that are currently part of the
PDE record or that may be added to the
PDE record in the future. As we stated
in the preamble to the October 22, 2009
proposed rule, we believe that the
ability to analyze new claims-related
elements added to the PDE record
would increase both specific and
general knowledge of Medicare
beneficiaries’ healthcare and the
operation of the Part D program and
would aid in our ability to conduct
program oversight, support operational
tasks, and provide more information for
use in internal and external healthcare
research studies. These rationales apply
not only to the collection of the 3 new
PDE elements that have been added
since 2007, but also to the collection of
any new elements that may be added in
the future. Furthermore, the addition of
more PDE elements beyond those that
PO 00000
Frm 00089
Fmt 4701
Sfmt 4700
19765
are currently collected is at the
Secretary’s discretion and will be
diligently reviewed and accorded the
proper protection consistent with the
principle outlined in the May 28, 2008
final rule. Plan sponsors will be notified
of any changes to the collection of PDE
data through the CMS Call Letter to Part
D plan sponsors, or via HPMS
memoranda. Therefore, we do not
believe it is necessary to undertake a
separate rulemaking to authorize CMS,
to use section 1860D–12 of the Act to
collect each new element that we may
add to the PDE record in the future.
Comment: Some commenters opposed
sharing the Plan identification element
from the PDE record in an unencrypted
form with HHS grantees expressing
concern about the data security and the
need to protect sensitive data, and
arguing that encrypted data should
satisfy most research needs. Other
commenters supported the PDE data
sharing provisions in the proposed rule,
with some supporting a proposed option
in the preamble of the proposed rule
that would also permit grantees of nonHHS Federal agencies access to plan
identifiers. One commenter supporting
the rule asked that we go further and
with proper restrictions allow access to
plan identifiers to all legitimate
researchers.
Response: After the Part D Data rule
was published in May 2008, we limited
the use of actual plan identifiers, but
after gaining experience in releasing
Part D data it soon became apparent that
there was a compelling need for other
HHS (such as FDA and NIH) agencies to
use plan identifiers in their linking,
oversight and research (for example,
influence of brand name recognition,
and benefit design on consumer choice)
under certain conditions. These
agencies cannot possibly conduct all of
their own research. Accordingly, they
engage grantees to perform approved
studies. These studies often assist CMS
in better understanding and improving
the Medicare program. Furthermore,
HHS is able to affect more oversight of
its own grantees through the threat of
future withdrawal of funding—a great
disincentive for researchers—should
any terms of the data use agreements be
broken (as opposed to a study
independently funded by a University).
Therefore, with this final rule we are
permitting access to plan identifiers
HHS grantees for nonpayment purposes
when the following conditions are
present:
• The plan identifier is essential to
the study and there is no other source
of CMS data that would substitute for
plan identifiers in order to carry out the
study;
E:\FR\FM\15APR2.SGM
15APR2
19766
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
• The study is key to the mission of
the sponsoring agency;
• The study provides a benefit to the
Medicare program; and
• The requestor attests that any
public findings or publications will not
identify plans or plan sponsors.
While we believe that similar benefits
may accrue to grantees of non-HHS
entities and to many external
researchers conducting studies of
beneficiary plan choices, we believe that
additional time is needed to evaluate
this issue. Therefore, for now, we will
limit the exception to the prohibition
against releasing unencrypted plan
identifier elements to external entities
in § 423.505(m)(1)(C) to HHS grantees at
this time.
Comment: One commenter asked for
clarification on whether or not CMS
intended to allow unencrypted data to
be transmitted to requesters of data. The
commenter had concerns with regard to
potential risk of violation of the security
rules under HIPAA.
Response: We ensure that any data
transmission is done only after
undergoing an approval process that
requires requesters to detail their
security procedures during
transmission, storage of and access to
Part D data.
Comment: Another commenter
wanted clarification as to whether the
fields discussed in the proposal had
already been added to the PDE layout.
Response: We note that the vaccine
administration fee and the rebate at
point-of-sale were added to the original
37 elements for CY 2008, and that in the
2010 Call Letter we notified sponsors
that a 40th element, Prescription Origin
Code, collected on an optional basis in
2009, would be part of the mandatory
reporting requirements beginning
January 1, 2010.
Comment: A commenter asked about
downstream entities, noting that the
rule does not specify who may have
access to this sensitive data.
Response: We share the commenter’s
concerns over the re-release of data to
entities not included on the DUA.
Under our current data sharing
procedures, researchers or other
external entities wishing to re-release
Part D data must notify us and receive
express permission for any subsequent
release, with appropriate modifications
made to any DUAs.
F. Changes To Implement New Policy
This section addresses two policies
under Parts C and D respectively. Under
Part D, we proposed new regulatory
requirements pertaining to the required
inclusion of protected drug categories
and classes on Part D formularies. While
our proposals initially were intended to
implement provisions in section 1860D–
4(b)(3)(G) as in effect at the time of our
October 22, 2009 proposed rule, since
that time on March 23, 2010 section
3307 of the PPACA was enacted.
Rather than specifying statutory
criteria for identifying protected classes
of drugs, as did section 1860D–
4(b)(3)(G)(i) of the Act at the time of the
proposed rule, section 1860D–4(b)(3)(G)
of the Act now provides that the
Secretary shall establish criteria for
determining ‘‘classes of clinical
concern’’ and until such time as the
Secretary establishes such criteria, the
following six classes of drugs shall be
protected: anticonvulsants,
antidepressants, antineoplastics,
antipsychotics, antiretrovirals, and
immunosuppressants for the treatment
of transplant rejection. As there are
many provisions in the PPACA affecting
Medicare Part D beneficiaries, we
believe it is important to take some time
to thoughtfully consider how best to
establish appropriate criteria. As such,
and in accordance with 1860D–
4(b)(3)(G) of the Act, we are protecting
the six statutorily-specified drug classes
and categories of drugs of ‘‘clinical
concern’’ and will turn in the future to
consider the criteria the Secretary
would issue under the statute.
Under Part C, we proposed to revise
our rules to allow beneficiaries who
elect MSAs as a type of health insurance
plan to pay only a pro-rated deductible
if their MSA deposit is pro-rated
because they enroll after January 1.
These revisions are detailed in Table 6.
TABLE 6—REVISIONS TO IMPLEMENT NEW POLICY
Part 422
Part 423
Provision
Subpart
sroberts on DSKD5P82C1PROD with RULES
Provide Criteria and a Process for identifying Protected Classes of
Drugs.
Pro-rating the Plan Deductible for Part C MSA Enrollments Occurring
During an Initial Coverage Election Period.
1. Protected Classes of Concern Under
Part D (§ 423.120(b)(2)(v))
In the October 22, 2009 proposed rule,
based on comments that we received on
an earlier January 16, 2009 interim final
rule with comment period (IFC) (74 FR
2881), we proposed criteria and
procedures for identifying ‘‘protected
classes’’ of drugs, within which all
covered Part D drugs must be included
in Part D formularies. While we had
previously identified six such classes
under our authority in section 1860D–
11(e)(2)(D) of the Act to ensure that
formularies were not discriminatory,
section 176 of MIPPA added a new
section 1860D–4(b)(3)(G)(i) to the Act
which required the Secretary, effective
plan year 2010, to address the issue of
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Frm 00090
Fmt 4701
Subpart
Section
N/A ...............
N/A
Subpart C .....
§ 423.120(b)(2)(v)
Subpart C .....
§ 422.103
N/A ...............
N/A
protected classes and undertake to
identify classes of drugs that met two
criteria specified statutory criteria:
• Restricted access to the drugs in the
category or class would have major or
life threatening clinical consequences
for individuals who have a disease or
disorder treated by drugs in such
category or class.
• There is a significant need for such
individuals to have access to multiple
drugs within a category or class due to
unique chemical actions and
pharmacological effects of the drugs
within a category or class.
Under section 176 of MIPPA, the
Secretary was provided discretion to
establish exceptions permitting Part D
sponsors to exclude from their
PO 00000
Section
Sfmt 4700
formularies, or to otherwise limit access
to (including utilization management
restrictions or prior authorization),
certain Part D drugs in the protected
categories and classes. Section 176 of
MIPPA required that such exceptions be
subject to a public notice and comment
process.
In the October 22, 2009 proposed rule,
we proposed interpreting several of the
statutory terms used in the criteria set
forth in section 176 of MIPPA to better
define the scope of the protections
afforded under that section. To that end,
we proposed to add several new
definitions at § 423.100, including:
‘‘restricted access,’’ ‘‘major or lifethreatening clinical consequences,’’
‘‘significant need for access to multiple
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
drugs,’’ ‘‘a short period of time,’’ and
‘‘multiple drugs.’’ Further, we proposed
that the MIPPA protections did not
apply to non-Part D drugs and their
exclusion from the formulary
requirements would not be based on the
exceptions authority under section
1860D–4(b)(3)(G)(iii) of the Act.
We also proposed to add a new
paragraph to § 423.120(b)(2) to identify
exceptions to the inclusion of all drugs
meeting the criteria set forth in section
176 of MIPPA and our implementing
regulations. Under proposed
§ 423.120(b)(2)(vi), exceptions would
include the following:
• Drug products that are determined
to be therapeutic equivalents under the
FDA’s Orange Book.
• Edits that limit the quantity of
drugs due to safety.
• Other drugs that we may specify
through a process that is based upon
scientific evidence and medical
standards of practice (and, in the case of
antiretroviral medications, is consistent
with the Department of Health and
Human Services Guidelines for the Use
of Antiretroviral Agents in HIV–1–
Infected Adults and Adolescents) and
which permits public notice and
comment. We welcomed comment on
these proposed definitions and
clarifications.
Finally, we noted in the preamble to
the October 22, 2009 proposed rule that
we continue to believe that the best way
to determine which drug classes and
categories should be identified as a
protected class and category is through
a data-driven process, which includes
an analysis of prescription drug event
data, a review of widely used treatment
guidelines, validation of the results by
a expert committee of clinicians, and
acceptance by the Secretary.
We also offered two approaches for
consideration, and solicited comment
on which option the public believed
would allow us to make timely
determinations in a transparent manner.
Those options were—
• Option 1: Announce protected
classes through subregulatory guidance
(for example, the Call Letter) that
provides a notice and comment process
but does not entail formal Federal
Register notice and comment
rulemaking; and
• Option 2: Announce the protected
classes through formal notice and
comment rulemaking.
Since issuance of the October 22,
2009 proposed rule, the PPACA was
enacted. Accordingly, new section
1860D–4(b)(3)(G) of the Act replaces
section 176 of MIPPA. Section 1860D–
4(b)(3)(G) of the Act requires a PDP
sponsor to include ‘‘all’’ covered part D
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
drugs in the categories and classes
identified by the Secretary as classes
and categories of ‘‘clinical concern.’’ It
requires the Secretary to establish
criteria to determine, as appropriate,
categories and classes of drugs of
‘‘clinical concern.’’ It provides for an
exceptions authority similar to the one
included in section 176 of MIPPA.
Section 3307 of PPACA further requires
that until the Secretary establishes
criteria to determine classes of ‘‘clinical
concern,’’ the following categories and
classes of drugs shall be identified and
protected as classes of ‘‘clinical
concern’’: anticonvulsants,
antidepressants, antineoplastics,
antipsychotics, antiretrovirals, and
immunosuppressants for the treatment
of transplant rejection.
Given that PPACA was recently
enacted and there are many provisions
affecting Medicare Part D beneficiaries,
we need time to thoughtfully consider
how best to establish criteria to identify
classes and categories of drugs of
‘‘clinical concern.’’ Accordingly,
consistent with the PPACA, at this time
we are requiring that PDP sponsors
include all covered part D drugs in the
following categories and classes:
anticonvulsants, antidepressants,
antineoplastics, antipsychotics,
antiretrovirals, and
immunosuppressants for the treatment
of transplant rejection. This requirement
will be in effect for plan year 2011 and
until such time as we undertake
additional notice-and-comment
rulemaking to establish the criteria for
identifying classes and categories of
drugs of ‘‘clinical concern.’’ Continuing
to protect the current six classes of
‘‘clinical concern’’ will ensure that
beneficiaries will continue to have
access to the medications they need and
will not experience a disruption in care.
We note that PPACA requires that
sponsors cover ‘‘all’’ Part D drugs rather
than ‘‘all or substantially all’’ as required
under section 30.2.5 of the Prescription
Drug Manual.
Consistent with this approach, we
have decided to adopt, in regulatory
text, neither the criteria we proposed in
the October rule which were specified
by MIPPA for identifying classes and
categories of drugs of ‘‘clinical concern,’’
nor the definitions used to interpret the
MIPPA criteria. However, we are
retaining the exceptions process in the
regulatory text, as new Section 1860D–
4(b)(3)(G) of the Act retains the
exceptions process established under
MIPPA.
Comment: Several commenters
expressed opposition to our exception
that inclusion of ‘‘all covered Part D
drugs’’ on formulary from a protected
PO 00000
Frm 00091
Fmt 4701
Sfmt 4700
19767
class or category does not extend to the
inclusion of all brand-name drugs and
generic versions of a covered drug in
question. They argue that this exception
is inconsistent with other CMS
formulary requirements, namely our
midyear formulary change policy for
which they argue that CMS makes it
clear that a brand-name drug and its
generic counterpart are different ‘‘drugs’’
for the purpose of submitting formulary
changes. In addition, one commenter
expressed concerns about different
exceptions in therapeutic equivalent
products, stating that some may not
provide the same benefit in the
physician’s judgment.
Response: We disagree with the
commenters’ arguments. It is important
to distinguish our formulary change
policy from the definition of a ‘‘drug’’ for
the purpose of explaining therapeutic
equivalence. For the protection of
beneficiaries who may experience cost
sharing changes, we require that when
a new generic equivalent is released into
the market and a plan sponsor proposes
to add the new generic to its formulary
and remove the brand-name drug, we
approve the change and notice be sent
to affected beneficiaries to make them
aware that a generic equivalent is
available and that there may be a change
in their cost-sharing if they continue to
take the brand-name.
For the purpose of formulary
submission to us, our regulations
specify at § 423.120(b)(2)(i) that two
therapeutically equivalent drugs cannot
be used to satisfy our requirement that
there be at least two drugs per category
and class on formulary. Contrary to the
commenters’ assertions, we believe this
existing formulary requirement is
consistent with our proposal in that
both standards acknowledge that
therapeutically equivalent products are
the same drug. Further, as stated in our
January 28, 2005 Part D final rule (70 FR
4260), inclusion of ‘‘all covered Part D
drugs’’ within a class or category of
clinical concern does not extend to
inclusion of all brand-name drugs and
generic versions of the covered drug in
question. The Orange Book, published
by the FDA, is a widely accepted
standard for determining therapeutically
equivalent drugs within the same class/
category (see https://www.accessdata.
fda.gov/scripts/cder/ob/default.cfm).
Therefore, we disagree that our policy
stating that inclusion of ‘‘all covered
Part D drugs’’ on formulary from a
protected class or category does not
extend to the inclusion of all brandname drugs and generic versions of a
covered drug in question is somehow
inconsistent with other formulary
policies.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19768
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Finally, with regard to the one
comment that some therapeutically
equivalent drugs may not provide the
same benefit in the physician’s
judgment, we note that a beneficiary,
working with his or her physician, may
pursue an exception if they believe that
a drug considered to be a therapeutic
equivalent is not providing the same
benefit as the brand drug originally
prescribed.
Comment: Several commenters
oppose the application of any utilization
management edit applications for
protected class drugs. Other
commenters contended that our
proposal undermines the benefits of
formulary and utilization management
processes. A few commenters in
particular oppose our exception for
drugs ‘‘with very limited applicability to
the Medicare Part D population and
non-Part D drugs’’ to be included on
formulary under the regulatory
protected classes provision, arguing that
if a drug fits the criteria, it should be
protected.
Response: We disagree with these
commenters. Consistent with the
definition of a Part D drug under
§ 423.100, we do not require inclusion
on formularies those drugs that are paid
for under Part B (for example, ‘‘incident
to’’ drugs supplied and administered by
physicians during patient visit and paid
for under Part B), and drugs whose
regulatory status under the definition of
a Part D drug is unknown. To do so
when they are not payable under Part D
would lead to beneficiary confusion.
Therefore, we are maintaining this
policy in this final rule.
Comment: A few commenters
expressed concern over CMS’s proposal
permitting the use of utilization
management processes that limit the
quantity of drugs under protected
classes due to safety. One commenter
argues that this policy would create a
significant opening for plans to expand
‘‘restrictive policies’’ and that CMS
should be clear on what we mean by
safety edit. The commenter asserted that
it is important for CMS to further define
what a valid safety edit is and to
specifically link it to prevention of
imminent harm to the health of the
beneficiary. Another commenter
asserted that the safety of any course of
drug therapy is a clinical concern and
it is critical for utilization controls not
to interfere with appropriate clinical
decisionmaking. This commenter notes
that the imposition of safety-based
quantity limitations—even where wellintentioned—may harmfully interfere
with patient needs if his or her clinical
context is not fully taken into account.
The commenter suggested that in
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
evaluating safety-based exceptions, CMS
should not rely only on information
contained in the package insert, but
should also consider clinical trial data
and accepted standards of care.
Response: We have been clear on
what is meant by a safety edit. As
indicated in section 30.2.2.1of Chapter 6
of the Medicare Prescription Drug
Manual (see https://www.cms.hhs.gov/
PrescriptionDrugCovContra/downloads/
R2PDBv2.pdf), safety edits refer to
point-of-sale (POS) edits implemented
to satisfy concurrent drug utilization
review (DUR) requirements set forth in
§ 423.153(c)(2). Examples include
screening for therapeutic duplication,
age or gender-related contraindications,
over-utilization, under-utilization, drugdrug interactions, incorrect drug dosage
or duration of drug therapy, drug-allergy
contraindications, and clinical abuse/
misuse. For the protection of
beneficiaries, we continue to believe
that the protected classes provision
must not interfere with this POS DUR to
help ensure that adverse events do not
occur. We believe that such edits must
be consistent with FDA labeling to
ensure that they are based on scientific
evidence and medical standards of
practice. To the extent that an
individual’s clinical needs require a
quantity greater than permitted under
the FDA labeling, we believe that the
exceptions process is the appropriate
vehicle for resolution of such cases.
Finally, in response to the comment that
permitting the use of safety edits would
create a significant opening for plans to
establish restrictive policies, we
disagree. Rather, our guidance is clear
that edits need to conform to FDA
labeling. To the extent that a plan
sponsor would establish safety edits that
were more restrictive than FDA labeling
contrary to our guidance, we would
likely uncover such edits through
complaints or through a review of
exceptions and appeals data and would
instruct the plan to revise its processes
immediately.
Comment: A commenter requested
that CMS clarify what is meant by
‘‘scientific evidence’’ and specify how
the use of such evidence would be
validated with respect to CMS’
proposed language that we may identify
other exceptions ‘‘through a process that
is based upon scientific evidence and
medical standards of practice (and, in
the case of antiretroviral medications, is
consistent with the Department of
Health and Human Services Guidelines
for the Use of Antiretroviral Agents in
HIV–1–Infected Adults and
Adolescents) and which permits public
notice and comment).’’ Another
commenter urged CMS to establish any
PO 00000
Frm 00092
Fmt 4701
Sfmt 4700
exception to the inclusion of all drugs
and biologicals in a protected category
or class only when warranted by
scientific evidence and medical
standards of practice, and only after a
notice and comment period.
Response: We will undertake future
rulemaking to identify additional
exceptions, as necessary. Further, where
appropriate, we will provide the citation
for the supporting scientific evidence
and medical standards of practice to
support our findings. We note that an
example of scientific evidence may
include information contained in the
FDA drug approval records or may
include evidence referenced in widelyused treatment guidelines, such as those
approved by the Agency for Healthcare
Research and Quality (AHRQ).
2. Pro-rating the Plan Deductible for Part
C MSA Enrollments Occurring During
an Initial Coverage Election Period
(§ 422.103)
In the October 22, 2009 proposed rule,
we proposed to revise the regulations to
provide for the pro-rating of the plan
deductible under an MA MSA plan in
the case of enrollments occurring during
an initial coverage election period at a
time other than the beginning of the
year. As we noted in the preamble to the
proposed rule, section 1851(a)(2)(B) of
the Act provides that Medicare
Advantage Medical Savings Account
(MSA) plans are a type of MA plan that
a MA-eligible Medicare beneficiary can
elect to receive his or her Medicare Part
A and B benefits. An MSA plan
combines both a tax advantaged Medical
Savings Account (MSA) and a highdeductible health insurance policy.
Under this MA plan option, Medicare
pays the MA organization offering the
MA plan the premium amount charged
by the organization for a highdeductible insurance policy and the
remainder of the MA payment amount
is deposited in the enrollee’s MSA. If an
individual enrolls in such a plan
midyear, under section 1853(e) of the
Act, a pro-rated share corresponding to
the number of months remaining in the
calendar year is placed into the
individual’s savings account. However,
as provided under § 422.103(d)
beneficiaries newly eligible for
Medicare who enroll in MSAs midyear
pursuant to an initial coverage election
period (ICEP) are currently required to
pay the full ‘‘high deductible’’ for the
calendar year. For example, an enrollee
whose 65th birthday is in May and who
chooses to enroll May 1 will be given 8/
12ths of the deposit that has been
approved for the plan for the year, but
this enrollee is required to pay the full
deductible approved for the plan for the
E:\FR\FM\15APR2.SGM
15APR2
19769
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
entire calendar year. An enrollee whose
65th birthday is later in the year could
enroll, for example, on September 1 and
would receive a pro-rated deposit
representing only 4/12ths of the year;
however, this enrollee would also be
required to pay the full calendar year
deductible.
The deductible under an MSA plan is
governed by section 1859(b)(3)(B) of the
Act, which specifies the maximum
amount of what the statute refers to as
the ‘‘annual deductible’’ under an MSA
plan. In the October 22, 2009 proposed
rule, we proposed to infer from the
statute’s use of the term ‘‘annual’’ that
the deductible amount at issue was
intended to apply to a full 12-month
period, and thus to specify in a
proposed revised § 422.103(d) that an
individual who enrolls in an MSA plan
under an ICEP other than at the
beginning of the calendar year would
only be subject to that portion of the
‘‘annual’’ deductible corresponding to
the number of months in which the
individual is enrolled. Interested
beneficiaries would be able to inquire
with organizations sponsoring MSA
plans about their options prior to
enrollment, and, upon enrollment,
would receive a confirmation of
enrollment letter that would inform
them of both their pro-rated deposit
amount and their pro-rated deductible.
As the result of our review and
consideration of commenter support for
our proposal, we are modifying
§ 422.103(d) in this final rule to provide
for a pro-rated deductible in the case of
any beneficiary enrolling in an MSA
plan after January 1, not just an
enrollment pursuant to an ICEP.
Comment: A commenter supported as
‘‘positive’’ our proposal to ‘‘revise the
regulations to specify that beneficiaries
who enroll in a Part C MSA during the
year’’ be required to ‘‘pay only a prorated deductible consistent with a prorated deposit.’’
Response: While the commenter’s
point in support of the policy rationale
for our proposed revision to
§ 422.103(d) was made in the context of
our proposal to pro-rate deductibles for
beneficiaries who enroll after January 1
under an ICEP, the commenter’s point
in support of symmetry between a prorated deposit and a pro-rated deductible
would apply to any situation in which
a beneficiary enrolls in an MSA plan
after January 1. It is noteworthy that the
language in section 1853(e) of the Act
limiting the Medicare payments to
months in which the individual is
enrolled is not limited to a late
enrollment under an ICEP. We thus
believe that the symmetry supported by
the commenter should apply in all cases
of midyear enrollment in an MSA plan.
For example, a beneficiary who receives
a special election period for relocating,
and enrolls in a MSA plan after January
1, should be required to pay only a prorated deductible. Therefore, we are
modifying § 422.103(d) in this final rule
to allow all beneficiaries who enroll in
a MSA plan midyear to pay a pro-rated
deductible.
G. Changes to Clarify Various Program
Participation Requirements
This section addresses proposals from
the October 22, 2009 proposed rule that
would either clarify existing regulations
or implement new requirements
consistent with existing policy
guidance, to assist MA organizations
with and PDP sponsors in attaining the
goals envisioned by the Congress when
the legislation implementing the
Medicare Advantage and Prescription
Drug Benefit programs was first passed.
These clarifications are detailed in
Table 7.
TABLE 7—CLARIFICATIONS OF VARIOUS SPONSOR PROGRAM PARTICIPATION REQUIREMENTS
Part 422
Part 423
Provision
sroberts on DSKD5P82C1PROD with RULES
Subpart
Clarify what we mean by
uniform benefits.
Ensure security of protected health information
and other personally
identifiable information.
Require plans to report
other payer information
to support coordination
of benefits (COB).
Visitor/Traveler Benefit
under Part C for the Purpose of Extending Enrollment up to 12 Months.
Codify authority to establish (MTM) Program requirements.
Clarify Pharmacy & Therapeutics (P&T) Committee
requirements.
Generic equivalent disclosure.
Application of access
standards at application
level.
Standard Timeframe for
coverage determinations.
Clarify Novation requirements.
VerDate Nov<24>2008
Section
Subpart
Subpart C ..........................
§ 422.100(d) ......................
Subpart C ..........................
§ 423.104.
Subpart K ..........................
§ 422.504 ...........................
Subpart K ..........................
§ 423.505.
Subpart C ..........................
§ 422.108 ...........................
Subpart C ..........................
§ 423.464.
Subpart B ..........................
§ 422.74 .............................
N/A ....................................
N/A.
N/A ....................................
N/A ....................................
Subpart D ..........................
§ 423.153(d).
N/A ....................................
N/A ....................................
Subpart C ..........................
§ 423.120.
N/A ....................................
N/A ....................................
Subpart C ..........................
§ 423.132.
N/A ....................................
N/A ....................................
Subpart C ..........................
§ 423.120.
N/A ....................................
N/A ....................................
Subpart M .........................
§ 423.568.
N/A ....................................
N/A ....................................
Subpart L ..........................
§ 423.551.
18:07 Apr 14, 2010
Jkt 220001
PO 00000
Frm 00093
Fmt 4701
Sfmt 4700
E:\FR\FM\15APR2.SGM
15APR2
Section
19770
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
TABLE 7—CLARIFICATIONS OF VARIOUS SPONSOR PROGRAM PARTICIPATION REQUIREMENTS—Continued
Part 422
Part 423
Provision
Subpart
sroberts on DSKD5P82C1PROD with RULES
Cost Contract Program revisions: Appeals and
Marketing Requirements.
Subpart O ..........................
1. Uniform Benefits Under Parts C and
D (§ 422.100(d) and § 423.104(b))
In the October 22, 2009 proposed rule,
we proposed to revise § 423.104(b) to
mirror the language at § 422.100 to
specify that Part D sponsors apply
uniform premiums and cost-sharing. As
we noted in the proposed rule, section
1852(d)(1)(A) of the Act requires a MA
organization offering a plan to select the
providers from whom the benefits under
the plan are provided so long as the
organization makes such benefits
available and accessible to each
individual electing the plan within the
plan’s service area with reasonable
promptness and in a manner which
assures continuity in the provision of
benefits. Section 1860D–2(a) of the Act
defines qualified prescription drug
coverage to mean access to standard or
actuarially equivalent prescription drug
coverage and access to negotiated prices
(in accordance with section 1860D–2(d)
of the Act). We codified these sections
of the statute in our regulations at
§ 422.100(d) and § 423.104(b) prior to
the proposed rule, but believed that
§ 423.104(b) should be further clarified
in regards to the PDP sponsor’s
imposition of uniform premiums and
cost sharing. In this final rule, we adopt
this provision as proposed with a minor
revision.
Comment: One commenter is
concerned about how the uniform
requirement would be applied in
unusual circumstances that may not be
in the enrollee’s best interests. For
example, the commenter asked what
would happen if an enrollee has already
paid the applicable cost sharing amount
once, but by no fault of the beneficiary,
the drug is either no longer usable, or
available because of a natural disaster.
Waivers should be considered in these
special circumstances.
Response: The circumstance the
commenter refers to is more
appropriately addressed by our
emergency access policy and not by a
revision to, or waiver of, the uniform
benefit requirement. Our emergency
access policy is currently provided in
Chapter 5 of the Medicare Prescription
Drug Benefit Program Manual and
VerDate Nov<24>2008
Section
18:07 Apr 14, 2010
Jkt 220001
§ 417.428
§ 417.492
§ 417.494
§ 417.500
§ 417.640
Subpart
...........................
...........................
...........................
...........................
...........................
N/A ....................................
outlines our expectations of Part D
sponsors when administering the Part D
benefit during a natural disaster or
public health emergency.
2. Ensuring the Security of Protected
Health Information (PHI) and Other
Personally Identifiable Information
(§ 422.504 and § 423.505)
In our October 2009 proposed rule (74
FR 54690), we specified that we
interpret the Secretary’s right to audit or
inspect the facilities of MAOs and Part
D sponsors to monitor compliance with
MA and Part D program regulations as
including the evaluation of compliance
with our requirements for maintaining
the privacy and security of protected
health information (PHI) and other
personally identifiable information of
Medicare enrollees. In order to clarify
our policy that beneficiaries’ PHI and
other personally identifiable
information must remain secure, we
proposed to revise § 422.504 and
§ 423.505 to make this interpretation
explicit. In a related change, we
proposed to clarify that we interpret the
term ‘‘facilities’’ to include an MAO’s or
Part D sponsor’s computer or other
electronic systems. We proposed to
implement these proposed changes at
§ 422.504(e)(1)(ii) and § 423.505(e)(1)(ii).
We also proposed conforming changes
to the contract requirements related to
downstream entities at § 422.504(i)(2)(i)
and § 423.505(i)(2)(i), respectively. We
noted in the preamble to the proposed
rule that we may review systems and
computer information generated by
downstream and related entities for
compliance with privacy and security
requirements. Such information
includes, but is not limited to, backup
tapes, print outs of screen shots, CDs,
and similar information, whether in the
possession of a downstream or related
entity or obtained from such entities by
the MAO or Part D sponsor. We are
adopting the revisions to § 422.504 and
§ 423.505 as specified in the proposed
rule.
Comment: Several commenters
supported the proposed provisions with
one commenter suggesting that CMS
draw upon its expertise in evaluating
PO 00000
Frm 00094
Fmt 4701
Sfmt 4700
Section
N/A.
and assessing plan compliance with
personal health information-related
requirements.
Response: We appreciate the
suggestion and will consider this as we
develop any additional guidance on
PHI-related requirements.
Comment: A commenter questioned
CMS’ authority to request backup tapes
and computer-generated information
held by pharmacies as part of CMS’
review of privacy/security of PHI
requirements. The commenter writes
that tapes and computer data can
contain information beyond that
normally submitted by plans and which
is often unrelated to a pharmacy’s Part
D contract. If CMS is, in fact, asking for
information outside of that provided as
part of the pharmacies’ contracts with
Part D plans or claims data that
pharmacies routinely submit, the
commenter requests that CMS clarify its
authority for doing this.
Response: Although we have the
authority to review information
generated in connection with the
downstream or related entity’s contract
with an MAO or Part D sponsor,
including information related to
compliance with privacy and security
requirements, it has never been our
intent to review documents or
information unrelated to a pharmacy’s
or other downstream or related entity’s
Part C or Part D contract.
3. Requirement for Sponsoring
Organizations Under Parts C and D to
Report Other Payer Information to the
Coordination of Benefits Contractor
(§ 422.108, § 423.462, and § 423.464)
In the October 22, 2009 proposed rule,
under the authority of sections
1852(a)(4) and 1860D–2(a)(4) of the Act,
we proposed to require the reporting of
other coverage information in § 422.108
for MA organizations and § 423.462 and
§ 423.464 for PDP sponsors. Our
rationale for proposing these changes
was the importance of the other payer
information for Medicare Seconday
Payer (MSP) procedures and for
prescription drug program coordination
of benefits. We proposed to limit
required reporting to that information
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
which is reported to the sponsor as
being inconsistent with existing
information on the COB file.
As we noted in the October 22, 2009
proposed rule, MA organizations are
responsible for identifying payers that
are primary to Part C of Medicare,
determining the amounts payable by
those payers, and for coordinating the
benefits the plan offers with the benefits
of such payers. Additionally, MA
organizations must take into account
Part C costs that could have been
recovered or avoided due to MSP when
determining costs in the base period for
purposes of their MA plan bids. MA
organizations must account for Part C
MSP amounts in one of three ways. MA
organizations must—
• Recover from liable third parties;
• Avoid Part C costs by directing
providers to bill liable third parties
directly; or
• Account for Part C costs that could
have been recovered or avoided, but that
were actually not recovered or avoided,
by not including them in Part C base
period costs.
MA organizations and PDPs are
required to follow the same rules
regarding—
• Their responsibilities under the
MSP statutory and regulatory
provisions;
• Collection of payment from
insurers, group health plans and large
group health plans, the enrollee, or
other entities for covered Part D drugs;
and
• The interaction of MSP rules with
State laws.
A Part D sponsor must also coordinate
with SPAPs, as well as other drug plans,
including Medicaid programs, group
health plans, FEHBP, military coverage,
and other plans or programs providing
prescription drug coverage. To support
the required benefit coordination,
section 1860D–2(b)(4)(D)(ii) of the Act
permits Part D sponsors to request
information on third party insurance
from beneficiaries. In addition, we
noted that the growing number of CMS
data sharing agreements with other
payers has improved the volume and
quality of other payer information
available to MA organizations and
prescription drug sponsors on the COB
data file provided by CMS. New
mandatory insurer reporting of MSP
group health plan coverage, liability
insurance, no-fault insurance, and
workers’ compensation, required by
section 111 of the Medicare, Medicaid,
and State Children’s Health Insurance
Program (SCHIP) Extension Act of 2007
(P.L. 110–173) (MMSEA), further
expands the other payer information
available for MA organization and PDP
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
MSP procedures and for Part D sponsor
COB (see 42 U.S.C. 1395y(b)(7) and (8)).
Most insurers will need to report their
own coverage already. It is only when
an MA organization becomes aware of
coverage that is primary to Medicare
offered by another insurer that it will
need to report under this rule.
Accordingly, given the importance of
the other payer information to MA
organization and PDP MSP procedures
and for prescription drug program
coordination of benefits, we proposed to
include in regulatory text the
requirement that MA organizations and
Part D sponsors, upon being notified of
credible new information regarding
other payers, or changes to existing
other payer information, report this
information to the CMS COB Contractor
(COBC) in accordance with the
processes and timeframes established by
us. The proposed changes would change
the requirement on MA organizations,
but would not change current MSP and
coordination of benefits policy for the
prescription drug program.
We noted that by ‘‘credible’’ we mean
information that is consistent with
conventions for how group health
insurance coverage is identified, for
instance, information that includes the
name and address of the insurance
company and the policy identification
number. We also proposed to extend the
reporting requirements to MA
organizations as they relate to other
primary payers. We noted that original
Medicare, MA organizations, or Part D
sponsors should never be reported to
CMS as a ‘‘primary’’ payer. In the
absence of another (that is, nonMedicare) primary payer, original
Medicare, an MA organization, or a Part
D plan are always primary. This is not
to say that if an enrollee has primary
individual or employer group coverage
with the same insurer or organization
through which they also have MA or
Part D coverage, such primary coverage
should not be reported. In fact, such
coverage must be reported. However,
reporting original Medicare, an MA or
Part D plan themselves as primary
serves no purpose and merely causes
confusion.
After reviewing the comments
received in response to the proposed
rule, we are adopting § 422.108(b)(3)
and § 423.462(b) as proposed.
Comment: A commenter supported
CMS’ proposed Part C reporting
requirement. Another commenter
requested that we revise the new
regulatory language to reference the fact
that we will only require MAOs and
PDPs to report ‘‘credible’’ new
information and that CMS either revise
the regulatory language or mention in
PO 00000
Frm 00095
Fmt 4701
Sfmt 4700
19771
the preamble discussion to the final rule
that we will only require reporting on
information that is inconsistent with
that in the COB data file.
Response: In this final rule, we are
reiterating that the portion of the
preamble discussion in the proposed
rule related to the requirement to report
only MSP and COB information that is
inconsistent with existing information
on the COB data file. We have also
repeated the preamble discussion of
what we mean by ‘‘credible’’ new
information and confirmed that we only
expect MAOs and PDPs to report such
‘‘credible’’ new information to the
COBC. We have not modified the
regulatory language since we believe it
is unnecessary to do so. However, we
have added § 423.464(h), which we
inadvertently omitted from the
proposed rule. Operational guidance, in
the form of our implementing
instructions, will be consistent with
preamble language in both the proposed
rule and this final rule.
Comment: One commenter pointed
out the apparent discrepancy between
the 30-day timeframe for reporting
credible MSP/COB information to the
COBC we mentioned in the preamble of
the October 2009 proposed rule, and the
45-day timeframe for correcting
discrepancies in MSP status (with an
additional 10 days to submit
corrections) discussed in Chapter 5 of
the MSP Manual. The commenter
requested that CMS retain the existing
45-day timeframe, with an additional 10
days for submission to the COBC.
Response: As noted in the preamble of
the proposed rule, section 50.2 of the
Coordination of Benefits chapter of the
Medicare Prescription Drug Benefits
Manual (CMS Publication # 100–18,
Chapter 14, last updated in September
2008) provides for reporting within 30
days of receipt and can be accessed on
the Internet at: https://www.cms.hhs.gov/
prescriptiondrugcovcontra/
12_PartDManuals.asp.
We will consider this comment as we
develop operational guidance related to
the reporting of MSP information
related to Part C by MAOs. However, we
note that the timeframe for reporting
MSP status in section 10.1 of Chapter 5
of the MSP manual is actually the lesser
of 10 calendar days from completion of
the evaluation or 45 calendar days from
receipt.
Comment: A commenter asked if the
requirements in § 422.108 and § 423.462
apply to only MA plans, or if these
requirements also apply to Group
Health Plans.
Response: The regulations at
§ 422.108 apply to MA organizations,
while the regulations at § 423.462 apply
E:\FR\FM\15APR2.SGM
15APR2
19772
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
to both MA organizations offering Part
D benefits as MA–PDs and free standing
PDPs. Information on the rules related
to Group Health Plan reporting of
insurance coverage required by section
111 of MMSEA can be found on the
following Internet Web site: https://
www.cms.hhs.gov/mandatoryinsrep/.
Comment: A commenter noted an
inconsistency between the preamble
and the regulation language. The
commenter stated that CMS seems to
have failed to include regulation
language at § 423.464 requiring Part D
sponsors to report new or changed
supplemental prescription drug
coverage information.
Response: In the preamble of the
proposed rule, we indicated our
intention to revise § 423.464 to include
a new requirement for Part D sponsors
to report new or changed other
prescription drug coverage information
to the CMS COB Contractor. However,
due to an oversight, the regulatory
language for this requirement was not
included in the proposed rule. However,
the preamble discussion of this
proposed requirement put interested
parties on notice that we were
considering imposing a new
requirement on Part D sponsors to
report new or changed prescription drug
coverage information to the CMS COB
contractor. Furthermore, we continue to
believe that this reporting requirement
is necessary to support the effective
coordination of prescription drug
benefits. Accordingly, we are including
this new requirement at § 423.464(h) in
this final rule.
4. Visitor/Traveler Benefit Under Part C
for the Purpose of Extending Enrollment
Up to 12 Months (§ 422.74)
In the October 2009 proposed rule, we
proposed to revise our requirements for
MA visitor/traveler benefits under Part
C. Section 422.74(d)(iii) currently
provides that an MA plan can offer a
‘‘visitor’’ or ‘‘traveler’’ (V/T) type program
which would allow its enrollees to
remain enrolled in the MA plan while
out of the plan’s service area for up to
12 months. Although we stated in the
preamble of the final rule in which
§ 422.74(d)(iii) was promulgated
(August 22, 2003 (68 FR 50848)) that the
visitor or traveler program must cover
the ‘‘the full range of services available
to other members,’’ we did not specify
in regulation text what we intended by
‘‘full range of services.’’
In order to clarify an MA
organization’s obligation to cover
services out of the service area, we
proposed to amend § 422.74(d)(4)(iii) to
specify that an MA organization may
offer an extended enrollment V/T
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
benefit option under an MA plan if that
plan furnishes all plan covered services,
that is, Medicare Parts A and B services
and all mandatory and optional
supplemental benefits at in-network
cost-sharing levels consistent with
Medicare access and availability
requirements at § 422.112. Under this
proposed clarification, MAOs that offer
a V/T benefit under an MA plan would
be required to make the option available
to all plan enrollees. We proposed that
the V/T benefit must be available to all
plan enrollees who are temporarily in
the areas where the V/T benefit is
offered for the 6 to 12 months the
member may remain in the area and stay
enrolled in the MA plan. We are
adopting our proposed revision to
§ 422.74(d) (4) (iii) without further
modification in this final rule.
Comment: A few commenters
supported our proposed revisions to the
V/T benefit requirements. They
indicated that currently there is
confusion surrounding the V/T benefit,
and many beneficiaries have found the
benefit does not provide them with
access to Medicare-covered services
they expected to have when outside
their plan’s network.
One commenter supported providing
Medicare-covered services under the
V/T benefit, but opposed our proposed
requirement to also include optional
supplemental benefits. The commenter
believed that this change would require
organizations to adjust plan premiums
and could ultimately impact an
organization’s decision to offer optional
supplemental benefits if a plan is not
able to develop and meet network
access requirements in the areas in
which it intended to offer the V/T
benefit.
Another commenter objected to the
fact that the proposed revisions are less
flexible than the existing rules
governing V/T benefits and opposed the
proposed requirement to provide
supplemental benefits under the V/T
benefit. The commenter indicated that it
may be more feasible for MA
organizations to enter into arrangements
with providers in other areas of the
country to provide access to Medicarecovered benefits than supplemental
benefits. The commenter recommended
that CMS defer incorporating the
proposed changes into the MA
regulations and instead issue draft subregulatory guidance for public
comment.
Response: We agree with the
commenters supporting our proposal to
require MA organizations that offer a V/
T benefit under an MA plan to furnish
all plan-covered services (Medicare
Parts A and B services and all
PO 00000
Frm 00096
Fmt 4701
Sfmt 4700
mandatory and optional supplemental
benefits) at in-network cost sharing in
the areas where the V/T benefit is
offered. We note that it is optional for
MA organizations to offer a V/T benefit
and that a V/T benefit gives MA
organizations the flexibility to retain
their members when they are outside
the service area for extended periods of
time when they might otherwise be
required to disenroll them for residing
outside the service areas for more than
6 months. We do not agree that
supplemental benefits should be
excluded from a V/T benefit. Since MA
organizations will receive full capitation
payments for enrollees that reside
outside the plan’s service areas for more
than 6 months, we believe that requiring
the plan to cover all plan-covered
benefits will allow the enrollees to
continue to realize the complete benefit
package for which they enrolled in the
plan. An MA organization that is not
able to form a network of direct
contracted providers to furnish
supplemental benefits may, with CMS
approval, allow its enrollees to obtain
these services from non-contracted
providers in the areas in which it offers
the V/T benefit. We are therefore
retaining our proposed changes to
§ 422.74(d)(4)(iii) in this final rule.
5. Medication Therapy Management
Program Requirements (§ 423.153)
In the October 22, 2009 proposed rule,
we proposed to codify our policy
guidance regarding medication therapy
management programs (MTMPs) in the
Part D regulations at § 423.153. As we
noted in the preamble to the proposed
rule, based on the experience garnered
from the first few years of the Part D
program, and as we await further
development of MTMP outcomes
measures that can serve the Part D
program, we have determined that it is
necessary to have more specific Part D
MTMP requirements for enrollment
methods, targeting procedures, and
MTM services. The 2010 Call Letter
included policy guidance regarding the
implementation of MTMPs that
reflected common practices among Part
D MTMPs that were derived from
extensive review of MTMP applications,
plan-reported data, exploratory research
on MTM, informational interviews with
Part D sponsors, and other relevant
literature and data. In the proposed rule,
we indicated that codifying this MTM
guidance in the Part D regulations
would promote greater consistency
across the Part D program, and allow for
better evaluation and comparison of
MTMPs when outcomes measures
become available.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Specifically, in accordance with
sections 1860D–4(c)(1)(C) and 1860D–
4(c)(2) of the Act, we proposed to add
the following regulatory requirements
regarding MTMPs—
• Section 423.153(d)(1)(v) to require
Part D sponsors to enroll beneficiaries in
their MTMPs using only an opt-out
method of enrollment. The opt-out
method of enrollment is currently the
preferred method of enrollment among
Part D sponsors, used by approximately
85 percent of current MTMPs, and has
increased enrollment of targeted
beneficiaries into MTMPs;
• Section 423.153(d)(1)(vi) to require
Part D sponsors to target beneficiaries
for enrollment in the MTMP at least
quarterly during each plan year.
Currently, more than 95 percent of Part
D sponsors target beneficiaries for
enrollment in their MTMPs on a daily,
weekly, monthly, or quarterly basis; and
• Section 423.153(d)(1)(vii) to require
Part D sponsors to offer a minimum
level of MTM services for each
beneficiary enrolled in the MTMP that
includes interventions for both
beneficiaries and prescribers; annual
comprehensive medication reviews; and
quarterly targeted medication reviews.
In addition, we proposed to revise
§ 423.153(d) to clarify which
beneficiaries should be targeted for
MTMP services.
In this final rule, based on the public
comments we received in response to
the proposed rule, we adopt these
provisions with some modification, as
explained below. Specifically, at
§ 423.153(d)(2)(iii), we adopt a specific
dollar threshold of $3,000 in incurred
annual costs for covered Part D drugs,
instead of, as proposed, relying on the
Initial Coverage Limit (ICL) as the
threshold at which plans must target
beneficiaries for MTM services. The
$3,000 cost threshold will be indexed
using the annual percentage increase in
average per capita aggregate
expenditures for Part D drugs, which is
found in § 423.104(d)(5)(iv). We note
that these provisions are consistent with
the changes made in PPACA.
Comment: One commenter is
concerned that the proposed rule does
not ensure adequate payment to
pharmacies for MTM services. The
commenter believes plan sponsors may
shift costs associated with MTMPs to
providers (specifically pharmacies)
through lowered payments. The
commenter urges CMS to require
quarterly reporting of payment to
pharmacies for MTM services and
should ensure that pharmacies are paid
adequately for furnishing these services.
Response: We disagree with the
commenter’s recommendation that CMS
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
require reporting of MTM payment data
to ensure payment adequacy. The noninterference provision at section 1860D–
11(i) of the Act explicitly provides that
the Secretary may not interfere with the
negotiations between pharmacies and
PDP sponsors, which would include
payment negotiations between the Part
D sponsors and pharmacies for MTM
services.
Comment: One commenter
encouraged CMS to require Part D
sponsors to disclose to CMS their
criteria for determining whether a
comprehensive medical review (CMR)
will be performed face-to-face or by
phone.
Response: We appreciate this
comment, but believe that as long as the
CMR is interactive and person-toperson, plans continue to have the
discretion to determine whether it can
be achieved through a phone or other
alternative real-time method. We will
monitor MTM program outcomes and
performance to ensure best practices are
adopted. In the event we receive data
revealing weaknesses in this approach
to CMR, we may consider revising the
CMR minimum requirements in future
rulemaking.
Comment: One commenter suggests
that when enrollees are provided with a
written summary of the interactive
consultation, such summary be
provided promptly to all prescribers
involved in an enrollee’s care.
Response: We agree with the
commenter and believe such written
summaries should be provided
promptly to the provider. However, we
believe the timeframe for the release of
such summaries to providers is better
addressed in the agreements between
the MTM providers and the plans. The
written summaries from the CMR will
vary in complexity, depending upon an
individual’s diagnoses and medication
usage; therefore, the time needed for
preparation of such summaries will
vary.
Comment: A few commenters
indicated that the outcomes of MTMPs
would be enhanced by requiring at least
one initial face-to-face consultation with
a pharmacist to review the patient’s
drug regimen and by offering another
face-to-face consultation at least
quarterly. Another commenter indicated
that the quarterly reviews should be
done person-to-person as this
interaction permits evaluation of cues
that may otherwise be missed if
performed through lower touch
interventions. Furthermore, periodic reevaluations must be conducted and
MTMPs should initiate programs to
detect proactively, on a monthly-basis,
under-utilization of prescribed
PO 00000
Frm 00097
Fmt 4701
Sfmt 4700
19773
medicines for all chronic therapies.
MTMPs should also be required to
initiate interventions to address
underutilization on at least a quarterly
basis.
Response: We appreciate these
comments, but not all beneficiaries can
access the MTM services face-to-face or
at the provider’s location. Furthermore,
we believe permitting alternative
interactive methods (for example, by
telephone or Web cam) will allow the
sponsors to try innovative techniques
that may better serve the beneficiary,
especially when the beneficiary resides
in a remote location or cannot travel to
the provider’s location. We emphasize,
however, that when using alternative
interactive methods, the CMR
interaction must remain a real-time
interaction.
We do not require the quarterly
assessment to be interactive because we
believe lower touch interventions,
coupled with the annual comprehensive
medication review will allow the
patient to be adequately served.
However, we encourage plans, to follow
up with a person-to-person interaction if
the quarterly review reveals that the
patient is facing medication related
problems.
Comment: One commenter indicated
that CMS should clarify what it means
by interactive, person-to-person
consultation. For some hearing impaired
or technically savvy beneficiaries the
Internet is a valuable communication
tool. CMS should allow the use of
emerging technologies to conduct the
CMR.
Response: As indicated in an earlier
response, we agree that the use of
alternative interactive methods be used
by Part D sponsors, as long as the CMR
is conducted in real-time.
Comment: One commenter
recommends sponsors have the
flexibility to determine if an MTMP
intervention should be for member,
prescriber or both. Another commenter
indicated that additional clarification is
needed about any and all prescriber
interventions to ensure that MTM
services are coordinated with and do
not adversely impact on, or interfere
with, the relationship between the
enrollee and his/her prescriber.
Response: Section 423.153(d)(1)(vii),
would require Part D sponsors to offer
interventions to the enrolled beneficiary
and his/her prescriber. As indicated in
the preamble to the proposed rule, this
does not mean that all interventions
must be targeted to both the beneficiary
and prescriber. Instead, sponsors must
determine, based upon the specific
nature of the intervention, whether it
should be targeted to the beneficiary,
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19774
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
the prescriber, or both, in order to
promote coordinated care.
Comment: One commenter indicated
that it is important that CMS clarify how
the MTM requirements will be applied,
if at all, in the long-term care setting.
Furthermore, this commenter asked how
Part D sponsors will coordinate their
efforts with the consultant pharmacists
who conduct monthly drug regimen
reviews for all residents in Medicare/
Medicaid certified facilities.
Response: The same MTM program
requirements apply to long-term care
residents as apply in the outpatient
setting, except that Part D sponsors are
not required to offer an interactive CMR
to targeted beneficiaries in an LTC
setting. The Part D sponsor will still be
required to do the quarterly medication
reviews and offer interventions targeted
to the individual’s prescribers. Part D
sponsors are not required to coordinate
their MTM services with the monthly
drug regimen reviews of the facilities’
consultant pharmacists at this time.
Comment: We received several
comments regarding performance
measures for pharmacists. Commenters
made the following recommendations:
• CMS should continue to use
validated performance-based measures
for pharmacy providers, such as the
Pharmacy Quality Alliance (PQA)
measures. These measures will give
further definition to MTMPs,
distinguish among different pharmacy
providers and the types of MTMPs
provided and appropriately compensate
pharmacists that are able to improve
quality of care.
• CMS should consider additional
performance measures, in conjunction
with participating pharmacists, and the
performance measures should be made
available publicly, on a yearly basis.
The commenter suggested that CMS
adopt only performance measures
established by national voluntary
consensus building.
• CMS should continue to allow as
much flexibility as possible until
evidence can demonstrate what aspects
of an MTMP bring desired results.
• CMS should expand upon existing
data collection and reporting
requirements. At a minimum, reported
data should include—
++ Number of adverse drug events
avoided, categorized by reason;
++ Data on adherence and
persistence by enrollees to their
prescribed drug therapies;
++ Information on the form,
frequency, and types of interventions;
and
++ Data on the per capita
administrative and drug costs under
each program.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Response: We appreciate the
commenters’ interest in this issue. We
will continue to utilize valid
performance measures such as the
measures developed by the PQA. In
addition, we will evaluate MTM
outcome data that we receive under the
Part D reporting requirements to ensure
that Medicare beneficiaries are receiving
effective and appropriate MTM services.
We will also continue to evaluate
MTMPs to ensure consistent guidelines
are applied, and issue best practices
when necessary. We note that an MTM
contract was awarded through 2010 to
assist CMS in monitoring and evaluating
sponsor’s MTM programs.
Comment: Two commenters indicated
that MTM services should be included
as part of access standards for retail
pharmacies. Another commenter
requested that CMS ensure that
pharmacists working in community
pharmacy practice settings (network
pharmacies), and pharmacists
unaffiliated with network pharmacies,
have the opportunity to contract with
Part D plans to provide MTM services.
Response: These comments are
outside the scope of this rulemaking and
therefore we will not be addressing
them in this rule.
Comment: A few commenters
recommend that CMS consider
requiring, or signaling a preference for,
pharmacists to provide MTM services.
Another commenter requested
clarification regarding the
characteristics of an ‘‘other qualified
provider’’ in the regulation and at a
minimum, a requirement that the
provider have demonstrated expertise in
medication use management.
Response: At present, 99 percent of
the MTMPs are utilizing the services of
pharmacists. While CMS believes
pharmacists will continue to be the
main provider of MTM services, the
statute at 1860D–4(c)(2) of the Act
permits plans the flexibility to use other
qualified providers to perform the
MTM. At this time, CMS does not
believe it is necessary to issue
regulations to govern the qualifications
for providers of MTM services, but may
consider rulemaking in the future, if
further data reporting and experience
reveal that additional refinement of the
policy is needed.
Comment: Several commenters
recommend that CMS not set specific
program requirements in regulatory
language, but continue to use the
subregulatory mechanism offered by the
annual industry call letter. They believe
there is insufficient experience to
include MTM policies in regulation, and
the implications of the more detailed
PO 00000
Frm 00098
Fmt 4701
Sfmt 4700
criteria for targeting beneficiaries for
MTMPs are not yet clear.
Response: We disagree with these
commenters regarding placing the
requirements in regulation. This
rulemaking process has afforded both
Part D plans and the public the
opportunity to comment on the MTMP
requirements prior to any changes being
made to the existing requirements.
Furthermore, because the MTMP
requirements are being incorporated in
our regulations, in the event a Part D
sponsor fails to meet its MTMP services
requirements, our ability to enforce
those requirements has been enhanced.
Accordingly, we believe that including
these MTMP requirements in our
regulations will help to ensure that
targeted beneficiaries receive
appropriate MTM services.
Comment: One commenter
recommends that CMS develop
standardized billing and documentation
data sets to eliminate the need for
pharmacists to utilize specific platforms
to obtain payment from different plans.
A standardized data set should include
a measure of a patient’s clinical
outcomes as well as the rates at which
the patient’s providers accept the
pharmacist’s recommendations.
Response: We agree that the adoption
of standardized documentation for
MTM could be helpful in measuring the
outcome of MTM. However, we believe
any such standard documentation or
billing be developed via an industry
standard-setting group, and not by CMS.
Comment: Several comments were
received regarding the MTM targeting
criteria. Specifically, commenters
suggested that CMS—
• Decrease the maximum number of
medications that a plan could require
for a targeted beneficiary to be eligible
for MTM services; currently that
number is eight. One commenter
recommended decreasing the number to
six, to prevent patients taking
combination drug products from being
unintentionally excluded from the
program because a single medication
has replaced two separate drug
products;
• Allow Medicare beneficiaries who
do not qualify for MTM services to
receive MTM services through a referral
or prior authorization process initiated
by their prescriber or pharmacist. Some
patients with only one chronic disease
or less than 8 medications may still
have medication use issues that would
benefit from participation in their plan’s
MTM program; and,
• Require MTM services upon
discharge from the hospital or anytime
a beneficiary undergoes a transition of
care. In both situations beneficiaries
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
would benefit from receiving MTM
services because MTM has the potential
to reduce costly hospital readmissions
due to medication misuse or nonadherence.
Response: The regulation governing
the number of prescriptions an
individual must take before he or she is
targeted for MTM services sets both a
ceiling and a floor on the number of
prescriptions that may be required.
Therefore, a plan sponsor has the
discretion to determine whether to
target beneficiaries taking anywhere
from two to eight medications. Our data
indicate that 85 percent of the plans
reviewed targeted beneficiaries in a
range of two to eight medications.
As for targeting certain other
beneficiaries for MTMP services, our
regulations provide that sponsors must
provide a minimum level of MTM
services to targeted beneficiaries. To the
extent a Part D plan wants to offer
additional MTM services, or provide
MTM services to individuals who do
not meet the targeting criteria, including
those individuals who have undergone
a transition in their level of care, they
may do so. However, additional
administrative reimbursement will not
be available for the provision of these
additional services.
Comment: We received some
comments regarding MTM targeting
frequency. One commenter indicated
that CMS should consider increasing the
minimum requirements regarding the
frequency with which plans conduct
outreach to eligible beneficiaries for
enrollment in MTM programs, and
specifically recommended that
beneficiaries be targeted for enrollment
at least monthly.
Response: The requirement of
quarterly targeting that was included in
the proposed rule, and that is being
adopted into this final rule, is a floor
that Part D sponsors may build upon.
Sponsors may adopt more frequent
targeting than the minimum quarterly
outreach threshold required under the
regulation. We will also continue to
monitor and evaluate MTM programs to
determine if there is any significant
difference in MTM outcomes when
beneficiaries are targeted more
frequently and will consider making
further changes to our requirements if
warranted.
Comment: One commenter believed a
better method for targeting beneficiaries
would be to examine an individual’s
historical and expected aggregate health
care spending using a cost threshold for
eligibility that is based on total
projected Medicare spending, rather
than just Part D spending.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Response: We do not agree with this
approach. Pursuant to section 1860D–
4(c)(2)(A)(ii)(III) of the Act, targeted
beneficiaries are defined as Part D
eligible individuals who ‘‘are identified
as likely to incur annual costs for
covered Part D drugs that exceed a
specified level by the Secretary.’’
Accordingly, the statute does not afford
CMS the flexibility to permit plans to
target individuals for MTM services
based upon their expected aggregate
health care spending. Furthermore,
given the complexity of this suggested
alternative, we believe the collection
and review of health care spending data
prior to determining whether an
individual will be targeted for MTM
services would only delay access to
MTM services.
Comment: One commenter indicated
that a Part D sponsor’s use of an opt-out
only enrollment process for placing
beneficiaries in its MTM programs must
be carried out thoughtfully and
carefully. CMS should require MTM
program policies that promote patient
collaboration with their physicians,
provide adequate enrollment
notification and include clear
instructions on opt-out. CMS should
also undertake an outreach initiative to
physicians.
Response: We appreciate the
commenter’s concerns regarding the
application of the opt-out method to
enroll beneficiaries into MTMPs.
However, we believe the opt-out
approach is critical for the health and
well-being of the Medicare population.
The elderly and disabled populations
are most at risk of polypharmacy
consequences. Therefore, an opt-out
enrollment policy that requires no
further action by the enrollee helps to
ensure that vulnerable individuals will
be enrolled in MTMPs, which we
believe will reduce adverse drug
reactions and ensure safe prescription
drug practices, before their health is at
risk. In addition, CMS has found that
the opt-out enrollment method is the
preferred method among Part D
sponsors to increase the number of
beneficiaries participating in MTMPs. In
2008, fewer than 15 percent of MTMPs
utilized an opt-in method. We will
continue to monitor Part D plans to
ensure they engage in best practices
when applying the opt-out enrollment
method to their plan members.
Comment: One commenter was
concerned that the use of the initial
coverage limit (ICL) as a targeting
benchmark for Part D MTM may elevate
cost considerations over clinical
considerations in targeting beneficiaries
for the Part D MTM program.
PO 00000
Frm 00099
Fmt 4701
Sfmt 4700
19775
Response: To the extent that the
commenter appears to be stating that it
is improper to consider cost
considerations in targeting beneficiaries
for the MTM program, we disagree. As
discussed above, section 1860D–
2(c)(2)(A)(ii)(III) of the Act expressly
instructs CMS to consider costs for Part
D drugs when targeting beneficiaries for
MTM. However, following further
consideration of this issue, reliance on
the ICL, which is specifically tied to the
cost structure of the Part D benefit to
target beneficiaries for MTM may be
problematic. There have been further
legislative proposals to restructure the
Part D benefit, including revising the
ICL, that may have unintended
consequences for basing the MTM
targeting criteria on the ICL.
Accordingly, we believe the
establishment of a specific dollar
threshold is more appropriate and are
reverting back to the $3000 limit, which
we previously established in the 2010
call letter. Consistent with statutory
requirement that drug costs be
considered in targeting beneficiaries for
MTM, we will apply an index that is
equal to the annual percentage increase
in average per capita aggregate
expenditures for Part D drugs.
Specifically, we will adjust the $3000
threshold by the index used to increase
the ICL, as originally proposed, which is
currently found at § 423.104(d)(5)(iv).
The decision to apply a $3000
threshold is based upon program
experience and our analysis of PDE
data. We originally established the
initial $4000 cost threshold at the
inception of the Part D program. At that
time, it was estimated that
approximately 25 percent of the Part D
eligible population would meet the
three criteria and be targeted for MTM
services. After two years of experience
and analysis of plan reported data, we
found that only 10.0 percent of
beneficiaries enrolled in a Part D plan
with an approved MTMP were eligible
for MTMP in 2006 (13.1 percent were
eligible for MTMP in 2007). In 2008, we
conducted an analysis using PDE data
from contract years 2006 and 2007
obtained from the Integrated Data
Repository (IDR) system. The total gross
drug cost and number of beneficiaries
that incurred annual drug costs (below)
or (greater or equal) to the $4000 cost
threshold was determined. The average
number of PDE fills and average cost per
beneficiary was also calculated. Further
analysis examined cost breakouts in
$500 increments to determine the
distribution of beneficiaries, as well as
the number of fills, and gross drug cost
for beneficiaries with annual drug costs
E:\FR\FM\15APR2.SGM
15APR2
19776
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
within these breakouts. It was
determined that close to 25 percent of
Part D enrolled beneficiaries with drug
utilization (beneficiaries with at least
one PDE during the study period)
during 2006 and 2007 had annual gross
drug costs of at least $3000. Therefore,
CMS lowered the cost threshold to
$3000 in the 2010 Call letter. Based
upon our analysis of the most recent
data, it appears that this threshold will
continue to ensure that approximately
25 percent of these beneficiaries
utilizing the Part D benefit receive MTM
services. Accordingly, we are adopting
the $3000 cost threshold in this final
rule.
6. Formulary Requirements—
Development and Revision by a
Pharmacy and Therapeutics Committee
(§ 423.120)
In the October 22, 2009 proposed rule,
we offered further clarifications
surrounding our formulary requirements
associated with pharmacy &
therapeutics (P&T) committees. As we
explained in the preamble to the
proposed rule, section 1860D–4(b)(3)(A)
of the Act requires Part D sponsors to
use a P&T committee to develop and
review the formulary if the Part D
sponsor uses a formulary. In developing
and reviewing the formulary, section
1860D–4(b)(3)(B) of the Act requires the
P&T committee to base clinical
decisions on the strength of scientific
evidence and standards of practice,
including accessing peer-reviewed
medical literature, such as randomized
clinical trials, pharmacoeconomic
studies, outcomes research data, and on
such other information as the committee
determines to be appropriate. The P&T
committee must also consider whether
the inclusion of a particular Part D drug
in a formulary or formulary tier has any
therapeutic advantages in terms of
safety and efficacy.
Based upon our experience with the
formulary development process since
the beginning of the Part D program, we
have come to recognize that the
application of prior authorization (PA)
criteria, step therapy, and quantity
limits are as important to the clinical
soundness of a formulary as the drugs
that are included. Access to Part D drugs
may be influenced as much by the
application of PA criteria, step therapy
requirements, or quantity limit
restrictions as it can be by exclusion of
a Part D drug from a Part D formulary.
Therefore, in accordance with section
1860D–4(b)(3)(A) and (b)(3)(B) of the
Act, we proposed adding new paragraph
§ 423.120(b)(1)(ix) to require P&T
committees to review and approve all
clinical PA criteria, step therapy
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
protocols, and quantity limit restrictions
applied to each covered Part D drug.
In this final rule, we adopt these
provisions as proposed.
Comment: One commenter is
concerned that utilization management
(UM) requirements have become
barriers to timely access, especially for
the low-income population for whom
the exceptions, reconsideration, and
appeals processes are difficult to
navigate. While UM tools may be used
appropriately by a Part D plan, they may
also result in impeding appropriate and
timely access to prescribed medications
and in themselves, can be
discriminatory in beneficiary selection
of the Part D plans to the extent that
beneficiaries are even aware of the
restrictions.
Response: It is our intention that the
changes adopted specifying the
responsibilities of the P&T committee in
this final regulation will address this
commenter’s concern regarding
potentially discriminatory practices that
may affect beneficiary protections. We
believe P&T committees are in the best
position to ascertain whether certain
UM tools, when applied to covered Part
D drugs, will inappropriately impede
access to these drugs, since the
committee’s membership includes
independent practicing pharmacists and
physicians with the clinical knowledge
necessary to provide an unbiased review
of the impact of UM tools on the Part
D sponsor’s formulary.
Comment: One commenter indicates
that it supports CMS’ improvement of
the rigor of evidence supporting
decisions of P&T committees, but
encourages CMS to strengthen its
evidence requirements even further.
This commenter is concerned that the
widely used treatment guidelines or
clinical literature standard may not be
specific enough and recommends that
CMS amend § 423.120 to provide that a
Part D sponsor may require that
beneficiaries try drugs supported solely
by off-label indications only if the
sponsor demonstrates that there are
generally accepted, widely used and
evidence-based treatment guidelines or
substantial and credible clinical
literature that recommend patients use
an off-label indication.
Response: The policy regarding a plan
member’s use of drugs for off-label
indications is out of the scope of this
final rule. However, we have recently
adopted in our guidance (see the 2010
Call Letter released on March 30, 2009)
that as part of our assessment of a
formulary’s appropriateness, Part D
sponsors will not be permitted to
require an enrollee to try and fail drugs
supported only by an off-label
PO 00000
Frm 00100
Fmt 4701
Sfmt 4700
indication (an indication only
supported in the statutory compendia)
before providing access to a drug
supported by an FDA approved
indication (on-label indication) unless
the off-label indication is supported by
widely used treatment guidelines or
clinical literature that we consider to
represent best practices. Generally, we
require such authoritative guidelines to
be endorsed or recognized by Federal
government entities or medical specialty
organizations.
Comment: One commenter indicated
that they agree, theoretically, that the
P&T committee should not have to
approve administrative PA criteria, such
as Part B versus Part D coverage, but
their experience has been that plans
utilize administrative criteria as excuses
not to cover drugs. Therefore, they
believe P&T committees should review
the administrative criteria to make sure
they are being applied properly.
Another commenter indicated that CMS
allow plan sponsors to implement nonclinical UM criteria without the input
and prior approval of their P&T
committees.
Response: Consistent with the
operational guidance in Chapters 6 and
7 of the Medicare Prescription Drug
Benefit Program Manual, we continue to
require Part D sponsors to submit
utilization management requirements,
such as prior authorization, step therapy
and quantity limits not based upon the
FDA’s maximum daily dose limits, as
part of their Health Plan Management
System (HPMS) formulary submission.
We believe these UM tools should be
reviewed by Part D sponsor P&T
committees for the reasons stated above.
However, we continue to believe that
the administrative criteria a plan uses
should not be subject to the P&T
committee review because they do not
require clinical information or
justification. Moreover, we believe that
when a beneficiary is subject to an
administrative UM tool (that is, one that
is not a coverage determination) that the
beneficiary believes unfairly denies
access to his/her prescription drugs,
such cases can be addressed through the
plan’s grievance process. In accordance
with § 423.564, Part D sponsors must
provide meaningful procedures for
timely hearing and resolving enrollee
grievances. Chapter 18 of the Medicare
Prescription Drug Benefit Manual
defines a grievance as any complaint or
dispute other than one that involves a
coverage determination or a low-income
subsidy or late enrollment penalty
determination, expressing
dissatisfaction with any aspect of the
operations, activities, or behavior of a
Part D sponsor, regardless of whether
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
remedial action is requested. Because
another avenue exists for redress of a
beneficiary’s concern about
administrative criteria such as ‘‘B versus
D’’ determination, we decline to adopt
the commenter’s suggestion.
Comment: One commenter questioned
the value of committing the resources of
a P&T committee to review and approve
quantity limits.
Response: We believe there is value to
P&T committees reviewing quantity
limits since the imposition of quantity
limits can affect clinical outcomes. As
we previously stated in the preamble to
the proposed rule, quantity limits are as
important to the clinical soundness of a
plan’s formulary as the drugs that are
included on the formulary. The P&T
committee, as a body of clinicians,
should review the quantity limits to
ensure restrictions do not affect a plan
member’s access to covered Part D drugs
that could lead to health or lifethreatening outcomes, especially when
quantity limits are not based upon the
FDA’s maximum daily dose limits.
Comment: One commenter indicated
that CMS provide Part D sponsors with
minimum standards for P&T
committees’ clinical review and make
those standards publicly available to
further strengthen the clinical
appropriateness of formularies.
Response: We disagree with the
commenter’s suggestion that we dictate
minimum standards for P&T
committees’ clinical review. Section
1860D–4(b)(3)(B) of the Act requires the
P&T committee base clinical decisions
on the strength of scientific evidence
and standards of practice, including
accessing peer-reviewed medical
literature, such as randomized clinical
trials, pharmacoeconomic studies,
outcomes research data, and on such
other information as the P&T committee
determines to be appropriate. Since the
statute specifically directs P&T
committees to make these clinical
decisions, we believe it does not have
the authority, or the capability, to
establish clinical review criteria for the
P&T committees.
Comment: One commenter urged
CMS to continue to engage in robust
formulary review to ensure that a plan
formulary appropriately reflects the
clinical needs of Medicare beneficiaries.
Response: We appreciate the
comment, but changes to CMS’
formulary review are outside the scope
of this final rule. We are not making any
further changes to our current formulary
review process at this time because we
believe we already conduct a robust
formulary review consistent with the
statutory and existing regulatory
parameters, and current guidance.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Comment: One commenter indicated
that plans inform beneficiaries of
utilization management criteria prior to
selecting their plans.
Response: As provided in § 423.128(c)
(2), a Part D plan, upon the request of
a Part D eligible individual, must
provide the procedures the Part D plan
uses to control utilization of services
and expenditures. CMS guidelines for
marketing materials spell out that as
part of a plan’s formulary, Part D plans
must indicate any applicable utilization
management tools (such as, prior
authorization, step therapy, and
quantity limit restrictions) for the drug.
Also, formulary and utilization
management criteria must be
appropriately displayed on the plan’s
Web site.
Comment: One commenter requested
that CMS require that P&T committee
decisions be in writing, including the
rationale behind formulary and
utilization management policies, and
that the committee’s decisions be made
public.
Response: As stated in response to the
previous comment, utilization criteria
are made available to the public prior to
enrollment, and to enrollees of the plan.
Additionally, § 423.120(b)(1)(viii)
requires the Part D sponsor’s P&T
committee decisions regarding
formulary development or revision, as
well as utilization management
activities, be documented in writing.
However, the Part D sponsors may
consider decision by their P&T
Committees to be proprietary and for
this reason, we decline to require plans
to make them public.
7. Generic Equivalent Disclosure Under
Part D (§ 423.132)
In the October 22, 2009 proposed rule,
we proposed revisions to part D
requirements related to the disclosure to
Part D enrollees who are residents of
long term care institutions of any
differential in pricing of drugs
dispensed compared to generic
equivalents. As we explained in the
preamble to the proposed rule, section
1860D–4(k)(1) of the Act requires a Part
D sponsor to have each of their network
pharmacies inform enrollees of any
difference between the price of the
drug(s) they are purchasing via the plan
and the price of the lowest priced
therapeutically equivalent generic
product available to the pharmacy.
Section 1860D–4(k)(2)(A) of the Act
requires that this information be
provided at the time of purchase except
for purchases delivered by mail when it
must be provided at the time of
delivery. Under section 1860D–
4(k)(2)(B) of the Act the Secretary has
PO 00000
Frm 00101
Fmt 4701
Sfmt 4700
19777
the authority to waive this requirement
for certain entities in certain cases as
specified in § 423.132(c).
When we issued the January 28, 2005
(70 FR 4273) Part D final rule, we
specified that for enrollees in long-term
care pharmacy settings, the timing
portion of the disclosure requirement
(that is, the requirement that the
enrollee be informed at time of
purchase) may be waived. Accordingly,
sponsors were required to disclose the
differential (if any) in pricing for longterm care network pharmacies by
requiring that this information be
provided in the explanation of benefits
(EOB). However, over time, we have
heard from sponsors, as well as
pharmaceutical benefit managers on
behalf of sponsors, that providing this
information in the EOB is unworkable
from a plan operational standpoint.
We also came to realize that the
generic equivalent information provided
on the EOB is of no value to the longterm care beneficiary. Unlike the
enrollee standing at the retail pharmacy
counter at time of service, enrollees in
long-term care institutions have limited
opportunities to effect a switch to a
lower-priced generic substitute before
dispensing.
For the aforementioned reasons, we
proposed revising § 423.132(c) by
adding long-term care network
pharmacies to the list of entities for
which from the public disclosure
requirement is waived, and revise
§ 423.132(d) to remove the requirement
that long-term care network pharmacies
provide the pricing differential
information in enrollees’ EOBs. In this
final rule, we adopt these provisions as
proposed.
Comment: A number of commenters
supported this change. One commenter
wanted to go even further and eliminate
this requirement for all areas of
pharmacy practice because it imposes
an unreasonable administrative burden.
Response: We disagree that
elimination of this requirement should
be extended to all areas of pharmacy
practice. Providing this information to
the beneficiary at the time of purchase
enables the beneficiary to choose the
lowest priced product available at the
pharmacy. The pharmacy can avoid the
administrative burden by dispensing the
lowest priced product.
Comment: Only one commenter did
not support this change and thought
that providing this information in the
EOB would help identify fraud, waste,
and abuse and enable the beneficiary to
change at a later date.
Response: Although we agree that this
information may have some value to a
beneficiary in the long-term care setting,
E:\FR\FM\15APR2.SGM
15APR2
19778
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
the primary reason for removing this
requirement is that it is unworkable
from a plan operational standpoint
considering the variable nature of
generic pricing and the programming
maintenance effort required, and we
continue to believe that the value to the
beneficiary, given the circumstances,
does not justify the burden of
maintaining the requirement.
8. Access to Covered Part D Drugs
(§ 423.120)
In the October 22, 2009 proposed rule,
we made corrections to current
regulatory requirements that would
align the regulations with the intent of
the statute with regard to the level of
analysis that should be conducted for
access to Part D drugs, namely at the
Part D sponsor level, rather than at the
plan level. As we noted in the preamble
to the proposed rule, the statute at
sections 1860D–4(b)(1)(C) and 1860D–
21(c)(1) of the Act establishes the
standards for convenient access for
network pharmacies for PDP sponsors
and other Part D sponsors. This section
of the statute requires that the sponsor
of a PDP shall secure the participation
in its network of a sufficient number of
pharmacies that dispense (other than by
mail order) drugs directly to patients to
ensure convenient access consistent
with the rules established by the
Secretary, and as long as they are no less
favorable than the TRICARE pharmacy
access standards. These standards are—
• Urban—a pharmacy within 2 miles
of 90 percent of the beneficiaries;
• Suburban—a pharmacy within 5
miles of 90 percent of the beneficiaries;
and
• Rural—a pharmacy within 15 miles
of 70 percent of the beneficiaries.
We adopted into regulation the
TRICARE standards, but instead of
specifying them at the contract or PDP
sponsor level, erroneously established
them at the plan level. Specifically, in
§ 423.120(a) of the regulation, which
describes the requirements to assure
pharmacy access, we inadvertently used
the term ‘‘plans’’ instead of the correct
terminology of PDP sponsor or other
Part D sponsors. This error is
problematic when considering the
definitions outlined in § 422.2 (for MA)
and § 423.4 (for Part D) because the term
‘‘plan’’ is intended to mean a specific
benefit package offered to beneficiaries
living in a geographic area. For any
given service area, Part D sponsors
frequently offer multiple plans under
one contract with CMS, and any given
plan may be offered within a subset of
the Part D sponsor’s total service area.
For example, a Part D sponsor may offer
a high and low option at one price in
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
part of the contract’s service area, and
also offer a high and low option at a
different price in the remaining portion
of the contract’s service area.
We noted that our intention has
always been to ensure adequate access
to Part D covered drugs at sponsor level,
not at the plan level. For one, the statute
explicitly states that access should be
ensured at the PDP sponsor level.
Further, assessing adequacy of
pharmacy access is one of the most
critical steps in the Part D application
review process and determining access
to Part D covered drugs at the plan level
is not possible during application
review. This is because plan service
areas (potentially subsets of Part D
sponsor or organization service areas)
are not determined until the time of the
bid submission, which occurs after
applications are reviewed. However,
sponsor service areas are known at the
time of application submission.
Our correction would align our
regulations with the intent of the statute
with regard to the level of analysis that
should be conducted for access to Part
D drugs, namely at the Part D sponsor
level, rather than at the plan level. We
also noted in the preamble that as a
practical matter and consistent with the
current drafting of the regulation, if the
Part D sponsor’s entire service area is
larger than one State, we will continue
to ensure access at no greater than the
State level for multistate regions. We
noted that this approach is necessary to
ensure that pharmacies are not unduly
clustered in one part of the region.
Therefore, based on the preceding, we
proposed to revise the text of the
regulation that discusses pharmacy
access in § 423.120(a)(1) through (a)(7)
to refer to PDP sponsors, MA
organizations offering local and regional
MA–PD plans, and cost contracts rather
than plans. Additionally, since
§ 423.120(a) (defining access
requirements for Part D drugs)
references a definition provided in
§ 423.112(a) (establishment of PDP
service areas), it was necessary to
correct the terminology in that location
as well. Therefore, we proposed revising
§ 423.112(a) to specify the establishment
of service areas for PDP sponsors. We
are adopting the above changes without
further modification into this final rule.
Comment: One commenter fully
supported the proposed revision to the
regulation clarifying access to Part D
drugs be measured at the sponsor level,
rather than at the plan level.
Response: We appreciate the support.
Comment: One commenter asked
CMS to exercise its statutory authority
to adopt regulations that would apply
access standards more favorable to
PO 00000
Frm 00102
Fmt 4701
Sfmt 4700
beneficiaries to Part D sponsors by
increasing the urban and suburban
percentages to 95 percent, and
increasing the rural standard to 10 miles
and 85 percent. This commenter
believes that the current access
standards are too lax, especially in rural
areas. Additionally, this commenter
noted that measuring distance ‘‘as the
crow flies’’ when evaluating pharmacy
access may not be representative of true
driving distance in certain locations.
Response: Our proposed regulatory
change addressed only the
organizational level at which the
pharmacy access standards would be
applied, not whether a change in those
standards is warranted. While we
appreciate the comment, we will not
address it at this time as it is outside the
scope of our proposal.
However, we wish to allay the
commenter’s concern that measuring
distance ‘‘as the crow flies’’ may actually
underrepresent true driving distance.
Presently, the software used by Part D
sponsors to demonstrate they meet our
retail pharmacy access standards has a
feature that allows distance to be
measured as estimated driving distance,
and sponsors are instructed to use this
feature.
Comment: One commenter suggested
that CMS move toward a more
automated and streamlined process for
conducting the initial review and
ongoing monitoring of Part D sponsor’s
retail pharmacy networks. The
commenter suggests CMS consider
establishing a certification process
whereby a first tier entity, such as a
PBM, may submit one set of access
reports in support of its certification. If
found acceptable by CMS, all Part D
sponsors using that PBM could
demonstrate their compliance with the
pharmacy access standards by
submitting an attestation that the
network they are using is already CMSapproved.
Response: We appreciate the
comment and note that we are working
on developing a more automated system
for the submission of pharmacy network
information. That said, the issue of our
review of network adequacy and the
processes we use is outside the scope of
our proposal, and we therefore decline
to address it in this rule.
Comment: One commenter urged
CMS to create retail pharmacy access
standards to ensure that beneficiaries
have the choice of obtaining medication
therapy management (MTM) services
from their retail community pharmacies.
Response: This comment concerns the
administration of MTM programs, not
the methodology for the calculation of
retail pharmacy access standards.
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
Therefore, we will not address this
comment as it concerns an issue outside
the scope of our proposed regulatory
change.
9. Standard Timeframe and Notice
Requirements for Coverage
Determinations Under Part D (§ 423.568)
In the October 22, 2009 proposed rule,
we proposed to make several changes to
§ 423.568 related to the standard
timeframes and notice requirements for
coverage determinations under Part D.
The first change we proposed was a
technical change that would require Part
D plan sponsors to accept standard
coverage determination requests orally
and in writing. This change would not
apply to standard requests for payment,
which must be submitted in writing
unless the plan sponsor adopts a policy
for accepting those requests orally. As
we explained in the preamble to the
proposed rule, we proposed this change
to § 423.568 because section 1860D–4(g)
of the Act requires Part D sponsors to
follow the same procedures as MA
organizations with respect to
organization determinations and
reconsiderations, and we were
proposing to make an identical revision
to § 422.568 of the MA appeals
regulations.
We also proposed to revise the
timeframe for a Part D plan sponsor to
notify an enrollee of a payment
determination in § 423.568(b), and
proposed to establish a regulatory
timeframe for making payment to an
enrollee when a decision is partially or
fully favorable. The regulation currently
requires a plan sponsor to notify an
enrollee of its payment determination
no later than 72 hours after receipt of a
request, and manual guidance requires
plan sponsors to make payment for fully
or partially favorable decisions within
30 days of the request. The proposed
revisions to § 423.568(b) would require
a Part D plan sponsor to notify an
enrollee of a payment decision no later
than 14 calendar days after receiving a
reimbursement request. If the decision
is partially or fully favorable, the plan
sponsor must also make payment within
the same 14-day timeframe. For
example, for partially and fully
favorable decisions, a plan sponsor must
both notify the enrollee of the decision
and make payment no later than 14
calendar days after receiving the
request). As noted in the preamble, we
proposed to revise the reimbursement
timeframes because we believe the
existing 72-hour requirement is virtually
impossible for plan sponsors to meet,
and as a result, plan sponsors are
issuing perfunctory denials. This
outcome is not in the best interest of
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Medicare’s Part D enrollees. We were
also concerned that the existing
requirement would in effect force
enrollees into the Part D appeals process
despite the fact that the majority of
these claims could have been paid
within the 30-day reimbursement
timeframe. Based on our experience and
previous discussions with Part D plan
sponsors, we determined Part D plan
sponsors generally are capable of
making reimbursement decisions and
payment within a 14-day period
following receipt of reimbursement
requests. We believe the proposed
revision to the timeframes for notifying
enrollees of payment determinations
will significantly increase the number of
timely payment-related decisions by
plan sponsors, and the revised
timeframes for making payment will be
more meaningful for the typical
Medicare beneficiary who often cannot
afford to wait 30 days to be reimbursed.
Finally, we proposed to add new
paragraphs (d) and (e) to § 423.568, to
explain the form and content of
favorable coverage determination
decisions. In § 423.568(d), we proposed
requiring plan sponsors to send written
notice of fully favorable decisions to
enrollees. We also proposed to allow
plan sponsors the option of providing
the initial notice orally so long as a
written follow-up notice is sent to the
enrollee within three calendar days of
the oral notification. In § 423.568(e), we
proposed to require notice of fully
favorable decisions to include the
conditions of the approval in a readable
and understandable manner. We noted
these changes were necessary because
prescription drugs are often provided to
beneficiaries on a recurring basis (unlike
most MA services which are generally
provided to beneficiaries only once),
and requiring plans to provide the terms
of an approval in writing helps ensure
continuity of care for Medicare
beneficiaries who receive prescription
drugs under Part D.
After reviewing the comments
received in response to these proposals,
in this final rule, we adopt the proposed
changes without modification. In
addition, as explained below, we are
adding paragraph (a)(3) to § 423.568,
which will require plan sponsors to
establish and maintain a method of
documenting all oral requests and
retaining the documentation in the case
file.
Comment: Several commenters
supported the proposed technical
change that would require Part D plan
sponsors to accept standard coverage
determination requests orally and in
writing, except for standard requests for
payment which must be submitted in
PO 00000
Frm 00103
Fmt 4701
Sfmt 4700
19779
writing. A commenter asked CMS to
clearly articulate how plans are to
record, track, and report oral requests.
Another commenter suggested allowing
plan sponsors to require the use of planspecific forms for payment requests.
Response: We appreciate the
comments we received in support of
this proposal, and the commenter’s
concern about the processes plan
sponsors should have in place to record,
track, and report oral requests. We agree
that it is important for plan sponsors to
document and track requests that are
submitted orally in order to determine
if plan sponsors are processing requests
in a timely manner. Therefore, in this
final rule, we are adding a new
paragraph (a)(3) to § 423.568, which will
require plan sponsors to establish and
maintain a method of documenting all
oral requests and to retain that
documentation in the case file. We do
not agree with the suggestion to require
the use of plan-specific forms for
payment requests. We have, since the
inception of the Part D program,
required plan sponsors to accept any
written request submitted by enrollees
and prohibited plan sponsors from
requiring the use of plan-specific
request forms. We do not believe there
is a compelling reason to depart from
this standard. During this time, we have
also received numerous requests to
standardize the Part D coverage
determination and appeals processes in
order to create consistency and
predictability for Part D enrollees, and
we are continuously looking to improve
the coverage determination and appeals
processes. Allowing each plan to require
the use of different forms for different
requests moves us further away from
creating a process that is easier for
enrollees to navigate. Although we
understand plan sponsors often need
enrollees to submit specific information
with reimbursement requests, requiring
the use of a specific form does not
guarantee that an enrollee will provide
all information a plan sponsor needs to
process the request (for example, an
enrollee may not complete part of the
form). When a reimbursement request is
not complete, plan sponsors must either
obtain the missing information or deny
the request within the applicable
decision making timeframe. Because we
are extending the timeframe for
resolving payment requests in this final
rule, plan sponsors have more time to
evaluate payment requests and obtain
missing information when necessary.
Comment: We received many
comments in response to the proposed
revisions to § 423.568(b), which would
require a Part D plan sponsor to notify
an enrollee of a payment decision and,
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19780
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
if appropriate, make payment no later
than 14 calendar days after receiving a
reimbursement request. Some
commenters that supported the 14-day
timeframe for making a decision
opposed the requirement to make
payment within the same 14-day
timeframe. The commenters objected
because a 14-day payment cycle is not
consistent with current industry
standards, and moving the payment
cycle to 14 days would require great
expense to update current processes and
systems, and would not offer any real
benefit to enrollees who already have
the prescription drugs in dispute. For
these reasons, the commenters
suggested maintaining the current 30day payment timeframe. As an
alternative, some of the commenters
suggested allowing plan sponsors an
additional 14 calendar days to make
payment after a decision has been made.
Other commenters suggested that CMS
defer implementation of the 14-day
timeframe until 2011.
We also received support for the
proposed 14-day timeframe from a
number of commenters, but the
commenters also opposed extending the
72 hour decision-making timeframe.
The commenters objected because
extending the timeframe would cause an
additional financial hardship for
enrollees who pay out-of-pocket for
prescriptions. The commenters argued
the proposal would extend the appeals
process by up to eleven days for
enrollees who receive denials, and
would prevent those enrollees from
obtaining a decision by the Part D
Independent Review Entity before a 30day prescription runs out. For that
reason, most of the commenters
suggested retaining the 72-hour
decision-making timeframe for
reimbursement requests. As an
alternative, a few of the commenters
suggested that CMS maintain a 72-hour
decision-making timeframe for payment
requests that involve exceptions, and a
14-day decision-making timeframe for
all other payment requests. Finally, one
commenter believed that a 7-day
timeframe would be acceptable for
making payment-related decisions.
Response: After careful review and
consideration of the numerous
comments and suggestions we received
about this provision, we continue to
believe that the timeframes established
in proposed § 423.568(b) strike the right
balance between ensuring plan sponsors
have enough time to properly adjudicate
reimbursement requests, and creating a
reimbursement timeframe that does not
impose an undue hardship on Medicare
beneficiaries who often cannot afford to
wait 30 days before being reimbursed.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Some commenters raised concerns
about plan sponsors not being able to
make payment within 14 calendar days
after receiving a reimbursement request
in large part because most Part D plan
sponsors process reimbursement
requests under a 30-day billing cycle,
which is the industry standard.
However, we note that plan sponsors
already have prior experience
processing some reimbursement
requests in less than 30 days. Pursuant
to section 171 of MIPPA and the PDP
Sponsor Application, Part D plan
sponsors are required to make payment
for certain reimbursement requests from
out-of-network pharmacies within 14
calendar days. Although the 14 calendar
day MIPPA requirement applies to
reimbursement requests that are
submitted electronically, we note the
MIPPA requirement to illustrate that a
14-day timeframe for processing
reimbursement requests is not
unprecedented under the Part D
program, and that plan sponsors
currently have systems in place to
accommodate billing cycles that are less
than 30 calendar days. As noted in the
preamble to the proposed rule, our
experience and previous discussions
with Part D plan sponsors on this issue
led us to conclude that plan sponsors
are capable of processing
reimbursement requests and sending
payment, when required, to enrollees
within 14 calendar days after receiving
a reimbursement request. In the 2009
Call Letter, we indicated that we would
exercise our enforcement discretion to
decline to bring an enforcement action
for non-compliance with the 72-hour
timeframe in § 423.568 if the plan
sponsor processes a reimbursement
request and submits reimbursement
(when appropriate) within 14 calendar
days after receipt of the request. As a
result, plan sponsors have been
permitted the option of either notifying
enrollees of their reimbursement
decisions within 72 hours and making
payment within 30 days, or, providing
notice of a reimbursement decision and
sending payment (when a decision is
partially or fully favorable) to the
enrollee within 14 calendar days after
receiving a reimbursement request.
We also understand the concerns
about enrollees receiving decisions as
quickly as possible. In particular, some
commenters indicated the need for
shorter timeframes when a request
involves an exception. We agree, but
note that the reimbursement process
was intended primarily for use in
resolving out-of-network issues.
Consequently, we do not believe that it
is the most efficient way to obtain
PO 00000
Frm 00104
Fmt 4701
Sfmt 4700
coverage decisions for non-formulary
drugs or drugs subject to a utilization
management requirement. Furthermore,
using the reimbursement process to
obtain coverage decisions for nonformulary drugs or drugs subject to a
utilization management requirement
does not obviate the need to provide
medical documentation either
demonstrating that an exception is
needed or that a utilization management
requirement has been met. In the former
case, if the reimbursement request is
submitted without a prescriber’s
supporting statement, the plan sponsor’s
decision making timeframe is tolled
until the statement is received. Thus, we
believe enrollees who need prescription
drugs that either are non-formulary, or
are subject to utilization management
requirements that they cannot meet,
would be better served by using the
exceptions process. Under § 423.568(a),
a plan sponsor must respond to a
standard exception request within 72
hours of receiving the request and the
prescriber’s supporting statement, and
consistent with § 423.572(a), a plan
must respond to an expedited request
within 24 hours of receiving the request
and the prescriber’s supporting
statement.
Finally, we appreciate some
commenters’ concerns that the 14-day
timeframe may result in enrollees
receiving unfavorable payment
determinations beyond the current 72hour timeframe. Thus, in order to
ensure that enrollees are able to access
the appeals process as quickly as
possible, we encourage plan sponsors to
issue unfavorable determinations sooner
than 14 days.
Therefore, we are finalizing the
proposed revisions at § 423.568(b) to
require Part D plan sponsors to notify an
enrollee of a payment decision no later
than 14 calendar days after receiving a
reimbursement request. If the decision
is partially or fully favorable, the plan
sponsor must also make payment within
the same 14 calendar-day timeframe.
Comment: We received a number of
comments supporting the proposal to
allow Part D plan sponsors to make the
initial notice of favorable standard
coverage determination decisions orally,
so long as a written confirmation of the
decision is mailed to the enrollee within
three calendar days of the oral notice.
However, one commenter suggested
revising the three calendar day
requirement to three business days.
Response: For the reasons noted in
our response to a similar comment
about the timeframe for providing
written follow-up of notice of a fully
favorable expedited redetermination
decision, we do not agree that it is
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
necessary to revise ‘‘calendar days’’ to
‘‘business days.’’
Comment: We received numerous
comments supporting the proposal to
require plan sponsors to include
specific information (such as, the
conditions of approval) in favorable
coverage determination notices.
However, one commenter opposed the
proposed requirement and suggested
allowing plan sponsors to provide the
approval conditions on request.
Response: As noted above in our
response to a similar comment relating
to favorable redetermination decisions,
we believe requiring plan sponsors to
provide the condition(s) of approval in
writing is an important enrollee
protection that helps ensure continuity
of care for Medicare beneficiaries who
receive prescription drugs under Part D,
and the commenter’s suggested
approach would diminish that
important protection.
Comment: We received several
comments asking us to develop a model
letter for fully favorable coverage
determination decisions under
§ 423.568.
Response: As noted in our response to
a similar comment regarding fully
favorable redetermination decisions, we
will explore developing either a model
or standard notice for favorable
decisions, and will publish any such
notice in Chapter 18 of the Medicare
Prescription Drug Benefit Manual.
sroberts on DSKD5P82C1PROD with RULES
10. Expediting Certain Coverage
Determinations (§ 423.570)
In the October 22, 2009 proposed rule,
we proposed to make a technical change
to § 423.570 by removing the cross
reference to § 423.568(a) and inserting a
cross-reference to § 423.568(b). This
change is necessary to be consistent
with the proposed revisions to
§ 423.568. We did not receive any
comments with regard to our proposed
revision. Therefore, this final rule
adopts this revision without change.
11. Timeframes and Notice
Requirements for Expedited Coverage
Determinations (§ 423.572)
The October 22, 2009 proposed rule
includes a proposed revision to
§ 423.572(b) that would require plan
sponsors to send written notice of fully
favorable expedited coverage decisions
to enrollees, and allow plan sponsors
the option of providing the initial notice
orally so long as a written follow-up
notice is sent to the enrollee within
three calendar days of the oral
notification. We also proposed to add
paragraph (c)(2), which would require
notice of a fully favorable expedited
coverage determinations to provide the
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
conditions of the approval in a readable
and understandable manner. As noted
in the proposed rule, the rationale for
adding these requirements is consistent
with our rationale for adding form and
content requirements for favorable
standard coverage determination
decisions, and in so doing, ensures
enrollees are able to maintain continuity
in their prescription drug treatment.
Finally, we proposed to revise
§ 423.572(c)(2)(i) by requiring plan
sponsors to issue adverse expedited
coverage determination decisions using
CMS approved language in readable and
understandable form. As noted in the
preamble to the proposed rule, this
proposed change would reconcile a
discrepancy in the regulations by
requiring plan sponsors to use the
standardized denial notice (Form CMS–
10146) for both standard and expedited
adverse coverage determinations.
Currently, the regulations require the
use of the standardized denial notice
only for standard adverse coverage
determinations. The only comment we
received on this provision was
supportive of the change. Accordingly,
we are adopting the proposed revision
to § 423.572(c)(2)(i) as set forth in the
proposed rule without change.
Comment: We received a number of
comments supporting the proposal to
allow Part D plan sponsors to make the
initial notice of favorable expedited
coverage determination decisions orally,
so long as a written confirmation of the
decision is mailed to the enrollee within
three calendar days of the oral notice.
However, one commenter suggested
revising the three calendar day
requirement to three business days, and
another commenter recommended
allowing plan sponsors to send the first
notice in writing, but not requiring plan
sponsors to send additional written
notices when any related refills are
approved.
Response: For the reasons noted in
our response to a similar comment
about the timeframe for providing
written follow-up of notice of a fully
favorable expedited redetermination
decision, we do not agree that it is
necessary to revise ‘‘calendar days’’ to
‘‘business days.’’ Also, as previously
noted, we believe a written notice
should follow every favorable decision,
including favorable decisions to
approve refills. This policy will help to
ensure continuity of care for Medicare
beneficiaries who are obtaining refills of
prescription drugs under Part D. We
note that additional favorable decisions
for refills are not necessary if the
coverage determination or appeal
decision specifically authorizes refills
for the remainder of the plan year.
PO 00000
Frm 00105
Fmt 4701
Sfmt 4700
19781
Comment: We received numerous
comments supporting the proposal to
require plan sponsors to include the
conditions of approval in favorable
decision notices. However, one
commenter opposed the proposal and
suggested allowing plan sponsors to
provide the approval conditions on
request. A different commenter asked
CMS to exempt Special Needs Plans
(SNPs) from the written-notice
requirement for favorable decisions
because SNPs hire nurse case managers
to make sure an enrollee’s medication
supply is not interrupted. Thus,
enrollees receiving medications from
SNPs do not need to know the
conditions of an approval.
Response: As noted in our responses
to similar comments, requiring plan
sponsors to provide the conditions of
approval in writing is an important
enrollee protection that helps ensure
uninterrupted drug coverage for
Medicare beneficiaries who receive
prescription drugs under the Part D
program. We believe implementing the
commenters’ suggestions would
diminish this important protection
because without this requirement,
enrollees would likely not receive
timely notice of the coverage limits for
approvals. Without this information,
enrollees may experience interruptions
in coverage. Thus, the best way to
ensure that enrollees receive timely
notice and understand the conditions
that apply to their approvals is to
require plan sponsors to consistently
provide this information, in writing, to
all enrollees.
Comment: We received several
comments asking us to develop a model
letter for fully favorable decisions
issued under § 423.572.
Response: As noted in our response to
an earlier comment, we will explore
developing either a model or
standardized notice for use in issuing
favorable notices and will publish any
such notice in Chapter 18 of the
Medicare Prescription Drug Benefit
Manual.
12. Clarify Novation Agreements Under
Part D (§ 423.551)
In the October 22, 2009 proposed rule,
we proposed revisions to§ 423.551 and
proposed adding a new paragraph
§ 423.551(g) to restrict the situations in
which we will approve the novation of
a PDP sponsor’s contract. A change in
ownership of an existing sponsor’s PDP
contract(s) can promote the efficient and
effective administration of the Part D
program. However, over the past few
years several PDP sponsors have
requested CMS approval of transactions
that involve the sale of a piece of the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19782
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sponsor’s contract with CMS or less
than all of the PDP contracts held by
that PDP sponsor. Therefore we have
proposed these revisions in order to
restrict a novation to those transfers
involving the selling of the sponsor’s
entire line of PDP business, which
would include all PDP sponsor
contracts held by the legal entity. We
believe that allowing the spin-off of just
one contract (when the PDP sponsor has
more than one PDP contract) or pieces
of a single contract can have a negative
impact on beneficiary election rights.
We recommended becoming more
prescriptive in this area because our
experience gained over the first 4 years
of the program indicates this is
necessary. As we noted in the preamble
to the proposed rule, our policy goals
are not served when a sponsor uses the
novation process to purchase a piece of
another sponsor’s contract with CMS for
less than the full line of PDP business.
We do not agree that picking and
choosing which markets a sponsor
wishes to serve at any given time and
to profit from its exit from a given PDP
region is most efficient when a simple
nonrenewal for that region is an option
available to the sponsor. Moreover, this
process should not be used as an
instrument for moving LIS beneficiaries
when a particular sponsor has missed
the benchmark.
We believe that the change we
proposed creates consistency between
the Part C program and the Part D
program, because the Part C regulations
only permit novations that include the
entire MA line of business (that is, all
MA contracts held by a single legal
entity).
We adopt these provisions as
proposed. As noted below, we amend
§ 423.551 to clarify that these provisions
do not apply to changes of ownership
between subsidiaries of the same parent
organization.
Comment: Several commenters
expressed concern that the proposed
policy could cause greater disruption for
beneficiaries by limiting sponsors’
ability to divest and acquire certain Part
D contracts in situations where those
transactions would have few effects on
beneficiaries. The commenters believe
that the proposed change may result in
Part D sponsors withdrawing plan
benefit packages and bid submissions,
prevent acquisitions and mergers, or
cause mid-year terminations, if the
novation option no longer is available in
many situations. The commenters also
believed that this change could impact
CMS efforts to consolidate PBPs and
service areas under one contract
number.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Response: We believe that there are
adequate PDP choices for beneficiaries,
and that restricting novations as
proposed is in the best interest of the
Part D program. We do not believe that
the proposed change would negatively
impact a sponsor’s ability to consolidate
PBPs even if the plans are located in
different geographical areas. To the
extent that this comment concerns the
application of this policy to novations
among subsidiaries of the same parent
organization, CMS agrees that those
types of transactions should be
permitted and would not require the
transfer of an entire line of Medicare
business. Novations between the
subsidiaries of the same parent
organization do not involve the buying
and selling of beneficiaries; rather, they
are usually undertaken to accommodate
an organization’s change to its internal
corporate structure. Therefore, we have
modified our proposed regulatory
language to clarify that the new policy
does not apply to changes of ownership
between subsidiaries of the same parent
organization.
Comment: One commenter stated that
no change is needed in the current
regulation to accomplish CMS’ policy
goal. The commenter, citing
§ 423.552(a)(3)(ii), believed that CMS
already has authority to determine
whether a proposed novation is in the
best interest of the Medicare program
and that CMS did not need to change
the regulation to keep this authority.
The commenter expressed concern,
however, that the proposed change
would limit CMS’s flexibility to approve
a novation of some but not all of an
entity’s Part D contract(s), even if CMS
determined that it was in the best
interest of the program to approve the
novation. The commenter added, that if
CMS does not retain the authority to
approve a novation representing less
than an organization’s entire line of PDP
business, the acquiring company would
have to terminate the contract, causing
substantial member disruption.
Response: We believe that a change to
the regulation is necessary to provide
clarity to sponsors regarding the
circumstances under which a PDP
novation would be approved by CMS.
Additionally, we believe that
beneficiary disruption in situations
where a sponsor nonrenews a contract
because it is not eligible to be novated,
is minimized by comprehensive
nonrenewal beneficiary rights and
required notifications, and that
beneficiary election rights trump any
member disruption that occurs due to a
nonrenewal.
Comment: One commenter stated that
it agreed with CMS that the novation
PO 00000
Frm 00106
Fmt 4701
Sfmt 4700
process should not be used, either in
Part C or Part D, to pick and choose
profitable markets, but it did not
interpret the current Part C regulation
related to the novation process to only
allow novations that include the entire
MA line of business (that is, all MA
contracts held by a single legal entity).
The commenter stated that there are
unique circumstances where a change of
ownership may be specific to Special
Needs Plans (SNPs) that may be better
served under new ownership that has a
specialized model. The commenter
suggested that the proposed provision
be modified (and our Part C regulations
modified as well) to allow for
exceptions, especially with regard to
SNPs.
Response: We have consistently
interpreted the Part C regulation to limit
novations in situations involving the
sale of less than an entity’s entire MA
line of business. Also, SNP plans do not
present unique circumstances that
would require an exception to our
proposed policy change. If a SNP plan
can no longer serve its enrollees, there
is existing regulatory authority pursuant
to which the failing SNP can non-renew
or terminate its Medicare contract. CMS
can then exercise its regulatory
authority related to plan enrollment to
ensure that affected beneficiaries either
elect or are assigned to an appropriate
new plan.
Comment: Several commenters
supported this change to the regulation,
and agreed with the underlying
reasoning used by CMS to make this
change and become more prescriptive in
this area.
Response: We appreciate these
comments.
Comment: A few commenters stated
that CMS should allow novations of one
contract, where a selling sponsor holds
multiple contracts, because otherwise
PDP sponsors will have to resort to
holding PDP contracts under different
legal entity names in order to avoid
having to novate all contracts as
required under the proposed
requirement, or terminating a contract,
which would result in beneficiary
disruption.
Response: A sponsor is already
afforded ample opportunity to leave a
particular Medicare market through the
contract non-renewal process. That
process does not require that a sponsor
non-renew all of its contracts, so there
is no need for organizations to hold
contracts through multiple legal entities.
The beneficiary disruption in this
instance would be no more than that
already contemplated by the Congress
and CMS when it adopted and
implemented a program which featured
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
the right of beneficiaries to elect their
own health and drug plan coverage.
Therefore, we believe that limiting
novation to the entire line of PDP
business is the best interest of the Part
D program.
Comment: One commenter asked
CMS to clarify that the proposed change
would not prevent a sponsor from
novating its Part D contract in
connection with sale of an MA–PD Plan
while retaining the entity’s stand-alone
Part D Plan contract or vice versa.
Response: We agree that in the
scenario described by the commenter,
the organization would be permitted to
retain a stand-alone PDP sponsor
contract after it had transferred
ownership of all of its Medicare
Advantage contracts, including those
through which it had been offering Part
D benefits. We believe that the
regulation makes this point clear on its
face as the language specifically
mentions only PDP contracts.
Comment: One commenter
encouraged CMS to reconsider its
proposed position that a Part D contract
can only be novated when the ‘‘entire
line of business’’ is involved. The
commenter stated that there are
important differences between Part C
and Part D contracting including the
notion that Part D contracts are national
in scope and Part C contracts generally
conform to State boundaries. The
commenter stated that the suggested
alignment between Part C and Part D
contract novation policy as discussed in
the preamble is not true when the
practical impact of that policy is
considered.
Response: The commenter has not
made clear, and we are unable to
determine on its own, how the stated
difference between Part C and D service
areas affects the novation policy we
adopt in this regulation. Therefore, we
retain our belief that a change to the
regulation to limit PDP novations to the
entire line of business is in the best
interest of the Part D program.
13. Cost Contract Program Revisions:
Appeals and Marketing Requirements
(§ 417.428, § 417.494, § 417.500, and
§ 417.640)
Under the authority in section
1876(i)(3)(D) of the Act to impose ‘‘other
terms and conditions’’ under contracts
authorized by the statute that the
Secretary finds ‘‘necessary and
appropriate,’’ and in implementation of
the requirements in section 1876 of the
Act set forth below, we proposed in our
October 22, 2009 proposed rule to apply
the following MA program requirements
to cost contracts authorized under
section 1876 of the Act:
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
• The MA program requirements on
appeals processes for contract
determinations and intermediate
sanctions under the authority in section
1876(i)(1) of the Act to terminate or nonrenew contracts, and the authority in
section 1876(i)(6) of the Act to impose
intermediate sanctions and CMPs (To
the extent that the CMPs in section
1876(i)(6)(B) and (C) of the Act differ
from those under Part C, the penalty
amounts under section 1876 of the Act
would continue to control); and
• The MA program’s marketing
requirements under the authority in
section 1876(c)(3)(C) of the Act to
regulate marketing of plans authorized
under section 1876 of the Act and
ensure that marketing material is not
misleading.
The specific revisions we proposed
are summarized below.
a. Cost Contract Determinations
(§ 417.492 and 417.494), Civil Money
Penalties (§ 417.500), and Intermediate
Sanctions (§ 417.500)
We proposed requiring cost contracts
to follow the contract determination
appeal procedures under Subpart N of
Part 422. We proposed codifying these
requirements in § 417.492(b)(2),
concerning notice of appeal rights, and
§ 417.494, concerning notice of
termination.
We proposed revising § 417.500 to
require cost contracts authorized under
section 1876 of the Act to follow the MA
programs requirements for appeals of
CMPs at Subpart T of Part 422. The
appeals process for CMPs specified at
Subpart T allows for a hearing by an
Administrative Law Judge (ALJ) and a
review of the ALJ’s decision by the
Departmental Appeals Board. We
proposed, in new paragraph (c), to
specify that the amount of CMPs a cost
contract may be assessed is governed by
section 1876(i)(6)(B) of the Act, not by
the provisions in part 422 of the MA
program regulations.
Our proposed revisions to the cost
contracts regulations authorized under
section 1876 of the Act would ensure
that these contracts follow the same
requirements for intermediate sanctions
appeals specified in § 422.750 through
§ 422.764 of the MA program
regulations (subpart O). These sections
concern—
• Types of intermediate sanctions and
CMPs (§ 422.750);
• Bases for intermediate sanctions
and CMPs (§ 422.752);
• Procedures for imposing
intermediate sanctions and CMPs
(§ 422.656)
• Collection of CMPs (§ 422.758);
PO 00000
Frm 00107
Fmt 4701
Sfmt 4700
19783
• Settlement of penalties (§ 422.762);
and
• Other applicable provisions
(§ 422.764).
With respect to determinations of the
amount of CMPs, the provisions in
section 1876(i)(6)(B) and (C) of the Act
would govern such amounts.
We are adopting our proposed
changes to § 417.472, § 417.492,
§ 417.494, § 417.500, § 417.640,
§ 417.640, § 417.642 through § 417.694,
and § 417.840 without further
modification in this final rule.
Comment: Two organizations
expressed concerns about extending the
MA requirements for appeals of contract
determinations to cost contract plans.
Both commenters point to differences in
cost contract plans and MA plans as
their basis for seeking revisions to our
proposals.
One commenter suggested that CMS’
approach of cross referencing the MA
appeals provisions in the cost plan
requirements is unworkable for three
reasons: (1) There are provisions of Part
422, Subpart N, that would not apply to
Medicare cost plans, for example,
organizations may not submit an
application to obtain a new section 1876
contract; (2) there are termination/nonrenewal provisions under part 417 that
are not addressed under Part 422, for
example, the obligation to non-renew a
portion or all of the service area under
the so called two-plan competition test
at § 417.402(c); and (3) simply
indicating that part 422 references
should be read as Part 417 references
does not provide the reader with
guidance regarding the applicable
provisions. This commenter asserts that,
without specific cross references, the
reader is left to guess which sections of
part 417 would substitute for the
sections of part 422 cited in part 422
subpart N and that, in some cases, there
are no directly analogous provisions
under part 417. Thus, it is unclear in
this commenter’s view whether CMS
intended to create a new requirement
for cost plans in a specific provision, or
whether the provision does not apply.
The commenter recommends that CMS
not simply cross reference subpart N,
part 422, in part 417 but revise the
language in part 417 to incorporate
structure that is similar to the part 422
rules for terminations, but includes
relevant part 417 cross references and is
modified to appropriately apply to
Medicare cost plans.
The second commenter also believed
that CMS’ proposed approach would not
provide sufficient clarity to cost
contracts regarding the requirements
that apply to them. For example, there
are provisions of part 422, subpart N
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19784
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
that would not apply to cost contracts,
and there are termination/non-renewal
provisions under part 417 that are not
addressed under part 422. Accordingly,
the commenter recommended that CMS
revise the language in part 417 to
incorporate a structure that is similar to
the part 422 rules and is modified to
appropriately apply to Medicare cost
plans.
Response: We agree with the
commenters that there are differences
between cost plan and MA plan
procedures in this area but believe that
the differences are minimal with respect
to the application of the MA provisions
concerning appeals of contract
determinations. We stated clearly in the
preamble of the proposed rule that the
part 422 regulations concerning appeals
of non-renewals, terminations, and
imposition of intermediate sanctions
and CMPs would apply to cost
contracts. Therefore, we believe there
should be no ambiguity in this regard.
In other words, if there is no ‘‘analogous
provision’’ under part 417, as one of the
commenters wrote, cost plans would
follow the part 422 requirements.
Concerning the possibility of confusion
resulting from different CMPs for cost
plans and MA plans, we did
acknowledge in the proposed rule, in
both the preamble and regulations text
at § 417.500(c), that CMPs for cost plans
would be assessed according to the
statutory requirements at section
1876(i)(6)(B) of the Act. We do not agree
with the commenter that additional
regulations for part 417 are necessary to
capture this distinction.
With respect to the other
discrepancies that the commenter
asserts make incorporation of the part
422 regulations ‘‘unworkable,’’ we do
not believe that there should be any
confusion about appeal of contract
determinations as a result of cost plan
competition requirements. The
application of such requirements is
statutory, and non-renewal of a cost
plan based on the statutory requirement
is not appealable. We note that the
current regulations for Part 417 do not
indicate that such a decision may be
appealed. Concerning the commenter’s
other example of an allegedly
unworkable discrepancy, the fact that
there may be no new cost plans and
thus no new applications, we note that
the part 422 contract determinations
include not only decisions on new
applications, but determinations
concerning non-renewals and
terminations, and thus have relevance to
cost contracts. The part 417 regulations
are clear that there may be no new cost
plans, as is CMS guidance, and we do
not believe that the part 422 contract
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
determination provisions would lead
anyone to believe otherwise.
Finally, we believe it is most efficient
to cross-reference the part 422
regulations as specified in the proposed
rule and are, therefore, adopting the
language in that rule.
b. Extending MA Marketing
Requirements to Cost Program Plans
(§ 417.428)
As noted above, based on the
authority in section 1876(c)(i)(C) to
regulate marketing and the authority in
section 1876(i)(3)(D) to specify new
section 1876 contract terms, we
proposed to amend § 417.428, which
governs 1876 cost contract program
marketing requirements, to require cost
contract plans to follow the MA
marketing requirements in § 422.2260 et
seq. (Subpart V).
We proposed that cost contracts
authorized under section 1876 of the
Act follow the same standards, with
respect to definitions concerning
marketing materials, as MAOs under
§ 422.2260, including how marketing
materials are defined. We also proposed
that the part 417 marketing regulations
be revised to provide that, consistent
with the requirements regarding review
and distribution of marketing materials
at § 422.2262, cost contractors
authorized under section 1876 of the
Act submit all such marketing materials
to CMS at least 45 days before the date
planned for distribution (10 days if
plans use CMS model language, without
any modifications), and that file and use
materials, as designated by CMS under
the MA marketing regulations, may be
released 5 days following their
submission to CMS.
We proposed to apply the same
standards with regard to CMS review of
marketing materials to cost contract
plans as currently applied to MAOs at
§ 422.2264. Cost contractors authorized
under section 1876 of the Act would be
required to comply with MA regulations
that specify the information that cost
contract plans must include in
marketing materials, and specify that
the cost contract plan must notify the
general public concerning the plan’s
enrollment period. Under section
1876(i)(3)(D) of the Act, we also
proposed that, in markets with a
significant non-English speaking
population, cost contract plans be
required to provide materials in the
language of these individuals.
We proposed to specify that if we
have not disapproved the distribution of
marketing materials or forms submitted
by a cost contract plan in an area, we
are deemed not to have disapproved the
distribution in all other areas covered by
PO 00000
Frm 00108
Fmt 4701
Sfmt 4700
the cost contract plan and cost contract
except with regard to any portion of the
material or form that is specific to the
particular area, as provided under
§ 422.2266.
We proposed to extend to cost
contract plans the following provisions
at § 422.2268—
• Plans may not offer gifts to potential
enrollees, unless the gifts are of nominal
value (as defined in the CMS Medicare
Marketing Guidelines), are offered to all
potential employees without regard to
whether or not the beneficiary enrolls,
and are not in the form of cash or other
monetary rebates;
• Plans may not market any health
care-related product during a marketing
appointment beyond the scope agreed
upon by the beneficiary, and
documented by the plan, prior to the
appointment;
• Plans may not market additional
health-related lines of plan business not
identified prior to an in-home
appointment without a separate
appointment that may not be scheduled
until 48 hours after the initial
appointment;
• Plans may not use a plan name that
does not include the plan type. The plan
type should be included at the end of
the plan name;
We proposed to extend to cost
contract plans authorized under section
1876 of the Act the following
requirements for MAOs under
§ 422.2272:
• Demonstrate to CMS’ satisfaction
that marketing resources are allocated to
marketing to the disabled Medicare
population as well as beneficiaries age
65 and over.
• Establish and maintain a system for
confirming that enrolled beneficiaries
have, in fact, enrolled in the plan, and
understand the rules applicable under
the plan.
• Employ as marketing
representatives only individuals who
are licensed by the State to conduct
marketing activities (as defined in the
CMS Medicare Marketing Guidelines) in
that State, and whom the cost program
has informed that State it has appointed,
consistent with the appointment process
provided for under State law.
We proposed applying the MA limits
on independent agent and broker
compensation at § 422.2274 to 1876 cost
contract plans. As with MA plans,
compensation would be based on a 6year compensation cycle. Agents and
brokers would receive initial
compensation (first year of the cycle)
with compensation over each of the
successive 5 years to be no more and no
less than 50 percent of the initial
aggregate compensation paid for the
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
enrollment. If an enrollee moves to plan
type distinct from the one in which he
or she is currently enrolled, the agent/
broker would receive an initial
commission and the cycle would begin
anew. Distinct plan types include MA,
MA–PD, PDP, and cost contract plans
authorized under section 1876 of the
Act.
We are adopting our proposed
changes to § 417.428 without further
modification in this final rule.
Comment: All commenters support
applying the MA marketing
requirements to cost contract plans. A
few of these commenters note, however,
that CMS is not applying one of the
marketing sections (§ 422.2276) which
exempts from the prior review and
approval requirements marketing
materials designed for members of an
employer group. While one of the
commenters on the employer group
requirement notes that cost contracts are
not eligible to offer 800-series plans for
their medical benefits, the commenter
notes that cost contracts have always
been permitted to negotiate with
employers to offer additional benefits to
their employer group members. The
commenter believes there is no statutory
or policy reason for treating cost
contracts differently than MA plans
with respect to marketing materials
furnished for employer groups and asks
that all MA marketing provisions,
including § 422.2276, apply to cost
plans. Another commenter believed that
while it makes sense, in general, to
apply the MA marketing requirements
to cost contract plans, there are several
differences between MA and cost
contract plans, and that these should be
reflected in updated Medicare
Marketing Guidelines.
Response: In order to permit employer
group health plans to tailor plans best
suited to their enrollees and to
communicate such information to
enrollees, we have permitted waivers of
the requirement that MA-eligible
individuals in an MA plan service area
be eligible to enroll in the plan in order
to permit an MA plan to be composed
solely of members of an employer group
plan (an ‘‘800 series plan’’). Because
non-employer group members are not
eligible to enroll in such plans, and the
employer generally provides
information to group members, we have
waived certain requirements, such as
the prior review and approval
requirement for marketing standards for
800 series plans based on the statutory
authority to permit such waivers at
1857(i)(1) of the Social Security Act.
There is no such general waiver
authority with respect to other MA
plans or cost plans that would permit
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
such plans to limit enrollment to a
particular group, or to waive statutory
marketing requirements, and CMS thus
would not have the authority to exempt
cost plans from such marketing
requirements. We are, therefore,
adopting the language from the
proposed rule. Concerning the
suggestion that CMS update the
Medicare Marketing Guidelines to
reflect any difference between cost
plans and MA plans, we are unsure to
which specific provisions, if any, the
commenter is referring but in revising
the guidelines, will point out any
necessary distinctions between MA and
cost plan procedures and policies.
Comment: One commenter
recommends that CMS amend the cost
plan enrollment regulations to allow
beneficiaries the option of electronic
enrollment into cost plans in the same
manner as MA organizations.
Response: This comment is outside
the scope of this rulemaking, and
therefore, is not addressed in this final
rule.
14. Out of Scope Comments
Comment: A number of commenters
asked CMS to revise § 423.562(a)(3) to
eliminate the option of posting Form
CMS–10147 Medicare Prescription Drug
Coverage and Your Rights, also known
as the Pharmacy Notice, in network
pharmacies. The notice instructs
enrollees to contact their plan sponsors
to request coverage determinations or
exceptions when they disagree with the
information provided at the pharmacy
counter. The commenters recommended
requiring plan sponsors to arrange with
network pharmacies to give enrollees
copies of the Pharmacy Notice
whenever prescription drugs are not
covered or are covered but subject to
utilization requirements that cannot be
resolved at the point-of-sale, or if an
enrollee pays out-of-pocket for
prescription drugs for either of these
reasons.
Response: The commenters’
suggestion is outside the scope of the
proposed rule. However, we agree that
receiving a written copy of the
Pharmacy Notice in any of the situations
described by the commenters is more
beneficial for an enrollee than being
referred to a copy of the notice posted
in the pharmacy. We will consider this
suggestion for future rulemaking.
Comment: A number of commenters
asked CMS to allow an enrollee to send
an appeal request to the Part D
Independent Review Entity (IRE) when
a coverage determination or
redetermination decision is not received
timely. The commenters also asked CMS
to closely monitor plan compliance to
PO 00000
Frm 00109
Fmt 4701
Sfmt 4700
19785
determine if coverage determination and
redetermination requests are timely
forwarded when appropriate, and
impose sanctions on plan sponsors that
are not meeting these requirements.
Response: The commenters’
suggestion is outside the scope of the
proposed rule. However, we want to
note our disagreement with the
commenter’s proposal to allow enrollees
to request appeals when plan sponsors
fail to make timely decisions. We
currently require plan sponsors to
automatically forward redetermination
requests that are not timely decided to
the Part D Independent Review Entity
for review once the decision-making
timeframe has expired, and we have
processes in place to monitor and plan
performance in this area and impose
sanctions when necessary. Furthermore,
the Part D IRE currently tracks the
volume of cases that are automatically
forwarded from plan sponsors. The
current auto-forwarding rate of 30
percent is not insignificant, so it appears
that plans are appropriately autoforwarding cases when they miss the
decision-making timeframes.
Comment: Numerous commenters
asked CMS to allow public access to the
prescription drug compendia used to
determine if a drug may be approved
under the Part D exceptions process.
Response: The commenters’
suggestion is outside the scope of the
proposed rule. We note that any private
or public entity may obtain access to the
prescription drug compendia by
contracting with the publishers.
Comment: A commenter, in response
to the revisions proposed to § 423.590,
requested clarification that the Part D
Independent Review Entity is
responsible for completing expedited
reconsideration reviews.
Response: We did not propose to
revise any of the regulatory provisions
pertaining to the Part D reconsideration
process, which is conducted by the Part
D Independent Review Entity for both
expedited and standard appeals.
However, we did propose to revise the
Part D expedited redetermination
process conducted by the Part D plan
sponsor. In the related preamble
discussion, we referenced the expedited
reconsideration process conducted by
MA organizations under § 422.590 to
illustrate a discrepancy between that
process and the expedited
redetermination process conducted by
Part D plan sponsors under § 423.590.
We believe the reference to the MA
expedited reconsideration process may
have confused the commenter, and
given the impression that we were
proposing changes to the Part D
E:\FR\FM\15APR2.SGM
15APR2
19786
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
reconsideration process when we were
not.
H. Changes To Implement Corrections
and Other Technical Changes
In this section, we address six
technical changes to the regulations
proposed in our October 22, 2009
proposed rule outlined in the Table
below.
TABLE 8—CHANGES TO IMPLEMENT CORRECTIONS AND OTHER TECHNICAL CHANGES
Part 422
Part 423
Provision
Subpart
Section
Subpart
Applications of Subpart M to Health Care
Prepayment Plans.
Generic Notice Requirements ........................
Subpart M ..................
§ 417.840 ...................
N/A .............................
N/A.
Subpart M ..................
N/A .............................
N/A.
Revision to Definition of Gross Covered Prescription Drug Costs.
Application Evaluation Procedures ................
N/A .............................
§ 422.622 ...................
§ 422.626 ...................
N/A .............................
Subpart G ..................
§ 423.308.
Subpart K ...................
Intermediate Sanctions ..................................
Basis for Imposing Intermediate Sanctions
and Civil Money Penalties.
Subpart O ..................
Subpart O ..................
§ 422.502(c) through
(d).
§ 422.750(a) ...............
§ 422.752 ...................
§ 423.503(c) through
(d)).
§ 423.750(a).
§ 423.752.
sroberts on DSKD5P82C1PROD with RULES
1. Application of Subpart M to Health
Care Prepayment Plans (§ 417.840)
In the October 22, 2009 proposed rule,
we proposed a technical correction to
the regulations governing Health Care
Prepayment Plans (HCPP) intended to
ensure that HCPP enrollees have access
to fast-track appeals for comprehensive
outpatient rehabilitation facility (CORF)
services furnished by an HCPP. As we
explained in the preamble to the
October 22, 2009 proposed rule and in
the January 28, 2005 MA final rule, we
required cost plans (HMOs), including
HCPPs, that are established under
section 1876 of the Act (Part E) and
regulated under part 417, to follow the
MA appeals requirements in subpart M
of part 422. In applying the MA appeals
procedures to HCPPs by regulation, we
adapted and implemented the section
1869 appeal rights that apply to Original
Medicare beneficiaries to the
circumstances of beneficiaries enrolled
in an HCPP. Because HCPPs only
provide Part B services, in our January
28, 2005 final rule (70 FR 4194), we
explicitly limited the application of
subpart M, for the HCPPs, to those
provisions affecting Part B services
delivered to HCPP enrollees, and
intended to encompass all Part B
services. However, in doing so, we
inadvertently failed to include the fasttrack appeal rights regarding Part B
services provided by a CORF. In a
proposed revision to § 417.840, we
proposed to correct this oversight, and
ensure that HCPP enrollees have access
to fast-track appeals for CORF services
furnished by an HCPP. This revision
would also ensure that HCPP enrollees
received the fast track appeal rights
provided for under section 1869 of the
Act with respect to such services (which
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Subpart K ...................
parallel those available to section 1876
cost enrollees and Part C enrollees).
We received only one comment on
this clarification, and the commenter
supported our proposed technical
revision. Accordingly, we are revising
§ 417.840 as set forth in the proposed
rule without change.
2. Generic Notice Delivery
Requirements (§ 422.622 and § 422.626)
In the October 22, 2009 proposed rule
(74 FR 54700), we proposed to make
technical revisions to § 422.622 and
§ 422.626 to ensure that the MA
regulations accurately state when plans
and providers are responsible for
delivering certain notices to enrollees.
Section 422.622 currently states that
when a QIO determines that an enrollee
may remain in an inpatient setting, the
MA organization must again provide the
enrollee with a copy of the Important
Message from Medicare (IM) when the
enrollee no longer requires inpatient
hospital care. However, our intent was
to make delivery of the IM the hospital’s
responsibility, and the form instructions
for the IM state this. Similarly, § 422.626
of subpart M inadvertently states that
delivery of the Notice of Medicare NonCoverage (NOMNC) is the MA
organization’s responsibility. Again,
consistent with the form instructions for
the NOMNC, our intent was to make
delivery of the notice the provider’s
responsibility. To address these
technical errors, we proposed replacing
‘‘MA organization’’ with ‘‘hospital’’ in
§ 422.622, and ‘‘provider’’ in § 422.626.
The only comment we received
regarding these provisions was
supportive of the proposed technical
revisions. Thus, we are making these
revisions as set forth in the proposed
rule without change.
PO 00000
Frm 00110
Fmt 4701
Sfmt 4700
Subpart O ..................
Subpart O ..................
Section
3. Revision to Definition of Gross
Covered Prescription Drug Costs
(§ 423.308)
In the October 22, 2009 proposed rule,
we proposed to revise the definition of
‘‘gross covered prescription drug costs’’
in § 423.308 to correctly reference both
‘‘negotiated prices’’ paid to network
pharmacies and ‘‘usual and customary
prices’’ paid to out-of-network
pharmacies. Specifically, we proposed
to replace the term ‘‘negotiated price’’
with the term ‘‘actual cost,’’ which is
defined at § 423.100 as ‘‘the negotiated
price for a covered Part D drug when the
drug is purchased at a network
pharmacy, and the usual and customary
price when a beneficiary purchases the
drug at an out of network pharmacy
consistent with § 423.124(a).’’ With this
correction, the definition of ‘‘gross
covered prescription drug costs’’ would
include ‘‘the share of actual costs (as
defined by § 423.100 of this part)
actually paid by the Part D plan that is
received as reimbursement by the
pharmacy or other dispensing entity.’’
As we noted in the preamble to the
October 22, 2009 proposed rule,, the
January 12, 2009 final rule (74 FR 1494)
included revisions to the definition of
‘‘gross covered prescription drug costs’’
in the Part D regulations at § 423.308. In
amending § 423.308 in that final rule,
we made a technical error in the
definition of ‘‘gross covered prescription
drug costs’’ (74 FR 1545) by referencing
‘‘negotiated price’’ as the prices made
available to Part D beneficiaries at
network pharmacies, and not also
referencing ‘‘usual and customary
prices,’’ the prices for drugs purchased
at out-of-network pharmacies. When we
revised the definition of ‘‘gross covered
prescription drug costs’’ in that final
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
rule, our intent was to clarify that Part
D sponsors must use the amount
received by the dispensing pharmacy or
other dispensing provider as the basis
for determining the drug costs that must
be reported to us. The use of the term
‘‘negotiated prices’’ as defined at
§ 423.100 (74 FR 1544) in the definition
of ‘‘gross covered prescription drug
costs’’ clarifies this requirement with
regards to covered Part D drugs
purchased at network pharmacies.
However, by not also referencing ‘‘usual
and customary prices’’ for covered Part
D drugs purchased at out-of-network
pharmacies, we inadvertently omitted
from the definition of ‘‘gross covered
prescription drug costs’’ the share of
drug costs actually paid by Part D
sponsors to out-of-network pharmacies.
Since section 1860D–15(b)(3) of the Act
defines ‘‘gross covered prescription drug
costs’’ as ‘‘the costs incurred under the
[Part D] plan, not including
administrative costs, but including costs
directly related to the dispensing of
covered part D drugs * * *,’’ these costs
must include costs incurred for covered
Part D drugs at out-of-network
pharmacies, as well as costs incurred at
network pharmacies. Therefore, we
needed to revise the definition of ‘‘gross
covered prescription drug costs’’ to
correctly reference both ‘‘negotiated
prices’’ paid to network pharmacies and
‘‘usual and customary prices’’ paid to
out-of-network pharmacies. We received
two comments, both of which supported
the proposed revision to the definition
of ‘‘gross covered prescription drug
costs.’’ The commenters agreed with our
proposed correction to add a reference
to ‘‘usual and customary prices’’ paid to
out-of-network pharmacies in the
definition of ‘‘gross covered prescription
drug costs.’’ Therefore, we are adopting
this revision to the definition of ‘‘gross
covered prescription drug costs’’ in
§ 423.308 as proposed.
4. Application Evaluation Procedures
(§ 422.502(c) and (d) and § 423.503(c)
and (d))
In the October 22, 2009 proposed rule,
we proposed two amendments to
regulations governing the application
evaluation procedures at § 422.502(c)
and (d), and § 423.503(c) and (d). In
addition, at § 422.502(c)(3)(iii) and
§ 423.503(c)(3)(iii) we proposed to make
a technical correction and delete the
language ‘‘right to reconsideration’’ and
replace it with ‘‘right to request a
hearing’’.
As we noted in the preamble to the
proposed rule, currently,
§ 422.502(c)(3)(iii) and
§ 423.503(c)(3)(iii) state that if we deny
the application, CMS gives written
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
notice to the contract applicant
indicating the applicant’s right to
request reconsideration. In our
December 5, 2007 final rule, we
modified the appeal rights for initial
applications and eliminated the
reconsideration process. However, in
the final regulations we did not update
§ 422.502(c)(3)(iii) and
§ 423.503(c)(3)(iii) to state that the
applicant has a right to request a hearing
and as a result the existing regulations
incorrectly provide for a right to
reconsideration.
In the October 22, 2009 proposed rule,
we also proposed to delete § 422.502(d)
and § 423.503(d). Sections 422.502(d)
and 423.503(d) currently provide that
we have the ability to oversee the
sponsoring organization’s continued
compliance with our requirements and
that if the sponsoring organization no
longer meets those requirements, we
will terminate the contract in
accordance with § 422.510 and
§ 423.509. We noted that this regulation
is not an appropriate regulation for a
section dedicated to the evaluation and
determination procedures for approving
or denying a contract application.
We received no comments on these
provisions. Accordingly, we are
adopting these provisions as proposed.
5. Intermediate Sanctions (§ 422.750(a)
and § 423.750(a))
In the October 2009 proposed rule (74
FR 203), we made three technical
changes to each intermediate sanction
regulation at § 422.750 (a) and
§ 423.750(a) to more accurately reflect
the statute. First, we changed
§ 422.750(a)(1) and § 423.750(a)(1),
which stated that we may impose a
suspension of enrollment of Medicare
beneficiaries. This regulation did not
adequately reflect the statutory language
which specifies that the enrollment
suspension applies to the ‘‘sponsoring
organization’s enrollment of Medicare
beneficiaries.
We also changed the language of
§ 422.750(a)(2) and § 423.750(a)(2),
which stated that we may impose a
suspension of payment to the
sponsoring organization for Medicare
beneficiaries who are enrolled in the
MA plan. This language does not
conform to the statutory language,
which states that suspension of payment
may be imposed for Medicare
beneficiaries enrolled after the date we
notify the organization of the imposition
of an intermediate sanction.
We also proposed to change
§ 422.750(a)(3) and § 423.750(a)(3),
which stated we may suspend all
marketing activities to Medicare
beneficiaries by a sponsoring
PO 00000
Frm 00111
Fmt 4701
Sfmt 4700
19787
organization for specified MA or Part D
‘‘plans.’’ We deleted the words ‘‘for
specified’’ MA or Part D ‘‘plans’’ because
those did not conform to the statutory
language that applies intermediate
sanctions at the organization level.
We received no comments on these
provisions. Accordingly, we are
adopting these provisions as proposed.
6. Basis for Imposing Intermediate
Sanctions and Civil Money Penalties
(§ 422.752 and § 423.752)
In the October 22, 2009 proposed rule,
we proposed conforming changes to our
regulation at § 422.752(a)(1), (3), and (4)
and § 423.752(a)(1), (3), and (4) to more
accurately reflect statutory language and
to ensure accuracy, consistency, and
uniformity. Specifically, we proposed to
amend § 422.752(a)(1) and
§ 423.752(a)(1) to conform with
statutory language and state that we may
impose an intermediate sanction if the
sponsoring organization fails
substantially to provide medically
necessary items and services that are
required (under law or under the
contract) to be provided to an individual
covered under the contract, if the failure
has adversely affected (or has
substantial likelihood of adversely
affecting) the individual.
We also proposed to amend
§ 422.752(a)(3) and § 423.752(a)(3) to
conform with statutory language and
stated that we may impose an
intermediate sanction if the sponsoring
organization ‘‘acts’’ to expel or refuses to
re-enroll a beneficiary in violation of the
provisions of this part.
Additionally, we proposed to amend
§ 422.752(a)(4) and § 423.752(a)(4) to
conform with the statutory language and
state that we may impose an
intermediate sanction if the sponsoring
organization engages in any practice
that would reasonably be expected to
have the effect of denying or
discouraging enrollment (except as
permitted by this part) by eligible
individuals with the organization whose
medical condition or history indicates a
need for substantial future medical
services.
As we noted in the proposed rule,
sections 1857(g) and 1860D–12 of the
Act provide a list of the bases for
intermediate sanctions and civil money
penalties. Existing regulations at
§ 422.752(a) and § 423.752(a) provide a
similar list of bases for intermediate
sanctions and civil money penalties.
However, the language provided in
§ 422.752(a)(1), (3), and (4) and
§ 423.752(a)(1), (3), and (4) does not
adequately conform to the statutory
language in section 1857(g)(1)(A), (C),
and (D) of the Act, respectively.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19788
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
First, § 422.752(a)(1) states that we
may impose an intermediate sanction if
the sponsoring organization fails
substantially to provide, to a sponsoring
organization enrollee, medically
necessary services that the organization
is required to provide (under law or
under the contract) to a sponsoring
organization enrollee, and that failure
adversely affects (or is substantially
likely to adversely affect) the enrollee.
This language is slightly different than
the language provided in the statute at
section 1857(g)(1)(A) of the Act.
Second, § 422.752(a)(3) and
§ 423.752(a)(3) states that we may
impose an intermediate sanction if the
sponsoring organization expels or
refuses to reenroll a beneficiary in
violation of the provisions of this part.
This language does not include the
word ‘‘acts’’ to expel which is mentioned
in the statute at section 1857(g)(1)(C) of
the Act.
Third, § 422.752(a)(4) and
§ 423.752(a)(4) states that we may
impose an intermediate sanction if the
sponsoring organization engages in any
practice that could reasonably be
expected to have the effect of denying
or discouraging enrollment of
individuals whose medical condition or
history indicates a need for substantial
future medical services. This language
does not match the exact language
contained in section 1857(g)(1)(D) of the
Act.
Finally, we made conforming changes
to § 422.752(c) and § 423.752(c).
Currently § 422.752(c)(1) and
§ 423.752(c)(1) state that we may impose
civil money penalties for any of the
determinations at § 422.510(a) and
§ 423.509(a), except § 422.510(a)(4) and
§ 423.509(a)(4). Also, § 422.752(c)(2)(ii)
and § 423.752(c)(2)(ii) state that OIG
may impose civil money penalties for a
determination made pursuant to
§ 422.510(a)(4) and § 423.509(a)(4).
Since we are proposing elsewhere in
these proposed regulations to
redesignate § 422.510(a)(4) and
§ 423.509(a)(4) to § 422.510(a)(2)(iii) and
§ 423.509(a)(2)(iii), we need to conform
§ 422.752 and § 423.752 to these
changes. Therefore, for regulations
§ 422.752(c)(1), § 422.752(c)(2)(ii),
§ 423.752(c)(1), and § 423.752(c)(2)(ii)
we are deleting the reference to
§ 422.510(a)(4) and § 422.509(a)(4) and
replace with a reference to
§ 422.510(a)(2)(iii) and
§ 423.509(a)(2)(iii).
We received no comments on these
provisions. Accordingly, we are
adopting these provisions as proposed.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
III. Provisions of the Final Rule
Except as otherwise noted below, this
final rule adopts the provisions of the
proposed rule. The provisions of this
final rule that differ from the proposed
rule are as follows:
• Changes to Strengthen Our Ability
to Distinguish for Approval Stronger
Applicants for Part C and D Program
Participation and to Remove
Consistently Poor Performers.
• Notice of Intent to Apply. We
modified § 422.503(b)(2) and
§ 423.502(b)(2) to clearly indicate that
the decision not to submit an
application after submission of a notice
of intent will not result in any
compliance consequences.
• Compliance Programs under Parts C
and D—
++ We made changes made to
§ 422.502(b)(4)(vi)(B) and
§ 423.504(b)(4)(vi)(B) to provide that the
compliance officer must be an employee
of the sponsoring organization, parent
organization or corporate affiliate and
clarify that they may not be an
employee of a first tier, downstream or
related entity of the sponsoring
organization and must be accountable to
the governing board of the sponsoring
organization.
++ At § 423.504(b)(4)(vi)(C)(3), we
adopt a new regulation for the Part D
program to specify that first tier,
downstream, and related entities have
met the fraud, waste, and abuse
certification requirements through
enrollment into the Medicare program
and accreditation as a Durable Medical
Equipment, Prosthetics, Orthotics, and
Supplies (DMEPOS) supplier are
deemed to have met the training and
educational requirements for fraud,
waste, and abuse.
• Termination of Contracts under
Parts C and D. We did not finalize the
modifications to § 422.510(a)(2)(i),
§ 423.509(a)(2)(i) (failure to comply with
regulatory requirements),
§ 422.510(a)(2)(ii) and § 423.509(a)(2)(ii)
(failure to comply with performance
standards).
• Maximum Allowable Out-of-Pocket
Cost Amount for Medicare Parts A and
B Services. At § 422.100(f)(4) with one
modification regarding its applicability
to all MA plans.
• Transition Process Under Part D
(§ 423.120(b)(3)). At § 423.120(b)(3), we
are modifying proposed paragraph (iii)
to clarify that transition notices must be
sent to beneficiaries within 3 business
days of adjudication of a temporary fill.
• Beneficiary Communications
Materials Under Parts C and D
++ Revised paragraph
§ 422.2260(5)(vii) to retain materials
PO 00000
Frm 00112
Fmt 4701
Sfmt 4700
about membership activities (for
example, materials on rules involving
non-payment of premiums,
confirmation of enrollment or
disenrollment, or annual notification
materials) in the definition of marketing
materials.
++ Added a new paragraph
§ 422.2260(6) to specifically exclude
from the definition of marketing ad hoc
customized or situational enrollee
communications from the definition of
marketing materials.
• Use of Standardized Technology
under Part D. At § 423.120, we clarify
that the effective date for the
requirement for a unique RxBIN or
RxBIN/RxPCN combination and a
unique Part D Rx identifier for each
individual Part D member will be
January 1, 2012.
• Notice of Alternative Medicare
Plans Available to Replace
Nonrenewing Plans Under Parts C and
D.
• Revised § 422.506 and § 423.507 to
require that both Part C and Part D
organizations inform beneficiaries of
both MA and PDP available options.
• Made minor technical changes to
§ 422.254(a)(4), § 423.265(b)(2),
§ 422.256(b)(4)(i) and § 423(b)(3)(i).
• RADV Appeals Processes.
++ In § 422.2 we are—
— Removing the definition of
documentation dispute process; and
— Adding the definition of initial
validation contractor (IVC).
++ In § 422.311 we are revising the
audit dispute and appeals processes.
• Changes to Improve Data Collection
for Oversight and Quality Assessment
++ At § 480.140(g), we clarify that
QIOs must disclose quality review study
information collected by the QIOs as
part of the RHQDAPU program, as
defined in section 1886(b)(3)(B) of the
Act, to CMS.
++ We also modify § 422.153 to
indicate that we will acquire quality
review study information from QIOs as
defined in part 475.
• CAHPS Survey Administration
Under Parts C and D. At § 417.492 and
§ 422.152, we clarify that all cost
contracts under section 1876 of the Act
with 600 or more enrollees in July of the
prior year, must contract with approved
Medicare Consumer Assessment of
Healthcare Providers and Systems
(CAHPS) survey vendors to conduct the
Medicare CAHPS satisfaction survey of
Medicare plan enrollees in accordance
with CMS specifications and submit the
survey data to CMS.
• Protected Classes of Concern under
Part D. We are not finalizing our
proposed revisions to § 423.120(b)(2)(v).
• Pro-rating the Plan Deductible for
Part C MSA Enrollments Occurring
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
During an Initial Coverage Election
Period. We are modifying § 422.103(d)
in this final rule to allow beneficiaries
who enroll in a MSA plan mid-year to
also pay a pro-rated deductible.
Medication Therapy Management
Programs Under Part D—At
§ 423.153(d)(2)(iii), we adopt the
establishment of a specific threshold of
$3,000 for MTM eligibility, instead of
relying on the ICL as the proposed target
for MTM eligibility.
• Standard Timeframe and Notice
Requirements for Coverage
Determinations Under Part D. We add
paragraph (a)(3) to § 423.568, which will
require plan sponsors to establish and
maintain a method of documenting all
oral requests and maintaining the
documentation in the case file.
• Novations. We amended § 423.551
to provide clarity to sponsors regarding
the circumstances under which a PDP
novation would be approved by CMS,
noting that they do not apply to changes
of ownership between subsidiaries of
the same parent organization.
sroberts on DSKD5P82C1PROD with RULES
IV. Collection of Information
Requirements
Under the Paperwork Reduction Act
of 1995, we are required to provide 60day notice in the Federal Register and
solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. In order to fairly evaluate
whether an information collection
should be approved by OMB, section
3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
The following sections of this
document contain paperwork burden
but not all of them are subject to the
information collection requirements
(ICRs) under the PRA for reasons noted.
A. ICRs Regarding Basic Contract
Requirements (§ 417.472)
Proposed § 417.472(i) states that HMO
or CMP must comply with the
requirements at § 422.152(b)(5).
Proposed § 417.472 states that all
coordinated care contracts (including
local and regional PPOs and contracts
with exclusively SNP benefit packages,
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
cost contracts under section 1876 of the
Act, private fee-for-service contracts,
and MSA contracts with 600 or more
enrollees in July of the prior year) must
contract with approved Medicare
Consumer Assessment of Healthcare
Providers and Systems (CAHPS) survey
vendors to conduct the Medicare
CAHPS satisfaction survey of MA plan
enrollees in accordance with CMS
specifications and submit the survey
data to CMS. The burden associated
with the requirement in § 417.472(i) and
(j) is detailed in our discussion of
§ 422.152.
B. ICRs Regarding Apportionment and
Allocation of Administrative and
General Costs (§ 417.564)
We are not imposing any new
reporting requirements. We are simply
clarifying what costs an HCPP may
report in its cost report as
administrative costs for reimbursement
from the government. We do not believe
that our proposal will result in
additional burden on cost plans;
therefore, we have not incorporated a
burden increase in the PRA section.
C. ICRs Regarding Medicare Secondary
Payer (MSP) Procedure (§ 422.108 and
§ 423.462)
Section 422.108(b)(3) proposes that
MA organizations must coordinate
benefits to Medicare enrollees with the
benefits of the primary payers,
including reporting, on an ongoing
basis, information obtained in
accordance with requirements in
paragraphs (b)(1) and (b)(2) of this
section in accordance with CMS
instructions. Similarly, § 423.462
proposed that Part D plan sponsors must
report creditable new or changed
primary payer information to the CMS
COB Contractor in accordance with the
processes and timeframes specified by
CMS. In the proposed rule, we
estimated the burden associated with
this requirement to be the time and
effort necessary to report the specified
information to CMS on an ongoing
basis. We estimated that 624 MA
organizations and 456 Part D plan
sponsors would need to comply with
these requirements, a total of 1,080
entities. We also estimated that, on
average, each entity would produce one
report thereby yielding a total of 1,080
reports annually for involved entities.
We estimated that it would take each
entity an average of 2,885 hours to
report the required information to CMS.
The estimated annual burden associated
with these requirements was 3,115,800
hours, and the cost associated with
meeting these requirements was $77.9
million.
PO 00000
Frm 00113
Fmt 4701
Sfmt 4700
19789
We have now determined that the
information collection burden imposed
by § 422.108 and § 423.462 is generally
part of the information being captured
in CMS–10265—Mandatory Insurer
Reporting information collection request
(ICR). The OMB control number (OCN)
is 0938–1074. Therefore, no new ICR is
required.
The collection approved under OCN
0938–1074 takes care of virtually all of
an MAO’s MSP reporting
responsibilities; the MAO is now
reporting on their own primary,
commercial insurance coverage. The
small number of cases where an MAO
will need to report either a new primary
carrier or the termination of such
coverage, that is not captured by OCN
0938–1074 is covered by existing
authority under OCN 0938–0753. Under
our previous Part C coordination of
benefits policy, we required MAOs to
survey members annually and to report
results to CMS.
The reporting burden under our
previous Part C coordination of benefits
policy was to report both survey nonresponders (approximately 10 percent of
enrollees) and those who reported that
they had other third party health
insurance coverage (less than 2 percent).
MAOs were not required to report to us
on members that responded to the
survey and said that they did not have
other third party health insurance
coverage—over 85 percent. Under the
new system MAOs will only have to
report to CMS those for whom MSP
status changes from what is showing on
the current COB file. We estimate this
will be less than 1 percent. The burden
of reporting is less now than it was
before the change, but the actual
reporting process is new. The new
reporting process is slightly more
burdensome than the old process and
we believe the overall burden will be
similar to what it was before this
change.
D. ICRs Regarding Disclosure
Requirements (§ 422.111)
Proposed § 422.111 states that we may
require an MA organization to disclose
to its enrollees or potential enrollees,
the MA organization’s performance and
contract compliance deficiencies in a
manner specified by CMS.
Our intent is to invoke this disclosure
authority when we become aware that
an MA organization has serious
compliance and performance
deficiencies such as those that may lead
to an intermediate sanction or require
immediate correction and where we
believe beneficiaries should be
specifically notified. The primary
purpose of this requirement is to
E:\FR\FM\15APR2.SGM
15APR2
19790
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
promote transparency and informed
choice especially in those situations
where we believe beneficiaries need or
should have access to this information.
The burden associated with this
requirement would be the time and
effort necessary for the MA organization
to make the aforementioned disclosures.
We have not developed a burden
estimate for this requirement because
we do not believe that we will exceed
the PRA threshold of 10 organizations
per any 12 month period. We have
based this assumption on past
experience. For example, while this
requirement does not just apply to those
organizations who have been
sanctioned, in 2009, CMS imposed
intermediate sanctions on a total of 4
sponsoring organizations (which is the
highest number of intermediate
sanctions imposed in any year or 12
month period from 2006 through 2009)
and, it is important to note, that not all
of the organizations sanctioned in 2009
were required to make such a
disclosure. Additional organizations
(not under sanction) experience
compliance deficiencies, however we
intend to utilize this disclosure
requirement in instances where we
become aware of serious deficiencies
which may lead to the imposition of
intermediate sanctions and/or require
immediate correction. For any of these
instances, we will then evaluate and
determine whether it is appropriate that
beneficiaries be specifically notified of
the underlying deficiencies to achieve
our stated goals of promoting
transparency and/or informed choice.
Therefore, we do not believe that we
will impose the disclosure requirement
on 10 or more sponsoring organizations
within any 12-month period which
would not require the development of a
burden estimate.
E. ICRs Regarding Quality Improvement
Program (§ 422.152)
Section 422.152(b)(3)(ii) states that
MA coordinated care plans must collect,
analyze and report quality performance
data indentified by CMS that are of the
same type as those specified under
paragraph (b)(3)(i) of this section.
Section 422.152(e)(2)(ii) states that MA
organizations offering an MA regional
plan or local PPO plan must collect,
analyze and report quality performance
data identified by CMS that are of the
same type as those described under
§ 422.152(e)(2)(i). The burden associated
with these requirements is the time and
effort necessary for an MA coordinated
care plan to collect, analyze and report
quality performance data to CMS. In the
proposed rule, we estimated that it
would require 1,000 hours per MA
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
coordinated care plan to comply with
these requirements. There are 624 MA
coordinated care plans. The estimated
annual burden associated with these
requirements was 624,000 hours. The
estimated annual cost associated with
these requirements was $36.9 million.
The new quality measures will be
identified during CY 2011 at which time
it will go through the PRA review and
approval process. CMS has begun
drafting the PRA package for the new
quality measures. However, the PRA
package cannot be completed until the
measures have been developed.
Section 422.152(b)(5) requires that all
coordinated care contracts (including
local and regional PPOs and contracts
with exclusively SNP benefit packages,
cost contracts under section 1876 of the
Act in Section 417.472, private fee-forservice contracts, and PDPs under
Section 423.156 with 600 or more
enrollees in July of the prior year) must
contract with approved Medicare
CAHPS survey vendors to conduct the
Medicare CAHPS satisfaction survey of
MA plan enrollees in accordance with
CMS specifications, and submit the
survey data to CMS. The burden
associated with this requirement is the
time and effort necessary to conduct the
CAHPS survey and submit the
corresponding data to CMS. The
associated burden is currently approved
under OMB control number 0938–0732.
For the CAHPS requirements, the
requirement will go into effect in 2011
when the contracts select approved
vendors to collect and submit CAHPS
data on their behalf. The data collection
begins in February 2011. We have
revised the currently approved ICR to
include the requirements contained in
this section. The burden associated with
these requirements is the time and effort
necessary for an MA organization,
Section 1876 Cost Plan, or PDP sponsor
to collect, analyze and report quality
performance data to CMS. We estimate
that it will require 54 hours per MA
organization or per PDP, to comply with
these requirements. The 54 hours
includes the time to select a CAHPS
survey vendor and the survey
administration time of the CAHPS
survey vendor for which the MA or PDP
contract pays. There are 624 contracts
(both MA and PDPs). The estimated
annual burden associated with these
requirements is 54 × 624 = 33,696 hours
for the affected contracts.
F. ICRs Regarding Risk Adjustment Data
Validation (RADV) Appeals (§ 422.311)
We received comments from an MA
organization disputing CMS’s burden
estimate associated with RADV audit
appeals. This organization contends that
PO 00000
Frm 00114
Fmt 4701
Sfmt 4700
CMS has underestimated the amount of
time, effort, and cost associated with
complying with CMS’s RADV appeals
processes, as proposed.
While we acknowledge that there can
be differences regarding the exact
burden estimate CMS developed for
RADV appeals, we continue to believe
that the overall impact analysis we
provided regarding RADV appealsrelated procedures is reasonable. To
date MA organizations have not been
afforded appeal rights under RADV
audits and CMS has no historical data
to verify what we believe is an
inherently reasonable level of effort and
associated burden-estimate. Also, since
invoking an MA organization’s appeal
rights is entirely voluntary on the part
of MA organizations, we likewise have
no altogether accurate way to estimate
the level of activity that MA
organizations will undertake in
appealing eligible RADV-related audit
provisions. Indeed, we think it is
entirely possible that various MA
organizations could take altogether
different approaches in requesting an
RADV appeal. For example—some
organizations might employ internal
resources to process an appeal request
(for example, employ in-house medical
record and legal staff) while other
organizations could hire external
medical record consultants and/or law
firms to process their appeals requests.
Given this uncertainty, CMS must rely
upon what we believe are reasonable
level of effort and burden-estimates, as
described in our proposed rules and
finalized here.
In section § 422.311 of the proposed
rules, CMS proposed a multi-step Risk
Adjustment Data Validation (RADV)
dispute and appeals process. One
important change to the RADV dispute
and appeal process that we have
implemented pursuant to public
comment is removal of the
documentation dispute process
described at § 422.311(c)(2)(ii) and
development of a process that would
allow MA organizations to appeal
medical record review determinations
that occur at the IVC level of medical
record review. We describe this new
process that we are implementing at
§ 422.311(c) (2). In effect, the new
medical record review appeal
procedures provides MA organizations
with two opportunities to appeal—first,
to appeal RADV medical record review
determinations and second, to appeal
the RADV payment error calculations.
It’s our belief that the level of effort
necessary to process a request for
documentation dispute will be roughly
the same level of effort necessary to
request Medical record review appeal
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
since both processes involve sending
CMS medical record documentation to
support identified RADV errors
identified pursuant to CMS’s initial
level of medical record review.
However, the scope of the eligibility
criteria for what CMS will allow MAOs
to appeal under medical record review
appeal could be broader when
compared with what CMS would have
allowed under the now removed
documentation dispute process. We
therefore have calculated a new burden
estimate for medical record review
appeal.
Whereas under documentation
dispute, RADV contract-level audit
statistics indicated that approximately
55 percent of RADV audit errors would
have been of the type that could be
eligible for documentation dispute, we
estimate that fully 100 percent of RADV
audit errors will be eligible for medical
record review appeal. The historical
contract-level RADV audit error rate to
date is approximately 15 percent.
Utilizing the statistics regarding the
number of organizations that we expect
to undergo RADV audit (70) annually,
we estimate that 100 percent of these
organizations will invoke their medical
record review appeal rights and appeal
their medical record review errors. On
average, CMS audits approximately 200
beneficiaries per contract; and each
beneficiary selected for testing has
approximately 2.5 Hierarchical
Condition Categories (or HCCs, which
are the base-level unit of analysis under
RADV audits) equating to roughly 500
HCCs tested per annual RADV contractlevel audit. Applying the 15 percent
contract-level RADV audit error rate to
the 500 tested HCCs renders an estimate
of 75 HCCs (500 × .15) eligible for
medical record review appeal per audit.
This equates to approximately 5,250
HCCs (70 audits × 75 HCCs/audit) that
could be appealed annually under
medical record review appeal. Each
HCC that is appealed will require
production of one medical record to
overturn the RADV testing error. We
continue to estimate that it will take
approximately 1 hour to prepare the
necessary documentation to dispute one
HCC via medical record review appeal.
This equates to 5,250 burden hours at
approximately $59.20/hour (based on
U.S. Dept. of Labor statistics for hourly
wages for management analysts)—or, an
annual dollar burden on the MA
industry of $310,800.
CMS also estimates that beyond
product of medical records, MAOs
pursuing medical record review appeal
would incur legal costs in the
preparation of the formal request for
appeal. Again, we assume all MAOs will
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
appeal their medical record review
determinations found to be in error (70
MAOs). We estimate 40 hours by an
attorney costing $60 per hour (Bureau of
Labor Statistics, 1/28/2010), and 20
hours by a health care administrator
costing $30 per hour (Bureau of Labor
Statistics, 1/28/2010); for a total cost of
$3,000 in labor costs per MAO per
appeal. This equates to an additional
aggregate annual dollar burden of
$210,000 ($3000 × 70 audits).Total
estimated aggregate annual dollar
burden to the MA industry annually
equals $520,800 ($310,800 for medical
record preparation + $210,000 for legal
preparation of appeal case). The total
aggregated burden is 9,450 hours.
G. ICRs Regarding Application
Requirements (§ 422.501 and § 423.502)
Section 422.501(b) and § 423.502(b)
require that an organization submitting
an application under this section for a
particular contract year must first
submit a completed Notice of Intent to
Apply by the date established by CMS.
We will not accept applications from
organizations that do not submit a
timely Notice of Intent to Apply. The
purpose of these requirements is to
facilitate CMS systems access earlier so
that the contract number may be given
out and applications may be submitted
electronically. While the burden
associated with the requirements
contained in § 422.501(b) and
§ 423.502(b), the Notice of Intent to
Apply, are subject to the PRA, the
burden associated with these
requirements is already approved under
the OMB control numbers for the Part C
and Part D applications, 0938–0935 and
0938–0936, respectively.
Section 422.501(c) and § 423.502(c)
propose to revise the current regulation,
making clear the application standards
for becoming an MA organization or
Part D plan sponsor. Specifically,
§ 422.501(c) and § 423.502(c) require
that applicants complete all parts of a
certified application. The burden
associated with the aforementioned
requirements is the time and effort
necessary for an application to complete
all parts of a certified Part C or Part D
application. While the burden
associated with the requirements
contained in § 422.501(c) and
§ 423.502(c) are subject to the PRA, the
burden associated with these
requirements is already approved under
OMB control numbers for the Part C and
Part D applications, 0938–0935 and
0938–0936, respectively.
PO 00000
Frm 00115
Fmt 4701
Sfmt 4700
19791
H. ICRs Regarding General Provisions
(§ 422.503 and § 423.504)
Section 422.503(b)(4)(vi) and
§ 423.504(b)(4)(vi) propose to expand on
the existing requirements by providing
clarification and additional guidance
with respect to the requirements for
developing, implementing and
maintaining effective compliance
programs. The burden associated with
this requirement is the time and effort
put forth by the sponsoring organization
to prepare a compliance plan that meets
the requirements of this section. While
these requirements are subject to the
PRA, it is currently approved under
OCN 0938–1000.
I. ICRs Regarding Contract Provisions
(§ 422.504 and 423.505)
Section 422.504 and § 423.505
explicitly state our existing authority to
find sponsors out of compliance with
either MA requirements, Part D
requirements, or both when the
sponsor’s performance represents an
outlier relative to the performance of
other sponsors. Specifically,
§ 422.504(e)(2) and § 423.505(e)(2) state
that HHS, the Comptroller General or
their designees have the right to audit,
evaluate, and inspect any books,
contracts, computer or other electronic
systems, including medical records and
documentation of the first tier,
downstream, and related to our contract
with the MA organization. These
sections contain recordkeeping
requirements. The burden associated
with § 422.504(e)(2) and § 423.505(e)(2)
is the time and effort necessary for MA
organizations or Part D sponsors to
maintain the information on file and
make it available to CMS upon request.
While these requirements are subject to
the PRA, we believe the associated
burden is exempt under 5 CFR
1320.3(b)(2).
J. ICRs Regarding Nonrenewal of
Contract (§ 422.506 and § 423.507)
Section 422.506 and § 423.507 contain
notification requirements for MA
organizations and Part D plan sponsors.
Section 422.506(a)(2) and
§ 423.507(a)(2) require that when an
organization does not intend to renew
its contract, it must notify each
Medicare enrollee by mail at least 90
calendar days before the date on which
the nonrenewal is effective. An
organization will also have to provide
information about alternative
enrollment options by complying with
at least one of the requirements
specified in § 422.506(a)(2)(ii) or
§ 423.507(a)(2)(ii). In addition,
§ 422.506(b)(2) and § 423.507(b)(2) state
E:\FR\FM\15APR2.SGM
15APR2
19792
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
that an organization must notify each
Medicare enrollee by mail at least 90
calendar days before the date on which
the nonrenewal is effective, or at the
conclusion of the appeals process. We
believe that fewer than 10 contracts will
be terminated on an annual basis, and
therefore, these requirements are
exempt from the PRA process.
K. ICRs Regarding Request for Hearing
(§ 422.662 and § 423.651)
With respect to Medicare contract
determinations and appeals, § 422.662
and § 423.651 provide the methods and
time period for when an MA
organization or Part D plan sponsor may
request a hearing after a contract
determination or intermediate sanction
has been imposed. The request for
hearing must be submitted in writing
and must be filed within 15 calendar
days after the receipt of the notice of the
contract determination or intermediate
sanction. This is an existing regulation
and in this rule we are only modifying
the language ‘‘after receipt of the hearing
decision’’ to conform to other
regulations. Furthermore, we believe the
associated burden is exempt from PRA
under 5 CFR 1320.4. Information
collected during the conduct of an
administrative action or audit is not
subject to the PRA.
sroberts on DSKD5P82C1PROD with RULES
L. ICRs Regarding Time and Place of
Hearing (§ 422.670 and § 423.655)
Section 422.670 and § 423.655 state
that CMS, an MA organization or a Part
D plan sponsor may request an
extension by filing a written request no
later than 10 calendar days prior to the
scheduled hearing. The burden
associated with these requirements is
the time and effort necessary for an MA
organization or a Part D plan sponsor to
submit a written extension request to
the presiding hearing officer.
Furthermore, we believe the associated
burden is exempt from the PRA under
5 CFR 1320.4. Information collected
during the conduct of an administrative
action is not subject to the PRA.
M. ICRs Regarding Review by the
Administrator (§ 422.692 and § 423.666)
Section 422.692 and § 423.666 state
that CMS, an MA organization or a PDP
plan sponsor that has received a hearing
decision may request a review by the
Administrator within 15 calendar days
after receipt of the hearing decision. The
burden associated with these
requirements is the time and effort
necessary to submit a request for the
Administrator to review a hearing
decision. This is an existing regulation
and in this rule we are only modifying
the language ‘‘after receipt of the hearing
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
decision’’ to conform to other
regulations. Furthermore, we believe the
associated burden is exempt from PRA
under 5 CFR 1320.4. Information
collected during the conduct of an
administrative action or audit is not
subject to the PRA.
N. ICRs Regarding Procedures for
Imposing Intermediate Sanctions and
Civil Monetary Penalties (§ 422.756 and
§ 423.756)
Section 422.756 and § 423.756 state
before CMS imposes intermediate
sanctions, MA organizations and Part D
plan sponsors may request a hearing
before a CMS hearing officer. A written
request must be received by the
designated CMS office within 15
calendar days after the receipt of the
notice of sanction. The burden
associated with these requirements is
the time and effort necessary to draft
and submit a hearing request to the
designated CMS office. This is an
existing regulation and we are only
modifying the language ‘‘after receipt of
the hearing decision’’ to conform to
other regulations. Furthermore, we
believe the associated burden is exempt
from PRA under 5 CFR 1320.4.
Information collected during the
conduct of an administrative action or
audit is not subject to the PRA.
O. ICRs Regarding Disclosure
Requirements (§ 423.128)
Proposed § 423.128 states that we may
require a Part D Plan Sponsor to
disclose to its enrollees or potential
enrollees, the Part D Plan Sponsor’s
performance and contract compliance
deficiencies in a manner specified by
CMS.
Our intent is to invoke this disclosure
authority when we become aware that a
Part D sponsor has serious compliance
and performance deficiencies such as
those that may lead to an intermediate
sanction or require immediate
correction and where we believe
beneficiaries should be specifically
notified. The primary purpose of this
requirement is to promote transparency
and informed choice especially in those
situations where we believe
beneficiaries need or should have access
to this information. The burden
associated with this requirement would
be the time and effort necessary for the
Part D sponsor to make the
aforementioned disclosures. We have
not developed a burden estimate for this
requirement because we do not believe
that we will exceed the PRA threshold
of 10 organizations per any 12 month
period. We have based this assumption
on past experience. For example, while
this requirement does not just apply to
PO 00000
Frm 00116
Fmt 4701
Sfmt 4700
those organizations who have been
sanctioned, in 2009, CMS imposed
intermediate sanctions on a total of 4
sponsoring organizations (which is the
highest number of intermediate
sanctions imposed in any year or 12
month period from 2006 through 2009)
and, it is important to note, that not all
of the organizations sanctioned in 2009
were required to make such a
disclosure. Additional organizations
(not under sanction) experience
compliance deficiencies, however we
intend to utilize this disclosure
requirement in instances where we
become aware of serious deficiencies
which may lead to the imposition of
intermediate sanctions and require
immediate correction. For any of these
instances, we will then evaluate and
determine whether it is appropriate that
beneficiaries be specifically notified of
the underlying deficiencies to achieve
our stated goals of promoting
transparency and informed choice.
Therefore, we do not believe that we
will impose the disclosure requirement
on 10 or more sponsoring organizations
within any 12-month period which
would not require the development of a
burden estimate.
P. ICRs Regarding Validation of Part C
and Part D Reporting Requirements
(§ 422.516 and § 423.514)
In this final rule, we are amending
§ 422.516 and § 423.514 to state that
each Part C and Part D sponsor will be
subject to an independent yearly audit
of Part C and Part D measures (collected
pursuant to our reporting requirements)
to determine their reliability, validity,
completeness, and comparability in
accordance with specifications
developed by CMS. The burden
associated with this provision is the
time and effort of the MA organizations
and Part D sponsors in procuring an
auditor and in supporting the auditor as
well as the time and effort of the auditor
in conducting the yearly audit.
In the proposed rule, we estimated the
total burden hours related to the time
and effort for all auditing organizations
to perform the annual audit for both Part
C and Part D data validation to be
215,840. In addition, we estimated the
total yearly burden for procuring and
supporting the auditor would be 85,200
hours (120 hours per sponsor × 710
sponsors). Therefore, the total estimated
burden was 301,040 hours. At that time,
we assumed that the auditing
organizations would audit all thirteen
measures that comprised the Part C
reporting requirements and all 21
sections that comprised the Part D
reporting requirements. For Part C, two
of the original thirteen reporting
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
sroberts on DSKD5P82C1PROD with RULES
requirements were suspended—agent
compensation structure and agent
training and testing. Additionally, two
of the remaining eleven Part C measures
will not undergo the data validation—
PFFS Plan enrollment Verification Calls
and PFF Provider Payment Dispute
Resolution Process. We estimate that
Part C reductions alone will reduce the
annual hourly burden for all auditing
organizations to perform the annual
audit by 66,412 hours (215,840 × 4/13).
This reduction leads to an estimate of
149,428 hours to perform the annual
audit for Part C measures. The CY2010
Part D Reporting Requirements PRA
package approved by OMB in October
2009 included burden estimates for data
validation and auditing activities. The
PRA package included the burden for
plans to audit 17 of the 21 Part D
reporting sections. This number has
now been decreased because only 8
reporting sections will be audited. The
elimination of 9 reporting sections from
the requirements for data validation and
auditing for Part D will result in the
following reduction in labor hours: 0.5
hours × 9 sections × 715 plans = 3,218
hours.
The combined Part C and Part D
reductions in data validation
requirements from those in the
proposed rule will result in 69,630
fewer labor hours. The total estimated
labor hours is therefore 301,040 ¥
69630 = 231,410.
Q. ICRs Regarding Drug Utilization
Management, Quality Assurance, and
Medication Therapy Management
Programs (MTMPs) (§ 423.153)
The revisions to § 423.153 state that
Part D plans must offer a minimum level
of medication therapy management
services for each beneficiary enrolled in
the MTMP that includes, but is not
limited to, annual comprehensive
medication reviews with written
summaries. The comprehensive medical
review must include an interactive,
person-to-person consultation
performed by a pharmacist or other
qualified provider unless the beneficiary
is in a long-term care setting.
Additionally, there must by quarterly
targeted medication reviews with
follow-up interventions when
necessary.
The burden associated with these
requirements is the time and effort
necessary for Part D sponsors (both MA–
PDs and PDPs) to conduct the medical
reviews with written summaries. We
estimate that each medical review will
take an average of 30 minutes to
conduct. Similarly, we estimate that
there will be 1,875,000 reviews
conducted by 456 Part D sponsors on an
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
19793
annual basis. The total annual burden
associated with this requirement is
937,500 hours.
S. ICRs Regarding Timeframes and
Notice Requirements for Expedited
Coverage Determinations (§ 423.572)
R. ICRs Regarding Timeframes and
Notice Requirements for Standard
Coverage Determinations (§ 423.568)
If a Part D plan sponsor makes a
completely favorable expedited decision
under paragraph (b) of this section, it
must give the enrollee written notice of
the determination. The initial notice
may be provided orally, so long as a
written follow-up notice is sent within
3 calendar days of the oral notification.
The burden associated with the
requirements listed in § 423.572(b) is
the time and effort necessary for a Part
D plan sponsor to notify an enrollee
(and the prescribing physician or other
prescriber involved, as appropriate) in
writing of completely favorable
expedited decision. We estimate that the
456 Part D plan sponsors will issue a
combined 87,103 written favorable
expedited notifications per year. We
further estimate that it will take a Part
D plan sponsor 30 minutes to distribute
a single notice. The estimated annual
burden associated with the requirement
in § 423.572(b) is 43,552 hours.
The Part D plan sponsor must, under
paragraph (a)(3), establish and maintain
a method of documenting all oral
requests for standard coverage
determinations and retain the
documentation in the case file.
The burden associated with this
requirement is the time and effort
necessary for Part D plan sponsors to
maintain the required documentation
outlined in this section. We estimate
that, on an annual basis, 90 percent of
all coverage determination requests will
be standard requests, and three percent
of those requests will not involve
reimbursement issues. Of the estimated
1,013,881 requests received annually,
we estimate that approximately 90
percent (912,493) will be made orally.
We estimate that it will take a Part D
plan sponsor 3 minutes to document
and retain the required documentation
in the case file. Thus, it will take each
of the 456 Part D plan sponsors 100
hours to maintain the required
documentation on an annual basis, for
a total annual burden of 45,625 hours.
If a Part D plan sponsor makes a
completely favorable standard decision
under paragraph (d) of this section, it
must give the enrollee written notice of
the determination. Pursuant to
paragraph (d) of this section, the initial
notice of a favorable decision may be
provided orally, so long as a written
follow-up notice is sent within 3
calendar days of the oral notification.
The burden associated with the
requirement in paragraph (d) is the time
and effort necessary for a Part D plan
sponsor to notify an enrollee (and the
prescribing physician or other
prescriber involved, as appropriate) in
writing of a completely favorable
standard decision for benefits. We
estimate that each year, the 456 Part D
plan sponsors will issue a total of
approximately 760,411 written favorable
standard notifications for benefits. We
further estimate that it will take a Part
D plan sponsor 30 minutes to distribute
a single notice. The estimated annual
burden associated with the requirement
in § 423.568(d) is 380,206 hours. For
§ 423.568, we will update 0938–0964 to
include the burden estimates associated
with this requirement.
PO 00000
Frm 00117
Fmt 4701
Sfmt 4700
T. ICRs Regarding Access To Covered
Part D Drugs (§ 423.120)
Section 423.120(b)(3)(iv) requires
sponsors to provide enrollees with
appropriate notice regarding their
transition process within three business
days after providing a temporary supply
of non-formulary Part D drugs
(including Part D drugs that are on a
sponsor’s formulary but require prior
authorization or step therapy under a
sponsor’s utilization management rules).
The burden associated with this
requirement is the time and effort
necessary for a Part D plan sponsor to
provide a notice to beneficiaries
regarding the transition process. We
estimate this will result in 1.35 million
notices that would take an average of 15
minutes to prepare. We then estimate
the total burden to be 337,500 hours.
Section 423.120(c)(4) requires Part D
sponsors to contractually mandate that
their network pharmacies submit claims
electronically to the Part D sponsor or
its intermediary on behalf of the
beneficiary whenever feasible unless the
enrollee expressly requests that a
particular claim not be submitted to the
Part D sponsor or its intermediary.
Section 423.120(c)(4) requires the
approximately 28 pharmacy claims
processors currently responsible for the
electronic adjudication of pharmacy
benefits to change their RxBIN or RxBIN
and RxPCN combination if such
identifiers are not already unique to its
Medicare line of business, and the Part
D cardholder identification number if it
is not already unique to each Medicare
E:\FR\FM\15APR2.SGM
15APR2
19794
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Part D enrollee. We estimate the annual
hourly burden to be 1,380 hours per
processor to make the coding changes
necessary to implement this
requirement. We estimate the yearly
burden to be 38,640 hours for CY 2010.
This is a one time only burden for
programming. The collection burden for
these provisions will be reflected in a
revised submission of the ICR approved
under OMB control number 0938–0964.
U. ICRs Regarding Timeframes and
Responsibility for Making
Redeterminations (§ 423.590)
sroberts on DSKD5P82C1PROD with RULES
Section 423.590(d)(2) states that if a
Part D plan sponsor first notifies an
enrollee of an adverse or favorable
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
expedited determination orally, it must
mail written confirmation to the
enrollee within 3 calendar days of the
oral notification. The burden associated
with this requirement is the time and
effort necessary for a Part D plan
sponsor to follow up an initial oral
notification to an enrollee with a written
notification. In the proposed rule, we
estimated a burden. We subsequently
discovered that appeals notices,
including those for Part D, are exempt
from PRA under 5 CFR 1320.4. We will
update 0938–0964 to include the
§ 423.590 exclusion language.
Comment: A commenter questioned
our evidence of costs or time that
PO 00000
Frm 00118
Fmt 4701
Sfmt 4700
support CMS’ burden estimates and
questioned the basis of the estimates.
Response: We believe that we
provided evidence for both the cost and
time estimates in the COI and regulatory
impact analysis sections of the October
2009 proposed rule. The commenter did
not provide any cost estimates that
would call into question the validity of
these estimates.
V. Annual Information Collection
Burden
Table X shows our estimates of the
annual reporting and recordkeeping
burden based on the discussion detailed
in sections III.A. through III.V. of this
final rule.
E:\FR\FM\15APR2.SGM
15APR2
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
..................
12,348
1,080
*624
624
9,450
*710
710
28
*456
456
456
456
Respondents
4,997,523
1,080
624
624
9,450
710
1,350,000
28
1,875,000
912,493
760,411
87,103
Responses
..........................
2,885
1,000
54
1
327.1
0.25
1,380
0.5
0.05
0.5
0.5
Burden per
response
(hours)
5,797,650
3,115,800
624,000
33,969
9,450
231,410
337,500
38,640
937,500
45,625
380,206
43,550
Total annual
burden
(hours)
........................
25.00
59.13
91.26
52.91
138.71
21.93
25.88
120.00
39.45
41.03
41.33
Hourly labor
cost of
reporting
($)
290.6
77.9
36.9
3.1
.5
32.1
7.4
1.0
112.5
1.8
15.6
1.8
Total labor
cost of
reporting
($ millions)
4.9
0.0
0.0
0.0
0.0
.1
0.0
4.8
0.0
0.0
0.0
0.0
Total capital/
maintenance
costs
($ millions)
295.5
77.9
36.9
3.1
.5
32.2
7.4
5.8
112.5
1.8
15.6
1.8
Total cost
($ millions)
Note: Provisions regarding § 422.152(b)(5) and § 423.156 and § 422.516(g) and § 423.514(g) will not go into effect until contract year 2011. They are included here because they will be in effect for the period of
2010–2015. Therefore, the totals in this table will not agree with the totals for CY 2010 in the RIA Table of costs (Table 10) in the section V.C of this final rule.
Total ....................................................................................
0938–1074
0938–New
0938–0732
0938–New
0938–New
0938–0964
0938–0964
0938–0964
0938–0964
0938–0964
0938–0964
OMB
Control No.
TABLE 9—ESTIMATED ANNUAL REPORTING AND RECORDKEEPING BURDENS
§ 422.108 and § 423.462 ............................................................
§ 422.152(b)(3)(ii) and § 422.152(e)(2)(ii) ..................................
§ 422.152(b)(5) and § 423.156 ...................................................
§ 422.311(c)(2) ...........................................................................
§ 422.516(g) and § 423.514(g) ...................................................
§ 423.120(b)(iv) ...........................................................................
§ 423.120(c)(3) ...........................................................................
§ 423.153 ....................................................................................
§ 423.568(a)(3) ...........................................................................
§ 423.568(b) ................................................................................
§ 423.572(b) ................................................................................
Regulation section(s)
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
PO 00000
Frm 00119
Fmt 4701
Sfmt 4700
E:\FR\FM\15APR2.SGM
15APR2
19795
19796
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
V. Regulatory Impact Analysis (RIA)
sroberts on DSKD5P82C1PROD with RULES
A. Need for Regulatory Action
This final rule makes revisions to the
regulations governing the Medicare
Advantage (MA) program (Part C) and
prescription drug benefit program (Part
D) based on our continued experience in
the administration of the Part C and D
programs. The revisions strengthen
various program participation and exit
requirements; strengthen beneficiary
protections; ensure that plan offerings to
beneficiaries include meaningful
differences; improve plan payment rules
and processes; improve data collection
for oversight and quality assessment,
implement new policy such as a Part D
formulary policy, and clarify program
policy.
B. Overall Impact
We have examined the impact of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), the
Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), Executive Order 13132 on
Federalism (August 4, 1999), and the
Congressional Review Act (5 U.S.C.
804(2)).
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).
The RFA requires agencies to analyze
options for regulatory relief of small
entities, if a rule has a significant impact
on a substantial number of small
entities. 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 $7.0 million to $34.5 million in any
1 year. Individuals and States are not
included in the definition of a small
entity. MA organizations and Part D
sponsors, the only entities that will be
affected by the provisions of this rule,
are not generally considered small
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
business entities. They must follow
minimum enrollment requirements
(5,000 in urban areas and 1,500 in nonurban areas) and because of the revenue
from such enrollments, these entities are
generally above the revenue threshold
required for analysis under the RFA.
While a very small rural plan could fall
below the threshold, we do not believe
that there are more than a handful of
such plans. A fraction of MA
organizations and sponsors are
considered small businesses because of
their non-profit status. HHS uses as its
measure of significant economic impact
on a substantial number of small
entities, a change in revenue of more
than 3 to 5 percent. We do not believe
that this threshold would be reached by
the requirements in this final rule
because this rule will have minimal
impact on small entities. Therefore, an
analysis for the RFA will not be
prepared because the Secretary has
determined that this final rule will not
have a significant 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 604 of the
RFA. For purposes of section 1102(b) of
the Act, we define a small rural hospital
as a hospital that is located outside of
a Metropolitan Statistical Area and has
fewer than 100 beds. We are not
preparing an analysis for section 1102(b)
of the Act because we believe and the
Secretary has determined that this rule
will not have a significant impact on the
operations of a substantial number of
small rural hospitals.
Section 202 of the Unfunded
Mandates Reform Act of 1995 also
requires that agencies assess anticipated
costs and benefits before issuing any
rule whose mandates require spending
in any 1 year by State, local or tribal
governments, in the aggregate, or by the
private sector of $100 million in 1995
dollars, updated annually for inflation.
That threshold level is currently $135
million. This final rule is expected to
reach this spending threshold.
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.
We do not believe that this final rule
PO 00000
Frm 00120
Fmt 4701
Sfmt 4700
imposes substantial direct requirement
costs on State and local governments,
preempts State law, or otherwise has
Federalism implications.
We estimate this rule is ‘‘economically
significant’’ as measured by the $100
million threshold, and hence a major
rule under the Congressional Review
Act. Accordingly, we have prepared a
Regulatory Impact Analysis.
Because there are costs to plans and
sponsors associated with several
provisions of this rule, we indicate
general areas affected and specify the
associated costs. For specific burden
associated with the requirements and
the bases for our estimates, see section
IV. of this final rule.
C. Increase in Costs to MA
Organizations and Part D Sponsors
The provisions of this final rule
would require MA organizations and
Part D sponsors an estimated cost of
approximately $260.3 million for CY
2010.
We believe the following
requirements will result in costs to MA
organizations and Part D sponsors
between 2010 and 2015: Medicare
Secondary Payer Procedures (§ 422.108),
CAHPS Survey Costs for MAs and PDPs
(§ 422.152(b)(5) and § 423.156), Quality
Improvement program
(§ 422.152(b)(3)(ii), § 422.152(e)(2)(ii)),
and § 423.156,Validation of Reporting
Requirements (§ 422.516 and § 423.514),
Access to Covered Part D Drugs
(§ 423.120(b)(iv)), Pharmacy Use of
Standard Technology under Part D
(§ 423.120(c)(3)), Drug Utilization
Management, Quality Assurance, and
Medication Therapy Management
(§ 423.153), Documenting Oral Requests
for Standard Coverage Determinations
(§ 423.568(a)(3)), Timeframe and Notice
Requirements for Standard Coverage
Determinations (§ 423.568), and
Timeframes and Notice Requirements
for Expedited Coverage Determinations
(§ 423.572(b)). It is true that all of the
costs, besides those associated with
MIPPA 176, are labor or capital,
primarily labor. We expect that these
costs will all be reflected in higher bid
prices that will be federally-funded.
Therefore, all the requirements, except
MIPPA 176, will result in costs to MA
organizations and Part D sponsors
between CY 2010 and CY 2015.
We believe that the regulatory
provisions implementing the MIPPA
176 provision will result in savings to
the Medicare Program.
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
19797
TABLE 10—ESTIMATED COSTS AND SAVINGS BY PROVISION FOR CYS 2010–2015
[$ in millions]
Calendar year
Provision(s)
2010
Medicare Secondary Payer Procedures.
Quality Improvement ............................
CAHPS Survey Costs for MAs and
PDPs.
RADV ...................................................
Data Validation .....................................
Transition Notification ..........................
Pharmacy Use of Standard Technology.
Drug Utilization Management ..............
Documenting Oral Requests for Standard Coverage Determinations.
Standard Coverage Determinations
Notification.
Expedited Coverage Determinations
Notification.
MIPPA 176 ...........................................
sroberts on DSKD5P82C1PROD with RULES
Total ..............................................
18:07 Apr 14, 2010
2011
2012
2013
2014
2015
§ 422.108 and § 423.462
77.9
77.9
77.9
77.9
77.9
77.9
467.4
§ 422.152(b)(3)(ii) and
§ 422.152(e)(2)(ii).
§ 422.152(b)(5) and
§ 423.156.
§ 422.311 ........................
§ 422.516 and § 423.514
§ 423.120(b)(iv) ...............
§ 423.120(c)(3) ...............
36.9
36.9
36.9
36.9
36.9
36.9
221.4
0
3.1
3.1
3.1
3.1
3.1
15.5
0.5
0.1
7.4
5.8
0.5
32.1
7.4
0
0.5
32.1
7.4
0
0.5
32.1
7.4
0
0.5
32.1
7.4
0
0.5
32.1
7.4
0
3.0
160.6
44.4
5.8
§ 423.153 ........................
§ 423.568(a)(3) ...............
112.5
1.8
112.5
1.8
112.5
1.8
112.5
1.8
112.5
1.8
112.5
1.8
675.0
10.8
§ 423.568(b) ....................
15.6
15.6
15.6
15.6
15.6
15.6
93.6
§ 423.572 ........................
1.8
1.8
1.8
1.8
1.8
1.8
10.8
.........................................
0
¥160
¥340
¥460
¥520
¥570
¥2,050
.........................................
260.30
129.60
¥50.40
¥170.40
¥230.40
¥280.40
¥341.70
D. Expected Benefits
Beginning in CY 2013, we expect net
savings due to the combined impact of
these new final provisions. We expect
that the net impact across the 6-year
period from CY 2010 through CY 2015
will be a cost of $308.3 million.
Many of the new requirements
involve clarifications of existing
regulations and policies. As such, they
should help plans to improve their
administrative operational functions
which will streamline the Medicare
Advantage and Medicare Prescription
Drug programs and strengthen
beneficiary protections within these
programs. Specifically, we believe that
the requirements in this final rule will
improve coordination of care, increase
quality of data reporting, increase ability
to comply with existing regulations and
policies, enhance appeal and grievance
procedures, and curtail illegal marketing
practices. Additional benefits include
clarification of timeframes and
notification requirements. Some of the
new requirements may lead to changes
in health plan service areas.
We anticipate that several of the
requirements in this final rule will be
beneficial to PBMs in administering the
Part D benefit for Part D sponsors.
Proposed codification of the transition
process requirements and establishment
of the protected classes will assist PBMs
in applying the Part D requirements
consistently across Part D plans and
managing the Part D sponsor’s benefit
packages more efficiently. Establishing
cut-off limits for COB and requiring Part
D sponsors to report other payer
information in a timely fashion to CMS’
COB contractors will improve the
VerDate Nov<24>2008
Total
(2010–2015)
Regulation section(s)
Jkt 220001
administrative burden of the payment
reconciliation process. The technical
correction to the definition of ‘‘gross
covered prescription drug costs’’ will
also help PBMs calculate a beneficiary’s
gross covered prescription drug costs.
The original Medicare savings in
2007, resulting from the Medicare
Secondary Payer (MSP) Procedures were
estimated at $6.5 billion. This included
$2.9 billion recovered or avoided for
working-aged individuals, $1.9 billion
for working-disabled individuals, $877
million for workers’ compensation, $278
million for ESRD beneficiaries, and
another $485 million recovered or
avoided for liability and other insurers.
In 2007, there were approximately 8.5
million MA enrollees and 44 million
total Medicare enrollees (an MA
penetration rate of approximately 19
percent). The $6.5 billion in MSP
savings can be attributed to the 35.5
million original Medicare enrollees and
thus equates to approximately $183 per
original Medicare enrollee. In 2009, MA
penetration was higher consisting of 11
million MA enrollees out of
approximately 45 million total Medicare
enrollees. This translates to an
estimated 24 percent MA penetration.
We assume a similar MSP take up rate
for MA enrollees as that obtained in the
original 2007 Medicare savings and
therefore project a total MSP savings of
approximately $2 billion by 2010.
The estimated impact of MSP on 624
MA organizations and 456 PDPs based
on 3.1158 million burden hours at
approximately $25 per hour (based on
U.S. Department of Labor (DOL)
statistics for the hourly wages of claims
analysts of $22.20 per hour and for
PO 00000
Frm 00121
Fmt 4701
Sfmt 4700
management analysts of $59.20/hour), is
approximately $77.9 million. All labor
rate calculations in the RIA are derived
from the May 2008 wage statistics
supplied by the Department of Labor
(DOL), Bureau of Labor Statistics and
include fringe benefits and overhead
costs. We expect an MA organization to
use approximately 1.5 FTEs to
implement Part C MSP procedures
related to avoiding costs, reporting data,
and collecting from liable third parties
related to MSP. We estimate the work
mix to be completed to be 90 percent by
the claims analyst and 10 percent by the
management analyst.
We note that MAOs expenses for
processing claims related to MSP
recoveries are considered part of their
administrative overhead costs. MA
organizations that faithfully pursue and
recover from liable third parties will
have lower medical expenses. Lower
medical expenses make such plans more
attractive to enrollees. The lower the
medical expenses in an MA plan, the
higher the potential rebate. The rebate is
calculated as the difference between the
cost of Medicare benefits and the
benchmark for that plan. The
benchmark is a fixed amount. Therefore,
as the cost of Medicare benefits
decreases with the benchmark
remaining constant, the rebate amount
increases. That is, as more MSP dollars
are collected or avoided, medical
expenses go down and rebates go up,
allowing the sponsoring MA
organization to offer potential enrollees
additional non-Medicare benefits
funded by rebate dollars. Such nonMedicare benefits include reductions in
cost sharing. Since cost sharing is
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19798
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
generally expressed as a percentage of
medical costs, it will be proportionally
lower as overall medical costs go down,
providing MA organizations offering
such plans with an additional
competitive edge.
In sections 422.152(b)(3)(ii) and
422.152(e)(2)(ii), we require MA
organizations to collect, analyze, and
report quality performance data
identified by CMS that are of the same
type of data that MA organizations are
currently required to collect and report
to CMS. The mean estimated burden per
MA contract as indicated in section IV.
E of this final rule is 1,000 hours. The
estimated mean cost per hour for these
MA contracts is $59.20. The mean cost
per MA contract is $59,200. Since the
number of MA contracts is estimated to
be 624, the overall estimated cost across
all contracts is $36.9 million (624 ×
$59,200).
In § 422.311 we describe the Risk
Adjustment Data Validation (RADV)
dispute and appeals process that
audited MAOs can voluntarily choose to
participate in. In our proposed rule, we
estimated that upwards of 100 MAOs
would be selected for contract-level
RADV audits annually. We now believe
that a more accurate estimate of the
number of MAOs that will be selected
for contract-level RADV audits is
between 60 and 80 MAOs. Here, we will
assume that CMS selects 70 MAOs for
contract-level RADV audit. On average,
CMS audits approximately 200
beneficiaries per contract; and each
beneficiary selected for testing has
approximately 2.5 Hierarchical
Condition Categories (or HCCs, which
are the base-level unit of analysis under
RADV audits) equating to roughly 500
HCCs tested per audit. To date, the
average contract-level RADV error rate
has been approximately 15 percent.
Thus, we assume a total burden to
audited MAOs of approximately 5,250
HCCs ((500 × .15) 70) that will require
validation medical records (each HCC is
typically associated with one medical
record.)
We continue to estimate that it will
take approximately 1 hour to prepare
the necessary documentation to dispute
one HCC via medical record review
appeal. At a per plan-level estimate, this
equates to $4,440 per medical record
review appeal. Annualized across all
audited MAOs, this in turn equates to
5,250 burden hours at approximately
$59.20/hour (based on U.S. Dept. of
Labor statistics for hourly wages for
management analysts)—or, an annual
dollar burden on the MA industry of
$310,800.
We also estimate that beyond
production of medical records, MAOs
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
pursuing medical record review appeal
would incur legal costs in the
preparation of the formal request for
appeal. Again, we assume that all MAO
will appeal their medical record error
determinations (70 organizations.) We
estimate 40 hours by an attorney costing
$60 per hour (Bureau of Labor Statistics,
1/28/2010), and 20 hours by a health
care administrator costing $30 per hour
(Bureau of Labor Statistics, January 28,
2010); for a total cost of $3,000 in labor
costs per MAO per appeal. When
annualized across all contract-specific
RADV audits, this in turn equates to an
additional aggregate annual dollar
burden of $210,000 ($3000 × 70 audits).
Total estimated aggregate annual dollar
burden to the MA industry annually
equals $520,800 ($310,00 for medical
record preparation + $210,000 for legal
preparation of appeal case).
The validation of reporting
requirements (§ 422.516 and § 423.514)
focuses on how the sponsor collects,
stores, and reports the new Part C and
Part D data requirements. Standards and
procedures will also focus on how
sponsors compile data, and verify
calculations, computer code, and
algorithms. The estimated mean hourly
burden per affected Part C and Part D
sponsor to procure an auditing
organization and to support the auditing
organization in its data collection efforts
including staff interviews is 120 hours,
as indicated in section IV.O. of this final
rule. We believe the auditor, who is
hired by the plan, will typically have a
team consisting of a management
analyst, two senior auditors, a senior
claims analyst, a senior statistician, an
IT systems analyst, a computer
programmer, and a word processor. We
used May 2008 wage statistics supplied
by the DOL, Bureau of Labor Statistics
to develop estimates of direct wages. We
also added fringe benefits, overhead
costs, and general and administrative
expenses using percentages that are
consistent with CMS contracts. Based
on our experience and discussions with
program experts, we developed an
estimate of the blended hourly burden.
The estimated mean cost per hour for
these sponsors is $43.14 (wages, fringe
benefits, and overhead). The estimated
mean number of hours per sponsor is
120. Thus, the mean cost per sponsor to
procure and support the auditor is
$5,177 (1200 × $43.14). Furthermore,
with the 710 estimated number of
sponsors, the overall cost across all
sponsors to complete the work involved
in procuring and supporting the
auditing contractors is $3.7 million (710
× $5,177). The number of hours is
85,200.
PO 00000
Frm 00122
Fmt 4701
Sfmt 4700
The total estimated burden hours
related to the time and effort for all
auditing organizations to perform the
annual audit for both Part C and Part D
data validation is estimated to be
146,210 hours. The mean cost per hour
is estimated to be $194.21. Therefore,
the estimated annual cost for auditing
contracts involving all 710 sponsors is
$28.4 million. The estimated total
annual cost for auditing contracts and
for the procurement and audit support
time and effort of the sponsors is $32.1
million ($28.4 million + $3.7 million).
The total estimated burden hours,
including the hours for sponsors to
procure contractors, is 231,410. Lastly,
there is a one-time cost to develop the
software that will allow data entry into
HPMS. This is a Federal cost estimated
at $100,000 or $0.1 million for CY 2010.
Beginning in 2011 MA organizations
under § 422.152(b)(5), section 1876 Cost
plans under § 417.472, and Part D
sponsors under § 423.156 will begin
paying for the data collection costs of
the CAHPS annual survey. Data
collection is to be performed by a
contractor hired by the MAO, section
1876 Cost plan or Part D sponsor. The
mean estimated burden per contract, as
indicated in section IV. of this final rule,
is 54 hours. The 54 hours includes the
time to select a vendor and the survey
administration time of the survey
vendor that the contract pays. The
estimated cost per contract is $5,023.
Beginning in 2011, the overall estimated
annual cost across the 624 contracts is
$3.1 million.
Section 423.120(b)(iv) requires
sponsors to provide enrollees with
appropriate notice regarding their
transition process within a reasonable
amount of time after providing a
temporary supply of non-formulary Part
D drugs (including Part D drugs that are
on a sponsor’s formulary but require
prior authorization or step therapy
under a sponsor’s utilization
management rules). In section IV.S. of
this final rule, we estimated that 1.35
million notices would be required with
an average preparation time of 15
minutes. As a result, the estimated total
burden is calculated at 337,500 hours.
At an estimated $20.15 in hourly labor
cost of reporting, the total cost is $6.8
million (337,500 × $20.15). In addition,
we estimated an additional cost of
printing, supplies, and postage of $0.475
per notice. This yields a cost of
$641,250 for the 1.35 million notices.
Therefore, the total cost for sponsors to
provide enrollees with appropriate
notice regarding their transition process
within a reasonable amount of time after
providing a temporary supply of
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
nonformulary Part D drugs is estimated
at $7.4 million.
As indicated in section IV.R of this
final rule, developing 760,411 written
notices outlining favorable standard
coverage determinations (§ 423.568(d))
is estimated to result in an annual
burden of 380,206 hours. At an
estimated cost of $40.00 per hour, the
total annual cost of this change is $15.2
million. In addition, the aggregate cost
of printing, supplies and postage
associated for all the notices is
$361,195. Therefore, the overall total
cost for providing written notices of a
favorable standard coverage
determination (§ 423.568(d)) is
estimated to be $15.56 million.
Section § 423.120(c)(3) requires the
approximately 28 pharmacy claims
processors currently responsible for the
electronic adjudication of pharmacy
benefits to change their RxBIN or RxBIN
and RxPCN combination if such
identifiers are not already unique to its
Medicare line of business, and the Part
D cardholder identification number if it
is not already unique to each Medicare
Part D enrollee. We estimate the annual
hourly burden to be 1,380 hours per
processor to make the coding changes
necessary to implement this
requirement. The yearly burden is
therefore estimated to be 38,640 hours
for CY 2010 (1,380 × 28). This is a onetime burden for programming. At an
average labor cost of $150.00 per hour,
we estimate the overall cost in CY2010
to be $5.8 million.
The revisions to § 423.153 state that
Part D plans must offer a minimum level
of medication therapy management
services for each beneficiary enrolled in
the MTMP that includes but is not
limited to annual comprehensive
medication reviews with written
summaries. The burden associated with
this requirement was estimated at
937,500 hours, as reflected in section
IV.P of this final rule. At an estimated
average hourly labor cost of $120.00, the
total cost is $112.5 million for 2010
(937,500 × $120.00).
Establishing and maintaining a
method of documenting all oral requests
for standard coverage determinations
and retaining the documentation in the
case file (§ 423.568(a)(3)), are estimated
to result in an annual burden of 45,625
hours. At an estimated cost of $40.00
per hour, the estimated total annual cost
of this change is $1.8 million.
As indicated in section IV.S of this
final rule, developing 87,103 written
notices for favorable expedited coverage
determination (§ 423.572(b)) is
estimated to result in an annual burden
of 43,552 hours. At an estimated cost of
$40.00 per hour, the total annual cost of
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
this change is $1.74 million. In addition,
the aggregate cost of printing, supplies
and postage associated for all the
notices is $41,374. Therefore, the overall
total cost for providing written notices
of an expedited coverage determination
(§ 423.572(b)) is estimated to be $1.78
million.
Since issuance of the October 22,
2009 proposed rule, PPACA was
enacted. Accordingly, new section
1860D–4(b)(3)(G) of the Act replaces
section 176 of MIPPA. Section 1860D–
4(b)(3)(G) of the Act requires a PDP
sponsor to include ‘‘all’’ covered part D
drugs—in the categories and classes
identified by the Secretary as classes
and categories of ‘‘clinical concern.’’ It
requires the Secretary to establish
criteria to determine, as appropriate,
categories and classes of drugs of
‘‘clinical concern.’’ It provides for an
exceptions authority similar to the one
included in section 176 of MIPPA.
Section 3307 of PPACA further requires
that until the Secretary establishes
criteria to determine classes of ‘‘clinical
concern,’’ the following categories and
classes of drugs shall be identified and
protected as classes of ‘‘clinical
concern’’: anticonvulsants,
antidepressants, antineoplastics,
antipsychotics, antiretrovirals, and
immunosuppressants for the treatment
of transplant rejection. Consistent with
this approach, we are removing from the
regulatory text the criteria specified by
section 176 of MIPPA for identifying
classes and categories of drugs of
‘‘clinical concern,’’ as well as the
definitions used to interpret the MIPPA
criteria. We are retaining the exceptions
process in the regulatory text, as new
section 1860D–4(b)(3)(G) of the Act
retains the exceptions process
established under section 176 of MIPPA.
The estimated cost of implementing
section 176 of MIPPA for FY 2010
budget baseline projections was $4.9
billion for FY 2010 through 2019. The
removal of the section 176 MIPPA
criteria eliminates the cost included in
the baseline generating savings of $4.9
billion for FYs 2010 through 2019.
E. Anticipated Effects—Effects of
Maximum Out-of-Pocket Cost (MOOP)
Limit and Cost Sharing Thresholds
We are finalizing our proposal to
establish and require local MA plans to
have a maximum out-of-pocket (MOOP)
limit on members’ out-of-pocket cost
sharing, the amount of which will be
established annually by CMS. In
addition, we are finalizing our proposal
to require cost sharing thresholds for
Parts A and B services, the amounts of
which will be determined annually by
CMS. These changes provide significant
PO 00000
Frm 00123
Fmt 4701
Sfmt 4700
19799
protection for MA enrollees from out of
pocket costs and will lend greater
predictability and transparency to
benefit packages, so that beneficiaries
will better understand and anticipate
their out-of-pocket expenditures.
However, we do not believe these
changes will, by themselves, have a
significant impact on plan participation
or significantly increase plan premiums.
We believe the impact on enrollee
premiums will be limited for several
reasons. First, we have made a
voluntary MOOP available for the past
years (2008, 2009, and 2010). For CY
2010, the voluntary MOOP for all Parts
and B services was set at $3,400. About
40 percent of current MA plans have
adopted the voluntary MOOP while
remaining competitive (and enrolling
approximately one-third of all MA
enrollees), and they do not appear to
have incurred significant costs in
administering a MOOP limit.
Second, as we described elsewhere in
this preamble, it is our intention to set
both the MOOP and Parts A and B cost
sharing thresholds at levels that, while
affording reasonable financial protection
for those beneficiaries with high health
care needs, do not result in significant
new operating costs for MA plans or
increased out-of-pocket costs for
beneficiaries to the extent that MA plans
pass along any increased costs to their
enrollees in the form of premium
increases. We will develop the MOOP
and Parts A and B cost sharing
thresholds using data provided by our
Office of the Actuary (OACT) to ensure
this result. In addition, given a
competitive marketplace and Medicare
beneficiaries’ sensitivity to premium
amounts, we believe that MA plans may
choose instead to modify their benefit
packages to reduce costs elsewhere.
Furthermore, we estimate that
beneficiaries in plans that currently
offer the CY 2010 voluntary MOOP limit
of $3,400 (about 40 percent of MA
plans) will experience no cost increases
as a result of these provisions. In fact,
to the extent they instead choose the
higher, mandatory MOOP limit, we
would expect a net decrease in costs.
We estimate that the maximum impact
of these requirements on beneficiary
premiums for those plans that currently
have no MOOP limit of any kind (31
percent of all CY 2010 MA plans) would
average $5. The average impact on
premiums would be lower for plans that
currently have a nonqualified MOOP—
one with an amount higher than the
voluntary MOOP limit of $3400
established for CY 2010 and/or that does
not include all Parts A and B services.
Approximately 29 percent of all CY
2010 plans had such a MOOP. However,
E:\FR\FM\15APR2.SGM
15APR2
19800
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
given competitive market pressures, we
believe MA plans may instead choose to
modify their benefit packages rather
than increase premiums.
Finally, we believe that the many
advantages for beneficiaries as a result
of the new MOOP and cost-sharing
threshold requirements will outweigh
any small premium increases that may
result. All MA plan enrollees will be
protected against high out of pocket
costs, and will be better able to compare
plans by focusing on differences in
premium and plan quality. Furthermore,
enrollee cost-sharing will be more
predictable and transparent. As we have
explained in the preamble of the final
rule, our goal is to set cost-sharing limits
at a level that should not result in
significant new costs for MA plans or
beneficiaries.
F. Alternatives Considered
sroberts on DSKD5P82C1PROD with RULES
1. Strengthening CMS’ Ability To Take
Timely, Effective Contract
Determinations or Intermediate
Sanctions (Part C and D)
We are finalizing our modifications to
the regulations which more clearly and
accurately reflect our existing statutory
authority to terminate a contract. The
existing enumerated list of
determinations that are the basis to
terminate a contract are not all
inclusive. Initially it was our belief that
continuing to add to the existing list
may fail to stress to sponsoring
organizations that failure to comply
with all of our regulations and contract
and performance requirements may be
used to support a termination decision.
After receiving numerous comments
concerning this provision we have
decided, however, not to remove the
enumerated list and instead to add
language to provide additional examples
of determinations that could support a
decision to terminate a contract. Also,
we have revised the proposed regulatory
language to clarify that the failure to
comply with the regulatory
requirements contained in parts 422 and
423 or failure to meet our performance
requirements, may constitute a basis for
CMS to determine that the MA
Organization or Part D sponsor meets
the requirements for contract
termination in accordance with the
statutory standard.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
2. Changing the Standards of Review,
Clarifying the Standard of Proof and
Burden of Proof for Appeals, and
Modifying the Conduct of Hearing for
Contract Decisions (Including Denials of
Initial Applications to Contract, Service
Area Expansions for Existing Contracts,
Contract Non-Renewals and
Terminations, and Intermediate
Sanctions)
We are finalizing our change to the
standards of review and clarification of
the standard of proof when an appeal of
a contract determination or intermediate
sanction is requested and an evidentiary
hearing is conducted. The existing
standards of review require the Hearing
Officer to determine whether the
sponsoring organization can
demonstrate ‘‘substantial compliance’’
with Part C and/or Part D requirements
on the ‘‘earliest of’’ the following three
dates: the date the organization received
written notice of contract determination
or intermediate sanction, the date of the
most recent onsite audit, or the date of
the alleged breach of current contract or
past substantial noncompliance. In
practice, these standards of review
(‘‘substantial compliance’’ and ‘‘earliest
of test’’) have led to confusion among
parties to the hearing and have been
difficult for the hearing officer to apply.
Additionally, though the existing
regulations explicitly state that the
sponsoring organization bears the
burden of proof, it does not provide the
standard of proof that is to be applied
by the Hearing Officer. Therefore, we
have deleted the ‘‘substantial
compliance’’ and ‘‘earliest of’’ test and
revise the regulations to explicitly state
the standard of proof and provide clear
standards of review for each type of
contract determination or intermediate
sanction.
First, we have explicitly stated that
the hearing officer must apply the
‘‘preponderance of the evidence’’
standard of proof when weighing the
evidence at all hearings for contract
determinations or intermediate
sanctions. Second, we have clarified the
standards of review, which vary
according to the type of contract
determination or intermediate sanction.
In particular, the change makes the
distinction between how the evidentiary
standard of review is to be applied to
appeals of CMS determinations
involving Part C or D contract
qualification applications, those
involving the termination or nonrenewal of a Part C or D sponsor
contract, and those involving the
imposition of intermediate sanctions.
Finally, we have clarified that because
the sponsoring organization bears the
PO 00000
Frm 00124
Fmt 4701
Sfmt 4700
burden of proof, under any briefing
schedule determined by the hearing
officer, it must first present evidence
and argument to the hearing officer
before we present our evidence and
argument. We considered leaving the
existing regulations unchanged, but
ultimately rejected that option.
3. Clarify That CMS May Require a ‘‘Test
Period’’ During an Enrollment/
Marketing Sanction
We are finalizing our proposal that in
instances where an enrollment and/or
marketing suspension has been
imposed, we may determine that it is
appropriate to subject the MA
organization or Part D sponsor to a ‘‘test
period’’ whereby the organization or
sponsor will, for a limited time, engage
in marketing activities and/or accept
enrollments in order to assist us in
making a determination as to whether
the bases for the sanctions have been
corrected and are not likely to recur.
We considered leaving the existing
regulations unchanged. However, we
believe the requirements in this final
rule will strengthen our ability to
adequately assess compliance with our
requirements. Also, it will help us avoid
situations where we may lift a sanction
based on inadequate testing of an
organization’s systems/processes, only
to find that the deficiencies have not
been corrected, thereby requiring us to
reinstate the sanction.
4. Right for CMS To Require an
Independent Audit of Sponsoring
Organizations Under Intermediate
Sanction
We are finalizing language in the
October 2009 proposed rule which
states that CMS may require sponsoring
organizations that are under
intermediate sanctions to hire an
independent auditor to evaluate
whether the bases for a sanction have
been corrected and are not likely to
recur in order to assist CMS in its
determination whether to lift the
sanction. The purpose of this provision
is to provide us with additional
assurances, through a neutral third party
evaluation, whether the sponsoring
organization is in compliance with CMS
requirements and the bases for the
sanction have been corrected and are
not likely to recur.
Another option we considered was to
not require sanctioned sponsoring
organizations to hire an independent
auditor but rather to allow sponsoring
organizations the discretion to hire an
independent auditor. We believe that
this alternative proposal is not
necessary to promulgate in regulation as
sanctioned sponsoring organizations
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
already have the discretion to hire an
independent auditor.
We also considered leaving the
regulations unchanged. However, given
our experience with the nature and
extent of some compliance deficiencies
(for example, those caused by
information technology issues or lack of
adequate internal controls) and the need
to obtain the level of skill and
experience necessary to conduct an
exhaustive evaluation of the correction
of these deficiencies, we believe this
additional assurance and access to
expertise (such as a qualified
independent auditor) is appropriate and
will benefit both plan sponsors and
CMS.
sroberts on DSKD5P82C1PROD with RULES
5. The Ability for CMS To Require
Sponsors To Disclose to Current and
Potential Enrollees Compliance and
Performance Deficiencies
We are finalizing our proposal that we
may require certain sponsoring
organizations to disclose their current
compliance and/or performance
deficiencies to existing and potential
enrollees. Our intent is to invoke this
disclosure authority when we become
aware that an MA organization has
serious compliance and/or performance
deficiencies such as those that may lead
to an intermediate sanction or require
immediate correction and where we
believe beneficiaries should be
specifically notified. The primary
purpose of this requirement is to
promote transparency and informed
choice especially in those situations
where we believe beneficiaries need or
should have access to this information.
An additional purpose is to provide
appropriate incentives for sponsoring
organizations to make improvements to
their operations and also provide
relevant information to beneficiaries
and the public concerning plan choices.
We considered not adding this
disclosure authority to the existing
regulations. However, we believe this
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
change is necessary to provide us with
another tool to strengthen our
compliance and oversight authority and
provide appropriate transparency
concerning compliance and/or
performance deficiencies to
beneficiaries and the public.
6. Reducing Duplicative and Low
Enrollment Plans (Parts C and D)
We are implementing regulations to
reduce duplicative benefit packages
based upon our authority to add such
additional terms to our contracts with
Medicare Advantage organizations or
Part D plan sponsors as we ‘‘may find
necessary and appropriate’’ as specified
in section 1857(e)(1) of the Act (see also
section 1860D–12(b)(3)(D) of the Act
(incorporating section 1857(e)(1) of the
Act by reference for Part D.)) In
addition, we are using our authority
under section 1860D–11(d)(2)(B) of the
Act as further support to propose
regulations imposing ‘‘reasonable
minimum standards’’ on Part D
sponsors.
One alternative would be to make no
changes to our current regulations
regarding bid submission and review
and to continue our current efforts to
eliminate duplicative or low enrollment
plan options. However, since our
current regulations do not explicitly
address the issue of eliminating
duplicative or low enrollment plans, we
believe that codifying our authority to
do so will provide us with more
leverage over plans during the bid
submission, review, negotiation, and
approval processes.
Another alternative would be to
provide more detail in regulation text
regarding the specific criteria we would
use to eliminate duplicative or low
enrollment plan options. We believe by
addressing the issue generally in
regulations text, we maintain our
flexibility to adjust our review processes
and criteria consistent with current
market trends.
PO 00000
Frm 00125
Fmt 4701
Sfmt 4700
19801
7. Validation of Part C and Part D
Reporting Requirements and CAHPS
Survey Administration
Several of the required changes
involve costs to MAOs and Part D
sponsors. One such regulatory change
was the audit requirement of Part C and
Part D measures. We considered not
requiring an audit. However, because
we believe that an audit is necessary to
ensure that the Part C and Part D
measures are consistent with our
specifications, are reliable, valid, and
comparable, and are credible to
stakeholders, this alternative was
rejected. A second such regulatory
change was requiring MAOs and Part C
sponsors to assume a portion of the cost
of the annual CAHPs survey as a result
of hiring contractors to conduct the data
collection. We considered not requiring
MAOs and Part C sponsors to hire
contractors to perform the CAHPs data
collection. However, we rejected this
alternative because we believe that the
benefits obtained through this
regulatory change outweigh the costs
incurred by the MAOs and Part C
sponsors. We believe these changes
actually benefit the plans by informing
them of the issues that, from the
beneficiaries’ perspectives, needs
attention.
G. Accounting Statement
As required by OMB Circular A–4
(available at https://
www.whitehouse.gov/omb/circulars/
a004/a-4.pdf), in Table 11, we have
prepared an accounting statement
showing the classification of the
expenditures associated with the
provisions of this final rule. The
accounting statement is based on
estimates in Table 10 (our best estimate
of the costs and savings as a result of the
changes) discounted at the 7 percent
and 3 percent for the time period of CY
2010 through CY 2015.
E:\FR\FM\15APR2.SGM
15APR2
19802
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
TABLE 11—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM CY 2010 TO CY 2015
[$ in millions]
TRANSFERS (MIPPA 176)
Category
Units discount rate
Year dollar
Period covered
7%
3%
¥$318.64
¥$331.65
Annualized Monetized Transfers ...................................................................
2009
CYs 2010–2015
From Whom To Whom? ................................................................................
Federal Government to MAO and Part D Sponsors
TABLE 11—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM CY 2010 TO CY 2015
[$ in millions]
COSTS (All other provisions)
Units discount rate
Year dollar
Period covered
7%
Annualized Costs to MAOs and Part D Sponsors ........................................
2009
Compared to the proposed rule, the
annualized costs to MAOs and Part D
sponsors have decreased from $319.51
million and $319.46 million, at the 7
and 3 percent annualized discount rates,
to $283.86 million and $2284.35 million
at the 7 and 3 percent discount rates for
the final rule.
42 CFR Part 422
H. Conclusion
42 CFR Part 423
We estimate that the cost of
implementing these provisions will be
$260.3 million in CY 2010. This is $61.4
million less than the estimated cost in
the proposed rule ($321.7 million).
Sponsors will experience additional
costs which they are likely to pass on
to CMS through direct subsidy
payments and to beneficiaries through
increases in premiums as reflected in
their bids. Beginning in CY 2012, we
expect that these provisions will
generate a net savings to the Medicare
program on an annual basis. For the
entire estimated time period, CYs 2010
through 2015, we estimate the overall
impact to be a savings of $341.70
million (undiscounted).
In accordance with the provisions of
Executive Order 12866, this final rule
was reviewed by the Office of
Management and Budget.
Administrative practice and
procedure, Emergency medical services,
Health facilities, Health maintenance
organizations (HMO), Health
professionals, Medicare, Penalties,
Privacy, Reporting and recordkeeping
requirements.
Administrative practice and
procedure, Health facilities, Health
maintenance organizations (HMO),
Medicare, Penalties, Privacy, and
Reporting and recordkeeping
requirements.
42 CFR Part 480
Health care, Health professions,
Health records, Peer Review
Organizations (PRO), Penalties, Privacy,
and Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR
chapter IV as set forth below:
■
42 CFR Part 417
sroberts on DSKD5P82C1PROD with RULES
List of Subjects
PART 417—HEALTH MAINTENANCE
ORGANIZATIONS, COMPETITIVE
MEDICAL PLANS, AND HEALTH CARE
PREPAYMENT PLANS
■
Administrative practice and
procedure, Grant programs—health,
Health care, Health insurance, Health
maintenance organizations (HMO), Loan
programs—health, Medicare, and
Reporting and recordkeeping
requirements.
Authority: Sec. 1102 and 1871 of the Social
Security Act (42 U.S.C. 1302 and 1395hh),
secs. 1301, 1306, and 1310 of the Public
Health Service Act (42 U.S.C. 300e, 300e–5,
and 300e–9), and 31 U.S.C. 9701.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
1. The authority citation for part 417
continues to read as follows:
PO 00000
Frm 00126
Fmt 4701
Sfmt 4700
3%
$283.86
$284.35
CYs 2010–2015
Subpart K—Enrollment, Entitlement,
and Disenrollment Under Medicare
Contract
2. Section 417.428 is revised to read
as follows:
■
§ 417.428
Marketing activities.
(a) With the exception of § 422.2276
of this chapter, the procedures and
requirements relating to marketing
requirements set forth in subpart V of
part 422 of this chapter also apply to
Medicare contracts with HMOs and
CMPs under section 1876 of the Act.
(b) In applying those provisions,
references to part 422 of this chapter
must be read as references to this part,
and references to MA organizations as
references to HMOs and CMPs.
Subpart L—Medicare Contract
Requirements
3. Section 417.472 is amended by
adding paragraphs (i) and (j) to read as
follows:
■
§ 417.472
Basic contract requirements.
*
*
*
*
*
(i) The HMO or CMP must comply
with the requirements at § 422.152(b)(5).
(j) All coordinated care contracts
(including local and regional PPOs,
contracts with exclusively SNP benefit
packages, private fee-for-service
contracts, and MSA contracts), and all
cost contracts under section 1876 of the
Act, with 600 or more enrollees in July
of the prior year, must contract with
approved Medicare Consumer
Assessment of Healthcare Providers and
Systems (CAHPS) survey vendors to
conduct the Medicare CAHPS
satisfaction survey of Medicare plan
enrollees in accordance with CMS
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
specifications and submit the survey
data to CMS.
■ 4. Section 417.492 is amended by
revising paragraph (b)(2) to read as
follows:
§ 417.492
Nonrenewal of contract.
*
*
*
*
*
(b) * * *
(2) Notice of appeal rights. CMS gives
the HMO or CMP written notice of its
right to appeal the nonrenewal decision,
in accordance with part 422 subpart N
of this chapter, if CMS’s decision was
based on any of the reasons specified in
§ 417.494(b).
■ 5. Section 417.494 is amended by
revising paragraph (b)(2) to read as
follows:
§ 417.494
contract.
Modification or termination of
*
*
*
*
*
(b) * * *
(2) If CMS decides to terminate a
contract, it sends a written notice
informing the HMO or CMP of its right
to appeal the termination in accordance
with part 422 subpart N of this chapter.
*
*
*
*
*
■ 6. Section 417.500 is revised to read
as follows:
§ 417.500 Intermediate sanctions for and
civil monetary penalties against HMOs and
CMPs.
(a) Except as provided in paragraph
(c) of this section, the rights,
procedures, and requirements related to
intermediate sanctions and civil money
penalties set forth in part 422 subparts
O and T of this chapter also apply to
Medicare contracts with HMOs or CMPs
under sections 1876 of the Act.
(b) In applying paragraph (a) of this
section, references to part 422 of this
chapter must be read as references to
this part and references to MA
organizations must be read as references
to HMOs or CMPs.
(c) In applying paragraph (a) of this
section, the amounts of civil money
penalties that can be imposed are
governed by section 1876(i)(6)(B) and
(C) of the Act, not by the provisions in
part 422 of this chapter.
Subpart O—Medicare Payment: Cost
Basis
7. Section 417.564 is amended by
adding new paragraphs (b)(2)(iii) and (c)
to read as follows:
sroberts on DSKD5P82C1PROD with RULES
■
§ 417.564 Apportionment and allocation of
administrative and general costs.
*
*
*
(b) * * *
(2) * * *
VerDate Nov<24>2008
*
*
18:07 Apr 14, 2010
Jkt 220001
(iii) For the costs incurred under
paragraphs (b)(1)(i) through (iv) of this
section that include personnel costs, the
organization must be able to identify the
person hours expended for each
administrative task and the rate of pay
for those persons performing the tasks.
Administrative tasks performed and rate
of pay for the persons performing those
tasks must match in terms of the skill
level needed to accomplish those tasks.
This information must be made
available to CMS upon request.
(c) Costs excluded from
administrative costs. In accordance with
section 1861(v) of the Act, the following
costs must be excluded from
administrative costs:
(1) Donations.
(2) Fines and penalties.
(3) Political and lobbying activities.
(4) Charity or courtesy allowances.
(5) Spousal education.
(6) Entertainment.
(7) Return on equity.
Subpart R—Medicare Contract Appeals
8. Section § 417.640 is revised to read
as follows:
■
§ 417.640
Applicability.
(a) The rights, procedures, and
requirements relating to contract
determinations and appeals set forth in
part 422 subpart N of this chapter also
apply to Medicare contracts with HMOs
or CMPs under section 1876 of the Act.
(b) In applying paragraph (a) of this
section, references to part 422 of this
chapter must be read as references to
this part and references to MA
organizations must be read as references
to HMOs or CMPs.
§ 417.642
through § 417.694 [Removed]
9. Remove § 417.642 through
§ 417.694.
■
Subpart U–Health Care Prepayment
Plans
10. Section 417.840 is revised to read
as follows:
■
§ 417.840 Administrative review
procedures.
The HCPP must apply § 422.568
through § 422.626 of this chapter to—
(a) Organization determinations and
fast-track appeals that affect its
Medicare enrollees; and
(b) Reconsiderations, hearings,
Medicare Appeals Council review, and
judicial review of the organization
determinations and fast-track appeals
specified in paragraph (a) of this
section.
PO 00000
Frm 00127
Fmt 4701
Sfmt 4700
19803
PART 422—MEDICARE ADVANTAGE
PROGRAM
11. The authority citation for part 422
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
Subpart A—General Provisions
12. Section 422.2 is amended by—
A. Adding the definitions of
‘‘Attestation process,’’ ‘‘Hierarchical
condition categories,’’ and ‘‘Initial
Validation Contractor.’’
■ B. Revising the definition of ‘‘Point of
service.’’
■ C. Adding the definitions of ‘‘RADV
payment error calculation appeal
process’’ and ‘‘Risk adjustment data
validation (RADV) audit.
■ D. Revising the introductory text of
the definition of ‘‘Service area’’.
■ E. Adding the definition of ‘‘The one
best medical record’’.
The additions and revisions read as
follows:
■
■
§ 422.2
Definitions.
*
*
*
*
*
Attestation process means a CMSdeveloped RADV audit-related dispute
process that enables MA organizations
undergoing RADV audit to submit CMSgenerated and physician practitioner
signed attestations for medical records
with missing or illegible signatures or
credentials. Physicians/practitioners
who documented health care services in
the specific medical record under RADV
review will be allowed to attest that
they provided and documented the
health care services evidenced in the
specific medical record.
*
*
*
*
*
Hierarchical condition categories
(HCC) means disease groupings
consisting of disease codes (currently
ICD–9–CM codes) that predict average
healthcare spending. HCCs represent the
disease component of the enrollee risk
score that are applied to MA payments.
*
*
*
*
*
Initial Validation Contractor (IVC)
means the first level of medical record
review under the RADV audit process.
*
*
*
*
*
Point of service (POS) means a benefit
option that an MA HMO plan can offer
to its Medicare enrollees as a mandatory
supplemental, or optional supplemental
benefit. Under the POS benefit option,
the HMO plan allows members the
option of receiving specified services
outside of the HMO plan’s provider
network. In return for this flexibility,
members typically have higher costsharing requirements for services
E:\FR\FM\15APR2.SGM
15APR2
19804
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
received and, when offered as a
mandatory or optional supplemental
benefit, may also be charged a premium
for the POS benefit option.
*
*
*
*
*
RADV payment error calculation
appeal process means an administrative
process that enables MA organizations
that have undergone RADV audit to
appeal the CMS calculation of an MA
organization’s RADV payment error.
Risk adjustment data validation
(RADV) audit means a CMSadministered payment audit of a
Medicare Advantage (MA) organization
that ensures the integrity and accuracy
of risk adjustment payment data.
*
*
*
*
*
Service area means a geographic area
that for local MA plans is a county or
multiple counties, and for MA regional
plans is a region approved by CMS
within which an MA-eligible individual
may enroll in a particular MA plan
offered by an MA organization.
Facilities in which individuals are
incarcerated are not included in the
service area of an MA plan. Each MA
plan must be available to all MA-eligible
individuals within the plan’s service
area. In deciding whether to approve an
MA plan’s proposed service area, CMS
considers the following criteria:
*
*
*
*
*
The one best medical record for the
purposes of Medicare Advantage Risk
Adjustment Validation (RADV) means
the clinical documentation for a single
encounter for care (that is, a physician
office visit, an inpatient hospital stay, or
an outpatient hospital visit) that
occurred for one patient during the data
collection period. The single encounter
for care must be based on a face-to-face
encounter with a provider deemed
acceptable for risk adjustment and
documentation of this encounter must
be reflected in the medical record.
■ 13. Amend § 422.4 by—
■ A. Revising paragraphs (a)(1)(v)and
(a)(2)(i)(A).
■ B. Redesignating paragraph (a)(2)(i)(B)
as paragraph (a)(2)(i)(C).
■ C. Adding new paragraphs (a)(2)(i)(B)
and (a)(3)(iv).
The revisions and additions read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 422.4
(a) * * *
(1) * * *
(v) A PPO plan is a plan that—
(A) Has a network of providers that
have agreed to a contractually specified
reimbursement for covered benefits with
the organization offering the plan;
(B) Provides for reimbursement for all
covered benefits regardless of whether
18:07 Apr 14, 2010
Subpart B—Eligibility, Election, and
Enrollment
14. Section 422.74 is amended by
revising paragraphs (d)(1)(i)(B) and
(d)(4)(iii) to read as follows:
■
§ 422.74 Disenrollment by the MA
organization.
*
Types of MA plans.
VerDate Nov<24>2008
the benefits are provided within the
network of providers;
(C) Only for purposes of quality
assurance requirements in § 422.152(e),
is offered by an organization that is not
licensed or organized under State law as
an HMO; and
(D) Does not permit prior notification
for out-of-network services—that is, a
reduction in the plan’s standard costsharing levels when the out-of-network
provider from whom an enrollee is
receiving plan-covered services
voluntarily notifies the plan prior to
furnishing those services, or the enrollee
voluntarily notifies the PPO plan prior
to receiving plan-covered services from
an out-of-network provider.
(2) * * *
(i) * * *
(A) Pays at least for the services
described in § 422.101, after the enrollee
has incurred countable expenses (as
specified in the plan) equal in amount
to the annual deductible specified in
§ 422.103(d);
(B) Does not permit prior
notification—that is, a reduction in the
plan’s standard cost-sharing levels when
the provider from whom an enrollee is
receiving plan-covered services
voluntarily notifies the plan prior to
furnishing those services, or the enrollee
voluntarily notifies the MSA plan prior
to receiving plan-covered services from
a provider; and
*
*
*
*
*
(3) * * *
(iv) Does not permit prior
notification—that is, a reduction in the
plan’s standard cost-sharing levels when
the provider from whom an enrollee is
receiving plan-covered services
voluntarily notifies the plan prior to
furnishing those services, or the enrollee
voluntarily notifies the PFFS plan prior
to receiving plan-covered services from
a provider.
*
*
*
*
*
Jkt 220001
*
*
*
*
(d) * * *
(1) * * *
(i) * * *
(B) Providing the individual with a
grace period, that is, an opportunity to
pay past due premiums in full. The
length of the grace period must—
(1) Be at least 2 months; and
(2) Begin on the first day of the month
for which the premium is unpaid or the
PO 00000
Frm 00128
Fmt 4701
Sfmt 4700
first day of the month following the date
on which premium payment is
requested, whichever is later.
*
*
*
*
*
(4) * * *
(iii) Exception. If the MA plan offers
a visitor/traveler benefit when the
individual is out of the service area but
within the United States (as defined in
§ 400.200 of this chapter) for a period of
consecutive days longer than 6 months
but less than 12 months, the MA
organization may elect to offer to the
individual the option of remaining
enrolled in the MA plan if—
(A) The individual is disenrolled on
the first day of the 13th month after the
individual left the service area (or
residence, if paragraph (d)(4)(i)(B) of
this section applies);
(B) The individual understands and
accepts any restrictions imposed by the
MA plan on obtaining these services
while absent from the MA plan’s service
area for the extended period, consistent
with paragraph (d)(4)(i)(C) of the
section;
(C) The MA organization makes this
visitor/traveler option available to all
Medicare enrollees who are absent for
an extended period from the MA plan’s
service area. MA organizations may
limit this visitor/traveler option to
enrollees who travel to certain areas, as
defined by the MA organization, and
who receive services from qualified
providers who directly provide, arrange
for, or pay for health care; and
(D) The MA organization furnishes all
Medicare Parts A and B services and all
mandatory and optional supplemental
benefits at the same cost sharing levels
as apply within the plan’s service area;
and
(E) The MA organization furnishes the
services in paragraph (d)(4)(iii)(D) of
this section consistent with Medicare
access and availability requirements at
§ 422.112 of this part.
*
*
*
*
*
Subpart C—Benefits and Beneficiary
Protections
15. Section 422.100 is amended by—
A. Revising the introductory text for
paragraph (f).
■ B. In paragraphs (f)(1) and (f)(2)
removing the ‘‘;’’ and adding a ‘‘.’’ in its
place.
■ C. Adding new paragraphs (f)(4)
through (f)(6).
The revisions and additions read as
follows:
■
■
§ 422.100
General requirements.
*
*
*
*
*
(f) CMS review and approval of MA
benefits and associated cost sharing.
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
CMS reviews and approves MA benefits
and associated cost sharing using
written policy guidelines and
requirements in this part and other CMS
instructions to ensure all of the
following:
*
*
*
*
*
(4) Except as provided in paragraph
(f)(5), MA local plans (as defined in
§ 422.2) must have an out-of pocket
maximum for Medicare Parts A and B
services that is no greater than the
annual limit set by CMS.
(5) With respect to a local PPO plan,
the limit specified under paragraph
(f)(4) applies only to use of network
providers. Such local PPO plans must
include a total catastrophic limit on
beneficiary out-of-pocket expenditures
for both in-network and out-of-network
Parts A and B services that is—
(i) Consistent with the requirements
applicable to MA regional plans at
§ 422.101(d)(3) of this part; and
(ii) Not greater than the annual limit
set by CMS.
(6) Cost sharing for Medicare Part A
and B services specified by CMS does
not exceed levels annually determined
by CMS to be discriminatory for such
services.
*
*
*
*
*
■ 16. Section 422.103 is amended by
adding a new paragraph (d)(3) to read as
follows:
§ 422.103
Benefits under an MA MSA plan.
*
*
*
*
*
(d) * * *
(3) Is pro-rated for enrollments
occurring during a beneficiary’s initial
coverage election period as described at
§ 422.62(a)(1) of this part or during any
other enrollments occurring after
January 1.
*
*
*
*
*
■ 17. Section 422.105 is amended by
revising paragraphs (b), (c), and (f) to
read as follows:
§ 422.105 Special rules for self-referral and
point of service option.
sroberts on DSKD5P82C1PROD with RULES
*
*
*
*
*
(b) Point of service option. As a
general rule, a POS benefit is an option
that an MA organization may offer in an
HMO plan to provide enrollees with
additional choice in obtaining specified
health care services. The organization
may offer a POS option—
(1) Before January 1, 2006, under a
coordinated care plan as an additional
benefit as described in section
1854(f)(1)(A) of the Act;
(2) Under an HMO plan as a
mandatory supplemental benefit as
described in § 422.102(a); or
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(3) Under an HMO plan as an optional
supplemental benefit as described in
§ 422.102(b).
(c) Ensuring availability and
continuity of care. An MA HMO plan
that includes a POS benefit must
continue to provide all benefits and
ensure access as required under this
subpart.
*
*
*
*
*
(f) POS-related data. An MA
organization that offers a POS benefit
through an HMO plan must report
enrollee utilization data at the plan level
by both plan contracting providers (innetwork) and by non-contracting
providers (out-of-network) including
enrollee use of the POS benefit, in the
form and manner prescribed by CMS.
■ 18. Section 422.108 is amended by
revising paragraph (b)(3) to read as
follows:
§ 422.108 Medicare secondary payer (MSP)
procedures.
*
*
*
*
*
(b) * * *
(3) Coordinate its benefits to Medicare
enrollees with the benefits of the
primary payers, including reporting, on
an ongoing basis, information obtained
related to requirements in paragraphs
(b)(1) and (b)(2) of this section in
accordance with CMS instructions.
*
*
*
*
*
■ 19. Section 422.111 is amended by
adding a new paragraph (g) to read as
follows:
§ 422.111
Disclosure requirements.
*
*
*
*
*
(g) CMS may require an MA
organization to disclose to its enrollees
or potential enrollees, the MA
organization’s performance and contract
compliance deficiencies in a manner
specified by CMS.
■ 20. Section 422.112 is amended by
adding a new paragraph (a)(10) to read
as follows:
§ 422.112
Access to services.
(a) * * *
(10) Prevailing patterns of community
health care delivery. Coordinated care
and PFFS MA plans that meet Medicare
access and availability requirements
through direct contracting network
providers must do so consistent with
the prevailing community pattern of
health care delivery in the areas where
the network is being offered. Factors
making up community patterns of
health care delivery that CMS will use
as a benchmark in evaluating a
proposed MA plan health care delivery
network include, but are not limited to
the following:
PO 00000
Frm 00129
Fmt 4701
Sfmt 4700
19805
(i) The number and geographical
distribution of eligible health care
providers available to potentially
contract with an MAO to furnish plan
covered services within the proposed
service area of the MA plans.
(ii) The prevailing market conditions
in the service area of the MA plan.
Specifically, the number and
distribution of health care providers
contracting with other health care plans
(both commercial and Medicare)
operating in the service area of the plan.
(iii) Whether the service area is
comprised of rural or urban areas or
some combination of the two.
(iv) Whether the MA plan’s proposed
provider network meet Medicare time
and distance standards for member
access to health care providers
including specialties.
(v) Other factors that CMS determines
are relevant in setting a standard for an
acceptable health care delivery network
in a particular service area.
*
*
*
*
*
Subpart D—Quality Improvement
21. Section 422.152 is amended by—
A. Revising paragraphs (a)(1) and
(a)(2).
■ B. Redesignating paragraph (b)(3)(ii)
as paragraph (b)(3)(iii).
■ C. Adding new paragraph (b)(3)(ii).
■ D. Adding new paragraph (b)(5).
■ F. Redesignating paragraphs (e)(2)(ii)
and (e)(2)(iii) as paragraphs (e)(2)(iii)
and (e)(2)(iv), respectively.
■ H. Adding a new paragraph (e)(2)(ii).
The revisions and additions read as
follows:
■
■
§ 422.152
Quality improvement program.
(a) * * *
(1) Have a chronic care improvement
program that meets the requirements of
paragraph (c) of this section concerning
elements of a chronic care program and
addresses populations identified by
CMS based on a review of current
quality performance;
(2) Conduct quality improvement
projects that can be expected to have a
favorable effect on health outcomes and
enrollee satisfaction, meet the
requirements of paragraph (d) of this
section, and address areas identified by
CMS; and
*
*
*
*
*
(b) * * *
(3) * * *
(ii) Collect, analyze, and report
quality performance data identified by
CMS that are of the same type as those
under paragraph (b)(3)(i) of this section.
*
*
*
*
*
(5) All coordinated care contracts
(including local and regional PPOs,
E:\FR\FM\15APR2.SGM
15APR2
19806
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
contracts with exclusively SNP benefit
packages, private fee-for-service
contracts, and MSA contracts), and all
cost contracts under section 1876 of the
Act, with 600 or more enrollees in July
of the prior year, must contract with
approved Medicare Consumer
Assessment of Healthcare Providers and
Systems (CAHPS) survey vendors to
conduct the Medicare CAHPS
satisfaction survey of Medicare plan
enrollees in accordance with CMS
specifications and submit the survey
data to CMS.
*
*
*
*
*
(e) * * *
(2) * * *
(ii) Collect, analyze, and report
quality performance data identified by
CMS that are of the same type as those
described under paragraph (e)(2)(i) of
this section.
*
*
*
*
*
■ 22. Section 422.153 is added to reads
as follows:
§ 422.153 Use of quality improvement
organization review information.
CMS will acquire from quality
improvement organizations (QIOs) as
defined in part 475 of this chapter only
data collected under section
1886(b)(3)(B)(viii) of the Act and subject
to the requirements in § 480.140(g).
CMS will acquire this information, as
needed, and may use it for the following
limited functions:
(a) Enable beneficiaries to compare
health coverage options and select
among them.
(b) Evaluate plan performance.
(c) Ensure compliance with plan
requirements under this part.
(d) Develop payment models.
(e) Other purposes related to MA
plans as specified by CMS.
■ 23. Section 422.156 is amended by
revising paragraphs (b)(7) and (f) to read
as follows:
§ 422.156 Compliance deemed on the
basis of accreditation.
sroberts on DSKD5P82C1PROD with RULES
*
*
*
*
*
(b) * * *
(7) The requirements listed in
§ 423.165 (b)(1) through (3) of this
chapter for MA organizations that offer
prescription drug benefit programs.
*
*
*
*
*
(f) Authority. Nothing in this subpart
limits CMS’ authority under subparts K
and O of this part, including but not
limited to, the ability to impose
intermediate sanctions, civil money
penalties, and terminate a contract with
an MA organization.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
Subpart F—Submission of Bids,
Premiums, and Related Information
and Plan Approval
the same MA organization (or parent
organization to that MA organization).
*
*
*
*
*
24. Section 422.254 is amended by
adding new paragraphs (a)(4) and (b)(5)
to read as follows:
Subpart G—Payments to Medicare
Advantage Organizations
■
§ 422.254
Submission of bids.
(a) * * *
(4) Substantial differences between
bids. An MA organization’s bid
submissions must reflect differences in
benefit packages or plan costs that CMS
determines to represent substantial
differences relative to a sponsor’s other
bid submissions.
(b) * * *
(5) Actuarial valuation. The bid must
be prepared in accordance with CMS
actuarial guidelines based on generally
accepted actuarial principles.
(i) A qualified actuary must certify the
plan’s actuarial valuation (which may
be prepared by others under his or her
direction or review).
(ii) To be deemed a qualified actuary,
the actuary must be a member of the
American Academy of Actuaries.
(iii) Applicants may use qualified
outside actuaries to prepare their bids.
*
*
*
*
*
■ 25. Section 422.256 is amended by
adding a new paragraph (b)(4) to read as
follows:
§ 422.256 Review, negotiation, and
approval of bids.
*
*
*
*
*
(b) * * *
(4) Substantial differences between
bids—(i) General. CMS approves a bid
only if it finds that the benefit package
and plan costs represented by that bid
are substantially different from the MA
organization’s other bid submissions. In
order to be considered ‘‘substantially
different,’’ as provided under
§ 422.254(a)(4) of this subpart, each bid
must be significantly different from
other plans of its plan type with respect
to premiums, benefits, or cost-sharing
structure.
(ii) Transition period for MA
organizations with new acquisitions.
After a 2-year transition period, CMS
approves a bid offered by an MA
organization (or by a parent organization
to that MA organization) that recently
purchased (or otherwise acquired or
merged with) another MA organization
only if it finds that the benefit package
or plan costs represented by that bid are
substantially different, as provided
under paragraph (b)(4)(i) of this section,
from any benefit package and plan costs
represented by another bid submitted by
PO 00000
Frm 00130
Fmt 4701
Sfmt 4700
26. Section 422.306 is amended by
revising paragraph (a) to read as follows:
■
§ 422.306
Annual MA capitation rates.
*
*
*
*
*
(a) Minimum percentage increase rate.
The annual capitation rate for each MA
local area is equal to the minimum
percentage increase rate, which is the
annual capitation rate for the area for
the preceding year increased by the
national per capita MA growth
percentage (defined at § 422.308(a)) for
the year, but not taking into account any
adjustment under § 422.308(b) for a year
before 2004.
*
*
*
*
*
■ 27. A new section 422.311 is added to
read as follows:
§ 422.311 RADV audit dispute and appeal
processes.
(a) Risk adjustment data validation
(RADV) audits. In accordance with
§ 422.2 and § 422.310(e), CMS annually
conducts RADV audits to ensure risk
adjusted payment integrity and
accuracy.
(b) RADV audit results. (1) MA
organizations that undergo RADV audits
will be issued an audit report post
medical record review that describes the
results of the RADV audit as follows:
(i) Detailed enrollee-level information
relating to confirmed enrollee HCC
discrepancies.
(ii) The contract-level RADV payment
error estimate in dollars.
(iii) The contract-level payment
adjustment amount to be made in
dollars.
(iv) An approximate timeframe for the
payment adjustment.
(v) A description of the MA
organization’s RADV audit appeal
rights.
(2) Compliance date. The compliance
date for meeting RADV medical record
submission requirements for the
validation of risk adjustment data is the
due date when MA organizations
selected for RADV audit must submit
medical records to CMS or its
contractors.
(3) Medical record review appeal. MA
organizations that do not agree with the
medical record review determinations
for audited HCCs may appeal the
medical record review determinations of
the initial validation contractor to CMS
in accordance with paragraph (c)(2) of
this section.
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
(c) RADV audit dispute and appeal
processes—(1) Attestation process—(i)
Submission requirements for
attestations. MA organizations—
(A) May submit CMS-generated
attestations from physician/
practitioner(s) in order to dispute
signature-related or credential-related
RADV errors in accordance with the
attestations provisions of this section.
(B) Are not obligated to submit
attestations to CMS.
(ii) RADV audit-related errors eligible
for attestation process. CMS will only
accept an attestation to support a
physician or outpatient medical record
with a missing signature or missing
credential or both.
(iii) RADV audit-related errors and
documentation ineligible for attestation
process.
(A) Attestations from providers for
anything other than signature-related
and credential-related errors will not be
permitted.
(B) Inpatient provider-type medical
records are not eligible for attestation.
(iv) Manner and timing of a request
for attestation. (A) CMS will provide
MA organizations selected for RADV
audits with attestations and
accompanying instructions at the time
the organization receives its audit
instructions.
(B) If an organization decides to
submit attestations completed by
physicians or other practitioners, the
MA organization must submit the
attestations to CMS at the same time
that the MA organization is required to
submit related medical records for
RADV audit.
(v) Attestation content. An attestation
must accompany and correspond to the
medical record submitted for RADV
audit and must meet the following
requirements:
(A) Contain only CMS-generated
attestations.
(B) The CMS attestation form may not
be altered unless otherwise instructed
and agreed-upon in writing by CMS.
(C) Attestations must be completed
and be signed and dated by the eligible
risk adjustment physician/practitioner
whose medical record accompanies the
attestation.
(D) Attestations must be based upon
medical records that document face-toface encounters between beneficiaries
and RADV-eligible physicians/
practitioners.
(vi) Attestation review and
determination procedures. CMS—(A)
Reviews each submitted attestation to
determine if it meets CMS requirements
and is acceptable for use during the
medical record review; and
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(B) Provides written notice of its
determination(s) regarding submitted
attestations to the MA organization at
the time CMS issues its RADV audit
report.
(vii) Effect of CMS’s attestation
determination. (A) CMS’ attestation
determination is final.
(B) An MA organization may choose
to appeal its medical record review
determinations for audited HCCs
following initial validation contractor
review using a CMS-administered
medical record review determination
appeal process.
(2) RADV-related medical record
review errors and documentation
eligible for medical record review
determination appeal process: (i)
General rules. (A) In order to be eligible
for medical record review determination
appeal, MA organizations must adhere
to established RADV audit procedures
and RADV appeals requirements.
Failure to follow CMS rules regarding
the RADV medical record review audit
procedures and RADV appeals
requirements may render the MA
organization’s request for appeal
invalid.
(B) The medical record review
determination appeal process applies
only to error determinations from
review of the one best medical record
submitted by the MA organization and
audited by the RADV initial validation
contractor (IVC).
(C) MA organizations that choose to
appeal the IVC’s medical record review
determination(s) may only submit the
IVC-audited one best medical record
and IVC-reviewed attestation,
previously submitted in accordance
with paragraph (c)(1) of this section, to
CMS for re-review.
(D) MA organizations’ request for
medical record review determination
appeal may not include additional
documentary evidence beyond the IVCaudited one best medical record and
IVC-reviewed attestation.
(ii) RADV-related audit errors and
documentation ineligible for medical
record review appeal process. (A) MA
organizations may not appeal errors that
resulted because MA organizations
failed to adhere to established RADV
audit procedures and RADV appeals
requirements. This includes failure by
the MA organization to meet the
medical record submission deadline
established by CMS.
(B) Any other documentation
submitted to CMS beyond the one best
medical record and attestation
submitted to and audited by the IVC
will not be reviewed by CMS under the
medical record review determination
appeal process.
PO 00000
Frm 00131
Fmt 4701
Sfmt 4700
19807
(C) The MA organization’s written
request for medical record review
determination appeal must specify the
audited HCC(s) that CMS identified as
being in error and eligible for medical
record review determination appeal,
and that the MA organization wishes to
appeal.
(iii) Manner and timing of a request
for medical record review determination
appeal. (A) At the time CMS issues its
IVC RADV audit report to audited MA
organizations, CMS notifies these MA
organizations of any RADV HCC errors
that are eligible for medical record
review determination appeal.
(B) MA organizations have 30
calendar days from date of issuance of
the RADV audit report to file a written
request with CMS for medical record
review determination appeal.
(C) A request for medical record
review determination appeal must
specify the determinations with which
the MA organization disagrees and the
reasons for the request for appeal.
(iv) Medical record review
determination appeal review and
notification procedures. (A) Designation
of a hearing officer. CMS designates a
hearing officer to conduct the medical
record review determination appeal.
The hearing officer need not be an ALJ.
(B) Disqualification of hearing officer.
(1) A hearing officer may not conduct a
hearing in a case in which he or she is
prejudiced or partial to any party or has
any interest in the matter pending for
decision.
(2) A party to the hearing who objects
to the designated hearing officer must
notify that officer in writing at the
earliest opportunity.
(3) The hearing officer must consider
the objections, and may, at his or her
discretion, either proceed with the
hearing or withdraw.
(i) If the hearing officer withdraws,
CMS designates another hearing officer
to conduct the hearing.
(ii) If the hearing officer does not
withdraw, the objecting party may, after
the hearing, present objections and
request that the officer’s decision be
revised or a new hearing be held before
another hearing officer. The objections
must be submitted in writing to CMS.
(v) Hearing officer’s review. The
hearing officer reviews the IVC-audited
one best medical record and the IVCreviewed attestation submitted by the
MA organization to determine whether
it supports overturning medical record
review determination errors listed in the
MA organization’s IVC-level RADV
audit report.
(vi) Hearing procedures. (A) CMS
provides written notice of the time and
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19808
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
place of the hearing at least 30 calendar
days before the scheduled date.
(B) The hearing is conducted by a
CMS hearing officer who neither
receives testimony nor accepts any new
evidence that was not presented to the
IVC. The CMS hearing officer is limited
to the review of the record that was
before the IVC.
(vii) Hearing officer’s decision. As
soon as practical after the hearing, the
hearing officer issues a decision which
provides written notice of the hearing
officer’s review of the appeal of medical
record review determination(s) to the
MA organization and to CMS.
(viii) Computations based on hearing
decision. In accordance with the hearing
officer’s decision, CMS recalculates the
MA organization’s RADV payment error
and issues a new RADV audit report to
the appellant MA organization.
(ix) Effect of hearing decision. The
hearing officer’s decision is final and
binding, unless the MA organization
requests review of the hearings officer
appeal determination by the CMS
Administrator.
(x) Review by the CMS Administrator.
(A) A MA organization that has received
a hearing officer decision may request
review by the CMS Administrator
within 30 calendar days of receipt of the
hearing officer’s determination. A
request for CMS Administrator review
must be made in writing and filed with
CMS.
(B) After receiving a request for
review, the CMS Administrator has the
discretion to elect to review the hearing
officer’s decision or to decline to review
the hearing decision.
(C) If the CMS Administrator elects to
review the hearing decision, the CMS
Administrator—
(1) Acknowledges the decision to
review the hearing decision in writing;
and
(2) Reviews the decision and
determine based upon all of the
following whether the determination
should be upheld, reversed, or
modified:
(i) The hearing record.
(ii) Written arguments submitted by
the MA organization or CMS.
(xi) Notification of Administrator
determination. (A) The Administrator
notifies both parties of his or her
determination regarding review of the
hearing decision within 30 calendar
days of acknowledging his or her
decision to review the hearing decision.
(B) The decision of the hearing officer
is final if the Administrator—
(1) Declines to review the hearing
decision; or
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(2) Does not make a determination
regarding review within 30 calendar
days.
(3) RADV payment error calculation
appeal process. (i) MA organizations
may appeal CMS’ RADV payment error
calculation.
(ii) RADV payment error-related
issues ineligible for appeal. MA
organizations may not—
(A) Appeal RADV medical record
review-related errors as part of the
RADV payment error calculation appeal
process. In accordance with paragraph
(c)(2) of this section, MA organizations
that wish to appeal medical record
review determinations may do so
following issuance of the IVC RADV
audit report of findings.
(B) Introduce new HCCs to CMS for
payment consideration in the context of
their RADV payment error calculation
appeal.
(C) Appeal RADV errors that result
from an MA organization’s failure to
submit a medical record.
(D) Appeal CMS’ RADV payment
error calculation methodology.
(iii) Manner and timing of a request
for appeal. (A) MA organizations may
not appeal their RADV error calculation
until any appeals of RADV medical
record review determinations filed by
the MA organization have been
completed and the decisions are final.
(B) At the time CMS issues either its
IVC or post-medical record review
appeal RADV audit report, CMS notifies
affected MA organizations in writing of
their appeal rights around the RADV
payment error calculation.
(C) MA organizations have 30
calendar days from the date of this
notice to submit a written request for
reconsideration of its RADV payment
error calculation.
(iv) Burden of proof. The MA
organization bears the burden of proof
in demonstrating that CMS failed to
follow its stated RADV payment error
calculation methodology.
(v) Content of request. The written
request for reconsideration must specify
the issues with which the MA
organization disagrees and the reasons
for the disagreements.
(A) The written request for
reconsideration may include additional
documentary evidence the MA
organization wishes CMS to consider.
(B) CMS does not accept
reconsiderations for issues with the
methodology applied in any part of the
RADV audit.
(vi) Conduct of written
reconsideration. (A) In conducting the
written reconsideration, CMS reviews
all of the following information:
PO 00000
Frm 00132
Fmt 4701
Sfmt 4700
(1) The RADV payment error
calculation.
(2) The evidence and findings upon
which they were based.
(3) Any other written evidence
submitted by the MA organization.
(B) CMS ensures that a third party—
either within CMS or a CMS
contractor—not otherwise involved in
the initial RADV payment error
calculation reviews the written request
for reconsideration.
(C) The third party recalculates the
payment error in accordance with CMS
RADV payment calculation procedures
described in CMS’ RADV payment error
calculation standard operating
procedures.
(D) The third party described in
paragraph (c)(3)(vi)(B) of this section
provides his or her determination to a
CMS reconsideration official not
otherwise involved in the RADV
payment error calculation to review the
reconsideration determination.
(vi) Decision of the CMS
reconsideration official. The CMS
reconsideration official informs the MA
organization and CMS in writing of the
decision of the CMS reconsideration
official.
(vii) Effect of the CMS reconsideration
official. The written reconsideration
decision is final and binding unless a
request for a hearing is filed by CMS or
the appellant MA organization in
accordance with paragraph (c) (4) of this
section.
(4) Right to a hearing. CMS or a MA
organization dissatisfied with the
written decision of the CMS
reconsideration official is entitled to a
hearing as provided in this section.
(i) Manner and timing for request. A
request for a hearing must be made in
writing and filed with CMS within 30
calendar days of the date CMS and the
MA organization receives the CMS
reconsideration officer’s written
reconsideration decision.
(ii) Content of request. The written
request for hearing must include a copy
of the written decision of the CMS
reconsideration official and must
specify the findings or issues in the
reconsideration decision with which
either CMS or the MA organization
disagrees and the reasons for the
disagreement.
(iii) Hearing procedures. (A) CMS
provides written notice of the time and
place of the hearing at least 30 calendar
days before the scheduled date.
(B) The hearing will be held on the
record, unless the parties request,
subject to the hearing officer’s
discretion, a live or telephonic hearing.
The hearing officer may schedule a live
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
or telephonic hearing on his/her own
motion.
(C) The hearing is conducted by the
CMS hearing officer who neither
receives testimony nor accepts any new
evidence that was not presented with
the request for reconsideration. The
CMS hearing officer is limited to the
review of the record that was before
CMS when CMS made either its initial
RADV payment error calculation
determination or its post-medical record
review appeal payment error calculation
determination and when the CMS
reconsideration official issued the
written reconsideration decision.
(C) The hearing officer has full power
to make rules and establish procedures,
consistent with the law, regulations, and
CMS rulings. These powers include the
authority to dismiss the appeal with
prejudice or take any other action which
the hearing officer considers appropriate
for failure to comply with such rules
and procedures.
(iv) Decision of the CMS Hearing
Officer. The CMS hearing officer
decides whether the reconsideration
official’s decision was correct, and
sends a written decision to CMS and the
MA organization, explaining the basis
for the decision.
(v) Effect of the Hearing Officer’s
decision. The hearing officer’s decision
is final and binding, unless the decision
is reversed or modified by the
Administrator in accordance with
paragraph (c)(5) of this section.
(vi) Review by the CMS Administrator.
(A) CMS or a MA organization that has
received a hearing officer’s decision
upholding or overturning a CMS initial
or reconsideration-level RADV payment
error calculation determination may
request review by the CMS
Administrator within 30 calendar days
of receipt of the hearing officer’s
decision.
(B) At his or her discretion, the CMS
Administrator can choose to either
review or not review a case.
(C) If the CMS Administrator chooses
to review the case, the CMS
Administrator—
(1) Acknowledges his or her decision
to review the hearing officer’s decision
in writing; and
(2) Determines whether to uphold,
reverse, or modify the Hearing Officer’s
decision based on his or her review of
the following:
(i) The Hearing Officer’s decision.
(ii) Written documents submitted by
CMS or the MA organization to the
Hearing Officer.
(iii) Any other any other information
included in the record of the Hearing
Officer’s decision.
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(D) The Administrator notifies both
parties of his or her determination
regarding review of the hearing decision
within 30 calendar days of receiving the
request for review.
(E) If the Administrator chooses to
review, the Administrator’s
determination is final and binding.
(F) The decision of the hearing officer
is final if the Administrator—
(1) Declines to review the hearing
decision; or
(2) Does not make a determination
regarding review within 30 calendar
days.
Subpart K—Contracts With Medicare
Advantage Organizations
28. Section 422.501 is amended by—
A. Redesignating paragraphs (b)
through (e) as paragraphs (c) through (f),
respectively.
■ B. Adding a new paragraph (b).
■ C. Revising newly redesignated
paragraph (c)(1) introductory text and
paragraph (c)(2).
The addition and revisions read as
follows:
■
■
§ 422.501
Application requirements.
*
*
*
*
*
(b) Completion of a notice of intent to
apply. (1) An organization submitting an
application under this section for a
particular contract year must first
submit a completed Notice of Intent to
Apply by the date established by CMS.
CMS will not accept applications from
organizations that do not first submit a
timely Notice of Intent to Apply.
(2) Submitting a Notice of Intent to
Apply does not bind that organization to
submit an application for the applicable
contract year.
(3) An organization’s decision not to
submit an application after submitting a
Notice of Intent To Apply will not form
the basis of any action taken against the
organization by CMS.
(c) * * *
(1) In order to obtain a determination
on whether it meets the requirements to
become an MA organization and is
qualified to provide a particular type of
MA plan, an entity, or an individual
authorized to act for the entity (the
applicant) must fully complete all parts
of a certified application, in the form
and manner required by CMS, including
the following:
*
*
*
*
*
(2) The authorized individual must
thoroughly describe how the entity and
MA plan meet, or will meet, all the
requirements described in this part.
*
*
*
*
*
■ 29. Section 422.502 is amended by—
■ A. Revising paragraphs (a)(1), (a)(2),
and (b).
PO 00000
Frm 00133
Fmt 4701
Sfmt 4700
19809
B. Adding a new paragraph (c)(2)(iii).
C. Revising paragraph (c)(3)(iii).
D. Removing paragraph (d).
The revisions and addition read as
follows:
■
■
■
§ 422.502 Evaluation and determination
procedures.
(a) * * *
(1) With the exception of evaluations
conducted under paragraph (b) of this
section, CMS evaluates an application
for an MA contract solely on the basis
of information contained in the
application itself and any additional
information that CMS obtains through
other means such as on-site visits.
(2) After evaluating all relevant
information, CMS determines whether
the applicant’s application meets all the
requirements described in this part.
(b) Use of information from a current
or prior contract. If an MA organization
fails during the 14 months preceding the
deadline established by CMS for the
submission of contract qualification
applications to comply with the
requirements of the Part C program
under any current or prior contract with
CMS under title XVIII of the Act or fails
to complete a corrective action plan
during the 14 months preceding the
deadline established by CMS for the
submission of contract qualification
applications, CMS may deny an
application based on the applicant’s
failure to comply with the requirements
of the Part C program under any current
or prior contract with CMS even if the
applicant currently meets all of the
requirements of this part.
(c) * * *
(2) * * *
(iii) If CMS does not receive a revised
application within 10 days from the
date of the notice, or if after timely
submission of a revised application,
CMS still finds the applicant does not
appear qualified to contract as an MA
organization or has not provided enough
information to allow CMS to evaluate
the application, CMS will deny the
application.
(3) * * *
(iii) The applicant’s right to request a
hearing in accordance with the
procedures specified in subpart N of
this part.
■ 30. Section 422.503 is amended by—
■ A. Revising paragraphs (b)(4)(vi).
■ B. Adding new paragraph (b)(7).
The revisions and addition read as
follows:
§ 422.503
General provisions.
*
*
*
*
*
(b) * * *
(4) * * *
(vi) Adopt and implement an effective
compliance program, which must
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
19810
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
include measures that prevent, detect,
and correct non-compliance with CMS’
program requirements as well as
measures that prevent, detect, and
correct fraud, waste, and abuse. The
compliance program must, at a
minimum, include the following core
requirements:
(A) Written policies, procedures, and
standards of conduct that—
(1) Articulate the organization’s
commitment to comply with all
applicable Federal and State standards;
(2) Describe compliance expectations
as embodied in the standards of
conduct;
(3) Implement the operation of the
compliance program;
(4) Provide guidance to employees
and others on dealing with potential
compliance issues;
(5) Identify how to communicate
compliance issues to appropriate
compliance personnel;
(6) Describe how potential
compliance issues are investigated and
resolved by the organization; and
(7) Include a policy of nonintimidation and non-retaliation for
good faith participation in the
compliance program, including but not
limited to reporting potential issues,
investigating issues, conducting selfevaluations, audits and remedial
actions, and reporting to appropriate
officials.
(B) The designation of a compliance
officer and a compliance committee
who report directly and are accountable
to the organization’s chief executive or
other senior management.
(1) The compliance officer, vested
with the day-to-day operations of the
compliance program, must be an
employee of the MA organization,
parent organization or corporate
affiliate. The compliance officer may not
be an employee of the MA
organization’s first tier, downstream or
related entity.
(2) The compliance officer and the
compliance committee must
periodically report directly to the
governing body of the MA organization
on the activities and status of the
compliance program, including issues
identified, investigated, and resolved by
the compliance program.
(3) The governing body of the MA
organization must be knowledgeable
about the content and operation of the
compliance program and must exercise
reasonable oversight with respect to the
implementation and effectiveness of the
compliance programs.
(C)(1) Each MA organization must
establish and implement effective
training and education between the
compliance officer and organization
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
employees, the MA organization’s chief
executive or other senior administrator,
managers and governing body members,
and the MA organization’s first tier,
downstream, and related entities. Such
training and education must occur at a
minimum annually and must be made a
part of the orientation for a new
employee, new first tier, downstream
and related entities, and new
appointment to a chief executive,
manager, or governing body member.
(2) First tier, downstream, and related
entities who have met the fraud, waste,
and abuse certification requirements
through enrollment into the Medicare
program are deemed to have met the
training and educational requirements
for fraud, waste, and abuse.
(D) Establishment and
implementation of effective lines of
communication, ensuring
confidentiality, between the compliance
officer, members of the compliance
committee, the MA organization’s
employees, managers and governing
body, and the MA organization’s first
tier, downstream, and related entities.
Such lines of communication must be
accessible to all and allow compliance
issues to be reported including a
method for anonymous and confidential
good faith reporting of potential
compliance issues as they are identified.
(E) Well-publicized disciplinary
standards through the implementation
of procedures which encourage good
faith participation in the compliance
program by all affected individuals.
These standards must include policies
that—
(1) Articulate expectations for
reporting compliance issues and assist
in their resolution,
(2) Identify noncompliance or
unethical behavior; and
(3) Provide for timely, consistent, and
effective enforcement of the standards
when noncompliance or unethical
behavior is determined.
(F) Establishment and implementation
of an effective system for routine
monitoring and identification of
compliance risks. The system should
include internal monitoring and audits
and, as appropriate, external audits, to
evaluate the MA organization, including
first tier entities’, compliance with CMS
requirements and the overall
effectiveness of the compliance
program.
(G) Establishment and
implementation of procedures and a
system for promptly responding to
compliance issues as they are raised,
investigating potential compliance
problems as identified in the course of
self-evaluations and audits, correcting
such problems promptly and thoroughly
PO 00000
Frm 00134
Fmt 4701
Sfmt 4700
to reduce the potential for recurrence,
and ensure ongoing compliance with
CMS requirements.
(1) If the MA organization discovers
evidence of misconduct related to
payment or delivery of items or services
under the contract, it must conduct a
timely, reasonable inquiry into that
conduct.
(2) The MA organization must
conduct appropriate corrective actions
(for example, repayment of
overpayments, disciplinary actions
against responsible employees) in
response to the potential violation
referenced in paragraph (b)(4)(vi)(G)(1)
of this section.
(3) The MA organization should have
procedures to voluntarily self-report
potential fraud or misconduct related to
the MA program to CMS or its designee.
*
*
*
*
*
(7) Not have terminated a contract by
mutual consent under which, as a
condition of the consent, the MA
organization agreed that it was not
eligible to apply for new contracts or
service area expansions for a period of
2 years per § 422.508(c) of this subpart.
*
*
*
*
*
■ 31. Section 422.504 is amended by—
■ A. Redesignating paragraph (e)(1(ii)
and (e)(1)(iii) as paragraph (e)(1)(iii) and
(e)(1)(iv), respectively.
■ B. Adding a new paragraph (e)(1)(ii).
■ C. Revising newly redesignated
paragraph (e)(1)(iii).
■ D. Revising paragraph (i)(2)(i).
■ E. Add a new paragraph (m).
The additions and revisions read as
follows:
§ 422.504
Contract provisions.
*
*
*
*
*
(e) * * *
(1) * * *
(ii) Compliance with CMS
requirements for maintaining the
privacy and security of protected health
information and other personally
identifiable information of Medicare
enrollees;
(iii) The facilities of the MA
organization to include computer and
other electronic systems; and
*
*
*
*
*
(i) * * *
(2) * * *
(i) HHS, the Comptroller General, or
their designees have the right to audit,
evaluate, and inspect any books,
contracts, computer or other electronic
systems, including medical records and
documentation of the first tier,
downstream, and entities related to
CMS’ contract with the MA
organization.
*
*
*
*
*
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
(m)(1) CMS may determine that an
MA organization is out of compliance
with a Part C requirement when the
organization fails to meet performance
standards articulated in the Part C
statutes, regulations, or guidance.
(2) If CMS has not already articulated
a measure for determining
noncompliance, CMS may determine
that a MA organization is out of
compliance when its performance in
fulfilling Part C requirements represents
an outlier relative to the performance of
other MA organizations.
■ 32. Section 422.506 is amended by—
■ A. Revising paragraph (a)(2)(ii).
■ B. Removing paragraph (a)(2)(iii).
■ C. Revising paragraph (a)(3)(i).
■ D. Adding a new paragraph (b)(1)(iv).
■ E. Revising paragraph (b)(2)(ii).
■ F. Removing paragraph (b)(2)(iii).
■ G. Revising paragraph (b)(3).
The revisions and addition read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 422.506
Nonrenewal of contract.
(a) * * *
(2) * * *
(ii) Each Medicare enrollee by mail at
least 90 calendar days before the date on
which the nonrenewal is effective. The
MA organization must also provide
information about alternative
enrollment options by doing one or
more of the following:
(A) Provide a CMS approved written
description of alternative MA plan,
MA–PD plan, and PDP options available
for obtaining qualified Medicare
services within the beneficiaries’ region.
(B) Place outbound calls to all affected
enrollees to ensure beneficiaries know
who to contact to learn about their
enrollment options.
(3) * * *
(i) The MA organization notifies its
Medicare enrollees in accordance with
paragraph (a)(2)(ii) of this section; and
*
*
*
*
*
(b) * * *
(1) * * *
(iv) The contract must be nonrenewed
as to an individual MA plan if that plan
does not have a sufficient number of
enrollees to establish that it is a viable
independent plan option.
(2) * * *
(ii) To each of the MA organization’s
Medicare enrollees by mail at least 90
calendar days before the date on which
the nonrenewal is effective, or at the
conclusion of the appeals process if
applicable.
(b) * * *
(3) Opportunity to develop and
implement a corrective action plan.
(i) Before providing a notice of intent
of nonrenewal of the contract, CMS will
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
provide the MA organization with
notice specifying the MA organization’s
deficiencies and a reasonable
opportunity of at least 30 calendar days
to develop and implement a corrective
action plan to correct the deficiencies.
(ii) The MA organization is solely
responsible for the identification,
development, and implementation of its
corrective action plan and for
demonstrating to CMS that the
underlying deficiencies have been
corrected within the time period
specified by CMS in the notice
requesting corrective action.
*
*
*
*
*
■ 33. Section 422.508 is amended by
adding paragraph (c) to read as follows:
§ 422.508 Modification or termination of
contract by mutual consent.
*
*
*
*
*
(c) Agreement to limit new MA
applications. As a condition of the
consent to a mutual termination CMS
will require, as a provision of the
termination agreement language
prohibiting the MA organization from
applying for new contracts or service
area expansions for a period of 2 years,
absent circumstances warranting special
consideration.
■ 34. Section 422.510 is amended by—
■ A. Revising paragraphs (a), (b)
introductory text, and (b)(2)(i).
■ B. Redesignating paragraphs (b)(2)(ii)
and (b)(2)(iii) as (b)(2)(iii) and (b)(2)(iv),
respectively.
■ C. Adding a new paragraph (b)(2)(ii).
■ D. Revising paragraph (c).
The revisions and addition read as
follows:
§ 422.510
Termination of contract by CMS.
(a) Termination by CMS. CMS may at
any time terminate a contract if CMS
determines that the MA organization
meets any of the following:
(1) Has failed substantially to carry
out the contract.
(2) Is carrying out the contract in a
manner that is inconsistent with the
efficient and effective administration of
this part.
(3) No longer substantially meets the
applicable conditions of this part.
(4) Based on creditable evidence, has
committed or participated in false,
fraudulent or abusive activities affecting
the Medicare, Medicaid or other State or
Federal health care programs, including
submission of false or fraudulent data.
(5) Substantially fails to comply with
the requirements in subpart M of this
part relating to grievances and appeals.
(6) Fails to provide CMS with valid
data as required under § 422.310.
(7) Fails to implement an acceptable
quality assessment and performance
PO 00000
Frm 00135
Fmt 4701
Sfmt 4700
19811
improvement program as required under
subpart D of this part.
(8) Substantially fails to comply with
the prompt payment requirements in
§ 422.520.
(9) Substantially fails to comply with
the service access requirements in
§ 422.112 or § 422.114.
(10) Fails to comply with the
requirements of § 422.208 regarding
physician incentive plans.
(11) Substantially fails to comply with
the marketing requirements in subpart V
of this part.
(12) Fails to comply with the
regulatory requirements contained in
this part or part 423 of this chapter or
both.
(13) Fails to meet CMS performance
requirements in carrying out the
regulatory requirements contained in
this part or part 423 of this chapter or
both.
(b) Notice. If CMS decides to
terminate a contract it gives notice of
the termination as follows:
*
*
*
*
*
(2) Expedited termination of contract
by CMS. (i) The procedures specified in
paragraph (b)(1) of this section do not
apply if—
(A) CMS determines that a delay in
termination, resulting from compliance
with the procedures provided in this
part prior to termination, would pose an
imminent and serious risk to the health
of the individuals enrolled with the MA
organization; or
(B) The MA organization experiences
financial difficulties so severe that its
ability to make necessary health services
available is impaired to the point of
posing an imminent and serious risk to
the health of its enrollees, or otherwise
fails to make services available to the
extent that such a risk to health exists;
or
(C) The contract is being terminated
based on the grounds specified in
paragraph (a)(4) of this section.
(ii) CMS notifies the MA organization
in writing that its contract will be
terminated on a date specified by CMS.
If a termination is effective in the
middle of a month, CMS has the right
to recover the prorated share of the
capitation payments made to the MA
organization covering the period of the
month following the contract
termination.
*
*
*
*
*
(c) Opportunity to develop and
implement a corrective action plan—(1)
General. (i) Before providing a notice of
intent to terminate the contract, CMS
will provide the MA organization with
notice specifying the MA organization’s
deficiencies and a reasonable
E:\FR\FM\15APR2.SGM
15APR2
19812
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
opportunity of at least 30 calendar days
to develop and implement a corrective
action plan to correct the deficiencies.
(ii) The MA organization is solely
responsible for the identification,
development, and implementation of its
corrective action plan and for
demonstrating to CMS that the
underlying deficiencies have been
corrected within the time period
specified by CMS in the notice
requesting corrective action.
(2) Exceptions. The MA organization
will not be provided with an
opportunity to develop and implement
a corrective action plan prior to
termination if—
(i) CMS determines that a delay in
termination, resulting from compliance
with the procedures provided in this
part prior to termination, would pose an
imminent and serious risk to the health
of the individuals enrolled with the MA
organization;
(ii) The MA organization experiences
financial difficulties so severe that its
ability to make necessary health services
available is impaired to the point of
posing an imminent and serious risk to
the health of its enrollees, or otherwise
fails to make services available to the
extent that such a risk to health exists;
or
(iii) The contract is being terminated
based on the violation specified in (a)(4)
of this section.
*
*
*
*
*
■ 35. Section 422.516 is amended by—
■ A. Revising the section heading.
■ B. Adding a new paragraph (g).
The revision and addition to read as
follows:
§ 422.516 Validation of Part C reporting
requirements.
*
*
*
*
*
(g) Data validation. Each Part C
sponsor must subject information
collected under paragraph (a) of this
section to a yearly independent audit to
determine their reliability, validity,
completeness, and comparability in
accordance with specifications
developed by CMS.
Subpart M—Grievances, Organization
Determinations, and Appeals
36. Section 422.561 is amended by
revising the definition of
‘‘Representative’’ to read as follows:
sroberts on DSKD5P82C1PROD with RULES
■
§ 422.561
Definitions.
*
*
*
*
*
Representative means an individual
appointed by an enrollee or other party,
or authorized under State or other
applicable law, to act on behalf of an
enrollee or other party involved in the
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
grievance or appeal. Unless otherwise
stated in this subpart, the representative
will have all the rights and
responsibilities of an enrollee or party
in filing a grievance, and in obtaining an
organization determination or in dealing
with any of the levels of the appeals
process, subject to the applicable rules
described in part 405 of this chapter.
§ 422.566
[Amended]
37. Section 422.566 is amended by—
A. Republishing paragraph (b)
introductory text.
■ B. Revising paragraph (b)(4).
■ C. Redesignating paragraph (b)(5) as
(b)(6).
■ D. Adding a new paragraph (b)(5).
■ E. In paragraphs (c)(1)(i), and (c)(2)(i)
removing the parenthetical phrase
‘‘(including his or her authorized
representative)’’ is removed and
‘‘(including his or her representative)’’ is
added in its place.
The revision and addition to read as
follows:
■
■
§ 422.566
Organization determinations.
*
*
*
*
*
(b) Actions that are organization
determinations. An organization
determination is any determination
made by an MA organization with
respect to any of the following:
*
*
*
*
*
(4) Reduction, or premature
discontinuation, of a previously
authorized ongoing course of treatment.
(5) Reduction of a previously
authorized course of treatment if the
enrollee believes that continuation of
the course of treatment is medically
necessary.
*
*
*
*
*
■ 38. Section 422.568 is amended by —
■ A. Redesignating paragraphs (a)
through (f) as paragraphs (b) through (g),
respectively.
■ B. Adding a new paragraph (a).
■ C. Revising newly designated
paragraph (d).
The addition and revision read as
follows:
§ 422.568 Standard timeframes and notice
requirements for organization
determinations.
(a) Method and place for filing a
request. An enrollee must ask for a
standard organization determination by
making a request with the MA
organization or, if applicable, to the
entity responsible for making the
determination (as directed by the MA
organization), in accordance with the
following:
(1) The request may be made orally or
in writing, except as provided in
paragraph (a)(2) of this section.
PO 00000
Frm 00136
Fmt 4701
Sfmt 4700
(2) Requests for payment must be
made in writing (unless the MA
organization or entity responsible for
making the determination has
implemented a voluntary policy of
accepting verbal payment requests).
*
*
*
*
*
(d) Written notice for MA organization
denials. The MA organization must give
the enrollee a written notice if—
(1) An MA organization decides to
deny service or payment in whole or in
part, or reduce or prematurely
discontinue the level of care for a
previously authorized ongoing course of
treatment.
(2) An enrollee requests an MA
organization to provide an explanation
of a practitioner’s denial of an item or
service, in whole or in part.
*
*
*
*
*
■ 39. Section 422.574 is amended by
revising paragraph (a) to read as follows:
§ 422.574 Parties to the organization
determination.
*
*
*
*
*
(a) The enrollee (including his or her
representative);
*
*
*
*
*
■ 40. Section 422.622 is amended by
revising paragraph (f)(3) to read as
follows:
§ 422.622 Requesting immediate QIO
review of the decision to discharge from the
inpatient hospital.
*
*
*
*
*
(f) * * *
(3) If the QIO determines that the
enrollee still requires inpatient hospital
care, the hospital must provide the
enrollee with a notice consistent with
§ 422.620(c) of this subpart when the
hospital or MA organization once again
determines that the enrollee no longer
requires inpatient hospital care.
*
*
*
*
*
■ 41. Section 422.624 is amended by
revising paragraph (c)(1) to read as
follows:
§ 422.624 Notifying enrollees of
termination of provider services.
*
*
*
*
*
(c) * * *
(1) The enrollee (or the enrollee’s
representative) has signed and dated the
notice to indicate that he or she has
received the notice and can comprehend
its contents; and
*
*
*
*
*
■ 42. Section 422.626 is amended by—
■ A. Redesignating paragraph (f) as
paragraph (g).
■ B. Redesignating paragraph (e)(5) as
paragraph (f) and revising the newly
redesignated paragraph (f).
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
The revisions read as follows:
§ 422.626 Fast-track appeals of service
terminations to independent review entities
(IREs).
*
*
*
*
*
(f) Responsibilities of the provider. If
an IRE reverses an MA organization’s
termination decision, the provider must
provide the enrollee with a new notice
consistent with § 422.624(b) of this
subpart.
*
*
*
*
*
Subpart N—Medicare Contract
Determinations and Appeals
43. Section 422.644 is amended by
revising paragraph (c) to read as follows:
■
§ 422.644
Notice of contract determination.
*
*
*
*
*
(c) CMS-initiated terminations—(1)
General rule. Except as provided in
(c)(2) of this section, CMS mails notice
to the MA organization 90 calendar days
before the anticipated effective date of
the termination.
(2) Exception. If a contract is
terminated in accordance with
§ 422.510(b)(2)(i) of this part, CMS
notifies the MA organization of the date
that it will terminate the MA
organization’s contract.
*
*
*
*
*
■ 44. Section § 422.660 is revised to
read as follows:
sroberts on DSKD5P82C1PROD with RULES
§ 422.660 Right to a hearing, burden of
proof, standard of proof, and standards of
review.
(a) Right to a hearing. The following
parties are entitled to a hearing:
(1) A contract applicant that has been
determined to be unqualified to enter
into a contract with CMS under Part C
of Title XVIII of the Act in accordance
with § 422.501 and § 422.502.
(2) An MA organization whose
contract has been terminated under
§ 422.510 of this part.
(3) An MA organization whose
contract has not been renewed under
§ 422.506 of this part.
(4) An MA organization who has had
an intermediate sanction imposed in
accordance with § 422.752(a) through
(b) of this part.
(b) Burden of proof, standard of proof,
and standards of review at a hearing. (1)
During a hearing to review a contract
determination as described at
§ 422.641(a) of this subpart, the
applicant has the burden of proving by
a preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 422.501 and
§ 422.502 of this part.
(2) During a hearing to review a
contract determination as described at
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
§ 422.641(b) of this subpart, the MA
organization has the burden of proving
by a preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 422.506 of
this part.
(3) During a hearing to review a
contract determination as described at
§ 422.641(c) of this subpart, the MA
organization has the burden of proving
by a preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 422.510 of
this part.
(4) During a hearing to review the
imposition of an intermediate sanction
as described at § 422.750 of this part, the
MA organization has the burden of
proving by a preponderance of the
evidence that CMS’ determination was
inconsistent with the requirements of
§ 422.752 of this part.
(c) Timing of favorable decisions.
Notice of any decision favorable to the
MA organization appealing a
determination that it is not qualified to
enter into a contract with CMS must be
issued by September 1 for the contract
in question to be effective on January 1
of the following year.
■ 45. Section 422.662 is amended by
revising paragraphs (a) and (b) to read
as follows:
§ 422.662
Request for hearing.
(a) Method and place for filing a
request. (1) A request for a hearing must
be made in writing and filed by an
authorized official of the contract
applicant or MA organization that was
the party to the determination under the
appeal.
(2) The request for the hearing must
be filed in accordance with the
requirements specified in the notice.
(b) Time for filing a request. A request
for a hearing must be filed within 15
calendar days after the receipt of the
notice of the contract determination or
intermediate sanction.
*
*
*
*
*
■ 46. Section 422.664 is amended by
revising paragraph (b)(2) to read as
follows:
§ 422.664 Postponement of effective date
of a contract determination when a request
for a hearing is filed timely.
*
*
*
*
*
(b) * * *
(2) A contract terminated in
accordance with § 422.510(b)(2)(i) of
this part will be terminated on the date
specified by CMS and will not be
postponed if a hearing is requested.
■ 47. Section 422.670 is revised to read
as follows:
PO 00000
Frm 00137
Fmt 4701
Sfmt 4700
§ 422.670
19813
Time and place of hearing.
(a) The hearing officer—
(1) Fixes a time and place for the
hearing, which is not to exceed 30
calendar days after the receipt of the
request for the hearing; and
(2) Sends written notice to the parties
that informs the parties of the general
and specific issues to be resolved, the
burden of proof, and information about
the hearing procedure.
(b)(1) The hearing officer may, on his
or her own motion, change the time and
place of the hearing.
(2) The hearing officer may adjourn or
postpone the hearing.
(c)(1) The MA organization or CMS
may request an extension by filing a
written request no later than 10 calendar
days prior to the scheduled hearing.
(2) When either the MA organization
or CMS requests an extension, the
hearing officer will provide a one-time
15 calendar day extension.
(3) Additional extensions may be
granted at the discretion of the hearing
officer.
■ 48. Section 422.676 is amended by
revising paragraph (d) to read as
follows:
§ 422.676
Conduct of hearing.
*
*
*
*
*
(d) The MA organization bears the
burden of going forward and must first
present evidence and argument before
CMS presents its evidence and
argument.
■ 49. Section 422.682 is revised to read
as follows:
§ 422.682
Witness lists and documents.
Witness lists and documents must be
identified and exchanged at least 5
calendar days before the scheduled
hearing.
■ 50. Section 422.692 is amended by
revising paragraphs (a) and (c) to read as
follows:
§ 422.692
Review by the Administrator.
(a) Request for review by
Administrator. CMS or an MA
organization that has received a hearing
decision may request a review by the
Administrator within 15 calendar days
after receipt of the hearing decision as
provided under § 422.690(b). Both the
MA organization and CMS may provide
written arguments to the Administrator
for review.
*
*
*
*
*
(c) Notification of Administrator
determination. The Administrator
notifies both parties of his or her
determination regarding review of the
hearing decision within 30 calendar
days after receipt of request for review.
E:\FR\FM\15APR2.SGM
15APR2
19814
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
If the Administrator declines to review
the hearing decision or the
Administrator does not make a
determination regarding review within
30 calendar days, the decision of the
hearing officer is final.
*
*
*
*
*
■ 51. Section 422.696 is amended by
revising the section heading and
paragraph heading for paragraph (a) to
read as follows:
§ 422.696 Reopening of a contract
determination or decision of a hearing
officer or the Administrator.
*
(a) Contract determination.* * *
*
*
*
*
Subpart O—Intermediate Sanctions
52. Section 422.750 is amended by
revising paragraph (a) to read as follows:
■
§ 422.750 Types of intermediate sanctions
and civil money penalties.
(a) The following intermediate
sanctions may be imposed and will
continue in effect until CMS is satisfied
that the deficiencies that are the basis
for the sanction determination have
been corrected and are not likely to
recur:
(1) Suspension of the MA
organization’s enrollment of Medicare
beneficiaries.
(2) Suspension of payment to the MA
organization for Medicare beneficiaries
enrolled after the date CMS notifies the
organization of the intermediate
sanction.
(3) Suspension of all marketing
activities to Medicare beneficiaries by
an MA organization.
*
*
*
*
*
■ 53. Section 422.752 is amended by
revising paragraphs (a) introductory
text, (a)(1), (a)(3), and (a)(4) to read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 422.752 Basis for imposing intermediate
sanctions and civil money penalties.
(a) All intermediate sanctions. For the
violations listed in this paragraph, CMS
may impose one or more of the
sanctions specified in § 422.750(a) of
this subpart on any MA organization
with a contract. The MA organization
may also be subject to other remedies
authorized under law.
(1) Fails substantially to provide
medically necessary items and services
that are required (under law or under
the contract) to be provided to an
individual covered under the contract, if
the failure has adversely affected (or has
the substantial likelihood of adversely
affecting) the individual.
*
*
*
*
*
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(3) Acts to expel or refuses to re-enroll
a beneficiary in violation of the
provisions of this part.
(4) Engages in any practice that would
reasonably be expected to have the
effect of denying or discouraging
enrollment (except as permitted by this
part) by eligible individuals with the
organization whose medical condition
or history indicates a need for
substantial future medical services.
*
*
*
*
*
■ 54. Section 422.756 amended by—
■ A. Revising paragraph (b).
■ B. Removing paragraph (c).
■ C. Redesignating paragraphs (d)
through (f) as paragraphs (c) through (e),
respectively.
■ D. Revising the newly redesignated
paragraphs (c)(1) and (c)(3).
The revisions read as follows:
§ 422.756 Procedures for imposing
intermediate sanctions and civil money
penalties.
*
*
*
*
*
(b) Hearing. (1) The MA organization
may request a hearing before a CMS
hearing officer.
(2) A written request must be received
by the designated CMS office within 15
calendar days after the receipt of the
notice.
(3) A request for a hearing under
§ 422.660 does not delay the date
specified by CMS when the sanction
becomes effective.
(4) The MA organization must follow
the right to a hearing procedure as
specified at § 422.660 through § 422.684.
(c) Effective date and duration of
sanction—(1) Effective date. The
effective date of the sanction is the date
specified by CMS in the notice.
*
*
*
*
*
(3) Duration of sanction. The sanction
remains in effect until CMS is satisfied
that the deficiencies that are the basis
for the sanction determination have
been corrected and are not likely to
recur.
(i) CMS may require that the MA
organization hire an independent
auditor to provide CMS with additional
information to determine if the
deficiencies that are the basis for the
sanction determination have been
corrected and are not likely to recur.
The independent auditor must work in
accordance with CMS specifications and
must be willing to attest that a complete
and full independent review has been
performed.
(ii) In instances where marketing or
enrollment or both intermediate
sanctions have been imposed, CMS may
require an MA organization to market or
to accept enrollments or both for a
PO 00000
Frm 00138
Fmt 4701
Sfmt 4700
limited period of time in order to assist
CMS in making a determination as to
whether the deficiencies that are the
bases for the intermediate sanctions
have been corrected and are not likely
to recur.
(A) If, following this time period,
CMS determines the deficiencies have
not been corrected or are likely to recur,
the intermediate sanctions will remain
in effect until such time that CMS is
assured the deficiencies have been
corrected and are not likely to recur.
(B) The MA organization does not
have a right to a hearing under
§ 422.660(a)(4) of this part to challenge
CMS’ determination to keep the
intermediate sanctions in effect.
*
*
*
*
*
Subpart V—Medicare Advantage
Marketing Requirements
55. Section 422.2260 is amended by
revising paragraph (5)(vii) of the
definition of ‘‘marketing materials’’ and
adding a new paragraph (6) to read as
follows:
■
§ 422.2260 Definitions concerning
marketing materials.
*
*
*
*
*
Marketing materials.* * *
(5) * * *
(vii) Membership activities (for
example, materials on rules involving
non-payment of premiums,
confirmation of enrollment or
disenrollment, or nonclaim specific
notification information).—
(6) Marketing materials exclude ad
hoc enrollee communications materials,
meaning informational materials that—
(i) Are targeted to current enrollees;
(ii) Are customized or limited to a
subset of enrollees or apply to a specific
situation;
(iii) Do not include information about
the plan’s benefit structure; and
(iv) Apply to a specific situation or
cover claims processing or other
operational issues.
■ 56. Section 422.2262 is amended by—
■ A. Revising the section heading.
■ B. Revising paragraphs (a)(1) and (b).
■ C. Adding new paragraphs (c) and (d).
The revisions and additions read as
follows:
§ 422.2262 Review and distribution of
marketing materials.
(a) * * *
(1) Except as provided in paragraph
(b) of this section, an MA organization
may not distribute any marketing
materials (as defined in § 422.2260 of
this subpart), or election forms, or make
such materials or forms available to
individuals eligible to elect an MA
organization unless—
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
(i) At least 45 days (or 10 days if using
certain types of marketing materials that
use, without modification, proposed
model language and format, including
standardized language and formatting,
as specified by CMS) before the date of
distribution the MA organization has
submitted the material or form to CMS
for review under the guidelines in
§ 422.2264 of this subpart; and
(ii) CMS does not disapprove the
distribution of new material or form.
*
*
*
*
*
(b) File and use. The MA organization
may distribute certain types of
marketing material, designated by CMS,
5 days following their submission to
CMS if the MA organization certifies
that in the case of these marketing
materials, it followed all applicable
marketing guidelines and, when
applicable, used model language
specified by CMS without modification.
(c) Standardized model marketing
materials. When specified by CMS,
organizations must use standardized
formats and language in model
materials.
(d) Ad hoc enrollee communication
materials. Ad hoc enrollee
communication materials may be
reviewed by CMS, which may upon
review determine that such materials
must be modified, or may no longer be
used.
PART 423—MEDICARE PROGRAM;
MEDICARE PRESCRIPTION DRUG
PROGRAM
57. The authority citation for part 423
continues to read as follows:
■
Authority: Secs. 1102, 1860D–1 through
1860D–42, and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395w–101 through
1395w–152, and 1395hh).
Subpart B—Eligibility and Enrollment
58. Section 423.34 is revised to read
as follows:
■
sroberts on DSKD5P82C1PROD with RULES
§ 423.34 Enrollment of low-income
subsidy eligible individuals.
(a) General rule. CMS must ensure the
enrollment into Part D plans of lowincome subsidy eligible individuals
who fail to enroll in a Part D plan.
(b) Definitions—Full-benefit dualeligible individual. For purposes of this
section, a full-benefit dual eligible
individual means an individual who
is—
(1) Determined eligible by the State
for—
(i) Medical assistance for full-benefits
under Title XIX of the Act for the month
under any eligibility category covered
under the State plan or comprehensive
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
benefits under a demonstration under
section 1115 of the Act; or
(ii) Medical assistance under section
1902(a)(10(C) of the Act (medically
needy) or section 1902(f) of the Act
(States that use more restrictive
eligibility criteria than are used by the
SSI program) for any month if the
individual was eligible for medical
assistance in any part of the month.
(2) Eligible for Part D in accordance
with § 423.30(a) of this subpart.
Low-income subsidy-eligible
individual. For purposes of this section,
a low-income subsidy eligible
individual means an individual who
meets the definition of full subsidy
eligible (including full benefit dual
eligible individuals as set forth in this
section) or other subsidy eligible in
§ 423.772 of this part.
(c) Reassigning low-income subsidyeligible individuals. Notwithstanding
§ 423.32(e) of this subpart, during the
annual coordinated election period,
CMS may reassign certain low-income
subsidy-eligible individuals in another
PDP if CMS determines that the further
enrollment is warranted.
(d) Enrollment rules—(1) General rule.
Except for low-income subsidy eligible
individuals who are qualifying covered
retirees with a group health plan
sponsor as specified in paragraph (d)(3)
of this section, CMS enrolls those
individuals who fail to enroll in a Part
D plan into a PDP offering basic
prescription drug coverage in the area
where the beneficiary resides that has a
monthly beneficiary premium amount
that does not exceed the low-income
subsidy amount (as defined in
§ 423.780(b) of this part). In the event
that there is more than one PDP in an
area with a monthly beneficiary
premium at or below the low-income
premium subsidy amount, individuals
are enrolled in such PDPs on a random
basis.
(2) Individuals enrolled in an MSA
plan or one of the following that does
not offer a Part D benefit. Low-income
subsidy eligible individuals enrolled in
an MA private fee-for-service plan or
cost-based HMO or CMP that does not
offer qualified prescription drug
coverage or an MSA plan and who fail
to enroll in a Part D plan must be
enrolled into a PDP plan as described in
paragraph (d)(1) of this section.
(3) Exception for individuals who are
qualifying covered retirees. (i) Full
benefit dual eligible individuals who are
qualifying covered retirees as defined in
§ 423.882 of this part, and for whom
CMS has approved the group health
plan sponsor to receive the retirement
drug subsidy described in subpart R of
this part, also are automatically enrolled
PO 00000
Frm 00139
Fmt 4701
Sfmt 4700
19815
in a Part D plan, consistent with this
paragraph, unless they elect to decline
that enrollment.
(ii) Before effectuating such an
enrollment, CMS provides notice to
such individuals of their choices and
advises them to discuss the potential
impact of Medicare Part D coverage on
their group health plan coverage. The
notice informs individuals that they will
be deemed to have declined to enroll in
Part D unless they affirmatively enroll
in a Part D plan or contact CMS and
confirm that they wish to be autoenrolled in a PDP. Individuals who elect
not to be auto-enrolled, may enroll in
Medicare Part D at a later time if they
choose to do so.
(iii) All other low income subsidy
eligible beneficiaries who are qualified
covered retirees are not enrolled by
CMS into PDPs.
(e) Declining enrollment and
disenrollment. Nothing in this section
prevents a low income subsidy eligible
individual from—
(1) Affirmatively declining enrollment
in Part D; or
(2) Disenrolling from the Part D plan
in which the individual is enrolled and
electing to enroll in another Part D plan
during the special enrollment period
provided under § 423.38.
(f) Effective date of enrollment for
full-benefit dual eligible individuals.
Enrollment of full-benefit dual eligible
individuals under this section must be
effective as follows:
(1) January 1, 2006 for individuals
who are full-benefit dual-eligible
individuals as of December 31, 2005.
(2) The first day of the month the
individual is eligible for Part D under
§ 423.30(a)(1) for individuals who are
Medicaid eligible and subsequently
become newly eligible for Part D under
§ 423.30(a)(1) on or after January 1,
2006.
(3) For individuals who are eligible
for Part D under § 423.30(a)(1) of this
subpart and subsequently become newly
eligible for Medicaid on or after January
1, 2006, enrollment is effective with the
first day of the month when the
individuals become eligible for both
Medicaid and Part D.
(g) Effective date of enrollment for
non-full-benefit dual-eligible
individuals who are low-income
subsidy-eligible individuals. The
effective date for non-full-benefit dualeligible individuals who are low-income
subsidy-eligible individuals is no later
than the first day of the second month
after CMS determines that they meet the
criteria for enrollment under this
section.
E:\FR\FM\15APR2.SGM
15APR2
19816
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
59. Section 423.38 is amended by
revising paragraph (c)(4) to read as
follows:
■
§ 423.38
Enrollment periods.
*
*
*
*
*
(c) * * *
(4) The individual is a full-subsidy
eligible individual or other subsidyeligible individual as defined in
§ 423.772 of this part.
*
*
*
*
*
■ 60. Section 423.44 is amended by—
■ A. Redesignating paragraphs (d)(1)(iii)
and (d)(1)(iv) as paragraphs (d)(1)(iv)
and (d)(1)(v), respectively.
■ B. Adding a new paragraph (d)(1)(iii).
■ C. Redesignating the introductory text
of paragraph (d)(5) as paragraph
(d)(5)(i).
■ D. Adding new paragraph (d)(5)(ii).
The revisions and additions read as
follows:
§ 423.44
PDP.
Involuntary disenrollment by the
*
*
*
*
*
(d) * * *
(1) * * *
(iii) The PDP sponsor provides the
individual with a grace period, that is,
an opportunity to pay past due
premiums in full. The grace period
must—
(A) Be at least 2 months; and
(B) Begin on the first day of the month
for which the premium is unpaid or the
first day of the month following the date
on which premium payment is
requested, whichever is later.
*
*
*
*
*
(5) * * *
(ii) Special rule. If the individual has
not moved from the PDP service area,
but has been absent from the service
area for more than 12 consecutive
months, the PDP sponsor must disenroll
the individual from the plan effective on
the first day of the 13th month after the
individual left the service area.
*
*
*
*
*
Subpart C—Benefits and Beneficiary
Protections
61. Section 423.100 is amended by
adding the definitions of ‘‘Drug category
or class,’’ ‘‘Major or life threatening
clinical consequences,’’ ‘‘Multiple
drugs,’’ ‘‘Restricted access,’’ and
‘‘Significant need for access to multiple
drugs’’ to read as follows:
sroberts on DSKD5P82C1PROD with RULES
■
§ 423.100
Definitions.
*
*
*
*
*
Drug category or class means, for the
purpose of § 423.120(b)(2)(v) of the
subpart, the identification of a drug
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
grouping that is reasonable to identify
the applicable drug products.
*
*
*
*
*
Major or life threatening clinical
consequences means consequences in
which serious clinical events may arise
as a result of not taking a drug that can
lead to patient hospitalization, or a
persistent or significant disability or
incapacity, or that can result in death.
Multiple drugs mean two or more Part
D drugs.
*
*
*
*
*
Restricted access means, for the
purposes of § 423.120(b)(2)(v)(A) of this
subpart, an enrollee who but for
§ 423.120(b0(2)(v) of this subpart
urgently requires a Part D drug but is
waiting for an expedited
redetermination by a Part D plan or an
CMS independent review entity with
respect to coverage of that drug.
*
*
*
*
*
Significant need for access to multiple
drugs means instances in which —
(1) There is a need for simultaneous
use of drugs within a drug grouping
because such drugs work in
combination with each other; or
(2) There is a strong likelihood of
sequential use of drugs within a class or
category within a short period of time
due to the unique effects the drugs have
on various individuals.
*
*
*
*
*
■ 62. Section 423.104 by—
■ A. Revising paragraph (b).
■ B. Adding a new paragraph (d)(2)(iii).
The revision and addition read as
follows:
§ 423.104 Requirements related to
qualified prescription drug coverage.
*
*
*
*
*
(b) Availability of prescription drug
plan. A PDP sponsor offering a
prescription drug plan must offer the
plan—
(1) To all Part D eligible beneficiaries
residing in the plan’s service area; and
(2) At a uniform premium, with
uniform benefits and level of costsharing throughout the plan’s service
area.
*
*
*
*
*
(d) * * *
(2) * * *
(iii) Tiered cost sharing under
paragraph (d)(2)(ii) of this paragraph
may not exceed levels annually
determined by CMS to be
discriminatory.
*
*
*
*
*
■ 63. Section 423.112 is amended by
revising paragraph (a) to read as follows:
PO 00000
Frm 00140
Fmt 4701
Sfmt 4700
§ 423.112 Establishment of prescription
drug plan sponsor service areas.
(a) Service area for prescription drug
plan sponsors. The service area for a
prescription drug plan sponsor other
than a fallback prescription drug plan
sponsor consists of one or more PDP
regions as established under paragraphs
(b) and (c) of this section.
*
*
*
*
*
■ 64. Section 423.120 is amended by—
■ A. Revising paragraph (a).
■ B. Redesignating paragraphs (b)(1)(ix)
as paragraph (b)(1)(x).
■ C. Adding a new paragraph (b)(1)(ix).
■ E. Revising paragraph (b)(3).
■ F. Redesignating paragraph (c) as
paragraph (c)(1).
■ G. Adding new paragraphs (c)(2)
through (c)(4).
The revisions and additions read as
follows:
§ 423.120
Access to covered Part D drugs.
(a) Assuring pharmacy access—(1)
Standards for convenient access to
network pharmacies. Except as provided
in paragraph (a)(7) of this section, a Part
D sponsor (as defined in § 423.4 of this
part) must have a contracted pharmacy
network consisting of retail pharmacies
sufficient to ensure that, for
beneficiaries residing in each State in a
PDP sponsor’s service area (as defined
in § 423.112(a) of this part), each State
in a regional MA-organization’s service
area (as defined in § 422.2 of this part),
the entire service area of a local MA
organization (as defined in § 422.2 of
this chapter) or the entire geographic
area of a cost contract (as defined in
§ 417.401 of this chapter) all of the
following requirements are satisfied:
(i) At least 90 percent of Medicare
beneficiaries, on average, in urban areas
served by the Part D sponsor live within
2 miles of a network pharmacy that is
a retail pharmacy or a pharmacy
described under paragraph (a)(2) of this
section.
(ii) At least 90 percent of Medicare
beneficiaries, on average, in suburban
areas served by the Part D sponsor live
within 5 miles of a network pharmacy
that is a retail pharmacy or a pharmacy
described under paragraph (a)(2) of this
section.
(iii) At least 70 percent of Medicare
beneficiaries, on average, in rural areas
served by the Part D sponsor live within
15 miles of a network pharmacy that is
a retail pharmacy or a pharmacy
described under paragraph (a)(2) of this
section.
(2) Applicability of some non-retail
pharmacies to standards for convenient
access. Part D sponsors may count I/T/
U pharmacies and pharmacies operated
E:\FR\FM\15APR2.SGM
15APR2
sroberts on DSKD5P82C1PROD with RULES
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
by Federally Qualified Health Centers
and Rural Health Centers toward the
standards for convenient access to
network pharmacies in paragraph (a)(1)
of this section.
(3) Access to non-retail pharmacies. A
Part D sponsor’s contracted pharmacy
network may be supplemented by nonretail pharmacies, including pharmacies
offering home delivery via mail-order
and institutional pharmacies, provided
the requirements of paragraph (a)(1) of
this section are met.
(4) Access to home infusion
pharmacies. A Part D sponsor’s
contracted pharmacy network must
provide adequate access to home
infusion pharmacies consistent with
written policy guidelines and other
CMS instructions. A Part D plan must
ensure that such network pharmacies, at
a minimum meet all the following
requirements:
(i) Are capable of delivering homeinfused drugs in a form that can be
administered in a clinically appropriate
fashion.
(ii) Are capable of providing infusible
Part D drugs for both short-term acute
care and long-term chronic care
therapies.
(iii) Ensure that the professional
services and ancillary supplies
necessary for home infusion therapy are
in place before dispensing Part D home
infusion drugs.
(iv) Provide delivery of home infusion
drugs within 24 hours of discharge from
an acute care setting, or later if so
prescribed.
(5) Access to long-term care
pharmacies. A Part D sponsor must offer
standard contracting terms and
conditions, including performance and
service criteria for long-term care
pharmacies that CMS specifies, to all
long-term care pharmacies in its service
area. The sponsor must provide
convenient access to long-term care
pharmacies consistent with written
policy guidelines and other CMS
instructions.
(6) Access to I/T/U pharmacies. A
Part D sponsor must offer standard
contracting terms and conditions
conforming to the model addendum that
CMS develops, to all I/T/U pharmacies
in its service area. The sponsor must
provide convenient access to I/T/U
pharmacies consistent with written
policy guidelines and other CMS
instructions.
(7) Waiver of pharmacy access
requirements. CMS waives the
requirements under paragraph (a)(1) of
this section in the case of either of the
following:
(i) An MA organization or cost
contract (as described in section 1876(h)
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
of the Act) that provides its enrollees
with access to covered Part D drugs
through pharmacies owned and
operated by the MA organization or cost
contract, provided the organization’s or
plan’s pharmacy network meets the
access standard set forth—
(A) At § 422.112 of this chapter for an
MA organization; or
(B) At § 417.416(e) of this chapter for
a cost contract.
(ii) An MA organization offering a
private fee-for-service plan described in
§ 422.4 of this chapter that—
(A) Offers qualified prescription drug
coverage; and
(B) Provides plan enrollees with
access to covered Part D drugs
dispensed at all pharmacies, without
regard to whether they are contracted
network pharmacies and without
charging cost-sharing in excess of that
described in § 423.104(d)(2) and (d)(5).
(8) Pharmacy network contracting
requirements. In establishing its
contracted pharmacy network, a Part D
sponsor offering qualified prescription
drug coverage—
(i) Must contract with any pharmacy
that meets the Part D sponsor’s standard
terms and conditions; and
(ii) May not require a pharmacy to
accept insurance risk as a condition of
participation in the Part D sponsor’s
contracted pharmacy network.
(9) Differential cost-sharing for
preferred pharmacies. A Part D sponsor
offering a Part D plan that provides
coverage other than defined standard
coverage may reduce copayments or
coinsurance for covered Part D drugs
obtained through a preferred pharmacy
relative to the copayments or
coinsurance applicable for such drugs
when obtained through a non-preferred
pharmacy. Such differentials are taken
into account in determining whether the
requirements under § 423.104(d)(2) and
(d)(5) and § 423.104(e) are met. Any
cost-sharing reduction under this
section must not increase CMS
payments to the Part D plan under
§ 423.329.
(10) Level playing field between mailorder and network pharmacies. A Part D
sponsor must permit its Part D plan
enrollees to receive benefits, which may
include a 90-day supply of covered Part
D drugs, at any of its network
pharmacies that are retail pharmacies. A
Part D sponsor may require an enrollee
obtaining a covered Part D drug at a
network pharmacy that is a retail
pharmacy to pay any higher cost-sharing
applicable to that covered Part D drug
at the network pharmacy that is a retail
pharmacy instead of the cost-sharing
applicable to that covered Part D drug
PO 00000
Frm 00141
Fmt 4701
Sfmt 4700
19817
at the network pharmacy that is a mailorder pharmacy.
(b) * * *
(1) * * *
(ix) Reviews and approves all clinical
prior authorization criteria, step therapy
protocols, and quantity limit restrictions
applied to each covered Part D drug.
*
*
*
*
*
(3) Transition process. A Part D
sponsor must provide for an appropriate
transition process for enrollees
prescribed Part D drugs that are not on
its Part D plan’s formulary (including
Part D drugs that are on a sponsor’s
formulary but require prior
authorization or step therapy under a
plan’s utilization management rules).
The transition process must:
(i) Be applicable to all of the
following:
(A) New enrollees into Part D plans
following the annual coordinated
election period.
(B) Newly eligible Medicare enrollees
from other coverage.
(C) Individuals who switch from one
plan to another after the start of the
contract year.
(D) Current enrollees remaining in the
plan affected by formulary changes.
(ii) Ensure access to a temporary
supply of drugs within the first 90 days
of coverage under a new plan. This 90
day timeframe applies to retail, home
infusion, long-term care and mail-order
pharmacies,
(iii) Ensure the provision of a
temporary fill when an enrollee requests
a fill of a non-formulary drug during the
time period specified in paragraph
(b)(3)(ii) of this section (including Part
D drugs that are on a plan’s formulary
but require prior authorization or step
therapy under a plan’s utilization
management rules).
(A) In the outpatient setting, the onetime, temporary supply of nonformulary Part D drugs (including Part
D drugs that are on a sponsor’s
formulary but require prior
authorization or step therapy under a
sponsor’s utilization management rules)
must be for at least 30 days of
medication, unless the prescription is
written by a prescriber for less than 30
days and requires the Part D sponsor to
allow multiple fills to provide up to a
total of 30 days of medication.
(B) In the long-term care setting, the
temporary supply of non-formulary Part
D drugs (including Part D drugs that are
on a sponsor’s formulary but require
prior authorization or step therapy
under a sponsor’s utilization
management rules) must be for up to 93
days in 31 day supply increments, with
refills provided, if needed, unless a
E:\FR\FM\15APR2.SGM
15APR2
19818
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
lesser amount is actually prescribed by
the prescriber.
(iv) Ensure written notice is provided
to each affected enrollee within 3
business days after adjudication of the
temporary fill.
(v) Ensure that reasonable efforts are
made to notify prescribers of affected
enrollees who receive a transition notice
under paragraph (b)(3)(iv) of this
section.
(c) * * *
(2) When processing Part D claims, a
Part D sponsor or its intermediary must
comply with the electronic transaction
standards established by 45 CFR
162.1102. CMS will issue guidance on
the use of conditional fields within such
standards.
(3) A Part D sponsor must require its
network pharmacies to submit claims to
the Part D sponsor or its intermediary
whenever the card described in
paragraph (c)(1) of this section is
presented or on file at the pharmacy
unless the enrollee expressly requests
that a particular claim not be submitted
to the Part D sponsor or its
intermediary.
(4) Beginning January 1, 2012, a part
D sponsor must assign and exclusively
use a unique—
(i) Part D BIN or RxBIN and Part D
processor control number (RxPCN)
combination in its Medicare line of
business; and
(ii) Part D cardholder identification
number (RxID) to each Medicare Part D
enrollee to clearly identify Medicare
Part D beneficiaries.
■ 65. Section 423.128 is amended by
adding a new paragraph (f) to read as
follows:
§ 423.128 Dissemination of Part D plan
information.
sroberts on DSKD5P82C1PROD with RULES
*
*
*
*
*
(f) Disclosure requirements. CMS may
require a Part D plan sponsor to disclose
to its enrollees or potential enrollees,
the Part D plan sponsor’s performance
and contract compliance deficiencies in
a manner specified by CMS.
■ 66. Section 423.132 is amended by—
■ A. Revising the introductory text of
paragraph c.
■ B. In paragraphs (c)(2) and (c)(3),
removing the ‘‘;’’ and adding a ‘‘.’’ in its
place.
■ C. In paragraph (c)(4), removing ‘‘;
and’’ and adding a ‘‘.’’ in its place.
■ D. Redesignating paragraph (c)(5) as
(c)(6).
■ E. Adding a new paragraph (c)(5).
■ F. Revising paragraph (d).
The revisions and additions read as
follows:
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
§ 423.132 Public disclosure of
pharmaceutical prices for equivalent drugs.
*
*
*
*
*
(c) Waiver of public disclosure
requirement. CMS waives the
requirement under paragraph (a) of this
section in any of the following cases:
*
*
*
*
*
(5) A long-term care network
pharmacy.
*
*
*
*
*
(d) Modification of timing
requirement. CMS modifies the
requirement under paragraph (b) of this
section under circumstances where
CMS deems compliance with this
requirement to be impossible or
impracticable.
Subpart D—Cost Control and Quality
Improvement Requirements
67. Section 423.153 is amended by—
A. Adding paragraphs (d)(1)(v)
through (vii).
■ B. Revising paragraph (d)(2).
The additions and revisions read as
follows:
■
■
§ 423.153 Drug utilization management,
quality assurance, and medication therapy
management programs (MTMPs).
*
*
*
*
*
(d) * * *
(1) * * *
(v) Must enroll targeted beneficiaries
using an opt-out method of enrollment
only.
(vi) Must target beneficiaries for
enrollment in the MTMP at least
quarterly during each plan year.
(vii) Must offer a minimum level of
medication therapy management
services for each beneficiary enrolled in
the MTMP that includes all of the
following:
(A) Interventions for both
beneficiaries and prescribers.
(B) Annual comprehensive
medication reviews with written
summaries. The comprehensive medical
review must include an interactive,
person-to-person consultation
performed by a pharmacist or other
qualified provider unless the beneficiary
is in a long-term care setting.
(C) Quarterly targeted medication
reviews with follow-up interventions
when necessary.
(2) Targeted beneficiaries. Targeted
beneficiaries for the MTMP described in
paragraph (d)(1) of this section are
enrollees in the sponsor’s Part D plan
who meet all of the following:
(i) Have multiple chronic diseases,
with three chronic diseases being the
maximum number a Part D plan sponsor
may require for targeted enrollment.
(ii) Are taking multiple Part D drugs,
with eight Part D drugs being the
PO 00000
Frm 00142
Fmt 4701
Sfmt 4700
maximum number of drugs a Part D
plan sponsor may require for targeted
enrollment.
(iii) Are likely to incur the following
annual Part D drug costs:
(A) For 2011, costs for covered Part D
drugs greater than or equal to $3,000.
(B) For 2012 and subsequent years,
costs for covered Part D drugs in an
amount greater than or equal to $3000
increased by the annual percentage
specified in § 423.104(d)(5)(iv) of this
part.
*
*
*
*
*
■ 68. Section 423.156 is revised to read
as follows:
§ 423.156
Consumer satisfaction surveys.
Part D contracts with 600 or more
enrollees as of July of the prior year
must contract with approved Medicare
Consumer Assessment of Healthcare
Providers and Systems (CAHPS) survey
vendors to conduct the Medicare
CAHPS satisfaction survey of Part D
plan enrollees in accordance with CMS
specifications and submit the survey
data to CMS.
■ 69. Section 423.165 is amended by—
■ A. Removing paragraph (b)(4).
■ B. Revising paragraph (f).
The revision reads as follows:
§ 423.165 Compliance deemed on the
basis of accreditation.
*
*
*
*
*
(f) Authority. Nothing in this section
limits CMS’ authority under subparts K
and O of this part, including, but not
limited to the ability to impose
intermediate sanctions, civil money
penalties, and terminate a contract with
a Part D plan sponsor.
Subpart F—Submission of Bids and
Monthly Beneficiary Premiums: Plan
Approval
70. Section 423.265 is amended by
revising paragraph (b) to read as follows:
■
§ 423.265 Submission of bids and related
information.
*
*
*
*
*
(b) Bid submission—(1) General. Not
later than the first Monday in June, each
potential Part D sponsor must submit
bids and supplemental information
described in this section for each Part D
plan it intends to offer in the subsequent
calendar year.
(2) Substantial differences between
bids. Potential Part D sponsors’ bid
submissions must reflect differences in
benefit packages or plan costs that CMS
determines to represent substantial
differences relative to a sponsor’s other
bid submissions. In order to be
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
considered ‘‘substantially different,’’
each bid must be significantly different
from the sponsor’s other bids with
respect to beneficiary out-of-pocket
costs or formulary structures.
*
*
*
*
*
■ 71. Section 423.272 is amended by
adding a new paragraph (b)(3) to read as
follows:
§ 423.272 Review and negotiation of bid
and approval of plans submitted by
potential Part D sponsors.
*
*
*
*
*
(b) * * *
(3) Substantial differences between
bids—(i) General. CMS approves a bid
only if it finds that the benefit package
or plan costs represented by that bid are
substantially different as provided
under § 423.265(b)(2) of this subpart
from the benefit package or plan costs
represented by another bid submitted by
the same Part D sponsor.
(ii) Transition period for PDP
sponsors with new acquisitions. After a
2-year transition period, as determined
by CMS, CMS approves a bid offered by
a PDP sponsor (or by a parent
organization to that PDP sponsor) that
recently purchased (or otherwise
acquired or merged with) another Part D
sponsor if it finds that the benefit
package or plan costs represented by
that bid are substantially different from
any benefit package or plan costs
represented by another bid submitted by
the same Part D sponsor (or parent
organization to that Part D sponsor.
*
*
*
*
*
Subpart G—Payments to Part D Plan
Sponsors for Qualified Prescription
Drug Coverage
§ 423.308
[Amended]
72. Section 423.308 is amended in
paragraph (1) of the definition of ‘‘gross
covered prescription drug costs’’ by
removing the phrase ‘‘The share of
negotiated prices’’ and adding in its
place ‘‘The share of actual costs’’.
■
Subpart J—Coordination Under Part D
Plans With Other Prescription Drug
Coverage
73. Section 423.462 is amended by—
A. Redesignating the existing text as
paragraph (a).
■ B. Adding a paragraph heading for
paragraph (a) and new paragraph (b).
The additions read as follows:
sroberts on DSKD5P82C1PROD with RULES
■
■
§ 423.462 Medicare secondary payer
procedures.
(a) General rule. * * *
(b) Reporting requirements. A Part D
sponsor must report credible new or
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
changed primary payer information to
the CMS Coordination of Benefits
Contractor in accordance with the
processes and timeframes specified by
CMS.
■ 74. Section 423.464 is amended by
adding new paragraphs (a)(3), (e)(1)(vi),
(g), and (h) to read as follows:
§ 423.464 Coordination of benefits with
other providers of prescription drug
coverage.
(a) * * *
(3) Retroactive claims adjustments,
underpayment reimbursements, and
overpayment recoveries as described in
paragraph (g) of this section and
§ 423.466(a) of this subpart.
*
*
*
*
*
(e) * * *
(1) * * *
(vi) Does not engage in midyear plan
or noncalendar year plan enrollment
changes on behalf of a substantial
number of its members when authorized
to do so on the beneficiary’s behalf.
*
*
*
*
*
(g) Responsibility to account for other
providers of prescription drug coverage
when a retroactive claims adjustment
creates an overpayment or
underpayment. When a Part D sponsor
makes a retroactive claims adjustment,
the sponsor has the responsibility to
account for SPAPs and other entities
providing prescription drug coverage in
reconciling the claims adjustments that
create overpayments or underpayments.
In carrying out these reimbursements
and recoveries, Part D sponsors must
also account for payments made and for
amounts being held for payment by
other individuals or entities. Part D
sponsors must have systems to track and
report adjustment transactions and to
support all of the following:
(1) Adjustments involving payments
by other plans and programs providing
prescription drug coverage have been
made.
(2) Reimbursements for excess costsharing and premiums for low-income
subsidy eligible individuals have been
processed in accordance with the
requirements in § 423.800(c).
(3) Recoveries of erroneous payments
for enrollees as specified in
§ 423.464(f)(4) have been sought.
(h) Reporting requirements. A Part D
sponsor must report credible new or
changed supplemental prescription drug
coverage information to the CMS
Coordination of Benefits Contractor in
accordance with the processes and
timeframes specified by CMS.
■ 75. A new § 423.466 is added to
subpart J to read as follows:
PO 00000
Frm 00143
Fmt 4701
Sfmt 4700
§ 423.466
benefits.
19819
Timeframes for coordination of
(a) Retroactive claims adjustments,
underpayment refunds, and
overpayment recoveries. Whenever a
sponsor receives information that
necessitates a retroactive claims
adjustment, the sponsor must process
the adjustment and issue refunds or
recovery notices within 45 days of the
sponsor’s receipt of complete
information regarding claims
adjustment.
(b) Coordination of benefits. Part D
sponsors must coordinate benefits with
SPAPs, other entities providing
prescription drug coverage,
beneficiaries, and others paying on the
beneficiaries’ behalf for a period not to
exceed 3 years from the date on which
the prescription for a covered Part D
drug was filled.
Subpart K—Application Procedures
and Contracts With PDP Sponsors
76. Section 423.502 is amended by—
A. Redesignating paragraphs (b)
through (d) as (c) through (e),
respectively
■ B. Adding a new paragraph (b).
■ C. Revising newly redesignated
paragraph (c)(1) introductory text and
paragraph (c)(2).
The addition and revisions reads as
follows:
■
■
§ 423.502
Application requirements.
*
*
*
*
*
(b) Completion of a notice of intent to
apply. (1) An organization submitting an
application under this section for a
particular contract year must first
submit a completed Notice of Intent to
Apply by the date established by CMS.
CMS will not accept applications from
organizations that do not submit a
timely Notice of Intent to Apply.
(2) Submitting a Notice of Intent to
Apply does not bind that organization to
submit an application for the applicable
contract year.
(3) An organization’s decision not to
submit an application after submitting
an Notice of Intent to Apply will not
form the basis of any action taken
against the organization by CMS.
(c) * * *
(1) In order to obtain a determination
on whether it meets the requirements to
become a Part D plan sponsor, an entity,
or an individual authorized to act for
the entity (the applicant), must fully
complete all parts of a certified
application in the form and manner
required by CMS, including the
following:
*
*
*
*
*
(2) The authorized individual must
describe thoroughly how the entity is
E:\FR\FM\15APR2.SGM
15APR2
19820
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
qualified to meet the all requirements
described in this part.
*
*
*
*
*
■ 77. Section 423.503 is amended by—
■ A. Revising paragraphs (a)(1), (a)(2),
and (b).
■ B. Adding a new paragraph (c)(2)(iii).
■ C. Revising paragraph(c)(3)(iii).
■ D. Removing paragraph (d).
The revisions and addition read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 423.503 Evaluation and determination
procedures for applications to be
determined qualified to act as a sponsor.
(a) * * *
(1) With the exception of evaluations
conducted under paragraph (b) of this
section, CMS evaluates an entity’s
application solely on the basis of
information contained in the
application itself and any additional
information that CMS obtains through
on-site visits.
(2) After evaluating all relevant
information, CMS determines whether
the application meets all the
requirements described in this part.
(b) Use of information from a current
or prior contract. If a Part D plan
sponsor fails during the 14 months
preceding the deadline established by
CMS for the submission of contract
qualification applications (or in the case
of a fallback entity, the previous 3-year
contract) to comply with the
requirements of the Part D program
under any current or prior contract with
CMS under title XVIII of the Act or fails
to complete a corrective action plan
during the 14 months preceding the
deadline established by CMS for the
submission of contract qualification
applications, CMS may deny an
application based on the applicant’s
failure to comply with the requirements
of the Part D program under any current
or prior contract with CMS even if the
applicant currently meets all of the
requirements of this part.
(c) * * *
(2) * * *
(iii) If CMS does not receive a revised
application within 10 days from the
date of the notice, or if after timely
submission of a revised application,
CMS still finds the applicant does not
appear qualified to contract as a Part D
plan sponsor or has not provided
enough information to allow CMS to
evaluate the application, CMS denies
the application.
(3) * * *
(iii) The applicant’s right to request a
hearing in accordance with the
procedures specified in subpart N of
this part.
■ 78. Section 423.504 is amended by—
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
A. Revising paragraph (b)(4)(vi)
B. Redesignating paragraph (b)(6) as
paragraph (b)(7).
■ C. Adding a new paragraph (b)(6).
The revision and addition read as
follows:
■
■
§ 423.504
General provisions.
*
*
*
*
*
(b) * * *
(4) * * *
(vi) Adopt and implement an effective
compliance program, which must
include measures that prevent, detect,
and correct noncompliance with CMS’
program requirements as well as
measures that prevent, detect, and
correct fraud, waste, and abuse. The
compliance program must, at a
minimum, include the following core
requirements:
(A) Written policies, procedures, and
standards of conduct that—
(1) Articulate the Part D plan
sponsor’s commitment to comply with
all applicable Federal and State
standards;
(2) Describe compliance expectations
as embodied in the standards of
conduct;
(3) Implement the operation of the
compliance program;
(4) Provide guidance to employees
and others on dealing with potential
compliance issues;
(5) Identify how to communicate
compliance issues to appropriate
compliance personnel;
(6) Describe how potential
compliance issues are investigated and
resolved by the Part D plan sponsor; and
(7) Include a policy of nonintimidation and non-retaliation for
good faith participation in the
compliance program, including but not
limited to reporting potential issues,
investigating issues, conducting selfevaluations, audits and remedial
actions, and reporting to appropriate
officials.
(B) The designation of a compliance
officer and a compliance committee
who report directly and are accountable
to the Part D plan sponsor’s chief
executive or other senior management.
(1) The compliance officer, vested
with the day-to-day operations of the
compliance program, must be an
employee of the Part D plan sponsor,
parent organization or corporate
affiliate. The compliance officer may not
be an employee of the Part D plan
sponsor’s first tier, downstream or
related entity.
(2) The compliance officer and the
compliance committee must
periodically report directly to the
governing body of the Part D plan
sponsor on the activities and status of
PO 00000
Frm 00144
Fmt 4701
Sfmt 4700
the compliance program, including
issues identified, investigated, and
resolved by the compliance program.
(3) The governing body of the Part D
plan sponsor must be knowledgeable
about the content and operation of the
compliance program and must exercise
reasonable oversight with respect to the
implementation and effectiveness of the
compliance programs.
(C)(1) Each Part D plan sponsor must
establish, implement and provide
effective training and education for its
employees including, the chief
executive and senior administrators or
managers; governing body members;
and first tier, downstream, and related
entities.
(2) The training and education must
occur at a least annually and be a part
of the orientation for new employees
including, the chief executive and
senior administrators or managers;
governing body members; and first tier,
downstream, and related entities.
(3) First tier, downstream, and related
entities who have met the fraud, waste,
and abuse certification requirements
through enrollment into the Medicare
program or accreditation as a Durable
Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) are
deemed to have met the training and
educational requirements for fraud,
waste, and abuse.
(D) Establishment and
implementation of effective lines of
communication, ensuring
confidentiality, between the compliance
officer, members of the compliance
committee, the Part D plan sponsor’s
employees, managers and governing
body, and the Part D plan sponsor’s first
tier, downstream, and related entities.
Such lines of communication must be
accessible to all and allow compliance
issues to be reported including a
method for anonymous and confidential
good faith reporting of potential
compliance issues as they are identified.
(E) Well-publicized disciplinary
standards through the implementation
of procedures which encourage good
faith participation in the compliance
program by all affected individuals.
These standards must include policies
that—
(1) Articulate expectations for
reporting compliance issues and assist
in their resolution;
(2) Identify non-compliance or
unethical behavior; and
(3) Provide for timely, consistent, and
effective enforcement of the standards
when non-compliance or unethical
behavior is determined.
(F) Establishment and implementation
of an effective system for routine
monitoring and identification of
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
compliance risks. The system should
include internal monitoring and audits
and, as appropriate, external audits, to
evaluate the Part D plan sponsors,
including first tier entities’, compliance
with CMS requirements and the overall
effectiveness of the compliance
program.
(G) Establishment and
implementation of procedures and a
system for promptly responding to
compliance issues as they are raised,
investigating potential compliance
problems as identified in the course of
self-evaluations and audits, correcting
such problems promptly and thoroughly
to reduce the potential for recurrence,
and ensure ongoing compliance with
CMS requirements.
(1) If the Part D sponsor discovers
evidence of misconduct related to
payment or delivery of prescription
drug items or services under the
contract, it must conduct a timely,
reasonable inquiry into that conduct;
(2) The Part D sponsor must conduct
appropriate corrective actions (for
example, repayment of overpayments
and disciplinary actions against
responsible individuals) in response to
the potential violation referenced above.
(3) The Part D plan sponsor should
have procedures to voluntarily selfreport potential fraud or misconduct
related to the Part D program to CMS or
its designee.
*
*
*
*
*
(6) Not have terminated a contract by
mutual consent under which, as a
condition of the consent, the Part D plan
sponsor agreed that it was not eligible
to apply for new contracts or service
area expansions for a period up to 2
years per § 423.508(e) of this subpart.
*
*
*
*
*
■ 79. Section 423.505 is amended by—
■ A. Redesignating paragraph (e)(1)(ii)
and (e)(1)(iii) as paragraph (e)(1)(iii) and
(e)(1)(iv), respectively.
■ B. Adding a new paragraph (e)(1)(ii).
■ C. Revising newly redesignated
paragraph (e)(1)(iii).
■ D. Revising paragraph (f)(3)
introductory text.
■ E. Revising paragraphs (i)(2)(i) and
(m)(1)(iii)(C).
■ F. Add a new paragraph (n).
The additions and revisions read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 423.505
Contract provisions.
*
*
*
*
*
(e) * * *
(1) * * *
(ii) Compliance with CMS
requirements for maintaining the
privacy and security of protected health
information and other personally
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
identifiable information of Medicare
enrollees;
(iii) The facilities of the Part D
sponsor to include computer and other
electronic systems; and
*
*
*
*
*
(f) * * *
(3) All data elements included in all
its drug claims for purposes deemed
necessary and appropriate by the
Secretary, including, but not limited to
the following:
*
*
*
*
*
(i) * * *
(2) * * *
(i) HHS, the Comptroller General, or
their designees have the right to audit,
evaluate, and inspect any books,
contracts, computer or other electronic
systems, including medical records and
documentation of the first tier,
downstream, and related entities related
to CMS’ contract with the Part D
sponsor.
*
*
*
*
*
(m)(1) * * *
(iii) * * *
(C) Plan identifier elements on the
claim are encrypted or unavailable for
release to external entities with the
exception of HHS grantees that CMS
determines meet all of the following
criteria:
(1) The plan identifier is essential to
the study.
(2) The study is key to the mission of
the sponsoring agency.
(3) The study provides significant
benefit to the Medicare program.
(4) The requestor attests that any
public findings or publications will not
identify plans.
*
*
*
*
*
(n)(1) CMS may determine that a Part
D plan sponsor is out of compliance
with a Part D requirement when the
sponsor fails to meet performance
standards articulated in the Part D
statutes, regulations, or guidance.
(2) If CMS has not already articulated
a measure for determining
noncompliance, CMS may determine
that a Part D sponsor is out of
compliance when its performance in
fulfilling Part D requirements represents
an outlier relative to the performance of
other Part D sponsors.
■ 80. Section 423.507 is amended by—
■ A. Revising paragraph (a)(2)(ii)
■ B. Removing paragraph (a)(2)(iii).
■ C. Adding a new paragraph (b)(1)(iii).
■ D. Revising paragraph (b)(2)(ii).
■ E. Removing (b)(2)(iii).
■ F. Redesignating paragraph (b)(2)(iv)
as (b)(2)(iii).
■ G. In newly redesignated paragraph
(b)(2)(iii), removing the reference
‘‘paragraphs (b)(2)(ii) and (iii) of this
PO 00000
Frm 00145
Fmt 4701
Sfmt 4700
19821
section’’ and add the reference
‘‘paragraph (b)(2)(ii) of this section’’ in
its place.
■ H. Revising paragraph (b)(3).
The revisions and addition read as
follows:
§ 423.507
Nonrenewal of a contract.
(a) * * *
(2) * * *
(ii) Each Medicare enrollee by mail at
least 90 calendar days before the date on
which the nonrenewal is effective. The
sponsor must also provide information
about alternative enrollment options by
doing one or more of the following:
(A) Provide a CMS approved written
description of alternative MA plan and
PDP options available for obtaining
qualified prescription drug coverage
within the beneficiaries’ region.
(B) Place outbound calls to all affected
enrollees to ensure beneficiaries know
who to contact to learn about their
enrollment options.
*
*
*
*
*
(b) * * *
(1) * * *
(iii) The contract must be nonrenewed
as to an individual PDP if that plan does
not have a sufficient number of
enrollees to establish that it is a viable
independent plan option.
(2) * * *
(ii) To each of the Part D plan
sponsor’s Medicare enrollees by mail at
least 90 calendar days before the date on
which the nonrenewal is effective, or at
the conclusion of the appeals process if
applicable.
*
*
*
*
*
(3) Opportunity to develop and
implement a corrective action plan. (i)
Before providing a notice of intent of
nonrenewal of the contract, CMS will
provide the Part D plan sponsor with
notice specifying the Part D sponsor’s
deficiencies and reasonable opportunity
of at least 30 calendar days to develop
and implement a corrective action plan
to correct the deficiencies.
(ii) The Part D plan sponsor is solely
responsible for the identification,
development, and implementation of its
corrective action plan and for
demonstrating to CMS that the
underlying deficiencies have been
corrected within the time period
specified by CMS in the notice
requesting corrective action.
*
*
*
*
*
■ 81. Section 423.508 is amended by
adding a new paragraph (e) to read as
follows:
§ 423.508 Modification or termination of
contract by mutual consent.
*
E:\FR\FM\15APR2.SGM
*
*
15APR2
*
*
19822
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
(e) Agreement to limit new Part D
applications. As a condition of the
consent to a mutual termination, CMS
will require, as a provision of the
termination agreement language
prohibiting the Part D plan sponsor from
applying for new contracts or service
area expansions for a period up to 2
years, absent circumstances warranting
special consideration.
■ 82. Amend § 423.509 by—
■ A. Revising paragraphs (a), paragraph
(b) introductory text, and paragraph
(b)(2)(i).
■ B. Redesignating paragraphs (b)(2)(ii)
and (b)(2)(iii) as (b)(2)(iii) and (b)(2)(iv),
respectively.
■ C. Adding a new paragraph (b)(2)(ii).
■ D. Revising paragraph (c).
The revisions and addition read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 423.509
Termination of contract by CMS.
(a) Termination by CMS. CMS may at
any time terminate a contract if CMS
determines that the Part D plan sponsor
meets any of the following:
(1) Has failed substantially to carry
out the contract.
(2) Is carrying out the contract in a
manner that is inconsistent with the
efficient and effective administration of
this part.
(3) No longer substantially meets the
applicable conditions of this part.
(4) Based on credible evidence, has
committed or participated in false,
fraudulent, or abusive activities
affecting the Medicare, Medicaid, or
other State or Federal health care
programs, including submission of false
or fraudulent data.
(5) Substantially fails to comply with
the requirements in subpart M of this
part relating to grievances and appeals.
(6) Fails to provide CMS with valid
risk adjustment, reinsurance and risk
corridor related data as required under
§ 423.322 and § 423.329 (or, for fallback
entities, fails to provide the information
in § 423.871(f)).
(7) Substantially fails to comply with
the service access requirements in
§ 423.120.
(8) Substantially fails to comply with
either of the following:
(i) Marketing requirements in subpart
V of this part.
(ii) Information dissemination
requirements of § 423.128 of this part.
(9) Substantially fails to comply with
the coordination with plans and
programs that provide prescription drug
coverage as described in subpart J of this
part.
(10) Substantially fails to comply with
the cost and utilization management,
quality improvement, medication
therapy management and fraud, abuse
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
and waste program requirements as
specified in subparts D and K of this
part.
(11) Fails to comply with the
regulatory requirements contained in
this part.
(12) Fails to meet CMS performance
requirements in carrying out the
regulatory requirements contained in
this part.
(b) Notice. If CMS decides to
terminate a contract it gives notice of
the termination as follows:
*
*
*
*
*
(2) Expedited termination of contract
by CMS. (i) The procedures specified in
(b)(1) of this section do not apply if—
(A) CMS determines that a delay in
termination, resulting from compliance
with the procedures provided in this
part prior to termination, would pose an
imminent and serious risk to the health
of the individuals enrolled with the Part
D plan sponsor;
(B) The Part D plan sponsor
experiences financial difficulties so
severe that its ability to make necessary
health services available is impaired to
the point of posing an imminent and
serious risk to the health of its enrollees,
or otherwise fails to make services
available to the extent that such a risk
to health exists; or
(C) The contract is being terminated
based on the violation specified in
paragraph (a)(4) of this section.
(ii) CMS notifies the MA organization
in writing that its contract will be
terminated on a date specified by CMS.
If a termination in is effective in the
middle of a month, CMS has the right
to recover the prorated share of the
capitation payments made to the Part D
plan sponsor covering the period of the
month following the contract
termination.
*
*
*
*
*
(c) Opportunity to develop and
implement a corrective action plan—(1)
General. (i) Before providing a notice of
intent to terminate the contract, CMS
will provide the Part D plan sponsor
with notice specifying the Part D plan
sponsor’s deficiencies and a reasonable
opportunity of at least 30 calendar days
to develop and implement a corrective
action plan to correct the deficiencies.
(ii) The Part D plan sponsor is solely
responsible for the identification,
development, and implementation of its
corrective action plan and for
demonstrating to CMS that the
underlying deficiencies have been
corrected within the time period
specified by CMS in the notice
requesting corrective action.
(2) Exceptions. The Part D plan
sponsor will not be provided with an
PO 00000
Frm 00146
Fmt 4701
Sfmt 4700
opportunity to develop and implement
a corrective action plan prior to
termination if—
(i) CMS determines that a delay in
termination, resulting from compliance
with the procedures provided in this
part prior to termination, would pose an
imminent and serious risk to the health
of the individuals enrolled with the Part
D plan sponsor;
(ii) The Part D plan sponsor
experiences financial difficulties so
severe that its ability to make necessary
health services available is impaired to
the point of posing an imminent and
serious risk to the health of its enrollees,
or otherwise fails to make services
available to the extent that such a risk
to health exists; or
(iii) The contract is being terminated
based on the violation specified in (a)(4)
of this section.
*
*
*
*
*
■ 83. Section 423.514 is amended by—
■ A. Revising the section heading.
■ B. Adding a new paragraph (g).
The revision and addition to read as
follows:
§ 423.514 Validation of Part D reporting
requirements.
*
*
*
*
*
(g) Data validation. Each Part D
sponsor must subject information
collected under paragraph (a) of this
section to a yearly independent audit to
determine its reliability, validity,
completeness, and comparability in
accordance with specifications
developed by CMS.
Subpart L—Effect of Change of
Ownership or Leasing of Facilities
During Term of Contract
84. Section 423.551 is amended by
adding a new paragraph (g) to read as
follows:
■
§ 423.551
General provisions.
*
*
*
*
*
(g) Sale of beneficiaries not permitted.
(1) CMS will only recognize the sale or
transfer of an organization’s entire PDP
line of business, consisting of all PDP
contracts held by the PDP sponsor with
the exception of the sale or transfer of
a full contract between wholly owned
subsidiaries of the same parent
organization which will be recognized
and allowed by CMS.
(2) CMS will not recognize or allow a
sale or transfer that consists solely of the
sale or transfer of individual
beneficiaries, groups of beneficiaries
enrolled in a pharmacy benefit package,
or one contract if the sponsor holds
more than one PDP contract.
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
Subpart M—Grievances, Coverage
Determinations, and Appeals
85. Section 423.568 is revised to read
as follows:
■
sroberts on DSKD5P82C1PROD with RULES
§ 423.568 Standard timeframe and notice
requirements for coverage determinations.
(a) Method and place for filing a
request. An enrollee must ask for a
standard coverage determination by
making a request with the Part D plan
sponsor in accordance with the
following:
(1) Except as specified in paragraph
(a)(2) of this section, the request may be
made orally or in writing.
(2) Requests for payment must be
made in writing (unless the Part D plan
sponsor has implemented a voluntary
policy of accepting oral payment
requests).
(3) The Part D plan sponsor must
establish and maintain a method of
documenting all oral requests and retain
the documentation in the case file.
(b) Timeframe for requests for drug
benefits. When a party makes a request
for a drug benefit, the Part D plan
sponsor must notify the enrollee (and
the prescribing physician or other
prescriber involved, as appropriate) of
its determination as expeditiously as the
enrollee’s health condition requires, but
no later than 72 hours after receipt of
the request, or, for an exceptions
request, the physician’s or other
prescriber’s supporting statement.
(c) Timeframe for requests for
payment. When a party makes a request
for payment, the Part D plan sponsor
must notify the enrollee of its
determination and make payment (when
applicable) no later than 14 calendar
days after receipt of the request.
(d) Written notice for favorable
decisions by a Part D plan sponsor. If a
Part D plan sponsor makes a completely
favorable decision under paragraph (b)
of this section, it must give the enrollee
written notice of the determination. The
initial notice may be provided orally, so
long as a written follow-up notice is
sent within 3 calendar days of the oral
notification.
(e) Form and content of the approval
notice. The notice of any approval
under paragraph (d) of this section must
explain the conditions of the approval
in a readable and understandable form.
(f) Written notice for denials by a Part
D plan sponsor. If a Part D plan sponsor
decides to deny a drug benefit, in whole
or in part, it must give the enrollee
written notice of the determination.
(g) Form and content of the denial
notice. The notice of any denial under
paragraph (f) of this section must meet
the following requirements:
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(1) Use approved notice language in a
readable and understandable form.
(2) State the specific reasons for the
denial.
(i) For drug coverage denials, describe
both the standard and expedited
redetermination processes, including
the enrollee’s right to, and conditions
for, obtaining an expedited
redetermination and the rest of the
appeals process.
(ii) For payment denials, describe the
standard redetermination process and
the rest of the appeals process.
(3) Inform the enrollee of his or her
right to a redetermination.
(4) Comply with any other notice
requirements specified by CMS.
(h) Effect of failure to meet the
adjudicatory timeframes. If the Part D
plan sponsor fails to notify the enrollee
of its determination in the appropriate
timeframe under paragraphs (b) or (c) of
this section, the failure constitutes an
adverse coverage determination, and the
plan sponsor must forward the
enrollee’s request to the IRE within 24
hours of the expiration of the
adjudication timeframe.
■ 86. Section 423.570 is amended by
revising paragraph (d)(1) to read as
follows:
§ 423.570 Expediting certain coverage
determinations.
*
*
*
*
*
(d) * * *
(1) Make the determination within the
72-hour timeframe established in
§ 423.568(b) for a standard
determination. The 72-hour period
begins on the day the Part D plan
sponsor receives the request for
expedited determination, or, for an
exceptions request, the physician’s or
other prescriber’s supporting statement.
*
*
*
*
*
■ 87. Section 423.572 is amended by
revising paragraphs (b) and (c) to read
as follows:
§ 423.572 Timeframes and notice
requirements for expedited coverage
determinations.
*
*
*
*
*
(b) Confirmation of oral notice. If the
Part D plan sponsor first notifies an
enrollee of an adverse or favorable
expedited determination orally, it must
mail written confirmation to the
enrollee within 3 calendar days of the
oral notification.
(c) Content of the notice of expedited
determination. (1) If the determination
is completely favorable to the enrollee,
the notice must explain the conditions
of the approval in a readable and
understandable form.
PO 00000
Frm 00147
Fmt 4701
Sfmt 4700
19823
(2) If the determination is not
completely favorable to the enrollee, the
notice must—
(i) Use approved language in a
readable and understandable form;
(ii) State the specific reasons for the
denial;
(iii) Inform the enrollee of his or her
right to a redetermination;
(iv) Describe—
(A) Both the standard and expedited
redetermination processes, including
the enrollee’s right to request an
expedited redetermination;
(B) Conditions for obtaining an
expedited redetermination; and
(C) Other aspects of the appeal
process.
*
*
*
*
*
■ 88. Section 423.590 is amended by—
■ A. Redesignating paragraph (d)(2) as
paragraph (d)(3).
■ B. Adding a new paragraph (d)(2).
■ C. Revising the introductory text of
paragraph (g).
■ D. Adding a new paragraph (h).
The revisions and additions read as
follows:
§ 423.590 Timeframes and responsibility
for making redeterminations.
*
*
*
*
*
(d) * * *
(2) Confirmation of oral notice. If the
Part D plan sponsor first notifies an
enrollee of an adverse or favorable
expedited redetermination orally, it
must mail written confirmation to the
enrollee within 3 calendar days of the
oral notification.
*
*
*
*
*
(g) Form and content of an adverse
redetermination notice. The notice of
any adverse determination under
paragraphs (a)(2), (b)(2), (d)(1) or (d)(2)
of this section must—
*
*
*
*
*
(h) Form and content of a completely
favorable redetermination notice. The
notice of any completely favorable
determination under paragraphs (a)(1),
(d)(1) or (d)(2) of this section must
explain the conditions of the approval
in a readable and understandable form.
Subpart N—Medicare Contract
Determinations and Appeals
89. Section 423.642 is amended by
revising paragraph (c) to read as follows:
■
§ 423.642
Notice of contract determination.
*
*
*
*
*
(c) CMS-initiated terminations—(1)
General rule. Except as provided in
(c)(2) of this section, CMS mails notice
to the Part D plan sponsor 90 calendar
days before the anticipated effective
date of the termination.
E:\FR\FM\15APR2.SGM
15APR2
19824
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
(2) Exception. If a contract is
terminated in accordance with
§ 423.509(b)(2)(i) of this part, CMS
notifies the Part D plan sponsor of the
date that it will terminate the Part D
plan sponsor’s contract.
*
*
*
*
*
■ 90. Section 423.650 is revised to read
as follows:
sroberts on DSKD5P82C1PROD with RULES
§ 423.650 Right to a hearing, burden of
proof, standard of proof, and standards of
review.
(a) Right to a hearing. The following
parties are entitled to a hearing:
(1) A contract applicant that has been
determined to be unqualified to enter
into a contract with CMS under Part D
of Title XVIII of the Act in accordance
with § 423.502 and § 423.503 of this
part.
(2) A Part D sponsor whose contract
has been terminated under § 423.509 of
this part.
(3) A Part D sponsor whose contract
has not been renewed in accordance
with § 423.507 of this part.
(4) A Part D sponsor who has had an
intermediate sanction imposed in
accordance with § 423.752(a) and (b) of
this part.
(b) Burden of proof, standard of proof,
and standard of review at hearing. (1)
During a hearing to review a contract
determination as described at
§ 423.641(a) of this subpart, the
applicant has the burden of proving by
a preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 423.502 and
§ 423.503 of this part.
(2) During a hearing to review a
contract determination as described at
§ 423.641(b) of this part, the Part D plan
sponsor has the burden of proving by a
preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 423.507 of
this part.
(3) During a hearing to review a
contract determination as described at
§ 423.641(c) of this subpart, the Part D
plan sponsor has the burden of proving
by a preponderance of the evidence that
CMS’ determination was inconsistent
with the requirements of § 423.509 of
this part.
(4) During a hearing to review the
imposition of an intermediate sanction
as described at § 423.750 of this part, the
Part D sponsor has the burden of
proving by a preponderance of the
evidence that CMS’ determination was
inconsistent with the requirements of
§ 423.752 of this part.
(c) Timing of favorable decision.
Notice of any decision favorable to the
Part D sponsor appealing a
determination that it is not qualified to
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
enter into a contract with CMS must be
issued by September 1 for the contract
in question to be effective on January 1
of the following year.
■ 91. Section 423.651 is amended by
revising paragraphs (a) and (b) to read
as follows:
(3) Additional extensions may be
granted at the discretion of the hearing
officer.
■ 94. Section 423.658 is amended by
revising paragraph (d) to read as
follows:
§ 423.651
*
Request for hearing.
(a) Method and place for filing a
request. (1) A request for a hearing must
be made in writing and filed by an
authorized official of the contract
applicant or Part D plan sponsor that
was the party to the determination
under the appeal.
(2) The request for the hearing must
be filed in accordance with the
requirements specified in the notice.
(b) Time for filing a request. A request
for a hearing must be filed within 15
calendar days after the receipt of the
notice of the contract determination or
intermediate sanction.
*
*
*
*
*
■ 92. Section 423.652 is amended by
revising paragraph (b)(2) to read as
follows:
§ 423.652 Postponement of effective date
of a contract determination when a request
for a hearing is filed timely.
*
*
*
*
*
(b) * * *
(2) A contract terminated in
accordance with § 423.509(b)(2)(i) of
this part will be terminated on the date
specified by CMS and will not be
postponed if a hearing is requested.
*
*
*
*
*
■ 93. Section 423.655 is revised to read
as follows:
§ 423.655
Time and place of hearing.
(a) The hearing officer—
(1) Fixes a time and place for the
hearing, which is not to exceed 30
calendar days after the receipt of request
for the hearing;
(2) Sends written notice to the parties
that informs the parties of the general
and specific issues to be resolved, the
burden of proof, and information about
the hearing procedure.
(b)(1) The hearing officer may, on his
or her own motion, change the time and
place of the hearing.
(2) The hearing officer may adjourn or
postpone the hearing.
(c)(1) The Part D plan sponsor or CMS
may request an extension by filing a
written request no later than 10 calendar
days prior to the scheduled hearing.
(2) When either the Part D plan
sponsor or CMS requests an extension
the hearing officer will provide a onetime 15-calendar day extension.
PO 00000
Frm 00148
Fmt 4701
Sfmt 4700
§ 423.658
Conduct of hearing.
*
*
*
*
(d) The Part D sponsor bears the
burden of going forward and must first
present evidence and argument before
CMS presents its evidence and
argument.
95. Section 423.661 is revised to read
as follows:
■
§ 423.661
Witnesses lists and documents.
Witness lists and documents must be
identified and exchanged at least 5
calendar days prior to the scheduled
hearing.
96. Section 423.666 is amended by
revising paragraphs (a) and (c) to read as
follows:
■
§ 423.666
Review by the Administrator.
(a) Request for review by
Administrator. CMS or a Part D plan
sponsor that has received a hearing
decision may request a review by the
Administrator within 15 calendar days
after receipt of the hearing decision as
provided under § 423.665(b) of this
subpart. Both the Part D plan sponsor
and CMS may provide written
arguments to the Administrator for
review.
*
*
*
*
*
(c) Notification of Administrator
determination. The Administrator
notifies both parties of his or her
determination regarding review of the
hearing decision within 30 calendar
days after receipt of request for review.
If the Administrator declines to review
the hearing decision or the
Administrator does not make a
determination regarding review within
30 calendar days, the decision of the
hearing officer is final.
*
*
*
*
*
■ 97. Section 423.668 is amended by
revising the section heading and the
paragraph heading for paragraph (a) to
read as follows:
§ 423.668 Reopening of a contract
determination or decision of a hearing
officer or the Administrator.
*
(a) Contract determination. * * *
*
*
*
*
Subpart O—Intermediate Sanctions
98. Section 423.750 is amended by
revising paragraph (a) to read as follows:
■
E:\FR\FM\15APR2.SGM
15APR2
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
§ 423.750 Types of intermediate sanctions
and civil money penalties.
(a) The following intermediate
sanctions may be imposed and will
continue in effect until CMS is satisfied
that the deficiencies that are the basis
for the sanction determination have
been corrected and are not likely to
recur:
(1) Suspension of the Part D plan
sponsor’s enrollment of Medicare
beneficiaries.
(2) Suspension of payment to the Part
D plan sponsor for Medicare
beneficiaries enrolled after the date
CMS notifies the organization of the
intermediate sanction.
(3) Suspension of all marketing
activities to Medicare beneficiaries by a
Part D plan sponsor.
*
*
*
*
*
■ 99. Section 423.752 is amended by
revising the paragraphs (a) introductory
text, (a)(1), (a)(3), and (a)(4) to read as
follows:
sroberts on DSKD5P82C1PROD with RULES
§ 423.752 Basis for imposing intermediate
sanctions and civil money penalties.
(a) All intermediate sanctions. For the
violations listed in this paragraph (a),
CMS may impose one or more of the
sanctions specified in § 423.750(a) of
this subpart on any Part D plan sponsor
with a contract. The Part D plan sponsor
may also be subject to other remedies
authorized under law.
(1) Fails substantially to provide
medically necessary items and services
that are required (under law or under
the contract) to be provided to an
individual covered under the contract, if
the failure has adversely affected (or has
the substantial likelihood of adversely
affecting) the individual.
*
*
*
*
*
(3) Acts to expel or refuses to re-enroll
a beneficiary in violation of the
provisions of this part.
(4) Engages in any practice that would
reasonably be expected to have the
effect of denying or discouraging
enrollment (except as permitted by this
part) by eligible individuals with the
organization whose medical condition
or history indicates a need for
substantial future medical services.
*
*
*
*
*
■ 100. Section 423.756 is amended by—
■ A. Revising paragraph (b).
■ B. Removing paragraph (c).
■ C. Redesignating paragraphs (d)
through (f) as paragraphs (c) through (e),
respectively.
■ D. Revising the newly redesignated
paragraphs (c)(1) and (c)(3).
The revisions read as follows:
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
19825
§ 423.756 Procedures for imposing
intermediate sanctions and civil money
penalties.
Subpart P—Premium and Cost-Sharing
Subsidies for Low-Income Individuals
*
■
*
*
*
*
(b) Hearing. (1) The Part D plan
sponsor may request a hearing before a
CMS hearing officer.
(2) A written request must be received
by the designated CMS office within 15
calendar days after the receipt of the
notice.
(3) A request for a hearing under
§ 423.650 of this part does not delay the
date specified by CMS when the
sanction becomes effective.
(4) The Part D plan sponsor must
follow the right to a hearing procedure
as specified at § 423.650 through
§ 423.662 of this part.
(c) * * *
(1) Effective date. The effective date of
the sanction is the date specified by
CMS in the notice.
*
*
*
*
*
(3) Duration of sanction. The sanction
remains in effect until CMS is satisfied
that the deficiencies that are the basis
for the sanction determination have
been corrected and are not likely to
recur.
(i) CMS may require that the Part D
plan sponsor hire an independent
auditor to provide CMS with additional
information to determine if the
deficiencies that are the basis for the
sanction determination have been
corrected and are not likely to recur.
The independent auditor must work in
accordance with CMS specifications and
must be willing to attest that a complete
and full independent review has been
performed.
(ii) In instances where marketing or
enrollment or both intermediate
sanctions have been imposed, CMS may
require a Part D plan sponsor to market
or to accept enrollments or both for a
limited period of time in order to assist
CMS in making a determination as to
whether the deficiencies that are the
bases for the intermediate sanctions
have been corrected and are not likely
to recur.
(A) If, following this time period,
CMS determines the deficiencies have
not been corrected or are likely to recur,
the intermediate sanctions will remain
in effect until such time that CMS is
assured the deficiencies have been
corrected and are not likely to recur.
(B) The Part D plan sponsor does not
have a right to a hearing under
§ 423.650(a)(4) of this subpart to
challenge CMS’ determination to keep
the intermediate sanctions in effect.
*
*
*
*
*
PO 00000
Frm 00149
Fmt 4701
Sfmt 4700
101. Section 423.773 by revising
paragraph (c)(2) to read as follows:
§ 423.773
Requirements for eligibility.
*
*
*
*
*
(c) * * *
(2) CMS notifies an individual treated
as a full-subsidy eligible under this
paragraph (c) that he or she does not
need to apply for the subsidies under
this subpart, and, at a minimum, is
deemed eligible for a full subsidy as
follows:
(i) For an individual deemed eligible
between January 1 and June 30 of a
calendar year, the individual is deemed
eligible for a full subsidy for the
remainder of the calendar year.
(ii) For an individual deemed eligible
between July 1 and December 31 of a
calendar year, the individual is deemed
eligible for the remainder of the
calendar year and the following
calendar year.
*
*
*
*
*
■ 102. Section 423.800 is amended by
adding a new paragraph (e) to read as
follows:
§ 423.800
program.
Administration of subsidy
*
*
*
*
*
(e) Timeframe for refunds and
recoveries due to retroactive
adjustments to cost sharing. Sponsors
must process retroactive adjustments to
cost-sharing for low-income subsidy
eligible individuals and any resulting
refunds and recoveries in accordance
with the timeframe specified in
§ 423.466(a) of this part.
Subpart V—Part D Marketing
Requirements
103. Section 423.2260 is amended by
revising paragraph (5)(vii) of the
definition ‘‘marketing materials’’ and
adding a new paragraph (6) to read as
follows:
■
§ 423.2260 Definitions concerning
marketing materials.
*
*
*
*
*
Marketing materials. * * *
(5) * * *
(vii) Membership activities (for
example, materials on rules involving
non-payment of premiums,
confirmation of enrollment or
disenrollment, or nonclaim-specific
notification information).
(6) Marketing materials exclude ad
hoc enrollee communications materials,
meaning informational materials that—
(i) Are targeted to current enrollees;
E:\FR\FM\15APR2.SGM
15APR2
19826
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules and Regulations
(ii) Are customized or limited to a
subset of enrollees or apply to a specific
situation;
(iii) Do not include information about
the plan’s benefit structure; and
(iv) Apply to a specific situation or
cover member-specific claims
processing or other operational issues.
104. Section 423.2262 is amended
by—
■ A. Revising paragraph (a)(1)(i).
■ B. Adding new paragraphs (c) and (d)
to read as follows:
■
§ 423.2262 Review and distribution of
marketing materials.
sroberts on DSKD5P82C1PROD with RULES
(a) * * *
(1) * * *
(i) At least 45 days (or 10 days if using
certain types of marketing materials that
use, without modification, proposed
model language and format, including
standardized language and formatting,
as specified by CMS) before the date of
distribution, the Part D sponsor submits
the material or form to CMS for review
under the guidelines in § 423.2264 of
this subpart; and
*
*
*
*
*
VerDate Nov<24>2008
18:07 Apr 14, 2010
Jkt 220001
(c) Standardized model marketing
materials. When specified by CMS,
organizations must use standardized
formats and language in model
materials.
(d) Ad hoc enrollee communication
materials. Ad hoc enrollee
communication materials may be
reviewed by CMS, which may upon
review determine that such materials
must be modified, or may not longer be
used.
PART 480—ACQUISITION,
PROTECTION, AND DISCLOSURE
QUALITY IMPROVEMENT
ORGANIZATION REVIEW
INFORMATION
105. The authority citation for part
480 continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
106. Section 480.140 is amended by
adding a new paragraph (g) to read as
follows:
■
§ 480.140 Disclosure of quality review
study information.
*
PO 00000
*
*
Frm 00150
*
Fmt 4701
*
Sfmt 9990
(g) The QIO must disclose to CMS
quality review study information
collected as part of the Reporting
Hospital Quality Data for Annual
Payment Update program, under section
1886(b)(3)(B)(viii) of the Act following
hospital review of the data. The quality
review study information must include
identifiers of MA plan beneficiaries,
hospitals, practitioners, and services
when CMS requests this information for
the sole purpose of conducting activities
related to MA organizations as
described in § 422.153 of this chapter.
Authority:
(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital
Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: March 11, 2010.
Charlene Frizzera,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: April 2, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010–7966 Filed 4–6–10; 4:15 pm]
BILLING CODE 4120–01–P
E:\FR\FM\15APR2.SGM
15APR2
]]>Agencies
[Federal Register Volume 75, Number 72 (Thursday, April 15, 2010)]
[Rules and Regulations]
[Pages 19678-19826]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-7966]
[[Page 19677]]
-----------------------------------------------------------------------
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
42 CFR Parts 417, 422, 423, and 480
Medicare Program; Policy and Technical Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs; Final
Rule
Federal Register / Vol. 75, No. 72 / Thursday, April 15, 2010 / Rules
and Regulations
[[Page 19678]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422, 423, and 480
[CMS-4085-F]
RIN 0938-AP77
Medicare Program; Policy and Technical Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule makes revisions to the regulations governing
the Medicare Advantage (MA) program (Part C) and prescription drug
benefit program (Part D) based on our continued experience in the
administration of the Part C and D programs. The revisions strengthen
various program participation and exit requirements; strengthen
beneficiary protections; ensure that plan offerings to beneficiaries
include meaningful differences; improve plan payment rules and
processes; improve data collection for oversight and quality
assessment, implement new policies and clarify existing program policy.
DATES: Effective Date: These regulations are effective on June 7, 2010.
However, we note that because health and drug plans under the Part C
and D programs operate under contracts with CMS that are applicable on
a calendar year basis, the provisions will not be applicable prior to
contract year January 1, 2011, except where otherwise noted.
FOR FURTHER INFORMATION CONTACT:
Alissa Deboy, (410) 786-6041, General information and Part D issues.
Sabrina Ahmed, (410) 786-7499, Part C issues.
Terry Lied, (410) 786-8973, Collection of information requirements and
regulatory impact analysis issues.
Kristy Nishimoto, (410) 786-8517, Part C and D enrollment and appeals
issues.
Jennifer Smith, (410) 786-2987, Part C and D compliance and sanction
issues.
Frank Szeflinski, (303) 844-7119, Part C payment issues.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Overview of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
B. History and Overview
II. Provisions of the Proposed Rule and Analysis and Responses to
Public Comments
A. Changes to Strengthen Our Ability To Distinguish for Approval
Stronger Applicants for Part C and D Program Participation and To
Remove Consistently Poor Performers
1. Require Notice of Intent to Apply Under Part C and D Within
the Application Requirements (Sec. 422.501 and Sec. 423.502)
2. Application Requirements (Sec. 422.501(c) and Sec.
423.502(c)) and Evaluation and Determination Procedures for
Determining Whether Applicants are Qualified for a Contract Under
Parts C and D (Sec. 422.502 and Sec. 423.503)
3. Deny Contract Qualification Applications Based on Past
Contract Performance (Sec. 423.750 and Sec. 422.750)
4. Use of Data to Evaluate Continued Ability to Act as a
Qualified Sponsoring Organization Under Parts C and D (Sec.
422.504, and Sec. 423.505)
5. Compliance Programs Under Part C and D (Sec.
422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi))
6. Network Adequacy of Coordinated Care and Network-Based
Private Fee-for-Service Plans Under Part C (Sec. 422.112)
7. Deemable Program Requirements Under Parts C and D (Sec.
422.156(b) (7), Sec. 422.156 (f), Sec. 423.165(b), and Sec.
423.165(f))
8. Modify the Corrective Action Plan (CAP) Process as it Relates
to Procedures for Termination and Nonrenewal of a Part C or D
Contract By CMS (Sec. 422.506(b)(3), Sec. 422.510(c)(1), Sec.
423.507(b)(3), and Sec. 423.509(c)(1))
9. Procedures for Imposing Intermediate Sanctions and Civil
Money Penalties Under Part C and D (Sec. 422.756 and 423.756)
10. Termination of Contracts Under Parts C and D (Sec.
422.510(a) and Sec. 423.509(a))
11. Request for Hearing Under Parts C and D (Sec. 422.662 and
Sec. 423.651)
12. Burden of Proof, Standard of Proof, Standard of Review and
Conduct of Hearing (Sec. 422.660, Sec. 423.650, Sec. 422.676, and
Sec. 423.658)
13. Expedited Contract Terminations Procedures (Sec. 422.510,
Sec. 423.509, Sec. 422.664, Sec. 423.652, Sec. 422.644, and
Sec. 423.642) Under Parts C and D
14. Time and Place of Hearing Under Parts C and D (Sec. 422.670
and Sec. 423.655)
15. Discovery Under Parts C and D (Sec. 422.682 and Sec.
423.661)
16. Review by the Administrator Under Parts C and D (Sec.
422.692(a) and Sec. 423.666(a))
17. Reopening of an Initial Contract Determination or Decision
of a Hearing Officer or the Administrator Under Parts C and D (Sec.
422.696 and Sec. 423.668)
18. Prohibition of MA and Part D Applications for 2 Years after
a Mutual Termination (Sec. 422.503(b)(6) and Sec. 423.504(b)(5))
B. Changes to Strengthen Beneficiary Protections
1. Broker and Agent Requirements Under Parts C and D
2. Beneficiary Communications Materials Under Parts C and D
(Sec. 422.2260, Sec. 423.2262, Sec. 423.2260, and Sec. 423.2262)
3. Required Use of Standardized Model Materials Under Parts C
and D (Sec. 422.2262 and Sec. 423.2262)
4. Involuntary Disenrollment for Failure to Pay Plan Premiums
Under Parts C and D (Sec. 422.74 and Sec. 423.44)
5. Maximum Allowable Out-of-Pocket Cost Amount for Medicare
Parts A and B Services (Sec. 422.100)
6. Maximum Allowable Cost Sharing Amount for Medicare Parts A
and B Services and Prescription Drugs (Sec. 422.100 and Sec.
423.104)
7. Prohibition on Prior Notification by PPO, PFFS, and MSA Plans
Under Part C (Sec. 422.2, Sec. 422.4, and Sec. 422.105)
8. Requirements for LIS Eligibility Under Part D (Sec. 423.773)
9. Enrollment of Full Subsidy Eligible Individuals and Other
Subsidy Eligible Individuals Under Part D (Sec. 423.34)
10. Special Enrollment Periods Under Part D (Sec. 423.380)
11. Transition Process Under Part D (Sec. 423.120(b)(3))
12. Part D Sponsor Responsibility for Retroactive Claims
Adjustment Reimbursements and Recoveries Under Part D (Sec.
423.464)
13. Time Limits for Coordination of Benefits (Sec. 423.466)
14. Use of Standardized Technology Under Part D (Sec. 423.120)
15. Absence from Service Area for More Than 12 Months Under Part
D (Sec. 423.44)
16. Prohibition of Mid Year Mass Enrollment Changes by SPAPS
Under Part D (Sec. 423.464(e))
17. Non-renewal Beneficiary Notification Requirement Under Parts
C and D (Sec. 422.506 and Sec. 423.507)
18. Notice of Alternative Medicare Plans Available to Replace
Non-Renewing Plans Under Parts C and D (Sec. 422.506(a)(2)(ii) and
Sec. 423.507(a)(2)(ii))
19. Timeframes and Responsibilities for Making Redeterminations
Under Part D (Sec. 423.590)
20. Requirements for Requesting Organization Determinations
Under Part C (Sec. 422.568)
21. Organization Determinations Under Part C (Sec. 422.566 and
Sec. 422.568)
22. Representatives (Sec. 422.561, Sec. 422.574, and Sec.
422.624)
23. Disclosure Requirements Under Parts C and D (Sec.
422.111(g) and Sec. 423.128(f))
24. Definition of MA Plan Service Area (Sec. 422.2)
C. Changes to Provide Plan Offerings With Meaningful Differences
1. Meaningful Differences in Bid Submissions and Bid Review
(Sec. 422.254, Sec. 423.265, Sec. 422.256, and 423.272)
2. Transition Process in Cases of Acquisitions and Mergers
(Sec. 422.256 and Sec. 423.272)
3. Non-renewing Low-enrollment Plans (Sec. 422.506(b)(1)(iv)
and Sec. 423.507(b)(1)(iii))
4. Medicare Options Compare and Medicare Prescription Drug Plan
Finder
[[Page 19679]]
D. Changes to Improve Payment Rules and Processes
1. Definitions Related to Risk Adjustment Data Validation
Appeals (Sec. 422.2) and Proposed Addition of Medicare Advantage
Organization Risk Adjustment Data Validation--Dispute and Appeal
Procedures (Sec. 422.311)
2. Payments to Medicare Advantage Organizations--Certification
of Actuarial Valuation (Sec. 422.254)
3. Determination of Acceptable Administrative Cost by HMO/CMP
Cost Contractors and Health Care Prepayment Plans (HCPPs) (Sec.
417.564)
4. Calculation of the Minimum Percentage Increase Under Part C
(Sec. 422.306)
E. Changes to Improve Data Collection for Oversight and Quality
Assessment
1. Requirements for Quality Improvement Programs Under Part C
(Sec. 422.152, Sec. 422.153, and Sec. 480.140)
a. Quality Improvement Programs
b. New Quality Measures
c. Use of Quality Improvement Organization Review Information
2. CAHPS Survey Administration Under Parts C and D (Sec.
417.472, Sec. 422.152, and Sec. 423.156)
3. Validation of Part C and Part D Reporting Requirements (Sec.
422.516 and Sec. 423.514)
4. Collection of Additional Part D Claims' Elements for
Nonpayment-Related Purposes (Sec. 423.505)
F. Changes to Implement New Policy
1. Protected Classes of Concern Under Part D (Sec.
423.120(b)(2)(v))
2. Pro-rating the Plan Deductible for Part C MSA Enrollments
Occurring During an Initial Coverage Election Period (Sec. 422.103)
G. Changes to Clarify Various Program Participation Requirements
1. Uniform Benefits Under Parts C and D (Sec. 422.100(d) and
Sec. 423.104))
2. Ensuring the Security of Protected Health Information and
Other Personally Identifiable Information (Sec. 422.504 and Sec.
423.505)
3. Requirement for Sponsoring Organizations Under Parts C and D
to Report Other Payer Information to the Coordination of Benefits
Contractor (Sec. 422.108 and Sec. 423.464)
4. Visitor/Traveler Benefit Under Part C for the Purpose of
Extending Enrollment Up to 12 Months (Sec. 422.74)
5. Medication Therapy Management Programs Under Part D (Sec.
423.153(d))
6. Formulary Requirements--Development and Revision by a
Pharmacy and Therapeutics Committee (Sec. 423.120)
7. Generic Equivalent Disclosure Under Part D (Sec. 423.132)
8. Access to Covered Part D drugs (Sec. 423.120)
9. Standard Timeframe and Notice Requirements for Coverage
Determinations Under Part D (Sec. 423.568)
10. Expediting Certain Coverage Determinations (Sec. 423.570)
11. Timeframes and Notice Requirements for Expedited Coverage
Determinations (Sec. 423.572)
12. Clarify Novation Agreements Under Part D (Sec. 423.551)
13. Cost Contract Program Revisions: Appeals and Marketing
Requirements (Sec. 417.428, Sec. 417.494, Sec. 417.500, and Sec.
417.640)
a. Cost Contract Determinations (Sec. 417.492 and 417.494),
Civil Money Penalties (Sec. 417.500), and Intermediate Sanctions
(Sec. 417.500)
b. Extending MA Marketing Requirements to Cost Program Plans
(Sec. 417.428)
14. Out of Scope Comments
H. Changes to Implement Corrections and Other Technical Changes
1. Application of Subpart M to Health Care Prepayment Plans
(Sec. 417.840)
2. Generic Notice Delivery Requirements (Sec. 422.622 and
422.626)
3. Revision to Definition of Gross Covered Prescription Drug
Costs (Sec. 423.308)
4. Application Evaluation Procedures (Sec. 422.502(c and d) and
Sec. 423.503(c and d))
5. Intermediate Sanctions (Sec. 422.750(a) and Sec.
423.750(a))
6. Basis for Imposing Intermediate Sanctions and Civil Money
Penalties (Sec. 422.752 and Sec. 423.752)
III. Provisions of the Final Rule
IV. Collection of Information Requirements
A. ICRs Regarding Basic Contract Requirements (Sec. 417.472)
B. ICRs Regarding Apportionment and Allocation of Administrative
and General Costs (Sec. 417.564)
C. ICRs Regarding Medicare Secondary Payer (MSP) Procedure
(Sec. 422.108 and Sec. 423.462)
D. ICRs Regarding Disclosure Requirements (Sec. 422.111)
E. ICRs Regarding Quality Improvement Program (Sec. 422.152)
F. ICRs Regarding Application Requirements (Sec. 422.501 and
Sec. 423.502)
G. ICRs Regarding General Provisions (Sec. 422.503 and Sec.
423.504)
H. ICRs Regarding Contract Provisions (Sec. 422.504 and
423.505)
I. ICRs Regarding Nonrenewal of Contract (Sec. 422.506 and
Sec. 423.507)
J. ICRs Regarding Request for Hearing (Sec. 422.662 and Sec.
423.651)
K. ICRs Regarding Time and Place of Hearing (Sec. 422.670 and
Sec. 423.655)
L. ICRs Regarding Review by the Administrator (Sec. 422.692 and
Sec. 423.666)
M. ICRs Regarding Procedures for Imposing Intermediate Sanctions
and Civil Monetary Penalties (Sec. 422.756 and Sec. 423.756)
N. ICRs Regarding Disclosure of Part D Plan Information (Sec.
423.128)
O. ICRs Regarding Consumer Satisfaction Surveys (Sec. 423.156)
P. ICRs Regarding Validation of Part C and Part D Reporting
Requirements (Sec. 422.516 and Sec. 423.514)
Q. ICRs Regarding Drug Utilization Management, Quality
Assurance, and Medication Therapy Management Programs (MTMPs) (Sec.
423.153)
R. ICRs Regarding Timeframes and Notice Requirements for
Standard Coverage Determinations (Sec. 423.568)
S. ICRs Regarding Timeframes and Notice Requirements for
Expedited Coverage Determinations (Sec. 423.572)
T. ICRs Regarding Access to Covered Part D Drugs (Sec. 423.120)
U. ICRs Regarding Timeframes and Responsibility for Making
Redeterminations (Sec. 423.590)
V. Annual Information Collection Burden
V. Regulatory Impact Analysis
A. Need for Regulatory Action
B. Overall Impact
C. Increase in Costs to MA Organizations and Part D Sponsors
D. Expected Benefits
E. Anticipated Effects--Effects of Cap on Out-of-Pocket Costs
and Cost Sharing Amounts
F. Alternatives Considered
1. Strengthening CMS' Ability to Take Timely, Effective Contract
Determinations or Intermediate Sanctions (Part C & D)
2. Changing the Standards of Review, Clarifying the Standard of
Proof and Burden of Proof for Appeals, and Modifying the Conduct of
Hearing for Contract Decisions (Including Denials of Initial
Applications to Contract, Service Area Expansions for Existing
Contracts, Contract Non-Renewals and Terminations, and Intermediate
Sanctions)
3. Clarify That CMS May Require a ``Test Period'' During an
Enrollment/Marketing Sanction
4. Right for CMS to Require an Independent Audit of Sponsoring
Organizations under Intermediate Sanction
5. The Ability for CMS to Require Sponsors to Disclose To
Current and Potential Enrollees Compliance and Performance
Deficiencies
6. Reducing Duplicative and Low Enrollment Plans (Parts C & D)
7. Validation of Part C and Part D Reporting Requirements
G. Accounting Statement
H. Conclusion
Regulations Text
Acronyms
AO Accrediting Organization
ADS Dispensing System
AEP Annual Enrollment Period
AHFS American Hospital Formulary Service
AHFS-DI American Hospital Formulary Service--Drug Information
AHRQ Agency for Health Care Research and Quality
ALJ Administrative Law Judge
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program]
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection
Act of 2000 (Pub. L. 106-554)
CAHPS Consumer Assessment Health Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CCS Certified Coding Specialist
CMR Comprehensive Medical Review
CMP Civil Money Penalties
[[Page 19680]]
CMR Comprehensive Medical Review
CMS Centers for Medicare & Medicaid Services
CMS-HCC CMS Hierarchal Condition Category
CTM Complaints Tracking Module
COB Coordination of Benefits
CORF Comprehensive Outpatient Rehabilitation Facility
CPC Certified Professional Coder
CY Calendar year
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
EGWP Employer Group/Union-Sponsored Waiver Plan
EOB Explanation of Benefits
ESRD End-stage renal disease
FACA Federal Advisory Committee Act
FDA Food and Drug Administration (HHS)
FEHBP Federal Employees Health Benefits Plan
FFS Fee-For-Service
FY Fiscal year
GAO General Accounting Office
HCPP Health Care Prepayment Plans
HEDIS HealthCare Effectiveness Data and Information Set
HHS [U.S. Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HMO Health Maintenance Organization
HOS Health Outcome Survey
HPMS Health Plan Management System
ICD-9-CM Internal Classification of Disease, 9th, Clinical
Modification Guidelines
ICEP Initial Coverage Enrollment Period
ICL Initial Coverage Limit
ICR Information Collection Requirement
IVC Initial Validation Contractor
LEP Late Enrollment Penalty
LIS Low Income Subsidy
LTC Long Term Care
LTCF Long Term Care Facility
MA Medicare Advantage
MAAA American Academy of Actuaries
MAO Medicare Advantage Operations
MA-PD Medicare Advantage-Prescription Drug Plans
M+C Medicare+Choice program
MPDPF Medicare Prescription Drug Plan Finder
MIPPA Medicare Improvements for Patients and Providers Act of 2008
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MSA Metropolitan statistical area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management Programs
NAIC National Association Insurance Commissioners
NCPDP National Council for Prescription Drug Programs
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-coverage
OEP Open Enrollment Period
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
OTC Over the Counter
PART C Medicare Advantage
PART D Medicare Prescription Drug Benefit Programs
PPACA Patient Protection and Affordable Care Act (Pub. L. 111-148)
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription drug plan
PFFS Private Fee For Service Plan
POS Point of service
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QIO Quality Improvement Organization
QRS Quality Review Study
PACE Programs of All Inclusive Care for the Elderly
RADV Risk Adjustment Data Validation
RAPS Risk Adjustment Payment System
RHIA Registered Health Information Administrator
RHIT Registered Health Information Technician
SCHIP State Children's Health Insurance Programs
SEP Special Enrollment Periods
SHIP State Health Insurance Assistance Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SPAP State Pharmaceutical Assistance Programs
SSI Supplemental Security Income
TrOOP True Out Of Pocket
U&C Usual and Customary
USP U.S. Pharmacopoeia
SUPPLEMENTARY INFORMATION:
I. Background
A. Overview of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) (Pub. L. 108-173) was enacted on December 8, 2003. The
MMA established the Part D program and made revisions to the provisions
in Part C of the Medicare statute governing the Medicare Advantage (MA)
program. The MMA directed that important aspects of the new Medicare
prescription drug benefit program under Part D be similar to and
coordinated with regulations for the MA program.
Generally, the provisions enacted in the MMA took effect January 1,
2006. The final rules for the MA and Part D prescription drug programs
appeared in the Federal Register on January 28, 2005 (70 FR 4588-4741
and 70 FR 4194-4585, respectively). While the provisions of the final
rule did not govern plan payment or benefits until January 1, 2006,
given the fact that provisions relating to applications, marketing,
contracts, and the new bidding process for the MA and Part D programs,
many provisions in these final rules became effective on March 22,
2005, 60 days after publication of the rule.
As we have gained experience with the MA program and the
prescription drug benefit program, we periodically have revised the
Part C and D regulations to continue to improve or clarify existing
policies and/or codify current guidance for both programs. For example,
in December 2007, we published a final rule with comment on contract
determinations involving Medicare Advantage (MA) organizations and
Medicare Part D prescription drug plan sponsors (72 FR 68700). In April
2008, we published a final rule to address policy and technical changes
to the Part D program (73 FR 20486). In September 2008 and January
2009, we finalized revisions to both the Medicare Advantage and
prescription drug benefit programs (73 FR 54226 and 74 FR 1494,
respectively) to implement provisions in the Medicare Improvement for
Patients and Providers Act (MIPPA) (Pub. L. 110-275), which contained
provisions impacting both the Medicare Part C and D programs, and make
other policy clarifications based on experience with both programs (73
FR 54208, 73 FR 54226, and 74 FR 2881).
B. History and Overview
The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established
a new ``Part C'' in the Medicare statute (sections 1851 through 1859 of
the Social Security Act (the Act) which provided for what was then
called the Medicare+Choice (M+C) program. Under section 1851(a)(1) of
the Act, every individual entitled to Medicare Part A and enrolled
under Medicare Part B, except for most 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 he
or she lived. The primary goal of the M+C program was to provide
Medicare beneficiaries with a wider range of health plan choices. The
M+C provisions in Part C were amended by the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-111),
and further amended by the Medicare, Medicaid, and State Children's
Health Insurance Program SCHIP) Benefits Improvement Act of 2000 (BIPA)
(Pub. L. 106-554).
As discussed above, the MMA, enacted on December 8, 2003, added a
new ``Part D'' to the Medicare statute (sections 1860D-1 through 42 of
the Act) creating the Medicare Prescription Drug Benefit Program, and
made significant changes to the M+C program.
[[Page 19681]]
Also as noted above, MIPPA, enacted on July 15, 2008, addressed a
number of provisions impacting the Part C and D programs, including
provisions impacting marketing under both programs which were
implemented in regulations published in the Federal Register on
September 18, 2008 (73 FR 54208), a final rule effective October 1,
2008, that paralleled provisions in MIPPA, and in the same issue of the
Federal Register (73 FR 54226), a separate interim final rule that
addressed the other provisions of MIPPA affecting the MA and Part D
programs. We also clarified the MIPPA marketing provisions in a
November 2008 interim final rule (73 FR 67407 and issued a separate
interim final rule in January 2009 to address MIPPA provisions related
to Part D plan formularies (74 FR 2881).
In October 22, 2009 Federal Register (74 FR 54634), we published a
proposed rule (file code CMS-4085-P), hereinafter referred to as the
October 22, 2009 proposed rule) addressing additional policy
clarifications under the Part C and D programs. As noted when issuing
this proposed rule, we believe that additional programmatic and
operational changes are needed in order to further improve our
oversight and management of the Part C and D programs and to further
improve beneficiary experience under MA or Part D plans.
Indeed, one of the primary reasons set forth in the preamble for
issuing the October 22, 2009 proposed rule was to address beneficiary
concerns associated with the annual task of selecting one plan from so
many options. We noted that while it is clear that the Medicare Part D
program has improved access to drug coverage for elderly and offered
beneficiaries a wide range of plans from which to choose, some have
suggested that a significant numbers of beneficiaries are confused by
the array of choices and find it difficult to make enrollment decisions
that are best for them. Moreover, experience has shown that
organizations submitting bids under Part C and D to offer multiple
plans have not consistently submitted plan benefit designs that were
significantly different from each other, which can add to beneficiary
confusion. In this rule, we finalize a number of proposals to the way
we administer the Part C and D programs to promote beneficiaries making
the best plan choice that suits their needs. Although we believe these
provisions will go a long way to further that goal, we are committed to
additional explorations of ways to structure choices for seniors to aid
them in making better plan choices, and will continue to evaluate
program changes in this area.
We also proposed additional provisions aimed at strengthening
existing beneficiary protections, improving payment rules and
processes, enhancing our ability to pursue data collection for
oversight and quality assessment, strengthening formulary policy, and
finalizing a number of clarifications and technical corrections to
existing policy. Except as noted or otherwise modified, we finalize
these requirements in this rule.
Section 902 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and
requires the Secretary, in consultation with the Director of the Office
of Management and Budget, to establish and publish timelines for the
publication of Medicare final regulations based on the previous
publication of a Medicare proposed or interim final regulation. Section
902 of the MMA also states that the timelines for these regulations may
vary but shall not exceed 3 years after publication of the preceding
proposed or interim final regulation except under exceptional
circumstances.
This final rule has been published within the 3-year time limit
imposed by section 902 of the MMA, and thus is in accordance with the
Congress' intent to ensure timely publication of final regulations.
On March 23, 2010, the Patient Protection and Affordable Care Act
(Pub. L. 111-148) was enacted. Several provisions of this public law
affect the Part C and D programs. In sections II.B. and II.F. of this
final rule, we provide a discussion of the effects of two of these
provisions on our proposed policies regarding MA cost sharing and
``protected classes'' of drugs under Part D, respectively.
II. Provisions of the Proposed Rule and Analysis and Responses to
Public Comments
We received approximately 114 items of timely correspondence
containing comments on the October 22, 2009 proposed rule. Commenters
included health and drug plan organizations, insurance industry trade
groups, pharmacy associations, pharmaceutical benefit manager (PBM)
organizations, provider associations, representatives of hospital and
long term care institutions, drug manufacturers, mental health and
disease specific advocacy groups, beneficiary advocacy groups,
researchers, and others.
In this final rule, we address all timely comments and concerns on
the policies included in the proposed rule. We note that there were
several comments submitted that were outside the scope of the proposals
set forth in the proposed rule and, as such, we do not address them
within this final rule. Generally, the commenters supported our efforts
to improve plan offerings by the same sponsor that are meaningfully
different from each other in order to support improved beneficiary
decision making and our efforts to clarify and codify existing policy
through rulemaking.
A. Changes to Strengthen Our Ability To Distinguish for Approval Strong
Applicants for Part C and D Program Participation and To Remove
Consistently Poor Performers
This section finalizes a number of proposed revisions designed to
strengthen our ability to approve strong applicants and remove poor
performers in the Part C and D programs. Since the implementation of
revisions to the MA and initial implementation of the prescription drug
programs in January 2006, we have steadily enhanced our ability to
measure MAO and PDP sponsor performance through efforts such as the
analysis of data provided routinely by sponsors and by our contractors,
regular review of beneficiary complaints, marketing surveillance
activities, and routine audits. This information, combined with
feedback we have received from beneficiary satisfaction surveys, HEDIS
data, and information from MAOs and PDP sponsors themselves, has
enabled us to develop a clearer sense of what constitutes a successful
Medicare organization capable of providing quality Part C and D
services to beneficiaries. Additionally, this information has also
allowed us to identify and take appropriate action against
organizations that are not meeting program requirements and not meeting
the needs of beneficiaries.
As set forth below, we are finalizing changes and clarifications to
our regulations to make certain that all current and potential MAOs and
PDP sponsors clearly understand and can reasonably anticipate how we
measure sponsor performance, determine when there is noncompliance, and
when enforcement actions are warranted.
These provisions are described in detail in Table 1.
[[Page 19682]]
Table 1--Provisions Strengthening Our Ability To Distinguish for Approval Strong Applicants and To Remove Consistently Poor Performers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision --------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notice of Intent to Apply.......... Subpart K............. Sec. 422.501................... Subpart K............. Sec. 423.502.
Application Standards.............. Subpart K............. Sec. 422.502................... Subpart K............. Sec. 423.503.
Compliance Measures/Analysis....... Subpart K............. Sec. 422.502................... Subpart K............. Sec. 423.503.
Compliance Programs................ Subpart K............. Sec. 422.503(b)(4)(vi)......... Subpart K............. Sec. 423.504(b)(4)(vi).
Network Adequacy of Coordinated Subpart C............. Sec. 422.112................... N/A................... N/A.
Care and Network-Based Private-Fee-
For-Service plans under Part C.
Clarify programmatic elements that Subpart D............. Sec. 422.156(b)(7), Sec. Subpart D............. Sec. 423.165(b), Sec.
are ``deemable''. 422.156(f). 423.165(f).
Procedures for termination and Subpart K............. Sec. 422.510(c)(1), Sec. Subpart K............. Sec. 423.509(c)(1), Sec.
Nonrenewals: Part C and D. 422.506(b)(3). 423.507(b)(3).
Intermediate Sanctions: procedures Subpart O............. Sec. 422.756................... Subpart O............. Sec. 423.756.
for imposing civil and money
penalties.
Contract Termination............... Subpart K............. Sec. 422.510(a)................ Subpart K............. Sec. 423.509(a).
Proper request for hearings........ Subpart N............. Sec. 422.662................... Subpart N............. Sec. 423.651.
Burden of Proof, Standard of Proof, Subpart N............. Sec. 422.660, Sec. 422.676(d) Subpart N............. Sec. 423.650, Sec.
Standard of Review and Conduct of 423.658(d).
Hearing.
Postponement of effective date of Subpart N............. Sec. 422.664................... Subpart N............. Sec. 423.652.
determination when a request is
being filed.
Extending timeframe for contract Subpart N............. Sec. 422.670................... Subpart N............. Sec. 423.655.
determination hearings.
Appeal times: require each party Subpart N............. Sec. 422.682................... Subpart N............. Sec. 423.661.
provide witness list and documents
5 calendar days before hearing.
Appeal times: require request for a Subpart N............. Sec. 422.692(a)................ Subpart N............. Sec. 423.666(a).
review by the administrator must Sec. 422.692(a).....
be received with 15 days after
receipt of hearing decision.
Contract redeterminations and Subpart N............. Sec. 422.696................... Subpart N............. Sec. 423.668.
reopening.
Mutual termination of contract..... Subpart K............. Sec. 422.503(b)(6)............. Subpart K............. Sec. 423.504(b)(6).
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Require Notice of Intent To Apply Under Part C and D Within the
Application Requirements (Sec. 422.501 and Sec. 423.502)
Under the authority of section 1871(a)(1) of the Act, which
authorizes us to prescribe such regulations as may be necessary to
carry out the administration of the Medicare program, we proposed an
administrative requirement in the October 22, 2009 proposed rule for
both the Part C and D programs related to the application submission to
qualify as MA and PDP sponsor contractors. We specifically proposed in
Sec. 422.501 and Sec. 423.502 to codify our existing guidance that
initial applicants and existing contractors seeking to expand complete
a nonbinding Notice of Intent to Apply.
We noted that as a result of the fully electronic submission
process and restrictions on access to the CMS Health Plan Management
System (HPMS), every applicant must complete a Notice of Intent to
Apply as described in the HPMS memo dated October 10, 2008. This
includes both initial applicants and current contractors seeking to
expand their organizations' service area and current contractors adding
a Special Needs Plan (SNP) or an Employer Group/Union-Sponsored Waiver
Plan (EGWP) to their existing contract.
We also noted that submitting a Notice of Intent to Apply does not
bind that organization to submit an application for the following year.
However, without a pending contract number and completed CMS User ID
connectivity, an organization will not be able to access the
appropriate modules in HPMS to complete the application materials.
In this final rule, we address comments received and finalize this
provision with modification. As explained below, we modified Sec.
422.503(b)(2) and Sec. 423.502 (b)(2) to clearly indicate that the
decision not to submit an application after submission of a notice of
intent will not result in any compliance consequences.
Comment: Several commenters supported this provision.
Response: We appreciate the commenters support of our proposal.
Comment: Some commenters were concerned about the due date of the
Notice of Intent to Apply and wanted exceptions to allow CMS the
flexibility to accept notice of intent after the due date. Some
commenters were particularly concerned about special need plans offered
in conjunction with Medicaid. Commenters also urged CMS to provide
organizations adequate time to make the decision whether to apply and
stated that some organizations may not consider submitting an
application at the time notices are due.
Response: As stated in the proposed regulation at Sec.
422.503(b)(2) and Sec. 423.503(b)(2), the Notice of Intent to Apply
does not bind the organization to submit an application. For this
reason, we do not believe it is necessary to be flexible with the due
date of the notice of intent. Organizations are free to submit a Notice
of Intent to Apply and then consider whether or not to submit an
application without risking any negative consequences from CMS. We also
believe that the notice of intent requirement will benefit applicants
as it will serve as a 3-month advance reminder to begin preparation for
their submission. We anticipate that the additional lead time will
result in more successful applications.
Comment: One commenter questioned whether the three month lead time
is necessary, particularly for existing sponsors, to ensure timely
connectivity to CMS systems.
Response: Our preparation for the receipt of applications is a
process that can take up to 3 months. We encourage interested parties
to see the October 2, 2009 HPMS memo for an example of the timeline
from submission of the Notice of Intent to Apply to the application
submission.
Comment: One commenter wanted CMS to add language indicating that
for those notices of intent that do not result in the submission of an
application, lack of submission would not be considered as part of any
punitive evaluation.
Response: As we stated in the October 2009 proposed rule, the
Notice of Intent
[[Page 19683]]
to Apply does not bind the organization to submit an application. We
want to make clear that the submission of a notice of intent without a
subsequent application submission would present no risk of reprimand or
sanction by us. For this reason, we are modifying Sec. 422.503(b) and
Sec. 423.502 (b) to clearly indicate that the decision not to submit
an application after submission of a notice of intent will not result
in any compliance consequences.
2. Application Requirements (Sec. 422.501 (c) and Sec. 423.502 (c))
and Evaluation and Determination Procedures for Determining Whether
Applicants Are Qualified for a Contract Under Parts C and D (Sec.
422.502 and Sec. 423.503)
In the October 2009 proposed rule, we proposed a single
clarification that applies to both MA organizations and Part D sponsors
related to our application evaluation procedures and appeals of our
determinations regarding applications. At Sec. 422.502 and Sec.
423.503, we specifically proposed to make explicit that we will approve
only those applications that demonstrate that they meet all (not
substantially all) Part C and D program requirements.
We noted that the application process under Part C and D requires
an applicant to submit for our review a combination of attestations
that it will comply with stated program requirements, as well as submit
contracts with organizations the applicant has contracted with to
perform key Part C or D functions, evidence of the applicant's risk-
bearing licenses, and data documenting that the applicant can provide
its members access to Part C and D services consistent with the
programs' requirements. We proposed at Sec. 422.501(c)(1) and (2),
Sec. 422.502(a)(2), Sec. 423.502(c)(1) and (2), and Sec.
423.503(a)(2) to require that applicants demonstrate that they meet all
requirements outlined in the MA organization and Part D sponsor
applications.
We simplified the application evaluation process under Sec.
422.502(a)(1) and Sec. 423.503(a)(1) by limiting the evaluation of an
entity's application to information contained in the application and
any additional information that we obtain through onsite visits. As we
noted in the proposed rule, limiting our review to this information
ensures that we will afford all applicants (numbering in the hundreds
each of the last 4 years) a fair and consistent review of their
qualifications. Organizations can be assured that we will not consider
additional sources of information regarding one applicant's
qualifications that we do not consider for others.
We also proposed to clarify our authority to decline to consider
application materials submitted after the expiration of the 10-day
period following our issuance of a notice of intent to deny an
organization's contract qualification application. We clarified Sec.
422.502(c)(2) and Sec. 423.503(c)(2) by proposing to add a new
paragraph (iii) to establish that if we do not receive a revised
application within 10 days from the date of the intent to deny notice,
or if after timely submission of a revised application the applicant
still appears unqualified to contract as an MA organization or Part D
sponsor or has not provided enough information to allow us to evaluate
the application, we will deny the application.
Further, we noted that consistent with the revisions to Sec.
422.650(b)(2) and Sec. 423.660(b)(2), which are discussed elsewhere in
this final rule, the applicant would not be permitted to submit
additional revised application material to the Hearing Officer for
review should the applicant elect to appeal the denial of its
application. Allowing for such a submission and review of such
information as part of the hearing would, in effect, extend the
deadline for submitting an approvable application. In this final rule,
we adopt these provisions as proposed. Comment: A number of commenters
expressed support for all areas of this provision.
Response: We appreciate the commenters support of our proposal.
Comment: Many commenters urged CMS to be flexible and allow for
unique circumstances. Several commenters noted that SNPs have only
limited ability to influence the terms and timelines that State
Medicaid agencies follow in executing the SNP agreements.
Response: We design our solicitations to ensure that all
organizations have a fair opportunity to demonstrate their
qualifications for an MA or PDP contract. As noted in the preamble to
the October 2009 proposed rule, allowing exceptions to requirements to
address unique circumstances would undermine the need for a uniform
application process applied fairly to all applicants. With respect to
Medicaid agency contracts, we may require that organizations submit
those documents as part of an application to qualify to offer a SNP
plan. When we include that requirement in a particular year's SNP
application, we have determined that organizations can reasonably be
expected to obtain the executed agreements in time for us to determine
that it is qualified to operate a SNP during the coming contract year.
We do not anticipate the need to provide any flexibility on this
particular matter.
Comment: One commenter stated that the ``all'' standard is not
practical given that there is not a narrative of requirements in the
applications, but a series of attestations and tables (with detailed
requirements stated in regulations and CMS subregulatory guidance).
Response: We believe the ``all'' standard is practical. Applicants
receive enough information to successfully apply and are given two
opportunities with instructions to cure deficiencies. While we advise
that applicants should be familiar with Part C and D program
regulations and guidance, in most instances they are not required to
describe how their organization will meet a requirement; rather they
simply attest that they will meet the requirement. Therefore, an
explanation of all the program requirements in the application is not
necessary for organizations to submit successful Part C or D
applications to us.
Comment: Several commenters stated that CMS has been unclear in its
previous deficiency responses to applicants and that it has been
difficult to obtain guidance from CMS. Commenters urged CMS to provide
clear rules and be consistent. In light of the inconsistencies with
which applications are reviewed, one commenter recommended using a
standard that emphasizes the materiality of the requirements that
sponsors must meet.
Response: We agree that in order for applicants to have a
consistent understanding of the expectations on which we base our
contract approval and denials, we must ensure the clarity and
transparency of the program requirements and review criteria.
Applicants receive up to three communications which explain our
application requirements and provide clear instructions on how to be a
successful applicant. Organizations that fail to completely and
accurately apply receive a courtesy e-mail explaining the deficiencies
and are given an opportunity to cure. Organizations that are still
deficient after the initial opportunity to cure receive a notice of
intent to deny and are given another opportunity to cure. All
application communications include contact information for CMS subject
matter specialists. We are always willing to work with applicants to
ensure a complete understanding of program and contracting
requirements.
Comment: One commenter stated that the applicants that have
disagreed with CMS' network adequacy determinations have been reluctant
to seek re-
[[Page 19684]]
evaluation of their network adequacy in specific counties because of
the possibility that CMS will confirm its original finding and deny the
entire application. A denial of one county in one state could result in
the denial of an entire application. To address this problem, the
commenter recommended that CMS revise its policy to provide that an
applicant for a network-based plan or service area expansion (SAE) may
drop a county or portion of its service area that has been identified
in the intent to deny notice after receiving CMS' final decision based
upon the additional information submitted by the organization.
Response: We afford sponsors multiple opportunities during the
application review process for applicants to modify their proposed
service area. However, when we conduct our final review of an
application prior to the issuance of a notice of intent to deny, we
must make the reasonable assumption, for the sake of consistency, that
the applicant seeks approval for its entire proposed service area, not
some portion that the applicant will identify at a later date.
Therefore, we will not allow applicants to modify their service areas
after they have received a final notice of denial of their application
from us.
Comment: One commenter recommended that CMS explicitly provide in
the regulation for a process to permit applicants to cure deficiencies
identified by CMS subsequent to the issuance of the notice of intent to
deny; and that if such an opportunity is not provided, CMS should base
any denial notice only on issues raised in the notice of intent to deny
and not on deficiencies that are identified later in the application
review process.
Response: When we have discovered a deficiency after we have issued
a notice of intent to deny, we have not disapproved that application
based on the failure to correct the new deficiency. Rather, we approve
the application (assuming all corrections have been made based on
deficiencies identified in the Notice of Intent to Deny), but
communicate to the applicant that the newly identified deficiency must
be corrected prior to executing a Medicare contract. If the issue is
not so corrected, it immediately becomes the subject of a CMS contract
compliance action.
Comment: One commenter requested that we clarify the type of
information gained via the onsite visits and how this information will
be used in evaluation of applications.
Response: We clarify, that we limit our application reviews (with
the exception of the past performance analysis) to the materials
organizations submit in response to the annual solicitations. We would
also make clear that we retain our authority to conduct site visits to
conduct compliance and monitoring activities.
Comment: One commenter noted that it would be beneficial to
sponsors if CMS provided a tool that allows sponsors to self-determine
network adequacy. The commenter stated that the CMS network adequacy
standards are subject to reviewer discretion and stated that this
ambiguity is unfair when the sponsor must identify, negotiate, and
complete contract terms, sometimes with multiple entities, within a 10-
day period.
Response: We have developed standardized network criteria and an
automated review process that we will use, starting with the contract
year 2011 application cycle, to review network adequacy. Applicants may
request exceptions where they do not meet the standardized criteria for
individual provider types in individual counties under limited, defined
circumstances. We believe these changes will increase the consistency
and transparency of network reviews.
3. Deny Contract Qualification Applications Based on Past Contract
Performance (Sec. 422.750 and Sec. 423.750)
As described in the existing provisions at Sec. 422.502(b) and
Sec. 423.503(b), we may deny an application based on the applicant's
failure to comply with the terms of a prior contract with CMS even if
the applicant currently meets all of the application requirements. In
the October 22, 2009 proposed rule, we proposed to modify these
provisions at Sec. 422.502(b) and Sec. 423.503(b) to clarify that we
will review past performance across any and all of the contracts held
by the applicant, by specifically revising the language to refer to
``any current or prior contract'' held by the organization, instead of
the current language referring to a ``previous year's contract.'' We
also clarified that the period that will be examined for past
performance problems will be limited to those identified by us during
the 14 months prior to the date by which organizations must submit
contract qualification applications to CMS. Fourteen months covers the
time period from the start of the previous contract year through the
time that applications are received for the next contract year.
In making these proposed changes, we noted that indicia of
performance deficiencies that might lead us to conclude that an
organization has failed to comply with a current or prior contract
include, but are not limited to, poor performance ratings as displayed
on the Medicare Options Compare and MPDPF Web sites; receipt of
requests for corrective action plans (CAPs) unrelated to an audit (as
these types of CAPs generally involve direct beneficiary harm); and
receipt of one or more other types of noncompliance notices from CMS
(for example, notices of noncompliance or warning letters).
Additionally, consistent with the proposed changes to Sec.
422.503(b), Sec. 422.508(c), Sec. 423.504(b), and Sec. 423.508(e),
we indicated that the withdrawal of Part C or D operations from some or
all of an organization's newly contracted service area prior to the
start of a benefit year (through mutual termination or otherwise) is an
indication of poor performance. Such a situation can arise when, for
example, an organization, after it has signed its Medicare contract for
the upcoming program year, loses a contract with a significant number
or type of providers, jeopardizing its ability to provide its members
adequate access to services. Also, an organization may suddenly face
financial difficulties that threaten its ability to offer the benefit
packages approved by us throughout the upcoming contract year. In such
instances, we noted that we could simply leave the contract in place
and take enforcement actions against the organization. However, under
such an approach, we would knowingly be permitting beneficiaries to
remain enrolled with an organization that cannot effectively deliver
the benefit. Instead, we indicated our preference to act in the best
interests of the beneficiaries by agreeing with the organization to
terminate its contract and work with the organization to make certain
that beneficiaries receive uninterrupted access to Medicare services
through another MA organization, PDP sponsor, or original Medicare. We
are adopting these proposed changes without further modification in
this final rule.
Comment: Several commenters expressed their support for our use of
the past performance review authority to ensure that underperforming
sponsors are not permitted to expand their participation in the Part C
and D programs.
Response: We appreciate the commenters' support.
Comment: Several commenters requested that CMS more clearly
articulate the methodology it will apply to past performance reviews
conducted under this regulatory provision. For example, commenters were
interested in knowing the relative weights CMS will
[[Page 19685]]
be assigning to different types of compliance actions (such as,
corrective action plan requests, warning letters) and whether we will
afford organizations the opportunity to correct deficiencies before CMS
makes past performance determinations.
Response: We expect to make past performance methodology available
through publication in our manuals. We believe that the manuals provide
us and sponsors with the best available avenue for providing such
detailed information and making updates to it as we continue to gain
more experience with conducting past performance analysis. Given that,
we note that the information on which we will base our past performance
analysis has already been made available to organizations. For example,
at any time an organization can review its own record of compliance
correspondence received from us to get a sense of the degree to which
the organization should be concerned about the likelihood that CMS
would deny an application for a new contract.
We believe that questions regarding corrective action opportunities
are not relevant to our process for reviewing past performance in
making application determinations. The purpose of the past performance
review is to determine whether the sponsor has demonstrated, over a 14-
month period, whether it has operated its Part C or D contract in a
manner that suggests that it is generally meeting and capable of
meeting program requirements and that new Medicare business would not
jeopardize that status. While some organizations take corrective action
to address any and all compliance issues prior to the expiration of the
14-month review period, such corrective action would not change the
fact that during that period of time, the organization demonstrated a
pattern of noncompliance that may raise questions about its ability to
take on new Medicare business.
Comment: Some commenters advised that the 14-month review period is
too long, while others stated that a longer period (for example, 3
years) would provide a more comprehensive view of a sponsor's contract
performance.
Response: We believe that the 14 month look-back provides an
adequate amount of time for us to review an MA organization's or Part D
sponsor's performance and the choice of 14 months as the look-back
period was not arbitrary. As we noted previously, and in the proposed
rule, 14 months covers the period spanning the start of the previous
contract year to the time we receive applications for the following
contract year. To shorten that time period to, say, 12 months would
leave a gap in our past performance review. Similarly, limiting the
period to the 14-month timeframe gives sponsors and organizations the
opportunity and incentive to promptly establish a positive compliance
track record so that the next CMS past performance review will find
them eligible for additional Part C or Part D business.
Comment: Several commenters asked that CMS indicate whether the
withdrawal from all or part of a service area, non-renewal of one or
more plans (on the Part C or Part D sponsor's initiative), withdrawal
of an application or bid, or termination of a contract after it has
been executed would be counted against an organization for purposes of
past performance analysis.
Response: We would not consider a sponsor-initiated non-renewal of
all or a portion of an MA or PDP sponsor contract as an indication of
poor contract performance. (However, under separate regulatory
authority sponsors that non-renew their contracts may not be permitted
to reenter the program for a period of 2 years.) We would treat non-
renewed plan benefit packages similarly, assuming the organization had
met the Part C or D requirements for providing timely notice to us and
our enrollees. We do not consider the withdrawal of an application for
qualification as Medicare contractor or of a bid prior to the
publication of the annual benchmark calculation as relevant to a
performance evaluation.
We do look unfavorably on organizations that withdraw bids after
the benchmark has been announced. Also, we consider the termination of
a contract for an upcoming benefit year after the organization has
executed the contract as a failure to meet Part C and D program
requirements. Accordingly, organizations should expect that these
occurrences would be considered against them when we evaluate their
past contract performance.
Comment: Several commenters offered suggestions on factors CMS
should take into consideration when developing and applying our past
performance review methodology. These included accounting for
distinctions between national and local organizations, beneficiary
impact of noncompliance (or lack thereof), unique characteristics of
SNP plans, and whether difficulties in an organization's operation of a
contract can be attributed to an entire organization or are limited to
operation of only one or more of its contracts.
Response: As noted previously, we plan to address issues raised by
some of the commenters more fully in guidance issued through our manual
update process. At this time, we can provide a general discussion of
some of the principles we intend to apply to the development of our
past performance methodology. We are cognizant of the variety of
products offered by Medicare contractors, and when an element of our
past performance evaluation is affected by the unique feature of a
particular plan type, we will adjust the application of our methodology
as appropriate. We also want to emphasize that we intend to be
conservative in our determinations. We expect to use our authority
under this provision to exclude only those organizations demonstrating
a pattern of poor performance. Finally, we acknowledge that not all
types of noncompliance will be given equal weight, and our methodology
will assign weights to different measures based on factors such as
beneficiary impact or program stability.
Comment: A number of commenters suggested that CMS provide the
results of its past performance analysis prior to the due dates for the
submission of notices of intent to apply or for the applications for
contract qualification.
Response: We will explore the feasibility of providing a
preliminary analysis in response to sponsors' requests. However, we
note that such a report would not be final, and in no case would even a
preliminary report be available before December of each year.
Comment: A number of commenters requested assurance that the past
performance review described previously in this final rule and in the
October 2009 proposed rule would not include information concerning a
sponsor's performance under contracts other than those governing
Medicare managed care and prescription drug plan operations (such as,
Medicaid, QIC contracts).
Response: Absent extraordinary circumstances, we plan to limit our
past performance review to the operations of organizations in the
performance of their Part C and D contracts only.
Comment: One commenter objected to CMS' use of past performance
analysis asserting that is equivalent to taking a second punitive
action for a single instance of noncompliance.
Response: In this final rule, we are clarifying the scope of our
existing authority and we do not believe it is equivalent to an
additional compliance or enforcement action taken against any of the
organization's existing Medicare contracts. Our denial of an
application based on an applicant's past contract performance is a
reflection of our belief that an organization demonstrating significant
operational difficulties
[[Page 19686]]
should focus on improving its existing operations before expanding into
new types of plan offerings or additional service areas. Such a
determination has no impact, punitive or otherwise, on a sponsor's
current Medicare contract rights and obligations.
Comment: One commenter requested that organizations be permitted to
attest that they will meet all Part C or D program requirements as of
no earlier than January 1 of the upcoming contract year, as
organizations are focused on enrollment and readiness activities prior
to that date.
Response: This comment concerns an aspect of the Part C and D
application and contracting processes unrelated to our exercise of the
past performance review authority. Thus, it is outside the scope of our
proposal, and we will not address it here.
4. Use of Data to Evaluate Continued Ability to Act as a Qualified
Sponsoring Organization Under Parts C and D (Sec. 422.504, and Sec.
423.505)
In the October 22, 2009 proposed rule, we clarified our authority
to find organizations or sponsors out of compliance with MA and Part D
requirements. We noted that under the authority of Sections 1857(e)(1)
and 1860D-12(b)(3)(D) of the Act, the Secretary may add terms to the
contracts with MA and Part D sponsors including terms that require the
sponsor to provide the Secretary ``with such information * * * as the
Secretary may find necessary and appropriate.'' Additionally, under
that authority, CMS established Sec. 422.516 and Sec. 423.514, which
support the submission of Part C and D Reporting Requirements. We
clarified that the data acquired through the reporting requirements are
often used for the purpose of monitoring an organization's or sponsor's
continued compliance with MA and Part D requirements. We also explained
that in some instances, we may use an outlier analysis to determine a
MA organization's or Part D sponsor's performance relative to industry
standards established by the performance of all the other organizations
and sponsors as described earlier in the preamble in our discussion of
the development of our policies concerning the awarding, monitoring,
and enforcement of Medicare contracts.
As part of the proposed rule, we added paragraphs Sec.
422.504(m)(1) and (2) and Sec. 423.505(n)(1) and (2) to make explicit
our existing authority to find organizations or sponsors out of
compliance with MA and Part D requirements when the organization's or
sponsor's performance fails to meet performance standards articulated
in statutes, regulations, and guidance or when an organization's or
sponsor's performance represents an outlier relative to the performance
of other organizations or sponsors. In this final rule, we adopt the
provisions as proposed.
Comment: Some commenters supported this provision, specifically the
development of consistent performance data evaluation processes.
Response: We appreciate the comments.
Comment: Many commenters recommended that CMS not use outlier data
to make compliance determinations for a variety of reasons. Some
commenters believed that CMS should only use specific, previously
articulated criteria to determine non-compliance. Other commenters
stated that the outlier analysis is arbitrary, inconsistent, and
capricious at least in part because it would result in CMS holding
sponsors to standards that are developed simply by measuring sponsors'
performance relative to each other, not what is actually required to
comply with Part C and D program requirements. One commenter noted that
such an approach is inconsistent with the operation of a program where
Medicare sponsor contracts are not awarded on a competitive basis.
Still other commenters recommended that if an outlier analysis
