[Title 42 CFR K]
[Code of Federal Regulations (annual edition) - October 1, 2007 Edition]
[Title 42 - PUBLIC HEALTH]
[Chapter IV - CENTERS FOR MEDICARE]
[Subchapter A - GENERAL PROVISIONS]
[Part 422 - MEDICARE ADVANTAGE PROGRAM]
[Subpart K - Contracts With Medicare Advantage Organizations]
[From the U.S. Government Printing Office]
42PUBLIC HEALTH32007-10-012007-10-01falseContracts With Medicare Advantage OrganizationsKSubpart KPUBLIC HEALTHCENTERS FOR MEDICAREGENERAL PROVISIONSMEDICARE ADVANTAGE PROGRAM
Subpart K_Contracts With Medicare Advantage Organizations
Source: 63 FR 35099, June 26, 1998, unless otherwise noted.
Sec. 422.500 Scope and definitions.
(a) Scope. This subpart sets forth application requirements for
entities seeking a contract as a Medicare organization offering an MA
plan. MA organizations offering prescription drug plans must, in
addition to the requirements of this part, follow the requirements of
part 423 of this chapter specifically related to the prescription drug
benefit.
(b) Definitions. For purposes of this subpart, the following
definitions apply:
Business transaction means any of the following kinds of
transactions:
(1) Sale, exchange, or lease of property.
(2) Loan of money or extension of credit.
(3) Goods, services, or facilities furnished for a monetary
consideration, including management services, but not including--
(i) Salaries paid to employees for services performed in the normal
course of their employment; or
[[Page 334]]
(ii) Health services furnished to the MA organization's enrollees by
hospitals and other providers, and by MA organization staff, medical
groups, or independent practice associations, or by any combination of
those entities.
Clean claim means--
(1) A claim that has no defect, impropriety, lack of any required
substantiating documentation (consistent with Sec. 422.310(d)) or
particular circumstance requiring special treatment that prevents timely
payment; and
(2) A claim that otherwise conforms to the clean claim requirements
for equivalent claims under original Medicare.
Downstream entity means any party that enters into an acceptable
written arrangement below the level of the arrangement between an MA
organization (or contract applicant) and a first tier entity. These
written arrangements continue down to the level of the ultimate provider
of both health and administrative services.
First tier entity means any party that enters into an acceptable
written arrangement with an MA organization or contract applicant to
provide administrative services or health care services for a Medicare
eligible individual.
Party in interest includes the following:
(1) Any director, officer, partner, or employee responsible for
management or administration of an MA organization.
(2) Any person who is directly or indirectly the beneficial owner of
more than 5 percent of the organization's equity; or the beneficial
owner of a mortgage, deed of trust, note, or other interest secured by
and valuing more than 5 percent of the organization.
(3) In the case of an MA organization organized as a nonprofit
corporation, an incorporator or member of such corporation under
applicable State corporation law.
(4) Any entity in which a person described in paragraph (1), (2), or
(3) of this definition:
(i) Is an officer, director, or partner; or
(ii) Has the kind of interest described in paragraphs (1), (2), or
(3) of this definition.
(5) Any person that directly or indirectly controls, is controlled
by, or is under common control with, the MA organization.
(6) Any spouse, child, or parent of an individual described in
paragraph (1), (2), or (3) of this definition.
Related entity means any entity that is related to the MA
organization by common ownership or control and--
(1) Performs some of the MA organization's management functions
under contract or delegation;
(2) Furnishes services to Medicare enrollees under an oral or
written agreement; or
(3) Leases real property or sells materials to the MA organization
at a cost of more than $2,500 during a contract period.
Significant business transaction means any business transaction or
series of transactions of the kind specified in the above definition of
``business transaction'' that, during any fiscal year of the MA
organization, have a total value that exceeds $25,000 or 5 percent of
the MA organization's total operating expenses, whichever is less.
[65 FR 35099, June 26, 1998, as amended at 65 FR 40327, June 29, 2000;
70 FR 4736, Jan. 28, 2005; 70 FR 52027, Sept. 1, 2005]
Sec. 422.501 Application requirements.
(a) Scope. This section sets forth application requirements for
entities that seek a contract as an MA organization offering an MA plan.
(b) Completion of an application. (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 complete a certified application, in the form and manner
required by CMS, including the following:
(i) Documentation of appropriate State licensure or State
certification that the entity is able to offer health insurance or
health benefits coverage that meets State-specified standards applicable
to MA plans, and is authorized by the State to accept prepaid capitation
for providing, arranging, or paying for the comprehensive health
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care services to be offered under the MA contract; or
(ii) For regional plans, documentation of application for State
licensure in any State in the region that the organization is not
already licensed.
(2) The authorized individual must thoroughly describe how the
entity and MA plan meet, or will meet, the requirements described in
this part.
(c) Responsibility for making determinations. (1) CMS is responsible
for determining whether an entity qualifies as an MA organization and
whether proposed MA plans meet the requirements of this part.
(2) A CMS determination that an entity is qualified to act as an MA
organization is distinct from the bid negotiation that occurs under
subpart F of this part and such negotiation is not subject to the
appeals provisions included in subpart N of this part.
(d) Resubmittal of application. An application that has been denied
by CMS may not be resubmitted for 4 months after the date of the notice
from CMS denying the application.
(e) Disclosure of application information under the Freedom of
Information Act. An applicant submitting material that he or she
believes is protected from disclosure under 5 U.S.C. 552, the Freedom of
Information Act, or because of exemptions provided in 45 CFR part 5 (the
Department's regulations providing exceptions to disclosure), must label
the material ``privileged'' and include an explanation of the
applicability of an exception described in 45 CFR part 5. Any final
decisions as to whether material is privileged is the final decision of
the Secretary.
[70 FR 4736, Jan. 28, 2005]
Sec. 422.502 Evaluation and determination procedures.
(a) Basis for evaluation and determination. (1) CMS evaluates an
application for an MA contract 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, public hearings, and any
other appropriate procedures.
(2) After evaluating all relevant information, CMS determines
whether the applicant's application meets the applicable requirements of
Sec. 422.501.
(b) Use of information from a prior contracting period. If an MA
organization has failed to comply with the terms of a previous contract
with CMS under title XVIII of the Act, or has failed to complete a
corrective action plan during the term of the contract, CMS may deny an
application based on the applicant's failure to comply with that prior
contract with CMS even if the contract applicant meets all of the
current requirements.
(c) Notice of determination. Within timeframes determined by CMS, it
notifies each applicant that applies for an MA contract under this part
of its determination and the basis for the determination. The
determination is one of the following:
(1) Approval of application. If CMS approves the application, it
gives written notice to the applicant, indicating that it qualifies to
contract as an MA organization.
(2) Intent to deny. (i)If CMS finds that the applicant does not
appear to be able to meet the requirements for an MA organization and/or
has not provided enough information to evaluate the application, CMS
gives the contract applicant notice of intent to deny the application
for an MA contract and a summary of the basis for this preliminary
finding.
(ii) Within 10 days from the date of the intent to deny notice, the
contract applicant must respond in writing to the issues or other
matters that were the basis for CMS' preliminary finding and must revise
its application to remedy any defects CMS identified.
(3) Denial of application. If CMS denies the application, it gives
written notice to the contract applicant indicating--
(i) That the applicant is not qualified to contract as an MA
organization under Part C of title XVIII of the Act;
(ii) The reasons why the applicant is not qualified; and
(iii) The applicant's right to request reconsideration in accordance
with the procedures specified in subpart N of this part.
(d) Oversight of continuing compliance. (1) CMS oversees an MA
organization's continued compliance with the requirements for an MA
organization.
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(2) If an MA organization no longer meets those requirements, CMS
terminates the contract in accordance with Sec. 422.510.
[70 FR 4736, Jan. 28, 2005]
Sec. 422.503 General provisions.
(a) Basic rule. In order to qualify as an MA organization, enroll
beneficiaries in any MA plans it offers, and be paid on behalf of
Medicare beneficiaries enrolled in those plans, an MA organization must
enter into a contract with CMS.
(b) Conditions necessary to contract as an MA organization. Any
entity seeking to contract as an MA organization must:
(1) Complete an application as described in Sec. 422.501.
(2) Be licensed by the State as a risk bearing entity in each State
in which it seeks to offer an MA plan as defined in Sec. 422.2.
(3) Meet the minimum enrollment requirements of Sec. 422.514,
unless waived under Sec. 422.514(b).
(4) Have administrative and management arrangements satisfactory to
CMS, as demonstrated by at least the following:
(i) A policy making body that exercises oversight and control over
the MA organization's policies and personnel to ensure that management
actions are in the best interest of the organization and its enrollees.
(ii) Personnel and systems sufficient for the MA organization to
organize, implement, control, and evaluate financial and marketing
activities, the furnishing of services, the quality improvement program,
and the administrative and management aspects of the organization.
(iii) At a minimum, an executive manager whose appointment and
removal are under the control of the policy making body.
(iv) A fidelity bond or bonds, procured and maintained by the MA
organization, in an amount fixed by its policymaking body but not less
than $100,000 per individual, covering each officer and employee
entrusted with the handling of its funds. The bond may have reasonable
deductibles, based upon the financial strength of the MA organization.
(v) Insurance policies or other arrangements, secured and maintained
by the MA organization and approved by CMS to insure the MA organization
against losses arising from professional liability claims, fire, theft,
fraud, embezzlement, and other casualty risks.
(vi) A compliance plan that consists of the following:
(A) Written policies, procedures, and standards of conduct that
articulate the organization's commitment to comply with all applicable
Federal and State standards.
(B) The designation of a compliance officer and compliance committee
that are accountable to senior management.
(C) Effective training and education between the compliance officer
and organization employees.
(D) Effective lines of communication between the compliance officer
and the organization's employees.
(E) Enforcement of standards through well-publicized disciplinary
guidelines.
(F) Procedures for internal monitoring and auditing.
(G) Procedures for ensuring prompt response to detected offenses and
development of corrective action initiatives relating to the
organization's MA contract.
(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.
(H) For MA-PDs, A comprehensive fraud and abuse plan to detect and
prevent fraud, waste, and abuse as specified at Sec.
423.504(b)(4)(vi)(H) of this chapter.
(5) Not accept new enrollees under a section 1876 reasonable cost
contract in any area in which it seeks to offer an MA plan.
(6) The MA organization's contract must not have been non-renewed
under Sec. 422.506 within the past 2 years unless--
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(i) During the 6-month period beginning on the date the organization
notified CMS of the intention to non-renew the most recent previous
contract, there was a change in the statute or regulations that had the
effect of increasing MA payments in the payment area or areas at issue;
or
(ii) CMS has otherwise determined that circumstances warrant special
consideration.
(c) Contracting authority. Under the authority of section 1857(c)(5)
of the Act, CMS may enter into contracts under this part without regard
to Federal and Departmental acquisition regulations set forth in title
48 of the CFR and provisions of law or other regulations relating to the
making, performance, amendment, or modification of contracts of the
United States if CMS determines that those provisions are inconsistent
with the efficient and effective administration of the Medicare program.
(d) Protection against fraud and beneficiary protections. (1) CMS
annually audits the financial records (including data relating to
Medicare utilization, costs, and computation of the bid) of at least
one-third of the MA organizations offering MA plans. These auditing
activities are subject to monitoring by the Comptroller General.
(2) Each contract under this section must provide that CMS, or any
person or organization designated by CMS has the right to:
(i) Inspect or otherwise evaluate the quality, appropriateness, and
timeliness of services performed under the MA contract;
(ii) Inspect or otherwise evaluate the facilities of the
organization when there is reasonable evidence of some need for such
inspection; and
(iii) Audit and inspect any books, contracts, and records of the MA
organization that pertain to--
(A) The ability of the organization or its first tier or downstream
providers to bear the risk of potential financial losses; or
(B) Services performed or determinations of amounts payable under
the contract.
(e) Severability of contracts. The contract must provide that, upon
CMS's request--
(1) The contract will be amended to exclude any MA plan or State-
licensed entity specified by CMS; and
(2) A separate contract for any such excluded plan or entity will be
deemed to be in place when such a request is made.
[63 FR 35099, June 26, 1998, as amended at 65 FR 40327, June 29, 2000.
Redesignated at 70 FR 4736, Jan. 28, 2005, and amended at 70 FR 4737,
Jan. 28, 2005; 70 FR 52027, Sept. 1, 2005; 70 FR 76198, Dec. 23, 2005]
Sec. 422.504 Contract provisions.
The contract between the MA organization and CMS must contain the
following provisions:
(a) Agreement to comply with regulations and instructions. The MA
organization agrees to comply with all the applicable requirements and
conditions set forth in this part and in general instructions. An MA
organization's compliance with paragraphs (a)(1) through (a)(13) of this
section is material to performance of the contract. The MA organization
agrees--
(1) To accept new enrollments, make enrollments effective, process
voluntary disenrollments, and limit involuntary disenrollments, as
provided in subpart B of this part.
(2) That it will comply with the prohibition in Sec. 422.110 on
discrimination in beneficiary enrollment.
(3) To provide--
(i) The basic benefits as required under Sec. 422.101 and, to the
extent applicable, supplemental benefits under Sec. 422.102; and
(ii) Access to benefits as required under subpart C of this part;
(iii) In a manner consistent with professionally recognized
standards of health care, all benefits covered by Medicare.
(4) To disclose information to beneficiaries in the manner and the
form prescribed by CMS as required under Sec. 422.111;
(5) To operate a quality assurance and performance improvement
program and have an agreement for external quality review as required
under subpart D of this part;
(6) To comply with all applicable provider requirements in subpart E
of this part, including provider certification
[[Page 338]]
requirements, anti-discrimination requirements, provider participation
and consultation requirements, the prohibition on interference with
provider advice, limits on provider indemnification, rules governing
payments to providers, and limits on physician incentive plans;
(7) To comply with all requirements in subpart M of this part
governing coverage determinations, grievances, and appeals;
(8) To comply with the reporting requirements in Sec. 422.516 and
the requirements in Sec. 422.310 for submitting data to CMS;
(9) That it will be paid under the contract in accordance with the
payment rules in subpart G of this part;
(10) To develop its annual bid, and submit all required information
on premiums, benefits, and cost-sharing by not later than the first
Monday in June, as provided in subpart F of this part;
(11) That its contract may not be renewed or may be terminated in
accordance with this subpart and subpart N of this part.
(12) To comply with all requirements that are specific to a
particular type of MA plan, such as the special rules for private fee-
for-service plans in Sec. Sec. 422.114 and 422.216 and the MSA
requirements in Sec. Sec. 422.56, 422.103, and 422.262; and
(13) To comply with the confidentiality and enrollee record accuracy
requirements in Sec. 422.118.
(14) An MA organization's compliance with paragraphs (a)(1) through
(a)(13) and (c) of this section is material to performance of the
contract.
(b) Communication with CMS. The MA organization must have the
capacity to communicate with CMS electronically.
(c) Prompt payment. The MA organization must comply with the prompt
payment provisions of Sec. 422.520 and with instructions issued by CMS,
as they apply to each type of plan included in the contract.
(d) Maintenance of records. The MA organization agrees to maintain
for 10 years books, records, documents, and other evidence of accounting
procedures and practices that--
(1) Are sufficient to do the following:
(i) Accommodate periodic auditing of the financial records
(including data related to Medicare utilization, costs, and computation
of the bid) of MA organizations.
(ii) Enable CMS to inspect or otherwise evaluate the quality,
appropriateness and timeliness of services performed under the contract,
and the facilities of the organization.
(iii) Enable CMS to audit and inspect any books and records of the
MA organization that pertain to the ability of the organization to bear
the risk of potential financial losses, or to services performed or
determinations of amounts payable under the contract.
(iv) Properly reflect all direct and indirect costs claimed to have
been incurred and used in the preparation of the bid proposal.
(v) Establish component rates of the bid for determining additional
and supplementary benefits.
(vi) Determine the rates utilized in setting premiums for State
insurance agency purposes and for other government and private
purchasers; and
(2) Include at least records of the following:
(i) Ownership and operation of the MA organization's financial,
medical, and other record keeping systems.
(ii) Financial statements for the current contract period and 10
prior periods.
(iii) Federal income tax or informational returns for the current
contract period and 10 prior periods.
(iv) Asset acquisition, lease, sale, or other action.
(v) Agreements, contracts, and subcontracts.
(vi) Franchise, marketing, and management agreements.
(vii) Schedules of charges for the MA organization's fee-for-service
patients.
(viii) Matters pertaining to costs of operations.
(ix) Amounts of income received by source and payment.
(x) Cash flow statements.
(xi) Any financial reports filed with other Federal programs or
State authorities.
(e) Access to facilities and records. The MA organization agrees to
the following:
(1) HHS, the Comptroller General, or their designee may evaluate,
through inspection or other means--
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(i) The quality, appropriateness, and timeliness of services
furnished to Medicare enrollees under the contract;
(ii) The facilities of the MA organization; and
(iii) The enrollment and disenrollment records for the current
contract period and 10 prior periods.
(2) HHS, the Comptroller General, or their designees may audit,
evaluate, or inspect any books, contracts, medical records, patient care
documentation, and other records of the MA organization, related entity,
contractor, subcontractor, or its transferee that pertain to any aspect
of services performed, reconciliation of benefit liabilities, and
determination of amounts payable under the contract, or as the Secretary
may deem necessary to enforce the contract.
(3) The MA organization agrees to make available, for the purposes
specified in paragraph (d) of this section, its premises, physical
facilities and equipment, records relating to its Medicare enrollees,
and any additional relevant information that CMS may require.
(4) HHS, the Comptroller General, or their designee's right to
inspect, evaluate, and audit extends through 10 years from the end of
the final contract period or completion of audit, whichever is later
unless--
(i) CMS determines there is a special need to retain a particular
record or group of records for a longer period and notifies the MA
organization at least 30 days before the normal disposition date;
(ii) There has been a termination, dispute, or allegation of fraud
or similar fault by the MA organization, in which case the retention may
be extended to 6 years from the date of any resulting final resolution
of the termination, dispute, fraud, or similar fault; or
(iii) CMS determines that there is a reasonable possibility of fraud
or similar fault, in which case CMS may inspect, evaluate, and audit the
MA organization at any time.
(f) Disclosure of information. The MA organization agrees to
submit--
(1) To CMS, certified financial information that must include the
following:
(i) Such information as CMS may require demonstrating that the
organization has a fiscally sound operation.
(ii) Such information as CMS may require pertaining to the
disclosure of ownership and control of the MA organization.
(2) To CMS, all information that is necessary for CMS to administer
and evaluate the program and to simultaneously establish and facilitate
a process for current and prospective beneficiaries to exercise choice
in obtaining Medicare services. This information includes, but is not
limited to:
(i) The benefits covered under an MA plan;
(ii) The MA monthly basic beneficiary premium and MA monthly
supplemental beneficiary premium, if any, for the plan or in the case of
an MSA plan, the MA monthly MSA premium.
(iii) The service area and continuation area, if any, of each plan
and the enrollment capacity of each plan;
(iv) Plan quality and performance indicators for the benefits under
the plan including--
(A) Disenrollment rates for Medicare enrollees electing to receive
benefits through the plan for the previous 2 years;
(B) Information on Medicare enrollee satisfaction;
(C) Information on health outcomes;
(D) The recent record regarding compliance of the plan with
requirements of this part, as determined by CMS; and
(E) Other information determined by CMS to be necessary to assist
beneficiaries in making an informed choice among MA plans and
traditional Medicare;
(v) Information about beneficiary appeals and their disposition;
(vi) Information regarding all formal actions, reviews, findings, or
other similar actions by States, other regulatory bodies, or any other
certifying or accrediting organization;
(vii) To CMS, any other information deemed necessary by CMS for the
administration or evaluation of the Medicare program.
(3) To its enrollees all informational requirements under Sec.
422.64 and, upon
[[Page 340]]
an enrollee's, request the financial disclosure information required
under Sec. 422.516.
(g) Beneficiary financial protections. The MA organization agrees to
comply with the following requirements:
(1) Each MA organization must adopt and maintain arrangements
satisfactory to CMS to protect its enrollees from incurring liability
(for example, as a result of an organization's insolvency or other
financial difficulties) for payment of any fees that are the legal
obligation of the MA organization. To meet this requirement, the MA
organization must--
(i) Ensure that all contractual or other written arrangements with
providers prohibit the organization's providers from holding any
beneficiary enrollee liable for payment of any such fees; and
(ii) Indemnify the beneficiary enrollee for payment of any fees that
are the legal obligation of the MA organization for services furnished
by providers that do not contract, or that have not otherwise entered
into an agreement with the MA organization, to provide services to the
organization's beneficiary enrollees.
(2) The MA organization must provide for continuation of enrollee
health care benefits--
(i) For all enrollees, for the duration of the contract period for
which CMS payments have been made; and
(ii) For enrollees who are hospitalized on the date its contract
with CMS terminates, or, in the event of an insolvency, through
discharge.
(3) In meeting the requirements of this paragraph, other than the
provider contract requirements specified in paragraph (g)(1)(i) of this
section, the MA organization may use--
(i) Contractual arrangements;
(ii) Insurance acceptable to CMS;
(iii) Financial reserves acceptable to CMS; or
(iv) Any other arrangement acceptable to CMS.
(h) Requirements of other laws and regulations. The MA organization
agrees to comply with-
(1) Federal laws and regulations designed to prevent or ameliorate
fraud, waste, and abuse, including, but not limited to, applicable
provisions of Federal criminal law, the False Claims Act (31 U.S.C. 3729
et. seq.), and the anti-kickback statute (section 1128B(b)) of the Act);
and
(2) HIPAA administrative simplification rules at 45 CFR parts 160,
162, and 164.
(i) MA organization relationship with related entities, contractors,
and subcontractors. (1) Notwithstanding any relationship(s) that the MA
organization may have with related entities, contractors, or
subcontractors, the MA organization maintains ultimate responsibility
for adhering to and otherwise fully complying with all terms and
conditions of its contract with CMS.
(2) The MA organization agrees to require all related entities,
contractors, or subcontractors to agree that--
(i) HHS, the Comptroller General, or their designees have the right
to inspect, evaluate, and audit any pertinent contracts, books,
documents, papers, and records of the related entity(s), contractor(s),
or subcontractor(s) involving transactions related to the MA contract;
and
(ii) HHS', the Comptroller General's, or their designee's right to
inspect, evaluate, and audit any pertinent information for any
particular contract period will exist through 10 years from the final
date of the contract period or from the date of completion of any audit,
whichever is later.
(3) All contracts or written arrangements between MA organizations
and providers, related entities, contractors, subcontractors, first tier
and downstream entities must contain the following:
(i) Enrollee protection provisions that provide, consistent with
paragraph (g)(1) of this section, arrangements that prohibit providers
from holding an enrollee liable for payment of any fees that are the
obligation of the MA organization.
(ii) Accountability provisions that indicate that the MA
organization may only delegate activities or functions to a provider,
related entity, contractor, or subcontractor in a manner consistent with
the requirements set forth at paragraph (i)(4)of this section.
(iii) A provision requiring that any services or other activity
performed by
[[Page 341]]
a related entity, contractor, subcontractor, or first-tier or downstream
entity in accordance with a contract or written agreement are consistent
and comply with the MA organization's contractual obligations.
(4) If any of the MA organizations' activities or responsibilities
under its contract with CMS are delegated to other parties, the
following requirements apply to any related entity, contractor,
subcontractor, or provider:
(i) Written arrangements must specify delegated activities and
reporting responsibilities.
(ii) Written arrangements must either provide for revocation of the
delegation activities and reporting requirements or specify other
remedies in instances where CMS or the MA organization determine that
such parties have not performed satisfactorily.
(iii) Written arrangements must specify that the performance of the
parties is monitored by the MA organization on an ongoing basis.
(iv) Written arrangements must specify that either--
(A) The credentials of medical professionals affiliated with the
party or parties will be either reviewed by the MA organization; or
(B) The credentialing process will be reviewed and approved by the
MA organization and the MA organization must audit the credentialing
process on an ongoing basis.
(v) All contracts or written arrangements must specify that the
related entity, contractor, or subcontractor must comply with all
applicable Medicare laws, regulations, and CMS instructions.
(5) If the MA organization delegates selection of the providers,
contractors, or subcontractor to another organization, the MA
organization's written arrangements with that organization must state
that the CMS-contracting MA organization retains the right to approve,
suspend, or terminate any such arrangement.
(j) Additional contract terms. The MA organization agrees to include
in the contract such other terms and conditions as CMS may find
necessary and appropriate in order to implement requirements in this
part.
(k) Severability of contracts. The contract must provide that, upon
CMS's request--
(1) The contract will be amended to exclude any MA plan or State-
licensed entity specified by CMS; and
(2) A separate contract for any such excluded plan or entity will be
deemed to be in place when such a request is made.
(l) Certification of data that determine payment. As a condition for
receiving a monthly payment under subpart G of this part, the MA
organization agrees that its chief executive officer (CEO), chief
financial officer (CFO), or an individual delegated the authority to
sign on behalf of one of these officers, and who reports directly to
such officer, must request payment under the contract on a document that
certifies (based on best knowledge, information, and belief) the
accuracy, completeness, and truthfulness of relevant data that CMS
requests. Such data include specified enrollment information, encounter
data, and other information that CMS may specify.
(1) The CEO, CFO, or an individual delegated the authority to sign
on behalf of one of these officers, and who reports directly to such
officer, must certify that each enrollee for whom the organization is
requesting payment is validly enrolled in an MA plan offered by the
organization and the information relied upon by CMS in determining
payment (based on best knowledge, information, and belief) is accurate,
complete, and truthful.
(2) The CEO, CFO, or an individual delegated with the authority to
sign on behalf of one of these officers, and who reports directly to
such officer, must certify (based on best knowledge, information, and
belief) that the data it submits under Sec. 422.310 are accurate,
complete, and truthful.
(3) If such data are generated by a related entity, contractor, or
subcontractor of an MA organization, such entity, contractor, or
subcontractor must similarly certify (based on best knowledge,
information, and belief) the accuracy, completeness, and truthfulness of
the data.
(4) The CEO, CFO, or an individual delegated the authority to sign
on behalf of one of these officers, and who
[[Page 342]]
reports directly to such officer, must certify (based on best knowledge,
information, and belief) that the information in its bid submission is
accurate, complete, and truthful and fully conforms to the requirements
in Sec. 422.254.
[63 FR 35099, June 26, 1998; 63 FR 52614, Oct. 1, 1998, as amended at 64
FR 7980, Feb. 17, 1999; 65 FR 40327, June 29, 2000. Redesignated at 70
FR 4736, Jan. 28, 2005 and amended at 70 FR 4737, Jan. 28, 2005; 70 FR
52027, Sept. 1, 2005]
Sec. 422.505 Effective date and term of contract.
(a) Effective date. The contract is effective on the date specified
in the contract between the MA organization and CMS and, for a contract
that provides for coverage under an MSA plan, not earlier than January
1999.
(b) Term of contract. Each contract is for a period of at least 12
months.
(c) Renewal of contract. In accordance with Sec. 422.506, contracts
are renewed annually only if--
(1) CMS informs the MA organization that it authorizes a renewal;
and
(2) The MA organization has not provided CMS with a notice of
intention not to renew.
(d) Renewal of contract contingent on reaching agreement on the bid.
Although an MA organization may be determined qualified to renew its
contract under this section, if the organization and CMS cannot reach
agreement on the bid under subpart F of this part, no renewal will take
place, and the failure to reach an agreement is not subject to the
appeals provisions in subpart N of this part.
[63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000.
Redesignated at 70 FR 4736, Jan. 28, 2005 and amended at 70 FR 4737,
Jan. 28, 2005]
Sec. 422.506 Nonrenewal of contract.
(a) Nonrenewal by an MA organization. (1) An MA organization may
elect not to renew its contract with CMS as of the end of the term of
the contract for any reason provided it meets the timeframes for doing
so set forth in paragraphs (a)(2) and (a)(3) of this section.
(2) If an MA organization does not intend to renew its contract, it
must notify--
(i) CMS in writing, by the first Monday in June of the year in which
the contract would end;
(ii) Each Medicare enrollee, at least 90 days before the date on
which the nonrenewal is effective. This notice must include a written
description of alternatives available for obtaining Medicare services
within the service area, including alternative MA plans, Medigap
options, and original Medicare and must receive CMS approval prior to
issuance.
(iii) The general public, at least 90 days before the end of the
current calendar year, by publishing a notice in one or more newspapers
of general circulation in each community located in the MA
organization's service area.
(3) CMS may accept a nonrenewal notice submitted after the first
Monday in June if--
(i) The MA organization notifies its Medicare enrollees and the
public in accordance with paragraph (a)(2)(ii) and (a)(2)(iii) of this
section; and
(ii) Acceptance is not inconsistent with the effective and efficient
administration of the Medicare program.
(4) If an MA organization does not renew a contract under this
paragraph (a), CMS will not enter into a contract with the organization
for 2 years unless there are special circumstances that warrant special
consideration, as determined by CMS.
(b) CMS decision not to renew. (1) CMS may elect not to authorize
renewal of a contract for any of the following reasons:
(i) The MA organization has not fully implemented or shown
discernable progress in implementing quality improvement projects as
defined in Sec. 422.152(d).
(ii) For any of the reasons listed in Sec. 422.510(a), which would
also permit CMS to terminate the contract.
(iii) The MA organization has committed any of the acts in Sec.
422.752(a) that would support the imposition of intermediate sanctions
or civil money penalties under subpart O of this part.
(2) Notice. CMS provides notice of its decision whether to authorize
renewal of the contract as follows:
(i) To the MA organization by May 1 of the contract year.
[[Page 343]]
(ii) If CMS decides not to authorize a renewal of the contract, to
the MA organization's Medicare enrollees by mail at least 90 days before
the end of the current calendar year.
(iii) If CMS decides not to authorize a renewal of the contract, to
the general public at least 90 days before the end of the current
calendar year, by publishing a notice in one or more newspapers of
general circulation in each community or county located in the MA
organization's service area.
(3) Notice of appeal rights. CMS gives the MA organization written
notice of its right to appeal the decision not to renew in accordance
with Sec. 422.644.
[63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000;
67 FR 13289, Mar. 22, 2002; 70 FR 4737, Jan. 28, 2005]
Sec. 422.508 Modification or termination of contract by mutual consent.
(a) A contract may be modified or terminated at any time by written
mutual consent.
(1) If the contract is terminated by mutual consent, except as
provided in paragraph (b) of this section, the MA organization must
provide notice to its Medicare enrollees and the general public as
provided in Sec. 422.512(b)(2) and (b)(3).
(2) If the contract is modified by mutual consent, the MA
organization must notify its Medicare enrollees of any changes that CMS
determines are appropriate for notification within timeframes specified
by CMS.
(b) If the contract terminated by mutual consent is replaced the day
following such termination by a new MA contract, the MA organization is
not required to provide the notice specified in paragraph (a)(1) of this
section.
Sec. 422.510 Termination of contract by CMS.
(a) Termination by CMS. CMS may terminate a contract for any of the
following reasons:
(1) The MA organization has failed substantially to carry out the
terms of its contract with CMS.
(2) The MA organization is carrying out its contract with CMS in a
manner that is inconsistent with the effective and efficient
implementation of this part.
(3) CMS determines that the MA organization no longer meets the
requirements of this part for being a contracting organization.
(4) There is credible evidence that the MA organization committed or
participated in false, fraudulent, or abusive activities affecting the
Medicare program, including submission of false or fraudulent data.
(5) 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.
(6) The MA organization substantially fails to comply with the
requirements in subpart M of this part relating to grievances and
appeals.
(7) The MA organization fails to provide CMS with valid data as
required under Sec. 422.310.
(8) The MA organization fails to implement an acceptable quality
assessment and performance improvement program as required under subpart
D of this part.
(9) The MA organization substantially fails to comply with the
prompt payment requirements in Sec. 422.520.
(10) The MA organization substantially fails to comply with the
service access requirements in Sec. 422.112 or Sec. 422.114.
(11) The MA organization fails to comply with the requirements of
Sec. 422.208 regarding physician incentive plans.
(12) The MA organization substantially fails to comply with the
marketing requirements in Sec. 422.80.
(b) Notice. If CMS decides to terminate a contract for reasons other
than the grounds specified in Sec. 422.510(a)(5), it gives notice of
the termination as follows:
(1) Termination of contract by CMS. (i) CMS notifies the MA
organization in writing 90 days before the intended date of the
termination.
(ii) The MA organization notifies its Medicare enrollees of the
termination by mail at least 30 days before the effective date of the
termination.
[[Page 344]]
(iii) The MA organization notifies the general public of the
termination at least 30 days before the effective date of the
termination by publishing a notice in one or more newspapers of general
circulation in each community or county located in the MA organization's
service area.
(2) Immediate termination of contract by CMS. (i) For terminations
based on violations prescribed in Sec. 422.510(a)(5), CMS notifies the
MA organization in writing that its contract has been terminated
effective the date of the termination decision by CMS. If termination is
effective in the middle of a month, CMS has the right to recover the
prorated share of the capitation payments made to the MA organization
covering the period of the month following the contract termination.
(ii) CMS notifies the MA organization's Medicare enrollees in
writing of CMS's decision to terminate the MA organization's contract.
This notice occurs no later than 30 days after CMS notifies the plan of
its decision to terminate the MA contract. CMS simultaneously informs
the Medicare enrollees of alternative options for obtaining Medicare
services, including alternative MA organizations in a similar geographic
area and original Medicare.
(iii) CMS notifies the general public of the termination no later
than 30 days after notifying the plan of CMS's decision to terminate the
MA contract. This notice is published in one or more newspapers of
general circulation in each community or county located in the MA
organization's service area.
(c) Corrective action plan--(1) General. Before terminating a
contract for reasons other than the grounds specified in paragraph
(a)(5) of this section, CMS provides the MA organization with reasonable
opportunity to develop and receive CMS approval of a corrective action
plan to correct the deficiencies that are the basis of the proposed
termination.
(2) Exception. If a contract is terminated under Sec.
422.510(a)(5), the MA organization will not have the opportunity to
submit a corrective action plan.
(d) Appeal rights. If CMS decides to terminate a contract, it sends
written notice to the MA organization informing it of its termination
appeal rights in accordance with subpart N of this part.
[63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000;
70 FR 52027, Sept. 1, 2005]
Sec. 422.512 Termination of contract by the MA organization.
(a) Cause for termination. The MA organization may terminate the MA
contract if CMS fails to substantially carry out the terms of the
contract.
(b) Notice. The MA organization must give advance notice as follows:
(1) To CMS, at least 90 days before the intended date of
termination. This notice must specify the reasons why the MA
organization is requesting contract termination.
(2) To its Medicare enrollees, at least 60 days before the
termination effective date. This notice must include a written
description of alternatives available for obtaining Medicare services
within the services area, including alternative MA plans, Medigap
options, original Medicare and must receive CMS approval.
(3) To the general public at least 60 days before the termination
effective date by publishing an CMS-approved notice in one or more
newspapers of general circulation in each community or county located in
the MA organization's geographic area.
(c) Effective date of termination. The effective date of the
termination is determined by CMS and is at least 90 days after the date
CMS receives the MA organization's notice of intent to terminate.
(d) CMS's liability. CMS's liability for payment to the MA
organization ends as of the first day of the month after the last month
for which the contract is in effect.
(e) Effect of termination by the organization. CMS does not enter
into an agreement with an organization that has terminated its contract
within the preceding 2 years unless there are circumstances that warrant
special consideration, as determined by CMS.
[63 FR 35099, June 26, 1998, as amended at 67 FR 13288, Mar. 22, 2002]
[[Page 345]]
Sec. 422.514 Minimum enrollment requirements.
(a) Basic rule. Except as provided in paragraph (b) of this section,
CMS does not enter into a contract under this subpart unless the
organization meets the following minimum enrollment requirement--
(1) At least 5,000 individuals (or 1,500 individuals if the
organization is a PSO) are enrolled for the purpose of receiving health
benefits from the organization; or
(2) At least 1,500 individuals (or 500 individuals if the
organization is a PSO) are enrolled for purposes of receiving health
benefits from the organization and the organization primarily serves
individuals residing outside of urbanized areas as defined in Sec.
412.62(f) (or, in the case of a PSO, the PSO meets the requirements in
Sec. 422.352(c)).
(3) Except as provided for in paragraph (b) of this section, an MA
organization must maintain a minimum enrollment as defined in paragraphs
(a)(1) and (a)(2) of this section for the duration of its contract.
(b) Minimum enrollment waiver. (1) For a contract applicant or MA
organization that does not meet the applicable requirement of paragraph
(a) of this section at application for an MA contract or during the
first 3 years of the contract, CMS may waive the minimum enrollment
requirement as provided for below. To receive a waiver, a contract
applicant or MA organization must demonstrate to CMS's satisfaction that
it is capable of administering and managing an MA contract and is able
to manage the level of risk required under the contract. Factors that
CMS takes into consideration in making this evaluation include the
extent to which--
(i) The contract applicant or MA organization's management and
providers have previous experience in managing and providing health care
services under a risk-based payment arrangement to at least as many
individuals as the applicable minimum enrollment for the entity as
described in paragraph (a) of this section, or
(ii) The contract applicant or MA organization has the financial
ability to bear financial risk under an MA contract. In determining
whether an organization is capable of bearing risk, CMS considers
factors such as the organization's management experience as described in
paragraph (b)(1)(i) of this section and stop-loss insurance that is
adequate and acceptable to CMS; and
(iii) The contract applicant or MA organization is able to establish
a marketing and enrollment process that allows it to meet the applicable
enrollment requirement specified in paragraph (a) of this section before
completion of the third contract year.
(2) If an MA organization fails to meet the enrollment requirement
in the first year, CMS may waive the minimum requirements for another
year provided that the organization--
(i) Requests an additional minimum enrollment waiver no later than
120 days before the end of the first year;
(ii) Continues to demonstrate it is capable of administering and
managing an MA contract and is able to manage the level of risk; and,
(iii) Demonstrates an acceptable marketing and enrollment process.
Enrollment projections for the second year of the waiver will become the
organization's transitional enrollment standard.
(3) If an MA organization fails to meet the enrollment requirement
in the second year, CMS may waive the minimum requirements for the third
year only if the organization has attained the transitional enrollment
standard as described in paragraph (b)(2)(iii) of this section.
(c) Failure to meet enrollment requirements. CMS may elect not to
renew its contract with an MA organization that fails to meet the
applicable enrollment requirement in paragraph (a) of this section
[63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000]
Sec. 422.516 Reporting requirements.
(a) Required information. Each MA organization must have an
effective procedure to develop, compile, evaluate, and report to CMS, to
its enrollees, and to the general public, at the times and in the manner
that CMS requires, and while safeguarding the confidentiality
[[Page 346]]
of the doctor-patient relationship, statistics and other information
with respect to the following:
(1) The cost of its operations.
(2) The patterns of utilization of its services.
(3) The availability, accessibility, and acceptability of its
services.
(4) To the extent practical, developments in the health status of
its enrollees.
(5) Information demonstrating that the MA organization has a
fiscally sound operation.
(6) Other matters that CMS may require.
(b) Significant business transactions. Each MA organization must
report to CMS annually, within 120 days of the end of its fiscal year
(unless for good cause shown, CMS authorizes an extension of time), the
following:
(1) A description of significant business transactions (as defined
in Sec. 422.500) between the MA organization and a party in interest.
(2) With respect to those transactions--
(i) A showing that the costs of the transactions listed in paragraph
(c) of this section do not exceed the costs that would be incurred if
these transactions were with someone who is not a party in interest; or
(ii) If they do exceed, a justification that the higher costs are
consistent with prudent management and fiscal soundness requirements.
(3) A combined financial statement for the MA organization and a
party in interest if either of the following conditions is met:
(i) Thirty-five percent or more of the costs of operation of the MA
organization go to a party in interest.
(ii) Thirty-five percent or more of the revenue of a party in
interest is from the MA organization.
(c) Requirements for combined financial statements. (1) The combined
financial statements required by paragraph (b)(3) of this section must
display in separate columns the financial information for the MA
organization and each of the parties in interest.
(2) Inter-entity transactions must be eliminated in the consolidated
column.
(3) The statements must have been examined by an independent auditor
in accordance with generally accepted accounting principles and must
include appropriate opinions and notes.
(4) Upon written request from an MA organization showing good cause,
CMS may waive the requirement that the organization's combined financial
statement include the financial information required in this paragraph
(c) with respect to a particular entity.
(d) Reporting and disclosure under ERISA. (1) For any employees'
health benefits plan that includes an MA organization in its offerings,
the MA organization must furnish, upon request, the information the plan
needs to fulfill its reporting and disclosure obligations (with respect
to the particular MA organization) under the Employee Retirement Income
Security Act of 1974 (ERISA).
(2) The MA organization must furnish the information to the employer
or the employer's designee, or to the plan administrator, as the term
``administrator'' is defined in ERISA.
(e) Loan information. Each organization must notify CMS of any loans
or other special financial arrangements it makes with contractors,
subcontractors and related entities.
(f) Enrollee access to Information. Each MA organization must make
the information reported to CMS under Sec. 422.502(f)(1) available to
its enrollees upon reasonable request.
Sec. 422.520 Prompt payment by MA organization.
(a) Contract between CMS and the MA organization. (1) The contract
between CMS and the MA organization must provide that the MA
organization will pay 95 percent of the ``clean claims'' within 30 days
of receipt if they are submitted by, or on behalf of, an enrollee of an
MA private fee-for-service plan or are claims for services that are not
furnished under a written agreement between the organization and the
provider.
(2) The MA organization must pay interest on clean claims that are
not paid within 30 days in accordance with sections 1816(c)(2)(B) and
1842(c)(2)(B).
(3) All other claims from non-contracted providers must be paid or
denied within 60 calendar days from the date of the request.
[[Page 347]]
(b)(1) Contracts between MA organizations and providers and
suppliers. Contracts or other written agreements between MA
organizations and providers must contain a prompt payment provision, the
terms of which are developed and agreed to by both the MA organization
and the relevant provider.
(2) The MA organization is obligated to pay contracted providers
under the terms of the contract between the MA organization and the
provider.
(c) Failure to comply. If CMS determines, after giving notice and
opportunity for hearing, that an MA organization has failed to make
payments in accordance with paragraph (a) of this section, CMS may
provide--
(1) For direct payment of the sums owed to providers, or MA private
fee-for-service plan enrollees; and
(2) For appropriate reduction in the amounts that would otherwise be
paid to the organization, to reflect the amounts of the direct payments
and the cost of making those payments.
(d) A CMS decision to not conduct a hearing under paragraph (c) of
this section does not disturb any potential remedy under State law for
1866(a)(1)(O) of the Act.
[63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000;
70 FR 4738, Jan. 28, 2005]
Sec. 422.521 Effective date of new significant regulatory requirements.
CMS will not implement, other than at the beginning of a calendar
year, requirements under this part that impose a new significant cost or
burden on MA organizations or plans, unless a different effective date
is required by statute.
[68 FR 50858, Aug. 22, 2003]
Sec. 422.524 Special rules for RFB societies.
In order to participate as an MA organization, an RFB society--
(a) May not impose any limitation on membership based on any factor
related to health status; and
(b) Must offer, in addition to the MA RFB plan, health coverage to
individuals who are members of the church or convention or group of
churches with which the society is affiliated, but who are not entitled
to receive benefits from the Medicare program.
Sec. 422.527 Agreements with Federally qualified health centers.
The contract between the MA organization and CMS must specify that--
(a) The MA organization must pay a Federally qualified health center
(FQHC) a similar amount to what it pays other providers for similar
services.
(b) Under such a contract, the FQHC must accept this payment as
payment in full, except for allowable cost sharing which it may collect.
(c) Financial incentives, such as risk pool payments or bonuses, and
financial withholdings are not considered in determining the payments
made by CMS under Sec. 422.316(a).
[70 FR 4738, Jan. 28, 2005]