# Medicare and Medicaid Programs; Programs of All-Inclusive Care for the Elderly (PACE)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2016-19153

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** August 16, 2016
- **Citation:** 81 FR 54666

## Text

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 423 and 460
[CMS-4168-P]
RIN 0938-AR60
Medicare and Medicaid Programs; Programs of All-Inclusive Care for the Elderly (PACE)

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would revise and update the requirements for the Programs of All-Inclusive Care for the Elderly (PACE) under the Medicare and Medicaid programs. The proposed rule addresses application and waiver procedures, sanctions, enforcement actions and termination, administrative requirements, PACE services, participant rights, quality assessment and performance improvement, participant enrollment and disenrollment, payment, federal and state monitoring, data collection, record maintenance, and reporting. The proposed changes would provide greater operational flexibility, remove redundancies and outdated information, and codify existing practice.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on October 17, 2016.

ADDRESSES:

In commenting, please refer to file code CMS-4168-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed):

1.
Electronically.
You may submit electronic comments on this regulation to
http://www.regulations.gov.
Follow the instructions for “submitting a comment.”

2.
By regular mail.
You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4168-P, P.O. Box 8016, Baltimore, MD 21244-8016.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.
By express or overnight mail.
You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-4168-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

4.
By hand or courier.
Alternatively, you may deliver (by hand or courier) your written comments before the close of the comment period to the following addresses:

a. For delivery in Washington, DC—Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201.

(Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.)

b. For delivery in Baltimore, MD—Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

If you intend to deliver your comments to the Baltimore address, please call telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members. Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the close of the comment period.

FOR FURTHER INFORMATION CONTACT:

Martha Hennessy, 410-786-0575.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:
All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received:
http://www.regulations.gov.
Follow the search instructions on that Web site to view public comments.

Timely received comments will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an appointment to view public comments, phone 1-800-743-3951.

Table of Contents

I. Executive Summary

A. Purpose

B. Summary of Key Economic Provisions

C. Summary of Costs and Benefits

II. Background

A. Program Description

B. Legislative and Regulatory History

C. PACE Regulatory Framework

III. Provisions of the Proposed Rule

A. Proposed Global Change Regarding Quality Assessment and Performance Improvement

B. Subpart A—Basis, Scope, and Definitions

C. Subpart B—PACE Organization Application and Waiver Process

D. Subpart C—PACE Program Agreement

E. Subpart D—Sanctions, Enforcement Actions, and Termination

F. Subpart E—PACE Administrative Requirements

G. Subpart F—PACE Services

H. Subpart G—Participant Rights

I. Subpart H—Quality Assessment and Performance Improvement

J. Subpart I—Participant Enrollment and Disenrollment

K. Subpart J—Payment

L. Subpart K—Federal/State Monitoring

M. Subpart L—Data Collection, Record Maintenance, and Reporting

IV. Collection of Information Requirements

V. Response to Comments

VI. Regulatory Impact Statement

Acronyms

Because of the many terms to which we refer by acronym in this proposed rule, we are listing the acronym and its corresponding term in alphabetical order below:

BBA Balanced Budget Act of 1997

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000

CMP Civil Money Penalty

CMS Centers for Medicare & Medicaid Services

COBRA Consolidated Omnibus Budget Reconciliation Act of 1985

GAO Government Accountability Office

HHS U.S. Department of Health and Human Services

HPMS Health Plan Management System

IDT Interdisciplinary Team

IFC Interim Final Rule with Comment Period

MA Medicare Advantage

MAO Medicare Advantage Organization

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003

MSP Medicare Secondary Payer

OBRA Omnibus Budget Reconciliation Act

OIG Office of Inspector General

PACE Programs of All-inclusive Care for the Elderly

PCA Personal Care Attendants

PDP Prescription Drug Plan

PO PACE Organization

SAA State Administering Agency

SSA Social Security Act

I. Executive Summary

A. Purpose

The purpose of this proposed rule is to revise and update the requirements for the Programs of All-Inclusive Care for the Elderly (PACE) under the Medicare and Medicaid programs. The proposals address application and waiver procedures, sanctions, enforcement actions and termination, administrative requirements, PACE services, participant rights, quality assessment and performance improvement, participant enrollment and disenrollment, payment, federal and state monitoring, data collection, record maintenance, and reporting. The proposed changes would provide greater operational flexibility, remove redundancies and outdated information, and codify existing practice.

B. Summary of Key Economic Provisions

1. Compliance Oversight Requirements

Compliance programs, as found in the Medicare Advantage (MA) and Medicare Part D programs, have long been recognized as key to protecting against fraud, waste, and abuse. The importance of these programs has been highlighted by several of our oversight bodies. As is authorized by sections 1934(f)(3) and 1894(f)(3) of the Social Security Act (the Act), we are now proposing to adopt two key elements of the Part D compliance program in the PACE regulations. Specifically, we would require each PACE organization (PO) to develop compliance oversight requirements that would be responsible for monitoring and auditing their organization for compliance with our regulations. Additionally, we would require POs to have measures that prevent, detect and correct non-compliance with CMS's program requirements as well as measures that prevent, detect, and correct fraud, waste, and abuse. This mirrors what POs are currently required to do for their Part D operations and would simply extend the requirement to all of the PO's operations. We believe by creating a uniform requirement for all of the PO's operations, we are balancing the duty of a PO to ensure compliance with CMS requirements with the need for flexibility as a provider of service.

2. Monitoring and Oversight of PACE Organizations

As a result of our experience with oversight and monitoring of the PACE program, we are proposing flexibilities in connection with the current requirement that POs be monitored for compliance with the PACE program requirements during and after a 3-year trial period. We must balance the responsibilities of ensuring that all of our beneficiaries are receiving quality care with our duty to effectively manage our resources and ensure proper oversight over all of the programs we manage. We are proposing therefore to use technology to enhance efficiencies in monitoring by remotely reviewing PO documents, which we have to date reviewed primarily through site visits. We would reduce the number of onsite visits after the 3-year trial period by utilizing a risk assessment to select which POs will be audited each year. This risk assessment would rely largely on an organization's past performance and ongoing compliance with CMS and state requirements. However, the risk assessment would also take into account other information that could indicate a PO needs to be reviewed, such as participant complaints or access to care concerns.

C. Summary of Costs and Benefits

Table 1—Summary of Costs and Benefits

Provision description
Total costs to POs

Total cost to Government
(without transfer)

Proposed Compliance Oversight Requirements
We estimate a one-time cost of $353,668 per year, annualized for 3 years, for developing the written material and documents necessary for internal auditing and monitoring programs (119 PO × 150 hours per PO × 59.44 (hourly rate) divided by 3 (annualized over 3 years)). We further estimate an annual cost of $1,414,672 per year to update materials and for routine identification of risks (119 PO × 200 hours per PO × 59.44 hourly rate). Thus total cost would be $1.7 million in years 1 through 3 and $1.4 million afterwards

Monitoring
We estimate that there will be an annual savings to POs based on our proposal of $707,617.60. We expect 72 PO audits under the current regulations. We expect only 35 audits if the proposed regulation is finalized. The savings to PO would be the effort saved by not having to produce documentation and other administrative burdens that occur during an audit for 37 audits. Consequently, we are estimating the savings per audit for a PO to be approximately $19,124.80 (2 Health Service Managers at $50.99/hour × 2 (Factor for fringe benefits) × 80 hours per person plus 1 executive administrative assistant at $17.55/hour × 2 (Factor for fringe benefits) × 80 hours per person). Therefore the total savings to POs will be $19,124.80 × 37 = $707,617.60
We estimate an annual savings of $1,029,455 to the government. We expect 72 PO audits under current regulations. We expect only 35 audits if the proposed regulation is finalized. The savings to us would be the effort saved by not having to perform 37 audits. The cost per audit is 2.5 FTE × $1,395 air-fare + 220 hours for GS-13s × $44.15/hr GS-13 wage × 2 (Fringe benefit factor) + 40 hours for GS-15s × $61.37/hr GS-15 wage × 2 (Fringe benefit factor) = $27,823. Hence the total savings is $27,832 × 37 = 1 million.

II. Background

A. Program Description

The Programs of All-Inclusive Care for the Elderly (PACE) program is a unique model of managed care service delivery for the frail elderly, most of whom are dually-eligible for Medicare and Medicaid benefits, and all of whom are assessed as being eligible for nursing home placement according to the Medicaid standards established by their respective states.

B. Legislative and Regulatory History

1. Demonstration Project

Section 603(c) of the Social Security Amendments of 1983 (Pub. L. 98-21), as extended by section 9220 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (Pub. L. 99-272), authorized the original demonstration PACE program for On Lok Senior Health Services (On Lok) in San Francisco, California. Section 9412(b) of the Omnibus Budget Reconciliation Act (OBRA) of 1986 (Pub. L. 99-509), authorized CMS to conduct a PACE demonstration program to determine whether the model of care developed by On Lok could be replicated across the country. The number of sites was originally limited to 10, but the OBRA of 1990 (Pub. L. 101-508) authorized an increase to 15 PACE demonstration programs. The PACE demonstration program was operated under a Protocol published by On Lok, Inc. as of April 14, 1995.

The PACE model of care includes, as core services, the provision of adult day health care and interdisciplinary team (IDT) care management, through which access to and allocation of all health services is managed. Physician, therapeutic, ancillary, and social support services are furnished in the participant's residence or onsite at a PACE center. Hospital, nursing home, home health, and other specialized services are generally furnished under contract. Financing of the PACE demonstration model was accomplished through prospective capitation payments under both Medicare and Medicaid. Under section 4118(g) of the OBRA of 1987 (Pub. L. 100-203), PACE demonstration programs had to assume full financial risk progressively over the initial 3 years. As such authority was removed by section 4803(b)(1)(B) of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), PACE demonstration programs approved after August 5, 1997 had to assume full financial risk at start-up.

2. Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33)

Section 4801 of the BBA authorized coverage of PACE under the Medicare program by amending title XVIII of Act to add section 1894 of the Act, which addresses Medicare payments and coverage of benefits under PACE. Section 4802 of the BBA authorized the establishment of PACE as a state option under Medicaid by amending title XIX of the Act and adding section 1934 of the Act, which directly parallels the provisions of section 1894 of the Act. Section 4803 of the BBA addresses implementation of PACE under both Medicare and Medicaid, the effective date, timely issuance of regulations, priority and special consideration in processing applications, and extension and transition for PACE demonstration project waivers.

As directed by section 4803 of the BBA, we published an interim final rule with comment period (IFC) on November 24, 1999, establishing requirements for PACE under sections 1894 and 1934 of the Act (64 FR 66234). The 1999 IFC was a comprehensive rule that addressed eligibility, administrative requirements, application procedures, services, payment, participant rights, and quality assurance under PACE.

3. The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554)

The following three sections of BIPA modified the PACE program:

• Section 901 extended the transition period for the PACE demonstration programs to allow an additional year for these organizations to transition to the permanent PACE program.

• Section 902 gave the Secretary of Health and Human Services (the Secretary) the authority to grandfather in the modifications these programs had implemented as of July 1, 2000. This provision allowed the PACE demonstration programs to continue program modifications they had implemented and avoid disruptions in participant care where these modifications were determined to be consistent with the PACE model.

• Section 903 specifically addressed flexibility in exercising the waiver authority provided under sections 1894(f)(2)(B) and 1934(f)(2)(B) of the Act. It authorized the Secretary to modify or waive PACE regulatory provisions in a manner that responds promptly to the needs of PACE organizations (POs) relating to the areas of employment and the use of community-based primary care physicians. Section 903 of BIPA also established a 90-day review period for waiver requests. On October 1, 2002, we issued an IFC to implement section 903 of BIPA (67 FR 61496).

4. Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)

On December 8, 2003, Congress enacted the MMA. Several sections of the MMA affected POs. Most notably, section 101 of the MMA affected the way in which POs are paid for providing certain outpatient prescription drugs to any Part D eligible participant. The MMA altered the payment structure for Part D drugs for POs by shifting the payer source for PACE enrollees who are full-benefit dual-eligible individuals from Medicaid to Medicare, and, in part, from the beneficiary to Medicare for individuals that are not full-benefit dual-eligible beneficiaries who elect to enroll in Part D. The MMA did not affect the manner in which POs are paid for the provision of outpatient prescription drugs to non-part D eligible PACE participants.

Section 101 of the MMA added section 1860D-21(f) of the Act, which provides that POs may elect to provide qualified prescription drug coverage to enrollees who are Part D eligible individuals. The MMA allows CMS the flexibility to deem POs as MA-PD local plans and to treat POs that elect to provide qualified drug coverage in a manner similar to MA-PD local plans. Due to inconsistencies in the PACE and MMA statutes, we chose to treat POs in a similar manner as MA-PD plans, thereby avoiding conflicting requirements. The requirements that apply to POs that elect to provide qualified prescription drug coverage to Part D eligible enrollees are described in section II.T.3. of the January 2005 Part D final rule (70 FR 4426 through 4434).

In addition, section 236 of the MMA amended the Act to extend to POs the existing statutory Medicare and Medicaid balance billing protections that had previously applied to POs under the PACE demonstration program authority.

Section 301 of the MMA amended the Medicare Secondary Payer (MSP) provisions in section 1862(b) of the Act. These amendments clarify the obligations of primary plans and primary payers, the nature of the insurance arrangements subject to the MSP rules, the circumstances under which Medicare may make conditional payments, and the obligations of primary payers to reimburse Medicare. To implement section 301 of the MMA, we issued an IFC published in the February 24, 2006
Federal Register
(71 FR 9466). The provisions in the IFC were finalized in a final rule published in the February 22, 2008
Federal Register
(73 FR 9679). The IFC revised pertinent MSP regulations found at 42 CFR part 411. Our PACE regulations at § 460.180(d) specify that Medicare does not pay for PACE services to the extent that Medicare is not the primary payer under part 411. The MSP regulations found at 42 CFR part 411 set forth our current policies regarding MSP obligations involving other payers.

5. 2006 PACE Final Rule

On December 8, 2006, we issued a final rule (71 FR 71244) (hereinafter 2006 final rule) that finalized both the PACE IFC published in the November 24, 1999
Federal Register
(64 FR 66234) and the PACE IFC published in the October 1, 2002
Federal Register
(67 FR 61496).

For a complete history of the PACE program, please see the 2006 final rule (71 FR 71244 through 71248).

C. PACE Regulatory Framework

Sections 1894(f) and 1934(f) of the Act set forth the requirements for issuing regulations to carry out sections 1894 and 1934 of the Act. Sections 1894(f)(2) and 1934(f)(2) of the Act state that the Secretary must incorporate the requirements applied to PACE demonstration waiver programs under the PACE Protocol when issuing interim final or final regulations, to the extent consistent with the provisions of sections 1894 and 1934 of the Act. However, the Secretary may modify or waive these provisions under certain circumstances. Sections 1894(a)(6) and 1934(a)(6) of the Act define the PACE Protocol as the Protocol for PACE as published by On Lok, Inc., as of April 14, 1995, or any successor protocol that may be agreed upon between the Secretary and On Lok, Inc. We issued the 1999 and 2002 IFCs and the 2006 final rule under authority of sections 1894(f) and 1934(f) of the Act.

We believe sections 1894(f) and 1934(f) of the Act primarily apply to issuance of the initial interim and final PACE program regulations because they refer to the PACE Protocol,
1

which has now been replaced by the PACE program agreement.
2

Sections 1894(f)(2)(B) and 1934(f)(2)(B) of the Act permit the Secretary to modify or waive provisions of the PACE Protocol as long as any such modification or waiver is not inconsistent with and does not impair any of the essential elements, objectives, and requirements of the PACE Protocol and, in particular, does not modify or waive any of the following five provisions:

1

https://www.gpo.gov/fdsys/pkg/FR-1999-11-24/pdf/99-29706.pdf.

2

https://www.cms.gov/Medicare/Health-Plans/pace/downloads/programagreement.pdf.

• The focus on frail elderly qualifying individuals who require the level of care provided in a nursing facility.

• The delivery of comprehensive integrated acute and long-term care services.

• The interdisciplinary team approach to care management and service delivery.

• Capitated, integrated financing that allows the PO to pool payments received from public and private programs and individuals.

• The assumption by the PO of full financial risk.

While we believe sections 1894(f) and 1934(f) of the Act no longer have direct application to the PACE program in many respects, we believe the limitations on waivers and modifications continue to apply to updates to the PACE program to the extent the updates concern essential elements, objectives, and requirements of the PACE Protocol, as replaced by the PACE program agreement, or any of the five listed provisions.

III. Provisions of the Proposed Rule

In this proposed rule, we are proposing to revise and update the policies finalized in the 2006 final rule to reflect subsequent changes in the practice of caring for the frail and elderly and changes in technology (for example, the use of electronic communications, including email, and the automation of certain processes) based on our experience implementing and overseeing the PACE program. PACE has proven successful in keeping frail, older individuals, many of whom are eligible for both Medicare and Medicaid benefits (dual eligibles), in community settings.
3

However, it is necessary to revise some regulatory provisions to afford more flexibility to POs and state administering agencies (SAAs) as a means to encourage the expansion of the PACE program to more states, thus increasing access for participants, and to further enhance the program's effectiveness at providing care while reducing costs. Therefore, we are proposing a number of flexibilities in this rule, including allowing non-physician medical providers practicing within the scope of their state licensure and clinical practice guidelines to serve in place of primary care physicians in some capacities, and permitting POs to better tailor the IDTs to improve efficiency, while continuing to meet the needs of their participants.

3
The Medicare Payment Advisory Commission's June 2012 Report to the Congress, Medicare and the Health Care Delivery System, pp. 76-77, available at
http://www.medpac.gov/documents/reports/jun12_entirereport.pdf.

A. Proposed Global Change Regarding Quality Assessment and Performance Improvement

Part 460 encompasses all of the regulatory provisions pertaining to PACE. We are proposing to replace all references to “quality assessment and performance improvement” in part 460 of the regulations (including subpart and section headings) with “quality improvement.” We are proposing this change because, in practice, the term “quality improvement” is used by the POs, SAAs, CMS, and the industry when referring to quality assessment and performance improvement for POs. Furthermore, the term “quality improvement” is used to mean the same thing in other CMS programs, such as the CMS Quality Improvement Organization Program and the Medicare Advantage Quality Improvement Program, so this change would allow for consistency in use of language across CMS programs. This would be a change in terminology only and would not designate a change in the requirements for the PACE quality program. While we are proposing to implement this change in every place that contains the term “quality assessment and performance improvement”, we are only discussing our rationale for this proposed change in this section of the preamble. This proposed change would affect the following sections and headings in the current regulations: §§ 460.32(a)(9), 460.60(c), 460.62(a)(7), 460.70(b)(1)(iii), 460.120(f), 460.122(i), 460.130(a), 460.132(a) and (c)(3), 460.134(a), 460.136(a), (b), and (c), 460.138(b), and 460.172(c), and the headings of subpart H and §§ 460.132, 460.134, and 460.136. As discussed in section III.I.3., we are proposing to remove § 460.140 in its entirety, so we would not need to change the reference in that section.

B. Subpart A—Basis, Scope, and Definitions

1. Proposed Part D Program Requirements (§ 460.3)

In the 2006 final rule (71 FR 71248), we indicated that MA-PD requirements with respect to Part D prescription drug coverage would apply to POs that elect to provide qualified Part D prescription drug coverage. However, the PACE regulations make no mention of Part D program requirements. To clarify this policy, we are proposing to add § 460.3, “Part D Program Requirements,” to state that the POs offering qualified prescription drug coverage and meeting the definition of a Part D plan sponsor (as defined at § 423.4) must abide by all applicable Part D program requirements in part 423. When we issue Part D program guidance we often receive questions regarding applicability to PACE and it has been our experience that POs are not always aware they must comply with Part D requirements unless a specific requirement has been waived. (For a list of the Part D regulatory requirements that are waived for POs,

see section 2.5 of the Part D Application for new POs, available at
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxContracting_ApplicationGuidance.html.
) We believe this proposed change is consistent with our current policy and does not involve any change in the current treatment of POs offering qualified Part D prescription drug coverage.

C. Subpart B—PACE Organization Application and Waiver Process

1. Purpose (§ 460.10)

In this section, we propose changes to part 460, subpart B. Section 460.10 describes the purpose of subpart B, which sets forth the processes for an entity to apply to become a PO and to apply for a waiver of certain regulatory requirements. We are proposing to revise this section to add a new paragraph (a) to address the application process and a new paragraph (b) in which we are proposing to move the current language in this section regarding the waiver process.

As discussed in section III.C.2. of this proposed rule, we are proposing to revise the regulations in subpart B to describe the process for a PO to seek approval from CMS to expand a service area and/or add a new PACE center site. Therefore, we are proposing to amend § 460.10 by adding language regarding the application procedures for expanding an existing service area and/or adding a new PACE center site. This section would still introduce the subpart that sets forth the application procedures for applying to become a PO.

2. Application Requirements (§ 460.12)

Section 460.12 sets forth the application requirements for an organization that wishes to participate in the PACE program. Section 460.12(a) currently requires an individual authorized to act for an entity to submit a complete application to CMS that describes how the entity meets all requirements in part 460 if the entity seeks approval from CMS to become a PO. As set forth in our PACE manual, an application must also be submitted for a PO that seeks to expand its service area and/or add a new PACE center site (see PACE Manual, Ch. 17, Sections 20.4 through 20.7). There are three scenarios specified in the PACE manual under which a PO may expand operations: (1) It may expand its geographic service area without building additional sites; (2) it may open another physical site in the existing geographic service area; and (3) it may expand its geographic service area and open another physical site in the expanded area. Currently, POs are required to submit an application to CMS and the SAA to expand their geographic service area and/or add a new PACE center to their PO. In October 2004, we released the PACE Expansion Application, available at
http://www.medicaid.gov/medicaid-chip-program-information/by-topics/long-term-services-and-supports/integrating-care/program-of-all-inclusive-care-for-the-elderly-pace/pace-4-states.html.
This application is for existing POs that wish to expand their geographic service areas, and/or add a new PACE center to their PO.

As with initial applications, our guidance requires POs to submit an expansion application to CMS through the SAA. However, current regulations do not specify a process for POs to submit, and the SAA and CMS to approve, an expansion application. Therefore, we are proposing amending § 460.12(a) to specify that it also applies to expansion applications submitted by existing POs that seek to expand their service area and/or to add a PACE center site. Specifically, we are proposing to add language in § 460.12(a) that an individual authorized to act for a PO that seeks to expand its service area and/or add a PACE center site must submit a complete application to CMS that describes how the PO meets all requirements in this part. We believe including this requirement in § 460.12 will help ensure POs understand our current practice of requiring an expansion application for a PO that seeks to expand its service area and/or add a PACE center site.

We also are proposing to add the phrase “in the form and manner specified by CMS” to § 460.12(a) when describing the submission to CMS of a complete application to become a PO or to expand a service area and/or add a PACE center, to allow for submission of applications and supporting information in formats other than paper, which is currently required. These applications are often hundreds of pages long, expensive to reproduce and transmit, and administratively inefficient, as staff reviewing different parts of the application are located in different physical locations and must receive hard copies of the material. To adapt to the increased use of electronic communications, electronic health records, and electronic data storage and exchange, we must continuously update the form and manner by which we administer our programs. We have successfully transitioned the Medicare Advantage application and Prescription Drug Plan (PDP) application to a fully electronic submission process, enabling a more organized and streamlined review, and would like to bring those same efficiencies to the PACE application process. We will provide further guidance on this process through HPMS or similar electronic system that may replace HPMS. POs and applicants may also refer to the CMS online tools for application submission at
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Long-Term-Services-and-Supports/Integrating-Care/Program-of-All-Inclusive-Care-for-the-Elderly-PACE/Program-of-All-Inclusive-Care-for-the-Elderly-PACE.html.

Section 460.12(a)(2) provides that we would accept applications from entities that seek approval as POs beginning on February 22, 2000, except we would accept applications on earlier dates for certain entities that qualify for priority processing or special consideration. We established this provision and two other sections of the PACE regulations, previously found at § 460.14 and § 460.16, to implement section 4803(c) of the BBA of 1997. Section 4803(c) directed us to give priority in processing applications, during the 3-year period following enactment of the BBA of 1997, to PACE demonstration programs and then to entities that had applied to operate a PACE demonstration program as of May 1, 1997. In addition, section 4803(c) of the BBA of 1997 required that we give special consideration in the processing of applications during the 3 years following enactment to any entity that as of May 1, 1997, had indicated specific intent to become a PO through formal activities such as entering into contracts for feasibility studies. In the 2006 final rule (71 FR 71253), we deleted § 460.14 (Priority Consideration) and § 460.16 (Special Consideration) because the authority to provide these considerations expired on August 5, 2000. For the same reason, we are proposing to delete paragraph (a)(2) of § 460.12, as it is no longer applicable.

Section 460.12(b) provides that an entity's application must be accompanied by an assurance from the SAA of the state in which the program is located indicating that the state (1) considers the entity to be qualified to be a PO and (2) is willing to enter into a PACE program agreement with the entity. However, we have received applications without the required SAA assurance. To help ensure that our current policy is clear, we are proposing to revise the language to require that the entity's application to become a PO include an assurance from the SAA that the state considers the entity to be qualified to be a PO and the state is

willing to enter into a PACE program agreement with the entity. We want entities to understand that we would not consider an application to become a PO to be complete without assurance from the SAA that the state both considers the entity to be qualified be a PO and is willing to enter into a PACE program agreement with the entity. We would not review applications that do not include this assurance.

Similarly, we are also proposing to redesignate paragraphs (b)(1) and (2) as § 460.12(b)(1) and add a new paragraph (b)(2) to codify the current requirement in the PACE expansion application that a PO's application to expand its service area and/or add a new PACE center site must include an assurance from the SAA that the state is willing to amend the PACE program agreement to include the new PACE center sites and/or expand the PO's service area. We also expect, as we stated in the preamble to the 1999 IFC for initial applications (64 FR 66238), that the SAA will verify that an applying entity has qualified administrative and clinical staff employed or under contract prior to furnishing services to participants in the expanded service area.

We also are proposing to move the language in § 460.22, which requires an entity to state in its application the service area it proposes for its program, and provides that CMS (in consultation with the SAA) may exclude an area already covered under another PACE program agreement, to proposed paragraph § 460.12(c) and remove § 460.22. In proposed § 460.12(c)(1), we would specify that both an entity submitting an application to become a PO and a PO submitting an application seeking to expand its service area must describe the proposed service area in their application. We also propose to make a corresponding change to the Medicare Part D definition of “Service area” in § 423.4 for PACE plans offering qualified prescription drug coverage by removing the reference to “§ 460.22 of this chapter” and adding in its place “§ 460.12(c) of this chapter,” as our proposed changes would move the language currently in § 460.22 to § 460.12(c).

Finally, to codify CMS's current practice regarding the permissibility of POs to expand their service area and/or add a new PACE center site (see PACE Manual, Ch. 17, Section 20.4), we are proposing to add § 460.12(d), which would provide that CMS and the SAA will only approve an expansion application after the PO has successfully completed its first trial period audit and, if applicable, has implemented an acceptable corrective action plan.

We believe all of these changes to § 460.12 would streamline the regulations and make the requirements clear, consistent with the PACE statutes. If we finalize these proposals, we will provide subregulatory guidance on application submission requirements after publication of the final rule.

3. CMS Evaluation of Applications (§ 460.18)

Section 460.18 describes the information that CMS uses to evaluate an application under PACE; however, this does not take into account all the potential sources of information that may be a part of the evaluation process, including information used in the evaluation of applications submitted for a PO that seeks to expand its service area and/or new PACE center site. Currently, § 460.18(b) specifies that CMS will use information obtained through on-site visits conducted by CMS or the SAA. Section 460.18(c) provides that CMS will use information obtained by the SAA. As discussed earlier in this section, we are proposing to revise our regulations to reflect that an application also must be submitted for a PO that seeks to expand its service area and/or add a new PACE center site. In evaluating expansion applications, CMS may consider additional information beyond that contained in the application itself, information obtained through on-site visits, or information obtained through the SAA. For example, our review of a service area expansion application might include information obtained from financial reviews, as well as the results from ongoing monitoring visits. Therefore, we propose to combine the language currently in § 460.18(b) and (c) in revised § 460.18(b) and delete § 460.18(c). The revised § 460.18(b) would state that CMS uses information obtained by CMS or the SAA through on-site visits or any other means. This change would take into account the additional information that we use to review any PACE application, including applications to expand a PO's service area or add a new PACE center site. We are also proposing to make a conforming change to the introductory language in § 460.18 to reflect the review of expansion applications, by deleting “for approval as a PACE organization.”

4. Notice of CMS Determination (§ 460.20)

Section 460.20 describes requirements for CMS to notify PACE applicants of the status of PACE applications. Currently, § 460.20 only specifies the requirements for CMS determination of applications submitted by entities seeking to become POs. As previously discussed in this section, we are proposing to amend the regulations in subpart B to include, in addition to requirements for applications from entities seeking to become POs, requirements for applications submitted by existing POs for service area and/or PACE center site expansions. In conjunction with that proposal, we are proposing changes to § 460.20 to also include specific language regarding the notification requirements for CMS determination of applications to expand a PO's service area and/or to add a new PACE center.

The current requirements in § 460.20 implement sections 1894(e)(8) and 1934(e)(8) of the Act, which require that an application for PO status be deemed approved unless the Secretary, within 90 days after the date of the submission of the application to the Secretary, either denies such request in writing or informs the applicant in writing with respect to any additional information that is needed in order to make a final determination with respect to the application. The Act further states that, after the date of receipt of any additional requested information from the applicant, the application must be deemed approved unless the Secretary, within 90 days of such date, denies such request.

While the Act requires that CMS provide notice to entities seeking to become POs of its determination within 90 days, the Act does not set out requirements for applications submitted by existing POs to expand their service area and/or to add a new PACE center site. We have published expansion application requirements in Chapter 17 of the PACE manual, available at
http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Internet-Only-Manuals-IOMs-Items/CMS019036.html.
Under that guidance, a PO is required to submit an expansion application when the PO is seeking to (1) expand its geographic service area; (2) add a new PACE center; or (3) expand its geographic service area and add a new PACE center.

The guidance provides that, when a PO submits an expansion application to expand its geographical service area without building additional sites, CMS has 45 days to request additional information from the PO, approve the application, or deny the application. Similarly, when a PO submits an expansion application to add a new PACE center in the existing service area, CMS has 45 days to request additional information from the PO, approve the application, or deny the application. In these scenarios, if CMS requests

additional information and the applicant provides the requested information, CMS has an additional 45 days to review and either approve or deny the expansion application. The second 45-day review period in this scenario only commences once CMS has received all of the additional requested material. If the applicant submits additional information per CMS's request, but CMS determines that there is still outstanding information requested from the applicant, CMS notifies the applicant and the additional 45-day review period does not begin until all requested information is received. Once CMS has received all of the requested information, CMS sends a letter to the applicant indicating that the second 45-day review period has commenced.

In the third scenario, when a PO submits an expansion application to expand its geographic service area and open a new PACE center site, CMS has 90 days to request additional information from the PO, approve the application, or deny the application. In this scenario, if CMS requests additional information and the PO provides the requested information, CMS has an additional 90 days to review and either approve or deny the expansion application. The second 90-day review period in this scenario only commences once CMS has received all of the additional requested material. If the applicant submits additional information per CMS's request, but CMS determines that there is still outstanding information requested from the applicant, CMS notifies the applicant and the additional 90-day review period does not begin until all requested information is received. Once CMS has received all of the requested information, CMS sends a letter to the applicant indicating that the second 90-day review period has commenced.

We are proposing to codify CMS's current sub-regulatory requirements for notifying POs of CMS's determination regarding service area and PACE center site expansion applications so the regulations include all of the relevant application timing requirements. Specifically, we are proposing to amend § 460.20(a) to make it clear that the notice of CMS determination applies to all three types of applications listed in proposed § 460.10(a), and that the 90-day time limit applies, except for applications to expand the service area or add a new PACE center site.

First, we are proposing to delete § 460.20(a)(3) and revise § 460.20(b). Currently, § 460.20(a) states that CMS will approve or deny, or request additional information on, a “complete application” within 90 days after submission of the application. We believe it is confusing to state that an application is complete if we are requesting additional information. Therefore, we are proposing to delete § 460.20(a)(3), which is the provision that describes CMS requesting additional information needed to make a final determination, and to revise § 460.20(b) to state that an application is only considered complete when CMS receives all information necessary to make a determination regarding approval or denial. Note that we would not consider the application complete without the required state assurance. We also propose to revise § 460.20(a) to specify that the time limit for CMS notification of determination is 45 days for expansion applications where a PO seeks to expand its service area or add a new PACE center.

Next, we are proposing that § 460.20(b) through (d) be redesignated as § 460.20(c) through (e) and revised as follows. We are proposing that new § 460.20(c) describe the process if CMS determines that the application is not complete because it does not include sufficient information for CMS to make a determination. Specifically, CMS would inform the entity that the application is not complete and request the additional information, and within 90 days (or 45 days for a service area or new PACE center expansion application) of CMS receiving all requested information from the entity, CMS would approve the application or deny it and notify the entity in writing of the basis of the denial and the process for requesting reconsideration of the denial. We are proposing these changes because it is not possible for CMS to make an informed decision to approve or deny an application in situations where we do not have all of the pertinent information. We would consider the State Readiness Review, which SAAs conduct to determine the PO's readiness to administer the PACE program and enroll participants, as information necessary to make our final determination and would ask for its submission in all requests for additional information if we did not already have this information. Further, if more than 6 months elapse between the date of submission of the application and the response to the CMS request for additional information, the entity is required to update the application to provide the most current information and materials related to the application; otherwise, we would consider the application incomplete. We propose to revise § 460.20(c) accordingly.

Section 460.20(b), which we are proposing to redesignate as § 460.20(c), currently outlines the requirements for POs when CMS requests from an entity additional information needed to make an application determination. As noted previously, we are proposing to amend the language in this provision to address the different time limits for expansion applications. We are also proposing to amend the language to specify that the time limits in § 460.20(a) do not begin until CMS receives all requested information and the application is complete. With the proposed changes to § 460.20(a) and the proposed addition of § 460.20(b), it is no longer necessary to describe CMS's review process after all requested information has been received; thus we would remove § 460.20(b)(1) and (2). Section 460.20(c), which we are proposing to redesignate as § 460.20(d), currently implements sections 1894(e)(8) and 1934(e)(8) of the Act and provides that an application for PO status will be deemed approved if CMS fails to act on it within 90 days of the date the application is submitted or the date CMS receives all requested additional information. We are proposing to amend this language to specify deemed approval will occur if CMS fails to act after the later of those dates, and that it only applies to entities submitting applications to become a PO, not expansion applications from existing POs. We believe this revision is necessary because, as described previously, we are proposing to address expansion applications in the regulations, and we want to make it clear that only initial applications will be deemed approved if CMS fails to act on them within the required time period. As previously noted, the PACE statutes do not set out requirements for applications submitted by existing POs to expand their service area and/or to add a new PACE center site. CMS does not currently employ “deemed approval” for expansion applications, and we do not believe there is any reason to do so for these applications at this time. We are further proposing to amend this language by specifying that the 90-day period commences after CMS has received a “complete” application, as this is consistent with the proposed amendments to § 460.20(a) and (b).

Finally, § 460.20(d) currently states that for purposes of the 90-day time limit described in this section, the date that an application is submitted to CMS is the date on which the application is delivered to the address designated by CMS. We are proposing to redesignate § 460.20(d) as § 460.20(e), and revise this paragraph to refer to the time limits

described in this section to include applications for service area expansions or new PACE center sites.

5. Service Area Designation (§ 460.22)

As discussed in section III.C.2. of this proposed rule, we are proposing to move the content of § 460.22, in its entirety but with a few revisions, to § 460.12(c). Therefore, we are proposing to delete § 460.22.

6. Submission and Evaluation of Waiver Requests (§ 460.26)

Section 460.26 sets forth the process for submitting and evaluating waiver requests. We are proposing to revise current § 460.26(a)(1) and (2) so that § 460.26(a)(1) would state that a PO, or an entity submitting an application to become a PO, must submit its waiver request through the SAA for initial review. Paragraph (a)(1) would also specify that the SAA forwards waiver requests to CMS along with any concerns or conditions regarding the waiver. Section 460.26(a)(2) would state that entities submitting an application to become a PO may submit a waiver request as a document separate from the application or in conjunction with and at the same time as the application. While we are not proposing any policy changes with these proposed revisions, we believe these changes would make the requirements for submission of the waiver request more concise and clear. We plan to provide additional detail on this part of the process in subregulatory guidance.

Section 460.26(b) states that CMS evaluates a waiver request from a PO on the basis of certain information. We are proposing to add “or PACE applicant” after “PACE organization” because a waiver request can be submitted by an existing PO or a PACE applicant (an entity that has applied to be a PO but is not yet a PO, or a PO applying to expand its service area and/or add a new PACE center site).

7. Notice of CMS Determination on Waiver Requests (§ 460.28)

Section 460.28 discusses the time frames for CMS determination and notification regarding approval or denial of waiver requests. We established this section to implement section 903 of BIPA, which provides in relevant part that the Secretary “shall approve or deny a request for a modification or a waiver . . . not later than 90 days after the date the Secretary receives the request.” We are proposing to retain most of the language in current § 460.28(a), but to specify that the 90-day time limit starts after CMS receives a complete waiver request. We discuss the need for a complete waiver request in subsequent paragraphs. In § 460.28(a), we propose to revise the heading to “General,” delete the reference to a denial being “in writing,” and state that CMS will take action on the complete waiver request in the form and manner specified by CMS. We are proposing these changes to reflect how we provide notification, whether it be electronically or in another format. It should be noted that CMS would not only provide notification verbally. We propose to redesignate § 460.28(a)(2) as new § 460.28(a)(3).

We propose to add a new § 460.28(a)(2) to address conditional approval of a waiver request from a PACE applicant when the application is still pending. Under CMS's current process, a PACE applicant may request a waiver while its application is still pending and receive either a denial of the waiver request or a conditional approval of the waiver request. The approval of the waiver request is conditioned on the approval of the application. CMS will only issue conditional approvals to entities with pending applications. Issuing a conditional approval enables CMS to adhere to the BIPA 90-day timeframe for making a determination with respect to a waiver request in situations where an application is still under review. Waiver requests that are not associated with a pending application will either receive an approval or denial.

In addition, we are proposing to remove the language in § 460.28(b) regarding the date of receipt of the waiver, because our proposed changes to § 460.28(a) and (b) make it clear that the 90-day clock will start on the day CMS receives a complete waiver request. We are also proposing to change current paragraph (c)(1) regarding deemed approval of a waiver request to refer to CMS failing to act within 90 days of receipt of a complete waiver request, and redesignate it as paragraph (c). CMS will notify POs to confirm receipt of “complete” waiver requests.

We are proposing new language in § 460.28(b) regarding additional information requests for waivers. Unlike sections 1894(e)(8) and 1934(e)(8) of the Act, which give CMS 90 days to request additional information from entities applying to become POs, section 903 of BIPA does not explicitly impose a time limit for CMS to request additional information that is necessary to make a determination on a waiver request. In the 2006 final rule, we stated that there is “no statutory authority to stop the 90-day clock if additional information is necessary to make a determination on a waiver request.” (71 FR 71255). Although we cannot stop the clock, we believe the statute can be read to start the 90-day clock upon CMS's receipt of a complete waiver request. We therefore are proposing in new paragraph (b) that a waiver request is complete when CMS receives all information necessary for CMS to make a determination regarding approval or denial. If CMS determines that the waiver request is not complete, CMS would request additional information needed to make a determination. The 90-day clock would start when CMS receives the complete waiver request. We are proposing these changes because it is not possible to make an informed decision to approve or deny a request for a waiver in situations where we do not have all of the pertinent information. Further, we believe this change would reduce the administrative burden on CMS as well as the POs because, currently, CMS denies incomplete waiver requests and POs must resubmit new waiver requests that include the missing information. Under the proposed process, CMS and the PO would work together to ensure that the request includes all necessary information, which should alleviate the need to resubmit a waiver request.

This is similar to the proposed treatment of PACE applications, and we believe consistency in review procedures would be helpful to all parties involved. We also note that approval of a waiver associated with a PACE application is contingent upon the approval of that PACE application because there is nothing to waive if there is no PACE program. Accordingly, waivers that are submitted for review in conjunction with a PACE application or while a PACE application is being reviewed would only be approved if that application is approved. As previously discussed, we propose to add a new § 460.28(a)(2) that provides for conditional approval for entities with a pending application to become a PO.

Currently, § 460.28(c)(2) allows CMS to withdraw its approval of a waiver for good cause. We are proposing to redesignate this provision as paragraph (d)(1) and amend it to provide that CMS “in consultation with the” SAA may withdraw approval of a waiver request for good cause. We are proposing to add this language because any significant change to the PACE program agreement, which includes waivers, should be made in consultation with the SAA because the SAA also is a signatory of the agreement. We are proposing in § 460.28(d)(2) that, if the waiver approval is withdrawn, CMS must notify the PO or PACE applicant and the SAA that approval of a waiver has been

withdrawn and specify the reason for withdrawal and the effective date of the withdrawal in the notice. Currently, while the regulation enables CMS to withdraw an approval of a waiver request, it does not require that we notify the PO or PACE applicant and the SAA of the withdrawal, the reason for withdrawal, or the date when the withdrawal would be effective. We believe this information is critical to the PO or PACE applicant and the SAA because it likely would require a change in operation of the PO or could change how an applicant would operate a PO if its application is approved.

D. Subpart C—PACE Program Agreement

1. Content and Terms of PACE Program Agreement (§ 460.32)

Section 460.32 specifies the required and optional content of a PACE program agreement. Under § 460.32(a)(12), a PACE program agreement must contain information about the Medicaid capitation rate and the methodology used to calculate the Medicare capitation rate. This requirement is based on sections 1934(d)(2) and 1894(d)(2) of the Act, which provide that the Medicaid capitation amount and the Medicare capitation amount, respectively, to be applied for a PO for a contract year must be an amount specified in the PACE program agreement for the year.

Section 460.32(a)(12) and § 460.180(b) require the PACE program agreement to specify the methodology used to calculate the Medicare capitation rate, as opposed to the actual rate. The PACE Medicare rate is based on Part A and B payment rates established for purposes of payments to Medicare Advantage organizations and is subject to certain other adjustments (see § 460.180). For the Medicaid capitation rate, however, our current regulations require the PACE program agreement to specify the actual amount negotiated between the POs and the SAA (see § 460.32(a)(12) and § 460.182(b)).

As states are moving toward more managed care delivery systems for the long term care population, some states are redesigning their methodologies for developing PACE Medicaid capitation rates to more closely align with these other managed care delivery systems. Some of the new methodologies result in Medicaid payment variations based on factors such as frailty adjustments and performance incentive payments. Additionally, because many states update their PACE Medicaid capitation rates annually based on the state fiscal year, there are operational challenges associated with updating the PACE program agreement appendices to reflect changes to the Medicaid rates because they are not necessarily updated consistent with a PACE program agreement's contract year. As a result, we believe it is not always practical to include the actual Medicaid capitation rates in the PACE program agreement. Therefore, we are proposing to amend § 460.32(a)(12) to require that the program agreement include the Medicaid capitation rates or Medicaid payment rate methodology, as well as the methodology used to calculate the Medicare capitation rate. Medicaid capitation rates are developed and updated by the states (in negotiation with the POs) and approved by CMS. Operationally, states submit documentation to CMS to support their proposed PACE Medicaid capitation rates. CMS reviews the documentation to ensure the proposed rates are in compliance with the requirements of § 460.182, and provides the state with written approval of the rates. The Medicaid capitation rates are then communicated to the POs by the state in writing.

We are also interested in seeking, more generally, comments regarding other modifications we might make to the required content of the PACE program agreement, specifically, those cited at § 460.32(a) and § 460.182(d). We are particularly interested in comments regarding the need for capturing the level of detail currently required within the agreement itself, along with updated information as may be necessary throughout the contract period. Much of the required program agreement content relates to operational components of the PO's program. Our expectation is that POs regularly review and update this information, particularly as it relates to policies and procedures, to ensure its business practices are current, in accordance with regulation and guidance, and are consistently employed. We request comment on whether specific policies and procedures, and other existing requirements should continue to be part of the PACE program agreement.

E. Subpart D—Sanctions, Enforcement Actions, and Termination

1. Violations for Which CMS May Impose Sanctions (§ 460.40)

To support PACE program integrity and to protect PACE participants, we are proposing to amend provisions related to enforcement actions we may take when POs fail to comply with the PACE program agreement and/or program requirements. Currently, § 460.50 identifies some causes for CMS or an SAA to terminate a PACE agreement. Provisions authorize terminating for cause in circumstances including, but not limited to, uncorrected failure to comply substantially with conditions of the PACE program or with the terms of the PACE agreement, and inability to ensure the health and safety of participants, such as the presence of deficiencies that CMS or the SAA determines cannot be corrected. While current regulations reflect CMS and the SAA's authority to terminate an organization in these circumstances, we believe that we need to clarify our authority with respect to alternative enforcement actions in the form of sanctions or civil money penalties (CMPs).

We propose adding a new provision to § 460.40, designated as paragraph (b), to allow CMS the discretion to take alternative actions in the form of sanctions or CMPs when we are authorized to terminate a PO's PACE program agreement. Consistent with the authorizations in sections 1894(e)(6)(B) and (f)(3) and sections 1934(e)(6)(B) and (f)(3) of the Act, this new provision aligns the PACE enforcement structure with the enforcement structure that applies to the Medicare+Choice program, renamed, and hereinafter referred to, as the Medicare Advantage program. The Medicare Advantage program enforcement authorities in sections 1857(g)(3) and (4) of the Act allow CMS the discretion to take enforcement actions in the form of sanctions or CMPs when CMS is authorized to terminate the organization's contract. We propose that this authority also be utilized in the PACE program, consistent with our statutory authority identified in section 1894(c)(6)(B) and 1934(e)(6)(B) of the Act to promote consistency with the enforcement structure of the Medicare Advantage program. This change will give CMS the discretion to impose sanctions and CMPs on POs for continued noncompliance, in addition to our current authority to take the most extreme action of termination of the PACE program agreement. To add paragraph (b), we are proposing to redesignate the introductory language in § 460.40 as paragraph (a) and redesignate paragraphs (a) through (i) as paragraphs (a)(1) through (9).

2. Civil Money Penalties (§ 460.46)

Due to the redesignation of paragraphs in § 460.40, we also are proposing to make technical, non-substantive changes to the citations in this section to reflect the substantive and technical changes discussed above.

Specifically, we are amending § 460.46(a)(1) by removing the reference “§ 460.40(c) or (d)” and adding in its place the reference “§ 460.40(a)(3) or (4)”. We are proposing to amend § 460.46(a)(2) by removing the reference “§ 460.40(e)” and adding in its place the reference “§ 460.40(a)(5)”. We are also proposing to amend § 460.46(a)(3) by removing the reference “§ 460.40(f)(1)” and adding in its place the reference “§ 460.40(a)(6)(i)”. These changes reflect the new numbering of § 460.40 that was discussed previously in this proposed rule.

Additionally, we are adding a new note to § 460.46(a), in accordance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act) (Sec. 701 of Pub. L. 114-74). The 2015 Act requires agencies to adjust the civil money penalties annually for inflation. The Department of Health and Human Services will publish all of the Department's adjusted CMP amounts at 42 CFR 1003.102. To ensure transparency, we have added a note stating that the penalty amounts are adjusted for inflation and citing to 42 CFR 1003.102.

F. Subpart E—PACE Administrative Requirements

1. PACE Organizational Structure (§ 460.60)

Sections 1894(a)(3)(A)(i) and 1934(a)(3)(A)(i) of the Act require a PO to be (or be a distinct part of) a public entity or a private, nonprofit entity organized for charitable purposes under section 501(c)(3) of the Internal Revenue Code of 1986. We implemented these provisions in § 460.60(a), which provides that a PO must be, or be a distinct part of, either (1) an entity of city, county, state, or Tribal government or (2) a private, not-for-profit entity organized for charitable purposes under section 501(c)(3) of the Internal Revenue Code of 1986, and it may be a corporation, a subsidiary of a larger corporation, or a department of a corporation. In this discussion, we will refer to all entities that meet this standard as not-for-profit entities.

Sections 1894(h) and 1934(h) of the Act direct the Secretary to waive the requirement that a PO be a not-for-profit entity in order to demonstrate the operation of a PO by private, for-profit entities. Section 4804(b) of the BBA of 1997 requires the Secretary to provide a report to Congress on the impact of the demonstration on quality and cost of services, including certain findings regarding the frailty level, access to care, and the quality of care of PACE participants enrolled with for-profit POs, as compared to not-for-profit POs. Section 4804(b)(2) of the BBA of 1997 requires the report to Congress to include findings on whether any of the following four statements is true with respect to the for-profit PACE demonstration:

1. The number of covered lives enrolled with entities operating under demonstration project waivers under sections 1894(h) and 1934(h) of the Act is fewer than 800 (or such lesser number as the Secretary may find statistically sufficient to make determinations respecting findings described in the succeeding subparagraphs).

2. The population enrolled with such entities is less frail than the population enrolled with other POs.

3. Access to or quality of care for individuals enrolled with such entities is lower than such access or quality for individuals enrolled with other POs.

4. The application of such section has resulted in an increase in expenditures under the Medicare or Medicaid programs above the expenditures that would have been made if such section did not apply. (We refer to these statements collectively as the BBA statements.)

Under sections 1894(a)(3)(B)(ii) and 1934(a)(3)(B)(ii) of the Act, after the date the report is submitted to Congress, the requirement that a PO be a not-for-profit entity will not apply unless the Secretary determines that any of the BBA statements are true.

In 2008, Mathematica Policy Research completed a study of the permanent not-for-profit POs.
4

An interim report to Congress based on this study was submitted in January 2009. At the time of the 2008 Mathematica study, no for-profit entities had enrolled in the PACE demonstration. Therefore, neither report assessed a for-profit PACE population nor did the interim report address the BBA statements.

4
A copy of the 2008 Mathematica study results can be found here:
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/Beauchamp_2008.pdf.

From 2012 to 2013, Mathematica, under contract with CMS, conducted a study to address quality of and access to care for participants of for-profit POs, specifically focusing on the third BBA statement. The 2013 Mathematica report also included material that provided insight into the first and second BBA statements.
5

Based on the two Mathematica studies, HHS prepared and submitted the report to the Congress on May 19, 2015. A copy of the report to Congress can be found at
https://innovation.cms.gov/Files/reports/RTC_For-Profit_PACE_Report_to_Congress_051915_Clean.pdf.

5
A copy of the 2013 Mathematica study results can be found here:
https://innovation.cms.gov/Files/reports/pace-access-qualityreport.pdf.

As detailed in the report, HHS could not conclude that any of the four BBA statements were true. First, the number of covered lives enrolled with for-profit POs was not fewer than 800, and the sample size for the survey examining BBA statements two and three was large enough to make statistically significant determinations of differences. The report stated that HHS could not conclude that for-profit PACE participants are less frail than not-for-profit PACE participants. It also stated that HHS could not conclude that for-profit PACE participants experienced systematic adverse differences in quality of care or access to care as compared to not-for-profit PACE participants. Finally, expenditures were equal between for-profit and not-for-profit POs after controlling for beneficiary risk score, organization frailty score, and county rates, so there would not have been an increase in expenditures if participants in the for-profit POs had been enrolled with a not-for-profit PO.

Based on the findings in the report to Congress, we determined that under sections 1894(a)(3)(B) and 1934(a)(3)(B) of the Act, the requirement that a PO be a not-for profit entity would no longer apply after May 19, 2015 (the submission date of the report to Congress). Because the statutory not-for-profit restriction no longer applies, we are proposing to remove the corresponding restriction in § 460.60(a) in its entirety. We propose to redesignate § 460.60(b), (c), and (d) as § 460.60(a), (b), and (c).

In addition, we propose to revise current paragraph (d)(3) (redesignated paragraph (c)(3)) regarding changes in the organizational structure of a PO and add a new paragraph (d) to address PO changes of ownership. Section 460.60(d)(3) currently provides that a PO planning a change in organizational structure must notify CMS and the SAA, in writing, at least 14 days before the change takes effect. We have stated in guidance that a change in organizational structure is one that may affect the philosophy, mission, and operations of the PO and affect care delivery to participants, and would include any change in ownership (see PACE Manual, Ch. 2, section 20.3).

In the 1999 IFC (64 FR 66241) we required POs to notify both CMS and the SAA at least 60 days prior to any change in their organizational structure and obtain advance approval for any change that involved a change of ownership. In the 2006 final rule (71 FR 71264), we discussed the comments we

received on this provision and explained it was not our intent to require POs to notify CMS and the SAA in writing every time there was a change in personnel or a change in the line of reporting of direct participant care staff. Based on comments that the 60-day timeframe was unnecessary, we elected to change the requirement to the 14-day requirement that is currently in place. We also deleted the requirement that changes in organizational structure must be approved in advance by CMS and the SAA, agreeing with commenters that POs have the ability to make such business decisions based on their individual circumstances. As CMS and the SAA are responsible for the health care provided to participants, we retained the 14-day notification requirement in § 460.60(d)(3) to allow CMS and the SAA sufficient time to monitor whether the change is having a substantial impact on the participants or their care. However, we reiterated that in the event of a change of ownership, we would apply the general provisions described in the Medicare Advantage regulations at § 422.550.

Based on our experiences with PO changes of ownership since we published the 2006 final rule, we no longer believe 14 days gives us enough time to review and process a change of ownership. A change of ownership is significantly different from other organizational changes in that it results in the acquiring entity assuming the responsibilities under the PACE program agreement. We need additional time to determine whether the acquiring entity meets statutory and regulatory requirements for entering into a PACE program agreement. Our ultimate responsibility is to the PACE participants, and we need to ensure that an entity is able to assume and fulfill the responsibilities of a PO under the PACE program agreement.

Moreover, the process to effectuate a change of ownership transaction in our systems requires more time than the 14-day timeframe in the current regulation. For example, a minimum of 6 weeks is needed to effectuate changes in our payment systems for the new owner. A 60-day advance notification requirement is more consistent with that timing. We also want our regulations to be clear that the requirements in 42 CFR part 422, subpart L (Effect of Change of Ownership or Leasing of Facilities During Term of Contract), which apply to MAOs under the Medicare Advantage program, apply to POs in a change of ownership scenario. Therefore, we propose to amend newly redesignated paragraph (c)(3) to indicate that the 14-day timeframe does not apply to changes of ownership, and to add new paragraph (d), which would specify that a PO planning a change of ownership must comply with all requirements in 42 CFR part 422, subpart L, and must notify CMS and the SAA, in writing, at least 60 days before the anticipated effective date of the change. We believe this will provide the time we need to determine if the entity acquiring the PO meets all PACE requirements and will be able to continue providing quality care to the participants of the PO, and to reflect the change in our systems. We also believe the amended language would provide greater clarity to POs as to the requirements that will apply in change of ownership scenarios. We believe the Medicare Advantage requirements for changes of ownership in 42 CFR part 422, subpart L, are appropriate for the PACE program. We will only enter into a PACE program agreement with an entity that is determined to meet PACE program requirements.

For the purposes of this provision, any change of ownership as defined in § 422.550(a), such as an asset transfer, a merger, or change in partnership, would require a novation agreement, where the contract is substituted for the former contract. POs will need to follow all change of ownership requirements in 42 CFR part 422, subpart L, and must submit all of the necessary documents to CMS for review within the allotted timeframes. Upon CMS's determination that the conditions for CMS approval of a novation agreement are met, a new PACE program agreement will be executed with the acquiring entity.

2. Governing Body (§ 460.62)

Section 460.62 focuses on the ability of the PO's governing body to provide effective administration in an outcome-oriented environment. As we have previously explained in the 1999 IFC (64 FR 66241) and the 2006 final rule (71 FR 71264), the governing body guides operations and promotes and protects participant health and safety, and it is legally and fiscally responsible for the administration of the PO. Additionally, the governing body must create and foster an environment that provides quality care that is consistent with participant needs and the program mission. To that end, we are proposing to revise the language in § 460.62(a)(7) and to add new paragraph (a)(8). Currently, § 460.62(a)(7) references a “quality assessment and performance improvement” program. In addition to replacing that term with “quality improvement,” as discussed previously in section II.A. of this proposed rule, we are also proposing to add a reference to the quality improvement program requirements in § 460.130, to make it clear that the governing body is ultimately responsible for ensuring the PO meets those requirements.

In addition, as discussed later in this section, we are proposing in a new § 460.63 to require that all POs adopt and implement effective compliance oversight. Because the governing body is both legally and fiscally responsible for administration of the PO, and is responsible for ensuring that the organization provides quality care (see § 460.62(a)), we believe adoption and implementation of compliance oversight requirements is the responsibility of the governing body. Having legal responsibility over the governance of the organization requires ensuring that the organization complies with federal and state regulations, adheres to contract requirements, and minimizes waste and abuse. To that end, we are proposing to add a new § 460.62(a)(8) that specifies the governing body of the PO must have full legal authority and responsibility for adopting and implementing effective compliance oversight as described in § 460.63.

3. Proposed Compliance Oversight Requirements

Compliance programs, as found in the Medicare Advantage (MA) and Medicare Part D programs, have long been recognized as key to protecting against fraud, waste, and abuse. The importance of these programs has been highlighted by several of our oversight bodies. As is authorized by sections 1934(f)(3) and 1894(f)(3) of the Act, we are now proposing to adopt compliance oversight requirements in the PACE regulations. Specifically, we would require each PO to have a compliance oversight program that is responsible for monitoring and auditing their organization for compliance with our regulations. Additionally, we would require POs to have measures that prevent, detect and correct non-compliance with CMS's program requirements as well as measures that prevent, detect, and correct fraud, waste, and abuse. This is a proposed new section at § 460.63, entitled “Compliance Oversight Requirements.”

In determining what compliance oversight CMS should require of all POs, we considered as potential models the compliance program requirements for Medicare Part C organizations at § 422.503(b)(4)(vi) and the compliance program requirements for Part D sponsors at § 423.504(b)(4)(vi). POs offering qualified prescription drug coverage under Part D are already required to have a compliance program

as a part of their Part D benefit, however, specific requirements of the Part D compliance program were waived for all POs. The Part D application took into account PACE as a direct care provider as well as a payer, and it weighed the importance of maintaining compliance with CMS regulations with the need for flexibility as a direct care provider. All Part D compliance program elements were waived except the two elements proposed in this regulation.

In § 460.63, we propose to establish that the two elements of a Part D compliance program required of POs participating in Part D will become compliance oversight requirements for the PO as a whole. Specifically, we propose to require each PO to adopt and implement effective compliance oversight, which includes measures that prevent, detect and correct non-compliance with CMS's program requirements as well as measures that prevent, detect and correct fraud, waste and abuse. We propose that the compliance oversight program in PACE include, at a minimum: (1) The establishment and implementation of an effective system for routine monitoring and identification of compliance risks, which should include internal monitoring and audits and, as appropriate, external audits, to evaluate the PO, including contractors, compliance with CMS requirements and the overall effectiveness of the compliance oversight program; and (2) the 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 ensuring ongoing compliance with our requirements. Included in this proposal would be the requirements that a PO: (1) Conduct a timely and reasonable inquiry if evidence of misconduct relating to payment or delivery of items or services is discovered, (2) conduct appropriate corrective action in response to potential violations (for example, repayment of overpayments or disciplinary actions against responsible employees), and (3) have procedures to voluntarily self-report potential fraud or misconduct to CMS and the SAA. The PO should already have these elements implemented for their Part D benefit, but they would need to expand these efforts to cover all of the services provided by the PO.

POs are not currently required to conduct internal organization wide monitoring or auditing efforts. Through our experiences with MA and Part D organizations, we believe that conducting monitoring and auditing is key to identifying and correcting issues of non-compliance with CMS requirements. We believe that by adding these two compliance oversight provisions we are balancing the duty of a PO to ensure compliance with CMS requirements with the need for flexibility as a provider of service. POs will also benefit from improving their ability to identify and correct compliance risks within their own organization.

Additionally, our proposal requires the PO to implement appropriate corrective action in response to any identified issues of non-compliance that POs may discover. These elements are important safeguards to protect against fraud, waste, and abuse, and to ensure POs are compliant with CMS requirements. We believe our proposal for POs to adopt these compliance oversight requirements is a reasonable approach and will ensure POs are identifying and correcting potential non-compliance at the earliest possible stage.

If finalized, we intend to verify compliance with this new requirement through monitoring or auditing of the PO.

4. Personnel Qualifications (§ 460.64)

Section 460.64 sets forth the personnel qualifications for staff with direct participant contact. In the 2006 final rule (71 FR 71267), we added a requirement at § 460.64(a)(3) that all personnel that have direct participant contact must have a minimum of 1 year of experience with a frail or elderly population. Our rationale was that the PACE population is comprised of frail or elderly individuals who must be cared for by staff with the specific training and experience necessary to understand the complexities and differences in geriatric patients.

However, we are concerned that many POs, especially those in rural settings, may have candidates for PO staff positions who meet all other qualifications for a specific position under § 460.64(a) but do not have 1 year of experience working with the frail or elderly population. We have approved several waivers of this requirement. For example, this situation often arises for positions such as van driver or transportation coordinator. We have received anecdotal reports that some POs encounter van drivers who have many years of relevant experience as school bus drivers but are unable to hire these drivers based on the requirement that staff with direct participant contact have 1 year of experience working with the frail or elderly population. We also have approved this type of waiver request for registered nurses (RNs), social workers, and other direct care providers.

We believe that POs should be able to hire individuals who meet all other qualification requirements under § 460.64(a) except for the 1 year of experience requirement under paragraph (a)(3), and provide training to these individuals upon hiring. This required training may be provided either through a training entity or directly by the PO. This training must be based on industry standards in order to provide these individuals with the skills necessary to work with the frail or elderly population in PACE. For example, through training, an individual would be taught about the complexities and differences in geriatric patients, and that he or she needs to be gentler, more patient and more observant than with a healthy, younger population. Therefore, we are proposing to amend § 460.64(a)(3) to state that a member of the PO's staff (employee or contractor) who has direct participant contact must have 1 year of experience working with a frail or elderly population or, if the individual has less than 1 year of experience but meets all other requirements under paragraph (a) of § 460.64, must receive appropriate training from the PACE organization on working with a frail or elderly population upon hiring. This proposal would afford POs the flexibility to hire an otherwise qualified individual with less than 1 year of experience working with the frail or elderly population and subsequently provide the requisite training.

Current language in § 460.64(a)(4) requires staff with direct participant contact to meet a standardized set of competencies for a specific position established by the PO and approved by CMS before working independently. We continue to believe POs must establish a competency evaluation program for direct participant care staff as required by § 460.71(a)(2) and discussed in the 2006 final rule (71 FR 71267) to ensure that staff have the skills, knowledge and abilities needed to deliver safe care to participants. However, we do not believe it is necessary for CMS to approve those competency evaluation programs prior to their use. CMS expects the PO to use current industry standards. Therefore, we propose to revise to this paragraph to remove the reference to CMS approval. We also are proposing to make technical, non-substantive changes to the language in

paragraph (a) by changing the order of the current language in order to make the provision clearer and more concise.

5. Training (§ 460.66)

Section 460.66 requires the PO to provide training for staff members and to develop a specific training program for personal care attendants (PCAs). Paragraph (b) requires the PO to develop a training program for each PCA in order to establish the individual's competency in furnishing personal care services and specialized skills associated with the specific care needs of individual participants. Paragraph (c) states that PCAs must exhibit competency before performing personal care services independently. We are proposing to redesignate § 460.66(b) and (c) to § 460.71, “Oversight of Direct Participant Care,” as new paragraphs (c) and (d), respectively, because § 460.71 already includes requirements regarding training of staff and competency evaluations for employees and contracted staff furnishing care directly to participants. We believe including all of the related requirements in the same section would reduce confusion over applicable requirements. We are not proposing any changes to the language in § 460.66(a) but are proposing to remove the paragraph designation of paragraph (a).

6. Program Integrity (§ 460.68)

Section 460.68 was established to guard against potential conflicts of interest and certain other risks individuals and organizations could present to the integrity of the PACE program. Section 460.68(a) addresses risks presented by a PO employing or contracting with persons with criminal convictions. Section 460.68(a)(1) addresses individuals and organizations who have been excluded from participation in the Medicare or Medicaid programs. Section 460.68(a)(2) addresses individuals and organizations who have been convicted of offenses related to their involvement in Medicaid, Medicare, other health insurance or health care programs or social service programs under title XX of the Act. Section 460.68(a)(3) currently states that a PO must not employ individuals or contract with organizations or individuals in any capacity where an individual's contact with participants would pose a potential risk because the individual has been convicted of physical, sexual, drug, or alcohol use.

We believe that the current language in § 460.68(a) may not be tailored to effectively mitigate the risks that employing or contracting with certain individuals and organizations with prior convictions may pose to the PACE program, while still allowing POs to hire and contract with individuals who have had issues in their past that do not pose a risk to the PACE program. Accordingly, we are proposing to amend § 460.68(a) by adding clarifying language to current paragraph (a)(3) and by adding two new paragraphs (a)(4) and (5).

The current language in § 460.68(a)(3) may have, in some cases, been overbroad so as to impair the PO's ability to hire or contract with appropriate staff. For example, under the current regulation, a PO is precluded from employing an individual with a conviction related to underage drinking, who has not had a conviction in adulthood, who is an otherwise appropriately qualified individual to work in a PO, and who would pose no foreseeable threat to participants. In other instances, however, it is possible that an individual's past criminal conviction or convictions related to physical, sexual, drug, or alcohol abuse could provide POs with reason to believe that the individual may pose a threat of harm to participants. For example, there is a foreseeable risk of harm to participants if a PO employs a transportation driver who has a history of multiple DUI convictions. We believe that it is important for POs to consider an individual's past criminal convictions and the potential risk to participants; however, we do not want to limit POs' ability to hire or contract with qualified individuals. This reflects the direction we have taken for long-term care facilities (see, for example, § 483.13(c)(1)(ii)), where specific restrictions are focused on individuals that are found guilty of abusing, neglecting or mistreating nursing home residents.

As such we are proposing to amend the language at § 460.68(a)(3) to enable POs to make a determination as to whether an individual's contact with participants would pose a potential risk because the individual has been convicted of one or more criminal offenses related to physical, sexual, drug, or alcohol abuse or use. We note that POs are still bound by state laws governing the hiring of individuals that provide care and services to the frail elderly in state programs. We also note that the current language in § 460.68(a)(3), which refers to “drug, or alcohol abuse” does not parallel the terminology used in criminal statutes, which often do not use the term “abuse” to describe the misconduct at issue, and also does not take into account criminal convictions that could be related to drug, or alcohol use, such as DUIs, or drunken and disorderly conduct. We are therefore proposing to amend the language to include “drug, or alcohol abuse or use.”

Although we do not want to foreclose POs from employing or contracting with qualified individuals or organizations that would pose no harm to participants despite past convictions, we are proposing to add language in paragraphs (a)(4) and (5), to impose additional limitations on POs employing or contracting with individuals or organizations that may pose a risk to participants. In new paragraph (a)(4), we are proposing to add a restriction stating that a PO must not employ individuals or contract with organizations or individuals who have been found guilty of abusing, neglecting, or mistreating individuals by a court of law or who have had a finding entered into the state nurse aide registry concerning abuse, neglect, mistreatment of residents, or misappropriation of their property. This language parallels regulatory restrictions applicable to Long Term Care facilities in § 483.13(c)(1)(ii). We believe these safeguards intended to protect residents in long term care facilities are equally appropriate protections for participants in the PACE program. In paragraph (a)(5), we are proposing to add a restriction stating that a PO must not employ individuals or contract with organizations or individuals who have been convicted of any of the crimes listed in section 1128(a) of the Act. These offenses, which are bases for mandatory exclusion from federal health care programs, are: (1) Conviction of program-related crimes; (2) conviction relating to patient abuse; (3) felony conviction relating to health care fraud; or (4) felony conviction relating to controlled substance. Because we are proposing to add two paragraphs to the current three paragraphs in paragraph (a), we are proposing to remove the word “or” at the end of paragraph (a)(2). We also invite public comment on whether we should extend this provision to restrict hiring with respect to those with certain criminal justice histories to also include those with current restraining orders against them.

7. Contracted Services (§ 460.70)

Sections 1894(b)(1)(A) and 1934(b)(1)(A) of the Act state that, under a PACE program agreement, a PO must furnish items and services to PACE participants directly or under contract with other entities. Accordingly, we require in § 460.70 that all administrative or care-related services, except for emergency services as

described in § 460.100, that are not furnished directly by a PO must be obtained through contracts that meet the requirements specified in regulations. We are seeking input on whether contracted services authorized by the PO or services operated directly by the PO should comply with the Home and Community-Based Settings (HCBS) regulation at § 441.301(c)(4) when non-institutional settings are used to house and/or provide services to PACE participants, provided they do not conflict with requirements under this section. The HCBS settings requirements apply broadly to many different Medicaid authorities, including state plan services and waivers, such as sections 1915(c), 1915(i), and 1915(k) of the Act. Because POs already support the majority of participants in non-institutional settings, we are seeking comments on whether or not CMS should apply the requirements to POs. Although we are not proposing any changes in this proposed rule requiring compliance with § 441.301(c)(4) when non-institutional settings used to house and/or provide services to PACE participants, we are requesting comments on possible proposals to do so in future rulemaking. Changes we are considering and on which we are soliciting comments include:

• Adding a new paragraph § 460.70(b)(1)(iv) stating, a contractor must comply with the Home and Community-Based Settings (HCBS) regulation at § 441.301(c)(4) when non-institutional settings are used to house, provide services to, or house and provide services to PACE participants, provided they do not conflict with requirements under this section.

• Adding a new paragraph § 460.98(b)(4) stating, the PO must comply with the Home and Community-Based Settings (HCBS) regulation at § 441.301(c)(4) when non-institutional settings are used to house, provide services to, or house and provide services to PACE participants, provided they do not conflict with requirements under this section.

In this proposed rule, we are proposing several revisions concerning contracts with entities that furnish administrative or care-related services. Section 460.70(d)(5) specifies the required terms for contracts with entities that furnish administrative or care-related services. Sections 460.70(d)(5)(vi) through (ix) address additional contract requirements where the PO chooses to contract with individuals as IDT members or key administrative staff. Although the current provisions do not explicitly reference those individuals, this was our intent when we adopted the requirements in the 2002 IFC (see 67 FR 61498, 61505) and when we addressed these requirements in the 2006 final rule (see 71 FR 71270, 71335). This is also how we have interpreted the regulation in practice, however, we understand it has caused confusion for POs. To make the regulation clearer and reduce confusion, we are proposing to add a new paragraph (d)(6) under which we are proposing to redesignate § 460.70(d)(5)(vi) through (ix) as § 460.70(d)(6)(i) through (iv) and state that these contract requirements apply to individuals providing contracted services to the IDT or performing the duties of the program director or medical director. We are also proposing to make a technical change to the language in former § 460.70(d)(5)(vii), proposed § 460.70(d)(6)(ii), to change “meeting” to “meetings.”

We are proposing to make a technical change to § 460.70(e)(2) to change “PACE Center” to “PACE center” consistent with the definition in § 460.6, and other references throughout the regulation. We are also proposing to revise § 460.70(e)(2) to correct the reference contained in that section by changing § 460.98(d) to be § 460.98(c).

8. Oversight of Direct Participant Care (§ 460.71)

Section 460.71 identifies PO oversight requirements for employees and contracted staff with direct patient care responsibilities. Paragraph (a) requires the PO to ensure that all employees and contracted staff furnishing care directly to participants demonstrate the skills necessary for performance of their position, and further requires, under paragraph (a)(1), that the PO provide an orientation to all employees and contracted staff. Paragraph (b) requires the PO to develop a program to ensure that all staff furnishing direct participant care services meet certain requirements, including, under paragraph (b)(4) that they are free of communicable diseases and are up to date with immunizations before performing direct patient care.

We are proposing to make some technical, non-substantive changes to paragraph (a)(1) that would make the provision more concise. We are also proposing to amend paragraph (b)(4). Our intent when we amended § 460.71 in the 2006 final rule was to reflect our current policy described in § 460.64(a)(5), which states that PACE staff (employees or contractors) who have direct participant contact must be medically cleared for communicable diseases and have all immunizations up-to-date before engaging in direct participant contact (see 71 FR 71273). We note that § 460.71(b)(4) was not amended in a consistent manner, which we understand caused confusion among POs about whether to attach the same meaning to “medically cleared for communicable diseases” and “free of communicable diseases.” Therefore, we are proposing to amend § 460.71(b)(4) by referencing the language previously added to § 460.64(a)(5) so that both sections are consistent and contain the same language.

As noted previously in our discussion of proposed changes to § 460.66, we propose to move paragraphs (b) and (c) of § 460.66 related to direct participant care to § 460.71(c) and (d), respectively.

9. Physical Environment (§ 460.72)

Section 460.72 addresses requirements for the physical environment of the PACE center, including those pertaining to space and equipment, fire safety, and emergency and disaster preparedness. CMS previously issued a proposed rule under the Medicare and Medicaid programs that, if finalized, would affect the PACE requirements at § 460.72. Specifically, in the December 27, 2013
Federal Register
(78 FR 79802), CMS published a proposed rule titled “Medicare and Medicaid Programs; Emergency Preparedness Requirements for Medicare and Medicaid Participating Providers and Suppliers; Proposed Rule.” The rule proposed to establish national emergency preparedness requirements for 17 types of Medicare- and Medicaid-participating providers and suppliers, including POs, to ensure that they adequately plan for both natural and man-made disasters, and coordinate with federal, state, tribal, regional, and local emergency preparedness systems. Regarding PACE, the proposed rule generally would remove the current PO emergency preparedness requirements at § 460.72(c)(1) through (5) and incorporate them into a new proposed § 460.84, “Emergency preparedness.” For a complete discussion of the PACE emergency preparedness proposal, see 78 FR 79107 through 79108, 79185.

As with all rulemaking, the public was afforded an opportunity to comment on these proposed revisions during the notice and comment period. CMS intends to address the comments and any changes to the PACE program through that rulemaking and not in this proposed rule.

10. Marketing (§ 460.82)

Section 460.82 addresses requirements governing the marketing

activities of POs. Section 460.82 provides special language requirements, and paragraph (c)(1) states that a PO must furnish printed marketing materials to prospective and current participants in English and in any other principal languages of the community. We are proposing to further clarify this requirement by defining what we mean by “principal languages of the community.” As we stated in the 2006 final rule (71 FR 71279), we believe the determination of a principal language of the community is a state determination. However, we recognize that not all states have an established standard for when a language is considered to be a principal language of the community (in other words, a language threshold). Where a state has not established such a standard, we are proposing the following standard would be applied—a principal language of the community would be any language spoken in the home by at least 5 percent of the individuals in the PO's service area. We refer to any language spoken “in the home” because U.S. Census data identifies the principal language as the primary language spoken in the home. We established a similar 5 percent language threshold for marketing materials in the Medicare Advantage program (see § 422.2264(e)), and we believe this threshold is also appropriate for PACE. Moreover, we strive to create harmony across program requirements when feasible. This reduces complexity for those organizations that operate multiple CMS programs. Currently, in the Medicare Advantage program, we determine which MA organizations must provide translated marketing materials by using the U.S. Census Bureau's American Community Survey (ACS) data, and we then communicate that information to plans via HPMS. If we finalize this proposal, we would use the same approach in PACE. We note that our proposal does not aim to replace any state-based language thresholds; rather the goal is to provide a standard in instances where a state standard does not exist. Additionally, this proposal would not preclude POs from producing materials in alternative languages when those languages are spoken by less than 5 percent of the individuals in the PO's service area, rather it aims to set a more clear standard for when furnishing such materials is a requirement.

Paragraph (e) pertains to prohibited marketing practices and places certain restrictions on PO employees and agents. Paragraph (e)(3) states that gifts or payments to induce enrollment are prohibited. As we stated in the 2006 final rule, this provision does not prevent a PO from offering gifts of a nominal value (see 71 FR 71279). For example, as we explained in the 2006 final rule, offering gifts to potential enrollees that attend a marketing presentation is permitted as long as these gifts are of a nominal amount and are provided whether or not the individual enrolls in the PACE program. The gift cannot be a cash gift or be readily converted into cash regardless of the amount. To ensure that our regulations reflect this distinction, we are proposing to amend paragraph (e)(3) to specify that gifts or payments to induce enrollment are prohibited, unless the gifts are of nominal value as defined in CMS guidance, are offered to all potential enrollees without regard to whether they enroll in the PACE program, and are not in the form of cash or other monetary rebates. CMS currently defines “nominal value” in section 30.10 of the PACE Marketing Guidelines (
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/pace111c03.pdf
) to mean an item worth $15 or less, based on the retail value of the item, which is consistent with the values in the marketing guidelines under the Medicare Advantage and Medicare Part D programs. We believe this revision to paragraph (e)(3) would preserve our goal of ensuring that current and potential PACE participants and their families or guardians elect PACE based on the merits of the program versus the enticement of a gift, while clarifying that POs have the ability to offer prospective participants a small gift such as a pen with the organization's name and contact information without the concern of violating the PACE marketing regulations. Similar flexibility has been permitted under both the Medicare Advantage and Part D programs for several years with no notable adverse impact to participants. As such, the PACE program will continue to look to these two programs to define the monetary value that constitutes a nominal gift. In addition, and consistent with the Medicare Advantage and Part D programs, the PACE regulatory definition of a nominal gift will exclude any gifts in the form of cash or monetary rebates.

Section 460.82(e)(4) prohibits contracting outreach efforts to individuals or organizations whose sole responsibility involves direct contact with the elderly to solicit enrollment. Due to the particular nature of the PACE program and the PACE population, we believe it is in the best interest of the program to only permit POs to market their programs through their own employees. Therefore, we are proposing amendments to this section to specifically prohibit POs from using non-employed agents/brokers, including contracted entities, to market PACE programs.

The decision to enroll in a PACE program is significantly different from the decision to enroll into other Medicare or Medicaid managed care programs because PACE participants must agree to receive all medical care (as well as other services) from the PO into which they enroll. This may mean PACE participants must give up longstanding relationships with health care providers as well as become liable for the costs of any unauthorized services. This is an important distinction that non-employed agents and brokers may overlook when they market PACE programs to potential participants. Agents and brokers that do not work for POs often sell other products, such as Medicare Advantage and Medicare Prescription Drug Plan (PDP) products. These products are significantly different from PACE in many respects, including the services that are covered, the ways in which participants receive the services, and the enrollment requirements for participants. We are concerned that these substantial differences, combined with the typical low enrollment numbers associated with the PACE program, make it difficult for agents and brokers that are not employed by POs to fully understand and explain the PACE program to potential participants. It is important to emphasize that our concern is less about false marketing (which connotes a malicious action) and more about enrollment numbers not becoming the primary motivation when marketing PACE. An independent third party would likely not have the opportunity to develop the necessary expertise to act as agents employed by a PO. We believe employees of the PO are the best equipped to provide potential participants and their caregivers with accurate information about the PO, the services it provides and the ramifications of receiving services not approved by the PO's IDT. This is especially important given the vulnerable nature of the PACE population, which is elderly and frail and often has more complex health care needs than Medicare or Medicaid managed care populations, for which the use of non-employed agents and brokers for marketing may be more appropriate.

We believe that only permitting POs to use employees for marketing activities will help ensure potential

PACE participants fully understand the program, the rules, how to access services, and the ramifications of not accessing services through the PO. Accordingly, we are proposing to amend § 460.82(e) to remove the term “agents” and simplify the language. The revised provision would state that a PACE organization must not use the following marketing practices, which are prohibited. In conjunction with that revision, we are also proposing to amend paragraph (e)(4) to prohibit marketing by any individuals other than the employees of the PACE organization. We realize that some POs have existing arrangements with independent agents and brokers. We also recognize that, as with other functions, POs may delegate such responsibilities to an outside entity. Therefore, we are seeking comment as to whether CMS's proposed prohibition on the use of independent agents and brokers is appropriate. If commenters believe that this prohibition is not appropriate, we ask for specific reasons for allowing their use, descriptions of how POs contemplate using agents and brokers, and the protections POs have in place to ensure accurate information is provided to potential PACE participants.

Section 460.82(e)(5) prohibits unsolicited door-to-door marketing. We are proposing to add language to § 460.82(e)(5) specifying that any other unsolicited means of direct contact, including calling or emailing a potential or current participant without the individual initiating contact, is a prohibited marketing practice under PACE. Unsolicited contact, for example, through telephone (also known as “cold calling”) or email, is similar to, and generally as prevalent if not more prevalent, than door-to-door marketing, which is already expressly prohibited under § 460.82(e)(5). The purpose of this addition is to clarify that unsolicited means of direct contact through telephone and email are not allowed under PACE. Although we declined in the 2006 final rule to expand this prohibition beyond door-to-door solicitation, we stated we would continue to monitor marketing practices by POs and would propose additional safeguards as appropriate (see 71 FR 71279). Based on the vulnerability of the population served by the PACE program and the increase in health care fraud that we have seen since 2006, we believe a prohibition on other unsolicited means of direct contact is appropriate for PACE. Moreover, such a prohibition is consistent with our marketing requirements for MA organizations (see § 422.2268(d)) and PDP sponsors (see § 423.2268(d)).

We are also proposing to remove § 460.82(f), which requires that POs establish, implement, and maintain a documented marketing plan with measurable enrollment objectives and a system for tracking its effectiveness. Based on the insight we have gained through years of oversight responsibility for the PACE program, we believe the requirement for a marketing plan is redundant. We believe that the pertinent information captured in the plan is attainable through other account management activities. For example, POs convey marketing strategy in regularly scheduled meetings with their CMS Account Managers. The CMS Account Manager is also made aware of marketing materials and messages, as well as the intended audience for such materials and messages, through the marketing submission and review process. In addition, CMS has a separate method for tracking enrollment data.

G. Subpart F—PACE Services

1. Service Delivery (§ 460.98)

Section 460.98 addresses service delivery under PACE. We propose to make a technical change to the heading of § 460.98(d) to replace “PACE Center” with “PACE center” for consistency with other references in § 460.98 and throughout part 460. Likewise, in paragraph (d)(3) we would replace “Pace center” with “PACE center” for the same reason.

In addition, we are requesting public comment on potential changes to our PACE center requirements, which originated from the PACE Protocol. As defined in § 460.6, a PACE center is a facility which includes a primary care clinic, areas for therapeutic recreation, restorative therapies, socialization, personal care, and dining, and which serves as the focal point for coordination and provision of most PACE services. Under § 460.98(b)(2), PACE services must be furnished in at least the PACE center, the home and inpatient facilities, and under § 460.98(b)(2), certain minimum services must be furnished at each PACE center. Section 460.98(d) requires a PO to operate at least one PACE center either in, or contiguous to, its defined service area with sufficient capacity to allow routine attendance by participants. A PO must ensure accessible and adequate services to meet the needs of its participants and, if necessary, must increase the number of PACE centers, staff, or other PACE services. If a PO operates more than one center, each PACE center must offer the full range of services and have sufficient staff to meet the needs of participants.

As explained in the 2006 final rule (71 FR 71283), we believe the success of the PACE delivery model has been predicated on the combination of the IDT assessment, care planning, and the PACE center. The PACE center requirement established in the original PACE Protocol provides a point of service where the primary care clinic is located, where services are provided, and socialization occurs with staff that is consistent and familiar. The IDT not only works from the PACE center, it also provides the majority of services to participants at the PACE center, where most participants come on a regular basis to receive the majority of their care. Attendance at the center has been considered an important aspect of the PACE model, which helps to differentiate it from home health care or institutional care. More recently CMS has allowed participants to receive services at alternative care settings. However, those services are meant to supplement, not replace, the services that the PACE center must furnish.

Over the years, we have received a number of requests to provide greater flexibility with respect to the PACE center operation and service requirements. We have heard concerns that the development costs and the length of time required to establish a PACE center can be significant and as well as inhibit expansion of existing programs. To better understand the issues facing POs, we invite public comment on ways to revise the current regulatory requirements to allow greater flexibility with regard to the settings in which IDT members provide PACE services, while still ensuring that PACE participants can receive the full range of services and benefits that has made PACE such a successful model for this population. We will use public comments to inform future PACE rulemaking concerning how to allow greater flexibility with regard to the settings in which IDT members provide PACE services.

2. Emergency Care (§ 460.100)

Section 460.100 addresses emergency care under PACE. We are proposing to make a technical revision to § 460.100(e)(3)(i) by replacing references to “POs” and “PO” with references to “PACE organizations” and “PACE organization,” respectively, to make the language consistent throughout § 460.100 and with other references in part 460.

3. Interdisciplinary Team (§ 460.102)

Section 460.102 sets forth the requirements for an IDT, which are based on provisions in Part IV, section B of the PACE Protocol (see 64 FR 66248). As we have stated previously in preambles to rules and subregulatory guidance (see
http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/pace111c08.pdf
), we believe a well-functioning IDT is critical to the success of the PACE program because the team is instrumental in controlling the delivery, quality, and continuity of care. Further, members of the IDT should be knowledgeable about the overall needs of the participants, not just the needs that relate to their individual disciplines (64 FR 66248; 71 FR 71285). Section 460.102(a)(1) requires that the PO establish an IDT at each PACE center to comprehensively assess and meet the individual needs of each participant. Section 460.102(b) specifies the composition of the team and provides that it be comprised of at least the 11 members listed in the section.

Under sections 1894(f)(2)(B)(iii) and 1934(f)(2)(B)(iii) of the Act, the IDT approach to care management and service delivery is a requirement that cannot be waived. However, we understand there may be circumstances when it would be difficult for a PO to have a separate individual fill each of the 11 IDT roles, which may be an obstacle for the expansion of the PACE program, especially in rural areas. To provide greater flexibility for POs, we are proposing that a PO be permitted to have one individual fulfill a maximum of two separate roles on an IDT when the individual meets applicable state licensure requirements and is qualified to fill each role and able to provide appropriate care to meet the participant's needs. For example, a registered nurse cannot fill the role of a Master's level social worker unless the registered nurse also has a Master's degree in social work. Pursuant to §§ 460.190 and 460.192, CMS and the SAA monitor POs during the trial period and perform ongoing monitoring after the trial period to ensure that POs are in compliance with all PACE requirements. These monitoring activities will serve as a safeguard to help ensure there is no negative impact to the quality of care being provided. During these reviews, CMS and the SAA can confirm that when an IDT member is serving in two IDT roles, participants' needs are still being met. As such, we are proposing to revise paragraph (a)(1) to state that the IDT must be composed of members that fill the roles described in paragraph (b). We also are proposing to revise paragraph (b) to state the IDT must be composed of members qualified to fill at a minimum the following roles, in accordance with CMS guidelines. We will publish the IDT guidelines in HPMS following publication of the final rule. Paragraph (b) would also state that one individual may fill two separate roles on the IDT where the individual meets applicable state licensure requirements and is qualified to fill the two roles and able to provide appropriate care to meet the needs of participants.

Section 460.102(b)(1) currently provides that the IDT must include a primary care physician, and § 460.102(c) requires that primary medical care be furnished by a PACE primary care physician who is responsible for managing a participant's medical situations and overseeing a participant's use of medical specialists and inpatient care. We are aware that changes in the practice of medicine and state licensing laws have expanded the practice of non-physician practitioners (for example, nurse practitioners), such that these practitioners in many cases are able to fulfill the role served by the primary care physician. Thus, including those individuals on the IDT in the role of the primary care provider may prove to be more operationally feasible and cost-effective, particularly in rural areas or areas where labor costs may be high. We have approved requests by POs to waive the requirement at § 460.102(b)(1) and (c) so that primary medical care can be furnished by someone other than a primary care physician on the IDT, thus allowing POs to deliver care through a non-physician primary care provider (such as a nurse practitio

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2016-19153. Public record. Not legal advice.