Health Care Financing Research and Demonstration Cooperative Agreements and Grants for Fiscal Years 1994 Through 1996

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[ORD-066-N]

Health Care Financing Research and Demonstration Cooperative

Agreements and Grants for Fiscal Years 1994 Through 1996

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice.

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

SUMMARY: This notice announces the availability of HCFA funding under

cooperative agreements and grants for projects that will focus on major

issues in the reform, financing, and delivery of health care. The

notice contains information about the subject areas for cooperative

agreements and grants that will be given priority, project

requirements, application procedures, and other relevant

considerations.

DATES: Cooperative agreement and grant applications for priority areas,

as described in sections I. and II. of this notice, must be submitted

by March 24, 1994, February 7, 1995, or February 6, 1996, in order to

be considered under the annual funding cycle. For an explanation of

timely submission, see section VIII. of this notice.

ADDRESSES: Standard application forms and related instructions may be

requested by telephone, by calling (410) 966-6120, or may be requested

in writing from and must be formally submitted to:

Ms. JuDee Caquelin, Grants Officer, Health Care Financing

Administration, Office of Budget and Administration, Office of

Acquisitions and Grants, Room 389 East High Rise, 6325 Security

Boulevard, Baltimore, Maryland 21207-5187.

Ms. Caquelin is also available at (410) 966-5157 to answer

questions and to provide guidance regarding completion of the

application forms.

FOR FURTHER INFORMATION CONTACT: Carl Hackerman, (410) 966-6644, Health

Care Financing Administration, Office of Research and Demonstrations,

Office of Operations Support, Division of Program Support, 2-C-9 Oak

Meadows Building, 6325 Security Boulevard, Baltimore, Maryland 21207-

5187.

SUPPLEMENTARY INFORMATION:

I. HCFA's Research and Demonstration Projects Awarded as

Cooperative Agreements and Grants

A. Goals

Our research and demonstration program conducts studies whose goals

are to assess the current health care delivery/financing sector and to

develop innovative ways to improve the quality and cost-effectiveness

of health care programs. We support the conduct of extramural research

and demonstration projects principally through two award mechanisms:

procurements (contracts) and assistance awards (cooperative agreements

and grants). This announcement concerns projects that will be awarded

as cooperative agreements and grants. (Announcements of planned

procurement awards are made through notices published in the ``Commerce

Business Daily.'') The principal purpose of our cooperative agreements

and grants program is to stimulate, support, and assist, through an

active health services research and demonstration program, the

resolution of major health care organizational and financing issues. We

hope to advance knowledge in issues of health care financing and

delivery and to develop ways of applying that knowledge. We believe

this assistance will serve a long term and vital purpose--to increase

the efficiency and effectiveness of the entire health care sector by

improving the ways in which health care is financed and delivered.

Direct payments for health care services constitute one of the

largest single segments of Federal and State budgets. In addition,

employee health benefits paid by businesses add significantly to the

cost of United States (U.S.) goods and services. Access to and quality

of care and cost-effectiveness of current delivery systems and

potential new financing mechanisms continue to be areas of significant

research interest as we continually reassess current methods of payment

for health care programs and look for innovative methods for paying for

health care services in the future. The public interest in research in

these areas is particularly great at this time as the Nation considers

approaches to restructuring the health care sector and controlling

expenditures for health care. Many of the research topics described in

this solicitation reflect overarching issues that must be considered as

part of health care reform.

These and other research interests described here are intended to

provide information on controlling health care costs and restructuring

current systems that will be useful to a broad audience, including

State governments, private insurers, and self-insured businesses, as

well as the Federal government.

This notice describes the application procedures, general policy

considerations, criteria to be used in reviewing applications, and

selection criteria for our cooperative agreements and grants. Our

current research and demonstration interest is for applications that

address the following areas:

Health care systems reform and financing.

Managed care systems.

Provider payment.

Access and quality of care.

Service delivery systems.

Subacute and long-term care.

B. Funds for Cooperative Agreements and Grants

A review of the requirements for existing priorities, our FY 1994

budget, and expected FY 1995 and FY 1996 budgets indicate that

approximately up to $2 million to $4 million per year may be available

to the Office of Research and Demonstrations (ORD), HCFA, to fund new

cooperative agreements and grants for research and demonstration

projects.

C. Eligibility Requirements

Applications for cooperative agreements and grants may be submitted

by private or public nonprofit agencies or organizations, including

State agencies that administer the Medicaid program. Private for-profit

organizations may apply for cooperative agreements and grants

(discretionary funds) under sections 1110(a)(1), 1875(a) and 1881(f) of

the Social Security Act; section 402(a)(1) of Public Law 90-248, as

amended; section 222(a) of Public Law 92-603, as amended; and section

9335 of Public Law 99-509.

D. Number and Size of Projects

Most awards range from $100,000 to $350,000 per year for 1 to 3

years. We also may award some projects for larger amounts. The number

of cooperative agreements and grants depends on: the availability of

funds; needs of projects that are continuing from prior years; priority

interest areas established by us; and the technical quality of

applications.

E. Additional Information

Information on our authority for making these awards, applicable

regulations, and the duration of funding is contained in section IV of

this notice. Application procedures are detailed in section V of this

notice.

II. Priority Areas

A. Health Care Systems Reform and Financing

The U.S. spends more per capita on health care than any nation in

the world, yet many Americans have no reliable way to finance their

access to our health care system. Growth in U.S. health care costs for

several decades has been more than 4 percent faster than general

inflation, and it now consumes more than one-eighth of our entire gross

domestic product (GDP). If current trends continue, total health

spending will reach or exceed 26 percent of our GDP by the year 2030.

Medicare spending increased by nearly 300 percent in the past decade.

Medicaid spending has increased by nearly 600 percent since 1980. U.S.

businesses are spending more on health care premiums than they earn in

after-tax profits.

There are some major distortions in the U.S. market for health

insurance that yield inefficiencies: (a) Fragmentation of the

marketplace, (b) the nature of consumer demand, including tax subsidies

that lower consumer sensitivity to costs, (c) limited consumer

information, which can lead consumers to mistake higher prices or more

intensive service delivery for better care or superior outcomes, and

(d) opportunities for favorable risk selection that give inefficient

health care plans unfair cost advantages. Also, the substantial

consumer and provider uncertainties about the effectiveness of a broad

range of diagnostic and therapeutic procedures and technologies, plus

the limited emphasis on disease prevention, contribute to

overutilization and occurrences of preventable illness.

Critics suggest that the U.S. health care system is too complex and

often lacking in accountability for the billions of dollars it

consumes. Others would point to the excellence of what the U.S. health

care system produces. While some aspects of the U.S. health care system

are envied by most of the world, the sector appears rife with

contradictory incentives for providers, patients, and payers. There is

wide concern about the administrative costs of insurers and providers

and that buyers are too weak to exercise market power. Experience

rating practices, coupled with such underwriting devices as exclusions

for pre-existing conditions and the requirements of various individual

States for mandatory coverage of certain kinds of limited license

providers or specified services, work synergistically to raise premiums

beyond many persons' ability to pay and the ability of many small

businesses to offer health insurance to employees.

We are interested in supporting research to address three general

areas: (a) Extending access to needed services to all segments of our

population, (b) controlling the growth in health care costs, and (c)

improving the quality of health care services and products. These three

subjects have become almost universally recognized as key areas by

those who are committed to reforming our health care system. Therefore,

we wish to sponsor research concerning major U.S. health care sector

reform issues and also aspects of reforming health care financing

incentives.

The types of issues in this category that we believe need study are

grouped into two general areas: health care systems reform issues, and

health care financing issues.

1. Systems Reform Issues

From these studies we hope to obtain useful guidance about how much

restructuring of the current U.S. health care sector is necessary as

well as feasible to implement and sustain.

Managed competition. We are interested in research into

the following topics to support the managed competition portion of

health care reform:

--Risk adjusters. Under many health reform proposals, premiums to

health plans would be adjusted to reflect enrollees' health risks. This

would lessen incentives to select (and retain) only healthy enrollees.

Plans that cover a sicker than average population would receive a

transfer of funds from plans with a healthier than average population.

Implementation of the system would require the development of health

risk adjusters. Other issues need to be addressed, such as whether

geographic variations in prices and utilization within State and sub-

State areas should be recognized in the payment system.

The Administration's health reform proposal recognizes the need for

risk adjusters and the reality that, in the short term, some reliance

will need to be placed on retrospective approaches while work proceeds

on prospective approaches. In the short term, risk adjustment may use

reinsurance (based on costs or on fixed payments for high cost

conditions and treatments), demographics, and survey data for risk

adjustment/pooling. In the medium term, prospective systems relying on

diagnostic, health status, and other information should be tested and

implemented.

Health risk adjusters need to be designed, for both Medicare and

non-Medicare populations including children, to predict expected health

care costs based on the health status of the individuals to be covered

by the system. Research projects could include work on a number of

possible methodologies: Ambulatory care groups (ACGs); diagnostic cost

groups (DCGs); payment amounts for capitated systems; ACG and DCG

hybrid adjusters; and other risk adjusters based on more detailed

clinical data, demographic data, administrative data, or survey data.

The Administration's proposal recognizes that special approaches,

perhaps relying heavily on retrospective adjustments, need to be

developed for mental illness. We are interested in private sector

efforts in managed care for mental illness and how they may aid in the

development of payment methods and risk adjustments for and in the

management of mental health services in health reform. The

Administration proposal recognizes that States may need to provide

incentives for health plans to enroll and serve disadvantaged groups.

We are interested in ways to modify the payment/risk adjustment

methodology to provide financial incentives to ensure enrollment and

access, and in ways to measure any extra costs associated with ensuring

adequate care.

We are also interested in the development of databases and systems

necessary to support health risk adjuster methodologies and in risk

adjustment mechanisms currently used in the private sector. We are

interested in research on the sensitivity of risk adjusters to

``gaming,'' on simulations of the effect of risk adjusters on premiums,

and on ways to manage and monitor the system. We are interested in

further research on other pooling mechanisms such as re-insurance and

outlier payments for costly cases or diseases.

We are interested in shared risk arrangements between a payer and a

plan or a plan and a provider.

While we are interested in both long- and short-term research,

because of the importance of risk adjusters for managed competition

approaches, projects of practical value that can be completed in a

short time are a very high priority.

--Administrative costs. We are interested in funding projects that

investigate possible changes in administrative costs associated with

the provision of health care under reform and explore how

administrative functions and costs might vary under health alliances of

different sizes and with different characteristics. In particular, we

are interested in projects that look at administrative functions and

costs associated with health alliances (or other mechanisms that pool

the purchasing of health insurance), and with the provision of large

group health insurance coverage in the place of small and individual

policies. We are interested in projects that consider changes in the

administrative costs of insurance, of providers (for example, managed

care arrangements, physician offices, and hospitals), and in States'

administrative costs associated with their responsibilities under

health reform.

--Consumer behavior. We are interested in funding projects that examine

consumer behavior in choosing health insurance coverage. Particularly,

we are interested in studies that estimate the potential for consumer

shifts to lower cost plans provided by the health alliance under

reform, and the size of potential savings that could be expected as a

result of these shifts. A related area of interest is research that

examines consumer choice when confronted with a variety of health

coverage options (for example, traditional fee-for-service, health

maintenance organization (HMO), and other managed care arrangements).

Consumer and beneficiary information. Very little is

known, from the viewpoint of either the beneficiary or the health care

provider, concerning how consumers make decisions affecting their

health care. Under the current system of health insurance, consumers

(including Medicare beneficiaries and Medicaid recipients) often have

little information on benefit plans, coverage restrictions, and cost-

sharing, as well as the quality and/or efficiency of health insurance

options. Improved information resources would enable purchasers to

choose among health plans based on their relative value and quality and

support the objectives of health care reform. Ultimately, improved

information for consumers could give providers greater incentives to

control costs while improving quality of services.

Information gaps are most prominent in the following areas: (1)

Consumer knowledge of benefit plans, coverage, cost-sharing, and

utilization controls, (2) effects of consumer knowledge on the

selection of health plans, including the interaction of health status

and expected level of use on choice; (3) the types of information most

helpful in assisting consumers in selecting efficient providers, such

as information about the costs and quality of services, and (4) the

types of information that can be developed to help consumers to become

knowledgeable about outcomes and costs of alternative treatments. We

are interested in projects in all of the above areas, including

projects that improve the information that Medicare beneficiaries and

Medicaid recipients and other health care consumers receive (for

example, assessing various ways of providing information to consumers)

and evaluate the impact of improved information on consumer

satisfaction, access to health care, quality of care, and the cost of

health care services. These might include analyses of current HMO/CMP

marketing practices that emphasize the ``quality'' features of their

plan versus those of others.

International perspectives. We are interested in detailed

studies that analyze specific health care policies of other developed

nations. Studies should examine specific features of other countries'

health financing and delivery systems, with special emphasis placed on:

health care cost containment; health care market characteristics,

including the extent of managed care development; payment mechanisms,

including negotiation-based approaches; modalities for delivering

primary care; health care quality measures; health outcomes measures;

health planning; and policies fostering lower infant mortality. Studies

should evaluate system features or initiatives at a micro-level rather

than use general aggregate information, and should include detailed

analyses of relevant data. We would like to support studies of the

reimbursement and payment systems used in other developed countries

that evaluate the pertinence of these systems in the context of the

U.S. health care system. Similarly, we would consider projects offering

comparisons and evaluations of cost containment mechanisms used or

proposed for other countries that might be considered for use in the

U.S.

Analyzing global payment strategies. We are interested in

initiating both research and pilot efforts to develop global payment

strategies. The effort would encompass approaches for developing

budgets at national, State, sub-State, and community (including the

rural community) levels. As currently envisioned, these projects would

develop processes involving major sectors of the health care provider,

practitioner, and supplier industries, with health alliances and other

major purchasers of health care and public representatives, in the

development of a global payment target for what health care spending

should be in a near term.

We are also interested in other formula-based approaches or

institutional mechanisms for establishing targets. We believe this will

require more research into current health expenditure patterns, which

examines their stability, and trends for population groups in

geographic areas. Our interest also extends to studies of mechanisms

for implementing or enforcing targets through such methods as third-

party utilization review and controls on premiums. We want to know more

about administrative features including data needs and reports, the

monitoring for looming problems, the roles of voluntary mechanisms, and

the options for mitigating financial gains or losses. We are also

interested in studies of current methods of third-party utilization

review and premium controls, and how these might be linked with

performance-based quality measurements.

Assessing advantages and disadvantages of all-payer

systems. Issues of cost-shifting by providers and among payers have

been discussed and analyzed for at least 50 years. Today, there appears

to be a common understanding that only a small percentage of patients

actually pay the full submitted charges from hospitals and physicians

for the care they receive. By and large, publicly financed and operated

programs pay at lower levels than do most private health insurance

systems. Within the private health sector, larger insurers and

employers are often able to achieve acceptance of lower payments than

those that smaller firms or plans can obtain. A wide variety of

hospital and/or physician networks have developed, based in large part

on the willingness of the providers to accept discounts from regularly

billed charges and fees. In order to be able to determine whether

uniform or ``all-payer'' systems for health care are desirable and

feasible, we believe that more study of uniform payment system

approaches that would be compatible with managed competition

initiatives is warranted. We are particularly interested in systems

that would encompass many kinds of health care providers,

practitioners, suppliers, and their services including ``mixed'' models

covering both managed care plans and traditional health insurance. We

believe that initial steps will involve the careful design of systems

that would take the following into consideration:

--The data needs for the construction and implementation of such a

system and their sources, strengths, and limitations.

--Means for involving hospitals, physicians, and suppliers.

--Ways of involving all payers, both public and private.

--Administrative approaches.

--Consumer and community involvement.

--Transitional considerations.

--Resource requirements for development and operation of the system.

--Potential legal impediments (national, State, and/or local).

--Capabilities of States to develop effective systems.

--Likely impacts of such systems on health services costs, access, and

quality.

--Consideration of the possible special circumstances of, and factors

related to, rural communities that might necessitate different all-

payer approaches.

Medicare Current Beneficiary Survey data and other new

data bases. In 1991, we launched the first round of a Medicare Current

Beneficiary Survey (MCBS), a longitudinal panel survey that collects

information on about 13,000 aged and disabled Medicare beneficiaries.

Persons aged 85 and over and persons entitled to Medicare due to

disability were oversampled to increase the sample size of these

vulnerable subgroups. The MCBS collects a variety of information

relating to the use of covered and noncovered services, including

costs, insurance coverage, out-of-pocket expenditures, health status,

income, assets, and living arrangements. Three interviews are conducted

annually for persons living in the community and for the

institutionalized.

Medicare administrative claims data, which contain detailed

information on the use and cost of Medicare-covered services, are being

linked with data collected from the MCBS. At this point, it is

anticipated that a survey panel will run for about 3 years, although

Medicare administrative data could be appended for many years

thereafter. This data set will make possible studies of, for example,

supplemental insurance coverage held by Medicare beneficiaries or out-

of-pocket payments for health care services; consumer cost and consumer

choice issues; for example, choice/satisfaction of Medicare

beneficiaries enrolling in HMOs versus fee-for-service plans; Medigap

employer coverage; and managed care information.

At this time, researchers have planned a series of analyses using

the MCBS to examine whether or not the introduction of the Medicare

physician fee schedule had an impact on access. Also, the MCBS is

useful for the development of the adjusted average per capita cost,

which is, in turn, useful for refining risk adjustments. We are

interested in studies that seek to refine risk adjustment methodologies

using the MCBS. In general, we are interested in encouraging

proficiency in and use of this valuable database among additional

researchers, particularly to address research issues and topics

identified in this solicitation. In addition, in 1991, we established a

National Claims History File (NCHF) system that facilitates access to

Medicare claims data. The NCHF also is a rich source of data for

analyses of health care services and financing issues. We encourage

researchers to consider ways to use these data sets, when appropriate,

in developing research projects.

2. Financing Issues.

The aim of these studies is to find better ways for individuals,

households, businesses, insurers, health care providers and

institutions, communities, and governments to provide and arrange

payment for needed health care services through improvements in the

health care system and its financing mechanisms, including the

following alternatives:

General financing approaches. We continue to be interested

in research on the design and impact of proposals for reducing tax

burden on low-income taxpayers; income-related financing of premiums

and/or copayments; changing the distribution of financing between

taxpayers and beneficiaries; and examination of approaches such as

medical savings accounts that encourage private savings for health care

expenses.

Alternatives for Medicaid financing. Medicaid covers an

extensive variety of health care services, both acute and long-term

care, and stresses benefits for eligible children and pregnant women.

There are Federal minimum standards mandating particular services and

populations to be covered, and a State can extend these minimums in a

variety of ways. Federal payments are made to a State for a percentage

of the benefit payments under its State Plan for Medical Assistance,

and for a percentage of its costs in administering the plan.

--We are interested in ways to improve the Federal financing of, and

arrangements with, State low-income health care programs. One area of

interest involves the basic approach for determining the Federal

assistance payments to States. Under present law, the Federal medical

assistance percentage (FMAP) determines a percentage rate of Federal

participation that is based on State per capita income levels. In 1991,

these FMAPs ranged from 50 percent (the statutory minimum) to nearly 80

percent. We are interested in the assessment of alternative methods for

computing the FMAP. Models might consider the potential impact (State-

by-State) of (a) calculating the basic Federal matching rate based on

State fiscal capacity or number of persons requiring health care

subsidies instead of per capital income, with and without ceilings and/

or floors; (b) modifying the FMAP to consider a State's actual Medicaid

expenditures relative to its fiscal capacity; (c) paying for basic

services to specific enrollee groups at a higher rate than other

services or groups and/or limiting expenditures for nonbasic services

(for example, personal care aides) to a percentage of that for basic

services (for example, preventive care); (d) reducing the FMAP when

expenditures exceed a specified threshold; (e) projects to examine

linkages between Medicaid and workplace health insurance; and (f)

projects that study alternative approaches to monitoring family income.

We are highly interested in careful studies of competing ideas for

improving the efficiency, effectiveness, and fairness of funding of

health care for the poor and the uninsurable. These approaches might

consider changes proposed in Federal funding and budgetary constraints

imposed under health care reform. For example, approaches could

include: Methods for determining the level and composition of State

funding of health care costs and determining the maintenance of that

effort; equity across States in health care expenditures; the extent to

which disproportionate share payments, as well as provider taxes and

donations, are included in or excluded from the base used in

calculating Federal payments; and the extent to which a State must

provide residual Medicaid services to low-income persons or provides

other health care services not included in the standard benefit package

and the costs of that care. Another analysis might consider designing

matching incentives according to the extent States use managed care

arrangements. Considerations should also be given to approaches based

on Federal global capitation payments to States; Federal or State or

joint arrangements with private health insurers to provide health care

coverage for low-income persons; and to approaches that rely upon those

low-income individuals who receive health care subsidies to select an

approach that they believe is suitable for themselves.

--We are also interested in projects or simulations uncoupling Medicaid

acute care services from Medicaid long-term care to examine alternative

Federal/State financing arrangements for each type of care. We are also

interested in designs of approaches under which the Federal Government

would capitate States for all or part of their Medical Assistance Plan

in place of FMAP for those parts, in exchange for greater flexibility

for States.

Private insurance financing. Under current tax policy, the

unemployed and many individuals in low-paying jobs do not benefit from

the tax provisions associated with employer-paid health insurance.

These tax incentives benefit higher-income employed persons who, in

order to protect their incomes and assets, presumably would want to

purchase insurance even in the absence of tax incentives. We are

interested in analyses of these equity issues. Projects might examine a

refundable tax credit that could replace the current tax exclusion. By

using tax credits, rather than exclusions, the link between a

taxpayer's marginal tax rate and the amount of the tax subsidy is

eliminated. Such tax credits could also extend more of the tax subsidy

to the unemployed, the working poor, and the self-employed. Other

modifications of the tax code that might be examined include increasing

deductions for self-paid premiums and/or setting caps on the amount of

exclusion of employer's premium payments. But, these would appear to

also result in larger subsidies to higher-income persons than to those

with lower incomes.

Various models such as health insurance networks and health

alliances have been identified as methods for extending the negotiating

and purchasing power of large employers to groups of small employers.

Models such as multiple employer trusts, multiple employer welfare

arrangements, employer coalitions, and other approaches already exist

that have allowed small employers to band together to purchase

insurance that they could not have afforded alone. However, these

arrangements have not been without problems and a number of these

groups have become insolvent. We are interested in analyses of the

strengths and weaknesses of these approaches. This interest also

includes analyses of how such models would operate in rural and small

metropolitan areas and whether modifications to the basic models, or

alternative approaches, should be considered for these areas.

Supplemental insurance. We are interested in studies of

the demand for and use of insurance policies that supplement Medicare

and other health insurance (including Medicare Select) and their effect

on utilization of services and patient outcomes. Individuals and

families might use supplemental policies to fill gaps in coverage and/

or to cover deductibles and coinsurance, either of which might affect

utilization. We would like to know what types of co-payment are used

and what their relationships are to risk selection.

Alternative approaches to prepayment for health care

expenses. We are interested in projects that examine further incentives

for individuals, businesses, and governments to improve risk-sharing

approaches. We are interested in approaches that might undertake the

sharing by the Federal Government of financing risks with States,

communities, or private entities. For instance, for the Medicare

program, we would be interested in the design of approaches involving

public or private sponsors. These might be either a private entity such

as a health insurer or a labor/management welfare fund or a State or

local government agency that would assume the responsibility and risk

for paying Medicare benefits for entitled residents of a defined area.

If this were a public institution, its own program benefits would

presumably be administered in the same manner (perhaps consolidating

the Medicare and Medicaid benefits for the residents of a State). If

this were a private entity, it would likewise coordinate administration

of its private benefits with Medicare's benefits. Issues to be

considered include rate-setting, performance monitoring, and

distribution of gains or losses.

B. Managed Care Systems

Managed care refers to a diverse, and still evolving, set of

alternative delivery models introduced over the past two decades.

Managed care plans offer the opportunity for more cost-efficient use of

health resources, expanded choices of health service delivery systems

for consumers, and better health outcomes through effective care

management.

Our interest in managed care encompasses a wide range of

alternative service delivery, case management, payment and data systems

that encourage or facilitate a cost-effective continuum of care, or

that otherwise foster efficiency in health service delivery through

management of the volume, intensity, and appropriateness of care.

In an effort to better understand and increase enrollment in HMOs,

preferred provider organizations (PPOs), and other managed care plans,

we are interested in a variety of research in two general areas:

1. Understanding Current Managed Care Techniques and Service Delivery

Models

Identifying efficient and effective practices. In order to

expand our understanding of how managed care systems might best be

structured to provide cost-effective, quality care, we need to

understand the techniques and methods used by current managed care

models, particularly those that may be determinants of successful risk

contractors. We believe emphasis needs to be placed on studies that

determine which features contribute most to the efficiency and

effectiveness of specific managed care models, including the impact of

these approaches on utilization, costs of care, and health outcomes.

These studies should provide information to help identify those

features that have potential for general application. The types of

``best practices'' in which we are interested include approaches for

marketing programs to beneficiaries and other enrollee groups, enrollee

education strategies, incentives to physicians, and the use of new

technology by HMOs.

We are very interested in studies of how managed care programs deal

with the challenges involved in enrolling disabled and special needs

populations. For example, studies could examine the experience of State

managed care programs and identify best practices and lessons learned.

New models. We are interested in studies and evaluation of

new managed care models. We are particularly interested in the recent

experience of new and evolving models such as primary care case

management approaches, the use of primary care case management by

private insurance and public programs, and its applicability to health

care reform and/or existing programs such as Medicare and Medicaid.

Data and managed care. We are interested in evaluation of

prototype data systems and managed care. This is a critical area for

managed competition and health care reform. We are interested in

studies and development of claims data systems that capture needed

information across alternative delivery systems and that serve

complimentary objectives to fee-for-service data systems.

Barriers to entry. We are interested in studies that

provide an improved understanding of the factors that may present

barriers to entry or expansion of existing managed care programs,

including (1) physician attitudes toward HMO contracting, (2) the

impact of the new resource-based fee schedule for physicians on their

decisions to participate in HMOs, (3) factors that influence a Medicare

HMO's decision not to participate in risk contracting, (4) barriers

affecting enrollment of Medicare or Medicaid recipients in managed care

systems, (5) State legislative and regulatory barriers, and (6) public

attitude toward managed care plans.

Comparisons of managed and fee-for-service care. We would

like to support studies that examine the relative effectiveness of

managed capitated systems compared to traditional delivery systems. We

are interested in comparisons in terms of cost, quality of care, and,

particularly, health outcomes. Although some prior research has been

done on this issue, payment reforms and changes in delivery models and

benefit packages have occurred in the interim that may have changed the

relative cost-effectiveness of the systems and the impact of the

systems on health outcomes. The following are examples of questions

that appear to require answers:

--How satisfied are HMO/CMP enrollees versus fee-for-service enrollees?

--What are the short- and long-term effects of HMOs offering

supplemental benefits (for example, coverage of prescription drugs)? Do

these benefits tend to increase adverse selection into plans? Does an

HMO's decision to provide non-Medicare-covered services in some cases

result in better care? Are these benefits cost-effective in the long

term by delaying or preventing more expensive illness and medical care?

--How do HMOs make use of new technology relative to the fee-for-

service sector? HMOs provide a unique setting for analyzing the use of

new technology, since HMOs do not have the incentives inherent in fee-

for-service practice to use new technologies as services that can

increase revenue. We are interested in studies that provide information

about the extent to which new technologies are accepted and used in

HMOs versus the fee-for-service sector in terms of the types of

technology utilized, the extent of this utilization, and the effects of

utilization on health outcomes. We are interested in knowing whether

the use of new technologies more closely resembles fee-for-service

patterns in certain types of managed care plans--for example,

individual practice association models versus staff model plans; or

hospital-controlled plans versus physician-controlled plans. Studies in

this area could examine use of information technology as well as

medical technology.

--What are the impacts of recent fee-for-service payment reforms (for

example, prospective payment systems and physician payment reforms) on

managed care plans? Have these changes in payment methods altered the

ability of managed care plans to attract providers into risk-sharing

arrangements or to contract with providers on a discounted fee-for-

service basis? Has risk-sharing between HMOs and physicians been

reduced? Have physician payment reforms made primary care physicians

less likely to contract with HMOs and specialists more likely to do so?

What are the effects of these reforms on the ability of managed care

plans to reduce utilization below fee-for-service levels?

--What is the relative cost-effectiveness of various managed care

models? How do HMOs, PPOs, Federally Qualified Health Centers (FQHCs),

and other organizational models compare with each other and with fee-

for-service in terms of cost-effectiveness and outcomes of care?

--We are also interested in studies that examine the quality of care

among managed care systems and whether there are differences between

the quality of care provided under such systems and under traditional

fee-for-service systems, with emphasis on health outcomes, particularly

outcomes over an extended period (for example, 6 months to 1 year after

an event). Similarly, we are interested in studies that examine whether

there are differences in access to, and utilization of, certain types

of services in managed care systems versus traditional delivery

systems. For example, what type and levels of preventive services are

provided in HMOs or in FQHCs? Are there differences in rates of

expensive procedures (for example, hip replacement and coronary artery

bypass graft)? We would like to be able to identify and evaluate tools

to assess the effectiveness of quality assurance systems and the

quality of medical care being provided to enrollees in both managed

care and fee-for-service systems. The studies might also provide

suggestions on effective measurements including both process of care

and alternate outcome measures (for example, readmissions and

complications) and suggest how they might be incorporated into

monitoring programs.

Quality of care. We are interested in studies that provide

improved information to measure the quality of care provided in managed

care systems, including measurement of health outcomes, development of

performance standards for managed care providers, and assessments of

different quality review systems used by HMOs. Our interest includes

projects that develop improved tools for assessing the quality and

effectiveness of care in HMOs. Also, we are interested in cost-benefit

studies that examine trade-offs between investment in administrative

systems (for example, computer-based data systems) and other case

management efforts (for example, utilization reviews).

Targeting approaches. We would like to support additional

work to develop: (1) Techniques to better target managed care

interventions and/or to be able to establish risk-sensitive payments to

managed care plans and providers (for example, through the analysis of

provider and/or beneficiary claims history data); and (2) methodologies

to assess the cost-effectiveness and relative value of alternative

utilization management interventions, such as provider education

efforts, provider incentives to reduce utilization, more intensive

prior or concurrent review applied to selected providers, specialties,

or services, and beneficiary-oriented utilization management

interventions. These approaches may include case management or

``gatekeeper'' systems to minimize the risks of excessive or

inappropriate service use, interventions targeted toward ``high-cost''

patients, and consumer information and counseling programs (for

example, management of exceptionally high-cost medical cases).

Private sector activities. We are interested in studies

that examine the experiences of private sector managed care activities

and retiree programs and identify lessons for managed care programs

serving Medicare beneficiaries and Medicaid recipients.

2. Developing Alternative Managed Care Service Delivery Models and

Payment Systems

We are interested in improving current health care delivery and

payment systems through the development and testing of alternative

models, including the following areas:

We would like to support projects that assist potential

enrollees in choosing, accessing, and effectively using managed care

services. We are particularly interested in developing and testing

approaches to promote informed choice, to reduce burden, and to

minimize biased selection in consumer access to managed care systems,

such as coordinated open enrollment or enrollment through independent

entities capable of facilitating unbiased access to managed care

systems.

Our interest in development of improved risk adjusters,

identified previously in the section on Health Systems Reform and

Financing, includes an interest in studies that develop improved risk

adjusters for the adjusted average per capita cost payment system for

Medicare HMOs.

We are interested in studies that examine the use of

competitive bidding approaches to establish payment levels for HMOs,

for example, studies to synthesize existing information and research,

and studies that analyze data to estimate the payments and effects of

these types of approaches.

Recognizing that managed care models also involve

providers paid on a fee-for-service basis (such as PPO networks and

various utilization and/or case management systems), we are interested

in studies and demonstrations that develop and/or test cost-effective

payment methods for these fee-for-service-based managed care models.

Examples of such projects include (a) methodologies to establish and

ensure cost-effective payments for the administrative costs of the

PPOs, case management, or other organizations administering these

managed care systems, including incentive payment arrangements based on

measures of program benefit savings (or losses) achieved by such

entities; (b) approaches to establishing cost-effective fee-for-service

payments to affected providers, or otherwise controlling their costs

(for example, through negotiated discounts, bundled payments, incentive

arrangements with participating providers, resource-based relative

value units, or flexible allocation of coverage and payment allowances

within pre-established limits); and (c) studies that examine the

applicability of such mechanisms in the Medicare and/or Medicaid

programs, including the use of independent entities such as PPOs or

``brokers'' to establish alternative payment arrangements within fee-

for-service-based managed care models and point-of-service PPOs that

incorporate negotiated rates with providers and strong incentives for

beneficiaries.

3. State Level Managed Care Program

With increased emphasis on managed care, the program parameters

that administrators use to monitor program and recipient performance

are, increasingly, program data. In the past, this was the claim form

itself. In many capitated systems under managed care, claims are

nonexistent. Instead, practitioners are paid on a salaried basis and

work in terms of patient encounters. Key questions that need to be

addressed follow:

We wish to develop, demonstrate, and evaluate data systems

that capture needed information across alternate delivery systems, not

just for fee-for-service systems. We would like to know what data

elements are critical for administrators to track in a managed care

setting? How can these be related to the fee-for-service environment?

What portions of current automated data systems are appropriate for

capturing information on managed care?

From what lessons learned in the private insurance sector

may regulators benefit? Which States are doing a ``better'' job of

handling this fluid data environment? Why? What lessons can be learned

from these States that would be useful to other States?

C. Provider Payment

In FY 1991, Medicare payments amounted to $114 billion and are

expected to exceed $160 billion by FY 1994. By far the greatest part of

this amount is for payments to hospitals for inpatient and outpatient

services (64 percent), followed by payments for physician and supplier

services (30 percent). The latest data show that hospital costs have

increased by a rate of 9 percent during FY 1990. Simultaneously,

between FY 1980 and FY 1990, Medicare spending for physician services

per beneficiary tripled, increasing at an annual rate of over 12

percent. Even with physician payment reform, total Medicare

expenditures are expected to increase at an annual rate of 12 percent

from 1991 to 1996. In FY 1994, Medicare expenditures for physician and

supplier services are expected to be $44.3 billion.

The rise in payments for hospital outpatient services is no less

dramatic. In recent years, Medicare benefit payments for outpatient

hospital services have increased more than twice as fast as payments

for inpatient services. Between 1986 and 1991, inpatient hospital

payments increased from $46.4 billion to $63.2 billion, an increase of

35 percent with an annual rate of change of 6.2 percent. For outpatient

hospital services, payments rose from $5.1 billion to $9.8 billion, an

increase of 90 percent with an annual rate of change of 13.7 percent.

While the data described here relate to a large public program,

similar increases can be found in the private sector. Given the recent

attention to the rate of increase in national health expenditures, we

have supported, and will continue to support, research that explores

promising approaches to reform the way in which services are purchased

from providers. In particular, we are interested in studies and

demonstrations in the following areas:

Characteristics of efficient providers and methods for

determining efficiency and effectiveness. Classical economic theory

makes a series of assumptions about the characteristics of a perfectly

competitive market and the behavior of consumers and providers. If

these assumptions are met and the firm behaves rationally, the theory

states that the firm will minimize production costs thereby achieving

economic efficiency, and the firm will set its level of output so that

the marginal cost of producing an additional unit is equal to the

price.

A perfectly competitive market is often not the case, however,

especially in the health care sector, where many of the conditions that

will, in theory, lead to economic efficiency are lacking. Most

providers are nonprofit; patients are not fully informed about their

diagnosis, alternative treatment modes, quality of different providers

and prices charged by different providers; many consumers have

extensive insurance coverage, which reduces their price sensitivity;

and there are significant legal and regulatory barriers to entry into

the market in the form of licensing for professionals and certificate

of need requirements for hospitals. As a result, there is less reason

to believe that health care providers and provider managers are

striving for maximum economic efficiency. For example, under the

economic theory of cost minimization, hospitals should purchase

technology only if it will result in decreased costs or higher quality.

However, unlike industries where capital investments are typically made

to reduce total costs, in the hospital industry, capital costs

typically lead to increases in operating costs as well. There is a

concern that the availability of technology will create a demand to use

the service and thereby increase the intensity of services provided.

The expensive technology adds significantly to the hospital's cost, and

it is frequently underutilized. In addition to increasing the level of

expenditures, if an adequate level of proficiency in a new technology

cannot be obtained through a sufficient volume, there can be a higher

than necessary rate of complications and deaths, as is seen in the

example of open heart surgery. While the introduction of the

prospective payment system (PPS) for hospitals and physician payment

reform are changing the environment somewhat, health care providers do

have multiple objectives and therefore do not operate to provide their

services at the lowest cost.

Accordingly:

--We are interested in studies that investigate the characteristics of

hospitals that are efficient in the sense of providing patients an

adequate level of care in the least costly manner. In defining hospital

efficiency, it is critical that account be taken of the impact of

technological change on the services provided by hospitals. Differences

in services (or ``outputs'') must be controlled for and judgments must

be made about appropriate levels and/or mixes of services. Hospital

efficiency may need to be evaluated in the context of risk-adjusted

population-based utilization measures that reflect systemwide

utilization.

--We would also support studies that develop criteria for identifying

efficient medical practices, and methods for examining their practice

costs.

--We are interested in studies that provide improved understanding of

the determinants of hospital costs, their differences across hospitals,

and the growth in volume and intensity of services in hospitals; the

implications of growing resource intensity of inpatient care and

decline of inpatient volume for hospitals, patients, and health care

expenditures; and effects of changes in the marketplace on patient

care, hospital market structure, and hospitals' financial relationships

with other providers such as home health agencies, skilled nursing

facilities, and ambulatory surgical centers.

--We are interested in analyses that would examine cost data for

outpatient departments and/or ambulatory surgical centers to

distinguish between efficient and inefficient providers and to identify

determinants of efficient performance for high quality care. These

studies might examine characteristics of efficient hospitals,

particularly within a major category of hospitals (for example, size,

urban/rural, teaching/nonteaching) in providing outpatient care.

Traditionally, we have used the following approach to establish prices

for inpatient and outpatient hospital services and physician and

supplier services. Under the direction of legislation, historic data

have been used to establish a fee-for-service payment amount for

physician and supplier services that is then trended forward with

adjustments for increased productivity and inflation. Increasingly, we

have had difficulty accurately reflecting productivity gains and the

true cost of new technology in our fee schedules. We are interested in

studies that develop new methodologies for these purposes.

Payment systems that promote efficiency. We are interested

in testing payment systems that promote provider efficiency while

maintaining an adequate level of care.

The private sector has used the market to establish prices for

provider services through the use of a variety of models. HMOs,

employer groups, and insurance companies all use a variety of selective

contracting arrangements that use competitive pricing. These approaches

have the advantage of forcing the provider to reveal prices for which

they can provide the services after factoring in such variables as

increased productivity, new technology, and the use of alternative

services. We are interested in research examining, analyzing, and

comparing the mechanisms these approaches use to establish prices for

health care services. While the private sector uses the market to

establish prices, it recognizes that ensuring quality of care is an

equally important aspect of the selection process. Accordingly, great

attention to quality of care is included in the payment system. We are

interested in further testing of administrative mechanisms (such as PPO

arrangements) that use market forces to establish prices in large

geographic areas.

Bundling provider payments. We continue to be interested

in testing a bundled payment option for all services routinely

furnished within an episode of care. By combining the payment for

physician and facility services into one price, this approach enables

health care providers to allocate medical resources based upon their

own discretion while coordinating the delivery of medical services and

often divergent incentives to maximize efficiency and quality. We are

currently testing payment models of this type for coronary artery

bypass grafts and cataract surgery. We are interested in supporting the

development and testing of similar approaches for other types of

medical and surgical procedures and/or other types of patients or

development of classification systems and weights for combined systems.

Refinements to the hospital PPS. The evolution and

extension of PPS for hospital services creates an ongoing need for

research to develop and evaluate refinements to existing payment

methods. We are interested in studies of refinements to the present

PPS, including the following:

--Improved geographic adjusters, including alternative methods of

constructing the hospital wage index and defining labor market areas,

and use of alternative sources of data.

--Studies that examine sources of case mix intensity changes, and

methods of classifying patients by resource use.

--Studies related to the possible effects of the new capital payment

regulation.

--Studies that develop methods to evaluate new technologies and that

examine the influence of new technologies and procedures and how they

should affect payments (for example, effects on diagnosis-related group

(DRG) weights, studies of the cost and necessity for computerized axial

tomography, and magnetic resonance imaging).

--Development of prospective payment systems for types of hospitals now

excluded from PPS.

Payment for physician services. We are particularly

interested in projects that develop, refine, and/or test alternative

payment systems for physician services that include incentives to

control the growth in expenditures for physician services, particularly

approaches that involve coordinating or bundling payments for physician

services and for related health care services. The current fee-for-

service system for billing and paying physician services under Medicare

generates about one-half billion billed services each year, and this

number has been growing rapidly. This rapid growth has been accompanied

by growth and expansions in the numbers of nonphysician services paid

by Medicare and continues to complicate the Medicare payment system. In

the early 1980s, the Congress directed us to examine whether the DRG

system used for inpatient hospital prospective payment might be used to

also pay physician services (section 603(a)(2)(B) of Pub. L. 98-21). As

explained earlier under the discussion of hospital payment issues, we

are interested in research to determine whether there are more feasible

methods for coordinating or bundling payments for physician and related

health care services provided to a patient. These might range from

approaches that merely bundle payment for fairly standard tests with

visit payments, to systems that examine services of all physicians and

others who provide care to the same patient. Such systems could include

hospital medical staff models, models based on physician groups, or

methods that profile the amounts and kinds of care provided to

patients. We are interested in research to identify opportunities to

increase the efficiency of the Medicare fee schedule payment system for

various types of physician specialties or services, and in studies that

provide a better understanding of physician practice costs and whether/

how these costs are changing over time, for example, studies that

examine resource-based practice expense allocations and risk-based

malpractice allocations or a service- or category-specific risk-based

approach to allocate malpractice expenses. We also seek alternative

approaches for valuing payments for nonphysician services. We are

interested in projects for options that might be used to encourage more

primary care.

Outpatient services. We are placing a high priority on the

issue of payment for outpatient services because of the rapid growth of

expenditures in this area and the potential to significantly benefit

from reform. Unlike inpatient services, which are primarily paid for on

a prospective basis, most hospital outpatient services are paid for

based entirely or partially on costs. As a result, there are only

limited incentives toward efficiency. Thus, we would like to complete

our work on the development and evaluation of prospective payment for

outpatients as we move toward implementation and to sponsor additional

research on several related issues.

Over the past several years, we have sponsored several research

projects relating to payment for outpatient services and the

development of possible models for a prospective payment system for

outpatient services. This research has covered several topics,

including the development of Ambulatory Patient Groups (APGs), a

typology of outpatient services that can be used for a PPS for

outpatients; research into the resource costs of delivering outpatient

services in a variety of settings, including outpatient departments,

ambulatory surgery centers, and physician offices; and a series of

analyses of the outpatient setting and the potential effects of

implementing an outpatient PPS. In addition, we have sponsored the

development and implementation of a PPS for use in a State Medicaid

Program and have sponsored the evaluation of this system.

As we move toward the possible implementation of a PPS for

outpatient services in the Medicare program, we are interested in

supporting and stimulating additional efforts in this area, for

example, research related to the following:

--Additional research into the resource costs of providing ambulatory

care in a variety of settings, including research into the effects of

volume of services on fixed costs and research into the effects of

administrative costs on per service costs of care.

--Additional refinement of APGs, especially in areas such as mental

health treatment where existing International Classification of

Diseases, 9th revision (ICD-9) codes may prove an inadequate basis for

estimating resource consumption on the basis of diagnosis.

--Continuing research into the impacts of various payment approaches on

various types of providers.

--The impact of new technologies and program changes related to

outpatient care.

--Bundling of outpatient services: The extent to which services such as

diagnostic services (for example, laboratory tests, radiology, and

other tests), physician professional services, and/or other services

are bundled into the payment for the outpatient visit is an important

issue. Bundling gives providers incentives to use the packaged services

more efficiently. We encourage additional research on alternative

methods and approaches (for example, separate payment for bundled

physician and hospital services, and payment for bundled services

combined with the facility payment) to bundle outpatient diagnostic,

physician professional, and/or other services, as well as examinations

of potential provider responses to bundling various types of services.

--Alternative sites of care: There has been proliferation of types and

numbers of outpatient sites of care in recent years, with a large

growth in ambulatory surgical centers, freestanding radiology centers,

and other sites that compete with hospital outpatient departments. We

are interested in studies that examine the determinants of growth of

alternative providers of hospital outpatient services and also studies

that analyze resource costs and outcomes at hospital outpatient

departments and at alternate sites of ambulatory care.

--We are interested in studying and testing alternative payment

arrangements for rural hospitals and allied providers that promote both

access to care and economic efficiency.

--We are interested in projects that demonstrate and evaluate the

effectiveness of rural telemedicine systems and in projects to develop,

pilot test, and evaluate payment methodology for telemedicine

consultations.

Controlling volume and intensity growth. We are interested

in studies of approaches for controlling unwarranted growth in the

volume and intensity of all kinds of personal health care services.

These might also examine the impact of Medicare's current volume

performance standards for physicians and alternative formulations of

these standards.

D. Access and Quality of Care

We wish to support projects that develop knowledge that can be used

in assessing and improving access and quality of care, especially for

underserved populations. During the more than a quarter of a century of

operation of the Medicare and Medicaid programs, access and quality of

care have been public policy issues, and they will continue to be so.

We believe emphasis is indicated in the following areas:

Studies relating to basic access issues, for example,

system capacity. Projects that examine the basic capacity of the health

care system, including primary care, specialty care, and inpatient

services, are of interest to us. Studies that treat these issues in the

light of health care reform are of highest interest.

Studies relating to the maternal and child health

populations. Projects that develop methods for assessing access and

quality of care for these populations are of highest interest. Examples

of possible studies would be the application of quality of care

measures to (a) the study of Medicaid capitated, Medicaid noncapitated,

and capitated non-Medicaid maternal and child groups within a State;

and (b) emergency room use by Medicaid recipients, the privately

insured, and the uninsured for selected clinical conditions.

Poverty is associated with higher mortality and morbidity rates

starting at the youngest end of the age spectrum. This is reflected in

the higher incidence of poor pregnancy outcomes, including low birth

weight, birth defects, and infant death. Increasing numbers of poor

children, lacking adequate health care, suffer from preventable

conditions such as iron deficiency anemias and high lead blood levels,

thus impairing mental and physical development. Additionally, because

of marked declines in immunization rates among poor children, they have

a higher incidence of infectious diseases. This is the population that

the Early Periodic Screening, Diagnosis, and Treatment (EPSDT) Program

is focused on.

There is a need to develop more appropriate health services for

vulnerable populations groups, such as pregnant women and children.

Prenatal care is the first step in the obstetric chain that includes

labor and delivery, birth outcomes, and infant health. Prior studies

suggest that adequate prenatal care is cost-effective and generally

correlated with birth outcomes such as infant mortality, birth weight,

and prematurity, thereby reducing costs for subsequent health care.

Yet, between 1980 and 1989 the proportion of mothers receiving late or

no prenatal care increased for each age group except mothers over the

age of 35. At the same time, there was a 50 percent rise in the

proportion of mothers in their twenties receiving late or no prenatal

care. Neonatal and postneonatal death rates for nonwhites are more than

double those of whites. Factors that are positively and negatively

associated with an individual's receipt of early and adequate prenatal

care need to be studied.

Black and low-income children receive the least amount of health

services, especially for those conditions that call for early

intervention and more intensive treatment and follow-up. Utilization of

preventive care services for children and the adequacy of outreach

programs need further investigation.

Approaches to extend health care to these populations, such as

Medicaid eligibility expansions or the EPSDT populations, do not ensure

adequate access to care. Issues related to the availability of health

providers and appropriate utilization of services have led many States

to encourage managed care systems. The extent to which managed care

improves the quality and availability of care for the poor, especially

women, infants, and children, needs to be studied further. In addition,

studies are needed to assess what protective mechanisms are in place to

safeguard against adverse outcomes for these vulnerable population

groups.

We also would be interested in comparative studies of delivery

systems in other countries for maternal and child health and for

prenatal care and their possible effects on maternal and child health

outcomes.

Women's health issues.

Recently, in response to public policy concerns that women had not

been included in many of the biomedical studies sponsored by the

Federal Government, a number of studies and clinical trials have been

designed to focus on women's health issues. While health services

research studies of the Medicare and Medicaid populations have often

examined issues relating to women's health--such as insurance coverage

of pregnant women and children, the use of cardiac procedures in

hospitalized patients, and the characteristics of elderly women living

alone--there are many other areas of inquiry relating to access,

quality of care, and effectiveness that could provide new knowledge for

the development of health policy. For example, health services research

studies of Medicaid and other low income groups that examine access to

family planning and the prevention, treatment, and screening for

sexually-transmitted diseases and acquired immune deficiency syndrome

(AIDS) and human immunodeficiency virus-related conditions would be

desirable. Also, studies relating to risk factors, prevention, and

effectiveness of different treatments for heart disease, cancer,

osteoporosis, depression, substance abuse, and alcoholism in women are

of interest. In addition, we are interested in health services research

studies that shed light on the potential effects on women of various

health care reform options, especially those relating to the financing

and delivery of health care services.

Studies relating to prevention and special services. There

is a growing consensus that prevention of illness is fundamental to

improving health status as well as an important factor in curtailing

the escalation of health care spending. Preventive services are

important for the Medicaid population; several preventive services,

including the Maternal and Child Health populations, are now included

under Medicare. Studies that focus on access to these services are of

interest to us.

Studies relating to early retirees. We are interested in

examining the incentives related to health care coverage and benefits

and out-of-pocket costs in the context of early retirement. What are

the factors affecting early retirement? What are the utilization

patterns of early retirees?

Maintaining Medicare eligibles within mainstream Health

Alliance structures. When early retirees age sufficiently to become

eligible for Medicare benefits, they must decide to stay in their

Health Alliance or enroll in Medicare. This could involve a change in

providers, caregivers, and coverage limits, as well as the change of

insurer. What are the strategies for maintaining continuity of care and

coverage for care when an early retiree becomes eligible for Medicare?

Research and demonstration projects that develop methods

and applications for applying knowledge about quality and

appropriateness of care. Projects that develop the components and

methodology for quality reporting systems for accountable health plans,

including appropriate controls for illness severity or projects in

which the results of research about quality of care are used or adapted

locally by public and private organizations responsible for ensuring

utilization and appropriateness of care, are of special interest to us.

Over- and under-utilization of health care. Both over-and

under-utilization of health care are problems that can lead to

unnecessary expenditures, and we believe this misutilization is at

least partially related to access to care. We would like to support

studies in this area. Comparative assessments of utilization and

expenditures by the privately insured, Medicare, Medicaid, and the

uninsured populations are important parts of such studies. We encourage

studies to develop criteria for judging over- and under-utilization

from claims data or in managed care settings.

We are also interested in supporting projects that implement

counseling programs for patients and providers to improve their

understanding of the patient's right to decline medical treatment and/

or to formulate advance directives.

Education and feedback. There are indications that

education and feedback are important components in maximizing the

dissemination of knowledge that can improve quality of care. We are

interested in supporting projects that test methods of providing

information to, and educating, practitioners and reviewers of medical

care in a way that achieves appropriate changes in physician and

provider behavior.

Prescription drug payment and related studies. Recent or

proposed changes in Federal drug payment and other policies have

affected the marketplace for prescription drugs. For example, the

Omnibus Budget Reconciliation Act (OBRA) of 1990 imposed limits on

price increases of Medicaid drugs and mandated rebates, drug

utilization review, and patient counseling. The Veterans Health Care

Act of 1992 mandated a minimum discount of 24 percent for all Federal

drug purchases. And, the Administration's Health Security Act proposes

to mandate a basic rebate of 17 percent for a Medicare drug benefit

program. In addition to the greater role played by the Government as

purchaser of pharmaceuticals, a number of other changes have affected

the market: the growing importance of price conscious managed care,

rapidly emerging biotechnology, recent changes in the tax law (that is,

OBRA 1993), and increasing generic competition. We are interested in

supporting both empirical and theoretical research to examine the

effects of payment and other broad policies (for example, formularies,

prior authorization, drug utilization review) on the use of drugs,

expenditures for drugs, and the development of new products.

--Academic Detailing. Drug utilization review programs may detect

aberrant patterns in a physician's prescribing behavior. Different

means of contacting physicians have been used, including letters,

telephone calls and visits (known as academic detailing) to the

physician by a trained physician or pharmacist. We are interested in

studies and demonstrations of the effects of the use of person-to-

person interventions to influence physician prescribing practices in

both public and private insurance programs and other settings. Three

important areas are: The relative costs of academic detailing compared

to existing program interventions that influence physician prescribing;

who, how, and what drugs or diseases to target; and the development of

cost-effective approaches for such programs.

--Prior Approval. Medicaid programs and private insurers have

instituted prior approval programs to control the use and cost of

prescription drugs. A prior approval list contains medications

requiring authorization for use prior to reimbursement by insurers. We

are interested in studies relating to the effects of such programs on

access to prescription drugs and their impact on use, outcomes, and

costs of services. We are also interested in studies that examine the

decision making process of placing drugs on a prior approval list and

the consistency across prior approval programs.

E. Service Delivery Systems

Providing affordable health care to all Americans while containing

health care spending growth and maintaining the excellence of health

care services requires not only the comprehensive assessment of how

health services are and should be financed, but also the assessment of

how health services are and should be delivered. Policy makers have

assumed that higher payments for health services will ensure access to

services and increase the supply of providers--institutional or

professional, where the services are needed. This, however, is not

necessarily the case. Health delivery systems are affected by specific

delivery characteristics as well as the medical care provider payment

system. System characteristics are important irrespective of the

financing mechanism for payment of services. We are interested in

comprehensive and balanced studies of what features of health care

delivery systems are effective in ensuring that services are available

in geographic areas that may be currently underserved (for example,

urban inner city and rural or frontier areas); and what methods may be

effective in restraining growth of the health infrastructure in areas

that are, by many measures, oversupplied or overutilized. We seek more

than an enumeration of the current situation; rather, we seek to

understand what should be undertaken in preparing for the future. We

desire a comprehensive review of the U.S. health service delivery

sector that examines demographic, behavioral, and economic factors that

influence the U.S. health delivery sector and an examination of new

provider delivery settings. Toward this goal, we are interested in

examining: (a) How markets arrange for and allocate health resources,

the supply of health organizations or institutions or professionals,

and the geographic distributions of resources within the health

delivery system, especially rural/inner city issues; (b) personnel and

medical professional manpower issues; and (c) the study of new provider

settings and service delivery approaches.

Allocation of health resources. We would like to sponsor

examinations of how markets arrange for and allocate health resources,

the supply of health organizations, institutions, or professionals, and

the geographic distribution of resources within the health delivery

system; and studies of alternative delivery systems and financing

models to address the many problems faced by the health care system. We

are interested in studies that do the following:

--Develop resource distribution planning models. Mechanisms to better

distribute health care resources to meet underserved rural community

and inner city needs are of interest to us. These may include the

creation of networks of health care providers that ensure access for

rural and inner city residents to an organized system of providers that

covers the entire continuum of care.

--Develop additional alternatives to those rural hospitals that are no

longer viable in their communities. These alternatives may include both

inpatient and outpatient models with both physician and nonphysician

providers.

--Investigate what health planning models and assumptions are useful

and have been successful. Although in the late 1980s some mandatory

planning models were considered by some to be ineffective in reducing

capital expansion and health spending, are there successful health

system resource and services planning models that should be reexamined?

Additionally, we know very little about effectiveness of the voluntary

business and health provider coalitions that have emerged. Some States

consider health planning extremely useful and have continued

certificate of need programs. We are interested in studies of what

constitutes a successful planning program.

--Develop measures of capacity. We need to critically reanalyze

commonly accepted measures of health system capacity to determine if

measures such as beds per capita, full time employees, hospital

admissions, average length of stay, bed occupancy, and other

institutional measures of utilization are appropriate (adequate)

measures of the supply and stock of services that should be provided.

Health and medical professional manpower issues. In order

to more fully understand the relationship between health financing

models and the supply of health resources, we are interested in

exploring the factors that influence the supply of health

professionals, specialty training, and geographic dispersion. An

example of the types of questions of concern here would be: Can the

elements of the educational process and the ``service'' aspects of

medical interns' and residents' training be disentangled? If they can,

what would be a minimum medical school curriculum for safe practice,

given some educators belief that much of an intern's and resident's

time is spent in service tasks, not educational efforts. Examples in

this area include:

--Medical education financing effects on practice choices. We are

interested in projects that consider how Medicare funds currently paid

to hospitals in the form of direct medical education payments or

indirect medical education adjustments to prospective payments for

inpatient hospital care can affect the specialty and type-of-practice

choices of physicians.

--Incentives for nonhospital ambulatory training sites. Such studies

could focus on developing model approaches to encourage more

noninpatient training sites and facilitate the training of more primary

care and minority physicians in settings such as HMOs, group practices,

ambulatory care settings, and nursing homes. This should lead to a

model that could increase nonhospital based ambulatory training for all

physicians, but especially those training to be primary care

practitioners. It would also be desirable that the model encourage

physicians to practice in underserved areas (urban and rural).

--Manpower issues. We are interested in the development of financial

mechanisms to provide incentives for more physicians to practice in

rural areas (especially obstetricians and primary care physicians such

as family practitioners, internists, and pediatricians). We also are

interested in studying the availability and effective use of pediatric

and family nurse practitioner services under State Medicaid programs.

--Measures of underutilization. Given the mobility of the U.S.

population, we need to reevaluate the relevancy of common measures of

underservice, such as communities without a practicing physician. This

reevaluation could examine such issues as the minimum population size

needed to support a primary care practice, a general surgical practice,

and very specialized practices. Examination of population density

should address such issues as whether there are populations so sparse

that no permanent medical professional can be supported. Definitions of

fundamental primary health care needs may play a part in such studies.

The work should define basic assumptions used to derive appropriate

minimum/maximum physician rates per population.

Studies of new provider settings and delivery approaches.

We would like to conduct studies and demonstrations largely designed to

increase the use of primary and preventive health services and thereby

reduce the incidence of more serious conditions as well as long-term

costs. Our interest includes settings and approaches that improve

health delivery for specified populations such as the homeless, migrant

workers, maternal and child health, adolescent males, and the disabled.

Examples of these initiatives include:

--More convenient service locations, such as (a) school-based and

school-related health clinics, (b) health care in public housing, and

(c) mobile health units.

--Service integration initiatives designed to remove institutional

barriers to the receipt of health care and to provide access to the

full range of available services in order to maximize the benefit of

these public programs, for example, (a) ``one-stop shopping''

initiatives that would provide a variety of support services at one

location to increase the utilization of services by populations such as

high-risk pregnant women, (b) outstationed Medicaid eligibility workers

in Federally qualified health centers, homeless shelters, and schools,

(c) new provider settings for EPSDT services, and (d) innovative

settings for the delivery of family planning and prenatal care services

for adolescents.

--Other populations. We are interested in studies that provide

information about changes in the patient populations and service

patterns of special populations, for example, patients with human

immunodeficiency virus, auto-immune deficiency syndrome, and end-stage

renal disease. We also are interested in studies and demonstrations

that examine cost-effective alternative service modalities targeted

toward specific populations.

--Alternative service delivery models. We are interested in

demonstrations of alternative service delivery models that would

promote more cost-effective and high-quality health care, for example:

+Geriatric care models that more effectively integrate and

coordinate prevention, primary care, and chronic care for the elderly,

including hospital-based geriatric care models.

+Alternative settings for transitional care that would reduce

health care expenditures through earlier discharges from hospitals.

F. Subacute and Long-Term Care

Demographic and practice pattern changes continue to increase

demands on subacute and long-term care delivery and financing

mechanisms. Medicaid is the principal source of funding for long-term

care in the United States. In FY 1994, Federal expenditures for long-

term care under the Medicaid program are expected to exceed $30

billion, 34 percent of all Medicaid vendor payments. Medicare policy

changes, in response to industry and congressional pressures, have led

to rapidly rising payments for subacute care by skilled nursing

facilities and home health agencies, and, as the elderly population

continues to grow, further program benefit expansions may be approved

by the Congress. Several major policy committees (for example, the

President's Task Force on National Health Care Reform) have targeted

long-term care as one component of the health services delivery sector

requiring attention and potentially major reform in the next few years.

We wish to support this process through studies designed to better

understand the trends and factors affecting the cost, accessibility,

and quality of subacute and long-term care services under Medicare and

Medicaid and to explore cost-effective delivery and financing

mechanisms.

Innovative approaches to the delivery of long-term care.

We are interested in sponsoring research and demonstration efforts on

innovative approaches to the cost-effective delivery of long-term care

services. Such studies will examine methods of targeting services to

special populations in greatest need of services, as well as exploring

whether new types of services or provider organizations should be

developed to supplement those now covered under Medicare and Medicaid

for these populations. We are also interested in innovative managed

care models in both institutional and noninstitutional settings.

We are particularly interested in research and demonstration

efforts that focus on the development of geriatric care models that

more effectively integrate and coordinate prevention, primary care, and

chronic care of the elderly. Special emphasis should be given to models

that can be implemented in managed-care settings, such as HMOs

contracting on a risk basis under the rules of section 1876 of the

Social Security Act.

The relationship between long-term care services (including

personal care and assistive devices) and housing is becoming

increasingly important. For example, in caring for the frail elderly in

noninstitutional settings, supported housing brings participants with

needs for custodial care physically closer. Such a setting allows the

frail elderly to preserve some independence in their living

environment, while it facilitates economies of scale in providing for

their care. Use of congregate care can be seen in the increasing number

of alternative housing settings for the elderly, such as adult foster

homes and assisted living facilities. Continuing care retirement

communities likewise combine housing and long-term care services.

Supported housing is also a key component in providing treatment and

related services to individuals with chronic mental illness. We are

interested in research and demonstration efforts that more fully

explore this relationship. For example, how might the acute and chronic

care benefit package of an integrated service delivery and financing

model be delivered in the context of an assisted living facility?

Payment and benefit initiatives. We are interested in

sponsoring research and demonstration efforts that explore innovative

approaches to integrate acute and post-acute care benefits so as to

improve coordination of care. Such initiatives may take a general

approach (for example, across DRGs) or may be limited to selected

conditions.

We are also interested in payment alternatives to current cost-

based payment for home health agency and rehabilitation facility

services, including studies of the feasibility of case-mix systems for

these settings.

We continue to be interested in studies that examine financial

incentives for cost-effective, quality care in nursing homes, such as

capitation for long-term care services.

Eligibility initiatives. Studies are of interest that

examine the feasibility and effect of using various disability criteria

(for example, limitations in function, ability to perform work or other

major activities, or the availability of family or other informal care)

as the basis for eligibility determinations for long-term care benefits

for both elderly and nonelderly populations.

The growth in Medicaid estate planning has highlighted Medicaid

financial eligibility criteria as they relate to transfer of assets for

purposes of becoming Medicaid eligible. We are interested in studies

that examine the relationship between these transfers and overall

increases in long-term care expenditures. We are also interested in

studies of innovative State programs that address this issue, including

studies of estate recovery programs.

Financing initiatives. We are interested in studying

developments in the private and public sectors that affect the

provision and financing of long-term care services, such as further

development of the private long-term care insurance market.

There have been discussions of financing approaches for long-term

care such as universal long-term care insurance for all employed

persons. For example, one approach might couple State-administered

universal coverage for episodes of care, lasting 30 or more days, at a

recognized long-term care facility with a State trust fund dedicated to

long-term care financing and supported by employer/active employee

premium payments. The coverage would extend to workers, retirees,

spouses, and dependents. States would determine premium requirements,

the employer/employee premium sharing parameters, the provider payment

rates, and the arrangements for disbursing benefits. The trust fund

might be managed by the State or by an insurance company or investment

firm under State regulation.

Currently, funding of long-term care for both the elderly and

nonelderly disabled is primarily through Medicaid, although private

insurance, individual resources, and State and local dollars are also

sources, depending on the target group. Long-term care financing for

individuals with disabilities can be described as financing across age

and disability groups, financed through these sources, rather than

different financing mechanisms for different disability groups.

However, some recent proposals have suggested that alternative

financing strategies should be considered for different disability

groups. For example, a study completed by HHS recommended that funding

for individuals with mental retardation and related conditions be taken

out of the Medicaid program and a new Federal program be created to

fund a range of services for these individuals. These financing

proposals are based on a recognition that different disability groups

require different types of health and social support services, have

developed distinct service systems, etc. We are interested in research

that explores the strengths and weaknesses of the current system of

long-term care financing, relative to financing systems developed for

different disability groups.

Use of long-term care by nonelderly populations. We wish

to expand our research and demonstration agenda to focus on the service

delivery and financing issues related to providing long-term care

services to individuals with mental retardation, chronic mental

illness, and other nonelderly disabled populations. In contrast to the

considerable support for research and demonstration projects involving

long-term care for the functionally disabled elderly, we have sponsored

few projects to examine the role of the Medicare program or the use of

flexibilities under Medicaid optional services and waivers to meet the

rapidly changing environment of long-term care for the non-aged

disabled. The following are examples of the types of issues that are of

interest to us:

--Children with disabilities. We are interested in studies that examine

the effect of the recent Zebley decision on disability determinations

for children, and subsequent changes in eligibility for and use of

long-term care services.

Also, research on the extent to which children with disabilities

have public or private health insurance coverage, and the impact of

such coverage on Medicaid program expenditures and on access to care,

is of interest.

--Mental retardation and related conditions. We are interested in

answers to the following questions:

(a) What is the impact of standards for licensing service providers

and surveying quality of community-based services on the quality of

care delivered?

(b) What factors influence the costs of intermediate care

facilities for the mentally retarded?

(c) What is the relationship between cost and effectiveness?

(d) What assessments can be done of the cost-effectiveness and

quality of community-based care for individuals with mental retardation

under Medicaid, including the Medicaid 2176 waiver program, the

Community Supported Living Arrangements program, and other State

optional services?

--Chronically mentally ill. We would like information on the

characteristics of long-term care service use among State Medicaid

programs and the changing patterns of use over time.

--Working-age disabled. We would like to know: (a) What is the impact

of current public and private insurance limitations in meeting the

acute rehabilitative and long-term needs of this population, and (b) to

what extent do various subpopulations of the non-aged disabled (for

example, working-age adults and individuals with selected types of

disabilities) have public or private health insurance coverage, and

what is the impact of this coverage on Medicare and Medicaid program

expenditures and access to care? We are interested in studies that

focus on the new specialized health service delivery programs and

innovative payment approaches designed to meet the rapidly growing

demand for specialized services, such as rehabilitation services,

maintenance services, assistive technology, durable medical equipment,

social assistance services, and environmental modifications.

Studies of work transitions for this population continue to be of

interest to us. Included are assessments of Medicaid's impact in

facilitating section 1619 transitional work-programs for supplemental

security income adult disabled persons and assessments of an extended

period of Medicare coverage for social security disability insurance

beneficiaries who return to work.

We are particularly interested in studies that include research

emphasizing secondary analyses that document the implications of

demographic trends on the financing, delivery, and quality of long-term

care services for these groups. We are also interested in studies that

examine and attempt to account for wide variation among States in the

use of institutional, relative to community-based, services.

Dynamics of disability and service use. We would like to

initiate studies to understand the dynamics of chronic physical and

cognitive disability and acute, subacute, and long-term care service

use and the implications for future demand for long-term care under

Medicare and Medicaid. Studies are of interest that link and analyze

data from multiple data bases such as the Medicare Current Beneficiary

Survey, National Long-term Care Survey, the Survey of Income and

Program Participation, the National Medical Expenditure Survey, and the

National Health Interview Survey with our administrative data to

examine, using both cross-sectional and longitudinal analyses,

characteristics of the disabled and long-term care service.

Access issues. We are interested in studies assessing

problems of access to long-term care for certain subpopulations of the

disabled, such as beneficiaries in inner city areas or rural areas.

Effects of program changes. We would like to study the

effects of major program changes on the cost, accessibility, and

quality of subacute and long-term care services under Medicare and

Medicaid. Examples of possible new studies in this area are those that

examine the following:

--Patient-level cost, utilization, transitions, substitution, and

outcomes of Medicare-supported rehabilitation hospital units, skilled

nursing facility, and home health services.

--The cost-effectiveness of services experiencing rapid expansion, such

as Medicare and Medicaid financed home care and case management

services.

--Service utilization and expenditures of Medicare program and policy

changes related to home health and nursing facility coverage.

III. Purpose and Content of Cooperative Agreements and Grants

A. General Considerations

The cooperative agreements and grants we award are intended to

assist in the resolution of major health financing issues or in

developing new methods for administration of our programs. Our

cooperative agreement and grant program focuses primarily on analyses,

experiments, pilot projects, and demonstrations that provide

information useful for the Medicare and Medicaid programs. Applications

that fit one of the priority areas will be considered to have been

solicited.

B. Cooperative Agreements and Grants

All cooperative agreements will include an explicit statement of

the nature, character, and intent of anticipated Federal programmatic

involvement to ensure that the responsibilities of both parties are

understood. Each cooperative agreement will incorporate the

requirements of 45 CFR part 74 or part 92 or both, as applicable, among

its terms and conditions. Cooperative agreements will not be awarded to

a State Medicaid agency for section 1115 (of the Social Security Act

(the Act)) projects in which only waivers of Federal Medicaid State

plan requirements under section 1902 of the Act or costs not otherwise

matchable under section 1903 of the Act are approved to carry out a

demonstration. The instrument to be used for this type of award may be

a grant (without discretionary funds) of waivers under section

1115(a)(1) and costs authorized under section 1115(a)(2) of the Act.

Cooperative agreements may be awarded for section 1115 projects with

discretionary funds, even if waivers under section 1115(a)(1) and costs

under section 1115(a)(2) also are involved. In these cases, the

cooperative agreement conditions will apply to the entire operation and

management of the project. Cooperative agreements may be used for

projects awarded under all other authorities listed in section IV.A.

(Authorities) of this notice.

We may suspend or terminate any cooperative agreement or grant, in

whole or in part, at any time before the date of expiration, whenever

we determine that the awardee has materially failed to comply with the

terms of the cooperative agreement or grant. We will promptly notify

the awardee in writing of the determination and the reasons for, and

the effective date of, the suspension or termination. In addition, we

reserve the right to withdraw waivers at any time if we determine that

continuing the waivers would no longer be in the public interest. If a

waiver is withdrawn, we will be liable only for normal closeout costs.

C. Waivers

1. Demonstrations Requiring Waiver of Medicaid Rules

Researchers who wish to conduct demonstrations that would require

that Medicaid rules be waived must contact the appropriate State

Medicaid agency. Demonstration proposals involving the Medicaid program

must be submitted by the single State agency responsible for

administration of the Medicaid program in that State. Organizations

that wish to ask for Medicaid waivers are strongly encouraged to

coordinate with researchers or research firms in order to ensure that

the experimental design and evaluation protocol are of the highest

quality.

2. Section 1115(a) Projects

Under section 1115(a)(1) of the Act, compliance with statutory

Medicaid State plan requirements (section 1902 of the Act) may be

waived in order to enable a State Medicaid agency to carry out a

demonstration project that will further the general objectives of the

Medicaid program. Under section 1115(a)(2) of the Act, costs of a

section 1115(a) project that otherwise would not properly be included

as expenditures under the State plan may be regarded as expenditures

and thus be subject to Federal financial participation (FFP). Unless

they are specifically waived, all requirements of the Act, the Code of

Federal Regulations, and other issuances that pertain to the title XIX

program apply to a project approved under section 1115(a). If a State

Medicaid agency applies for a section 1115(a) project, it should give

special attention to the preparation of the budget. The agency must

provide estimates of the costs or savings attributable to the

demonstration project contrasted with the normal Federal program costs.

That is, the agency must furnish the estimated yearly costs, before

waivers and after waivers, for both service costs and administrative

costs. These budgets are substantially more extensive than the budget

for other applications.

3. Other Waivers

Waivers of the requirements of title XVIII of the Act and of

corresponding HCFA regulations may be requested for projects conducted

under section 222(a) of the Social Security Amendments of 1972 (Pub. L.

92-603), as amended, and section 402 of the Social Security Amendments

of 1967 (Pub. L. 90-248), as amended. (See 42 U.S.C. 1395b-1.) The

waivers requested must relate to an experimental or demonstration

project that involves changes in the benefit package or method of

payment. In applying for these waivers or changes in payment or Federal

financial participation, the applicant must provide sufficient

budgeting information to permit estimates of the likely costs or

savings of the project compared to the normal Federal program costs.

That is, the application must furnish the estimated yearly costs,

before waivers and after waivers, for both program and administrative

costs.

4. Methodology for Estimated Gross Costs of Projects Involving Waivers

We have a methodology to be used in estimating gross and net waiver

costs. A description of this methodology may be obtained by contacting

Carl Hackerman at the address given at the beginning of this notice.

This methodology is subject to change, and applicants are therefore

instructed to ensure they are using the current methodology.

IV. Cooperative Agreements and Grants--General Information

A. Authorities

Our authority for making these awards is based on the following:

1. The Social Security Act, section 1110, 42 U.S.C. 1310,

concerning Medicaid cooperative research or demonstration projects, and

section 1115(a), 42 U.S.C. 1315(a), concerning Medicaid demonstration

projects.

2. The Social Security Act, section 1875, 42 U.S.C. 1395ll,

concerning Medicare studies and recommendations for cooperative

agreements only, and section 1881(f), 42 U.S.C. 1395rr(f), concerning

end-stage renal disease experiments and pilot projects.

3. Section 402 of the Social Security Amendments of 1967 (Public

Law 90-248), as amended, 42 U.S.C. 1395b-1, concerning Medicare and

Medicaid experiments and demonstration projects.

4. Section 222(a) of the Social Security Amendments of 1972 (Public

Law 92-603), as amended, 42 U.S.C. 1395b-1 (note), concerning

experiments and demonstration projects pertaining to prospectively-

based payment systems.

5. The Social Security Act, section 1881(c)(7), 42 U.S.C.

1395rr(c)(7), concerning the national end-stage renal disease registry.

B. Regulations

General policies and procedures that govern the administration of

all HHS cooperative agreements and grants are located in title 45 of

the CFR, parts 74 and 92. Applicants are urged to review the

requirements contained in those regulations.

C. Duration of Funding

We fund projects for a period of 1 year at a time and may continue

funding on a noncompetitive basis, generally for up to 3 years, if we

made the original award as a multiple year project. Continuation

funding is contingent on the availability of future year funds, the

applicant's ability to meet prior year project objectives, and whether

continued funding is in the best interest of the Government. We treat

applicants that seek to continue a project for a longer period of time

than that stated in the original awards as applicants for new projects.

Thus, they must compete for available funds, and we will review these

applications competitively along with all other new applications. Under

this announcement, we do not intend to award grants or cooperative

agreements with performance periods longer than 3 years.

Applications received for projects of more than 3 years duration

will be considered, but they will be carefully analyzed to determine if

the period of performance can be shortened by curtailing some of the

activities. Under rare circumstances, and if the Government determines

that the time period cannot be reduced, awards of more than 3 years

duration are possible.

V. Application Procedures

A. Priority Area Designation

Each application should be limited to one of the priority areas

described earlier. The application must include in the project title

block the priority area title to which the applicant is responding. If

we determine a different priority area is a more appropriate area for

consideration of a proposal, we reserve the right to change priority

area designation without notifying the applicant. (An application being

submitted for an unsolicited area should identify the program area from

among those listed earlier into which the application most clearly

fits.)

B. Criteria for Screening and Reviewing Applications

1. Screening Requirements

In order for an application to be in conformance, it must meet all

of the requirements listed below. Applications that do not meet these

screening requirements will not be considered for funding/approval by

the review panels.

a. Length. The applicant should provide a brief (1 or 2 paragraph)

abstract summarizing the objectives of the proposal. A summary, not to

exceed 5 pages, of the proposed project must be included. This summary

should discuss the project objectives, hypotheses to be examined, data

to be used and their source(s), model type(s) and structure(s) to be

used in analyses, resources available to conduct the project, and

amount and duration of support requested. The narrative portion of the

application should be typewritten, single-sided, and should not exceed

50 (for a research proposal) or 80 (for a demonstration proposal)

double-spaced pages, exclusive of resumes, forms, and so forth.

Applications should be neither unduly elaborative nor contain

voluminous or unnecessary documentation.

b. Number of copies. An original signed application and 14 copies

must be submitted. Medicaid State agencies are required to submit an

original signed application and two copies. Additional copies--up to a

maximum of 10--would assist in the processing of the application.

c. HCFA priorities. Those projects that specifically address a

priority area/topic stated in this announcement generally will receive

preference. Applications determined by HCFA or the review panel to be

unrelated to our announced priorities will not generally be considered

for funding.

2. Evaluation Criteria

Applications that meet the screening criteria will be reviewed by a

technical review panel composed of at least three individuals.

Reviewers will score the applications basing their scoring decisions

and approval recommendations on the following criteria. (Relative

weights are shown in parentheses.)

a. Project methodology/design. (40 points) The application

describes specific plans for conducting the project in terms of the

tasks to be performed. It includes relevant information about:

Hypotheses to be tested (if applicable); concise and clear statement of

goals and measurable/achievable objectives; what the project will do

and how it relates to similar work done in the area; how the project

will be conducted; data to be collected (including specification of

data sources); plan for data analysis; and milestones/phases in the

progress of the project.

Specifically, the proposal should contain the following:

(i) A clear, quantifiable statement of the project goals and

objectives.

(ii) An explicit description of the research design, including the

questions to be addressed and the methods and data to be used. The

methodology must be well defined and scientifically valid.

(iii) If the project is a demonstration proposal, the applicant

should include separate sections on both the research design and the

evaluation design. The research design section should include a

detailed description of the payment methodology and other programmatic

changes. The evaluation section should provide an indication of the

applicant's understanding of the evaluation issues and the various

approaches to them. Should an award be made, the applicant may be

required to collect data in a standardized manner to facilitate

evaluation efforts. We will have the option of determining whether the

applicant or HCFA will be responsible for the evaluation.

(iv) Demonstrations must contain a phase-down/phase-out plan that:

(A) Ensures that Medicare and Medicaid beneficiaries, as well as

any other project participants, are phased out of any special programs

that were initiated and exist as payable or covered health services

only under the auspices of the project, or ensures that plans are in

effect to provide other care for the project participants by the date

the project is scheduled to end; and

(B) Ensures that any new payment methods initiated by the project

will cease to apply at the end of the project (that is, the project in

and of itself cannot commit the Medicare or Medicaid programs to an

indefinite use of the payment methodology beyond the end of the

project).

(v) The tasks and milestones must be clearly described and must

include a schedule of reports to be submitted to HCFA (Progress and

Financial Reports as required by 45 CFR parts 74 and 92).

(vi) The application must contain information specifying the

availability of the data to be used, if data are to be collected. The

discussion must describe the nature of the data sought, the sample

design and size controls, comparisons of any data, and the problems

that might be encountered in collection. Data that are collected under

a HCFA cooperative agreement or grant must be available to HCFA or its

agents. The applicant, however, must ensure the confidentiality of any

personally identifiable information collected under the auspices of any

HCFA cooperative agreement or grant. The application must contain

detailed plans to protect the confidentiality of all information that

identifies individuals under the project. The plan must specify that

this information is confidential, that it may not be disclosed directly

or indirectly except for purposes directly connected with the conduct

of the project, and that in all cases where disclosure takes place for

any purpose not directly connected with the conduct of the project, the

informed written consent of the individual must be obtained.

(vii) Projects that require waivers (for example those under

section 1115(a) of the Act, section 222(a) of Public Law 92-603, as

amended, and section 402(b) of Public Law 90-248, as amended) must

define the services, list the waivers, discuss the implications if

these waivers are granted, and state the effect on Federal, State, and

local laws as well as the effect (beneficial or adverse) on individuals

enrolled in the project. If the project involves both Medicare and

Medicaid waivers, a request for Medicaid waivers from the State agency

administering the Medicaid program must be included with the

application. Applicants should contact HCFA for further information if

questions arise in these cases.

b. Knowledge/experience/capability in area. (20 points) The

application describes the applicant's prior experience in the area or

in related areas. The principal investigator and other key staff are

qualified and possess the experience in this or related areas and the

variety of skills required to produce final results that are readily

comprehensible and usable. The application should provide evidence of

understanding and knowledge of prior and ongoing work in the area.

Specific information also must be provided concerning how the personnel

are to be organized in the project, to whom they will report, and how

they will be used to accomplish specific objectives or portions of the

project.

c. Level of effort. (20 points) The resources that will be needed

to conduct the project are specified, including personnel, time,

budget, and facilities. The staffing pattern clearly links

responsibilities/levels of efforts to project tasks. The project's

costs are reasonable in view of the anticipated results. Any

collaborative effort (including subcontracts) with other organizations

is clearly identified and written assurances included. A description by

category (personnel, travel, consultants, and so forth) of the total of

the Federal funds required is included. Funds are specified for each

budget period. Specifically, the application should contain the

following:

(i) Information specifying the availability of adequate facilities

and equipment for the project or clearly state how these are to be

obtained.

(ii) The budget must be developed in detail with justifications and

explanations for the amount requested. The estimated costs must be

reasonable considering the anticipated results.

(iii) Applicants are expected to contribute towards the project

costs. Generally 5 percent of the total costs is considered acceptable.

No demonstration project will be awarded that covers 100 percent of the

project's costs. The budget may not include costs for construction or

remodeling or for project activities that take place before the

applicant has received official notification of our approval of the

project.

(iv) For demonstration projects involving waivers, budget estimates

for administrative and service costs must be prepared in accordance

with the prescribed methodology. Such applications also must contain

estimates, prepared in accordance with the prescribed methodology in

this announcement, of the amount of program and administrative

expenditures that will occur under the waivers and a comparison of

these expenditures to those that are projected to occur in the program

in the absence of the waivers.

(v) Each application must include a statement that, if the project

is awarded, the awardee will furnish quarterly reports of expenditures

for administrative and program costs (and, for demonstration projects

involving waivers, for service costs) for the project within the

approved budget in the format to be specified under special terms and

conditions in the cooperative agreement or grant.

d. Project objectives and expected outcomes. (20 points) How

closely do the project objectives fit those of the solicitation? What

is the intrinsic merit of the research/study? The need for the project

is discussed in terms of the importance of the issues to be addressed

and the particular project proposed, as well as how the proposed

project builds on and expands previous work in the area. The

application should discuss plans for utilization of the project's

results, for the potential usefulness of the anticipated results, and

expected benefits to HCFA and other target groups.

VI. Other Considerations

A. Selection Criteria for Funding New Projects

Although the recommendations of the technical review panels are a

major factor in making the decision about an application, scores and

recommendations are not the only factors. The compatibility of

applications to our priorities as judged by HCFA Senior Staff, the

availability of HCFA resources, and the comments of other HCFA and

Department staff are considered in making funding decisions.

B. Other Requirements

1. This program is not covered by Executive Order 12372,

``Intergovernmental Review of Federal Programs.''

2. Applications approved by us for funding will contain a specific

set of special terms and conditions that are applicable upon the

applicant's acceptance of the award.

These include the following:

a. The HCFA project officer will be notified before formal

presentation of any report or statistical or analytical material based

on information obtained through this cooperative agreement. Formal

presentation includes papers, articles, professional publications,

speeches and testimony. In the course of this research, whenever the

principal investigator determines that a significant new finding has

been developed, he or she will immediately communicate it to the HCFA

project officer before formal dissemination to the general public. As

required by section 511 of the Departments of Labor, Health and Human

Services, and Education and Related Agencies Appropriations Act of 1990

(Pub. L. 101-166), the awardee, whenever issuing statements, press

releases, requests for proposals, bid solicitations, and other

documents (including reports and published articles) concerning this

project or findings and results from this project, must clearly state

(1) the percentage of the total cost of the project financed with

Federal money, (2) the dollar amount of Federal funds for the project,

and (3) the percentage and dollar amount of the total costs of the

project financed by nongovernmental sources. The final report may not

be released or published without permission from the HCFA project

officer within the first 4 months following receipt of the report by

the HCFA project officer. The final report will contain a disclaimer

that the opinions expressed are those of the awardee and do not

necessarily reflect the opinions of HCFA.

b. At any phase of the project, including the project's conclusion,

the awardee, if requested by us, must submit the analytic data file(s)

with appropriate documentation, representing the data developed/used in

end product analyses generated under the award. The analytic file(s)

may include primary data collected, acquired, or generated under the

award and/or data furnished by us. The content, format, documentation,

and schedule for production of the data will be agreed upon by the

principal investigator and the HCFA project officer. The negotiated

format(s) could include both file(s) that would be limited to HCFA

internal use and file(s) that HCFA could make available to the general

public.

c. At any phase of the project, including at the project's

conclusion, the awardee, if so requested by us, must deliver to us any

materials, systems, or other items developed, refined, or enhanced in

the course of the project or under the award. The awardee agrees that

HCFA will have royalty-free, nonexclusive, and irrevocable rights to

reproduce, publish, or otherwise use and to authorize others to use the

items for Federal Government purposes.

d. Any additional specific project requirements.

3. When a project is completed, the awardee must submit a final

report. As a minimum, the report must contain the following:

a. Identification of the project director, principal investigator,

cooperative agreement or grant number, awardee, and title of the

project.

b. Acknowledgment of the support received from us and a disclaimer

to the effect that the findings do not necessarily reflect the opinions

or policies of HCFA.

c. An executive summary (one or two pages) that provides an

overview of the project and highlights significant findings.

d. A description of the initial hypotheses, objectives, and scope

of the project.

e. An explanation of the study methodology.

f. A discussion of significant findings and demonstration or

research results (and the implications of these results, if any). In

the final report, and on a semiannual basis during the course of the

project, the awardee must provide a list and copies of all papers

presented and of all articles, reports, and other types of publications

that result from the project, for inclusion in a subject bibliography

system maintained by ORD, HCFA. It is further requested that the

awardee continue to provide the updated information for 2 years after

the project's completion. The ORD ``Author's Guidelines for Cooperative

Agreements, Grants and Contracts'' should be used in preparing the

final report. This document is available on request from the ORD

Publications Coordinator, room 1-C-9 Oak Meadows Building, 6325

Security Boulevard, Baltimore, Maryland 21207-5187, (410) 966-6885.

C. Multiple Applications

The applicant must indicate when the same or a similar application

is submitted to another HHS agency, for example, the Social Security

Administration or one of the Public Health Service programs.

D. Cooperative Agreement and Grant Policies

Projects are funded through a competitive process and chosen from

among the applications submitted in response to this announcement. In

the case of demonstration projects, all awardees are expected to share

directly in the costs of the project. Normally, this sharing must be at

least 5 percent of the total project costs. For section 1115(a) of the

Act projects, the amount that the single State agency will be expected

to provide generally must be at least 5 percent of the special Federal

project funds.

If, following review of a proposed activity, we determine that a

research or demonstration project presents a danger to the physical or

mental well-being of a participant of the project, Federal funds will

not be made available for that project without the written informed

consent of each participant. Other policies, including

responsibilities, awarding and payment procedures, special provisions,

and assurances, may be found in 45 CFR parts 74 and 92.

It is a national policy to place a fair share of purchases with

small, minority-owned, and woman-owned business firms. HHS is strongly

committed to the objectives of this policy and encourages all

recipients of its cooperative agreements and grants to take affirmative

steps to ensure such fairness; in particular, recipients should (1)

place small, minority-owned, and woman-owned business firms on bidders'

mailing lists, (2) solicit these firms whenever they are potential

sources of supplies, equipment, construction, or services, (3) where

feasible, divide total requirements into smaller needs and set delivery

schedules that will encourage participation by these firms, and (4) use

the assistance of the Minority Business Development Agency of the

Department of Commerce, the Office of Small and Disadvantaged Business

Utilization, HHS, and similar available State and local government

agencies.

VII. Review of Applications

An independent review will be conducted by a panel of not less than

three experts. The panel will include experts from both HHS and the

private sector. There will be at least one independent review panel for

each priority area. An ORD chairperson will coordinate the panel's

review but will not vote. The chairperson will also prepare the

panelists' recommendations (summary statement) to the Director, ORD.

The panelists' recommendations will contain numerical ratings (based on

the specified rating criteria), ranking of all applications, and a

written assessment of each application. These will be summarized in a

ranking and approval list and in a matrix that will be prepared for

each application. When the panelists determine that an application is

unrelated to the announced funding priorities, numerical ratings will

generally not be assigned to the application, and the application will

generally not be considered for funding. Applicants may request in

writing a copy of the summary statement of the review of their

application after they have received from HCFA the letter announcing

approval or disapproval. Summary statements will be made available

subject to the applicable limitations of the Freedom of Information Act

(5 U.S.C. 552), the Federal Advisory Committee Act (5 U.S.C. App. 2),

the Privacy Act (5 U.S.C. 552a), and 45 CFR parts 5, 5b, and 11.

VIII. Closing Date and Time

In order to be considered under this announcement, for the annual

funding cycles for FYs 1994, 1995, and 1996, a cooperative agreement

and grant application, as described in sections I and III of this

notice, must be submitted to HCFA by March 24, 1994, by February 7,

1995, or by February 6, 1996, respectively. Submissions by facsimile

(FAX) transmission will not be accepted. Applications mailed through

the U.S. Postal Service or a commercial delivery service will be ``on

time'' if they are received on or before the closing date, or sent on

or before the closing date and received in time for submission to the

independent review group. Applicants are cautioned to request a legible

U.S. Postal Service postmark or to obtain a legibly dated receipt from

the commercial carrier or the U.S. Postal Service. Privately metered

postmarks will not be acceptable as proof of timely mailing.

Applications that do not meet the above criteria will be considered

late applications. Those submitting late applications will be notified

that the applications were not considered in the current competition.

Authority: Sections 1110, 1115(a), 1875, 1881(c)(7) and 1881(f)

of the Social Security Act (42 U.S.C. 1310, 1315(a) 1395ll,

1395rr(c)(7) and 1395rr(f)); section 402 of the Social Security

Amendments of 1967, as amended (42 U.S.C. 1395b-1); section 222(a)

of the Social Security Amendments of 1972, as amended (42 U.S.C.

1395-1 (note)).

(Catalog of Federal Domestic Assistance Program No. 93.779, Health

Financing Research, Demonstrations and Experiments).

Editorial Note: This document was received by the Office of the

Federal Register on January 13, 1994.

Dated: July 20, 1993.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

[FR Doc. 94-851 Filed 1-12-94; 8:45 am]

BILLING CODE 4120-01-P