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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A94-851

## Record

- **Collection:** Federal Register
- **Document type:** Uncategorized Document
- **Published:** January 13, 1994

## Text

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.

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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
P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-851. Public record. Not legal advice.