Medicare Program; Criteria and Standards for Evaluating Intermediary and Carrier Performance During FY 2000

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[HCFA-4009-GNC]

RIN 0938-AJ88

Medicare Program; Criteria and Standards for Evaluating

Intermediary and Carrier Performance During FY 2000

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

ACTION: General notice with comment period.

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SUMMARY: This notice describes the criteria and standards to be used

for evaluating the performance of fiscal intermediaries and carriers in

the administration of the Medicare program beginning January 1, 2000.

The results of these evaluations are considered whenever HCFA enters

into, renews, or terminates an intermediary agreement or carrier

contract or takes other contract actions (for example, assigning or

reassigning providers or services to an intermediary or designating

regional or national intermediaries).

This notice is published in accordance with sections 1816(f) and

1842(b)(2) of the Social Security Act. We are publishing for public

comment in the Federal Register those criteria and standards against

which we evaluate intermediaries and carriers.

DATES: The criteria and standards are effective January 1, 2000.

Comments: Comments will be considered if we receive them at the

appropriate address as provided below no later than 5 p.m. (EDT) on

January 3, 2000.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services (HHS), Attention: HCFA-4009-GNC, P.O. Box

8016, Baltimore, MD 21244-8016.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue,

SW., Washington, DC, 20201, or 7500 Security Boulevard, Baltimore,

Maryland 21244.

Because of the staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code HCFA-4009-GNC. Comments received timely will be available

for public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 443-G of

the Department's office at 200 Independence Avenue, SW., Washington,

D.C., on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Sue Lathroum, (410) 786-7409.

SUPPLEMENTARY INFORMATION:

I. Background

Under section 1816 of the Social Security Act (the Act), public or

private organizations and agencies participate in the administration of

Part A (Hospital Insurance) of the Medicare program under agreements

with the Secretary of Health and Human Services. These agencies or

organizations, known as fiscal intermediaries, determine whether

medical services are covered under Medicare and determine correct

payment amounts. The intermediaries then make payments to the health

care providers on behalf of the beneficiaries. Section 1816(f) of the

Act requires us to develop criteria, standards, and procedures to

evaluate an intermediary's performance of its functions under its

agreement. We evaluate intermediary performance through the contract

management process.

Under section 1842 of the Act, we are authorized to enter into

contracts with carriers to fulfill various functions in the

administration of Part B (Supplementary Medical Insurance) of the

Medicare program. Beneficiaries, physicians, and suppliers of services

submit claims to these carriers. The carriers determine whether the

services are covered under Medicare and the payable amount for the

services or supplies, and then make payment to the appropriate party.

Under section 1842(b)(2) of the Act, we are required to develop

criteria, standards, and procedures to evaluate a carrier's performance

of its functions under its contract. We also evaluate carrier

performance through the contract management process.

We are publishing the criteria and standards in the Federal

Register in order to allow the public an opportunity to comment before

implementation. In addition to the statutory requirement, our

regulations at 42 CFR 421.120 and 421.122 provide for publication of a

Federal Register notice to announce criteria and standards for

intermediaries prior to implementation. Regulation 42 CFR 421.201

provides for publication of a Federal Register notice to announce

criteria and standards for carriers prior to implementation. The

current criteria and standards were published in the Federal Register

on September 7, 1994 (59 FR 46258).

To the extent possible, we make every effort to publish the

criteria and standards before the beginning of the Federal fiscal year,

which is October 1. If we do not publish a Federal Register notice

before the new fiscal year begins, readers may presume that until and

unless notified otherwise, the criteria and standards which were in

effect for the previous fiscal year remain in effect.

In those instances where we are unable to meet our goal of

publishing the subject Federal Register notice before the beginning of

the fiscal year, we may publish the criteria and standards notice at

any subsequent time during the year. If we choose to publish a notice

in this manner, the evaluation period for any such criteria and

standards that are the subject of the notice will be revised to be

effective on the first day of the first month following publication.

Hence, any revised criteria and standards will measure performance

prospectively; that is, we will not apply new measurements to assess

performance on a retroactive basis.

Also, it is not our intention to revise the criteria and standards

that will be used during the evaluation period once this information

has been published in a Federal Register notice. However, on occasion,

either because of Administrative mandate or Congressional action, there

may be a need for changes that have direct impact upon the criteria and

standards previously published, or which require the addition of new

criteria or standards, or that cause the deletion of previously

published criteria and standards. Should such changes be necessitated,

we will issue a Federal Register notice prior to implementation of the

changes. In all instances, necessary manual issuances will be published

each year to ensure that the criteria and standards are implemented

uniformly and accurately. Also, as in previous years, the Federal

Register notice will be republished and the effective date revised if

changes are warranted as a result of the public comments received on

the criteria and standards.

II. Criteria and Standards--General

Basic tenets of the Medicare program are to pay claims promptly and

accurately and to foster good beneficiary and provider relations.

Contractors must administer the Medicare program efficiently and

economically. We have developed a contractor management program for FY

2000 that sets

[[Page 67921]]

expectations for the contractor; measures the performance of the

contractor; evaluates the performance against the expectations; and,

takes appropriate contract action based upon evaluation of the

contractor's performance. The goal of performance evaluation is to

ensure that contractors meet their contractual obligations. We measure

contractor performance to ensure that contractors do what is required

of them by law, regulation and HCFA directive. We ensure that

contractors perform well and continually improve their performance. To

better evaluate contractor performance, we are working to develop and

refine measurable performance standards in key areas, and we will be

facilitating the sharing of ``best practices'' among HCFA reviewers. We

also are increasing the number of standardized evaluation protocols for

use in FY 2000. We have structured contractor evaluation into five

criteria designed to meet those objectives.

The first criterion in the FY 2000 contractor performance

evaluation is ``Claims Processing,'' which measures contractual

performance against claims processing accuracy and timeliness

requirements. Within the Claims Processing criterion, we have

identified those performance standards that are mandated by either

legislation, regulation or judicial decision. These standards include

claims processing timeliness, and the accuracy of Explanations of

Medicare Benefits. Further evaluation in the Claims Processing

criterion may include, but is not limited to, the accuracy of bill and

claims processing, the level of electronic claims payment, and the

percent of bills and claims paid with interest.

The second criterion is ``Customer Service,'' which assesses the

completeness of the service provided to customers by the contractor in

its administration of the Medicare program. Mandated standards in the

Customer Service criterion include the rate of cases reversed by an

Administrative Law Judge, the timeliness of intermediary

reconsideration cases, the accuracy and timeliness of carrier reviews

and hearings, and the accuracy and timeliness of carrier replies to

beneficiary telephone inquiries. In FY 2000, customer feedback may be

used to collect comparable data on customer satisfaction and identify

areas in need of improvement. Among the specific contractor services

that may be included in the evaluation process under the Customer

Service criterion are: beneficiary relations; provider education;

appropriate telephone inquiry responses; and the tone and accuracy of

all correspondence.

The third criterion is ``Payment Safeguards,'' which evaluates

whether the Medicare trust funds are safeguarded against inappropriate

program expenditures. Intermediary and carrier performance may be

evaluated in the areas of medical review, Medicare secondary payer,

fraud and abuse, and audit and reimbursement. Mandated performance

standards in the Payment Safeguards criterion are the accuracy of

decisions on skilled nursing facility (SNF) demand bills, and the

timeliness of processing Tax Equity and Fiscal Responsibility Act

(TEFRA) target rate adjustments, exceptions, and exemptions. Further

evaluation in this criterion may include, but is not limited to, some

core standards for Medical Review and Benefit Integrity.

The fourth criterion is ``Fiscal Responsibility,'' which evaluates

the contractor's efforts to protect the Medicare program and the public

interest. Contractors must effectively manage Federal funds for both

payment of benefits and cost of administration under the Medicare

program. Proper financial and budgetary controls, including internal

controls, must be in place to ensure contractor compliance with its

agreement with HHS and HCFA. Additional functions reviewed under this

criterion may include, but are not limited to, adherence to approved

budget, compliance with the Budget and Performance Requirements, and

adherence to the Chief Financial Officers Act.

The fifth and final criterion is ``Administrative Activities,''

which measures a contractor's administrative management of the Medicare

program. A contractor must efficiently and effectively manage its

operations to ensure constant improvement in the way it does business.

Proper systems security, Automated Data Processing (ADP) maintenance,

and disaster recovery plans must be in place. It must also ensure that

all necessary actions and system changes have been made and tested so

that it is meeting established milestones along the critical path of

HCFA's requirements for millennium compliance. Year 2000 compliant

means information technology that accurately processes date and time

data (including, but not limited to, calculating, comparing, and

sequencing) from, into, and between the centuries (the years 1999 and

2000), and leap year calculations. Furthermore, Year 2000 compliant

information technology, when used in combination with other information

technology, must accurately process date and time data if the other

information technology properly exchanges date and time data with it. A

contractor's evaluation under the Administrative Activities criterion

may include, but is not limited to, establishment, application,

documentation, and effectiveness of internal controls, which are

essential in all aspects of a contractor's operation. Administrative

Activities evaluations may also include implementation reviews of

performance improvement plans, change management plans, and data and

reporting requirements.

We have also developed separate measures for evaluating unique

activities of Regional Home Health Intermediaries (RHHIs). Section

1816(e)(4) of the Act requires the Secretary to designate regional

agencies or organizations, which are already Medicare intermediaries

under section 1816, to perform bill processing functions with respect

to freestanding home health agency (HHA) bills. The law requires that

we limit the number of such regional intermediaries (i.e., RHHIs) to

not more than ten (see 42 CFR 421.117 and the Final Rule published in

the Federal Register on May 19, 1988 (53 FR 17936) for more details

about the RHHIs).

In addition, section 1816(e)(4) of the Act requires the Secretary

to develop criteria and standards in order to determine whether to

designate an agency or organization to perform services with respect to

hospital affiliated HHAs. We have developed separate measures for RHHIs

in order to evaluate the distinct RHHI functions. These functions

include the bills processing of freestanding HHAs, hospital affiliated

HHAs, and hospices. Through an evaluation using these criteria and

standards we may determine whether the RHHI functions should be moved

from one intermediary to another in order to ensure effective and

efficient administration of the program benefit.

Below we list the criteria and standards to be used for evaluating

the performance of intermediaries and carriers. In a number of

instances, we identify a HCFA manual as a source of more detailed

requirements. Intermediaries and carriers have copies of various

Medicare manuals referenced in this notice. Members of the public also

have access to our manualized instructions.

Medicare manuals are available for review at local Federal

Depository Libraries (FDLs). Under the FDL Program, government

publications are sent to approximately 1400 designated public libraries

throughout the United States. Interested parties may examine

[[Page 67922]]

the documents at any one of the FDLs. Some may have arrangements to

transfer material to a local library not designated as an FDL. To

locate the nearest FDL, individuals should contact any public library.

In addition, individuals may contact regional depository libraries,

which receive and retain at least one copy of nearly every Federal

government publication, either in printed or microfilm form, for use by

the general public. These libraries provide reference services and

interlibrary loans; however, they are not sales outlets. Individuals

may obtain information about the location of the nearest regional

depository library from any library. Information may also be obtained

from the following web site: www.hcfa.gov/pubforms/progman.htm. Some

manuals may be obtained from the following web site: www.hcfa.gov/

pubforms/p2192toc.htm.

Finally, all HCFA regional offices maintain all Medicare manuals

for public inspection. To find the location of the nearest available

HCFA regional office, individuals may call the FOR FURTHER INFORMATION

CONTACT individual listed at the beginning of this notice. That

individual can also provide information about purchasing or subscribing

to the various Medicare manuals.

III. Criteria and Standards for Intermediaries

Claims Processing Criterion

The Claims Processing criterion contains 4 mandated standards.

Standard 1--95% of clean electronically submitted non-Periodic Interim

Payment (PIP) bills paid within statutorily specified time frames.

Clean bills are defined as bills that do not require Medicare

intermediaries and/or carriers to investigate or develop external to

their Medicare operations on a prepayment basis. Specifically, clean,

non-PIP electronic claims can be paid as early as the 14th day (13 days

after the date of receipt) and must be paid by the 31st day (30 days

after the date of receipt).

Standard 2--95% of clean paper non-PIP bills paid within specified time

frames. Specifically, clean, non-PIP paper claims can be paid as early

as the 27th day (26 days after the date of receipt), and must be paid

by the 31st day (30 days after the date of receipt).

Standard 3--Reversal rate by Administrative Law Judges (ALJ) is

acceptable. HCFA has defined an acceptable reversal rate as one that is

at or below 5.0%.

Standard 4--75% of reconsiderations are processed within 60 days and

90% are processed within 90 days.

Additional functions may be evaluated under this criterion. These

functions include, but are not limited to the--

Bill processing accuracy;

Attainment of Electronic Media Claims goals;

Establishment and maintenance of relationship with Common

Working File Host;

Management of shared processing sub-contract; and

Analysis and validation of data.

Customer Service Criterion

We may review the intermediary's efforts to enhance customer

satisfaction through the use of customer feedback. Results of the

feedback may be used to establish comparable data on customer

satisfaction and to identify areas in need of improvement. The results

may be summarized for publication in the report of contractor

performance and shared with individual contractors.

Functions which may be evaluated under this criterion include, but

are not limited to, the--

Accuracy, timeliness and appropriateness of responses to

telephone inquiries;

Accuracy of processing reconsideration cases with clear

responses and appropriate customer-friendly tone and clarity;

Accuracy, clearness and timeliness of responses to written

inquiries with appropriate customer-friendly tone and clarity;

Establishment and maintenance of relationships with

professional and beneficiary organizations and using focus groups; and

Conduct of educational and outreach efforts.

Payment Safeguards Criterion

The Payment Safeguard criterion contains 2 mandated standards.

Standard 1--Decisions of SNF demand bills are accurate.

Standard 2--TEFRA target rate adjustments, exceptions, and exemptions

are processed within mandated time frames. Specifically, applications

must be processed to completion within 75 days after receipt by the

contractor or returned to the hospitals as incomplete within 60 days of

receipt.

Additional functions may be evaluated under this criterion. These

functions include, but are not limited to--

Medical Review. We may evaluate if the fiscal

intermediary--

+ Increased the effectiveness of medical review payment safeguard

activities;

+ Exercised accurate and defensible decision making on medical

reviews;

+ Educated and communicated effectively with the provider and

supplier community;

+ Collaborated with other internal components and external entities

to ensure correct claims payment, and to address situations of fraud,

waste, and abuse.

Audit and Reimbursement. We may--

+ Assess the quality of a fiscal intermediary's activities in the

audit and settlement of Medicare cost reports; and

+ Assess the timeliness of Medicare cost report settlements and the

accuracy by which a fiscal intermediary has established interim

provider payments.

Medicare Secondary Payer. We may--

+ Review the intermediary's MSP processes in administering the

program and for identifying and recovering mistaken Medicare payments

in accordance with MIM, Part 3, Secs. 3400ff and 3600ff, and pertinent

HCFA instructions and transmittals;

+ Develop outcome measures to assess the intermediary's accuracy in

reporting savings and to determine if claim development procedures are

followed;

+ Evaluate the accuracy and timeliness of claims payment and

determine if the Common Working File, internal systems and required

software are utilized as prescribed; and

+ Evaluate the contractor's ability to prioritize and process

recoveries in compliance with instructions, determine if recoveries of

all payers are processed equally, and ensure that audit trail

documentation exists.

Fraud and Abuse. We may evaluate if the fiscal

intermediary--

+ Used proactive and reactive techniques in the detection and

development of potential fraud cases;

+ Used other corrective and preventive actions (such as payment

suspensions, Civil Monetary Penalties (CMPs), overpayment assessments,

pre-payment or post-payment claims reviews, system fixes, claim

denials, etc.);

+ Properly developed fraud cases for referral to the Office of the

Inspector General, HHS; and

+ Maintained a good working relationship and extensive networking

with both internal components and external partners.

[[Page 67923]]

Fiscal Responsibility Criterion

We may review the intermediary's efforts to establish and maintain

appropriate financial and budgetary internal controls over benefit

payments and administrative costs. Proper internal controls must be in

place to ensure that contractors comply with their agreements with

HCFA.

Additional matters to be reviewed under the Fiscal Responsibility

criterion may include, but are not limited to--

Adherence to approved budget;

Compliance with the Budget and Performance Requirements;

Adherence to the Chief Financial Officers Act; and

Control of administrative cost and benefit payments.

Administrative Activities Criterion

We may measure a contractor's administrative ability to manage the

Medicare program. We may evaluate the efficiency and effectiveness of

its operation, its system of internal controls, and its compliance with

HCFA directives and initiatives.

A contractor must efficiently and effectively manage its operations

to assure constant improvement in the way it does business. Proper

systems security, ADP maintenance, and disaster recovery plans must be

in place. It must also ensure that all necessary actions and system

changes have been made and tested so that it is meeting established

milestones along the critical path of HCFA's requirements for

millennium compliance. Year 2000 compliant means information technology

that accurately processes date and time data (including, but not

limited to, calculating, comparing, and sequencing) from, into, and

between the centuries (the years 1999 and 2000), and leap year

calculations. Furthermore, Year 2000 compliant information technology,

when used in combination with other information technology, must

accurately process date and time data if the other information

technology properly exchanges date and time data with it. A contractor

must also test standard system changes to ensure the accurate

implementation of HCFA instructions.

HCFA's evaluation of a contractor under the Administrative

Activities criterion may include, but is not limited to, reviews of the

contractor's--

Systems security;

ADP maintenance;

Disaster recovery plan;

Performance Improvement Plans implementation;

Change Management Plan implementation;

Data and reporting requirements implementation; and

Internal controls establishment and use.

IV. Criteria and Standards for Carriers

Claims Processing Criterion

The Claims Processing criterion contains 5 mandated standards.

Standard 1--95% of clean electronically submitted claims processed

within statutorily specified time frames. Specifically, clean

electronic claims can be paid as early as the 14th day (13 days after

the date of receipt) and must be paid by the 31st day (30 days after

the date of receipt).

Standard 2--95% of clean paper claims processed within specified time

frames. Specifically, clean paper claims can be paid as early as the

27th day (26 days after the date of receipt) and must be paid by the

31st day (30 days after the date of receipt).

Standard 3--98% of Explanations of Medicare Benefits (EOMBs) are

properly generated.

Standard 4--95% of review determinations are accurate and clear with

appropriate customer-friendly tone and clarity, and are completed

within 45 days.

Standard 5--90% of carrier hearing decisions are accurate and clear

with appropriate customer-friendly tone and clarity, and are completed

within 120 days.

Additional functions may be evaluated under this criterion. These

functions include, but are not limited to, the--

Claims Processing accuracy;

Attainment of Electronic Media Claims goals;

Management of shared processing sub-contract;

Establishment and maintenance of relationship with the

Common Working File Host; and

Analysis and validation of data.

Customer Service Criterion

The Customer Service criterion contains 1 mandated standard.

Standard 1--Telephone inquiries are answered timely.

Carriers are to achieve a monthly All Trunks Busy Rate of not more

than 5%. For callers choosing to speak with a customer service

representative, 97.5% or more of telephone calls are to be answered

within 120 seconds; no less than 85% are to be answered within the

first 60 seconds.

We may review the carrier's efforts to enhance customer

satisfaction through the use of customer feedback. Results of the

feedback may be used to establish comparable data on customer

satisfaction and to identify areas in need of improvement. The results

may be summarized for publication in the report of contractor

performance and shared with individual contractors.

Additional functions may be evaluated under this criterion. These

functions include, but are not limited to, the carrier's--

Accuracy and appropriateness of responses to telephone

inquiries;

Accuracy, clearness, and timeliness of responses to

written inquiries with appropriate customer-friendly tone and clarity;

Establishment and maintenance of relationships with

professional and beneficiary organizations and using focus groups; and

Conduct of educational and outreach efforts.

Payment Safeguards Criterion

Carrier functions that may be reviewed under this criterion

include, but are not limited to--

Medical Review. We may evaluate if the carrier --

+ Increased the effectiveness of medical review payment safeguard

activities;

+ Exercised accurate and defensible decision making on medical

reviews;

+ Effectively educated and communicated with the provider and

supplier community;

+ Collaborated with other internal components and external entities

to ensure correct claims payment, and to address situations of fraud,

waste, and abuse.

Medicare Secondary Payer. We may--

+ Review the carrier's MSP processes in administering the program

and for identifying and recovering mistaken Medicare payments in

accordance with the Medicare Carriers Manual (MCM, Part 3, Secs. 3375,

4306.3, and 4307-4308.1), and pertinent HCFA instructions and

transmittals;

+ Develop outcome measures to assess the carrier's accuracy in

reporting savings and to determine if claim development procedures are

followed;

+ Evaluate the accuracy and timeliness of claims payment and

determine if the Common Working File, internal systems and required

software are utilized as prescribed; and

+ Evaluate the contractor's ability to prioritize and process

recoveries in compliance with instructions, determine if recoveries of

all payers are processed equally, and ensure that audit trail

documentation exists.

Fraud and Abuse. We may evaluate if the carrier --

[[Page 67924]]

+ Used proactive and reactive techniques in the detection and

development of potential fraud cases;

+ Used other corrective and preventive actions (such as payment

suspensions, CMPs, overpayment assessments, education, pre-payment or

post-payment claims reviews, system fixes, edits, claim denials, etc.);

+ Properly developed fraud cases for referral to the Office of the

Inspector General, HHS;

+ Maintained a good working relationship and extensive networking

with both internal components and external partners.

Fiscal Responsibility Criterion

We may review the carrier's efforts to establish and maintain

appropriate financial and budgetary internal controls over benefit

payments and administrative costs. Proper internal controls must be in

place to ensure that contractors comply with their agreements with

HCFA.

Additional matters to be under the Fiscal Responsibility criterion

may include, but are not limited to--

Compliance with the Budget and Performance Requirements;

Adherence to approved budget;

Adherence to the Chief Financial Officers Act; and

Control of administrative cost and benefit payments.

Administrative Activities Criterion

We may measure a carrier's administrative ability to manage the

Medicare program. We may evaluate the efficiency and effectiveness of

its operation, its system of internal controls and its compliance with

HCFA's directives and initiatives.

A contractor must efficiently and effectively manage its operations

to assure constant improvement in the way it does business. Proper

systems security, ADP maintenance, and disaster recovery plans must be

in place. It must also ensure that all necessary actions and system

changes have been made and tested so that it is meeting established

milestones along the critical path of HCFA's requirements for

millennium compliance. Year 2000 compliant means information technology

that accurately processes date and time data (including, but not

limited to, calculating, comparing, and sequencing) from, into, and

between the centuries (the years 1999 and 2000), and leap year

calculations. Furthermore, Year 2000 compliant information technology,

when used in combination with other information technology, must

accurately process date and time data if the other information

technology properly exchanges date and time data with it. Also, a

contractor must test standard system changes to ensure accurate

implementation of HCFA instructions.

A carrier's evaluation under this criterion may include, but is not

limited to, reviews of--

Proper systems security;

ADP maintenance;

Disaster recovery plan;

Performance improvement plans implementation;

Change management plan implementation;

Data and reporting requirements implementation; and

Internal controls establishment and use.

V. Regional Home Health Intermediaries' (RHHIs') Criterion

The following standards are mandated for the Regional Home Health

Intermediaries' criterion:

Standard 1--95% of clean electronically submitted non-PIP HHA/hospice

bills paid within statutorily specified time frames. Specifically,

clean, non-PIP electronic claims can be paid as early as the 14th day

(13 pays after the date of receipt) and must be paid by the 31st day

(30 days after the date of receipt).

Standard 2--95% of clean paper non-PIP HHA/hospice bills paid within

specified time frames. Specifically, clean, non-PIP paper claims can be

paid as early as the 27th day (26 days after the date of receipt) and

must be paid by the 31st day (30 days after the date of receipt).

Standard 3--75% of HHA/hospice reconsiderations are processed within 60

days and 90% are processed within 90 days.

We may use this criterion to review a RHHI's performance with

respect to handling the HHA/hospice workload. This includes processing

HHA/hospice bills timely and accurately, properly paying and settling

HHA cost reports, and timely and accurately processing reconsiderations

from beneficiaries, HHAs, and hospices.

VI. Action Based on Performance Evaluations

A contractor's performance is evaluated against applicable program

requirements for each criterion. Each contractor must certify that all

information submitted to HCFA relating to the contractor management

process, including without limitation all records, reports, files,

papers and other information, whether in written, electronic, or other

form, is accurate and complete to the best of the contractor's

knowledge and belief. A contractor will also be required to certify

that its files, records, documents, and data have not been manipulated

or falsified in an effort to receive a more favorable performance

evaluation. A contractor must further certify that, to the best of its

knowledge and belief, the contractor has submitted, without withholding

any relevant information, all information required to be submitted with

respect to the contractor management process under the authority of

applicable law(s), regulation(s), contracts, or HCFA manual

provision(s). Any contractor that makes a false, fictitious, or

fraudulent certification may be subject to criminal and/or civil

prosecution, as well as appropriate administrative action. Such

administrative action may include debarment or suspension of the

contractor, as well as the termination or nonrenewal of a contract.

If a contractor meets the level of performance required by

operational instructions, it meets the requirements of that criterion.

Any performance measured below basic operational requirements

constitutes a program deficiency. The contractor will be required to

develop and implement a Performance Improvement Plan for each program

deficiency identified. The contractor will be monitored to ensure

effective and efficient compliance with the performance improvement

plan, and to ensure improved performance where requirements are not

met. The contractor will also be monitored when a program vulnerability

in any performance area is identified. A program vulnerability exists

when a contractor's performance complies with basic program

requirements, but one or more weaknesses are present which could result

in deficient performance if left ignored.

The results of performance evaluations and assessments under all

five criteria will be used for contract management activities and will

be published in the contractor's annual performance report. We may

initiate administrative actions as a result of the evaluation of

contractor performance based on these performance criteria. Under

sections 1816 and 1842 of the Act, we consider the results of the

evaluation in our determinations when--

Entering into, renewing, or terminating agreements or

contracts with contractors;

Deciding other contract actions for intermediaries and

carriers (such as deletion of an automatic renewal clause). These

decisions are made on a case-by-case basis and depend primarily

[[Page 67925]]

on the nature and degree of performance. More specifically, they depend

on the--

+ Relative overall performance compared to other contractors;

+ Number of criteria in which deficient performance occurs;

+ Extent of each deficiency;

+ Relative significance of the requirement for which deficient

performance occurs within the overall evaluation program; and

+ Efforts to improve program quality, service, and efficiency.

Deciding the assignment or reassignment of providers and

designation of regional or national intermediaries for classes of

providers.

We make individual contract action decisions after considering

these factors in terms of their relative significance and impact on the

effective and efficient administration of the Medicare program.

In addition, if the cost incurred by the intermediary or carrier to

meet its contractual requirements exceeds the amount which the

Secretary finds to be reasonable and adequate to meet the cost which

must be incurred by an efficiently and economically operated

intermediary or carrier, such high costs may also be grounds for

adverse action.

VII. Response to Public Comments

Because of the large number of items of correspondence we normally

receive on Federal Register documents published for comment, we are

unable to acknowledge or respond to them individually. We will consider

all comments we receive by the date and time specified in the DATES

section of this preamble, and, if we proceed with a subsequent

document, we will respond to the comments in the preamble of that

document.

In accordance with the provisions of Executive Order 12866, this

notice was reviewed by the Office of Management and Budget.

We have reviewed this notice under the threshold criteria of

Executive Order 13132 of August 4, 1999, Federalism, published in the

Federal Register on August 10, 1999 (64 FR 43255). The Executive Order

is effective November 2, 1999, which is 90 days after the date of this

Order. We have determined that the notice does not significantly affect

the rights, roles, and responsibilities of States.

Section 202 of the Unfunded Mandates Reform Act of 1995 requires

that agencies assess anticipated costs and benefits before issuing any

rule that may result in an expenditure by State, local, or tribal

governments, in the aggregate, or by the private sector, of $100

million in any one year. This notice will not have an effect on the

governments mentioned, and the private sector costs will not be greater

than the $100 million threshold.

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance, and Program No. 93.774, Medicare--

Supplementary Medical Insurance Program)

Dated: October 6, 1999.

Michael M. Hash,

Deputy Administrator, Health Care Financing Administration.

[FR Doc. 99-31361 Filed 12-2-99; 8:45 am]

BILLING CODE 4120-01-P