Medicare Program; Changes to the Medicare+Choice Program

SUMMARY: The purpose of this final rule is to set forth limited changes

to the Medicare+Choice regulations published in our June 26, 1998

interim final rule (63 FR 34968). Those regulations implemented section

4001 of the Balanced Budget Act of 1997 (BBA), which established the

Medicare+Choice (M+C) program. This final rule addresses selected

issues raised by commenters on the June 26, 1998 interim final rule

where we have identified the need for changes or where we believe that

clarifications are needed as soon as possible. Among these issues are

provider participation procedures, beneficiary enrollment options, and

several access-related issues, including initial care assessment

requirements, notification requirements when specialists are terminated

from an M+C plan, and several coordination of care requirements.

DATES: Effective date: This final rule is effective March 19, 1999.

FOR FURTHER INFORMATION CONTACT: Tony Hausner (410) 786-1093 (for

access to care issues). Debe McKeldin (410) 786-9159 (for enrollment

issues). Tony Culotta (410) 786-4661 (for provider participation rules

or other issues).

SUPPLEMENTARY INFORMATION:

I. Background

A. Balanced Budget Act of 1997

Section 4001 of the Balanced Budget Act of 1997 (BBA) (Public Law

105-33), enacted August 5, 1997, added sections 1851 through 1859 to

the Social Security Act (the Act) to establish a new Part C of the

Medicare program, known as the ``Medicare+Choice (M+C) Program.'' (The

existing Part C of the statute, which included provisions in section

1876 of the Act governing existing Medicare health maintenance

organization (HMO) contracts, has been redesignated as Part D.) Under

section 1851(a)(1) of the Act, every individual entitled to Medicare

Part A and enrolled under Part B, except for individuals with end-stage

renal disease, may elect to receive benefits through either the

existing Medicare fee-for-service program or a Part C M+C plan.

As its name implies, the primary goal of the Medicare+Choice

program is to provide Medicare beneficiaries with a wider range of

health plan choices through which to obtain their Medicare benefits.

Alternatives available to beneficiaries under the M+C program include

both the traditional managed care plans (such as HMOs) that have

participated in Medicare on a capitated payment basis under section

1876 of the Act, as well as a broader range of plans comparable to

those now available through private insurance. Specifically, effective

January 1, 1999, section 1851(a)(2) of the Act provides for three types

of M+C plans:

M+C coordinated care plans, including HMO plans (with or

without point of service options), provider-sponsored organization

(PSO) plans, and preferred provider organization (PPO) plans.

M+C medical savings account (MSA) plans (that is,

combinations of a high deductible M+C health insurance plan and a

contribution to an M+C MSA).

M+C private fee-for-service plans.

In addition to expanding the types of health plans permitted to

contract with Medicare, the M+C program introduces several other

fundamental changes to the managed care component of the Medicare

program. These changes include:

Establishment of an expanded array of quality assurance

standards and other consumer protection requirements.

Introduction of an annual coordinated enrollment period,

in conjunction with the distribution by HCFA of uniform, comprehensive

information about participating plans that is needed to promote

informed choices by beneficiaries.

Revisions in the way we calculate payment rates to the

plans that will narrow the range of payment variation across the

country and increase incentives for plans to operate in diverse

geographic areas.

Establishment of requirements concerning provider

participation procedures.

B. Summary of Interim Final Rule

In our June 26, 1998 interim final rule (63 FR 34968), we set forth

the new M+C regulations in 42 CFR part 422--Medicare+Choice Program.

The major subjects covered in each subpart of part 422 are as follows:

Subpart A--Definitions, including definition of types of

plans, application process, and user fees.

Subpart B--Requirements concerning beneficiary

eligibility, election, enrollment and disenrollment procedures, and

plan information and marketing materials.

Subpart C--Requirements concerning benefits, point of

service options, access to services (including rules on enrollee

assessments and notification upon termination of specialists), and

others.

Subpart D--Quality assurance standards, external review,

and deeming of accredited organizations.

Subpart E--Provider participation rules and the

prohibition against interference with health care professionals' advice

to enrollees.

Subpart F--Payment methodology for M+C organizations, risk

adjustment, and encounter data requirements.

Subpart G--Requirements concerning premiums, cost sharing,

and determination of adjusted community rate.

Subpart H--Requirements concerning provider-sponsored

organizations (PSOs).

Subpart I--Organization compliance with State law and

preemption by Federal law.

Subpart K--Contract requirements.

Subpart L--Change of ownership rules.

Subpart M--Beneficiary grievances, organization

determinations, and appeals.

Subpart N--Contractor appeals of nonrenewals or

terminations of contracts.

Subpart O--Procedures for imposing intermediate sanctions.

On October 1, 1998, we issued a correction notice in the Federal

Register (63 FR 52610) to correct technical errors that appeared in the

interim final rule. All references in this document to regulation text

are to the corrected text unless otherwise noted.

C. Number and Type of Public Comments

We received 87 items of correspondence containing comments on the

June 26, 1998 interim final rule. Commenters included managed care

organizations and other industry representatives, representatives of

physicians and other health care professionals, beneficiary advocacy

groups, representatives of hospitals and other providers, insurance

companies, States, accrediting and peer review organizations, members

of the Congress, and others. Consistent with the scope of the June 26,

1998 rule, most of the

[[Page 7969]]

comments addressed multiple issues, often in great detail. Listed below

are the five areas of the regulation that generated the most concern

(30 to 50 comments):

Access issues, including requirements concerning

coordination of care, initial assessments of enrollees' health care

needs, timely pre-approval of post-stabilization services, and

notification responsibilities when an organization terminates its

relationship with a specialist.

Quality improvement standards.

Payment rates and service area policy.

Provider participation rules.

Beneficiary appeals and grievances.

Among the other issues that generated substantial numbers of

comments were:

Eligibility, election, and enrollment policies.

Marketing restrictions.

Risk adjustment methodology and encounter data submission.

Contractual requirements.

Preemption of State law by Federal law.

May 1 deadline for Adjusted Community Rate (ACR)

submissions and capacity waivers.

We also received many general comments on the M+C program and the

impact of the interim final rule.

II. Provisions of This Final Rule

A. Summary

This final rule addresses a limited number of issues raised by

commenters on the June 26, 1998 interim final rule. We have attempted

to address some of the issues that provoked the most public comment,

particularly in cases where we have become convinced that changes are

necessary and have developed the policies necessary to implement the

changes. We also have included policy clarifications in certain areas

where the material in the interim final rule has been misinterpreted.

Finally, to the extent possible, we are addressing time-sensitive

issues, such as those that need to be resolved before publication of

the comprehensive M+C final rule or those that may affect plans or

beneficiaries in areas where Medicare risk contractors have chosen not

to participate in the M+C program in 1999.

We intend to address all other issues raised by commenters on the

M+C interim final rule in a comprehensive M+C final rule to be

published later in 1999. (For example, this rule does not deal with any

issues related to the quality standards contained in Part 4221 subpart

D of the regulations.)

On September 28, 1998, we issued Interim Quality Improvement System

for Managed Care (QISMC) Standards that reflected the M+C interim final

regulation as published in June 1998. To the extent that the changes

contained in this regulation require changes to QISMC, we will issue

these changes shortly. We will issue a final QISMC document after we

have issued the comprehensive M+C final rule, later in 1999.

B. Effective Date of Guaranteed Issue for Medigap Insurance

Section 4031 of the BBA established new rules under which Medicare

beneficiaries are eligible to purchase a Medicare supplemental

(Medigap) policy on a ``guaranteed issue basis.'' Some of the

situations addressed by the BBA involve beneficiaries who leave M+C

plans (or managed care risk plans under section 1876 of the Act ) and

return to original Medicare. In the June 26, 1998 interim final rule,

we indicated that further guidance on this subject was available from

the National Association of Insurance Commissioners (NAIC), which had

incorporated the BBA's Medigap changes into a revised Model Regulation

issued on April 29, 1998. The Model Regulation suggested that the

guaranteed issue provisions do not become effective until January 1,

2002, for an enrollee in an M+C organization whose contract terminates.

(The NAIC subsequently determined that this effective date was

incorrect, as discussed below.)

Comment: Several commenters asked us to clarify that the BBA

protection regarding the guaranteed issue of Medigap policies A, B, C,

and F took effect on July 1, 1998. They believe that this clarification

is necessary to eliminate confusion resulting from the NAIC's original,

erroneous interpretation that this guarantee was not effective until

2002. One commenter pointed out that this error stemmed from a

misinterpretation of certain provisions of section 1851(e) of the Act,

which discusses the circumstances under which a beneficiary who is

enrolled in an M+C plan may disenroll from the plan and enroll in

another M+C plan. The commenter offered a detailed analysis of the

appropriate interpretation of these provisions.

Response: HCFA and the NAIC agree that the guaranteed issue

provisions of the BBA became effective on July 1, 1998. On December 4,

1998, we published a notice in the Federal Register to clarify that, as

a matter of Federal law, the guaranteed issue provision of section

1882(s)(3)(B)(ii) of the Act (added by section 4031(a) of the BBA)

takes effect July 1, 1998; continues in effect through and beyond 2002;

and applies to any individual whose M+C election terminates under the

``circumstances'' specified in subparagraphs (A) through (D) of section

1851(e)(4) (63 FR 67081). (The notice also points out that the NAIC

issued a memorandum on October 16, 1998, indicating that there was a

mistake in its Model Regulation and that the effective date was July 1,

1998, not January 1, 2002.) As explained in detail in the December 4,

1998 notice, we agree with the commenter's analysis as to the

appropriate interpretation of the provisions of section 1851(e). How

these provisions are interpreted also has implications for

beneficiaries' enrollment options under the M+C program, as discussed

below in section II.C.

C. Clarification of Effective Date of Obligation to Accept Enrollments

During Special Election Periods (Secs. 422.60 and 422.62)

Under Sec. 422.60(a)(1), M+C organizations are required to accept

without restrictions enrollments from eligible beneficiaries during

initial coverage election periods, annual election periods (during the

month of November each year), and special election periods. While the

foregoing obligations to accept enrollees do not have a separate

effective date from the general effective date of the June 26, 1998 M+C

regulations, as in the case of the Medigap provisions discussed in

section II.B above, there has been confusion about the effective date

of the obligation to accept new enrollments during special election

periods. This confusion results from the fact that the description of

special election periods appears in Sec. 422.62(b), a provision that

specifies when individuals are entitled to disenroll from an M+C plan

after disenrollment rights become limited in 2002 (or earlier in the

case of an MSA plan). Because this disenrollment rights provision in

Sec. 422.62(b) is prefaced by a 2002 effective date (with a 1999

effective date for MSA plans), it is possible that the obligation under

Sec. 422.62(a)(1) to accept enrollments during a special election

period could be read not to apply until these dates. For the following

reasons, we believe such a reading would be incorrect, and are

clarifying in this rule that the obligation to accept enrollments

during special election periods applies in years prior to 2002.

A failure to adopt this clarification would result in what we

believe would be an unintended elimination (albeit temporary) of an

important beneficiary protection that has been in place since the

inception of the pre-BBA Medicare

[[Page 7970]]

risk program. There is no indication in the legislative history of the

BBA that the Congress intended to eliminate a beneficiary's

longstanding right to enroll in other plans when the organization in

which he or she is enrolled ceases to contract with Medicare. Under

section 1876(c)(3)(ii), when a contract under section 1876 ``is not

renewed or is otherwise terminated,'' other HMOs with risk contracts

``serving part of the same service area as under the terminated

contract are required to have an open enrollment period for individuals

who were enrolled under the terminated contract as of the date of

notice of such termination.'' Similarly, if an HMO nonrenews a portion

of its service area, risk contractors serving that part of the service

area ``are required to have an open enrollment period for individuals

residing in that part of the service area . . . .'' This beneficiary

protection permits beneficiaries enrolled in an HMO that ceases to

participate as a risk contractor to enroll in another HMO that serves

the same area.

The new M+C provisions in the BBA do not include a provision that

imposes the above requirement in the same manner as it is imposed in

section 1876. As in the case of the Medigap protections under section

1876(c)(3)(F) (discussed in section II.B above), the Congress adopted a

different approach to providing a similar beneficiary protection

previously addressed in a different way under section 1876. In the case

of Medigap protections, the Congress replaced a requirement that HMOs

provide protections to enrollees when a contract terminates with new

requirements that apply directly to Medigap insurers. In this case, the

Congress replaced a direct requirement that HMOs have open enrollment

when a contract is terminated with an indirect requirement that M+C

organizations accept enrollment when the circumstances (set forth under

section 1851(e)(4)) that give rise to a right to disenroll exist. In

both cases, there is no reason to believe that the Congress intended to

deprive beneficiaries of the benefits of these protections between 1999

and 2002. Indeed, there would be no rational reason for doing so.

Section 1851(e)(6), which is implemented in Sec. 422.60(a)(1),

requires that M+C organizations accept enrollments during initial

enrollment periods, during the month of November, and during special

election periods ``described in'' the first sentence in section

1851(e)(4). The first sentence in section 1851(e)(4) sets forth the

circumstances under which a beneficiary is permitted to disenroll after

2002, when the beneficiary ``lock in'' will go into effect. The first

sentence in section 1851(e)(4) accordingly is prefaced with the clause

``[e]ffective as of January 1, 2002.'' As one commenter noted, ``The

reference to January 1, 2002 specifically addresses the movement from

one Medicare+Choice plan to another, and is part of a clearly laid out

section that provides a gradual transition from the current system of

totally free movement between plans to a restricted system of annual

`lock-ins'. The need for exceptions does not exist before January 1,

2002, and so the provision does not become effective until that date.''

Thus, we believe that the reference to January 1, 2002 is best

interpreted as relevant only for purposes of the right to disenroll

that is the subject of section 1851(e)(4) itself, and not for purposes

of the separate obligation to accept enrollments under section

1851(e)(6). In other words, section 1851(e)(6) incorporates the

underlying circumstances that give rise to the right to disenroll, and

provides that M+C organizations must accept enrollments when these

circumstances exist. It does not incorporate the reference to 2002 in

the first clause. Included in the circumstances listed under section

1851(e)(4) is the situation in which an organization's contract has

been terminated ``or the organization has terminated or otherwise

discontinued providing the plan in the area in which the individual

resides.'' Accordingly, for all plans offered by M+C organizations, the

organization currently must accept enrollments from eligible

individuals if an M+C plan is discontinued in the area the organization

serves or under any of the other circumstances described in

Sec. 422.62(b). (We note that the organization would not have to accept

enrollment in a plan that has reached its enrollment capacity,

consistent with Sec. 422.60(b).)

This interpretation is consistent with our interpretation of the

new Medigap protections in the BBA (see section II.B and our December

4, 1998 Federal Register notice), which similarly provide for

beneficiary rights when the circumstances specified in section

1851(e)(4) exist.

In order to clarify our interpretation in the regulations text, we

are revising Sec. 422.60(a)(1) to clarify that while the circumstances

described in Sec. 422.62(b)(1) through (b)(4) are incorporated under

Sec. 422.60(a)(1), the effective dates for the disenrollment rights

under Sec. 422.62(b) are not.

D. Notification Requirement for Rule Changes (Sec. 422.111(d)(2))

Section 1852(c) of the Act lists several areas where an M+C

organization must disclose specific information to each M+C plan

enrollee. These requirements are set forth under Sec. 422.111 and are,

in large part, a codification of program administration requirements

under section 1876 of the Act. Among the disclosure provisions is a

requirement under Sec. 422.111(d)(2) (carried over from

Sec. 417.436(c)) that if an M+C organization intends to change its

rules for a plan, it must submit the changes to us in accordance with

the procedures for approval of marketing materials under Sec. 422.80

and then notify all enrollees 30 days before the effective date of the

change.

Comment: Several commenters asked how this requirement interacts

with related provisions under Sec. 422.64, which concerns the

comparative information that we distribute about M+C plans. A commenter

noted that under the 30-day rule set forth at Sec. 422.111(d)(2), an

M+C organization presumably could change plan rules between the time

that we distribute information about an M+C plan and the effective date

of a beneficiary's enrollment in that plan. The commenter suggested

that enrollees should be notified at least 90 days before the effective

date of any changes in plan rules. Another commenter suggested that

failure to provide proper notice should be reported to beneficiaries

and lead to enforcement sanctions.

Response: Section 422.64, which is based on section 1851(d) of the

Act, outlines the general and comparative information that we

distribute to all M+C eligible beneficiaries as part of the annual

``open season'' notification. For the most part, the comparative

information describes the benefits, premiums, and service areas of all

M+C plans; this information is largely derived from the documents an

M+C organization submits by May 1 as part of the ACR approval process.

After January 1, 2002, this information may not be changed after the

ACR is approved until the calendar year following the year for which

the information is provided. Under Sec. 422.300(b), prior to 2002,

premiums or benefits may be changed after an ACR is approved if the

changes add benefits or lower premiums or cost sharing.

While Sec. 422.111(d) provides for 45-day advance submission to us

and 30-day advance notice to enrollees of changes in M+C plan rules,

this provision does not grant an M+C organization authority to change

rules

[[Page 7971]]

that it is otherwise prohibited from changing. To the extent that an

M+C organization is permitted to change rules (for example, grievance

procedures disclosed under Sec. 422.111(b)(8) or prior authorization

procedures disclosed under Sec. 422.111(b)(7)), it must submit the

changes for us to review 45 days in advance, and give enrollees 30-days

advance notice. This general rule would apply to changes in benefits,

premiums, or cost sharing prior to 2002, as permitted under

Sec. 422.300(b). (Currently, the primary vehicle through which

organizations inform enrollees of changes in plan rules is the Annual

Notification of Change (ANOC).)

The requirement under Sec. 422.111(d) that organizations notify

plan enrollees at least 30 days before the intended effective date of

any rule changes does not conflict with the intent of the statute, as

implemented through Sec. 422.64, that M+C eligible individuals receive

accurate comparative information about available M+C plans through our

annual information campaign. However, we recognize the need to ensure

that information organizations distribute to enrollees in their plans

reflects all rule changes that will be in effect as of January 1 of a

given year. Thus, to eliminate any possibility of otherwise permissible

rule changes during the annual open season period, we are revising

Sec. 422.111(d) to: (1) Indicate that the 30-day notification rule

applies only for mid-year changes in plan rules; and (2) Specify that

an M+C organization must notify enrollees by October 15 of any plan

policy changes that are scheduled to take effect on the following

January 1. Under this policy, for example, an M+C organization would

submit its ANOC for our review by September 1 in order to allow for the

45-day review period required under Sec. 422.80(a)(1). This will ensure

that current enrollees (and, upon request, prospective enrollees)

receive accurate information about all plan rules in time for the

annual election period each November, as well as promote coordination

in the information distribution efforts by us and M+C organizations.

E. Access to Services (Sec. 422.112)

Section 422.112 establishes a series of requirements aimed at

ensuring that enrollees in M+C plans have adequate access to services.

As discussed in our June 26, 1998 interim final rule (63 FR 34989),

these requirements stem from section 1852(d) of the Act and existing

regulations and policies under part 417, as well as addressing

recommendations from the Consumer Bill of Rights and Responsibilities.

Commenters addressed all aspects of these provisions, and we are

continuing to consider their comments on many of the requirements

contained in this section. In this limited final rule, we will address

comments and clarify our policy on several access-related issues, as

discussed below. We intend to address all other comments on access

issues in the comprehensive final rule to be published later this year.

Please note that due to the numbering errors in the June 26, 1998

document, we published a correction notice in the Federal Register on

October 1, 1998 (63 FR 52613). In that notice, we republished

Sec. 422.112 in its entirety. For purposes of this document, all

references are to the corrected regulation citations.

1. Coordination of Care (Secs. 422.112(a)(4) and (b))

Background. Section 422.112 imposes two separate coordination

requirements. First, under Sec. 422.112(a)(4), M+C organizations must

have procedures that enable the organization to identify individuals

with serious or complex medical conditions, assess and monitor those

conditions, and establish and implement treatment plans. As indicated

in the preamble to the June 26, 1998 regulations, this requirement was

based on recommendations of the President's Advisory Commission on

Consumer Protection and Quality in the Health Care Industry, in its

``Consumer Bill of Rights and Responsibilities.'' Also, under

Sec. 422.112 (b), to ensure continuity of care, M+C organizations must

make a variety of arrangements, including designating a practitioner

``having primary responsibility for coordinating the enrollee's overall

health care,'' providing an ongoing source of primary care, and

completing an initial assessment within 90 days of enrollment. As

indicated in the preamble to the June 26, 1998 regulations, these

provisions were based on the requirements developed as part of the

Quality Improvement System for Managed Care (QISMC).

In view of the comments, we recognize the need to revise these

provisions. The intent of these provisions will still be to require (1)

plans to have procedures for identifying individuals with serious or

complex medical conditions, assess and monitor those conditions, and

implement treatment plans; and (2) ensure continuity of care. However,

we need to allow for somewhat greater flexibility in arrangements since

not all types of managed care plans require enrollees to be assigned to

primary care providers (PCPs).

Approximately 13 public commenters addressed these coordination

requirements. The comments and our responses are discussed below.

Comments on Sec. 422.112(a)(4)

Comment: Several commenters requested that we define complex and

serious medical conditions. One commenter recommended that M+C

organizations be given discretion to define ``complex or serious

medical conditions'' within broad parameters set by HCFA. Another

commenter suggested that we delay implementation of the requirements

until national criteria for the identification of complex and serious

conditions are developed.

Response: The interim final regulation currently requires M+C

organizations to develop procedures that enable the organization to

identify individuals with complex or serious conditions, assess and

monitor those conditions, and establish and implement treatment plans.

The regulations do not place further requirements on M+C organizations

as to these provisions. Thus, organizations have discretion to define

the concept of a ``complex or serious condition.'' We plan to develop a

definition of this term, which could result in further guidance on this

set of issues. Until we provide further guidance, we expect

organizations to adopt their own definition and procedures to implement

these provisions.

Comment: One commenter stated that M+C organizations should be

allowed to limit the number of visits to a specialist, and that they

should be allowed to ensure that the PCP remains involved in the care

plan so that the patient continues to receive preventive services and

other services not provided by the specialist.

Response: The regulations do not prohibit limiting the number of

direct access visits, as long as the number of direct access visits to

the specialist is adequate, consistent with the treatment plan.

Furthermore, the regulations do not prohibit an M+C organization from

ensuring that a PCP is involved, and we would encourage this

relationship.

Comment: One commenter stated that if a specialist develops the

treatment plan, then he or she should be the one to update it. Another

commenter suggested that organizations be required to use physicians to

develop the treatment plans.

Response: We agree with the recommendation that if a specialist

develops a treatment plan, then he or she should be the one to update

it. Thus, we will delete the requirement

[[Page 7972]]

that the treatment plan should be updated by the PCP.

We have added the requirement that the M+C organization ``assures

adequate coordination among providers.'' This requirement is added

because of the changes in the coordination requirements in

Sec. 422.112(b), discussed below.

As to the development of the treatment plan, we believe that any

health professional or a team of health professionals may develop the

treatment plan.

Comment: One commenter requested that we require M+C organizations

to permit enrollees with complex and serious conditions to have a

choice of specialists; to use a specialist as their PCP; allow for the

treatment plan to be updated by the PCP and the enrollee; and allow an

enrollee who needs post-acute care to have a choice of post-acute

provider in consultation with the PCP.

Response: While M+C organizations are encouraged to adopt these

procedures, we do not believe that it would be appropriate to specify

these requirements. As indicated above, we have eliminated the

requirement that the treatment plan be updated by the PCP. Whoever

develops the treatment plan is encouraged to consult with the enrollee.

Comment: Several commenters stated that requiring M+C organizations

to develop treatment plans encourages over-utilization of specialists

and micro-management of primary and specialty care.

Response: M+C organizations can control the number of visits to

specialty care in the treatment plan. The development of treatment

plans is good medical practice and is performed routinely in most

medical settings.

Comment: One commenter (1) recommended that instead of direct

access visits to specialists, we should require that M+C organizations

operate comprehensive case management systems for chronically ill

enrollees; and (2) contended that the BBA did not provide statutory

authority to issue the requirements dealing with serious and complex

conditions.

Response: The requirements are imposed pursuant to our authority

under section 1856(b)(1) of the Act to establish M+C standards by

regulation. These standards were based upon the President's Advisory

Commission's ``Consumer Bill of Rights and Responsibilities'' mentioned

above. While we encourage M+C organizations to develop comprehensive

case management systems, this is not a requirement. We have determined

that developing treatment plans that include an adequate number of

direct access visits to specialists is the most appropriate requirement

at this time.

Comment: Several commenters recommended that we require that the

treatment plan for enrollees with complex and serious conditions be

completed in either 14 or 30 days, and that these persons be reassessed

every 90 days.

Response: M+C organizations are encouraged to consider these

recommendations, but we do not believe it is necessary to specify these

requirements. Existing provisions already require that the treatment

plan be appropriate, time-specific, and updated periodically. Comments

on Sec. 422.112(b)

Comment: Several commenters stated that M+C organizations that have

open access arrangements and PPOs cannot meet the requirements that

organizations ensure continuity of care through the ``the use of a

practitioner who is specifically designated as having primary

responsibility for coordinating the enrollee's overall health care.''

They recommended that we revise these requirements to provide more

flexibility for these types of M+C organizations.

Response: We concur with this recommendation. Therefore, we have

made the following changes to this section:

(1) We have deleted the requirement that the M+C organization use a

practitioner who has primary responsibility for coordinating health

care. We recognize that open access plans and PPOs do not have a single

professional who coordinates care, and that they may use other

mechanisms to coordinate care.

(2) We have revised the requirement to specify that M+C

organizations develop ``policies that specify under what circumstances

services need to be coordinated and the methods for coordination.'' We

have modified this requirement because not all organizations assign

health care professionals to coordinate care; they may use other

methods to achieve coordination where needed.

(3) We have modified the requirement that an M+C organization must

provide an ongoing source of primary care, and instead require that an

organization offer to provide each enrollee with an ongoing source of

primary care and provide this source of primary care to all who accept

the offer. Again, we modified this requirement because not all

organizations require that enrollees be assigned to a PCP. However, all

organizations are required to have an adequate network of PCPs and

specialists and, thus, be able to ensure that every enrollee can have a

PCP if he or she so chooses.

We have made these changes to the coordination provisions to

provide sufficient flexibility to ensure that beneficiaries can choose

the type of M+C plan option that best meets their needs. The Congress

intended the M+C program to allow for maximum choice of types of plans

and wants us to assure that all plans that have open arrangements are

included in the program. Nevertheless, we still want to ensure

coordination of care, and therefore we have maintained most of the

various coordination requirements of this section and have made only a

few changes to these requirements.

Furthermore, because of this increased flexibility, to ensure that

adequate coordination occurs for complex or serious medical conditions,

we have added to Sec. 422.112(a)(4) the requirement that the M+C

organization assures that adequate coordination occurs among providers.

2. Initial Care Assessments (Sec. 422.112(b)(5)(i))

Background. Another issue that we believe should be addressed at

this time involves Sec. 422.112(b)(5)(i), which requires M+C

organizations to conduct an initial assessment of each enrollee's

health care needs within 90 days of the effective date of enrollment.

Although a number of commenters strongly endorsed the requirement, we

received many other comments that indicated the need for further

guidance to maximize compliance efforts by M+C organizations. The

intent of the requirement is to ensure that organizations have

sufficient information about enrollees to identify and meet the

enrollees' health care needs. We believe that requiring initial

assessments is consistent with current industry practices and need not

result in burdening M+C organizations with additional administrative

responsibilities.

Approximately 16 public comments addressed the initial assessment

requirement. The comments and our responses are discussed below.

Comment: Many commenters requested that we clarify the ``form'' of

the initial health assessment. Commenters inquired whether the

assessment could be carried out through a telephone call, or mailed

questionnaire, or whether it must be a physical examination. Further,

commenters questioned whether, under certain circumstances, some

enrollees could be exempted from the initial assessment requirement.

For example, commenters indicated that an M+C

[[Page 7973]]

organization should not be required to complete an initial assessment

for individuals who were commercial members of a managed care plan and

then ``age-in'' to the organization's M+C plan. Similarly, enrollees

who remain under the care of network providers or retain the same

primary care provider, despite enrolling in a different M+C

organization, should not be subject to the assessment requirement.

Response: We believe that M+C organizations should have the

flexibility to choose the form and substance of the initial assessment.

Thus, the assessment may take the form of a phone call, questionnaire,

home visit, or physical examination. However, the assessment instrument

must ensure that the M+C organization and its provider network have the

information required for effective and continuous patient care and

quality review, as required under Sec. 422.112(b)(5). The assessment

should also be sufficient to identify enrollees with complex or serious

medical conditions, consistent with Sec. 422.112(a)(4).

We recognize that in some situations it would be duplicative and

unnecessary to subject certain enrollees to the initial assessment

requirement. Consequently, we would not expect M+C organizations to

conduct initial assessments on enrollees for whom the necessary, up-to-

date information on their care needs is already available, such as

enrollees who age-in, are already under the care of network providers,

or who retain the same primary care provider when enrolling with a

different M+C organization.

Comment: Several commenters suggested that we only require M+C

organizations to make ``best efforts'' to conduct the initial

assessment, since 100 percent compliance is not achievable. They

asserted that 100 percent compliance is not an achievable standard

because enrollees may refuse to cooperate in carrying out the initial

assessment. Commenters requested that we identify the minimal standard

an M+C organization should meet to comply with the initial assessment

requirement. For example, one commenter suggested that if an M+C

organization makes three unsuccessful attempts to contact an enrollee,

to arrange for an initial assessment, this should be considered a

sufficient ``best effort.''

Response: We understand that an M+C organization, through no fault

of its own, may not be able to achieve full compliance with the initial

assessment requirement. Rather than maintain a regulatory standard that

may be unachievable, we are revising the regulation to require M+C

organizations to make ``best efforts'' to conduct the initial

assessment of each enrollee's health care needs within 90 days of the

effective date of enrollment. We are specifying that a ``best-effort''

attempt must include following up on unsuccessful attempts to contact

an enrollee. The revised regulation is not intended to release the M+C

organization from its obligation to conduct the initial assessment, but

to acknowledge that 100 percent compliance may not be a realistic

standard.

We also recognize that some enrollees may refuse to cooperate with

an organization's efforts to conduct the initial assessment. If this

occurs, the M+C organization should fully document the refusal in the

enrollee's medical record.

Comment: Some commenters suggested that we should delay

implementing the initial assessment requirement until an instrument is

developed that sufficiently identifies complex or serious medical

conditions.

Response: As noted above, we believe that an M+C organization

should have the flexibility to use an assessment instrument of its own

choice. Although we are not providing further specifications for the

health assessment at this time, we may do so in the future. We will

work with plan, industry, provider, and consumer representatives in

developing further guidance in this area. Also, as discussed above, we

are working to better define the concept of complex or serious medical

conditions.

Comment: Two commenters suggested that we clarify who will pay for

the initial assessment. They also requested that we require M+C

organizations to provide accurate eligibility lists to the primary care

provider in a timely manner.

Response: M+C organizations are required to either directly furnish

or arrange for the initial assessment. Like all other services provided

by an M+C organization, initial assessment costs are covered in the

capitated payment paid to the M+C organization. Provider compensation

will depend upon the contractual relationship between the provider and

the M+C organization.

We recognize that providing accurate eligibility lists is a

desirable administrative practice. However, we do not believe it is

necessary to require M+C organizations to provide eligibility lists,

unless we subsequently determine that absence of such a requirement

results in noncompliance with the initial assessment provisions.

Comment: One commenter requested clarification regarding the point

in the enrollment process after which the M+C organization could

conduct the initial assessment. Another commenter suggested that we

require that the assessment be conducted within 30 days of enrollment.

Response: As stated above, M+C organizations are required to

conduct the initial assessment within 90 days of the effective date of

enrollment. We believe this is a reasonable minimum standard, when

viewed in conjunction with related access requirements under

Sec. 422.112, such as an appropriate treatment plan for individuals

with serious medical conditions and the requirement for timely access

to care and member services. Given the potential for pre-enrollment

health screening, it is not appropriate for an M+C organization to

conduct the initial assessment before the effective date of enrollment.

3. Involuntary Terminations (Sec. 422.112(a)(5))

Background. In our June 26, 1998 interim final regulation,

Sec. 422.112(a)(2) established the requirements that an M+C

organization must meet when it terminates an M+C plan or specialist.

Subsequently, due to the numbering errors in the June 26, 1998

document, we published a correction notice on October 1, 1998 (63 FR

52613), which sets forth these ``involuntary termination'' requirements

under Sec. 422.112(a)(5). For purposes of this document, all references

are to the corrected regulation citations. Section 422.112(a)(5)

provides that if an M+C organization terminates an M+C plan or

specialist other than for cause, the M+C organization must inform

beneficiaries at the time of termination of their right to maintain

access to specialists, provide the names of other M+C plans in the area

that contract with specialists of the beneficiaries' choice, and

explain the process the beneficiary would need to follow should he or

she decide to return to original Medicare.

Comments and Responses

We received fourteen comments on the involuntary termination

provisions. Several commenters remarked that the numbering of the

section was confusing and mistaken. As noted above, we made the

appropriate changes in the October 1, 1998 correction notice.

Comment: One commenter questioned the statutory source of a

beneficiary's right to maintain access to specialists.

Response: Section 1852(d)(iv) of the Act requires M+C organizations

to provide access to the appropriate providers, including credentialed

[[Page 7974]]

specialists, for medically necessary treatment and services.

Comment: Most of the comments on Sec. 422.112(a)(5) opposed these

notification requirements. As discussed in detail below, these

commenters cited a variety of reasons for their opposition, including

the administrative burden and feasibility of obtaining the necessary

information, unnecessary duplication in the regulations, and absence of

necessary detail. Although most commenters opposed the notification

requirements, one commenter asserted that the requirements were

reasonable and necessary to protect the interests of Medicare

beneficiaries. This commenter recommended that the notification

requirements apply for all terminations of physicians and other health

care professionals, rather than only for terminations of specialists.

Commenters raised the following objections:

(1) Administrative burden and feasibility.

Commenters objected to the perceived administrative burden

associated with the notification requirements of Sec. 422.112(a)(5). In

particular, commenters found infeasible the provision that plans must

provide the names of other M+C plans in the area that contract with

specialists of the beneficiary's choice. They noted that plans do not

have access to competing plans' network information. They stated that

details of another plan's contractual relationships with its

specialists was proprietary information. Commenters also argued that

Sec. 422.112(a)(5) would be difficult for plans to implement because

they do not track real-time information regarding which beneficiaries

are receiving care from specific specialists.

(2) Unnecessary duplication in the regulations.

Commenters pointed out that in several areas, the provisions of

Sec. 422.112(a)(5) overlap with other provisions of the M+C

regulations. Several commenters mistakenly referred to the general

notification requirements under Sec. 422.111(e) when discussing the

requirements for involuntary terminations of specialists under

Sec. 422.112(a)(5). Others simply noted that the two sections both

dealt with provider terminations and that this duplication served no

purpose. Some commenters also stated that it was confusing and

unnecessary to include both plan and specialist terminations in

Sec. 422.112(a)(5), since enrollee notification upon plan termination

was addressed previously in Sec. 422.62. Other commenters assumed that

these provisions implied that an enrollee whose specialist was

terminated was free to disenroll from his or her plan and have a

special election period as described under Sec. 422.62(b).

(3) Absence of necessary detail.

Several commenters found it unclear which beneficiaries must be

notified when a specialist is terminated. Also, they asked for further

guidance regarding the meaning of terms such as ``other than for

cause'' and ``involuntary termination.''

In view of these objections, commenters proposed several

alternatives. Some suggested we delete Sec. 422.112(a)(5) entirely.

Others recommended that it should suffice for an M+C organization to

inform those beneficiaries who had been under the treatment of the

formerly contracted specialist how they can access comparable specialty

services within the plan.

Response: Based on these comments, we recognized that revisions to

Sec. 422.112(a)(5) were necessary. We considered revising

Sec. 422.112(a)(5) by replacing the requirement that an M+C

organization must provide the names of other M+C plans in the area that

contract with specialists of the beneficiary's choice with the

requirement that the M+C organization must provide the names of

specialists within the plan's provider network through whom enrollees

can obtain necessary care. Instead, after careful review of both the

comments regarding duplicative regulations and of the regulations

themselves, we believe that the better course is to delete

Sec. 422.112(a)(5) completely.

Under the notification requirements Sec. 422.111(e), an M+C

organization must make a good faith effort to provide written notice of

the termination of a contracted provider within 15 working days to all

enrollees who are patients seen on a regular basis by the provider

whose contract is terminating, irrespective of whether the termination

was for cause or without cause. Thus, notification to beneficiaries is

not limited to the termination of specialists, but includes other

physician and provider types. Furthermore, Sec. 422.111(e) applies to

all types of terminations, not just those that are ``involuntary'' and

``other than for cause,'' as under Sec. 422.112(a)(5). Given the

elimination of the requirement that M+C organizations must provide the

names of other M+C plans in the area that contract with specialists of

the beneficiary's choice, we believe that having separate notification

requirements in Sec. 422.112, ``Access to services,'' serves no

purpose.

Similarly, we believe that the notification requirements for plan

termination in Sec. 422.112(a)(5) are sufficiently addressed in

Sec. 422.62(b) and Sec. 422.74. Thus, it is unnecessary to include

notification requirements for plan termination in Sec. 422.112(a)(5).

Consequently, we are deleting Sec. 422.112(a)(5) in its entirety.

Thus, we agree with commenters that Sec. 422.112(a)(5)

unnecessarily duplicates other M+C provisions. Moreover, this overlap

serves as a real source of confusion as evidenced by the mistakes

commenters themselves made. For example, we believe the similarity

between Sec. 422.62(b) and Sec. 422.112(a)(5) prompted commenters to

mistakenly assume that Sec. 422.112(a)(5) entitles an enrollee whose

specialist is terminated to disenroll from his or her plan and have a

special election period.

More importantly, we believe removing Sec. 422.112(a)(5) from the

M+C regulation in no way compromises a Medicare beneficiary's access to

adequate health care from all appropriate providers. We are convinced

that the remaining provisions, particularly Sec. 422.111(e), continue

to require adequate notification and access requirements for needed

care, including specialty care. Finally, we would expect that the

specialists themselves would be both best able and most willing to

inform their own patients of their other plan affiliations; plans

should not interfere with the ability of providers to communicate such

information to their patients.

In addition to the fact that we deemed Secs. 422.111(e), 422.62(b),

and 422.74 more than adequate safeguards of a beneficiary's access to

needed care, we also realized that portions of Sec. 422.112(a)(5)'s

requirements were major obstacles to its effective implementation. We

agree that it may be impractical for plans to ascertain with which

other plans a given specialist contracts. Furthermore, it may be

unreasonable to expect M+C organizations to turn over their specialist

lists to competing organizations.

We note that the deletion of Sec. 422.112(a)(5) renders moot the

terminology questions about which types of terminations were subject to

these requirements. After the removal of Sec. 422.112(a)(5), the

notification standard for which enrollees are to be notified is the

``regular basis'' standard articulated in Sec. 422.111(e). As stated

previously, application of this standard is not limited to specialists,

but instead includes all contracted providers.

[[Page 7975]]

Comment: Two commenters wanted to know if the provisions for

involuntary termination were related to the special requirements for

individuals with complex or serious medical conditions.

Response: We believe this comment was prompted by the organization

of Sec. 422.112(a), which was revised in the October 1, 1998 correction

notice. Like the requirements concerning individuals with complex

medical conditions, the involuntary termination provisions are

concerned with an enrollee's access to specialists. However, the

involuntary termination requirements are not limited to individuals

with serious medical conditions.

F. Provider Participation Rules (Secs. 422.202 and 422.204)

Section 1852(j) of the Act sets forth the statutory provisions

regarding provider participation. These provisions include rules

regarding participation procedures, consultation in medical policies,

prohibitions on interference with provider advice to enrollees, and

limitations on physician incentive plans. Regulations implementing

these rules are located in subpart E of part 422. Although we received

many comments on all aspects of the subpart E regulations, the two

areas that generated the most controversy were the notice and appeal

rights associated with provider participation procedures

(Sec. 422.202(a)) and the related provider rights associated with

denials, suspension, or terminations of contracts (Sec. 422.204(c)). In

this final rule, we will address comments on these two areas; comments

on other aspects of subpart E will be addressed in the subsequent final

rule.

Section 1852(j)(1) establishes the underlying requirements for the

regulations under discussion here. The statute generally requires that

an M+C organization establish ``reasonable procedures,'' under an

agreement between a physician and the organization, governing the

participation of a physician under an M+C plan. It then specifies that

these procedures include--

Providing notice of the rules regarding participation;

Providing written notice of participation decisions that

are adverse to physicians; and

Providing a process within the organization for appealing

adverse decisions.

These requirements represented new Federal requirements for

Medicare contracting organizations. Thus, as discussed in our June 26,

1998, interim final rule (63 FR 34967), we consulted a variety of

sources in developing the regulations necessary to implement the

provisions of section 1852(j)(1). Under our broad authority under

section 1856(b)(1) to establish M+C standards by regulation, the

implementing regulations included several discretionary provisions.

Foremost among these were the following:

Specification of the types of participation rules that are

subject to the disclosure, notification, and appeal rights established

by the statute.

Application of the provider participation procedures to

practitioners other than physicians.

Requiring advance notification of material changes in a

broad range of provider participation rules.

Establishment of specific procedures, and applicability

rules, relating to the appeal of adverse decisions involving

participation rules.

We received 30 comments on these issues. Eighteen commenters,

mainly beneficiary advocacy groups or representatives of physicians and

other health care professionals, generally supported the new provider

participation rules. Twelve commenters, generally representing managed

care organizations, expressed opposition to the changes. Discussed

below are the comments we received on these issues and our responses to

those comments.

Comment: Noting that the statute generally applies the standards

for provider relationships with M+C organizations only to physicians,

four commenters objected to our decision to apply these protections to

all health care professionals. They believe that this expansion

contradicts the clear intent of the statute and imposes an unwarranted

burden on M+C organizations. Other commenters strongly supported the

decision to apply the provider participation rules to both physicians

and other health care professionals. Several commenters requested that

the list of providers to whom the participation rules apply be expanded

to include institutional providers, such as hospitals, nursing homes,

and Federally qualified community health centers (FQHCs), as well as

pharmacies.

Response: As commenters noted, the requirements of sections

1852(j)(1) and (j)(2) of the Act, concerning provider participation

procedures and consultation in medical policies, respectively, apply

specifically to plan relationships with physicians. In the interim

final rule, we extended these provisions in Secs. 422.202 and 422.204

of the M+C regulations to include health care professionals other than

physicians. The list of health care professionals generally encompassed

all licensed, independent practitioners for whom coverage for services

could be provided under an M+C plan.

We have carefully reviewed both the statute itself and the comments

on this issue. We note that section 1852(j)(3) of the Act, concerning

prohibiting interference with provider advice to enrollees, is not

limited to physicians but applies to all health care professionals.

Thus, an argument can be made that the limited applicability of the

provisions in sections 1851(j)(1) and (j)(2) to physicians clearly

suggests that the Congress intended to exclude health care

professionals other than physicians from the protections of these

provisions. Based on this review, we have decided to revise the

regulations to comply with the strict statutory construction of these

provisions. Thus, we are revising the appropriate provisions of

Secs. 422.202 and 422.204 so that the applicable notice and appeal

rights and consultation requirements will apply only to physicians, as

defined under section 1861(r) of the Act.

We recognize that many commenters believe that it is appropriate to

extend the statutory provider participation protections to health care

professionals other than physicians, and that many States as well as

the NCQA have adopted standards that apply these rules to all

``practitioners.'' Moreover, we continue to believe that section

1856(b)(1) clearly provides the Secretary with the authority to

establish these standards. However, given that the introduction of the

M+C provider participation requirements reportedly may prove difficult

for many M+C organizations to implement, we have become convinced that

the most prudent policy at this time is to limit the applicability of

these provisions to physicians, as specified in the statute.

Comment: Several commenters objected to what they perceive as the

expansive interpretation under Sec. 422.202(a) of what constitute

``participation rules.'' They believe that the examples included under

Sec. 422.202(a)(1) of what are considered ``participation rules'' are

much broader than those intended under the BBA. These commenters

indicated that the breadth of the participation rules, particularly

when combined with the provider appeal rights provisions under

Sec. 422.204(c), place unreasonable and unwarranted administrative

burdens on M+C organizations without producing any concomitant benefits

for M+C enrollees. Specifically, they asserted that the regulatory

interpretation of ``participation rules'' includes most of an

organization's administrative policies

[[Page 7976]]

and procedures, rather than only those that directly related to

decisions about provider participation.

Response: As noted above, section 1852(j) of the Act requires that

a plan have reasonable procedures that include providing written notice

of the rules regarding participation. Because neither the statute nor

the existing part 417 regulations, which did not include provider

participation procedures, provide guidance as to what is meant by

``participation rules,'' we looked to other sources. The examples of

participation rules that are established under Sec. 422.202(a)(1) stem

largely from section 6 of the NAIC's Managed Care Plan Network Adequacy

Model Act. (This model act focuses on the establishment of written

agreements establishing participation standards between managed care

plans and participating providers.) As stated in the preamble of the

June 26, 1998, interim final rule, our intent was to adopt a ``broad

definition of procedures that might affect participation'' including

all procedures that might affect how a provider would participate in a

plan (63 FR 35000).

Based on our review of the comments, we agree that this

interpretation is unnecessarily expansive. We believe that it is

preferable to adopt a narrower interpretation of what constitute

``rules regarding participation'' that would focus on whether a

physician can participate under a given M+C plan. Thus, we are revising

Sec. 422.202(a)(1) to indicate that the written notice of the rules of

participation will include terms of payment, credentialing policies,

and other rules directly related to participation decisions. We are

deleting from the regulations reference to other administrative

policies and programs that are unlikely to directly affect a

physician's participation, such as utilization review procedures, data

reporting, confidentiality policies, etc. We believe that this change

will ensure that the related requirements under Sec. 422.202(a), such

as the notice of material changes and the appeal rights for adverse

decisions cannot be construed to include policies that are not directly

related to participation decisions. We would still expect an M+C

organization to distribute full information about its administrative

policies to participating physicians, as well as to other participating

health care professionals and providers, and these changes would not

affect the organization policies subject to the consultation

requirements of Sec. 422.202(b).

Comment: In view of our interpretation of the scope of

participation rules, several commenters suggested that an M+C

organization should not be required to disclose its participation rules

to all health care professionals, but only to indicate that the rules

existed and would be made available upon request. These commenters also

indicated that requiring M+C organizations to disclose their

participation rules to prospective providers would result in

dissemination of what they consider proprietary information.

Response: As discussed above, we have narrowed both the

applicability and the scope of the provider participation procedures

required under Sec. 422.202(a). We continue to believe, as noted in the

June 26, 1998 interim final rule (63 FR 35000), that advance disclosure

of the required participation rules to potential participating

physicians is the best way to reduce subsequent appeals. However, we

note that the regulations only require that an M+C organization have

reasonable procedures in this regard. We do not believe that the policy

of disseminating participation rules upon request is inherently

unreasonable, but we also do not intend to mandate the release of what

an organization considers proprietary information.

Comment: Commenters both supported and opposed the requirement

under Sec. 422.202(a)(2) that a plan's procedures include providing

health care professionals with written notice of material changes in

participation rules before those rules take effect. Again, commenters

asserted that the scope of this requirement was overly broad, and

recommended that the notification be limited to changes that affect the

terms or conditions of a health care professional's participation.

Three commenters suggested that changes mandated through Federal law or

regulation should be exempted from the advance notification

requirement. Another commenter asked whether an M+C organization was

required to obtain signatures from health care professionals to

acknowledge receipt of the notice.

Response: We believe that reductions in the scope of what

constitute participation rules should negate most of these objections.

We agree that in the unlikely event that immediate changes are mandated

through Federal law or regulation, an organization should be exempt

from the requirement that written notice be provided before the changes

are put into effect. There is no requirement that an organization

obtain signatures acknowledging receipt of a notice of changes,

although an organization is free to make this policy part of its

participation procedures.

Comment: Commenters asked for an explanation of the meaning of a

``material'' change under Sec. 422.202(a)(2) and of an ``adverse''

decision under Sec. 422.202(a)(3).

Response: We believe that these are widely used terms that are

generally understood, and do not believe that it would be appropriate

to specify more detailed criteria as to how these terms should be

applied. We believe that M+C organizations will be in the best position

to determine whether a change in rules would be significant enough to

be considered ``material'' as this term is generally defined. We assume

that any change that could affect participation decisions would be

material. Similarly, it should be fairly clear whether a change would

be viewed as adversely affecting a physician.

Comment: The requirement under Sec. 422.202(a)(4) that an M+C

organization's provider participation procedures include establishment

of a process for appealing adverse decisions also provoked mixed

responses, as did the accompanying requirement that the appeals process

for termination decisions conform to the requirements of

Sec. 422.204(c). One commenter suggested that we clarify under

Sec. 422.202(a)(4) that the requirement for an appeals process only

applies in cases of adverse ``participation'' decisions, not any

decision that a health care professional views as adverse.

Approximately 10 commenters strongly supported these requirements, with

several requesting that we add more specificity to the appeals

procedures required in termination cases, including an opportunity for

a terminated health care professional to obtain a reconsideration by

HCFA of a denied appeal.

Other commenters objected to various aspects of these requirements,

including both the scope of their applicability and what they perceived

as the overly prescriptive detail of the appeal procedures in

termination cases. One particular point of contention was the

application of the appeals requirements to denials of an initial

application to participate. Commenters believe requiring M+C

organizations to convene hearing panels whenever a health care

professional is denied participation under a plan was unreasonable,

especially if we have already approved the plan network's adequacy.

Several commenters suggested that we make a distinction between (1)

situations where an organization refuses to accept a health care

professional's application to participate under a plan

[[Page 7977]]

(presumably because it already has sufficient practitioners of a given

type) and (2) situations where the organization denies participation to

a specific health care professional based on review of an application,

while continuing to accept applications generally. Other commenters

asserted that contract nonrenewals and expirations should not be

considered denials, citing parallels with our contract nonrenewal

policies; one of these commenters also noted that we should permit

``mutual consent'' terminations without the comprehensive disclosure

and notification material required under Sec. 422.204(c)(1). One

commenter suggested that appeal rights should only apply when a

termination is based on quality of care issues, not when a termination

was simply a ``business decision.''

Response: In light of our narrowed definition of participation

rules, we agree to the suggestion that ``participation'' be inserted

between ``adverse'' and ``decisions'' in Sec. 422.202(a)(4). We also

agree that it would not be appropriate to grant appeal rights to

physicians who have never been accepted into the M+C organization's

network, and that the Congress intended only that an organization grant

rights to its current contracting physicians. This interpretation is

supported by the fact that section 1852(j)(1) refers to the required

procedures as being ``under an agreement between a physician and an

organization.'' To clarify this point, we have revised

Sec. 422.204(c)(1) by deleting the reference to ``denials'' of an

agreement.

In support of the contention that physician contract nonrenewals

and expirations should not be subject to appeal, commenters erroneously

stated that this is the case with respect to HCFA non-renewal

decisions. In fact, as set forth in subpart N of part 422, these

decisions are subject to appeal. With respect to ``mutual consent''

terminations, to the extent the physician is voluntarily leaving the

organization's network, we agree that appeal rights do not have to be

provided.

Finally, we have not adopted the suggestion to limit appeal rights

to situations where terminations are based on quality of care issues.

We believe that the elimination of appeal rights for any termination

characterized as a ``business decision'' would undermine the intent of

the provider protection provisions.

Comment: As noted above, several commenters recommended that we add

more specificity to the appeals procedures required in termination

cases, including an opportunity for a terminated health care

professional to obtain a reconsideration of a denied appeal before

HCFA. Other commenters objected to what they perceived as the overly

prescriptive detail of the appeal procedures in termination cases. One

commenter suggested that although it supported the overall principle

that requires appeals for adverse participation decisions, it was

concerned that the detailed due process requirements established under

Sec. 422.204(c) may be overly burdensome.

Other commenters strongly objected to both Sec. 422.204(c)(1),

which spells out the required elements of a notification of denial,

suspension, or termination, and to Sec. 422.204(c)(2), which provides

for a hearing panel composed of a majority of ``peers'' of the affected

health care professional. They particularly objected to the release of

``standards and profiling data'' and the numbers and mix of health care

professionals needed by the plan, and indicated that these required

elements would prove unduly burdensome, intrusive, and often irrelevant

to a given case. These commenters also asserted that the use of peer

panels was unnecessary and difficult to implement, particularly when

nonphysicians were involved. Again, a number of commenters representing

health care professionals supported these requirements in their

entirety.

Response: Again, the reductions in the scope and applicability of

participation procedures under subpart E of part 422 should reduce

concerns that the related due process requirements will be overly

burdensome. In particular, we believe that the requirement to convene a

hearing panel composed of a majority of peers of the affected physician

should not prove difficult to implement. We do not believe it is

appropriate for us to establish an independent process for resolving

participation disputes between physicians and M+C organizations. Such a

process would constitute unwarranted interference in the business

relationships between M+C organizations and physicians.

We agree that it may not be necessary in all cases for an M+C

organization to include in its written notice to a physician

information about the standards and profiling data used to evaluate the

physician and the numbers and mix of physicians that the organization

needs. Therefore, we are revising Sec. 422.204(c)(1) to indicate that

this information must be included in the notification of a decision to

suspend or terminate an agreement with a physician only to the extent

that it is relevant to the decision.

G. Risk Adjustment and Encounter Data (Secs. 422.256(d) and 422.257)

Section 1853 of the Act sets forth the requirements related to

calculating the annual capitation rates for the M+C program. These

provisions were discussed in detail in the June 26, 1998 interim final

rule (63 FR 35004). Effective by no later than January 1, 2000, section

1853(a)(3)(C) of the Act requires that the Secretary implement a risk-

adjusted payment methodology that accounts for variations in per capita

cost based on health status and other demographic factors. Section

1853(a)(3)(B) addresses the collection of encounter data from M+C

organizations that are needed to implement a risk adjustment

methodology. The regulatory requirements needed to implement these BBA

provisions are set forth in subpart F of part 422. We published a

notice in the Federal Register on September 8, 1998, soliciting further

recommendations about the methodology for implementing risk-adjusted

payments (63 FR 47506).

We received about 20 comments from managed care industry

representatives and others recommending that we delay or phase in the

adoption of risk-adjusted M+C payments. Many of these commenters also

expressed concern over our plans to collect encounter data. We have

considered these comments, as well as those received in response to the

September 8, 1998, notice. As required under section 1853(b)(2) of the

Act, we released on January 15, 1999, the Advance Notice of

Methodological Changes for CY 2000 Medicare+Choice Payment Rates. In

this notice, we describe the risk adjustment methodology that will be

employed in determining M+C payments in 2000, including the transition

strategy that we have adopted as part of that methodology. We also

respond in the notice to the major issues raised in the comments that

we have received on risk adjustment. We will, however, respond formally

to the comments in the comprehensive M+C rule to be published later in

1999. The January 15, 1999, notice is available on the HCFA Web site

(http://www.hcfa.gov/stats/hmorates/45d1999/45day.htm).

H. May 1 Deadline for ACR Submissions and Enrollment Capacity Limits

(Sec. 422.306(a))

Consistent with section 1854(a) of the Act, an M+C organization

must submit by May 1 of each year an ACR proposal for each plan it

wishes to offer in the following year. Regulations

[[Page 7978]]

implementing this requirement are set forth under Sec. 422.306. The ACR

submission must identify the service area and enrollment capacity of

each plan. As discussed in the June 26, 1998 interim final rule, these

requirements will apply for contract periods beginning on or after

January 1, 2000.

Comment: Several commenters representing managed care organizations

indicated that they believe that the May 1 deadline for ACR submissions

is too early. They noted that this deadline is 4 months earlier than

the deadline under section 1876 and cited the new ACR proposal

methodology, difficulties in collecting necessary data, and pricing

uncertainties as reasons why the May 1 deadline is unreasonable.

Commenters suggested moving the date for ACR submissions back to either

July 1 or August 1, or keeping the May 1 deadline but allowing a

subsequent opportunity to make limited modifications to benefits,

premiums, or copayments. Commenters also inquired as to what if any

changes we intend to make regarding implementation of our service area

policy.

Response: Although we recognize the difficulties inherent to

estimating the costs of a benefit package for 2000 based on at most 4

months of experience under the 1999 benefit package, the May 1 deadline

stems from section 1854(a) of the Act and thus is not discretionary.

(We note that the President's FY 2000 budget includes a proposal that

would permit us to extend the deadline for ACR submissions until July

1.) We intend to issue instructions concerning implementation of

service area policy and other requirements for 2000 in advance of the

May 1, 1999, deadline for ACR submissions. We can assure M+C

organizations that we will not introduce any policy modifications via

the subsequent comprehensive M+C final rule that would impose any

significant new administrative requirements on M+C plan operations

before the year 2000 ACR submission and review cycle.

Comment: Commenters indicated that requiring an organization to

establish a capacity limit by May 1 was very difficult, given that it

may be impossible to confirm the participation of provider groups at

that time. They asked that this deadline be extended.

Response: Again, section 1854(a)(1)(B) of the Act specifies that an

M+C organization must inform HCFA of any limit on enrollment capacity

by May 1 of a given year. However, we recognize the possibility of

changing circumstances after that time, and would not want an

organization to limit its enrollment unnecessarily or be forced to

accept enrollees without being able to ensure proper access to care.

Therefore, we intend to establish an administrative process for

reviewing requests for enrollment capacity waivers. Further guidance in

this regard is under development and will be issued as soon as

possible.

I. Compliance With Rehabilitation Act of 1973 (Secs. 422.502(h) and

422.110(c))

Sections 422.502(h) and 422.110(c) specify several anti-

discrimination statutes with which an M+C organization must comply,

including the Civil Rights Act of 1964, Age Discrimination Act of 1975,

and The Americans with Disabilities Act.

Comment: One commenter noted that the Rehabilitation Act of 1973

had been inadvertently omitted from the lists of applicable anti-

discrimination statutes.

Response: We agree with the commenter and will add the

Rehabilitation Act of 1973 to the required statutes listed under

Secs. 422.502(h) and 422.110(c).

III. Changes to the M+C Regulations

For the convenience of the reader, listed below are all changes to

the M+C regulations that are set forth in this final rule:

Section 422.60(a) has been revised to clarify that an

individual enrolled in an M+C plan has a right to a special election

period under any of the circumstances described in Sec. 422.62(b)(1)

through (b)(4). Thus, an individual enrolled in an M+C plan that

withdraws or is terminated from the M+C program has an opportunity for

a special election period among other M+C plans in the affected area.

In Secs. 422.110(c) and 422.502(h)(iii), we have added the

Rehabilitation Act of 1973 to the list of anti-discrimination laws with

which an M+C organization must comply.

We have revised Sec. 422.111(d) to specify that for rule

changes that will become effective on January 1 of each year, an M+C

organization must notify enrollees by October 15 of the previous year.

The existing 30-day notification rule still applies for midyear

changes.

We have revised Sec. 422.112(a)(4) and (b)(1) through

(b)(3) to eliminate the requirement that a treatment plan may be

prepared and updated only by a primary care provider (PCP) and to

clarify how and when care is coordinated.

We have deleted Sec. 422.112(a)(5), which set forth

separate notification requirements for the involuntary termination of

plans and specialists.

We have revised Sec. 422.112(b)(5)(i) to specify that an

organization must make a ``best-effort'' attempt to conduct required

initial assessments, including following up on unsuccessful attempts to

contact an enrollee.

We have made revisions throughout Secs. 422.202 and

422.204 to limiting the applicability of the provider participation

requirements to physicians.

Under Sec. 422.202(a)(1), we have adopted a less expansive

interpretation of what constitute participation rules, basically

limiting the notification requirements associated with participation

rules to policies directly related to participation decisions.

Section 422.204(c) has been revised to indicate that the

availability of the provider appeals process applies only to cases

involving suspension or termination of participation privileges, rather

than including initial denials of an application to participate, and to

clarify what information must be included in notifications of appeal

rights.

IV. Collection of Information Requirements--Paperwork Reduction Act

Under the Paperwork Reduction Act of 1995 (PRA), agencies are

required to provide a 30-day notice in the Federal Register and solicit

public comment when a collection of information requirement is

submitted to the Office of Management and Budget (OMB) for review and

approval. To fairly evaluate whether an information collection should

be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we

solicit comments on the following issues:

Whether the information collection is necessary and useful

to carry out the proper functions of the agency;

The accuracy of the agency's estimate of the information

collection burden;

The quality, utility, and clarity of the information to be

collected; and

Recommendations to minimize the information collection

burden on the affected public, including automated collection

techniques.

Therefore, we are soliciting public comment on each of these issues

for the information collection requirement discussed below.

The following sections of this document contain revised information

collection requirements:

Section 422.202 Participation Procedures

Section 422.202(a) requires an M+C organization that operates a

coordinated care plan or network MSA plan to provide for the

participation of

[[Page 7979]]

individual physicians, and the management and members of groups of

physicians. To accomplish this, M+C plans must establish and maintain

procedures set forth in this section and provide written notice of--(1)

rules of participation including terms of payment, credentialing, and

other rules directly related to participation decisions; (2) material

changes in participation rules before the changes are put into effect;

and (3) participation decisions that are adverse to physicians'

participation.

The disclosure requirements associated with this section have been

revised and the associated burden reduced by requiring that only

contracting physicians and not all contracting individual health care

professionals receive written notice of the streamlined disclosure

requirements summarized above.

In the ``Collection of Information Requirements'' section of the

June 26, 1998, interim final rule (63 FR 34967), we noted that we

believed the above requirements are reasonable and customary business

practices and the burden of meeting these requirements is exempt from

the PRA as stipulated under 5 CFR 1320.3(b)(2). Therefore, we are

retaining the 1 token hour of burden assigned to these requirements.

Section 422.204 Provider Credentialing and Provider Rights

Section 422.204(c)(1) requires an M+C organization that suspends or

terminates an agreement under which the physician provides services to

M+C plan enrollees must give the affected individual written notice of

the reasons for the action, including, if relevant, the standards and

profiling data used to evaluate the physician and the numbers and mix

of physicians needed by the M+C organization, and the affected

physician's right to appeal the action and the process and timing for

requesting a hearing.

The disclosure requirements associated with this section have been

revised and the associated burden reduced by requiring that only

contracting physicians and not all contracting individual health care

professionals receive written notice of the disclosure requirements

summarized above.

In the ``Collection of Information Requirements'' section of the

June 26, 1998, interim final rule, we estimated the burden associated

with these requirements to be on average 10 hours per M+C organization

on an annual basis. While the number of necessary disclosures has been

reduced by requiring disclosures only to contracting physicians, the

scope of the disclosure requirement has been expanded to include the

disclosure, if relevant, of the standards and profiling data used to

evaluate the physician and the numbers and mix of physicians needed by

the M+C organization. Therefore, we are retaining the previous estimate

of 10 hours of annual burden per M+C organization.

Section 422.204 (c)(3) requires an M+C organization that suspends

or terminates a contract with a physician because of deficiencies in

the quality of care to give written notice of that action to licensing

or disciplinary bodies or to other appropriate authorities.

The disclosure requirements associated with this section have been

revised and the associated burden reduced by requiring that only

suspended or terminated physicians be reported by the M+C organization

to the appropriate licensing bodies, disciplinary bodies, or other

appropriate authorities.

In the ``Collection of Information Requirements'' section of the

June 26, 1998, interim final rule, we estimated that on average the

annual burden associated with this requirement to be 2.25 hours per M+C

organization. While the number of necessary disclosures has been

reduced by requiring disclosures related only to contracting

physicians, as previously noted, we have no exact data available to

estimate how often this situation might occur. Therefore, we are

retaining the previous estimated average burden of 2.25 hours per M+C

organization.

We have submitted a copy of this final rule to OMB for its review

of the revised information collection requirements in Secs. 422.202 and

422.204. These revised requirements are not effective until they have

been approved by OMB.

If you have any comments on any of these information collection and

record keeping requirements, please mail the original and 3 copies

within 30 days of this publication date directly to the following:

Health Care Financing Administration, Office of Information Services,

Information Technology Investment Management Group, Division of HCFA

Enterprise Standards, Room N2-14-13, 7500 Security Boulevard,

Baltimore, MD 21244-1850. Attn: John Burke HCFA-1030-FC.

And,

Office of Information and Regulatory Affairs, Office of Management and

Budget, Room 10235, New Executive Office Building, Washington, DC

20503, Attn: Allison Herron Eydt, HCFA Desk Officer.

V. Regulatory Impact Statement

We have examined the impact of this final rule as required by

Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Public

Law 96-354). Executive Order 12866 directs agencies to assess all costs

and benefits of available regulatory alternatives and, when regulation

is necessary, to select regulatory approaches that maximize net

benefits (including potential economic, environmental, public health

and safety effects, distributive impacts, and equity). The RFA requires

agencies to analyze options for regulatory relief of small businesses.

For purposes of the RFA, small entities include small businesses, non-

profit organizations, and governmental agencies. Most hospitals and

most other providers and suppliers are small entities, either by

nonprofit status or by having revenues of $5 million or less annually.

Small entities that are providers will be affected by this rule, but we

do not expect that effect to be of an economically significant nature.

The Unfunded Mandate Reform Act of 1995, in section 202, requires

that agencies prepare an assessment of anticipated costs and benefits

before proposing any rule that may result in an annual expenditure by

State, local, or tribal governments, in the aggregate, or by the

private sector, of $100 million. This rule has no consequential effect

on State, local, or tribal governments. The impact on the private

sector is well below the threshold.

Section 1102(b) of the Social Security Act requires us to prepare a

regulatory impact analysis for any rule that may have a significant

impact on the operations of a substantial number of small rural

hospitals. This analysis must conform to the provisions of section 604

of the RFA. For purposes of section 1102(b) of the Act, we define a

small rural hospital as a hospital that is located outside a

Metropolitan Statistical Area and has fewer than 50 beds.

Summary of the Proposed Rule

As discussed in detail above, this rule sets forth limited changes

to the Medicare+Choice regulations published in our June 26, 1998

interim final rule (63 FR 34968). Those regulations implemented section

4001 of the Balanced Budget Act of 1997, which established the

Medicare+Choice program. We note that we received a number of comments

on the impact analysis contained in the June 26, 1998 interim final

rule. Many of the commenters asserted that our analysis did not fully

take into account the costs

[[Page 7980]]

associated with various aspects of the M+C regulations, including, for

example, the quality standards and the provider participation

procedures. One commenter asserted that the costs of discretionary

provisions such as these would be between $1 and 2 million for an M+C

organization with 35,000 enrollees. Other commenters acknowledged that

it was difficult to quantify the costs of various facets of the M+C

program, but expressed the belief that the new regulations would impose

a significant and costly administrative burden on M+C organizations.

We recognize that greater quantification in our estimates of the

impact of the M+C regulations on managed care organizations is

desirable. We note, however, that only one commenter offered any

financial estimate of the costs associated with the M+C provisions, and

that estimate was completely unsubstantiated. Thus, we continue to

solicit any quantitative data that can help to assess the overall costs

of complying with the regulations, or the costs associated with any

particular provisions.

At this time, we are in the process of developing a statistically-

based model for evaluating the impact of managed care policies on M+C

organizations; however, this model is likely to focus heavily on

payment rates and risk adjustment methodology, rather than

administrative burden. We intend to respond more fully to comments on

the overall impact of the M+C program and its implementing regulations

in the comprehensive final rule to be published later this year.

Again, this final rule makes only limited changes to the provisions

set forth in our June 26, 1998 interim final rule. These changes

include:

Adoption of a less expansive interpretation of what

constitute participation rules, basically limiting the notification

requirements associated with participation rules to policies directly

related to participation decisions.

Limiting the applicability of the provider participation

requirements to physicians.

Clarifying that the availability of the provider appeals

process applies only to cases involving suspension or termination of

participation privileges, rather than including initial denials of an

application to participate.

Specifying that the requirement for an initial assessment

within 90 days of enrollment may be considered met for patients who

``age in'' to a plan or who switch plans, but remain under the care of

the same primary care provider. We also clarify that an M+C

organization may choose the form of the initial assessment.

Clarifying that individuals enrolled in an M+C plan that

withdraws or is terminated from the M+C program have an opportunity for

a special election period among other M+C plans in the affected area,

effective July 1, 1998.

Elimination of the separate notification requirements for

the involuntary termination of specialists.

Revising the coordination of care requirements to clarify

how and when care is coordinated and not limit the coordination

function to primary care providers.

For the most part, we do not believe that these changes will result

in any significant changes in the economic impact of the M+C

regulations. The reductions in the scope and applicability of the

provider participation procedures are the only provisions that we

believe have any potential for measurable impact. Although we do not

expect the volume of provider appeals to result in substantial costs

for M+C organizations, clearly, these changes can only reduce the

associated costs. Similarly, we anticipate the that the changes

concerning notification rules for involuntary terminations of

specialists, as well as the clarifications regarding coordination of

care policy and completion of the initial assessments, have the

potential for only incremental cost implications. Thus, we believe that

this final rule clearly does not constitute a major rule under

Executive Order 12866 or as defined in Title 5, U.S. Code, section

804(2).

In accordance with Executive Order 12866, this regulation was

reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 422

Health maintenance organizations (HMO), Medicare+Choice, Provider

sponsored organizations (PSO).

42 CFR chapter IV part 422 is amended as set forth below.

PART 422--MEDICARE+CHOICE PROGRAM

1. The authority citation for part 422 continues to read as

follows:

Authority: Secs. 1102, 1851 through 1857, 1859, and 1871 of the

Social Security Act (42 U.S.C. 1302, 1395w-21 through 1395w-27, and

1395hh ).

2. In Sec. 422.60, paragraph (a)(1) is revised to read as follows:

Sec. 422.60 Election process.

(a) Acceptance of enrollees: General rule. (1) Except for the

limitations on enrollment in an M+C MSA plan provided by

Sec. 422.62(d)(1) and except as specified in paragraph (a)(2) of this

section, each M+C organization must accept without restriction (except

for an M+C RFB plan as provided by Sec. 422.57) individuals who are

eligible to elect an M+C plan that the M+C organization offers and who

elect an M+C plan during initial coverage election periods under

Sec. 422.62(a)(1), annual election periods under Sec. 422.62(a)(2), and

under the circumstances described in Sec. 422.62(b)(1) through (b)(4).

* * * * *

3. In Sec. 422.110, paragraph (c) is revised to read as follows:

Sec. 422.110 Discrimination against beneficiaries prohibited.

* * * * *

(c) Plans are required to observe the provisions of the Civil

Rights Act, Age Discrimination Act, Rehabilitation Act of 1973, and

Americans with Disabilities Act (see Sec. 422.502(h)).

4. In Sec. 422.111, paragraph (d) is revised to read as follows:

Sec. 422.111 Disclosure requirements.

* * * * *

(d) Changes in rules. If an M+C organization intends to change its

rules for an M+C plan, it must:

(1) Submit the changes for HCFA review under the procedures of

Sec. 422.80.

(2) For changes that take effect on January 1, notify all enrollees

by the previous October 15.

(3) For all other changes, notify all enrollees at least 30 days

before the intended effective date of the changes.

* * * * *

5. Section 422.112 is revised to read as follows:

Sec. 422.112 Access to services.

(a) Rules for coordinated care plans and network M+C MSA plans. An

M+C organization that offers an M+C coordinated care plan or network

M+C MSA plan may specify the networks of providers from whom enrollees

may obtain services if the M+C organization ensures that all covered

services, including additional or supplemental services contracted for

by (or on behalf of) the Medicare enrollee, are available and

accessible under the plan. To accomplish this, the M+C organization

must meet the following requirements:

(1) Provider network. Maintain and monitor a network of appropriate

providers that is supported by written agreements and is sufficient to

provide adequate access to covered services to meet the needs of the

population served. These providers are typically utilized in

[[Page 7981]]

the network as primary care providers (PCPs), specialists, hospitals,

skilled nursing facilities, home health agencies, ambulatory clinics,

and other providers.

(2) PCP panel. Establish a panel of PCPs from which the enrollee

may select a PCP.

(3) Specialty care. Provide or arrange for necessary specialty

care, and in particular give women enrollees the option of direct

access to a women's health specialist within the network for women's

routine and preventive health care services provided as basic benefits

(as defined in Sec. 422.2), notwithstanding that the M+C organization

maintains a PCP or some other means for continuity of care.

(4) Serious medical conditions. Ensure that for each plan, the M+C

organization has in effect HCFA-approved procedures that enable the M+C

organization, through appropriate health care professionals, to--

(i) Identify individuals with complex or serious medical

conditions;

(ii) Assess those conditions, and use medical procedures to

diagnose and monitor them on an ongoing basis; and

(iii) Establish and implement a treatment plan that--

(A) Is appropriate to those conditions;

(B) Includes an adequate number of direct access visits to

specialists consistent with the treatment plan;

(C) Is time-specific and updated periodically; and

(D) Ensures adequate coordination of care among providers.

(5) Service area expansion. If seeking a service area expansion for

an M+C plan, demonstrate that the number and type of providers

available to plan enrollees are sufficient to meet projected needs of

the population to be served.

(6) Credentialed providers. Demonstrate to HCFA that its providers

in an M+C plan are credentialed through the process set forth at

Sec. 422.204(a).

(7) Written standards. Establish written standards for the

following:

(i) Timeliness of access to care and member services that meet or

exceed standards established by HCFA. Timely access to care and member

services within a plan's provider network must be continuously

monitored to ensure compliance with these standards, and the M+C

organization must take corrective action as necessary.

(ii) Policies and procedures (coverage rules, practice guidelines,

payment policies, and utilization management) that allow for individual

medical necessity determinations.

(iii) Provider consideration of beneficiary input into the

provider's proposed treatment plan.

(8) Hours of operation. Ensure that--

(i) The hours of operation of its M+C plan providers are convenient

to the population served under the plan and do not discriminate against

Medicare enrollees; and

(ii) Plan services are available 24 hours a day, 7 days a week,

when medically necessary.

(9) Cultural considerations. (i) Ensure that services are provided

in a culturally competent manner to all enrollees, including those with

limited English proficiency or reading skills, diverse cultural and

ethnic backgrounds, and physical or mental disabilities.

(ii) Provide coverage for emergency and urgent care services in

accordance with paragraph (c) of this section.

(b) Rules for all M+C organizations to ensure continuity of care.

The M+C organization must ensure continuity of care and integration of

services through arrangements that include, but are not limited to the

following--

(1) Policies that specify under what circumstances services are

coordinated and the methods for coordination;

(2) Offering to provide each enrollee with an ongoing source of

primary care and providing a primary care source to each enrollee who

accepts the offer;

(3) Programs for coordination of plan services with community and

social services generally available through contracting or

noncontracting providers in the area served by the M+C plan, including

nursing home and community-based services; and

(4) Procedures to ensure that the M+C organization and its provider

network have the information required for effective and continuous

patient care and quality review, including procedures to ensure that--

(i) The M+C organization makes a ``best-effort'' attempt to conduct

an initial assessment of each enrollee's health care needs, including

following up on unsuccessful attempts to contact an enrollee, within 90

days of the effective date of enrollment;

(ii) Each provider, supplier, and practitioner furnishing services

to enrollees maintains an enrollee health record in accordance with

standards established by the M+C organization, taking into account

professional standards; and

(iii) There is appropriate and confidential exchange of information

among provider network components.

(5) Procedures to ensure that enrollees are informed of specific

health care needs that require follow-up and receive, as appropriate,

training in self-care and other measures they may take to promote their

own health; and

(6) Systems to address barriers to enrollee compliance with

prescribed treatments or regimens.

(c) Special rules for all M+C organizations for emergency and

urgently needed services--(1) Coverage. The M+C organization covers

emergency and urgently needed services--

(i) Regardless of whether the services are obtained within or

outside the M+C organization; and

(ii) Without required prior authorization.

(2) Financial responsibility. The M+C organization may not deny

payment for a condition--

(i) That is an emergency medical condition as defined in

Sec. 422.2; or

(ii) For which a plan provider or other M+C organization

representative instructs an enrollee to seek emergency services within

or outside the plan.

(3) Stabilized condition. The physician treating the enrollee must

decide when the enrollee may be considered stabilized for transfer or

discharge, and that decision is binding on the M+C organization.

(4) Limits on charges to enrollees. For emergency services obtained

outside the M+C plan's provider network, the M+C organization may not

charge the enrollee more than $50 or what it would charge the enrollee

if he or she obtained the services through the M+C organization,

whichever is less.

6. Section 422.202 is revised to read as follows:

Sec. 422.202 Participation procedures.

(a) Notice and appeal rights. An M+C organization that operates a

coordinated care plan or network MSA plan must provide for the

participation of individual physicians, and the management and members

of groups of physicians, through reasonable procedures that include the

following:

(1) Written notice of rules of participation including terms of

payment, credentialing, and other rules directly related to

participation decisions.

(2) Written notice of material changes in participation rules

before the changes are put into effect.

(3) Written notice of participation decisions that are adverse to

physicians.

(4) A process for appealing adverse participation decisions,

including the right of physicians to present information and their

views on the decision. In the case of a termination or suspension of a

provider contract by the M+C organization, this process must conform to

the rules in Sec. 422.204(c).

(b) Consultation. The M+C organization must consult with the

[[Page 7982]]

physicians who have agreed to provide services under an M+C plan

offered by the organization, regarding the organization's medical

policy, quality assurance program, and medical management procedures

and ensure that the following standards are met:

(1) Practice guidelines and utilization management guidelines--

(i) Are based on reasonable medical evidence or a consensus of

health care professionals in the particular field;

(ii) Consider the needs of the enrolled population;

(iii) Are developed in consultation with contracting physicians;

and

(iv) Are reviewed and updated periodically.

(2) The guidelines are communicated to providers and, as

appropriate, to enrollees.

(3) Decisions with respect to utilization management, enrollee

education, coverage of services, and other areas in which the

guidelines apply are consistent with the guidelines.

(c) An M+C organization that operates an M+C plan through

subcontracted physician groups must provide that the participation

procedures in this section apply equally to physicians within those

subcontracted groups.

7. In Sec. 422.204, paragraph (c) is revised to read as follows:

Sec. 422.204 Provider credentialing and provider rights.

* * * * *

(c) Suspension or termination of contract. An M+C organization that

operates a coordinated care plan or network MSA plan providing benefits

through contracting providers must meet the following requirements:

(1) Notice to physician. An M+C organization that suspends or

terminates an agreement under which the physician provides services to

M+C plan enrollees must give the affected individual written notice of

the following:

(i) The reasons for the action, including, if relevant, the

standards and profiling data used to evaluate the physician and the

numbers and mix of physicians needed by the M+C organization.

(ii) The affected physician's right to appeal the action and the

process and timing for requesting a hearing.

(2) Composition of hearing panel. The M+C organization must ensure

that the majority of the hearing panel members are peers of the

affected physician.

(3) Notice to licensing or disciplinary bodies. An M+C organization

that suspends or terminates a contract with a physician because of

deficiencies in the quality of care must give written notice of that

action to licensing or disciplinary bodies or to other appropriate

authorities.

(4) Timeframes. An M+C organization and a contracting provider must

provide at least 60 days written notice to each other before

terminating the contract without cause.

8. In Sec. 422.502, paragraph (h)(1) is revised to read as follows:

Sec. 422.502 Contract provisions.

* * * * *

(h) Requirements of other laws and regulations. (1) The M+C

organization agrees to comply with--

(i) Title VI of the Civil Rights Act of 1964 as implemented by

regulations at 45 CFR part 84;

(ii) The Age Discrimination Act of 1975 as implemented by

regulations at 45 CFR part 91;

(iii) The Rehabilitation Act of 1973;

(iv) The Americans With Disabilities Act;

(v) Other laws applicable to recipients of Federal funds; and

(vi) All other applicable laws and rules.

* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773,

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

Supplementary Medical Insurance Program)

Dated: January 29, 1999.

Nancy-Ann Min DeParle,

Administrator, Health Care Financing Administration.

Approved: February 10, 1999.

Donna E. Shalala,

Secretary.

[FR Doc. 99-3751 Filed 2-11-99; 11:31 am]

BILLING CODE 4120-01-P