42 C.F.R. § 422.503 General provisions.
Title 42 - Public Health
(a) Basic rule. In order to qualify as an MA organization, enroll beneficiaries in any MA plans it offers, and be paid on behalf of Medicare beneficiaries enrolled in those plans, an MA organization must enter into a contract with CMS. (b) Conditions necessary to contract as an MA organization. Any entity seeking to contract as an MA organization must: (1) Complete an application as described in §422.501. (2) Be licensed by the State as a risk bearing entity in each State in which it seeks to offer an MA plan as defined in §422.2. (3) Meet the minimum enrollment requirements of §422.514, unless waived under §422.514(b). (4) Have administrative and management arrangements satisfactory to CMS, as demonstrated by at least the following: (i) A policy making body that exercises oversight and control over the MA organization's policies and personnel to ensure that management actions are in the best interest of the organization and its enrollees. (ii) Personnel and systems sufficient for the MA organization to organize, implement, control, and evaluate financial and marketing activities, the furnishing of services, the quality improvement program, and the administrative and management aspects of the organization. (iii) At a minimum, an executive manager whose appointment and removal are under the control of the policy making body. (iv) A fidelity bond or bonds, procured and maintained by the MA organization, in an amount fixed by its policymaking body but not less than $100,000 per individual, covering each officer and employee entrusted with the handling of its funds. The bond may have reasonable deductibles, based upon the financial strength of the MA organization. (v) Insurance policies or other arrangements, secured and maintained by the MA organization and approved by CMS to insure the MA organization against losses arising from professional liability claims, fire, theft, fraud, embezzlement, and other casualty risks. (vi) A compliance plan that consists of the following: (A) Written policies, procedures, and standards of conduct that articulate the organization's commitment to comply with all applicable Federal and State standards. (B) The designation of a compliance officer and compliance committee that are accountable to senior management. (C) Effective training and education between the compliance officer and organization employees. (D) Effective lines of communication between the compliance officer and the organization's employees. (E) Enforcement of standards through well-publicized disciplinary guidelines. (F) Procedures for internal monitoring and auditing. (G) Procedures for ensuring prompt response to detected offenses and development of corrective action initiatives relating to the organization's MA contract. (1) If the MA organization discovers evidence of misconduct related to payment or delivery of items or services under the contract, it must conduct a timely, reasonable inquiry into that conduct. (2) The MA organization must conduct appropriate corrective actions (for example, repayment of overpayments, disciplinary actions against responsible employees) in response to the potential violation referenced in paragraph (b)(4)(vi)(G)(1) of this section. (H) For MA-PDs, A comprehensive fraud and abuse plan to detect and prevent fraud, waste, and abuse as specified at §423.504(b)(4)(vi)(H) of this chapter. (5) Not accept new enrollees under a section 1876 reasonable cost contract in any area in which it seeks to offer an MA plan. (6) The MA organization's contract must not have been non-renewed under §422.506 within the past 2 years unless— (i) During the 6-month period beginning on the date the organization notified CMS of the intention to non-renew the most recent previous contract, there was a change in the statute or regulations that had the effect of increasing MA payments in the payment area or areas at issue; or (ii) CMS has otherwise determined that circumstances warrant special consideration. (c) Contracting authority. Under the authority of section 1857(c)(5) of the Act, CMS may enter into contracts under this part without regard to Federal and Departmental acquisition regulations set forth in title 48 of the CFR and provisions of law or other regulations relating to the making, performance, amendment, or modification of contracts of the United States if CMS determines that those provisions are inconsistent with the efficient and effective administration of the Medicare program. (d) Protection against fraud and beneficiary protections. (1) CMS annually audits the financial records (including data relating to Medicare utilization, costs, and computation of the bid) of at least one-third of the MA organizations offering MA plans. These auditing activities are subject to monitoring by the Comptroller General. (2) Each contract under this section must provide that CMS, or any person or organization designated by CMS has the right to: (i) Inspect or otherwise evaluate the quality, appropriateness, and timeliness of services performed under the MA contract; (ii) Inspect or otherwise evaluate the facilities of the organization when there is reasonable evidence of some need for such inspection; and (iii) Audit and inspect any books, contracts, and records of the MA organization that pertain to— (A) The ability of the organization or its first tier or downstream providers to bear the risk of potential financial losses; or (B) Services performed or determinations of amounts payable under the contract. (e) Severability of contracts. The contract must provide that, upon CMS's request— (1) The contract will be amended to exclude any MA plan or State-licensed entity specified by CMS; and (2) A separate contract for any such excluded plan or entity will be deemed to be in place when such a request is made. [63 FR 35099, June 26, 1998, as amended at 65 FR 40327, June 29, 2000. Redesignated at 70 FR 4736, Jan. 28, 2005, and amended at 70 FR 4737, Jan. 28, 2005; 70 FR 52027, Sept. 1, 2005; 70 FR 76198, Dec. 23, 2005]
Title 42: Public Health
PART 422—MEDICARE ADVANTAGE PROGRAM
Subpart K—Contracts With Medicare Advantage Organizations
§ 422.503 General provisions.
