42 C.F.R. Subpart K—Contracts With Medicare Advantage Organizations
Title 42 - Public Health
Source: 63 FR 35099, June 26, 1998, unless otherwise noted.
(a) Scope. This subpart sets forth application requirements for entities seeking a contract as a Medicare organization offering an MA plan. MA organizations offering prescription drug plans must, in addition to the requirements of this part, follow the requirements of part 423 of this chapter specifically related to the prescription drug benefit. (b) Definitions. For purposes of this subpart, the following definitions apply: Business transaction means any of the following kinds of transactions: (1) Sale, exchange, or lease of property. (2) Loan of money or extension of credit. (3) Goods, services, or facilities furnished for a monetary consideration, including management services, but not including— (i) Salaries paid to employees for services performed in the normal course of their employment; or (ii) Health services furnished to the MA organization's enrollees by hospitals and other providers, and by MA organization staff, medical groups, or independent practice associations, or by any combination of those entities. Clean claim means— (1) A claim that has no defect, impropriety, lack of any required substantiating documentation (consistent with §422.310(d)) or particular circumstance requiring special treatment that prevents timely payment; and (2) A claim that otherwise conforms to the clean claim requirements for equivalent claims under original Medicare. Downstream entity means any party that enters into an acceptable written arrangement below the level of the arrangement between an MA organization (or contract applicant) and a first tier entity. These written arrangements continue down to the level of the ultimate provider of both health and administrative services. First tier entity means any party that enters into an acceptable written arrangement with an MA organization or contract applicant to provide administrative services or health care services for a Medicare eligible individual. Party in interest includes the following: (1) Any director, officer, partner, or employee responsible for management or administration of an MA organization. (2) Any person who is directly or indirectly the beneficial owner of more than 5 percent of the organization's equity; or the beneficial owner of a mortgage, deed of trust, note, or other interest secured by and valuing more than 5 percent of the organization. (3) In the case of an MA organization organized as a nonprofit corporation, an incorporator or member of such corporation under applicable State corporation law. (4) Any entity in which a person described in paragraph (1), (2), or (3) of this definition: (i) Is an officer, director, or partner; or (ii) Has the kind of interest described in paragraphs (1), (2), or (3) of this definition. (5) Any person that directly or indirectly controls, is controlled by, or is under common control with, the MA organization. (6) Any spouse, child, or parent of an individual described in paragraph (1), (2), or (3) of this definition. Related entity means any entity that is related to the MA organization by common ownership or control and— (1) Performs some of the MA organization's management functions under contract or delegation; (2) Furnishes services to Medicare enrollees under an oral or written agreement; or (3) Leases real property or sells materials to the MA organization at a cost of more than $2,500 during a contract period. Significant business transaction means any business transaction or series of transactions of the kind specified in the above definition of “business transaction” that, during any fiscal year of the MA organization, have a total value that exceeds $25,000 or 5 percent of the MA organization's total operating expenses, whichever is less. [65 FR 35099, June 26, 1998, as amended at 65 FR 40327, June 29, 2000; 70 FR 4736, Jan. 28, 2005; 70 FR 52027, Sept. 1, 2005] (a) Scope. This section sets forth application requirements for entities that seek a contract as an MA organization offering an MA plan. (b) Completion of an application. (1) In order to obtain a determination on whether it meets the requirements to become an MA organization and is qualified to provide a particular type of MA plan, an entity, or an individual authorized to act for the entity (the applicant) must complete a certified application, in the form and manner required by CMS, including the following: (i) Documentation of appropriate State licensure or State certification that the entity is able to offer health insurance or health benefits coverage that meets State-specified standards applicable to MA plans, and is authorized by the State to accept prepaid capitation for providing, arranging, or paying for the comprehensive health care services to be offered under the MA contract; or (ii) For regional plans, documentation of application for State licensure in any State in the region that the organization is not already licensed. (2) The authorized individual must thoroughly describe how the entity and MA plan meet, or will meet, the requirements described in this part. (c) Responsibility for making determinations. (1) CMS is responsible for determining whether an entity qualifies as an MA organization and whether proposed MA plans meet the requirements of this part. (2) A CMS determination that an entity is qualified to act as an MA organization is distinct from the bid negotiation that occurs under subpart F of this part and such negotiation is not subject to the appeals provisions included in subpart N of this part. (d) Resubmittal of application. An application that has been denied by CMS may not be resubmitted for 4 months after the date of the notice from CMS denying the application. (e) Disclosure of application information under the Freedom of Information Act. An applicant submitting material that he or she believes is protected from disclosure under 5 U.S.C. 552, the Freedom of Information Act, or because of exemptions provided in 45 CFR part 5 (the Department's regulations providing exceptions to disclosure), must label the material “privileged” and include an explanation of the applicability of an exception described in 45 CFR part 5. Any final decisions as to whether material is privileged is the final decision of the Secretary. [70 FR 4736, Jan. 28, 2005] (a) Basis for evaluation and determination. (1) CMS evaluates an application for an MA contract on the basis of information contained in the application itself and any additional information that CMS obtains through other means such as on-site visits, public hearings, and any other appropriate procedures. (2) After evaluating all relevant information, CMS determines whether the applicant's application meets the applicable requirements of §422.501. (b) Use of information from a prior contracting period. If an MA organization has failed to comply with the terms of a previous contract with CMS under title XVIII of the Act, or has failed to complete a corrective action plan during the term of the contract, CMS may deny an application based on the applicant's failure to comply with that prior contract with CMS even if the contract applicant meets all of the current requirements. (c) Notice of determination. Within timeframes determined by CMS, it notifies each applicant that applies for an MA contract under this part of its determination and the basis for the determination. The determination is one of the following: (1) Approval of application. If CMS approves the application, it gives written notice to the applicant, indicating that it qualifies to contract as an MA organization. (2) Intent to deny. (i)If CMS finds that the applicant does not appear to be able to meet the requirements for an MA organization and/or has not provided enough information to evaluate the application, CMS gives the contract applicant notice of intent to deny the application for an MA contract and a summary of the basis for this preliminary finding. (ii) Within 10 days from the date of the intent to deny notice, the contract applicant must respond in writing to the issues or other matters that were the basis for CMS' preliminary finding and must revise its application to remedy any defects CMS identified. (3) Denial of application. If CMS denies the application, it gives written notice to the contract applicant indicating— (i) That the applicant is not qualified to contract as an MA organization under Part C of title XVIII of the Act; (ii) The reasons why the applicant is not qualified; and (iii) The applicant's right to request reconsideration in accordance with the procedures specified in subpart N of this part. (d) Oversight of continuing compliance. (1) CMS oversees an MA organization's continued compliance with the requirements for an MA organization. (2) If an MA organization no longer meets those requirements, CMS terminates the contract in accordance with §422.510. [70 FR 4736, Jan. 28, 2005] (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] The contract between the MA organization and CMS must contain the following provisions: (a) Agreement to comply with regulations and instructions. The MA organization agrees to comply with all the applicable requirements and conditions set forth in this part and in general instructions. An MA organization's compliance with paragraphs (a)(1) through (a)(13) of this section is material to performance of the contract. The MA organization agrees— (1) To accept new enrollments, make enrollments effective, process voluntary disenrollments, and limit involuntary disenrollments, as provided in subpart B of this part. (2) That it will comply with the prohibition in §422.110 on discrimination in beneficiary enrollment. (3) To provide— (i) The basic benefits as required under §422.101 and, to the extent applicable, supplemental benefits under §422.102; and (ii) Access to benefits as required under subpart C of this part; (iii) In a manner consistent with professionally recognized standards of health care, all benefits covered by Medicare. (4) To disclose information to beneficiaries in the manner and the form prescribed by CMS as required under §422.111; (5) To operate a quality assurance and performance improvement program and have an agreement for external quality review as required under subpart D of this part; (6) To comply with all applicable provider requirements in subpart E of this part, including provider certification requirements, anti-discrimination requirements, provider participation and consultation requirements, the prohibition on interference with provider advice, limits on provider indemnification, rules governing payments to providers, and limits on physician incentive plans; (7) To comply with all requirements in subpart M of this part governing coverage determinations, grievances, and appeals; (8) To comply with the reporting requirements in §422.516 and the requirements in §422.310 for submitting data to CMS; (9) That it will be paid under the contract in accordance with the payment rules in subpart G of this part; (10) To develop its annual bid, and submit all required information on premiums, benefits, and cost-sharing by not later than the first Monday in June, as provided in subpart F of this part; (11) That its contract may not be renewed or may be terminated in accordance with this subpart and subpart N of this part. (12) To comply with all requirements that are specific to a particular type of MA plan, such as the special rules for private fee-for-service plans in §§422.114 and 422.216 and the MSA requirements in §§422.56, 422.103, and 422.262; and (13) To comply with the confidentiality and enrollee record accuracy requirements in §422.118. (14) An MA organization's compliance with paragraphs (a)(1) through (a)(13) and (c) of this section is material to performance of the contract. (b) Communication with CMS. The MA organization must have the capacity to communicate with CMS electronically. (c) Prompt payment. The MA organization must comply with the prompt payment provisions of §422.520 and with instructions issued by CMS, as they apply to each type of plan included in the contract. (d) Maintenance of records. The MA organization agrees to maintain for 10 years books, records, documents, and other evidence of accounting procedures and practices that— (1) Are sufficient to do the following: (i) Accommodate periodic auditing of the financial records (including data related to Medicare utilization, costs, and computation of the bid) of MA organizations. (ii) Enable CMS to inspect or otherwise evaluate the quality, appropriateness and timeliness of services performed under the contract, and the facilities of the organization. (iii) Enable CMS to audit and inspect any books and records of the MA organization that pertain to the ability of the organization to bear the risk of potential financial losses, or to services performed or determinations of amounts payable under the contract. (iv) Properly reflect all direct and indirect costs claimed to have been incurred and used in the preparation of the bid proposal. (v) Establish component rates of the bid for determining additional and supplementary benefits. (vi) Determine the rates utilized in setting premiums for State insurance agency purposes and for other government and private purchasers; and (2) Include at least records of the following: (i) Ownership and operation of the MA organization's financial, medical, and other record keeping systems. (ii) Financial statements for the current contract period and 10 prior periods. (iii) Federal income tax or informational returns for the current contract period and 10 prior periods. (iv) Asset acquisition, lease, sale, or other action. (v) Agreements, contracts, and subcontracts. (vi) Franchise, marketing, and management agreements. (vii) Schedules of charges for the MA organization's fee-for-service patients. (viii) Matters pertaining to costs of operations. (ix) Amounts of income received by source and payment. (x) Cash flow statements. (xi) Any financial reports filed with other Federal programs or State authorities. (e) Access to facilities and records. The MA organization agrees to the following: (1) HHS, the Comptroller General, or their designee may evaluate, through inspection or other means— (i) The quality, appropriateness, and timeliness of services furnished to Medicare enrollees under the contract; (ii) The facilities of the MA organization; and (iii) The enrollment and disenrollment records for the current contract period and 10 prior periods. (2) HHS, the Comptroller General, or their designees may audit, evaluate, or inspect any books, contracts, medical records, patient care documentation, and other records of the MA organization, related entity, contractor, subcontractor, or its transferee that pertain to any aspect of services performed, reconciliation of benefit liabilities, and determination of amounts payable under the contract, or as the Secretary may deem necessary to enforce the contract. (3) The MA organization agrees to make available, for the purposes specified in paragraph (d) of this section, its premises, physical facilities and equipment, records relating to its Medicare enrollees, and any additional relevant information that CMS may require. (4) HHS, the Comptroller General, or their designee's right to inspect, evaluate, and audit extends through 10 years from the end of the final contract period or completion of audit, whichever is later unless— (i) CMS determines there is a special need to retain a particular record or group of records for a longer period and notifies the MA organization at least 30 days before the normal disposition date; (ii) There has been a termination, dispute, or allegation of fraud or similar fault by the MA organization, in which case the retention may be extended to 6 years from the date of any resulting final resolution of the termination, dispute, fraud, or similar fault; or (iii) CMS determines that there is a reasonable possibility of fraud or similar fault, in which case CMS may inspect, evaluate, and audit the MA organization at any time. (f) Disclosure of information. The MA organization agrees to submit— (1) To CMS, certified financial information that must include the following: (i) Such information as CMS may require demonstrating that the organization has a fiscally sound operation. (ii) Such information as CMS may require pertaining to the disclosure of ownership and control of the MA organization. (2) To CMS, all information that is necessary for CMS to administer and evaluate the program and to simultaneously establish and facilitate a process for current and prospective beneficiaries to exercise choice in obtaining Medicare services. This information includes, but is not limited to: (i) The benefits covered under an MA plan; (ii) The MA monthly basic beneficiary premium and MA monthly supplemental beneficiary premium, if any, for the plan or in the case of an MSA plan, the MA monthly MSA premium. (iii) The service area and continuation area, if any, of each plan and the enrollment capacity of each plan; (iv) Plan quality and performance indicators for the benefits under the plan including— (A) Disenrollment rates for Medicare enrollees electing to receive benefits through the plan for the previous 2 years; (B) Information on Medicare enrollee satisfaction; (C) Information on health outcomes; (D) The recent record regarding compliance of the plan with requirements of this part, as determined by CMS; and (E) Other information determined by CMS to be necessary to assist beneficiaries in making an informed choice among MA plans and traditional Medicare; (v) Information about beneficiary appeals and their disposition; (vi) Information regarding all formal actions, reviews, findings, or other similar actions by States, other regulatory bodies, or any other certifying or accrediting organization; (vii) To CMS, any other information deemed necessary by CMS for the administration or evaluation of the Medicare program. (3) To its enrollees all informational requirements under §422.64 and, upon an enrollee's, request the financial disclosure information required under §422.516. (g) Beneficiary financial protections. The MA organization agrees to comply with the following requirements: (1) Each MA organization must adopt and maintain arrangements satisfactory to CMS to protect its enrollees from incurring liability (for example, as a result of an organization's insolvency or other financial difficulties) for payment of any fees that are the legal obligation of the MA organization. To meet this requirement, the MA organization must— (i) Ensure that all contractual or other written arrangements with providers prohibit the organization's providers from holding any beneficiary enrollee liable for payment of any such fees; and (ii) Indemnify the beneficiary enrollee for payment of any fees that are the legal obligation of the MA organization for services furnished by providers that do not contract, or that have not otherwise entered into an agreement with the MA organization, to provide services to the organization's beneficiary enrollees. (2) The MA organization must provide for continuation of enrollee health care benefits— (i) For all enrollees, for the duration of the contract period for which CMS payments have been made; and (ii) For enrollees who are hospitalized on the date its contract with CMS terminates, or, in the event of an insolvency, through discharge. (3) In meeting the requirements of this paragraph, other than the provider contract requirements specified in paragraph (g)(1)(i) of this section, the MA organization may use— (i) Contractual arrangements; (ii) Insurance acceptable to CMS; (iii) Financial reserves acceptable to CMS; or (iv) Any other arrangement acceptable to CMS. (h) Requirements of other laws and regulations. The MA organization agrees to comply with- (1) Federal laws and regulations designed to prevent or ameliorate fraud, waste, and abuse, including, but not limited to, applicable provisions of Federal criminal law, the False Claims Act (31 U.S.C. 3729 et. seq.), and the anti-kickback statute (section 1128B(b)) of the Act); and (2) HIPAA administrative simplification rules at 45 CFR parts 160, 162, and 164. (i) MA organization relationship with related entities, contractors, and subcontractors. (1) Notwithstanding any relationship(s) that the MA organization may have with related entities, contractors, or subcontractors, the MA organization maintains ultimate responsibility for adhering to and otherwise fully complying with all terms and conditions of its contract with CMS. (2) The MA organization agrees to require all related entities, contractors, or subcontractors to agree that— (i) HHS, the Comptroller General, or their designees have the right to inspect, evaluate, and audit any pertinent contracts, books, documents, papers, and records of the related entity(s), contractor(s), or subcontractor(s) involving transactions related to the MA contract; and (ii) HHS', the Comptroller General's, or their designee's right to inspect, evaluate, and audit any pertinent information for any particular contract period will exist through 10 years from the final date of the contract period or from the date of completion of any audit, whichever is later. (3) All contracts or written arrangements between MA organizations and providers, related entities, contractors, subcontractors, first tier and downstream entities must contain the following: (i) Enrollee protection provisions that provide, consistent with paragraph (g)(1) of this section, arrangements that prohibit providers from holding an enrollee liable for payment of any fees that are the obligation of the MA organization. (ii) Accountability provisions that indicate that the MA organization may only delegate activities or functions to a provider, related entity, contractor, or subcontractor in a manner consistent with the requirements set forth at paragraph (i)(4)of this section. (iii) A provision requiring that any services or other activity performed by a related entity, contractor, subcontractor, or first-tier or downstream entity in accordance with a contract or written agreement are consistent and comply with the MA organization's contractual obligations. (4) If any of the MA organizations' activities or responsibilities under its contract with CMS are delegated to other parties, the following requirements apply to any related entity, contractor, subcontractor, or provider: (i) Written arrangements must specify delegated activities and reporting responsibilities. (ii) Written arrangements must either provide for revocation of the delegation activities and reporting requirements or specify other remedies in instances where CMS or the MA organization determine that such parties have not performed satisfactorily. (iii) Written arrangements must specify that the performance of the parties is monitored by the MA organization on an ongoing basis. (iv) Written arrangements must specify that either— (A) The credentials of medical professionals affiliated with the party or parties will be either reviewed by the MA organization; or (B) The credentialing process will be reviewed and approved by the MA organization and the MA organization must audit the credentialing process on an ongoing basis. (v) All contracts or written arrangements must specify that the related entity, contractor, or subcontractor must comply with all applicable Medicare laws, regulations, and CMS instructions. (5) If the MA organization delegates selection of the providers, contractors, or subcontractor to another organization, the MA organization's written arrangements with that organization must state that the CMS-contracting MA organization retains the right to approve, suspend, or terminate any such arrangement. (j) Additional contract terms. The MA organization agrees to include in the contract such other terms and conditions as CMS may find necessary and appropriate in order to implement requirements in this part. (k) 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. (l) Certification of data that determine payment. As a condition for receiving a monthly payment under subpart G of this part, the MA organization agrees that its chief executive officer (CEO), chief financial officer (CFO), or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to such officer, must request payment under the contract on a document that certifies (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of relevant data that CMS requests. Such data include specified enrollment information, encounter data, and other information that CMS may specify. (1) The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to such officer, must certify that each enrollee for whom the organization is requesting payment is validly enrolled in an MA plan offered by the organization and the information relied upon by CMS in determining payment (based on best knowledge, information, and belief) is accurate, complete, and truthful. (2) The CEO, CFO, or an individual delegated with the authority to sign on behalf of one of these officers, and who reports directly to such officer, must certify (based on best knowledge, information, and belief) that the data it submits under §422.310 are accurate, complete, and truthful. (3) If such data are generated by a related entity, contractor, or subcontractor of an MA organization, such entity, contractor, or subcontractor must similarly certify (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of the data. (4) The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to such officer, must certify (based on best knowledge, information, and belief) that the information in its bid submission is accurate, complete, and truthful and fully conforms to the requirements in §422.254. [63 FR 35099, June 26, 1998; 63 FR 52614, Oct. 1, 1998, as amended at 64 FR 7980, Feb. 17, 1999; 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] (a) Effective date. The contract is effective on the date specified in the contract between the MA organization and CMS and, for a contract that provides for coverage under an MSA plan, not earlier than January 1999. (b) Term of contract. Each contract is for a period of at least 12 months. (c) Renewal of contract. In accordance with §422.506, contracts are renewed annually only if— (1) CMS informs the MA organization that it authorizes a renewal; and (2) The MA organization has not provided CMS with a notice of intention not to renew. (d) Renewal of contract contingent on reaching agreement on the bid. Although an MA organization may be determined qualified to renew its contract under this section, if the organization and CMS cannot reach agreement on the bid under subpart F of this part, no renewal will take place, and the failure to reach an agreement is not subject to the appeals provisions in subpart N of this part. [63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000. Redesignated at 70 FR 4736, Jan. 28, 2005 and amended at 70 FR 4737, Jan. 28, 2005] (a) Nonrenewal by an MA organization. (1) An MA organization may elect not to renew its contract with CMS as of the end of the term of the contract for any reason provided it meets the timeframes for doing so set forth in paragraphs (a)(2) and (a)(3) of this section. (2) If an MA organization does not intend to renew its contract, it must notify— (i) CMS in writing, by the first Monday in June of the year in which the contract would end; (ii) Each Medicare enrollee, at least 90 days before the date on which the nonrenewal is effective. This notice must include a written description of alternatives available for obtaining Medicare services within the service area, including alternative MA plans, Medigap options, and original Medicare and must receive CMS approval prior to issuance. (iii) The general public, at least 90 days before the end of the current calendar year, by publishing a notice in one or more newspapers of general circulation in each community located in the MA organization's service area. (3) CMS may accept a nonrenewal notice submitted after the first Monday in June if— (i) The MA organization notifies its Medicare enrollees and the public in accordance with paragraph (a)(2)(ii) and (a)(2)(iii) of this section; and (ii) Acceptance is not inconsistent with the effective and efficient administration of the Medicare program. (4) If an MA organization does not renew a contract under this paragraph (a), CMS will not enter into a contract with the organization for 2 years unless there are special circumstances that warrant special consideration, as determined by CMS. (b) CMS decision not to renew. (1) CMS may elect not to authorize renewal of a contract for any of the following reasons: (i) The MA organization has not fully implemented or shown discernable progress in implementing quality improvement projects as defined in §422.152(d). (ii) For any of the reasons listed in §422.510(a), which would also permit CMS to terminate the contract. (iii) The MA organization has committed any of the acts in §422.752(a) that would support the imposition of intermediate sanctions or civil money penalties under subpart O of this part. (2) Notice. CMS provides notice of its decision whether to authorize renewal of the contract as follows: (i) To the MA organization by May 1 of the contract year. (ii) If CMS decides not to authorize a renewal of the contract, to the MA organization's Medicare enrollees by mail at least 90 days before the end of the current calendar year. (iii) If CMS decides not to authorize a renewal of the contract, to the general public at least 90 days before the end of the current calendar year, by publishing a notice in one or more newspapers of general circulation in each community or county located in the MA organization's service area. (3) Notice of appeal rights. CMS gives the MA organization written notice of its right to appeal the decision not to renew in accordance with §422.644. [63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000; 67 FR 13289, Mar. 22, 2002; 70 FR 4737, Jan. 28, 2005] (a) A contract may be modified or terminated at any time by written mutual consent. (1) If the contract is terminated by mutual consent, except as provided in paragraph (b) of this section, the MA organization must provide notice to its Medicare enrollees and the general public as provided in §422.512(b)(2) and (b)(3). (2) If the contract is modified by mutual consent, the MA organization must notify its Medicare enrollees of any changes that CMS determines are appropriate for notification within timeframes specified by CMS. (b) If the contract terminated by mutual consent is replaced the day following such termination by a new MA contract, the MA organization is not required to provide the notice specified in paragraph (a)(1) of this section. (a) Termination by CMS. CMS may terminate a contract for any of the following reasons: (1) The MA organization has failed substantially to carry out the terms of its contract with CMS. (2) The MA organization is carrying out its contract with CMS in a manner that is inconsistent with the effective and efficient implementation of this part. (3) CMS determines that the MA organization no longer meets the requirements of this part for being a contracting organization. (4) There is credible evidence that the MA organization committed or participated in false, fraudulent, or abusive activities affecting the Medicare program, including submission of false or fraudulent data. (5) The MA organization experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists. (6) The MA organization substantially fails to comply with the requirements in subpart M of this part relating to grievances and appeals. (7) The MA organization fails to provide CMS with valid data as required under §422.310. (8) The MA organization fails to implement an acceptable quality assessment and performance improvement program as required under subpart D of this part. (9) The MA organization substantially fails to comply with the prompt payment requirements in §422.520. (10) The MA organization substantially fails to comply with the service access requirements in §422.112 or §422.114. (11) The MA organization fails to comply with the requirements of §422.208 regarding physician incentive plans. (12) The MA organization substantially fails to comply with the marketing requirements in §422.80. (b) Notice. If CMS decides to terminate a contract for reasons other than the grounds specified in §422.510(a)(5), it gives notice of the termination as follows: (1) Termination of contract by CMS. (i) CMS notifies the MA organization in writing 90 days before the intended date of the termination. (ii) The MA organization notifies its Medicare enrollees of the termination by mail at least 30 days before the effective date of the termination. (iii) The MA organization notifies the general public of the termination at least 30 days before the effective date of the termination by publishing a notice in one or more newspapers of general circulation in each community or county located in the MA organization's service area. (2) Immediate termination of contract by CMS. (i) For terminations based on violations prescribed in §422.510(a)(5), CMS notifies the MA organization in writing that its contract has been terminated effective the date of the termination decision by CMS. If termination is effective in the middle of a month, CMS has the right to recover the prorated share of the capitation payments made to the MA organization covering the period of the month following the contract termination. (ii) CMS notifies the MA organization's Medicare enrollees in writing of CMS's decision to terminate the MA organization's contract. This notice occurs no later than 30 days after CMS notifies the plan of its decision to terminate the MA contract. CMS simultaneously informs the Medicare enrollees of alternative options for obtaining Medicare services, including alternative MA organizations in a similar geographic area and original Medicare. (iii) CMS notifies the general public of the termination no later than 30 days after notifying the plan of CMS's decision to terminate the MA contract. This notice is published in one or more newspapers of general circulation in each community or county located in the MA organization's service area. (c) Corrective action plan—(1) General. Before terminating a contract for reasons other than the grounds specified in paragraph (a)(5) of this section, CMS provides the MA organization with reasonable opportunity to develop and receive CMS approval of a corrective action plan to correct the deficiencies that are the basis of the proposed termination. (2) Exception. If a contract is terminated under §422.510(a)(5), the MA organization will not have the opportunity to submit a corrective action plan. (d) Appeal rights. If CMS decides to terminate a contract, it sends written notice to the MA organization informing it of its termination appeal rights in accordance with subpart N of this part. [63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000; 70 FR 52027, Sept. 1, 2005] (a) Cause for termination. The MA organization may terminate the MA contract if CMS fails to substantially carry out the terms of the contract. (b) Notice. The MA organization must give advance notice as follows: (1) To CMS, at least 90 days before the intended date of termination. This notice must specify the reasons why the MA organization is requesting contract termination. (2) To its Medicare enrollees, at least 60 days before the termination effective date. This notice must include a written description of alternatives available for obtaining Medicare services within the services area, including alternative MA plans, Medigap options, original Medicare and must receive CMS approval. (3) To the general public at least 60 days before the termination effective date by publishing an CMS-approved notice in one or more newspapers of general circulation in each community or county located in the MA organization's geographic area. (c) Effective date of termination. The effective date of the termination is determined by CMS and is at least 90 days after the date CMS receives the MA organization's notice of intent to terminate. (d) CMS's liability. CMS's liability for payment to the MA organization ends as of the first day of the month after the last month for which the contract is in effect. (e) Effect of termination by the organization. CMS does not enter into an agreement with an organization that has terminated its contract within the preceding 2 years unless there are circumstances that warrant special consideration, as determined by CMS. [63 FR 35099, June 26, 1998, as amended at 67 FR 13288, Mar. 22, 2002] (a) Basic rule. Except as provided in paragraph (b) of this section, CMS does not enter into a contract under this subpart unless the organization meets the following minimum enrollment requirement— (1) At least 5,000 individuals (or 1,500 individuals if the organization is a PSO) are enrolled for the purpose of receiving health benefits from the organization; or (2) At least 1,500 individuals (or 500 individuals if the organization is a PSO) are enrolled for purposes of receiving health benefits from the organization and the organization primarily serves individuals residing outside of urbanized areas as defined in §412.62(f) (or, in the case of a PSO, the PSO meets the requirements in §422.352(c)). (3) Except as provided for in paragraph (b) of this section, an MA organization must maintain a minimum enrollment as defined in paragraphs (a)(1) and (a)(2) of this section for the duration of its contract. (b) Minimum enrollment waiver. (1) For a contract applicant or MA organization that does not meet the applicable requirement of paragraph (a) of this section at application for an MA contract or during the first 3 years of the contract, CMS may waive the minimum enrollment requirement as provided for below. To receive a waiver, a contract applicant or MA organization must demonstrate to CMS's satisfaction that it is capable of administering and managing an MA contract and is able to manage the level of risk required under the contract. Factors that CMS takes into consideration in making this evaluation include the extent to which— (i) The contract applicant or MA organization's management and providers have previous experience in managing and providing health care services under a risk-based payment arrangement to at least as many individuals as the applicable minimum enrollment for the entity as described in paragraph (a) of this section, or (ii) The contract applicant or MA organization has the financial ability to bear financial risk under an MA contract. In determining whether an organization is capable of bearing risk, CMS considers factors such as the organization's management experience as described in paragraph (b)(1)(i) of this section and stop-loss insurance that is adequate and acceptable to CMS; and (iii) The contract applicant or MA organization is able to establish a marketing and enrollment process that allows it to meet the applicable enrollment requirement specified in paragraph (a) of this section before completion of the third contract year. (2) If an MA organization fails to meet the enrollment requirement in the first year, CMS may waive the minimum requirements for another year provided that the organization— (i) Requests an additional minimum enrollment waiver no later than 120 days before the end of the first year; (ii) Continues to demonstrate it is capable of administering and managing an MA contract and is able to manage the level of risk; and, (iii) Demonstrates an acceptable marketing and enrollment process. Enrollment projections for the second year of the waiver will become the organization's transitional enrollment standard. (3) If an MA organization fails to meet the enrollment requirement in the second year, CMS may waive the minimum requirements for the third year only if the organization has attained the transitional enrollment standard as described in paragraph (b)(2)(iii) of this section. (c) Failure to meet enrollment requirements. CMS may elect not to renew its contract with an MA organization that fails to meet the applicable enrollment requirement in paragraph (a) of this section [63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000] (a) Required information. Each MA organization must have an effective procedure to develop, compile, evaluate, and report to CMS, to its enrollees, and to the general public, at the times and in the manner that CMS requires, and while safeguarding the confidentiality of the doctor-patient relationship, statistics and other information with respect to the following: (1) The cost of its operations. (2) The patterns of utilization of its services. (3) The availability, accessibility, and acceptability of its services. (4) To the extent practical, developments in the health status of its enrollees. (5) Information demonstrating that the MA organization has a fiscally sound operation. (6) Other matters that CMS may require. (b) Significant business transactions. Each MA organization must report to CMS annually, within 120 days of the end of its fiscal year (unless for good cause shown, CMS authorizes an extension of time), the following: (1) A description of significant business transactions (as defined in §422.500) between the MA organization and a party in interest. (2) With respect to those transactions— (i) A showing that the costs of the transactions listed in paragraph (c) of this section do not exceed the costs that would be incurred if these transactions were with someone who is not a party in interest; or (ii) If they do exceed, a justification that the higher costs are consistent with prudent management and fiscal soundness requirements. (3) A combined financial statement for the MA organization and a party in interest if either of the following conditions is met: (i) Thirty-five percent or more of the costs of operation of the MA organization go to a party in interest. (ii) Thirty-five percent or more of the revenue of a party in interest is from the MA organization. (c) Requirements for combined financial statements. (1) The combined financial statements required by paragraph (b)(3) of this section must display in separate columns the financial information for the MA organization and each of the parties in interest. (2) Inter-entity transactions must be eliminated in the consolidated column. (3) The statements must have been examined by an independent auditor in accordance with generally accepted accounting principles and must include appropriate opinions and notes. (4) Upon written request from an MA organization showing good cause, CMS may waive the requirement that the organization's combined financial statement include the financial information required in this paragraph (c) with respect to a particular entity. (d) Reporting and disclosure under ERISA. (1) For any employees' health benefits plan that includes an MA organization in its offerings, the MA organization must furnish, upon request, the information the plan needs to fulfill its reporting and disclosure obligations (with respect to the particular MA organization) under the Employee Retirement Income Security Act of 1974 (ERISA). (2) The MA organization must furnish the information to the employer or the employer's designee, or to the plan administrator, as the term “administrator” is defined in ERISA. (e) Loan information. Each organization must notify CMS of any loans or other special financial arrangements it makes with contractors, subcontractors and related entities. (f) Enrollee access to Information. Each MA organization must make the information reported to CMS under §422.502(f)(1) available to its enrollees upon reasonable request. (a) Contract between CMS and the MA organization. (1) The contract between CMS and the MA organization must provide that the MA organization will pay 95 percent of the “clean claims” within 30 days of receipt if they are submitted by, or on behalf of, an enrollee of an MA private fee-for-service plan or are claims for services that are not furnished under a written agreement between the organization and the provider. (2) The MA organization must pay interest on clean claims that are not paid within 30 days in accordance with sections 1816(c)(2)(B) and 1842(c)(2)(B). (3) All other claims from non-contracted providers must be paid or denied within 60 calendar days from the date of the request. (b)(1) Contracts between MA organizations and providers and suppliers. Contracts or other written agreements between MA organizations and providers must contain a prompt payment provision, the terms of which are developed and agreed to by both the MA organization and the relevant provider. (2) The MA organization is obligated to pay contracted providers under the terms of the contract between the MA organization and the provider. (c) Failure to comply. If CMS determines, after giving notice and opportunity for hearing, that an MA organization has failed to make payments in accordance with paragraph (a) of this section, CMS may provide— (1) For direct payment of the sums owed to providers, or MA private fee-for-service plan enrollees; and (2) For appropriate reduction in the amounts that would otherwise be paid to the organization, to reflect the amounts of the direct payments and the cost of making those payments. (d) A CMS decision to not conduct a hearing under paragraph (c) of this section does not disturb any potential remedy under State law for 1866(a)(1)(O) of the Act. [63 FR 35099, June 26, 1998, as amended at 65 FR 40328, June 29, 2000; 70 FR 4738, Jan. 28, 2005] CMS will not implement, other than at the beginning of a calendar year, requirements under this part that impose a new significant cost or burden on MA organizations or plans, unless a different effective date is required by statute. [68 FR 50858, Aug. 22, 2003] In order to participate as an MA organization, an RFB society— (a) May not impose any limitation on membership based on any factor related to health status; and (b) Must offer, in addition to the MA RFB plan, health coverage to individuals who are members of the church or convention or group of churches with which the society is affiliated, but who are not entitled to receive benefits from the Medicare program. The contract between the MA organization and CMS must specify that— (a) The MA organization must pay a Federally qualified health center (FQHC) a similar amount to what it pays other providers for similar services. (b) Under such a contract, the FQHC must accept this payment as payment in full, except for allowable cost sharing which it may collect. (c) Financial incentives, such as risk pool payments or bonuses, and financial withholdings are not considered in determining the payments made by CMS under §422.316(a). [70 FR 4738, Jan. 28, 2005]
Title 42: Public Health
PART 422—MEDICARE ADVANTAGE PROGRAM
Subpart K—Contracts With Medicare Advantage Organizations
§ 422.500 Scope and definitions.
§ 422.501 Application requirements.
§ 422.502 Evaluation and determination procedures.
§ 422.503 General provisions.
§ 422.504 Contract provisions.
§ 422.505 Effective date and term of contract.
§ 422.506 Nonrenewal of contract.
§ 422.508 Modification or termination of contract by mutual consent.
§ 422.510 Termination of contract by CMS.
§ 422.512 Termination of contract by the MA organization.
§ 422.514 Minimum enrollment requirements.
§ 422.516 Reporting requirements.
§ 422.520 Prompt payment by MA organization.
§ 422.521 Effective date of new significant regulatory requirements.
§ 422.524 Special rules for RFB societies.
§ 422.527 Agreements with Federally qualified health centers.
