42 C.F.R. Subpart K—Application Procedures and Contracts with Part D plan sponsors
Title 42 - Public Health
This subpart sets forth application procedures and contracts with Part D plans: application procedures and requirements; contract terms; procedures for termination of contracts; reporting by Part D plans. For purposes of this subpart, Medicare Advantage (MA) organizations offering Part D plans follow the requirements of part 422 of this chapter for MA organizations, except in cases where the requirements for the qualified prescription drug coverage involve additional requirements. 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 Part D plan sponsor's enrollees by pharmacies and other providers, by Part D plan sponsor staff, medical groups, or independent practice associations, or by any combination of those entities. Downstream entity means any party that enters into a written arrangement, acceptable to CMS, below the level of the arrangement between a Part D plan sponsor (or 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 a written arrangement, acceptable to CMS, with a Part D plan sponsor or applicant to provide administrative services or health care services for a Medicare eligible individual under Part D. Party in interest means the following: (1) Any director, officer, partner, or employee responsible for management or administration of a Part D plan sponsor. (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 a PDP sponsor organized as a nonprofit corporation, an incorporator or member of the corporation under applicable State corporation law. (4) Any entity in which a person specified in paragraphs (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 Part D plan sponsor. (6) Any spouse, child, or parent of an individual specified in paragraphs (1), (2), or (3) of this definition. Related entity means any entity that is related to the PDP sponsor by common ownership or control and— (1) Performs some of the Part D plan sponsor'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 Part D plan sponsor 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 Part D plan sponsor, have a total value that exceeds $25,000 or 5 percent of the PDP sponsor's total operating expenses, whichever is less. (a) Scope. This section sets forth application requirements for an entity that seeks a determination from CMS that it is qualified to contract as a sponsor of a Part D plan. (b) Completion of an application. (1) In order to obtain a determination on whether it meets the requirements to become a Part D plan sponsor, 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 as specified in subpart I of this part; or (ii) A Federal waiver as specified in subpart I of this part. (2) The authorized individual must describe thoroughly how the entity is qualified to meet the requirements described in this part. (c) Responsibility for making determinations. (1) CMS is responsible for determining whether an entity is qualified to contract as a Part D plan sponsor and meets the requirements of this part. (2) A CMS determination that an entity is qualified to act as a Part D plan sponsor is distinct from the bid negotiations that occur under subpart F of part 423 and such negotiations are not subject to the appeals provisions included in subpart N of this part. (d) 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 USC 552, the Freedom of Information Act, or because of exemptions provided in 45 CFR part 5 (the Department's regulations providing exemptions to disclosure), must label the material “privileged” and include an explanation of the applicability of an exemption specified in 45 CFR part 5. (a) Basis for evaluation and determination. (1) CMS evaluates an entity's application on the basis of information contained in the application itself and any additional information that CMS obtains through on-site visits, publicly available information, and any other appropriate procedures. (2) After evaluating all relevant information, CMS determines whether the application meets the applicable requirements specified in §423.504 and §423.505. (b) Use of information from a prior contracting period. If a Part D plan sponsor fails to comply with the terms of a previous year's contract (or in the case of a fallback entity, the previous 3-year contract) with CMS under title XVIII of the Act, or fails 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 applicant currently meets all of the requirements of this part. (c) Notice of determination. Except for fallback entities, which are governed under subpart Q of this part, CMS notifies each applicant that applies to be determined qualified to contract as a Part D plan sponsor, under this part, of its determination on the application and the basis for the determination. The determination may be 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 Part D plan sponsor. (2) Intent to deny. (i) If CMS finds that the applicant does not appear qualified to contract as a Part D plan sponsor and/or has not provided enough information to evaluate the application, it gives the applicant notice of intent to deny the application and a summary of the basis for this preliminary finding. (ii) Within 10 days from the date of the notice, the applicant may respond in writing to the issues or other matters that were the basis for CMS's preliminary finding and may revise its application to remedy any defects CMS identified. (3) Denial of application. If CMS denies the application, it gives written notice to the applicant indicating— (i) That the applicant is not qualified to contract as a Part D sponsor under Part D of title XVIII of the Act; (ii) The reasons why the applicant does is not so qualified; and (iii) The applicant's right to request reconsideration in accordance with the procedures specified in subpart N. (d) Oversight of continuing compliance. (1) CMS oversees a Part D plan sponsor's continued compliance with the requirements for a Part D plan sponsor. (2) If a Part D plan sponsor no longer meets those requirements, CMS terminates the contract in accordance with §423.509. (a) General rule. Subject to the provisions at §423.265(a)(1) concerning submission of bids, to enroll beneficiaries in any Part D drug plan it offers and be paid on behalf of Part D eligible individuals enrolled in those plans, a Part D plan sponsor must enter into a contract with CMS. The contract may cover more than one Part D plan. (b) Conditions necessary to contract as a Part D plan sponsor. Any entity seeking to contract as a Part D plan sponsor must— (1) Complete an application as described in §423.502 demonstrating that the entity has the capability to meet the requirements of this Part, including those listed in §423.505. (2) Be organized and licensed under State law as a risk bearing entity eligible to offer health insurance or health benefits coverage in each State in which it offers a Part D plan, or have secured a Federal waiver, as described in subpart I of this part. (Fallback entity applicants need not be licensed as risk-bearing entities, nor are they required to obtain State licensure demonstrating that the applicant is eligible to offer health insurance or health benefits coverage in each State in which it applies to operate.) (3) Meet the minimum enrollment requirements of §423.512(a) unless waived under §423.512(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 Part D plan sponsor'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 Part D plan sponsor to organize, implement, control, and evaluate financial and marketing activities, the furnishing of prescription drug services, the quality assurance, medical therapy management, and drug and or utilization management programs, 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 Part D sponsor, 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 Part D plan sponsor. (v)Insurance policies or other arrangements, secured and maintained by the Part D plan sponsor and approved by CMS to insure the Part D plan sponsor 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 articulating the organization's commitment to comply with all applicable Federal and State standards. (B)The designation of a compliance officer and compliance committee accountable to senior management. (C)Effective training and education between the compliance officer and organization employees, contractors, agents, and directors. (D)Effective lines of communication between the compliance officer and the organization's employees, contractors, agents, directors, and members of the compliance committee. (E)Enforcement of standards through well-publicized disciplinary guidelines. (F) Procedures for effective internal monitoring and auditing. (G) Procedures for ensuring prompt responses to detected offenses and development of corrective action initiatives relating to the organization's contract as a Part D plan sponsor. (1) If the Part D sponsor discovers evidence of misconduct related to payment or delivery of prescription drug items or services under the contract, it must conduct a timely, reasonable inquiry into that conduct; (2) The Part D sponsor must conduct appropriate corrective actions (for example, repayment of overpayments and disciplinary actions against responsible individuals) in response to the potential violation referenced above. (H) A comprehensive fraud and abuse plan to detect, correct, and prevent fraud, waste, and abuse. This fraud and abuse plan should include procedures to voluntarily self-report potential fraud or misconduct related to the Part D program to the appropriate government authority. (5) Not have non-renewed a contract under §423.507 within the past 2 years unless— (i) During the 6-month period, beginning on the date the entity 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 Part D sponsor payments in the payment area or areas at issue; or (ii) CMS has otherwise determined that circumstances warrant special consideration. (6) For a full risk or limited risk PDP applicant, not submitted a bid or offered a fallback prescription drug plan in accordance with the following rules. (i) CMS does not contract with a potential PDP sponsor for the offering of a full risk or limited risk prescription drug plan in a PDP region for a year if the applicant— (A) Submitted a bid under §423.863 for the year (as the first year of a contract period under §423.863 to offer a fallback prescription drug plan in any PDP region; (B) Offers a fallback prescription drug plan in any PDP region during the year; or (C) Offered a fallback prescription drug plan in that PDP region during the previous year. (ii) Construction. For purposes of this paragraph (b)(6), an entity is treated as submitting an application to become qualified to contract as a full risk or limited risk PDP sponsor, if the entity is acting as a subcontractor for an integral part of the drug benefit management activities of a full risk or limited risk PDP sponsor or applicant. The previous sentence does not apply to entities that are subcontractors of an MA organization except insofar as the MA organization is applying to act as a full risk or limited risk PDP sponsor. (c) Contracting authority. CMS may enter into contracts under this part, or in order to carry out 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, but not limited to, data relating to Medicare utilization and costs, including allowable reinsurance and risk corridor costs as well as low income subsidies and other costs) under this part of at least one-third of the Part D sponsors offering Part D drug plans. (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 Part D plan sponsor's contract; (ii) Inspect or otherwise evaluate the facilities of the Part D sponsor when there is reasonable evidence of some need for the inspection; and (iii) Audit and inspect any books, contracts, and records of the Part D plan sponsor 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' request— (1) The contract could be amended to exclude any State-licensed entity, or a Part D plan specified by CMS; and (2) A separate contract for any excluded plan or entity must be deemed to be in place when a request is made. (a) General rule. The contract between the Part D plan sponsor and CMS must contain the provisions specified in paragraph (b) of this section. (b) Requirements for contracts. The Part D plan sponsor agrees to— (1) All the applicable requirements and conditions set forth in this part and in general instructions. (2) Accept new enrollments, make enrollments effective, process voluntary disenrollments, and limit involuntary disenrollments, as provided in subpart B of this part. (3) Comply with the prohibition in §423.34(a) on discrimination in beneficiary enrollment. (4) Provide the basic prescription drug coverage as defined under §423.100 and, to the extent applicable, supplemental benefits as defined in §423.100. (Fallback entities may offer only standard prescription drug coverage as specified in §423.855.) (5) Disclose information to beneficiaries in the manner and the form specified by CMS under §423.128. (6) Operate quality assurance, cost and utilization management, medication therapy management, and support e-prescribing as required under subpart D of this part. (7) Comply with all requirements in subpart M of this part governing coverage determinations, grievances, and appeals, and formulary exceptions. (8) Comply with the reporting requirements in §423.514 and the requirements in §423.329(b) for submitting drug claims and related information to CMS for its use in risk adjustment calculations. (9) Provide CMS with the information CMS determines is necessary to carry out payment provisions in subpart G of this part (or for fallback entities, the information necessary to carry out the payment provisions in subpart Q of this part). (10) Allow CMS to inspect and audit any books and records of a Part D plan sponsor that pertain to the information regarding costs provided to CMS under paragraph (b)(9) of this section, or, if a fallback entity, the information submitted under subpart Q. (11) Be paid under the contract in accordance with the payment rules in subpart G of this part, or, if a fallback entity, in accordance with the payment rules of subpart Q of this part. (12) Except for fallback entities, submit a future year's bid, including all required information on premiums, benefits, and cost-sharing, by any applicable due date, as provided in subpart F so that CMS and the Part D plan sponsor may conduct negotiations regarding the terms and conditions of the proposed bid and benefit plan renewal. (13) Permit CMS to determine that it is not qualified to renew its contract or that its contract may be terminated in accordance with this subpart and subpart N of this part. (Subpart N applies to fallback entities only to the extent a fallback contract is terminated.) (14) Comply with the confidentiality and enrollee record accuracy specified in §423.136. (15) Comply with State law and preemption by Federal law requirements described in subpart I of this part. (16) Comply with the coordination requirements with SPAPs and plans that provide other prescription drug coverage as described in subpart J of this part. (17) Provide benefits by means of point of service systems to adjudicate in a drug claims in a timely and efficient manner in compliance with CMS standards, except when necessary to provide access in underserved areas, I/T/U pharmacies (as defined in §423.100), and long-term care pharmacies (as defined in §423.100). (18) To agree to have a standard contract with reasonable and relevant terms and conditions of participation whereby any willing pharmacy may access the standard contract and participate as a network pharmacy. (c) Communication with CMS. The Part D plan sponsor must have the capacity to communicate with CMS electronically in accordance with CMS requirements. (d) Maintenance of records. The Part D plan sponsor 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 part D plan sponsors). (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 Part D plan sponsor 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) Except for fallback entities, properly reflect all direct and indirect costs claimed to have been incurred and used in the preparation of the Part D plan sponsor's bid and necessary for the calculation of gross covered prescription drug costs, allowable reinsurance costs, and allowable risk corridor costs (as defined in §423.308). (v) Except for fallback entities, establish the basis for the components, assumptions, and analysis used by the Part D plan in determining the actuarial valuation of standard, basic alternative, or enhanced alternative coverage offered in accordance with the CMS guidelines specified in §423.265(c)(3). (2) Include records of the following: (i) Ownership and operation of the Part D sponsor'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 actions. (v) Agreements, contracts, and subcontracts. (vi) Franchise, marketing, and management agreements. (vii) Matters pertaining to costs of operations. (viii) Amounts of income received by source and payment. (ix) Cash flow statements. (x) Any financial reports filed with other Federal programs or State authorities. (xi) All prescription drug claims for the current contract period and 10 prior periods. (xii) All price concessions (including concessions offered by manufacturers) for the current contract period and 10 prior periods accounted for separately from other administrative fees. (e) Access to facilities and records. The Part D plan sponsor 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 Part D plan sponsor; 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 record s, patient care documentation, and other records of the Part D plan sponsor, related entity(s), contractor(s), subcontractor(s), 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 Part D plan sponsor 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 Part D plan sponsor at least 30 days before the normal disposition date; (ii) There is a termination, dispute, or allegation of fraud or similar fault by the Part D plan sponsor, in which case the retention may be extended to 6 years from the date of any resulting final resolution of the termination, dispute, or 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 Part D plan sponsor at any time. (f) Disclosure of information. The Part D plan sponsor agrees to submit to CMS— (1) Certified financial information that must include the following: (i) Information as CMS may require demonstrating that the organization has a fiscally sound operation. (ii) Information as CMS may require pertaining to the disclosure of ownership and control of the Part D plan sponsor. (2) All information to CMS 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 prescription drug coverage. This information includes, but is not limited to: (i) The benefits covered under a Part D plan. (ii) The Part D plan monthly basic beneficiary premium and Part D plan monthly supplemental beneficiary premium, if any, for the plan. Fallback entities submit the monthly beneficiary premium for standard prescription drug coverage. (iii) The service area 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) The recent records regarding compliance of the plan with requirements of this part, as determined by CMS; and (D) Other information determined by CMS to be necessary to assist beneficiaries in making an informed choice regarding Part D plans. (v) Information about beneficiary appeals and their disposition, and formulary exceptions. (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) Information on other matters that CMS may require, including, but not limited to, program monitoring and oversight, performance measures, quality assessment, research and evaluation, CMS outreach activities, payment-related oversight*, and fraud, abuse, and waste*, as specified in CMS guidelines. (viii) Any other information deemed necessary to CMS for the administration or evaluation of the Medicare program. (3)To its enrollees, all informational requirements under §423.128 and, upon an enrollee's request, the financial disclosure information required under §423.128(c)(4). (g) Beneficiary financial protections. The Part D plan sponsor agrees to comply with the following requirements: (1) Each Part D plan sponsor must adopt and maintain arrangements satisfactory to CMS to protect its enrollees from incurring liability for payment of any fees that are the legal obligation of the Part D sponsor. To meet this requirement, the Part D plan sponsor must— (i) Ensure that all contractual or other written arrangements prohibit the sponsor's contracting agents 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 Part D plan sponsor for covered prescription drugs furnished by non-contracting pharmacists, or that have not otherwise entered into an agreement with the Part D plan sponsor, to provide services to the organization's beneficiary enrollees. (2) In meeting the requirements of this paragraph, other than the provider contract requirements specified in paragraph (g)(1)(i) of this section, the Part D plan sponsor 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 Part D plan sponsor agrees to comply with— (1) Federal laws and regulations designed to prevent fraud, waste, and abuse, including, but not limited to applicable provisions of Federal criminal law, the False Claims Act (32 U.S.C. §§3729 et seq.), and the anti-kickback statute (section 1128B(b) of the Act). (2) HIPAA Administrative Simplification rules at 45 CFR parts 160, 162, and 164. (i) Relationship with related entities, contractors, and subcontractors. (1) Notwithstanding any relationship(s) that the Part D plan sponsor may have with related entities, contractors, or subcontractors, the Part D sponsor maintains ultimate responsibility for adhering to and otherwise fully complying with all terms and conditions of its contract with CMS. (2) The Part D plan sponsor 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 CMS' contract with the Part D plan sponsor; 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 exists 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 Part D plan sponsors and pharmacies or other 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 pharmacies or other providers from holding an enrollee liable for payment of any fees that are the obligation of the Part D plan sponsor. (ii) Accountability provisions that indicate that the Part D sponsor may delegate activities or functions to a pharmacy, related entity, contractor, or subcontractor only in a manner consistent with 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 Part D plan sponsor's contractual obligations. (4) If any of the Part D plan sponsors' activities or responsibilities under its contract with CMS is delegated to other parties, the following requirements apply to any related entity, contractor, subcontractor, or pharmacy: (i) Written arrangements must specify delegated activities and reporting responsibilities. (ii) Written arrangements must either provide for revocation of the delegation activities and reporting responsibilities described in paragraph (i)(4)(i) of this section or specify other remedies in instances when CMS or the Part D plan sponsor determine that the parties have not performed satisfactorily. (iii) Written arrangements must specify that the Part D plan sponsor on an ongoing basis monitors the performance of the parties. (iv) All contracts or written arrangements must specify that the related entity, contractor, or subcontractor must comply with all applicable Federal laws, regulations, and CMS instructions. (5) If the Part D plan sponsor delegates selection of its prescription drug providers to another organization, the Part D sponsor's written arrangements with that organization must state that the CMS-contracting Part D plan sponsor retains the right to approve, suspend, or terminate any such arrangement. (j) Additional contract terms. The Part D plan sponsor agrees to include in the contract other terms and conditions as CMS may find necessary and appropriate in order to implement requirements in this part. (k) Certification of data that determine payment—(1) General rule. As a condition for receiving a monthly payment under subpart G of this part (or for fallback entities, payment under subpart Q of this part),, the Part D plan sponsor 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 the 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 all data related to payment. The data may include specified enrollment information, claims data, bid submission data, and other data that CMS specifies. (2) Certification of enrollment and payment information. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that each enrollee for whom the organization is requesting payment is validly enrolled in a program offered by the organization and the information CMS relies on in determining payment is accurate, complete, and truthful and acknowledge that this information will be used for the purposes of obtaining Federal reimbursement. (3) Certification of claims data. The CEO, CFO, or an individual delegated with the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the claims data it submits under §423.329(b)(3) (or for fallback entities, under §423.871(f)) are accurate, complete, and truthful and acknowledge that the claims data will be used for the purpose of obtaining Federal reimbursement. If the claims data are generated by a related entity, contractor, or subcontractor of a Part D plan sponsor, the entity, contractor, or subcontractor must similarly certify (based on best knowledge, information, and belief) the accuracy, completeness, and truthfulness of the data and acknowledge that the claims data will be used for the purposes of obtaining Federal reimbursement. (4) Certification of bid submission information. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the information in its bid submission and assumptions related to projected reinsurance and low income cost sharing subsidies is accurate, complete, and truthful and fully conforms to the requirements in §423.265. (5) Certification of allowable costs for risk corridor and reinsurance information. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the information provided for purposes of supporting allowable costs, as defined in §423.308, is accurate, complete, and truthful and fully conforms to the requirements in §423.336 and §423.343 and acknowledge that this information will be used for the purposes of obtaining Federal reimbursement. (6) Certification of Accuracy of Data for Price Comparison. The CEO, CFO, or an individual delegated the authority to sign on behalf of one of these officers, and who reports directly to the officer, must certify (based on best knowledge, information, and belief) that the information provided for purposes of price comparison is accurate, complete, and truthful. (a) Effective date. The contract is effective on the date specified in the contract between the Part D plan sponsor and CMS. (b) Term of contract. Each contract is for a period of 12 months. (c) Qualification to renew a contract. In accordance with §423.507 of this subpart, an entity is determined qualified to renew its contract annually only if— (1) CMS informs the Part D plan sponsor that it is qualified to renew its contract; and (2) The Part D plan sponsor has not provided CMS with a notice of intention not to renew. (d) Renewal of contract contingent on reaching agreement on the bid. Although a Part D plan sponsor may be determined qualified to renew its contract under this section, if the sponsor and CMS cannot reach agreement on the bid under subpart F, no renewal takes place, and the failure to reach agreement is not subject to the appeals provisions in subpart N of this part. (e) The provisions of this section do not apply to fallback entities. (a) Nonrenewal by a Part D plan sponsor. (1) Except for fallback entities, a Part D plan sponsor may elect not to renew its contract with CMS, effective at 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 a Part D plan sponsor does not intend to renew its contract, it must notify— (i) CMS in writing by the first Monday of June in the year in which the contract ends; (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 qualified prescription drug coverage within the PDP region, including MA-PD plans , and other PDPs, and must receive CMS approval prior to issuance; and (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 or county located in the Part D plan sponsor's service area. (3) If a Part D plan sponsor does not renew a contract under this paragraph (a), CMS cannot enter into a contract with the organization for 2 years unless there are special circumstances that warrant special consideration, as determined by CMS. (4) If a Part D plan sponsor does not renew a contract under this paragraph (a), it must ensure the timely transfer of any data or files. (b) CMS decision that a Part D plan sponsor is not qualified to renew. (1) Except for fallback entities, CMS may determine that a Part D plan sponsor is not qualified to renew its contract for any of the following reasons: (i) The reasons listed in §423.509(a) that also permit CMS to terminate the contract. (ii) The Part D plan sponsor has committed any of the acts in §423.752 that support the imposition of intermediate sanctions or civil money penalties under §423.750. (2) Notice of decision. CMS provides notice of its decision of whether a Part D plan sponsor is qualified to renew its contract as follows: (i) To the Part D plan sponsor by May 1 of the current contract year. (ii) If CMS decides that a Part D plan sponsor is not qualified to renew its contract, to the Part D plan sponsor's Medicare enrollees by mail at least 90 days before the end of the current calendar year. (iii) If CMS determines that the Part D plan sponsor is not qualified to renew its 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 Part D plan sponsor's service area. (iv) The notice provisions in paragraphs (b)(2)(ii) and (iii) of this section also apply in cases where a non-renewal results because CMS and the Part D plan sponsor are unable to reach agreement on the bid under subpart F. (3) Notice of appeal rights. CMS gives the Part D plan sponsor written notice of its right to appeal the decision that the sponsor is not qualified renew its contract in accordance with §423.642(b). (a) General rule. A contract may be modified or terminated at any time by written mutual consent. (b) Notification of termination. If the contract is terminated by mutual consent, the Part D plan sponsor must provide notice to its Medicare enrollees and the general public as provided in paragraph (c) of this section. (c) Notification of modification. If the contract is modified by mutual consent, the Part D plan sponsor must notify its Medicare enrollees of any changes that CMS determines are appropriate for notification within timeframes specified by CMS. (d) Timely transfer of data and files. If a contract is terminated under paragraph (a) of this section, the Part D plan sponsor must ensure the timely transfer of any data or files. (a) Termination by CMS. CMS may terminate a contract for any of the following reasons if the Part D sponsor— (1) Failed substantially to carry out the terms of its contract with CMS; (2) Is carrying out its contract with CMS in a manner that is inconsistent with the effective and efficient implementation of this part; (3) No longer meets the requirements of this part for being a contracting organization; (4) There is credible evidence that the Part D sponsor committed or participated in false, fraudulent, or abusive activities affecting the Medicare program, including submission of false or fraudulent data; (5) Experiences financial difficulties so severe that its ability to provide necessary prescription drug coverage 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 a risk to health exists; (6) Substantially fails to comply with the requirements in subpart M of this part relating to grievances and appeals; (7) Fails to provide CMS with valid risk adjustment, reinsurance and risk corridor related data as required under §423.322 and §423.329 (or, for fallback entities, fails to provide the information in §423.871(f)). (8) Substantially fails to comply with the service access requirements in §423.120; (9) Substantially fails to comply with the marketing requirements in §423.128; (10) Substantially fails to comply with the coordination with plans and programs that provide prescription drug coverage as described in subpart J of this part; or (11) Substantially fails to comply with the cost and utilization management, quality improvement, medication therapy management and fraud, abuse and waste program requirements as specified in subparts D and K of this part. (b) Notice of termination. If CMS decides to terminate a contract for reasons other than the grounds specified in paragraph (a)(4) or (a)(5) of this section, it gives notice of the termination as follows: (1) Termination of contract by CMS. (i) CMS notifies the Part D plan in writing 90 days before the intended date of the termination. (ii) The Part D plan sponsor notifies its Medicare enrollees of the termination by mail at least 30 days before the effective date of the termination. (iii) The Part D plan sponsor 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 Part D plan sponsor's service area. (iv) If a Part D plan sponsor's contract is terminated under paragraph (a) of this section, it must ensure the timely transfer of any data or files. (2) Immediate termination of contract by CMS. (i) For terminations based on violations specified in paragraph (a)(4) or paragraph (a)(5) of this section, CMS notifies the Part D plan sponsor in writing that its contract is 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 prospective monthly payments made to the Part D sponsor covering the period of the month following the contract termination. (ii) CMS notifies the Part D plan sponsor's Medicare enrollees in writing of CMS's decision to terminate the Part D plan sponsor's contract. This notice occurs no later than 30 days after CMS notifies the plan of its decision to terminate the Part D plan sponsor's contract. CMS simultaneously informs the Medicare enrollees of alternative options for obtaining qualified prescription drug coverage, including alternative PDP sponsors and MA-PDs in a similar geographic area. (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 Part D plan sponsor's contract. This notice is published in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor's service area. (c) Corrective action plan—(1) General rule. Before terminating a contract for reasons other than the grounds specified in paragraph (a)(4) or (a)(5) of this section, CMS provides the Part D plan sponsor 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 paragraph (a)(4) or (a)(5) of this section, the Part D plan sponsor does 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 Part D plan sponsor informing it of its termination appeal rights in accordance with §423.642. (a) Cause for termination. The Part D plan sponsor may terminate its contract if CMS fails to substantially carry out the terms of the contract. (b) Notice of termination. The Part D plan sponsor 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 Part D sponsor 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 qualified prescription drug coverage within the services area, including alternative PDPs, MA-PDPs, and original Medicare and must receive CMS approval. (3) To the general public, at least 60 days before the termination effective date by publishing a CMS-approved notice in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor'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 Part D plan sponsor's notice of intent to terminate. (d) CMS's liability. CMS's liability for payment to the Part D plan sponsor 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. (f) Timely transfer of data and files. If a contract is terminated under paragraph (a) of this section, the Part D plan sponsor must ensure the timely transfer of any data or files. (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 are enrolled for the purpose of receiving prescription drug benefits from the organization; or (2) At least 1,500 individuals are enrolled for purposes of receiving prescription drug benefits from the organization and the organization primarily serves individuals residing outside of urbanized areas as defined in §412.62(f) of this chapter; (3) Except as provided for in paragraph (b) of this section, a Part D plan sponsor 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. CMS waives the requirement of paragraphs (a)(1) and (a)(2) of this section during the first contract year for a sponsor in a region. (a) Required information. Each Part D plan sponsor 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, statistics indicating 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) Information demonstrating that the Part D plan sponsor has a fiscally sound operation. (5) Other matters that CMS may require. (b) Significant business transactions. Each Part D plan sponsor 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 §423.501, between the Part D plan sponsor and a party in interest, including the following: (i) Indication 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. (2) A combined financial statement for the Part D plan sponsor 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 Part D sponsor go to a party in interest. (ii) Thirty five percent or more of the revenue of a party in interest is from the Part D plan sponsor. (c) Requirements for combined financial statements. (1) The combined financial statements required by paragraph (b)(2) of this section must display in separate columns the financial information for the Part D plan sponsor and each of the parties in interest. (2) Inter-entity transactions must be eliminated in the consolidated column. (3) The statements must be examined by an independent auditor in accordance with generally accepted accounting principles and must include appropriate opinions and notes. (4) Upon written request from a Part D plan sponsor showing good cause, CMS may waive the requirement that the organization's combined financial statement include the financial information required in this paragraph (c) of this section for a particular entity. (d) Reporting and disclosure under Employee Retirement Income Security Act of 1974 (ERISA). (1) For any employees' health benefits plan that includes a Part D plan sponsor in its offerings, the PDP sponsor must furnish, upon request, the information the plan needs to fulfill its reporting and disclosure obligations (for the particular PDP sponsor) under the Employee Retirement Income Security Act of 1974 (ERISA). (2) The PDP sponsor 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 Part D plan sponsor 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 Part D plan sponsor must make the information reported to CMS under this section available to its enrollees upon reasonable request. CMS may not implement, other than at the beginning of a calendar year, regulations under this section that impose new, significant regulatory requirements on a PDP sponsor or a prescription drug plan.
Title 42: Public Health
PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
Subpart K—Application Procedures and Contracts with Part D plan sponsors
§ 423.500 Scope.
§ 423.501 Definitions
§ 423.502 Application requirements.
§ 423.503 Evaluation and determination procedures for applications to be determined qualified to act as a sponsor.
§ 423.504 General provisions.
§ 423.505 Contract provisions.
§ 423.506 Effective date and term of contract.
§ 423.507 Nonrenewal of contract.
§ 423.508 Modification or termination of contract by mutual consent.
§ 423.509 Termination of contract by CMS.
§ 423.510 Termination of contract by the Part D sponsor.
§ 423.512 Minimum enrollment requirements.
§ 423.514 Reporting requirements.
§ 423.516 Prohibition of midyear implementation of significant new regulatory requirements.
