42 C.F.R. Subpart C—Mechanized Claims Processing and Information Retrieval Systems
Title 42 - Public Health
(a) This subpart implements the following sections of the Act: (1) Section 1903(a)(3) of the Act, which provides for FFP in State expenditures for the design, development, or installation of mechanized claims processing and information retrieval systems and for the operation of certain systems. Additional HHS regulations and CMS procedures for implementing these regulations are in 45 CFR part 74, 45 CFR part 95, subpart F, and part 11, State Medicaid Manual; and (2) Section 1903(r) of the Act, which—(i) Requires reductions in FFP otherwise due a State under section 1903(a) if a State fails to meet certain deadlines for operating a mechanized claims processing and information retrieval system or if the system fails to meet certain conditions of approval or conditions of reapproval; (ii) Requires a Federal performance review at least every three years of the mechanized claims processing and information retrieval systems; and (iii) Allows waivers of conditions of approval, conditions of reapproval, and FFP reductions under certain circumstances. (b) The requirements under section 1903(r) of the Act do not apply to Puerto Rico, Guam, the Virgin Islands, American Samoa and the Northern Mariana Islands. [50 FR 30846, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989] For purposes of this section: (a) The following terms are defined at 45 CFR part 95, subpart F §95.605:
“Advance Planning Document”; “Design” or “System Design”; “Development”; “Enhancement”; “Hardware”; “Installation”; “Operation”; and, “Software”. (b) “Mechanized claims processing and information retrieval system” or “system” means the system of software and hardware used to process Medicaid claims from providers of medical care and services for the medical care and services furnished to recipients under the medical assistance program and to retrieve and produce service utilization and management information required by the Medicaid single State agency and Federal Government for program administration and audit purposes. The system consists of (1) Required subsystems specified in the State Medicaid Manual; (2) Required changes to the required system or subsystem that are published in accordance with §433.123 of this subpart and specified in the State Medicaid Manual; and (3) Approved enhancements to the system. Eligibility determination systems are not part of mechanized claims processing and information retrieval systems or enhancements to those systems. [51 FR 45330, Dec. 18, 1986, as amended at 54 FR 41973, Oct. 13, 1989] (a) FFP is available at the 90 percent rate in State expenditures for the design, development, installation, or enhancement of a mechanized claims processing and information retrieval system only if the APD is approved by CMS prior to the State's expenditure of funds for these purposes. (b) CMS will approve the system described in the APD if the following conditions are met: (1) CMS determines the system is likely to provide more efficient, economical, and effective administration of the State plan. (2) The system meets the system requirements and performance standards in Part 11 of the State Medicaid Manual, as periodically amended. (3) The system is compatible with the claims processing and information retrieval systems used in the administration of Medicare for prompt eligibility verification and for processing claims for persons eligible for both programs. (4) The system supports the data requirements of quality improvement organizations established under Part B of title XI of the Act. (5) The State owns any software that is designed, developed, installed or improved with 90 percent FFP. (6) The Department has a royalty free, non-exclusive, and irrevocable license to reproduce, publish, or otherwise use and authorize others to use, for Federal Government purposes, software, modifications to software, and documentation that is designed, developed, installed or enhanced with 90 percent FFP. (7) The costs of the system are determined in accordance with 45 CFR 74.171. (8) The Medicaid agency agrees in writing to use the system for the period of time specified in the advance planning document approved by CMS or for any shorter period of time that CMS determines justifies the Federal funds invested. (9) The agency agrees in writing that the information in the system will be safeguarded in accordance with subpart F, part 431 of this subchapter. (c) Eligibility determination systems are not part of mechanized claims processing and information retrieval systems and are not eligible for 75 percent FFP under this subpart. These systems are also not eligible for 90 percent FFP for any APD approved after November 13, 1989. [43 FR 45201, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 45 FR 14213, Mar. 5, 1980; 50 FR 30846, July 30, 1985; 51 FR 45330, Dec. 18, 1986; 54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 55 FR 4375, Feb. 7, 1990] (a) Except as waived under §433.130 or 433.131, FFP will be reduced as specified in paragraph (b) of this section unless the Medicaid agency has in continuous operation a mechanized claims processing and information retrieval system that meets the following conditions: (1) The APD for the system was approved by CMS; (2) The system is operational by September 30, 1985; and (3) The system is initially approved by the last day of the fourth quarter that begins after the date the system became operational as determined by CMS. (b) CMS will reduce FFP in expenditures for compensation and training of skilled professional medical personnel and support staff under section 1903(a)(2) of the Act, and for general administration under section 1903(a)(7) of the Act, by the following increments applied separately to those two categories of expenditures: (1) Five percentage points for the first two quarters beginning after a deadline in paragraph (a) of this section; (2) An additional five percentage points during each additional two-quarter period, through the quarter in which the State achieves compliance with the conditions for initial operation or initial approval of an operating system. FFP reductions will not exceed 25 percentage points for each type of reduction. (c) The amount of FFP (determined under section 1903(a)(3)(B)) that would be available retroactively for operating a system that later receives initial approval will be reduced by CMS by the same percentage points for the identical periods of time described in subparagraph (b)(1) of this section, until the system is initially approved. No reduction will be made after the first quarter during which the system is initially approved. [50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989] (a) To obtain initial approval, the Medicaid agency must inform CMS in writing that the system meets the conditions specified in §433.116(c) through (h). (b) If CMS disapproves the system, or determines that the system met requirements for initial approval on a date later than the date required under §433.113(a)(3), the notice will include— (1) The findings of fact upon which the determination was made; and (2) The procedures for appeal of the determination in the context of a reconsideration of the resulting disallowance, to the Departmental Appeals Board. [50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989] (a) Subject to 42 CFR 433.113(c), FFP is available at 75 percent of expenditures for operation of a mechanized claims processing and information retrieval system approved by CMS, from the first day of the calendar quarter after the date the system met the conditions of initial approval, as established by CMS (including a retroactive adjustment of FFP if necessary to provide the 75 percent rate beginning on the first day of that calendar quarter). Subject to 45 CFR 95.611(a), the State shall obtain prior written approval from CMS when it plans to acquire ADP equipment or services, when it anticipates the total acquisition costs will exceed thresholds, and meets other conditions of the subpart. (b) CMS will approve the system operation if the conditions specified in paragraphs (c) through (h) of this section are met. (c) The conditions of §433.112(b) (1) through (4) and (7) through (9), as periodically modified under §433.112(b)(2), must be met. (d) The system must have been operating continuously during the period for which FFP is claimed. (e) The system must provide individual notices, within 45 days of the payment of claims, to all or a sample group of the persons who received services under the plan. (f) The notice required by paragraph (e) of this section— (1) Must specify— (i) The service furnished; (ii) The name of the provider furnishing the service; (iii) The date on which the service was furnished; and (iv) The amount of the payment made under the plan for the service; and (2) Must not specify confidential services (as defined by the State) and must not be sent if the only service furnished was confidential. (g) The system must provide both patient and provider profiles for program management and utilization review purposes. (h) If the State has a Medicaid fraud control unit certified under section 1903(q) of the Act and §455.300 of this chapter, the Medicaid agency must have procedures to assure that information on probable fraud or abuse that is obtained from, or developed by, the system is made available to that unit. (See §455.21 of this chapter for State plan requirements.) [45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, July 30, 1985; 55 FR 4375, Feb. 7, 1990] (a) A replacement system must meet all conditions of initial approval of a mechanized claims processing and information retrieval system. (b) The agency must submit a APD that includes— (1) The date the replacement system will be in operation; and (2) A plan for orderly transition from the system being replaced to the replacement system. (c) FFP is available at— (1) 90 percent in expenditures for design, development, and installation in accordance with the provisions of §433.112; and (2) 75 percent in expenditures for operation of an approved replacement system in accordance with the provisions of §433.116(b) through (h), from the date that the system met the conditions of initial approval, as established by CMS. (d) FFP is available at 75 percent in expenditures for the operation of an approved system that is being replaced (or at a reduced rate determined under §433.120 of this subpart for a system that has been disapproved) until the replacement system is in operation and approved. [50 FR 30847, July 30, 1985] (a) CMS will review at least once every three years each system operation initially approved under §433.114 and reapprove it for FFP at 75 percent of expenditures if the following conditions are met: (1) The system meets the conditions of §433.112(b) (1), (3), (4), and (7) through (9). (2) The system meets the conditions of §433.116 (d) through (h). (3) The system meets the performance standards for reapproval and the system requirements in part 11 of the State Medicaid Manual as periodically amended. (4) Automated eligibility determination systems approved or operating on or before November 13, 1989, will not qualify for FFP at 75 percent of expenditures after November 13, 1989. (b) CMS may review an entire system operation or focus its review on parts of the operation. However, at a minimum, CMS will review standards, system requirements and other conditions of reapproval that have demonstrated weakness in a previous review or reviews. (c) CMS will issue to each Medicaid agency, by the end of the first quarter after the review period, a written notice informing the agency whether its system is reapproved or disapproved. If the system is disapproved, the notice will also include— (1) CMS's decision to reduce FFP for system operations, and the percentage to which it is reduced, beginning with the next calender quarter; (2) The findings of fact upon which the determination was made; and (3) A statement that State claims in excess of the reduced FFP rate will be disallowed and that any such disallowance will be appealable to the Departmental Appeals Board. [54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990] (a) If CMS determines after the reapproval review that the system no longer meets the conditions of reapproval in §433.119, CMS will reduce FFP for system operations for at least four quarters. However, no system will be subject to reduction of FFP for at least the first four quarters after the quarter in which the system is initially approved as eligible for 75 percent FFP. (b) CMS will reduce FFP in expenditures for system operations from 75 percent to no more than 70 percent and no less than 50 percent; however, CMS will not reduce FFP by more than 10 percentage points in any four-quarter period. The percentage to which the FFP is reduced will depend primarily on the following criteria: (1) The number of conditions judged unsatisfactory; (2) The extent to which conditions were not met; (3) The significance of the unsatisfactory conditions in overall mechanized claims processing and information retrieval system operations; and (4) The actual and potential program impact attributable to the unsatisfactory conditions. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989] (a) The agency may appeal to the Departmental Appeals Board under 45 CFR part 16, a disallowance concerning a reduction in FFP claimed for system operation caused by a disapproval of the State's system. If the Board finds such a disallowance to be appropriate, the discretionary determination to reduce FFP by a particular percentage amount (instead of by a lesser percentage) is not subject to review by the Board unless the percentage reduction exceeds the range authorized by section 1903(r)(4)(B) of the Act. (b) The decisions concerning whether to restore any FFP retroactively and the actual number of quarters for which FFP will be restored under §433.122 of this subpart are not subject to administrative appeal to the Departmental Appeals Board under 45 CFR part 16. (c) An agency's request for a reconsideration before the Board under paragraph (a) of this section does not delay implementation of the reduction in FFP. However, any reduction is subject to retroactive adjustment if required by the Board's determination on reconsideration. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990] When FFP has been reduced under §433.120(a), and CMS determines upon subsequent review that the system meets all current performance standards, system requirements and other conditions of reapproval, the following provisions apply: (a) CMS will resume FFP in expenditures for system operations at the 75 percent level beginning with the quarter following the review determination that the system again meets conditions of reapproval. (b) CMS may retroactively waive a reduction of FFP in expenditures for system operations if CMS determines that the waiver could improve the administration of the State Medicaid plan. However, CMS cannot waive this reduction for any quarter before the fourth quarter immediately preceding the quarter in which CMS issues the determination (as part of the review process) stating that the system is reapproved. [54 FR 41974, Oct. 13, 1989] (a) Whenever CMS modifies system requirements or other conditions for approval under §433.112 or §433.116, CMS will— (1) Publish a notice in the (2) Respond in a subsequent (3) Issue the new or modified requirements or conditions in the State Medicaid Manual. (b) For changes in system requirements or other conditions for approval, CMS will allow an appropriate period for Medicaid agencies to meet the requirement determining this period on the basis of the requirement's complexity and other relevant factors. (c) Whenever CMS modifies performance standards and other conditions for reapproval under §433.119, CMS will notify Medicaid agencies at least one calendar quarter before the review period to which the new or modified standards or conditions apply. [57 FR 38782, Aug. 27, 1992] CMS will terminate FFP at any time if the Medicaid agency fails to provide State and Federal representatives with full access to the system, including on-site inspection. CMS may request such access at any time to determine whether the conditions in this subpart are being met. [43 FR 45201, Sept. 29, 1978. Redesignated and amended at 50 FR 30847 and 30848, July 30, 1985] (a) CMS will waive requirements for initial operation and approval of systems under §433.113 for a State meeting the requirements of paragraph (b) of this section and that had a 1976 population of less than one million and made total Federal and State Medicaid expenditures of less than $100 million in fiscal year 1976. Population figures are those reported by the Bureau of the Census. Expenditures for fiscal year 1976 are those reported by the State for that year. (b) To be eligible for this waiver, the agency must submit its reasons to CMS in writing and demonstrate to CMS's satisfaction that a system will not significantly improve the efficiency of the administration of the State plan. (c) If CMS denies the waiver request, the notice of denial will include— (1) The findings of fact upon which the denial was made; and (2) The procedures for appeal of the denial. (d) If CMS determines, after granting a waiver, that a system would significantly improve the administration of the State Medicaid program, CMS may withdraw the waiver and require that a State obtain initial approval of a system within two years of the date of waiver withdrawal. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989] If a State is unable to comply with the conditions of approval or of reapproval and the noncompliance will cause a percentum reduction in FFP, CMS will waive the FFP reduction in the following circumstances: (a) Good cause. If CMS determines that good cause existed, CMS will waive the FFP reduction attributable to those items for which the good cause existed. A waiver of FFP consequences of the failure to meet the conditions of approval or reapproval based upon good cause will not extend beyond two consecutive quarters. (b) Circumstances beyond the control of a State. The State must satisfactorily explain the circumstances that are beyond its control. When CMS grants the waiver, CMS will also defer all other system deadlines for the same length of time that the waiver applies. [50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]
Title 42: Public Health
PART 433—STATE FISCAL ADMINISTRATION
Subpart C—Mechanized Claims Processing and Information Retrieval Systems
§ 433.110 Basis, purpose, and applicability.
§ 433.111 Definitions.
§ 433.112 FFP for design, development, installation or enhancement of mechanized claims processing and information retrieval systems.
§ 433.113 Reduction of FFP for failure to operate a system and obtain initial approval.
§ 433.114 Procedures for obtaining initial approval; notice of decision.
§ 433.116 FFP for operation of mechanized claims processing and information retrieval systems.
§ 433.117 Initial approval of replacement systems.
§ 433.119 Conditions for reapproval; notice of decision.
§ 433.120 Procedures for reduction of FFP after reapproval review.
§ 433.121 Reconsideration of the decision to reduce FFP after reapproval review.
§ 433.122 Reapproval of a disapproved system.
§ 433.123 Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.
§ 433.127 Termination of FFP for failure to provide access to claims processing and information retrieval systems.
§ 433.130 Waiver of conditions of initial operation and approval.
§ 433.131 Waiver for noncompliance with conditions of approval and reapproval.
