42 C.F.R. Subpart I—Sanctions
Title 42 - Public Health
(a) Each State that contracts with an MCO must, and each State that contracts with a PCCM may, establish intermediate sanctions, as specified in §438.702, that it may impose if it makes any of the determinations specified in paragraphs (b) through (d) of this section. The State may base its determinations on findings from onsite surveys, enrollee or other complaints, financial status, or any other source. (b) A State determines whether an MCO acts or fails to act as follows: (1) Fails substantially to provide medically necessary services that the MCO is required to provide, under law or under its contract with the State, to an enrollee covered under the contract. (2) Imposes on enrollees premiums or charges that are in excess of the premiums or charges permitted under the Medicaid program. (3) Acts to discriminate among enrollees on the basis of their health status or need for health care services. This includes termination of enrollment or refusal to reenroll a recipient, except as permitted under the Medicaid program, or any practice that would reasonably be expected to discourage enrollment by recipients whose medical condition or history indicates probable need for substantial future medical services. (4) Misrepresents or falsifies information that it furnishes to CMS or to the State. (5) Misrepresents or falsifies information that it furnishes to an enrollee, potential enrollee, or health care provider. (6) Fails to comply with the requirements for physician incentive plans, as set forth (for Medicare) in §§422.208 and 422.210 of this chapter. (c) A State determines whether an MCO, PIHP, PAHP or PCCM has distributed directly, or indirectly through any agent or independent contractor, marketing materials that have not been approved by the State or that contain false or materially misleading information. (d) A State determines whether— (1) An MCO has violated any of the other requirements of sections1903(m) or 1932 of the Act, and any implementing regulations; (2) A PCCM has violated any of the other applicable requirements of sections 1932 or 1905(t)(3) of the Act and any implementing regulations; (3) For any of the violations under paragraphs (d)(1) and (d)(2) of this section, only the sanctions specified in §438.702, paragraphs (a)(3), (a)(4), and (a)(5) may be imposed. (a) The types of intermediate sanctions that a State may impose under this subpart include the following: (1) Civil money penalties in the amounts specified in §438.704. (2) Appointment of temporary management for an MCO as provided in §438.706. (3) Granting enrollees the right to terminate enrollment without cause and notifying the affected enrollees of their right to disenroll. (4) Suspension of all new enrollment, including default enrollment, after the effective date of the sanction. (5) Suspension of payment for recipients enrolled after the effective date of the sanction and until CMS or the State is satisfied that the reason for imposition of the sanction no longer exists and is not likely to recur. (b) State agencies retain authority to impose additional sanctions under State statutes or State regulations that address areas of noncompliance specified in §438.700, as well as additional areas of noncompliance. Nothing in this subpart prevents State agencies from exercising that authority. (a) General rule. The limit on, or the maximum civil money penalty the State may impose varies depending on the nature of the MCO's or PCCM's action or failure to act, as provided in this section. (b) Specific limits. (1) The limit is $25,000 for each determination under the following paragraphs of §438.700: (i) Paragraph (b)(1) (Failure to provide services). (ii) Paragraph (b)(5) (Misrepresentation or false statements to enrollees, potential enrollees, or health care providers). (iii) Paragraph (b)(6) (Failure to comply with physician incentive plan requirements). (iv) Paragraph (c) (Marketing violations). (2) The limit is $100,000 for each determination under paragraph (b)(3) (discrimination) or (b)(4) (Misrepresentation or false statements to CMS or the State) of §438.700. (3) The limit is $15,000 for each recipient the State determines was not enrolled because of a discriminatory practice under paragraph (b)(3) of §438.700. (This is subject to the overall limit of $100,000 under paragraph (b)(2) of this section). (c) Specific amount. For premiums or charges in excess of the amounts permitted under the Medicaid program, the maximum amount of the penalty is $25,000 or double the amount of the excess charges, whichever is greater. The State must deduct from the penalty the amount of overcharge and return it to the affected enrollees. (a) Optional imposition of sanction. The State may impose temporary management only if it finds (through onsite survey, enrollee complaints, financial audits, or any other means) that— (1) There is continued egregious behavior by the MCO, including but not limited to behavior that is described in §438.700, or that is contrary to any requirements of sections 1903(m) and 1932 of the Act; or (2) There is substantial risk to enrollees' health; or (3) The sanction is necessary to ensure the health of the MCO's enrollees— (i) While improvements are made to remedy violations under §438.700; or (ii) Until there is an orderly termination or reorganization of the MCO. (b) Required imposition of sanction. The State must impose temporary management (regardless of any other sanction that may be imposed) if it finds that an MCO has repeatedly failed to meet substantive requirements in section 1903(m) or section 1932 of the Act, or this subpart. The State must also grant enrollees the right to terminate enrollment without cause, as described in §438.702(a)(3), and must notify the affected enrollees of their right to terminate enrollment. (c) Hearing. The State may not delay imposition of temporary management to provide a hearing before imposing this sanction. (d) Duration of sanction. The State may not terminate temporary management until it determines that the MCO can ensure that the sanctioned behavior will not recur. A State has the authority to terminate an MCO or PCCM contract and enroll that entity's enrollees in other MCOs or PCCMs, or provide their Medicaid benefits through other options included in the State plan, if the State determines that the MCO or PCCM has failed to do either of the following: (a) Carry out the substantive terms of its contract; or (b) Meet applicable requirements in sections 1932, 1903(m), and 1905(t) of the Act. (a) Notice of sanction. Except as provided in §438.706(c), before imposing any of the intermediate sanctions specified in this subpart, the State must give the affected entity timely written notice that explains the following: (1) The basis and nature of the sanction. (2) Any other due process protections that the State elects to provide. (b) Pre-termination hearing—(1) General rule. Before terminating an MCO or PCCM contract under §438.708, the State must provide the entity a pre-termination hearing. (2) Procedures. The State must do the following: (i) Give the MCO or PCCM written notice of its intent to terminate, the reason for termination, and the time and place of the hearing; (ii) After the hearing, give the entity written notice of the decision affirming or reversing the proposed termination of the contract and, for an affirming decision, the effective date of termination; and (iii) For an affirming decision, give enrollees of the MCO or PCCM notice of the termination and information, consistent with §438.10, on their options for receiving Medicaid services following the effective date of termination. After a State notifies an MCO or PCCM that it intends to terminate the contract, the State may do the following: (a) Give the entity's enrollees written notice of the State's intent to terminate the contract. (b) Allow enrollees to disenroll immediately without cause. (a) The State must give the CMS Regional Office written notice whenever it imposes or lifts a sanction for one of the violations listed in §438.700. (b) The notice must— (1) Be given no later than 30 days after the State imposes or lifts a sanction; and (2) Specify the affected MCO, the kind of sanction, and the reason for the State's decision to impose or lift a sanction. (a) The State plan must include a plan to monitor for violations that involve the actions and failures to act specified in this part and to implement the provisions of this part. (b) A contract with an MCO must provide that payments provided for under the contract will be denied for new enrollees when, and for so long as, payment for those enrollees is denied by CMS under section 438.730(e). (a) Basis for sanction. (1) A State agency may recommend that CMS impose the denial of payment sanction specified in paragraph (e) of this section on an MCO with a contract under this part if the agency determines that the MCO acts or fails to act as specified in §438.700(b)(1) through (b)(6). (b) Effect of an Agency Determination. (1) The State agency's determination becomes CMS's determination for purposes of section 1903(m)(5)(A) of the Act unless CMS reverses or modifies it within 15 days. (2) When the agency decides to recommend imposing the sanction described in paragraph (e) of this section, this recommendation becomes CMS's decision, for purposes of section 1903(m)(5)(B)(ii) of the Act, unless CMS rejects this recommendation within 15 days. (c) Notice of sanction. If the State agency's determination becomes CMS's determination under section (b)(2), the State agency takes the following actions: (1) Gives the MCO written notice of the nature and basis of the proposed sanction; (2) Allows the MCO 15 days from the date it receives the notice to provide evidence that it has not acted or failed to act in the manner that is the basis for the recommended sanction; (3) May extend the initial 15-day period for an additional 15 days if— (i) the MCO submits a written request that includes a credible explanation of why it needs additional time; (ii) the request is received by CMS before the end of the initial period; and (iii) CMS has not determined that the MCO's conduct poses a threat to an enrollee's health or safety. (d) Informal reconsideration. (1) If the MCO submits a timely response to the notice of sanction, the State agency— (i) Conducts an informal reconsideration that includes review of the evidence by a State agency official who did not participate in the original recommendation; (ii) Gives the MCO a concise written decision setting forth the factual and legal basis for the decision; and (iii) Forwards the decision to CMS. (2) The agency decision under paragraph (d)(1)(ii) of this section becomes CMS's decision unless CMS reverses or modifies the decision within 15 days from date of receipt by CMS. (3) If CMS reverses or modifies the State agency decision, the agency sends the MCO a copy of CMS's decision. (e) Denial of payment. (1) CMS, based upon the recommendation of the agency, may deny payment to the State for new enrollees of the HMO under section 1903(m)(5)(B)(ii) of the Act in the following situations: (i) If a CMS determination that an MCO has acted or failed to act, as described in paragraphs (b)(1) through (b)(6) of §438.700, is affirmed on review under paragraph (d) of this section. (ii) If the CMS determination is not timely contested by the MCO under paragraph (c) of this section. (2) Under §438.726(b), CMS's denial of payment for new enrollees automatically results in a denial of agency payments to the HMO for the same enrollees. (A new enrollee is an enrollee that applies for enrollment after the effective date in paragraph (f)(1) of this section.) (f) Effective date of sanction. (1) If the MCO does not seek reconsideration, a sanction is effective 15 days after the date the MCO is notified under paragraph (b) of this section of the decision to impose the sanction. (2) If the MCO seeks reconsideration, the following rules apply: (i) Except as specified in paragraph (d)(2)(ii) of this section, the sanction is effective on the date specified in CMS's reconsideration notice. (ii) If CMS, in consultation with the State agency, determines that the MCO's conduct poses a serious threat to an enrollee's health or safety, the sanction may be made effective earlier than the date of the agency's reconsideration decision under paragraph (c)(1)(ii) of this section. (g) CMS's role. (1) CMS retains the right to independently perform the functions assigned to the State agency under paragraphs (a) through (d) of this section. (2) At the same time that the agency sends notice to the MCO under paragraph (c)(1)(i) of this section, CMS forwards a copy of the notice to the OIG. (3) CMS conveys the determination described in paragraph (b) of this section to the OIG for consideration of possible imposition of civil money penalties under section 1903(m)(5)(A) of the Act and part 1003 of this title. In accordance with the provisions of part 1003, the OIG may impose civil money penalties on the MCO in addition to, or in place of, the sanctions that may be imposed under this section.
Title 42: Public Health
PART 438—MANAGED CARE
Subpart I—Sanctions
§ 438.700 Basis for imposition of sanctions.
§ 438.702 Types of intermediate sanctions.
§ 438.704 Amounts of civil money penalties.
§ 438.706 Special rules for temporary management.
§ 438.708 Termination of an MCO or PCCM contract.
§ 438.710 Due process: Notice of sanction and pre-termination hearing.
§ 438.722 Disenrollment during termination hearing process.
§ 438.724 Notice to CMS.
§ 438.726 State plan requirement.
§ 438.730 Sanction by CMS: Special rules for MCOs
