[Title 42 CFR L]
[Code of Federal Regulations (annual edition) - October 1, 2007 Edition]
[Title 42 - PUBLIC HEALTH]
[Chapter IV - CENTERS FOR MEDICARE]
[Subchapter A - GENERAL PROVISIONS]
[Part 417 - HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS]
[Subpart L - Medicare Contract Requirements]
[From the U.S. Government Printing Office]
42PUBLIC HEALTH32007-10-012007-10-01falseMedicare Contract RequirementsLSubpart LPUBLIC HEALTHCENTERS FOR MEDICAREGENERAL PROVISIONSHEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS
Subpart L_Medicare Contract Requirements
Source: 50 FR 1346, Jan. 10, 1985, unless otherwise noted.
Sec. 417.470 Basis and scope.
(a) Basis. This subpart implements those portions of section
1857(e)(2) of the Act pertaining to cost sharing in enrollment-related
costs and section 1876(c), (g), (h), and (i) of the Act that pertain to
the contract between CMS and an HMO or CMP for participation in the
Medicare program.
(b) Scope. This subpart sets forth--
(1) Specific contract requirements; and
(2) Procedures for renewal, nonrenewal, or termination of a
contract.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 62
FR 63673, Dec. 2, 1997]
Sec. 417.472 Basic contract requirements.
(a) Submittal of contract. An HMO or CMP that wishes to contract
with CMS to furnish services to Medicare beneficiaries must submit a
signed contract that meets the requirements of this subpart and any
other requirements established by CMS.
(b) Agreement to comply with regulations and instructions. The
contract must provide that the HMO or CMP agrees to comply with all the
applicable requirements and conditions set forth in this subpart and in
general instructions issued by CMS.
(c) Other contract provisions. In addition to the requirements set
forth in Sec. Sec. 417.474 through 417.488, the contract must contain
any other terms and conditions that CMS requires to implement section
1876 of the Act.
(d) Exemption from Federal procurement regulations. The Federal
Acquisition Regulations and HHS Acquisition Regulations contained in
title 48 of the Code of Federal Regulations do not apply to Medicare
contracts under section 1876 of the Act.
(e) Compliance with civil rights laws. The HMO or CMP must comply
with title VI of the Civil Rights Act of 1964 (regulations at 45 CFR
part 80), section 504 of the Rehabilitation Act of 1973 (regulations at
45 CFR part 84), and the
[[Page 157]]
Age Discrimination Act of 1975 (regulations at 45 CFR part 91).
(f) Requirements for advance directives. The HMO or CMP must meet
all the requirements for advance directives at Sec. 417.436(d).
(g) Authority to waive conflicting contract requirements. Under
section 1876(i)(5) of the Act, CMS is authorized to administer the terms
of this subpart without regard to provisions of law or other regulations
relating to the making, performance, amendment, or modification of
contracts of the United States if it determines that those provisions
are inconsistent with the efficient and effective administration of the
Medicare program.
(h) Collection of fees from risk HMOs and CMPs. (1) The rules set
forth in Sec. 422.10 of this chapter for M+C plans also apply to
collection of fees from risk HMOs and CMPs.
(2) In applying the part 422 rules, references to ``M+C
organizations'' or ``M+C plans'' must be read as references to ``risk
HMOs and CMPs''.
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 57
FR 8202, Mar. 6, 1992; 58 FR 38079, July 15, 1993; 60 FR 45680, Sept. 1,
1995; 63 FR 35067, June 26, 1998]
Sec. 417.474 Effective date and term of contract.
(a) Effective date. The contract must specify its effective date,
which may not be earlier than the date it is signed by both CMS and the
HMO or CMP.
(b) Term. The contract must specify the duration of its term as
follows:
(1) For the initial term, at least 12 months, but no more than 23
months.
(2) For any subsequent term, 12 months.
[60 FR 45680, Sept. 1, 1995]
Sec. 417.476 Waived conditions.
If CMS waives any of the qualifying conditions required under
subpart J of this part, the contract must specify the following
information for each waived condition:
(a) The specific terms of the waiver.
(b) The expiration date of the waiver.
(c) Any other information required by CMS.
[60 FR 45680, Sept. 1, 1995]
Sec. 417.478 Requirements of other laws and regulations.
The contract must provide that the HMO or CMP agrees to comply
with--
(a) The requirements for QIO review of services furnished to
Medicare enrollees as set forth in subchapter D of this chapter;
(b) Sections 1318(a) and (c) of the PHS Act, which pertain to
disclosure of certain financial information;
(c) Section 1301(c)(8) of the PHS Act, which relates to liability
arrangements to protect enrollees of the HMO or CMP; and
(d) The reporting requirements in Sec. 417.126(a), which pertain to
the monitoring of an HMO's or CMP's continued compliance.
[50 FR 1346, Jan. 10, 1985; 50 FR 20570, May 17, 1985, as amended at 56
FR 8853, Mar. 1, 1991; 58 FR 38079, 38082, July 15, 1993]
Sec. 417.479 Requirements for physician incentive plans.
(a) The contract must specify that an HMO or CMP may operate a
physician incentive plan only if--
(1) No specific payment is made directly or indirectly under the
plan to a physician or physician group as an inducement to reduce or
limit medically necessary services furnished to an individual enrollee;
and
(2) The stop-loss protection, enrollee survey, and disclosure
requirements of this section are met.
(b) Applicability. The requirements in this section apply to
physician incentive plans between HMOs and CMP and individual physicians
or physician groups with which they contract to provide medical services
to enrollees. The requirements in this section also apply to
subcontracting arrangements as specified in Sec. 417.479(i). These
requirements apply only to physician incentive plans that base
compensation (in whole or in part) on the use or cost of services
furnished to Medicare beneficiaries or Medicaid recipients.
(c) Definitions. For purposes of this section:
Bonus means a payment an HMO or CMP makes to a physician or
physician group beyond any salary, fee-for-service payments, capitation,
or returned withhold.
[[Page 158]]
Capitation means a set dollar payment per patient per unit of time
(usually per month) that an organization pays a physician or physician
group to cover a specified set of services and administrative costs
without regard to the actual number of services provided. The services
covered may include the physician's own services, referral services, or
all medical services.
Payments means any amounts the HMO or CMP pays physicians or
physician groups for services they furnish directly, plus amounts paid
for administration and amounts paid (in whole or in part) based on use
and costs of referral services (such as withhold amounts, bonuses based
on referral levels, and any other compensation to the physician or
physician group to influence the use of referral services). Bonuses and
other compensation that are not based on referral levels (such as
bonuses based solely on quality of care furnished, patient satisfaction,
and participation on committees) are not considered payments for
purposes of this section.
Physician group means a partnership, association, corporation,
individual practice association, or other group that distributes income
from the practice among members. An individual practice association is a
physician group only if it is composed of individual physicians and has
no subcontracts with physician groups.
Physician incentive plan means any compensation arrangement between
an HMO or CMP and a physician or physician group that may directly or
indirectly have the effect of reducing or limiting services furnished to
Medicare beneficiaries or Medicaid recipients enrolled in the HMO or
CMP.
Referral services means any specialty, inpatient, outpatient, or
laboratory services that a physician or physician group orders or
arranges, but does not furnish directly.
Risk threshold means the maximum risk, if the risk is based on
referral services, to which a physician or physician group may be
exposed under a physician incentive plan without being at substantial
financial risk.
Withhold means a percentage of payments or set dollar amounts that
an HMO or CMP deducts from a physician's service fee, capitation, or
salary payment, and that may or may not be returned to the physician,
depending on specific predetermined factors.
(d) Prohibited physician payments. No specific payment of any kind
may be made directly or indirectly under the incentive plan to a
physician or physician group as an inducement to reduce or limit covered
medically necessary services covered under the HMO's or CMP's contract
furnished to an individual enrollee. Indirect payments include offerings
of monetary value (such as stock options or waivers of debt) measured in
the present or future.
(e) General rule: Determination of substantial financial risk.
Substantial financial risk occurs when the incentive arrangements place
the physician or physician group at risk for amounts beyond the risk
threshold, if the risk is based on the use or costs of referral
services. Amounts at risk based solely on factors other than a
physician's or physician group's referral levels do not contribute to
the determination of substantial financial risk. The risk threshold is
25 percent.
(f) Arrangements that cause substantial financial risk. For purposes
of this paragraph, potential payments means the maximum anticipated
total payments (based on the most recent year's utilization and
experience and any current or anticipated factors that may affect
payment amounts) that could be received if use or costs of referral
services were low enough. The following physician incentive plans cause
substantial financial risk if risk is based (in whole or in part) on use
or costs of referral services and the patient panel size is not greater
than 25,000 patients:
(1) Withholds greater than 25 percent of potential payments.
(2) Withholds less than 25 percent of potential payments if the
physician or physician group is potentially liable for amounts exceeding
25 percent of potential payments.
(3) Bonuses that are greater than 33 percent of potential payments
minus the bonus.
(4) Withholds plus bonuses if the withholds plus bonuses equal more
than 25 percent of potential payments. The threshold bonus percentage
for a
[[Page 159]]
particular withhold percentage may be calculated using the formula--
Withhold = 0.75 (Bonus %) + 25%.
(5) Capitation, arrangements, if--
(i) The difference between the maximum potential payments and the
minimum potential payments is more than 25 percent of the maximum
potential payments; or
(ii) The maximum and minimum potential payments are not clearly
explained in the physician's or physician group's contract.
(6) Any other incentive arrangements that have the potential to hold
a physician or physician group liable for more than 25 percent of
potential payments.
(g) Requirements for physician incentive plans that place physicians
at substantial financial risk. HMOs and CMPs that operate incentive
plans that place physicians or physician groups at substantial financial
risk must do the following:
(1) Conduct enrollee surveys. These surveys must--
(i) Include either all current Medicare/Medicaid enrollees in the
HMO or CMP and those who have disenrolled (other than because of loss of
eligibility in Medicaid or relocation outside the HMO's or CMP's service
area) in the past 12 months, or a sample of these same enrollees and
disenrollees;
(ii) Be designed, implemented, and analyzed in accordance with
commonly accepted principles of survey design and statistical analysis;
(iii) Address enrollees/disenrollees satisfaction with the quality
of the services provided and their degree of access to the services; and
(iv) Be conducted no later than 1 year after the effective date of
the Medicare contract and at least annually thereafter.
(2) Ensure that all physicians and physician groups at substantial
financial risk have either aggregate or per-patient stop-loss protection
in accordance with the following requirements:
(i) If aggregate stop-loss protection is provided, it must cover 90
percent of the costs of referral services (beyond allocated amounts)
that exceed 25 percent of potential payments.
(ii) If the stop-loss protection provided is based on a per-patient
limit, the stop-loss limit per patient must be determined based on the
size of the patient panel and may be a single combined limit or consist
of separate limits for professional services and institutional services.
In determining patient panel size, the patients may be pooled in
accordance with paragraph (h)(2) of this section. Stop-loss protection
must cover 90 percent of the costs of referral services that exceed the
per patient limit. The per-patient stop-loss limit is as follows:
------------------------------------------------------------------------
Single Separate Separate
Panel size combined institutional professional
limit limit limit
------------------------------------------------------------------------
1-1000........................ $6,000 $10,000 $3,000
1,001-5000.................... 30,000 40,000 10,000
5,001-8,000................... 40,000 60,000 15,000
8,001-10,000.................. 75,000 100,000 20,000
10,001-25,000................. 150,000 200,000 25,000
25,000............. none none none
------------------------------------------------------------------------
(h) Disclosure and other requirements for organizations with
physician incentive plans.--(1) Disclosure to CMS. Each health
maintenance organization or competitive medical plan must provide to CMS
information concerning its physician incentive plans as requested.
(2) Pooling of patients. Pooling of patients is permitted only if--
(i) It is otherwise consistent with the relevant contracts governing the
compensation arrangements for the physician or physician group;
(ii) The physician or physician group is at risk for referral
services with respect to each of the categories of patients being
pooled;
(iii) The terms of the compensation arrangements permit the
physician or physician group to spread the risk across the categories of
patients being pooled;
[[Page 160]]
(iv) The distribution of payments to physicians from the risk pool
is not calculated separately by patient category; and
(v) The terms of the risk borne by the physicians or physician group
are comparable for all categories of patients being pooled.
(3) Disclosure to Medicare beneficiaries. Each health maintenance
organization or competitive medical plan must provide the following
information to any Medicare beneficiary who requests it:
(i) Whether the prepaid plan uses a physician incentive plan that
affects the use of referral services.
(ii) The type of incentive arrangement.
(iii) Whether stop-loss protection is provided.
(iv) If the prepaid plan was required to conduct a survey, a summary
of the survey results.
(i) Requirements related to subcontracting arrangements--(1)
Physician groups. An HMO or CMP that contracts with a physician group
that places the individual physician members at substantial financial
risk for services they do not furnish must do the following:
(i) Disclose to CMS any incentive plan between the physician group
and its individual physicians that bases compensation to the physician
on the use or cost of services furnished to Medicare beneficiaries or
Medicaid recipients. The disclosure must include the information
specified in paragraphs (h)(1)(i) through (h)(1)(vii) of this section
and be made at the times specified in paragraph (h)(2) of this section.
(ii) Provide adequate stop-loss protection to the individual
physicians.
(iii) Conduct enrollee surveys as specified in paragraph (g)(1) of
this section.
(2) Intermediate entities. An HMO or CMP that contracts with an
entity (other than a physician group) for the provision of services to
Medicare beneficiaries must do the following:
(i) Disclose to CMS any incentive plan between the entity and a
physician or physician group that bases compensation to the physician or
physician group on the use or cost of services furnished to Medicare
beneficiaries or Medicaid recipients. The disclosure must include the
information required to be disclosed under paragraphs (h)(1)(i) through
(h)(1)(vii) of this section and be made at the times specified in
paragraph (h)(2) of this section.
(ii) If the physician incentive plan puts a physician or physician
group at substantial financial risk for the cost of services the
physician or physician group does not furnish--
(A) Meet the stop-loss protection requirements of this subpart; and
(B) Conduct enrollee surveys as specified in paragraph (g)(1) of
this section.
(3) For purposes of paragraph (i)(2) of this section, an entity
includes, but is not limited to, an individual practice association that
contracts with one or more physician groups and a physician hospital
organization.
(j) Sanctions against the HMO or CMP. CMS may apply intermediate
sanctions, or the Office of Inspector General may apply civil money
penalties described at Sec. 417.500, if CMS determines that an HMO or
CMP fails to comply with the requirements of this section.
[61 FR 13446, Mar. 27, 1996; 61 FR 46385, Sept. 3, 1996, as amended at
61 FR 69049, Dec. 31, 1996; 68 FR 50855, Aug. 22, 2003]
Sec. 417.480 Maintenance of records: Cost HMOs and CMPs.
A reasonable cost contract must provide that the HMO or CMP agrees
to maintain books, records, documents, and other evidence of accounting
procedures and practices that--
(a) Are sufficient to--
(1) Ensure an audit trail; and
(2) Properly reflect all direct and indirect costs claimed to have
been incurred under the contract; and
(b) Include at least records of the following:
(1) Ownership, HMO or CMP, and operation of the HMO's or CMP's
financial, medical, and other recordkeeping systems.
(2) Financial statements for the current contract period and three
prior periods.
(3) Federal income tax or information returns for the current
contract period and three prior periods.
(4) Asset acquisition, lease, sale, or other action.
(5) Agreements, contracts, and subcontracts.
[[Page 161]]
(6) Franchise, marketing, and management agreements.
(7) Schedules of charges for the HMO's or CMP's fee-for-service
patients.
(8) Matters pertaining to costs of operations.
(9) Amounts of income received by source and payment.
(10) Cash flow statements.
(11) Any financial reports filed with other Federal programs or
State authorities.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60
FR 45680, Sept. 1, 1995]
Sec. 417.481 Maintenance of records: Risk HMOs and CMPs.
A risk contract must provide that the HMO or CMP agrees to maintain
and make available to CMS upon request, books, records, documents, and
other evidence of acounting procedures and practices that--
(a) Are sufficient to--
(1) Establish component rates of the ACR for determining additional
and supplementary benefits; and
(2) Determine the rates utilized in setting premiums for State
insurance agency purposes; and
(b) Include at least any records or financial reports filed with
other Federal agencies or State authorities.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60
FR 45680, Sept. 1, 1995]
Sec. 417.482 Access to facilities and records.
The contract must provide that the HMO or CMP agrees to the
following:
(a) HHS may evaluate, through inspection or other means, the
quality, appropriateness, and timeliness of services furnished under the
contract to its Medicare enrollees.
(b) HHS may evaluate, through inspection or other means, the
facilities of the HMO or CMP when there is reasonable evidence of some
need for that inspection.
(c) HHS, the Comptroller General, or their designees may audit or
inspect any books and records of the HMO or CMP or its transferee that
pertain to any aspect of services performed, reconciliation of benefit
liabilities, and determination of amounts payable under the contract.
(d) HHS may evaluate, through inspection or other means, the
enrollment and disenrollment records for the current contract period and
three prior periods, when there is reasonable evidence of some need for
that inspection.
(e) In the case of a reasonable cost HMO or CMP to make available
for the purposes specified in paragraphs (a), (b), (c), and (d) of this
section, its premises, physical facilities, and equipment, its records
relating to its Medicare enrollees, the records specified in Sec.
417.480 and any additional relevant information that CMS may require.
(f) That the right to inspect, evaluate, and audit, will extend
through three years from the date of the final settlement for any
contract period unless--
(1) CMS determines there is a special need to retain a particular
record or group of records for a longer period and notifies the HMO or
CMP at least 30 days before the normal disposition date;
(2) There has been a termination, dispute, fraud, or similar fault
by the HMO or CMP, in which case the retention may be extended to three
years from the date of any resulting final settlement; or
(3) CMS determines that there is a reasonable possibility of fraud,
in which case it may reopen a final settlement at any time.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]
Sec. 417.484 Requirement applicable to related entities.
(a) Definition. As used in this section, related entity means any
entity that is related to the HMO or CMP by common ownership or control
and--
(1) Performs some of the HMO's or CMP'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 HMO or CMP at a
cost of more than $2,500 during a contract period.
(b) Requirement. The contract must provide that the HMO or CMP
agrees to
[[Page 162]]
require all related entities to agree that--
(1) HHS, the Comptroller General, or their designees have the right
to inspect, evaluate, and audit any pertinent books, documents, papers,
and records of the subcontractor involving transactions related to the
subcontract; and
(2) The right under paragraph (b)(1) of this section to information
for any particular contract period will exist for a period equivalent to
that specified in Sec. 417.482(f).
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]
Sec. 417.486 Disclosure of information and confidentiality.
The contract must provide that the HMO or CMP agrees to the
following:
(a) To submit to CMS--
(1) All financial information required under subpart O of this part
and for final settlement; and
(2) Any other information necessary for the administration or
evaluation of the Medicare program.
(b) To comply with the requirements set forth in part 420, subpart
C, of this chapter pertaining to the disclosure of ownership and control
information.
(c) To comply with the requirements of the Privacy Act, as
implemented by 45 CFR part 5b and subpart B of part 401 of this chapter,
with respect to any system of records developed in performing carrier or
intermediary functions under Sec. Sec. 417.532 and 417.533.
(d) To meet the confidentiality requirements of Sec. 482.24(b)(3)
of this chapter for medical records and for all other enrollee
information that is--
(1) Contained in its records or obtained from CMS or other sources;
and
(2) Not covered under paragraph (c) of this section.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993; 60
FR 45680, Sept. 1, 1995]
Sec. 417.488 Notice of termination and of available alternatives: Risk contract.
A risk contract must provide that the HMO or CMP agrees to give
notice as follows if the contract is terminated:
(a) At least 60 days before the effective date of termination, to
give its Medicare enrollees a written notice that--
(1) Specifies the termination date; and
(2) Describes the alternatives available for obtaining Medicare
services after termination.
(b) To pay the cost of the written notices.
[60 FR 45680, Sept. 1, 1995]
Sec. 417.490 Renewal of contract.
A contract with an HMO or CMP is renewed automatically for the next
12-month period unless CMS or the HMO or CMP decides not to renew, in
accordance with Sec. 417.492.
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38082, July 15, 1993]
Sec. 417.492 Nonrenewal of contract.
(a) Nonrenewal by the HMO or CMP. (1) If an HMO or CMP does not
intend to renew its contract, it must--
(i) Give written notice to CMS at least 90 days before the end of
the current contract period;
(ii) Notify each Medicare enrollee by mail at least 60 days before
the end of the contract period; and
(iii) Notify the general public at least 30 days before the end of
the contract period, by publishing a notice in one or more newspapers of
general circulation in each community or county located in the HMO's or
CMP's geographic area.
(2) CMS may accept a nonrenewal notice submitted less than 90 days
before the end of a contract period if--
(i) The HMO or CMP notifies its Medicare enrollees and the public in
accordance with paragraph (a)(1) of this section; and
(ii) Acceptance would not otherwise jeopardize the effective and
efficient administration of the Medicare program.
(b) Nonrenewal by CMS--(1) Notice of nonrenewal. If CMS decides not
to renew a contract, it gives written notice of nonrenewal as follows:
(i) To the HMO or CMP at least 90 days before the end of the
contract period.
[[Page 163]]
(ii) To the HMO's or CMP's Medicare enrollees at least 60 days
before the end of the contract period.
(iii) To the general public at least 30 days before the end of the
contract period.
(2) Notice of appeal rights. CMS gives the HMO or CMP written notice
of its right to appeal the nonrenewal decision, in accordance with
subpart R of this part, if CMS's decision was based on any of the
reasons specified in Sec. 417.494(b).
[50 FR 1346, Jan. 10, 1985, as amended at 58 FR 38079, July 15, 1993; 60
FR 45681, Sept. 1, 1995]
Sec. 417.494 Modification or termination of contract.
(a) Modification or termination by mutual consent. (1) CMS and an
HMO or CMP may modify or terminate a contract at any time by written
mutual consent.
(2) If the contract is modified, the HMO or CMP must notify its
Medicare enrollees of any changes that CMS determines are appropriate
for notification.
(3) If the contract is terminated, the HMO or CMP must notify its
Medicare enrollees, and CMS notifies the general public, at least 30
days before the termination date.
(b) Termination by CMS. (1) CMS may terminate a contract for any of
the following reasons:
(i) The HMO or CMP has failed substantially to carry out the terms
of the contract.
(ii) The HMO or CMP is carrying out the contract in a manner that is
inconsistent with the effective and efficient implementation of section
1876 of the Act.
(iii) The HMO or CMP has failed substantially to comply with the
composition of enrollment requirements specified in Sec. 417.413(d).
(iv) CMS determines that the HMO or CMP no longer meets the
requirements of section 1876 of the Act and this subpart for being an
HMO or CMP.
(2) If CMS decides to terminate a contract, it sends a written
notice informing the HMO or CMP of its right to appeal the termination
in accordance with subpart R of this part.
(3) An HMO or CMP with a risk contract must notify its Medicare
enrollees of the termination as described in Sec. 417.488.
(4) CMS notifies the HMO's or CMP's Medicare enrollees and the
general public of the termination at least 30 days before the effective
date of termination.
(c) Termination by the HMO or CMP. The HMO or CMP may terminate the
contract if CMS has failed substantially to carry out the terms of the
contract.
(1) The HMO or CMP must notify CMS at least 90 days before the
effective date of the termination and must include in its notice the
reasons for the termination.
(2) The HMO or CMP must notify its Medicare enrollees of the
termination at least 60 days before the termination date. Risk HMOs or
CMPs must also provide a written description of alternatives available
for obtaining Medicare services after termination of the contract. The
HMO or CMP is responsible for the cost of these notices.
(3) The HMO or CMP must notify the general public of the termination
at least 30 days before the termination date.
(4) The contract is terminated effective 60 days after the HMO or
CMP mails the notice to Medicare enrollees as required in paragraph
(c)(2) of this section.
(5) CMS's liability for payment ends as of the first day of the
month after the last month for which the contract is in effect.
[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 22322, June 11, 1987; 56
FR 46571, Sept. 13, 1991; 58 FR 38079, 38082, July 15, 1993; 60 FR
45681, Sept. 1, 1995]
Sec. 417.500 Sanctions against HMOs and CMPs.
(a) Basis for imposition of sanctions. CMS may impose the
intermediate sanctions specified in paragraph (d) of this section, as an
alternative to termination of contract, if CMS determines that an HMO or
CMP does one or more of the following:
(1) Fails substantially to provide the medically necessary services
required to be provided to a Medicare enrollee and the failure adversely
affects (or has
[[Page 164]]
a substantial likelihood of adversely affecting) the enrollee.
(2) Requires Medicare enrollees to pay amounts in excess of premiums
permitted.
(3) Acts, in violation of the provisions of subpart K of this part,
to expel or to refuse to reenroll an individual.
(4) Engages in any practice that could reasonably be expected to
have the effect of denying or discouraging enrollment (except as
permitted by subpart K of this part) by eligible individuals whose
medical conditions or histories indicate a need for substantial future
medical services.
(5) Misrepresents or falsifies information that it furnishes under
this part to CMS, an individual, or to any other entity.
(6) Fails to comply with the requirements of section 1876(g)(6)(A)
of the Act relating to the prompt payment of claims.
(7) Fails to meet the requirement in section 1876(f)(1) of the Act
that not more than 50 percent of the organization's enrollment be
Medicare beneficiaries and Medicaid recipients.
(8) Has a Medicare risk contract and--
(i) Employs or contracts with individuals or entities excluded from
participation in Medicare under section 1128 or section 1128A of the Act
for the provision of health care, utilization review, medical social
work, or administrative services; or
(ii) Employs or contracts with any entity for the provision of those
services (directly or indirectly) through an excluded individual or
entity.
(9) Fails to comply with the requirements of Sec. Sec. 417.479(d)
through (i) relating to physician incentive plans.
(b) Notice of sanction and opportunity to respond--(1) Notice of
sanction. Before imposing the intermediate sanctions specified in
paragraph (d) of this section, CMS--
(i) Sends a written notice to the HMO or CMP stating the nature and
basis of the proposed sanction; and
(ii) Sends the OIG a copy of the notice (other than a notice
regarding the restriction on Medicare and Medicaid enrollees as
described in paragraph (a)(7) of this section), once the sanction has
been confirmed following the notice period or the reconsideration.
(2) Opportunity to respond. CMS allows the HMO or CMP 15 days from
receipt of the notice to provide evidence that it has not committed an
act or failed to comply with a requirement described in paragraph (a) of
this section, as applicable. CMS may allow a 15-day addition to the
original 15 days upon receipt of a written request from the HMO or CMP.
To be approved, the request must provide a credible explanation of why
additional time is necessary and be received by CMS before the end of
the 15-day period following the date of receipt of the sanction notice.
CMS does not grant an extension if it determines that the HMO's or CMP's
conduct poses a threat to an enrollee's health and safety.
(c) Informal reconsideration. If, consistent with paragraph (b)(2)
of this section, the HMO or CMP submits a timely response to CMS's
notice of sanction, CMS conducts an informal reconsideration that:
(1) Consists of a review of the evidence by a CMS official who did
not participate in the initial decision to impose a sanction; and
(2) Gives the HMO or CMP a concise written decision setting forth
the factual and legal basis for the decision that affirms or rescinds
the original determination.
(d) Specific sanctions. If CMS determines that an HMO or CMP has
acted or failed to act as specified in paragraph (a) of this section and
affirms this determination in accordance with paragraph (c) of this
section, CMS may--
(1) Require the HMO or CMP to suspend acceptance of applications for
enrollment made by Medicare beneficiaries during the sanction period;
(2) Suspend payments to the HMO or CMP for Medicare beneficiaries
enrolled during the sanction period; and
(3) Require the HMO or CMP to suspend all marketing activities to
Medicare enrollees.
(e) Effective date and duration of sanctions--(1) Effective date.
Except as provided in paragraph (e)(2) of this section, a sanction is
effective 15 days after the date that the organization is notified of
the decision to impose the
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sanction or, if the HMO or CMP timely seeks reconsideration under
paragraph (c) of this section, on the date specified in the notice of
CMS's reconsidered determination.
(2) Exception. If CMS determines that the HMO's or CMP's conduct
poses a serious threat to an enrollee's health and safety, CMS may make
the sanction effective on a date before issuance of CMS's reconsidered
determination.
(3) Duration of sanction. The sanction remains in effect until CMS
notifies the HMO or CMP that CMS is satisfied that the basis for
imposing the sanction has been corrected and is not likely to recur.
(f) Termination by CMS. In addition to or as an alternative to the
sanctions described in paragraph (d) of this section, CMS may decline to
renew a HMO's or CMP's contract in accordance with Sec. 417.492(b), or
terminate the contract in accordance with Sec. 417.494(b).
(g) Civil money penalties. If CMS determines that a HMO or CMP has
committed an act or failed to comply with a requirement described in
paragraph (a) of this section (with the exception of the requirement to
limit the percentage of Medicare and Medicaid enrollees described in
paragraph (a)(7) of this section), CMS notifies the OIG of that
determination. CMS also conveys to the OIG information when it reverses
or terminates a sanction imposed under this subpart. In accordance with
the provisions of 42 CFR part 1003, the OIG may impose civil money
penalties on the HMO or CMP in addition to or in place of the sanctions
that CMS may impose under paragraph (d) of this section.
[59 FR 36083, July 15, 1994, as amended at 60 FR 45681, Sept. 1, 1995;
61 FR 13448, Mar. 27, 1996]