[Title 42 CFR U]
[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 U - Health Care Prepayment Plans]
[From the U.S. Government Printing Office]


42PUBLIC HEALTH32007-10-012007-10-01falseHealth Care Prepayment PlansUSubpart UPUBLIC HEALTHCENTERS FOR MEDICAREGENERAL PROVISIONSHEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS
                 Subpart U_Health Care Prepayment Plans

    Source: 50 FR 1375, Jan. 10, 1985, unless otherwise noted.



Sec. 417.800  Payment to HCPPs: Definitions and basic rules.

    (a) Definitions. As used in this subpart, unless the context 
indicates otherwise--
    Covered Part B services means physicians' services, diagnostic X-ray 
tests, laboratory, other diagnostic tests, and any additional medical 
and other health services, that the HCPP furnishes to its Medicare 
enrollees.
    Health care prepayment plan (HCPP) means an organization that meets 
the following conditions:
    (1) Effective January 1, 1999, (or on the effective date of the HCPP 
agreement in the case of a 1998 applicant) either--
    (A) Is union or employer sponsored; or
    (B) Does not provide, or arrange for the provision of, any inpatient 
hospital services.
    (2) Is responsible for the organization, financing, and delivery of 
covered Part B services to a defined population on a prepayment basis.
    (3) Meets the conditions specified in paragraph (b) of this section.
    (4) Elects to be reimbursed on a reasonable cost basis.

[[Page 187]]

    Medicare enrollee means a beneficiary under Part B of Medicare who 
has been identified on CMS records as an enrollee of the HCPP. Reporting 
period means the period specified by CMS for which an HCPP must report 
its costs and utilization.
    (b) Qualifying conditions. (1) Except as provided in paragraph 
(b)(2) of this section, an organization wishing to participate as an 
HCPP must--
    (i) Enter into a written agreement with CMS as specified in Sec. 
417.801;
    (ii) Furnish physicians' services through its employees or under a 
formal arrangement with a medical group, independent practice 
association or individual physicians; and
    (iii) Furnish covered Part B services to its Medicare enrollees 
through institutions, entities, and persons that have qualified under 
the applicable requirements of title XVIII of the Social Security Act 
and section 353 of the PHS Act.
    (2) An organization that, as of January 31, 1983, was being 
reimbursed on a reasonable cost basis under section 1833(a)(1)(A) of the 
Act, and that would not otherwise meet the conditions specified in 
paragraph (b)(1) of this section, may receive reimbursement on a 
reasonable cost basis as an HCPP, provided it files an agreement with 
CMS as required by Sec. 417.801.
    (c) Payment of reasonable cost. (1) Except as otherwise provided in 
this subpart, CMS pays an HCPP on the basis of the reasonable cost it 
incurs, as specified in subpart O of this part, for the covered Part B 
services furnished to its Medicare enrollees.
    (2) Payment for Part B services: Basic rules. (i) Cost basis 
payment. Except as provided in paragraph (d) of this section, CMS pays 
an HCPP on the basis of the reasonable costs it incurs, as specified in 
subpart O of this part, for the covered Part B services furnished to its 
Medicare enrollees.
    (ii) Deductions. In determining the amount due an HCPP for covered 
Part B services furnished to its Medicare enrollees, CMS deducts, from 
the reasonable cost actually incurred by the HCPP, the following:
    (A) The actuarial value of the Part B deductible.
    (B) An amount equal to 20 percent of the cost incurred for any 
service that is subject to the Medicare coinsurance.
    (d) Covered services not reimbursed to an HCPP. (1) Services 
reimbursed under Part A are not reimbursable to an HCPP. CMS makes 
payment for these services directly to the hospital, or other provider 
of services, on a reasonable cost basis through the provider's Medicare 
fiscal intermediary (for more details, see parts 412 and 413 of this 
chapter).
    (2) Covered Part B services furnished by a provider of services to 
an HCPP's Medicare enrollees are not payable to the HCPP. CMS makes 
payment for these services to the provider on behalf of the Medicare 
enrollee through the provider's Medicare fiscal intermediary. This 
requirement does not affect Medicare payment to the HCPP for physicians' 
services furnished to its Medicare enrollees for which the physicians 
are compensated by the HCPP.
    (e) Payment for services to nonenrollees. CMS makes payment to an 
HCPP for covered Part B services furnished by the HCPP to a Medicare 
beneficiary who is not enrolled in the HCPP if the beneficiary assigns 
his rights to payment in accordance with Sec. 424.55 of this chapter. 
Payment is made on a reasonable charge basis through the HCPP's Medicare 
carrier.

[50 FR 1346, Jan. 10, 1985, as amended at 51 FR 34833, Sept. 30, 1986; 
53 FR 6648, Mar. 2, 1988; 57 FR 7135, Feb. 28, 1992; 58 FR 38081, July 
15, 1993; 60 FR 34888, July 5, 1995; 63 FR 35067, June 26, 1998; 63 FR 
52611, Oct. 1, 1998]



Sec. 417.801  Agreements between CMS and health care prepayment plans.

    (a) General requirement. (1) In order to participate and receive 
payment under the Medicare program as an HCPP as defined in Sec. 
417.800, an organization must enter into a written agreement with CMS.
    (2) An existing group practice prepayment plan (GPPP) that continues 
as an HCPP under this subpart U must have entered into a written 
agreement with CMS within 60 days of January 31, 1983.
    (b) Terms. The agreement must provide that the HCPP agrees to--

[[Page 188]]

    (1) Maintain compliance with the requirements for participation and 
reimbursement on a reasonable cost basis of HCPPs as specified in Sec. 
417.800;
    (2) Not charge the Medicare enrollee or any other person for items 
or services for which that enrollee is entitled to have payment made 
under the provisions of this part, except for any deductible or 
coinsurance amounts for which the enrollee is liable;
    (3) Refund, as promptly as possible, any money incorrectly collected 
as charges or premiums, or in any other way from Medicare enrollees in 
the HCPP in accordance with the requirements specified in Sec. 417.456;
    (4) Not impose any limitations on the acceptance of Medicare 
enrollees or beneficiaries for care and treatment that it does not 
impose on all other individuals;
    (5) Meet the advance directives requirements specified in Sec. 
417.436(d) of this part;
    (6) Establish administrative review procedures in accordance with 
Sec. Sec. 417.830 through 417.840 for Medicare enrollees who are 
dissatisfied with denied services or claims; and
    (7) Consider any additional requirements that CMS finds necessary or 
desirable for efficient and effective program administration.
    (c) Duration of agreement. Except for the term of the initial 
agreement, the agreement is for a term of one year and may be renewed 
annually by mutual consent. The term of the initial agreement is set by 
CMS.
    (d) Termination or nonrenewal of agreement by CMS. (1) CMS may 
terminate or not renew an agreement if it determines that--
    (i) The HCPP no longer meets the requirements for participation and 
reimbursement as an HCPP as specified in Sec. 417.800;
    (ii) The HCPP is not in substantial compliance with the provisions 
of the agreement, applicable CMS regulations, or applicable provisions 
of the Medicare law; or
    (iii) The HCPP undergoes a change in ownership as specified in 
subpart M of this part.
    (2) CMS will give notice of termination or nonrenewal to the HCPP at 
least 90 days before the effective date stated in the notice.
    (e) Termination or nonrenewal of agreement by HCPP. (1) If an HCPP 
does not wish to renew its agreement at the end of the term, it must 
give written notice to CMS at least 90 days before the end of the term 
of the agreement. If an HCPP wishes to terminate its agreement before 
the end of the term, it must file a written notice with CMS stating the 
intended effective date of termination.
    (2) CMS may approve the termination date proposed by the HCPP, or 
set a different date no later than 6 months after that date. CMS makes 
this decision based on a finding that termination on a specific date 
would not--
    (i) Unduly disrupt the furnishing of services to the community 
serviced by the HCPP; or
    (ii) Otherwise interfere with the efficient administration of the 
Medicare program.

[50 FR 1375, Jan. 10, 1985, as amended at 57 FR 8202, Mar. 6, 1992; 58 
FR 38081, July 15, 1993; 59 FR 49843, Sept. 30, 1994; 59 FR 59943, Nov. 
21, 1994]



Sec. 417.802  Allowable costs.

    (a) General rule. The costs that are considered allowable for HCPP 
reimbursement are the same as those for reasonable cost HMOs and CMPs 
specified in subpart O of this part, except those in Sec. Sec. 417.531, 
417.532 (a)(3) and (c) through (g), 417.536 (l) and (m), 417.546, 
417.548, and 417.550(b)(2).
    (b) Physicians' services and other Part B supplier services 
furnished under arrangements--(1) Principle. The amount paid by an HCPP 
for physicians' services and other Part B supplier services furnished 
under arrangements is an allowable cost to the extent it is reasonable.
    (2) Application: Payment on other than a fee-for-service basis. If 
the HCPP pays for physicians' services and other Part B supplier 
services on other than a fee-for-service basis--
    (i) Except as specified in paragraph (b)(2)(ii) of this section, the 
costs incurred by the HCPP may be considered reasonable if they--
    (A) Do not exceed those that a prudent and cost-conscious buyer 
would incur to purchase those services; and

[[Page 189]]

    (B) Are comparable to costs incurred for similar services furnished 
by similar physicians and other suppliers in the same or a similar 
locality.
    (ii)(A) If a physician group to whom the HCPP makes payment 
compensates its physicians on a fee-for-service basis, the HCPP's 
payment to the group may not exceed the reasonable charges for those 
services, as defined in subpart E of part 405 of this chapter.
    (B) Payment in excess of the limits specified in paragraph 
(b)(2)(ii)(A) of this section is allowable if the group has procedures 
under which members of the group accept effective incentives, such as 
risk-sharing, designed to avoid unnecessary or unduly costly utilization 
of health services. In such cases, the amount paid by the HCPP is 
considered reasonable if it meets the conditions specified in paragraph 
(b)(2)(i) of this section.
    (3) Application: Payment on a fee-for-service basis. If the HCPP 
pays for physicians' services and other Part B supplier services on a 
fee-for-service basis--
    (i) Except as specified in paragraph (b)(3)(ii) of this section, the 
costs incurred by the HCPP are considered reasonable if they do not 
exceed--
    (A) The reasonable charges for those services, as defined in subpart 
E of part 405 of this chapter; and
    (B) The amount that CMS would pay for those services if they were 
furnished to beneficiaries who are not enrolled in the HCPP and who 
receive the services from sources other than providers of services or 
other entities that are reimbursed on a reasonable cost basis.
    (ii) Payment to a physician group organized on an individual-
practice basis is not subject to the paragraph (b)(3)(i) of this section 
if the group pays its physicians on a fee-for-service basis and has 
procedures under which the members of the group accept effective 
incentives, such as risk-sharing, designed to avoid unnecessary or 
unduly costly utilization of health services. In these cases, the amount 
paid by an HCPP is considered reasonable if it meets the conditions 
specified in paragraph (b)(2)(i) of this section.

[50 FR 1375, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993]



Sec. 417.804  Cost apportionment.

    (a) The HCPP follows the cost apportionment principles specified in 
Sec. Sec. 417.552 through 417.566, except for provisions on provider 
costs and provisions on departmental apportionment.
    (b) The HCPP may use a method for reporting costs that is approved 
by CMS. CMS bases its approval on a finding that the method--
    (1) Results in an accurate and equitable allocation of allowable 
costs; and
    (2) Is justifiable from an administrative and cost efficiency 
standpoint.



Sec. 417.806  Financial records, statistical data, and cost finding.

    (a) The principles specified in Sec. 417.568 apply to HCPPs, except 
those in paragraph (c) of that section.
    (b) The HCPP may use a method for reporting costs that is approved 
by CMS. CMS bases its approval on a finding that the method--
    (1) Results in an accurate and equitable allocation of allowable 
costs; and
    (2) Is justifiable from an administrative and cost efficiency 
standpoint.
    (c) An HCPP must permit the Department and the Comptroller General 
to audit or inspect any books and records of the HCPP and of any related 
organization that pertain to the determination of amounts payable for 
covered Part B services furnished its Medicare enrollees. For purposes 
of this requirement, the principles specified in Sec. 417.486 apply to 
HCPPs.

[50 FR 1375, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993]



Sec. 417.808  Interim per capita payments.

    The HCPP follows the principles specified in Sec. Sec. 417.570 and 
417.572 on interim per capita payments, except for the following:
    (a) When applying these principles to HCPPs, the term ``reporting 
period'' should be used instead of the term ``contract period'' 
contained in that section.
    (b) An HCPP must submit to CMS an annual operating budget and 
enrollment forecast, in the form and detail specified by CMS, at least 
60 days before the beginning of each reporting period. A reporting 
period must be 12 consecutive months, except that the

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HCPP's initial reporting period for participating in Medicare may be as 
short as 6 months or as long as 18 months.
    (c) An HCPP must submit to CMS an interim cost report and enrollment 
data applicable to the first 6-month period of the HCPP's reporting 
period in the form and detail specified by CMS. The interim cost report 
must be submitted not later than 45 days after the close of the first 6-
month period of the HCPP's reporting period.
    (d) In lieu of an interim payment based on the actual monthly 
enrollment in an HCPP, CMS and the HCPP may agree to a uniform monthly 
interim reimbursement rate for a reporting period. This interim rate is 
based on the HCPP's budget and enrollment forecast, if CMS is satisfied 
that the rate is consistent with efficiency and economy, and will not 
result in excessive adjustment at the end of the reporting period.



Sec. 417.810  Final settlement.

    (a) General requirement. CMS and an HCPP must make a final 
settlement, and payment of amounts due either to the HCPP or to CMS, 
following the submission and review of the HCPP's annual cost report and 
the supporting documents specified in paragraph (b) of this section.
    (b) Annual cost report as basis for final settlement--(1) Form and 
due date. An HCPP must submit to CMS a cost report and supporting 
documents in the form and detail specified by CMS, no later than 120 
days following the close of a reporting period.
    (2) Contents. The report must include--
    (i) The HCPP's per capita incurred costs of providing covered Part B 
services to its Medicare enrollees during the reporting period, 
including any costs incurred by another organization related to the HCPP 
by common ownership or control;
    (ii) The HCPP's methods of apportioning costs among its Medicare 
enrollees, enrollees who are not Medicare beneficiaries, and other 
nonenrollees, including Medicare beneficiaries receiving health care 
services on a fee-for-service or other basis; and
    (iii) Information on enrollment and other data as specified by CMS.
    (3) Extension of time to submit cost report. CMS may grant an HCPP 
an extension of time to submit a cost report for good cause shown.
    (4) Failure to report required financial information. If an HCPP 
does not submit the required cost report and supporting documents within 
the time specified in paragraph (b)(1) of this section, and has not 
requested and received an extension of time for good cause shown, CMS 
may--
    (i) Regard the failure to report this information as evidence of 
likely overpayment and reduce or suspend interim payments to the HCPP; 
and
    (ii) Determine that amounts previously paid are overpayments, and 
make appropriate recovery.
    (c) Determination of final settlement. Following the HCPP's 
submission of the reports specified in paragraph (b) of this section in 
acceptable form, CMS makes a determination of the total reimbursement 
due the HCPP for the reporting period and the difference, if any, 
between this amount and the total interim payments made to the HCPP. CMS 
sends to the HCPP a notice of the amount of reimbursement by the 
Medicare program. This notice--
    (1) Explains CMS's determination of total reimbursement due the HCPP 
for the reporting period; and
    (2) Informs the HCPP of its right to have the determination reviewed 
at a hearing as provided in part 405, subpart R of this chapter.
    (d) Payment of amounts due. (1) Within 30 days of CMS's 
determination, CMS or the HCPP, as appropriate, will make payment of any 
difference between the total amount due and the total interim payments 
made to the HCPP by CMS.
    (2) If the HCPP does not pay CMS within 30 days of CMS's 
determination of any amounts the HCPP owes CMS, CMS may offset further 
payments to the HCPP to recover, or to aid in the recovery of, any 
overpayment identified in its determination.
    (3) Any offset of payments CMS makes under paragraph (d)(2) of this 
section will remain in effect even if the HCPP has requested a hearing 
on the determination under the provisions of part 405, subpart R of this 
chapter.
    (e) Tentative settlement. (1) If a final settlement cannot be made 
within 90

[[Page 191]]

days after the HCPP submits the report specified in paragraph (b) of 
this section, CMS will make an interim settlement by estimating the 
amount payable to the HCPP.
    (2) CMS or the HCPP will make payment within 30 days of CMS's 
determination under the tentative settlement of any estimated amounts 
due.
    (3) The tentative settlement is subject to adjustment at the time of 
a final settlement.

[50 FR 1375, Jan. 10, 1985, as amended at 58 FR 38081, July 15, 1993]



Sec. 417.830  Scope of regulations on beneficiary appeals.

    Sections 417.832 through 417.840 establish procedures for the 
presentation and resolution of organization determinations, 
reconsiderations, hearings, Departmental Appeals Board review, court 
reviews, and finality of decisions that are applicable to Medicare 
enrollees of an HCPP.

[59 FR 59943, Nov. 21, 1994, as amended at 61 FR 32348, June 24, 1996]



Sec. 417.832  Applicability of requirements and procedures.

    (a) The administrative review rights and procedures specified in 
Sec. Sec. 417.834 through 417.840 pertain to disputes involving an 
organization determination, as defined in Sec. 417.838, with which the 
enrollee is dissatisfied.
    (b) Physicians and other individuals who furnish items or services 
under arrangements with an HCPP have no right of administrative review 
under Sec. Sec. 417.834 through 417.840.
    (c) The provisions of part 405 dealing with the representation of 
parties apply to organization determinations and appeals.
    (d) The provisions of part 405 dealing with administrative law judge 
hearings, Medicare Appeals Council review, and judicial review are 
applicable, unless otherwise provided.

[59 FR 59943, Nov. 21, 1994, as amended at 70 FR 4713, Jan. 28, 2005]



Sec. 417.834  Responsibility for establishing administrative review procedures.

    The HCPP is responsible for establishing and maintaining the 
administrative review procedures that are specified in Sec. Sec. 
417.830 through 417.840.

[59 FR 59943, Nov. 21, 1994]



Sec. 417.836  Written description of administrative review procedures.

    Each HCPP is responsible for ensuring that all Medicare enrollees 
are informed in writing of the administrative review procedures that are 
available to them.

[59 FR 59943, Nov. 21, 1994]



Sec. 417.838  Organization determinations.

    (a) Actions that are organization determinations. For purposes of 
Sec. Sec. 417.830 through 417.840, an organization determination is a 
refusal to furnish or arrange for services, or reimburse the party for 
services provided to the beneficiary, on the grounds that the services 
are not covered by Medicare.
    (b) Actions that are not organization determinations. The following 
are not organization determinations for purposes of Sec. Sec. 417.830 
through 417.840:
    (1) A determination regarding services that were furnished by the 
HCPP, either directly or under arrangement, for which the enrollee has 
no further obligation for payment.
    (2) A determination regarding services that are not covered under 
the HCPP's agreement with CMS.

[59 FR 59943, Nov. 21, 1994]



Sec. 417.840  Administrative review procedures.

    The HCPP must apply Sec. 422.568 through Sec. 422.619 of this 
chapter to organization determinations that affect its Medicare 
enrollees, and to reconsiderations, hearings, Medicare Appeals Council 
review, and judicial review of those organization determinations.

[70 FR 4713, Jan. 28, 2005]