[Federal Register Volume 59, Number 172 (Wednesday, September 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21914]


[[Page Unknown]]

[Federal Register: September 7, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
[BPO-123-GNC]

 

Medicare Program; Criteria and Standards for Evaluating 
Intermediary and Carrier Performance During FY 1995

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: General notice with comment period.

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SUMMARY: This notice describes the criteria and standards to be used 
for evaluating the performance of fiscal intermediaries and carriers in 
the administration of the Medicare program beginning October 1, 1994. 
The results of these evaluations are considered whenever HCFA enters 
into, renews, or terminates an intermediary agreement or carrier 
contract or takes other contract actions (for example, assigning or 
reassigning providers of services to an intermediary or designating 
regional or national intermediaries).
    This notice is published in accordance with sections 1816(f) and 
1842(b)(2) of the Social Security Act. We are publishing for public 
comment in the Federal Register those criteria and standards against 
which we evaluate intermediaries and carriers.

EFFECTIVE DATE: The criteria and standards are effective October 1, 
1994.

COMMENTS: Comments will be considered if we receive them at the 
appropriate address as provided below no later than 5 p.m. (EDT) on 
October 7, 1994.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPO-123-GNC, P.O. Box 26676, 
Baltimore, MD 21207.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, D.C. 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
Maryland 21207.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPO-123-GNC. Comments received timely will be available 
for public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's office at 200 Independence Avenue, SW., Washington, 
D.C., on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Bob Loyal, (410) 966-7403.

SUPPLEMENTARY INFORMATION:

I. Background

    Under section 1816 of the Social Security Act (the Act), public or 
private organizations and agencies participate in the administration of 
Part A (Hospital Insurance) of the Medicare program under agreements 
with the Secretary of Health and Human Services. These agencies or 
organizations, known as fiscal intermediaries, determine whether 
medical services are covered under Medicare and determine correct 
payment amounts. The intermediaries then make payments to the health 
care providers on behalf of the beneficiaries. Section 1816(f) of the 
Act requires us to develop criteria, standards, and procedures to 
evaluate an intermediary's performance of its functions under its 
agreement. We evaluate intermediary performance through the contract 
management process.
    Under section 1842 of the Act, we are authorized to enter into 
contracts with carriers to fulfill various functions in the 
administration of Part B (Supplementary Medical Insurance) of the 
Medicare program. Beneficiaries, physicians, and suppliers of services 
submit claims to these carriers. The carriers determine whether the 
services are covered under Medicare and the payable amount for the 
services or supplies and then make payment to the appropriate party. 
Under section 1842(b)(2) of the Act, we are required to develop 
criteria, standards, and procedures to evaluate a carrier's performance 
of its functions under its contract. We also evaluate carrier 
performance through the contract management process.
    We are publishing the criteria and standards in the Federal 
Register in order to allow the public an opportunity to comment before 
implementation. In addition to the statutory requirement, our 
regulations at 42 CFR 421.120 and 421.122 provide for publication of a 
Federal Register notice to announce criteria and standards for 
intermediaries prior to implementation. Regulations at 42 CFR 421.201 
provide for publication of a Federal Register notice to announce 
criteria and standards for carriers prior to implementation. The 
current criteria and standards were published in the Federal Register 
on September 30, 1993 (58 FR 51085).
    To the extent possible, we make every effort to publish the 
criteria and standards prior to the beginning of the Federal fiscal 
year, which is October 1st.
    If we do not publish a Federal Register notice before the new 
fiscal year begins, readers may presume that until and unless notified 
otherwise, the criteria and standards which were in effect for the 
previous fiscal year remain in effect.
    In those instances where we are unable to meet our goal of 
publishing the subject Federal Register notice before the beginning of 
the fiscal year, we may publish the criteria and standards notice at 
any subsequent time during the year. If we choose to publish a notice 
in this manner, the evaluation period for any such criteria and 
standards which are the subject of the notice will be revised to be 
effective on the first day of the first month following publication. 
Hence, any revised criteria and standards will measure performance 
prospectively; that is, we will not apply new measurements to assess 
performance on a retroactive basis.
    Also, it is not our intention to revise the criteria and standards 
which will be used during the evaluation period once this information 
has been published in a Federal Register notice. However, on occasion, 
either because of Administrative mandate or Congressional action, there 
may be a need for changes which have direct impact upon the criteria 
and standards previously published, or which require the addition of 
new criteria or standards, or that cause the deletion of previously 
published criteria and standards. Should such changes be necessitated, 
we will issue a Federal Register notice prior to implementation of the 
changes.
    In all instances, necessary manual issuances will be published each 
year to ensure that the criteria and standards are implemented 
uniformly and accurately. Also, as in previous years, the Federal 
Register notice will be republished and the effective date revised if 
changes are warranted as a result of the public comments received on 
the criteria and standards.

II. Incentive Payments to Carriers

    In accordance with section 1842(c)(1)(B) of the Act, this notice 
also describes the current methodology that will be used to award 
incentive payments to carriers that successfully increase the 
proportion of physicians in the carrier's service area who are 
participating physicians, or the proportion of payments to 
participating physicians.
    Section 1842(h) of the Act sets forth the Medicare participating 
physician program. ``Participating'' means accepting assignment on all 
Medicare claims. ``Accepting assignment'' means physicians accept 
Medicare's approved amount as full payment, with the beneficiary 
responsible for only the Medicare deductible and coinsurance amounts. 
The main goal of the program is to reduce the financial impact of 
medical costs upon beneficiaries by establishing incentives for 
physicians to accept assignment on all Medicare claims. The provisions 
give all physicians an annual opportunity to enroll or disenroll as a 
Medicare participating physician.
    Section 1842(b)(3)(H) of the Act requires Medicare carriers to 
implement programs to recruit and retain physicians as participating 
physicians. These programs include educational and outreach activities 
and the use of professional relations personnel to handle billing and 
other problems relating to payment of claims of participating 
physicians. These programs are also designed to familiarize 
beneficiaries with the participating physician program and to assist 
the beneficiaries in locating participating physicians. Carriers also 
increase participation through the use of public relations, literature, 
and training in the physician community. We believe carriers continue 
to perform these activities because they are advantageous to their 
operations. By properly educating the provider community, carriers save 
staff time and produce cleaner claims which result in fewer inquiries 
as well as fewer exceptions.
    Also, we believe that the implementation of the resource-based 
relative value scale (RBRVS) fee schedule has contributed largely to 
the increase in the number of physicians participating in the Medicare 
program. Nonparticipation is discouraged by the ``limiting charges'' 
imposed under physician payment reform.
    We will continue to pay incentive bonuses to any carrier that 
achieves an increase of at least one-tenth of one percent in the 
participating physicians' rate or proportion of payments for 
participating physicians' services in the carrier's total service area. 
Carriers that achieve an increase in physicians' participation or 
payments for participating physician services of less than 2 percentage 
points will be paid a partial incentive payment. Carriers that achieve 
an increase of at least 2 percentage points, but less than 4 points, 
will be paid the full incentive payment. Carriers that achieve an 
increase equal to or greater than 4 percentage points will be paid a 
bonus for each additional 2 percentage point increase over and above 
the initial 2 percentage point increase.
    As required by section 1842(c)(1)(B) of the Act, the amount of the 
total incentive payable to carriers is one percent of the total 
payments to carriers for claims processing costs for the fiscal year. 
The total incentive pool is calculated by summing the total claims 
processing costs reported by each carrier in fiscal year (FY) 1985 and 
multiplying the total by one percent. The total claims processing costs 
in that fiscal year amounted to $380 million. Therefore, carrier 
bonuses in FY 1995 will be one percent of this amount or $3.8 million. 
Fiscal year 1985 has been used as a base because it reflects the claims 
processing costs and workload at the inception of the participating 
physician program.
    For the purpose of determining each carrier's eligibility for an 
incentive payment, we make two comparisons. We compare the carrier's 
physician participation rate after the latest enrollment period with 
the physician participation rate after the prior enrollment date. We 
make a similar comparison of the proportion of covered charges for 
services by participating physicians during the quarter following the 
enrollment period with those of the quarter following the prior 
enrollment period. We intend to use whichever difference yields the 
higher percentage increase to determine eligibility for award of the 
incentive payment. Currently, we issue carrier incentive payments by 
September 30 following each annual enrollment period. The amount of 
these payments will be included in line 11 (other) of the carrier's 
Notice of Budget Approval, Form HCFA-1524.

III. Criteria and Standards--General

    Basic tenets of the Medicare program are to pay claims promptly and 
accurately and to foster good beneficiary and provider relations. 
Contractors must administer the Medicare program efficiently and 
economically. We have developed a contractor management program for FY 
1995 that sets expectations for the contractor; measures the 
performance of the contractor; evaluates the performance against the 
expectations; and, takes appropriate contract action based upon 
evaluation of the contractor's performance. The goal of performance 
evaluation is to ensure that contractors meet their contractual 
obligations. We measure contractor performance to ensure that the 
following objectives are met: contractors do what is required of them 
by law, regulation and HCFA directive; do it well; and continually 
improve what they do. We have restructured contractor evaluation into 
five criteria, designed to meet those objectives. This restructuring 
effort considered comments from HCFA components as well as beneficiary 
and provider groups which have commented on past Federal Register 
notifications.
    The first criterion in the FY 1995 contractor performance 
evaluation is ``Claims Processing'', which measures contractual 
performance against claims processing accuracy and timeliness 
requirements. Within the Claims Processing criterion, we have 
identified those performance standards which are mandated by either 
legislation, regulation or judicial decision. These standards include 
claims processing timeliness, the rate of cases reversed by an 
Administrative Law Judge, the timeliness of intermediary 
reconsideration cases, and the accuracy and timeliness of carrier 
reviews and hearings. Further evaluation in the Claims Processing 
criterion may include, but is not limited to, the accuracy of bill and 
claims processing, the level of electronic claims payment, and the 
accuracy of intermediary reconsideration cases.
    The second criterion is ``Customer Service'', which assesses the 
completeness of the service provided to customers by the contractor in 
its administration of the Medicare program. Mandated standards in the 
Customer Service criterion include the accuracy of Explanations of 
Medicare Benefits, and the accuracy and timeliness of carrier replies 
to beneficiary telephone inquiries. In FY 1995, customer feedback may 
be used to collect comparable data on customer satisfaction and 
identify areas in need of improvement. Among the specific contractor 
services that may be included in the evaluation process under the 
Customer Service criterion are: beneficiary relations; provider 
education; appropriate telephone inquiry responses; and the tone and 
accuracy of all correspondence.
    The third criterion is ``Payment Safeguards'', which evaluates 
whether the Medicare trust fund is safeguarded against inappropriate 
program expenditures. Intermediary and carrier performance may be 
evaluated in the areas of medical review, Medicare secondary payer, 
fraud and abuse, and audit and reimbursement. Mandated performance 
standards in the Payment Safeguards criterion are the accuracy of 
decisions on skilled nursing facility (SNF) demand bills, and the 
timeliness of processing Tax Equity and Fiscal Responsibility Act 
(TEFRA) target rate adjustments, exceptions, and exemptions. Further 
evaluation in this criterion may include, but is not limited to, the 
efficient and effective compilation and analysis of data to bring about 
continuous improvement in contractor efforts to safeguard Medicare 
program dollars.
    The fourth criterion is ``Fiscal Responsibility'', which evaluates 
the contractor's efforts to protect the Medicare program and the public 
interest. Contractors must effectively manage Federal funds for both 
payment of benefits and cost of administration under the Medicare 
program. Proper financial and budgetary controls must be in place to 
ensure contractor compliance with its agreement with HHS and HCFA. 
Additional functions reviewed under this criterion may include, but are 
not limited to, bottom line unit cost, compliance with the Budget and 
Performance Requirements, adherence to Chief Financial Officer's Act.
    The fifth and final criterion is ``Administrative Activities'', 
which measures a contractor's administrative management of the Medicare 
program. A contractor must efficiently and effectively manage its 
operations to assure constant improvement in the way it does business. 
Proper systems security, ADP maintenance, and disaster recovery plans 
must be in place. A contractor's evaluation under the Administrative 
Activities criterion may include, but is not limited to, establishment, 
application, documentation, and effectiveness of internal controls. 
Internal controls include all aspects of a contractor's operation. It 
can include implementation reviews of corrective action plans, task 
management plans, data and reporting requirements, and management 
improvement plans.
    We have also developed separate measures for evaluating unique 
activities of Regional Home Health Intermediaries (RHHIs).
    Section 1816(e)(4) of the Act requires the Secretary to designate 
regional agencies or organizations, which are already Medicare 
intermediaries under section 1816, to perform bill processing functions 
with respect to freestanding home health agency (HHA) bills. The law 
requires that we limit the number of such regional intermediaries 
(i.e., RHHIs) to not more than ten; there are currently nine (see 42 
CFR 421.117 and the Federal Register published on May 19, 1988 (53 FR 
17936) for more details about the RHHIs).
    In addition, section 1816(e)(4) of the Act requires the Secretary 
to develop criteria and standards in order to determine whether to 
designate an agency or organization to perform services with respect to 
hospital affiliated HHAs. We have developed separate measures for RHHIs 
in order to evaluate the distinct RHHI functions. These functions 
include the processing of freestanding HHA, hospital affiliated HHA, 
and hospice bills. Through an evaluation using these criteria and 
standards we may determine whether the RHHI functions should be moved 
from one intermediary to another in order to ensure effective and 
efficient administration of the program benefit.
    Below we list the criteria and standards to be used for evaluating 
the performance of intermediaries and carriers. In a number of 
instances, we identify a HCFA manual as a source of more detailed 
requirements. Intermediaries and carriers have copies of the various 
Medicare manuals referenced in this notice. Members of the public also 
have access to our manualized instructions.
    Medicare manuals are available for review at local Federal 
Depository Libraries (FDLs). Under the FDL Program, government 
publications are sent to approximately 1400 designated libraries 
throughout the United States. Interested parties may examine the 
documents at any one of the FDLs. Some may have arrangements to 
transfer material to a local library not designated as an FDL. To 
locate the nearest FDL, individuals should contact any library.
    In addition, individuals may contact regional depository libraries, 
which receive and retain at least one copy of nearly every Federal 
government publication, either in printed or microfilm form, for use by 
the general public. These libraries provide reference services and 
interlibrary loans; however, they are not sales outlets. Individuals 
may obtain information about the location of the nearest regional 
depository library from any library.
    Finally, all HCFA regional offices maintain all Medicare manuals 
for public inspection. To find the location of the nearest available 
HCFA regional office, individuals may contact the individual listed at 
the beginning of this notice. That individual can also provide 
information about purchasing or subscribing to the various Medicare 
manuals.

IV. Criteria and Standards for Intermediaries

Claims Processing Criterion

    The Claims Processing criterion contains 4 mandated standards.
    Standard 1--95% of clean electronically submitted non-Periodic 
Interim Payment (PIP) bills paid within statutorily specified time 
frames. Specifically, clean, non-PIP electronic claims can be paid as 
early as the 14th day (13 days after the date of receipt) and must be 
paid by the 31st day (30 days after the date of receipt).
    Standard 2--95% of clean paper non-PIP bills paid within specified 
time frames. Specifically, clean, non-PIP paper claims can be paid as 
early as the 27th day (26 days after the date of receipt), and must be 
paid by the 31st day (30 days after the date of receipt).
    Standard 3--Reversal rate by Administrative Law Judges (ALJ) is at 
or below 5.0%.
    Standard 4--75% of reconsiderations are processed within 60 days 
and 90% are processed within 90 days.
    Additional functions may be evaluated under this criterion. These 
functions include, but are not limited to:
     Accurate Bill Processing;
     Attainment of Electronic Media Claims goals;
     Accurate processing of reconsideration cases with clear 
responses and appropriate customer-friendly tone and clarity;
     Management of shared processing sub-contract;
     Relationship with Common Working File Host;
     Data analysis and validation.

Customer Satisfaction Criterion

    We may review the intermediary's efforts to enhance customer 
satisfaction through the use of customer feedback. Results of the 
feedback may be used to establish comparable data on customer 
satisfaction and to identify areas in need of improvement. The results 
may be summarized for publication in the report of contractor 
performance and shared with individual contractors.
    We may also evaluate, but are not limited to, the following 
functions:
     The accuracy, timeliness and appropriateness of responses 
to telephone inquiries;
     The accuracy, clearness and timeliness of responses to 
written inquiries with appropriate customer-friendly tone and clarity;
     Relationships with professional and beneficiary 
organizations and use of focus groups;
     Educational and outreach efforts.

Payment Safeguards Criterion

    The Payment Safeguard criterion contains 2 mandated standards.
    Standard 1--Decisions of SNF demand bills are accurate.
    Standard 2--TEFRA target rate adjustments, exceptions, and 
exemptions are processed within mandated timeframes.
    Additional functions may be evaluated under this criterion. These 
functions include, but are not limited to:
     Medical Review: We may assess the ability of the Medicare 
contractors to apply their analytical skills and focus resources on 
particular providers or claim types which represent unnecessary or 
inappropriate care. We may review contractor efforts in developing 
local and national data that identify aberrancies and form the basis of 
corrective actions, such as educating the provider, and/or become the 
basis of medical review policies or review screens as directed by the 
Medicare Intermediary Manual (MIM) Sec. 3939 and Budget and Performance 
Requirements. We may also review the effectiveness of the contractor's 
identification and corrective action. We may also review a sample of a 
contractor's medical review decisions to assure that the decisions 
comply with current coverage guidelines and that the contractor's use 
of each medical review screen is supported by sufficient documentation. 
We may assess contractors' medical review efforts at developing 
effective means of addressing aberrancies identified during the 
analysis of all local and national data, and take action to assure that 
the focused medical review procedures and systems designed and utilized 
by the contractor have allowed it to meet program requirements. We may 
also review a contractor's efforts to review information or 
documentation located in the fraud unit.
     Audit and Reimbursement: We may assess the quality of 
fiscal intermediaries' activities in the audit and settlement of 
Medicare cost reports. We may assess the timeliness of Medicare cost 
report settlements and the accuracy by which fiscal intermediaries have 
established interim provider payments.
     Medicare Secondary Payer: The Medicare Secondary Payer 
(MSP) program may use the MSP review guide to review the intermediary's 
MSP processes in administering the program and for identifying and 
recovering mistaken Medicare payments in accordance with MIM, Part 3, 
Secs. 3400ff and 3600ff, and pertinent HCFA instructions and 
transmittals. We may develop outcome measures to assess the 
intermediary's accuracy in reporting savings and to determine if claim 
development procedures are followed. We may also evaluate the accuracy 
and timeliness of claims payment and determine if the Common Working 
File, internal systems and required software are utilized as 
prescribed. We may also evaluate the contractor's ability to prioritize 
and process recoveries in compliance with instructions, determine if 
recoveries of all payers are processed equally, and ensure that audit 
trail documentation exists.
     Fraud and Abuse: The Fraud and Abuse program may use the 
formally established mechanism to review the intermediaries in the 
basic level of fraud detection, deterrence and development as described 
in MIM, Part 3, Sec. 3950ff, and pertinent HCFA instructions and 
transmittals. We may assess the ability of the contractor to identify 
fraud cases that exist within its service area, and to take appropriate 
action to dispose of these cases. We may review the contractor's 
efforts in investigating allegations of fraud made by beneficiaries, 
providers, HCFA, OIG, and other sources. We may develop an outcome 
measure to assess the contractor's ability to put in place an effective 
fraud detection and deterrence program.

Fiscal Responsibility Criterion

    We may review the intermediary's efforts to establish and maintain 
appropriate financial and budgetary internal controls over benefit 
payments and administrative costs. Proper internal controls must be in 
place to ensure that contractors comply with their agreements with 
HCFA.
    Additional matters to be reviewed under the Fiscal Responsibility 
criterion may include, but are not limited to:
     Bottom line unit cost;
     Compliance with the Budget and Performance Requirements;
     Adherence to Chief Financial Officer's Act;
     Overall control of administrative cost and benefit 
payments.

Administrative Activities Criterion

    We may measure a contractor's administrative ability to manage the 
Medicare program. We may address the efficiency and effectiveness of 
their operation, their system of internal controls and the compliance 
with HCFA directives and initiatives. A contractor's evaluation under 
the Administrative Activities criterion may include, but is not limited 
to, implementation reviews of:
     Proper systems security;
     ADP maintenance;
     Disaster recovery plan;
     Corrective action plans;
     Task management plans;
     Data and reporting requirements;
     Management improvement plans.

V. Criteria and Standards for Carriers

Claims Processing Criterion

    The Claims Processing criterion contains 4 mandated standards.
    Standard 1--95% of clean electronically submitted claims processed 
within statutorily specified time frames. Specifically, clean 
electronic claims can be paid as early as the 14th day (13 days after 
the date of receipt) and must be paid by the 31st day (30 days after 
the date of receipt).
    Standard 2--95% of clean paper claims processed within specified 
time frames. Specifically, clean paper claims can be paid as early as 
the 27th day (26 days after the date of receipt) and must be paid by 
the 31st day (30 days after the date of receipt).
    Standard 3--95% of reviews are accurate and clear with appropriate 
customer-friendly tone and clarity and are completed within 45 days.
    Standard 4--90% of carrier hearings are accurate and clear with 
appropriate customer-friendly tone and clarity and are completed within 
120 days.
    Additional functions may be evaluated under this criterion. These 
functions include, but are not limited to:
     Accuracy of Claims Processing;
     Attainment of Electronic Media Claims goals;
     Management of shared processing sub-contract;
     Relationship with Common Working File Host;
     Data analysis and validation.

Customer Satisfaction Criterion

    The Customer Satisfaction criterion contains 2 mandated standards.
    Standard 1--98% of Explanations of Medicare Benefits (EOMBs) are 
properly generated.
    Standard 2--Telephone inquiries are timely answered.
    Telephone calls are to be answered within 120 seconds and callers 
are not to get a busy signal more than 20% of the time.
    We may review the carrier's efforts to enhance customer 
satisfaction through the use of customer feedback. Results of the 
feedback may be used to establish comparable data on customer 
satisfaction and to identify areas in need of improvement. The results 
may be summarized for publication in the report of contractor 
performance and shared with individual contractors.
    We may also evaluate, but are not limited to evaluating, the 
following functions:
     The accuracy and appropriateness of responses to telephone 
inquiries;
     The accuracy, clearness and timeliness of responses to 
written inquiries with appropriate customer-friendly tone and clarity;
     Relationships with professional and beneficiary 
organizations and use of focus groups;
     Educational and outreach efforts.

Payment Safeguards Criterion

    Carrier functions that may be reviewed under this criterion 
include, but are not limited to:
     Medical Review: We may assess the ability of the Medicare 
contractors to apply their analytical skills and focus resources on 
particular providers or claim types which represent unnecessary or 
inappropriate care. We may review contractor efforts in developing 
effective means of addressing aberrancies identified through analyzing 
data to target prepay and postpay review. This forms the basis of 
corrective actions such as educating the provider and/or become the 
basis of medical review policies or review screens as directed by the 
carrier manual and Budget and Performance Requirements. We may also 
review a sample of the contractor's use of medical coverage guidelines 
to determine if the contractor's use of each medical review screen is 
supported by sufficient documentation. We may assess the effectiveness 
of contractors' medical review efforts at developing means of 
addressing aberrancies identified during the analysis of all local and 
national data and take action to assure that the focused medical review 
procedures and systems designed and utilized by the contractor have 
allowed it to meet program requirements. We may also review a 
contractor's efforts to review information or documentation located in 
the fraud unit.
     Medicare Secondary Payer: The Medicare Secondary Payer 
(MSP) program may use the MSP review guide to review the carrier's MSP 
processes in administering the program and for identifying and 
recovering mistaken Medicare payments in accordance with the Medicare 
Carrier Manual (MCM), Part 3, Secs. 3375, 4306.3, and 4307-4308.1, and 
pertinent HCFA instructions and transmittals. We may develop outcome 
measures to assess the carrier's accuracy in reporting savings and to 
determine if claim development procedures are followed. We may also 
evaluate the accuracy and timeliness of claims payment and determine if 
the Common Working File, internal systems and required software are 
utilized as prescribed. We may also evaluate the contractor's ability 
to prioritize and process recoveries in compliance with instructions, 
determine if recoveries of all payers are processed equally, and ensure 
that audit trail documentation exists.
     Fraud and Abuse: The Fraud and Abuse program may use the 
formally established mechanism to review the carriers in the basic 
level of fraud detection, deterrence and development as described in 
MCM, Part 3, Sec. 14000ff, and pertinent HCFA issued instructions and 
transmittals. We may assess the ability of the contractor to identify 
fraud cases that exist within its service area, and to take appropriate 
action to dispose of these cases. We may review the contractor's 
efforts in investigating allegations of fraud made by beneficiaries, 
providers, HCFA, OIG, and other sources. We may develop an outcome 
measure to assess the contractor's ability to put in place an effective 
fraud detection and deterrence program.

Fiscal Responsibility Criterion

    We may review the carrier's efforts to establish and maintain 
appropriate financial and budgetary internal controls over benefit 
payments and administrative costs. Proper internal controls must be in 
place to ensure that contractors comply with their agreements with 
HCFA.
    Additional matters to be reviewed under the Fiscal Responsibility 
criterion may include, but are not limited to:
     Bottom line unit cost;
     Compliance with the Budget and Performance Requirements;
     Adherence to Chief Financial Officer's Act;
     Overall control of administrative cost and benefit 
payments.

Administrative Activities Criterion

    We may measure a carrier's administrative ability to manage the 
Medicare program. We may address the efficiency and effectiveness of 
their operation, their system of internal controls and compliance with 
our directives and initiatives. A carrier's evaluation under this 
criterion may include, but is not limited to, implementation reviews 
of:
     Proper systems security;
     ADP maintenance;
     Disaster recovery plan;
     Corrective action plans;
     Task management plans;
     Data and reporting requirements;
     Management improvement plans.

VI. Regional Home Health Intermediaries (RHHIs) Criterion

    The following standards are mandated for the Regional Home Health 
Intermediaries criterion:
    Standard 1--95% of clean electronically submitted non-PIP HHA/
hospice bills paid within statutorily specified time frames. 
Specifically, clean, non-PIP electronic claims can be paid as early as 
the 14th day (13 days after the date of receipt) and must be paid by 
the 31st day (30 days after the date of receipt).
    Standard 2--95% of clean paper non-PIP HHA/hospice bills paid 
within specified time frames. Specifically, clean, non-PIP paper claims 
can be paid as early as the 27th day (26 days after the date of 
receipt) and must be paid by the 31st day (30 days after the date of 
receipt).
    Standard 3--75% of HHA/hospice reconsiderations are processed 
within 60 days and 90% are processed within 90 days.
    We may use this criterion to review a RHHI's performance with 
respect to handling the HHA/hospice workload. This includes processing 
HHA/hospice bills timely and accurately, properly paying and settling 
HHA cost reports, and timely and accurately processing reconsiderations 
from beneficiaries, HHAs, and hospices.

VII. Action Based on Performance Evaluations

    A contractor's performance is evaluated against applicable program 
requirements for each criterion. Each contractor must certify that all 
information submitted to HCFA relating to contractor management 
process, including without limitation all records, reports, files, 
papers and other information, whether in written, electronic, or other 
form, is accurate and complete to the best of the contractor's 
knowledge and belief. A contractor will also be required to certify 
that its files, records, documents, and data have not been manipulated 
or falsified in an effort to receive a more favorable performance 
evaluation. A contractor must further certify that, to the best of its 
knowledge and belief, the contractor has submitted, without withholding 
any relevant information, all information required to be submitted with 
respect to the contractor management process under the authority of 
applicable law(s), regulation(s), contracts, or HCFA manual 
provision(s). Any contractor that makes a false, fictitious, or 
fraudulent certification may be subject to criminal and/or civil 
prosecution, as well as appropriate administrative action. Such 
administrative action may include debarment or suspension of the 
contractor, as well as the termination or nonrenewal of a contract.
    If a contractor meets the level of performance required by 
operational instructions, it meets the requirements of that criterion. 
Any performance measured below basic operational expectations 
constitutes a deficiency. The contractor may be required to develop and 
implement a corrective action plan when performance problems are 
identified. The contractor will be monitored to assure effective and 
efficient compliance with the corrective action plan and improved 
performance where requirements are not met.
    The results of performance evaluations and assessments under all 
five criteria will be used for contract management activities and will 
be published in the contractor's annual performance report. We may 
initiate administrative actions as a result of the evaluation of 
contractor performance based on these performance criteria. Under 
sections 1816 and 1842 of the Act, we consider the results of the 
evaluation in our determinations on:
     Entering into, renewing, or terminating agreements or 
contracts with contractors.
     Decisions concerning other contract actions for 
intermediaries and carriers (such as deletion of an automatic renewal 
clause). These decisions are made on a case-by-case basis and depend 
primarily on the nature and degree of performance. More specifically, 
they depend on:

+ Relative overall performance compared to other contractors;
+ Number of criteria in which deficient performance occurs;
+ Extent of each deficiency;
+ Relative significance of the requirement for which deficient 
performance occurs within the overall evaluation program; and
+ Efforts to improve program quality, service, and efficiency.

     Decisions concerning the assignment or reassignment of 
providers and designation of regional or national intermediaries for 
classes of providers.
    We make individual contract action decisions after considering 
these factors in terms of their relative significance and impact on the 
effective and efficient administration of the Medicare program.
    In addition, if the cost incurred by the intermediary or carrier to 
meet its contractual requirements exceeds the amount which the 
Secretary finds to be reasonable and adequate to meet the cost which 
must be incurred by an efficiently and economically operated 
intermediary or carrier, such high costs may also be grounds for 
adverse action.

VIII. Response to Public Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are 
unable to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the comments in the preamble of that 
document.
    In accordance with Executive Order 12866, this notice has not been 
reviewed by the Office of Management and Budget.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: August 11, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 94-21914 Filed 9-6-94; 8:45 am]
BILLING CODE 4120-01-P