[Federal Register Volume 61, Number 171 (Tuesday, September 3, 1996)]
[Rules and Regulations]
[Pages 46384-46385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22147]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 417

[OMC-010-FC]
RIN 0938-AF74


Medicare and Medicaid Programs; Requirements for Physician 
Incentive Plans in Prepaid Health Care Organizations

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

ACTION: Final rule correction; Notice of changes in compliance dates, 
with comment period.

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SUMMARY: In the March 27, 1996, issue of the Federal Register, we 
published, at 61 FR 13430, a final rule with comment period that 
implements requirements in sections 4204(a) and 4731 of the Omnibus 
Budget Reconciliation Act of 1990 that concern physician incentive 
plans. In the preamble of that rule, we set forth dates by which 
prepaid health plans had to comply with certain of the rule's 
provisions. This document clarifies and changes some of those 
deadlines, and provides an opportunity for public comments on them. It 
does not otherwise change the requirements set forth in the rule.
    In addition this document corrects the March 27 rule's inadvertent 
reversal of the nomenclature change made by a previous final rule.

DATES: Effective date: September 3, 1996.
    Comment dates: Comments on the decision to change the compliance 
dates published in the March 27, 1996 preamble will be considered if 
received at the appropriate address provided below, no later than 5 
p.m. on November 4, 1996.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: OMC-010-CN, P.O. Box 26688, 
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, DC 20201, 
or Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code OMC-010-CN. 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 offices at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Medicare: Tony Hausner, (410) 786-
1093. Medicaid: Beth Sullivan, (410) 786-4596.

SUPPLEMENTARY INFORMATION:

I. Change in Compliance Dates

    The preamble for the March 27, 1996, rule (61 FR 13430) stated that 
the regulation was effective on April 26, 1996. The preamble also set 
forth a set of ``compliance dates,'' by which times the prepaid health 
plans affected by the regulation would be required to have taken 
actions to be in compliance with the regulation. These dates varied, 
depending on the specific requirements of the regulations. They also 
varied depending on whether the prepaid health plan had a contract with 
Medicare or Medicaid in place on March 27, 1996, or entered into its 
initial contract at a later date.
    These compliance dates ranged from a date certain--May 28, 1996--to 
a date determined by when the prepaid health plan applied for a 
contract, renewed an existing contract, or took other actions specified 
in the regulation. For example, most of the requirements that prepaid 
health plans disclose specified elements of information to us would 
become applicable by May 28, 1996, or by the renewal date of the plan's 
contract with us, whichever is later. Since all Medicare risk contracts 
with prepaid health plans are put on a January 1 renewal cycle, this 
meant that, for practical purposes, these requirements would all become 
effective on January 1, 1997.
    The explanation of these compliance dates in the March 27, 1996, 
preamble, however, was not sufficiently comprehensive and unambiguous 
to be fully understood. There has been considerable confusion, doubt, 
and misunderstanding about them, particularly with respect to their 
applicability to new contracts entered into subsequent to March 27, 
1996. It is also now apparent that some of the compliance dates were 
clearly impracticable. Most notably, the regulation requires plans, 
under certain circumstances, to obtain ``stop-loss'' insurance; the 
compliance date set forth for doing so was May 28, 1996. This was not 
only unrealistic, but it was also inconsistent with the related 
disclosure requirements that would not go into effect until January 1, 
1997, and with the wording in the congressional authorizing legislation 
stating that the law should become effective with the start of a 
contract year. We notified prepaid health plans on May 28 that this 
requirement would not be enforced before January 1, 1997.
    Because of these difficulties with the compliance dates set forth 
in the March 27 publication, we have decided to simplify and clarify 
all of the compliance dates. Stated in general terms, the compliance 
date for all provisions (other than the two exceptions noted below) is 
now the first renewal date falling on or after January 1, 1997, or the 
effective date of a new contract or agreement having an effective date 
on or after January 1, 1997. To explain how this statement applies to 
contracts and agreements having various renewal dates or effective 
dates, and how it applies differently to Medicare contracts and to 
Medicaid contracts or agreements, we provide the following details:
     For all affected health maintenance organizations (HMOs), 
competitive medical plans (CMPs), and health insuring organizations 
(HIOs) that have contracts or agreements with HCFA or State Medicaid 
Agencies in effect on the date of this notice, the March 27, 1996, 
regulation becomes applicable (according to the terms set forth in the 
regulation) at the time the contract or agreement is next renewed on or 
after January 1, 1997. For all plans with Medicare risk contracts, this 
means the compliance date is January 1, 1997, since that is uniformly 
the renewal date for all risk contracts. That is also the renewal date 
for the majority of Medicare cost contracts, although there are a few 
for which the renewal date will occur later in 1997, at which time this 
regulation becomes applicable to them. Medicaid agreements have varying 
dates for renewal and some of them are written as multi-year 
agreements. For Medicaid agreements, compliance is required for all 
plans at a date during calendar year 1997. That date is the date on 
which the agreement is renewed or, in the case of multi-year 
agreements, the anniversary date of the effective date of the 
agreement.
     For all affected HMOs and CMPs that enter into Medicare 
contracts between the date of this notice and the end of calendar year 
1996, the

[[Page 46385]]

compliance date is January 1, 1997. For HMOs and HIOs entering into 
Medicaid contracts or agreements during this period, the regulation 
becomes applicable on the first anniversary date in 1997 of the 
effective date of their contract or agreement.
     For all affected HMOs, CMPs, and HIOs that enter into 
contracts or agreements on or after January 1, 1997, whether for 
Medicare or Medicaid, the regulation becomes applicable on the 
effective date of the contract or agreement.
    There are two exceptions to the general rule set forth above:
     The requirement in Sec. 417.479(g)(1) that surveys be 
conducted of plan enrollees and disenrollees under specified 
circumstances must be met within 1 year of the compliance date for the 
plan in question, as set forth above. This allows affected HMOs, CMPs, 
and HIOs discretion on the timing of the survey and permits them to 
combine it with a survey they may already be conducting and to survey 
all the enrollees in their sample at the same time.
     The requirement in Sec. 417.479(h)(1)(vi) that plans 
disclose capitation payments for the most recent year must be met, by 
all plans with contracts or agreements in effect on December 31, 1996, 
by April 1, 1997, disclosing information for calendar year 1996. Plans 
with new agreements on or after January 1, 1997, must comply by April 1 
of the first year after the year of the effective date, disclosing data 
for the calendar year of the effective date.

II. Other Provisions of the March 27 Regulation

    This document does not address any of the requirements set forth in 
the March 27, 1996, final rule other than the compliance dates. All of 
the obligations of prepaid plans set forth in the regulation remain 
intact. The March 27, 1996, rule provided a 60-day opportunity for 
comment. We have received a variety of comments in response to it. We 
will be publishing a document in the Federal Register later, evaluating 
and responding to these comments. In the meantime, prepaid plans 
affected by this regulation should be making arrangements to comply 
with the requirements as set forth on March 27, in accordance with the 
compliance dates established in this document.

III. Technical Corrections in Nomenclature

    The March 27 rule inadvertently reversed a nomenclature change that 
a previous final rule identified as OCC-015 (published on July 15, 
1993, at 58 FR 134) had made throughout part 417. This document 
corrects the oversight by restoring the precise terms ``HMO'' and 
``CMP'' that are currently used throughout part 417 instead of the 
generic ``organization''.

IV. Waiver of Prior Notice and Comment

    Changes in final regulations are ordinarily published in proposed 
form to provide for a period of public comment prior to the change 
taking effect. However, we may waive this procedure if we find good 
cause that prior notice and comment are impractical, unnecessary, or 
contrary to public interest. We find good cause to implement the 
changes made in this notice without prior notice and comment because 
the delay in prior notice and comment would be impractical and contrary 
to the public interest. As set forth above, we do not believe that it 
would be reasonable to expect HMOs, CMPs, and HIOs to be in compliance 
with the requirements that the final rule indicated these entities were 
required to comply with by May 28, 1996. We have already communicated 
with affected entities the fact that we were planning to publish a 
notice changing these compliance dates and would not take enforcement 
actions under the regulations pending this change. We believe that it 
is not in the public interest for regulatory compliance obligations to 
be imposed under a timeframe that both the entities affected and we 
believe to be unreasonable and impractical. Given the fact that some of 
these compliance obligations have already taken effect, we believe that 
it would be impractical to leave these obligations in place pending a 
public notice and comment process.

Corrections


Sec. 417.479  [Corrected]

    1. On page 13446, column 3, in Sec. 417.479(a) introductory text, 
``organization'' is revised to read ``HMO or CMP''.
    2. On page 13447, column 1, in paragraph (b), ``eligible 
organizations'' is revised to read ``HMOs and CMPs''; in the 
definitions in paragraph (c) of ``bonus'', ``payments'', and 
``physician incentive plan'', ``organization'', wherever it appears, is 
revised to read ``HMO or CMP'', and in the definition of ``payments'', 
``this subpart'' is revised to read ``this section''.
    3. On page 13447, column 2, in the definition of ``withhold'', 
``organization'' is revised to read ``HMO or CMP'', and in paragraph 
(d), ``organization's'' is revised to read ``HMO's or CMP's''.
    4. On page 13447, column 3, in paragraph (g) introductory text, 
``organizations'' is revised to read ``HMOs and CMPs'', and in 
paragraph (g)(1)(i), ``organization'' is revised to read ``HMO or 
CMP'', and ``organization's'' is revised to read ``HMO's or CMP's''.
    5. On page 13448, column 1, in paragraph (g)(2)(ii) introductory 
text and paragraph (g)(2)(iii), ``organization'', wherever it appears, 
is revised to read ``HMO or CMP'', and in paragraphs (h)(1) 
introductory text and (h)(1)(v)(B), ``organization'' is revised to read 
``HMO or CMP''.
    6. On page 13448, column 2, in paragraphs (h)(2)(i) introductory 
text, (h)(2)(ii) introductory text, (h)(3) introductory text, and 
paragraph (i)(1) introductory text, ``organization'' is revised to read 
``HMO or CMP''.
    7. On page 13448, column 3, in paragraph (i)(2) introductory text, 
and the heading of paragraph (j), ``organization'' is revised to read 
``HMO or CMP'', and in the text of paragraph (j), ``eligible 
organization'' is revised to read ``HMO or CMP''.

(Catalog of Federal Domestic Assistance Program No. 93.733--
Medicare--Hospital Insurance Program; No. 93.774--Medicare 
Supplementary Medical Insurance Program; No. 93.778--Medical 
Assistance Program)

    Dated: August 4, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: August 14, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-22147 Filed 8-30-96; 8:45 am]
BILLING CODE 4120-01-P