[Federal Register Volume 64, Number 31 (Wednesday, February 17, 1999)]
[Rules and Regulations]
[Pages 7968-7982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3751]



[[Page 7967]]

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Part IV





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



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42 CFR Part 422



Medicare Program; Changes to the Medicare+Choice Program; Rule

  Federal Register / Vol. 64, No. 31 / Wednesday, February 17, 1999 / 
Rules and Regulations  

[[Page 7968]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 422

[HCFA-1030-F]
RIN 0938-AI29


Medicare Program; Changes to the Medicare+Choice Program

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The purpose of this final rule is to set forth limited changes 
to the Medicare+Choice regulations published in our June 26, 1998 
interim final rule (63 FR 34968). Those regulations implemented section 
4001 of the Balanced Budget Act of 1997 (BBA), which established the 
Medicare+Choice (M+C) program. This final rule addresses selected 
issues raised by commenters on the June 26, 1998 interim final rule 
where we have identified the need for changes or where we believe that 
clarifications are needed as soon as possible. Among these issues are 
provider participation procedures, beneficiary enrollment options, and 
several access-related issues, including initial care assessment 
requirements, notification requirements when specialists are terminated 
from an M+C plan, and several coordination of care requirements.

DATES: Effective date: This final rule is effective March 19, 1999.

FOR FURTHER INFORMATION CONTACT: Tony Hausner (410) 786-1093 (for 
access to care issues). Debe McKeldin (410) 786-9159 (for enrollment 
issues). Tony Culotta (410) 786-4661 (for provider participation rules 
or other issues).

SUPPLEMENTARY INFORMATION:

I. Background

A. Balanced Budget Act of 1997

    Section 4001 of the Balanced Budget Act of 1997 (BBA) (Public Law 
105-33), enacted August 5, 1997, added sections 1851 through 1859 to 
the Social Security Act (the Act) to establish a new Part C of the 
Medicare program, known as the ``Medicare+Choice (M+C) Program.'' (The 
existing Part C of the statute, which included provisions in section 
1876 of the Act governing existing Medicare health maintenance 
organization (HMO) contracts, has been redesignated as Part D.) Under 
section 1851(a)(1) of the Act, every individual entitled to Medicare 
Part A and enrolled under Part B, except for individuals with end-stage 
renal disease, may elect to receive benefits through either the 
existing Medicare fee-for-service program or a Part C M+C plan.
    As its name implies, the primary goal of the Medicare+Choice 
program is to provide Medicare beneficiaries with a wider range of 
health plan choices through which to obtain their Medicare benefits. 
Alternatives available to beneficiaries under the M+C program include 
both the traditional managed care plans (such as HMOs) that have 
participated in Medicare on a capitated payment basis under section 
1876 of the Act, as well as a broader range of plans comparable to 
those now available through private insurance. Specifically, effective 
January 1, 1999, section 1851(a)(2) of the Act provides for three types 
of M+C plans:
     M+C coordinated care plans, including HMO plans (with or 
without point of service options), provider-sponsored organization 
(PSO) plans, and preferred provider organization (PPO) plans.
     M+C medical savings account (MSA) plans (that is, 
combinations of a high deductible M+C health insurance plan and a 
contribution to an M+C MSA).
     M+C private fee-for-service plans.
    In addition to expanding the types of health plans permitted to 
contract with Medicare, the M+C program introduces several other 
fundamental changes to the managed care component of the Medicare 
program. These changes include:
     Establishment of an expanded array of quality assurance 
standards and other consumer protection requirements.
     Introduction of an annual coordinated enrollment period, 
in conjunction with the distribution by HCFA of uniform, comprehensive 
information about participating plans that is needed to promote 
informed choices by beneficiaries.
     Revisions in the way we calculate payment rates to the 
plans that will narrow the range of payment variation across the 
country and increase incentives for plans to operate in diverse 
geographic areas.
     Establishment of requirements concerning provider 
participation procedures.

B. Summary of Interim Final Rule

    In our June 26, 1998 interim final rule (63 FR 34968), we set forth 
the new M+C regulations in 42 CFR part 422--Medicare+Choice Program. 
The major subjects covered in each subpart of part 422 are as follows:
     Subpart A--Definitions, including definition of types of 
plans, application process, and user fees.
     Subpart B--Requirements concerning beneficiary 
eligibility, election, enrollment and disenrollment procedures, and 
plan information and marketing materials.
     Subpart C--Requirements concerning benefits, point of 
service options, access to services (including rules on enrollee 
assessments and notification upon termination of specialists), and 
others.
     Subpart D--Quality assurance standards, external review, 
and deeming of accredited organizations.
     Subpart E--Provider participation rules and the 
prohibition against interference with health care professionals' advice 
to enrollees.
     Subpart F--Payment methodology for M+C organizations, risk 
adjustment, and encounter data requirements.
     Subpart G--Requirements concerning premiums, cost sharing, 
and determination of adjusted community rate.
     Subpart H--Requirements concerning provider-sponsored 
organizations (PSOs).
     Subpart I--Organization compliance with State law and 
preemption by Federal law.
     Subpart K--Contract requirements.
     Subpart L--Change of ownership rules.
     Subpart M--Beneficiary grievances, organization 
determinations, and appeals.
     Subpart N--Contractor appeals of nonrenewals or 
terminations of contracts.
     Subpart O--Procedures for imposing intermediate sanctions.
    On October 1, 1998, we issued a correction notice in the Federal 
Register (63 FR 52610) to correct technical errors that appeared in the 
interim final rule. All references in this document to regulation text 
are to the corrected text unless otherwise noted.

C. Number and Type of Public Comments

    We received 87 items of correspondence containing comments on the 
June 26, 1998 interim final rule. Commenters included managed care 
organizations and other industry representatives, representatives of 
physicians and other health care professionals, beneficiary advocacy 
groups, representatives of hospitals and other providers, insurance 
companies, States, accrediting and peer review organizations, members 
of the Congress, and others. Consistent with the scope of the June 26, 
1998 rule, most of the

[[Page 7969]]

comments addressed multiple issues, often in great detail. Listed below 
are the five areas of the regulation that generated the most concern 
(30 to 50 comments):
     Access issues, including requirements concerning 
coordination of care, initial assessments of enrollees' health care 
needs, timely pre-approval of post-stabilization services, and 
notification responsibilities when an organization terminates its 
relationship with a specialist.
     Quality improvement standards.
     Payment rates and service area policy.
     Provider participation rules.
     Beneficiary appeals and grievances.
    Among the other issues that generated substantial numbers of 
comments were:
     Eligibility, election, and enrollment policies.
     Marketing restrictions.
     Risk adjustment methodology and encounter data submission.
     Contractual requirements.
     Preemption of State law by Federal law.
     May 1 deadline for Adjusted Community Rate (ACR) 
submissions and capacity waivers.
    We also received many general comments on the M+C program and the 
impact of the interim final rule.

II. Provisions of This Final Rule

A. Summary

    This final rule addresses a limited number of issues raised by 
commenters on the June 26, 1998 interim final rule. We have attempted 
to address some of the issues that provoked the most public comment, 
particularly in cases where we have become convinced that changes are 
necessary and have developed the policies necessary to implement the 
changes. We also have included policy clarifications in certain areas 
where the material in the interim final rule has been misinterpreted. 
Finally, to the extent possible, we are addressing time-sensitive 
issues, such as those that need to be resolved before publication of 
the comprehensive M+C final rule or those that may affect plans or 
beneficiaries in areas where Medicare risk contractors have chosen not 
to participate in the M+C program in 1999.
    We intend to address all other issues raised by commenters on the 
M+C interim final rule in a comprehensive M+C final rule to be 
published later in 1999. (For example, this rule does not deal with any 
issues related to the quality standards contained in Part 4221 subpart 
D of the regulations.)
    On September 28, 1998, we issued Interim Quality Improvement System 
for Managed Care (QISMC) Standards that reflected the M+C interim final 
regulation as published in June 1998. To the extent that the changes 
contained in this regulation require changes to QISMC, we will issue 
these changes shortly. We will issue a final QISMC document after we 
have issued the comprehensive M+C final rule, later in 1999.

B. Effective Date of Guaranteed Issue for Medigap Insurance

    Section 4031 of the BBA established new rules under which Medicare 
beneficiaries are eligible to purchase a Medicare supplemental 
(Medigap) policy on a ``guaranteed issue basis.'' Some of the 
situations addressed by the BBA involve beneficiaries who leave M+C 
plans (or managed care risk plans under section 1876 of the Act ) and 
return to original Medicare. In the June 26, 1998 interim final rule, 
we indicated that further guidance on this subject was available from 
the National Association of Insurance Commissioners (NAIC), which had 
incorporated the BBA's Medigap changes into a revised Model Regulation 
issued on April 29, 1998. The Model Regulation suggested that the 
guaranteed issue provisions do not become effective until January 1, 
2002, for an enrollee in an M+C organization whose contract terminates. 
(The NAIC subsequently determined that this effective date was 
incorrect, as discussed below.)
    Comment: Several commenters asked us to clarify that the BBA 
protection regarding the guaranteed issue of Medigap policies A, B, C, 
and F took effect on July 1, 1998. They believe that this clarification 
is necessary to eliminate confusion resulting from the NAIC's original, 
erroneous interpretation that this guarantee was not effective until 
2002. One commenter pointed out that this error stemmed from a 
misinterpretation of certain provisions of section 1851(e) of the Act, 
which discusses the circumstances under which a beneficiary who is 
enrolled in an M+C plan may disenroll from the plan and enroll in 
another M+C plan. The commenter offered a detailed analysis of the 
appropriate interpretation of these provisions.
    Response: HCFA and the NAIC agree that the guaranteed issue 
provisions of the BBA became effective on July 1, 1998. On December 4, 
1998, we published a notice in the Federal Register to clarify that, as 
a matter of Federal law, the guaranteed issue provision of section 
1882(s)(3)(B)(ii) of the Act (added by section 4031(a) of the BBA) 
takes effect July 1, 1998; continues in effect through and beyond 2002; 
and applies to any individual whose M+C election terminates under the 
``circumstances'' specified in subparagraphs (A) through (D) of section 
1851(e)(4) (63 FR 67081). (The notice also points out that the NAIC 
issued a memorandum on October 16, 1998, indicating that there was a 
mistake in its Model Regulation and that the effective date was July 1, 
1998, not January 1, 2002.) As explained in detail in the December 4, 
1998 notice, we agree with the commenter's analysis as to the 
appropriate interpretation of the provisions of section 1851(e). How 
these provisions are interpreted also has implications for 
beneficiaries' enrollment options under the M+C program, as discussed 
below in section II.C.

C. Clarification of Effective Date of Obligation to Accept Enrollments 
During Special Election Periods (Secs. 422.60 and 422.62)

    Under Sec. 422.60(a)(1), M+C organizations are required to accept 
without restrictions enrollments from eligible beneficiaries during 
initial coverage election periods, annual election periods (during the 
month of November each year), and special election periods. While the 
foregoing obligations to accept enrollees do not have a separate 
effective date from the general effective date of the June 26, 1998 M+C 
regulations, as in the case of the Medigap provisions discussed in 
section II.B above, there has been confusion about the effective date 
of the obligation to accept new enrollments during special election 
periods. This confusion results from the fact that the description of 
special election periods appears in Sec. 422.62(b), a provision that 
specifies when individuals are entitled to disenroll from an M+C plan 
after disenrollment rights become limited in 2002 (or earlier in the 
case of an MSA plan). Because this disenrollment rights provision in 
Sec. 422.62(b) is prefaced by a 2002 effective date (with a 1999 
effective date for MSA plans), it is possible that the obligation under 
Sec. 422.62(a)(1) to accept enrollments during a special election 
period could be read not to apply until these dates. For the following 
reasons, we believe such a reading would be incorrect, and are 
clarifying in this rule that the obligation to accept enrollments 
during special election periods applies in years prior to 2002.
    A failure to adopt this clarification would result in what we 
believe would be an unintended elimination (albeit temporary) of an 
important beneficiary protection that has been in place since the 
inception of the pre-BBA Medicare

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risk program. There is no indication in the legislative history of the 
BBA that the Congress intended to eliminate a beneficiary's 
longstanding right to enroll in other plans when the organization in 
which he or she is enrolled ceases to contract with Medicare. Under 
section 1876(c)(3)(ii), when a contract under section 1876 ``is not 
renewed or is otherwise terminated,'' other HMOs with risk contracts 
``serving part of the same service area as under the terminated 
contract are required to have an open enrollment period for individuals 
who were enrolled under the terminated contract as of the date of 
notice of such termination.'' Similarly, if an HMO nonrenews a portion 
of its service area, risk contractors serving that part of the service 
area ``are required to have an open enrollment period for individuals 
residing in that part of the service area . . . .'' This beneficiary 
protection permits beneficiaries enrolled in an HMO that ceases to 
participate as a risk contractor to enroll in another HMO that serves 
the same area.
    The new M+C provisions in the BBA do not include a provision that 
imposes the above requirement in the same manner as it is imposed in 
section 1876. As in the case of the Medigap protections under section 
1876(c)(3)(F) (discussed in section II.B above), the Congress adopted a 
different approach to providing a similar beneficiary protection 
previously addressed in a different way under section 1876. In the case 
of Medigap protections, the Congress replaced a requirement that HMOs 
provide protections to enrollees when a contract terminates with new 
requirements that apply directly to Medigap insurers. In this case, the 
Congress replaced a direct requirement that HMOs have open enrollment 
when a contract is terminated with an indirect requirement that M+C 
organizations accept enrollment when the circumstances (set forth under 
section 1851(e)(4)) that give rise to a right to disenroll exist. In 
both cases, there is no reason to believe that the Congress intended to 
deprive beneficiaries of the benefits of these protections between 1999 
and 2002. Indeed, there would be no rational reason for doing so.
    Section 1851(e)(6), which is implemented in Sec. 422.60(a)(1), 
requires that M+C organizations accept enrollments during initial 
enrollment periods, during the month of November, and during special 
election periods ``described in'' the first sentence in section 
1851(e)(4). The first sentence in section 1851(e)(4) sets forth the 
circumstances under which a beneficiary is permitted to disenroll after 
2002, when the beneficiary ``lock in'' will go into effect. The first 
sentence in section 1851(e)(4) accordingly is prefaced with the clause 
``[e]ffective as of January 1, 2002.'' As one commenter noted, ``The 
reference to January 1, 2002 specifically addresses the movement from 
one Medicare+Choice plan to another, and is part of a clearly laid out 
section that provides a gradual transition from the current system of 
totally free movement between plans to a restricted system of annual 
`lock-ins'. The need for exceptions does not exist before January 1, 
2002, and so the provision does not become effective until that date.''
    Thus, we believe that the reference to January 1, 2002 is best 
interpreted as relevant only for purposes of the right to disenroll 
that is the subject of section 1851(e)(4) itself, and not for purposes 
of the separate obligation to accept enrollments under section 
1851(e)(6). In other words, section 1851(e)(6) incorporates the 
underlying circumstances that give rise to the right to disenroll, and 
provides that M+C organizations must accept enrollments when these 
circumstances exist. It does not incorporate the reference to 2002 in 
the first clause. Included in the circumstances listed under section 
1851(e)(4) is the situation in which an organization's contract has 
been terminated ``or the organization has terminated or otherwise 
discontinued providing the plan in the area in which the individual 
resides.'' Accordingly, for all plans offered by M+C organizations, the 
organization currently must accept enrollments from eligible 
individuals if an M+C plan is discontinued in the area the organization 
serves or under any of the other circumstances described in 
Sec. 422.62(b). (We note that the organization would not have to accept 
enrollment in a plan that has reached its enrollment capacity, 
consistent with Sec. 422.60(b).)
    This interpretation is consistent with our interpretation of the 
new Medigap protections in the BBA (see section II.B and our December 
4, 1998 Federal Register notice), which similarly provide for 
beneficiary rights when the circumstances specified in section 
1851(e)(4) exist.
    In order to clarify our interpretation in the regulations text, we 
are revising Sec. 422.60(a)(1) to clarify that while the circumstances 
described in Sec. 422.62(b)(1) through (b)(4) are incorporated under 
Sec. 422.60(a)(1), the effective dates for the disenrollment rights 
under Sec. 422.62(b) are not.

D. Notification Requirement for Rule Changes (Sec. 422.111(d)(2))

    Section 1852(c) of the Act lists several areas where an M+C 
organization must disclose specific information to each M+C plan 
enrollee. These requirements are set forth under Sec. 422.111 and are, 
in large part, a codification of program administration requirements 
under section 1876 of the Act. Among the disclosure provisions is a 
requirement under Sec. 422.111(d)(2) (carried over from 
Sec. 417.436(c)) that if an M+C organization intends to change its 
rules for a plan, it must submit the changes to us in accordance with 
the procedures for approval of marketing materials under Sec. 422.80 
and then notify all enrollees 30 days before the effective date of the 
change.
    Comment: Several commenters asked how this requirement interacts 
with related provisions under Sec. 422.64, which concerns the 
comparative information that we distribute about M+C plans. A commenter 
noted that under the 30-day rule set forth at Sec. 422.111(d)(2), an 
M+C organization presumably could change plan rules between the time 
that we distribute information about an M+C plan and the effective date 
of a beneficiary's enrollment in that plan. The commenter suggested 
that enrollees should be notified at least 90 days before the effective 
date of any changes in plan rules. Another commenter suggested that 
failure to provide proper notice should be reported to beneficiaries 
and lead to enforcement sanctions.
    Response: Section 422.64, which is based on section 1851(d) of the 
Act, outlines the general and comparative information that we 
distribute to all M+C eligible beneficiaries as part of the annual 
``open season'' notification. For the most part, the comparative 
information describes the benefits, premiums, and service areas of all 
M+C plans; this information is largely derived from the documents an 
M+C organization submits by May 1 as part of the ACR approval process. 
After January 1, 2002, this information may not be changed after the 
ACR is approved until the calendar year following the year for which 
the information is provided. Under Sec. 422.300(b), prior to 2002, 
premiums or benefits may be changed after an ACR is approved if the 
changes add benefits or lower premiums or cost sharing.
    While Sec. 422.111(d) provides for 45-day advance submission to us 
and 30-day advance notice to enrollees of changes in M+C plan rules, 
this provision does not grant an M+C organization authority to change 
rules

[[Page 7971]]

that it is otherwise prohibited from changing. To the extent that an 
M+C organization is permitted to change rules (for example, grievance 
procedures disclosed under Sec. 422.111(b)(8) or prior authorization 
procedures disclosed under Sec. 422.111(b)(7)), it must submit the 
changes for us to review 45 days in advance, and give enrollees 30-days 
advance notice. This general rule would apply to changes in benefits, 
premiums, or cost sharing prior to 2002, as permitted under 
Sec. 422.300(b). (Currently, the primary vehicle through which 
organizations inform enrollees of changes in plan rules is the Annual 
Notification of Change (ANOC).)
    The requirement under Sec. 422.111(d) that organizations notify 
plan enrollees at least 30 days before the intended effective date of 
any rule changes does not conflict with the intent of the statute, as 
implemented through Sec. 422.64, that M+C eligible individuals receive 
accurate comparative information about available M+C plans through our 
annual information campaign. However, we recognize the need to ensure 
that information organizations distribute to enrollees in their plans 
reflects all rule changes that will be in effect as of January 1 of a 
given year. Thus, to eliminate any possibility of otherwise permissible 
rule changes during the annual open season period, we are revising 
Sec. 422.111(d) to: (1) Indicate that the 30-day notification rule 
applies only for mid-year changes in plan rules; and (2) Specify that 
an M+C organization must notify enrollees by October 15 of any plan 
policy changes that are scheduled to take effect on the following 
January 1. Under this policy, for example, an M+C organization would 
submit its ANOC for our review by September 1 in order to allow for the 
45-day review period required under Sec. 422.80(a)(1). This will ensure 
that current enrollees (and, upon request, prospective enrollees) 
receive accurate information about all plan rules in time for the 
annual election period each November, as well as promote coordination 
in the information distribution efforts by us and M+C organizations.

E. Access to Services (Sec. 422.112)

    Section 422.112 establishes a series of requirements aimed at 
ensuring that enrollees in M+C plans have adequate access to services. 
As discussed in our June 26, 1998 interim final rule (63 FR 34989), 
these requirements stem from section 1852(d) of the Act and existing 
regulations and policies under part 417, as well as addressing 
recommendations from the Consumer Bill of Rights and Responsibilities. 
Commenters addressed all aspects of these provisions, and we are 
continuing to consider their comments on many of the requirements 
contained in this section. In this limited final rule, we will address 
comments and clarify our policy on several access-related issues, as 
discussed below. We intend to address all other comments on access 
issues in the comprehensive final rule to be published later this year.
    Please note that due to the numbering errors in the June 26, 1998 
document, we published a correction notice in the Federal Register on 
October 1, 1998 (63 FR 52613). In that notice, we republished 
Sec. 422.112 in its entirety. For purposes of this document, all 
references are to the corrected regulation citations.
1. Coordination of Care (Secs. 422.112(a)(4) and (b))
    Background. Section 422.112 imposes two separate coordination 
requirements. First, under Sec. 422.112(a)(4), M+C organizations must 
have procedures that enable the organization to identify individuals 
with serious or complex medical conditions, assess and monitor those 
conditions, and establish and implement treatment plans. As indicated 
in the preamble to the June 26, 1998 regulations, this requirement was 
based on recommendations of the President's Advisory Commission on 
Consumer Protection and Quality in the Health Care Industry, in its 
``Consumer Bill of Rights and Responsibilities.'' Also, under 
Sec. 422.112 (b), to ensure continuity of care, M+C organizations must 
make a variety of arrangements, including designating a practitioner 
``having primary responsibility for coordinating the enrollee's overall 
health care,'' providing an ongoing source of primary care, and 
completing an initial assessment within 90 days of enrollment. As 
indicated in the preamble to the June 26, 1998 regulations, these 
provisions were based on the requirements developed as part of the 
Quality Improvement System for Managed Care (QISMC).
    In view of the comments, we recognize the need to revise these 
provisions. The intent of these provisions will still be to require (1) 
plans to have procedures for identifying individuals with serious or 
complex medical conditions, assess and monitor those conditions, and 
implement treatment plans; and (2) ensure continuity of care. However, 
we need to allow for somewhat greater flexibility in arrangements since 
not all types of managed care plans require enrollees to be assigned to 
primary care providers (PCPs).
    Approximately 13 public commenters addressed these coordination 
requirements. The comments and our responses are discussed below.

Comments on Sec. 422.112(a)(4)

    Comment: Several commenters requested that we define complex and 
serious medical conditions. One commenter recommended that M+C 
organizations be given discretion to define ``complex or serious 
medical conditions'' within broad parameters set by HCFA. Another 
commenter suggested that we delay implementation of the requirements 
until national criteria for the identification of complex and serious 
conditions are developed.
    Response: The interim final regulation currently requires M+C 
organizations to develop procedures that enable the organization to 
identify individuals with complex or serious conditions, assess and 
monitor those conditions, and establish and implement treatment plans. 
The regulations do not place further requirements on M+C organizations 
as to these provisions. Thus, organizations have discretion to define 
the concept of a ``complex or serious condition.'' We plan to develop a 
definition of this term, which could result in further guidance on this 
set of issues. Until we provide further guidance, we expect 
organizations to adopt their own definition and procedures to implement 
these provisions.
    Comment: One commenter stated that M+C organizations should be 
allowed to limit the number of visits to a specialist, and that they 
should be allowed to ensure that the PCP remains involved in the care 
plan so that the patient continues to receive preventive services and 
other services not provided by the specialist.
    Response: The regulations do not prohibit limiting the number of 
direct access visits, as long as the number of direct access visits to 
the specialist is adequate, consistent with the treatment plan. 
Furthermore, the regulations do not prohibit an M+C organization from 
ensuring that a PCP is involved, and we would encourage this 
relationship.
    Comment: One commenter stated that if a specialist develops the 
treatment plan, then he or she should be the one to update it. Another 
commenter suggested that organizations be required to use physicians to 
develop the treatment plans.
    Response: We agree with the recommendation that if a specialist 
develops a treatment plan, then he or she should be the one to update 
it. Thus, we will delete the requirement

[[Page 7972]]

that the treatment plan should be updated by the PCP.
    We have added the requirement that the M+C organization ``assures 
adequate coordination among providers.'' This requirement is added 
because of the changes in the coordination requirements in 
Sec. 422.112(b), discussed below.
    As to the development of the treatment plan, we believe that any 
health professional or a team of health professionals may develop the 
treatment plan.
    Comment: One commenter requested that we require M+C organizations 
to permit enrollees with complex and serious conditions to have a 
choice of specialists; to use a specialist as their PCP; allow for the 
treatment plan to be updated by the PCP and the enrollee; and allow an 
enrollee who needs post-acute care to have a choice of post-acute 
provider in consultation with the PCP.
    Response: While M+C organizations are encouraged to adopt these 
procedures, we do not believe that it would be appropriate to specify 
these requirements. As indicated above, we have eliminated the 
requirement that the treatment plan be updated by the PCP. Whoever 
develops the treatment plan is encouraged to consult with the enrollee.
    Comment: Several commenters stated that requiring M+C organizations 
to develop treatment plans encourages over-utilization of specialists 
and micro-management of primary and specialty care.
    Response: M+C organizations can control the number of visits to 
specialty care in the treatment plan. The development of treatment 
plans is good medical practice and is performed routinely in most 
medical settings.
    Comment: One commenter (1) recommended that instead of direct 
access visits to specialists, we should require that M+C organizations 
operate comprehensive case management systems for chronically ill 
enrollees; and (2) contended that the BBA did not provide statutory 
authority to issue the requirements dealing with serious and complex 
conditions.
    Response: The requirements are imposed pursuant to our authority 
under section 1856(b)(1) of the Act to establish M+C standards by 
regulation. These standards were based upon the President's Advisory 
Commission's ``Consumer Bill of Rights and Responsibilities'' mentioned 
above. While we encourage M+C organizations to develop comprehensive 
case management systems, this is not a requirement. We have determined 
that developing treatment plans that include an adequate number of 
direct access visits to specialists is the most appropriate requirement 
at this time.
    Comment: Several commenters recommended that we require that the 
treatment plan for enrollees with complex and serious conditions be 
completed in either 14 or 30 days, and that these persons be reassessed 
every 90 days.
    Response: M+C organizations are encouraged to consider these 
recommendations, but we do not believe it is necessary to specify these 
requirements. Existing provisions already require that the treatment 
plan be appropriate, time-specific, and updated periodically. Comments 
on Sec. 422.112(b)
    Comment: Several commenters stated that M+C organizations that have 
open access arrangements and PPOs cannot meet the requirements that 
organizations ensure continuity of care through the ``the use of a 
practitioner who is specifically designated as having primary 
responsibility for coordinating the enrollee's overall health care.'' 
They recommended that we revise these requirements to provide more 
flexibility for these types of M+C organizations.
    Response: We concur with this recommendation. Therefore, we have 
made the following changes to this section:
    (1) We have deleted the requirement that the M+C organization use a 
practitioner who has primary responsibility for coordinating health 
care. We recognize that open access plans and PPOs do not have a single 
professional who coordinates care, and that they may use other 
mechanisms to coordinate care.
    (2) We have revised the requirement to specify that M+C 
organizations develop ``policies that specify under what circumstances 
services need to be coordinated and the methods for coordination.'' We 
have modified this requirement because not all organizations assign 
health care professionals to coordinate care; they may use other 
methods to achieve coordination where needed.
    (3) We have modified the requirement that an M+C organization must 
provide an ongoing source of primary care, and instead require that an 
organization offer to provide each enrollee with an ongoing source of 
primary care and provide this source of primary care to all who accept 
the offer. Again, we modified this requirement because not all 
organizations require that enrollees be assigned to a PCP. However, all 
organizations are required to have an adequate network of PCPs and 
specialists and, thus, be able to ensure that every enrollee can have a 
PCP if he or she so chooses.
    We have made these changes to the coordination provisions to 
provide sufficient flexibility to ensure that beneficiaries can choose 
the type of M+C plan option that best meets their needs. The Congress 
intended the M+C program to allow for maximum choice of types of plans 
and wants us to assure that all plans that have open arrangements are 
included in the program. Nevertheless, we still want to ensure 
coordination of care, and therefore we have maintained most of the 
various coordination requirements of this section and have made only a 
few changes to these requirements.
    Furthermore, because of this increased flexibility, to ensure that 
adequate coordination occurs for complex or serious medical conditions, 
we have added to Sec. 422.112(a)(4) the requirement that the M+C 
organization assures that adequate coordination occurs among providers.
2. Initial Care Assessments (Sec. 422.112(b)(5)(i))
    Background. Another issue that we believe should be addressed at 
this time involves Sec. 422.112(b)(5)(i), which requires M+C 
organizations to conduct an initial assessment of each enrollee's 
health care needs within 90 days of the effective date of enrollment. 
Although a number of commenters strongly endorsed the requirement, we 
received many other comments that indicated the need for further 
guidance to maximize compliance efforts by M+C organizations. The 
intent of the requirement is to ensure that organizations have 
sufficient information about enrollees to identify and meet the 
enrollees' health care needs. We believe that requiring initial 
assessments is consistent with current industry practices and need not 
result in burdening M+C organizations with additional administrative 
responsibilities.
    Approximately 16 public comments addressed the initial assessment 
requirement. The comments and our responses are discussed below.
    Comment: Many commenters requested that we clarify the ``form'' of 
the initial health assessment. Commenters inquired whether the 
assessment could be carried out through a telephone call, or mailed 
questionnaire, or whether it must be a physical examination. Further, 
commenters questioned whether, under certain circumstances, some 
enrollees could be exempted from the initial assessment requirement. 
For example, commenters indicated that an M+C

[[Page 7973]]

organization should not be required to complete an initial assessment 
for individuals who were commercial members of a managed care plan and 
then ``age-in'' to the organization's M+C plan. Similarly, enrollees 
who remain under the care of network providers or retain the same 
primary care provider, despite enrolling in a different M+C 
organization, should not be subject to the assessment requirement.
    Response: We believe that M+C organizations should have the 
flexibility to choose the form and substance of the initial assessment. 
Thus, the assessment may take the form of a phone call, questionnaire, 
home visit, or physical examination. However, the assessment instrument 
must ensure that the M+C organization and its provider network have the 
information required for effective and continuous patient care and 
quality review, as required under Sec. 422.112(b)(5). The assessment 
should also be sufficient to identify enrollees with complex or serious 
medical conditions, consistent with Sec. 422.112(a)(4).
    We recognize that in some situations it would be duplicative and 
unnecessary to subject certain enrollees to the initial assessment 
requirement. Consequently, we would not expect M+C organizations to 
conduct initial assessments on enrollees for whom the necessary, up-to-
date information on their care needs is already available, such as 
enrollees who age-in, are already under the care of network providers, 
or who retain the same primary care provider when enrolling with a 
different M+C organization.
    Comment: Several commenters suggested that we only require M+C 
organizations to make ``best efforts'' to conduct the initial 
assessment, since 100 percent compliance is not achievable. They 
asserted that 100 percent compliance is not an achievable standard 
because enrollees may refuse to cooperate in carrying out the initial 
assessment. Commenters requested that we identify the minimal standard 
an M+C organization should meet to comply with the initial assessment 
requirement. For example, one commenter suggested that if an M+C 
organization makes three unsuccessful attempts to contact an enrollee, 
to arrange for an initial assessment, this should be considered a 
sufficient ``best effort.''
    Response: We understand that an M+C organization, through no fault 
of its own, may not be able to achieve full compliance with the initial 
assessment requirement. Rather than maintain a regulatory standard that 
may be unachievable, we are revising the regulation to require M+C 
organizations to make ``best efforts'' to conduct the initial 
assessment of each enrollee's health care needs within 90 days of the 
effective date of enrollment. We are specifying that a ``best-effort'' 
attempt must include following up on unsuccessful attempts to contact 
an enrollee. The revised regulation is not intended to release the M+C 
organization from its obligation to conduct the initial assessment, but 
to acknowledge that 100 percent compliance may not be a realistic 
standard.
    We also recognize that some enrollees may refuse to cooperate with 
an organization's efforts to conduct the initial assessment. If this 
occurs, the M+C organization should fully document the refusal in the 
enrollee's medical record.
    Comment: Some commenters suggested that we should delay 
implementing the initial assessment requirement until an instrument is 
developed that sufficiently identifies complex or serious medical 
conditions.
    Response: As noted above, we believe that an M+C organization 
should have the flexibility to use an assessment instrument of its own 
choice. Although we are not providing further specifications for the 
health assessment at this time, we may do so in the future. We will 
work with plan, industry, provider, and consumer representatives in 
developing further guidance in this area. Also, as discussed above, we 
are working to better define the concept of complex or serious medical 
conditions.
    Comment: Two commenters suggested that we clarify who will pay for 
the initial assessment. They also requested that we require M+C 
organizations to provide accurate eligibility lists to the primary care 
provider in a timely manner.
    Response: M+C organizations are required to either directly furnish 
or arrange for the initial assessment. Like all other services provided 
by an M+C organization, initial assessment costs are covered in the 
capitated payment paid to the M+C organization. Provider compensation 
will depend upon the contractual relationship between the provider and 
the M+C organization.
    We recognize that providing accurate eligibility lists is a 
desirable administrative practice. However, we do not believe it is 
necessary to require M+C organizations to provide eligibility lists, 
unless we subsequently determine that absence of such a requirement 
results in noncompliance with the initial assessment provisions.
    Comment: One commenter requested clarification regarding the point 
in the enrollment process after which the M+C organization could 
conduct the initial assessment. Another commenter suggested that we 
require that the assessment be conducted within 30 days of enrollment.
    Response: As stated above, M+C organizations are required to 
conduct the initial assessment within 90 days of the effective date of 
enrollment. We believe this is a reasonable minimum standard, when 
viewed in conjunction with related access requirements under 
Sec. 422.112, such as an appropriate treatment plan for individuals 
with serious medical conditions and the requirement for timely access 
to care and member services. Given the potential for pre-enrollment 
health screening, it is not appropriate for an M+C organization to 
conduct the initial assessment before the effective date of enrollment.
3. Involuntary Terminations (Sec. 422.112(a)(5))
    Background. In our June 26, 1998 interim final regulation, 
Sec. 422.112(a)(2) established the requirements that an M+C 
organization must meet when it terminates an M+C plan or specialist. 
Subsequently, due to the numbering errors in the June 26, 1998 
document, we published a correction notice on October 1, 1998 (63 FR 
52613), which sets forth these ``involuntary termination'' requirements 
under Sec. 422.112(a)(5). For purposes of this document, all references 
are to the corrected regulation citations. Section 422.112(a)(5) 
provides that if an M+C organization terminates an M+C plan or 
specialist other than for cause, the M+C organization must inform 
beneficiaries at the time of termination of their right to maintain 
access to specialists, provide the names of other M+C plans in the area 
that contract with specialists of the beneficiaries' choice, and 
explain the process the beneficiary would need to follow should he or 
she decide to return to original Medicare.
Comments and Responses
    We received fourteen comments on the involuntary termination 
provisions. Several commenters remarked that the numbering of the 
section was confusing and mistaken. As noted above, we made the 
appropriate changes in the October 1, 1998 correction notice.
    Comment: One commenter questioned the statutory source of a 
beneficiary's right to maintain access to specialists.
    Response: Section 1852(d)(iv) of the Act requires M+C organizations 
to provide access to the appropriate providers, including credentialed

[[Page 7974]]

specialists, for medically necessary treatment and services.
    Comment: Most of the comments on Sec. 422.112(a)(5) opposed these 
notification requirements. As discussed in detail below, these 
commenters cited a variety of reasons for their opposition, including 
the administrative burden and feasibility of obtaining the necessary 
information, unnecessary duplication in the regulations, and absence of 
necessary detail. Although most commenters opposed the notification 
requirements, one commenter asserted that the requirements were 
reasonable and necessary to protect the interests of Medicare 
beneficiaries. This commenter recommended that the notification 
requirements apply for all terminations of physicians and other health 
care professionals, rather than only for terminations of specialists.
    Commenters raised the following objections:
    (1) Administrative burden and feasibility.
    Commenters objected to the perceived administrative burden 
associated with the notification requirements of Sec. 422.112(a)(5). In 
particular, commenters found infeasible the provision that plans must 
provide the names of other M+C plans in the area that contract with 
specialists of the beneficiary's choice. They noted that plans do not 
have access to competing plans' network information. They stated that 
details of another plan's contractual relationships with its 
specialists was proprietary information. Commenters also argued that 
Sec. 422.112(a)(5) would be difficult for plans to implement because 
they do not track real-time information regarding which beneficiaries 
are receiving care from specific specialists.
    (2) Unnecessary duplication in the regulations.
    Commenters pointed out that in several areas, the provisions of 
Sec. 422.112(a)(5) overlap with other provisions of the M+C 
regulations. Several commenters mistakenly referred to the general 
notification requirements under Sec. 422.111(e) when discussing the 
requirements for involuntary terminations of specialists under 
Sec. 422.112(a)(5). Others simply noted that the two sections both 
dealt with provider terminations and that this duplication served no 
purpose. Some commenters also stated that it was confusing and 
unnecessary to include both plan and specialist terminations in 
Sec. 422.112(a)(5), since enrollee notification upon plan termination 
was addressed previously in Sec. 422.62. Other commenters assumed that 
these provisions implied that an enrollee whose specialist was 
terminated was free to disenroll from his or her plan and have a 
special election period as described under Sec. 422.62(b).
    (3) Absence of necessary detail.
    Several commenters found it unclear which beneficiaries must be 
notified when a specialist is terminated. Also, they asked for further 
guidance regarding the meaning of terms such as ``other than for 
cause'' and ``involuntary termination.''
    In view of these objections, commenters proposed several 
alternatives. Some suggested we delete Sec. 422.112(a)(5) entirely. 
Others recommended that it should suffice for an M+C organization to 
inform those beneficiaries who had been under the treatment of the 
formerly contracted specialist how they can access comparable specialty 
services within the plan.
    Response: Based on these comments, we recognized that revisions to 
Sec. 422.112(a)(5) were necessary. We considered revising 
Sec. 422.112(a)(5) by replacing the requirement that an M+C 
organization must provide the names of other M+C plans in the area that 
contract with specialists of the beneficiary's choice with the 
requirement that the M+C organization must provide the names of 
specialists within the plan's provider network through whom enrollees 
can obtain necessary care. Instead, after careful review of both the 
comments regarding duplicative regulations and of the regulations 
themselves, we believe that the better course is to delete 
Sec. 422.112(a)(5) completely.
    Under the notification requirements Sec. 422.111(e), an M+C 
organization must make a good faith effort to provide written notice of 
the termination of a contracted provider within 15 working days to all 
enrollees who are patients seen on a regular basis by the provider 
whose contract is terminating, irrespective of whether the termination 
was for cause or without cause. Thus, notification to beneficiaries is 
not limited to the termination of specialists, but includes other 
physician and provider types. Furthermore, Sec. 422.111(e) applies to 
all types of terminations, not just those that are ``involuntary'' and 
``other than for cause,'' as under Sec. 422.112(a)(5). Given the 
elimination of the requirement that M+C organizations must provide the 
names of other M+C plans in the area that contract with specialists of 
the beneficiary's choice, we believe that having separate notification 
requirements in Sec. 422.112, ``Access to services,'' serves no 
purpose.
    Similarly, we believe that the notification requirements for plan 
termination in Sec. 422.112(a)(5) are sufficiently addressed in 
Sec. 422.62(b) and Sec. 422.74. Thus, it is unnecessary to include 
notification requirements for plan termination in Sec. 422.112(a)(5). 
Consequently, we are deleting Sec. 422.112(a)(5) in its entirety.
    Thus, we agree with commenters that Sec. 422.112(a)(5) 
unnecessarily duplicates other M+C provisions. Moreover, this overlap 
serves as a real source of confusion as evidenced by the mistakes 
commenters themselves made. For example, we believe the similarity 
between Sec. 422.62(b) and Sec. 422.112(a)(5) prompted commenters to 
mistakenly assume that Sec. 422.112(a)(5) entitles an enrollee whose 
specialist is terminated to disenroll from his or her plan and have a 
special election period.
    More importantly, we believe removing Sec. 422.112(a)(5) from the 
M+C regulation in no way compromises a Medicare beneficiary's access to 
adequate health care from all appropriate providers. We are convinced 
that the remaining provisions, particularly Sec. 422.111(e), continue 
to require adequate notification and access requirements for needed 
care, including specialty care. Finally, we would expect that the 
specialists themselves would be both best able and most willing to 
inform their own patients of their other plan affiliations; plans 
should not interfere with the ability of providers to communicate such 
information to their patients.
    In addition to the fact that we deemed Secs. 422.111(e), 422.62(b), 
and 422.74 more than adequate safeguards of a beneficiary's access to 
needed care, we also realized that portions of Sec. 422.112(a)(5)'s 
requirements were major obstacles to its effective implementation. We 
agree that it may be impractical for plans to ascertain with which 
other plans a given specialist contracts. Furthermore, it may be 
unreasonable to expect M+C organizations to turn over their specialist 
lists to competing organizations.
    We note that the deletion of Sec. 422.112(a)(5) renders moot the 
terminology questions about which types of terminations were subject to 
these requirements. After the removal of Sec. 422.112(a)(5), the 
notification standard for which enrollees are to be notified is the 
``regular basis'' standard articulated in Sec. 422.111(e). As stated 
previously, application of this standard is not limited to specialists, 
but instead includes all contracted providers.

[[Page 7975]]

    Comment: Two commenters wanted to know if the provisions for 
involuntary termination were related to the special requirements for 
individuals with complex or serious medical conditions.
    Response: We believe this comment was prompted by the organization 
of Sec. 422.112(a), which was revised in the October 1, 1998 correction 
notice. Like the requirements concerning individuals with complex 
medical conditions, the involuntary termination provisions are 
concerned with an enrollee's access to specialists. However, the 
involuntary termination requirements are not limited to individuals 
with serious medical conditions.

F. Provider Participation Rules (Secs. 422.202 and 422.204)

    Section 1852(j) of the Act sets forth the statutory provisions 
regarding provider participation. These provisions include rules 
regarding participation procedures, consultation in medical policies, 
prohibitions on interference with provider advice to enrollees, and 
limitations on physician incentive plans. Regulations implementing 
these rules are located in subpart E of part 422. Although we received 
many comments on all aspects of the subpart E regulations, the two 
areas that generated the most controversy were the notice and appeal 
rights associated with provider participation procedures 
(Sec. 422.202(a)) and the related provider rights associated with 
denials, suspension, or terminations of contracts (Sec. 422.204(c)). In 
this final rule, we will address comments on these two areas; comments 
on other aspects of subpart E will be addressed in the subsequent final 
rule.
    Section 1852(j)(1) establishes the underlying requirements for the 
regulations under discussion here. The statute generally requires that 
an M+C organization establish ``reasonable procedures,'' under an 
agreement between a physician and the organization, governing the 
participation of a physician under an M+C plan. It then specifies that 
these procedures include--
     Providing notice of the rules regarding participation;
     Providing written notice of participation decisions that 
are adverse to physicians; and
     Providing a process within the organization for appealing 
adverse decisions.
    These requirements represented new Federal requirements for 
Medicare contracting organizations. Thus, as discussed in our June 26, 
1998, interim final rule (63 FR 34967), we consulted a variety of 
sources in developing the regulations necessary to implement the 
provisions of section 1852(j)(1). Under our broad authority under 
section 1856(b)(1) to establish M+C standards by regulation, the 
implementing regulations included several discretionary provisions. 
Foremost among these were the following:
     Specification of the types of participation rules that are 
subject to the disclosure, notification, and appeal rights established 
by the statute.
     Application of the provider participation procedures to 
practitioners other than physicians.
     Requiring advance notification of material changes in a 
broad range of provider participation rules.
     Establishment of specific procedures, and applicability 
rules, relating to the appeal of adverse decisions involving 
participation rules.
    We received 30 comments on these issues. Eighteen commenters, 
mainly beneficiary advocacy groups or representatives of physicians and 
other health care professionals, generally supported the new provider 
participation rules. Twelve commenters, generally representing managed 
care organizations, expressed opposition to the changes. Discussed 
below are the comments we received on these issues and our responses to 
those comments.
    Comment: Noting that the statute generally applies the standards 
for provider relationships with M+C organizations only to physicians, 
four commenters objected to our decision to apply these protections to 
all health care professionals. They believe that this expansion 
contradicts the clear intent of the statute and imposes an unwarranted 
burden on M+C organizations. Other commenters strongly supported the 
decision to apply the provider participation rules to both physicians 
and other health care professionals. Several commenters requested that 
the list of providers to whom the participation rules apply be expanded 
to include institutional providers, such as hospitals, nursing homes, 
and Federally qualified community health centers (FQHCs), as well as 
pharmacies.
    Response: As commenters noted, the requirements of sections 
1852(j)(1) and (j)(2) of the Act, concerning provider participation 
procedures and consultation in medical policies, respectively, apply 
specifically to plan relationships with physicians. In the interim 
final rule, we extended these provisions in Secs. 422.202 and 422.204 
of the M+C regulations to include health care professionals other than 
physicians. The list of health care professionals generally encompassed 
all licensed, independent practitioners for whom coverage for services 
could be provided under an M+C plan.
    We have carefully reviewed both the statute itself and the comments 
on this issue. We note that section 1852(j)(3) of the Act, concerning 
prohibiting interference with provider advice to enrollees, is not 
limited to physicians but applies to all health care professionals. 
Thus, an argument can be made that the limited applicability of the 
provisions in sections 1851(j)(1) and (j)(2) to physicians clearly 
suggests that the Congress intended to exclude health care 
professionals other than physicians from the protections of these 
provisions. Based on this review, we have decided to revise the 
regulations to comply with the strict statutory construction of these 
provisions. Thus, we are revising the appropriate provisions of 
Secs. 422.202 and 422.204 so that the applicable notice and appeal 
rights and consultation requirements will apply only to physicians, as 
defined under section 1861(r) of the Act.
    We recognize that many commenters believe that it is appropriate to 
extend the statutory provider participation protections to health care 
professionals other than physicians, and that many States as well as 
the NCQA have adopted standards that apply these rules to all 
``practitioners.'' Moreover, we continue to believe that section 
1856(b)(1) clearly provides the Secretary with the authority to 
establish these standards. However, given that the introduction of the 
M+C provider participation requirements reportedly may prove difficult 
for many M+C organizations to implement, we have become convinced that 
the most prudent policy at this time is to limit the applicability of 
these provisions to physicians, as specified in the statute.
    Comment: Several commenters objected to what they perceive as the 
expansive interpretation under Sec. 422.202(a) of what constitute 
``participation rules.'' They believe that the examples included under 
Sec. 422.202(a)(1) of what are considered ``participation rules'' are 
much broader than those intended under the BBA. These commenters 
indicated that the breadth of the participation rules, particularly 
when combined with the provider appeal rights provisions under 
Sec. 422.204(c), place unreasonable and unwarranted administrative 
burdens on M+C organizations without producing any concomitant benefits 
for M+C enrollees. Specifically, they asserted that the regulatory 
interpretation of ``participation rules'' includes most of an 
organization's administrative policies

[[Page 7976]]

and procedures, rather than only those that directly related to 
decisions about provider participation.
    Response: As noted above, section 1852(j) of the Act requires that 
a plan have reasonable procedures that include providing written notice 
of the rules regarding participation. Because neither the statute nor 
the existing part 417 regulations, which did not include provider 
participation procedures, provide guidance as to what is meant by 
``participation rules,'' we looked to other sources. The examples of 
participation rules that are established under Sec. 422.202(a)(1) stem 
largely from section 6 of the NAIC's Managed Care Plan Network Adequacy 
Model Act. (This model act focuses on the establishment of written 
agreements establishing participation standards between managed care 
plans and participating providers.) As stated in the preamble of the 
June 26, 1998, interim final rule, our intent was to adopt a ``broad 
definition of procedures that might affect participation'' including 
all procedures that might affect how a provider would participate in a 
plan (63 FR 35000).
    Based on our review of the comments, we agree that this 
interpretation is unnecessarily expansive. We believe that it is 
preferable to adopt a narrower interpretation of what constitute 
``rules regarding participation'' that would focus on whether a 
physician can participate under a given M+C plan. Thus, we are revising 
Sec. 422.202(a)(1) to indicate that the written notice of the rules of 
participation will include terms of payment, credentialing policies, 
and other rules directly related to participation decisions. We are 
deleting from the regulations reference to other administrative 
policies and programs that are unlikely to directly affect a 
physician's participation, such as utilization review procedures, data 
reporting, confidentiality policies, etc. We believe that this change 
will ensure that the related requirements under Sec. 422.202(a), such 
as the notice of material changes and the appeal rights for adverse 
decisions cannot be construed to include policies that are not directly 
related to participation decisions. We would still expect an M+C 
organization to distribute full information about its administrative 
policies to participating physicians, as well as to other participating 
health care professionals and providers, and these changes would not 
affect the organization policies subject to the consultation 
requirements of Sec. 422.202(b).
    Comment: In view of our interpretation of the scope of 
participation rules, several commenters suggested that an M+C 
organization should not be required to disclose its participation rules 
to all health care professionals, but only to indicate that the rules 
existed and would be made available upon request. These commenters also 
indicated that requiring M+C organizations to disclose their 
participation rules to prospective providers would result in 
dissemination of what they consider proprietary information.
    Response: As discussed above, we have narrowed both the 
applicability and the scope of the provider participation procedures 
required under Sec. 422.202(a). We continue to believe, as noted in the 
June 26, 1998 interim final rule (63 FR 35000), that advance disclosure 
of the required participation rules to potential participating 
physicians is the best way to reduce subsequent appeals. However, we 
note that the regulations only require that an M+C organization have 
reasonable procedures in this regard. We do not believe that the policy 
of disseminating participation rules upon request is inherently 
unreasonable, but we also do not intend to mandate the release of what 
an organization considers proprietary information.
    Comment: Commenters both supported and opposed the requirement 
under Sec. 422.202(a)(2) that a plan's procedures include providing 
health care professionals with written notice of material changes in 
participation rules before those rules take effect. Again, commenters 
asserted that the scope of this requirement was overly broad, and 
recommended that the notification be limited to changes that affect the 
terms or conditions of a health care professional's participation. 
Three commenters suggested that changes mandated through Federal law or 
regulation should be exempted from the advance notification 
requirement. Another commenter asked whether an M+C organization was 
required to obtain signatures from health care professionals to 
acknowledge receipt of the notice.
    Response: We believe that reductions in the scope of what 
constitute participation rules should negate most of these objections. 
We agree that in the unlikely event that immediate changes are mandated 
through Federal law or regulation, an organization should be exempt 
from the requirement that written notice be provided before the changes 
are put into effect. There is no requirement that an organization 
obtain signatures acknowledging receipt of a notice of changes, 
although an organization is free to make this policy part of its 
participation procedures.
    Comment: Commenters asked for an explanation of the meaning of a 
``material'' change under Sec. 422.202(a)(2) and of an ``adverse'' 
decision under Sec. 422.202(a)(3).
    Response: We believe that these are widely used terms that are 
generally understood, and do not believe that it would be appropriate 
to specify more detailed criteria as to how these terms should be 
applied. We believe that M+C organizations will be in the best position 
to determine whether a change in rules would be significant enough to 
be considered ``material'' as this term is generally defined. We assume 
that any change that could affect participation decisions would be 
material. Similarly, it should be fairly clear whether a change would 
be viewed as adversely affecting a physician.
    Comment: The requirement under Sec. 422.202(a)(4) that an M+C 
organization's provider participation procedures include establishment 
of a process for appealing adverse decisions also provoked mixed 
responses, as did the accompanying requirement that the appeals process 
for termination decisions conform to the requirements of 
Sec. 422.204(c). One commenter suggested that we clarify under 
Sec. 422.202(a)(4) that the requirement for an appeals process only 
applies in cases of adverse ``participation'' decisions, not any 
decision that a health care professional views as adverse. 
Approximately 10 commenters strongly supported these requirements, with 
several requesting that we add more specificity to the appeals 
procedures required in termination cases, including an opportunity for 
a terminated health care professional to obtain a reconsideration by 
HCFA of a denied appeal.
    Other commenters objected to various aspects of these requirements, 
including both the scope of their applicability and what they perceived 
as the overly prescriptive detail of the appeal procedures in 
termination cases. One particular point of contention was the 
application of the appeals requirements to denials of an initial 
application to participate. Commenters believe requiring M+C 
organizations to convene hearing panels whenever a health care 
professional is denied participation under a plan was unreasonable, 
especially if we have already approved the plan network's adequacy.
    Several commenters suggested that we make a distinction between (1) 
situations where an organization refuses to accept a health care 
professional's application to participate under a plan

[[Page 7977]]

(presumably because it already has sufficient practitioners of a given 
type) and (2) situations where the organization denies participation to 
a specific health care professional based on review of an application, 
while continuing to accept applications generally. Other commenters 
asserted that contract nonrenewals and expirations should not be 
considered denials, citing parallels with our contract nonrenewal 
policies; one of these commenters also noted that we should permit 
``mutual consent'' terminations without the comprehensive disclosure 
and notification material required under Sec. 422.204(c)(1). One 
commenter suggested that appeal rights should only apply when a 
termination is based on quality of care issues, not when a termination 
was simply a ``business decision.''
    Response: In light of our narrowed definition of participation 
rules, we agree to the suggestion that ``participation'' be inserted 
between ``adverse'' and ``decisions'' in Sec. 422.202(a)(4). We also 
agree that it would not be appropriate to grant appeal rights to 
physicians who have never been accepted into the M+C organization's 
network, and that the Congress intended only that an organization grant 
rights to its current contracting physicians. This interpretation is 
supported by the fact that section 1852(j)(1) refers to the required 
procedures as being ``under an agreement between a physician and an 
organization.'' To clarify this point, we have revised 
Sec. 422.204(c)(1) by deleting the reference to ``denials'' of an 
agreement.
    In support of the contention that physician contract nonrenewals 
and expirations should not be subject to appeal, commenters erroneously 
stated that this is the case with respect to HCFA non-renewal 
decisions. In fact, as set forth in subpart N of part 422, these 
decisions are subject to appeal. With respect to ``mutual consent'' 
terminations, to the extent the physician is voluntarily leaving the 
organization's network, we agree that appeal rights do not have to be 
provided.
    Finally, we have not adopted the suggestion to limit appeal rights 
to situations where terminations are based on quality of care issues. 
We believe that the elimination of appeal rights for any termination 
characterized as a ``business decision'' would undermine the intent of 
the provider protection provisions.
    Comment: As noted above, several commenters recommended that we add 
more specificity to the appeals procedures required in termination 
cases, including an opportunity for a terminated health care 
professional to obtain a reconsideration of a denied appeal before 
HCFA. Other commenters objected to what they perceived as the overly 
prescriptive detail of the appeal procedures in termination cases. One 
commenter suggested that although it supported the overall principle 
that requires appeals for adverse participation decisions, it was 
concerned that the detailed due process requirements established under 
Sec. 422.204(c) may be overly burdensome.
    Other commenters strongly objected to both Sec. 422.204(c)(1), 
which spells out the required elements of a notification of denial, 
suspension, or termination, and to Sec. 422.204(c)(2), which provides 
for a hearing panel composed of a majority of ``peers'' of the affected 
health care professional. They particularly objected to the release of 
``standards and profiling data'' and the numbers and mix of health care 
professionals needed by the plan, and indicated that these required 
elements would prove unduly burdensome, intrusive, and often irrelevant 
to a given case. These commenters also asserted that the use of peer 
panels was unnecessary and difficult to implement, particularly when 
nonphysicians were involved. Again, a number of commenters representing 
health care professionals supported these requirements in their 
entirety.
    Response: Again, the reductions in the scope and applicability of 
participation procedures under subpart E of part 422 should reduce 
concerns that the related due process requirements will be overly 
burdensome. In particular, we believe that the requirement to convene a 
hearing panel composed of a majority of peers of the affected physician 
should not prove difficult to implement. We do not believe it is 
appropriate for us to establish an independent process for resolving 
participation disputes between physicians and M+C organizations. Such a 
process would constitute unwarranted interference in the business 
relationships between M+C organizations and physicians.
    We agree that it may not be necessary in all cases for an M+C 
organization to include in its written notice to a physician 
information about the standards and profiling data used to evaluate the 
physician and the numbers and mix of physicians that the organization 
needs. Therefore, we are revising Sec. 422.204(c)(1) to indicate that 
this information must be included in the notification of a decision to 
suspend or terminate an agreement with a physician only to the extent 
that it is relevant to the decision.

G. Risk Adjustment and Encounter Data (Secs. 422.256(d) and 422.257)

    Section 1853 of the Act sets forth the requirements related to 
calculating the annual capitation rates for the M+C program. These 
provisions were discussed in detail in the June 26, 1998 interim final 
rule (63 FR 35004). Effective by no later than January 1, 2000, section 
1853(a)(3)(C) of the Act requires that the Secretary implement a risk-
adjusted payment methodology that accounts for variations in per capita 
cost based on health status and other demographic factors. Section 
1853(a)(3)(B) addresses the collection of encounter data from M+C 
organizations that are needed to implement a risk adjustment 
methodology. The regulatory requirements needed to implement these BBA 
provisions are set forth in subpart F of part 422. We published a 
notice in the Federal Register on September 8, 1998, soliciting further 
recommendations about the methodology for implementing risk-adjusted 
payments (63 FR 47506).
    We received about 20 comments from managed care industry 
representatives and others recommending that we delay or phase in the 
adoption of risk-adjusted M+C payments. Many of these commenters also 
expressed concern over our plans to collect encounter data. We have 
considered these comments, as well as those received in response to the 
September 8, 1998, notice. As required under section 1853(b)(2) of the 
Act, we released on January 15, 1999, the Advance Notice of 
Methodological Changes for CY 2000 Medicare+Choice Payment Rates. In 
this notice, we describe the risk adjustment methodology that will be 
employed in determining M+C payments in 2000, including the transition 
strategy that we have adopted as part of that methodology. We also 
respond in the notice to the major issues raised in the comments that 
we have received on risk adjustment. We will, however, respond formally 
to the comments in the comprehensive M+C rule to be published later in 
1999. The January 15, 1999, notice is available on the HCFA Web site 
(http://www.hcfa.gov/stats/hmorates/45d1999/45day.htm).

H. May 1 Deadline for ACR Submissions and Enrollment Capacity Limits 
(Sec. 422.306(a))

    Consistent with section 1854(a) of the Act, an M+C organization 
must submit by May 1 of each year an ACR proposal for each plan it 
wishes to offer in the following year. Regulations

[[Page 7978]]

implementing this requirement are set forth under Sec. 422.306. The ACR 
submission must identify the service area and enrollment capacity of 
each plan. As discussed in the June 26, 1998 interim final rule, these 
requirements will apply for contract periods beginning on or after 
January 1, 2000.
    Comment: Several commenters representing managed care organizations 
indicated that they believe that the May 1 deadline for ACR submissions 
is too early. They noted that this deadline is 4 months earlier than 
the deadline under section 1876 and cited the new ACR proposal 
methodology, difficulties in collecting necessary data, and pricing 
uncertainties as reasons why the May 1 deadline is unreasonable. 
Commenters suggested moving the date for ACR submissions back to either 
July 1 or August 1, or keeping the May 1 deadline but allowing a 
subsequent opportunity to make limited modifications to benefits, 
premiums, or copayments. Commenters also inquired as to what if any 
changes we intend to make regarding implementation of our service area 
policy.
    Response: Although we recognize the difficulties inherent to 
estimating the costs of a benefit package for 2000 based on at most 4 
months of experience under the 1999 benefit package, the May 1 deadline 
stems from section 1854(a) of the Act and thus is not discretionary. 
(We note that the President's FY 2000 budget includes a proposal that 
would permit us to extend the deadline for ACR submissions until July 
1.) We intend to issue instructions concerning implementation of 
service area policy and other requirements for 2000 in advance of the 
May 1, 1999, deadline for ACR submissions. We can assure M+C 
organizations that we will not introduce any policy modifications via 
the subsequent comprehensive M+C final rule that would impose any 
significant new administrative requirements on M+C plan operations 
before the year 2000 ACR submission and review cycle.
    Comment: Commenters indicated that requiring an organization to 
establish a capacity limit by May 1 was very difficult, given that it 
may be impossible to confirm the participation of provider groups at 
that time. They asked that this deadline be extended.
    Response: Again, section 1854(a)(1)(B) of the Act specifies that an 
M+C organization must inform HCFA of any limit on enrollment capacity 
by May 1 of a given year. However, we recognize the possibility of 
changing circumstances after that time, and would not want an 
organization to limit its enrollment unnecessarily or be forced to 
accept enrollees without being able to ensure proper access to care. 
Therefore, we intend to establish an administrative process for 
reviewing requests for enrollment capacity waivers. Further guidance in 
this regard is under development and will be issued as soon as 
possible.

I. Compliance With Rehabilitation Act of 1973 (Secs. 422.502(h) and 
422.110(c))

    Sections 422.502(h) and 422.110(c) specify several anti-
discrimination statutes with which an M+C organization must comply, 
including the Civil Rights Act of 1964, Age Discrimination Act of 1975, 
and The Americans with Disabilities Act.
    Comment: One commenter noted that the Rehabilitation Act of 1973 
had been inadvertently omitted from the lists of applicable anti-
discrimination statutes.
    Response: We agree with the commenter and will add the 
Rehabilitation Act of 1973 to the required statutes listed under 
Secs. 422.502(h) and 422.110(c).

III. Changes to the M+C Regulations

    For the convenience of the reader, listed below are all changes to 
the M+C regulations that are set forth in this final rule:
     Section 422.60(a) has been revised to clarify that an 
individual enrolled in an M+C plan has a right to a special election 
period under any of the circumstances described in Sec. 422.62(b)(1) 
through (b)(4). Thus, an individual enrolled in an M+C plan that 
withdraws or is terminated from the M+C program has an opportunity for 
a special election period among other M+C plans in the affected area.
     In Secs. 422.110(c) and 422.502(h)(iii), we have added the 
Rehabilitation Act of 1973 to the list of anti-discrimination laws with 
which an M+C organization must comply.
     We have revised Sec. 422.111(d) to specify that for rule 
changes that will become effective on January 1 of each year, an M+C 
organization must notify enrollees by October 15 of the previous year. 
The existing 30-day notification rule still applies for midyear 
changes.
     We have revised Sec. 422.112(a)(4) and (b)(1) through 
(b)(3) to eliminate the requirement that a treatment plan may be 
prepared and updated only by a primary care provider (PCP) and to 
clarify how and when care is coordinated.
     We have deleted Sec. 422.112(a)(5), which set forth 
separate notification requirements for the involuntary termination of 
plans and specialists.
     We have revised Sec. 422.112(b)(5)(i) to specify that an 
organization must make a ``best-effort'' attempt to conduct required 
initial assessments, including following up on unsuccessful attempts to 
contact an enrollee.
     We have made revisions throughout Secs. 422.202 and 
422.204 to limiting the applicability of the provider participation 
requirements to physicians.
     Under Sec. 422.202(a)(1), we have adopted a less expansive 
interpretation of what constitute participation rules, basically 
limiting the notification requirements associated with participation 
rules to policies directly related to participation decisions.
     Section 422.204(c) has been revised to indicate that the 
availability of the provider appeals process applies only to cases 
involving suspension or termination of participation privileges, rather 
than including initial denials of an application to participate, and to 
clarify what information must be included in notifications of appeal 
rights.

IV. Collection of Information Requirements--Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 30-day notice in the Federal Register and solicit 
public comment when a collection of information requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. To fairly evaluate whether an information collection should 
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comments on the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
     The accuracy of the agency's estimate of the information 
collection burden;
     The quality, utility, and clarity of the information to be 
collected; and
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Therefore, we are soliciting public comment on each of these issues 
for the information collection requirement discussed below.
    The following sections of this document contain revised information 
collection requirements:

Section 422.202  Participation Procedures

    Section 422.202(a) requires an M+C organization that operates a 
coordinated care plan or network MSA plan to provide for the 
participation of

[[Page 7979]]

individual physicians, and the management and members of groups of 
physicians. To accomplish this, M+C plans must establish and maintain 
procedures set forth in this section and provide written notice of--(1) 
rules of participation including terms of payment, credentialing, and 
other rules directly related to participation decisions; (2) material 
changes in participation rules before the changes are put into effect; 
and (3) participation decisions that are adverse to physicians' 
participation.
    The disclosure requirements associated with this section have been 
revised and the associated burden reduced by requiring that only 
contracting physicians and not all contracting individual health care 
professionals receive written notice of the streamlined disclosure 
requirements summarized above.
    In the ``Collection of Information Requirements'' section of the 
June 26, 1998, interim final rule (63 FR 34967), we noted that we 
believed the above requirements are reasonable and customary business 
practices and the burden of meeting these requirements is exempt from 
the PRA as stipulated under 5 CFR 1320.3(b)(2). Therefore, we are 
retaining the 1 token hour of burden assigned to these requirements.

Section 422.204  Provider Credentialing and Provider Rights

    Section 422.204(c)(1) requires an M+C organization that suspends or 
terminates an agreement under which the physician provides services to 
M+C plan enrollees must give the affected individual written notice of 
the reasons for the action, including, if relevant, the standards and 
profiling data used to evaluate the physician and the numbers and mix 
of physicians needed by the M+C organization, and the affected 
physician's right to appeal the action and the process and timing for 
requesting a hearing.
    The disclosure requirements associated with this section have been 
revised and the associated burden reduced by requiring that only 
contracting physicians and not all contracting individual health care 
professionals receive written notice of the disclosure requirements 
summarized above.
    In the ``Collection of Information Requirements'' section of the 
June 26, 1998, interim final rule, we estimated the burden associated 
with these requirements to be on average 10 hours per M+C organization 
on an annual basis. While the number of necessary disclosures has been 
reduced by requiring disclosures only to contracting physicians, the 
scope of the disclosure requirement has been expanded to include the 
disclosure, if relevant, of the standards and profiling data used to 
evaluate the physician and the numbers and mix of physicians needed by 
the M+C organization. Therefore, we are retaining the previous estimate 
of 10 hours of annual burden per M+C organization.
    Section 422.204 (c)(3) requires an M+C organization that suspends 
or terminates a contract with a physician because of deficiencies in 
the quality of care to give written notice of that action to licensing 
or disciplinary bodies or to other appropriate authorities.
    The disclosure requirements associated with this section have been 
revised and the associated burden reduced by requiring that only 
suspended or terminated physicians be reported by the M+C organization 
to the appropriate licensing bodies, disciplinary bodies, or other 
appropriate authorities.
    In the ``Collection of Information Requirements'' section of the 
June 26, 1998, interim final rule, we estimated that on average the 
annual burden associated with this requirement to be 2.25 hours per M+C 
organization. While the number of necessary disclosures has been 
reduced by requiring disclosures related only to contracting 
physicians, as previously noted, we have no exact data available to 
estimate how often this situation might occur. Therefore, we are 
retaining the previous estimated average burden of 2.25 hours per M+C 
organization.
    We have submitted a copy of this final rule to OMB for its review 
of the revised information collection requirements in Secs. 422.202 and 
422.204. These revised requirements are not effective until they have 
been approved by OMB.
    If you have any comments on any of these information collection and 
record keeping requirements, please mail the original and 3 copies 
within 30 days of this publication date directly to the following:

Health Care Financing Administration, Office of Information Services, 
Information Technology Investment Management Group, Division of HCFA 
Enterprise Standards, Room N2-14-13, 7500 Security Boulevard, 
Baltimore, MD 21244-1850. Attn: John Burke HCFA-1030-FC.
    And,
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Allison Herron Eydt, HCFA Desk Officer.

V. Regulatory Impact Statement

    We have examined the impact of this final rule as required by 
Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Public 
Law 96-354). Executive Order 12866 directs agencies to assess all costs 
and benefits of available regulatory alternatives and, when regulation 
is necessary, to select regulatory approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety effects, distributive impacts, and equity). The RFA requires 
agencies to analyze options for regulatory relief of small businesses. 
For purposes of the RFA, small entities include small businesses, non-
profit organizations, and governmental agencies. Most hospitals and 
most other providers and suppliers are small entities, either by 
nonprofit status or by having revenues of $5 million or less annually. 
Small entities that are providers will be affected by this rule, but we 
do not expect that effect to be of an economically significant nature.
    The Unfunded Mandate Reform Act of 1995, in section 202, requires 
that agencies prepare an assessment of anticipated costs and benefits 
before proposing any rule that may result in an annual expenditure by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million. This rule has no consequential effect 
on State, local, or tribal governments. The impact on the private 
sector is well below the threshold.
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis for any rule that may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 604 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside a 
Metropolitan Statistical Area and has fewer than 50 beds.

Summary of the Proposed Rule

    As discussed in detail above, this rule sets forth limited changes 
to the Medicare+Choice regulations published in our June 26, 1998 
interim final rule (63 FR 34968). Those regulations implemented section 
4001 of the Balanced Budget Act of 1997, which established the 
Medicare+Choice program. We note that we received a number of comments 
on the impact analysis contained in the June 26, 1998 interim final 
rule. Many of the commenters asserted that our analysis did not fully 
take into account the costs

[[Page 7980]]

associated with various aspects of the M+C regulations, including, for 
example, the quality standards and the provider participation 
procedures. One commenter asserted that the costs of discretionary 
provisions such as these would be between $1 and 2 million for an M+C 
organization with 35,000 enrollees. Other commenters acknowledged that 
it was difficult to quantify the costs of various facets of the M+C 
program, but expressed the belief that the new regulations would impose 
a significant and costly administrative burden on M+C organizations.
    We recognize that greater quantification in our estimates of the 
impact of the M+C regulations on managed care organizations is 
desirable. We note, however, that only one commenter offered any 
financial estimate of the costs associated with the M+C provisions, and 
that estimate was completely unsubstantiated. Thus, we continue to 
solicit any quantitative data that can help to assess the overall costs 
of complying with the regulations, or the costs associated with any 
particular provisions.
    At this time, we are in the process of developing a statistically-
based model for evaluating the impact of managed care policies on M+C 
organizations; however, this model is likely to focus heavily on 
payment rates and risk adjustment methodology, rather than 
administrative burden. We intend to respond more fully to comments on 
the overall impact of the M+C program and its implementing regulations 
in the comprehensive final rule to be published later this year.
    Again, this final rule makes only limited changes to the provisions 
set forth in our June 26, 1998 interim final rule. These changes 
include:
     Adoption of a less expansive interpretation of what 
constitute participation rules, basically limiting the notification 
requirements associated with participation rules to policies directly 
related to participation decisions.
     Limiting the applicability of the provider participation 
requirements to physicians.
     Clarifying that the availability of the provider appeals 
process applies only to cases involving suspension or termination of 
participation privileges, rather than including initial denials of an 
application to participate.
     Specifying that the requirement for an initial assessment 
within 90 days of enrollment may be considered met for patients who 
``age in'' to a plan or who switch plans, but remain under the care of 
the same primary care provider. We also clarify that an M+C 
organization may choose the form of the initial assessment.
     Clarifying that individuals enrolled in an M+C plan that 
withdraws or is terminated from the M+C program have an opportunity for 
a special election period among other M+C plans in the affected area, 
effective July 1, 1998.
     Elimination of the separate notification requirements for 
the involuntary termination of specialists.
     Revising the coordination of care requirements to clarify 
how and when care is coordinated and not limit the coordination 
function to primary care providers.
    For the most part, we do not believe that these changes will result 
in any significant changes in the economic impact of the M+C 
regulations. The reductions in the scope and applicability of the 
provider participation procedures are the only provisions that we 
believe have any potential for measurable impact. Although we do not 
expect the volume of provider appeals to result in substantial costs 
for M+C organizations, clearly, these changes can only reduce the 
associated costs. Similarly, we anticipate the that the changes 
concerning notification rules for involuntary terminations of 
specialists, as well as the clarifications regarding coordination of 
care policy and completion of the initial assessments, have the 
potential for only incremental cost implications. Thus, we believe that 
this final rule clearly does not constitute a major rule under 
Executive Order 12866 or as defined in Title 5, U.S. Code, section 
804(2).
    In accordance with Executive Order 12866, this regulation was 
reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 422

    Health maintenance organizations (HMO), Medicare+Choice, Provider 
sponsored organizations (PSO).

    42 CFR chapter IV part 422 is amended as set forth below.

PART 422--MEDICARE+CHOICE PROGRAM

    1. The authority citation for part 422 continues to read as 
follows:

    Authority: Secs. 1102, 1851 through 1857, 1859, and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395w-21 through 1395w-27, and 
1395hh ).

    2. In Sec. 422.60, paragraph (a)(1) is revised to read as follows:


Sec. 422.60  Election process.

    (a) Acceptance of enrollees: General rule. (1) Except for the 
limitations on enrollment in an M+C MSA plan provided by 
Sec. 422.62(d)(1) and except as specified in paragraph (a)(2) of this 
section, each M+C organization must accept without restriction (except 
for an M+C RFB plan as provided by Sec. 422.57) individuals who are 
eligible to elect an M+C plan that the M+C organization offers and who 
elect an M+C plan during initial coverage election periods under 
Sec. 422.62(a)(1), annual election periods under Sec. 422.62(a)(2), and 
under the circumstances described in Sec. 422.62(b)(1) through (b)(4).
* * * * *
    3. In Sec. 422.110, paragraph (c) is revised to read as follows:


Sec. 422.110  Discrimination against beneficiaries prohibited.

* * * * *
    (c) Plans are required to observe the provisions of the Civil 
Rights Act, Age Discrimination Act, Rehabilitation Act of 1973, and 
Americans with Disabilities Act (see Sec. 422.502(h)).
    4. In Sec. 422.111, paragraph (d) is revised to read as follows:


Sec. 422.111  Disclosure requirements.

* * * * *
    (d) Changes in rules. If an M+C organization intends to change its 
rules for an M+C plan, it must:
    (1) Submit the changes for HCFA review under the procedures of 
Sec. 422.80.
    (2) For changes that take effect on January 1, notify all enrollees 
by the previous October 15.
    (3) For all other changes, notify all enrollees at least 30 days 
before the intended effective date of the changes.
* * * * *
    5. Section 422.112 is revised to read as follows:


Sec. 422.112  Access to services.

    (a) Rules for coordinated care plans and network M+C MSA plans. An 
M+C organization that offers an M+C coordinated care plan or network 
M+C MSA plan may specify the networks of providers from whom enrollees 
may obtain services if the M+C organization ensures that all covered 
services, including additional or supplemental services contracted for 
by (or on behalf of) the Medicare enrollee, are available and 
accessible under the plan. To accomplish this, the M+C organization 
must meet the following requirements:
    (1) Provider network. Maintain and monitor a network of appropriate 
providers that is supported by written agreements and is sufficient to 
provide adequate access to covered services to meet the needs of the 
population served. These providers are typically utilized in

[[Page 7981]]

the network as primary care providers (PCPs), specialists, hospitals, 
skilled nursing facilities, home health agencies, ambulatory clinics, 
and other providers.
    (2) PCP panel. Establish a panel of PCPs from which the enrollee 
may select a PCP.
    (3) Specialty care. Provide or arrange for necessary specialty 
care, and in particular give women enrollees the option of direct 
access to a women's health specialist within the network for women's 
routine and preventive health care services provided as basic benefits 
(as defined in Sec. 422.2), notwithstanding that the M+C organization 
maintains a PCP or some other means for continuity of care.
    (4) Serious medical conditions. Ensure that for each plan, the M+C 
organization has in effect HCFA-approved procedures that enable the M+C 
organization, through appropriate health care professionals, to--
    (i) Identify individuals with complex or serious medical 
conditions;
    (ii) Assess those conditions, and use medical procedures to 
diagnose and monitor them on an ongoing basis; and
    (iii) Establish and implement a treatment plan that--
    (A) Is appropriate to those conditions;
    (B) Includes an adequate number of direct access visits to 
specialists consistent with the treatment plan;
    (C) Is time-specific and updated periodically; and
    (D) Ensures adequate coordination of care among providers.
    (5) Service area expansion. If seeking a service area expansion for 
an M+C plan, demonstrate that the number and type of providers 
available to plan enrollees are sufficient to meet projected needs of 
the population to be served.
    (6) Credentialed providers. Demonstrate to HCFA that its providers 
in an M+C plan are credentialed through the process set forth at 
Sec. 422.204(a).
    (7) Written standards. Establish written standards for the 
following:
    (i) Timeliness of access to care and member services that meet or 
exceed standards established by HCFA. Timely access to care and member 
services within a plan's provider network must be continuously 
monitored to ensure compliance with these standards, and the M+C 
organization must take corrective action as necessary.
    (ii) Policies and procedures (coverage rules, practice guidelines, 
payment policies, and utilization management) that allow for individual 
medical necessity determinations.
    (iii) Provider consideration of beneficiary input into the 
provider's proposed treatment plan.
    (8) Hours of operation. Ensure that--
    (i) The hours of operation of its M+C plan providers are convenient 
to the population served under the plan and do not discriminate against 
Medicare enrollees; and
    (ii) Plan services are available 24 hours a day, 7 days a week, 
when medically necessary.
    (9) Cultural considerations. (i) Ensure that services are provided 
in a culturally competent manner to all enrollees, including those with 
limited English proficiency or reading skills, diverse cultural and 
ethnic backgrounds, and physical or mental disabilities.
    (ii) Provide coverage for emergency and urgent care services in 
accordance with paragraph (c) of this section.
    (b) Rules for all M+C organizations to ensure continuity of care. 
The M+C organization must ensure continuity of care and integration of 
services through arrangements that include, but are not limited to the 
following--
    (1) Policies that specify under what circumstances services are 
coordinated and the methods for coordination;
    (2) Offering to provide each enrollee with an ongoing source of 
primary care and providing a primary care source to each enrollee who 
accepts the offer;
    (3) Programs for coordination of plan services with community and 
social services generally available through contracting or 
noncontracting providers in the area served by the M+C plan, including 
nursing home and community-based services; and
    (4) Procedures to ensure that the M+C organization and its provider 
network have the information required for effective and continuous 
patient care and quality review, including procedures to ensure that--
    (i) The M+C organization makes a ``best-effort'' attempt to conduct 
an initial assessment of each enrollee's health care needs, including 
following up on unsuccessful attempts to contact an enrollee, within 90 
days of the effective date of enrollment;
    (ii) Each provider, supplier, and practitioner furnishing services 
to enrollees maintains an enrollee health record in accordance with 
standards established by the M+C organization, taking into account 
professional standards; and
    (iii) There is appropriate and confidential exchange of information 
among provider network components.
    (5) Procedures to ensure that enrollees are informed of specific 
health care needs that require follow-up and receive, as appropriate, 
training in self-care and other measures they may take to promote their 
own health; and
    (6) Systems to address barriers to enrollee compliance with 
prescribed treatments or regimens.
    (c) Special rules for all M+C organizations for emergency and 
urgently needed services--(1) Coverage. The M+C organization covers 
emergency and urgently needed services--
    (i) Regardless of whether the services are obtained within or 
outside the M+C organization; and
    (ii) Without required prior authorization.
    (2) Financial responsibility. The M+C organization may not deny 
payment for a condition--
    (i) That is an emergency medical condition as defined in 
Sec. 422.2; or
    (ii) For which a plan provider or other M+C organization 
representative instructs an enrollee to seek emergency services within 
or outside the plan.
    (3) Stabilized condition. The physician treating the enrollee must 
decide when the enrollee may be considered stabilized for transfer or 
discharge, and that decision is binding on the M+C organization.
    (4) Limits on charges to enrollees. For emergency services obtained 
outside the M+C plan's provider network, the M+C organization may not 
charge the enrollee more than $50 or what it would charge the enrollee 
if he or she obtained the services through the M+C organization, 
whichever is less.
    6. Section 422.202 is revised to read as follows:


Sec. 422.202  Participation procedures.

    (a) Notice and appeal rights. An M+C organization that operates a 
coordinated care plan or network MSA plan must provide for the 
participation of individual physicians, and the management and members 
of groups of physicians, through reasonable procedures that include the 
following:
    (1) Written notice of rules of participation including terms of 
payment, credentialing, and other rules directly related to 
participation decisions.
    (2) Written notice of material changes in participation rules 
before the changes are put into effect.
    (3) Written notice of participation decisions that are adverse to 
physicians.
    (4) A process for appealing adverse participation decisions, 
including the right of physicians to present information and their 
views on the decision. In the case of a termination or suspension of a 
provider contract by the M+C organization, this process must conform to 
the rules in Sec. 422.204(c).
    (b) Consultation. The M+C organization must consult with the

[[Page 7982]]

physicians who have agreed to provide services under an M+C plan 
offered by the organization, regarding the organization's medical 
policy, quality assurance program, and medical management procedures 
and ensure that the following standards are met:
    (1) Practice guidelines and utilization management guidelines--
    (i) Are based on reasonable medical evidence or a consensus of 
health care professionals in the particular field;
    (ii) Consider the needs of the enrolled population;
    (iii) Are developed in consultation with contracting physicians; 
and
    (iv) Are reviewed and updated periodically.
    (2) The guidelines are communicated to providers and, as 
appropriate, to enrollees.
    (3) Decisions with respect to utilization management, enrollee 
education, coverage of services, and other areas in which the 
guidelines apply are consistent with the guidelines.
    (c) An M+C organization that operates an M+C plan through 
subcontracted physician groups must provide that the participation 
procedures in this section apply equally to physicians within those 
subcontracted groups.
    7. In Sec. 422.204, paragraph (c) is revised to read as follows:


Sec. 422.204  Provider credentialing and provider rights.

* * * * *
    (c) Suspension or termination of contract. An M+C organization that 
operates a coordinated care plan or network MSA plan providing benefits 
through contracting providers must meet the following requirements:
    (1) Notice to physician. An M+C organization that suspends or 
terminates an agreement under which the physician provides services to 
M+C plan enrollees must give the affected individual written notice of 
the following:
    (i) The reasons for the action, including, if relevant, the 
standards and profiling data used to evaluate the physician and the 
numbers and mix of physicians needed by the M+C organization.
    (ii) The affected physician's right to appeal the action and the 
process and timing for requesting a hearing.
    (2) Composition of hearing panel. The M+C organization must ensure 
that the majority of the hearing panel members are peers of the 
affected physician.
    (3) Notice to licensing or disciplinary bodies. An M+C organization 
that suspends or terminates a contract with a physician because of 
deficiencies in the quality of care must give written notice of that 
action to licensing or disciplinary bodies or to other appropriate 
authorities.
    (4) Timeframes. An M+C organization and a contracting provider must 
provide at least 60 days written notice to each other before 
terminating the contract without cause.
    8. In Sec. 422.502, paragraph (h)(1) is revised to read as follows:


Sec. 422.502  Contract provisions.

* * * * *
    (h) Requirements of other laws and regulations. (1) The M+C 
organization agrees to comply with--
    (i) Title VI of the Civil Rights Act of 1964 as implemented by 
regulations at 45 CFR part 84;
    (ii) The Age Discrimination Act of 1975 as implemented by 
regulations at 45 CFR part 91;
    (iii) The Rehabilitation Act of 1973;
    (iv) The Americans With Disabilities Act;
    (v) Other laws applicable to recipients of Federal funds; and
    (vi) All other applicable laws and rules.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: January 29, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Approved: February 10, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-3751 Filed 2-11-99; 11:31 am]
BILLING CODE 4120-01-P