[Federal Register Volume 64, Number 226 (Wednesday, November 24, 1999)]
[Rules and Regulations]
[Pages 66234-66304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29706]



[[Page 66233]]

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Part II





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



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42 CFR Part 460, et al.



Medicare and Medicaid Programs; Programs of All-Inclusive Care for the 
Elderly (PACE); Final Rule

Federal Register / Vol. 64, No. 226 / Wednesday, November 24, 1999 / 
Rules and Regulations

[[Page 66234]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 460, 462, 466, 473, and 476

[HCFA-1903-IFC]
RIN 0938-AJ63


Medicare and Medicaid Programs; Programs of All-Inclusive Care 
for the Elderly (PACE)

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

ACTION: Interim final rule with comment period.

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

SUMMARY: This rule establishes requirements for Programs of All-
inclusive Care for the Elderly (PACE) under Medicare and Medicaid. 
These are pre-paid, capitated programs for beneficiaries who meet 
special eligibility requirements and who elect to enroll. Programs must 
apply for approval and are evaluated in terms of specific criteria. 
Only a limited number of programs can be approved. Priority 
consideration will be given to applicants that have been operating 
under ongoing PACE demonstration projects.

DATES: Effective date: These regulations are effective on November 24, 
1999. The incorporation by reference of the publication listed in the 
rule was approved by the Director of the Federal Register as of 
November 24, 1999.
    Comment date: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on January 
24, 2000.

ADDRESSES: Mail an original and 3 copies of written comments to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1903-IFC, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    If you prefer, you may deliver an original and 3 copies of your 
written comments to one of the following addresses: Room 309-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, D.C. 
20201, or Room C5-09-26, 7500 Security Boulevard, Baltimore, Maryland 
21244-1850.
    Comments may also be submitted electronically to the following e-
mail address: [email protected] For e-mail comment procedures, see 
the beginning of SUPPLEMENTARY INFORMATION. For further information on 
ordering copies of the Federal Register contained in this document, see 
the beginning of SUPPLEMENTARY INFORMATION.

FOR FURTHER INFORMATION CONTACT: Janet Samen, (410) 786-4533; or Terry 
Pratt, for State technical assistance, (410) 786-5831.

SUPPLEMENTARY INFORMATION:

E-mail, Comments, Procedures, and Availability of Copies

    E-mail comments must include the full name and address of the 
sender, and must be submitted to the referenced address in order to be 
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In commenting, please refer to file code HCFA-1903-IFC. Comments 
received timely will be available for public inspection as they are 
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of a document, in Room 309-G of the Department's offices at 200 
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I. Background

A. Legislative History

    Section 4801 of Pub. Law 105-33, the Balanced Budget Act of 1997 
(BBA), authorized coverage of PACE under the Medicare program. It 
amended title XVIII of the Social Security Act (the Act) by adding 
section 1894, which addresses Medicare payments to, and coverage of 
benefits under, PACE. Section 4802 of BBA authorized the establishment 
of PACE as a State option under Medicaid. It amended title XIX of the 
Act by adding section 1934, which directly parallels the provisions of 
section 1894. Section 4803 of BBA addresses implementation of PACE 
under both Medicare and Medicaid, the effective date, timely issuance 
of regulations, priority and special consideration in processing 
applications, and transition from PACE demonstration project waiver 
status.

B. Demonstration Project History

    Section 603(c) of the Social Security Amendments of 1983 (Pub. Law 
98-21), as extended by section 9220 of the Consolidated Omnibus Budget 
Reconciliation Act (COBRA) of 1985 (Pub. Law 99-272) authorized the 
original demonstration waiver for On Lok Senior Health Services in San 
Francisco. Section 9412(b) of Pub. Law 99-509, the Omnibus Budget 
Reconciliation Act (OBRA) of 1986, authorized HCFA to conduct a PACE 
demonstration project to determine whether the model of care developed 
by On Lok could be replicated across the country. (The number of sites 
was originally limited to 10, but OBRA 1990 authorized an increase to 
15 demonstration sites.) The PACE demonstration replicated a unique 
model of managed care service delivery for a small number of very frail 
community-dwelling elderly, most of whom were dually eligible for 
Medicare and Medicaid coverage and all of whom were assessed as being 
eligible for nursing home placement according to the standards 
established by their respective States. The model of care included as 
core services the provision of adult day health care and 
multidisciplinary team case management, through which access to and 
allocation of all health services was controlled. Physician, 
therapeutic,

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ancillary and social support services were furnished in the 
participant's residence or on-site at the adult day health center, 
unless those locations were not feasible. Hospital, nursing home, home 
health, and other specialized services were furnished under contract. 
Financing of this model was accomplished through prospective capitation 
of both Medicare and Medicaid payments. Demonstration sites had been 
permitted by section 4118(g) of Pub. Law 100-203 (OBRA of 1987) to 
assume full financial risk progressively over the initial three years, 
but that authority was removed by section 4803(b)(1)(B) of the BBA. 
There are currently 25 approved PACE demonstration sites.

C. Use of the PACE Protocol

    Throughout this document, when we refer to ``the Protocol'' we mean 
the Protocol for the Program of All-inclusive Care for the Elderly 
(PACE), as published by On Lok, Inc., as of April 14, 1995, or any 
successor protocol that may be agreed upon between HCFA and On Lok, 
Inc. A copy of the Protocol is included at Addendum A.
    We are directed by sections 1894(f)(2) and 1934(f)(2) of the Act to 
incorporate the requirements applied to PACE demonstration waiver 
programs under the Protocol, to the extent consistent with the 
provisions of sections 1894 and 1934 of the Act. We also are authorized 
to modify or waive provisions of the Protocol if the modification or 
waiver is not inconsistent with and would not impair the essential 
elements, objectives, and requirements of sections 1894 and 1934 of the 
Act.

D. Consultation With States

    Sections 4801 and 4802 of Public Law 105-33 clearly dictate a 
cooperative relationship between the Secretary and the States in the 
development, implementation and administration of the PACE program. In 
order to fulfill these requirements we utilized the American Public 
Welfare Association (APWA) as the conduit to solicit States for 
volunteers to consult with HCFA staff. The participating State staff 
members represented States with a range of PACE experience. Each State 
staff volunteer selected a specific target area to provide information.
    In order to efficiently and effectively obtain a large amount of 
feedback in a short period of time, HCFA staff arranged a series of 
conference calls to discuss a wide range of issues pertaining to PACE 
organization requirements, the application process, enrollment, and 
payment and related financial data collection. Each subject area 
discussion included HCFA staff and two to three State representatives. 
The feedback obtained during these meetings has been an invaluable 
source of information in understanding State operational concerns, in 
constructing the regulation and in the development of operational 
guidelines that will be released at a later date. We believe that this 
approach will minimize operational barriers that are frequently 
inherent when new programs are initiated.

E. Consultations With State Agency on Aging

    Under the Older Americans Act, State Agencies on Aging are charged 
with the responsibility of promoting comprehensive and coordinated 
service systems for older persons in their States. Consistent with this 
responsibility, the State Agencies on Aging oversee important programs 
for home and community-based services funded through Title III of the 
Older Americans Act, State revenues, and the Medicaid home and 
community-based waiver program. (Two thirds of the State agencies are 
involved in administering home and community-based programs.)
    The State agencies also implement and oversee important planning, 
information and referral, case management, and quality assurance 
functions as well as administering the State Long Term Care Ombudsman 
Program through which service quality in nursing homes and board and 
care homes are monitored in every State. Home care quality is monitored 
in an increasing number of States.
    The State agency which administers the PACE program should 
regularly consult with the State Agency on Aging in overseeing the 
operation of the PACE program in order to avoid service duplication in 
the PACE service areas and to assure the delivery and quality of 
services to PACE participants. We are considering the extent to which 
the State Long Term Care Ombudsman Program would be useful in promoting 
the rights of PACE participants and in monitoring the quality of care 
provided by PACE organizations. Additional information on this topic is 
presented in the section on ``participant rights''.

F. State Medicaid Plan Requirement

    The State Medicaid plan is the contract between the States and the 
Federal government whereby States agree to administer the Medicaid 
program in accordance with Federal law and policy. The State plan 
preprint sets forth the scope of the Medicaid program, including groups 
covered, services furnished, and payment policy. When a State completes 
a new State plan preprint page due to changes in its Medicaid program 
(called a ``State plan amendment''), the preprint page must be approved 
by HCFA in order for the State to receive Federal matching funds.
    Section 1905(a)(26) of the Act, as added by section 4802(a)(1) of 
BBA, provides authority for States to elect PACE as an optional 
Medicaid benefit. The State plan electing the optional PACE program 
must be approved before we can approve an application for a PACE 
organization in that State.
    We developed an interim State plan preprint for PACE. A State 
Medicaid letter dated March 23, 1998, provides information and guidance 
to State Medicaid agencies on how to satisfy the State plan amendment 
requirement. Additional directions for completing the State plan 
amendment will be provided in a State Medicaid Director letter that 
will be issued at or soon after publication of this regulation.

G. Interaction With Medicare+Choice

    The BBA also established a new Medicare+Choice program that 
expanded the health care options available to Medicare beneficiaries. 
Under the Medicare+Choice program, beneficiaries may elect to receive 
Medicare benefits through enrollment in one of an array of private 
health plan choices beyond the original (fee-for-service) Medicare 
program or the plans previously available through managed care 
organizations under section 1876 of the Act. The BBA set forth the 
requirements for Medicare+Choice organizations in a new part C of title 
XVIII of the Act. Interim final regulations to implement the 
Medicare+Choice program were published June 26, 1998 (63 FR 34968). 
Final regulations addressing some of the comments were published 
February 17, 1999 (64 FR 7968).
    Although the PACE program has certain fundamental similarities to 
Medicare+Choice and managed care organizations, PACE is not a 
Medicare+Choice plan. The BBA established distinct requirements for the 
PACE program. PACE is similar to some Medicare+Choice options in these 
ways: it is capitated; it is risk-based; it provides managed care; and 
it is an elective option. However, PACE differs significantly from 
Medicare+Choice plan in other ways such as: it is not available 
nationwide (only in a limited number of sites); it includes statutory 
waivers that expand the scope of Medicare covered services; it is not 
available to all beneficiaries (only to a defined subset of frail 
elderly); and it is a joint Medicare/Medicaid program. However, the BBA 
did direct us to

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consider some of the requirements established for Medicare+Choice as we 
develop regulations for PACE organizations in certain areas common to 
both programs, e.g., beneficiary protections, payment rates, and 
sanctions.

II. Provisions of the Interim Final Rule

General Approach

    As part of the President's and Vice President's regulatory reform 
initiative, we have been committed to changing current regulations to 
focus on outcome of care and to eliminate unnecessary procedural 
requirements. We remain committed to this regulatory reform initiative. 
However, in the development of the regulations for the PACE program, 
several factors have contributed to the use of a more procedural rather 
than outcome-oriented approach.
    As set forth in sections 4801 and 4802 of the BBA, the PACE program 
includes medical as well as non-medical services for the care of the 
frail elderly; this is both a new and a unique model of service 
delivery. Moreover, as previously noted, sections 1894(f)(2) and 
1934(f)(2) of the Act establish as the foundation for this regulation 
the PACE Protocol. By imposing such a requirement, Congress assured the 
use of the procedural elements contained in the PACE Protocol as a 
minimum to ensure beneficiary protections and safeguards. As Congress 
mandated, we are adopting the requirements of the PACE Protocol to the 
extent they are consistent with the statutory provisions. We have 
clarified and expanded upon certain provisions contained in the 
Protocol to more clearly define the requirements and make them more 
quantifiable for purposes of enforcement. We will identify and discuss 
all substantive modifications made to the requirements contained in the 
Protocol.
    After reviewing the public comments that we receive and after we 
gain some experience applying the provisions of this interim final rule 
to PACE programs, we will reevaluate the provisions to determine where 
we can make modifications to adopt an approach more consistent with the 
regulatory reform initiative.
    This interim final rule contains the first published regulations 
applicable to the PACE program. To accommodate the new regulations, we 
are establishing a new subchapter E (PROGRAMS OF ALL-INCLUSIVE CARE FOR 
THE ELDERLY (PACE)) and a new part 460 (PROGRAMS OF ALL-INCLUSIVE CARE 
FOR THE ELDERLY (PACE)). We are also redesignating subchapter D as 
subchapter F (PEER REVIEW ORGANIZATIONS); we are redesignating parts 
462, 466, 473, and 476 as parts 475, 476, 478, and 480, respectively; 
and are revising the section numbers to conform to the new part 
numbers. We are reserving the former subchapter D. In addition, we are 
redesignating subchapter E as subchapter G (STANDARDS AND 
CERTIFICATION) with no changes in part designations.

Subpart A--Basis, Scope and Definitions

Basis (Sec. 460.2)

    We state that the regulations set forth in Subchapter E, part 460, 
are based on sections 1894, 1905(a), and 1934 of the Act, which 
authorize Medicare payments to, and coverage of benefits under, PACE 
and authorize the establishment of PACE as a State option under 
Medicaid to provide for Medicaid payments to, and coverage of benefits 
under, PACE.

Scope and Purpose (Sec. 460.4)

    We state that the purpose of this regulation is to set forth the 
requirements that an entity must meet in order to be approved as a PACE 
organization that operates a PACE program under Medicare and Medicaid. 
This part also sets forth how individuals may qualify to enroll in a 
PACE program, how Medicare and Medicaid payment will be made for PACE 
services, provisions for Federal and State monitoring of PACE programs, 
and procedures for sanctions and terminations. We state that the 
purpose of a PACE program is to provide pre-paid, capitated, 
comprehensive health care services that are designed to:
     Enhance the quality of life and autonomy for frail, older 
adults;
     Maximize dignity of and respect for older adults;
     Enable frail, older adults to live in their homes and in 
the community as long as medically and socially feasible; and
     Preserve and support the older adult's family unit.
    This philosophy is based on Part I, section A, of the Protocol. 
Adopting a mission or philosophy statement that includes these elements 
indicates that an entity is guided by a set of values that influence 
its structure, planning, and day-to-day operations that is consistent 
with the purpose of PACE.

Definitions (Sec. 460.6)

    We provide several definitions based on those in sections 1894(a) 
and 1934(a) of the Act and add definitions of several other terms.
    Sections 1894(a)(3) and 1934(a)(3) of the Act define a ``PACE 
provider.'' We have changed that term to ``PACE organization'' in this 
regulation for clarity. The term ``PACE provider'' would be confusing 
because both Medicare (at 42 CFR 400.202) and Medicaid (at 42 CFR 
400.203) define the word ``provider,'' but the definitions are 
different and neither applies to entities that operate PACE programs. 
Those definitions denote individual providers of individual services 
under conventional fee-for-service systems. We selected the alternative 
term ``PACE organization'' since ``organization'' is the term used in 
both titles XVIII and XIX when referring to managed care organizations, 
which are more similar to entities under PACE. In the few places where 
we do use the term ``provider'' in this regulation, we are using it in 
the broad generic sense to refer to an individual or an entity that 
furnishes health care services. Our use of the term is not limited to 
the narrow Medicare definition in 400.202. We define a PACE 
organization as an entity that has in effect a PACE program agreement.
    Based on sections 1894(a)(4) and 1934(a)(4) of the Act, we define a 
PACE program agreement as an agreement between a PACE organization, 
HCFA, and the State administering agency for the operation of a PACE 
program.
    In accordance with sections 1894(a)(8) and 1934(a)(8) of the Act, 
we define the State administering agency as the State agency 
responsible for administering the PACE program agreement.
    In accordance with sections 1894(a)(9) and 1934(a)(9) of the Act, 
we define a trial period as the first three contract years in which a 
PACE organization operates under a PACE program agreement, including 
any contract year during which the entity operated under a PACE 
demonstration waiver program.
    We have added a definition of a contract year as the term of a PACE 
program agreement, which is a calendar year except that a PACE 
organization's initial (start-up) contract year may be from 12 to 23 
months as determined by HCFA. This will enable us to adjust the length 
of the initial (start-up) contract year so that subsequent years are on 
a standard annual calendar year cycle.
    We define a Medicare beneficiary as an individual who is entitled 
to Medicare Part A benefits and/or enrolled under Medicare Part B. This 
term includes dually-eligible individuals who are also Medicaid 
recipients.
    We have defined a participant as an individual enrolled in a PACE 
program. A Medicare participant is a Medicare beneficiary who is 
enrolled in a PACE

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program, and a Medicaid participant is a Medicaid recipient who is 
enrolled in a PACE program.
    We clarify that the term ``services'' includes both items and 
services.

Subpart B--PACE Organization Application and Evaluation

Purpose (Sec. 460.10)

    This subpart establishes application requirements for an entity 
that seeks approval from HCFA as a PACE organization.

PACE Under Both Medicare and Medicaid

    We are requiring that each PACE organization must enter into a 
program agreement under both sections 1894 and 1934 of the Act, i.e., 
that each organization participate in both Medicare and Medicaid. Most 
of the text of those sections is identical and our analysis indicates 
that key sections contemplate entities acting as PACE organizations 
under both programs.
    Sections 1894(f)(2) and 1934(f)(2) of the Act require that we 
incorporate in regulations the requirements applied to PACE 
demonstration waiver programs under the PACE Protocol, to the extent 
consistent with the provisions of sections 1894 and 1934. Under the 
Protocol, PACE demonstration programs operated under both Medicare and 
Medicaid. We believe that the directive to incorporate the requirements 
in the Protocol reflects an expectation by Congress that all PACE 
organizations would participate in both Medicare and Medicaid. This 
view is reinforced by paragraph (f)(2)(B) of these sections, which 
permits us to modify or waive provisions of the PACE Protocol ``so long 
as such modification or waiver is not inconsistent with and would not 
impair the essential elements, objectives, and requirements'' of 
sections 1894 and 1934, but which forbids modifying or waiving, among 
others, the following provisions:
     Capitated, integrated financing that allows the 
organization to pool payments received from public and private programs 
and individuals; and
     The assumption by the organization of full financial risk.
    We have concluded that both of these provisions preclude the 
possibility of a Medicare-only or Medicaid-only PACE program. For 
example, if a program could collect capitation payments from Medicare 
but bill fee-for-service under Medicaid, not all financing would be 
capitated, nor would financing be integrated, nor would the 
organization assume full financial risk.
    The law does not require that States offer the PACE benefit under 
Medicaid. As indicated by its title, section 4802 of BBA provides for 
the ``Establishment of PACE Program as Medicaid State Option.'' If an 
entity attempted to become a PACE organization under Medicare in a 
State which has not included PACE program services as an option under 
its Medicaid program, it would not be possible for that entity to be 
both a Medicare and a Medicaid PACE organization. While this would 
curtail the availability of PACE programs in such States, we have 
concluded that this result was intended because a Medicare-only program 
could not meet the fundamental concept of an all-inclusive, integrated, 
capitated, full-risk program.
    Moreover, both sections 1894 and 1934 of the Act contemplate the 
active collaboration of Federal and State governments in the 
administration of PACE. Each State must have a State administering 
agency that is responsible for administering PACE program agreements in 
the State under sections 1894 and 1934 of the Act. The State 
administering agency closely cooperates with HCFA in establishing 
procedures for entering into, extending, and terminating PACE program 
agreements. The State administering agency cooperates with HCFA and the 
PACE organization in the development of participant health status and 
quality of life outcome measures. The State administering agency 
cooperates with HCFA in conducting oversight reviews of PACE programs 
and has the authority to terminate a PACE program agreement for cause. 
If Medicare-only programs had been contemplated in a State that does 
not elect the PACE option, there would have been no reason to assign 
such a significant role to a State administering agency. We believe 
that a State which has not chosen PACE as an optional service would be 
ill-prepared or unable to perform this role.
    Most of the text of section 1894 of the Act is identical to text in 
section 1934. Portions of that text reflect the concept of entities 
acting as PACE organizations under both programs. The scope of Medicare 
PACE program benefits includes ``all items and services covered under 
this title (for individuals enrolled under this section [section 1894]) 
and all items and services covered under title XIX.'' Similarly, 
section 1934 defines the Medicaid benefit package as ``all items and 
services covered under title XVIII (for individuals enrolled under 
section 1894) and all items and services covered under this title.'' In 
addition, to be eligible for PACE, an individual must require the 
nursing facility level of care covered under the State Medicaid plan.
    Section 1894(e) of the Act provides that ``the Secretary, in close 
cooperation with the State administering agency'' will establish 
program agreements for ``entities that meet the requirements for a PACE 
organization under this section, section 1934, and regulations.'' A 
corresponding provision is found at section 1934(e) of the Act, 
referring to ``entities that meet the requirements for a PACE 
organization under this section, section 1894, and regulations.'' We 
believe that the use of the correlative ``and'' indicates that PACE 
entities would have to meet all three sets of requirements.
    A parallel provision provides for termination of PACE program 
agreements (see paragraphs (e)(5) of sections 1894 and 1934 of the 
Act). Termination of an agreement under both sections 1894 and 1934 may 
be accomplished by either ``the Secretary or a State administering 
agency.''
    On the other hand, we acknowledge that there are some portions of 
the law which are inconsistent with this position. First, there is the 
fact that Congress enacted Medicare and Medicaid PACE benefits through 
two separate statutory sections. In addition, section 4803(c)(1) of BBA 
directs us, in determining ``provider status,'' to ``give priority in 
processing applications of entities to qualify as PACE programs under 
section 1894 or 1934 of the Social Security Act.'' Further, section 
1894(a)(4) defines a PACE program agreement as ``an agreement, 
consistent with this section, section 1934 (if applicable), and 
regulations promulgated to carry out such sections.'' See also section 
1934(a)(4).
    Nonetheless, it is highly unlikely that any entity could be a 
viable PACE organization without approval under both Medicare and 
Medicaid. The majority of potential participants are Medicare 
beneficiaries who also are eligible for Medicaid. Those who are not 
currently Medicaid-eligible may eventually exhaust their financial 
resources and become eligible. Medicare participants who are not 
enrolled in PACE under Medicaid must pay premiums equal to the Medicaid 
capitation rate. Aside from the technicality that there would not be an 
established Medicaid capitation rate in a State that does not elect the 
PACE option, most of these participants would lack the ability to pay 
such significant premiums.
    As the above citations illustrate, some provisions of the law are 
conflicting and thus ambiguous. We therefore must interpret them to 
give effect to as many of the provisions as possible and to the policy 
objectives that they advance. In

[[Page 66238]]

keeping with the Congressional intent that the PACE Protocol guide our 
implementation of the PACE program, we have determined that PACE 
organizations must be approved under both Medicare and Medicaid. Based 
on this interpretation, if a State should choose not to amend its State 
Medicaid plan to adopt PACE as an optional Medicaid service, we would 
not accept PACE applications from entities in that State. Also, if a 
State has elected the optional benefit but declines to recommend a 
particular entity as a PACE organization, we would not accept an 
application from that entity.

Application Requirements (Sec. 460.12)

    Section 1905(a)(26) of the Act provides authority for States to 
elect PACE as an optional Medicaid benefit. The State plan electing the 
optional PACE program must be approved before we can approve an 
application for a PACE organization in that State.
    We have established Sec. 460.12 to set forth the application 
requirements for the PACE program. In order for HCFA to determine 
whether an entity qualifies as a PACE organization, an individual 
authorized to act for the entity must submit an application that 
describes thoroughly how the entity meets all the requirements 
specified in this regulation. In recognition of the 90-day review 
timeframe specified in the statute and described below and the 
numerical limit on the number of PACE program agreements, HCFA will 
review and take action to approve, deny or request additional 
information only on complete applications; i.e, those applications that 
address all elements of the PACE program agreement. HCFA will send a 
letter to each applicant indicating whether or not the application is 
complete and specifying when the 90-day review period ends.
    Except for entities that qualify for priority processing or special 
consideration as discussed below, we will accept and begin to review 
applications 90 days after the effective date of this interim final 
regulation. Entities interested in obtaining specific information for 
use in applying for PACE organization status should access the PACE 
homepage, available through both the Medicare and Medicaid HCFA 
websites (www.hcfa.gov/medicare (or medicaid) /PACE/pacehmpg.htm).
    States have played a significant role in the development of PACE 
demonstration projects as well as other community-based alternatives to 
institutionalization. Most States have implemented home and community 
based programs to provide comprehensive coordinated services to various 
groups of Medicaid recipients. As a result, States have gained 
extensive experience in demographic analysis and contracting with 
entities that are capable of delivering a specified range of services.
    Although the PACE statute does not specify the States' role in the 
application approval process, many aspects of implementing PACE in 
Medicare and Medicaid will necessitate extensive involvement of the 
State administering agencies and the State Medicaid Agencies. With 
regard to applications, we believe the States are in the best position 
to work with potential organizations to develop programs that meet our 
requirements and are integrated into the State's overall long-term care 
delivery system.
    Therefore, we are requiring in Sec. 460.12(b) that applications for 
PACE organization status be accompanied by an assurance from the State 
administering agency indicating that it considers the entity to be 
qualified to be a PACE organization and that the State is willing to 
enter into a PACE program agreement with the entity. We will not accept 
applications from entities that have not obtained these assurances.
    To enable a State to make such assurances, an entity would have 
established to the satisfaction of the State that it is committed to 
the PACE model of care, there is sufficient funding for program 
development and facilities, there is adequate demand for PACE services 
as shown by demographic analysis, and the entity has hired core PACE 
staff and has developed contracts for referral arrangements and other 
program services that the site will not furnish directly.
    Entities that are interested in developing a PACE program agreement 
should contact their State administering agency to determine whether 
the State has submitted or plans to submit a State plan amendment to 
elect PACE as an optional benefit under its State Medicaid plan and if 
the State has established additional requirements for PACE 
organizations.

Priority Consideration (Sec. 460.14)

    We have established section 460.14 to address priority 
applications. The statute requires that we give priority in processing 
applications through August 5, 2000, to entities that are operating 
under PACE demonstration waivers under the authority of section 603(c) 
of the Social Security Amendments of 1983, as extended by section 9220 
of COBRA of 1985, or section 9412(b) of the OBRA of 1986. In addition, 
we are directed to give priority to entities that applied to operate 
under a PACE demonstration waiver under section 9412(b) of the OBRA of 
1986 as of May 1, 1997.
    To give priority in processing applications from entities that meet 
the criteria, we will accept applications only from these entities 
beginning on the effective date of this interim final regulation and 
continuing for 45 days. Applications from other entities will not be 
accepted during this period. During the subsequent 45 days, extending 
to 90 days after the effective date of this regulation, we will 
continue to accept applications from entities that meet the priority 
processing criteria and we also will accept applications from entities 
that qualify for special consideration.

Special Consideration (Sec. 460.16)

    In Sec. 460.16, Special Consideration, we define the qualifications 
to receive special consideration of a PACE application.
    The statute requires that we give special consideration in the 
processing of applications through August 5, 2000, to an entity that, 
as of May 1, 1997, indicated a specific intent to become a PACE 
organization through formal activities, such as entering into a 
contract to conduct a PACE feasibility study.
    To give special consideration in processing applications from 
entities that meet the criteria, we will accept applications from these 
entities beginning 45 days after the effective date of this interim 
final regulation. During the 45-day period that extends from 45 days 
after the effective date to 90 days after the effective date, we will 
accept applications only from entities that meet the priority 
processing criteria or entities that qualify for special consideration. 
Applications from other entities will not be accepted during this 
period.
    Applications from entities that believe they are entitled to 
special consideration must include information regarding the formal 
activities they engaged in towards becoming a PACE organization. If we 
agree that special consideration is appropriate for applications 
submitted after the special 45-day window, we will identify those 
applicants and factor in the entity's special status in the event that 
we have a greater number of applications under review than available 
capacity for PACE program agreements.

HCFA Evaluation of Applications (Sec. 460.18)

    We will approve entities based upon a review of the materials 
submitted as part of the application, as well as information from the 
State

[[Page 66239]]

administering agency and information obtained through onsite visits.

Notice of HCFA Determination (Sec. 460.20)

    Sections 1894(e)(8) and 1934(e)(8) of the Act require us to approve 
or deny an application for PACE organization status within 90 days 
after the date of the submission of the application unless additional 
information is requested. Applications are deemed approved unless we 
deny PACE organization status in writing or request additional 
information within the 90-day timeframe. We clarify that, for purposes 
of the 90-day time limit described in this section, the date that an 
application is considered to be submitted to HCFA is the date on which 
the application is delivered to the address designated by HCFA.
    These sections also provide that we may request in writing such 
additional information as may be required in order to make a final 
determination regarding the application and, after the date we receive 
such information, the application shall be deemed approved unless, 
within 90 days of such date, we deny such request.
    Based on this authority, we may take up to 90 days to request 
additional information and, once the information is received, may take 
an additional 90 days to complete processing of the application. It is 
important to note that there is no corresponding requirement that the 
State administering agency or the PACE organization respond to HCFA's 
request for additional information within a specified timeframe.
    If the additional information proves insufficient to approve the 
application, the application will be denied. We will notify each 
applicant of our determination and the basis for the determination in 
writing. If the application is denied, we will provide the basis for 
the denial and the process for requesting reconsideration of the 
application.

Priority and Special Consideration

    Section 4803(c) of the BBA directs us to give priority in 
processing applications of entities to qualify as PACE organizations 
under section 1894 or 1934 of the Act first to PACE demonstration sites 
and then to entities which had applied to operate a PACE demonstration 
site as of May 1, 1997. In addition, section 4803(c)(3) of the BBA 
requires that we give special consideration in the processing of 
applications to any entity that, as of May 1, 1997, had indicated 
specific intent to become a PACE organization through formal activities 
such as entering into contracts for feasibility studies.

Service Area Designation (Sec. 460.22)

    In Sec. 460.22, Service Area Designation, we specify that each 
application must designate the service area of the program. HCFA (in 
consultation with the State administering agency) may exclude from the 
proposed service area designation any area that is already covered 
under another PACE program agreement. This will avoid unnecessary 
duplication of services and impairing the financial and service 
viability of an existing PACE organization. This section implements the 
provisions of sections 1894(e)(2)(B) and 1934(e)(2)(B) of the Act.

Limit on Number of PACE Program Agreements (Sec. 460.24)

    Sections 1894(e)(1)(B) and 1934(e)(1)(B) of the Act establish a 
limit on the number of PACE program agreements that may be in effect on 
August 5 of each year, i.e., the anniversary of the enactment of the 
PACE statute. Those sections state that the Secretary shall not permit 
the number of PACE organizations with which agreements are in effect 
under those sections or under section 9412(b) of the OBRA of 1986 to 
exceed--
     40 as of August 5, 1997, the date of the enactment of the 
PACE statute, or
     As of each succeeding anniversary of such date, the 
numerical limitation for the preceding year plus 20. The annual 
increase in the number of PACE program agreements is not tied to the 
actual number of agreements in effect as of a previous anniversary 
date.
    Based on this statutory language, we may enter into up to 80 PACE 
program agreements as of August 5, 1999 and the limit on the number of 
PACE program agreements increases by 20 each year thereafter.

Subpart C--PACE Program Agreement

Program Agreement Requirement (Sec. 460.30)

    In accordance with sections 1894(a)(4) and 1934(a)(4) of the Act we 
have established Sec. 460.30 to require that each PACE organization 
have an agreement with HCFA and the State administering agency for the 
operation of a PACE program by the organization under Medicare and 
Medicaid. This three-party agreement must be signed by an authorized 
official of the organization, as well as by an authorized HCFA official 
and an authorized State official.

Content and Terms of PACE Program Agreement (Sec. 460.32)

    In Sec. 460.32(a), we stipulate the required content of a PACE 
program agreement.
    We are requiring that each PACE program agreement designate the 
service area of the program, specifically identifying the area by 
county, zip code, street boundaries, census tract, block, or tribal 
jurisdictional area, to the extent that those identifiers are 
appropriate. Any changes in the designated service area will require 
advance approval by HCFA and the State administering agency. This 
requirement implements the provisions of sections 1894(e)(2)(A)(I) and 
1934(e)(2)(A)(I) of the Act and reflects Part I, section D of the 
Protocol.
    Each PACE organization must agree to meet all applicable 
requirements under Federal, State, and local laws and regulations, 
including provisions of the Civil Rights Act, the Age Discrimination 
Act, and the Americans with Disabilities Act. This includes, but is not 
limited to, all requirements contained elsewhere in these regulations. 
This requirement implements in part the provisions of sections 
1894(e)(2)(A)(iv) and 1934(e)(2)(A)(iv) of the Act.
    We require that each agreement indicate the effective date and term 
of the agreement.
    We are requiring that each PACE program agreement include 
information related to: organizational structure of the PACE 
organization; participant rights; process for grievances and appeals; 
eligibility, enrollment and disenrollment policies; service 
description; quality assessment and performance improvement; capitation 
rates; names and numbers of administrative contacts in the 
organization; and program agreement termination procedures. These 
requirements are based on sections 1894(b)(2) and 1934(b)(2) of the Act 
and on Part X, section A of the Protocol.
    We will identify in each PACE program agreement the levels of 
performance that we require the organization to achieve on standard 
quality measures and the data and information on participant care that 
we and the State require the organization to collect. A detailed 
discussion of the levels of performance and the standard quality 
measures are contained in the preamble discussions for Secs. 460.134 
and 460.202(b) of this regulation.
    In Sec. 460.32(b), we specify that a PACE program agreement may 
provide additional requirements for individuals to qualify as PACE 
program eligible individuals. This provision implements

[[Page 66240]]

sections 1894(e)(2)(A)(ii) and 1934(e)(2)(A)(ii) of the Act. However, 
the eligibility criteria in Sec. 460.150(b)(1)-(3) cannot be modified. 
In addition, a PACE program agreement may contain such additional terms 
and conditions as the parties agree to, if such terms and conditions 
are consistent with sections 1894 and 1934 of the Act and with these 
regulations. This provision implements sections 1894(e)(2)(A)(v) and 
1934(e)(2)(A)(v) of the Act.

Duration of PACE Program Agreement (Sec. 460.34)

    In Sec. 460.34, we specify that each agreement will be effective 
for a contract year, but may be extended for additional contract years 
in the absence of a notice by a party to terminate, in accordance with 
sections 1894(e)(2)(A)(iii) and 1934(e)(2)(A)(iii) of the Act.

Subpart D--Sanctions, Enforcement Actions, and Terminations

Violations for Which HCFA May Impose Sanctions (Sec. 460.40)

    In Sec. 460.40 we specify, based on paragraph (e)(6)(B) of sections 
1894 and 1934 of the Act, that HCFA can impose, in addition to any 
other remedies authorized by law, any of three types of sanctions if 
HCFA determines that a PACE organization has committed any of nine 
listed violations. The following PACE organization violations specified 
in this section are based on provisions of sections 1857(g)(1) and 
1903(m)(5)(A) of the Act:
     Fails substantially to furnish to a participant medically 
necessary items and services that are covered PACE services, if the 
failure has adversely affected (or has substantial likelihood of 
adversely affecting) the participant.
     Involuntarily disenrolls a participant, in violation of 
Sec. 460.164.
     Discriminates in enrollment or disenrollment among 
Medicare beneficiaries or Medicaid recipients, or both, who are 
eligible to enroll in a PACE program, on the basis of an individual's 
health status or need for health care services.
     Engages in any practice that would reasonably be expected 
to have the effect of denying or discouraging enrollment, except as 
permitted by Sec. 460.150, by Medicare beneficiaries or Medicaid 
recipients whose medical condition or history indicates a need for 
substantial future medical services.
     Imposes charges on participants enrolled under Medicare or 
Medicaid for premiums in excess of the premiums permitted.
     Misrepresents or falsifies information that is furnished 
to HCFA or the State under this part; or, to an individual or any other 
entity under this part.
     Prohibits or otherwise restricts a covered health care 
professional from advising a participant who is a patient of the 
professional about the participant's health status, medical care, or 
treatment for the participant's condition or disease, regardless of 
whether the PACE program provides benefits for that care or treatment, 
if the professional is acting within his or her lawful scope of 
practice.
     Operates a physician incentive plan that does not meet the 
requirements of section 1876(i)(8) of the Act.
     Employs or contracts with any individual who is excluded 
from participation in Medicare or Medicaid under section 1128 or 1128A 
of the Act (or with any entity that employs or contracts with such an 
individual) for the provision of health care, utilization review, 
medical social work, or administrative services.

Sanctions That HCFA Can Impose (Secs. 460.42 and 460.46)

    We describe the two types of sanctions in Secs. 460.42 (suspension 
of enrollment or payment by HCFA) and 460.46 (civil money penalties). 
Each of the sanctions, or remedies, that are specified in these 
sections for specific violations are based on provisions of sections 
1857(g)(2), 1857(g)(4), and 1903(m)(5)(B) of the Act. With respect to 
suspension of enrollment in PACE, HCFA may suspend enrollment of 
Medicare beneficiaries after the date HCFA notifies the organization of 
the violation. Suspending enrollment of Medicaid recipients is an 
action taken by the State rather than HCFA. With respect to suspension 
of payment, HCFA may suspend Medicare payment to the PACE organization 
and deny payment to the State for medical assistance for services 
furnished under the PACE program agreement.
    In addition, HCFA may impose civil money penalties of $100,000 plus 
$15,000 for each individual not enrolled as a result of the PACE 
organization's discrimination in enrollment or disenrollment or 
practice that would deny or discourage enrollment; $25,000 plus double 
the excess amount above the permitted premium charged a participant by 
the PACE organization; $100,000 for each misrepresentation or 
falsification of information; and $25,000 for any violation specified 
in Sec. 460.40.

Additional Actions by HCFA or the State (Sec. 460.48)

    In Sec. 460.48 we specify, based on paragraph (e)(6)(A) of sections 
1894 and 1934 of the Act, that if HCFA, after consultation with the 
State administering agency, determines that a PACE organization is not 
in substantial compliance with requirements in these regulations, HCFA 
or the State administering agency can take one or more of the following 
actions: Condition the continuation of the PACE program agreement upon 
timely execution of a corrective action plan; withhold some or all 
payments under the PACE program agreement until the organization 
corrects the deficiency; or terminate the program agreement.

Termination of PACE Program Agreement (Sec. 460.50)

    In Sec. 460.50 we specify, in accordance with paragraph (e)(5)(A) 
of sections 1894 and 1934 of the Act, that HCFA or a State 
administering agency may terminate at any time a PACE program agreement 
for cause and that a PACE organization may terminate an agreement after 
appropriate notice to HCFA, the State administering agency, and 
participants. In accordance with paragraph (e)(5)(B) of sections 1894 
and 1934 of the Act, we specify that HCFA or a State administering 
agency may terminate a PACE program agreement with a PACE organization 
if HCFA or the State administering agency determines that:
     Either there are significant deficiencies in the quality 
of care furnished to participants, or the PACE organization has failed 
to comply substantially with conditions under these regulations or with 
the terms of its PACE program agreement; and
     The PACE organization has failed to develop and 
successfully initiate, within 30 days of the date of the receipt of 
written notice, a plan to correct the deficiencies, or has failed to 
continue implementation of such a plan.

    Based on the Protocol, Part IX, section A.1, we also provide for 
termination if HCFA or the State administering agency determines that 
the organization cannot ensure the health and safety of its 
participants. This determination may result from the identification of 
deficiencies which HCFA or the State administering agency determines 
cannot be corrected. Based on the Protocol, Part IX, section A.2, we 
also require that if the organization terminates the agreement, a 
minimum of 90 days notice must be given to HCFA and the State 
administering agency regarding the organization's intent and that 
participants must be given a minimum of 60 days notice.

[[Page 66241]]

Transitional Care During Termination (Sec. 460.52)

    Based on the Protocol, Part IX, section B, we require that the PACE 
organization develop a detailed written plan for phase-down in the 
event of termination which includes the following: the process for 
informing participants, the community, HCFA and the State administering 
agency in writing about termination and transition procedures; and 
steps that will be taken to help assist participants to obtain 
reinstatement of conventional Medicare and Medicaid benefits, 
transition their care to other providers, and terminate marketing and 
enrollment activities. Also, in accordance with paragraphs (a)(2)(C) 
and (e)(5)(C) of sections 1894 and 1934 of the Act, we specify in 
Sec. 460.52 that an entity whose PACE program agreement is in the 
process of being terminated must provide assistance to each participant 
in obtaining necessary transitional care through appropriate referrals 
and making the participant's medical records available to new 
providers.

Termination Procedures (Sec. 460.54)

    In Sec. 460.54 we specify termination procedures based on paragraph 
(e)(7) of sections 1894 and 1934 of the Act, which provide that:
     The provisions of section 1857(h) of the Act apply to 
termination of a PACE program agreement in the same manner as they 
apply to a termination of a contract with a Medicare+Choice 
organization under part C of title XVIII of the Act.

The provisions of section 1857 of the Act authorize termination of an 
agreement with an organization based on the following:
     We provide the organization with the reasonable 
opportunity to develop and implement a corrective action plan to 
correct the deficiencies that were the basis of our determination that 
cause exists for termination; and
     We provide the organization with reasonable notice and 
opportunity for hearing (including the right to appeal an initial 
decision) before terminating the agreement. However, termination is 
authorized by section 1857(h)(2) of the Act without invoking these 
procedures if we determine that a delay in termination, resulting from 
compliance with these procedures before termination, would pose an 
imminent and serious risk to the health of participants enrolled with 
the organization.

Subpart E--PACE Administrative Requirements

PACE Organizational Structure (Sec. 460.60)

    We have established Sec. 460.60 to specify the structural 
requirements for a PACE organization. We believe that these 
requirements are essential to the PACE organization's ability to ensure 
the health and safety of the participants. The performance of certain 
basic organizational functions is a minimum condition for an 
environment in which appropriate care can occur. We have based the 
organizational structure requirements on Part I of the Protocol.
    We require that the PACE organization have a current organizational 
chart showing officials in the PACE organization and relationships to 
any other organizational entities. The chart for a corporate entity 
must indicate the PACE organization's relationship to the corporate 
board and to any parent, affiliate, or subsidiary corporate entities. A 
PACE organization that is planning a change in organizational structure 
must notify HCFA, the State administering agency, and participants, in 
writing, at least 60 days before the change would take effect. Changes 
in organizational structure must be approved by HCFA and the State 
administering agency. In the event of a change that would constitute a 
change of ownership, HCFA would apply the general provisions described 
in 42 CFR 422.550. Changes in organizational structure approved by HCFA 
and the State administering agency must be forwarded to the consumer 
advisory committee (described later in the preamble in the section on 
governing body) for dissemination to participants as appropriate. We 
specifically invite comment on the extent to which changes in 
organizational structure are important to participants, information on 
the types of changes that have been communicated to participants, the 
timing of disclosure, and the effect on participants.
    The Protocol requires that a PACE organization have a project 
director. We have included this requirement, but have changed the term 
to program director. We have renamed this position and further defined 
the role of the individual. The PACE organization must have a program 
director who is responsible for the oversight and administration of the 
entity. She or he would be responsible for the effective planning, 
organization, administration, and evaluation of the organization's 
operations. The program director would ensure that decisions about 
medical, social and supportive services are not unduly influenced by 
fiscal managers. The program director is responsible for ensuring that 
appropriate personnel perform their functions within the organization. 
The program director would inform employees and contract providers of 
all organization policies and procedures. If the PACE organization is 
part of a larger health system, the program director would clearly 
define and inform staff (employees and contractors) of the 
relationship.
    We have also maintained the Protocol's requirement for a medical 
director, but we have further defined the responsibilities of this 
position. The PACE organization must have a medical director who is 
responsible for the delivery of participant care, clinical outcomes, 
and the implementation and oversight of the quality assessment and 
performance improvement program. Thus, the medical director is 
responsible for achieving the best clinical outcomes possible for all 
participants. Under this requirement, we would expect the medical 
director to use data comparing the program with other PACE 
organizations, where data are available, and to use the organization's 
data to demonstrate internal improvements in outcomes over time.

Governing Body (Sec. 460.62)

    This section focuses on the ability of the organization's governing 
body to provide effective administration in an outcome-oriented 
environment. The governing body guides operations and promotes and 
protects participant health and safety. The governing body is legally 
and fiscally responsible for the administration of the PACE 
organization. However, the specific approach to administration of the 
organization is left to the discretion of the governing body. This 
reflects our goal of promoting the effective management of the 
organization, without limiting flexibility in determining how to 
achieve that goal.
    The governing body must create and foster an environment that 
provides quality care that is consistent with participant needs and the 
program mission. To that end, the primary requirement is that an 
identifiable governing body, or designated person(s) so functioning, 
have full legal authority and responsibility for the governance and 
operation of the organization, the development of policies consistent 
with the mission, the management and provision of all services 
(including the management of contractors), fiscal operations, and the 
development of

[[Page 66242]]

policies on participant health and safety. Also, the governing body 
will establish personnel policies and contract provisions with respect 
to employees or contractors with patient care responsibilities giving 
adequate notice before leaving the PACE organization's network. These 
provisions would be intended to avoid disruptions in care and permit 
orderly transition of responsibilities.
    We have added a requirement that the governing body be responsible 
for the quality assessment and performance improvement program. The 
purpose of this requirement is to link the development, implementation, 
and coordination of the ongoing quality assessment and performance 
improvement program with all aspects of the PACE program. We believe 
this requirement will stimulate an aggressive effort by the 
organization to identify and use the best practices available for all 
participants. As discussed in the section on the quality assessment and 
performance improvement program, the PACE organization has the 
flexibility to design its own quality improvement program.
    Consistent with the Protocol, we have included a requirement that 
the PACE organization must ensure community representation on issues 
related to participant care. This may be achieved by having a community 
representative on the governing body.
    We have added a requirement that a PACE organization must establish 
a consumer advisory committee to provide advice to the governing body 
on matters of concern to participants. Consumer participation through 
advisory committees is a well accepted community organization vehicle 
to maximize the involvement of consumers in a program designed to serve 
them. With the use of such a committee the governing body will have the 
benefit of consumer advice, including advice on quality of care. 
Consumers also are likely to feel a greater stake in the operation of 
the program. In order to assure appropriate representation, 
participants and representatives of participants must constitute a 
majority of the membership of this committee. One specific duty of the 
consumer advisory committee is to receive information regarding changes 
in the PACE organization's structure to determine those about which 
information should be disseminated to participants.

Personnel Qualifications (Sec. 460.64)

    Although the Protocol does not specify personnel requirements for 
the various staff employed by or under contract with the PACE 
organization, we believe that certain minimum standards must be met in 
order to ensure quality of care for the frail elderly population being 
served. To this end, we have established Sec. 460.64.
    Our approach to personnel qualifications follows principles 
described in a Federal Register publication proposing changes to the 
conditions of participation for home health agencies, 62 FR 11022-23 
(March 10, 1997). This is a flexible approach that relies on State 
requirements as much as possible. We require that personnel meet 
applicable State licensure, certification, or registration 
requirements. The personnel qualifications fall into three categories: 
(1) personnel for whom there are statutory qualifications; (2) 
personnel for whom all States have licensure, certification, or 
registration requirements; and (3) personnel for whom we have specified 
requirements since not all States have licensure, certification, or 
registration requirements.
    The first category consists of personnel for whom the Act contains 
qualifications. Section 1861(r) of the Act generally defines a 
physician as a doctor of medicine or osteopathy, legally authorized to 
practice medicine and surgery by the State in which such function or 
action is performed, or certain other practitioners for limited 
purposes. This definition is reflected in regulations at 42 CFR 410.20, 
and we have adopted this definition for a physician providing services 
for a PACE organization. In addition, to reflect the key role of the 
primary care physician in the PACE model, we are requiring the primary 
care physician to have a minimum of 1 year's experience in working with 
a frail or elderly population.
    In the second category of personnel qualifications, we defer to 
State law. We specify that all staff (employee or contractor) of the 
PACE organization must meet applicable State requirements. That is, 
they must be legally authorized (currently licensed or, if applicable, 
certified or registered) to practice in the State in which they perform 
the function or action and must act within the scope of their authority 
to practice.
    The third category of personnel qualifications includes certain 
professions for which not all States currently have licensing, 
certification, or registration requirements. If a State does have 
licensing, certification, or registration requirements for a 
professional listed in this section, then the State qualifications 
would apply.
    We reviewed the personnel requirements of other Medicare and 
Medicaid providers that serve populations similar to PACE participants 
(e.g., home health agencies, nursing facilities, intermediate care 
facilities), and we have established personnel requirements for PACE 
organizations that are as consistent as possible with those applicable 
to other providers. If a State does not have licensing, certification, 
or registration requirements applicable to the following professions, 
then the qualifications specified below apply.
    We are requiring that the registered nurse be a graduate of a 
school of professional nursing and have a minimum of one year's 
experience working with a frail or elderly population.
    We are requiring that the social worker (1) have a master's degree 
in social work from an accredited school of social work; and (2) have a 
minimum of one year's experience working with a frail or elderly 
population.
    We are requiring that the physical therapist (1) be a graduate of a 
physical therapy curriculum approved by the American Physical Therapy 
Association, the Committee on Allied Health Education and Accreditation 
of the American Medical Association, or the Council on Medical 
Education of the American Medical Association and the American Physical 
Therapy Association; and (2) have a minimum of one year's experience 
working with a frail or elderly population.
    We are requiring that the occupational therapist (1) be a graduate 
of an occupational therapy curriculum accredited jointly by the 
Committee on Allied Health Education and Accreditation of the American 
Medical Association and the American Occupational Therapy Association; 
(2) be eligible for the National Registration Examination of the 
American Occupational Therapy Association; (3) have 2 years of 
appropriate experience as an occupational therapist and have achieved a 
satisfactory grade on a proficiency examination conducted, approved, or 
sponsored by the U.S. Public Health Service, except that such 
determination of proficiency does not apply with respect to persons 
initially licensed by a State or seeking initial qualification as an 
occupational therapist after December 31, 1977; and (4) have a minimum 
of one year's experience working with a frail or elderly population.
    We are requiring that the recreation therapist or activities 
coordinator have 2 years experience in a social or recreational program 
providing and

[[Page 66243]]

coordinating services for a frail or elderly population within the last 
5 years, one of which was full-time in a patient activities program in 
a health care setting.
    We are requiring that the dietitian (1) have a baccalaureate or 
advanced degree from an accredited college with major studies in food 
and nutrition or dietetics; and (2) have a minimum of one year's 
experience working with a frail or elderly population.
    We are requiring that all PACE center drivers (1) have a valid 
driver's license to operate a van or bus in the State of operation; and 
(2) be capable of and experienced in transporting individuals with 
special mobility needs.
    We believe that each of these persons should have experience 
working with the frail or elderly population in order to better 
recognize issues specific to this population.
    We have not defined personnel requirements for the PACE center 
manager or the home care coordinator. We are giving PACE organizations 
the flexibility to determine who is best suited to fill these positions 
since each PACE center may have different needs. Since the home care 
coordinator is responsible for acting as the liaison between the 
multidisciplinary team and the home care providers, she or he should 
possess good leadership and communication skills. In addition, the home 
care coordinator should be able to identify and understand 
participants' medical and social needs and evaluate the home care needs 
of participants. Therefore, we believe that a registered nurse or 
social worker would be a good candidate to fill this position.
    We have not imposed personnel requirements for personal care 
attendants since these individuals will primarily be providing ``non-
skilled'', personal care services (e.g., bathing, toileting, 
transferring). We are soliciting comments on whether to include 
specific personnel requirements for personal care attendants. It is 
important that personal care attendants possess certain basic skills 
necessary to provide quality care to PACE participants. Thus, we are 
requiring PACE organizations to implement a training program for each 
personal care attendant to ensure that they exhibit competency in basic 
skills in personal care services. The training program should include 
maintenance of a clean, safe, and healthy environment; appropriate and 
safe techniques in personal hygiene and grooming; safe transfer 
techniques and ambulation; reading and recording temperature, pulse, 
and respiration; and observation, reporting, and documentation of 
patient status and the care or service furnished. In addition, the 
training program developed for each personal care attendant must 
include other elements consistent with their assigned duties for 
specific participants.
    We recognize that personal care attendants in the home environment 
may furnish not only personal care services, but also home care 
services. When the participant needs home care services, the PACE 
organization must ensure that it has qualified staff (either employees 
or contractors) that meet the requirements for home health aides to 
furnish these services.

Training (Sec. 460.66)

    In Sec. 460.66, we have required that the PACE organization provide 
ongoing training to maintain and improve the skills and knowledge of 
each staff member with respect to their specific duties. The training 
should result in the staff's continued ability to demonstrate the 
skills necessary for the performance of their specific positions or job 
duties. The ability of the PACE organization to ensure patient safety 
and to achieve patient-specific performance measures requires competent 
staff. We believe there is a direct relationship between the quality of 
the organization's staff and patient well-being. The training 
requirement is intended to ensure that all staff are able to adapt to 
new or additional job demands. The PACE organization is only 
responsible for ensuring that the individual is educated and trained 
for her or his specific job. The individual would continue to be 
responsible for her or his own professional education and for any 
continuing education needed to maintain licensure or professional 
certification unless the organization chooses to assume this 
responsibility. In addition, we have included a specific training 
requirement for personal care attendants as described above.

Program Integrity (Sec. 460.68)

    We have established Sec. 460.68 to guard against potential 
conflicts of interest or other program integrity problems for PACE 
organizations, based on Part I, section E of the Protocol. An 
organization must not have any staff (employees or contractors) who 
have been convicted of criminal offenses related to their involvement 
in Medicaid, Medicare, other health insurance or health care programs, 
or social service programs under Title XX of the Act. We expanded this 
provision from the Protocol to prohibit an organization from having any 
staff who have been excluded from participation in Medicare or 
Medicaid, or having staff in any capacity where an individual's contact 
with participants would pose a potential risk because the individual 
has been convicted of physical, sexual, drug, or alcohol abuse. Members 
of the PACE organization's governing body, and their family members, 
are prohibited from having a direct or indirect interest in contracts 
with the organization. (Examples of indirect interests are holdings in 
the name of a spouse, dependent child, or other relative who resides 
with the member of the governing body.) These requirements are intended 
to protect participants and to prevent fraud under Medicare and 
Medicaid.
    We recognize that in rural, Tribal, or urban Indian communities 
there may be limited availability of individuals willing to and capable 
of performing key functions for the PACE organization. HCFA and the 
State administering agency may grant a waiver of the conflict of 
interest requirement for PACE organizations to allow individuals who 
have a direct or indirect interest in a contract or the provision of 
services to the PACE organization to recuse themselves from decisions 
directly or indirectly affecting those interests, rather than barring 
them entirely from serving on the PACE organization's policy making 
board or as directors, officers, partners, employees, or consultants of 
the PACE organization. Such a waiver may be granted if HCFA and the 
State administering agency determine that there are not enough people 
who could meet the requirement in the PACE organization's service area 
and the proposed alternative does not adversely affect the availability 
of care or the quality of care that is provided to participants.
    We have also added the requirement that the PACE organization must 
have a process to gather information on program integrity issues and 
respond to any request from HCFA within a reasonable amount of time.

Contracted Services (Sec. 460.70)

    Under the scope of benefits described in sections 1894(b)(1) and 
1934(b)(1) of the Act, a PACE organization may enter into written 
contracts with each outside entity to furnish services to participants. 
Consequently, we require that all services, except for emergency 
services as described in Sec. 460.100, not furnished directly by a PACE 
organization must be obtained through contracts which meet the 
requirements specified in regulations. We are adopting the contracting 
provisions in Part VII, section A of the Protocol.
    A PACE organization can only contract with entities that meet all 
applicable Federal and State

[[Page 66244]]

requirements. We have provided some examples of the types of 
requirements that contractors would be expected to meet. The contractor 
must be accessible, i.e., located within or near the PACE 
organization's service area.
    To avoid breakdowns in communication or in the provision of care, 
we require a PACE organization to designate an official liaison to 
coordinate activities between contractors and the organization. 
Effective coordination of services is necessary to avoid duplicative or 
conflicting services. Designating an individual as liaison provides a 
conduit for sharing information. The liaison would inform contractors 
of PACE organization policies, changes in participants' plans of care, 
information from team meetings, and quality improvement activities and 
goals. Contractor staff would inform the PACE organization, through the 
liaison, of updates and changes in a participant's status, personnel 
changes in the contractor, and any other information necessary for the 
continuity of participant care. All care must be evaluated by the PACE 
organization, with particular attention to care provided by contracted 
personnel. This requirement provides a mechanism to ensure that 
contracted personnel are adhering to organization policies and 
procedures. It also affords the organization an opportunity to identify 
any education or training needs of contracted personnel.
    The PACE center is required to maintain a current list of 
contractors and provide a copy to anyone upon request. Copies of signed 
contracts for inpatient care must be furnished to HCFA and the State 
administering agency.
    Under the specific contract content requirements, we require each 
contract to be in writing and contain the following information:
     Name of contractor.
     Services furnished.
     Payment rate and method.
     Terms of the contract, including the beginning and ending 
dates, as well as methods of extension, renegotiation and termination.
     Contractor agreement to: furnish only those services 
authorized by the PACE multidisciplinary team; accept payment from the 
PACE organization as payment in full and not to bill participants, 
HCFA, the State Medicaid agency or private insurers; hold harmless 
HCFA, the State and PACE participants in the event that the PACE 
organization cannot or will not pay for services performed by the 
contractor pursuant to the contract; not assign or delegate duties 
under the contract unless prior written approval is obtained from the 
PACE organization; and submit reports as required by the PACE 
organization.
    We have not established a specific notice requirement for 
termination of contracts. We believe that PACE organizations will 
contract with individuals and entities that understand and embrace the 
organization's mission and commitment to participants. As discussed 
previously, the governing body is required to establish personnel 
policies that address adequate notice of termination by contractors and 
employees with direct patient care responsibilities to permit an 
orderly transition and avoid disruptions in care. We specifically 
request public comment on whether we should add a requirement for 
notice before a contractor could terminate its contract.

Physical Environment (Sec. 460.72)

    To ensure that the center and home are free of hazards that may 
cause harm to the participants, staff, or visitors, we have established 
Sec. 460.72. Because issues of adequate space, infection control, fire 
prevention, dietary services, and the safety of transportation services 
are important to ensure quality care, we have added requirements for 
each in this condition.
    We have maintained the following requirements from the PACE 
Protocol with a few clarifications:
     The PACE center must be designed, constructed, equipped, 
and maintained to provide for the physical safety of participants, 
personnel, and visitors;
     The PACE center must ensure a safe, sanitary, functional, 
accessible and comfortable environment for the delivery of services, 
that protects the dignity and privacy of the participant; and
     The PACE center must include sufficient suitable space and 
equipment to provide primary medical care and suitable space for team 
meetings, treatment, therapeutic recreation, restorative therapies, 
socialization, personal care and dining. (We believe that a PACE 
organization should furnish primary care services in the center, but 
this provision allows flexibility to avoid duplicating an entire 
primary care clinic if that is not necessary.)
    The PACE organization must establish, implement, and maintain a 
written plan to ensure that all equipment is maintained in accordance 
with the manufacturer's recommendations to keep all equipment 
(mechanical, electrical and patient care) free of defect. Based on the 
manufacturer's experience with the equipment, we believe it has the 
most knowledge about routine maintenance and recommended repair 
schedules necessary to keep the equipment in good operating condition.
    The Life Safety Code (LSC) is a set of fire protection requirements 
designed to provide a reasonable level of safety from fire. The LSC was 
developed by the National Fire Protection Association and adopted by 
the Department of Health and Human Services as the standard which 
ensures reasonably fire-safe facilities. The LSC specifies requirements 
for building construction features such as walls and doors, exits and 
exit access, and fire protection devices such as sprinklers, smoke 
detectors, and fire extinguishers.
    The 1997 edition of the LSC is divided into occupancy chapters, 
including Business, Education, and Health Care Occupancies. Business 
occupancies include clinics and offices, and educational occupancies 
cover schools and day care centers. Health care occupancies include 
facilities where the patients are rendered incapable of self-
preservation and where they remain overnight. Unfortunately, the LSC 
does not designate a specific category for comprehensive outpatient 
services provided to nursing home eligibles, so we have chosen to 
stipulate that the PACE center must meet the occupancy provisions of 
the 1997 edition of the LSC for the type of setting in which it is 
located (i.e., hospital, office building, etc.).
    Each type of LSC occupancy requires a fire alarm system. A fire 
alarm system must provide three functions: (1) Initiation--a method of 
initiating the alarm, such as a pullbox; (2) notifications--a method of 
notifying the occupants, such as a loud bell, horn, chimes, or flashing 
lights for those patients who are deaf; and (3) control--a method of 
controlling other fire protection functions and features, such as air 
conditioning shutdown, automatic release (closing) of fire doors, etc. 
We require a PACE center to meet the requirements for a fire alarm 
system in accordance with the occupancy section of the LSC that applies 
to its building. Each occupancy section also requires evacuation plans, 
fire exit drills, and fire procedures. The purpose of the drills is to 
test the efficiency, knowledge, and response of the staff and to ensure 
that safe care will be provided to participants during an emergency.
    The statute and implementing regulations governing some Medicare 
providers (i.e., nursing facilities, hospitals, hospices) authorize us 
to accept a State code in lieu of the LSC

[[Page 66245]]

if it adequately protects patients. Likewise, under these regulations 
the LSC will not apply in a State where HCFA finds that a fire and 
safety code imposed by State law adequately protects PACE participants 
and staff.
    We recognize that it could be burdensome to require strict 
adherence to all of the requirements of the LSC. PACE centers may be 
established in a variety of building types (e.g., hospitals or office 
buildings), which must be considered in requiring adherence to the LSC. 
We also recognize that some centers may have alternative features that 
provide an equivalent level of protection to that required by the 
specific requirements of the LSC. In some buildings it may even be 
impractical or impossible to provide a specific feature due to the 
construction of the building. Therefore, we have specified that HCFA 
may waive specific provisions of the LSC which, if rigidly applied, 
would result in unreasonable hardship on the organization. Specific 
provisions may be waived only if the waiver does not adversely affect 
the health and safety of the participants and staff.
    We have established four requirements that we believe are 
fundamental for a PACE organization to effectively prepare for 
emergency situations. The PACE organization must establish, implement, 
and maintain documented procedures to manage medical and nonmedical 
emergencies or disasters that are likely to threaten the health or 
safety of participants, staff or the public including, but not limited 
to, fire, equipment, water or power failures, care-related emergencies, 
and natural disasters likely to affect their geographic location. We 
also state that we do not expect organizations to develop emergency 
plans for natural disasters that typically do not affect their 
geographic area. For example, organizations in the Southeast would not 
typically need to develop emergency procedures for earthquakes.
    PACE organizations must train each staff member (employee and 
contractors) on the actions necessary to address different medical and 
nonmedical emergencies. This requirement is designed to ensure the 
safety and security of both the participants and the staff. In 
addition, the participants must be appropriately trained on the 
organization's emergency procedures since they may need to take steps 
to protect themselves during an emergency. PACE participants need to be 
informed on what to do, where to go, and whom to contact if a center 
emergency occurs. The PACE center must also provide periodic 
orientation to staff and participants.
    Appropriate medical practice dictates that the organization must 
have trained personnel, drugs, and emergency equipment immediately 
available at every center at all times to adequately support 
participants until an Emergency Medical System (EMS) responds to the 
center. We have defined the minimum emergency equipment that must be on 
the premises and immediately available as easily portable oxygen, 
airways, suction, and emergency drugs. In addition, the center must 
have a documented plan to obtain EMS services from sources outside the 
center when needed.
    At least annually, a PACE organization must actually test, 
evaluate, and document the effectiveness of its emergency and disaster 
plans to ensure appropriate responses to the situations and needs that 
may arise from both medical and nonmedical emergencies. Drills and 
emergency episodes often reveal a weakness or flaw in the design of the 
emergency plan. An annual review will allow flaws or potential problems 
to be identified and corrected.

Infection Control (Sec. 460.74)

    Infection control is vital to the health and safety of 
participants, so we are requiring in Sec. 460.74 that the PACE 
organization adhere to accepted policies and standard procedures, 
including at least the standard precautions developed by and available 
from the Centers for Disease Control and Prevention (CDC). These 
guidelines have been developed by the CDC in collaboration with 
industry representatives and have proven effective as a means of 
diminishing the spread of blood-borne pathogens and other infectious 
agents. The PACE organization must establish, implement, and maintain a 
documented infection control plan that will assure a safe and sanitary 
environment and prevent and control the transmission of disease and 
infection. At a minimum, the infection control plan must include the 
following:
    (1) Procedures to identify, investigate, control, and prevent 
infections in every center and in a participant's place of residence;
    (2) Procedures to record any incidents of infection; and
    (3) Procedures to analyze the incidents of infection, to identify 
trends, and develop corrective actions related to the reduction of 
future incidents.

Transportation Services (Sec. 460.76)

    Transportation services are a critical component of PACE service 
delivery, so it is crucial that the PACE organization take appropriate 
steps to ensure that participants can be safely transported from their 
homes to the center and to appointments. We have established 
Sec. 460.76 to require that the PACE organization's transportation 
services must be safe, accessible and equipped to meet the needs of 
each participant. In addition, we require that the organization's 
transportation program include procedures on at least the following: 
(1) Maintenance of transportation vehicles according to the 
manufacturer's recommendations; (2) equipping transportation vehicles 
to communicate with the PACE center; (3) training transportation 
personnel on the special needs of participants and appropriate 
emergency response; and (4) as part of the multidisciplinary team 
process, communicating relevant changes in the participants' care plans 
to transportation personnel.

Dietary Services (Sec. 460.78)

    It is important that each PACE center provide each participant with 
a nourishing, palatable, well-balanced meal that meets the daily 
nutritional and special dietary needs of each participant. Each meal 
must be: prepared by methods that conserve nutritive value, flavor, and 
appearance; prepared in a form designed to meet individual needs; and 
prepared and served at the proper temperature. The center must provide 
substitute foods or nutritional supplements that meet the daily 
nutritional and special dietary needs of any participant who refuses 
the food served, cannot tolerate the food served, or who does not eat 
adequate amounts. In addition, the PACE organization must provide 
nutrition support (that is, tube feedings, total parenteral nutrition, 
or peripheral parenteral nutrition) to meet the daily nutritional needs 
of a participant if indicated by his or her medical condition or 
diagnosis.
    It is vital to the health and safety of participants that the food 
provided meets acceptable safety standards. Therefore, we are requiring 
the PACE organization to:
    (1) Procure foods (including nutritional supplements and items to 
meet special nutrition needs) from sources approved or considered 
satisfactory by Federal, State, Tribal or local authorities that have 
jurisdiction over the service area of the organization;
    (2) store, prepare, distribute, and serve foods (including 
nutritional supplements and items to meet special nutrition needs) 
under sanitary conditions; and

[[Page 66246]]

    (3) dispose of garbage and refuse properly.

Fiscal Soundness (Sec. 460.80)

    Part I, section F of the Protocol addresses fiscal soundness and 
paragraph (e)(4)(A)(ii) of sections 1894 and 1934 of the Act requires 
that during the trial period we conduct a comprehensive assessment of a 
PACE organization's fiscal soundness. We have established Sec. 460.80 
to address requirements for fiscal soundness.
    Each PACE organization must have a fiscally sound operation as 
demonstrated by total assets being greater than total unsubordinated 
liabilities, sufficient cash flow and adequate liquidity to meet 
obligations as they become due, and a net operating surplus or a plan 
for maintaining solvency.
    Each organization must have a documented insolvency plan approved 
by HCFA and the State administering agency which, in the event of 
insolvency, provides for: the continuation of benefits for the duration 
of the period for which capitation payment has been made; the 
continuation of benefits to participants who are confined in a hospital 
on the date of insolvency until their discharge; and protection of 
participants from liability for payment of any fees which are the legal 
obligation of the PACE organization.
    Each organization must have adequate arrangements to cover expenses 
in the event it becomes insolvent. To this end, we have specified 
requirements in this section that are consistent with the Protocol.

Marketing (Sec. 460.82)

    Based on Part III, section B of the Protocol, we have established 
Sec. 460.82 to address marketing of PACE programs. PACE organizations 
must conduct marketing activities that inform the general public about 
their programs.
    All marketing material must be approved by HCFA and the State 
administering agency. Initial marketing material is reviewed as part of 
the application process. After an organization is under a PACE program 
agreement, any new or revised marketing materials must be submitted for 
review by HCFA and the State administering agency. We will complete our 
review within 45 days after we receive the information from the 
organization or the material will be deemed approved. We have added the 
requirement for review and approval of revised marketing materials 
since revisions could potentially introduce false or misleading 
information. Although the Protocol includes a 30-day review and 
approval timeframe, we adopted a 45-day period to be consistent with 
the process used by HCFA for review of changes to Medicare+Choice 
organization marketing materials.
    Printed marketing materials must meet participants' special 
language requirements. Marketing materials must provide complete and 
clear information regarding the requirement that all services (other 
than emergency services), including primary care and specialist 
physician services, be furnished by or authorized by the PACE 
organization and that participants may be fully and personally liable 
for the costs of unauthorized or out-of-PACE program agreement 
services.
    PACE organizations must ensure that their employees or agents do 
not conduct prohibited marketing activities such as discrimination of 
any kind among individuals who meet PACE eligibility standards; 
activities that could mislead or confuse potential participants or 
misrepresent the PACE organization, HCFA, or the State administering 
agency; activities that involve gifts or payments to induce enrollment; 
contracting outreach efforts to individuals or organizations whose sole 
responsibility involves direct contact with the elderly to solicit 
enrollment; or unsolicited door-to-door marketing.
    Each PACE organization must establish, implement, and maintain a 
documented marketing plan with measurable enrollment objectives and a 
system for tracking its effectiveness.

Subpart F--PACE Services

PACE Benefits Under Medicare and Medicaid (Sec. 460.90)

    Pursuant to sections 1894(a)(2)(B) and (b)(1) and 1934(a)(2)(B) and 
(b)(1) of the Act, we have established Sec. 460.90 to specify that 
Medicare and Medicaid benefit limitations and conditions relating to 
amount, duration, scope of services, deductibles, copayments, 
coinsurance, or other cost sharing do not apply to PACE benefits. In 
addition, we have specified that, in accordance with sections 
1894(a)(1)(B)(i) and 1934(a)(1)(A) of the Act, the PACE participant 
shall receive Medicare and Medicaid benefits solely through the PACE 
organization.

Required Services (Sec. 460.92)

    Based on the provisions of sections 1894(b)(1)(A) and 1934(b)(1)(A) 
of the Act, we are requiring in Sec. 460.92 that each PACE benefit 
package include for all participants, regardless of source of payment, 
all Medicaid covered services as specified in the State's approved 
Medicaid plan, a variety of services specified in the Protocol, and 
other services determined necessary by the multidisciplinary team to 
meet the participant's needs (e.g., respite care). As specified in Part 
IV, section A.3 of the Protocol, at a minimum the PACE organization 
must provide the following benefit package:
     Multidisciplinary assessment and treatment planning;
     Primary care services including physician and nursing 
services;
     Social work services;
     Restorative therapies, including physical therapy, 
occupational therapy and speech-language pathology;
     Personal care and supportive services;
     Nutritional counseling;
     Recreational therapy;
     Transportation;
     Meals;
     Medical specialty services including, but not limited to: 
anesthesiology, audiology, cardiology, dentistry, dermatology, 
gastroenterology, gynecology, internal medicine, nephrology, 
neurosurgery, oncology, ophthalmology, oral surgery, orthopedic 
surgery, otorhinolaryngology, plastic surgery, pharmacy consulting 
services, podiatry, psychiatry, pulmonary disease, radiology, 
rheumatology, surgery, thoracic and vascular surgery, and urology;
     Laboratory tests, x-rays and other diagnostic procedures;
     Drugs and biologicals;
     Prosthetics and durable medical equipment, corrective 
vision devices such as eyeglasses and lenses, hearing aids, dentures, 
and repairs and maintenance for these items;
     Acute inpatient care: ambulance; emergency room care and 
treatment room services; semi-private room and board; general medical 
and nursing services; medical surgical/intensive care/coronary care 
unit, as necessary; laboratory tests, x-rays and other diagnostic 
procedures; drugs and biologicals; blood and blood derivatives; 
surgical care, including the use of anesthesia; use of oxygen; 
physical, occupational, and respiratory therapies; speech-language 
pathology; and social services.
     Nursing facility care: semi-private room and board; 
physician and skilled nursing services; custodial care; personal care 
and assistance; drugs and biologicals; physical, occupational, and 
recreational therapies and speech-language pathology, if necessary; 
social services; and medical supplies and appliances.

[[Page 66247]]

Required Services for Medicare Participants (Sec. 460.94)

    In accordance with paragraph (b)(1)(A)(i) of sections 1894 and 1934 
of the Act, we specify that the PACE benefit package for Medicare 
participants must include, in addition to the services required by 
Sec. 460.92, the scope of hospital insurance benefits described in 42 
CFR part 409 and the scope of supplemental medical insurance benefits 
described in 42 CFR part 410.
    This provision is based on explicit statutory wording that requires 
the inclusion of Medicare covered services only for individuals 
enrolled under section 1894 of the Act. Those individuals include 
Medicare-only participants and dually-eligible Medicare/Medicaid 
participants. The PACE organization may choose to include coverage of 
these services for other participants, but is not required to do so.
    In accordance with section 1894(g) of the Act, we specify that the 
following requirements of title XVIII of the Act (and regulations 
relating to such requirements) are waived and do not apply to services 
under the PACE program:
     The provisions of subpart F of part 409 of 42 CFR that 
limit coverage of institutional services;
     The provisions of subparts G and H of 42 CFR part 409 and 
parts 412 through 414 that relate to rules for payment for benefits;
     The provisions of subparts D and E of 42 CFR part 409 that 
limit coverage of extended care services or home health services;
     The provisions of subpart D of 42 CFR part 409 that impose 
a 3-day prior hospitalization requirement for coverage of extended care 
services; and
     The provisions of 42 CFR 411.15(g) and (k) that may 
prevent payment for PACE program services to individuals enrolled in 
the PACE program.

Excluded Services (Sec. 460.96)

    We provide a list of excluded services based on Part IV, section 
A.6 of the Protocol. The services that are excluded from coverage under 
the PACE program are as follows:
     Any service that is not authorized by the 
multidisciplinary team, even if it is listed as a required service, 
unless it is an emergency service .
     For services in inpatient facilities, private room and 
private duty nursing services, unless medically necessary, and non-
medical items for personal convenience such as telephone, radio or 
television rental, unless specifically authorized by the 
multidisciplinary team as part of a participant's plan of care.
     Cosmetic surgery, which does not include surgery required 
for improved functioning of a malformed part of the body resulting from 
an accidental injury or for reconstruction following mastectomy.
     Experimental medical, surgical or other health procedures.
     Services rendered outside the United States, except as may 
be permitted in accordance with 42 CFR 424.122 and 424.124 or as may be 
permitted under the State's approved Medicaid Plan. While the Protocol 
did not recognize any exceptions, the required inclusion of Medicare 
and Medicaid covered services results in certain limited exceptions 
being possible. For example, a State that borders another country might 
include some Medicaid coverage across the border, and Medicare covers 
some emergency hospital, ambulance, and physician services outside the 
United States. (As defined in 42 CFR 400.200, the United States 
includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam, 
American Samoa, and the Northern Mariana Islands.)

Service Delivery (Sec. 460.98)

    We are requiring in Sec. 460.98 that the PACE organization must 
establish and implement a written plan to provide care that meets the 
needs of its participants across all care settings on a 24 hour basis, 
each day of the year. The PACE organization must furnish comprehensive 
medical, health, and social services that integrate acute and long-term 
care. These services must be furnished at least in the PACE center, the 
participant's home, and inpatient facilities. The PACE organization 
must not discriminate against any participant in the delivery of 
required PACE services based on race, ethnicity, national origin, 
religion, sex, age, mental or physical disability, or source of 
payment.
    The requirements in this section implement provisions in Part IV, 
section B of the Protocol and ensure the availability of and access to 
services as a PACE organization grows. The following requirements are 
based on the Protocol:
     At least the following services must be furnished at every 
PACE center: primary care (including physician and nursing services); 
social services; restorative therapies (including physical and 
occupational therapy); personal care and supportive services; 
nutritional counseling; recreational therapy; and meals.
     The PACE organization must operate at least one PACE 
center either in or contiguous to its designated service area, with 
sufficient capacity for routine attendance by its participants.
     The PACE organization must ensure accessible and adequate 
services to meet the needs of all its participants. When necessary, the 
organization must increase the number of centers, staff, and other PACE 
services.
     The frequency of a participant's attendance at the center 
is determined by the multidisciplinary team based on the needs and 
desires of each participant.
    We added the requirement that, if there is more than one center, 
each center must offer the full range of services and have sufficient 
staff to meet the needs of participants.

Emergency Care (Sec. 460.100)

    We expanded on and clarified the provisions in Part IV, section A 
of the Protocol to ensure access to necessary services and to adopt a 
beneficiary-centered approach.
    We require a PACE organization to establish and maintain a written 
plan for handling emergency health care needs. The organization must 
ensure that the participants and caregivers know when and how to access 
emergency services and ensure that HCFA, the State, and PACE 
participants are held harmless if the PACE organization does not pay 
for emergency services.
    Emergency care is appropriate when services are needed immediately 
because of an injury or sudden illness and the time required to reach 
the PACE organization or a network provider would cause risk of 
permanent damage to the participant's health. Thus, emergency care 
services include inpatient and outpatient services, furnished by a 
qualified emergency services provider (other than the PACE organization 
or one of its contract providers) either in or out of the PACE 
organization's service area, that are needed to evaluate or stabilize 
an emergency medical condition. An emergency medical condition means a 
condition manifesting itself by acute symptoms of sufficient severity 
(including severe pain) such that a prudent layperson, with an average 
knowledge of health and medicine, could reasonably expect the absence 
of immediate medical attention to result in: serious jeopardy to the 
health of the participant; serious impairment to bodily functions; or 
serious dysfunction of any bodily organ or part.
    Emergency services that fall within this description do not require 
prior

[[Page 66248]]

authorization by the PACE organization. We believe that relying on the 
prudent layperson standard in establishing a participant's need for 
emergency services is more clear than the definition of emergency care 
in the Protocol. We adopted the prudent layperson standard from the 
Consumer's Bill of Rights and Responsibilities (discussed in detail in 
the section on participant rights). The same standard is used in the 
Medicare+Choice definition of emergency medical condition. This 
standard encompasses a slightly broader range of circumstances than 
does the Protocol language, by including some situations that could fit 
under the Protocol description of ``urgent care'' or ``urgently needed 
services.'' We think this clarification is helpful because the Protocol 
wording does not clearly distinguish between emergency and urgent care.
    Other services a participant may need while temporarily absent from 
the PACE organization's service area, that are not emergency services 
but cannot be delayed until the participant returns, would need prior 
authorization. The fact that these services may be ``urgently needed'' 
means that the PACE organization would be expected to authorize a 
participant to obtain them from a non-contract provider outside of the 
service area, but it does not exempt them from the requirement for 
prior authorization. This approach differs from that applied to 
Medicare+Choice organizations, where prior authorization for urgently 
needed services is not required. We believe that the differences in the 
population served by PACE organizations warrant different treatment of 
urgent, though not emergency, care needs. Due to the relative frailty, 
more limited mobility, and more complex health status of PACE 
participants, we believe the need to maintain coordination of care by 
the multidisciplinary team justifies contact with and authorization by 
the PACE organization prior to receipt of non-emergency care outside 
the PACE network.
    The emergency services plan must provide for the availability of 
appropriate on-call providers. We expanded this requirement from the 
Protocol to provide a safety net for unanticipated health incidents, so 
participants do not encounter difficulty obtaining care when they are 
away from the PACE center, when they are away from the PACE 
organization's service area and require services that cannot be delayed 
until they return, or when they require post-stabilization care 
services following emergency services. An on-call provider must be 
available 24-hours per day to address any participant questions about 
accessing emergency services and respond to requests for authorization 
of urgently needed out-of-network services or post-stabilization care 
services following emergency services.
    We believe that PACE organizations are organized to be responsive 
to all participant care needs, including the need for urgently needed 
or post-stabilization services. However, in order to ensure that 
unforeseen circumstances do not result in delays in needed care, we 
have clarified that the PACE organization must cover urgently needed 
out-of-network or post-stabilization care services if it does not 
respond to a request for approval within 1 hour after being contacted 
or cannot be contacted for approval.

Multidisciplinary Team (Sec. 460.102)

    This section is based on provisions in Part IV, section B of the 
Protocol. The Protocol requires that the PACE organization assign each 
participant to a multidisciplinary team based at the PACE center where 
the participant attends. We have included a requirement that the PACE 
organization must establish a multidisciplinary team at each center to 
comprehensively assess and meet the individual needs of each 
participant. We believe that a well-functioning multidisciplinary team 
is critical to the success of the PACE program, as the team is 
instrumental in controlling the delivery, quality, and continuity of 
care. Members of the multidisciplinary team should be knowledgeable 
about the overall needs of the patient, not just the needs which relate 
to their individual disciplines. In order to meet all of the health, 
psychosocial, and functional needs of the participant, team members 
must view the participant in a holistic manner and focus on a 
comprehensive care approach.
    Based on the Protocol, we are requiring that the multidisciplinary 
team be composed of at least the following members:
    a. Primary Care Physician--We considered expanding this to include 
nurse practitioners but decided to retain the requirement in the 
Protocol. While it would be acceptable for a PACE organization to 
include a nurse practitioner on the multidisciplinary team, we believe 
that this should be in addition to rather than instead of the primary 
care physician. The physician is an integral part of the team serving 
as a gatekeeper for the participant's medical care, and we feel it is 
important to retain this standard in order to ensure quality care.
    b. Registered Nurse--The Protocol requires the inclusion of a 
``nurse.'' We are specifying that this team member be a registered 
nurse. The nurse represented on the multidisciplinary team must exhibit 
leadership and management skills that are more consistent with the 
training received by registered nurses, as opposed to licensed 
practical nurses. In addition, we believe that a registered nurse would 
be better able to determine and respond to the health care needs of the 
frail population, particularly for home care services. We welcome 
comments on this issue.
    c. Social Worker;
    d. Physical Therapist;
    e. Occupational Therapist;
    f. Recreational Therapist or Activity Coordinator;
    g. Dietitian;
    h. PACE Center Manager--We have changed the Protocol terminology 
from ``PACE Center Supervisor'' to ``PACE Center Manager''. The center 
manager is responsible for overall operation of the PACE center and 
ensuring service delivery. The individual who holds this position 
should be a good facilitator and should possess good communication 
skills. She or he could be the leader of the multidisciplinary team, 
but we are not requiring this. We are giving the PACE organization and 
the multidisciplinary team the flexibility to decide who should lead 
the team and facilitate the discussions.
    i. Home Care Coordinator--Since PACE services may be furnished in 
the home, the coordination of in-home services with PACE center and 
primary care services is critical to effective service delivery. This 
coordination is especially important if the PACE organization has 
contractors providing the home care services. The PACE organization 
must designate a home care coordinator to supervise and coordinate home 
care services, whether these services are furnished by a PACE employee 
or through a contractor. We are changing the Protocol's term ``home 
care liaison'' to ``home care coordinator'', because ``home care 
liaison'' has another meaning in Medicare and we want to avoid 
confusion.
    j. Personal care attendants or their representatives--We have 
changed the Protocol term ``health care worker/aide'' to ``personal 
care attendant'', as we believe this term more accurately describes 
this type of worker. We believe that ``health care worker'' is too 
general and could apply to other members of the team.

[[Page 66249]]

    k. Drivers or their representatives--This requirement remains 
unchanged from the Protocol.
    Due to the age of PACE participants, a geriatrician could be a 
valuable member of the multidisciplinary team. As one option, the 
primary care physician could be a geriatrician. However, physicians who 
specialize in geriatrics are relatively rare and availability might be 
a serious problem. We have not required the involvement of a 
geriatrician but we welcome comments about whether such a requirement 
would be desirable and, if so, whether the geriatrician should be 
employed by the PACE organization and should primarily serve PACE 
participants.
    Consistent with the Protocol, we are requiring that primary medical 
care for all participants be furnished by the PACE primary care 
physician(s). The primary care physician must serve as the gatekeeper 
to the participant's use of medical specialists and inpatient care, and 
he or she must be an integral member of the multidisciplinary team. 
Ultimate responsibility for management of medical situations must rest 
with the PACE primary care physician.
    The multidisciplinary team is responsible for the initial 
assessment, periodic reassessments, the plan of care, and coordinating 
24-hour care delivery. A critical element of the success of the 
multidisciplinary team is the degree to which team members share 
information and communicate with one another. The Protocol requires the 
physician to keep the multidisciplinary team informed of the medical 
condition of each participant and to remain alert to pertinent input 
from other team members. We feel this should be the responsibility of 
each member of the team rather than just the physician, as it is 
critical to timely intervention to address potential problems. We are 
modifying the requirement to reflect this; i.e., each member of the 
team must regularly inform the multidisciplinary team of the medical, 
functional, and psychosocial condition of each participant and remain 
alert to pertinent input from other team members, participants, and 
caregivers. This communication can take place through formal measures 
such as team meetings and written documentation in participants' 
medical records, but should not be limited to formal mechanisms; 
informal communication between team members (e.g., CARDEX systems, 
informal updates during shift changes and as different personnel report 
to work) should be encouraged as well. It is critical that personal 
care attendants be involved in the communication process. Since they 
often have the first contact with the participant, it is important that 
they regularly share information on the participant's mood, activities, 
daily habits, etc. Each team member must document changes in the 
participant's condition in the participant's medical record.
    We are retaining the Protocol requirement that members of the 
multidisciplinary team must serve primarily PACE participants, unless a 
waiver is granted. After considering this issue, we concluded that for 
a frail elderly population, such as is served by the PACE program, it 
is important to support and retain measures that promote quality and 
continuity of care. If team members serve primarily PACE participants, 
they are able to develop a rapport with participants and are better 
able to plan for and provide their care. We recognize that team members 
may have other patients, but this must not interfere with the provision 
of services for PACE participants. HCFA and the State administering 
agency may grant a waiver of this requirement if they determine that--
     There are not enough individuals available in the PACE 
organization's service area who meet the requirement; and
     The proposed alternative does not adversely affect the 
availability of care or the quality of care that is provided to 
participants.
    If an applicant seeking approval as a PACE organization believes a 
waiver is warranted, it must include a request for the waiver in its 
application and describe in detail the circumstances supporting the 
request. For example, in a rural, Tribal, or urban Indian community the 
number of PACE participants, or the availability of appropriate 
multidisciplinary team members in some categories, may be insufficient 
for some team members to primarily serve PACE participants. Such an 
applicant would need to demonstrate that the alternative it proposes 
will maintain the continuity of care and assure sufficient availability 
of services so that participants receive prompt, effective care.
    We are requiring that the PACE organization establish, implement 
and maintain documented internal procedures governing the exchange of 
information between team members, contractors, and participants and 
their caregivers consistent with the requirements for confidentiality 
in Sec. 460.200(e). It is important for the organization to develop 
these procedures to avoid breakdowns in communication which would be 
detrimental to the success of the PACE program. We also want to 
emphasize the importance of regular communication from family members 
and other caregivers and health care workers in the home. It is 
critical that these individuals routinely report changes in participant 
status to the multidisciplinary team.
    Consistent with the Protocol, we are requiring that the following 
members of the team be employees of the PACE organization: primary care 
physician (unless an exception is granted), registered nurse, social 
worker, recreational therapist or activity coordinator, PACE center 
manager, home care coordinator, and PACE center personal care 
attendants. It is important to note that ``personal care attendants'' 
in this context refers to individuals who work in the PACE center to 
provide assistance to participants while they are at the center (e.g., 
assist medical staff, escort participants, bathe and toilet 
participants) and does not refer to personal care attendants who 
provide care to participants outside of the PACE center. Personal care 
attendants who work in the home are not required to be employees of the 
PACE organization.
    HCFA and the State administering agency may grant a waiver of the 
requirement that the primary care physician be employed by the PACE 
organization if they determine that--
     There are not enough physicians in the PACE organization's 
service area who meet the PACE requirements or State licensing laws 
make it inappropriate for the organization to employ physicians; and
     The proposed alternative does not adversely affect the 
availability or the quality of care that is provided to participants.
    If an applicant seeking approval as a PACE organization believes a 
waiver is warranted, it must include a request for the waiver in its 
application and describe in detail the circumstances supporting the 
request. For example, in a rural, Tribal, or urban Indian community the 
number of PACE participants, or the availability of primary care 
physicians, may be insufficient to make employment by the organization 
a feasible option. As another example, some State licensing laws 
prohibit the corporate practice of medicine, making it inappropriate 
for the organization to employ physicians. Such applicants would need 
to demonstrate that their contracts with physicians will maintain the 
continuity of care and assure sufficient availability of services so 
that participants receive prompt, effective care. We invite

[[Page 66250]]

comments on whether this waiver provision is too broadly defined.

Participant Assessment (Sec. 460.104)

    The information obtained through the participant assessment is the 
basis for the treatment plan developed by the multidisciplinary team. 
As such, it is important that the assessment be as comprehensive as 
possible, in order to capture all of the information necessary for the 
multidisciplinary team to develop a plan of care that will adequately 
address all of the participant's functional, psychosocial, and health 
care needs.
    The assessment process begins before enrollment, as set forth in 
Sec. 460.152, when the PACE organization evaluates whether a potential 
participant can be cared for appropriately in the program. Often, 
current PACE demonstration programs present a proposed plan of care to 
the potential participant as part of the enrollment process. The 
initial comprehensive assessment must be completed promptly following 
enrollment, but individual team members' in-person assessment of the 
participant should be scheduled at appropriate intervals based on the 
participant's level of health. Because the initial assessments are 
thorough, this will ensure that the participant is not overwhelmed with 
several team members conducting assessments at one time. However, the 
initial comprehensive assessment must be completed quickly so that the 
plan of care can be completed and implemented without delay. This often 
has been accomplished by the effective date of enrollment and should 
never be delayed more than a few days beyond that date. With the team 
concept, the goal is to obtain input from each discipline, as well as 
from the participant, to perform an assessment that identifies the 
services necessary to address the participant's needs and care 
preferences.
    As part of the initial comprehensive assessment, each of the 
following members of the multidisciplinary team must individually 
evaluate the participant in person and develop a discipline-specific 
assessment of the participant's health and social status:
     Primary care physician;
     Registered nurse;
     Social worker;
     Physical therapist or occupational therapist, or both;
     Recreational therapist or activity coordinator;
     Dietitian; and
     Home care coordinator.
    These individuals represent the most vital components of the 
participant's treatment and psychosocial development. These disciplines 
are the core needed to determine the specific needs of the participant. 
At the recommendation of individual team members, other professional 
disciplines (e.g., speech-language pathology, dentistry, or audiology) 
may participate in the initial comprehensive assessment if the 
participant's needs warrant their inclusion.
    HCFA is currently in the preliminary stages of developing a 
standardized core assessment instrument to be used by PACE 
organizations for continuous quality improvement. Until such time as 
this instrument is completed, we are requiring that the participant's 
assessment include, at a minimum, the following information:
     physical and cognitive function and ability;
     medication use;
     participant and caregiver preferences for treatment;
     socialization and availability of family support;
     current health status and treatment needs;
     nutritional status;
     home environment, including home access and egress;
     participant behavior;
     psychosocial status;
     medical and dental status; and
     participant language.
    We believe that this information will provide a basic framework 
from which a comprehensive plan of care can be developed. This 
assessment is appropriate for every participant, and ensures that the 
plan of care focuses on the participant's medical, psychosocial, and 
functional needs. However, this list represents the minimum information 
to be included in the comprehensive assessment, and the PACE 
organization is encouraged to include other assessment items as 
necessary. HCFA may impose additional or more specific assessment 
requirements upon development of the standardized core assessment 
instrument.
    The Protocol requires that the discipline-specific plans be 
consolidated into a single plan of care for the participant. The 
development of the plan of care must occur through discussion and 
consensus of the entire multidisciplinary team. We are clarifying this 
requirement by stating that the discussion must take place during team 
meetings, in order to facilitate group discussion of the plan of care 
and ensure that all members of the team are actively involved in the 
decision-making process, and that the plan of care must be completed 
promptly.
    In developing the plan of care, the PACE multidisciplinary team is 
also required to inform female participants that they are entitled to 
choose a women's health specialist from the network of PACE providers. 
We have included this requirement to be in compliance with the 
Consumer's Bill of Rights and Responsibilities (discussed in more 
detail later in this preamble in the section on participant rights). 
This requirement is intended to ensure that female participants are 
able to select providers who specialize in women's health for routine 
and preventive care.
    Reassessments are necessary to provide information to adjust 
participants' plans of care. Periodic reassessments ensure the 
continued accuracy and effectiveness of the participant's plan of care. 
Consistent with the Protocol, we are requiring the following members of 
the multidisciplinary team to conduct an in-person reassessment on at 
least a semi-annual basis:
     Primary care physician;
     Registered nurse;
     Social worker;
     Recreational therapist or activity coordinator; and
     Other team members actively involved in the development or 
implementation of the participant's plan of care, for example, home 
care coordinator, physical therapist, occupational therapist, or 
dietitian.
    The primary care physician, registered nurse, social worker, and 
recreational therapist/activity coordinator are required to provide 
assessments at least semi-annually as they are the most critical in 
terms of defining outcomes of care. Other team members actively 
involved in the participant's plan of care must also reassess 
semiannually, as they have an impact on the care the participant is 
receiving. If the participant is not receiving these other services 
(e.g., home care, physical therapy, occupational therapy, dietitian 
services), these members of the team would not be required to conduct a 
semi-annual assessment.
    Consistent with the Protocol, we are requiring the following 
members of the multidisciplinary team to conduct an in-person 
reassessment on at least an annual basis:
     Physical therapist and/or occupational therapist;
     Dietitian; and
     Home care coordinator.
    It is important for the multidisciplinary team to monitor and 
respond to any changes in a participant's condition or family situation 
or any concerns raised by the

[[Page 66251]]

participant or his or her designated representative. The Protocol 
requires that the participant be reassessed by the team or by selected 
members of the team to develop a new plan of care when the health 
status or psychosocial situation of a participant changes. We believe 
that at least all members of the multidisciplinary team that are 
required to perform the initial comprehensive assessment should 
reassess the participant. If fewer members participate in this 
reassessment, a critical component of a participant's care might be 
overlooked.
    If a participant's health or psychosocial status has changed or if 
a participant (or his or her designated representative) believes that a 
particular service needs to be initiated, continued, or eliminated for 
the participant, the appropriate multidisciplinary team members must 
reassess the participant. The purpose of this reassessment is to 
evaluate whether it is necessary to increase, continue, reduce, or 
terminate particular services and whether a different course of 
treatment is needed. A complete reassessment should ensure that the 
participant is receiving a continuing program of care that meets his or 
her current needs. Requiring a reassessment based on the concerns of 
the participant emphasizes the active role the participant plays in the 
assessment process and subsequent development of the plan of care. The 
participant's adherence to the plan is critical to the successful 
delivery of services. Therefore, permitting the participant (or 
designated representative) to trigger a reassessment gives participants 
the opportunity to express any dissatisfaction with the manner in which 
any care or services will be furnished.
    The PACE organization is required to have explicit procedures for 
timely resolution of requests from participants (or designated 
representatives) to initiate, continue, or terminate a particular 
service. Unless an extension is granted, the multidisciplinary team 
must notify the participant (or designated representative) of its 
decision to approve or deny the request as expeditiously as the 
participant's condition requires, but no later than 72 hours after the 
multidisciplinary team receives the request. We considered establishing 
both a standard process and an expedited process for responding to a 
participant request; however, because of the frailty of this 
population, we concluded that every request is urgent and requires a 
quick response. We want to ensure that a participant's health is not 
adversely affected due to a delay in reassessing the participant's 
condition. The goal of the program is to maximize the participant's 
functioning, and a quick response is meant to ensure that all factors 
are evaluated, all necessary services are being furnished, and 
participant health is not compromised. A timely notification also 
allows participants adequate time to consider appeal rights, if 
necessary, without compromising their health.
    The multidisciplinary team may extend the 72-hour timeframe by no 
more than 5 additional days if the participant or designated 
representative requests the extension, or the team documents its need 
for additional information and how the delay is in the interest of the 
participant. An extension could be warranted because not all the 
appropriate members of the multidisciplinary team may always be able to 
meet with the participant, conduct a discipline-specific reassessment, 
discuss the results of the reassessment with the entire 
multidisciplinary team, and develop a response to the request within 72 
hours. The PACE organization retains the flexibility to determine the 
most appropriate manner in which to provide notification to the 
participant (or designated representative).
    If, based on the reassessment, the multidisciplinary team decides 
to deny the participant's request, the denial must be explained to the 
participant (or designated representative) orally and in writing. The 
PACE organization must provide the specific reasons for the denial in 
understandable language.
    If the participant (or designated representative) is dissatisfied 
with the outcome of the reassessment, the participant may appeal the 
decision in accordance with Sec. 460.122. Specifically, the PACE 
organization must: (1) Inform the participant or designated 
representative of his or her right to appeal the decision; (2) describe 
both the standard and expedited appeals processes, including the right 
to and conditions for obtaining an expedited appeal of a denial of 
services; and (3) describe the right to and conditions for continuation 
of contested services through the period of the appeal.
    If the multidisciplinary team fails to provide the participant with 
timely notice of the resolution of the request for reassessment or does 
not furnish the services required by the revised plan of care, this 
failure constitutes an adverse decision, and the participant's request 
must be automatically processed as an appeal by the PACE organization 
in accordance with Sec. 460.122.
    Team members who reassess a participant must reevaluate the plan of 
care. Any changes in the plan of care must be discussed and approved by 
the multidisciplinary team and the participant (or designated 
representative). The plan of care reflects the team's and participant's 
goals for the participant's care. Obtaining the participant's approval 
of the proposed plan of care is important to the successful delivery of 
services and the participant's adherence to the plan.
    In addition, we also require that any services included in the 
revised plan of care as a result of a reassessment must be furnished to 
the participant as expeditiously as the participant's health condition 
requires. It is critical that care not be delayed and that the 
participant receive comprehensive care that maintains his or her 
functional status. Because we recognize that some changes in the 
participant's plan of care (e.g., installing a wheelchair ramp at the 
participant's home) may require more time to accomplish, we have chosen 
not to specify a timeframe for delivering services. However, we are 
soliciting comment on the necessity of requiring a specific timeframe. 
Whenever a participant assessment or reassessment occurs, the 
information must be documented in the participant's medical record.

Plan of Care (Sec. 460.106)

    Based on Part IV, section B of the Protocol, we developed 
requirements for the participant's plan of care. We are requiring that 
the multidisciplinary team promptly develop a comprehensive plan of 
care that specifies the care needed to meet the participant's medical, 
physical, emotional, and social needs, as identified in the initial 
comprehensive assessment. The plan of care must identify measurable 
outcomes to be achieved and must be developed in collaboration with the 
participant and her or his caregiver. The specified outcomes need not 
be discipline-specific. Instead, these are team goals for the 
participant's care. Involving the participant in the plan of care is 
important to the successful delivery of services and the participant's 
adherence to the plan.
    We are requiring the team to implement, coordinate, and monitor the 
plan of care by providing services directly and supervising the 
delivery of services furnished by contract providers. The participant's 
health and psychosocial status, as well as the effectiveness of the 
plan of care, must be monitored continuously through the provision of 
services, informal observation, input from participants and caregivers, 
and communications among

[[Page 66252]]

members of the multidisciplinary team and other providers.
    We are requiring that, on at least a semiannual basis, the 
multidisciplinary team reevaluate the participant plan of care, 
including the defined outcomes, and make changes as necessary. 
Semiannual review of the participant's plan of care ensures that the 
needs of the participant are being met. It allows the team to determine 
if the participant's level of health has changed thus dictating a 
change in the level of services or even the setting in which care must 
be provided.
    We are requiring that participant plans of care be developed, 
reviewed, and reevaluated in collaboration with the participants or 
caregivers. The purpose of participant/caregiver involvement is to 
assure that they approve of the care plan and that participant concerns 
are addressed. We are giving PACE organizations the flexibility to 
determine how often care plans should be reviewed with the participant. 
We welcome comments on the issue of whether or not to impose a 
timeframe for this activity.
    The participant's plan of care and any changes in the plan must be 
documented in the participant's medical record.

Subpart G--Participant Rights

(Sections 460.110-460.118)

Introduction
    In accordance with sections 1894(b)(2)(B) and 1934(b)(2)(B) of the 
Act, the PACE program agreement requires the PACE organization to have 
in effect, ``written safeguards of the rights of enrolled participants 
(including a patient bill of rights and procedures for grievances and 
appeals) in accordance with regulations and with other requirements of 
this title and Federal and State law that are designed for the 
protection of patients.'' In addition, sections 1894(f)(3) and 
1934(f)(3) of the Act give us the discretion to apply such requirements 
of part C of title XVIII and sections 1903(m) and 1932 of the Act 
relating to protection of beneficiaries and program integrity as would 
apply to Medicare+Choice organizations under part C and to Medicaid 
managed care organizations under prepaid capitation agreements under 
section 1903(m). Moreover, sections 1894(f)(2) and 1934(f)(2) of the 
Act require us to incorporate the requirements in the PACE protocol 
which includes a patient bill of rights.
    We also have made every effort to assure that the rights and 
protections established in the PACE agreement are in substantial 
compliance with the Presidential Advisory Commission's (The Commission) 
Consumer Bill of Rights and Responsibilities (CBRR), which appears as 
an addendum to The Commission's Final Report to the President, entitled 
Quality First: Better Health Care for All Americans (March 1998). (A 
copy of the Final Report can be obtained by calling the Agency for 
Health Care Policy and Research, Department of Health and Human 
Services at 1-800-358-9295.) The President issued an Executive 
Memorandum to the Secretary of the Department of Health and Human 
Services dated February 20, 1998, which requires that, by December 31, 
1999, Medicare and Medicaid health care programs be brought into 
substantial compliance with the CBRR. The PACE program is included 
within that framework.
    In considering how to apply these patient protections, the statute 
requires that we take into account the differences between the 
populations served and benefits provided under PACE, Medicare+Choice, 
and Medicaid managed care. We believe that the PACE program is unique 
in its approach to meeting the needs of the frail elderly. Unlike most 
managed care organizations which are responsible for meeting health 
care needs alone, the PACE program is an integrated partnership between 
the individual, the community, and the PACE organization, which is 
dedicated to providing all-inclusive care to meet all medical and 
social needs to enable the participant to remain in the community.
    We believe it is important to establish participant rights that 
reflect the differences in the PACE delivery approach from that of 
other managed care systems. For example, since PACE participants 
receive services most days of the week, either at the PACE center or 
through home visits, PACE organizations are able to monitor changes in 
a participant's medical condition and social service needs on a daily 
basis. When PACE participants are referred to contracted specialists, 
in most cases, the PACE organization makes the appointment, provides 
transportation, and often provides an aide or other staff member to 
accompany the participant. While managed care organizations may provide 
this level of care management to some enrollees, PACE organizations do 
so routinely for their entire participant census. Also, while managed 
care organizations furnish a selected array of medical services, they 
do not furnish all-inclusive care, including social and recreational 
services intended to enhance participants' quality of life.
    To reiterate the philosophy set forth in the PACE Protocol, the 
PACE organization furnishes comprehensive services designed to: (1) 
enhance the quality of life and autonomy for frail, older adults; (2) 
maximize dignity and respect of older adults; (3) enable frail, older 
adults to live in their homes and in the community as long as medically 
and socially feasible; and (4) preserve and support the older adult's 
family unit. The bill of rights for PACE participants must complement 
and maintain this philosophy. We have relied on the PACE Protocol and 
incorporated the basic rights that it identifies. However, we are also 
guided by the Medicare+Choice regulations and by the CBRR.
    We also recognize that the statute directs us to consider State 
law. We have interpreted this to mean that a PACE organization's 
participant bill of rights may include additional rights and 
protections as required by State or local laws and regulations or 
ethical considerations of particular concern, but only if these 
additions or modifications provide stronger rights and protections than 
those established in this regulation. Regardless, it is up to the PACE 
organization to establish appropriate policies and procedures for 
assuring that the participant bill of rights is fully operational 
throughout the PACE organization.
    Consistent with the Protocol and the CBRR, we have retained the 
concept that participants can choose to be represented by family 
members, caregivers, or other representatives. We intend that a 
participant may designate a representative to exercise any or all of 
the rights to which the participant is entitled.
    We are requiring, as did the Protocol, the PACE organization to 
provide encouragement and assistance to participants in understanding 
and exercising their rights and in recommending changes in PACE 
policies and services. In addition, it is likely that many of the frail 
elderly or their chosen representatives will need guidance in 
navigating the pre-enrollment, enrollment, and post-enrollment 
processes of PACE. In the previous discussion on consultations with the 
State Administration on Aging, we referred to the State Long Term Care 
Ombudsman Programs. These State programs promote and monitor the 
quality of care in nursing homes, including identifying and resolving 
complaints, making regular visits to nursing homes, and generally, 
improving the quality of care and

[[Page 66253]]

quality of life of nursing home residents. The role of the ombudsman is 
to engage in a variety of activities designed to encompass both active 
advocacy and representation of residents' interests. We are 
specifically requesting public comment on whether the ombudsman program 
could play a role in consumer assistance to potential PACE 
participants, as well as to those who have disenrolled and need 
assistance in organizing their care. With regard to PACE participants, 
we are also interested in receiving public input as to whether an 
ombudsman could provide one-on-one consumer assistance to PACE 
participants and their designated representatives to exercise their 
rights and work effectively with the multidisciplinary team.
    In Sec. 460.110, we require a PACE organization to have a written 
participant bill of rights that is designed to protect and promote the 
rights of each participant. The organization is required to inform 
participants upon enrollment, in writing, of their rights and 
responsibilities, and all rules and regulations governing 
participation. In addition, the organization must protect participants' 
rights and provide for the exercise of those rights.
    Finally, there are numerous references throughout the regulations 
to the PACE organization furnishing various kinds of information to 
participants in writing. In order for this information to be 
understandable and useful, it must be presented in a legible format. 
The frail elderly PACE population would be expected to have vision 
problems that make the use of sufficiently large, clear type 
particularly important in written communications. While we are not 
mandating the use of a particular typeface or font size, we expect PACE 
organizations to ensure that documents are legible for their intended 
audience.

Specific Participant Rights

     Right #1--Respect and nondiscrimination. Each participant 
has the right to considerate, respectful care from all PACE employees 
and contractors at all times and under all circumstances. Each 
participant has the right not to be discriminated against in the 
delivery of required PACE services based on race, ethnicity, national 
origin, religion, sex, age, mental or physical disability, or source of 
payment.
    The individual's right to respect and nondiscrimination is embedded 
in the basic philosophy of the PACE program. Within this context, it is 
essential that PACE participants are assured of the following rights:
    (1) To receive comprehensive health care in a safe and clean 
environment and in an accessible manner.
    (2) To be treated with dignity and respect, be afforded privacy and 
confidentiality in all aspects of care, and be provided humane care.
    (3) Not to be required to perform services for the PACE 
organization.
    (4) To have reasonable access to a telephone.
    (5) To be free from harm, including physical or mental abuse, 
neglect, corporeal punishment, involuntary seclusion, excessive 
medication, and any physical or chemical restraint imposed for purposes 
of discipline or convenience and not required to treat the 
participant's medical symptoms.
    (6) To be encouraged and assisted to exercise rights as a 
participant, including the Medicare and Medicaid appeals processes as 
well as civil and other legal rights.
    (7) To be encouraged and assisted to recommend changes in policies 
and services to PACE staff.
    The following discussion provides the rationale for inclusion of 
these rights. In keeping with the PACE model, we recognize the 
participant's right to receive comprehensive care in a safe and clean 
environment and in an accessible manner. The Protocol states that a 
PACE participant must receive treatment and rehabilitative services. We 
have expanded this requirement to state that the participant has a 
right to receive comprehensive health care. The PACE organization must 
offer and manage all health, medical, and social services needed to 
restore or preserve the participant's independence. The PACE 
multidisciplinary team must arrange for preventive, rehabilitative, 
curative, and supportive services in adult day health centers, 
participant homes, hospitals, and nursing homes. The revised language 
addresses the complete range of services in each setting that a 
participant is entitled to, once enrolled in the PACE organization.
    The Protocol stipulates that the participant has the right to have 
dignity, privacy, and humane care. For purposes of clarification, we 
require the PACE organization to treat the participant with dignity and 
respect, to afford the participant privacy and confidentiality in all 
aspects of care, and to provide humane care. The PACE organization must 
assure that a participant's dignity and privacy are respected not only 
in its own facilities but also in affiliated or contract providers. 
Staff should be instructed that any discussions with participants 
regarding treatment, the participant care plan, and medical conditions 
should be held in private and kept confidential. While recognizing the 
participant's right to privacy and confidentiality, we are not 
advocating physical barriers because participants should be in the view 
of the staff at all times to ensure safety. However, in situations 
where there is participant body exposure during treatment, the staff 
should be instructed to provide temporary screens or curtains.
    We have adopted from the Protocol the right to be free from harm, 
including physical or mental abuse, neglect, corporeal punishment, 
involuntary seclusion, excessive medication, and inappropriate use of 
physical or chemical restraints. We have revised the wording used in 
the Protocol regarding the use of restraints. We do not view this as a 
policy change from the protocol, but felt the rewording was necessary 
to emphasize that the use of restraints must be limited to those 
situations with adequate, appropriate clinical justification. The use 
of restraints must be based on the assessed needs of the patient, be 
monitored and reassessed appropriately, and be ordered for a defined 
and limited period of time. The least restrictive and most effective 
method available must be utilized and it must conform to the patient's 
plan of care. Restraints may only be used as a last resort and must be 
removed or ended at the earliest possible time. We do not believe that 
restraints of any kind should ever be used as a preferred approach to 
care and we expect PACE organizations to ensure that their programs are 
``restraint free'' to the greatest extent possible. Specific 
requirements regarding the use of restraints are established in 
Sec. 460.114.
    We are in the midst of examining our seclusion and restraint policy 
for all HCFA-covered providers. We call your attention to the 
discussion of the use of seclusion and restraints in the HCFA interim 
final rule with comment concerning the conditions of participation for 
hospitals (HCFA-3018-IFC, published July 2, 1999, 64 FR 36070). In that 
regulation, we have established very explicit standards for the use of 
seclusion and restraints both in medical/surgical care and for behavior 
management (see Sec. 482.13(e) and (f)). While the standards are not 
identical to those we have included in Sec. 460.114, they share the 
common principle that patients have the right to be free from 
restraints of any form that are not medically or psychiatrically 
necessary or are used as means of coercion, discipline, convenience, or 
retaliation by staff. In the preamble for the hospital conditions of 
participation, we indicate our intent to examine the

[[Page 66254]]

applicability of the hospital restraint and seclusion standards to 
other providers. Therefore, we formally ask for comments about how best 
to extend the protections proposed for hospital patients to 
participants in the PACE program.
    We have also adopted the rights established in the Protocol to 
encourage and assist the participant to exercise his or her rights, 
including the Medicare and Medicaid appeals processes, as well as civil 
and legal rights and we have maintained the right to telephone access. 
On the other hand, we have altered the right not to be required to 
perform services for the organization unless the services are included 
for therapeutic purposes in the plan of care. Upon reflection, it is 
our belief that a therapeutic program should not be tied to performing 
services for the PACE organization.
    The CBRR specifies that organizations should not discriminate on 
the basis of race, ethnicity, national origin, religion, sex, age, 
mental or physical disability, or source of payment. PACE organizations 
are required to comply with all Federal, State, and local laws, 
including discrimination statutes with regard to marketing, enrollment, 
and provision of services. However, we recognize that, with regard to 
health status considerations, PACE organizations are required as part 
of the intake process to assess whether a potential participant is 
appropriate for PACE, that is, meets the State's nursing home 
eligibility standard but can be cared for in the community. Meeting 
required certification standards within the PACE context is not deemed 
a violation of antidiscrimination laws. Still, in order to ensure that 
the qualification decision is free from other, illegal forms of 
discrimination, we are requiring PACE organizations to retain 
information on individuals who are assessed but, for whatever reason, 
are not enrolled.
     Right #2--Information disclosure. Each PACE participant 
has the right to receive accurate, easily understood information and to 
receive assistance in making informed health care decisions. 
Specifically, each participant has the right:
    (1) To be fully informed in writing of the services available from 
the PACE organization, including identification of all services that 
are delivered through contracts, rather than furnished directly by the 
PACE organization--
    (A) Before enrollment;
    (B) At enrollment; and
    (C) When there is a change in services.
    (2) To have the enrollment agreement, described in Sec. 460.154, 
fully explained in a manner understood by the participant.
    (3) To examine, or upon reasonable request, to be assisted to 
examine the results of the most recent review of the PACE organization 
conducted by HCFA or the State administering agency and any plan of 
correction in effect.
    In order for consumers, independently or in concert with their 
designated representatives, to make rational decisions, they need 
accurate, reliable information that will allow them to assess 
differences in their health care options, including information 
critical to their initial decision to enroll in PACE and whether to 
remain in PACE. The CBRR provides for comprehensive information to be 
provided to consumers in three basic categories: health plan 
information; health professional information; and health care 
facilities. Topics addressed include benefits, cost-sharing, dispute 
resolution, consumer satisfaction and plan performance information, 
network characteristics, care management information, corporate 
organization, etc. The CBRR indicates that certain information should 
be provided routinely with the remaining information available upon 
request.
    Information that is provided to potential enrollees is addressed in 
more detail in the sections on marketing (Sec. 460.82) and enrollment 
(Sec. 460.154). With regard to participant rights, we have linked the 
right to information disclosure to the information that is included in 
the enrollment agreement. The PACE organization must explain the 
enrollment agreement in a manner understood by the participant to 
ensure that all participants fully comprehend their rights and 
responsibilities from the beginning of their relationship with the PACE 
organization. Among the items in the enrollment agreement are: an 
acknowledgment that the participant understands that the PACE 
organization is the participant's sole service provider; a description 
of PACE services available and how services are obtained from the PACE 
organization; the procedures for obtaining emergency and urgently 
needed out-of-network services; information on the grievance and 
appeals processes; conditions for disenrollment; description of 
participant premiums, if any, and procedures for payment of premiums. 
We are requiring that the PACE organization inform participants 
whenever changes occur in the services available from the PACE 
organization.
    The enrollment agreement also indicates that the PACE organization 
has a program agreement with HCFA and the State administering agency 
that is subject to renewal on a periodic basis. In order to provide 
participants with information on the status of their organization's 
agreement, PACE participants have the right to examine the results of 
the most recent review of the PACE organization conducted by HCFA and 
the State administering agency and any plan of correction in effect.
    We are also requiring in Sec. 460.60(d), that changes in the 
organizational structure of the PACE provider be approved in advance by 
HCFA and the State administering agency. Once approved, information 
about changes in organizational structure will be forwarded to the 
consumer advisory committee for dissemination to participants as 
appropriate. In this way, participants will be kept informed about the 
organizational structure of the PACE provider and may determine if any 
organizational changes made by the PACE organization affect their 
continued enrollment in PACE.
     Right #3--Choice of providers. Each participant has the 
right to a choice of health care providers, within the PACE 
organization's network, that is sufficient to ensure access to 
appropriate high-quality health care. Specifically, each participant 
has the right:
    (1) To choose his or her primary care physician and specialists 
from within the PACE network.
    (2) To request that a qualified specialist for women's health 
services provide routine or preventive women's health services.
    (3) To disenroll from the program at any time.
    The right to access specialists must be seen in the context of the 
PACE model. Active involvement by participants in care planning in 
conjunction with a multidisciplinary team approach to care management 
and service delivery are fundamental aspects of the PACE model of care. 
In fact, although sections 1894(f)(2)(B) and 1934(f)(2)(B) of the Act 
provide for waiver of certain provisions of the protocol, use of the 
multidisciplinary team approach may not be waived. Development of a 
participant's plan of care begins with a comprehensive assessment. 
Participant preferences for care are identified components of the 
assessment. Once the plan of care is developed, the team is required to 
continuously monitor the effectiveness of the plan in collaboration 
with participants.
    Moreover, the team is required to develop, review, and reevaluate 
the plan of care in collaboration with the participant to ensure there 
is agreement

[[Page 66255]]

with the plan of care and that participant concerns are addressed. 
These provisions complement the participant rights to participate in 
treatment decisions, to be fully informed of his or her functional 
status by the multidisciplinary team, to participate in the development 
and implementation of the plan of care, and to make health care 
decisions, including the right to refuse treatment and to be informed 
of the consequences of the decisions.
    It is in this context that the determination with regard to the 
need for specialty care is made by the multidisciplinary team and the 
participant. If there is disagreement, then the participant has the 
right to engage the dispute resolution process. Regardless, the 
multidisciplinary team is expected to give ample consideration to a 
participant's request to see a specialist and to objectively determine 
whether such visits are necessary to meet the needs described in the 
plan of care. To further emphasize access to a woman's health care 
specialist within the context of the PACE model, we have identified 
such a request as one of the participant preferences that must be 
considered in developing the plan of care.
    The CBRR asserts that consumers with complex or serious medical 
conditions who require frequent specialty care should have direct 
access to a qualified specialist of their choice within a plan's 
network of providers. Authorizations, when required, should be for an 
adequate number of direct access visits under an approved treatment 
plan. We believe that central to the PACE model, with its reliance on 
an all-inclusive plan of care that is derived by a multidisciplinary 
team in collaboration with the participant, is the organization's 
interest in ensuring that participants obtain the care they need, 
including specialty care, in the easiest and most efficient manner 
possible. A participant who needs a course of therapy with a specialist 
will have that need reflected in his or her plan of care and would 
receive that care for the duration and number of visits specified in 
the plan. In light of the requirements elsewhere in this rule 
concerning the development and management of the plan of care, we 
believe it would be redundant to include an explicit requirement that 
would mirror this CBRR provision, and have, therefore, not included 
such a requirement.
    With regard to having a choice of primary care physician and 
specialists, the PACE organization is required to maintain sufficient 
staff and contractors to meet the needs of its participants. Given the 
participant census of PACE organizations, it is most likely that choice 
will be limited. PACE organizations likely will start out with one of 
each type of specialist and perhaps only one primary care physician. 
Although CBRR includes the right to choose among physicians in the 
provider's network, it was aimed at managed care organizations with 
thousands of patients and numerous providers. Such is not the case with 
the PACE model. Potential participants must weigh the limited network 
of PACE organizations with the benefits of a comprehensive, all-
inclusive delivery system in choosing to enroll.
    CBRR provides a right to transitional care for patients who are 
undergoing an extensive course of treatment for a chronic or disabling 
condition. As we discuss in greater detail in the section on the 
enrollment process, potential participants must be advised that the 
PACE organization is the participant's sole source provider and that 
the organization guarantees access to services, but not to a specific 
provider. As a result, PACE employees and specialists under contract 
are expected to provide as much advance notice as possible of their 
decision to terminate their relationship with the PACE organization in 
order to provide sufficient time for the organization to secure a 
replacement. In addition, the PACE organization and its contractors are 
expected to provide as much advance notice as possible of a decision to 
terminate a contract in order to provide for an orderly transition for 
participants. We are requesting public input on the propriety of 
establishing a contract requirement to ensure a minimum transition 
period.
     Right #4--Access to emergency services. Each participant 
has the right to access emergency health care services when and where 
the need arises without prior authorization by the PACE 
multidisciplinary team.
    In addition to establishing a participant right to emergency 
services without prior authorization, we have described emergency care, 
emergency medical condition, urgently needed services and post-
stabilization care services previously in the preamble in the section 
regarding emergency care and in Sec. 460.100, consistent with the CBRR.
     Right #5--Participation in treatment decisions. Each 
participant has the right to fully participate in all decisions related 
to his or her care. A participant who is unable to fully participate in 
treatment decisions has the right to designate a representative. 
Specifically, each participant has the right:
    (1) To have all treatment options explained in a culturally 
competent manner, and to make health care decisions, including the 
right to refuse treatment, and be informed of the consequences of the 
decisions.
    (2) To have the PACE organization explain advance directives and to 
establish them, if the participant so desires, in accordance with 
Secs. 489.100 and 489.102 of this chapter.
    (3) To be fully informed of his or her health and functional status 
by the multidisciplinary team.
    (4) To participate in the development and implementation of the 
plan of care.
    (5) To request a reassessment by the multidisciplinary team.
    (6) To be given reasonable advance notice, in writing, of any 
transfer to another treatment setting and the justification for the 
transfer (i.e., due to medical reasons or for the participant's welfare 
or that of other participants). The PACE organization must document the 
justification in the participant's medical record.
    As noted previously, active involvement by participants and their 
designated representatives in care planning is fundamental to the PACE 
model of care. As a result, we have retained the rights in the Protocol 
related to participant involvement in the development and 
implementation of the plan of care. We retained the participant's right 
to be fully informed by the multidisciplinary team of his or her health 
and functional status. In support of this right, the PACE participant 
must have, upon written request, access to all records pertaining to 
herself or himself. Moreover, the team must provide care information in 
a manner that is responsive to the culturally diverse populations whom 
they serve. The PACE organization may need to develop strategies for 
enhancing cultural competence in its staff such as increased use of 
interpreters, incorporating in-house training programs, recruiting 
culturally diverse staff or contractors, or establishing relationships 
with organizations that provide technical assistance regarding cultural 
aspects of health care.
    The Protocol states that a participant has the right to refuse 
treatment and be informed of the consequences of such refusal. The 
Protocol also states that PACE participants can establish advance 
directives and make health care decisions. We restructured these two 
requirements in order to place greater emphasis on the participant's 
right to make health care decisions and to clarify that the right to 
refuse treatment

[[Page 66256]]

is a type of health care decision. We have maintained the participant's 
right to make advance directives but have clarified that within this 
right the PACE organization is required to fully explain advance 
directives (in accordance with Secs. 489.100 and 489.102 of this 
chapter) to participants.
    We have maintained the requirement that PACE organizations provide 
reasonable advance notice in writing of any transfer to another part of 
the program. However, we are soliciting comment on the necessity of 
specifying a timeframe for participant notification. Given the frailty 
of the PACE population, some participants may require additional time 
to prepare for the transition to other parts of the program, while 
others may require the transfer without delay. We welcome comments on 
the feasibility of including a specific timeframe that would apply to 
all participants.
    In addition to these specific rights, there are other processes 
embodied in the PACE model that promote participant involvement in care 
planning and implementation. For example, the comprehensive assessment 
that serves as the basis for the plan of care includes participant and 
caregiver preferences for care and input from participant and 
caregivers is used by the multidisciplinary team to monitor the 
effectiveness of the plan of care. Finally, the team is specifically 
required to develop, review, and reevaluate the plan of care in 
collaboration with the participant or caregiver to ensure that there is 
agreement with the plan of care and that participant concerns are 
addressed.
    In support of effective involvement in care planning and 
communication between participants and providers, we note that the 
statute provides for a specific sanction if we determine that the PACE 
organization imposes a physician incentive plan that does not meet 
statutory requirements (see Sec. 460.40(h)) or prohibits or otherwise 
restricts a health care practitioner from discussing treatment options 
with the participant or caregiver (see Sec. 460.40(g)).
     Right #6--Confidentiality of health information. Each 
participant has the right to communicate with health care providers in 
confidence and to have the confidentiality of his or her individually 
identifiable health care and other information protected, including 
information contained in an automated data bank (see Sec. 460.200). 
Each participant also has the right to review and copy his or her own 
medical records and request amendments to those records.
    Consistent with the CBRR and Medicare+Choice and Medicaid managed 
care organization requirements, participants have the right to 
communicate with any member of the multidisciplinary team and contract 
providers in confidence and to have the confidentiality of their 
individually identifiable health care information protected.
    In addition, the section on maintenance of records and reporting of 
data (see Sec. 460.200 ) specifically addresses confidentiality and the 
safeguarding of health, financial, and other information. It requires 
PACE organizations to establish written policies and implement 
procedures to safeguard the privacy of participant information and 
ensure appropriate use and release of participant information. When the 
HHS privacy standards required by the Health Insurance Portability & 
Accountability Act of 1996, Public Law 104-191, are finalized, most 
plans and providers (including HCFA components and most PACE 
organizations) will be required to comply with the requirements of that 
regulation as well.
     Right #7--Complaints and appeals. Each participant has the 
right to a fair and efficient process for resolving differences with 
the PACE organization, including a rigorous system for internal review 
by the organization and an independent system of external review. 
Specifically, each participant has the right:
    (1) To be encouraged and assisted to voice complaints to PACE staff 
and outside representatives of his or her choice, free of any 
restraint, interference, coercion, discrimination or reprisal by the 
PACE staff.
    (2) To appeal any treatment decision of the PACE organization, its 
employees, or contractors through the process described in 
Sec. 460.122.
    We have adopted the concepts expressed in the CBRR for both the 
internal and external appeals processes as described in detail in the 
following section.
    Sec. 460.116 requires the PACE organization to have written 
policies and implement procedures to ensure that the staff, the 
participant, and his or her representative understand these rights. The 
regulations also require that, at the time of enrollment, staff review 
the bill of rights with the participant and representative, if any, in 
a manner which they understand. The PACE organization is expected to 
assure that information is provided to the physically and mentally 
disabled, that translator services are available as needed for non-
English speaking participants, and that interpreter services and other 
accommodations (such as TTY connections) are made available to the 
hearing-impaired.
    We have incorporated the requirement that participant rights be 
posted in a prominent place in the PACE center in English and any other 
principal language of the community. This allows participants, center 
staff, and other concerned persons to review the participant's rights 
at any time. For those participants who speak or read in only a ``non-
predominant'' language, the participants should have their rights 
explained to them in a manner they understand.
    Sec. 460.118 requires the PACE organization to have and implement 
documented, established procedures to respond to and rectify a 
violation of a participant's right. This is intended to ensure that the 
PACE organization will address all violations of participants' rights 
and not allow problems to continue.

Grievances and Appeals

    In accordance with sections 1894(b)(2)(B) and (f)(3) and 
1934(b)(2)(B) and (f)(3) of the Act, we have established requirements 
at Secs. 460.120 through 460.124 requiring PACE organizations to 
establish procedures for grievances and appeals. We have adapted these 
requirements from Part II, section B of the Protocol. Rather than 
follow the Protocol's interchangeable use of the terms ``complaint,'' 
``grievance,'' and ``appeal,'' we have distinguished between grievances 
and appeals. Our intent was to delineate between (1) a participant's 
grievance regarding dissatisfaction with service delivery or the 
quality of a service furnished and (2) a participant's action with 
respect to noncoverage of or nonpayment for a service. We believe that 
such a distinction is needed to clearly establish both a process to 
address a participant's dissatisfaction with service delivery or 
quality of care furnished and a process to address the PACE 
organization's refusal to furnish or pay for a particular service. The 
grievance process and the appeals process are similar, since both are 
based on the Protocol, with some minor differences due to the nature of 
the complaint.

Grievance Process (Sec. 460.120)

    A grievance is defined as a complaint, either written or oral, 
expressing dissatisfaction with service delivery or the quality of care 
furnished.
    The PACE organization must have a formal written process to 
evaluate and resolve grievances, whether medical or

[[Page 66257]]

non-medical in nature, by PACE participants, their family members, or 
representatives. Having a formal written process to evaluate and 
resolve grievances is essential since all personnel (employees and 
contractors) who have contact with participants should be aware of and 
understand the basic procedures for receiving and documenting 
grievances in order to initiate the appropriate process for resolving 
participant concerns.
    We have retained the requirement from the Protocol that all 
participants must be informed of the grievance process in writing. This 
information must be provided to participants upon enrollment into the 
PACE program and at least annually thereafter. We believe it is 
critical that participants are fully and promptly informed of this 
process and periodically reminded of their rights, so they may exercise 
these rights from the beginning of their relationship with the PACE 
organization.
    The grievance process, at a minimum, must include procedures for:
    (1) filing a participant's grievance;
    (2) documenting the participant's grievance;
    (3) responding to and resolving the participant's grievance in a 
timely manner; and
    (4) maintaining confidentiality of the participant's grievance.
    The PACE organization's internal procedures should assure that 
every grievance is handled in a uniform manner and that there is 
communication between different individuals who are responsible for 
reviewing or resolving grievances. In addition, the PACE organization 
must also have appropriate documentation, so the information can be 
utilized both in the organization's internal quality improvement 
activities and in HCFA's quality assessment projects. Requiring that 
grievances be responded to and resolved in a timely manner provides a 
protection to the participants. It is intended to ensure that the PACE 
organization addresses all participant concerns and does not allow the 
problem in service delivery to be unresolved. Finally, at all times, an 
organization must have procedures governing confidentiality to protect 
against unauthorized or inadvertent disclosure of information. 
Participant confidentiality may also prevent reprisal against the 
participant.
    It is critical that the PACE organization continue to provide care 
to the participant during the grievance process because under the law 
participants must receive care solely through the PACE organization. 
Continuing care also encourages participants to continue to voice 
concerns about service delivery without fear of any reprisal.
    The PACE organization must discuss the step, including timeframes 
for response, that will be taken to resolve the participant's grievance 
both at the time of the participant's enrollment and when a grievance 
is filed. This assures the participant that there will be resolution of 
the issue. In addition, the organization acknowledges the participant's 
concern, tries to address the problem, and makes any necessary 
adjustments in service delivery.
    The PACE organization must maintain, aggregate, and analyze 
information on grievance proceedings. This requirement is an integral 
part of fostering an environment of continuous improvement, and it 
complements the requirement on internal quality assessment and 
performance improvement. We expect that, once an organization has a 
quality improvement system in place, participant grievances will be 
analyzed evaluated since grievances may be the first clue that a 
problem exists. By analyzing the number and types of grievances, a PACE 
organization will be able to develop activities to monitor and improve 
the grievance resolution process, as well as identify and make 
improvements or modifications in area of care. This also applies to the 
appeals process.

PACE Organization's Appeals Process (Sec. 460.122)

    An appeal is defined as participant's action taken with respect to 
a PACE organization's noncoverage of or nonpayment for a service. The 
PACE organization must have a formal written appeals process, with 
specified timeframes for response. We have retained the requirement 
from the Protocol that all participants must be informed of the appeals 
process in writing. This information must be provided to participants 
upon enrollment into the PACE program, at least annually thereafter, 
and whenever the multidisciplinary team denies a request for services 
or payment. The appeals process, at a minimum, must include procedures 
for:
    (1) timely preparation and processing of written denials of 
coverage or payment in accordance with Sec. 460.104(c)(3)
    (2) filing a participant's appeal;
    (3) documenting the participant's appeal;
    (4) appointing an appropriately credentialed and impartial third 
party that was not in the original action and that does not have a 
stake in the outcome of the appeal to review the participant's appeal;
    (5) responding to and resolving the participant's appeals as 
expeditiously as the participant's health condition requires, but no 
later than 30 calendar days after it receives an appeal; and
    (6) maintaining confidentiality of the participant's appeals.
    The appeals process is very similar to the grievance process. 
However, we have included the requirement that an objective third party 
be appointed to review all appeals, so information is reviewed by an 
individual or group that has no stake or involvement in the decision. 
This helps to prevent bias in the decision. In addition, we have 
specified that the PACE organization must respond to participant 
appeals within 30 days of receipt of an appeal and established a 
shorter timeframe for expedited appeals. We have not included a 
provision for a 14-day extension of this 30-day timeframe (as allowed 
under the Medicare+Choice regulations at 42 CFR 422.590(a)) in 
recognition of the frailty of the PACE population. We are soliciting 
comments on both the appropriateness of this timeframe and on the 
necessity of requiring a specific timeframe.
    We have adopted the Protocol requirement that the PACE organization 
must give the parties involved in the appeal a reasonable opportunity 
to present evidence related to the dispute in person as well as in 
writing.
    It is critical that the PACE organization continue to furnish care 
to the participant during the appeal process because under the law 
participants must receive care solely through the PACE organization. In 
addition, we have incorporated the Medicaid continuation of benefits 
provision for all Medicaid participants. Under the continuation of 
benefits provision, the PACE organization may not terminate or reduce 
disputed services while an appeal is pending if the Medicaid 
participant requests that they be continued with the understanding that 
he or she may be liable for the cost of those services if the appeal is 
not resolved in his or her favor. It is critical that all other care 
continue in order to maintain the participant's functional status. The 
goal of the program is to furnish comprehensive care to the participant 
and this cannot be accomplished if there is a breakdown in the 
provision of services.
    The PACE organization must have an expedited appeals process for 
situations in which the participant believes that if the service is not 
furnished her or his life, health, or ability to regain

[[Page 66258]]

maximum function would be jeopardized. This provides for prompt 
consideration of requests for services if the participant's health 
might be adversely affected if she or he had to wait for the standard 
appeals process. As noted above, the goal of the program is to maximize 
the participant's functioning, and the expedited appeals process 
ensures that all factors are evaluated so that all necessary services 
are being furnished and participant health is not compromised. We have 
added a requirement that the PACE organization must respond to the 
appeal as expeditiously as the participant's health condition requires, 
but no later than 72 hours after it receives the appeal. The 72-hour 
timeframe may be extended by up to 14 calendar days if the participant 
requests the extension or if the organization justifies to the State 
administering agency the need for additional information and how the 
delay is in the interest of the participant. These timeframes for 
responding to expedited appeals are consistent with the requirements 
for Medicare+Choice plans in 42 CFR 422.590(d), published June 26, 1998 
(63 FR 35110-35111). We recognize that the outcome of pending 
litigation may compel modification of this requirement. We will amend 
the requirement if resolution of the litigation makes changes 
necessary.
    The PACE organization must take appropriate action as expeditiously 
as the health condition of the participant requires if, on appeal, a 
determination is made in favor of the participant. There may be 
situations in which the PACE organization has made an incorrect or 
inaccurate assessment of the participant's needs or condition and has 
denied a service. In these situations, it is critical that care not be 
delayed and that the participant continue to receive comprehensive care 
that maintains her or his functional status.
    We have maintained the Protocol requirement that all determinations 
that are wholly or partially adverse to the participant must be 
forwarded to HCFA and the State administering agency. We have required 
that the PACE organization notify HCFA, the State administering agency, 
and the participant of its actions at the time the decision is made.
    Additional Appeal Rights Under Medicare or Medicaid (Sec. 460.124)
    The PACE organization must also inform participants in writing of 
their additional appeal rights under Medicaid or Medicare managed care 
(Sec. 460.124), assist participants in choosing which appeal process to 
pursue if both are applicable, and then forward the appeal to the 
appropriate external entity. Participants who are dually eligible for 
Medicare and Medicaid may utilize either the Medicare or the Medicaid 
managed care appeal process. In those cases where participants are 
covered only under one program (Medicare or Medicaid), only the 
appropriate appeals process would apply.

Subpart H--Quality Assessment and Performance Improvement

    We have adopted quality assessment and performance improvement 
requirements that are consistent with the provisions from Part V of the 
Protocol. We have also added requirements to prepare PACE organizations 
for the outcome-based continuous quality improvement (OBCQI) system 
that is being developed under a HCFA contract by the Center for Health 
Services and Policy Research (CHSPR) at the University of Colorado.
    Sections 1894(e)(3) and 1934(e)(3) of the Act state that under a 
PACE program agreement, the PACE organization, the Secretary, and the 
State administering agency shall jointly cooperate in the development 
and implementation of health status and quality of life outcome 
measures with respect to PACE participants.
    The CHSPR is developing a core data set that will provide the 
foundation for OBCQI in PACE. In developing the data set for PACE, 
CHSPR is examining existing HCFA data instruments such as the Minimum 
Data Set (a part of the nursing home Resident Assessment Instrument), 
the Outcome and Assessment Information Set (OASIS, a part of the 
Medicare home health agency conditions of participation, DataPACE 
(developed by On Lok, Inc. and used currently by PACE demonstration 
sites), and the Functional Independence Measure (FIM) items (an 
assessment data set used in rehabilitation hospitals), for data items 
which may be pertinent for PACE. This project supports the development 
of an OBCQI system for PACE and consists of five tracks of activities: 
(1) Outcome indicator development; (2) outcome measure development; (3) 
data item and instrument assessment and specification; (4) feasibility 
and pilot testing of the measures, the data items, and the system; and 
(5) construction and finalization of a practical OBCQI program for 
PACE. The data items to be specified will need to be collected at 
defined time points. In order to have comparable data across the PACE 
centers, all PACE providers will be required to collect all items in 
this data set for each of their PACE centers exactly as specified.
    In spring of 1999, CHSPR began feasibility testing of the proposed 
data items and the time point for data collection. Pilot testing 
activities are scheduled March 2000 and continue through November 2000. 
Draft final recommendations for the core data items, outcome measures, 
data collection time points, risk-adjustment methods for the 
organization-level outcome reports, and the OBCQI implementation plan 
will be available early in 2001 with the final report completed in the 
spring of 2001.
    The OBCQI system for PACE will be used to assess and improve (where 
needed) the quality of care provided to PACE participants. In order to 
have comparable data across the PACE centers, all PACE organizations 
will be required to collect the items in this data set for each of 
their PACE centers as specified. If new PACE organizations are 
investing in data systems, these systems must be flexible enough to 
incorporate the data items specified as a result of the OBCQI project. 
HCFA's expectation is that the OBCQI approach resulting from this 
project will be carefully integrated into, not simply added to or 
superimposed on, current clinical and administrative practices at the 
PACE sites. The unique nature of PACE and the health status attributes 
of PACE participants are being considered in developing the OBCQI 
system.
    HCFA has begun to specify a preliminary classification scheme or 
framework of outcomes relevant to the PACE program. This taxonomy will 
be refined over the course of the project to develop an OBCQI system. 
The initial classification of outcomes includes: functional status, 
physiologic status and symptom management, cognitive functioning, 
emotional and mental health status, participant quality of life, 
caregiver quality of life, satisfaction with care, knowledge and 
compliance, end of life, and utilization.
    The general framework for the PACE OBCQI system consists of two 
stages. The first stage is outcome analysis which includes data 
collection, analysis, and outcome reporting. The second stage is 
outcome enhancement and entails selecting specific outcomes for review, 
after which plans of action are documented to change or reinforce care 
behaviors. A key characteristic of OBCQI is the use of outcomes to help 
focus efforts in individual PACE sites to improve care behaviors. For 
the purposes of this project an outcome is defined as a participant or 
caregiver change in health, knowledge, ability, quality of life, 
outlook, or motivation that occurs over a period of time. Outcomes can 
be global ones that

[[Page 66259]]

pertain to all PACE participants or can be more focused and pertain to 
specific types of participants such as those diagnosed with dementia. 
There are both end-result and instrumental outcomes. An end-result 
outcome is a change in participant or caregiver status in an area that 
care is or should be intended to directly impact. Attainment of one or 
more end-result outcomes is the primary purpose of care (e.g., an 
improvement in skin breakdown when care has or should have been 
furnished to maintain or enhance skin integrity). An instrumental 
outcome is a ``facilitating'' outcome that may be important in 
attaining an end-result outcome, although it is not the primary purpose 
of care (e.g., participant adherence to a medication regimen). Outcome 
indicators are constructs or attributes of change in health status that 
reflect a participant outcome, but are not concerned with the 
quantification of the outcome. When the outcome indicator is precisely 
quantified, it results in an outcome measure.
    PACE organizations and reviewers will be able to use organization-
level outcome reports to compare one PACE organization and its PACE 
centers to all other PACE organizations and their PACE centers relative 
to risk-adjusted outcomes. Additionally, a PACE organization or 
reviewers will be able to track a given organization's outcomes and 
evaluate/monitor how the outcomes have changed relative to an earlier 
time period.
    PACE organizations and States have opportunities to give input into 
the development of the outcome measures and the OBCQI system. These 
opportunities include membership in the project Advisory Committee, 
participation in the clinical and research technical expert panels, and 
involvement in piloting the data collection instruments, time points 
for data collection, and the outcome measures. Additionally, feedback 
and input from State Medicaid representatives and PACE organizations is 
sought at the annual PACE policy forum sponsored by the National PACE 
Association (NPA) in the spring of each year.

General Rule (Sec. 460.130)

    We are requiring the PACE organization to develop, implement, 
maintain, and evaluate an effective data-driven quality assessment and 
performance improvement program. It is important that the quality 
assessment and performance improvement program take into consideration 
the wide range of services furnished by PACE. Additionally, the program 
should use data to identify and improve areas of poor performance. The 
PACE organization must take actions that result in improvements in its 
performance across the spectrum of care.

Quality Assessment and Performance Improvement Plan (Sec. 460.132)

    The PACE organization must have a written quality assessment and 
performance improvement plan. Consistent with the protocol, we are 
requiring PACE organizations to have their quality assessment and 
performance improvement plan annually reviewed by the PACE governing 
body and, if necessary, revised. Further, in this section we set forth 
the minimum requirements for a written plan that specifies how the PACE 
organization proposes to (1) Identify areas in which to improve or 
maintain the delivery of services and patient care; (2) develop and 
implement plans of action to improve or maintain quality of care; and 
(3) document and disseminate the results of the quality assessment and 
improvement activities to the PACE staff and subcontractors.

Minimum Requirements for Quality Assessment and Performance Improvement 
Program (Sec. 460.134)

    The requirement contained in Sec. 460.134 is consistent with the 
PACE Protocol, but it provides more explicit information about what 
types of outcomes must be used to monitor quality. The PACE 
organization's quality assessment and performance improvement program 
must include, but need not be limited to, the use of objective measures 
to demonstrate improved performance with regard to:
    (1) Service utilization. PACE demonstration programs currently 
collect utilization data such as inpatient hospitalizations and 
emergency room visits. This information can be used to evaluate fiscal 
well-being, as well as evaluate quality of care. A PACE organization 
can use its own utilization data for its PACE centers to compare with 
other PACE organizations and their centers across the nation. By 
comparing utilization data across PACE centers, the PACE organizations, 
HCFA and State administering agencies can identify PACE centers who 
appear to have unusually high or low utilization of a particular 
service. Reviewers will be able to target reviews of PACE centers whose 
utilization data suggest, for example, that participants may be 
receiving fewer services than necessary to achieve expected outcomes. 
The purpose of including utilization data in the PACE organization's 
quality assessment and performance improvement program is to help the 
PACE organization ensure that participants receive the appropriate 
level of care through their PACE center. Additionally, using 
information regarding utilization of and reasons for emergency care and 
hospital and nursing home admissions, the PACE organization can 
identify areas for improvement.
    (2) Caregiver and participant satisfaction. Caregiver and 
participant satisfaction with services is an important element of a 
quality assessment and performance improvement program. A PACE 
organization must survey, on an ongoing basis, participants and their 
caregivers to determine satisfaction with the services furnished and 
the outcomes achieved. Given the large number of PACE participants who 
are cognitively impaired and the critical role caregivers play in 
keeping PACE participants in the community, it is important to survey 
caregivers about their satisfaction with the program. HCFA expects the 
PACE organization to use this information to identify opportunities to 
improve services and caregiver and participant satisfaction. HCFA does 
not intend, at this point, to prescribe the specific tools for 
measuring participant and family satisfaction. Since the OBCQI project 
has not finalized the indicators to measure these issues, it would be 
unreasonable to request specific data collection for these items at 
this time. It is the responsibility of the PACE organization to survey 
the participants and family but HCFA is not specifying the survey tool 
they must use. The PACE organization will be expected to demonstrate 
its satisfaction measurement system and how it is used as part of the 
overall internal quality assessment and performance improvement system. 
Upon completion of the CHSPR OBCQI project, PACE organizations may be 
required to collect data on a limited number of specific caregiver and 
participant satisfaction measures. In developing the measures, we will 
examine the Consumer Assessments of Health Plans Study Surveys that 
HCFA is currently using for Medicare managed care plans.
    (3) Measures derived from participant assessment data. These 
measures can be used to determine if individual and organization-level 
measurable outcomes are achieved compared to a specified previous time 
period. These measures should encompass the various areas needed to 
monitor care for PACE participants, including physiologic, functional, 
cognitive, mental health, social/behavioral, and quality of life

[[Page 66260]]

outcomes. At the completion of the PACE OBCQI project, the types of 
measures will be specified in these areas. In the meantime, PACE 
organizations should begin to use similar measures in these areas as 
part of their internal quality improvement programs. For example, PACE 
organizations should begin to focus their own quality improvement 
activities on outcomes such as stabilization in ability to bathe, from 
a baseline period to each follow-up period; improvement in dyspnea from 
admission into PACE to a follow-up period; improvement in 
transportation services over a specific time period; and improvement in 
caregiver stress from participant admission into PACE to a follow-up 
time period.
    (4) Effectiveness and safety of staff-provided and contracted 
services, including the competency of clinical staff, promptness of 
service delivery, and achievement of treatment goals and measurable 
outcomes. For participants to experience the outcomes that the PACE 
benefit is intended to achieve, staff must demonstrate skills and 
competencies necessary to facilitate those desired outcomes. The PACE 
organization is expected to include data-based, criterion-referenced 
performance measures of staff skills, to utilize these data to ensure 
that staff maintain skills, and to provide training as new techniques 
and technologies are introduced and as new staff are hired. Each PACE 
organization will be expected to demonstrate that it has a system of 
appropriate complexity for keeping track of the skills and competencies 
of the staff and for effectively identifying and addressing staff 
training needs. These data should be an integral part of the PACE 
organization's internal quality assessment and performance improvement 
program that provides continuous feedback on staff performance.
    (5) Non-clinical areas. The types of outcomes in this area include 
outcomes related to participants' grievances, transportation services, 
and meals. For example, if a PACE organization finds a high rate of 
grievances not resolved, the PACE organization might target its 
activities to improve the grievance process.
    We expect PACE organizations to use the most current clinical 
practice guidelines and professional standards in the development of 
outcome measures applicable to the care of PACE participants. 
Continuous improvement is only possible through the identification and 
use of current information, techniques, and practices. While HCFA is 
not imposing any specific standards of practice, this requirement 
establishes the expectation that the PACE organization will utilize the 
current standards as a routine part of its daily operations.
    We have added a requirement that the PACE organization must meet 
minimum levels of performance on standardized quality measures that 
will be established by HCFA and the State administering agency which 
are specified in the PACE program agreement. For example, HCFA might 
require all PACE organizations to achieve a 95 percent flu immunization 
rate for their PACE participants. If a PACE organization fails 
substantially to meet these specified requirements, the continuation of 
the PACE program agreement may be conditional on the execution of a 
corrective action plan, or alternatively, some or all further payments 
for PACE program services may be withheld until the deficiencies have 
been corrected. We are not establishing minimum performance standards 
in this regulation. Rather, we will establish minimum performance 
standards based on analysis of available data sets that are applicable 
to PACE participants.
    We have added a requirement that the PACE organization take actions 
to ensure the accuracy and completeness of all data used for outcome 
monitoring. A data-driven quality assessment and performance 
improvement program must be based on accurate data. The regulations 
require that PACE organizations set up mechanisms to check for the 
accuracy, timely collection, and completeness of all data.

Internal Quality Assessment and Performance Improvement Activities 
(Sec. 460.136)

    In Sec. 460.136, we require that the PACE organization must use a 
set of outcome measures to identify areas of good or problematic 
performance and must take actions targeted at reinforcing or improving 
care based on these outcome measures.
    The PACE organization also must incorporate any actions resulting 
in performance improvement into its standards of practice for the 
delivery of care. A method of periodically tracking performance to 
assure that any improvements are sustained over time must also be 
incorporated in the program. The PACE organization must use its own 
experience from its performance improvement program to change care 
behaviors and to ensure that these behaviors are sustained.
    Unlike the Protocol, we are requiring the PACE organization to set 
priorities for performance improvement, considering the prevalence and 
severity of identified problems and giving priority to improvement 
activities that affect clinical outcomes. However, any identified 
problems that directly or potentially threaten the health and safety of 
participants must be corrected immediately. Prioritizing areas of 
improvement is essential to ensure consistency in the quality of care 
furnished over time. Conditions that may threaten the health and safety 
of participants must be immediately and directly addressed when they 
are identified.
    Similar to the Protocol, we are requiring the PACE organization to 
designate an individual to coordinate and oversee implementation of 
quality assessment and performance improvement activities. The purpose 
of this requirement is to ensure that the PACE organization designates 
responsibility for a quality assessment and performance improvement 
plan and the various activities resulting from this plan. Also, this 
individual is responsible for ensuring that all team members, PACE 
staff, and contract providers are aware of the various quality 
assessment and performance improvement activities.
    We have added a requirement that the PACE organization ensure that 
all team members, PACE staff, and contract providers are involved in 
the development and implementation of the quality assessment and 
performance improvement activities and are aware of the results of 
these activities. The process of service delivery in PACE requires the 
team to identify participant problems, determine appropriate treatment 
objectives, select interventions and evaluate outcomes of care on an 
individual participant basis. The multidisciplinary teams are in a 
unique position to provide PACE management with structured feedback on 
the performance of the PACE program and suggest ways in which 
performance can be improved. Thus, we expect the PACE organization to 
make full use of the multidisciplinary team and other staff in 
contributing to the internal quality improvement program.
    Consistent with the Protocol, we are requiring the PACE 
organization to involve PACE participants and caregivers in the quality 
assessment and performance improvement activities, including providing 
information about their satisfaction with services. One of the best 
sources of information about the strengths and weaknesses of a program 
is from the users of the program. In this case, it is important for 
PACE programs to get feedback from

[[Page 66261]]

both PACE participants and caregivers to help identify areas that need 
improvement.

Committees With Community Input (Sec. 460.138)

    Similar to the Protocol, we are requiring that the PACE 
organization develop a committee(s) with community input to (1) 
evaluate data collected pertaining to quality outcome measures, (2) 
address the implementation of and results from the quality assessment 
and performance improvement plan, and (3) provide input related to 
ethical decision-making including end-of-life issues and implementation 
of the Patient Self-Determination Act. Through this committee, the PACE 
organization will be able to receive guidance regarding its quality 
assessment and performance improvement program and the ethical issues 
faced by PACE organizations.

Additional Quality Assessment Activities (Sec. 460.140)

    As the final requirement under Quality Assessment and Performance 
Improvement as set forth in this section, we require that PACE 
organizations participate in periodic, external quality improvement 
reporting requirements as may be specified by the HCFA or the State 
administering agency. Examples of participation in a quality assessment 
and performance improvement activity include the reporting of data 
items for outcome measurement purposes, participation in the survey 
process, and participation in a HCFA-directed national quality 
improvement project.

Subpart I--Participant Enrollment and Disenrollment

Eligibility To Enroll in a PACE Program (Sec. 460.150)

    In accordance with sections 1894(a)(5) and (c)(1) and 1934(a)(5) 
and (c)(1) of the Act, we have established Sec. 460.150, to specify the 
requirements for eligibility to enroll in the PACE program. According 
to the Protocol, in order to be eligible for enrollment in PACE, an 
individual must be:
    a. At least fifty-five years of age;
    b. A resident in the PACE organization's service area;
    c. Assessed by the multidisciplinary team; and
    d. Certified by the State Medicaid Agency as eligible for nursing 
home level of care.
    With the exception of the requirement to be assessed by the 
multidisciplinary team, these requirements are also included in the 
statute.
    Sections 1894(c)(2) and 1934(c)(2) of the Act provide that a PACE 
program eligible must have a health status comparable to the health 
status of individuals who have participated in the PACE demonstration 
waiver programs. Further, sections 1894(c)(2) and 1934(c)(2) of the Act 
specify that this determination will be based upon information on 
health status and related indicators (such as medical diagnoses and 
measures of activities of daily living, instrumental activities of 
daily living, and cognitive impairment) that are part of a uniform 
minimum data set collected by PACE organizations on potential PACE 
program eligible individuals. This provision means that PACE 
organizations will continue to serve patients who are as frail as those 
served under the demonstration; this will prevent PACE organizations 
from selecting enrollees who need less care and whose care is therefore 
less costly.
    We examined some informational data extracted from the PACE Fact 
Book (Second Edition, 1996, prepared by On Lok, Inc., 1333 Bush Street, 
San Francisco, California, 94109) which provides a portrait of 
participants in the eleven fully-capitated demonstration sites as of 
December 31, 1995. Activities of daily living (ADL) are personal care 
tasks (bathing, dressing, toileting, transferring, and eating) that a 
person must be able to perform to be considered independent. A person 
is considered to have an ADL dependency, and a score of ``1'' is 
assigned, for each of those 5 tasks for which some or full assistance 
is needed to perform the task. A similar scale measures dependencies in 
8 instrumental activities of daily living (IADL), which are meal 
preparation, shopping, housework, laundry, heavy chores, money 
management, taking medications, and transportation. The 2710 
participants in these 11 sites at the end of 1995 had an average of 2.8 
ADL dependencies (varying by site from 2.3 to 3.8) and an average of 
7.5 IADL dependencies (varying from 6.9 to 7.9 by site). Additionally, 
these participants had an average of 7.9 medical conditions (varying 
from 4.9 to 11.0 by site) and an average number of 4.5 errors or 
unanswered questions (varying from 2.0 to 6.4) on the Short Portable 
Mental Status Questionnaire used to evaluate mental functioning.
    The PACE Fact Book acknowledges the difficulty of maintaining a 
valid and consistent data set in a multisite project with sites 
scattered across the country. However, there are many reasons why the 
data would be expected to show differences across sites. Although the 
targeted population for all the PACE demonstration sites is individuals 
who meet the nursing facility level of care, the specific criteria used 
to determine if an individual needs this level of care vary by State. 
Actual implementation of the PACE program also differs in other ways 
across sites to reflect the particular community in which the site is 
located. Furthermore, marketing efforts vary, as do the maturity of the 
site and particular staffing arrangements. We are convinced that any 
means of determining whether individuals have a health status 
comparable to that of participants in the PACE demonstration programs 
must take into account variances among sites and differences across 
patients within a site. Therefore, we have concluded that we could not 
develop a tool that would more adequately determine health status 
comparable to individuals in the PACE demonstration programs than the 
current criteria used by States to determine if an individual needs a 
nursing facility level of care.
    In determining how best to implement this requirement, we also 
considered other safeguards against selective enrollment. Sections 
1894(c)(3) and 1934(c)(3) of the Act include a requirement that 
participants be recertified annually as requiring a nursing facility 
level of care. Under the demonstration program, the need for a nursing 
facility level of care was a one-time certification. Thus, under the 
demonstration, PACE organizations could continue to serve individuals 
who had a short-term need for a nursing facility level of care but 
whose condition had shown significant improvement. The law's annual 
recertification requirement ensures that participants will continue to 
need a nursing facility level of care.
    Additionally, we are implementing a requirement that PACE 
organizations must notify HCFA and the State administering agency of 
enrollment denials. HCFA and State administering agencies may analyze 
this information to detect selective enrollment. Finally, the quality 
assurance requirements included in these regulations will allow the 
monitoring of case-mix profiles across sites. While it might be very 
difficult to identify situations where organizations engage in 
selective enrollment on an individual participant basis, the improved 
quality assurance mechanisms will allow the identification and 
correction of routine instances through the review of organization-
level case-mix profiles.
    After weighing both the need to maintain State and organization 
flexibility to develop programs suitable to the communities in which 
the PACE organizations will operate and the implementation of other 
safeguards against selective enrollment, we believe

[[Page 66262]]

having a health status comparable to the PACE demonstrations is 
inherently equivalent to needing a nursing facility level of care. We 
are satisfied that applying the nursing facility level of care 
requirement in conjunction with the other safeguards discussed will 
minimize selective enrollment while preserving program flexibility; 
however, we invite comments with regard to other ways to implement this 
provision.
    Additionally, the statute requires that an individual meet any 
other eligibility conditions imposed under the PACE program agreement. 
Although we are aware that under the demonstration some PACE sites have 
set their minimum age limits higher than 55, we believe the provision 
of the law allowing site-specific eligibility requirements allows for 
additional requirements not the modification of the three requirements 
specified in the law.
    We also caution organizations that these site-specific eligibility 
requirements are not intended to allow programs to discriminate against 
individuals with problems such as cognitive deficits, disruptive 
behavior, or substance abuse. Any site-specific eligibility criteria 
must be specified in the program agreement, and HCFA will not approve 
criteria that would serve as a way to selectively enroll individuals 
whose care is anticipated to be less costly or who are thought to be 
easier to care for.
    The eligibility requirement specified in Sec. 450.150(c) 
incorporates the Protocol provision that at the point of enrollment an 
individual's condition must be such that his or her health or safety 
would not be jeopardized by living in a community setting. We recognize 
that enrollment in the PACE program is not appropriate for everyone who 
meets the basic eligibility criteria. Determining whether or not an 
individual's health or safety would be jeopardized by living in the 
community setting involves assessing the individual's care support 
network as well as the individual's health condition. As specified in 
Sec. 460.152(a)(4), this determination is made by the PACE organization 
when assessing whether the potential participant can be cared for 
appropriately in this program. Consequently, we have not included the 
Protocol requirement regarding assessment by the multidisciplinary team 
in the eligibility criteria. We believe that the intent of this 
Protocol requirement is preserved through the intake process 
requirements in Sec. 460.152.
    We have reflected in the regulations the statutory provision in 
sections 1894(i) and 1934(j) of the Act that PACE program eligibility 
is not contingent upon an individual's eligibility for Medicare or 
Medicaid.

Enrollment Process (Sec. 460.152)

    We have established Sec. 460.152 to specify the PACE organization's 
responsibility during the intake process and actions required in the 
event a potential PACE participant is denied enrollment because his or 
her health or safety would be jeopardized by living in a community 
setting.
    Although we recognize that the intake process must be flexible, we 
have specified certain steps that must, at a minimum, be included. 
These are not intended to be sequential steps and may in fact occur 
concurrently. Potential participants need reliable, accurate 
information on the PACE delivery system in order to make a rational 
decision whether to enroll. There is both a legal and an ethical 
obligation to inform potential participants about how the PACE 
organization controls and affects the delivery of health care and other 
services, albeit in full partnership with the participant. The 
following discussion describes the information that is made available 
to the potential participant routinely and upon request. One-on-one 
assistance is provided throughout the pre-enrollment process. In all 
situations, the information is provided in a culturally competent 
manner, including providing information in a language understood by the 
participant.
    The most basic disclosure is that all health care services must be 
received through the PACE organization. Once that disclosure is made 
and understood by the potential participant, other key disclosures 
relate to what is included within and what is excluded from the PACE 
program, what costs would be borne by the participant, how to access 
emergency services, and how the grievance and appeals processes work. 
Other information that should be disclosed upon request includes the 
process that the PACE organization uses to decide that drugs, devices, 
and procedures are experimental and whether the PACE organization uses 
a drug formulary.
    The uniqueness of the PACE model depends upon the partnership 
formed between the participant and the multidisciplinary team. 
Therefore, a potential participant should be made aware of how the team 
works, who is on it, and what choices exist for participant selection 
of a primary care physician. The participant must also know how the 
organization provides access to services not provided directly by the 
multidisciplinary team, to contractors who furnish specialty services, 
to health care facilities such as hospitals and nursing homes, and to 
home health care. Also, participants may request information regarding 
whether there are financial incentives to providers. Finally, to the 
extent that board certification and other credentials, clinical 
protocols and medical practice guidelines, consumer satisfaction survey 
results, or the results of the organization's most recent Federal or 
State review are of particular interest to participants, these must be 
disclosed upon request.
    With regard to specific intake tasks, we have deleted the Protocol 
requirement for a complete assessment by the multidisciplinary team 
prior to the denial of enrollment based on health and safety issues. We 
believe that such a determination can generally be made without a 
complete multidisciplinary team assessment and that this is consistent 
with actual practice under the PACE demonstration program. As an 
additional protection against selective enrollment, we have added a 
requirement that HCFA and the State administering agency must be 
notified when potential participants are denied enrollment because the 
PACE organization has determined that their health or safety would be 
jeopardized in a community setting. Additional wording and organization 
changes have been made in this section; however, except where otherwise 
specifically noted, our intent is to clarify, not change, the 
enrollment process as described in the Protocol.
    If a prospective participant is denied enrollment because his or 
her health or safety would be jeopardized by living in the community, 
we are requiring the PACE organization to inform the individual in 
writing of the reason for the denial; as appropriate, refer the 
individual to alternative services; retain supporting documentation of 
the reason for the determination; and notify HCFA and the State 
administering agency as well as make the documentation available for 
review.

Enrollment Agreement (Sec. 460.154)

    While the program agreement will contain the specific enrollment 
and disenrollment procedures to be followed by the PACE organization, 
in Sec. 460.154 we are specifying general requirements which must be 
met by all PACE organizations. The statute is silent as to any general 
enrollment requirements; however, it provides that the regulations 
should incorporate, to the extent possible, the requirements applied to 
the PACE demonstration waiver programs under the PACE Protocol.

[[Page 66263]]

Thus, we are adopting the Protocol enrollment and disenrollment 
provisions with the exceptions noted below.
    We have removed the reference to the Member Handbook because we 
found the distinction between the Member Handbook and the Enrollment 
Agreement to be confusing. We have defined the minimum information 
which must be included in the Enrollment Agreement to incorporate those 
materials which would generally be expected to be included in a Member 
Handbook. Although PACE organizations may actually utilize a cover 
sheet to obtain the participant's signature and a ``handbook'' to 
provide the required information, the cover sheet alone does not 
constitute the Enrollment Agreement and must be accompanied by the 
additional minimum information specified when provided to the 
participant.
    Although this is not a change from current practice, we would like 
to emphasize that an individual who accepts PACE as his/her sole source 
of services could not then make an election of hospice care under 
section 1812(d) of the Act and 42 CFR 418.24 or section 1905(o)(2) of 
the Act. However, hospice-type services are available from the PACE 
organization since the PACE model of care is designed to furnish 
services which meet health care needs along a continuum.
    We have added a requirement for the Enrollment Agreement to include 
notification that Medicaid recipients and individuals dually-eligible 
for Medicare and Medicaid enrolled in PACE are not liable for any 
premiums, but they may be held liable for any applicable spenddown 
liability under 42 CFR 435.121 and 435.831 and any amounts due under 
the post-eligibility treatment of income process under Sec. 460.184.
    We also added a requirement for the Enrollment Agreement to include 
information on the consequences of subsequent enrollment in other 
optional Medicare or Medicaid programs following disenrollment from 
PACE. This is intended to ensure that participants are informed in 
advance of conditions that might apply if they are disenrolled from 
PACE and elect, for example, to enroll in another prepayment plan.
    We have added a requirement that any changes to the information 
contained in the Enrollment Agreement must be provided to the 
participant in writing and be fully discussed with the participant and 
his or her representative or caregiver. We feel it is essential that 
all participants be aware of any changes in this information in order 
to protect and exercise their rights.

Other Enrollment Procedures (Sec. 460.156)

    We have established this section to specify the documentation that 
must be provided to a PACE participant who signs the enrollment 
agreement. Specifically, a PACE participant must be given a copy of the 
Enrollment Agreement, a PACE membership card, emergency information to 
be posted in his or her home identifying the individual as a PACE 
participant which includes the phone number of the PACE organization, 
and when applicable, stickers for the PACE participant's Medicare or 
Medicaid cards (or both) that indicate the individual is a PACE 
participant and include the phone number of the PACE organization.
    In addition, the PACE organization must submit participant 
information to HCFA and the State administering agency in accordance 
with established procedures.
    We have also included a requirement that, in the event there are 
changes in the Enrollment Agreement information at any time during the 
participant's enrollment, the PACE organization must provide to the 
participant an updated copy of the information to the participant at 
least 60 days before any change, and explain the changes to the 
participant and his or her representative or caregiver in a manner they 
understand.

Effective Date of Enrollment (Sec. 460.158)

    Consistent with the Protocol, we have established this section to 
specify that a PACE participant's enrollment in the program is 
effective the first day of the calendar month following the date the 
PACE organization receives the signed enrollment agreement.

Continuation of Enrollment (Sec. 460.160)

    In this section we have specified that a PACE participant's 
enrollment continues until death regardless of changes in health status 
unless the PACE participant voluntarily disenrolls in accordance with 
Sec. 460.162, or is involuntarily disenrolled in accordance with 
Sec. 460.164.
    We have incorporated the statutory requirement contained in 
sections 1894(c)(3) and 1934(c)(3) of the Act for an annual 
recertification of the need for a nursing facility level of care. We 
believe that the law contemplated that reevaluations would be conducted 
by the State administering agency for all participants, whether 
Medicaid eligible or not.
    The statute provides that this annual reevaluation may be waived 
for those individuals for whom the State administering agency 
determines there is no reasonable expectation of improvement or 
significant change in condition. As a waiver could not be granted until 
the first annual recertification is due, a participant for whom this 
requirement is waived would have been receiving services under the PACE 
program for at least a year. We feel it is unlikely, especially in view 
of the age and frailty of PACE participants as a whole, that a person 
who has not shown significant improvement in the past year would show 
significant enough improvement in the future to no longer need a 
nursing facility level of care. The law permits a waiver ``during a 
period in accordance with regulations'' in those cases where the State 
administering agency determines no reasonable expectation of 
improvement. Therefore, we are providing in regulations that such a 
waiver should be for the life of the participant; the reasons for the 
waiver must be explicitly documented in the medical record. We 
recognize that this regulation as drafted does not provide a mechanism 
for reinitiating the recertification process once a waiver has been 
granted, and we invite comments on this issue.
    Finally, sections 1894(c)(4) and 1934(c)(4) of the Act allow for 
the continuing, or deemed, eligibility of those individuals who are 
determined through the annual recertification process to no longer meet 
the nursing facility level of care requirement if, in the absence of 
continued coverage under PACE, the individual would reasonably be 
expected to again meet the nursing facility level of care within the 
next 6 months. We feel this determination should be made by the State 
administering agency, which may solicit input from the PACE 
organization and that the deemed eligibility should continue until the 
next annual recertification. While it is the State's responsibility to 
determine the need for nursing facility level of care, the PACE 
organization has a detailed knowledge of the day-to-day care and 
service requirements of the individual participants and would, 
therefore, be better able to predict a participant's reaction to the 
loss of PACE services. We invite comments on whether this 
responsibility should be shared or carried out solely by either the 
State administering agency or the PACE organization. We also invite 
comments on whether this deemed eligibility should continue for 12 
months (until

[[Page 66264]]

the next annual recertification is due) or for a shorter period.

Voluntary Disenrollment (Sec. 460.162)

    In accordance with sections 1894(c)(5)(A) and 1934(c)(5)(A) of the 
Act, this section specifies that a PACE participant may voluntarily 
disenroll from the program without cause at any time.

Involuntary Disenrollment (Sec. 460.164)

    In accordance with sections 1894(c)(5)(B) and 1934(c)(5)(B) of the 
Act, we have established this section to specify the conditions under 
which a PACE participant can be involuntarily disenrolled from the PACE 
program. The Protocol, in Part III, section D.1, describes various 
circumstances under which a participant may be involuntarily 
disenrolled.
    The statutory language at sections 1894(c)(5)(B) and 1934(c)(5)(B) 
of the Act provides that a participant may only be involuntarily 
disenrolled for nonpayment of premiums (if applicable) on a timely 
basis or for engaging in disruptive or threatening behavior. We have 
incorporated the Protocol requirement that a participant may be 
involuntarily disenrolled if he/she fails to pay or to make 
satisfactory arrangements to pay any premium due the PACE organization 
after a 30-day grace period.
    We have incorporated the following reasons for involuntary 
disenrollment from the Protocol:
    a. The participant moves out of the PACE program service area or is 
out of the service area for more than 30 days unless the PACE 
organization agrees to a longer absence due to extenuating 
circumstances;
    b. The PACE organization is unable to offer health care services 
due to the loss of State licenses or contracts with outside providers.
    We have also added as a reason for involuntary disenrollment that 
the PACE organization agreement with HCFA and the State administering 
agency is not renewed or is terminated. In all of these situations the 
disenrollment is not a subjective determination made by the PACE 
organization but is necessary due to outside causes. We also 
incorporated as a reason for involuntary disenrollment the statutory 
provision regarding the annual recertification of nursing facility 
level of care.
    We did not incorporate the following reasons for disenrollment from 
the Protocol: the participant refuses to provide accurate financial 
information, provides false information or illegally transfers assets. 
As these situations would affect the determination of Medicaid 
eligibility, we believe they would actually prevent enrollment in the 
first place. However, if the individual is already enrolled when these 
situations occur or are discovered, they may affect the participant's 
payment responsibility and thus lead to either voluntary disenrollment 
or involuntary disenrollment based on failure to pay. We also did not 
incorporate, as a reason for disenrollment, a breakdown in the 
physician and/or team and participant relationship. Since this 
relationship and the functioning of the multidisciplinary team are 
critical to the success of the PACE model, we expect that a breakdown 
in team function would signal a severe problem that needed attention 
from HCFA and the State administering agency far surpassing a review of 
an involuntary disenrollment decision.
    In revising the Protocol provisions to incorporate the statutory 
provision regarding disruptive or threatening behavior, we felt the 
need to balance two concerns: first, to protect participants who are 
exhibiting difficult behaviors from being ``dumped'' by the PACE 
organization but secondly to provide a safeguard which allows the 
organization to disenroll a competent but noncompliant participant 
whose behavior disrupts the organization's ability to furnish adequate 
services to that individual for reasons beyond the organization's 
control. Therefore, after consulting with State agencies, we have 
defined a person who engages in disruptive or threatening behavior as:
    a. A person whose behavior is jeopardizing his/her health or safety 
or that of others, or
    b. A person with decision-making capacity who consistently refuses 
to comply with his/her individual plan of care or the terms of the 
Enrollment Agreement.
    However, a PACE organization may not involuntarily disenroll a PACE 
participant on the grounds that the individual has engaged in 
noncompliant behavior if such behavior is related to a mental or 
physical condition of the individual unless the individual's behavior 
is jeopardizing his/her health or safety or that of others. The term 
``noncompliant behavior'' includes repeated noncompliance with medical 
advice and repeated failure to keep appointments.
    While we believe this definition provides a necessary safeguard, we 
are certainly not suggesting that a participant should be disenrolled 
at the first sign of difficulty. We caution organizations to use this 
authority only as a last resort when all reasonable remedies (which 
must be documented in the medical record) have been exhausted.
    Based on sections 1894(c)(5)(B)(iii) and 1934(c)(5)(B)(iii) of the 
Act, we specify that proposed involuntary disenrollments are subject to 
a timely review and final determination prior to the proposed 
disenrollment becoming effective. This provision further protects the 
participant from ``dumping'' by the organization and provides for the 
continuation of services until a final determination is made. The State 
administering agencies would review all proposed involuntary 
disenrollments. We also invite comments on whether the regulations 
should specify a time frame in which the review must be conducted and, 
if so, what an appropriate timeframe is.

Effective Date of Disenrollment (Sec. 460.166)

    We are requiring that the PACE organization must use the most 
expedient process allowed for by Medicare and Medicaid procedures as 
specified in the program agreement while ensuring that the 
disenrollment date is coordinated between Medicare and Medicaid (for 
participants who are dually-eligible for both programs) and that 
reasonable advance notice is given to the participant. We are further 
requiring that, until such time the enrollment is terminated, PACE 
participants must continue to use PACE organization services and remain 
liable for any premiums, and the PACE organization must continue to 
furnish all needed services.

Reinstatement in Other Medicare and Medicaid Programs (Sec. 460.168)

    We have established this section to prescribe the PACE 
organization's responsibility to facilitate a PACE participant's 
reinstatement in other Medicare and Medicaid programs after 
disenrollment. We are requiring that the PACE organization make 
appropriate referrals and ensure medical records are made available to 
new providers in a timely manner. In addition, we are requiring that 
the PACE organization work with the State administering agency and HCFA 
to reinstate the participant in other Medicare and Medicaid programs 
for which the individual is eligible.

Reinstatement in PACE (Sec. 460.170)

    Section 460.170 provides that a previously disenrolled participant 
may be reinstated in the PACE program. We did not adopt the protocol 
provision limiting a participant to a one-time-only

[[Page 66265]]

reinstatement following a voluntary disenrollment because we believe 
that frail elderly individuals may experience living arrangement 
changes that take them in and out of a PACE organization's service area 
and result in unavoidable disenrollments. We have retained the Protocol 
provision that a PACE participant can be reinstated in the PACE program 
with no break in coverage if the reason for the disenrollment was 
failure to pay the premiums and the PACE participant pays the premium 
before the effective date of the disenrollment.

Documentation of Disenrollments (Sec. 460.172)

    We have established Sec. 460.172 to specify that a PACE 
organization must have a procedure in place to document the reasons for 
all voluntary and involuntary disenrollments; make the documentation 
available for review by HCFA and the State administering agency; and 
use the information on voluntary disenrollments in the PACE 
organization's internal quality assessment and performance improvement 
program.

Subpart J--Payment

    Sections 1894(d) and 1934(d) of the Act require that payment to a 
PACE organization be based on a capitation amount. The Medicare 
capitation amount will be based upon the Medicare+Choice payment rates 
established under section 1853 of the Act. The Medicaid capitation 
amount is negotiated between the State and the PACE organization.
    The following basic principles distinguish the PACE financing model 
from traditional Medicare and Medicaid reimbursement:
     Obligation for payments is shared by Medicare, Medicaid, 
and individuals.
     Medicare, Medicaid, and private payments for acute, long-
term care, and other services are pooled.
     The capitation rates paid by Medicare and Medicaid are 
designed to result in cost savings relative to expenditures that would 
otherwise be paid for a comparable nursing-facility-eligible population 
not enrolled under the PACE program.
     The PACE organization accepts the capitation payment 
amounts described in this section as payment in full from Medicare and 
Medicaid.

Medicare Payment to PACE Organizations (Sec. 460.180)

    Section 1894(d) of the Act requires us to make prospective monthly 
payments of a capitation amount for each PACE program eligible 
individual enrolled in the same manner and from the same sources as 
payments are made to a Medicare+Choice organization under section 1853 
of the Act. Payments are to be adjusted in the manner described in 
section 1853(a)(2) or section 1876(a)(1)(E) of the Act; that is, 
retroactively adjusted to take into account any difference between the 
actual number of participants and the estimated number of participants 
to be enrolled in determining the amount of the advance payment.
    Consistent with the basic methodology applied to risk-based HMOs, 
PACE organizations will receive monthly payments based on an interim 
per capita rate per participant. Under that methodology, separate rates 
are established for Part A and Part B. The PACE organization receives 
payments based on each participant's entitlement to Medicare Part A and 
B. Therefore, if the participant is entitled to Part A benefits, but is 
not enrolled under Part B, the PACE organization receives only the 
monthly capitation rate established for Part A. For Medicare Part A-
only participants who are also eligible for Medicaid, the State is 
obligated to pay Medicare Part B premiums under section 1902(a)(10) of 
the Act. Therefore, PACE organizations should verify at the time of 
enrollment whether the participant is dually eligible for Medicare and 
Medicaid and whether the participant has Medicare Part A and Part B. 
Payment for a participant will begin with the effective date of 
enrollment (see Sec. 460.158).
    Under section 1894(d)(2) of the Act, the capitation amount should 
be adjusted to take into account the comparative frailty of PACE 
participants and other factors the Secretary determines to be 
appropriate. As explained below, a frailty factor and an adjustment 
factor for PACE participants who have end-stage renal disease (ESRD) 
will be applied to the appropriate payment rate.

Frailty Factor

    Under the PACE demonstration, the Medicare capitation rate for each 
PACE organization was calculated using HCFA's standard Adjusted Average 
Per Capita Cost (AAPCC) methodology developed in accordance with the 
1982 Tax Equity and Fiscal Responsibility Act to pay risk-based health 
maintenance organizations for Medicare enrollees. However, instead of 
using the usual adjustments for age, sex, welfare status, institutional 
status, employment status, and disability, there is one frailty 
adjuster of 2.39 for all PACE participants except those diagnosed with 
ESRD. As of January 1, 1998, instead of using the AAPCC, the Medicare 
capitation rate paid to PACE demonstration projects is calculated using 
the Medicare+Choice rates with the frailty adjuster of 2.39.
    This frailty factor was developed for the PACE demonstration sites 
using information gathered from the ``pre-Channeling'' demonstrations 
serving the nursing-facility-eligible population and information from 
the cost experience at On Lok, which began receiving Medicare and 
Medicaid payments in 1983. (The pre-Channeling demonstration targeted 
the frail elderly and provided case management and community-based 
services in order to decrease the use of institutional care.) Studies 
have been done to examine the accuracy of the 2.39 factor. Researchers 
at the Bigel Institute for Health Policy did a study in 1990 to 
estimate the per capita costs of the nursing-facility-eligible 
population in the period 1984-1985. They linked data from the 1984 
National Long-Term Care Survey (which collected health and functional 
status information on Medicare beneficiaries) to Medicare claims. Their 
cost estimates suggest that the per capita Medicare costs for the 
nursing-facility-eligible population averaged 2.42 times the average 
Medicare costs for the overall elderly population.
    In 1998, the University of Wisconsin assessed the adequacy of this 
factor in relation to the Medicare costs experienced by nursing-
facility-eligible populations. The authors found significant variation 
among States in the manner in which nursing-facility-eligibility is 
determined. The application of these various definitions of nursing-
facility-eligible to available survey data indicates that there is a 
natural clustering of results, despite the apparent difference among 
definition formats. Marginal cost differences between nursing-facility-
eligible and non-nursing-facility-eligible individuals can be explained 
in part by key variables: age, sex, functional impairment, and the 
level of recent health service utilization. With no prior risk 
adjustment, the data suggest that an average frailty factor of about 
200 percent is appropriate. However, this factor should be adjusted for 
the profile of participants at each site. These studies relate to 
populations that are nursing-facility-eligible and not specifically to 
PACE. Consequently, we believe that the 2.39 factor used in the 
demonstration is an appropriate interim payment measure. As discussed 
later in this section, we are working to develop a risk adjustment 
methodology that will account for the relative frailty of the PACE 
population.

[[Page 66266]]

End Stage Renal Disease (ESRD) Adjustment

    Under the PACE demonstration, PACE programs have been paid in two 
ways for Medicare ESRD participants. Each month for each ESRD 
participant, the PACE program is paid the AAPCC Part A and Part B ESRD 
rate. The rate is not adjusted by the 2.39 frailty factor. Instead, 
PACE programs receive additional payment each month for the actual cost 
of services in excess of the AAPCC ESRD payment rate. However, section 
1894(d) of the Act does not contemplate payment of actual cost.
    An analysis of 1994 Medicare claims data for ESRD patients shows 
that Medicare expenditures for ESRD patients who are 75 or older are 
significantly higher than expenditures for all ESRD patients. This 
finding has been fairly constant over time. The group of ESRD patients 
who are 75 or over tend to be very frail and in most cases would be 
considered nursing-facility-eligible. This group of elderly ESRD 
patients can be used as a proxy for ESRD patients who are nursing-
facility-eligible. ESRD patients who are 75 or over have 46 percent 
higher Part A expenditures relative to all ESRD patients, while their 
Part B expenditures are 36 percent higher. We have applied this 
information to calculate adjusters for ESRD patients enrolled in PACE. 
Thus, the Part A ESRD adjuster will be 1.46 and the Part B ESRD 
adjuster will be 1.36. We welcome comments on these adjustment factors. 
As discussed in more detail below, these adjustment factors are 
established as an interim measure pending development of a risk 
adjustment methodology.

Risk Adjustment

    Section 1853(a)(3) of the Act requires that payment rates to 
Medicare+Choice plans be risk-adjusted starting January 1, 2000. At the 
present time HCFA is developing the risk adjustment methodology and 
evaluating how to apply the methodology to PACE and other HCFA 
demonstration projects. The Announcement of Calendar Year 2000 
Medicare+Choice Payment Rates, published January 15, 1999 on the HCFA 
website, displays the risk adjustor rates and methodology that will be 
effective for Medicare+Choice plans starting January 1, 2000. The 
demographic rate methodology will be phased out, while a risk 
methodology using health status will be phased in. By 2003, 80 percent 
of the capitated payments will be based on health status risk 
adjustors, while 20 percent will be based on the existing AAPCC rate 
structure. Specific HCFA demonstrations programs and PACE will not 
implement the new risk adjustor methodology on January 1, 2000, but 
will have a one-year deferral. This extension is needed to study the 
applicability and impact of risk adjustment on capitated payments for 
the frail.
    We anticipate using the encounter data and other types of 
information collected from Medicare+Choice organizations and PACE 
organizations to conduct research to evaluate risk adjustment payment 
options for special populations such as PACE participants and examine 
the possibility of using a hybrid methodology.
    We will require initially that each PACE organization submit 
inpatient hospital encounter data using the UB-92 to HCFA through a 
fiscal intermediary (FI), similar to the requirements for 
Medicare+Choice plans. The PACE organizations will need to establish 
electronic linkages with the designated FIs and may need to modify 
their contracts with hospitals to ensure that a completed UB-92 for 
each hospital discharge of a PACE participant is provided by the 
hospital to the PACE organization. We will subsequently require PACE 
organizations to submit additional encounter data consistent with the 
encounter data requirements for Medicare+Choice plans set forth in 42 
CFR 422.257, published in the Federal Register on June 26, 1998 (63 FR 
35092).
    In order to develop a frailty adjustor for payment to PACE 
organizations, we may also collect and analyze data on functional 
status of PACE participants to profile participants at each PACE site. 
PACE demonstration projects are participating in the Health Outcomes 
Survey. PACE organizations may be required to collect this or similar 
functional data in order to adjust the Medicare+Choice payment rates. 
Until we develop a specific risk adjustment methodology for PACE, we 
will continue to adjust PACE rates using the frailty and ESRD adjustors 
described above. We welcome comments on this issue.

Medicare Secondary Payer (MSP)

    We specify the application of MSP provisions because HCFA cannot 
pay for PACE services to the extent that Medicare is not the primary 
payer under section 1862(b) of the Act and 42 CFR part 411. We require 
the PACE organization to identify payers that are primary to Medicare, 
determine the amounts payable by those payers, and coordinate its 
benefits to Medicare participants with the benefits of the primary 
payers.
    Under MSP provisions, the PACE organization may charge other 
individuals or entities for PACE services covered under Medicare for 
which Medicare is not the primary payer, as follows:
     If a Medicare participant receives from a PACE 
organization covered services that are also covered under State or 
Federal workers' compensation, any no-fault insurance, or any liability 
insurance policy or plan, including a self-insured plan, the PACE 
organization may charge--
    + The insurance carrier, the employer, or any other entity that is 
liable for payment for the services under section 1862(b) of the Act 
and 42 CFR part 411; and
    + The Medicare participant, to the extent that he or she has been 
paid by the carrier, employer, or entity.
     If Medicare payment is precluded by section 1862(b) of the 
Act for services that a PACE organization furnished to a Medicare 
participant who is covered under a group health plan (GHP) or large 
group health plan (LGHP), the organization may charge the GHP or LGHP 
for those services and may charge the Medicare participant to the 
extent that he or she has been paid by the GHP or LGHP for those 
services.

Medicaid Payment (Sec. 460.182)

    Section 1934(d) of the Act requires a State to make prospective 
monthly capitated payments for each PACE program participant eligible 
for medical assistance under the State plan. The capitation payment 
amount must be specified in the PACE program agreement and be less, 
taking into account the frailty of PACE participants, than the amount 
that would otherwise have been paid under the State plan if the 
individuals were not enrolled in a PACE program.
    A national Medicaid rate-setting methodology for PACE has not been 
established. Rather, each State which elects PACE as a Medicaid State 
plan option will develop a payment amount based on the cost of 
comparable services for the State's nursing-facility-eligible 
population. Generally, the amounts are based on a blend of the cost of 
nursing home and community-based care for the frail elderly. The 
monthly capitation payment amount is negotiated between the PACE 
organization and the State administering agency and can be renegotiated 
on an annual basis.
    As these statutory requirements do not differ from the Protocol 
requirements regarding Medicaid payments under the PACE demonstration, 
the regulations mirror the Protocol requirements.

[[Page 66267]]

Post-Eligibility Treatment of Income (Sec. 460.184)

    Section 1934(b)(1)(A)(i) of the Act indicates that a PACE 
organization shall provide, to eligible individuals, all covered items 
and services without application of deductibles, copayments, 
coinsurance, or other cost sharing that would otherwise apply under 
Medicare or Medicaid. Section 1934(i) of the Act permits States to use 
post-eligibility treatment of income in the same manner as it is 
applied for individuals receiving services under a waiver under section 
1915(c) of the Act.
    The post-eligibility treatment of income provision reduces the 
amount of Medicaid payments to a PACE organization by the amount 
remaining after specified deductions are made from the income of the 
PACE participant. The income remaining after these deductions are 
applied is the amount a participant is liable to pay toward the cost of 
the PACE services. Therefore, an argument could be made that sections 
1934(b) and (i) of the Act are in conflict since under section 1934(i) 
PACE participants may incur limited liability for part of the cost of 
their services. However, we have concluded that the type of Medicaid 
participant liability permitted by section 1934(i) is not cost sharing 
prohibited by section 1934(b)(1)(A)(I).
    Section 1902(a)(17) of the Act permits an individual (or family) 
who has more income than allowed for Medicaid eligibility to reduce 
excess income by incurring expenses for medical and/or remedial care to 
establish Medicaid eligibility. However, this spenddown process is used 
in establishing Medicaid eligibility rather than being the type of cost 
sharing prohibited by section 1934(b)(1)(A)(I).
    We interpret section 1934(b)(1)(A)(I) to refer to deductibles, 
copayments, coinsurance or other cost sharing beyond participant 
liabilities related to Medicaid eligibility. Any other reading of the 
law would make section 1934(i) merely surplusage which could not be 
given meaning. Therefore, to give meaning to each of the sections of 
the Act at issue here, we are providing in section 460.184, which 
implements section 1934(i), references to 42 CFR 435.726 and 435.735 
which lay out the post-eligibility treatment of income and resource 
requirements which may be applied here in the same manner as applied to 
individuals receiving home and community-based services.

Conforming Amendments

    The BBA also made conforming amendments to sections 1924(a)(5) and 
1903(f)(4)(C) of the Act pertaining to eligibility for medical 
assistance. Section 1924(a)(5) was revised to indicate that special 
treatment of income and resources for institutionalized spouses in 
determining eligibility for medical assistance is applied to 
individuals receiving services under a PACE program under section 1934 
or 1894. Further, section 710 of the Omnibus Appropriation Bill (Pub. 
L. 105-277), enacted October 21, 1998, permits PACE program eligible 
individuals enrolled in a PACE program under section 1934 of the Act to 
be eligible for Medicaid under the optional categorically needy 
eligibility group at section 1902(a)(10(A)(ii)(IV) of the Act. Under 
this authority, States can determine eligibility for PACE enrollees 
using institutional rules, including use of the special income level 
group at section 1902(a)(10)(A)(ii)(IV) of the Act.

PACE Premiums (Sec. 460.186)

    Neither section 1894 nor section 1934 of the Act addresses the 
premiums a PACE organization can charge a PACE participant. In 
accordance with sections 1894(f)(2) and 1934(f)(2) of the Act, we have 
adopted most of the PACE premium requirements from Part VI, section D, 
of the Protocol into the regulations.
    It is important to note that the term ``premiums'' as used in this 
regulation does not include spenddown liability under 42 CFR 435.121 
and 435.831, or post-eligibility treatment of income under 
Sec. 460.184. This use of the word is more narrow than the way the word 
is used in the Protocol, where a participant's ``share of cost'' 
responsibility under Medicaid is referred to as a type of premium. PACE 
organizations can continue to collect any liability due them under 
Medicaid spenddown and post-eligibility processes, but that liability 
is not a premium.
    We specify that a participant's monthly premium responsibility 
depends upon his or her eligibility under Medicare and Medicaid.
    The Protocol says that the premium for Medicare-only participants 
is equal to the Medicaid capitation amount. Nearly all Medicare 
participants have both Part A and Part B, and the capitation amount 
that Medicare pays is the sum of both Part A and Part B capitation 
rates. However, section 1894(a)(1) of the Act permits an individual who 
is entitled to Medicare benefits under Part A or enrolled under Part B 
to enroll in the PACE program. For those rare persons who are eligible 
under only one part, the Medicare capitation amount will be only the 
portion for that part. Such a participant is required to make up the 
difference, that is, pay an additional premium amount equal to the 
missing piece of the Medicare capitation amount. We specify the 
premiums for Medicare-only participants as follows--
     For a participant who is entitled to Medicare Part A and 
enrolled under Medicare Part B, but is not eligible for Medicaid, the 
premium equals the Medicaid capitation amount.
     For a participant who is entitled to Medicare Part A, but 
is not enrolled under Part B and is not eligible for Medicaid, the 
premium equals the Medicaid capitation amount plus the Medicare Part B 
capitation rate.
     For a participant who is enrolled only under Medicare Part 
B and is not eligible for Medicaid, the premium equals the Medicaid 
capitation amount plus the Medicare Part A capitation rate.
    We specify that no premium may be charged to a participant who is 
dually eligible for both Medicare and Medicaid or one who is only 
eligible for Medicaid.

Subpart K--Federal/State Monitoring

Monitoring During Trial Period (Sec. 460.190)

    Sections 1894(e)(4)(A) and 1934(e)(4)(A) of the Act provide for 
annual close oversight during the trial period, which is a PACE 
organization's first 3 contract years (see sections 1894(a)(9) and 
1934(a)(9) of the Act). We have established Sec. 460.190 to address the 
law's requirements for review during the trial period. During the trial 
period, HCFA in cooperation with the State administering agency will 
conduct comprehensive annual reviews of a PACE organization.
    In accordance with the law, the review will include an on-site 
visit to the PACE organization, a comprehensive assessment of the 
organization's fiscal soundness, a comprehensive assessment of the 
organization's capacity to furnish all PACE services to all enrolled 
participants, a detailed analysis of the organization's substantial 
compliance with all significant requirements of sections 1894 and 1934 
and these regulations, and any other elements that HCFA or the State 
administering agency find necessary.
    We anticipate that on-site reviews would be conducted by a survey 
team that includes an individual who is experienced in providing care 
to the frail elderly and is knowledgeable about the PACE service 
delivery system.

[[Page 66268]]

Ongoing Monitoring After Trial Period (Sec. 460.192)

    In accordance with paragraph (e)(4)(B) of sections 1894 and 1934 of 
the Act, we specify that at the conclusion of the trial period, HCFA, 
in cooperation with the State administering agency, continues to 
conduct reviews of a PACE program, as appropriate. These reviews will 
take into account the performance level of the PACE organization with 
respect to the quality of care provided and compliance of the 
organization in meeting the PACE program requirements. Such reviews 
will include an on-site visit at least every two years.

Corrective Action (Sec. 460.194)

    We require the PACE organization to take action to correct 
deficiencies identified during the reviews. HCFA or the State 
administering agency will monitor the effectiveness of corrective 
actions. Failure to correct deficiencies can result in sanctions or 
terminations in accordance with subpart D.

Disclosure of Review Results (Sec. 460.196)

    In accordance with paragraph (e)(4)(C) of sections 1894 and 1934 of 
the Act, we specify requirements for disclosing the results of 
oversight reviews. HCFA and the State administering agency promptly 
report the results of reviews under Secs. 460.190 and 460.192 to the 
PACE organization, along with any recommendations for changes to the 
organization's program. The results are made available to the public 
upon request. In addition, we are requiring that the PACE organization 
post a notice of the availability of the results of the most recent 
review and any plans of correction or responses related to the most 
recent review. The PACE organization must also make the results 
available for examination in a place readily accessible to 
participants.

Subpart L--Data Collection, Record Maintenance and Reporting

Maintenance of Records and Reporting of Data (Sec. 460.200)

    In accordance with sections 1894(e)(3)(A) and 1934(e)(3)(A) of the 
Act, we are requiring PACE organizations to collect data, maintain 
records and submit reports. We describe data and records to include 
participant health outcome data, financial books and records, medical 
records, and personnel records. We require the documents to be 
accessible to HCFA and the State administering agency upon request and 
be stored in a manner consistent with the PACE organization's written 
policies that protects them from loss, destruction, unauthorized use or 
inappropriate alteration.
    We have established several requirements intended to safeguard the 
privacy of any information that identifies a particular participant. 
The PACE organization must establish written policies and implement 
procedures to ensure that information from, or copies of, records are 
released only to authorized individuals and that original medical 
records are released only in accordance with Federal or State laws, 
court orders, or subpoenas. A participant's written consent must be 
obtained before the release of identifiable information to persons not 
otherwise authorized to receive it. A participant's written consent may 
limit the degree of information and the persons to whom information may 
be released. Participants are guaranteed timely access to review and 
copy their own medical records and may request amendments to their 
records. Finally, the PACE organization must abide by all Federal and 
State laws regarding confidentiality and disclosure of participant 
mental health and medical records and other health information.
    The Protocol does not specify a minimum record retention timeframe. 
In order to enable adequate oversight and to be consistent with the 
requirements established for Medicare+Choice plans, we require PACE 
organizations to retain records for the longest of the following 
periods: the period specified by State law; six years from the date of 
the last entry made in the record; or for medical records of 
disenrolled participants, six years after the date of disenrollment. If 
any litigation, claim, financial management review, or audit is started 
before the expiration of the retention period, we are requiring that 
those records shall be retained until completion of the litigation, or 
until claims or audit findings involving the records have been resolved 
and final action taken.

Participant Health Outcomes Data (Sec. 460.202)

    We have modified the requirement in Part VII, section B of the 
Protocol for data collection and reporting. We are requiring that PACE 
organizations maintain a health information system that collects, 
analyzes, integrates, and reports data necessary to measure their 
performance and to develop their quality assessment and performance 
improvement programs. After development of HCFA's collection and 
reporting strategy, PACE organizations will be expected to collect 
specific data at specified time intervals. We envision that this 
information system can be used by HCFA, the State administering agency, 
PACE organizations, participants and their caregivers, researchers, 
policy makers, and other professionals furnishing care to PACE 
participants. This system also will provide information to help PACE 
organizations, participants, and caregivers make better choices about 
care and help identify organizations' opportunities for continuous 
improvement in all participant care processes.
    Each PACE organization will collect, evaluate, and report the data 
as part of managing its quality assessment and performance improvement 
program. These data will assist the PACE organization in its efforts to 
identify opportunities to improve participant care and outcomes, to 
evaluate the results of its performance improvement activities, and to 
share those results with other PACE organizations.
    The data set will focus on items such as functional status, health 
status, cognitive ability, mental health, medication use, nutritional 
status, health care utilization, participant and caregiver quality of 
life, and any other measures of participant care that the PACE 
organization community believes to be useful both for tracking 
participant care and for identifying opportunities for improvement. The 
items in the data set will be essential to the PACE organization for 
purposes of continuous care planning, for the effective and efficient 
operation of the organization, and for assisting participants and their 
caregivers in making informed decisions about their care. Thus, 
accurate and precise data collected at uniform time points (i.e., from 
a baseline point such as enrollment, return from hospital, etc.) will 
be essential. Aggregating the data to a level that makes it useful to 
PACE organizations for internal quality improvement programs is an 
important benefit of having a central data system that feeds data back 
to PACE organizations for comparative purposes on a continuous basis. 
An aggregated data set is also useful in establishing national 
improvement efforts.
    Given that the core data set is still under development and will 
not be ready for implementation until sometime in the summer of 2000, 
PACE organizations should be collecting information on their own to 
feed into their quality assessment and performance improvement 
activities. PACE organizations may want to collect the items on 
DataPACE, which was developed by On Lok and contains information on 
participant demographics, health and functional status, service 
utilization, and informal

[[Page 66269]]

support. This will allow for the continued collection of data elements 
collected in the demonstration project for comparison between 
demonstration sites and permanent PACE organizations. However, if PACE 
organizations are developing computerized information systems, the 
systems should be flexible enough to be able to replace, in the future, 
items now in the system with similar items that are developed as a 
result of the CHSPR project.
    Additionally, we have added a requirement that the PACE 
organization must furnish data and information in the manner and at the 
time intervals specified by HCFA and the State administering agency, 
pertaining to its participant care activities. These data will be used 
to monitor the quality of care provided to PACE participants, including 
participant outcomes. The items to be collected will be specified in 
the PACE program agreement and will be subject to the confidentiality 
requirements specified in Sec. 460.200. Once the core data set is 
completed, PACE organizations will be required to submit these data to 
HCFA and/or the State administering agency. Since this data set is 
under development, HCFA will require PACE organizations, in the 
meantime, to submit to HCFA and/or the State administering agency a 
limited amount of information in order to monitor the quality of care 
furnished to PACE participants. This information will be specified in 
the PACE program agreement. The required information will include the 
number of grievances and appeals; rates and reasons for disenrollment; 
utilization of the adult day health center, home health, acute 
hospital, nursing home, transitional housing, rehabilitation unit/
facility, mental health services, and outpatient drugs; vaccination 
rates for flu and pneumonia; percent of participants receiving retinal 
eye exams and dental exams; and the number of participants with a 
fracture or decubitus during the reporting period.
    We also will require each PACE organization to conduct an annual 
satisfaction survey of its participants and caregivers. The findings 
will be reported to HCFA and/or the State administering agency and 
should be used by the PACE organization to identify opportunities for 
improvement. Finally, as discussed previously, we will require 
reporting of inpatient and outpatient encounter data and may require 
reporting of functional data in order to develop a risk adjustment 
methodology for PACE.

Financial Record Keeping and Reporting Requirements (Sec. 460.204)

    In Sec. 460.204, Financial Record Keeping and Reporting 
Requirements, we require that a PACE organization must provide HCFA and 
the State administering agency with accurate financial reports that are 
prepared using an accrual basis of accounting and verifiable by 
auditors.
    In addition, we are requiring that the PACE organization maintain 
an accrual accounting record-keeping system that accurately documents 
all financial transactions, provides an audit trail to source 
documents, and generates financial statements.
    Further, except as stipulated under Medicare principles of 
reimbursement as set forth in 42 CFR 413, a PACE organization must 
follow standardized definitions and accounting, statistical, and 
reporting practices that are widely accepted in the health care 
industry.
    We are also requiring that a PACE organization must permit HCFA and 
the State administering agency to audit or inspect any books and 
records of original entry that pertain to any aspect of services 
performed, reconciliation of participants' benefit liabilities or 
determination of Medicare and Medicaid amounts payable.
    Under the PACE demonstration, HCFA and the PACE organization had a 
risk-sharing agreement in which HCFA shared in a portion of the 
organization's losses during the first 3 years of operations. To 
monitor each organization's costs and the amount of HCFA's liability, 
HCFA required the organization to submit monthly budgeted versus actual 
financial reports during the first year and quarterly reports during 
subsequent years unless the organization's performance indicated a need 
for more frequent reporting. In addition, organizations were required 
to submit quarterly cumulative cost reports for risk-sharing 
determinations. Annually, organizations were required to submit 
independently certified cost reports for final risk sharing 
determinations.
    The statute does not provide for risk-sharing arrangements between 
HCFA and PACE organizations. It places the organization at full 
financial risk for all services. Since risk sharing is no longer a 
condition of the agreement, the cost and financial reports described 
above are no longer needed for this purpose.

Financial Statements (Sec. 460.208)

    HCFA, in cooperation with the State administering agency, has the 
responsibility of assessing fiscal soundness as described in 
Sec. 460.80.
    The financial information required to assess the fiscal soundness 
of a PACE organization is information from basic financial statements, 
the balance sheet, statement of revenues and expenses, and sources and 
uses of funds statement. An organization that has completed its trial 
period will be required to submit these basic financial statements, 
annually. An organization that is in the trial period will be required 
to submit quarterly financial statements in addition to the annual 
certified financial statements. An organization may use the ``Annual 
Statement'' (also known as the ``orange blank'') which was developed by 
the National Association of Insurance Commissioners of Nashville, 
Tennessee (615-254-6291) for reporting by HMOs.
    Sections 1894(e)(3) and (4) and 1934(e)(3) and (4) of the Act 
require the Secretary and the State administering agency to work in 
consultation to determine what data and cost and financial reports the 
PACE organization must submit so these agencies can monitor the cost 
and effectiveness of a PACE organization and perform necessary reviews.
    In Sec. 460.208, we are requiring that, not later than 180 days 
after the end of the organization's fiscal year, the PACE organization 
submit a certified financial statement that includes appropriate 
footnotes. This financial statement must be certified by an independent 
certified public accountant. At a minimum, the certified financial 
statement must include a certification statement, a balance sheet, a 
statement of revenues and expenses, and a source and use of funds 
statement.
    Throughout the entire duration of the trial period, we are 
requiring that not later than 45 days after the end of each quarter of 
the organization's fiscal year, a PACE organization must submit a 
quarterly financial statement, which is not required to be certified by 
an independent certified public accountant.
    At the conclusion of the trial period, HCFA or the State 
administering agency may require a PACE organization to submit monthly 
or quarterly financial statements, or both, if HCFA or the State 
administering agency determines that an organization's performance 
requires more frequent monitoring and oversight due to concerns about 
fiscal soundness. These additional reports do not have to be certified 
by a certified public accountant.
    We consulted with representatives from various State organizations 
that currently service PACE programs under demonstrations. Initial 
observations indicate that data collection and

[[Page 66270]]

financial reporting requirements vary among the State organizations at 
the present time. It appears that the data collection and financial 
reports we require in this interim final regulation can also assist the 
State administering agency in the monitoring and oversight 
requirements. Of course, States will still have the authority to 
request any data and reports that they consider to be necessary in 
implementing PACE. HCFA will continue to consult with State 
organizations to develop consistency in reporting requirements in order 
to minimize the reporting burden for PACE organizations. We welcome 
comments on this issue.

Medical Records (Sec. 460.210)

    The participant's medical record presents a total picture of the 
care provided. The medical record is a useful tool in diagnosing, 
treating and caring for the participant. The medical record: (1) 
Facilitates communication among the various health care professionals 
providing services to the participant; (2) provides a focal point for 
coordinating the actions of the multidisciplinary team; (3) provides an 
accurate picture of the participant's progress in achieving care goals; 
and (4) provides the team members with data for evaluating and 
documenting the quality and appropriateness of care delivered. Because 
care for this population will be provided by a variety of sources 
(i.e., center employees, contracted personnel, hospital staff, nursing 
home staff, etc.), it is critical that all information on the 
participant be documented in the medical record to ensure quality and 
continuity of care. As a result, we have retained with few 
modifications the minimum elements specified in the Protocol to be 
included in the participant's medical record.
    To facilitate continuity of care, we are requiring in Sec. 460.210 
that the PACE organization maintain a single comprehensive medical 
record for each participant at the PACE center he or she attends. 
Participant medical records should be complete, accurately documented, 
easily retrievable, systematically organized, and available to all 
staff. We recognize that a PACE organization may have more than one 
site. However, participant medical records must be located at the site 
the participant receives services so that staff have access to 
pertinent information. This requirement also should prevent time lost 
in obtaining records and facilitate timely review and documentation of 
the medical record. We have added appropriate language to address this 
issue.
    At a minimum, the participant medical record must include:
     Appropriate identifying information;
     Documentation of all services furnished, including
    + a summary of emergency care and other inpatient or long-term care 
services (We included the last phrase to ensure that any services 
furnished to the participant outside the scope of the center's direct 
care is documented in the medical record. It is critical to the 
continuity of care that the center staff be informed of all outside 
services furnished to the participant. Once the participant returns to 
the center, the course of treatment can be reevaluated and adjusted 
based on any changes in the participant's status.);
    + Services furnished by employees of the PACE center; and
    + Services furnished by contractors and their reports (This is 
intended to ensure that anyone who furnishes services to the 
participant, as either an employee of the PACE organization or under 
contract, shares the information with the center staff for 
documentation in the medical record. Again, this requirement is 
intended to facilitate communication between providers.);
     Multidisciplinary assessments, reassessments, plans of 
care, and treatment and progress notes that are signed and dated;
     Laboratory, radiological and other test reports (This 
change clarifies that all tests should be included in the participant 
medical record.);
     Medication records;
     Hospital discharge summaries, if applicable;
     Reports of contact with informal support (e.g., care 
giver, legal guardian, or next of kin);
     Enrollment Agreement signed by the participant;
     Physician orders;
     Disenrollment justification, if applicable;
     Advance directives, if applicable (For example, when a 
participant has executed an advance directive that fact should be 
prominently displayed. If the PACE organization cannot implement an 
advance directive as a matter of conscience that fact also should be 
prominently displayed.);
     A signed release permitting disclosure of personal 
information; and
     Accident and incident reports. (Accident and incident 
reports are included because they may be an indicator of changes in the 
participant's functional status, problems or changes in the 
participant's home environment, or physical problems with the center or 
its staff.)
    We also require the PACE organization to provide for the prompt 
transfer of copies of appropriate medical record information between 
treatment facilities to ensure continuity of care whenever a 
participant is temporarily or permanently transferred to another 
facility. Examples of appropriate medical record information include, 
but are not limited to, such things as the reason for the transfer, the 
name and phone number of the attending physician, participants' 
demographics, active diagnosis and treatment plan including current 
medications and ADL status, special dietary considerations, etc. It is 
essential that the medical history and plan of care follow the 
participant. This requirement is intended to ensure communication 
between providers. We are soliciting comments on whether a specific 
timeframe for the transfer of participant medical record information 
should be required.
    We have added a requirement for authentication of the medical 
record to ensure that the appropriate individuals have reviewed and 
completed the participant's medical records. All entries must be 
legible, clear, complete, and appropriately authenticated and dated. 
Authentication must include signatures or a secured computer entry by a 
unique identifier of the primary author who has reviewed and approved 
the entry.

III. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this preamble, and, when we proceed with a subsequent 
document, we will respond to the comments in the preamble to that 
document.

IV. Waiver of Proposed Rulemaking and Delayed Effective Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed and the terms and substance 
of the proposed rule or a description of the subjects and issues 
involved. This procedure can be waived, however, if an agency finds 
good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of

[[Page 66271]]

the finding and its reasons in the rule issued.
    Section 4803(a) of BBA directed us to promulgate these regulations 
in a timely manner, so that entities may establish and operate ongoing 
PACE programs under Medicare and Medicaid for periods beginning not 
later than August 5, 1998. Section 1894(f)(1) of the Act, as added by 
section 4801 of BBA, and section 1934(f)(1) of the Act, as added by 
section 4802 of BBA, authorize the issuance of interim final 
regulations for this purpose. Thus, the BBA expressly provides that we 
may implement the PACE program without publication of a notice of 
proposed rulemaking and a period for public comment.
    For these reasons, we find notice-and-comment rulemaking procedures 
both unnecessary and impracticable. Therefore, we find good cause to 
waive the notice of proposed rulemaking and to issue this final rule on 
an interim basis. We are providing a 60-day period for public comment.
    Generally, we provide a 30-day delay before effectuation of a final 
rule unless we find good cause to dispense with that delay (5 U.S.C. 
section 553(d)). For the same reasons applicable to waiver of proposed 
rulemaking and in order to allow the current PACE demonstration 
projects the opportunity to apply for PACE organization status as soon 
as possible after publication of this interim final rule, we find that 
the 30-day delay is impracticable and not in the public interest. 
Therefore, we find good cause to waive the 30-day delay in the 
effective date of the regulation.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of the information 
collection requirements (ICRs) summarized and discussed below.

A. The following ICRs and Associated Burden Are Subject to the PRA.

Section 460.12  Application Requirements

    Section 460.12(a)(1) states that in order for HCFA to determine 
whether an entity qualifies as a PACE organization, an individual 
authorized to act for the entity must submit to HCFA a complete 
application that describes how the entity meets all requirements in 
this part.
    The burden associated with this requirement is the time and effort 
to compile and submit application information to HCFA. We estimate that 
25 entities will apply per year and that each entity will take 151 
hours to complete the requirements of this section for a total annual 
burden of 3,775 hours.
    In summary, section 460.12(a)(2) provides that HCFA will only 
evaluate applications from entities located in States with approved 
State plan amendments electing PACE as an optional Medicaid benefit. In 
addition, 460.12(b) states that an application must be accompanied by 
an assurance from the State administering agency of the State in which 
the program is located indicating that the State considers the entity 
to be qualified to be a PACE organization and is willing to enter into 
a PACE program agreement with the entity.
    The burden associated with these requirements is the time and 
effort for a State to develop its State plan amendment to elect PACE as 
an optional Medicaid benefit and to write an assurance to HCFA 
indicating that the State considers the entity to be qualified to be a 
PACE organization and that the State is willing to enter into a PACE 
program agreement with the entity. We estimate that 25 States will each 
take 20 hours to complete these requirements for a total annual burden 
of 500 hours.

Section 460.30  Program Agreement Requirement

    In summary, Sec. 460.30(a) and (b) state that a PACE organization 
must have an agreement with HCFA and the State administering agency to 
operate a PACE program under Medicare and Medicaid. Furthermore, the 
program agreement must be signed by an authorized official of the 
organization, HCFA, and the State administering agency.
    Since HCFA prepares the program agreement, the burden associated 
with this requirement is the time and effort of officials to review and 
sign the agreement. We estimate that organization and State officials 
will take 2 hours per agreement to complete this requirement. There 
will be approximately 54 agreements for a total annual burden of 108 
hours.

Section 460.70  Contracted Services

    In summary, Sec. 460.70(b)(1) requires that a PACE organization 
contract only with entities that meet all applicable Federal and State 
requirements.
    The burden associated with this requirement to demonstrate that a 
PACE organization has contracted only with appropriate entities is 
captured by the initial contracts in section 460.12, application 
requirements. The remaining burden associated with this section is the 
ongoing time associated with the PACE organizations' verification, and 
maintenance of the verification documentation, that any new contractors 
are qualified entities. We estimate that each organization will spend 5 
hours verifying the qualifications of new contractors. There will be 
approximately 54 PACE organizations for a total annual burden of 270 
hours.
    Section 460.70(d) states that the PACE organization must furnish a 
copy of each signed contract for inpatient care to HCFA and the State 
administering agency.
    While the requirement to furnish a copy of each signed contract for 
inpatient care is subject to the PRA, the initial burden associated 
with this requirement is captured in Sec. 460.12, application 
requirements. The remaining burden associated with this requirement is 
the time and effort associated with furnishing a copy of each new or 
revised contract for inpatient care to HCFA and the State administering 
agency. We estimate that each PACE organization will take 30 minutes to 
complete this requirement. There will be approximately 54 PACE 
organizations for a total annual burden of 27 hours.

Section 460.72  Physical Environment

    Section 460.72(a)(3) states that a PACE organization must 
establish, implement, and maintain a written plan to ensure that all 
equipment is maintained in accordance with the manufacturer's 
recommendations.
    The burden associated with this requirement is the time and effort 
to establish and maintain a written plan to ensure that all equipment 
is maintained in accordance with the manufacturer's recommendations. 
While the requirement to ``establish'' a written

[[Page 66272]]

plan is subject to the PRA, the burden associated with that requirement 
is captured in Sec. 460.12, application requirements. We estimate that 
each PACE organization will take 1 hour to ``maintain'' a written plan. 
There will be approximately 54 PACE organizations for a total annual 
burden of 54 hours.
    Section 460.72(c)(5) states that at least annually, a PACE 
organization must actually test, evaluate, and document the 
effectiveness of its emergency and disaster plans.
    The burden associated with this requirement is the time and effort 
for a PACE organization to document the effectiveness of its emergency 
and disaster plans. We estimate that each PACE organization will take 
30 minutes to complete this requirement. There will be approximately 54 
PACE organizations for a total annual burden of 27 hours.

Section 460.82  Marketing

    Section 460.82(c) states that a PACE organization must furnish 
printed marketing materials to prospective and current participants in 
English and in any other principal languages of the community, and in 
braille if necessary.
    While the requirement to ``furnish'' these materials is subject to 
the PRA, the burden associated with that requirement is captured in 
Sec. 460.82(a), which is discussed below under paragraph F. The 
remaining burden associated with this requirement is the time and 
effort for the PACE organization to prepare printed marketing materials 
to meet special language requirements. We estimate that 54 PACE 
organizations will each take 2 hours to prepare and update the material 
on an annual basis for a total of 108 burden hours.
    Section 460.82(f) states that a PACE organization must establish, 
implement, and maintain a documented marketing plan with measurable 
enrollment objectives and a system for tracking its effectiveness.
    While the requirement to ``establish'' a documented plan and a 
tracking system is subject to the PRA, the burden associated with that 
requirement is captured in Sec. 460.12, application requirements. The 
remaining burden associated with this requirement is the time and 
effort for a PACE organization to update and maintain a marketing plan 
and a tracking system. We estimate that each PACE organization will 
take 16 hours on an annual basis to comply with this requirement. There 
will be approximately 54 PACE organizations for a total annual burden 
of 864 hours.

Section 460.102  Multidisciplinary Team

    Section 460.102(e) states that the PACE organization must 
establish, implement, and maintain documented internal procedures 
governing the exchange of information between team members, 
contractors, and participants and their caregivers.
    While the requirement to ``establish'' the documented procedures is 
subject to the PRA, the burden associated with that requirement is 
captured in section 460.12, application requirements. The remaining 
burden associated with this requirement is the time and effort for the 
PACE organization to update and maintain documented internal procedures 
governing the exchange of information. We estimate that each PACE 
organization will take 1 hour on an annual basis to complete this 
requirement. There will be approximately 54 PACE organizations for a 
total annual burden of 54 hours.

Section 460.104  Participant Assessment

    Section 460.104(c)(3)(ii) specifies a timeframe for the 
multidisciplinary team to perform a reassessment and respond to a 
participant's (or the participant's designated representative) request 
for a change in services. The team may extend the timeframe in 
accordance with Sec. 460.104(c)(3)(iii) if they document its need for 
information and how the delay is in the interest of the participant.
    The burden associated with this requirement is the time and effort 
for the PACE organization to document the reasons for an extension. We 
estimate that on average there will be approximately 8 participants per 
organization who request a reassessment and the team determines they 
need additional time to respond. Therefore, the burden associated with 
this requirement is (8 participants  x  10 minutes)  x  54 PACE 
organizations = 72 annual hours of burden.

Section 460.116  Explanation of Rights

    Section 460.116(c) states that the PACE organization must write the 
participant rights in English and in any other principal language of 
the community and display the rights in a prominent place in the PACE 
center.
    The burden associated with this requirement is the time and effort 
for the PACE organization to (1) write the participant rights in 
English and in any other principal language of the community; and (2) 
display the rights in a prominent place in the PACE center. While the 
ICRs listed above are subject to the PRA, we believe that the burden 
associated with writing the participant rights in English and in any 
other principal language of the community is exempt from the PRA in 
accordance with 5 CFR 1320.3(b)(2) because the time, effort, and 
financial resources necessary to comply with these requirements would 
be incurred by persons in the normal course of their activities. 
However, we do believe the remaining burden associated with updating 
and displaying these rights is subject to the PRA. We estimate that, on 
average, each PACE organization will take 8 hours on an annual basis to 
comply with these requirements. There will be approximately 54 PACE 
organizations for a total annual burden of 432 hours.

Section 460.120  Grievance Process

    Section 460.120(b) states that upon enrollment, and at least 
annually thereafter, the organization must give a participant written 
information on the grievance process.
    The burden associated with this requirement is the time and effort 
for the PACE organization to give a participant written information on 
the grievance process. We estimate that, on average, there will be 160 
participants per organization receiving written information on the 
grievance process. Therefore, the burden associated with the disclosure 
of the grievance materials is (160 participants  x  5 minutes)  x  54 
PACE organizations = 720 annual hours of burden.
    Section 460.120(e) states that the PACE organization must discuss 
with, and provide to the participant in writing the specific steps, 
including timeframes for response, that will be taken to resolve the 
participant's grievance.
    The burden associated with this requirement is the time and effort 
for the PACE organization to discuss with, and provide to the 
participant in writing the specific steps, including timeframes for 
response, that will be taken to resolve the participant's grievance. We 
estimate that, on average, there will be 8 participants per 
organization receiving the additional written information on the 
grievance process. Therefore, the burden associated with the disclosure 
of the additional grievance materials is (8 participants x 10 minutes) 
x  54 PACE organizations = 72 annual hours of burden.

Section 460.122  PACE Organization's Appeals Process

    Section 460.122(b) states that upon enrollment, and at least 
annually thereafter, and whenever the multidisciplinary team denies a 
request

[[Page 66273]]

for service or payment, the organization must give a participant 
written information on the appeals process.
    The burden associated with this requirement is the time and effort 
for a PACE organization to give a participant written information on 
the appeals process upon enrollment and at least annually thereafter. 
We estimate that, on average, there will be 160 participants per 
organization receiving written information on the appeals process. 
Therefore, the burden associated with the disclosure of the material 
outlining the appeals process is (160 participants  x  5 minutes)  x  
54 PACE organizations = 720 annual hours of burden.
    Section 460.122(h) states that for a determination that is wholly 
or partially adverse to a participant, at the same time the decision is 
made, the PACE organization must notify HCFA, the State administering 
agency, and the participant.
    The burden associated with this requirement is the time and effort 
for a PACE organization to notify HCFA, the State administering agency, 
and the participant that the PACE organization has made an adverse 
decision. We estimate that, on average, each organization will be 
required to notify 4 participants in writing of an adverse decision. 
Therefore, the burden associated with these disclosure requirements is 
1 hour per plan, (4 participant notifications  x  5 minutes) + (4 HCFA 
notifications  x  5 minutes) + (4 State notifications  x  5 minutes) 
x  54 organizations = 54 annual hours of burden for all organizations.

Section 460.124  Additional Appeal Rights Under Medicare or Medicaid

    Section 460.124 states that a PACE organization must inform a 
participant in writing of his or her appeal rights under Medicare or 
Medicaid managed care, or both, assist the participant in choosing 
which to pursue if both are applicable, and forward the appeal to the 
appropriate external entity.
    The burden associated with this requirement is the time and effort 
for a PACE organization to provide information to a participant in 
writing of his or her appeal rights under Medicare or Medicaid, or 
both, to assist the participant in filing Medicare and Medicaid 
appeals. We estimate that, on average, there will be two participants 
per organization receiving written information and assistance related 
to their appeal rights. Therefore, the burden associated with the 
disclosure of the material outlining appeals rights and assistance is 
(two participants  x  1 hour)  x  54 organizations = 108 annual hours 
of burden.

Section 460.132  Quality Assessment and Performance Improvement Plan

    Section 460.132(b) states that the PACE governing body must review 
the plan annually and revise it, if necessary.
    The burden associated with this requirement is the time and effort 
for a PACE organization to document that the annual review was 
conducted and to revise the quality assessment and performance 
improvement plan if necessary. We estimate that each PACE organization 
will take 8 hours to complete this requirement. There will be 
approximately 54 PACE organizations for a total annual burden of 432 
hours.

Section 460.152  Enrollment Process

    Section 460.152(a)(3) states that the State administering agency 
must assess the potential participant, including any individual who is 
not eligible for Medicaid, to ensure that he or she needs the level of 
care required under the State Medicaid plan for coverage of nursing 
facility services.
    The burden associated with this requirement is the time and effort 
necessary for each State administering agency to maintain documentation 
of each potential participant assessment. We estimate that each State 
administering agency will take 100 hours to complete this requirement. 
There are approximately 25 State agencies that will be affected by this 
requirement for a total annual burden of 2,500 hours.
    Section 460.152(b)(4) states that if a prospective participant is 
denied enrollment because his or her health or safety would be 
jeopardized by living in a community setting, the PACE organization 
must notify HCFA and the State administering agency and make the 
documentation available for review.
    The burden associated with this requirement is the time and effort 
for the PACE organization to notify HCFA and the State administering 
agency of the action. We estimate that on average 25 applicants per 
organization will be denied on an annual basis. The burden associated 
with notifying HCFA and the State agency is estimated to be 5 minutes 
each, for a total of (25 applicants  x  10 minutes)  x  54 
organizations = 225 total annual hours.

Section 460.156  Other Enrollment Procedures

    Section 460.156(a) states that after the participant signs the 
Enrollment Agreement, the PACE organization must give the participant 
the following: (1) A copy of the enrollment agreement; (2) a PACE 
membership card; (3) emergency information to be posted in his or her 
home identifying the individual as a PACE participant and explaining 
how to access emergency services; and (4) stickers for the 
participant's Medicare and Medicaid cards, when applicable, which 
indicate that he or she is a PACE participant and include the phone 
number of the PACE organization.
    While the ICRs listed above are subject to the PRA, we believe that 
the burden associated with items 1, 2, and 3 (above) is exempt from the 
PRA in accordance with 5 CFR 1320.3(b)(2) because the time, effort, and 
financial resources necessary to comply with these requirements would 
be incurred by persons in the normal course of their activities.
    The burden associated with item 4 (above) is the time and effort 
for a PACE organization to give stickers for the participant's Medicare 
and Medicaid cards, when applicable, which indicate that he or she is a 
PACE participant and include the phone number of the PACE organization. 
We estimate each PACE organization will take 1 minute per new enrollee 
to complete this requirement. There will be approximately 54 
organizations that each will spend 1 hour a year for a total annual 
burden of 54 hours.
    Section 460.156(b) states that the PACE organization must submit 
monthly participant information to HCFA and the State administering 
agency, in accordance with established procedures.
    The burden associated with this requirement is the time and effort 
for the PACE organization to submit monthly participant information to 
HCFA and the State administering agency. We estimate that each PACE 
organization will take 12 hours (1 hour per month) to complete this 
requirement. There will be approximately 54 PACE organizations for a 
total annual burden of 648 hours.

Section 460.160  Continuation of Enrollment

    In summary, Sec. 460.160(b) states that at least annually, the 
State administering agency must reevaluate whether a participant needs 
the level of care required under the State Medicaid plan for coverage 
of nursing facility services.
    The burden associated with this requirement is the time and effort 
for the State administering agency to document the annual reevaluation. 
We estimate that each State agency will take 170 hours to complete this 
requirement. There are approximately 25 State agencies for a total 
annual burden of 4,250 hours.

[[Page 66274]]

Section 460.164  Involuntary Disenrollment

    Section 460.164(e) states that before an involuntary disenrollment 
is effective, the State administering agency must review the 
documentation and determine in a timely manner that the PACE 
organization has adequately documented acceptable grounds for 
disenrollment.
    The burden associated with this requirement is the time and effort 
for the State administering agency to review and determine that the 
PACE organization has adequately documented acceptable grounds for 
disenrollment. We estimate that each State agency will be required to 
review 17 case files on an annual basis, at 1 hour each, for a total of 
17 hours. There are approximately 25 State agencies for a total annual 
burden of 425 hours.

Section 460.190  Monitoring During Trial Period

    Section 460.190(a) states that during the trial period, HCFA, in 
cooperation with the State administering agency, will conduct 
comprehensive annual reviews of the operations of a PACE organization 
to ensure compliance with the requirements of these regulations. The 
burden associated with this requirement is the time and effort 
necessary to disclose all materials necessary to demonstrate compliance 
with the regulations. Given that PACE organizations are obligated under 
the program agreement and the requirements set forth in these 
regulations to maintain all information that would be requested as part 
of the comprehensive review, we estimate the burden to be 8 hours per 
organization to disclose necessary information to demonstrate 
compliance. Approximately 42 PACE organizations will be in the trial 
period. The total burden imposed by this section is 336 hours.

Section 460.196  Disclosure of Review Results

    Section 460.196(c) states that the PACE organization must post a 
notice of the availability of the results of the most recent review and 
any plans of correction or responses related to the most recent review.
    The burden associated with this requirement is the time and effort 
for a PACE organization to post a notice. We estimate that each PACE 
organization will take 5 minutes to complete this requirement. There 
will be approximately 54 PACE organizations for a total annual burden 
of 4.5 hours.

Section 460.202  Participant Health Outcomes Data

    In summary, Sec. 460.202(a) and (b) state that a PACE organization 
must establish and maintain a health information system that collects, 
analyzes, integrates, and reports data necessary to measure the 
organization's performance, including outcomes of care furnished to 
participants. Also, a PACE organization must furnish data and 
information pertaining to its provision of participant care in the 
manner, and at the time intervals, specified by HCFA and the State 
administering agency.
    The burden associated with this requirement is the time and effort 
for a PACE organization to demonstrate the establishment of a health 
information system and to furnish data and information pertaining to 
its provision of participant care to HCFA and the State administering 
agency. While the requirement to demonstrate the ``establishment'' of a 
system is subject to the PRA, the burden associated with that 
requirement is captured in Sec. 460.12, application requirements. 
Therefore, the remaining burden associated with this section is the 
requirement to furnish information specified by HCFA and the State 
administering agency. We estimate that each PACE organization will take 
100 hours (50 hours for HCFA compliance + 50 Hours for State 
compliance) to complete this requirement. There will be approximately 
54 PACE organizations for a total annual burden of 5,400 hours.

Section 460.208  Financial Statements

    Section 460.208(a)(1) states that not later than 180 days after the 
organization's fiscal year ends, a PACE organization must submit a 
certified financial statement that includes appropriate footnotes.
    The burden associated with this requirement is the time and effort 
for a PACE organization to submit a certified financial statement. We 
estimate that each PACE organization will take 4 hours to complete this 
requirement. There will be approximately 54 PACE organizations for a 
total annual burden of 216 hours.
    Section 460.208(c)(1) states that not later than 45 days after the 
end of each quarter of the organization's fiscal year throughout the 
trial period, a PACE organization must submit a quarterly financial 
statement.
    The burden associated with this requirement is the time and effort 
for a PACE organization to submit a quarterly financial statement. We 
estimate that each PACE organization will take 16 hours (4 hours per 
quarter) to complete this requirement. There will be approximately 42 
PACE organizations that are affected by this trial period requirement 
for a total annual burden of 672 hours.

B. The following ICRs Are Subject to the PRA. However, the Burden 
Associated With These Requirements Is Captured in the Application 
Requirements Described in Sec. 460.12, Application Requirements 
(Paragraph A, Above)

Section 460.22  Service Area Designation

    Section 460.22(a) states that each entity must state in its 
application the service area it proposes for its program.

Section 460.32  Content and Terms of PACE Program Agreement

    Section 460.32 specifies various information that the PACE 
organization must furnish so that the information can be included in 
the PACE program agreement.

Section 460.52  Transitional Care During Termination

    Section 460.52(a) states that the PACE organization must develop a 
detailed written plan for phase-down in the event of termination.

Section 460.60  PACE Organizational Structure

    Section 460.60(d)(1) and (2) requires the PACE organization to have 
a current organizational chart showing officials in the organization 
and relationships to any other organizational entities; the chart for a 
corporate entity must indicate the organization's relationship to the 
corporate board and to any parent, affiliate, or subsidiary corporate 
entities.

Section 460.68  Program integrity.

    Section 460.68(c)(2) states that if an applicant seeking approval 
as a PACE organization believes a waiver regarding direct or indirect 
interest is warranted, it must include a request for the waiver in its 
application.

Section 460.80  Fiscal Soundness

    Section 460.80(b) states that the organization must have a 
documented plan in the event of insolvency, approved by HCFA and the 
State administering agency.
    Section 460.80(c) states that a PACE organization must demonstrate 
that it has arrangements to cover expenses in the event it becomes 
insolvent.

Section 460.82  Marketing

    Section 460.82(b)(2) states that HCFA reviews initial marketing 
information as

[[Page 66275]]

part of an entity's application for approval as a PACE organization, 
and approval of the application includes approval of marketing 
information.

Section 460.102  Multidisciplinary Team

    Section 460.102(g)(2) states that if an applicant seeking approval 
as a PACE organization believes a waiver of restrictions on the 
multidisciplinary team is warranted, it must include a request for the 
waiver in its application and describe in detail the circumstances 
supporting the request.

Section 460.104  Participant Reassessment

    Section 460.104(c)(3) states that the PACE orgasnization must 
establish procedures for timely resolution of requests by a participant 
to initiate, eliminate, or continue a particular service. We will 
review the procedures as part of the application approval process.

Section 460.118  Violation of Rights

    Section 460.118 states that the PACE organization must have 
established documented procedures to respond to and rectify a violation 
of a participant's rights.

Section 460.120  Grievance Process

    Section 460.120(a) states that a PACE organization must have a 
formal written process to evaluate and resolve medical and non-medical 
grievances by participants, their family members, or representatives.

Section 460.122  PACE Organization's Appeals Process

    Section 460.122(a) states that the PACE organization must have a 
formal written appeals process, with specified time frames for 
response, which may be used by a participant to address noncoverage or 
nonpayment of a service.

Section 460.132  Quality Assessment and Performance Improvement Plan

    Section 460.132(a) requires a PACE organization to have a written 
quality assessment and performance improvement plan.

Section 460.200  Maintenance of Records and Reporting of Data

    Section 460.200(d) states that a PACE organization must establish 
written policies and procedures to safeguard all data, books, and 
records against loss, destruction, unauthorized use, or inappropriate 
alteration.

C. The Following ICRs Are Subject to the PRA. However, the Burden 
Associated With These Requirements Is Contained in Sec. 460.132(b), 
Quality Assessment and Performance Improvement Plan (Paragraph A, 
Above)

Section 460.120  Grievance Process

    Section 460.120(f) states that the PACE organization must maintain, 
aggregate, and analyze information on grievance proceedings. This 
information must be used in the internal quality assessment and 
performance improvement program.

Section 460.122  PACE Organization's Appeals Process

    Section 460.122(i) states that a PACE organization must maintain, 
aggregate, and analyze information on appeal proceedings and use this 
information in the organization's internal quality assessment and 
performance improvement program.

D. The following ICRs Are Subject to the PRA. However, the Burden 
Associated With These Requirements Are Contained in Secs. 460.202, 
Participant Health Outcomes Data, and Statistical Reports, and 460.208, 
Financial Statements (Paragraph A, Above)

Section 460.200  Maintenance of Records and Reporting of Data

    Section 460.200(a) states that a PACE organization must collect 
data, maintain records, and submit reports as required by HCFA and the 
State administering agency.
    Section 460.200(c) states that a PACE organization must submit to 
HCFA and the State administering agency all reports that HCFA and the 
State administering agency require to monitor the operation, cost, 
quality, and effectiveness of the program and establish payment rates.

E. The following ICRs Are Subject to the PRA. However, the Burden 
Associated With These Requirements Is Contained in Sec. 460.208, 
Financial Statements (Paragraph A, Above).

Section 460.204  Financial Recordkeeping and Reporting Requirements

    Section 460.204(a) states that a PACE organization must provide 
HCFA and the State administering agency with accurate financial 
reports.

F. The Following ICRs Are Subject to the PRA. However, We Believe That 
the Burden Associated With These ICRs Is Exempt From the PRA in 
Accordance With 5 CFR 1320.3(b)(2) Because the Time, Effort, and 
Financial Resources Necessary To Comply With These Requirements Would 
Be Incurred by Persons in the Normal Course of Their Activities. We Are 
Soliciting Comments on This Determination and Request Any Data on the 
Additional Burdens That May Be Imposed by These Requirements.

Section 460.52  Transitional Care During Termination

    Section 460.52(b) states that an entity whose PACE program 
agreement is terminated must provide assistance to each participant in 
obtaining necessary transitional care through appropriate referrals and 
making the participant's medical records available to new providers.

Section 460.70  Contracted Services

    Section 460.70(a) states that the PACE organization must have a 
written contract with each outside organization, agency, or individual 
that furnishes administrative or care-related services not furnished 
directly by the PACE organization except for emergency services as 
described in section 460.100.
    Section 460.70(c) states that a list of contractors must be on file 
at the PACE center and a copy must be provided to anyone upon request.

Section 460.72  Physical Environment

    Section 460.72(c)(1) states that the PACE organization must 
establish, implement, and maintain documented procedures to manage 
medical and nonmedical emergencies and disasters that are likely to 
threaten the health or safety of the participants, staff or the public.
    Section 460.72(c)(4) states that the organization must have a 
documented plan to obtain emergency medical assistance from sources 
outside the center when needed.

Section 460.74  Infection Control

    Section 460.74(b) states that the PACE organization must establish, 
implement, and maintain a documented infection control plan.

Section 460.82  Marketing

    Section 460.82(a) states that a PACE organization must inform the 
public about its program and give prospective participants the 
following written information: an adequate description of the PACE 
organization's enrollment and disenrollment policies and requirements; 
PACE enrollment procedures; description of benefits and services; 
premiums; and other information necessary for prospective

[[Page 66276]]

participants to make an informed decision about enrollment.
    Section 460.82(d) states that marketing materials must inform a 
potential participant that he or she must receive all needed health 
care, including primary care and specialist physician services (other 
than emergency services), from the PACE organization or from an entity 
authorized by the PACE organization. All marketing materials must state 
clearly that PACE participants may be fully and personally liable for 
the costs of unauthorized or out-of-PACE program agreement services.

Section 460.98  Service Delivery

    Section 460.98(a) states that a PACE organization must establish 
and implement a written plan to provide care that meets the needs of 
each participant in all care settings 24 hours a day, every day of the 
year.

Section 460.100  Emergency Care

    Section 460.100(a) states that a PACE organization must establish 
and maintain a written plan to handle emergency care.

Section 460.102  Multidisciplinary Team

    In summary, Sec. 460.102(d) states that the multidisciplinary team 
is responsible for the initial assessment, periodic reassessments, plan 
of care, and coordination of 24 hour care delivery. Each team member 
must regularly inform the multidisciplinary team of the medical, 
functional, and psychosocial condition of each participant; and 
document changes in a participant's condition in the participant's 
medical record.

Section 460.104  Participant Assessment

    In summary, Sec. 460.104 states that the multidisciplinary team 
must explain why it denys a participant's request for services, inform 
participants of additional appeal processes available, and document all 
assessment and reassessment information in the participant's medical 
record.

Section 460.106  Plan of Care

    Section 460.106(f) states that the team must document the plan of 
care, and any changes made to it, in the participant's medical record.

Section 460.110  Bill of Rights

    Section 460.110(a) states that a PACE organization must have a 
written participant bill of rights designed to protect and promote the 
rights of each participant.
    Section 460.110(b) states that, upon enrollment, the organization 
must inform a participant in writing of her or his rights and 
responsibilities, and all rules and regulations governing 
participation.

Section 460.112  Specific Rights to Which a Participant Is Entitled

    Section 460.112(b)(1) states that a participant has the right to be 
fully informed in writing of the services available from the PACE 
organization.
    Section 460.112(b)(2) states that a participant has the right to 
have the enrollment agreement fully explained in a manner understood by 
the participant.
    Section 460.112(e)(3) states that a participant has the right to be 
fully informed of his or her health and functional status by the 
multidisciplinary team and to participate in the development and 
implementation of the plan of care.
    Section 460.112(e)(2) states that a participant has the right to 
have the PACE organization explain advance directives and to establish 
them, if the participant so desires.
    Section 460.112(e)(6) states that a participant has the right to be 
given reasonable advance notice, in writing, of any transfer to another 
treatment setting, and the justification for it, due to medical reasons 
or for the participant's welfare, or that of other participants. The 
PACE organization must document the justification in the participant's 
medical record.

Section 460.116  Explanation of Rights

    Section 460.116(a) states that a PACE organization must have 
written policies and implement procedures to ensure that the 
participant, his or her representative, if any, and staff understand 
these rights.
    Section 460.116(b) states that upon enrollment, the staff must 
fully explain the rights to the participant and his or her 
representative, if any, in a manner understood by the participant.

Section 460.122  PACE Organization's Appeals Process

    Section 460.122(d) states that a PACE organization must give all 
parties involved in the appeal appropriate written notification and a 
reasonable opportunity to present evidence related to the dispute in 
person, as well as in writing.

Section 460.152  Enrollment Process

    Section 460.152(a)(1) requires that at a minimum, the intake 
process must include the following steps: the PACE staff must explain 
to the potential participant and his or her representative or 
caregiver: the PACE program; the requirement that the PACE organization 
is the participant's sole service provider; monthly premiums, if any; 
and any Medicaid spenddown obligations.
    Section 460.152(a)(2) states that the potential participant must 
sign a release to allow the PACE organization to obtain his or her 
medical and financial information and eligibility status for Medicare 
and Medicaid.
    Section 460.152(b)(1) states that if a prospective participant is 
denied enrollment because his or her health or safety would be 
jeopardized by living in a community setting, the PACE organization 
must notify the individual in writing of the reason for denial.
    Section 460.152(b)(2) states that if a prospective participant is 
denied enrollment because his or her health or safety would be 
jeopardized by living in a community setting, the PACE organization 
must refer the individual to alternative services, as appropriate.
    Section 460.152(b)(3) states that if a prospective participant is 
denied enrollment because his or her health or safety would be 
jeopardized by living in a community setting, the PACE organization 
must maintain supporting documentation of the reason for the 
determination.

Section 460.154  Enrollment Agreement

    In summary, Sec. 460.154 states that if the potential participant 
meets the eligibility requirements and wants to enroll, he or she must 
sign an enrollment agreement in accordance with the requirements in 
this section.

Section 460.156  Other Enrollment Procedures

    Section 460.156(c) states that if there are changes in the 
enrollment agreement information at any time during the participant's 
enrollment, the PACE organization must give an updated copy of the 
information to the participant; and explain the changes to the 
participant and his or her representative or caregiver in a manner they 
understand.

Sec. 460.164  Involuntary Disenrollment

    Section 460.164(c) states that if a PACE organization proposes to 
disenroll a participant who is disruptive or threatening, the 
organization must document in the participant's medical record the 
reasons for proposing to disenroll the participant; and all efforts to 
remedy the situation.

[[Page 66277]]

Section 460.168  Reinstatement in Other Medicare and Medicaid Programs

    Section 460.168(a) states that in order to facilitate a 
participant's reinstatement in other Medicare and Medicaid programs 
after disenrollment, the PACE organization must make appropriate 
referrals and ensure medical records are made available to new 
providers in a timely manner.

Section 460.172  Documentation of Disenrollment

    Section 460.172(a) states that a PACE organization must have a 
procedure in place to document the reasons for all voluntary and 
involuntary disenrollments.

Section 460.200  Maintenance of Records and Reporting of Data

    Section 460.200(e) states that a PACE organization must maintain 
the confidentiality of any information that identifies a particular 
participant; establish and implement procedures that govern the use and 
release of a participant's information; and obtain a participant's 
consent before releasing personal information that is not required by 
law to be released. Section 460.200(f)(1) states that a PACE 
organization must retain records for the longest of the following 
periods: the period of time specified in State law; six years from the 
last entry date; or for medical records of disenrolled participants, 
six years after the date of disenrollment.

Section 460.204  Financial Recordkeeping and Reporting Requirements

    Section 460.204(b) states that a PACE organization must maintain an 
accrual accounting recordkeeping system.

Section 460.210  Medical Records

    Section 460.210(a) states that a PACE organization must maintain a 
single, comprehensive medical record for each participant, in 
accordance with accepted professional standards.
    Section 460.210(c) states that a the organization must promptly 
transfer copies of medical record information between treatment 
facilities.
    Section 460.210(d) states that all entries must be legible, clear, 
complete, and appropriately authenticated and dated. Authentication 
must include signatures or a secured computer entry by a unique 
identifier of the primary author who has reviewed and approved the 
entry.

G. We Believe the Following Requirements Are Not Subject to the PRA in 
Accordance With 5 CFR 1320.3(c)(4) Since They Do Not Require 
Information From Ten or More Entities on an Annual Basis. We Are 
Soliciting Comments on This Determination and Request Any Data on the 
Additional Burdens That May Be Imposed by These Requirements.

Section 460.20  Special Consideration

    Section 460.20(b) states that an application from an entity seeking 
special consideration must include documentation of those formal 
activities.

Section 460.60  PACE Organizational Structure

    Section 460.60(d)(3) states that A PACE organization planning a 
change in organizational structure must notify HCFA and the State 
administering agency, in writing, at least 60 days before the change 
takes effect.

Section 460.82  Marketing

    Section 460.82(b)(3) states that once a PACE organization is under 
a PACE program agreement, any revisions to existing marketing 
information and new information are subject to the following: HCFA 
approves or disapproves marketing information within 45 days after 
receipt from the organization.

H. In Accordance With 5 CFR 1320.4(a)(2), We Believe the Following ICRs 
Are Exempt From the PRA Since It Is in Response to an Administrative 
Action, Investigation, or Audit Against Specific Individuals or 
Entities.

Section 460.68  Program Integrity

    Section 460.68(d) states that a PACE organization must have a 
formal process in place to gather information related to paragraphs (a) 
and (b) of this section, and must be able to respond in writing to a 
request for information from HCFA within a reasonable amount of time.

Section 460.172  Documentation of Disenrollment

    Section 460.172(b) states that a PACE organization must make 
documentation available for review by HCFA and the State administering 
agency.

Section 460.192  Ongoing Monitoring After Trial Period

    Section 460.192(a) states that at the conclusion of the trial 
period, HCFA, in cooperation with the State administering agency, 
continues to conduct reviews of a PACE organization, as appropriate, 
taking into account the performance level of the organization with 
respect to the quality of care provided and compliance of the 
organization with all requirements of this part.

Section 460.194  Corrective Action

    Section 460.194(a) states that a PACE organization must take action 
to correct deficiencies identified during reviews.

Section 460.200  Maintenance of Records and Reporting of Data

    Section 460.200(f)(2) states that if litigation, a claim, a 
financial management review, or an audit arising from the operation of 
the PACE program is started before the expiration of the retention 
period, specified in paragraph (f)(1) of this section, the PACE 
organization must retain the records until the completion of the 
litigation, or resolution of the claims or audit findings.

Section 460.204  Financial Recordkeeping and Reporting Requirements

    Section 460.204(d) states that a PACE organization must permit HCFA 
and the State administering agency to audit or inspect any books and 
records of original entry that pertain to the following: any aspect of 
services performed; reconciliation of participant's benefit 
liabilities; and/or determination of Medicare and Medicaid amounts 
payable.

Section 460.208  Financial Statements

    Section 460.208(c)(2) states that if HCFA or the State 
administering agency determines that an organization's performance 
requires more frequent monitoring and oversight due to concerns about 
fiscal soundness, HCFA or the State administering agency may require a 
PACE organization to submit monthly or quarterly financial statements, 
or both.
    We have submitted a copy of this interim final with comment rule to 
OMB for its review of the information collection requirements described 
above. These requirements are not effective until they have been 
approved by OMB.
    If you comment on any of these information collection and record 
keeping requirements, please mail copies directly to the following:

Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards, 
Room C2-26-17, 7500 Security Boulevard, Baltimore, MD 21244-1850, Attn: 
John Burke, HCFA-1903-IFC, and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive

[[Page 66278]]

Office Building, Washington, DC 20503, Attn: Allison Eydt, HCFA Desk 
Officer.

VI. Regulatory Impact Statement

    We have examined the impacts of this interim 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 government agencies. Most 
hospitals and most other providers and suppliers are small entities, 
either by non-profit status or by having revenues of $5 million or less 
annually. For purposes of the RFA, all PACE providers are considered to 
be small entities. Individuals and States are not included in the 
definition of a small entity.
    Section 1102(b) of the Social Security Act, (the Act) requires us 
to prepare a regulatory impact analysis if a rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Such an 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 of 
a Metropolitan Statistical Area and has fewer than 50 beds. This rule 
will not affect a significant number of small rural hospitals.
    This interim final rule will affect a very limited number of small 
non-profit entities that are operating, or seek to operate, a PACE 
program. We are authorized to approve no more than 40 such programs as 
of August 5, 1997, and the ceiling increases by an additional 20 each 
year as of each succeeding August 5th (e.g., we can approve no more 
than 60 by August 5, 1998 and no more than 80 by August 5, 1999). The 
rule will indirectly affect Medicare beneficiaries and Medicaid 
recipients who could qualify for a PACE program and who might wish to 
enroll in one in their geographic area, because it will affect the 
availability of those programs. A typical PACE program maintains an 
enrollment of about 200-300 individuals.
    Non-profit entities that wish to receive Medicare and Medicaid 
payment for their PACE services must comply with the requirements in 
this rule. Due to the all-inclusive nature of the services and the 
concomitant expense of providing such care, entities that do not 
qualify for Medicare and Medicaid funding are unlikely to be 
financially viable.
    The requirements contained in this rule are largely similar to the 
requirements that have been applicable to the existing PACE 
demonstration project sites through the Protocol (described in section 
I.C of this document). Other entities that have contemplated or already 
have started developing PACE programs have been aware of those 
requirements and would have designed their potential programs to comply 
with them. Because the basic effect of this rule is to codify 
prevailing industry standards, its impact is not significant.
    While we do not have data on which to base an estimate of overall 
costs or savings to the Medicare and Medicaid programs, we believe that 
any incremental difference would be so small as to be negligible. PACE 
services substitute for services that would otherwise be covered, and 
payment rates are adjusted so that the total payment level is less than 
the projected payment that would have been made if the participants 
were not enrolled in PACE. Thus, the overall result should be a slight 
savings for this small population.
    If this rule were not issued, PACE programs could not be approved 
as ongoing programs under Medicare or Medicaid. Sections 4801 and 4802 
of BBA require us to promulgate regulations to carry out those sections 
and approve PACE programs. Section 4803(d) of BBA specifies that the 
PACE demonstration authority remains in effect until the effective date 
of these regulations, and a transition period from demonstration status 
to ongoing status begins on that date.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and we certify, that this rule 
will not have a significant economic impact on a substantial number of 
small entities or a significant impact on the operations of a 
substantial number of small rural hospitals.

Federalism

    Under Executive Order 13132, this regulation will not significantly 
affect the States beyond what is required and provided for under the 
BBA. It follows the intent and letter of the law and does not usurp 
State authority beyond what the BBA requires. This regulation describes 
the processes that must be undertaken by HCFA, the States, and PACE 
organizations in order to implement the PACE program.
    As noted previously, sections 4801 and 4802 of the BBA clearly 
describe a cooperative relationship between the Secretary and the 
States in the development, implementation, and administration of the 
PACE program. The following are some examples of areas in which we 
engaged in partnership with States to establish policy and procedures:
    1. Establishing procedures for entering into, extending, and 
terminating PACE agreements--1894(e)(1)(A) and 1934(e)(1)(A).
    2. Establishing procedures for excluding service areas already 
covered under other PACE provider agreements in order to avoid 
unnecessary duplication of services and also to avoid impairing the 
financial and service viability of the existing program--1894(e)(2)(B) 
and 1934(e)(2)(B).
    3. Establishing procedure for the PACE provider to make available 
PACE program data--1894(e)(3)(A)(i)(III) and 1934(e)(2)(A)(i)(III).
    4. In conjunction with the PACE provider, developing and 
implementing health status and quality of life outcome measures--
1894(e)(3)(B) and 1934 (e)(3)(B).
    5. The statute requires the Secretary and State to conduct a 
comprehensive annual review--1894(e)(4)(A) and 1934(e)(4)(A).
    6. Establishing the frequency of the on-sight review--1894(e)(4)(B) 
and 1934(e)(4)(B).
    7. Establishing a mechanism for communicating of the Secretary's 
findings and State action when a PACE provider is failing to comply 
with Federal requirements; i.e., enforcement authority--1894(e)(6)(A) 
and 1934(e)(6)(A).
    8. Establishing the entity responsible for the annual eligibility 
recertification--1894(c)(3) and 1934(c)(3); and continuation of 
eligibility requirements--1894(c)(4) and 1934(c)(4).
    For this reason, we obtained State input in the early stages of 
policy development through conference calls with State Medicaid Agency 
representatives. The BBA requires the States to designate the agency of 
the State responsible for the administration of the PACE program. 
Although the State may designate the State Medicaid Agency to 
administer the PACE program, another agency may be named. The 8 
agencies that volunteered to participate in these discussions 
represented a balanced view of States;

[[Page 66279]]

some with PACE demonstration site experience and some who were not yet 
involved with PACE, but were interested in providing input to establish 
a new long term care optional benefit. The calls were very productive 
in understanding the variety of State concerns inherent in implementing 
a new program. In addition, in order to formulate processes to 
operationalize the PACE program, we have maintained ties with State 
representatives through monthly conference calls to obtain information 
on a variety of topics including the applications review and approval 
process, data collection needs, and enrollment/disenrollment issues.
    We are committed to continuing this dialogue with States after 
publication of the regulation to ensure this cooperative atmosphere 
continues as we implement the PACE program and transition the current 
PACE demonstration sites to full provider status. We expect that States 
would take responsibility for site selection and participate in 
provider approval and ongoing monitoring activities. States may also 
determine how many sites to authorize and how many participants each 
site may serve. In recognition of the unique relationship between the 
Secretary and the States for the PACE program, we have directed 
potential PACE organizations to first contact their State administering 
agency to verify that the State has elected PACE as an optional benefit 
under its State Medicaid Plan, determine whether the State has 
established additional requirements for PACE organizations, and obtain 
technical assistance.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 460

    Aged, Health Incorporation by reference, Medicare, Medicaid, 
Reporting and recordkeeping requirements.

42 CFR Part 462

    Grant programs-health, Health care, Health professions, Peer Review 
Organizations (PRO).

42 CFR Part 466

    Grant programs-health, Health care, Health facilities, Health 
professions, Peer Review Organizations (PRO), Reporting and 
recordkeeping requirements.

42 CFR Part 473

    Administrative practice and procedure, Health care, Health 
professions, Peer Review Organizations (PRO), Reporting and 
recordkeeping requirements.

42 CFR Part 476

    Health care, Health professional, Health record, Peer Review 
Organizations (PRO), Penalties, Privacy, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, 42 CFR Chapter IV is 
amended as follows:

SUBCHAPTER D  [Redesignated]

    1. Subchapter D is redesignated as subchapter F; a new subchapter D 
is added and reserved; and parts 462, 466, 473, and 476 are 
redesignated as parts 475, 476, 478 and 480, respectively.

SUBCHAPTER E  [Redesignated]

    2. Subchapter E is redesignated as Subchapter G.
    3. A new subchapter E, consisting of part 460 is added to read as 
follows:

SUBCHAPTER E--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

PART 460--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)

Subpart A--Basis, Scope, and Definitions

Sec.
460.2  Basis.
460.4  Scope and purpose.
460.6  Definitions.

Subpart B--PACE Organization Application and Evaluation

460.10  Purpose.
460.12  Application requirements.
460.14  Priority consideration.
460.16  Special consideration.
460.18  HCFA evaluation of applications.
460.20  Notice of HCFA determination.
460.22  Service area designation.
460.24  Limit on number of PACE program agreements.

Subpart C--PACE Program Agreement

460.30  Program agreement requirement.
460.32  Content and terms of PACE program agreement.
460.34  Duration of PACE program agreement.

Subpart D--Sanctions, Enforcement Actions, and Termination

460.40  Violations for which HCFA may impose sanctions.
460.42  Suspension of enrollment or payment by HCFA.
460.46  Civil money penalties.
460.48  Additional actions by HCFA or the State.
Sec. 460.50  Termination of PACE program agreement.
460.52  Transitional care during termination.
460.54  Termination procedures.

Subpart E--PACE Administrative Requirements

460.60  PACE organizational structure.
460.62  Governing body.
460.64  Personnel qualifications.
460.66  Training.
460.68  Program integrity.
460.70  Contracted services.
460.72  Physical environment.
460.74  Infection control.
460.76  Transportation services.
460.78  Dietary services.
460.80  Fiscal soundness.
460.82  Marketing.

Subpart F--PACE Services

460.90  PACE benefits under Medicare and Medicaid.
460.92  Required services.
460.94  Required services for Medicare participants.
460.96  Excluded services.
460.98  Service delivery.
460.100  Emergency care.
460.102  Multidisciplinary team.
460.104  Participant assessment.
460.106  Plan of care.

Subpart G--Participant Rights

460.110  Bill of rights.
460.112  Specific rights to which a participant is entitled.
460.114  Restraints.
460.116  Explanation of rights.
460.118  Violation of rights.
460.120  Grievance process.
460.122  PACE organization's appeals process.
460.124  Additional appeal rights under Medicare or Medicaid.

Subpart H--Quality Assessment and Performance Improvement

460.130  General rule.
460.132  Quality assessment and performance improvement plan.
460.134  Minimum requirements for quality assessment and performance 
improvement program.
460.136  Internal quality assessment and performance improvement 
activities.
460.138  Committees with community input.
460.140  Additional quality assessment activities.

Subpart I--Participant Enrollment and Disenrollment

Sec. 460.150  Eligibility to enroll in a PACE program.
460.152  Enrollment process.
460.154  Enrollment agreement.
460.156  Other enrollment procedures.
460.158  Effective date of enrollment.
460.160  Continuation of enrollment.
460.162  Voluntary disenrollment.
460.164  Involuntary disenrollment.
460.166  Effective date of disenrollment.
460.168  Reinstatement in other Medicare and Medicaid programs.
460.170  Reinstatement in PACE.
460.172  Documentation of disenrollment.

Subpart J--Payment

460.180  Medicare payment to PACE organizations.
460.182  Medicaid payment.

[[Page 66280]]

460.184  Post-eligibility treatment of income.
460.186  PACE premiums.

Subpart K--Federal/State Monitoring

460.190  Monitoring during trial period.
460.192  Ongoing monitoring after trial period.
460.194  Corrective action.
460.196  Disclosure of review results.

Subpart L--Data Collection, Record Maintenance, and Reporting

460.200  Maintenance of records and reporting of data.
460.202  Participant health outcomes data.
460.204  Financial recordkeeping and reporting requirements.
460.208  Financial statements.
460.210  Medical records.
    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395).

Subpart A--Basis, Scope, and Definitions


Sec. 460.2  Basis

    This part implements sections 1894, 1905(a), and 1934 of the Act, 
which authorize the following:
    (a) Medicare payments to, and coverage of benefits under, PACE.
    (b) The establishment of PACE as a State option under Medicaid to 
provide for Medicaid payments to, and coverage of benefits under, PACE.


Sec. 460.4  Scope and purpose.

    (a) General. This part sets forth the following:
    (1) The requirements that an entity must meet to be approved as a 
PACE organization that operates a PACE program under Medicare and 
Medicaid.
    (2) How individuals may qualify to enroll in a PACE program.
    (3) How Medicare and Medicaid payments will be made for PACE 
services.
    (4) Provisions for Federal and State monitoring of PACE programs.
    (5) Procedures for sanctions and terminations.
    (b) Program purpose. PACE provides pre-paid, capitated, 
comprehensive health care services designed to meet the following 
objectives:
    (1) Enhance the quality of life and autonomy for frail, older 
adults.
    (2) Maximize dignity of, and respect for, older adults.
    (3) Enable frail, older adults to live in the community as long as 
medically and socially feasible.
    (4) Preserve and support the older adult's family unit.


Sec. 460.6  Definitions.

    As used in this part, unless the context indicates otherwise, the 
following definitions apply:
    Contract year means the term of a PACE program agreement, which is 
a calendar year, except that a PACE organization's initial contract 
year may be from 12 to 23 months, as determined by HCFA.
    Medicare beneficiary means an individual who is entitled to 
Medicare Part A benefits or enrolled under Medicare Part B, or both.
    Medicaid participant means an individual determined eligible for 
Medicaid who is enrolled in a PACE program.
    Medicare participant means a Medicare beneficiary who is enrolled 
in a PACE program.
    PACE stands for programs of all-inclusive care for the elderly.
    PACE center means a facility operated by a PACE organization where 
primary care is furnished to participants.
    PACE organization means an entity that has in effect a PACE program 
agreement to operate a PACE program under this part.
    PACE program agreement means an agreement between a PACE 
organization, HCFA, and the State administering agency for the 
operation of a PACE program.
    Participant means an individual who is enrolled in a PACE program.
    Services includes both items and services.
    State administering agency means the State agency responsible for 
administering the PACE program agreement.
    Trial period means the first 3 contract years in which a PACE 
organization operates under a PACE program agreement, including any 
contract year during which the entity operated under a PACE 
demonstration waiver program.

Subpart B--PACE Organization Application and Evaluation


Sec. 460.10  Purpose.

    This subpart sets forth application requirements for an entity that 
seeks approval from HCFA as a PACE organization.


Sec. 460.12  Application requirements.

    (a) General. (1) An individual authorized to act for the entity 
must submit to HCFA a complete application that describes how the 
entity meets all requirements in this part.
    (2) HCFA evaluates only complete applications from entities located 
in States with approved State plan amendments electing PACE as an 
optional Medicaid benefit.
    (3) HCFA accepts applications from entities that seek approval as 
PACE organizations beginning on February 22, 2000 except for the 
following:
    (i) Beginning on November 24, 1999, HCFA accepts applications from 
entities that meet the requirements for priority consideration in 
processing of applications, as provided in Sec. 460.14.
    (ii) Beginning on January 10, 2000, HCFA accepts applications from 
entities that meet the requirements for special consideration in 
processing applications, as provided in Sec. 460.16.
    (b) State assurance. An entity's application must be accompanied by 
an assurance from the State administering agency of the State in which 
the program is located indicating that the State--
    (1) Considers the entity to be qualified to be a PACE organization; 
and
    (2) Is willing to enter into a PACE program agreement with the 
entity.


Sec. 460.14  Priority consideration.

    Until August 5, 2000, HCFA gives priority consideration in 
processing applications for PACE organization status to an entity that 
meets either of the following criteria:
    (a) Is operating under PACE demonstration waivers under one of the 
following authorities:
    (1) Section 603(c) of the Social Security Amendments of 1983, as 
extended by section 9220 of the Consolidated Omnibus Budget 
Reconciliation Act of 1985.
    (2) Section 9412(b) of the Omnibus Budget Reconciliation Act of 
1986.
    (b) Has applied to operate under a PACE demonstration under section 
9412(b) of the Omnibus Budget Reconciliation Act of 1986 as of May 1, 
1997.


Sec. 460.16  Special consideration.

    Until August 5, 2000, HCFA gives special consideration in 
processing applications to an entity that meets the following 
conditions:
    (a) Indicated, by May 1, 1997, a specific intent to become a PACE 
organization through formal activities.
    (b) Includes documentation of its formal activities.


Sec. 460.18  HCFA evaluation of applications.

    HCFA evaluates an application for approval as a PACE organization 
on the basis of the following information:
    (a) Information contained in the application.
    (b) Information obtained through onsite visits conducted by HCFA or 
the State administering agency.
    (c) Information obtained by the State administering agency.


Sec. 460.20  Notice of HCFA determination.

    (a) Time limit for notification of determination. Within 90 days 
after an

[[Page 66281]]

entity submits a complete application to HCFA, HCFA takes one of the 
following actions:
    (1) Approves the application.
    (2) Denies the application and notifies the entity in writing of 
the basis for the denial and the process for requesting reconsideration 
of the denial.
    (3) Requests additional information needed to make a final 
determination.
    (b) Additional information requested. If HCFA requests from an 
entity additional information needed to make a final determination, 
within 90 days after HCFA receives all requested information from the 
entity, HCFA takes one of the following actions:
    (1) Approves the application.
    (2) Denies the application and notifies the entity in writing of 
the basis for the denial and the process for requesting reconsideration 
of the denial.
    (c) Deemed approval. An application is deemed approved if HCFA 
fails to act on the application within 90 days after one of the 
following dates:
    (1) The date the application is submitted by the organization.
    (2) The date HCFA receives all requested additional information.
    (d) Date of submission. For purposes of the 90-day time limit 
described in this section, the date that an application is submitted to 
HCFA is the date on which the application is delivered to the address 
designated by HCFA.


Sec. 460.22  Service area designation.

    (a) An entity must state in its application the service area it 
proposes for its program.
    (b) HCFA, in consultation with the State administering agency, may 
exclude from designation an area that is already covered under another 
PACE program agreement to avoid unnecessary duplication of services and 
avoid impairing the financial and service viability of an existing 
program.


Sec. 460.24  Limit on number of PACE program agreements.

    (a) Numerical limit. Except as specified in paragraph (b) of this 
section, HCFA does not permit the number of PACE organizations with 
which agreements are in effect under this part or under section 9412(b) 
of the Omnibus Budget Reconciliation Act of 1986, to exceed the 
following:
    (1) As of August 5, 1997--40.
    (2) As of each succeeding August 5, the numerical limit for the 
preceding year plus 20, without regard to the actual number of 
agreements in effect on a previous anniversary date. (For example, the 
limit is 60 on August 5, 1998 and 80 on August 5, 1999.)
    (b) Exception. The numerical limit does not apply to a private, 
for-profit PACE organization that meets the following conditions:
    (1) Is operating under a demonstration project waiver under section 
1894(h) and 1934(h) of the Act.
    (2) Was operating under a waiver and subsequently qualifies for 
PACE organization status in accordance with sections 1894(a)(3)(B)(ii) 
and 1934(a)(3)(B)(ii) of the Act.

Subpart C--PACE Program Agreement


Sec. 460.30  Program agreement requirement.

    (a) A PACE organization must have an agreement with HCFA and the 
State administering agency for the operation of a PACE program by the 
PACE organization under Medicare and Medicaid.
    (b) The agreement must be signed by an authorized official of the 
PACE organization.


Sec. 460.32  Content and terms of PACE program agreement.

    (a) Required content. A PACE program agreement must include the 
following information:
    (1) A designation of the service area of the organization's 
program. The area may be identified by county, zip code, street 
boundaries, census tract, block, or tribal jurisdictional area, as 
applicable. HCFA and the State administering agency must approve any 
change in the designated service area.
    (2) The organization's commitment to meet all applicable 
requirements under Federal, State, and local laws and regulations, 
including provisions of the Civil Rights Act, the Age Discrimination 
Act, and the Americans With Disabilities Act.
    (3) The effective date and term of the agreement.
    (4) A description of the organizational structure of the PACE 
organization and information on administrative contacts, including the 
following:
    (i) Name and phone number of the program director.
    (ii) Name of all governing body members.
    (iii) Name and phone number of a contact person for the governing 
body.
    (5) A participant bill of rights approved by HCFA and an assurance 
that the rights and protections will be provided.
    (6) A description of the process for handling participant 
grievances and appeals.
    (7) A statement of the organization's policies on eligibility, 
enrollment, voluntary disenrollment, and involuntary disenrollment.
    (8) A description of services available to participants.
    (9) A description of the organization's quality assessment and 
performance improvement program.
    (10) A statement of the levels of performance required by HCFA on 
standard quality measures.
    (11) A statement of the data and information required by HCFA and 
the State administering agency to be collected on participant care.
    (12) The capitation rates for Medicare and Medicaid.
    (13) A description of procedures that the organization will follow 
if the PACE program agreement is terminated.
    (b) Optional content. (1) An agreement may provide additional 
requirements for individuals to qualify as PACE program eligible 
individuals, in accordance with Sec. 460.150(b)(4).
    (2) An agreement may contain any additional terms and conditions 
agreed to by the parties if the terms and conditions are consistent 
with sections 1894 and 1934 of the Act and regulations in this part.


Sec. 460.34  Duration of PACE program agreement.

    An agreement is effective for a contract year, but may be extended 
for additional contract years in the absence of a notice by a party to 
terminate.

Subpart D--Sanctions, Enforcement Actions, and Termination


Sec. 460.40  Violations for which HCFA may impose sanctions.

    In addition to other remedies authorized by law, HCFA may impose 
any of the sanctions specified in Secs. 460.42 and 460.46 if HCFA 
determines that a PACE organization commits any of the following 
violations:
    (a) Fails substantially to provide to a participant medically 
necessary items and services that are covered PACE services, if the 
failure has adversely affected (or has substantial likelihood of 
adversely affecting) the participant.
    (b) Involuntarily disenrolls a participant in violation of 
Sec. 460.164.
    (c) Discriminates in enrollment or disenrollment among Medicare 
beneficiaries or Medicaid recipients, or both, who are eligible to 
enroll in a PACE program, on the basis of an individual's health status 
or need for health care services.
    (d) Engages in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment, except as 
permitted by Sec. 460.150, by Medicare beneficiaries or Medicaid 
recipients whose medical condition or history indicates a need for 
substantial future medical services.
    (e) Imposes charges on participants enrolled under Medicare or 
Medicaid

[[Page 66282]]

for premiums in excess of the premiums permitted.
    (f) Misrepresents or falsifies information that is furnished--
    (1) To HCFA or the State under this part; or
    (2) To an individual or any other entity under this part.
    (g) Prohibits or otherwise restricts a covered health care 
professional from advising a participant who is a patient of the 
professional about the participant's health status, medical care, or 
treatment for the participant's condition or disease, regardless of 
whether the PACE program provides benefits for that care or treatment, 
if the professional is acting within his or her lawful scope of 
practice.
    (h) Operates a physician incentive plan that does not meet the 
requirements of section 1876(i)(8) of the Act.
    (i) Employs or contracts with any individual who is excluded from 
participation in Medicare or Medicaid under section 1128 or section 
1128A of the Act (or with any entity that employs or contracts with 
that individual) for the provision of health care, utilization review, 
medical social work, or administrative services.


Sec. 460.42  Suspension of enrollment or payment by HCFA.

    (a) Enrollment. If a PACE organization commits one or more 
violations specified in Sec. 460.40, HCFA may suspend enrollment of 
Medicare beneficiaries after the date HCFA notifies the organization of 
the violation.
    (b) Payment. If a PACE organization commits one or more violations 
specified in Sec. 460.40, for individuals enrolled after the date HCFA 
notifies the PACE organization of the violation, HCFA may take the 
following actions:
    (1) Suspend Medicare payment to the PACE organization.
    (2) Deny payment to the State for medical assistance for services 
furnished under the PACE program agreement.
    (c) Term of suspension. A suspension or denial of payment remains 
in effect until HCFA is satisfied that the following conditions are 
met:
    (1) The PACE organization has corrected the cause of the violation.
    (2) The violation is not likely to recur.


Sec. 460.46  Civil money penalties.

    (a) HCFA may impose civil money penalties up to the following 
maximum amounts:
    (1) For each violation regarding enrollment or disenrollment 
specified in Sec. 460.40 (c) or (d), $100,000 plus $15,000 for each 
individual not enrolled as a result of the PACE organization's 
discrimination in enrollment or disenrollment or practice that would 
deny or discourage enrollment.
    (2) For each violation regarding excessive premiums specified in 
Sec. 460.40(e), $25,000 plus double the excess amount above the 
permitted premium charged a participant by the PACE organization. (The 
excess amount charged is deducted from the penalty and returned to the 
participant).
    (3) For each misrepresentation or falsification of information, 
specified in Sec. 460.40(f)(1), $100,000.
    (4) For any other violation specified in Sec. 460.40, $25,000.
    (b) The provisions of section 1128A of the Act (other than 
subsections (a) and (b)) apply to a civil money penalty under this 
section in the same manner as they apply to a civil money penalty or 
proceeding under section 1128A(a).


Sec. 460.48  Additional actions by HCFA or the State.

    After consultation with the State administering agency, if HCFA 
determines that the PACE organization is not in substantial compliance 
with requirements in this part, HCFA or the State administering agency 
may take one or more of the following actions:
    (a) Condition the continuation of the PACE program agreement upon 
timely execution of a corrective action plan.
    (b) Withhold some or all payments under the PACE program agreement 
until the organization corrects the deficiency.
    (c) Terminate the PACE program agreement.


Sec. 460.50  Termination of PACE program agreement.

    (a) Termination of agreement by HCFA or State. HCFA or a State 
administering agency may terminate at any time a PACE program agreement 
for cause, including, but not limited to the circumstances in 
paragraphs (b) or (c) of this section.
    (b) Termination due to uncorrected deficiencies. HCFA or the State 
administering agency may terminate a PACE program agreement if HCFA or 
the State administering agency determines that both of the following 
circumstances exist:
    (1) Either--
    (i) There are significant deficiencies in the quality of care 
furnished to participants; or
    (ii) The PACE organization failed to comply substantially with 
conditions for a PACE program or PACE organization under this part, or 
with terms of its PACE program agreement.
    (2) Within 30 days of the date of the receipt of written notice of 
a determination made under paragraph (b)(1) of this section, the PACE 
organization failed to develop and successfully initiate a plan to 
correct the deficiencies, or failed to continue implementation of the 
plan of correction.
    (c) Termination due to health and safety risk. HCFA or a State 
administering agency may terminate a PACE program agreement if HCFA or 
the State administering agency determines that the PACE organization 
cannot ensure the health and safety of its participants. This 
determination may result from the identification of deficiencies that 
HCFA or the State administering agency determines cannot be corrected.
    (d) Termination of agreement by PACE organization. A PACE 
organization may terminate an agreement after timely notice to HCFA, 
the State administering agency, and participants, as follows:
    (1) To HCFA and the State administering agency, 90 days before 
termination.
    (2) To participants, 60 days before termination.


Sec. 460.52  Transitional care during termination.

    (a) The PACE organization must develop a detailed written plan for 
phase-down in the event of termination, which describes how the 
organization plans to take the following actions:
    (1) Inform participants, the community, HCFA and the State 
administering agency in writing about termination and transition 
procedures.
    (2) Assist participants to obtain reinstatement of conventional 
Medicare and Medicaid benefits.
    (3) Transition participants' care to other providers.
    (4) Terminate marketing and enrollment activities.
    (b) An entity whose PACE program agreement is in the process of 
being terminated must provide assistance to each participant in 
obtaining necessary transitional care through appropriate referrals and 
making the participant's medical records available to new providers.


Sec. 460.54  Termination procedures.

    (a) Except as provided in paragraph (b) of this section, if HCFA 
terminates an agreement with a PACE organization, it furnishes the PACE 
organization with the following:
    (1) A reasonable opportunity to develop and implement a corrective 
action plan to correct the deficiencies

[[Page 66283]]

that were the basis of HCFA's determination that cause exists for 
termination.
    (2) Reasonable notice and opportunity for hearing (including the 
right to appeal an initial determination) before terminating the 
agreement.
    (b) HCFA may terminate an agreement without invoking the procedures 
described in paragraph (a) of this section if HCFA determines that a 
delay in termination, resulting from compliance with these procedures 
before termination, would pose an imminent and serious risk to the 
health of participants enrolled with the organization.

Subpart E--PACE Administrative Requirements


Sec. 460.60  PACE organizational structure.

    (a) A PACE organization must be, or be a distinct part of, one of 
the following:
    (1) An entity of city, county, State, or Tribal government.
    (2) A private not-for-profit entity organized for charitable 
purposes under section 501(c)(3) of the Internal Revenue Code of 1986. 
The entity may be a corporation, a subsidiary of a larger corporation, 
or a department of a corporation.
    (b) Program director. The organization must employ a program 
director who is responsible for oversight and administration of the 
entity.
    (c) Medical director. The organization must employ a medical 
director who is responsible for the delivery of participant care, for 
clinical outcomes, and for the implementation, as well as oversight, of 
the quality assessment and performance improvement program.
    (d) Organizational chart. (1) The PACE organization must have a 
current organizational chart showing officials in the PACE organization 
and relationships to any other organizational entities.
    (2) The chart for a corporate entity must indicate the PACE 
organization's relationship to the corporate board and to any parent, 
affiliate, or subsidiary corporate entities.
    (3) A PACE organization planning a change in organizational 
structure must notify HCFA and the State administering agency, in 
writing, at least 60 days before the change takes effect.
    (4) Changes in organizational structure must be approved in advance 
by HCFA and the State administering agency.
    (5) Changes in organizational structure approved by HCFA and the 
State administering agency must be forwarded to the consumer advisory 
committee described in Sec. 460.62(c) of this part for dissemination to 
participants as appropriate.


Sec. 460.62  Governing body.

    (a) Governing body. A PACE organization must be operating under the 
control of an identifiable governing body (for example, a board of 
directors) or a designated person functioning as a governing body with 
full legal authority and responsibility for the following:
    (1) Governance and operation of the organization.
    (2) Development of policies consistent with the mission.
    (3) Management and provision of all services, including the 
management of contractors.
    (4) Establishment of personnel policies that address adequate 
notice of termination by employees or contractors with direct patient 
care responsibilities.
    (5) Fiscal operations.
    (6) Development of policies on participant health and safety, 
including a comprehensive, systemic operational plan to ensure the 
health and safety of participants.
    (7) Quality assessment and performance improvement program.
    (b) Community representation. A PACE organization must ensure 
community representation on issues related to participant care. This 
may be achieved by having a community representative on the governing 
body.
    (c) Consumer advisory committee. A PACE organization must establish 
a consumer advisory committee to provide advice to the governing body 
on matters of concern to participants. Participants and representatives 
of participants must constitute a majority of the membership of this 
committee.


Sec. 460.64  Personnel qualifications.

    (a) General qualification requirements. Except as specified in 
paragraphs (b) and (c) of this section, each member of the staff 
(employee or contractor) of the PACE organization must meet the 
following conditions:
    (1) Be legally authorized (currently licensed or, if applicable, 
certified or registered) to practice in the State in which he or she 
performs the function or actions.
    (2) Only act within the scope of his or her authority to practice.
    (b) Federally-defined qualifications for physician. (1) A physician 
must meet the qualifications and conditions in Sec. 410.20 of this 
chapter.
    (2) A primary care physician must have a minimum of 1 year's 
experience working with a frail or elderly population.
    (c) Qualifications when no State licensing laws, State 
certification, or registration requirements exist. If there are no 
State licensing laws, State certification, or registration applicable 
to the profession, the following requirements must be met:
    (1) Registered nurse. A registered nurse must meet the following 
requirements:
    (i) Be a graduate of a school of professional nursing.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (2) Social worker. A social worker must meet the following 
requirements:
    (i) Have a master's degree in social work from an accredited school 
of social work.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (3) Physical therapist. A physical therapist must meet the 
following requirements:
    (i) Be a graduate of a physical therapy curriculum approved by one 
of the following:
    (A) The American Physical Therapy Association.
    (B) The Committee on Allied Health Education and Accreditation of 
the American Medical Association.
    (C) The Council on Medical Education of the American Medical 
Association and the American Physical Therapy Association.
    (D) Other equivalent organizations approved by the Secretary.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (4) Occupational therapist. An occupational therapist must meet the 
following requirements:
    (i) Be a graduate of an occupational therapy curriculum accredited 
jointly by the Committee on Allied Health Education and Accreditation 
of the American Medical Association and the American Occupational 
Therapy Association or other equivalent organizations approved by the 
Secretary.
    (ii) Be eligible for the National Registration Examination of the 
American Occupational Therapy Association.
    (iii) Have 2 years of appropriate experience as an occupational 
therapist and have achieved a satisfactory grade on a proficiency 
examination conducted, approved, or sponsored by the U.S. Public Health 
Service, except that the determination of proficiency does not apply 
with respect to persons initially licensed by a State or seeking 
initial qualification as an occupational therapist after December 31, 
1977.

[[Page 66284]]

    (iv) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (5) Recreation therapist or activities coordinator. A recreation 
therapist or activities coordinator must have 2 years experience in a 
social or recreational program providing and coordinating services for 
a frail or elderly population within the last 5 years, one of which was 
full-time in a patient activities program in a health care setting.
    (6) Dietitian. A dietitian must meet the following requirements:
    (i) Have a baccalaureate or advanced degree from an accredited 
college with major studies in food and nutrition or dietetics.
    (ii) Have a minimum of 1 year's experience working with a frail or 
elderly population.
    (7) Drivers. A PACE center driver must meet the following 
requirements:
    (i) Have a valid driver's license to operate a van or bus in the 
State of operation.
    (ii) Be capable of, and experienced in, transporting individuals 
with special mobility needs.


Sec. 460.66  Training.

    (a) The PACE organization must provide training to maintain and 
improve the skills and knowledge of each staff member with respect to 
the individual's specific duties that results in his or her continued 
ability to demonstrate the skills necessary for the performance of the 
position.
    (b) The PACE organization must develop a training program for each 
personal care attendant to establish the individual's competency in 
furnishing personal care services and specialized skills associated 
with specific care needs of individual participants.


Sec. 460.68  Program integrity.

    (a) Persons with criminal convictions. A PACE organization must not 
employ individuals or contract with organizations or individuals--
    (1) Who have been excluded from participation in the Medicare or 
Medicaid programs;
    (2) Who have been convicted of criminal offenses related to their 
involvement in Medicaid, Medicare, other health insurance or health 
care programs, or social service programs under title XX of the Act; or
    (3) In any capacity where an individual's contact with participants 
would pose a potential risk because the individual has been convicted 
of physical, sexual, drug, or alcohol abuse.
    (b) Direct or indirect interest in contracts. Except as provided in 
paragraph (c) of this section, no member of the PACE organization's 
governing body or any immediate family member may have a direct or 
indirect interest in any contract that supplies any administrative or 
care-related service or materials to the PACE organization.
    (c) Waiver. (1) HCFA and the State administering agency may waive 
the requirement in paragraph (b) of this section for PACE organizations 
in the following communities:
    (i) Rural.
    (ii) Tribal.
    (iii) Urban Indian.
    (2) If an applicant seeking approval as a PACE organization 
believes a waiver under this paragraph is warranted, it must include a 
request for the waiver in its application that meets the following 
requirements:
    (i) Identifies the rural, tribal, or urban Indian community.
    (ii) Establishes recusal restrictions for each member of the PACE 
organization governing body or immediate family member to which the 
exception would apply.
    (iii) Establishes a process to record recusal actions on a case-by-
case basis.
    (iv) Establishes a process to make available to the public the 
general recusal restrictions and record of actions.
    (3) HCFA and the State administering agency may grant a waiver if 
they determine the following:
    (i) There is insufficient availability in the PACE organization's 
service area of individuals who could meet the requirement.
    (ii) The proposed alternative does not adversely affect the 
availability of care or the quality of care that is provided to 
participants.
    (d) Disclosure requirements. A PACE organization must have a formal 
process in place to gather information related to paragraphs (a) and 
(b) of this section and must be able to respond in writing to a request 
for information from HCFA within a reasonable amount of time.


Sec. 460.70  Contracted services.

    (a) General rule. The PACE organization must have a written 
contract with each outside organization, agency, or individual that 
furnishes administrative or care-related services not furnished 
directly by the PACE organization except for emergency services as 
described in Sec. 460.100.
    (b) Contract requirements. A contract between a PACE organization 
and a contractor must meet the following requirements:
    (1) The PACE organization must contract only with an entity that 
meets all applicable Federal and State requirements, including, but not 
limited to, the following:
    (i) An organizational contractor, such as a hospital, must meet 
Medicare or Medicaid participation requirements.
    (ii) A practitioner or supplier must meet Medicare or Medicaid 
requirements applicable to the services it furnishes.
    (iii) A contractor must comply with the requirements of this part 
with respect to service delivery, participant rights, and quality 
assessment and performance improvement activities.
    (2) A contractor must be accessible to participants, located either 
within or near the PACE organization's service area.
    (3) A PACE organization must designate an official liaison to 
coordinate activities between contractors and the organization.
    (c) List of contractors. A current list of contractors must be on 
file at the PACE center and a copy must be provided to anyone upon 
request.
    (d) Copies of signed contracts. The PACE organization must furnish 
a copy of each signed contract for inpatient care to HCFA and the State 
administering agency.
    (e) Content of contract. Each contract must be in writing and 
include the following information:
    (1) Name of contractor.
    (2) Services furnished.
    (3) Payment rate and method.
    (4) Terms of the contract, including beginning and ending dates, 
methods of extension, renegotiation, and termination.
    (5) Contractor agreement to do the following:
    (i) Furnish only those services authorized by the PACE 
multidisciplinary team.
    (ii) Accept payment from the PACE organization as payment in full, 
and not bill participants, HCFA, the State administering agency, or 
private insurers.
    (iii) Hold harmless HCFA, the State, and PACE participants if the 
PACE organization does not pay for services performed by the contractor 
in accordance with the contract.
    (iv) Not assign the contract or delegate duties under the contract 
unless it obtains prior written approval from the PACE organization.
    (v) Submit reports required by the PACE organization.


Sec. 460.72  Physical environment.

    (a) Space and equipment--(1) Safe design. A PACE center must meet 
the following requirements:
    (i) Be designed, constructed, equipped, and maintained to provide 
for the physical safety of participants, personnel, and visitors.

[[Page 66285]]

    (ii) Ensure a safe, sanitary, functional, accessible, and 
comfortable environment for the delivery of services that protects the 
dignity and privacy of the participant.
    (2) Primary care clinic. The PACE center must include sufficient 
suitable space and equipment to provide primary medical care and 
suitable space for team meetings, treatment, therapeutic recreation, 
restorative therapies, socialization, personal care, and dining.
    (3) Equipment maintenance. A PACE organization must establish, 
implement, and maintain a written plan to ensure that all equipment is 
maintained in accordance with the manufacturer's recommendations.
    (b) Fire Safety. (1) Except as provided in paragraph (b)(2) of this 
section, a PACE center must meet the occupancy provisions of the 1997 
edition of the Life Safety Code of the National Fire Protection 
Association (which is incorporated by reference) that apply to the type 
of setting in which the center is located. Incorporation by reference 
of the Life Safety Code, 1997 edition, was approved by the Director of 
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 
51. The Life Safety Code is available for inspection at the Office of 
the Federal Register, 800 North Capitol Street, N.W., Washington, D.C. 
Copies of the Life Safety Code may be obtained from the National Fire 
Protection Code (NFPA), 1 Batterymarch Park, P.O. Box 9101, Quincy, MA 
02269-9101. If any changes in the Life Safety Code, 1997 edition, are 
also to be incorporated by reference, notice to that effect will be 
published in the Federal Register.
    (2) Exceptions. (i) The Life Safety Code provisions do not apply in 
a State in which HCFA determines that a fire and safety code imposed by 
State law adequately protects participants and staff.
    (ii) HCFA may waive specific provisions of the Life Safety Code 
that, if rigidly applied, would result in unreasonable hardship on the 
center, but only if the waiver does not adversely affect the health and 
safety of the participants and staff.
    (c) Emergency and disaster preparedness--(1) Procedures. The PACE 
organization must establish, implement, and maintain documented 
procedures to manage medical and nonmedical emergencies and disasters 
that are likely to threaten the health or safety of the participants, 
staff, or the public.
    (2) Emergencies defined. Emergencies include, but are not limited, 
to the following:
    (i) Fire.
    (ii) Equipment, water, or power failure.
    (iii) Care-related emergencies.
    (iv) Natural disasters likely to occur in the organization's 
geographic area. (An organization is not required to develop emergency 
plans for natural disasters that typically do not affect its geographic 
location.)
    (3) Emergency training. A PACE organization must provide 
appropriate training and periodic orientation to all staff (employees 
and contractors) and participants to ensure that staff demonstrate a 
knowledge of emergency procedures, including informing participants 
what to do, where to go, and whom to contact in case of an emergency.
    (4) Availability of emergency equipment. Emergency equipment, 
including easily portable oxygen, airways, suction, and emergency 
drugs, along with staff who know how to use the equipment, must be on 
the premises of every center at all times and be immediately available. 
The organization must have a documented plan to obtain emergency 
medical assistance from sources outside the center when needed.
    (5) Annual test of emergency and disaster plan. At least annually, 
a PACE organization must actually test, evaluate, and document the 
effectiveness of its emergency and disaster plans.


Sec. 460.74  Infection control.

    (a) Standard procedures. The PACE organization must follow accepted 
policies and standard procedures with respect to infection control, 
including at least the standard precautions developed by the Centers 
for Disease Control and Prevention.
    (b) Infection control plan. The PACE organization must establish, 
implement, and maintain a documented infection control plan that meets 
the following requirements:
    (1) Ensures a safe and sanitary environment.
    (2) Prevents and controls the transmission of disease and 
infection.
    (c) Contents of infection control plan. The infection control plan 
must include, but is not limited to, the following:
    (1) Procedures to identify, investigate, control, and prevent 
infections in every center and in each participant's place of 
residence.
    (2) Procedures to record any incidents of infection.
    (3) Procedures to analyze the incidents of infection to identify 
trends and develop corrective actions related to the reduction of 
future incidents.


Sec. 460.76  Transportation services.

    (a) Safety, accessibility, and equipment. A PACE organization's 
transportation services must be safe, accessible, and equipped to meet 
the needs of the participant population.
    (b) Maintenance of vehicles. (1) If the PACE organization owns, 
rents, or leases transportation vehicles, it must maintain these 
vehicles in accordance with the manufacturer's recommendations.
    (2) If a contractor provides transportation services, the PACE 
organization must ensure that the vehicles are maintained in accordance 
with the manufacturer's recommendations.
    (c) Communication with PACE center. The PACE organization must 
ensure that transportation vehicles are equipped to communicate with 
the PACE center.
    (d) Training. The PACE organization must train all transportation 
personnel (employees and contractors) in the following:
    (1) Managing the special needs of participants.
    (2) Handling emergency situations.
    (e) Changes in care plan. As part of the multidisciplinary team 
process, PACE organization staff (employees and contractors) must 
communicate relevant changes in a participant's care plan to 
transportation personnel.


Sec. 460.78  Dietary services.

    (a) Meal requirements. (1) Except as specified in paragraphs (a)(2) 
or (a)(3) of this section, the PACE organization must provide each 
participant with a nourishing, palatable, well-balanced meal that meets 
the daily nutritional and special dietary needs of each participant. 
Each meal must meet the following requirements:
    (i) Be prepared by methods that conserve nutritive value, flavor, 
and appearance.
    (ii) Be prepared in a form designed to meet individual needs.
    (iii) Be prepared and served at the proper temperature.
    (2) The PACE organization must provide substitute foods or 
nutritional supplements that meet the daily nutritional and special 
dietary needs of any participant who has any of the following problems:
    (i) Refuses the food served.
    (ii) Cannot tolerate the food served.
    (iii) Does not eat adequately.
    (3) The PACE organization must provide nutrition support to meet 
the daily nutritional needs of a participant, if indicated by his or 
her medical condition or diagnosis. Nutrition support consists of tube 
feedings, total parenteral nutrition, or peripheral parenteral 
nutrition.

[[Page 66286]]

    (b) Sanitary conditions. The PACE organization must do the 
following:
    (1) Procure foods (including nutritional supplements and nutrition 
support items) from sources approved, or considered satisfactory, by 
Federal, State, Tribal, or local authorities with jurisdiction over the 
service area of the organization.
    (2) Store, prepare, distribute, and serve foods (including 
nutritional supplements and nutrition support items) under sanitary 
conditions.
    (3) Dispose of garbage and refuse properly.


Sec. 460.80  Fiscal soundness.

    (a) Fiscally sound operation. A PACE organization must have a 
fiscally sound operation, as demonstrated by the following:
    (1) Total assets greater than total unsubordinated liabilities.
    (2) Sufficient cash flow and adequate liquidity to meet obligations 
as they become due.
    (3) A net operating surplus or a financial plan for maintaining 
solvency that is satisfactory to HCFA and the State administering 
agency.
    (b) Insolvency plan. The organization must have a documented plan 
in the event of insolvency, approved by HCFA and the State 
administering agency, which provides for the following:
    (1) Continuation of benefits for the duration of the period for 
which capitation payment has been made.
    (2) Continuation of benefits to participants who are confined in a 
hospital on the date of insolvency until their discharge.
    (3) Protection of participants from liability for payment of fees 
that are the legal obligation of the PACE organization.
    (c) Arrangements to cover expenses. (1) A PACE organization must 
demonstrate that it has arrangements to cover expenses in the amount of 
at least the sum of the following in the event it becomes insolvent:
    (i) One month's total capitation revenue to cover expenses the 
month before insolvency.
    (ii) One month's average payment to all contractors, based on the 
prior quarter's average payment, to cover expenses the month after the 
date it declares insolvency or ceases operations.
    (2) Arrangements to cover expenses may include, but are not limited 
to, the following:
    (i) Insolvency insurance or reinsurance.
    (ii) Hold harmless arrangement.
    (iii) Letters of credit, guarantees, net worth, restricted State 
reserves, or State law provisions.


Sec. 460.82  Marketing.

    (a) Information that a PACE organization must include in its 
marketing materials. (1) A PACE organization must inform the public 
about its program and give prospective participants the following 
written information:
    (i) An adequate description of the PACE organization's enrollment 
and disenrollment policies and requirements.
    (ii) PACE enrollment procedures.
    (iii) Description of benefits and services.
    (iv) Premiums.
    (v) Other information necessary for prospective participants to 
make an informed decision about enrollment.
    (2) Marketing information must be free of material inaccuracies, 
misleading information, or misrepresentations.
    (b) Approval of marketing information. (1) HCFA must approve all 
marketing information before distribution by the PACE organization, 
including any revised or updated material.
    (2) HCFA reviews initial marketing information as part of an 
entity's application for approval as a PACE organization, and approval 
of the application includes approval of marketing information.
    (3) Once a PACE organization is under a PACE program agreement, any 
revisions to existing marketing information and new information are 
subject to the following:
    (i) Time period for approval. HCFA approves or disapproves 
marketing information within 45 days after HCFA receives the 
information from the organization.
    (ii) Deemed approval. Marketing information is deemed approved, and 
the organization can distribute it, if HCFA and the State administering 
agency do not disapprove the marketing material within the 45-day 
review period.
    (c) Special language requirements. A PACE organization must furnish 
printed marketing materials to prospective and current participants as 
specified below:
    (1) In English and in any other principal languages of the 
community.
    (2) In Braille, if necessary.
    (d) Information on restriction of services. (1) Marketing materials 
must inform a potential participant that he or she must receive all 
needed health care, including primary care and specialist physician 
services (other than emergency services), from the PACE organization or 
from an entity authorized by the PACE organization.
    (2) All marketing materials must state clearly that PACE 
participants may be fully and personally liable for the costs of 
unauthorized or out-of-PACE program agreement services.
    (e) Prohibited marketing practices. A PACE organization must ensure 
that its employees or its agents do not use prohibited marketing 
practices which includes the following:
    (1) Discrimination of any kind, except that marketing may be 
directed to individuals eligible for PACE by reason of their age.
    (2) Activities that could mislead or confuse potential 
participants, or misrepresent the PACE organization, HCFA, or the State 
administering agency.
    (3) Gifts or payments to induce enrollment.
    (4) Contracting outreach efforts to individuals or organizations 
whose sole responsibility involves direct contact with the elderly to 
solicit enrollment.
    (5) Unsolicited door-to-door marketing.
    (f) Marketing Plan. A PACE organization must establish, implement, 
and maintain a documented marketing plan with measurable enrollment 
objectives and a system for tracking its effectiveness.

Subpart F--PACE Services


Sec. 460.90  PACE benefits under Medicare and Medicaid.

    If a Medicare beneficiary or Medicaid recipient chooses to enroll 
in a PACE program, the following conditions apply:
    (a) Medicare and Medicaid benefit limitations and conditions 
relating to amount, duration, scope of services, deductibles, 
copayments, coinsurance, or other cost-sharing do not apply.
    (b) The participant, while enrolled in a PACE program, must receive 
Medicare and Medicaid benefits solely through the PACE organization.


Sec. 460.92  Required services.

    The PACE benefit package for all participants, regardless of the 
source of payment, must include the following:
    (a) All Medicaid-covered services, as specified in the State's 
approved Medicaid plan.
    (b) Multidisciplinary assessment and treatment planning.
    (c) Primary care, including physician and nursing services.
    (d) Social work services.
    (e) Restorative therapies, including physical therapy, occupational 
therapy, and speech-language pathology services.
    (f) Personal care and supportive services.
    (g) Nutritional counseling.
    (h) Recreational therapy.

[[Page 66287]]

    (i) Transportation.
    (j) Meals.
    (k) Medical specialty services including, but not limited to the 
following:
    (1) Anesthesiology.
    (2) Audiology.
    (3) Cardiology.
    (4) Dentistry.
    (5) Dermatology.
    (6) Gastroenterology.
    (7) Gynecology.
    (8) Internal medicine.
    (9) Nephrology.
    (10) Neurosurgery.
    (11) Oncology.
    (12) Ophthalmology.
    (13) Oral surgery.
    (14) Orthopedic surgery.
    (15) Otorhinolaryngology.
    (16) Plastic surgery.
    (17) Pharmacy consulting services.
    (18) Podiatry.
    (19) Psychiatry.
    (20) Pulmonary disease.
    (21) Radiology.
    (22) Rheumatology.
    (23) General surgery.
    (24) Thoracic and vascular surgery.
    (25) Urology.
    (l) Laboratory tests, x-rays and other diagnostic procedures.
    (m) Drugs and biologicals.
    (n) Prosthetics, orthotics, durable medical equipment, corrective 
vision devices, such as eyeglasses and lenses, hearing aids, dentures, 
and repair and maintenance of these items.
    (o) Acute inpatient care, including the following:
    (1) Ambulance.
    (2) Emergency room care and treatment room services.
    (3) Semi-private room and board.
    (4) General medical and nursing services.
    (5) Medical surgical/intensive care/coronary care unit.
    (6) Laboratory tests, x-rays and other diagnostic procedures.
    (7) Drugs and biologicals.
    (8) Blood and blood derivatives.
    (9) Surgical care, including the use of anesthesia.
    (10) Use of oxygen.
    (11) Physical, occupational, respiratory therapies, and speech-
language pathology services.
    (12) Social services.
    (p) Nursing facility care.
    (1) Semi-private room and board.
    (2) Physician and skilled nursing services.
    (3) Custodial care.
    (4) Personal care and assistance.
    (5) Drugs and biologicals.
    (6) Physical, occupational, recreational therapies, and speech-
language pathology, if necessary.
    (7) Social services.
    (8) Medical supplies and appliances.
    (q) Other services determined necessary by the multidisciplinary 
team to improve and maintain the participant's overall health status.


Sec. 460.94  Required services for Medicare participants.

    (a) Except for Medicare requirements that are waived for the PACE 
program, as specified in paragraph (b) of this section, the PACE 
benefit package for Medicare participants must include the following 
services:
    (1) The scope of hospital insurance benefits described in part 409 
of this chapter.
    (2) The scope of supplemental medical insurance benefits described 
in part 410 of this chapter.
    (b) Waivers of Medicare coverage requirements. The following 
Medicare requirements are waived for purposes of the PACE program and 
do not apply:
    (1) The provisions of subpart F of part 409 of this chapter that 
limit coverage of institutional services.
    (2) The provisions of subparts G and H of part 409 of this chapter, 
and parts 412 through 414 of this chapter that relate to payment for 
benefits.
    (3) The provisions of subparts D and E of part 409 of this chapter 
that limit coverage of extended care services or home health services.
    (4) The provisions of subpart D of part 409 of this chapter that 
impose a 3-day prior hospitalization requirement for coverage of 
extended care services.
    (5) Sections 411.15(g) and (k) of this chapter that may prevent 
payment for PACE program services to PACE participants.


Sec. 460.96  Excluded services.

    The following services are excluded from coverage under PACE:
    (a) Any service that is not authorized by the multidisciplinary 
team, even if it is a required service, unless it is an emergency 
service.
    (b) In an inpatient facility, private room and private duty nursing 
services (unless medically necessary), and nonmedical items for 
personal convenience such as telephone charges and radio or television 
rental (unless specifically authorized by the multidisciplinary team as 
part of the participant's plan of care).
    (c) Cosmetic surgery, which does not include surgery that is 
required for improved functioning of a malformed part of the body 
resulting from an accidental injury or for reconstruction following 
mastectomy.
    (d) Experimental medical, surgical, or other health procedures.
    (e) Services furnished outside of the United States, except as 
follows:
    (1) In accordance with Secs. 424.122 through 424.124 of this 
chapter.
    (2) As permitted under the State's approved Medicaid plan.


Sec. 460.98  Service delivery.

    (a) Plan. A PACE organization must establish and implement a 
written plan to furnish care that meets the needs of each participant 
in all care settings 24 hours a day, every day of the year.
    (b) Provision of services. (1) The PACE organization must furnish 
comprehensive medical, health, and social services that integrate acute 
and long-term care.
    (2) These services must be furnished in at least the PACE center, 
the home, and inpatient facilities.
    (3) The PACE organization may not discriminate against any 
participant in the delivery of required PACE services based on race, 
ethnicity, national origin, religion, sex, age, mental or physical 
disability, or source of payment.
    (c) Minimum services furnished at each PACE center. At a minimum, 
the following services must be furnished at each PACE center:
    (1) Primary care, including physician and nursing services.
    (2) Social services.
    (3) Restorative therapies, including physical therapy and 
occupational therapy.
    (4) Personal care and supportive services.
    (5) Nutritional counseling.
    (6) Recreational therapy.
    (7) Meals.
    (d) Center operation. (1) A PACE organization must operate at least 
one PACE center either in, or contiguous to, its defined service area 
with sufficient capacity to allow routine attendance by participants.
    (2) A PACE organization must ensure accessible and adequate 
services to meet the needs of its participants. If necessary, a PACE 
organization must increase the number of PACE centers, staff, or other 
PACE services.
    (3) If a PACE organization operates more than one center, each 
center must offer the full range of services and have sufficient staff 
to meet the needs of participants.
    (e) Center attendance. The frequency of a participant's attendance 
at a center is determined by the multidisciplinary team, based on the 
needs and preferences of each participant.


Sec. 460.100  Emergency care.

    (a) Written plan. A PACE organization must establish and maintain a 
written plan to handle emergency care. The

[[Page 66288]]

plan must ensure that HCFA, the State, and PACE participants are held 
harmless if the PACE organization does not pay for emergency services.
    (b) Emergency care. Emergency care is appropriate when services are 
needed immediately because of an injury or sudden illness and the time 
required to reach the PACE organization or one of its contract 
providers, would cause risk of permanent damage to the participant's 
health. Emergency services include inpatient and outpatient services 
that meet the following requirements:
    (1) Are furnished by a qualified emergency services provider, other 
than the PACE organization or one of its contract providers, either in 
or out of the PACE organization's service area.
    (2) Are needed to evaluate or stabilize an emergency medical 
condition.
    (c) An emergency medical condition means a condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
such that a prudent layperson, with an average knowledge of health and 
medicine, could reasonably expect the absence of immediate medical 
attention to result in the following:
    (1) Serious jeopardy to the health of the participant.
    (2) Serious impairment to bodily functions.
    (3) Serious dysfunction of any bodily organ or part.
    (d) Explanation to participant. The organization must ensure that 
the participant or caregiver, or both, understand when and how to get 
access to emergency services.
    (e) On-call providers. The plan must provide for the following:
    (1) An on-call provider, available 24-hours per day to address 
participant questions about emergency services and respond to requests 
for authorization of urgently needed out-of-network services and post 
stabilization care services following emergency services.
    (2) Coverage of urgently needed out-of-network and post-
stabilization care services when either of the following conditions are 
met:
    (i) The services are preapproved by the PACE organization.
    (ii) The services are not preapproved by the PACE organization 
because the PACE organization did not respond to a request for approval 
within 1 hour after being contacted or cannot be contacted for 
approval.


Sec. 460.102  Multidisciplinary team.

    (a) Basic requirement. A PACE organization must meet the following 
requirements:
    (1) Establish a multidisciplinary team at each center to 
comprehensively assess and meet the individual needs of each 
participant.
    (2) Assign each participant to a multidisciplinary team functioning 
at the PACE center that the participant attends.
    (b) Composition of multidisciplinary team. The multidisciplinary 
team must be composed of at least the following members:
    (1) Primary care physician.
    (2) Registered nurse.
    (3) Social worker.
    (4) Physical therapist.
    (5) Occupational therapist.
    (6) Recreational therapist or activity coordinator.
    (7) Dietitian.
    (8) PACE center manager.
    (9) Home care coordinator.
    (10) Personal care attendant or his or her representative.
    (11) Driver or his or her representative.
    (c) Primary care physician. (1) Primary medical care must be 
furnished to a participant by a PACE primary care physician.
    (2) Each primary care physician is responsible for the following:
    (i) Managing a participant's medical situations.
    (ii) Overseeing a participant's use of medical specialists and 
inpatient care.
    (d) Responsibilities of multidisciplinary team. (1) The 
multidisciplinary team is responsible for the initial assessment, 
periodic reassessments, plan of care, and coordination of 24 hour care 
delivery.
    (2) Each team member is responsible for the following:
    (i) Regularly informing the multidisciplinary team of the medical, 
functional, and psychosocial condition of each participant.
    (ii) Remaining alert to pertinent input from other team members, 
participants, and caregivers.
    (iii) Documenting changes in a participant's condition in the 
participant's medical record.
    (3) Except as specified in paragraph (g) of this section, the 
members of the multidisciplinary team must serve primarily PACE 
participants.
    (e) Exchange of information between team members. The PACE 
organization must establish, implement, and maintain documented 
internal procedures governing the exchange of information between team 
members, contractors, and participants and their caregivers consistent 
with the requirements for confidentiality in Sec. 460.200(e).
    (f) Organization employees. Except as specified in paragraph (g) of 
this section, at least the following members of the multidisciplinary 
team must be employees of the PACE organization:
    (1) Primary care physician.
    (2) Registered nurse.
    (3) Social worker.
    (4) Recreational therapist or activity coordinator.
    (5) PACE center manager.
    (6) Home care coordinator.
    (7) PACE center personal care attendant.
    (g) Waivers. (1) HCFA and the State administering agency may waive 
either or both of the following:
    (i) The requirement in paragraph (d)(3) of this section that 
members of the multidisciplinary team must serve primarily PACE 
participants.
    (ii) The requirement in paragraph (f)(1) of this section that the 
primary care physician must be an employee of the PACE organization.
    (2) If an applicant seeking approval as a PACE organization 
believes a waiver under this paragraph is warranted, it must include a 
request for the waiver in its application and describe in detail the 
circumstances supporting the request.
    (3) HCFA and the State administering agency may grant a waiver if 
they determine the following:
    (i) There is insufficient availability in the PACE organization's 
service area of individuals who meet the requirements, or State 
licensing laws make it inappropriate for the organization to employ 
physicians.
    (ii) The proposed alternative does not adversely affect the 
availability of care or the quality of care that is furnished to 
participants.


Sec. 460.104  Participant assessment.

    (a) Initial comprehensive assessment--(1) Basic requirement. The 
multidisciplinary team must conduct an initial comprehensive assessment 
on each participant. The assessment must be completed promptly 
following enrollment.
    (2) As part of the initial comprehensive assessment, each of the 
following members of the multidisciplinary team must evaluate the 
participant in person, at appropriate intervals, and develop a 
discipline-specific assessment of the participant's health and social 
status:
    (i) Primary care physician.
    (ii) Registered nurse.
    (iii) Social worker.
    (iv) Physical therapist or occupational therapist, or both.
    (v) Recreational therapist or activity coordinator.
    (vi) Dietitian.
    (vii) Home care coordinator.
    (3) At the recommendation of individual team members, other

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professional disciplines (for example, speech-language pathology, 
dentistry, or audiology) may be included in the comprehensive 
assessment process.
    (4) Comprehensive assessment criteria. The comprehensive assessment 
must include, but is not limited to, the following:
    (i) Physical and cognitive function and ability.
    (ii) Medication use.
    (iii) Participant and caregiver preferences for care.
    (iv) Socialization and availability of family support.
    (v) Current health status and treatment needs.
    (vi) Nutritional status.
    (vii) Home environment, including home access and egress.
    (viii) Participant behavior.
    (ix) Psychosocial status.
    (x) Medical and dental status.
    (xi) Participant language.
    (b) Development of plan of care. The multidisciplinary team must 
promptly consolidate discipline-specific assessments into a single plan 
of care for each participant through discussion in team meetings and 
consensus of the entire multidisciplinary team. In developing the plan 
of care, female participants must be informed that they are entitled to 
choose a qualified specialist for women's health services from the PACE 
organization's network to furnish routine or preventive women's health 
services.
    (c) Periodic reassessment--(1) Semiannual reassessment. On at least 
a semiannual basis, or more often if a participant's condition 
dictates, the following members of the multidisciplinary team must 
conduct an in-person reassessment:
    (i) Primary care physician.
    (ii) Registered nurse.
    (iii) Social worker.
    (iv) Recreational therapist or activity coordinator.
    (v) Other team members actively involved in the development or 
implementation of the participant's plan of care, for example, home 
care coordinator, physical therapist, occupational therapist, or 
dietitian.
    (2) Annual reassessment. On at least an annual basis, the following 
members of the multidisciplinary team must conduct an in-person 
reassessment:
    (i) Physical therapist or occupational therapist, or both.
    (ii) Dietitian.
    (iii) Home care coordinator.
    (3) Reassessment based on change in participant status or at the 
request of the participant or designated representative. If the health 
or psychosocial status of a participant changes or if a participant (or 
his or her designated representative) believes that the participant 
needs to initiate, eliminate, or continue a particular service, the 
members of the multidisciplinary team, listed in paragraph (a)(2) of 
this section, must conduct an in-person reassessment.
    (i) The PACE organization must have explicit procedures for timely 
resolution of requests by a participant or his or her designated 
representative to initiate, eliminate, or continue a particular 
service.
    (ii) Except as provided in paragraph (c)(3)(iii) of this section, 
the multidisciplinary team must notify the participant or designated 
representative of its decision to approve or deny the request from the 
participant or designated representative as expeditiously as the 
participant's condition requires, but no later than 72 hours after the 
date the multidisciplinary team receives the request for reassessment.
    (iii) The multidisciplinary team may extend the 72-hour timeframe 
for notifying the participant or designated representative of its 
decision to approve or deny the request by no more than 5 additional 
days for either of the following reasons:
    (A) The participant or designated representative requests the 
extension.
    (B) The team documents its need for additional information and how 
the delay is in the interest of the participant.
    (iv) The PACE organization must explain any denial of a request to 
the participant or the participant's designated representative orally 
and in writing. The PACE organization must provide the specific reasons 
for the denial in understandable language.
    (v) If the participant or designated representative is dissatisfied 
with the decision on the request, the PACE organization is responsible 
for the following:
    (A) Informing the participant or designated representative of his 
or her right to appeal the decision as specified in Sec. 460.122.
    (B) Describing both the standard and expedited appeals processes, 
including the right to, and conditions for, obtaining expedited 
consideration of an appeal of a denial of services as specified in 
Sec. 460.122.
    (C) Describing the right to, and conditions for, continuation of 
appealed services through the period of an appeal as specified in 
Sec. 460.122(e).
    (D) If the multidisciplinary team fails to provide the participant 
with timely notice of the resolution of the request or does not furnish 
the services required by the revised plan of care, this failure 
constitutes an adverse decision, and the participant's request must be 
automatically processed by the PACE organization as an appeal in 
accordance with Sec. 460.122.
    (d) Changes to plan of care. Team members who conduct a 
reassessment must meet the following requirements:
    (1) Reevaluate the participant's plan of care.
    (2) Discuss any changes in the plan with the multidisciplinary 
team.
    (3) Obtain approval of the revised plan from the multidisciplinary 
team and the participant (or designated representative).
    (4) Furnish any services included in the revised plan of care as a 
result of a reassessment to the participant as expeditiously as the 
participant's health condition requires.
    (e) Documentation. Multidisciplinary team members must document all 
assessment and reassessment information in the participant's medical 
record.


Sec. 460.106  Plan of care.

    (a) Basic requirement. The multidisciplinary team must promptly 
develop a comprehensive plan of care for each participant.
    (b) Content of plan of care. The plan of care must meet the 
following requirements:
    (1) Specify the care needed to meet the participant's medical, 
physical, emotional, and social needs, as identified in the initial 
comprehensive assessment.
    (2) Identify measurable outcomes to be achieved.
    (c) Implementation of the plan of care. (1) The team must 
implement, coordinate, and monitor the plan of care whether the 
services are furnished by PACE employees or contractors.
    (2) The team must continuously monitor the participant's health and 
psychosocial status, as well as the effectiveness of the plan of care, 
through the provision of services, informal observation, input from 
participants or caregivers, and communications among members of the 
multidisciplinary team and other providers.
    (d) Evaluation of plan of care. On at least a semi-annual basis, 
the multidisciplinary team must reevaluate the plan of care, including 
defined outcomes, and make changes as necessary.
    (e) Participant and caregiver involvement in plan of care. The team 
must develop, review, and reevaluate the plan of care in collaboration 
with the participant or caregiver, or both, to ensure that there is 
agreement with the

[[Page 66290]]

plan of care and that the participant's concerns are addressed.
    (f) Documentation. The team must document the plan of care, and any 
changes made to it, in the participant's medical record.

Subpart G--Participant Rights


Sec. 460.110  Bill of rights.

    (a) Written bill of rights. A PACE organization must have a written 
participant bill of rights designed to protect and promote the rights 
of each participant. Those rights include, at a minimum, the ones 
specified in Sec. 460.112.
    (b) Explanation of rights. The organization must inform a 
participant upon enrollment, in writing, of his or her rights and 
responsibilities, and all rules and regulations governing 
participation.
    (c) Protection of rights. The organization must protect and provide 
for the exercise of the participant's rights.


Sec. 460.112  Specific rights to which a participant is entitled.

    (a) Respect and nondiscrimination. Each participant has the right 
to considerate, respectful care from all PACE employees and contractors 
at all times and under all circumstances. Each participant has the 
right not to be discriminated against in the delivery of required PACE 
services based on race, ethnicity, national origin, religion, sex, age, 
mental or physical disability, or source of payment. Specifically, each 
participant has the right to the following:
    (1) To receive comprehensive health care in a safe and clean 
environment and in an accessible manner.
    (2) To be treated with dignity and respect, be afforded privacy and 
confidentiality in all aspects of care, and be provided humane care.
    (3) Not to be required to perform services for the PACE 
organization.
    (4) To have reasonable access to a telephone.
    (5) To be free from harm, including physical or mental abuse, 
neglect, corporal punishment, involuntary seclusion, excessive 
medication, and any physical or chemical restraint imposed for purposes 
of discipline or convenience and not required to treat the 
participant's medical symptoms.
    (6) To be encouraged and assisted to exercise rights as a 
participant, including the Medicare and Medicaid appeals processes as 
well as civil and other legal rights.
    (7) To be encouraged and assisted to recommend changes in policies 
and services to PACE staff.
    (b) Information disclosure. Each PACE participant has the right to 
receive accurate, easily understood information and to receive 
assistance in making informed health care decisions. Specifically, each 
participant has the following rights:
    (1) To be fully informed in writing of the services available from 
the PACE organization, including identification of all services that 
are delivered through contracts, rather than furnished directly by the 
PACE organization at the following times:
    (i) Before enrollment.
    (ii) At enrollment.
    (iii) When there is a change in services.
    (2) To have the enrollment agreement, described in Sec. 460.154, 
fully explained in a manner understood by the participant.
    (3) To examine, or upon reasonable request, to be assisted to 
examine the results of the most recent review of the PACE organization 
conducted by HCFA or the State administering agency and any plan of 
correction in effect.
    (c) Choice of providers. Each participant has the right to a choice 
of health care providers, within the PACE organization's network, that 
is sufficient to ensure access to appropriate high-quality health care. 
Specifically, each participant has the right to the following:
    (1) To choose his or her primary care physician and specialists 
from within the PACE network.
    (2) To request that a qualified specialist for women's health 
services furnish routine or preventive women's health services.
    (3) To disenroll from the program at any time.
    (d) Access to emergency services. Each participant has the right to 
access emergency health care services when and where the need arises 
without prior authorization by the PACE multidisciplinary team.
    (e) Participation in treatment decisions. Each participant has the 
right to participate fully in all decisions related to his or her 
treatment. A participant who is unable to participate fully in 
treatment decisions has the right to designate a representative. 
Specifically, each participant has the following rights:
    (1) To have all treatment options explained in a culturally 
competent manner and to make health care decisions, including the right 
to refuse treatment, and be informed of the consequences of the 
decisions.
    (2) To have the PACE organization explain advance directives and to 
establish them, if the participant so desires, in accordance with 
Secs. 489.100 and 489.102 of this chapter.
    (3) To be fully informed of his or her health and functional status 
by the multidisciplinary team.
    (4) To participate in the development and implementation of the 
plan of care.
    (5) To request a reassessment by the multidisciplinary team.
    (6) To be given reasonable advance notice, in writing, of any 
transfer to another treatment setting and the justification for the 
transfer (that is, due to medical reasons or for the participant's 
welfare, or that of other participants). The PACE organization must 
document the justification in the participant's medical record.
    (f) Confidentiality of health information. Each participant has the 
right to communicate with health care providers in confidence and to 
have the confidentiality of his or her individually identifiable health 
care information protected. Each participant also has the right to 
review and copy his or her own medical records and request amendments 
to those records. Specifically, each participant has the following 
rights:
    (1) To be assured of confidential treatment of all information 
contained in the health record, including information contained in an 
automated data bank.
    (2) To be assured that his or her written consent will be obtained 
for the release of information to persons not otherwise authorized 
under law to receive it.
    (3) To provide written consent that limits the degree of 
information and the persons to whom information may be given.
    (g) Complaints and appeals. Each participant has the right to a 
fair and efficient process for resolving differences with the PACE 
organization, including a rigorous system for internal review by the 
organization and an independent system of external review. 
Specifically, each participant has the following rights:
    (1) To be encouraged and assisted to voice complaints to PACE staff 
and outside representatives of his or her choice, free of any 
restraint, interference, coercion, discrimination, or reprisal by the 
PACE staff.
    (2) To appeal any treatment decision of the PACE organization, its 
employees, or contractors through the process described in 
Sec. 460.122.


Sec. 460.114  Restraints.

    (a) The PACE organization must limit use of restraints to the least 
restrictive and most effective method available. The term restraint 
includes either a

[[Page 66291]]

physical restraint or a chemical restraint.
    (1) A physical restraint is any manual method or physical or 
mechanical device, materials, or equipment attached or adjacent to the 
participant's body that he or she cannot easily remove that restricts 
freedom of movement or normal access to one's body.
    (2) A chemical restraint is a medication used to control behavior 
or to restrict the participant's freedom of movement and is not a 
standard treatment for the participant's medical or psychiatric 
condition.
    (b) If the multidisciplinary team determines that a restraint is 
needed to ensure the participant's physical safety or the safety of 
others, the use must meet the following conditions:
    (1) Be imposed for a defined, limited period of time, based upon 
the assessed needs of the participant.
    (2) Be imposed in accordance with safe and appropriate restraining 
techniques.
    (3) Be imposed only when other less restrictive measures have been 
found to be ineffective to protect the participant or others from harm.
    (4) Be removed or ended at the earliest possible time.
    (c) The condition of the restrained participant must be continually 
assessed, monitored, and reevaluated.


Sec. 460.116  Explanation of rights.

    (a) Written policies. A PACE organization must have written 
policies and implement procedures to ensure that the participant, his 
or her representative, if any, and staff understand these rights.
    (b) Explanation of rights. The PACE organization must fully explain 
the rights to the participant and his or her representative, if any, at 
the time of enrollment in a manner understood by the participant.
    (c) Display. The PACE organization must meet the following 
requirements:
    (1) Write the participant rights in English and in any other 
principal languages of the community.
    (2) Display the participant rights in a prominent place in the PACE 
center.


Sec. 460.118  Violation of rights.

    The PACE organization must have established documented procedures 
to respond to and rectify a violation of a participant's rights.


Sec. 460.120  Grievance process.

    For purposes of this part, a grievance is a complaint, either 
written or oral, expressing dissatisfaction with service delivery or 
the quality of care furnished.
    (a) Process to resolve grievances. A PACE organization must have a 
formal written process to evaluate and resolve medical and nonmedical 
grievances by participants, their family members, or representatives.
    (b) Notification to participants. Upon enrollment, and at least 
annually thereafter, the PACE organization must give a participant 
written information on the grievance process.
    (c) Minimum requirements. At a minimum, the PACE organization's 
grievance process must include written procedures for the following:
    (1) How a participant files a grievance.
    (2) Documentation of a participant's grievance.
    (3) Response to, and resolution of, grievances in a timely manner.
    (4) Maintenance of confidentiality of a participant's grievance.
    (d) Continuing care during grievance process. The PACE organization 
must continue to furnish all required services to the participant 
during the grievance process.
    (e) Explaining the grievance process. The PACE organization must 
discuss with and provide to the participant in writing the specific 
steps, including timeframes for response, that will be taken to resolve 
the participant's grievance.
    (f) Analyzing grievance information. The PACE organization must 
maintain, aggregate, and analyze information on grievance proceedings. 
This information must be used in the PACE organization's internal 
quality assessment and performance improvement program.


Sec. 460.122  PACE organization's appeals process.

    For purposes of this section, an appeal is a participant's action 
taken with respect to the PACE organization's noncoverage of, or 
nonpayment for, a service.
    (a) PACE organization's written appeals process. The PACE 
organization must have a formal written appeals process, with specified 
timeframes for response, to address noncoverage or nonpayment of a 
service.
    (b) Notification of participants. Upon enrollment, at least 
annually thereafter, and whenever the multidisciplinary team denies a 
request for services or payment, the PACE organization must give a 
participant written information on the appeals process.
    (c) Minimum requirements. At a minimum, the PACE organization's 
appeals process must include written procedures for the following:
    (1) Timely preparation and processing of a written denial of 
coverage or payment as provided in Sec. 460.104(c)(3).
    (2) How a participant files an appeal.
    (3) Documentation of a participant's appeal.
    (4) Appointment of an appropriately credentialed and impartial 
third party who was not involved in the original action and who does 
not have a stake in the outcome of the appeal to review the 
participant's appeal.
    (5) Responses to, and resolution of, appeals as expeditiously as 
the participant's health condition requires, but no later than 30 
calendar days after the organization receives an appeal.
    (6) Maintenance of confidentiality of appeals.
    (d) Notification. A PACE organization must give all parties 
involved in the appeal the following:
    (1) Appropriate written notification.
    (2) A reasonable opportunity to present evidence related to the 
dispute, in person, as well as in writing.
    (e) Services furnished during appeals process. During the appeals 
process, the PACE organization must meet the following requirements:
    (1) For a Medicaid participant, continue to furnish the disputed 
services until issuance of the final determination if the following 
conditions are met:
    (i) The PACE organization is proposing to terminate or reduce 
services currently being furnished to the participant.
    (ii) The participant requests continuation with the understanding 
that he or she may be liable for the costs of the contested services if 
the determination is not made in his or her favor.
    (2) Continue to furnish to the participant all other required 
services, as specified in subpart F of this part.
    (f) Expedited appeals process. (1) A PACE organization must have an 
expedited appeals process for situations in which the participant 
believes that his or her life, health, or ability to regain maximum 
function would be seriously jeopardized, absent provision of the 
service in dispute.
    (2) Except as provided in paragraph (f)(3) of this section, the 
PACE organization must respond to the appeal as expeditiously as the 
participant's health condition requires, but no later than 72 hours 
after it receives the appeal.
    (3) The PACE organization may extend the 72-hour timeframe by up to 
14 calendar days for either of the following reasons:
    (i) The participant requests the extension.
    (ii) The organization justifies to the State administering agency 
the need for additional information and how the delay is in the 
interest of the participant.

[[Page 66292]]

    (g) Determination in favor of participant. A PACE organization must 
furnish the disputed service as expeditiously as the participant's 
health condition requires if a determination is made in favor of the 
participant on appeal.
    (h) Determination adverse to participant. For a determination that 
is wholly or partially adverse to a participant, at the same time the 
decision is made, the PACE organization must notify the following:
    (1) HCFA.
    (2) The State administering agency.
    (3) The participant.
    (i) Analyzing appeals information. A PACE organization must 
maintain, aggregate, and analyze information on appeal proceedings and 
use this information in the organization's internal quality assessment 
and performance improvement program.


Sec. 460.124  Additional appeal rights under Medicare or Medicaid.

    A PACE organization must inform a participant in writing of his or 
her appeal rights under Medicare or Medicaid managed care, or both, 
assist the participant in choosing which to pursue if both are 
applicable, and forward the appeal to the appropriate external entity.

Subpart H--Quality Assessment and Performance Improvement


Sec. 460.130  General rule.

    (a) A PACE organization must develop, implement, maintain, and 
evaluate an effective, data-driven quality assessment and performance 
improvement program.
    (b) The program must reflect the full range of services furnished 
by the PACE organization.
    (c) A PACE organization must take actions that result in 
improvements in its performance in all types of care.


Sec. 460.132  Quality assessment and performance improvement plan.

    (a) Basic rule. A PACE organization must have a written quality 
assessment and performance improvement plan.
    (b) Annual review. The PACE governing body must review the plan 
annually and revise it, if necessary.
    (c) Minimum plan requirements. At a minimum, the plan must specify 
how the PACE organization proposes to meet the following requirements:
    (1) Identify areas to improve or maintain the delivery of services 
and patient care.
    (2) Develop and implement plans of action to improve or maintain 
quality of care.
    (3) Document and disseminate to PACE staff and contractors the 
results from the quality assessment and performance improvement 
activities.


Sec. 460.134  Minimum requirements for quality assessment and 
performance improvement program.

    (a) Minimum program requirements. A PACE organization's quality 
assessment and performance improvement program must include, but is not 
limited to, the use of objective measures to demonstrate improved 
performance with regard to the following:
    (1) Utilization of PACE services, such as decreased inpatient 
hospitalizations and emergency room visits.
    (2) Caregiver and participant satisfaction.
    (3) Outcome measures that are derived from data collected during 
assessments, including data on the following:
    (i) Physiological well being.
    (ii) Functional status.
    (iii) Cognitive ability.
    (iv) Social/behavioral functioning.
    (v) Quality of life of participants.
    (4) Effectiveness and safety of staff-provided and contracted 
services, including the following:
    (i) Competency of clinical staff.
    (ii) Promptness of service delivery.
    (iii) Achievement of treatment goals and measurable outcomes.
    (5) Nonclinical areas, such as grievances and appeals, 
transportation services, meals, life safety, and environmental issues.
    (b) Basis for outcome measures. Outcome measures must be based on 
current clinical practice guidelines and professional practice 
standards applicable to the care of PACE participants.
    (c) Minimum levels of performance. The PACE organization must meet 
or exceed minimum levels of performance, established by HCFA and the 
State administering agency, on standardized quality measures, such as 
influenza immunization rates, which are specified in the PACE program 
agreement.
    (d) Accuracy of data. The PACE organization must ensure that all 
data used for outcome monitoring are accurate and complete.


Sec. 460.136  Internal quality assessment and performance improvement 
activities.

    (a) Quality assessment and performance improvement requirements. A 
PACE organization must do the following:
    (1) Use a set of outcome measures to identify areas of good or 
problematic performance.
    (2) Take actions targeted at maintaining or improving care based on 
outcome measures.
    (3) Incorporate actions resulting in performance improvement into 
standards of practice for the delivery of care and periodically track 
performance to ensure that any performance improvements are sustained 
over time.
    (4) Set priorities for performance improvement, considering 
prevalence and severity of identified problems, and give priority to 
improvement activities that affect clinical outcomes.
    (5) Immediately correct any identified problem that directly or 
potentially threatens the health and safety of a PACE participant.
    (b) Quality assessment and performance improvement coordinator. A 
PACE organization must designate an individual to coordinate and 
oversee implementation of quality assessment and performance 
improvement activities.
    (c) Involvement in quality assessment and performance improvement 
activities. (1) A PACE organization must ensure that all 
multidisciplinary team members, PACE staff, and contract providers are 
involved in the development and implementation of quality assessment 
and performance improvement activities and are aware of the results of 
these activities.
    (2) The quality improvement coordinator must encourage a PACE 
participant and his or her caregivers to be involved in quality 
assessment and performance improvement activities, including providing 
information about their satisfaction with services.


Sec. 460.138  Committees with community input.

    A PACE organization must establish one or more committees, with 
community input, to do the following:
    (a) Evaluate data collected pertaining to quality outcome measures.
    (b) Address the implementation of, and results from, the quality 
assessment and performance improvement plan.
    (c) Provide input related to ethical decisionmaking, including end-
of-life issues and implementation of the Patient Self-Determination 
Act.


Sec. 460.140  Additional quality assessment activities.

    A PACE organization must meet external quality assessment and 
reporting requirements, as specified by HCFA or the State administering 
agency, in accordance with Sec. 460.202.

[[Page 66293]]

Subpart I--Participant Enrollment and Disenrollment


Sec. 460.150  Eligibility to enroll in a PACE program.

    (a) General rule. To enroll in a PACE program, an individual must 
meet eligibility requirements specified in this section. To continue to 
be eligible for PACE, an individual must meet the annual 
recertification requirements specified in Sec. 460.160.
    (b) Basic eligibility requirements. To be eligible to enroll in 
PACE, an individual must meet the following requirements:
    (1) Be 55 years of age or older.
    (2) Be determined by the State administering agency to need the 
level of care required under the State Medicaid plan for coverage of 
nursing facility services, which indicates that the individual's health 
status is comparable to the health status of individuals who have 
participated in the PACE demonstration waiver programs.
    (3) Reside in the service area of the PACE organization.
    (4) Meet any additional program specific eligibility conditions 
imposed under the PACE program agreement. These additional conditions 
may not modify the requirements of paragraph (b)(1) through (b)(3) of 
this section.
    (c) Other eligibility requirements. (1) At the time of enrollment, 
an individual must be able to live in a community setting without 
jeopardizing his or her health or safety.
    (2) The criteria used to determine if an individual's health or 
safety would be jeopardized by living in a community setting must be 
specified in the program agreement.
    (d) Eligibility under Medicare and Medicaid. Eligibility to enroll 
in a PACE program is not restricted to an individual who is either a 
Medicare beneficiary or Medicaid recipient. A potential PACE enrollee 
may be, but is not required to be, any or all of the following:
    (1) Entitled to Medicare Part A.
    (2) Enrolled under Medicare Part B.
    (3) Eligible for Medicaid.


Sec. 460.152  Enrollment process.

    (a) Intake process. Intake is an intensive process during which 
PACE staff members make one or more visits to a potential participant's 
place of residence and the potential participant makes one or more 
visits to the PACE center. At a minimum, the intake process must 
include the following activities:
    (1) The PACE staff must explain to the potential participant and 
his or her representative or caregiver the following information:
    (i) The PACE program, using a copy of the enrollment agreement 
described in Sec. 460.154, specifically references the elements of the 
agreement including but not limited to Sec. 460.154(e), (i) through 
(m), and (r).
    (ii) The requirement that the PACE organization would be the 
participant's sole service provider and clarification that the PACE 
organization guarantees access to services, but not to a specific 
provider.
    (iii) A list of the employees of the PACE organization who furnish 
care and the most current list of contracted health care providers 
under Sec. 460.70(c).
    (iv) Monthly premiums, if any.
    (v) Any Medicaid spenddown obligations.
    (2) The potential participant must sign a release to allow the PACE 
organization to obtain his or her medical and financial information and 
eligibility status for Medicare and Medicaid.
    (3) The State administering agency must assess the potential 
participant, including any individual who is not eligible for Medicaid, 
to ensure that he or she needs the level of care required under the 
State Medicaid plan for coverage of nursing facility services, which 
indicates that the individual's health status is comparable to the 
health status of individuals who have participated in the PACE 
demonstration waiver programs.
    (4) PACE staff must assess the potential participant to ensure that 
he or she can be cared for appropriately in a community setting and 
that he or she meets all requirements for PACE eligibility specified in 
this part.
    (b) Denial of Enrollment. If a prospective participant is denied 
enrollment because his or her health or safety would be jeopardized by 
living in a community setting, the PACE organization must meet the 
following requirements:
    (1) Notify the individual in writing of the reason for the denial.
    (2) Refer the individual to alternative services, as appropriate.
    (3) Maintain supporting documentation of the reason for the denial.
    (4) Notify HCFA and the State administering agency and make the 
documentation available for review.


Sec. 460.154  Enrollment agreement.

    If the potential participant meets the eligibility requirements and 
wants to enroll, he or she must sign an enrollment agreement which 
contains, at a minimum, the following information:
    (a) Applicant's name, sex, and date of birth.
    (b) Medicare beneficiary status (Part A, Part B, or both) and 
number, if applicable.
    (c) Medicaid recipient status and number, if applicable.
    (d) Other health insurance information, if applicable.
    (e) Conditions for enrollment and disenrollment in PACE.
    (f) Description of participant premiums, if any, and procedures for 
payment of premiums.
    (g) Notification that a Medicaid participant and a participant who 
is eligible for both Medicare and Medicaid are not liable for any 
premiums, but may be liable for any applicable spenddown liability 
under Secs. 435.121 and 435.831 of this chapter and any amounts due 
under the post-eligibility treatment of income process under 
Sec. 460.184.
    (h) Notification that a Medicare participant may not disenroll from 
PACE at a social security office.
    (i) Notification that enrollment in PACE results in disenrollment 
from any other Medicare or Medicaid prepayment plan or optional 
benefit. Electing enrollment in any other Medicare or Medicaid 
prepayment plan or optional benefit, including the hospice benefit, 
after enrolling as a PACE participant is considered a voluntary 
disenrollment from PACE.
    (j) Information on the consequences of subsequent enrollment in 
other optional Medicare or Medicaid programs following disenrollment 
from PACE.
    (k) Description of PACE services available, including all Medicare 
and Medicaid covered services, and how services are obtained from the 
PACE organization.
    (l) Description of the procedures for obtaining emergency and 
urgently needed out-of-network services.
    (m) The participant bill of rights.
    (n) Information on the process for grievances and appeals and 
Medicare/Medicaid phone numbers for use in appeals.
    (o) Notification of a participant's obligation to inform the PACE 
organization of a move or lengthy absence from the organization's 
service area.
    (p) An acknowledgment by the applicant or representative that he or 
she understands the requirement that the PACE organization must be the 
applicant's sole service provider.
    (q) A statement that the PACE organization has an agreement with 
HCFA and the State administering agency that is subject to renewal on a 
periodic basis and, if the agreement is

[[Page 66294]]

not renewed, the program will be terminated.
    (r) The applicant's authorization for disclosure and exchange of 
personal information between HCFA, its agents, the State administering 
agency, and the PACE organization.
    (s) The effective date of enrollment.
    (t) The applicant's signature and the date.


Sec. 460.156  Other enrollment procedures.

    (a) Items a PACE organization must give a participant upon 
enrollment. After the participant signs the enrollment agreement, the 
PACE organization must give the participant the following:
    (1) A copy of the enrollment agreement.
    (2) A PACE membership card.
    (3) Emergency information to be posted in his or her home 
identifying the individual as a PACE participant and explaining how to 
access emergency services.
    (4) Stickers for the participant's Medicare and Medicaid cards, as 
applicable, which indicate that he or she is a PACE participant and 
include the phone number of the PACE organization.
    (b) Submittal of participant information to HCFA and the State. The 
PACE organization must submit participant information to HCFA and the 
State administering agency, in accordance with established procedures.
    (c) Changes in enrollment agreement information. If there are 
changes in the enrollment agreement information at any time during the 
participant's enrollment, the PACE organization must meet the following 
requirements:
    (1) Give an updated copy of the information to the participant.
    (2) Explain the changes to the participant and his or her 
representative or caregiver in a manner they understand.


Sec. 460.158  Effective date of enrollment.

    A participant's enrollment in the program is effective on the first 
day of the calendar month following the date the PACE organization 
receives the signed enrollment agreement.


Sec. 460.160  Continuation of enrollment.

    (a) Duration of enrollment. Enrollment continues until the 
participant's death, regardless of changes in health status, unless 
either of the following actions occur:
    (1) The participant voluntarily disenrolls.
    (2) The participant is involuntarily disenrolled, as described in 
Sec. 460.164.
    (b) Annual recertification requirement. At least annually, the 
State administering agency must reevaluate whether a participant needs 
the level of care required under the State Medicaid plan for coverage 
of nursing facility services.
    (1) Waiver of annual requirement. (i) The State administering 
agency may permanently waive the annual recertification requirement for 
a participant if it determines that there is no reasonable expectation 
of improvement or significant change in the participant's condition 
because of the severity of a chronic condition or the degree of 
impairment of functional capacity.
    (ii) The PACE organization must retain in the participant's medical 
record the documentation of the reason for waiving the annual 
recertification requirement.
    (2) Deemed continued eligibility. If the State administering agency 
determines that a PACE participant no longer meets the State Medicaid 
nursing facility level of care requirements, the participant may be 
deemed to continue to be eligible for the PACE program until the next 
annual reevaluation, if, in the absence of continued coverage under 
this program, the participant reasonably would be expected to meet the 
nursing facility level of care requirement within the next 6 months.
    (3) Continued eligibility criteria. (i) The State administering 
agency, in consultation with the PACE organization, makes a 
determination of continued eligibility based on a review of the 
participant's medical record and plan of care.
    (ii) The criteria used to make the determination of continued 
eligibility must be specified in the program agreement.


Sec. 460.162  Voluntary disenrollment.

    A PACE participant may voluntarily disenroll from the program 
without cause at any time.


Sec. 460.164  Involuntary disenrollment.

    (a) Reasons for involuntary disenrollment. A participant may be 
involuntarily disenrolled for any of the following reasons:
    (1) The participant fails to pay, or to make satisfactory 
arrangements to pay, any premium due the PACE organization after a 30-
day grace period.
    (2) The participant engages in disruptive or threatening behavior, 
as described in paragraph (b) of this section.
    (3) The participant moves out of the PACE program service area or 
is out of the service area for more than 30 consecutive days, unless 
the PACE organization agrees to a longer absence due to extenuating 
circumstances.
    (4) The participant is determined to no longer meet the State 
Medicaid nursing facility level of care requirements and is not deemed 
eligible.
    (5) The PACE program agreement with HCFA and the State 
administering agency is not renewed or is terminated.
    (6) The PACE organization is unable to offer health care services 
due to the loss of State licenses or contracts with outside providers.
    (b) Disruptive or threatening behavior. For purposes of this 
section, a participant who engages in disruptive or threatening 
behavior refers to a participant who exhibits either of the following:
    (1) A participant whose behavior jeopardizes his or her health or 
safety, or the safety of others; or
    (2) A participant with decision-making capacity who consistently 
refuses to comply with his or her individual plan of care or the terms 
of the PACE enrollment agreement.
    (c) Documentation of disruptive or threatening behavior. If a PACE 
organization proposes to disenroll a participant who is disruptive or 
threatening, the organization must document the following information 
in the participant's medical record:
    (1) The reasons for proposing to disenroll the participant.
    (2) All efforts to remedy the situation.
    (d) Noncompliant behavior. (1) A PACE organization may not 
disenroll a PACE participant on the grounds that the participant has 
engaged in noncompliant behavior if the behavior is related to a mental 
or physical condition of the participant, unless the participant's 
behavior jeopardizes his or her health or safety, or the safety of 
others.
    (2) For purposes of this section, noncompliant behavior includes 
repeated noncompliance with medical advice and repeated failure to keep 
appointments.
    (e) State administering agency review and final determination. 
Before an involuntary disenrollment is effective, the State 
administering agency must review it and determine in a timely manner 
that the PACE organization has adequately documented acceptable grounds 
for disenrollment.


Sec. 460.166  Effective date of disenrollment.

    (a) In disenrolling a participant, the PACE organization must take 
the following actions:
    (1) Use the most expedient process allowed under Medicare and 
Medicaid procedures, as set forth in the PACE program agreement.

[[Page 66295]]

    (2) Coordinate the disenrollment date between Medicare and Medicaid 
(for a participant who is eligible for both Medicare and Medicaid).
    (3) Give reasonable advance notice to the participant.
    (b) Until the date enrollment is terminated, the following 
requirements must be met:
    (1) PACE participants must continue to use PACE organization 
services and remain liable for any premiums.
    (2) The PACE organization must continue to furnish all needed 
services.


Sec. 460.168  Reinstatement in other Medicare and Medicaid programs.

    To facilitate a participant's reinstatement in other Medicare and 
Medicaid programs after disenrollment, the PACE organization must do 
the following:
    (a) Make appropriate referrals and ensure medical records are made 
available to new providers in a timely manner.
    (b) Work with HCFA and the State administering agency to reinstate 
the participant in other Medicare and Medicaid programs for which the 
participant is eligible.


Sec. 460.170  Reinstatement in PACE.

    (a) A previously disenrolled participant may be reinstated in a 
PACE program.
    (b) If the reason for disenrollment is failure to pay the premium 
and the participant pays the premium before the effective date of 
disenrollment, the participant is reinstated in the PACE program with 
no break in coverage.


Sec. 460.172  Documentation of disenrollment.

    A PACE organization must meet the following requirements:
    (a) Have a procedure in place to document the reasons for all 
voluntary and involuntary disenrollments.
    (b) Make documentation available for review by HCFA and the State 
administering agency.
    (c) Use the information on voluntary disenrollments in the PACE 
organization's internal quality assessment and performance improvement 
program.

Subpart J--Payment


Sec. 460.180  Medicare payment to PACE organizations.

    (a) Principle of payment. Under a PACE program agreement, HCFA 
makes a prospective monthly payment to the PACE organization of a 
capitation amount for each Medicare participant in a payment area based 
on the rate it pays to a Medicare+Choice organization.
    (b) Determination of rate. (1) The PACE program agreement specifies 
the monthly capitation amount for each year applicable to a PACE 
organization.
    (2) Except as specified in paragraph (b)(4) of this section, the 
monthly capitation amount is based on the aged Part A and Part B 
payment rates established for purposes of payment to Medicare+Choice 
organizations. As used in this section, ``Medicare+Choice rates'' means 
the Part A and Part B rates calculated by HCFA for making payment to 
Medicare+Choice organizations under section 1853 of the Act.
    (3) The rates specified in paragraph (b)(2) of this section are 
adjusted by a frailty factor necessary to ensure comparability between 
PACE participants and the reference population in the Medicare system. 
The factor is specified in the PACE program agreement.
    (4) For Medicare participants who require ESRD services, the 
monthly capitation amount is based on the Medicare+Choice State ESRD 
rate. The monthly rate is adjusted by a factor to recognize the frailer 
and older ESRD population being served by the PACE organization. The 
PACE program agreement specifies this factor.
    (5) HCFA may adjust the monthly capitation amount to take into 
account other factors HCFA determines to be appropriate.
    (6) The monthly capitation payment is a fixed amount, regardless of 
changes in the participant's health status.
    (7) The monthly capitation payment amount is an all-inclusive 
payment for Medicare benefits provided to participants. A PACE 
organization must not seek any additional payment from Medicare. The 
only additional payment that a PACE organization may collect from, or 
on behalf of, a Medicare participant for PACE services is the 
following:
    (i) Any applicable premium amount specified in Sec. 460.186.
    (ii) Any charge permitted under paragraph (d) of this section when 
Medicare is not the primary payer.
    (iii) Any payment from the State, as specified in Sec. 460.182, for 
a participant who is eligible for both Medicare and Medicaid.
    (iv) Payment with respect to any applicable spenddown liability 
under Secs. 435.121 and 435.831 of this chapter and any amount due 
under the post-eligibility treatment of income process under 
Sec. 460.184 for a participant who is eligible for both Medicare and 
Medicaid.
    (8) HCFA computes the Medicare monthly capitation payment amount 
under a PACE program agreement so that the total payment level for all 
participants is less than the projected payment under Medicare for a 
comparable population not enrolled under a PACE program.
    (c) Adjustments to payments. If the actual number of Medicare 
participants differs from the estimated number of participants on which 
the amount of the prospective monthly payment was based, HCFA adjusts 
subsequent monthly payments to account for the difference.
    (d) Application of Medicare secondary payer provisions. (1) Basic 
rule. HCFA does not pay for services to the extent that Medicare is not 
the primary payer under part 411 of this chapter.
    (2) Responsibilities of the PACE organization. The PACE 
organization must do the following:
    (i) Identify payers that are primary to Medicare under part 411 of 
this chapter.
    (ii) Determine the amounts payable by those payers.
    (iii) Coordinate benefits to Medicare participants with the 
benefits of the primary payers.
    (3) Charges to other entities. The PACE organization may charge 
other individuals or entities for PACE services covered under Medicare 
for which Medicare is not the primary payer, as specified in paragraphs 
(d)(4) and (5) of this section.
    (4) Charge to other insurers or the participant. If a Medicare 
participant receives from a PACE organization covered services that are 
also covered under State or Federal workers' compensation, any no-fault 
insurance, or any liability insurance policy or plan, including a self-
insured plan, the PACE organization may charge any of the following:
    (i) The insurance carrier, the employer, or any other entity that 
is liable for payment for the services under part 411 of this chapter.
    (ii) The Medicare participant, to the extent that he or she has 
been paid by the carrier, employer, or other entity.
    (5) Charge to group health plan (GHP) or large group health plan 
(LGHP). If Medicare is not the primary payer for services that a PACE 
organization furnished to a Medicare participant who is covered under a 
GHP or LGHP, the organization may charge the following:
    (i) GHP or LGHP for those services.
    (ii) Medicare participant to the extent that he or she has been 
paid by the GHP or LGHP for those services.


Sec. 460.182  Medicaid payment.

    (a) Under a PACE program agreement, the State administering agency 
makes a prospective monthly payment to the PACE organization of a 
capitation amount for each Medicaid participant.

[[Page 66296]]

    (b) The monthly capitation payment amount is negotiated between the 
PACE organization and the State administering agency, and specified in 
the PACE program agreement. The amount represents the following:
    (1) Is less than the amount that would otherwise have been paid 
under the State plan if the participants were not enrolled under the 
PACE program.
    (2) Takes into account the comparative frailty of PACE 
participants.
    (3) Is a fixed amount regardless of changes in the participant's 
health status.
    (4) Can be renegotiated on an annual basis.
    (c) The PACE organization must accept the capitation payment amount 
as payment in full for Medicaid participants and may not bill, charge, 
collect, or receive any other form of payment from the State 
administering agency or from, or on behalf of, the participant, except 
as follows:
    (1) Payment with respect to any applicable spenddown liability 
under Secs. 435.121 and 435.831 of this chapter and any amounts due 
under the post-eligibility treatment of income process under 
Sec. 460.184.
    (2) Medicare payment received from HCFA or from other payers, in 
accordance with Sec. 460.180(d).
    (d) State procedures for the enrollment and disenrollment of 
participants in the State's system, including procedures for any 
adjustment to account for the difference between the estimated number 
of participants on which the prospective monthly payment was based and 
the actual number of participants in that month, are included in the 
PACE program agreement.


Sec. 460.184  Post-eligibility treatment of income.

    (a) A State may provide for post-eligibility treatment of income 
for Medicaid participants in the same manner as a State treats post-
eligibility income for individuals receiving services under a waiver 
under section 1915(c) of the Act.
    (b) Post-eligibility treatment of income is applied as it is under 
a waiver of section 1915(c) of the Act, as specified in Secs. 435.726 
and 435.735 of this chapter, and section 1924 of the Act.


Sec. 460.186  PACE premiums.

    The amount that a PACE organization can charge a participant as a 
monthly premium depends on the participant's eligibility under Medicare 
and Medicaid, as follows:
    (a) Medicare Parts A and B. For a participant who is entitled to 
Medicare Part A, enrolled under Medicare Part B, but not eligible for 
Medicaid, the premium equals the Medicaid capitation amount.
    (b) Medicare Part A only. For a participant who is entitled to 
Medicare Part A, not enrolled under Medicare Part B, and not eligible 
for Medicaid, the premium equals the Medicaid capitation amount plus 
the Medicare Part B capitation rate.
    (c) Medicare Part B only. For a participant who is enrolled only 
under Medicare Part B and not eligible for Medicaid, the premium equals 
the Medicaid capitation amount plus the Medicare Part A capitation 
rate.
    (d) Medicaid, with or without Medicare. A PACE organization may not 
charge a premium to a participant who is eligible for both Medicare and 
Medicaid, or who is only eligible for Medicaid.

Subpart K--Federal/State Monitoring


Sec. 460.190  Monitoring during trial period.

    (a) Trial period review. During the trial period, HCFA, in 
cooperation with the State administering agency, conducts comprehensive 
annual reviews of the operations of a PACE organization to ensure 
compliance with the requirements of this part.
    (b) Scope of review. The review includes the following:
    (1) An onsite visit to the PACE organization, which may include, 
but is not limited to, the following:
    (i) Review of participants' charts.
    (ii) Interviews with staff.
    (iii) Interviews with participants and caregivers.
    (iv) Interviews with contractors.
    (v) Observation of program operations, including marketing, 
participant services, enrollment and disenrollment procedures, 
grievances, and appeals.
    (2) A comprehensive assessment of an organization's fiscal 
soundness.
    (3) A comprehensive assessment of the organization's capacity to 
furnish all PACE services to all participants.
    (4) Any other elements that HCFA or the State administering agency 
find necessary.


Sec. 460.192  Ongoing monitoring after trial period.

    (a) At the conclusion of the trial period, HCFA, in cooperation 
with the State administering agency, continues to conduct reviews of a 
PACE organization, as appropriate, taking into account the quality of 
care furnished and the organization's compliance with all of the 
requirements of this part.
    (b) Reviews include an on-site visit at least every 2 years.


Sec. 460.194  Corrective action.

    (a) A PACE organization must take action to correct deficiencies 
identified during reviews.
    (b) HCFA or the State administering agency monitors the 
effectiveness of corrective actions.
    (c) Failure to correct deficiencies may result in sanctions or 
termination, as specified in subpart D of this part.


Sec. 460.196  Disclosure of review results.

    (a) HCFA and the State administering agency promptly report the 
results of reviews under Secs. 460.190 and 460.192 to the PACE 
organization, along with any recommendations for changes to the 
organization's program.
    (b) HCFA and the State administering agency make the results of 
reviews available to the public upon request.
    (c) The PACE organization must post a notice of the availability of 
the results of the most recent review and any plans of correction or 
responses related to the most recent review.
    (d) The PACE organization must make the review results available 
for examination in a place readily accessible to participants.

Subpart L--Data Collection, Record Maintenance, and Reporting


Sec. 460.200  Maintenance of records and reporting of data.

    (a) General rule. A PACE organization must collect data, maintain 
records, and submit reports as required by HCFA and the State 
administering agency.
    (b) Access to data and records. A PACE organization must allow HCFA 
and the State administering agency access to data and records 
including, but not limited to, the following:
    (1) Participant health outcomes data.
    (2) Financial books and records.
    (3) Medical records.
    (4) Personnel records.
    (c) Reporting. A PACE organization must submit to HCFA and the 
State administering agency all reports that HCFA and the State 
administering agency require to monitor the operation, cost, quality, 
and effectiveness of the program and establish payment rates.
    (d) Safeguarding data and records. A PACE organization must 
establish written policies and implement procedures to safeguard all 
data, books, and records against loss, destruction, unauthorized use, 
or inappropriate alteration.
    (e) Confidentiality of health information. A PACE organization must 
establish written policies and

[[Page 66297]]

implement procedures to do the following:
    (1) Safeguard the privacy of any information that identifies a 
particular participant. Information from, or copies of, records may be 
released only to authorized individuals. Original medical records are 
released only in accordance with Federal or State laws, court orders, 
or subpoenas.
    (2) Maintain complete records and relevant information in an 
accurate and timely manner.
    (3) Grant each participant timely access, upon request, to review 
and copy his or her own medical records and to request amendments to 
those records.
    (4) Abide by all Federal and State laws regarding confidentiality 
and disclosure for mental health records, medical records, and other 
participant health information.
    (f) Retention of records. (1) A PACE organization must retain 
records for the longest of the following periods:
    (i) The period of time specified in State law.
    (ii) Six years from the last entry date.
    (iii) For medical records of disenrolled participants, 6 years 
after the date of disenrollment.
    (2) If litigation, a claim, a financial management review, or an 
audit arising from the operation of the PACE program is started before 
the expiration of the retention period, specified in paragraph (f)(1) 
of this section, the PACE organization must retain the records until 
the completion of the litigation, or resolution of the claims or audit 
findings.


Sec. 460.202  Participant health outcomes data.

    (a) A PACE organization must establish and maintain a health 
information system that collects, analyzes, integrates, and reports 
data necessary to measure the organization's performance, including 
outcomes of care furnished to participants.
    (b) A PACE organization must furnish data and information 
pertaining to its provision of participant care in the manner, and at 
the time intervals, specified by HCFA and the State administering 
agency. The items collected are specified in the PACE program 
agreement.


Sec. 460.204  Financial recordkeeping and reporting requirements.

    (a) Accurate reports. A PACE organization must provide HCFA and the 
State administering agency with accurate financial reports that are--
    (1) Prepared using an accrual basis of accounting; and
    (2) Verifiable by qualified auditors.
    (b) Accrual accounting. A PACE organization must maintain an 
accrual accounting recordkeeping system that does the following:
    (1) Accurately documents all financial transactions.
    (2) Provides an audit trail to source documents.
    (3) Generates financial statements.
    (c) Accepted reporting practices. Except as specified under 
Medicare principles of reimbursement, as defined in part 413 of this 
chapter, a PACE organization must follow standardized definitions, 
accounting, statistical, and reporting practices that are widely 
accepted in the health care industry.
    (d) Audit or inspection. A PACE organization must permit HCFA and 
the State administering agency to audit or inspect any books and 
records of original entry that pertain to the following:
    (1) Any aspect of services furnished.
    (2) Reconciliation of participants' benefit liabilities.
    (3) Determination of Medicare and Medicaid amounts payable.


Sec. 460.208  Financial statements.

    (a) General rule. (1) Not later than 180 days after the 
organization's fiscal year ends, a PACE organization must submit a 
certified financial statement that includes appropriate footnotes.
    (2) The financial statement must be certified by an independent 
certified public accountant.
    (b) Contents. At a minimum, the certified financial statement must 
consist of the following:
    (1) A certification statement.
    (2) A balance sheet.
    (3) A statement of revenues and expenses.
    (4) A source and use of funds statement.
    (c) Quarterly financial statement--(1) During trial period. A PACE 
organization must submit a quarterly financial statement throughout the 
trial period within 45 days after the last day of each quarter of the 
PACE organization's fiscal year.
    (2) After trial period. If HCFA or the State administering agency 
determines that an organization's performance requires more frequent 
monitoring and oversight due to concerns about fiscal soundness, HCFA 
or the State administering agency may require a PACE organization to 
submit monthly or quarterly financial statements, or both.


Sec. 460.210  Medical records.

    (a) Maintenance of medical records. (1) A PACE organization must 
maintain a single, comprehensive medical record for each participant, 
in accordance with accepted professional standards.
    (2) The medical record for each participant must meet the following 
requirements:
    (i) Be complete.
    (ii) Accurately documented.
    (iii) Readily accessible.
    (iv) Systematically organized.
    (v) Available to all staff.
    (vi) Maintained and housed at the PACE center where the participant 
receives services.
    (b) Content of medical records. At a minimum, the medical record 
must contain the following:
    (1) Appropriate identifying information.
    (2) Documentation of all services furnished, including the 
following:
    (i) A summary of emergency care and other inpatient or long-term 
care services.
    (ii) Services furnished by employees of the PACE center.
    (iii) Services furnished by contractors and their reports.
    (3) Multidisciplinary assessments, reassessments, plans of care, 
treatment, and progress notes that include the participant's response 
to treatment.
    (4) Laboratory, radiological and other test reports.
    (5) Medication records.
    (6) Hospital discharge summaries, if applicable.
    (7) Reports of contact with informal support (for example, 
caregiver, legal guardian, or next of kin).
    (8) Enrollment Agreement.
    (9) Physician orders.
    (10) Discharge summary and disenrollment justification, if 
applicable.
    (11) Advance directives, if applicable.
    (12) A signed release permitting disclosure of personal 
information.
    (13) Accident and incident reports.
    (c) Transfer of medical records. The organization must promptly 
transfer copies of medical record information between treatment 
facilities.
    (d) Authentication of medical records. (1) All entries must be 
legible, clear, complete, and appropriately authenticated and dated.
    (2) Authentication must include signatures or a secured computer 
entry by a unique identifier of the primary author who has reviewed and 
approved the entry.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program; Catalog of Federal Domestic Assistance Program 
No. 93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)


[[Page 66298]]


    Dated: May 6, 1999.
Nancy-Ann DeParle,
Administrator, Health Care Financing Administration.

    Approved: July 8, 1999.
Donna E. Shalala,
Secretary.

    Note: This Addendum A will not appear in the Code of Federal 
Regulations.

Addendum A

PACE Protocol

Overview

    The following document describes the minimum requirements for 
PACE (Program of All-inclusive Care for the Elderly) providers as 
well as core operational procedures and processes. This definition 
document, the PACE Protocol, was first developed in 1990 as part of 
a cooperative effort involving staff from Health Care Financing 
Administration's (HCFA) Office of Research and Demonstrations, 
states participating in the PACE replication, and PACE sites, 
including On Lok Senior Health Services.
    Originally authorized by Congress in 1986, the PACE 
demonstration was designed to determine if the community-based long 
term care model developed by On Lok Senior Health Services in San 
Francisco, California could be replicated. Since 1990, ten sites 
have successfully implemented PACE. For those sites, the protocol 
served as the specific legal instrument for implementation of the 
demonstration and the regulatory framework for operations in the 
absence of formal regulation.
    In preparation for moving PACE beyond demonstration status, a 
work group comprised of PACE site representatives began the process 
of updating the protocol in December 1993 to incorporate the 
experience existing PACE providers have had in implementation. With 
comments from HCFA and State Medicaid agency representatives, the 
document has now been finalized and is intended to serve as the 
basic standard for PACE providers.

Table of Contents

Introduction

Definitions

Part I. Organization

A. Philosophy Statement
B. Organizational Structure
C. Organizational Requirements
D. Service Area
E. Conflict of Interest
F. Fiscal Soundness

Part II. Participant Rights

A. Participant Bill of Rights
B. Complaints, Grievances and Appeals

Part III. Eligibility, Enrollment, Disenrollment

A. Eligibility
B. Marketing
C. Enrollment
D. Disenrollment

Part IV. Service Coverage and Arrangement

A. Service Coverage
B. Service Arrangement

Part V. Quality Assurance

A. Multidisciplinary Team
B. Written Quality Assurance Plan

Part VI. Reimbursement

A. PACE Reimbursement Overview
B. Medicare Payment
C. Medicaid Payment
D. Private Pay Premiums

Part VII. Provider Administration

A. Contracting Requirements
B. Data Collection and Reporting
C. Financial Reporting
D. Maintenance of Books and Records

Part VIII. External Oversight

A. General
B. National Standards and Periodic Surveys

Part IX. Provider Termination

A. Reasons for Termination
B. Termination Plan

Part X. Medicare and Medicaid Contracts Requirements

A. General

Introduction

    This document describes the minimum requirements for PACE 
(Program of All-inclusive Care for the Elderly) providers as well as 
core operational procedures and processes. The requirements outlined 
are applicable to PACE providers in varying degree depending upon 
whether the provider is in its initial trial period, as defined 
below, or if it has completed that period and attained permanent 
provider status. It is intended that this document outline the basic 
standards for PACE providers except as may be subsequently modified 
by law or regulation.

Definitions

    1. PACE provider: In this document, the term ``PACE provider'' 
means a private not-for-profit or public entity (or a distinct part 
of such an entity) which:
    (a) is primarily engaged in providing participants a 
comprehensive range of acute and long-term care services as 
described in Part IV. of this document; and
    (b) meets the requirements defined in this document and includes 
PACE providers with permanent status and PACE providers in the trial 
period.
    2. Trial Period: A period of up to three years in length during 
which the PACE provider meets all the requirements in operating a 
PACE program except that financial risk is shared between the 
provider and the federal and state governments based on the 
arrangement developed by HCFA. At the conclusion of this period, 
providers may opt for permanent provider status under Medicare and 
Medicaid.
    3. Participant: An individual who meets the eligibility 
requirements outlined in Part II and enrolls in a PACE program as 
described. This individual may also be called an enrollee.
    4. Contract: In this document, contract, when referring to the 
contract between the PACE provider and the federal and state 
governments, may be in the form of a cooperative agreement or a 
contract.

Part I: Organization

A. Philosophy Statement

    The PACE provider must include in its mission statement or 
philosophy statement the following values:
    1. To enhance the quality of life and autonomy for frail, older 
adults;
    2. To maximize dignity and respect of older adults;
    3. To enable frail, older adults to live in their homes and in 
the community as long as medically and socially feasible; and
    4. To preserve and support the older adult's family unit.

B. Organizational Structure

    1. The PACE provider must be a public or private not-for-profit 
501(c)(3) organization and may meet this requirement in any of the 
following ways:
    a. A free-standing 501(c)(3) corporation;
    b. A 501(c)(3) subsidiary of a larger organization;
    c. A department of a 501(c)(3) corporation; or
    d. Governmental entities at the city, county, or state level.
    2. As a community-based model of care, the PACE provider must 
ensure that community representation is provided on issues of 
program management and participant care. This representation may be 
achieved through participation on the board of the PACE provider or 
through advisory committees.
    3. The PACE provider must make available a current 
organizational chart displaying corporate officers and relationships 
to any parent or other corporate subsidiaries or affiliates, and 
indicating the PACE provider's relationship to the corporate board. 
A PACE provider considering a change in organizational structure 
must notify HCFA and the State Medicaid agency at least 60 days 
before the anticipated change. Changes must be approved by Health 
Care Financing Administration (HCFA) and the State Medicaid agency.

C. Organizational Requirements

    The PACE provider shall have the organizational, administrative 
and service delivery ability to effectively organize and guide 
operations and meet the contractual obligations which include, but 
are not limited to:
    1. A policymaking body which oversees operations and devotes 
resources sufficient to effectively plan, organize, administer and 
evaluate the PACE provider's operation;
    2. Ability to provide the complete PACE service package, 
including the full scope of Medicare and Medicaid benefits on a 
capitation basis regardless of the frequency, extent, or level of 
services provided to any participant;
    3. Project Director whose responsibilities and duties are 
described in writing;
    4. Medical Director whose responsibilities and duties are 
defined in writing;
    5. Staff to directly provide PACE Center services, including 
primary medical care;
    6. A standing multidisciplinary team based in the PACE Center 
composed of medical and health-related professionals and para-
professionals, all of whom meet applicable

[[Page 66299]]

state licensing and certification requirements and who provide 
direct care and services appropriate to participant need;
    7. Demonstrated separation of medical, social and supportive 
services from fiscal and administrative management sufficient to 
assure that medical decisions will not be unduly influenced by 
fiscal and administrative management;
    8. Staff to maintain financial records and books of accounts on 
an accrual basis;
    9. Staff to report data required for management, as well as the 
Federal and State governments;
    10. Facilities and equipment that meet applicable State 
requirements;
    11. A system for informing employees and contract providers 
about all relevant provider requirements including coverage and 
appeal procedures.

D. Service Area

    The PACE provider must serve a defined service area identified 
by county, zip code and street boundaries. Changes in the service 
area must be pre-approved by HCFA and the State Medicaid Agency.

E. Conflict of Interest

    1. The PACE provider must not have any agents or management 
staff who have been convicted of criminal offenses related to their 
involvement in Medicaid, Medicare and/or other health insurance and 
health care programs.
    2. No member of the PACE provider's policymaking body or any 
immediate family member thereof shall have any direct or indirect 
interest in any contract for supplying service or materials to the 
PACE provider.

F. Fiscal Soundness

    1. During the trial period, the PACE provider must prepare an 
annual budget by month or by quarter that is acceptable to HCFA and 
the State Medicaid agency. The budget shall be based on the cost 
center accounting structure provided by HCFA and the State Medicaid 
agency.
    The provider must have an insolvency plan approved by HCFA and 
the State Medicaid agency, which in the event of insolvency, 
provides for:
    a. The continuation of benefits for the duration of the contract 
period for which capitation payment has been made;
    b. The continuation of benefits to participants who are confined 
in a hospital on the date of insolvency until their discharge; and
    c. Arrangements to protect participants from incurring liability 
for payment of any fees which are the legal obligation of the PACE 
provider.
    2. By the end of the trial period, each PACE provider shall have 
a fiscally sound operation as demonstrated by total assets being 
greater than total unsubordinated liabilities, sufficient cash flow 
and adequate liquidity to meet obligations as they become due, a net 
operating surplus and a plan for handling insolvency that includes 
the provisions listed as 1.a-c. above. Furthermore, the PACE program 
must demonstrate that it has arrangements in place in the amount of 
at least the sum of the following to cover expenses in the event it 
becomes insolvent:
    a. One month's total capitation revenue to cover expenses the 
month prior to insolvency; and
    b. One month's average payment to subcontractors, including 
providers of emergency services, to cover potential expenses the 
month after the date insolvency has been declared or operations 
cease.
    Arrangements to cover expenses may include but are not limited 
to: Insolvency insurance, hold harmless arrangement, continuation of 
benefits provisions, letters of credit, guarantees, net worth, 
restricted state reserves, state law provisions.
    3. Providers are required to submit financial reports as 
specified in their contracts with HCFA and the State Medicaid 
agency.

Part II: Participant Rights

A. Participant Bill of Rights

    The PACE provider has a formal Participant Bill of Rights 
designed to protect and promote the rights of each participant to be 
treated with dignity and respect.
    1. These rights, which may be exercised by the participant or 
his/her representative, if necessary, include the rights:
    a. To have the ``Enrollment Agreement'' fully discussed and 
explained;
    b. To be fully informed in writing prior to and at the time of 
enrollment (as well as during participation) of the services 
available from the PACE provider;
    c. To be fully informed of rights and responsibilities as a 
participant and/or all rules and regulations governing 
participation;
    d. To be encouraged and assisted to exercise rights as a 
participant, as well as civil and legal rights.
    e. To be encouraged and assisted to voice grievances and 
recommend changes in policies and services to PACE staff and outside 
representatives of his/her choice. There will be no restraint, 
interference, coercion, discrimination or reprisal by the PACE staff 
towards participants exercising this right;
    f. To be fully informed by the multidisciplinary team of health 
and functional status;
    g. To participate in the development and implementation of the 
treatment plan designed to promote functional ability to the optimal 
level and to encourage independence;
    h. To receive treatment and rehabilitative services;
    i. To have dignity, privacy, and humane care;
    j. To be free from harm, including unnecessary physical 
restraint or isolation, excessive medication, physical or mental 
abuse or neglect;
    k. To be free from hazardous procedures;
    l. Not to be required to perform services for the provider that 
are not included for therapeutic purposes in the individual 
treatment plan;
    m. To be given reasonable advance notice of any transfer to 
another part of the program for medical reasons or for the 
participant's welfare or that of other participants. Such actions 
will be documented in the health record;
    n. To have reasonable access to telephones;
    o. To be assured of confidential treatment of all information 
contained in the health record, including information contained in 
any automated data bank. Written consent is required for the release 
of information to persons not otherwise authorized under law to 
receive it. Participants may provide written consent which limits 
the degree of information and the persons to whom information may be 
given;
    p. To refuse treatment and be informed of the consequences of 
such refusal;
    q. To disenroll from the program at any time subject to the 
terms of this agreement; and
    r. To establish advance directives and make health care 
decisions.
    2. Written policies or established procedures identify 
mechanisms for ensuring that the participant and family members 
understand their rights including items listed above.
    a. Staff must orally review the Participant Bill of Rights with 
the participant and family at enrollment in a language understood by 
the participant. A copy of the Bill of Rights is included in the 
member handbook given to participants at enrollment.
    b. Participant rights must be posted in a prominent place in the 
PACE center in English and any other predominant language of the 
community.

B. Complaints, Grievances and Appeals

    The PACE provider must have internal procedures, approved by 
HCFA and the State Medicaid agency, which provide participants and 
their family members a process for expressing dissatisfaction with 
the services provided by PACE, whether medical or non-medical in 
nature, and which allow for orderly resolution of any complaint or 
grievance. Furthermore, all involuntary disenrollments, other than 
those resulting from participants moving out of the PACE provider's 
geographic catchment area, are considered participant grievances and 
are subject to these procedures.
    1. The PACE provider must have written internal grievance 
procedures which describe the process by which participants can make 
appeals, and give the time frames for the PACE provider's response 
to participants.
    2. The PACE provider must inform all participants of the 
grievance procedures in writing (i.e., in member handbooks).
    3. In cases where grievances are not resolved to the 
participant's satisfaction (e.g., denial of payment for claim or 
refusal of services), the PACE provider must state the specific 
reasons for its determination and inform the participant of his/her 
right to appeal. The PACE provider must process grievances in a 
timely manner.
    4. Reconsideration of grievances must be made by a person or 
persons who were not involved in making the initial determination. 
The PACE provider must give the parties to the reconsideration 
reasonable opportunity to present evidence related to the issue in 
dispute, in person as well as in writing.
    5. All determinations that are wholly or partially adverse to 
the participant must be forwarded to HCFA and the State Medicaid 
agency. If on appeal a judgment is made in favor of the participant, 
the PACE provider

[[Page 66300]]

must take appropriate action in a timely manner.

Part III: Eligibility, Enrollment, Disenrollment

A. Eligibility

    1. To be eligible for enrollment in PACE, an individual must be:
    a. At least fifty-five years of age;
    b. A resident in the PACE provider's service area;
    c. Assessed by the PACE provider's multidisciplinary team; and
    d. Certified by the State Medicaid Agency as eligible for 
nursing home level of care.
    2. The contracts between the PACE provider, HCFA and the State 
Medicaid agency will include site-specific eligibility criteria 
including minimum age limit, service area and health status 
requirements of the State Medicaid agency for nursing home level of 
care.
    3. The PACE provider may choose not to enroll participants whose 
condition is such at the point of enrollment that their health and 
safety would be jeopardized by remaining in their home and 
community.

B. Marketing

    1. Marketing Activities. The PACE provider may inform the 
general public of its program through appropriate activities and 
media. The PACE provider must ensure that prohibited marketing 
activities are not conducted by its employees or its agents. 
Prohibited practices are:
    a. Discrimination of any kind aside from PACE eligibility 
requirements;
    b. Activities that could mislead or confuse potential 
participants, or misrepresent the PACE provider, HCFA or the State 
Medicaid agency;
    c. Gifts or payments to induce enrollment; and
    d. Subcontracting outreach efforts to individuals or 
organizations whose sole responsibility involves direct contact with 
elderly to solicit enrollment.
    2. Marketing Materials. a. The PACE provider must provide 
prospective participants adequate written descriptions of the PACE 
provider's enrollment requirements, procedures, benefits, fees and 
other charges, services and other information necessary for 
prospective participants to make an informed decision about 
enrollment.
    b. All written marketing information distributed to PACE 
participants to encourage or prolong enrollment must be approved by 
HCFA, the State Medicaid agency, and other agencies, if required. 
Approval or denial shall be granted in 30 days. No response in 30 
days constitutes approval.
    Distribution of marketing materials before HCFA and the State 
Medicaid agency approval or expiration of the 30 day period is 
prohibited.
    c. Marketing and enrollment materials which must be approved 
include, but are not limited to, marketing brochures, enrollment 
agreement, member handbook, and disenrollment forms.
    3. Marketing Plan. The PACE provider shall have an active 
marketing plan, with measurable enrollment objectives and a system 
for tracking its effectiveness.

C. Enrollment

    1. Participants enrolled in PACE must accept PACE as his/her 
sole service provider and its multidisciplinary team as his/her sole 
case manager (the ``lock-in'' provision).
    2. Following referral to the program, PACE provider staff 
schedule a screening visit with the potential participant and/or 
his/her significant others or legal guardians to explain:
    a. PACE;
    b. the ``lock-in'' provision; and
    c. monthly fees, if any.
    3. Following this explanation, the potential participant must 
sign a release of his/her medical and financial information.
    4. The potential participant is assessed by the PACE provider to 
determine eligibility.
    5. All participants, including Medicare-only eligibles, shall be 
reviewed by the State Medicaid agency for a one-time only 
certification at enrollment that the participant meets State 
Medicaid health status requirements for nursing home level of care. 
Procedures for enrollment, including level of care certification, 
shall be included in the contract between HCFA and the State 
Medicaid agency.
    6. If the potential participant is certified as nursing home 
eligible and is willing to join PACE, he/she must sign an Enrollment 
Agreement which contains the following information:
    a. Applicant's name, sex, date of birth, health insurance claim 
numbers, Medicare eligibility status (Part A and/or Part B) and 
number, Medicaid number or none;
    b. Description of benefits available, including all Medicare and 
Medicaid covered services, and how services are allocated or can be 
obtained from the PACE provider;
    c. Explanation of participant premiums and procedures for 
payment, if any;
    d. Effective date of enrollment;
    e. Explanation of participant rights, grievance procedures, 
conditions for enrollment and disenrollment and Medicare and 
Medicaid contacts in appeal situations;
    f. Notification of participant's obligation to notify PACE 
provider of a move or absence from the provider's service area;
    g. Explanation of the ``lock-in'' requirement and an 
acknowledgment on the part of the applicant that he/she understands 
that all services must be received through the PACE provider;
    h. Explanation of procedures for obtaining emergency services 
and urgent care;
    i. Requirement to maintain their own Medicare and Medicaid 
eligibility including Medicare Part B eligibility through the 
payment of required premiums;
    j. Statement that the private premium can only be raised once a 
year;
    k. Statement that PACE provider has a contract with HCFA and the 
State Medicaid agency which is subject to renewal on a periodic 
basis and failure of the PACE provider to renew the contract will 
result in termination of enrollment in the program;
    l. Explanation that the Medicare member may not disenroll from 
PACE at a social security office; and
    m. Explanation that enrollment in PACE will result in automatic 
disenrollment from any other Medicare or Medicaid prepayment health 
plan;
    n. Applicant's authorization for the disclosure and exchange of 
information between HCFA, its agent, the State Medicaid agency and 
the PACE provider;
    o. Applicant's signature and date.
    7. The participant's enrollment in the program is effective the 
first day of the calendar month following the signing date of the 
Enrollment Agreement.
    8. Once the participant signs the Enrollment Agreement, he/she 
is given:
    a. A copy of the Enrollment Agreement;
    b. The Member Handbook (Combined Contract and Evidence of 
Coverage), if different from the Enrollment Agreement;
    c. A PACE membership card;
    d. An emergency sticker to be posted in his/her home in case of 
emergency; and
    e. A sticker for his/her Medicare card and, if applicable, a 
Medicaid card which indicates that he/she is a PACE participant.
    9. The PACE provider will submit enrollment documents to HCFA 
and the State Medicaid agency in accordance with established 
procedures.
    10. Enrollment continues as long as desired by the participant, 
regardless of changes in health status, until death, voluntary 
disenrollment, or involuntary disenrollment as described in Section 
D.
    11. If, after complete assessment by the multidisciplinary team, 
a prospective participant is denied enrollment based on Part III, 
Section A.3., the PACE provider shall provide written notification 
explaining the reason for denial and refer the individual to 
alternative services as appropriate.

D. Disenrollment Process

    1. A PACE participant may either voluntarily or involuntarily 
disenroll from the program. A participant may be involuntarily 
disenrolled if he/she:
    a. Moves out of the PACE program service area;
    b. Is a person with decision making capacity who consistently 
does not comply with his/her individual plan of care and poses a 
significant risk to him/herself or others;
    c. Experiences a breakdown in the physician and/or team-
participant relationship such that the PACE provider's ability to 
furnish services to either the participant or other participants is 
seriously impaired;
    d. Refuses services and/or is unwilling to meet conditions of 
participation as they appear in the Enrollment Agreement;
    e. Refuses to provide accurate financial information, provides 
false information or illegally transfers assets;
    f. Fails to pay or to make satisfactory arrangements to pay any 
amount due the PACE provider after a 30-day grace period;
    g. Is out of the PACE provider service area for more than 30 
days (unless other arrangements have been made); or
    h. Is enrolled in a PACE program that loses its contracts and/or 
licenses enabling it to offer health care services.
    2. For voluntary disenrollments, the PACE provider shall use the 
most expedient process allowed for by Medicare and Medicaid 
procedures while ensuring a coordinated disenrollment date. The PACE 
provider disenrollment procedures shall be

[[Page 66301]]

included in the contracts with HCFA and the State Medicaid agency. 
Until enrollment is terminated, PACE participants are required to 
continue using the PACE provider services and remain liable for any 
premiums. The PACE provider shall continue to provide all needed 
services until the date of termination.
    3. To facilitate a participant's reinstatement in the fee-for-
service system, the PACE provider must:
    a. Assist a participant who wishes to return to the fee-for-
service system by making appropriate referrals and by making medical 
records available to new providers; and
    b. Work with HCFA and the State Medicaid agency to reinstate 
his/her benefits in the fee-for-service system.
    4. Renewal provisions. a. If the reason for disenrollment is due 
to failure to pay, payment of the monthly fee before the end of the 
month of disenrollment will result in reinstatement as of the first 
day of succeeding month. b. In the case of a voluntary 
disenrollment, a one time only reinstatement will be allowed if the 
participant meets eligibility criteria.
    5. All voluntary and involuntary disenrollments must be 
documented and available for review by HCFA and the State Medicaid 
agency.

Part IV: Service Coverage and Arrangement

A. Service Coverage

    1. The PACE service package includes, but is not limited to, all 
current Medicare and Medicaid services. All usual limitations and 
conditions for covered services are waived.
    2. The PACE provider must provide its participants with access 
to medical care and other services, as applicable, 24 hours per day, 
7 days a week, 365 days per year.
    3. At a minimum each PACE provider shall provide the following 
services:
    a. Multidisciplinary assessment and treatment planning;
    b. Primary care services including physician and nursing 
services;
    c. Social work services;
    d. Restorative therapies, including physical therapy, 
occupational therapy and speech therapy;
    e. Personal care and supportive services;
    f. Nutritional counseling;
    g. Recreational therapy;
    h. Transportation;
    i. Meals;
    j. Medical specialty services including, but not limited to: 
anesthesiology, audiology, cardiology, dentistry, dermatology, 
gastroenterology, gynecology, internal medicine, nephrology, 
neurosurgery, oncology, ophthalmology, oral surgery, orthopedic 
surgery, otorhinolaryngology, plastic surgery, pharmacy consulting 
services, podiatry, psychiatry, pulmonary disease, radiology, 
rheumatology, surgery, thoracic and vascular surgery, urology;
    k. Laboratory tests, x-rays and other diagnostic procedures;
    l. Drugs and biologicals;
    m. Prosthetics and durable medical equipment, corrective vision 
devices such as eyeglasses and lenses, hearing aids, dentures, and 
repairs and maintenance for these items;
    n. Acute inpatient care:
    i. Ambulance;
    ii. Emergency room care and treatment room services;
    iii. Semi-private room and board;
    iv. General medical and nursing services;
    v. Medical surgical/intensive care/coronary care unit, as 
necessary;
    vi. Laboratory tests, x-rays and other diagnostic procedures;
    vii. Drugs and biologicals;
    viii. Blood and blood derivatives;
    ix. Surgical care, including the use of anesthesia;
    x. Use of oxygen;
    xi. Physical, speech, occupational, and respiratory therapies; 
and
    xii. Social services.
    o. Nursing facility care:
    i. Semi-private room and board;
    ii. Physician and skilled nursing services;
    iii. Custodial care;
    iv. Personal care and assistance;
    v. Drugs and biologicals;
    vi. Physical, speech, occupational, and recreational therapies, 
if necessary;
    vii. Social services; and
    viii. Medical supplies and appliances.
    p. Additional services determined necessary by the 
multidisciplinary team.
    4. Emergency Care. Emergency services are defined as covered 
inpatient or outpatient services that are furnished in or out of the 
PACE provider's service area by a source other than the PACE 
provider or its contract providers and:
    a. Are needed immediately because of an injury or sudden 
illness; and
    b. The time required to reach the PACE provider staff and/or 
contract providers would have meant risk of permanent damage to the 
participant's health.
    5. Urgent Care. Urgently needed services are covered services 
required in order to prevent a serious deterioration of a 
participant's health that results from an unforeseen illness or 
injury if:
    a. The participant is temporarily absent from the provider's 
service area; and
    b. The receipt of health care services cannot be delayed until 
the participant returns to the provider's service area.
    6. Excluded services are:
    a. Any service which has not been authorized by the 
multidisciplinary team, even if it is listed as a covered benefit;
    b. Services rendered in a non-emergency setting or for a non-
emergency reason without authorization;
    c. Prescription and over-the-counter drugs not prescribed by the 
PACE provider physician;
    d. In inpatient facilities, private room and private duty 
nursing, unless medically necessary, and non-medical items for 
personal convenience such as telephone charges, radio or television 
rental;
    e. Cosmetic surgery unless required for improved functioning of 
a malformed part of the body resulting from an accidental injury or 
for reconstruction following mastectomy;
    f. Experimental medical, surgical or other health procedures or 
procedures not generally available;
    g. Care in a government hospital (VA, federal/State hospital) 
unless authorized;
    h. Service in any county hospital for the treatment of 
tuberculosis or chronic, medically uncomplicated drug dependency or 
alcoholism; and
    i. Any services rendered outside of the United States.

B. Service Arrangement

    1. PACE is a comprehensive health and social services delivery 
system which integrates acute and long-term care services. The PACE 
staff provides these services in all settings which may include, but 
are not limited to, the PACE Center, the home, and inpatient 
facilities.
    2. The PACE Center is the focal point for coordination and 
provision of most PACE services. The PACE Center is a facility which 
includes a primary care clinic, and areas for therapeutic 
recreation, restorative therapies, socialization, personal care and 
dining.
    a. At a minimum, the following services are provided in the PACE 
Center:
    i. Primary care services including physician and nursing 
services;
    ii. Social services;
    iii. Restorative therapies, including physical therapy and 
occupational therapy;
    iv. Personal care and supportive services;
    v. Nutritional counseling;
    vi. Recreational therapy; and
    vii. Meals.
    b. The PACE provider must operate at least one PACE Center in 
its defined service area with sufficient capacity to allow routine 
attendance by its enrolled population.
    c. The frequency of attendance is determined by the 
multidisciplinary team based on each participant's needs.
    d. The PACE Center is designed, equipped and maintained to 
provide for the physical safety of participants, personnel or 
visitors and to ensure a safe and sanitary environment.
    3. Each participant is assigned a multidisciplinary team based 
at the PACE Center. Responsibility for assessment, treatment 
planning and care delivery rests with the multidisciplinary team 
which coordinates and delivers care on a 24-hour basis. The 
multidisciplinary team is composed of at least the following 
members:
    a. Primary care physician;
    b. Nurse;
    c. Social worker;
    d. Physical therapist;
    e. Occupational therapist;
    f. Recreational therapist or activity coordinator;
    g. Dietitian;
    h. PACE Center supervisor;
    i. Home care liaison;
    j. Health workers/aides or their representatives; and
    k. Drivers or their representatives.
    4. The multidisciplinary team authorizes PACE covered services 
which meet the specific needs of the participant.
    5. As part of the initial assessment process, the following 
members of the multidisciplinary team conduct individual, in-person 
assessments of the participant's health and social status and 
develop discipline specific treatment plans which are documented in 
the participant's medical record:
    a. Primary care physician;
    b. Nurse;
    c. Social worker;

[[Page 66302]]

    d. Physical therapist and/or occupational therapist;
    e. Recreational therapist or activity coordinator;
    f. Dietitian; and
    g. Home care liaison.
    6. On at least a semi-annual basis, the following members of the 
multidisciplinary team conduct individual, in-person assessments of 
the participant's health and social status and develop discipline 
specific treatment plans which are documented in the participant's 
medical record:
    a. Primary care physician;
    b. Nurse;
    c. Social worker;
    d. Recreational therapist or activity coordinator; and
    e. Team members actively involved in the plan of care, i.e., 
home care liaison, physical therapist, occupational therapist, 
dietitian.
    7. On at least an annual basis, the following members of the 
multidisciplinary team conduct individual, in-person assessments of 
the participant's health and social status and develop discipline 
specific treatment plans which are documented in the participant's 
medical record:
    a. Physical therapist and/or occupational therapist;
    b. Dietitian; and
    c. Home care liaison.
    8. The treatment planning process consists of the following:
    a. On at least a semi-annual basis, the discipline specific 
plans are consolidated into a single plan of care for the 
participant through discussion and consensus of the entire 
multidisciplinary team, including members (e.g., health workers/
aides, drivers, PACE Center supervisor) who are not required to 
conduct quarterly assessments. The treatment plan is then discussed 
and finalized with the participant and/or his/her significant 
others.
    b. At the recommendation of individual team members, other 
professional disciplines (e.g., speech therapy, dentistry, 
audiology, etc.) can be included in the assessment and treatment 
planning process.
    9. When the health status or psycho-social situation of a 
participant changes, he/she is reassessed by the team or by selected 
members of the team to develop a new treatment plan. Changes in the 
treatment plan during the quarter are discussed and approved by the 
multidisciplinary team.
    10. Ultimate responsibility for management of medical situations 
rests with the PACE primary care physician. The physician keeps the 
multidisciplinary team informed of the medical condition of each 
participant and remains alert to pertinent input from other team 
members.
    11. The team implements the treatment plan by providing services 
directly and supervising the delivery of services provided by 
contract providers.
    12. The participant's health status and psycho-social conditions 
as well as the effectiveness of the treatment plan are monitored 
continuously through direct provision of services, informal 
observation, input from participants and their significant others, 
and communications among members of the multidisciplinary team and 
other providers.
    13. The multidisciplinary team is instrumental in controlling 
the delivery, quality and continuity of care.
    a. The following members of the team must be employees of the 
PACE provider or PACE Center:
    i. Primary care physician;
    ii. Nurse;
    iii. Social worker;
    iv. Recreational therapist or activity coordinator;
    v. PACE Center supervisor;
    vi. Home care liaison; and
    vii. PACE Center health workers/aides.
    b. The members of the multidisciplinary team must serve 
primarily PACE participants.
    c. The effective delivery of services depends on a consistent 
multidisciplinary team whose members are knowledgeable of individual 
participant's needs.
    14. The PACE provider must ensure accessible and adequate 
service capacity to meet the needs of the enrolled population. As 
enrollment increases, the number of PACE Centers, multidisciplinary 
teams and other PACE services must increase accordingly.
    15. Primary medical care is provided by the PACE primary care 
physician(s) to all participants. The primary care physician is the 
gatekeeper to the participant's use of medical specialists and 
inpatient care and is an integral member of the multidisciplinary 
team.
    16. Since PACE services may be provided in the home, the 
coordination of in-home services with PACE Center and primary care 
services is critical to effective service delivery. The PACE 
provider shall designate a home care liaison to supervise and 
coordinate home care services whether these services are provided 
directly by the PACE provider or through a contract vendor.
    17. All other PACE covered services can be provided either 
directly or on a contractual basis with related or unrelated 
organizations, agencies, or providers.
    18. Medical Records. a. To facilitate continuity of care, the 
PACE provider must maintain a single comprehensive medical record 
for each participant at the PACE Center which contains:
    i. Appropriate identifying information
    ii. Documentation of all services provided;
    iii. Multidisciplinary assessments, reassessments, plans of 
care, treatment and progress notes, signed and dated;
    iv. Lab reports;
    v. Medications record;
    vi. Hospital discharge summaries;
    vii. Reports from contracted providers;
    viii. Contacts with informal support;
    ix. Enrollment Agreements;
    x. Physician orders.
    xi. Discharge summary and disenrollment agreement, if 
applicable;
    xii. Information on advance directives; and
    xiii. Disclosure of release of information.
    b. Chart organization and documentation shall meet professional 
and other applicable requirements.
    c. Policies to ensure confidentiality, storage and retention 
must be in place in accordance with professional and other 
applicable requirements.
    19. Program Flexibility. At the request of a PACE provider, HCFA 
and the State Medicaid agency shall have the authority to waive 
specific requirements in this Section provided that in their 
judgment, the intent of the requirement is met by the proposed 
alternative, and safe and quality care will be provided. Such 
requests must be submitted in writing by the PACE provider and be 
approved by HCFA and the State Medicaid agency prior to 
implementation of the proposed alternative.

Part V: Quality Assurance

    A. The PACE multidisciplinary team is a critical element of 
quality assurance. The process of service delivery in this model 
requires the team to identify participant problems, determine 
appropriate treatment objectives, select interventions and evaluate 
efficiencies of care on an individual participant basis. This 
activity becomes the foundation for all subsequent quality assurance 
activities.
    B. The PACE provider must have a written plan of Quality 
Assurance and Improvement which provides for a system of ongoing 
assessment, implementation, evaluation, and revision of activities 
related to overall program administration and services. The plan 
should include, at the minimum, the following essential elements:
    1. Standards that are performance benchmarks, established by the 
provider, and are incorporated into the provider Policy and 
Procedure Manual. The provider standards must be based on the PACE 
protocol, applicable PACE standards and applicable licensing and 
certification criteria.
    2. Goals and objectives that provide a framework for quality 
improvement activities, evaluation and corrective action. These 
goals and objectives will be reviewed periodically.
    3. Quality indicators that are objective and measurable 
variables related to the entire range of services provided by the 
PACE provider. The methodology should assure that all demographic 
groups, all care settings (e.g., inpatient, PACE Center and in-home) 
will be included in the scope of the quality assurance review.
    Quality indicators should be selected for review on the basis of 
high volume, high risk diagnosis or procedure, adverse outcomes, or 
some other problem-focused method consistent with the state of the 
art.
    4. Process to review the effectiveness of the PACE 
multidisciplinary team in its ability to assess participant's care 
needs, identify the participant's treatment goals, assess 
effectiveness of interventions, evaluate adequacy and 
appropriateness of service utilization and reorganize plan as 
necessary.
    5. Policies and procedures related to establishing committees 
with community input to (1) evaluate data collected pertaining to 
quality indicators, (2) address the process and outcomes of the 
quality improvement plan, and (3) provide input related to ethical 
decision making including end-of-life issues and implementation of 
the Patient Self-Determination Act (PSDA).
    a. These procedures will define a process for taking appropriate 
action to resolve problems identified as part the quality assurance 
activities.

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    b. Policies will be established that define professional 
qualifications of individuals participating on these committees.
    6. Participant involvement in program QA plan and evaluation of 
satisfaction with services.
    7. Board level accountability for overall oversight of program 
activities and review of the QA plan, annual review and approval of 
the quality assurance plan by the program board with periodic 
feedback to Board on review process by oversight committees.
    8. The PACE provider shall designate an individual to coordinate 
and oversee implementation of quality assurance activities.

Part VI: Reimbursement

A. PACE Reimbursement Overview

    PACE is not limited to individuals on the basis of their 
eligibility for Medicare and/or Medicaid. The majority of PACE 
participants are eligible for Medicare, however, because PACE 
enrolls an elderly population. Medicaid eligibility is also common 
just as it is in a nursing home population. As financing for long-
term care services becomes more widely available, PACE providers 
will negotiate capitation payments from payers of those services.

B. Medicare Payment

    1. For a Medicare entitled participant, the monthly capitation 
rate paid by HCFA to the PACE provider equals the Adjusted Average 
Per Capita Cost (AAPCC) as calculated by HCFA for HMO reimbursement 
with adjustment for frailty factors necessary to ensure 
comparability between PACE participants and the reference population 
in the Medicare fee-for-service system.
    2. The capitation payment is fixed, regardless of changes in the 
participant's health status.
    3. The PACE provider shall accept the capitation payments as 
payment in full and shall not bill, charge, collect or receive any 
form of payment from HCFA and the participant (with the exception of 
the ESRD participants) except as provided in Section VI., D.
    4. HCFA procedures for accretions and deletions, payment 
mechanism, cost finding and risk sharing are included in the 
contract between the PACE provider and HCFA.

C. Medicaid Payment

    1. The monthly capitation payment from Medicaid is negotiated 
between the PACE provider and the State Medicaid agency and is 
specified in the contract between them. The Medicaid rate is 
renegotiated on an annual basis.
    2. The capitation payment is fixed, regardless of changes in the 
participant's health status.
    3. The PACE provider shall accept the capitation payments as 
payment in full and shall not bill, charge, collect or receive any 
other form of payment from State Medicaid agency and the participant 
except as provided in Section VI., D.
    4. State procedures for enrollment and disenrollment in the 
state system and capitation payment mechanism as well as any 
variations to HCFA's cost finding and risk sharing are included in 
the contract between the PACE provider and the State Medicaid 
agency.

D. Private Pay Premiums

    1. Participant's premium responsibility depends upon his/her 
eligibility for Medicare and Medicaid (cash grant and share of 
cost).
    a. Medicare Only--premium equal to Medicaid capitation. (This 
premium is determined on an annual basis.)
    b. Medicare and Medicaid with share of cost--premium equal to 
share of cost requirement.
    c. Medicare and Medicaid--no participant premium.
    d. Medicaid Only--no participant premium.
    2. The private pay premium is fixed, regardless of changes in 
the participant's health status.
    3. The PACE provider shall accept the private pay premium as 
payment in full and shall not bill, charge, collect or receive any 
other form of payment from the participants.
    4. Participants with private co-payment are to be billed 
monthly.
    5. If participants have long-term care insurance policies that 
cover PACE services, these benefits can be applied to participants' 
premium responsibility.

Part VII: Provider Administration

A. Contracting Requirements

    1. Subcontracts between the PACE provider and contract providers 
shall be established for services not delivered directly by the PACE 
provider.
    a. The PACE provider may contract only with qualified or 
licensed providers, who meet Federal and State requirements as 
applicable;
    b. Contract providers must be accessible to participants, 
located either within or near the PACE provider's geographic 
catchment area;
    c. The format of subcontracts must be approved by HCFA and the 
State Medicaid agency;
    d. A list of subcontractors must be on file at the State 
Medicaid agency and updated as it changes; and
    e. Copies of signed contracts for inpatient care are included in 
the contract between the PACE provider, HCFA and the State Medicaid 
agency.
    2. Each subcontract shall contain:
    a. Name of subcontractor;
    b. Specification of the services provided;
    c. Specification of reimbursement rate and payment method;
    d. Specification of the terms of the subcontract, including the 
beginning and ending dates, as well as methods of extension, re-
negotiation and termination;
    e. Subcontractor agreement to provide services in accordance 
with the services authorized by the PACE multidisciplinary team;
    f. Specification that the subcontract shall be governed by and 
construed in accordance with all laws, regulations and contractual 
obligations incumbent upon the PACE provider;
    g. Subcontractor agreement to accept the PACE provider's payment 
as payment in full and not to bill participants, HCFA, the State 
Medicaid agency or private insurers;
    h. Subcontractor's agreement to hold harmless HCFA, the State 
and PACE participants in the event that the PACE provider cannot or 
will not pay for services performed by the subcontractor pursuant to 
the subcontract;
    i. Subcontractor's agreement that assignment or delegation of 
the subcontract is prohibited unless prior written approval is 
obtained from the PACE provider;
    j. Subcontractor's agreement to submit reports as required by 
the PACE provider; and
    k. Subcontractor's agreement to make all books and records, 
pertaining to the goods and services furnished under the terms of 
the subcontract, available for inspection, examination or copying by 
the State Medicaid agency and/or HCFA.

B. Data Collection and Reporting

    1. During the trial period, the PACE provider shall meet the 
following data collection and reporting requirements.
    a. The PACE provider is required to collect a standardized set 
of date which includes the following:
    i. Participant-specific intake, assessment and service 
utilization data, coded according to the guidelines in the PACE Data 
Collection Manual. The definition of data and the manner in which it 
is collected may be changed to meet changes in HCFA and State 
Medicaid agency reporting requirements, in response to requests from 
PACE providers and others. Any changes made in data collection will 
incorporate sufficient lead time necessary to minimize transition 
difficulty. Data uniformity shall be maintained across all PACE 
providers.
    ii. Fiscal data based on cost center accounting structure 
provided by HCFA and the State Medicaid agency. At the twelfth 
month, the year-to-date summary will provide the necessary annual 
data.
    b. At a minimum, the provider must maintain complete 
participant-specific utilization data on-site updated to one month 
prior to the present. Data shall be transmitted to HCFA or its 
agent.
    c. To ensure the quality of the data, HCFA or its agent, may 
provide the PACE provider with training in the use of data 
collection tools and may conduct ongoing monitoring to determine 
data completeness and reliability. Data collection problems that are 
identified must be reported to HCFA and the State Medicaid agency. 
If HCFA and the State Medicaid agency determine that problems 
require correction, the PACE provider will be required to resolve 
them.
    d. HCFA, or its agent, reserve the right to review and assure 
the reliability and completeness of data and may obtain all provider 
data for the purposes of program monitoring.
    e. The PACE provider will submit to HCFA and State Medicaid 
agency, 45 days after the end of each quarter, the following 
quarterly reports:
    i. Quarterly narrative progress report; and
    ii. Quarterly program statistical reports--Program Status 
Report, Sociodemographic Characteristics of Participants, Health and 
Functional Status of Participants, and Service Utilization Summary. 
The contents of these reports may be changed to meet changes in

[[Page 66304]]

Federal and State reporting requirements or for the purpose of 
program monitoring.
    2. For providers that have completed the trial period, HCFA and 
its agent will work with PACE providers and their respective State 
Medicaid agencies to develop a standardized set of data to be 
collected by PACE providers and a standardized reporting processes. 
To assure the quality of the data, requirements 1.,c-d described 
above will apply.

C. Financial Reporting

    1. For sites in the trial period, the following financial 
reports are required:
    a. The PACE provider will submit a Budgeted versus Actual 
Financial Report for the current and year-to-date periods to HCFA, 
its agent, and the State Medicaid agency.
    During the first year of operation, this report will be 
submitted on a monthly basis 45 days after the end of each month. 
Thereafter, this report will be submitted on a quarterly basis 45 
days after the end of each quarter. HCFA and the State Medicaid 
agency reserve the right to extend the submission of this report on 
a monthly basis should provider performance indicate a need for more 
frequent monitoring.
    b. The PACE provider must submit a cumulative cost report in the 
form and detail prescribed by HCFA. The interim cost report is due 
45 days after the end of each provider's fiscal quarter and covers 
the period from the beginning of the fiscal year through the 
respective quarter.
    c. The PACE provider must submit to HCFA and the State Medicaid 
agency an independently certified cost report in the form and detail 
prescribed by HCFA, no later than 180 days after the end of the 
provider's fiscal year.
    d. PACE providers which are separate corporate entities must 
submit to HCFA and the State Medicaid agency a quarterly balance 
sheet.
    2. For providers that have completed the trial period, HCFA and 
its agent will work with PACE providers and their respective State 
Medicaid agencies to develop a standardized financial reporting 
process.

D. Maintenance of Books and Records

    1. The PACE provider must establish policies and procedures for 
maintaining all books and records necessary to determine whether 
contractual obligations are met. Books include, but are not limited 
to:
    a. Financial records;
    b. Medical records; and
    c. Personnel records;
    2. Books and records must be made available to HCFA and the 
State Medicaid agency upon request.
    3. Records must be stored so as to be protected against loss, 
destruction or unauthorized use.

Part VIII: External Oversight

A. General

    It is the duty and responsibility of the Secretary to assure 
that requirements which govern the provision of care by PACE 
providers, and the enforcement of such requirements, are adequate to 
protect the health, safety, welfare, and rights of participants and 
to promote the effective and efficient use of public moneys. 
External oversight activities will include:
    1. Periodic review of the financial status of the PACE provider 
to ensure its solvency and continuing viability; and
    2. A periodic on-site survey, as described below, to determine 
the quality of care provided by the PACE provider and adherence to 
requirements defined in the contracts between the PACE provider, 
HCFA and the State Medicaid agency.

B. National Standards and Surveys

    The National PACE Association (NPA) recommends that national 
standards for PACE be developed and an on-site survey process 
established for determining the quality of care provided by the PACE 
provider and the provider's adherence to contract requirements. To 
facilitate this process, NPA intends to develop model standards for 
use by HCFA and States. NPA urges HCFA and States to ensure that 
PACE providers are in accordance with these standards. NPA 
recommends that the survey process provides for surveys to be 
conducted at least once every two years by the State or through an 
accreditation organization or other entity. In addition, the 
Secretary would have the authority to conduct additional surveys, 
independent or in conjunction with the State, if there is reason to 
question the compliance of the PACE provider with any applicable 
requirements. Additional recommended provisions are:
    1. The survey shall consist of an on-site visit which includes 
review of participant charts, interviews with staff and participants 
and observation of program operations including multidisciplinary 
team processes.
    2. The survey shall be performed by a team composed of 
individuals who are experienced in providing care to the frail 
elderly and are knowledgeable about the PACE service delivery 
system. At a minimum, the team shall include a physician, nurse, 
social worker and a peer reviewer. The physician, nurse and social 
worker shall have experience in community-based care and should have 
recent clinical experience. The peer reviewer shall be from a PACE 
provider operating at full risk.
    3. Procedures will be established to determine whether 
corrective action has been taken by the PACE provider to resolve 
deficiencies identified during the survey.

Part IX: Provider Termination

    A. The PACE provider can be terminated for any one of the 
following four reasons and in each case must comply with HCFA and 
the State Medicaid agency guidelines for provider termination:
    1. Either HCFA and/or the State Medicaid agency determine the 
provider cannot insure the health and safety of its participants. 
This determination may result from a medical survey or audit 
revealing provider deficiencies which HCFA and/or the State 
determine cannot be corrected.
    2. The PACE provider chooses to discontinue providing services. 
In such event, a minimum of 90 days notice must be given to HCFA, 
its agent, and the State Medicaid agency regarding the provider's 
intent. Providers must give participants a minimum of 60 days 
notice.
    3. Either HCFA and/or the State Medicaid agency can terminate 
the PACE provider's contract in response to large losses for which 
corrective action is unsuccessful. In response to financial audits 
which show a loss, the provider must develop a plan which is 
designed to prevent future losses. If the plan is developed by the 
PACE provider and is determined to be unacceptable to HCFA and the 
State Medicaid agency, the provider's contract may be terminated.
    4. The provider may be terminated should it deviate from, 
violate or fail to comply with the contractual agreements of HCFA 
and the State Medicaid agency.
    B. The PACE provider is required to develop a detailed provider 
termination plan included in which are the following: the process of 
informing participants, the community, HCFA and State Medicaid 
agency; and steps that will be taken to reinstate participants' 
Medicare and Medicaid benefits through the fee-for-service system, 
transition their care to other providers, and terminate the referral 
and intake process.

Part X: Medicare and Medicaid Contracts Requirements

A. General

    The PACE provider should have formal contracts in place with the 
responsible federal and state agencies, which incorporate the 
requirements defining and applicable to PACE providers. These legal 
requirements would be based upon the PACE Protocol. Absent such 
formal contracts the PACE Protocol and other requirements, if any, 
which the responsible agencies deem appropriate, would govern. 
Critical elements of the formal contract should include, but not be 
limited to, requirements related to:

1. organization of the PACE provider
2. participant rights
3. eligibility, enrollment and disenrollment policies
4. service definition, coverage and arrangement
5. quality assurance
6. reimbursement
7. PACE provider administration
8. PACE provider termination

[FR Doc. 99-29706 Filed 11-12-99; 
10:48 am]
BILLING CODE 4120-03-U