[Federal Register Volume 65, Number 146 (Friday, July 28, 2000)]
[Notices]
[Pages 46466-46473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-19159]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

[HCFA-1115-N]
RIN 0938-AI26


Medicare Program; Solicitation for Proposals for the Medicare 
Coordinated Care Demonstration

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

ACTION: Notice.

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SUMMARY: This notice informs interested parties of an opportunity to 
apply for a cooperative agreement for the Medicare Coordinated Care 
Demonstration. This demonstration uses existing models of coordinated 
care interventions to improve the quality of services furnished to 
specific beneficiaries and manage expenditures under Parts A and B of 
the Medicare program. We are interested in testing models aimed at 
beneficiaries who have one or more chronic conditions that represent 
high costs to the Medicare program.
    Section 4016 of the Balanced Budget Act of 1997 requires a review 
of best practices and that the Medicare Coordinated Care Demonstration 
design be based on the findings of this assessment. We intend to select 
at least eight proposed projects for this demonstration through this 
competitive application process.

Eligible Organizations

    Potentially qualified applicants are existing providers of 
coordinated care services applicable to the Medicare population. See 
section II.C.1. of this notice for additional details.

FOR FURTHER INFORMATION CONTACT: For information concerning this 
demonstration, contact Catherine Jansto, HCFA Project Officer, at (410) 
786-7762, or [email protected].
    For information regarding cooperative agreement procedures, fiscal 
matters, or guidance in completing the application forms, contact 
Nettie Faulkner, Grants Management Specialist, at (410) 786-6639, or 
[email protected].
    General information regarding this project is available on HCFA's 
website (www.hcfa.gov/ord/coorcare.htm).

DATES: Applications will be considered ``on time'' if we receive them 
on or before October 11, 2000.

ADDRESSES: Mail applications to: Department of Health and Human 
Services, Health Care Financing Administration, Office of Internal 
Customer Support, Acquisition and Grants Group, Attn: Ms. Nettie 
Faulkner, Grants Management Specialist, Mail Stop: C2-21-15, 7500 
Security Boulevard, Baltimore, Maryland 21244-1850. Applications must 
be typed for clarity and should not exceed 40 double-spaced pages, 
exclusive of the executive summary, resumes, forms, and documentation 
supporting the cost proposal. Please refer to the file code HCFA-1115-N 
on the application.
    Because of staffing and resource limitations, we cannot accept 
applications by facsimile (FAX) transmission. Applications postmarked 
after the closing date, or postmarked on or before the closing date but 
not received in time for panel review, will be considered late 
applications.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Requirements

    Section 4016 of the Balanced Budget Act of 1997 (Pub. L. 105-33) 
requires the Secretary of Health and Human Services (the Secretary) to 
evaluate best practices in the private sector for methods of 
coordinated care. The statute also directs the Secretary to design a 
demonstration project for the original Medicare fee-for-service 
population based on this evaluation. The purpose of the demonstration 
is to evaluate models of coordinated care that improve the quality of 
services provided to specific beneficiaries with a chronic illness and 
manage expenditures under Parts A and B of the Medicare program so 
that, under the demonstration, Medicare expenditures do not exceed what 
they would have been in the absence of the demonstration.
    Section 4016(b)(3) authorizes the continuation of demonstration 
projects that are cost-effective. That is, the evaluation of the 
demonstration projects conducted by HCFA establishes that these 
projects reduce Medicare expenditures or do not increase Medicare 
expenditures while increasing the quality of services furnished and 
beneficiary and provider satisfaction. This section also authorizes us 
to expand the number of demonstration sites if the models tested are 
shown to be cost-effective. In addition, we may issue regulations to 
implement, on a permanent basis, the components of the demonstration 
projects that are proven to be cost-effective for the Medicare program.
    In July 1998, we competitively awarded a task order for conducting 
a review of best practices in coordinating care and for providing a 
recommendation of demonstration design options to Mathematica Policy 
Research, Inc. (MPR). We have evaluated the findings from the review of 
best practices and selected the following demonstration design.

B. Problem

    Historically, a small proportion of Medicare beneficiaries has 
accounted for a major proportion of Medicare expenditures. For example, 
in 1996, 12.1 percent of all Medicare enrollees accounted for 75.5 
percent ($126.1 billion) of all Medicare fee-for-service program 
payments. Many of these high-cost beneficiaries are chronically ill 
with certain common diagnoses, and most of the Medicare expenditures 
for their care are for repeated hospitalizations. During the next 30 
years, as the population ages, the number of these individuals is 
expected to grow dramatically.
    Health care for individuals with chronic illness is often 
fragmented and poorly coordinated across multiple health care providers 
and multiple sites of care. Oftentimes, evidence-based practice 
guidelines are not followed, nor are patients taught how best to care 
for themselves. These shortcomings are particularly true for patients 
served under reimbursement systems in which providers lack incentives 
for controlling the frequency, mix, and intensity of services, and have 
limited accountability for the outcomes of care.
    A number of health care organizations, including health maintenance 
organizations, private insurers, commercial firms, and academic medical 
centers, have developed programs to support adherence (by both provider 
and patient) to evidence-based medical practices, to better coordinate 
care across providers and between face-to-face encounters with 
chronically ill patients, and to reduce costs. At best, the literature 
on the effectiveness of

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these models is mixed. There is little hard evidence that these 
programs are effective. Hence, the applicability and cost-effectiveness 
of these programs, in general, for the original Medicare fee-for-
service program and specifically to its beneficiaries who suffer from 
complex co-morbid conditions is uncertain.

C. Findings From the Review of Best Practices

    On March 23, 1999, we published a notice in the Federal Register 
(64 FR 13998) announcing the opportunity to submit information on 
examples of best practices of coordinated care as well as to comment on 
potential aspects of the overall Medicare Coordinated Care 
Demonstration. Through a review of submitted information, electronic 
literature searches, and expert referrals, MPR identified programs 
self-reporting success in coordinating care for chronically ill 
patients. A multi-tiered approach focusing on structure, process, and 
outcomes was used to identify favorable characteristics of potentially 
successful programs and to develop a general framework that describes 
these coordinated care delivery models. The review emphasized the 
strength of the evidence supporting claims of success, the degree of 
impact on costs (hospitalizations and total costs), and the degree of 
impact on patient outcomes. A detailed discussion of the methodology, 
findings, and limitations of the best practices assessment is available 
in MPR's final report that can be accessed via our website 
(www.hcfa.gov/ord/coorcare.htm). A brief summary of the report's 
findings and limitations is presented below.
1. Findings
    MPR identified two main types of coordinated care programs and a 
three-step conceptual framework applicable to these coordinated care 
delivery models. The two main types of programs differ in the patients 
they serve and the tactics they adopt to accomplish the three steps of 
the conceptual framework for coordinating care. Because of limitations 
in the submitted data, the cost-effectiveness of the reviewed programs 
could not be determined with certainty. There were 37 programs 
reporting credible evidence of impacts on hospitalizations or total 
costs. Twenty-five of these programs were interviewed in greater depth 
to obtain greater insight into the reasons for their success. These 
programs are referred to as ``identified potentially cost-effective 
programs'' in this notice.
    a. Models of Coordinated Care: The identified potentially cost-
effective programs tended to operate as one of the following two 
program types.
 Case Management (CM) Programs
    These programs serve a select group of frail, disabled patients who 
suffer from severe illness, often multiple chronic health problems, and 
a high risk of recurrent, costly, adverse medical events. Each patient 
has a unique set of diseases, functional deficits, and social 
conditions. These programs follow a holistic approach to care and rely 
on case manager judgment and highly individualized approaches. 
Creative, innovative interventions are used to address individual care 
needs. Partnership with the patient, primary care physician (PCP), 
other providers, caregivers, and the social support system is integral 
to the interventions.
 Disease Management (DM) Programs
    These programs target persons whose primary health problem is a 
specific disease, although certain comorbid conditions are usually 
addressed as well. Patients with a similar level of severity of the 
disease face similar problems. The care coordination interventions tend 
to be highly structured and emphasize the use of standard protocols and 
clinical guidelines. The PCP may not play an active role in the 
implementation of the interventions; however, successful collaboration 
with PCPs generally influences program outcomes.
    Under both main types of coordinated care programs, the 
interventions provided go beyond those services for which payment under 
the original Medicare fee-for-service program is typically made. These 
interventions may include comprehensive geriatric assessment, intensive 
patient education, social services, telephone monitoring, medications, 
or transportation, among others.
    Overall, there was variation among the identified potentially cost-
effective programs within and between the two main types of programs. 
The scope, mix, and intensity of care coordination interventions varied 
as did the duration of the interventions, targeted disease(s), 
organizational structures, system and staff capabilities, outcomes, and 
other features. Notwithstanding this variation, there were many 
examples of programs that claim to have successfully combined 
particular practices to positively impact patient and cost outcomes.
    b. Goals of Successful Coordinated Care Programs: In general, the 
identified potentially cost-effective coordinated care programs use a 
variety of interventions to accomplish the following goals:
     Ensure optimal medical management.
     Enhance and support patient self-management.
     Eliminate barriers to efficient and effective utilization 
of health care services.
    To achieve these goals, the identified potentially cost-effective 
coordinated care programs of both types generally follow a three-step 
process that is described in the following conceptual framework.
    c. Conceptual Framework: Care coordination programs identify the 
patients they serve through a range of methods. After defining the 
target population (and any exclusionary criteria), programs may 
identify potentially eligible clients through provider or self-
referrals, claims data, special screening tools, or a combination of 
methods. Eligible and willing cases then receive the intervention.
    Many care coordination programs ``risk-stratify'' their patients, 
attempting to identify from those meeting the basic eligibility 
criteria the subset that would benefit most from the intervention. Some 
programs use risk stratification to restrict the set of patients 
admitted to the program, while others use it to tailor the intervention 
to the estimated level of risk of adverse outcomes faced by the 
patient. However, the degree of structure imposed in stratifying 
patients may vary. Thus, the three-step process discussed below focuses 
on what programs do once targeted patients are identified, rather than 
how they are selected.
    Step One: Assess and Plan: Accurately assess patients' barriers to 
improved health and devise a feasible plan to overcome those barriers. 
This step encompasses activities such as initial patient assessment, 
care plan development, establishing patient-specific goals, assessing 
patient education needs, and involving PCPs and other providers. The 
component tasks of Step One are as follows:
     Uncover all important problems. These are the problems 
that can keep the patient from better health and lead to unplanned 
hospitalizations. These problems vary for each patient.
     Address all important problems and goals. Every important 
problem and goal should have a plan and an intervention or 
interventions to address the problem.
     Draw from a comprehensive arsenal of proven interventions. 
A care coordinator must have a broad array of appropriate, proven 
interventions

[[Page 46468]]

available from which to choose the best ones to meet a patient's needs.
     Produce a clear, practical plan of care with specific 
goals. The first step concludes with a written, individualized plan of 
care. It is important that all concerned--patient, care coordinator, 
primary care physician--have a common, agreed-upon set of goals for the 
patient, and when and how the patient is going to achieve them.
    Step Two: Implement and Deliver: Implement the plan and deliver the 
interventions. This step encompasses activities such as patient 
education, service arrangement and provision, and coordination with 
providers. The component tasks of Step Two are as follows:
     Build ongoing relationships with the primary care 
physician (PCP) and with other providers. This task enables care 
coordinators to coordinate care and facilitate communication among 
providers. Also, programs that fail to engage the physician may be 
limited in the degree to which they can address the medical aspects of 
care coordination.
     Build ongoing relationships with patients and families. 
The foundation for this relationship is often laid during the initial 
assessment in the first step.
     Provide excellent patient education. This intervention 
must be part of every plan of care. Programs must teach patients 
crucial self-care skills, such as proper diet for their condition, 
medical compliance, self-monitoring, emergency action plans, and skills 
to cope with the stresses of chronic illnesses.
     Make certain that planned interventions are conducted. 
This task involves monitoring to make sure each intervention is 
conducted.
    Step Three: Reassess and Adjust: Determine whether the 
interventions are working as intended. If not, adjust the plan by going 
back to Step One. This step entails regular evaluation and monitoring 
of whether the plan of care developed in Step One and its 
implementation in Step Two are achieving the intended goals. The 
component tasks of Step Three are as follows:
     Perform periodic reassessments. The care coordinator must 
contact patients on a regular basis to make sure they continue to 
progress and have not encountered new problems.
     Be accessible. Patients must have an easy way to reach a 
care coordinator at all times.
     Nurture the relationship with PCPs and providers.
     Nurture the relationship with patient and family. This 
relationship and the relationship with the PCPs and providers must be 
maintained.
     Make prompt adjustments to the plan of care as needed. If 
the reassessment reveals a lack of progress, the plan of care may need 
to be changed. Several interventions may have to be tried and discarded 
before a successful solution is discovered. Changes in the plan of care 
also need to be made promptly, sometimes even urgently. Patients' level 
of risk for complications may change, necessitating a change in follow-
up frequency.
    Overlaying these three steps, at the program level, programs employ 
system-wide processes for assessing and improving the coordinated care 
delivery model as a whole. These continuous quality improvement 
processes ensure that lessons learned about failures and successes are 
disseminated to other care coordinators and program staff.
    d. Similarities Between Program Types: The two main types of 
coordinated care programs are similar in several respects. First, the 
identified potentially cost-effective programs of both types accomplish 
the same three basic steps and address the same basic components under 
each of these steps, as described above. Both disease and case 
management programs have case managers who act as advocates for their 
patients to help them get the care and attention they need. Strong 
programs of both types stress the critical importance of having 
personable, knowledgeable case managers who are effective 
communicators. Programs of both types also provide thorough patient 
education focused on self-care and overcoming personal barriers to 
improved health. In addition, the potentially cost-effective programs 
of both types are proactive rather than reactive, developing written 
care plans based on evidence-based, disease-specific guidelines at the 
outset, and monitoring patients between office visits.
    e. Differences Between Program Types: Despite these similarities, 
the two main types of coordinated care programs differ in the types of 
patients they serve and the tactics they adopt to accomplish the three 
steps and their component tasks. The major differences between disease 
management (DM) and case management (CM) programs seem to stem from the 
somewhat more limited set of problems that DM programs typically deal 
with. Patients in DM programs generally do not have as high a 
prevalence of difficult geriatric syndromes, such as incontinence, 
falling, cognitive impairments, delirium, or such social problems as 
inadequate family support, housing, or transportation. Instead, the 
vast majority of DM patients' problems center around a single disease 
or condition and fall into fundamental problems with either their own 
behavior or the disease-specific care they receive. Patient behavior 
problems contributing to their problems include poor medication 
compliance, lack of self-care skills, and lack of adherence to 
recommended lifestyle changes. Provider-based problems include failure 
to prescribe the most effective medications, poor coordination of care 
across providers and settings, lack of adherence to disease-specific 
guidelines based on evidence or expert panels, and inadequate follow-up 
and monitoring. Case management programs tend to serve patients with a 
more complex mix of problems and comorbidities. While they also face 
problems of poor self-care and compliance and inadequate prescribing 
and follow-up by their physicians, the patients are often frail and 
more prone to face adverse interactions from multiple prescription 
drugs that they may be taking for different conditions, or from 
conflicting advice about diet and exercise from different providers 
treating their multiple conditions.
    As a result of the differences in characteristics of the patients 
served, disease management and case management programs differ in the 
emphases they place on different component tasks, and on how they 
accomplish these tasks. They also differ on the degree to which patient 
education and treatment is standardized. Case management programs tend 
to rely more heavily on the judgment of the case manager and less on 
protocols. Case management programs also take a broader perspective, 
involving family and other caregivers and arranging for services more 
often than the typical disease management programs. (See MPR's final 
report for more comprehensive lists of key features of potentially 
cost-effective disease management and case management programs.)
    f. Rural Programs: A few of the identified potentially cost-
effective programs served rural areas. Each of these programs was of 
the case management type and looked similar to nonrural case management 
type programs. However, having strong ties to the community helped 
rural case managers gain patients' trust and find ways of getting 
things done. Travel distance placed important constraints on case 
managers by limiting their caseloads, forcing them to spend much energy 
on transportation arrangements, and making it difficult for them to 
forge

[[Page 46469]]

collaborative relations with outlying physicians.
2. Public Comments
    In response to the March 23, 1999 notice, we received 25 timely 
public comments on potential aspects of the overall demonstration. All 
but six of the comments were from providers that furnish coordinated 
care services. The commenters included for-profit vendors, tertiary 
hospitals, academic medical centers, health plans, and nonprofit 
groups. The comments related to the types of organizations that are 
appropriate providers of care coordination services, the care manager's 
role, desired features of care coordination programs, and reimbursement 
of care coordination services.
    Commenters suggested a variety of organizational structures in 
which to provide care management including for-profit and nonprofit 
entities, integrated delivery systems, and stand-alone care management 
providers.
    The majority of commenters believed that the care manager should be 
part of an interdisciplinary team and most believed that the care 
manager should be intimately involved in the provision of actual care 
to enrollees. One commenter stressed the need to define the care 
manager's role in relation to other providers of care coordination 
(such as discharge planners) in the current Medicare system. Commenters 
also suggested that programs need to integrate patients' physicians 
into the care coordination process.
    Several providers credited their success to the use of patient risk 
stratification, evidence-based medicine, information systems, or 
Internet and telecommunications technologies. The latter two were 
mentioned by several commenters as being useful for rural populations.
    There were many comments on the difficulties of providing care 
management services under the current Medicare fee-for-service payment 
system. Almost all respondents suggested some sort of risk bearing 
system in which providers would be paid a fixed fee per enrollee and 
would share in any savings to the Medicare system. Some also suggested 
that reimbursement be linked to patient outcomes.
3. Limitations
    Through the study design, a number of exemplary or highly regarded 
coordinated care programs may have been excluded from the review of 
best practices. Only those programs that volunteered to submit 
information and that provided self-reported evidence of favorable 
impacts on costs or hospital admissions were considered in the review. 
However, a review of excluded programs would not likely alter our basic 
conclusions about the three basic activities that successful programs 
must accomplish and the component tasks that they must address. Nor 
would have examination of additional programs been likely to permit 
more definitive statements about minimum requirements for a successful 
care management intervention. Evidence from additional programs would 
have likely provided further proof that there are multiple ways to 
achieve the goal of coordinating care.
    An additional limitation of the review is that the data were self-
reported and it was not possible to validate the reported impacts on 
outcomes. Nonetheless, the quality of the evidence reported was 
evaluated, and this ranking was used in the identification of 
potentially cost-effective practices. Thus, absent fraudulent 
representation of the data or concealment of questionable evaluation 
practices, programs that reported large impacts are likely to have had 
sizeable positive effects, even if the effects are somewhat overstated. 
This conclusion is reinforced by the focus of the study on programs 
that also tended to have features that case management experts believe 
to be strongly associated with good care coordination. Another data-
related limitation is that the cost-effectiveness of most programs 
could not be assessed due to the complete absence or poor quality of 
data on the costs of the interventions.
    In the analysis phase of the assessment, some of the less 
successful programs (those that reported comparatively smaller impacts) 
were reviewed in an effort to better understand potential differences 
between these programs and programs with similar structure and process 
features that reported large impacts. While this effort yielded limited 
insight (due largely to the wide variability in the quality of the 
evidence and large confidence intervals), examination of three 
unsuccessful programs reinforced the findings described above. These 
ineffective programs failed to identify all important problems, and 
failed to set specific goals in creating care plans. They also had 
shortcomings in implementing and delivering the care. Two of the 
programs cited difficulties building relations with primary care 
providers. One program relied solely on pamphlets for patient 
education. They also failed to reassess patients adequately, lacked 
procedures for patients to reach case managers between scheduled 
contacts, and relied on staff with backgrounds in acute care rather 
than community nursing.

D. Discussion

    The findings of the best practice assessment suggest two general 
conclusions. First, there are several, if not many, potentially 
effective ways of coordinating care, and second, the two delivery 
models identified (DM and CM) may have the potential to improve care 
for chronically ill Medicare beneficiaries. In general, these 
conclusions are sufficiently informative for the purposes of developing 
a demonstration design. A conceptual framework applicable to the 
identified coordinated care delivery models is provided, and it appears 
that implementation of each of these delivery models in the Medicare 
fee-for-service program under a demonstration is feasible.
    In addition to the conceptual framework and favorable 
characteristics of potentially cost-effective programs found through 
the review of best practices, there are several key design details that 
must be specified in order to ensure the likelihood of a successful 
demonstration within the time frame required by the Balanced Budget 
Act. These design issues include: Eligibility requirements, 
organizational capabilities for providing coordinated care services and 
for participating in the research and evaluation aspects of the 
demonstration, experimental design, technical operational design 
features, and the payment methodology to be tested. In specifying these 
requirements, we rely on our past experience with successful and 
unsuccessful demonstrations.

II. Provisions of This Notice

A. Purpose

    This notice solicits applications for demonstration projects that 
will use existing models of coordinated care to improve the quality of 
services furnished to specific beneficiaries and manage expenditures 
under Parts A and B of the Medicare program. These savings are to 
result from more efficient provision and utilization of Medicare-
covered services and the prevention of avoidable, costly medical 
complications. The intention of this demonstration is not to expand the 
set of services that Medicare covers with the exception of coordinated 
care services for targeted beneficiaries. Applicants may propose to 
expend a portion of the payments received for coordinated care services 
on services

[[Page 46470]]

that are typically not covered by the Medicare program. These services 
are not to be considered Medicare-covered services to which 
demonstration participants are entitled under the demonstration. 
Examples of these services include (but are not limited to): 
Coordination with community-based services, transportation, 
medications, noncovered home visits, and equipment. Beneficiaries will 
not be financially liable for these services.
    We are interested in testing a variety of delivery and payment 
models aimed at diseases that represent high costs to the original 
Medicare fee-for-service program. The number and type of models to be 
tested will be determined by the quality of the proposals received. 
Through this solicitation, we intend to award at least eight proposed 
projects. Five of the selected projects will be conducted in urban 
areas; three in rural areas. We intend to operate the demonstration 
projects for 4 years from implementation during which time a formal 
evaluation will be conducted. We will assign a project officer, to each 
selected project, who will serve as the point of contact with the 
demonstration project staff. Our project officer will provide technical 
consultation regarding cooperative agreement procedures, monitor 
demonstration site activities, and forward feedback to the 
demonstration project's staff.

B. Funding

    Under the demonstration, using a monthly all-inclusive rate, we 
will pay for the proposed coordinated care services. As required in the 
Balanced Budget Act of 1997, aggregate Medicare payments for the costs 
of the demonstration must be budget neutral for the Medicare program. 
This requirement means that, over the course of the projects, the 
aggregate Medicare payment for the coordinated care services (and any 
start up funding and incentive payments, if made) may be no greater 
than the total expected Medicare program savings from the coordinated 
care services. In addition to the monthly payment amounts, applicants 
may propose and we are willing to consider testing well-constructed 
performance incentives for the coordinated care entity.
    Applicants may request minimal financial assistance for initial 
implementation costs (one-time payment of up to $150,000 per 
demonstration project, subject to availability). If made, this funding 
will be considered as part of the project's budget neutrality estimate. 
We are willing to consider requests for assistance with the following 
kinds of initial implementation costs: Modification of existing 
protocols, services, outreach, and educational materials to address a 
Medicare fee-for-service population. Applicants' proposed project 
budget must show the applicant's share of start-up costs as well as the 
proposed HCFA share.

C. Requirements for Submissions

    We are seeking innovative proposals from a variety of qualified 
organizations that test whether models of coordinated care improve 
clinical outcomes, satisfaction, quality of life, and appropriate use 
of Medicare-covered services for targeted Medicare fee-for-service 
beneficiaries, while managing Medicare expenditures under Parts A and B 
so that budget neutrality of the project is achieved. Preference will 
be given to proposals aimed at beneficiaries who have one or more 
chronic conditions that represent high costs to the Medicare program, 
such as congestive heart failure, other heart disease (heart attack, 
ischemic heart disease, angina, arrhythmia), diabetes, liver disease, 
chronic obstructive pulmonary disease or other chronic lung disease, 
stroke or cerebrovascular or other vascular disease, psychotic 
disorders, major depressive disorders, drug/alcohol dependence, 
Alzheimer's or other dementia, cancer, or HIV/AIDS. Applicants 
proposing to target beneficiaries with chronic conditions not listed 
above must provide evidence justifying their selection.
    Applicants must describe, in detail, their experience with 
providing coordinated care services and the populations served. 
Enrollment and drop-out rates must be described. Applicants must submit 
evidence for the following required organizational capabilities: 
appropriately experienced clinical and management staff; accurate 
understanding of the original Medicare fee-for-service program coverage 
and payment policies; adequate data and information systems; capacity 
to capture and analyze relevant patient-specific data elements; 
willingness to submit data to our designated evaluation contractor; 
effective management oversight; and effective quality improvement 
processes.
    We are interested in models that are specifically targeted to the 
Medicare population and that take into account the beneficiaries' 
relative health and functional status, age, mental functioning, and 
other relevant factors. We are interested in and will give preference 
to proposals that focus on beneficiaries most likely to benefit from 
coordinated care interventions and that take patient comorbidities into 
account in the services provided.
    Many of the design elements of the proposed demonstration project 
will depend on the coordinated care delivery model and interventions 
offered by the applicant, as well as the proposed payment methodology. 
When appropriate, applicants must demonstrate capabilities consistent 
with the coordinated care conceptual framework described in section 
I.C. of this notice.
    Applicants must explain how their proposed program addresses each 
of the following aspects of the demonstration:
1. Coordinated Care Services
    We seek to test existing models of coordinated care that have at a 
minimum been pilot tested by the applicant, thus eliminating the need 
for a lengthy developmental time frame. The applicant must therefore be 
an existing provider of coordinated care services applicable to the 
Medicare population. For purposes of this notice, ``existing provider'' 
is defined as an entity that has provided coordination services similar 
to or identical to the coordinated care services proposed for the 
demonstration for at least 1 year prior to the date of this notice.
    Applicants must serve a chronically ill Medicare population, define 
their target population precisely, and have a defined scope of 
coordinated care services to be provided over a defined service period. 
The proposed coordinated care services must be appropriate for the 
targeted population, and must be likely to improve the quality of care 
for these individuals. The proposed bundle of coordinated care services 
may not include services for which separate Medicare payment is 
typically allowed (for example, physician office visits, inpatient 
hospital stays, durable medical equipment, and other Medicare-covered 
services).
    Proposals for models that rely on medication management regimens or 
services (to be furnished by a provider other than the coordinated care 
entity) that are not typically covered by the Medicare program must 
address issues related to the cost of the medications or services, 
beneficiaries' ability to afford the medications or services, 
implications for the applicant's protocols, and other pertinent 
details.
    Detailed processes must be proposed for beneficiary participant 
identification, recruitment, selection, enrollment, and discharge from 
the program. Applicants must indicate how they plan to assess whether 
an individual has one of the targeted

[[Page 46471]]

diseases and what additional restrictions will be placed on eligibility 
(for example, qualifying conditions, excluded conditions, and mandated 
referral from a physician). Additional processes must include: Ensuring 
optimal medical management; enhancing and supporting patient self-
management and patient and caregiver education; ensuring efficient and 
effective utilization of Medicare services; and ensuring adequate flow 
of patient information from setting to setting.
    Preference will be given to proposals in which the intervention 
protocols are not proprietary in nature.
2. Evidence of Prior Success
    Applicants must provide clear evidence that their program has 
achieved reductions in the use of medical services for the target 
population previously served. Applicants must provide estimates showing 
that Medicare savings from proportionately similar effects for the 
target Medicare population would be sufficient to cover the costs of 
the demonstration to the Medicare program (proposed aggregate payment 
for coordinated care services and any start up funding). For their 
claims of prior success, applicants must define the outcomes measures 
used, the length of time over which they were measured, and how the 
measures were calculated. Preference will be given to proposals that 
report strong, credible evidence of savings and improved patient 
outcomes calculated from actual data collected during past 
implementation of the proposed care coordination interventions by the 
applicant. Preference will also be given to proposals that will test 
protocols that have been shown to be cost-effective specifically with a 
Medicare population.
3. Experimental Design
    The proposed demonstration project must provide for voluntary 
participation for targeted Medicare beneficiaries. Preference will be 
given to proposals that make use of a randomized experimental design 
(for example, concurrent treatment group (receives coordinated care 
services) and control group (receives usual care) with patient 
assignment occurring after agreement to participate in the 
demonstration is established). For a randomized design, applicants must 
submit evidence of their ability to recruit and serve a study 
population of at least 618 Medicare beneficiaries per year (309 in the 
treatment group and 309 in the control group). When characteristics of 
the proposed intervention or the population under study renders a 
randomized design infeasible, applicants must provide a justification 
for this conclusion, and must fully describe how the proposed treatment 
and comparison groups would be identified such that the selection bias 
usually avoided by randomization would be minimized. For a comparison 
group design, applicants must submit evidence of their ability to 
recruit and serve a large enough population to allow us to 
differentiate statistically between the two groups.
    Details of the applicant's proposed experimental design must be 
specified in its proposal, including the expected number of eligible 
Medicare beneficiaries in the geographic area the program intends to 
serve and the proportion expected to volunteer for the demonstration. 
Applicants must either (1) allow us (or our contractor) to assign 
beneficiaries to the experimental or control/comparison groups, or (2) 
have their proposed procedures for assignment approved and monitored by 
HCFA. At the time enrollment begins, beneficiaries who are then being 
served by the applicant's program may not be recruited for 
participation in the demonstration.

    Note: Beneficiaries participating in the demonstration must be 
enrolled in Medicare Parts A and B and Medicare must be the primary 
payor.

4. Payment and Budget Neutrality
    Applicants must propose an overall payment methodology and project 
budget that are appropriate for their proposed coordinated care 
delivery model and budget neutral for the Medicare program. Applicants 
must submit evidence demonstrating the accuracy of the financial 
assumptions used in their proposed payment methodology and project 
budget. Applicants' accuracy in estimating the expected net Medicare 
savings, the expected total yearly Medicare expenditures for the 
treatment and control (or comparison) groups, and the strength of the 
evidence supporting these estimates will be considered in evaluating 
the proposals. Further, applicants selected for award will be required 
to submit to us data supporting their financial assumptions prior to 
finalization of the award. In addition, we may revisit the budget 
neutrality calculations periodically during demonstration 
implementation to assess if the projects are budget neutral to the 
Medicare program.
 All-Inclusive Rate
    The applicant's payment methodology must propose an all-inclusive 
rate per enrolled beneficiary served per calendar month for the 
proposed bundle of coordinated care services. Under the demonstration, 
the coordinated care entity may bill for and be paid for each calendar 
month for which the beneficiary was enrolled in the coordinated care 
program and received coordinated care service furnished by that 
coordinated care entity. Enrollment begins the first day of the month 
following consent for participation from the beneficiary. Applicants 
may propose an alternative enrollment process with justification. For 
example, an applicant may propose an enrollment process that would 
allow for enrollment during the month in which the beneficiary consents 
to participate and for subsequent partial monthly payment.
    This demonstration aims to give the care coordination entity 
increased flexibility in providing services and make participation in 
the care coordination program attractive to patients and providers. The 
monthly all-inclusive rate for coordinated care services furnished to 
participating beneficiaries will be considered an administrative fee; 
no beneficiary coinsurance amount or deductible liability will be 
applied. Further, the selected demonstration sites must submit bills 
for the coordinated care services furnished on an assignment basis (no 
balance billing will be permitted). Providing coordinated care services 
to beneficiaries without cost eliminates a potential financial barrier 
to willingness to participate, offers a modest incentive for 
beneficiaries to participate (without applicable supplemental 
insurance) and avoids a layer of complexity in the billing requirements 
both for us and the demonstration projects. In addition, applicants may 
propose to expend a portion of the payment for coordinated care 
services on other services to beneficiaries.
    Applicants may also propose to expend a portion of the monthly 
administrative fee for coordinated care services on appropriate 
payments to providers whose services are essential to the success of 
their programs. For example, an applicant may propose to pay physicians 
for services furnished to demonstration participants for which separate 
Medicare payment is not allowed. The payment might be structured as a 
monthly payment for care oversight or payment for participation in a 
scheduled multidisciplinary team conference. Payments to physicians 
must be tied to services furnished to an enrolled beneficiary and 
cannot be based upon referrals to the program. These

[[Page 46472]]

payments, if any, will be included in the budget-neutrality 
calculations and in determining any Medicare savings.
    The proposed payment amount must be reasonable given the scope of 
coordinated care services proposed and must be supported by prior 
evidence of cost savings. The derivation of the monthly all-inclusive 
rate from the component costs must be specified in the applicant's 
proposal. No separate payment will be made for recruitment, travel, 
capital investments, labor, administrative, implementation, operating, 
data collection, research, evaluation, or any other costs incurred by 
the demonstration selectees in the provision of the proposed 
coordinated care services. However, applicants may request minimal 
financial assistance for initial implementation costs (a one time 
payment of up to $150,000 per demonstration project, subject to 
availability). Applicants must submit a detailed project budget with 
documentation of how the requested start-up funds, if any, would be 
used.
 Case Mix
    In proposing the monthly all-inclusive rate per beneficiary, 
applicants may propose a payment schedule (of up to six rates) that 
reflects the intensity of services provided to beneficiaries with 
varying severity of disease or functioning, or length of time enrolled 
in the coordinated care program. Under this type of payment 
methodology, applicants must specify the mix of cases anticipated in 
the treatment group and develop an average rate. This average rate will 
determine the maximum monthly payment amount permitted (average monthly 
rate per beneficiary multiplied by the number of beneficiaries enrolled 
during the month cannot exceed the aggregate case mix adjusted rate for 
that month).
 Formal Evaluation
    The demonstration projects will be required to cooperate in an 
independent formal evaluation of the demonstration, including 
submission of cost and other program data and two site visits, 
conducted by HCFA or its contractor. No additional funding will be 
provided for these activities.
 Performance Incentives
    The primary focus of the demonstration program is an all-inclusive 
rate payment methodology. For the first year, all demonstration sites 
will be paid in this manner. For the second year and beyond, an 
applicant may propose testing alternative models such as a financial 
incentives program for the coordinated care entity beyond the monthly 
all-inclusive rate. Proposed performance-based financial incentive fee 
payments may be in the form of a fixed fee (capped by a percentage of 
net Medicare savings), or a percentage of net Medicare savings (as 
calculated by HCFA or its contractor). Development of appropriate 
outcomes-based incentives can be a significant challenge. Thus, 
applicants must define precisely the target measures to be used to 
determine if the performance-based financial incentive fee will be paid 
and how these measures will be calculated. Final decisions on these 
alternatives will depend on: (1) The applicant's ability to demonstrate 
the effectiveness of the proposed incentives, and (2) the applicant's 
ability to measure savings attributable to the intervention. Applicants 
should be aware that our primary interest is in testing the 
effectiveness of an all-inclusive rate payment and that this will be 
the primary basis for evaluating proposals.
5. Ability To Carry Out the Demonstration
    Applicants must demonstrate that they have the basic infrastructure 
to carry out the demonstration. At a minimum, the applicant must have 
adequate physical assets, trained staff, clinical protocols to guide 
care delivery and management, linkages to providers and services 
necessary to deliver care, and appropriate information and financial 
systems. Accordingly, applicants must have substantial experience in 
coordinating care.
    Proposals must include a detailed implementation plan describing 
tasks, time lines, and costs associated with implementing the 
demonstration program. Since applicants must demonstrate prior 
experience in operating successful care management programs, the 
implementation plan should focus on tasks and a time line for modifying 
the existing system to fit the demonstration program features listed 
above. Applicants may need to modify case management models, including 
protocols, services, outreach, and education to address a Medicare fee-
for-service population.
    The implementation plan must also demonstrate how the organization 
will modify its existing data and claims systems in order to submit 
electronic claims for payment to the appropriate Medicare 
contractor(s), using standard claims formats, and to meet all data 
requirements for the project. The preimplementation start-up phase 
should not exceed 6 months. Within 12 months from the implementation 
date, at least 309 treatment patients must be served (for a randomized 
design.)

D. Submission of Applications

    Applications (original and 10 copies) must be received by HCFA as 
indicated in the DATES and ADDRESSES sections of this notice. Only 
proposals that are considered ``on time'' will be reviewed and 
considered by the technical review panel. Applications must be typed 
for clarity and should not exceed 40 double-spaced pages, exclusive of 
the cover letter, executive summary, resumes, forms, and documentation 
supporting the cost proposal. That is, sections IV, V, VI, VII, and 
VIII below must be presented in 40 double-spaced typewritten pages. 
These sections make up the body of the proposal and must fully describe 
the proposed project.
Application Contents Outline
    To facilitate the review process, the application should include 
the following contents in the following order:
    I. Cover Letter--Must include a brief description of the proposed 
project and indicate the model to be tested (that is, DM or CM, target 
population, and urban site or rural site), and identify any and all 
HCFA provider numbers assigned to the applicant, a contact person, and 
contact information.
    II. ``Application for Federal Assistance'' Standard Form 424 
(including SF-424a ``Budget Information'' and SF-424b ``Assurances'', 
available on our website (www.hcfa.gov/ord/ordhp1.htm)).
    III. Executive Summary--Must include a summary of the project, care 
coordination experience, existence of adequate information systems, and 
willingness to share protocols for care coordination.
    IV. Statement of the Problem
    V. Demonstration Design
    VI. Organizational Capabilities
    VII. Project Budget and Cost-Effectiveness Evidence
    VIII. Implementation Plan
    IX. Related Supplemental Materials

E. Evaluation Process and Criteria

    A review of responsive proposals will be conducted by a panel of 
experts. This technical review panel will convene in the months 
following the due date for submission of proposals. The panelists' 
recommendations will contain numerical ratings based on the evaluation 
criteria, the ranking of all responsive proposals, and a written 
assessment of each applicant. In addition, we will conduct a financial 
analysis of the recommended proposals and evaluate the budget 
neutrality of these proposed projects.

[[Page 46473]]

Evaluation Criteria and Weights
 Soundness of the Demonstration Design (20 points)
    A. The proposal provides clear and convincing evidence and 
supporting materials that proposed care coordination services are 
appropriate for the targeted population, likely to achieve reductions 
in the use of medical services, and likely to improve the quality of 
care for these individuals.
    B. The proposed research design provides for voluntary 
participation of a sufficient number of Medicare beneficiaries. The 
research design provides for the enrollment of comparable treatment and 
comparison groups in order to allow for validity of the evaluation 
result. Preference will be given to applications that make use of an 
appropriate randomized design.
 Organizational Capabilities (30 points)
    A. The proposal provides evidence of the availability and adequacy 
of facilities, equipment, personnel, and data systems to successfully 
conduct the proposed project.
    B. The proposal provides evidence of the organizational capacity to 
ensure adequate service delivery and the provision of high quality of 
care.
    C. Specific information is provided concerning how the personnel 
are to be organized in the project, to whom they will report, and how 
they will be used to accomplish specific objectives or portions of the 
project.
 Ability To Implement the Demonstration (35 Points)
    A. The proposed project implementation strategy and plan are 
detailed and appropriate.
    B. There are adequate mechanisms for ensuring the medical necessity 
and reasonableness of the coordinated care services furnished under the 
demonstration.
    C. There are adequate mechanisms for ensuring that beneficiaries' 
physicians are integrated with the project.
    D. The strategy and plan for recruiting the required number of 
patients in the control and experimental groups appear reasonable and 
achievable.
    E. The data to be collected, data sources, and data analyses 
planned are specified in detail and are sufficient to ensure optimal 
medical management and efficient use of health care services.
    F. The implementation plan supports an independent evaluation of 
the project.
    G. The proposal provides evidence that effective continuous quality 
improvement processes are being employed and can be transferred to the 
demonstration.
 Strength of the Cost-Effectiveness Evidence (15 points)
    A. The proposal provides justification and explanation for the 
proposed payment amount(s).
    B. The proposed payment amount for the bundle of coordinated care 
services is reasonable considering the scope and nature of services 
included.
    C. The proposal provides clear, convincing evidence that, over the 
4 years of the demonstration, the aggregate Medicare expenditures under 
Parts A and B (including incentives and start-up funding, if made) will 
be no greater than expected Medicare expenditures in the absence of the 
demonstration.
Final Selection
    From among the most highly qualified applicants, the final 
selection of projects for the demonstration will be made by the HCFA 
Administrator and will take in to consideration operational 
feasibility, geographic location, and program priorities (such as 
testing a variety of approaches for delivering services, targeting 
beneficiaries, and payment). We reserve the right to conduct (a) site 
visit(s) prior to making awards. We expect to make the awards in early 
2001.

III. Collection of Information Requirements

    The information collection requirements contained in this notice 
have been approved by the Office of Management and Budget under the 
Paperwork Reduction Act of 1995 (42 U.S.C. 3501-3520) and assigned OMB 
control number 1938-0800. An agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless the collection displays a valid control number.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

    Authority: Section 4016 of the Balanced Budget Act of 1997 (Pub. 
L. 105-33).


(Catalog of Federal Domestic Assistance Program No. 93.779, Health 
Care Financing Research, Demonstrations and Evaluations)

    Dated: July 23, 2000.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
[FR Doc. 00-19159 Filed 7-27-00; 8:45 am]
BILLING CODE 4120-01-P