[Federal Register Volume 67, Number 17 (Friday, January 25, 2002)]
[Notices]
[Pages 3716-3718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-1874]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-4025-FN]
RIN 0938-ZA15


Medicare Program; Medicare+Choice Organizations--Approval of the 
Deeming Authority of the National Committee for Quality Assurance 
(NCQA) for Medicare+Choice (M+C) Managed Care Organizations That Are 
Licensed as Health Maintenance Organizations (HMOs)

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final notice.

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SUMMARY: This final notice announces the approval of the National 
Committee for Quality Assurance (NCQA) for deeming authority of 
Medicare+Choice (M+C) organizations that are licensed as health 
maintenance organizations (HMOs). We have found that NCQA's standards 
for managed care organizations (MCOs) submitted to us in the 
application process meet or exceed those established by the Medicare 
program. Therefore, M+C organizations that are licensed as HMOs and are 
accredited by NCQA may receive, at their request, deemed status for the 
M+C requirements in the six areas--Quality Assurance, Information on 
Advance Directives, Antidiscrimination, Access to Services, Provider 
Participation Rules, and Confidentiality and Accuracy of Enrollee 
Records--that are specified in Section 1852(e)(4)(C) of the Social 
Security Act (the Act). Regulations set forth in 42 CFR 422.157(b)(2) 
specify that the Secretary will publish a Federal Register notice that 
indicates whether an accreditation organization's request for approval 
has been granted and the effective date and term of the approval, which 
may not exceed 6 years.

FOR FURTHER INFORMATION CONTACT: Trisha Kurtz, (410) 786-4670.

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I. Background

    Under the Medicare program, eligible beneficiaries may receive 
covered services through a managed care organization (MCO) that has a 
Medicare+Choice (M+C) contract with the Centers for Medicare & Medicaid 
Services (CMS). To enter into an M+C contract, the organization must be 
licensed by the State as a risk bearing entity and must meet the 
requirements that are set forth in 42 CFR part 422. These regulations 
implement Part C of Title XVIII of the Social Security Act (the Act), 
which specifies the services that an MCO must provide and the 
requirements that the organization must meet to be an M+C contractor. 
Other relevant sections of the Act are Parts A and B of Title XVIII and 
Part A of Title XI pertaining to the provision of services by Medicare 
certified providers and suppliers.
    Following approval of the M+C contract, CMS engages in routine 
monitoring of the M+C organization to ensure continuing compliance. The 
monitoring process is comprehensive and uses a written protocol that 
itemizes the Medicare requirements the M+C organization must meet.
    An M+C organization may be exempt from CMS monitoring of the 
requirements that are in the areas listed in section 1852(e)(4)(C) of 
the Act as a result of the organization being accredited by a CMS-
approved accrediting organization. In essence, the Secretary ``deems'' 
that the Medicare requirements are met based on a determination that 
the accrediting organization's standards are at least as stringent as 
Medicare requirements. Regulations for the M+C deeming program are set 
forth in Secs. 422.156, 422.157, and 422.158. The term for which an 
accrediting organization may be approved by CMS may not exceed 6 years 
as stated in Sec. 422.157(b)(2). For continuing approval, the 
accrediting organization will have to re-apply to CMS.

II. Provisions of the Proposed Notice

    On August 1, 2001, we published a proposed notice in the Federal 
Register (66 FR 39775) announcing the receipt of an application from 
NCQA for approval of deeming authority for M+C organizations that are 
licensed as health maintenance organizations (HMOs). In the proposed 
notice, we provided the factors on which we would base our evaluation. 
In accordance with Sec. 422.157(b)(iii) of the proposed notice, we 
provided a 30-day public comment period. We did not receive public 
comments in response to the proposed notice for NCQA.

III. Deeming Approval Review and Evaluation

    As set forth in section 1852(e)(4) of the Act and our regulations 
at Sec. 422.158, the review and evaluation of the NCQA's accreditation 
program was compared to the requirements set forth in part 422 for the 
M+C program.

A. Components of the Review Process

    The review of NCQA's application for approval of M+C deeming 
authority included the following components.
1. Site Visit
    A site visit to NCQA's headquarters to assess--
     Corporate policies and procedures that relate to the MCO 
accreditation program;
     The survey, decision-making, and report-writing processes 
used in NCQA's MCO accreditation program;
     The resources available for accreditation reviews and the 
ability to financially sustain an M+C deeming program;
     The staff and surveyor training and evaluation programs;

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     The ability to investigate and respond appropriately to 
complaints against accredited MCOs; and
     Communication, customer support and release of 
accreditation information to the public.
2. Desk-Top Review
    A desk-top review of NCQA's MCO accreditation program, including--
     A description of NCQA's survey process for MCOs, including 
the frequency of surveys performed, whether the surveys are announced 
or unannounced, surveyor instructions, the review and accreditation 
status decision-making process, procedures used to notify accredited 
M+C organizations of deficiencies and monitoring of the correction of 
deficiencies, and the procedures used to enforce compliance with 
accreditation requirements;
     Information about the individuals who perform MCO 
accreditation reviews, including the size and composition of the survey 
team, the methods of compensation, the education and experience 
requirements, the content and frequency of the in-service training, the 
evaluation system used to monitor performance, and conflict of interest 
requirements;
     A description of the data management and analysis system, 
the types (full, partial, or denial) and categories (provisional, 
conditional, temporary) of accreditation offered by NCQA, the duration 
of each category of accreditation, and a statement identifying the 
types and categories that would serve as a basis for accreditation if 
CMS grants NCQA M+C organization deeming authority;
     The procedures used to respond to and investigate 
complaints or identify other problems with accredited organizations, 
including coordination of these activities with licensing bodies and 
ombudsmen programs;
     A description of how NCQA provides accreditation 
information to the general public;
     The policies and procedures for (1) withholding, denying 
and removal of accreditation status, and the other actions NCQA may 
take in response to noncompliance with their standards and 
requirements, and (2) how NCQA deals with accreditation of 
organizations that are acquired by another organization, have merged 
with another organization, or that undergo a change of ownership or 
management;
     Lists of all (1) NCQA accredited M+C organizations, (2) 
MCOs surveyed by NCQA in the past 3 years, and (3) MCOs that were 
scheduled to be surveyed by NCQA within 3 months of submitting their 
application;
     A written presentation of NCQA ability to furnish data 
electronically, via telecommunications;
     A resource analysis that included financial statements for 
the past 3 years (audited, if possible) and the projected number of 
deemed status surveys for the upcoming year; and
     A statement acknowledging that, as a condition of 
approval, NCQA agreed to comply with the ongoing responsibility 
requirements stated in Sec. 422.157(c).
3. Assessment of NCQA's Standards and Methods of Evaluation
    As part of the application, NCQA submitted a crosswalk that 
compared their standards and methods of evaluations with corresponding 
M+C requirements. A multicomponent team of CMS regional and central 
office staffs then reviewed and evaluated NCQA's standards and 
processes and compared them to the M+C requirements in six areas: 
Quality Assurance, Access to Services, Antidiscrimination, Information 
on Advance Directives, Provider Participation Rules, and 
Confidentiality and Accuracy of Enrollee Records.
4. Observation of an NCQA Accreditation
    An observation of an NCQA accreditation of an MCO allowed CMS staff 
to (1) validate that the accreditation review methods described in 
NCQA's application were equal to (or exceeded) the corresponding 
Medicare requirements, and (2) resolve outstanding issues that were 
identified during the review of NCQA's application materials.

B. Results of the Review Process

    We determined that NCQA's current accreditation program for MCOs 
did not either address or ``meet or exceed'' several of the M+C 
requirements that are contained in 5 of the 6 categories set forth in 
section 1852(e)(4)(C) of the Act. To address this issue, NCQA agreed to 
complement their current MCO accreditation program by applying a 
``Medicare+Choice Module'' (M+C Module). Thus, when assessing M+C 
organizations that seek deemed status for the Medicare requirements 
contained in the six categories established in the Act, NCQA will 
complement their current accreditation program with the M+C Module. The 
M+C Module will include the following:
1. Quality Assurance (42 CFR 422.152)
     A statement that ``if/when'' CMS establishes minimum 
performance levels, the M+C organization must meet the performance 
level(s) and report them to CMS.
     A requirement that M+C organizations must meet the full 
range of CMS Quality Assessment and Performance Improvement project 
topic requirements.
2. Provider Participation Rules (42 CFR Subpart E)
     A requirement for a written notice of (1) material changes 
in participating rules before the changes are put into effect, (2) 
initial participation decisions that are adverse to physicians, and (3) 
the appeals process and reasons for the action when a participating 
provider is suspended or terminated.
     A requirement that the majority of the appeals hearing 
panel members are peers of the affected physician.
     A requirement that both the M+C organization and 
contracting provider provide at least 60 days written notice to each 
other before terminating the contract without cause.
     A requirement that participating providers and suppliers 
who provide services to Medicare enrollees are approved for 
participation in Medicare and that the M+C organization does not employ 
or contract with providers who have opted-out of Medicare 
participation.
     A requirement that M+C organizations do not discriminate 
against health care professionals who serve high-risk populations or 
who specialize in the treatment of costly conditions in the formal 
selection and retention criteria.
     A requirement that the M+C organization provide sufficient 
notice to CMS and enrollees, if they object to covering, furnishing or 
paying for counseling or referral service on the basis of moral or 
religious grounds and that the M+C organization provides conscience 
protection policies to enrollees.
     NCQA agreed to a Physician Incentive Plan (PIP) review 
strategy proposed by CMS. M+C organizations will continue to provide 
PIP information to CMS. CMS will notify accrediting organizations of 
M+C organizations that they have deemed are ``noncompliant'' for any of 
the PIP requirements; then the accrediting organization will contact 
the M+C organization to inform them that they must comply with the PIP 
provisions. If, at the end of the accrediting organization's corrective 
action process,

[[Page 3718]]

the M+C organization continues to be noncompliant, the accrediting 
organization will turn the case over to CMS. However, PIP disclosure 
for 2002 is delayed until further notice. CMS is working to modify the 
regulations for disclosure as part of the effort to reduce 
administrative burdens on managed care organizations.
     A requirement that addresses the limitation on provider 
indemnification that is stated in Sec. 422.212.
3. Information on Advance Directives (42 CFR 422.128)
     NCQA agreed to add all the CMS requirements regarding 
information on advance directives to their M+C Module.
4. Antidiscrimination (42 CFR 422.110, 422.502(h))
     A requirement that an M+C organization may not deny, 
limit, or condition the coverage or furnishing of benefits to 
individuals eligible to enroll in an M+C plan offered by the 
organization on the basis of any factor that is related to health 
status.
     A requirement that an M+C organization may not enroll an 
individual who has been medically determined to have end-stage renal 
disease and a requirement that an enrollee who develops end-stage renal 
disease while enrolled in an M+C organization may not be disenrolled 
for that reason.
5. Access to Services (42 CFR 422.112)
     A requirement that M+C organizations have policies and 
procedures that allow an enrollee's representative to facilitate care 
or treatment decisions when the enrollee is unable to do so.
     A requirement that M+C organizations support a network of 
providers with written arrangements that address the provision of 
services covered under the M+C program.
     A requirement that M+C organizations provide direct access 
to women's health services for routine and preventive health care 
services.
     A statement that ensures that M+C organizations have 
procedures to identify individuals with complex needs and/or serious 
medical conditions.
     A requirement that M+C organizations should make a ``best 
effort'' attempt to conduct an initial assessment of enrollee health 
care needs within 90 days of the effective date of enrollment.

C. Term of Approval

    Regulations at Sec. 422.157(b)(2) permit us to grant a term of 
approval for deeming authority for accreditation organizations of up to 
6 years. On January 18, 2002, we notified NCQA of our approval of their 
application as a national accreditation organization for MCOs that 
request participation in the M+C program. We are granting this deeming 
authority through January 17, 2008.

IV. Paperwork Reduction Act

    The requirements associated with granting and withdrawal of deeming 
authority to national accreditation, codified in part 422, 
Medicare+Choice Program, are currently approved by OMB under OMB 
approval number 0938-0690, with an expiration date of June 30, 2002. 
Consequently, it does not need to be reviewed by the Office of 
Management and Budget (OMB) under the authority of the PRA.

V. Regulatory Impact Statement

    We have examined the impact of this notice 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 for small businesses. For 
purposes of the RFA, States and individuals are not considered small 
entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis for any notice that 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 consider 
a small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 100 beds.
    This notice merely recognizes NCQA as a national accreditation 
organization that has approval for deeming authority for HMOs that are 
participating in the M+C program. Since M+C organizations are monitored 
every 2 years by CMS's regional office staff to determine compliance 
with M+C requirements, we believe that the M+C deeming program has the 
potential to reduce both the regulatory and administrative burdens 
associated with the Medicare+Choice program. In FY 2001, there were 179 
M+C contracts and 5,578,605 enrollees. Approximately, 75 of those M+C 
organizations were accredited by NCQA.
    This notice, however, is not a major rule as defined in Title 5, 
United States Code, section 804(2) and is not an economically 
significant rule under Executive Order 12866.
    Therefore, we have determined, and the Secretary certifies, that 
this notice will not result in a significant impact on small entities 
and will not have an effect on the operations of small rural hospitals. 
Therefore, we are not preparing analyses for either the RFA or section 
1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This notice has no consequential effect on 
State, local, or tribal governments. We believe the private sector 
costs of this notice fall below this threshold as well.
    In accordance with Executive Order 13132, this notice will not 
significantly affect the rights of States and does not significantly 
affect State authority. This regulation describes only processes that 
must be undertaken to fulfill our obligation to conduct enforcement as 
required by the April 8, 1997 regulation.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by OMB.

    Authority: Secs. 1851 and 1855 of the Social Security Act (42 
USC 1395w-21 and 42 USC 1395w-25)

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
    Dated: December 10, 2001.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 02-1874 Filed 1-24-02; 8:45 am]
BILLING CODE 4120-01-P