[Federal Register Volume 68, Number 40 (Friday, February 28, 2003)]
[Notices]
[Pages 9681-9690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4087]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1225-GNC]
RIN 0938-ZA22


Medicare Program; Criteria and Standards for Evaluating 
Intermediary, Carrier, and Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Regional Carrier Performance During 
Fiscal Year 2003

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

ACTION: General notice with comment period.

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[[Page 9682]]

SUMMARY: This notice describes the criteria and standards to be used 
for evaluating the performance of fiscal intermediaries, carriers, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) regional carriers in the administration of the Medicare 
program beginning on the first day of the first month following 
publication of this notice in the Federal Register. The results of 
these evaluations are considered whenever we enter into, renew, or 
terminate an intermediary agreement, carrier contract, or DMEPOS 
regional carrier contract or take other contract actions, for example, 
assigning or reassigning providers or services to an intermediary or 
designating regional or national intermediaries. We are requesting 
public comment on these criteria and standards.

EFFECTIVE DATE: The criteria and standards are effective the March 3, 
2003.
    Comment Period: Comments will be considered if we receive them at 
the appropriate address as provided below no later than 5 p.m. (EDT) on 
March 31, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1225-GNC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (fax) transmission. Mail written comments (one original and 
two copies) to the following address:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1225-GNC, P.O. Box 8016, Baltimore, MD 
21244-8016.

    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and two copies) to one of the following 
addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC, 20201 or Room C5-14-03, 7500 Security Boulevard, 
Baltimore, Maryland 21244-1850.

    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of the comments being 
filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    For information on viewing public comments, see the SUPPLEMENTARY 
INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Sue Lathroum, (410) 786-7409.

SUPPLEMENTARY INFORMATION: In several instances, we identify a Medicare 
manual as a source of more detailed requirements. Medicare fee-for-
service contractors have copies of the various Medicare manuals 
referenced in this notice. Members of the public also have access to 
our manual instructions.
    Medicare manuals are available for review at local Federal 
Depository Libraries (FDLs). Under the FDL Program, government 
publications are sent to approximately 1,400 designated public 
libraries throughout the United States. To locate the nearest FDL, 
individuals should contact any public library.
    In addition, individuals may contact regional depository libraries 
that receive and retain at least one copy of nearly every Federal 
government publication, either in printed or microfilm form, for use by 
the general public. These libraries provide reference services and 
interlibrary loans; however, they are not sales outlets. Individuals 
may obtain information about the location of the nearest regional 
depository library from any library. Information may also be obtained 
from the following Web site: http://www.hcfa.gov/pubforms/progman.htm. 
Some manuals may be obtained from the following Web site: http://www.cms.gov/pubforms/p2192toc.htm.
    Finally, all of our Regional Offices (ROs) maintain all Medicare 
manuals for public inspection. To find the location of our nearest 
available RO, you may call the individual listed at the beginning of 
this notice. That individual can also provide information about 
purchasing or subscribing to the various Medicare manuals.
    Response to Public Comments: Because of the large number of items 
of correspondence we normally receive on Federal Register documents 
published for comment, we are unable to acknowledge or respond to them 
individually. We will consider all comments we receive by the date and 
time specified in the Comment Period section of this preamble, and, if 
we proceed with a subsequent document, we will respond to the comments 
in the preamble of that document.
    Inspection of Public Comments: Comments received timely are 
available for public inspection beginning approximately 2 weeks after 
the close of the comment period, at the headquarters of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 
p.m.
    To schedule an appointment to view public comments, phone (410) 
786-7197.

I. Background

A. Part A--Hospital Insurance

    Under section 1816 of the Social Security Act (the Act), public or 
private organizations and agencies participate in the administration of 
Part A (Hospital Insurance) of the Medicare program under agreements 
with us. These agencies or organizations, known as fiscal 
intermediaries, determine whether medical services are covered under 
Medicare, determine correct payment amounts and then make payments to 
the health care providers (for example, hospitals, skilled nursing 
facilities (SNFs), community mental health centers, etc.) on behalf of 
the beneficiaries. Section 1816(f) of the Act requires us to develop 
criteria, standards, and procedures to evaluate an intermediary's 
performance of its functions under its agreement.
    Section 1816(e)(4) of the Act requires us to designate regional 
agencies or organizations, which are already Medicare intermediaries 
under section 1816 of the Act, to perform claim processing functions 
with respect to freestanding Home Health Agency (HHA) claims. We refer 
to such organizations as Regional Home Health Intermediaries (RHHIs). 
See 42 CFR 421.117 and the final rule published in the Federal Register 
on May 19, 1988 at 53 FR 17936 for more details about the RHHIs.
    Evaluations of Medicare fee-for-service contractor performance need 
not be limited to the current fiscal year (FY), other fixed term basis, 
or agreement term. We may evaluate performance using a time frame that 
does not mirror the FY or other fixed term. The evaluation of 
intermediary performance is part of our contract management process.

B. Part B Medical Insurance

    Under section 1842 of the Act, we are authorized to enter into 
contracts with carriers to fulfill various functions in the 
administration of Part B (Supplementary Medical Insurance) of the 
Medicare program. Beneficiaries, physicians, and suppliers of services 
submit claims to these carriers. The carriers determine whether the 
services are covered under Medicare and the amount payable for the 
services or supplies, and then make payment to the appropriate party.
    Under section 1842(b)(2) of the Act, we are required to develop 
criteria, standards, and procedures to evaluate a

[[Page 9683]]

carrier's performance of its functions under its contract. Evaluations 
of Medicare fee-for-service contractor performance need not be limited 
to the current FY, other fixed term basis, or contract term. We may 
evaluate performance using a timeframe that does not mirror the FY. The 
evaluation of carrier performance is part of our contract management 
process.

C. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) Regional Carriers

    In accordance with section 1834(a)(12) of the Act, we have entered 
into contracts with four DMEPOS regional carriers to perform all of the 
duties associated with the processing of claims for DMEPOS, under Part 
B of the Medicare program. These DMEPOS regional carriers process 
claims based on a Medicare beneficiary's principal residence by State. 
Section 1842(a) of the Act authorizes contracts with carriers for the 
payment of Part B claims for Medicare covered services and items. 
Section 1842(b)(2) of the Act requires us to publish in the Federal 
Register criteria and standards for the efficient and effective 
performance of carrier contract obligations. Evaluation of Medicare 
fee-for-service contractor performance need not be limited to the 
current FY, other fixed term basis, or contract term. We may evaluate 
performance using a timeframe that does not mirror the FY. The 
evaluation of DMEPOS regional carrier performance is part of our 
contract management process.

D. Development and Publication of Criteria and Standards

    In addition to the statutory requirements, Sec.  421.120 and Sec.  
421.122 provide for publication of a Federal Register notice to 
announce criteria and standards for intermediaries before 
implementation. Section 421.201 provides for publication of a Federal 
Register notice to announce criteria and standards for carriers before 
implementation. The current criteria and standards for intermediaries, 
carriers, and DMEPOS regional carriers were published in the Federal 
Register on December 28, 2001 at 66 FR 67257.
    To the extent possible, we make every effort to publish the 
criteria and standards before the beginning of the Federal FY, which is 
October 1. If we do not publish a Federal Register notice before the 
new FY begins, readers may presume that until and unless notified 
otherwise, the criteria and standards that were in effect for the 
previous FY remain in effect.
    In those instances in which we are unable to meet our goal of 
publishing the subject Federal Register notice before the beginning of 
the FY, we may publish the criteria and standards notice at any 
subsequent time during the year. If we publish a notice in this manner, 
the evaluation period for the criteria and standards that are the 
subject of the notice will be effective on the first day of the first 
month following publication. Any revised criteria and standards will 
measure performance prospectively; that is, we will not apply new 
measurements to assess performance on a retroactive basis.
    It is not our intention to revise the criteria and standards that 
will be used during the evaluation period once this information has 
been published in a Federal Register notice. However, on occasion, 
either because of administrative action or congressional mandate, there 
may be a need for changes that have a direct impact on the criteria and 
standards previously published, or that require the addition of new 
criteria or standards, or that cause the deletion of previously 
published criteria and standards. If we must make these changes, we 
will publish an amended Federal Register notice before implementation 
of the changes. In all instances, necessary manual issuances will be 
published to ensure that the criteria and standards are applied 
uniformly and accurately. Also, as in previous years, this Federal 
Register notice will be republished and the effective date revised if 
changes are warranted as a result of the public comments received on 
the criteria and standards.

II. Analysis of and Response to Public Comments Received on FY 2001 
Criteria and Standards

    In response to the December 28, 2001 Federal Register general 
notice with comment, we received comments from five entities. We 
reviewed all comments, but none necessitated our reissuance of the FY 
2002 criteria and standards. Not all comments submitted pertained 
specifically to the FY 2002 criteria and standards. We advised Medicare 
program components of the concerns as appropriate. When warranted, we 
have incorporated revisions in this Federal Register notice. We are 
responding to the following performance evaluation comments:
    Comment: A commenter advised that we have established an 
``acceptable reversal rate'' of intermediary reconsideration 
determinations by Administrative Law Judges (ALJs), but that we have 
not developed an acceptable reversal rate for DMEPOS regional carriers.
    Response: Section 1816(f)(2) of the Act requires that we develop a 
standard to evaluate the extent to which intermediary determinations 
are reversed on appeal. This section of the Act applies only to 
intermediaries. The statute does not include a similar requirement for 
carriers and DMEPOS regional carriers, who by law employ a different 
process in reviewing Part B claims, including an additional level of 
contractor appeal known as the fair hearing. While there is no similar 
mandate under the Part B program for carriers or DMEPOS regional 
carriers, our reviewers routinely evaluate the accuracy of appeals 
decisions when they conduct a CPE review of a contractor's appeals 
operation. This review includes an evaluation of reversals both at the 
fair hearing and the ALJ level. We believe that this process adequately 
identifies problems with the accuracy of carrier and DMERC appeals 
decisions.
    Comment: A commenter advised that intermediaries must be given 
specific customer service performance objectives, and providers must be 
allowed to influence those objectives and to participate directly in 
the evaluations of contractor performance. The commenter considers 
provider input more critical if the Administration continues to support 
contractor reform.
    Response: Both intermediaries and carriers are required to have 
Provider Communications Advisory Groups which are comprised of 
representatives from the various Medicare provider types, such as 
hospitals, home health agencies, skilled nursing facilities, and 
physicians. These groups are to have meetings on a quarterly basis 
during which the provider representatives give contractors feedback 
about education and customer service needs and how well these needs are 
being met. The contractors report the minutes of these meetings to 
CMS's headquarters in quarterly update reports. We factor in this 
feedback when setting customer service standards for the contractor. We 
notify contractors of specific customer service performance standards 
by means of administrative directives. However, because such standards 
are not mandated by law or court decision, we do not specify them in 
this notice.
    Currently we evaluate contractor customer service by verifying 
implementation and execution of administrative directives, reviewing 
responses to correspondence, monitoring telephone responses, and 
reviewing educational materials distributed to providers. As we prepare

[[Page 9684]]

for the anticipated passage of contracting reform we will be doing even 
more to seek provider input into customer service performance 
objectives.
    Comment: A commenter requested that we publish the annual 
evaluations of all of the contractors so that the affected public will 
know whether contractors meet performance requirements. The commenter 
advised that currently, the evaluations are available only through a 
Freedom of Information Act (FOIA) request. Many providers, particularly 
smaller providers, are not aware of the procedures for making a FOIA 
request.
    Response: The current evaluation reports for Medicare fee-for-
service contractors are lengthy narratives, which are not conducive to 
publication. They are, however, available to the public upon written 
request. The policy that governs releasing these reports is explained 
at Sec. Sec.  401.133(c), 401.135, 401.136, and 401.140. There is no 
requirement that reports be requested under the FOIA. Written requests 
for reports may be addressed to: Centers for Medicare & Medicaid 
Services, ATTN: Center for Medicare Management, Mailstop S2-21-28, 7500 
Security Boulevard, Baltimore, Maryland 21244-1850.
    Comment: A commenter remarked that the Contractor Performance 
Evaluation (CPE) Rebuttal Process introduced in FY 2001 which gives 
contractors an opportunity to submit a written rebuttal within 7 
calendar days from the CPE exit conference, needs to be clarified as to 
how it applies to the review of provider audit workpapers under our 
Audit Quality Review Program (AQRP). The commenter believes we should 
have a consistent policy for responding to all CPE findings. The 
commenter further suggests that CMS needs to clarify its policies with 
respect to AQRP findings and how they relate to the summarized annual 
CPE for Provider audit.
    Response: The AQRP has an established procedure allowing 
contractors 30 days to review and respond to draft findings prepared as 
a result of the AQRP review. We review the contractor's responses for 
each individual AQRP review, delete or modify the findings as 
appropriate, prepare a rebuttal for those findings that are not 
modified, and issue a Management Letter. We then prepare and send to 
the contractor an Executive Summary of the results of all the 
individual AQRP reviews. This Executive Summary is then used as a basis 
for the preparation of a CPE report. Because the contractor has already 
been given a formal review and rebuttal type process under AQRP that 
exceeds the 7 calendar day CPE rebuttal process, and because the CPE 
report adopts the final AQRP findings, we have determined the CPE 
rebuttal process is unnecessary for AQRP reviews.

III. Criteria and Standards--General

    Basic principles of the Medicare program are to pay claims promptly 
and accurately and to foster good beneficiary and provider relations. 
Contractors must administer the Medicare program efficiently and 
economically. The goal of performance evaluation is to ensure that 
contractors meet their contractual obligations. We measure contractor 
performance to ensure that contractors do what is required of them by 
law, regulation, contract, and our directives.
    We have developed a contractor oversight program for FY 2003 that 
outlines expectations of the contractor; measures the performance of 
the contractor; evaluates the performance against the expectations; and 
provides for appropriate contract action based upon the evaluation of 
the contractor's performance.
    Several times throughout this notice, we refer to the 
``readability'' of letters, decisions, or correspondence that are going 
to Medicare beneficiaries from intermediaries or carriers. In those 
instances, ``readability'' is defined as being below the 8th grade 
reading level unless it is obvious that an incoming request from the 
beneficiary contains language written at a higher level. In such cases, 
the readability level is tailored to the capacities and circumstances 
of the intended recipient.
    In addition to evaluating performance based upon expectations for 
FY 2003, we may also conduct follow-up evaluations throughout FY 2003 
of areas in which contractor performance was out of compliance with 
laws, regulations, and our performance expectations during prior review 
years and thus required the contractor to submit a Performance 
Improvement Plan (PIP).
    In FY 2001, we established the Contractor Rebuttal Process as a 
commitment to continual improvement of CPE. We will continue the use of 
this process in FY 2003. The Contractor Rebuttal Process provides the 
contractors an opportunity to submit a written rebuttal of CPE findings 
of fact. Whenever we conduct an evaluation of contractor operations, 
contractors have 7 calendar days from the date of the CPE review exit 
conference to submit a written rebuttal. The CPE review team or, if 
appropriate, the individual reviewer will consider the contents of the 
rebuttal before the issuance of the final CPE report to the contractor.
    The FY 2003 CPE for intermediaries and carriers is structured into 
five criteria designed to meet the stated objectives. The first 
criterion is ``Claims Processing'' which measures contractual 
performance against claims processing accuracy and timeliness 
requirements as well as activities in handling appeals. Within the 
Claims Processing Criterion, we have identified those performance 
standards that are mandated by legislation, regulation, or judicial 
decision. These standards include claims processing timeliness, the 
accuracy of Explanations of Medicare Benefits (EOMBs) and Medicare 
Summary Notices (MSNs), the appropriateness of determinations reversed 
by ALJs, the timeliness of intermediary reconsideration cases, the 
timeliness of carrier reviews and hearings, and the readability of 
carrier reviews. Further evaluation in the Claims Processing Criterion 
may include, but is not limited to, the accuracy of claims processing, 
the percent of claims paid with interest, and the accuracy of 
reconsiderations, reviews, and hearings.
    The second criterion is ``Customer Service'' which assesses the 
adequacy of the service provided to customers by the contractor in its 
administration of the Medicare program. The mandated standard in the 
Customer Service Criterion is the need to provide beneficiaries with 
written replies that are responsive, that is, provide in detail the 
reasons for a determination when a beneficiary requests such 
information, have a customer-friendly tone and clarity, and are at the 
appropriate reading level. Further evaluation of services under this 
criterion may include, but is not limited to, the timeliness and 
accuracy of all correspondence both to beneficiaries and providers; 
monitoring of the quality of replies provided by the contractor's 
customer service representatives (quality call monitoring); beneficiary 
and provider education, training, and outreach activities; and service 
by the contractor's customer service representatives to beneficiaries 
who come to the contractor's facility (walk-in inquiry service).
    The third criterion is ``Payment Safeguards'' which evaluates 
whether the Medicare Trust Fund is safeguarded against inappropriate 
program expenditures. Intermediary and carrier performance may be 
evaluated in the areas of Benefit Integrity (BI), Medical Review (MR), 
Medicare Secondary Payer (MSP), Overpayments (OP), and Provider 
Enrollment (PE). In addition,

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intermediary performance may be evaluated in the area of Audit and 
Reimbursement (A&R). Mandated performance standards for intermediaries 
in the Payment Safeguards criterion are the accuracy of decisions on 
Skilled Nursing Facility (SNF) demand bills, and the timeliness of 
processing Tax Equity and Fiscal Responsibility Act (TEFRA) target rate 
adjustments, exceptions, and exemptions. There are no mandated 
performance standards for carriers in the Payment Safeguards criterion. 
Intermediaries and carriers may also be evaluated on any Medicare 
Integrity Program (MIP) activities if performed under their agreement 
or contract.
    The fourth criterion is ``Fiscal Responsibility'' which evaluates 
the contractor's efforts to protect the Medicare program and the public 
interest. Contractors must effectively manage Federal funds for both 
the payment of benefits and costs of administration under the Medicare 
program. Proper financial and budgetary controls, including internal 
controls, must be in place to ensure contractor compliance with its 
agreement with HHS and CMS.
    Additional functions reviewed under this criterion may include, but 
are not limited to, adherence to approved budget, compliance with the 
Budget and Performance Requirements (BPRs), and compliance with 
financial reporting requirements.
    The fifth and final criterion is ``Administrative Activities'' 
which measures a contractor's administrative management of the Medicare 
program. A contractor must efficiently and effectively manage its 
operations. Proper systems security (general and application controls), 
Automated Data Processing (ADP) maintenance, and disaster recovery 
plans must be in place. A contractor's evaluation under the 
Administrative Activities criterion may include, but is not limited to, 
establishment, application, documentation, and effectiveness of 
internal controls which are essential in all aspects of a contractor's 
operation, and the degree to which the contractor cooperates with us in 
complying with the Federal Managers' Financial Integrity Act of 1982 
(FMFIA). Administrative Activities evaluations may also include reviews 
related to contractor implementation of our general instructions and 
data and reporting requirements.
    We have developed separate measures for RHHIs in order to evaluate 
the distinct RHHI functions. These functions include the processing of 
claims from freestanding HHAs, hospital-affiliated HHAs, and hospices. 
Through an evaluation using these criteria and standards, we may 
determine whether the RHHI is effectively and efficiently administering 
the program benefit or whether the functions should be moved from one 
intermediary to another in order to gain that assurance.
    Below, we list the criteria and standards to be used for evaluating 
the performance of intermediaries, RHHIs, carriers, and DMEPOS regional 
carriers.

IV. Criteria and Standards for Intermediaries

A. Claims Processing Criterion

    The Claims Processing criterion contains the following four 
mandated standards:
    Standard 1. 95.0 percent of clean electronically submitted non-
Periodic Interim Payment claims are paid within statutorily specified 
time frames. Clean claims are defined as claims that do not require 
Medicare intermediaries to investigate or develop them outside of their 
Medicare operations on a prepayment basis. Specifically, clean, non-
Periodic Interim Payment electronic claims can be paid as early as the 
14th day (13 days after the date of receipt) and must be paid by the 
31st day (30 days after the date of receipt). Our expectation is that 
contractors will meet this percentage on a monthly basis.
    Standard 2. 95.0 percent of clean paper non-Periodic Interim 
Payment claims are paid within specified time frames. Specifically, 
clean, non-Periodic Interim Payment paper claims can be paid as early 
as the 27th day (26 days after the date of receipt) and must be paid by 
the 31st day (30 days after the date of receipt). Our expectation is 
that contractors will meet this percentage on a monthly basis.
    Standard 3. The percentage of reconsideration determinations 
reversed by ALJs is acceptable. We have defined an acceptable reversal 
rate by ALJs as one that is at or below 5.0 percent.
    Standard 4. 75.0 percent of reconsiderations are processed within 
60 days, and 90.0 percent are processed within 90 days. Our expectation 
is that contractors will meet this percentage on a monthly basis.
    Standard 5. 95.0 percent of Part B review determinations are 
completed within 45 days. Our expectation is that contractors will meet 
this percentage on a monthly basis.
    Standard 6. 90.0 percent of Part B hearing decisions are completed 
within 120 days. Our expectation is that contractors will meet this 
percentage on a monthly basis.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
    [sbull] Claims processing accuracy.
    [sbull] Establishment and maintenance of relationship with Common 
Working File (CWF) Host.
    [sbull] Accuracy of processing reconsideration cases with 
determination letters that are clear and have appropriate customer-
friendly tone.
    Because intermediaries process many claims for benefits under the 
Part B Medical Insurance portion of the Medicare Program, we also may 
evaluate how well an intermediary follows the procedures for processing 
appeals of any Part B claims. This includes accuracy of reviews and 
hearings, as well as the appropriateness of the reading level of any 
review determination letters. (See Claims Process Criterion for 
carriers under section VI.)

B. Customer Service Criterion

    Functions that may be evaluated under this criterion include, but 
are not limited to, the following:
    [sbull] Providing timely and accurate replies to beneficiary and 
provider telephone inquiries.
    [sbull] Quality Call Monitoring.
    [sbull] Training of Customer Service Representatives.
    [sbull] Ensuring the validity of the call center performance data 
that are being reported in the Customer Service Assessment and 
Management System.
    [sbull] Providing timely and accurate replies to beneficiaries and 
providers that address the concerns raised and are written with 
appropriate customer-friendly tone and clarity and that those written 
to beneficiaries are at the appropriate reading level.
    [sbull] Walk-in inquiry service.
    [sbull] Conducting beneficiary and provider education, training and 
outreach activities.
    [sbull] Effectively maintaining an Internet Website dedicated to 
furnishing providers and physicians timely, accurate, and useful 
Medicare program information.

C. Payment Safeguards Criterion

    The Payment Safeguard criterion contains the following two mandated 
standards:
    Standard 1. Decisions on SNF demand bills are accurate.
    Standard 2. TEFRA target rate adjustments, exceptions, and 
exemptions are processed within mandated time frames. Specifically, 
applications must be processed to completion within 75 days after 
receipt

[[Page 9686]]

by the contractor or returned to the hospitals as incomplete within 60 
days of receipt.
    Intermediaries may also be evaluated on any MIP activities if 
performed under their Part A agreement. These functions and activities 
include, but are not limited to the following:
    [sbull] Audit and Reimbursement
+ Performing the activities specified in our general instructions for 
conducting audit and settlement of Medicare cost reports.
+ Establishing accurate interim payments.

    [sbull] Benefit Integrity
+ Identifying potential fraud cases that exist within the 
intermediary's service area and taking appropriate actions to resolve 
these cases.
+ Investigating allegations of potential fraud that are made by 
beneficiaries, providers, CMS, Office of Inspector General (OIG), and 
other sources.
+ Putting in place effective detection and deterrence programs for 
potential fraud.

    [sbull] Medical Review
+ Increasing the effectiveness of medical review activities.
+ Exercising accurate and defensible decision making on medical 
reviews.
+ Effectively educating and communicating with the provider community.
+ Collaborating with other internal components and external entities to 
ensure correct claims payment, and to address situations of fraud, 
waste, and abuse.

    [sbull] Medicare Secondary Payer
+ Accurately reporting MSP savings.
+ Accurately following MSP claim development and edit procedures.
+ Auditing hospital files and claims to determine that claims are being 
filed to Medicare appropriately.
+ Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
+ Identifying, recovering, and referring mistaken Medicare payments in 
accordance with appropriate Medicare Intermediary Manual instructions 
and our other pertinent general instructions, in the specified order of 
priority.

    [sbull] Overpayments
+ Collecting and referring Medicare debts timely.
+ Accurately reporting overpayments to us.
+ Adhering to our instructions for management of Medicare Trust Fund 
debts.
    [sbull] Provider Enrollment
+ Complying with assignment of staff to the provider enrollment 
function and training the staff in procedures and verification 
techniques.
+ Complying with the operational standards relevant to the process for 
enrolling providers.

D. Fiscal Responsibility Criterion

    We may review the intermediary's efforts to establish and maintain 
appropriate financial and budgetary internal controls over benefit 
payments and administrative costs. Proper internal controls must be in 
place to ensure that contractors comply with their agreements with us.
    Additional functions that may be reviewed under the Fiscal 
Responsibility criterion include, but are not limited to, the 
following:

    [sbull] Adherence to approved program management and MIP budgets.
    [sbull] Compliance with the BPRs.
    [sbull] Compliance with financial reporting requirements.
    [sbull] Control of administrative cost and benefit payments.

E. Administrative Activities Criterion

    We may measure an intermediary's administrative ability to manage 
the Medicare program. We may evaluate the efficiency and effectiveness 
of its operations, its system of internal controls, and its compliance 
with our directives and initiatives.
    We may measure an intermediary's efficiency and effectiveness in 
managing its operations. Proper systems security (general and 
application controls), ADP maintenance, and disaster recovery plans 
must be in place. An intermediary must also test system changes to 
ensure the accurate implementation of our instructions.
    Our evaluation of an intermediary under the Administrative 
Activities criterion may include, but is not limited to, reviews of the 
following:
    [sbull] Systems security.
    [sbull] ADP maintenance (configuration management, testing, change 
management, security, etc).
    [sbull] Disaster recovery plan.
    [sbull] Implementation of our general instructions.
    [sbull] Data and reporting requirements implementation.
    [sbull] Internal controls establishment and use, including the 
degree to which the contractor cooperates with the Secretary in 
complying with the FMFIA.

V. Criteria and Standards for Regional Home Health Intermediaries 
(RHHIs)

    The following three standards are mandated for the RHHI criterion:
    Standard 1. 95.0 percent of clean electronically submitted non-
Periodic Interim Payment HHA and hospice claims are paid within 
statutorily specified time frames. Clean claims are defined as claims 
that do not require Medicare intermediaries to investigate or develop 
them outside of their Medicare operations on a prepayment basis. 
Specifically, clean, non-Periodic Interim Payment electronic claims can 
be paid as early as the 14th day (13 days after the date of receipt) 
and must be paid by the 31st day (30 days after the date of receipt). 
Our expectation is that contractors will meet this percentage on a 
monthly basis.
    Standard 2. 95.0 percent of clean paper non-Periodic Interim 
Payment HHA and hospice claims are paid within specified time frames. 
Specifically, clean, non-Periodic Interim Payment paper claims can be 
paid as early as the 27th day (26 days after the date of receipt) and 
must be paid by the 31st day (30 days after the date of receipt). Our 
expectation is that contractors will meet this percentage on a monthly 
basis.
    Standard 3. 75.0 percent of HHA and hospice reconsiderations are 
processed within 60 days and 90.0 percent are processed within 90 days. 
Our expectation is that contractors will meet this percentage on a 
monthly basis.
    Standard 4. 95.0 percent of HHA and Hospice Part B review 
determinations are completed within 45 days. Our expectation is that 
contractors will meet this percentage on a monthly basis.
    Standard 5. 90.0 percent of HHA and Hospice Part B hearing 
decisions are completed within 120 days. Our expectation is that 
contractors will meet this percentage on a monthly basis.
    We may use this criterion to review an RHHI's performance with 
respect to handling the HHA and hospice workload. This includes 
processing HHA and hospice claims timely and accurately; properly 
paying and settling HHA cost reports; and timely and accurately 
processing reconsiderations from beneficiaries, HHAs, and hospices.

VI. Criteria and Standards for Carriers

A. Claims Processing Criterion

    The Claims Processing criterion contains the following six mandated 
standards:
    Standard 1. 95.0 percent of clean electronically submitted claims 
are processed within statutorily specified time frames. Clean claims 
are defined as claims that do not require Medicare carriers to 
investigate or develop them outside of their Medicare operations on a 
prepayment basis. Specifically, clean electronic claims can be paid as 
early as the 14th day (13 days after the date of receipt) and must be 
paid by the 31st

[[Page 9687]]

day (30 days after the date of receipt). Our expectation is that 
contractors will meet this percentage on a monthly basis.
    Standard 2. 95.0 percent of clean paper claims are processed within 
specified time frames. Specifically, clean paper claims can be paid as 
early as the 27th day (26 days after the date of receipt) and must be 
paid by the 31st day (30 days after the date of receipt). Our 
expectation is that contractors will meet this percentage on a monthly 
basis.
    Standard 3. 98.0 percent of EOMBs and MSNs are properly generated. 
Our expectation is that EOMB and MSN messages are accurately reflecting 
the services provided.
    Standard 4. 95.0 percent of review determinations are completed 
within 45 days. Our expectation is that contractors will meet this 
percentage on a monthly basis.
    Standard 5. 90.0 percent of carrier hearing decisions are completed 
within 120 days. Our expectation is that contractors will meet this 
percentage on a monthly basis.
    Standard 6. Review determination letters prepared in response to 
beneficiary initiated appeal requests are written at an appropriate 
reading level.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:

    [sbull] Claims Processing accuracy.
    [sbull] Establishment and maintenance of relationship with the CWF 
Host.
    [sbull] Accuracy of processing review determination cases.
    [sbull] Accuracy of processing hearing cases with decision letters 
that are clear and have appropriate customer-friendly tone.

B. Customer Service Criterion

    The Customer Service criterion contains the following mandated 
standard:
    Standard. Replies to beneficiary correspondence address the 
beneficiary's concerns, are written with appropriate customer-friendly 
tone and clarity, and are at the appropriate reading level.
    Contractors must meet our performance expectations that 
beneficiaries and providers are served by prompt and accurate 
administration of the program in accordance with all applicable laws, 
regulations, and our general instructions.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
[sbull] Providing timely and accurate replies to beneficiary and 
provider telephone inquiries.
[sbull] Quality Call Monitoring.
[sbull] Training of Customer Service Representatives.
[sbull] Ensuring the validity of the call center performance data that 
are being reported in the Customer Service Assessment and Management 
System.
[sbull] Walk-in inquiry service.
[sbull] Conducting beneficiary and provider education, training, and 
outreach activities.
[sbull] Effectively maintaining an Internet Website dedicated to 
furnishing providers timely, accurate, and useful Medicare program 
information.

C. Payment Safeguards Criterion

    Carriers may be evaluated on any MIP activities if performed under 
their contracts. In addition, other carrier functions and activities 
that may be reviewed under this criterion include, but are not limited 
to the following:

    [sbull] Benefit Integrity
+ Identifying potential fraud cases that exist within the carrier's 
service area and taking appropriate actions to resolve these cases.
+ Investigating allegations of potential fraud that are made by 
beneficiaries, providers, CMS, OIG, and other sources.
+ Putting in place effective detection and deterrence programs for 
potential fraud.

    [sbull] Medical Review
+ Increasing the effectiveness of medical review activities.
+ Exercising accurate and defensible decision making on medical 
reviews.
+ Effectively educating and communicating with the provider community.
+ Collaborating with other internal components and external entities to 
ensure correct claims payment, and to address situations of fraud, 
waste, and abuse.

    [sbull] Medicare Secondary Payer
+ Accurately reporting MSP savings.
+ Accurately following MSP claim development/edit procedures.
+ Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
+ Identifying, recovering, and referring mistaken Medicare payments in 
accordance with the appropriate Medicare Carriers Manual instructions, 
and our other pertinent general instructions.

    [sbull] Overpayments
+ Collecting and referring Medicare debts timely.
+ Accurately reporting overpayments to us.
+ Compliance with our instructions for management of Medicare Trust 
Fund debts.

    [sbull] Provider Enrollment
+ Complying with assignment of staff to the provider enrollment 
function and training staff in procedures and verification techniques.
+ Complying with the operational standards relevant to the process for 
enrolling suppliers.

D. Fiscal Responsibility Criterion

    We may review the carrier's efforts to establish and maintain 
appropriate financial and budgetary internal controls over benefit 
payments and administrative costs. Proper internal controls must be in 
place to ensure that contractors comply with their contracts.
    Additional functions that may be reviewed under the Fiscal 
Responsibility criterion include, but are not limited to, the 
following:
    [sbull] Adherence to approved program management and MIP budgets.
    [sbull] Compliance with the BPRs.
    [sbull] Compliance with financial reporting requirements.
    [sbull] Control of administrative cost and benefit payments.

E. Administrative Activities Criterion

    We may measure a carrier's administrative ability to manage the 
Medicare program. We may evaluate the efficiency and effectiveness of 
its operations, its system of internal controls, and its compliance 
with our directives and initiatives.
    We may measure a carrier's efficiency and effectiveness in managing 
its operations. Proper systems security (general and application 
controls), Automatic Data Processing (ADP) maintenance, and disaster 
recovery plans must be in place. Also, a carrier must test system 
changes to ensure accurate implementation of our instructions.
    Our evaluation of a carrier under this criterion may include, but 
is not limited to, reviews of the following:
    [sbull] Systems security.
    [sbull] ADP maintenance (configuration management, testing, change 
management, security, etc.).
    [sbull] Disaster recovery plan.
    [sbull] Implementation of our general instructions.
    [sbull] Data and reporting requirements implementation.
    [sbull] Internal controls establishment and use, including the 
degree to which the contractor cooperates with the Secretary in 
complying with the FMFIA.

VII. Criteria and Standards for Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Regional Carriers

    For FY 2003 Contractor Performance Evaluation for DMEPOS regional

[[Page 9688]]

carriers has been structured into five criteria, which are the same 
criteria used for intermediaries and carriers: Claims Processing; 
Customer Service; Payment Safeguards; Fiscal Responsibility; and 
Administrative Activities. These criteria for DMEPOS regional carriers 
were referred to in prior Federal Register notices as Quality, 
Efficiency, Service, and Benefit Integrity.
    In these five criteria there are a total of seven mandated 
standards against which all DMEPOS regional carriers must be evaluated. 
There also are examples of other activities for which the DMEPOS 
regional carriers may be evaluated. The mandated standards are in the 
Claims Processing and Customer Service Criteria. In addition to being 
described in these criteria, the mandated standards are also described 
in Attachment J-37 to the DMEPOS regional carrier statement of work 
(SOW).

A. Claims Processing Criterion

    The Claims Processing criterion contains the following six mandated 
standards:
    Standard 1. 95.0 percent of clean electronically submitted claims 
are processed within statutorily specified time frames. Clean claims 
are defined as claims that do not require Medicare DMEPOS regional 
carriers to investigate or develop them outside of their Medicare 
operations on a prepayment basis. Specifically, clean electronic claims 
can be paid as early as the 14th day (13 days after the date of 
receipt) and must be paid by the 31st day (30 days after the date of 
receipt). Our expectation is that contractors will meet this percentage 
on a monthly basis.
    Standard 2. 95.0 percent of clean paper claims are processed within 
specified time frames. Specifically, clean paper claims can be paid as 
early as the 27th day (26 days after the date of receipt) and must be 
paid by the 31st day (30 days after the date of receipt). Our 
expectation is that contractors will meet this percentage on a monthly 
basis.
    Standard 3. Properly generated 98.0 percent of MSNs. Our 
expectation is that MSN messages are accurately reflecting the services 
provided.
    Standard 4. 95.0 percent of review determinations are completed 
within 45 days. Our expectation is that contractors will meet this 
percentage on a monthly basis.
    Standard 5. 90.0 percent of DMEPOS regional carrier hearing 
decisions are completed within 120 days. CMS's expectation is that 
contractors will meet this percentage on a monthly basis.
    Standard 6. Review determination letters prepared in response to 
beneficiary initiated requests are written at an appropriate reading 
level and state in detail the reasons for the determination.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
    [sbull] Claims processing accuracy.
    [sbull] Review determinations and hearing decisions are written 
accurately and clearly.
    [sbull] Telephone reviews are appropriately documented and 
adjudicated timely.
    [sbull] Requests for ALJ hearings are processed timely.

B. Customer Service Criterion

    The Customer Service Criterion contains the following mandated 
standard:
    Standard 1. Replies to beneficiary correspondence address concerns 
raised, are written with appropriate customer-friendly tone and 
clarity, and are at the appropriate reading level.
    Contractors must meet our performance expectations that 
beneficiaries and suppliers are served by prompt and accurate 
administration of the program in accordance with all applicable laws, 
regulations, the DMEPOS regional carrier SOW, and our general 
instructions.
    Additional functions that may be evaluated under this criterion 
include, but are not limited to, the following:
    [sbull] Providing timely and accurate replies to beneficiary and 
supplier telephone inquiries.
    [sbull] Quality Call Monitoring.
    [sbull] Training of Customer Service Representatives.
    [sbull] Ensuring the validity of the call center performance data 
that are being reported in the Customer Service Assessment and 
Management System.
    [sbull] Providing timely and accurate replies to beneficiaries, 
providers, and suppliers that address their concerns and are written 
with appropriate customer-friendly tone and clarity.
    [sbull] Walk-in inquiry service.
    [sbull] Conducting beneficiary and supplier education, training, 
and outreach activities.
    [sbull] Effectively maintaining an Internet Website dedicated to 
furnishing suppliers timely, accurate, and useful Medicare program 
information.
    [sbull] Ensuring that communications are made to interested 
supplier organizations for the purpose of developing and maintaining 
collaborative supplier education and training activities and programs.

C. Payment Safeguards Criterion

    DMEPOS regional carriers may be evaluated on any MIP activities if 
performed under their contracts. The DMEPOS regional carriers must 
undertake actions to promote an effective program administration with 
respect to DMEPOS regional carrier claims. These functions and 
activities include, but are not limited to the following:

    [sbull] Benefit Integrity
+ Identifying potential fraud cases that exist within the DMEPOS 
regional carrier's service area and taking appropriate actions to 
resolve these cases.
+ Investigating allegations of potential fraud made by beneficiaries, 
suppliers, CMS, OIG, and other sources.
+ Putting in place effective detection and deterrence programs for 
potential fraud.

    [sbull] Medical Review
+ Reducing the error rate by identifying patterns of in appropriate 
billing.
+ Educating suppliers concerning Medicare coverage and coding 
requirements.

    [sbull] Medicare Secondary Payer
+ Accurately reporting MSP savings.
+ Accurately following MSP claim development/edit procedures.
+ Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
+ Identifying, recovering, and referring mistaken Medicare payments in 
accordance with the appropriate program instructions in the specified 
order of priority.

    [sbull] Overpayments
+ Determining that the DMEPOS regional carrier completely, accurately, 
timely, and aggressively pursued all outstanding overpayments in 
adherence with the Medicare Carriers Manual and CMS Program Memoranda 
resulting from the Debt Collection Improvement Act (DCIA).
+ Verify that all overpayments were timely and accurately recorded.

D. Fiscal Responsibility Criterion

    We may review the DMEPOS regional carrier's efforts to establish 
and maintain appropriate financial and budgetary internal controls over 
benefit payments and administrative costs. Proper internal controls 
must be in place to ensure that contractors comply with their 
contracts. Additional matters that may be reviewed under this criterion 
include, but are not limited to the following:
    [sbull] Compliance with financial reporting requirements.

[[Page 9689]]

    [sbull] Adherence to approved program management and MIP budgets.
    [sbull] Control of administrative cost and benefit payments.

E. Administrative Activities

    We may measure a DMEPOS regional carrier's administrative ability 
to manage the Medicare program. We may evaluate the efficiency and 
effectiveness of its operations, its system of internal controls, and 
its compliance with our directives and initiatives. Our evaluation of a 
DMEPOS regional carrier under this criterion may include, but is not 
limited to review of the following:
    [sbull] Systems Security.
    [sbull] Disaster recovery plan.
    [sbull] Internal controls establishment and use, including the 
degree to which the contractor cooperates with the Secretary in 
complying with the FMFIA.

VIII. Action Based on Performance Evaluations

    We evaluate a contractor's performance against applicable program 
requirements for each criterion. Each contractor must certify that all 
information submitted to us relating to the contract management 
process, including, without limitation, all files, records, documents 
and data, whether in written, electronic, or other form, is accurate 
and complete to the best of the contractor's knowledge and belief. A 
contractor will also be required to certify that its files, records, 
documents, and data have not been manipulated or falsified in an effort 
to receive a more favorable performance evaluation. A contractor must 
further certify that, to the best of its knowledge and belief, the 
contractor has submitted, without withholding any relevant information, 
all information required to be submitted with respect to the contract 
management process under the authority of applicable law(s), 
regulation(s), contract(s), or our manual provision(s). Any contractor 
that makes a false, fictitious, or fraudulent certification may be 
subject to criminal and/or civil prosecution, as well as appropriate 
administrative action. This administrative action may include debarment 
or suspension of the contractor, as well as the termination or 
nonrenewal of a contract.
    If a contractor meets the level of performance required by 
operational instructions, it meets the requirements of that criterion. 
When we determine a contractor is not meeting performance requirements, 
we will use the terms ``major nonconformance'' or ``minor 
nonconformance'' to classify our findings. A major nonconformance is a 
nonconformance that is likely to result in failure of the supplies or 
services, or to materially reduce the usability of the supplies or 
services for their intended purpose. A minor nonconformance is a 
nonconformance that is not likely to materially reduce the usability of 
the supplies or services for their intended purpose, or is a departure 
from established standards having little bearing on the effective use 
or operation of the supplies or services. The contractor will be 
required to develop and implement a PIP for findings determined to be 
either a major or minor nonconformance. The contractor will be 
monitored to ensure effective and efficient compliance with the PIP, 
and to ensure improved performance when requirements are not met.
    The results of performance evaluations and assessments under all 
criteria applying to intermediaries, carriers, RHHIs, and DMEPOS 
regional carriers will be used for contract management activities and 
will be published in the contractor's annual Report of Contractor 
Performance (RCP). We may initiate administrative actions as a result 
of the evaluation of contractor performance based on these performance 
criteria. Under sections 1816 and 1842 of the Act, we consider the 
results of the evaluation in our determinations when--
    [sbull] Entering into, renewing, or terminating agreements or 
contracts with contractors, and
    [sbull] Deciding other contract actions for intermediaries and 
carriers (such as deletion of an automatic renewal clause). These 
decisions are made on a case-by-case basis and depend primarily on the 
nature and degree of performance. More specifically, these decisions 
depend on the following:

[sbull] Relative overall performance compared to other contractors.
[sbull] Number of criteria in which nonconformance occurs.
[sbull] Extent of each nonconformance.
[sbull] Relative significance of the requirement for which 
nonconformance occurs within the overall evaluation program.
[sbull] Efforts to improve program quality, service, and efficiency.
[sbull] Deciding the assignment or reassignment of providers and 
designation of regional or national intermediaries for classes of 
providers.

    We make individual contract action decisions after considering 
these factors in terms of their relative significance and impact on the 
effective and efficient administration of the Medicare program.
    In addition, if the cost incurred by the intermediary, RHHI, 
carrier, or DMEPOS regional carrier to meet its contractual 
requirements exceeds the amount that we find to be reasonable and 
adequate to meet the cost that must be incurred by an efficiently and 
economically operated intermediary or carrier, these high costs may 
also be grounds for adverse action.

IX. Regulatory Impact Statement

    We have examined the impacts of this notice as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million in any one year). Since this notice 
only describes criteria and standards for evaluating FIs (including 
RHHIs), carriers, and DMEPOS regional carriers and has no significant 
economic impact on the program, its beneficiaries, providers or 
suppliers, this is not a major notice.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. This notice does not affect small businesses; 
individuals and States are not included in the definition of small 
business entities.
    In addition, section 1102(b) of 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. This 
notice does not affect small rural hospitals.
    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. In accordance with Section 202, we have 
determined that the notice does not impose any unfunded mandates on 
State, local or tribal governments, or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a notice that imposes substantial 
direct

[[Page 9690]]

requirement costs on State and local governments, preempts State law, 
or otherwise has Federalism implications. We have determined that the 
notice does not significantly affect the rights, roles, and 
responsibilities of States.
    We have not prepared a Regulatory Impact Analysis for this notice, 
in accordance with Executive Order 12866, because it will not have a 
significant economic impact, nor does it impose any unfunded mandates 
on State, local, or tribal governments or the private sector. 
Furthermore, we certify that the notice will not have a significant 
impact on a substantial number of small entities or small rural 
hospitals.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

X. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently it need not be reviewed by the 
Office of Management and Budget under the authority of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

    Authority: Sections 1816(f), 1834(a)(12), and 1842(b) of the 
Social Security Act (42 U.S.C. 1395h(f), 1395m(a)(12), and 
1395u(b)).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance, and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: August 6, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 03-4087 Filed 2-27-03; 8:45 am]
BILLING CODE 4120-01-P