Federal Register, Volume 70 Issue 184 (Friday, September 23, 2005)

[Federal Register Volume 70, Number 184 (Friday, September 23, 2005)]
[Notices]
[Pages 55887-55896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18923]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1307-GNC]
RIN 0938-ZA74

Medicare Program; Criteria and Standards for Evaluating
Intermediary, Carrier, and Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) Regional Carrier Performance During
Fiscal Year 2006

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

ACTION: General notice with comment period.

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SUMMARY: This notice describes the criteria and standards to be used
for evaluating the performance of fiscal intermediaries (FIs),
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.

DATES: Effective Date: The criteria and standards are effective on
October 24, 2005.
Comment Date: To be assured consideration, comments must be
received at one of the addresses

[[Page 55888]]

provided below, no later than 5 p.m. beginning on the first day of the
first month following publication of this notice in the Federal
Register.

ADDRESSES: In commenting, please refer to file code CMS-1307-GNC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of three ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/regulations/ecomments or to http://www.regulations.gov, (attachments must be in
Microsoft Word, WordPerfect, or Excel; however, we prefer Microsoft
Word.)
2. By mail. You may mail written comments (one original and two
copies) to the following address only: Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Attention: CMS-1307-
GNC, P.O. Box 8013, Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received at
the close of the comment period.
3. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-7197 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 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 filing by stamping
in and retaining an extra copy 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. All
comments received before the close of the comment period are available
for viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. After
the close of the comment period, CMS posts all electronic comments
received before the close of the comment period on its public website.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Richard Johnson, (410) 786-5633.

SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments
from the public on all issues set forth in this notice to assist us in
fully considering issues and developing policies. You can assist us by
referencing the file code CMS-1307-GNC and the specific ``issue
identifier'' that precedes the section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all electronic
comments received before the close of the comment period on its public
website as soon as possible after they are received. Hard copy comments
received timely will be available for public inspection as they are
received, generally beginning approximately 3 weeks after publication
of a document, 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 1-800-743-3951.

I. Background

[If you choose to comment on issues in this section, please include the
caption ``BACKGROUND'' at the beginning of your comments.]

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 FIs, 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), and
community mental health centers) 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
for freestanding Home Health Agency (HHA) claims. We refer to these
organizations as Regional Home Health Intermediaries (RHHIs). See Sec.
421.117 and the final rule published on May 19, 1988 in the Federal
Register (53 FR 17936) for more details about the RHHIs.
The evaluation of intermediary performance is part of our contract
management process. These evaluations need not be limited to the
current fiscal year (FY), other fixed term basis, or agreement term.

B. Part B--Supplementary 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 carrier's performance
of its functions under its contract. Evaluations of Medicare fee-for-
service (FFS) contractor performance need not be limited to the current
FY, other fixed term basis, or contract term. 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 FFS
contractor performance

[[Page 55889]]

need not be limited to the current FY, other fixed term basis, or
contract term. 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, Sec.
421.122 and Sec. 421.201 provide for publication of a Federal Register
notice to announce criteria and standards for intermediaries and
carriers before the beginning of each evaluation period. The current
criteria and standards for intermediaries, carriers, and DMEPOS
regional carriers were published in the Federal Register (68 FR 74613)
on November 26, 2004.
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 beginning on the first day of
the first month following publication of this notice in the Federal
Register. Any revised criteria and standards will measure performance
prospectively; that is, any new criteria and standards in the notice
will be applied only to performance after the effective date listed on
the notice.
It is not our intention to revise the criteria and standards that
will be used during the evaluation period once this information is
published in a Federal Register notice. However, on occasion, either
because of administrative action or statutory 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.
The Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (MMA) (Pub. L. 108-173) was enacted on December 8, 2003.
Section 911 of the MMA establishes the Medicare FFS Contracting Reform
(MCR) initiative that will be implemented over the next several years.
This provision requires that we use competitive procedures to replace
our current FIs and carriers with Medicare Administrative Contractors
(MACs). The MMA requires that we compete and transition all work to
MACs by October 1, 2011.
FIs and or carriers will continue administering Medicare FFS work
until the final competitively selected MAC is up and operating. We will
continue to develop and publish standards and criteria for use in
evaluating the performance of FIs, carriers, and DMERCs as long as
these types of contractors exist.

II. Analysis of and Response to Public Comments Received on FY 2005
Criteria and Standards

We received three comments in response to the November 26, 2004
Federal Register general notice with comments. All comments were
reviewed, but none necessitated our reissuance of the FY 2005 Criteria
and Standards. Comments submitted did not pertain specifically to the
FY 2005 criteria and standards.

III. Criteria and Standards--General

[If you choose to comment on issues in this section, please include the
caption ``CRITERIA AND STANDARDS--GENERAL'' at the beginning of your
comments.]

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
statute, regulation, contract, and our directives.
We have developed a contractor oversight program for FY 2006 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.
As a means to monitor the accuracy of Medicare FFS payments, we
have established the Comprehensive Error Rate Testing (CERT) program
that measures and reports error rates for claims payment decisions made
by carriers, DMERCs, and FIs. Beginning in November 2003, the CERT
program measures and reports claims payment error rates for each
individual carrier and DMERC. FI-specific rates became available
November 2004. These rates measure not only how well contractors are
doing at implementing automated review edits and identifying which
claims to subject to manual medical review but they also measure the
impact of the contractor's provider outreach/education, as well as the
effectiveness of the contractor's provider call center(s). We will use
these contractor-specific error rates as a means to evaluate a
contractor's performance.
Several times throughout this notice, we refer to the appropriate
reading level of letters, decisions, or correspondence that are going
to Medicare beneficiaries from intermediaries or carriers. In those
instances, appropriate reading level is defined as whether the
communication is 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 these cases, the appropriate reading level is
tailored to the capacities and circumstances of the intended recipient.
In addition to evaluating performance based upon expectations for
FY 2006, we may also conduct follow-up evaluations throughout FY 2006
of areas in which contractor performance was out of compliance with
statute, regulations, and our performance expectations during prior
review years where contractors were required to submit a Performance
Improvement Plan (PIP).
We may also utilize Statement of Auditing Standards-70 (SAS-70)
reviews as a means to evaluate contractors in some or all business
functions.
In FY 2001, we established the Contractor Rebuttal Process as a
commitment to continual improvement of contractor performance
evaluation (CPE). We will continue the use of this process in FY 2006.
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

[[Page 55890]]

the rebuttal before the issuance of the final CPE report to the
contractor.
The FY 2006 CPE for intermediaries and carriers is structured into
five criteria designed to meet the stated objectives. The first
criterion, claims processing, 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 Medicare Summary Notices
(MSNs), the timeliness of intermediary redeterminations, the timeliness
of carrier redeterminations and hearings, and the appropriateness of
the reading level and content of intermediary and carrier
redetermination letters. 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 redeterminations and carrier hearings.
The second criterion, customer service, 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, they provide in detail
the reasons for a determination when a beneficiary requests this
information, they have a customer-friendly tone and clarity, and they
are at the appropriate reading level. Further evaluation of services
under this criterion may include, but will not be limited to, the
following: Timeliness and accuracy of all correspondence both to
beneficiaries and providers; monitoring of the quality of replies
provided by the contractor's telephone customer service representatives
(quality call monitoring); beneficiary and provider education,
training, and outreach activities; and service provided by the
contractor's customer service representatives to beneficiaries and
providers who come to the contractor's facility (walk-in inquiry
service).
The third criterion, payment safeguards, evaluates whether the
Medicare Trust Fund is safeguarded against inappropriate program
expenditures. Intermediary and carrier performance may be evaluated in
the areas of Medical Review (MR), Medicare Secondary Payer (MSP),
Overpayments (OP), and Provider Enrollment (PE). In addition,
intermediary performance may be evaluated in the area of Audit and
Reimbursement (A&R).
In FY 1996 the Congress enacted the Health Insurance Portability
and Accountability Act (HIPAA), Medicare Integrity Program, giving us
the authority to contract with entities other than, but not excluding,
Medicare carriers and intermediaries to perform certain program
safeguard functions. In situations where one or more program safeguard
functions are contracted to another entity, we may evaluate the flow of
communication and information between a Medicare FFS contractor and the
payment safeguard contractor. All benefit integrity functions have been
transitioned from intermediaries, carriers, and one DMERC to the
program safeguard contractors. Since, the other three DMERC contractors
will continue to conduct benefit integrity activities in FY 2006, we
may evaluate their performance of that function.
Mandated performance standards for intermediaries in the payment
safeguards criterion include the accuracy of decisions on 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, fiscal responsibility, 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 the 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, administrative activities, 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 that
are essential in all aspects of a contractor's operation, as well as
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.
In sections IV through VII of this notice, 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

[If you choose to comment on issues in this section, please include the
caption ``CRITERIA AND STANDARDS FOR INTERMEDIARIES'' at the beginning
of your comments.]

A. Claims Processing Criterion

The claims processing criterion contains the following four
mandated standards:
Standard 1. Not less than 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, the statute specifies that clean non-Periodic Interim
Payment electronic claims be paid no earlier than the 14th day after
the date of receipt, and that interest is payable for any clean claims
if payment is not issued by the 31st day after the date of receipt. The
HIPAA Administrative Simplification provisions and the implementing
regulations established standards for electronic transmission of
claims. We issued instructions that effective July 1, 2004, electronic
claims that do not comply with the appropriate HIPAA

[[Page 55891]]

claim standard will no longer qualify for payment as early as the 14th
day after the date of receipt. These ``non-HIPAA'' claims will not be
paid earlier than the 27th day after the date of receipt. These ``non-
HIPAA'' claims will continue to have interest payable if payment is not
issued by the 31st day after the date of receipt. Our expectation is
that contractors will pay 95 percent of these clean claims by the 31st
day (30 days after date of receipt) on a monthly basis.
Standard 2. Not less than 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. Redetermination letters prepared in response to
beneficiary-initiated appeal requests are written in a manner
calculated to be understood by the beneficiary. Letters must contain
the required elements as specified in Sec. 405.956.
Standard 4. All redeterminations must be concluded and mailed
within 60 days of receipt of the request, unless the appellant submits
documentation after the request, in which case the decision making
timeframe is extended for 14 calendar days for each submission.
Because intermediaries process many claims for benefits under the
Part B portion of the Medicare Program, we also may evaluate how well
an intermediary follows the procedures for processing appeals of any
claims for Part B benefits.
Additional functions that may be evaluated under this criterion
include, but are not limited to, the following:
Accuracy of claims processing.
Remittance advice transactions.
Establishment and maintenance of a relationship with
Common Working File (CWF) Host.
Accuracy of redeterminations as well as the
appropriateness of the reading level of any redetermination decision
letters.
Accuracy and timeliness of processing appeals under
section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement
and Protection Act of 2000 (BIPA) and sections 933 and 940 of the MMA.

Note: Section 521 of BIPA and sections 933 and 940 of MMA amend
section 1869 of the Act by requiring major revisions to the Medicare
appeals process. Section 937 of MMA also requires the creation of a
process outside the appeals process, whereby Medicare contractors
can correct minor errors and omissions. We may evaluate compliance
with our instructions concerning other provisions of section 521 of
BIPA and sections 933, 937 and 940 of MMA as they are implemented.

B. Customer Service Criterion

Functions that may be evaluated under this criterion include, but
are not limited to, the following:
Maintaining a properly programmed interactive voice
response system to assist with provider inquiries.
Performing quality call monitoring.
Training customer service representatives.
Entering valid call center performance data in the
customer service assessment and management system.
Providing timely and accurate written replies to
beneficiaries and/or providers that address the concerns raised and are
written with an appropriate customer-friendly tone and clarity and
those written to beneficiaries are at the appropriate reading level.
Maintaining walk-in inquiry service for beneficiaries and
providers.
Conducting beneficiary and provider education, training,
and outreach activities.
Effectively maintaining an Internet website dedicated to
furnishing providers and physicians timely, accurate, and useful
Medicare program information.
Ensuring written correspondence is evaluated for quality.

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 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 contractual agreement. These functions and
activities include, but are not limited to, the following:
Audit and Reimbursement
+ Performing the activities specified in our general instructions
for conducting audit and settlement of Medicare cost reports.
+ Establishing accurate interim payments.
Benefit Integrity
+ Referring allegations of potential fraud that are made by
beneficiaries, providers, CMS, Office of Inspector General (OIG), and
other sources to the Payment Safeguard Contractor.
+ Putting in place effective detection and deterrence programs for
potential fraud.
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 the effectiveness of medical review activities.
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 Contractors' efforts to
identify responsible payers primary to Medicare.
+ Identifying, recovering, and referring mistaken/conditional
Medicare payments in accordance with appropriate Medicare Manual
instructions and any other pertinent general instructions, in the
specified order of priority.
Overpayments
+ Collecting and referring Medicare debts timely.
+ Accurately reporting and collecting overpayments.
+ Adhering to our instructions for management of Medicare Trust
Fund debts.
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:
Adherence to approved program management and MIP budgets.

[[Page 55892]]

Compliance with the BPRs.
Compliance with financial reporting requirements.
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:
Systems security.
ADP maintenance (configuration management, testing, change
management, and security).
Implementation of the Electronic Data Interchange (EDI)
standards adopted for use under HIPAA.
Disaster recovery plan and systems contingency plan.
Data and reporting requirements implementation.
Internal controls establishment and use, including the
degree to which the contractor cooperates with the Secretary in
complying with the FMFIA.
Implementation of our general instructions.

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

[If you choose to comment on issues in this section, please include the
caption ``CRITERIA AND STANDARDS FOR RHHIs'' at the beginning of your
comments.]
The following four standards are mandated for the RHHI criterion:
Standard 1. Not less than 95.0 percent of clean electronically
submitted non-Periodic Interim Payment home health 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, the statute specifies that clean non-
Periodic Interim Payment electronic claims be paid no earlier than the
14th day after the date of receipt, and that interest is payable for
any clean claims if payment is not issued by the 31st day after the
date of receipt. The HIPAA Administrative Simplification provisions and
the implementing regulations established standards for electronic
transmission of claims. We issued instructions that effective July 1,
2004, electronic claims that do not comply with the appropriate HIPAA
claim standard will no longer qualify for payment as early as the 14th
day after the date of receipt. These ``non-HIPAA'' claims will not be
paid earlier than the 27th day after the date of receipt. These ``non-
HIPAA'' claims will continue to have interest payable if payment is not
issued by the 31st day after the date of receipt. Our expectation is
that contractors will pay 95 percent of these clean claims by the 31st
day (30 days after date of receipt) on a monthly basis.
Standard 2. Not less than 95.0 percent of clean paper non-periodic
interim payment home health 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. Redetermination letters prepared in response to
beneficiary initiated appeal requests are written in a manner
calculated to be understood by the beneficiary. Letters must contain
the required elements as specified in Sec. 405.956.
Standard 4: All redeterminations must be concluded and mailed
within 60 days of receipt of the request, unless the appellant submits
documentation after the request, in which case the decision making
timeframe is extended for 14 calendar days for each submission.
We may use this criterion to review an RHHI's performance for
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 BIPA section 521
redeterminations from beneficiaries, HHAs, and hospices.

Note: Section 521 of BIPA and sections 933 and 940 of MMA amend
section 1869 of the Act by requiring major revisions to the Medicare
appeals process. Section 937 of MMA requires the creation of a
process outside the appeals process, whereby Medicare contractors
can correct minor errors and omissions. We may evaluate compliance
with our instructions concerning other provisions of section 521 of
BIPA and sections 933, 937 and 940 of MMA as they are implemented.

VI. Criteria and Standards for Carriers

[If you choose to comment on issues in this section, please include the
caption ``CRITERIA AND STANDARDS FOR CARRIERS'' at the beginning of
your comments.]

A. Claims Processing Criterion

The Claims Processing criterion contains the following six mandated
standards:
Standard 1. Not less than 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, the statute specifies
that clean non-Periodic Interim payment electronic claims be paid no
earlier than the 14th day after the date of receipt, and that interest
is payable for any clean claims if payment is not issued by the 31st
day after the date of receipt. The HIPAA Administrative Simplification
provisions and the implementing regulations established standards for
electronic transmission of claims. We issued instructions that
effective July 1, 2004, electronic claims that do not comply with the
appropriate HIPAA claim standard will no longer qualify for payment as
early as the 14th day after the date of receipt. These ``non-HIPAA''
claims will not be paid earlier than the 27th day after the date of
receipt. These ``non-HIPAA'' claims will continue to have interest
payable if payment is not issued by the 31st day after the date of
receipt. Our expectation is that contractors will pay 95 percent of
these clean claims by the 31st day (30 days after date of receipt) on a
monthly basis.
Standard 2. Not less than 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 MSNs are properly generated. Our
expectation is that MSN messages are accurately reflecting the services
provided.
Standard 4. 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. This standard will remain in effect
until the Part B hearing officer work is transitioned to the QICs
sometime in FY 2006.
Standard 5. Redetermination letters prepared in response to
beneficiary

[[Page 55893]]

initiated appeal requests are written in a manner calculated to be
understood by the beneficiary. Letters must contain the required
elements as specified in Sec. 405.956.
Standard 6. All redeterminations must be concluded and mailed
within 60 days of receipt of the request, unless the appellant submits
documentation after the request, in which case the decision making time
frame is extended for 14 calendar days for each submission.
Additional functions that may be evaluated under this criterion
include, but are not limited to, the following:
Accuracy of claims processing.
Remittance advice transactions.
Establishment and maintenance of relationship with Common
Working File (CWF) Host.
Accuracy of redetermination decisions.
Accuracy of processing hearing cases with decision letters
that are clear and have an appropriate customer-friendly tone. This
standard will remain in effect until the Part B hearing officer work is
transitioned to the QICs sometime in FY 2006.
Accuracy and timeliness of appeals decisions issued
pursuant to the requirements of BIPA section 521 and sections 933 and
940 of MMA.

B. Customer Service Criterion

The customer service criterion contains the following mandated
standard: Replies to beneficiary written correspondence are responsive
to the beneficiary's concerns, are written with an appropriate
customer-friendly tone and clarity, and are written 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:
Maintaining a properly programmed interactive voice
response system to assist with provider inquiries.
Performing quality call monitoring.
Training customer service representatives.
Entering valid call center performance data in the
customer service assessment and management system.
Providing timely and accurate written replies to
beneficiary and/or providers.
Maintaining walk-in inquiry service for beneficiaries and
providers.
Conducting beneficiary and provider education, training,
and outreach activities.
Effectively maintaining an internet website dedicated to
furnishing providers timely, accurate, and useful Medicare program
information.
Ensuring written correspondence is evaluated for quality.

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:
Benefit Integrity
+ Referring allegations of potential fraud that are made by
beneficiaries, providers, CMS, OIG, and other sources to the payment
safeguard contractor.
+ Putting in place effective detection and deterrence programs for
potential fraud.
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 the effectiveness of medical review activities.
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/conditional
Medicare payments in accordance with the appropriate Medicare Manual
instructions, and our other pertinent general instructions.
Overpayments
+ Collecting and referring Medicare debts timely.
+ Accurately reporting and collecting overpayments.
+ Compliance with our instructions for management of Medicare Trust
Fund debts.
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:
Adherence to approved program management and MIP budgets.
Compliance with the BPRs.
Compliance with financial reporting requirements.
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), 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:
Systems security.
ADP maintenance (configuration management, testing, change
management, and security).
Disaster recovery plan/systems contingency plan.
Data and reporting requirements implementation.
Internal controls establishment and use, including the
degree to which the contractor cooperates with the Secretary in
complying with the FMFIA.
Implementation of the Electronic Data Interchange (EDI)
standards adopted for use under the Health Insurance Portability and
Accountability Act (HIPAA).
Implementation of our general instructions.

[[Page 55894]]

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

[If you choose to comment on issues in this section, please include the
caption ``CRITERIA AND STANDARDS FOR DMEPOS'' at the beginning of your
comments.]

The five criteria for DMEPOS regional carriers contain a total of
six 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 the DMEPOS regional carrier statement of work (SOW).

A. Claims Processing Criterion

The claims processing criterion contains the following six mandated
standards:
Standard 1. Not less than 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, the
statute specifies that clean non-Periodic Interim Payment electronic
claims be paid no earlier than the 14th day after the date of receipt,
and that interest is payable for any clean claims if payment is not
issued by the 31st day after the date of receipt. The HIPAA
Administrative Simplification provisions and the implementing
regulations established standards for electronic transmission of
claims. We issued instructions that effective July 1, 2004, electronic
claims that do not comply with the appropriate HIPAA claim standard
will no longer qualify for payment as early as the 14th day after the
date of receipt. These ``non-HIPAA'' claims will not be paid earlier
than the 27th day after the date of receipt. These ``non-HIPAA'' claims
will continue to have interest payable if payment is not issued by the
31st day after the date of receipt. Our expectation is that contractors
will pay 95 percent of these clean claims by the 31st day (30 days
after date of receipt) on a monthly basis.
Standard 2. Not less than 95.0 percent of clean paper claims are
processed within specified timeframes. Specifically, clean paper claims
can be paid as early as day 27 (26 days after the date of receipt) and
must be paid by day 31 (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 MSNs are properly generated. Our
expectation is that MSN messages are accurately reflecting the services
provided.
Standard 4. 90.0 percent of DMEPOS regional carrier hearing
decisions are completed within 120 days. Our expectation is that
contractors will meet this percentage on a monthly basis. This standard
will remain in effect until the Part B hearing officer work is
transitioned to the QICs sometime in FY 2006.
Standard 5. Redetermination letters prepared in response to
beneficiary initiated appeal requests are written in a manner
calculated to be understood by the beneficiary. Letters must contain
the required elements as specified in Sec. 405.956.
Standard 6. All redeterminations must be concluded and mailed
within 60 days of receipt of the request, unless the appellant submits
documentation after the request, in which case the decision making
timeframe is extended for 14 calendar days for each submission.
Additional functions that may be evaluated under this criterion
include, but are not limited to, the following:
Claims processing accuracy.
Accuracy and timeliness of appeals decisions prior to the
implementation of BIPA sections 521 and 933 and section 940 of MMA
requirements.
Requests for ALJ hearings are forwarded timely.
Accuracy and timeliness of appeals decisions issued
pursuant to the requirements of BIPA sections 521 and 933 and section
940 of MMA.

B. Customer Service Criterion

The customer service criterion contains the following mandated
standard: Replies to beneficiary written correspondence are responsive
to the beneficiary's concerns, are written with an appropriate
customer-friendly tone and clarity, and are written 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:
Maintaining a properly programmed interactive voice
response system to assist with provider inquiries.
Performing quality call monitoring.
Training customer service representatives.
Entering valid call center performance data in the
customer service assessment and management system.
Providing timely and accurate written replies to
beneficiaries and/or providers.
Maintaining walk-in inquiry service for beneficiaries and
suppliers.
Conducting beneficiary and provider education, training,
and outreach activities.
Effectively maintaining an internet website dedicated to
furnishing providers timely, accurate, and useful Medicare program
information.
Ensuring that communications are made to interested
supplier organizations for the purpose of developing and maintaining
collaborative supplier education and training activities and programs.
Ensuring written correspondence is evaluated for quality.

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 for
DMEPOS regional carrier claims. These functions and activities include,
but are not limited to the following:
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.
Medical Review
+ Increasing the effectiveness of medical review activities.
+ Exercising accurate and defensible decision making on medical
reviews.
+ Effectively educating and communicating with the supplier
community.

[[Page 55895]]

+ Collaborating with other internal components and external
entities to ensure the effectiveness of medical review activities.
Medicare Secondary Payer
+ Accurately reporting MSP savings.
+ Accurately following MSP claim development/edit procedures.
+ Supporting the coordination of benefits contractors' efforts to
identify responsible payers primary to Medicare.
Identifying, recovering, and referring mistaken/
conditional Medicare payments in accordance with the appropriate
program instructions in the specified order of priority.
Overpayments
+ Collecting and referring Medicare debts timely.
+ Accurately reporting and collecting overpayments.
+ Compliance with our instructions for management of Medicare Trust
Fund debts.

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:
Compliance with financial reporting requirements.
Adherence to approved program management and MIP budgets.
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:
Systems security.
Disaster recovery plan/systems contingency plan.
Internal controls establishment and use, including the
degree to which the contractor cooperates with the Secretary in
complying with the FMFIA.
Implementation of the EDI standards adopted for use under
HIPAA.

VIII. Action Based on Performance Evaluations

[If you choose to comment on this section, please include the caption
``ACTION BASED ON PERFORMANCE EVALUATIONS'' at the beginning of your
comments.]

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 is required to certify that its files, records, documents,
and data are not 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 for 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 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 PIPs 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--
Entering into, renewing, or terminating agreements or
contracts with contractors, and
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:
+ Relative overall performance compared to other contractors.
+ Number of criteria in which nonconformance occurs.
+ Extent of each nonconformance.
+ Relative significance of the requirement for which nonconformance
occurs within the overall evaluation program.
+ Efforts to improve program quality, service, and efficiency.
+ 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. Collection of Information Requirements

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

X. Response to Comments

Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are
unable

[[Page 55896]]

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.

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. 93.774,
Medicare--Supplementary Medical Insurance Program)

Dated: May 19, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 05-18923 Filed 9-22-05; 8:45 am]
BILLING CODE 4120-01-U