[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.


    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

    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.


    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

    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