[Federal Register Volume 73, Number 125 (Friday, June 27, 2008)]
[Notices]
[Pages 36522-36528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-14641]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1400-GNC]
RIN 0938-AP34


Medicare Program; Criteria and Standards for Evaluating 
Intermediary and Carrier Performance During Fiscal Year 2009

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

ACTION: General notice with comment period.

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SUMMARY: This general notice with comment period describes the criteria 
and standards to be used for evaluating the performance of fiscal 
intermediaries (FIs) and carriers in the administration of the Medicare 
program. The results of these evaluations are considered whenever we 
enter into, renew, or terminate a FI agreement, carrier contract, or 
take other contract actions, for example, assigning or reassigning 
providers or services to a FI 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 1, 2008.
    Comment Date: To be assured consideration, comments must be 
received no later than 5 p.m. on August 26, 2008.

ADDRESSES: In commenting, please refer to file code CMS-1400-GNC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the filecode to find the document 
accepting comments.
    2. By regular 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-1400-GNC, P.O. Box 8013, Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send 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-1400-GNC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. 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 either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201. (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.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.

[[Page 36523]]

    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Lee Ann Crochunis, (410) 786-3362.

SUPPLEMENTARY INFORMATION: 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 comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also 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, MD 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

A. Medicare 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 CMS. These agencies or organizations, known as fiscal 
intermediaries (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 FI'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 FIs 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) under 42 CFR 421.117.
    The evaluation of FI 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. Medicare 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 
Fiscal Year (FY), other fixed term basis, or contract term. The 
evaluation of carrier performance is part of our contract management 
process.

C. 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 the criteria and standards for FIs and 
carriers before the beginning of each evaluation period. In the October 
1, 2007 Federal Register (72 FR 55775), we published a general notice 
with comment period the current criteria and standards for FIs and 
carriers.
    To the extent possible, we make every effort to publish the 
criteria and standards before the beginning of the 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 make these changes, we will 
publish a 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 is being 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 carriers will continue administering Medicare FFS work as 
may be required 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 and carriers as 
long as these types of contractors exist.

[[Page 36524]]

II. Analysis of and Response to Public Comments Received on FY 2008 
Criteria and Standards

    We received three comments in response to the October 1, 2007 
Federal Register general notice with comment. All comments were 
reviewed, but none necessitated reissuance of the FY 2008 Criteria and 
Standards. Comments submitted did not pertain specifically to the FY 
2007 Criteria and Standards.

III. Criteria and Standards--General

    Basic principles of the Medicare program are to pay claims promptly 
and accurately, and to foster good beneficiary and provider relations. 
Contractors must administer the Medicare program efficiently and 
economically. The goal of performance evaluation is to ensure that 
contractors meet their contractual obligations. We measure contractor 
performance to ensure that contractors do what is required of them by 
statute, regulation, contract, and our directives.
    We have developed a contractor oversight program for FY 2009 that 
outlines what is expected of the contractor; measures the performance 
of the contractor; evaluates the contractor's performance against those 
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 and FIs. Since November 2003, the CERT program has been 
measuring and reporting claims payment error rates for each individual 
carrier. 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 mailed 
or otherwise transmitted to Medicare beneficiaries from intermediaries 
or carriers. In those instances, appropriate reading level is defined 
as whether the communication is below the eighth 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 our expectations 
for FY 2009, we may also conduct follow-up evaluations throughout FY 
2009 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 2009. 
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 considers the contents of the rebuttal before the 
issuance of the final CPE report to the contractor.
    The FY 2009 CPE for FIs 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 FI and carrier redeterminations, and the 
appropriateness of the reading level and content of FI 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, the accuracy of 
redeterminations, timeliness of forwarding case files to and 
effectuation of Qualified Independent Contractor (QIC) decisions, and 
effectuation of administrative law judge (ALJ) decisions.
    The second criterion, customer service, assesses the adequacy of 
the service provided to customers by the contractor in its 
administration of the Medicare program. Functions that may be evaluated 
under this criterion include, but will not be limited to, the 
following: (1) Timeliness and accuracy of all correspondence to 
providers; (2) monitoring the quality of replies provided by the 
contractor's provider telephone customer service representatives 
(quality call monitoring); and (3) provider outreach and education 
activities.
    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, FIs 
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 the intermediaries and carriers to the program 
safeguard contractors.
    Mandated performance standards for FIs 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. FIs 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

[[Page 36525]]

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 
FIs to another in order to gain that assurance.
    In sections IV. through VI. of this notice, we list the criteria 
and standards to be used for evaluating the performance of FIs, RHHIs, 
and carriers.

IV. Criteria and Standards for Fiscal Intermediaries

A. Claims Processing Criterion

    The claims processing criterion contains the following three 
mandated standards:
    Standard 1. Not less than 95.0 percent of clean electronically 
submitted nonperiodic interim payment claims are paid within 
statutorily specified timeframes. Clean claims are defined as claims 
that do not require Medicare FIs to investigate or develop outside of 
their Medicare operations on a prepayment basis. Specifically, the Act 
specifies that clean nonperiodic 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.
    Standard 2. 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 3. All redeterminations must be concluded and mailed 
within 60 days of receipt of the request, unless the party submits 
documentation after the request, in which case the decision-making 
timeframe is extended for up to 14 calendar days for each submission.
    Because FIs process many claims for benefits under the Part B 
portion of the Medicare Program, we also may evaluate how well a FI 
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 redetermination decisions.
     QIC case file requirements.
     Timely and accurate effectuation of appeal decisions.
     Accuracy and timeliness of processing appeals and clerical 
error reopenings as set forth in part 405, subpart I (Sec.  405.900 et 
seq.).

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 inquiries.
     Performing quality call monitoring.
     Training customer service representatives.
     Entering valid call center performance data in the 
customer service assessment and management system or its successor, the 
provider inquiry evaluation system.
     Providing timely and accurate written replies to providers 
that address the concerns raised and that are written with an 
appropriate customer-friendly tone and clarity.
     Ensuring written correspondence is evaluated for quality.
     Conducting provider outreach and education-activities.
     Effectively maintaining an Internet Web site dedicated to 
furnishing providers and physicians timely, accurate, and useful 
Medicare program information.

C. Payment Safeguards Criterion

    The Payment Safeguard criterion contains the following two mandated 
standards:
    Standard 1. Decisions on SNF demand bills are accurate.
    Standard 2. TEFRA target rate adjustments, exceptions, and 
exemptions are processed within mandated timeframes. 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.
    FIs 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.
     Medical Review
    ++ Increasing the effectiveness of medical review activities.
    ++ Exercising accurate and defensible decision-making on medical 
reviews.
    ++ Collaborating with other internal components and external 
entities to ensure the effectiveness of medical review activities.
     Medicare Secondary Payer
    ++ Accurately following MSP claim development and edit procedures.
    ++ Auditing hospital files and claims to determine that claims are 
being filed to Medicare appropriately.
    ++ Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
    ++ Supporting the MSP Recovery functions for provider, physician or 
other supplier debts and duplicate provider, physician or other 
supplier payments.
    ++ Accurately reporting MSP savings.
     Overpayments
    ++ Collecting and referring Medicare debts in a timely manner.
    ++ 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.

[[Page 36526]]

    ++ Complying with the operational standards relevant to the process 
for enrolling providers.

D. Fiscal Responsibility Criterion

    We may review the FI'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.
     Compliance with the BPRs.
     Compliance with financial reporting requirements.
     Control of administrative cost and benefit payments.

E. Administrative Activities Criterion

    We may measure an FI'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 FI'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. A FI 
must also test system changes to ensure the accurate implementation of 
our instructions.
    Our evaluation of FI 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)

    The following three standards are mandated for the RHHI criterion:
    Standard 1. Not less than 95.0 percent of clean electronically 
submitted nonperiodic interim payment home health and hospice claims 
are paid within statutorily specified timeframes. Clean claims are 
defined as claims that do not require Medicare FIs 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.
    Standard 2. 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 3. All redeterminations must be concluded and mailed 
within 60 days of receipt of the request, unless the party submits 
documentation after the request, in which case the decision-making 
timeframe is extended for up to 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 accurately processing redeterminations of initial 
determinations from beneficiaries, HHAs, and hospices.

VI. Criteria and Standards for Carriers

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 claims are processed within statutorily specified timeframes. 
Clean claims are defined as claims that do not require Medicare 
carriers to investigate or develop outside of their Medicare operations 
on a prepayment basis. Specifically, the Act 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.
    Standard 2. Ninety-eight percent of MSNs are properly generated. 
Our expectation is that MSN messages are accurately reflecting the 
services provided.
    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 party submits 
documentation after the request, in which case the decision-making 
timeframe is extended for up to 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.
     QIC case file requirements.
     Timely and accurate effectuation of appeal decisions.
     Accuracy and timeliness of processing appeals and clerical 
error reopenings as set forth in part 405, subpart I (Sec.  405.900 et 
seq.).

B. Customer Service Criterion

    Contractors must meet our performance expectations that providers 
are served by prompt and accurate administration of the program in 
accordance with all applicable laws, regulations, and our general 
instructions.
    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 inquiries.
     Performing quality call monitoring.
     Training customer service representatives.
     Entering valid call center performance data in the 
customer service assessment and management system or its successor the 
provider inquiry evaluation system.
     Providing timely and accurate written replies to providers 
that address the concerns raised and that are written with an 
appropriate customer-friendly tone and clarity.
     Ensuring written correspondence is evaluated for quality.
     Conducting provider outreach and education, activities.
     Effectively maintaining an Internet Web site dedicated to 
furnishing providers timely, accurate, and useful Medicare program 
information.

C. Payment Safeguards Criterion

    Carriers may be evaluated on any MIP activities if performed under 
their contracts. In addition, other carrier

[[Page 36527]]

functions and activities that may be reviewed under this criterion 
include, but are not limited to the following:
     Medical Review
    ++ Increasing the effectiveness of medical review activities.
    ++ Exercising accurate and defensible decision-making on medical 
reviews.
    ++ Collaborating with other internal components and external 
entities to ensure the effectiveness of medical review activities.
     Medicare Secondary Payer
    ++ Accurately following MSP claim development/edit procedures.
    ++ Supporting the Coordination of Benefits Contractor's efforts to 
identify responsible payers primary to Medicare.
    ++ Supporting the Medicare Secondary Payer Recovery functions for 
provider, physician or other supplier debts and duplicate provider, 
physician or other supplier payments.
    ++ Accurately reporting MSP savings.
     Overpayments
    ++ Collecting and referring Medicare debts in a timely manner.
    ++ 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 HIPAA.
     Implementation of our general instructions.

VII. Action Based on Performance Evaluations

    We evaluate a contractor's performance against applicable program 
requirements for each criterion. Each contractor must certify that all 
information submitted to us relating to the contract management 
process, including, without limitation, all files, records, documents 
and data, whether in written, electronic, or other form, is accurate 
and complete to the best of the contractor's knowledge and belief. A 
contractor 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 FIs, carriers, and RHHIs 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

[[Page 36528]]

and impact on the effective and efficient administration of the 
Medicare program.
    In addition, if the cost incurred by the FI, RHHI, or 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 FIs or carrier, these high costs 
may also be grounds for adverse action.

VIII. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping 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.).

IX. 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 to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this notice, and, if we proceed with a subsequent document, 
we will respond to the comments in the section entitled as ``Analysis 
of and Response to Public Comments Received on FY 2009 Criteria and 
Standards'' 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. 93.773, 
Medicare--Hospital Insurance, and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: May 16, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
 [FR Doc. E8-14641 Filed 6-26-08; 8:45 am]
BILLING CODE 4120-01-P