[Federal Register Volume 60, Number 172 (Wednesday, September 6, 1995)]
[Rules and Regulations]
[Pages 46228-46234]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21695]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Part 417
[OMC-014-FC]
Medicare Program; Payments to HMOs and CMPs and Appeals:
Technical Amendments
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule with comment period.
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SUMMARY: This rule clarifies and updates portions of the HCFA
regulations that pertain to payment for services furnished to Medicare
enrollees by health maintenance organizations (HMOs) and competitive
medical plans (CMPs); appeals by Medicare enrollees concerning payment
for those services; and appeals by HMOs and CMPs with regard to their
Medicare contracts.
This rule completes the special project aimed at the total
technical revision of part 417. Part 417 contains the regulations
applicable to all prepaid health care organizations, that is, HMOs,
CMPs, and health care prepayment plans (HCPPs).
These are technical and editorial changes that do not affect the
substance of the regulations. They are intended to make it easier to
find particular provisions, to eliminate needless repetition and remove
obsolete content, and to better ensure uniform understanding of the
rules.
DATES: Effective dates: These rules are effective as of October 1,
1995.
Comment date: We will consider comments received by October 6,
1995.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: OMC-014-FC, PO Box 26688,
Baltimore, MD 21207.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850
Due to staffing and resource limitations, we cannot accept comments
by facsimile (FAX) transmission. In commenting, please refer to file
code OMC-014-FC.
Written comments received timely will be available for public
inspection as they are received--generally beginning approximately 3
weeks after publication of the document, in Room 309-G of the
Department's offices at 200 Independence Avenue, SW., Washington, DC,
Monday through Friday, from 8:30 a.m. to 5 p.m. (phone: (202) 690-
7890).
Although we cannot respond to individual comments, if we revise
this rule as a result of comments, we will discuss all timely comments
in the preamble to the revised rule.
FOR FURTHER INFORMATION CONTACT: Tracy Jensen, (410) 786-1033.
SUPPLEMENTARY INFORMATION:
A. Background
The previous 4 technical regulations of the special project have--
Removed obsolete content;
Designated the remaining text under 17 subparts that
identify the different program aspects so that it is easier to refer to
those aspects and to find particular rules;
Through nomenclature and definition changes, established
certain terms to be used throughout part 417, so as to preclude
confusion, make clear that responsibility for the prepaid health care
programs has been delegated to HCFA, and ensure use of the most precise
terms available;
Redesignated certain portions of part 417 to free section
numbers needed so that new rules can be incorporated in logical order;
and
Established a separate subpart C to set forth the many
requirements for the organization and operation of HMOs. Under previous
rules, these were compressed into a single section (Sec. 417.107).
As a result of the redesignations, Secs. 417.107 through 417.119
were made available for new rules that are required because of
statutory amendments that affect the furnishing of services by
Federally qualified HMOs, or may be needed because of future changes in
the statute. Similarly, Secs. 417.128 through 417.139 are available for
additional rules on the organization and operation of those HMOs.
B. Changes made by this rule
This technical rule affects the following subparts:
Subpart N--Medicare Payment to HMOs and CMPs--General Rules
Subpart O--Medicare Payment: Cost Basis;
Subpart P--Medicare Payment: Risk Basis;
Subpart Q--Beneficiary Appeals; and,
Subpart R--Contract Appeals.
Changes to the first three subparts reflect a general change of
approach--
[[Page 46229]]
use of the term ``payment'' rather than ``reimbursement''. Changes in
all five subparts, such as use of the active voice, are intended to
improve clarity. They also provide more headings, revise confusing word
order, and remove obsolete provisions (rules that applied to contract
periods that began before 1986).
In subpart Q, the revisions add a paragraph explaining the
statutory basis for the beneficiary appeals rules and expand the
``Scope'' paragraph to reference a recently added provision that gives
the beneficiary the right to request immediate PRO review of a
determination that he or she no longer needs inpatient hospital care.
Other Required Information
Waiver of Proposed Rulemaking and Delayed Effective Date
The changes made by this rule are technical and editorial in
nature. Their aim is to simplify, clarify, and update subparts N
through R of part 417 without substantive change.
Accordingly, we find that notice and opportunity for public comment
are unnecessary and that there is good cause to waive proposed
rulemaking procedures.
In addition, it is important, for the convenience of the public,
that these changes be effective as of October 1, 1995, so that they can
be included in the 1995 edition of the Code of Federal Regulations on
which the public relies. Therefore, we find good cause to also waive
the usual 30-day delay in the effective date
As previously indicated, however, we will consider timely comments
from anyone who believes that, in making the technical and editorial
changes, we have unintentionally altered the substance.
Paperwork Reduction Act
Sections 417.558, 417.576, and 417.600 of the regulations amended
by this technical rule contain requirements that are subject to review
by the Office of Management and Budget (OMB) under the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501 et seq.). The requirement for a
certified cost report (Sec. 417.576(b)) has OMB approval under number
0938-0165, with an expiration date of 9-30-95. The burden for this
report is estimated at 200 hours for record keeping and 260 hours for
completing the report. The requirements for justification of exception
to cost limits (Sec. 417.558(c)) and for grievance and appeals
procedures (Sec. 417.600(b)) are being submitted for OMB approval. If
you comment on these requirements, please send a copy directly to:
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, Executive Office Building, Washington, DC 30503.
Regulatory Impact Statement
Consistent with the Regulatory Flexibility Act (RFA) and section
1102(b) of the Social Security Act, we prepare a regulatory flexibility
analysis for each rule, unless the Secretary certifies that the
particular rule will not have a significant economic impact on a
substantial number of small entities, or a significant impact on the
operation of a substantial number of small rural hospitals.
The RFA defines ``small entity'' as a small business, a nonprofit
enterprise, or a governmental jurisdiction (such as a county, city, or
township) with a population of less than 50,000. We also consider all
providers and suppliers of services to be small entities. For purposes
of section 1102(b) of the Act, we define small rural hospital as a
hospital that has fewer than 50 beds, and is not located in a
metropolitan statistical area.
We have not prepared a regulatory flexibility analysis because we
have determined and we certify that these rules (which make only
technical and editorial changes with no substantive effect) will not
have a significant economic impact on a substantial number of small
entities or a significant impact on the operation of a substantial
number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
rule was not reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 417
Administrative practice and procedure, Health maintenance
organizations (HMO), Medicare.
42 CFR part 417 is amended as set forth below.
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
A. The authority citation for part 417 continues to read as
follows:
Authority: secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), Secs. 1301, 1306, and 1310 of the Public
Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9); and 31
U.S.C. 9701.
B. Subpart N is amended as set forth below.
Subpart N--Medicare Payment to HMOs and CMPs: General Rules
1. Section 417.524 is revised to read as follows:
Sec. 417.524 Payment to HMOs or CMPs: General.
(a) Basic rule. The payments that HCFA makes to an HMO or CMP under
this subpart and subparts O and P of this part for furnishing covered
Medicare services are in place of any payment that HCFA would otherwise
make to a beneficiary or the HMO or CMP under sections 1814(b) and
1833(a) of the Act.
(b) Basis of payment. (1) HCFA pays the HMOs or CMPs on either a
reasonable cost basis or a risk basis depending on the type of contract
the HMO or CMP has with HCFA.
(2) In certain cases a risk HMO or CMP also receives payments on a
reasonable cost basis for certain Medicare enrollees who retain nonrisk
status, as provided in Sec. 417.444, after the HMO or CMP enters into a
risk contract.
Sec. 417.526 [Amended]
2. In Sec. 417.526, ``reimbursement'' is revised to read
``payment'' each time it appears.
3. Section 417.528 is amended to revise the section heading to
revise, paragraphs (a) through (c) and to add a heading to paragraph
(d) to read as follows:
Sec. 417.528 Payment when Medicare is not primary payer.
(a) Limits on payments and charges. (1) HCFA may not pay for
services to the extent that Medicare is not the primary payer under
section 1862(b) of the Act and part 411 of this chapter.
(2) The circumstances under which an HMO or CMP may charge, or
authorize a provider to charge, for covered Medicare services for which
Medicare is not the primary payer are stated in paragraphs (b) and (c)
of this section.
(b) Charge to other insurers or the enrollee. If a Medicare
enrollee receives from an HMO or CMP covered services that are also
covered under State or Federal worker's compensation, automobile
medical, or any no-fault insurance, or any liability insurance policy
or plan, including a self-insured plan, the HMO or CMP may charge, or
authorize a provider that furnished the service to charge--
(1) The insurance carrier, employer, or other entity that is liable
to pay for these services; or
(2) The Medicare enrollee, to the extent that he or she has been
paid by the carrier, employer, or other entity.
[[Page 46230]]
(c) Charge to group health plans (GHPs) or large group health plans
(LGHPs). An HMO or CMP may charge a GHP or LGHP for covered services it
furnished to a Medicare enrollee and may charge the Medicare enrollee
to the extent that he or she has been paid by the GHP or LGHP for these
covered services if--
(1) The Medicare enrollee is covered under the plan; and
(2) Under section 1862(b) of the Act, HCFA is precluded from paying
for the covered services .
(d) Responsibilities of HMO or CMP. * * *
C. Subpart O is amended as set forth below.
Subpart O--Medicare Payment: Cost Basis
1. Section 417.530 is revised to read as follows:
Sec. 417.530 Basis and scope.
This subpart sets forth the principles that HCFA follows to
determine the amount it pays for services furnished by a cost HMO or
CMP to its Medicare enrollees. These principles are based on sections
1861(v) and 1876 of the Act and are, for the most part, the same as
those set forth--
(a) In part 412 of this chapter, for paying the costs of inpatient
hospital services which, for cost HMOs and CMPs, are considered
``reasonable'' only if they do not exceed the amounts allowed under the
prospective payment system; and
(b) In part 413 of this chapter, for the costs of all other covered
services.
Sec. 417.531 [Amended]
2. In Sec. 417.531, the following changes are made:
a. In paragraph (a), ``reimbursement'' is revised to read
``payment'', and ``participating in the Medicare program'' is removed.
b. In paragraph (b), introductory text, ``the HMO or CMP may be
reimbursed'' is revised to read ``HCFA pays the HMO or CMP''.
Sec. 417.532 [Amended]
3. In Sec. 417.532, the following changes are made:
a. Throughout Sec. 417.532, ``reimbursement'' is revised to read
``payment'' and ``reimburses'' is revised to read ``pays''.
b. In paragraph (a)(3), ``Except as specified in paragraph (a)(4)
of this section,'' is removed and ``in judging'' is revised to read
``In judging''.
c. Paragraph (a)(4) is removed.
d. In paragraph (f), ``will determine'' is revised to read
``determines''.
e. Paragraph (g) is revised to read as follows:
Sec. 417.532 General considerations.
* * * * *
(g) Direct payment by HCFA. (1) If the HMO or CMP elects to have
HCFA pay for provider services, HCFA pays each provider on a reasonable
cost basis or under the PPS system, whichever is appropriate for the
particular provider under part 412 or part 413 of this chapter.
(2) In computing the Medicare payment to the HMO or CMP, HCFA
deducts these payments and any other payments made by the Medicare
intermediary or carrier on behalf of the HMO or CMP (such as payment
for emergency or urgently needed services under Sec. 417.558).
Sec. 417.533 [Amended]
4. In Sec. 417.533, the following changes are made:
a. In the introductory text, the phrase ``is responsible for'' is
revised to read ``must''.
b. In paragraphs (a), (b), and (c), ``Determining'', ``Making'',
and ``Carrying'' are revised to read ``Determine'', ``Make'', and
``Carry'', respectively.
Sec. 417.536 [Amended]
5. In Sec. 417.536, the following changes are made:
a. The section heading is revised to read ``Cost payment
principles.''
b. In paragraph (a), first sentence, the phrase ``or reasonable
cost reimbursement'' is removed.
c. In paragraphs (a), (f)(3), and (m), ``reimbursement'' is revised
to read ``payment''.
d. In paragraph (m), the heading is revised to read ``Limitations
on payment.''; in the introductory text, ``reimbursed'' is revised to
read ``paid''; and ``subpart E of part 405, and'' is removed.
Sec. 417.538 [Amended]
6. In Sec. 417.538, the following changes are made:
a. Paragraph (a) is revised to read as set forth below.
b. The heading of paragraph (b) is revised to read ``Included
costs.''
c. The heading of paragraph (d) is revised to read ``Limitation on
payment.'' and in the last sentence, ``such costs'' is revised to read
``those costs''.
Sec. 417.538 Enrollment and marketing costs.
(a) Principle. Costs incurred by an HMO or CMP in performing the
enrollment and marketing activities described in subpart k of this part
are allowable.
* * * * *
Sec. 417.544 [Amended]
7. In Sec. 417.544, in paragraph (a), the paragraph designations
(1), (2), and (3) are added, preceding the first, second, and third
sentences and in paragraph (b), the paragraph designations (1) and (2)
are added preceding the first and second sentences.
Sec. 417.548 [Amended]
9. In Sec. 417.548, the following changes are made:
a. In paragraph (a), ``reimbursable'' is revised to read
``payable''.
b. In paragraph (b), in the second sentence, ``For example, in'' is
removed and ``(c) Example. In'' is inserted in its place, and the
parenthetical phrase is revised to read ``(rather than the payment
amounts determined under part 412 or part 413 of this chapter)''.
10. Section 417.550 is revised to read as follows:
Sec. 417.550 Special Medicare program requirements.
(a) Principle. HCFA pays the full reasonable cost incurred by an
HMO or CMP for activities that are solely for Medicare purposes and
unique to Medicare contracts under section 1876 of the Act.
(b) Application. HCFA pays the full reasonable cost of the
following activities:
(1) Reporting increases and decreases in the number of Medicare
enrollees.
(2) Obtaining independent certification of the HMO's or CMP's cost
report to the extent that it is for Medicare purposes.
(3) Reporting special data that HCFA requires solely for program
planning and evaluation.
(c) Prior approval requirement. The costs specified in paragraph
(b) of this section must be separately budgeted and approved by HCFA
before the contract period begins.
(d) Limit on full payment. Full payment is limited to the costs
specified in paragraph (b) of this section. All other administrative
costs must be apportioned in accordance with Sec. 417.552.
Sec. 417.552 [Amended]
11. In Sec. 417.552, the following changes are made:
a. In the introductory text of paragraph (a), ``Except as provided
in Sec. 417.556(c)'' is removed and ``the'' is revised to read ``The''.
b. In paragraph (a)(1), ``Secs. 417.530 through 417.576; and'' is
revised to read ``this subpart; and''.
[[Page 46231]]
Sec. 417.554 [Amended]
12. In Sec. 417.554, the regulation citations at the end are
revised to read ``Sec. 405.480, part 412, and Secs. 413.5 and 413.24 of
this chapter.''
13. Section 417.558 is revised to read as follows:
Sec. 417.558 Emergency, urgently needed, and out-of-area services for
which the HMO or CMP accepts responsibility.
(a) Source of payment. Either HCFA or the HMO or CMP may pay a
provider for emergency or urgently needed services or other covered
out-of-area services for which the HMO or CMP accepts responsibility.
(b) Limits on payment. If the HMO or CMP pays, the payment amount
may not exceed the amount that is allowable under part 412 or part 413
of this chapter.
(c) Exception to limit on payment. Payment in excess of the limit
imposed by paragraph (b) of this section is allowable only if the HMO
or CMP demonstrates to HCFA's satisfaction that it is justified on the
basis of advantages gained by the HMO or CMP, as set forth in
Sec. 417.548.
Sec. 417.560 [Amended]
14. In Sec. 417.560, the following changes are made:
a. In paragraph (a) introductory text, ``will base'' is revised to
read ``bases''.
b. In paragraph (d)(1), ``(1) Except as provided in paragraph
(d)(2) of this section,'' is removed, and ``the Medicare share'' is
revised to read ``The Medicare share''.
c. Paragraph (d)(2) is removed.
15.-16. Section 417.564 is revised to read as follows:
Sec. 417.564 Apportionment and allocation of administrative and
general costs.
(a) Costs not directly associated with providing medical care.
Enrollment, marketing, and other administrative and general costs that
benefit the total enrollment of the HMO or CMP and are not directly
associated with furnishing medical care must be apportioned on the
basis of a ratio of Medicare enrollees to the total HMO or CMP
enrollment.
(b) Costs significantly related to providing medical services. (1)
The following administrative and general costs, which bear a
significant relationship to the services furnished, are not apportioned
to Medicare directly; they must be allocated or distributed to the HMO
or CMP components and then apportioned to Medicare in accordance with
Secs. 417.552 through 417.560:
(i) Facility costs.
(ii) Interest expense.
(iii) Medical record costs.
(iv) Centralized purchasing costs.
(v) Accounting and data processing costs.
(vi) Other administrative and general costs that are not included
in paragraph (a) of this section.
(2) The allocation or distribution process must be as follows:
(i) If a separate entity or department of an HMO or CMP performs
administrative functions the benefit of which can be quantitatively
measured (such as centralized purchasing and data processing), the
total allowable costs of this entity or department must be allocated or
distributed to the components of the HMO or CMP in reasonable
proportion to the benefits received by these components.
(ii) If a separate entity or department of an HMO or CMP performs
administrative functions the benefit of which cannot be quantitatively
measured (such as facility costs), the total allowable costs of this
entity or department must be allocated or distributed to the components
of the HMO or CMP on the basis of a ratio of total incurred and
distributed costs per component to the total incurred and distributed
costs for all components.
Sec. 417.568 [Amended]
17. In Sec. 417.568, the following changes are made:
a. In paragraph (a)(1), ``payable by Medicare'' is revised to read
``payable by HCFA'', and the comma after ``enrollees'' is removed.
b. In paragraph (a)(2), the phrase ``the HMO or CMP must follow''
is added immediately before ``standardized definitions * * *'', and the
last three words ``must be followed.'' are removed.
c. In paragraph (b)(2), ``as described in this paragraph'' is
revised to read ``as provided in paragraph (b)(3) of this section''.
d. In paragraph (b)(3), ``based on this basis'' is revised to read
``developed on this basis'' and ``will be acceptable'' is revised to
read ``is acceptable''.
e. Paragraph (c) is revised to read as set forth below.
f. In paragraph (d), ``the HMO or CMP'', the last time it appears,
is revised to read ``it''.
Sec. 417.568 Adequate financial records, statistical data, and cost
finding.
* * * * *
(c) Provider services furnished directly by the HMO or CMP. If the
HMO or CMP furnishes provider services directly, the provider is
subject to the cost-finding and cost-reporting requirements set forth
in parts 412 and 413 of this chapter. The provider must use an approved
cost-finding method described in Sec. 413.24 of this chapter to
determine the actual cost of these covered services.
* * * * *
Sec. 417.576 [Amended]
18. In Sec. 417.576, the following changes are made:
a. In the following paragraphs, ``reimbursement'' is revised to
read ``payment'': paragraphs (b)(2)(ii), (c)(1), (c)(2)(ii), (d)
heading, introductory text, and (d)(1), and (e)(1).
b. In the following paragraphs, ``reimbursable'' is revised to read
``payable'': paragraphs (c)(1) and (d)(2).
c. In paragraph (b)(2), ``Secs. 417.532 through 417.566'' is
revised to read ``this subpart''.
d. In paragraph (c)(1), ``providing'' is revised to read
``furnishing''.
e. In paragraph (c)(2)(ii), ``an insignificant amount'' is revised
to read ``an insignificant portion''.
f. Paragraphs (b)(3) and (e)(3) are revised to read as set forth
below:
Sec. 417.576 Final settlement.
* * * * *
(b) Certified cost report as basis for final settlement. * * *
(3) Failure to report required financial information. If the HMO or
CMP fails to submit the required cost report and supporting documents
within 180 days (or an extended period approved by HCFA under paragraph
(b)(1) of this section), HCFA may--
(i) Consider the failure to report as evidence of likely
overpayment; and
(ii) Initiate recovery of amounts previously paid, or reduce
interim payments, or both.
* * * * *
(e) Basis for retroactive adjustment. * * *
(3) Any withholding continues until the earliest of the following
occurs:
(i) The overpayment is liquidated.
(ii) The HMO or CMP enters into an agreement with HCFA to refund
the overpaid amount.
(iii) HCFA, on the basis of subsequently acquired information,
determines that there was no overpayment.
(iv) The decision of a hearing specified in paragraph (d)(4) of
this section is that there was no overpayment.
D. Subpart P is amended as set forth below.
Subpart P--Medicare Payment: Risk Basis
Sec. 417.580 [Amended]
1. In Sec. 417.580, paragraph (a), ``reimbursed'' is revised to
read ``pays''.
[[Page 46232]]
Sec. 417.582 [Amended]
2. In Sec. 417.582 the heading is revised and three definitions are
added in alphabetical order, to read as follows:
Sec. 417.582 Definitions.
AAPCC stands for adjusted average per capita cost.
ACR stands for adjusted community rate.
* * * * *
APCRP stands for average of per capita rates of payment.
* * * * *
Sec. 417.584 [Amended]
3. In Sec. 417.584, the following changes are made.
a. The introductory text of the section and paragraph (c) are
revised to read as set forth below.
b. In paragraph (d), ``Sec. 417.592(e)'' is revised to read
``Sec. 417.592(b)(2)''; ``will reduce'' is revised to read ``reduces'';
and the last sentence is removed.
Sec. 417.584 Payment to HMOs and CMPs with risk contracts.
Except in the circumstances specified in Sec. 417.440(d) for
inpatient hospital care, and as provided in Sec. 417.585 for hospice
care, HCFA makes payment for covered services only to the HMO or CMP.
* * * * *
(c) Adjustments to payments. If the actual number of Medicare
enrollees differs from the estimated number on which the amount of
advance monthly payment was based, HCFA adjusts subsequent monthly
payments to take account of the difference.
* * * * *
Sec. 417.585 [Amended]
4. In Sec. 417.585, the following changes are made:
a. The section heading is revised to read: ``Special rules: Hospice
care.''
b. In paragraph (a), ``No payment is made effective the first day''
is revised to read: ``This no-payment rule is effective from the first
day''.
c. In paragraph (b), Introductory text, ``for only'' is revised to
read ``but only for''.
d. In paragraph (b)(2), ``hospice care was elected'' is revised to
read ``the enrollee elected hospice care''.
e. In paragraph (c), the clause ``are made to the hospice
participating in Medicare elected by the enrollee'' is revised to read
``is made to the Medicare-participating hospice elected by the
enrollee''.
Sec. 417.586 [Removed]
5. Section 417.586 is removed.
Sec. 417.588 [Amended]
6. In Sec. 417.588, the following changes are made.
a. In paragraph (a), ``resulting in an AAPCC'' is revised to read
``to establish an AAPCC''.
b. In paragraph (c)(2), ``A further adjustment is made by HCFA'' is
revised to read ``HCFA makes a further adjustment''.
7. Section 417.592 is revised to read as follows:
Sec. 417.592 Additional benefits requirement.
(a) General rules. (1) An HMO or CMP that has an APCRP (as
determined under Sec. 417.590) greater than its ACR (as determined
under Sec. 417.594) must elect one of the options specified in
paragraph (b) of this section.
(2) The dollar value of the elected option must, over the course of
a contract period, be at least equal to the difference between the
APCRP and the proposed ACR.
(b) Options--(1) Additional benefits. Provide its Medicare
enrollees with additional benefits in accordance with paragraph (c) of
this section.
(2) Payment reduction. Request HCFA to reduce its monthly payments.
(3) Combination of additional benefits and payment reduction.
Provide fewer than the additional benefits required under paragraph
(b)(1) of this section and request HCFA to reduce the monthly payments
by the remaining difference between the APCRP and the ACR.
(4) Combination of additional benefits and withholding in a
stabilization fund. Provide fewer than the additional benefits required
under paragraph (b)(1) of this section, and request HCFA to withhold in
a stabilization fund (as provided in Sec. 417.596) the remaining
difference between the APCRP and the ACR.
(c) Special rules: Additional benefits option. (1) The HMO or CMP
must determine additional benefits separately for enrollees entitled to
both Part A and Part B benefits and those entitled only to Part B.
(2) The HMO or CMP may elect to provide additional benefits in any
of the following forms--
(i) A reduction in the HMO's or CMP's premium or in other charges
it imposes in the form of deductibles or coinsurance.
(ii) Health benefits in addition to the required Part A and Part B
covered services.
(iii) A combination of reduced charges and additional benefits.
(d) Notification to HCFA. (1) The HMO or CMP must give HCFA notice
of its ACR and its weighted APCRP at least 45 days before its contract
period begins.
(2) An HMO or CMP that elects the option of providing additional
benefits must include in its submittal--
(i) A description of the additional benefits it will provide to its
Medicare enrollees; and
(ii) Supporting evidence to show that the selected benefits meet
the requirements of paragraph (a)(2) of this section with respect to
dollar value equivalence.
8. Section 417.594 is amended to revise paragraphs (a), (b)(1) and
(b)(2), (c), (d), and (e) to read as follows:
Sec. 417.594 Computation of adjusted community rate (ACR).
(a) Basic rule. Each HMO or CMP must compute its basic rate as
follows:
(1) Compute an initial rate in accordance with paragraph (b) of
this section.
(2) Adjust and reduce the initial rate in accordance with
paragraphs (c) and (d) of this section.
(b) Computation of initial rates. (1) The HMO or CMP must compute
its initial rate using either of the following systems:
(i) A community rating system as defined in Sec. 417.104(b); or
(ii) A system, approved by HCFA, under which the HMO or CMP
develops an aggregate premium for all its enrollees and weights the
aggregate by the size of the various enrolled groups that compose its
enrollment.
(For purposes of this section, enrolled groups are defined as
employee groups or other bodies of subscribers that enroll in the HMO
or CMP through payment of premiums.)
(2) Regardless of which method the HMO or CMP uses--
(i) The initial rate must be equal to the premium it would charge
its non-Medicare enrollees for the Medicare-covered services;
(ii) The HMO or CMP must compute the rates separately for enrollees
entitled to Medicare Part A and Part B and for those entitled only to
Part B; and
(iii) The HMO or CMP must identify and take into account
anticipated revenue from health insurance payers for those services for
which Medicare is not the primary payer as provided in Sec. 417.528.
* * * * *
(c) Adjustment of initial rates--(1) Purpose of adjustment. The
purpose of adjustment is to reflect the utilization characteristics of
Medicare enrollees.
(2) Adjustment by the HMO or CMP. The HMO or CMP may adjust the
rate for a particular service using more than one of the following
factors if they do not duplicate each other:
[[Page 46233]]
(i) Unit of service. If the HMO or CMP purchases or identifies
services on a unit of service basis and the unit of service is defined
the same for all enrollees, the HMO or CMP may make an adjustment in
its initial rate to reflect the number of units of services furnished
to its Medicare enrollees in comparison to those furnished to other
enrollees.
(ii) Complexity or intensity of services. The HMO or CMP may make
an adjustment to reflect the differences in the complexity or intensity
of services furnished to its Medicare enrollees if the calculation of
its initial rate includes the elements of this adjustment.
(3) Support documentation. All adjustments made by the HMO or CMP
must be accompanied by adequate supporting data. If an HMO or CMP does
not have sufficient enrollment experience to develop this data, it may,
during its initial contract period, use documented statistics from a
nationally recognized statistical source.
(4) Adjustment by HCFA. If the HMO or CMP does not have adequate
data to adjust the initial rate calculated under paragraph (b) of this
section to reflect the utilization characteristics of its Medicare
enrollees, HCFA will, at the HMO's or CMP's request, adjust the initial
rate. HCFA adjusts the rate on the basis of differences in the
utilization characteristics of--
(i) Medicare and non-Medicare enrollees in other HMOs or CMPs; or
(ii) Medicare beneficiaries (in the HMO's or CMP's area, or State,
or the United States) who are eligible to enroll in an HMO or CMP and
other individuals in that same area, or State, or the United States.
(d) Reduction of adjusted rates. The HMO or CMP or HCFA further
reduces the adjusted rates by the actuarial value of applicable
Medicare deductibles and coinsurance.
(e) HCFA review--(1) Submission of data. The HMO or CMP must submit
its ACR and the methodology used to compute it for HCFA review and
approval, and must include adequate supporting data.
(2) Appeals procedures. (i) If HCFA determines that an HMO's or
CMP's ACR computation is not acceptable, the HMO or CMP may, within 30
days after receipt of notice of the determination, file with HCFA a
request for a hearing.
(ii) The request must state why the HMO or CMP believes the
determination is incorrect, and include any supporting evidence the HMO
or CMP considers pertinent.
(iii) A hearing officer designated by HCFA conducts the hearing in
accordance with the hearing procedures set forth in Secs. 405.1819
through 405.1833 of this chapter.
Sec. 417.596 [Amended]
9. In Sec. 417.596, the following changes are made:
a. In paragraphs (a), (b), and (c)(1), ``the average of its per
capita rates of payment'' is revised to read ``its APCRP''.
b. In paragraphs (c)(1) and (c)(2), ``will not'' is revised to read
``does not''.
c. In paragraph (d), ``for the purpose of establishing and
maintaining'' is revised to read ``to establish and maintain''.
Sec. 417.597 [Amended]
10. In paragraph (a) of Sec. 417.597, in the introductory text,
``the average of its per capita rates of payment'' is revised to read
``its APCRP''.
Sec. 417.598 [Amended]
11. In Sec. 417.598, ``will conduct'' is revised to read
``conducts''.
E. Subpart Q is amended as set forth below.
Subpart Q--Beneficiary Appeals
1. Section 417.600 is revised to read as follows:
Sec. 417.600 Basis and scope.
(a) Statutory basis. (1) Section 1869 of the Act provides the right
to a hearing and to judicial review for any individual dissatisfied
with a determination regarding his or her Medicare benefits.
(2) Section 1876 of the Act provides for Medicare payments to HMOs
and CMPs that contract with HCFA to enroll Medicare beneficiaries and
furnish Medicare-covered health care services to them. Section
1876(c)(5) provides that--
(i) An HMO or CMP must establish grievance and appeals procedures;
and
(ii) Medicare enrollees dissatisfied because they do not receive
health care services to which they believe they are entitled, at no
greater cost than they believe they are required to pay, have the
following appeal rights:
(A) The right to an ALJ hearing if the amount in controversy is
$100 or more.
(B) The right to judicial review of the hearing decision if the
amount in controversy is $1000 or more.
(iii) The Medicare enrollee and the HMO or CMP are parties to the
hearing and to the judicial review.
(b) Scope. This subpart sets forth--
(1) The appeals procedures, as required by section 1876(c)(5)(B) of
the Act for Medicare enrollees who are dissatisfied with an
``organization determination'' as defined in Sec. 417.606;
(2) The applicability of grievance procedures established by the
HMO or CMP under section 1876(c)(5)(A) of the Act and Sec. 417.604(a)
for complaints that do not involve an organization determination;
(3) The responsibility of the HMO or CMP--
(i) To develop and maintain procedures; and
(ii) To ensure that all Medicare enrollees have a complete written
explanation of their grievance and appeal rights, of the steps to
follow, and of the time limits for each step of the procedures; and
(4) The special rules that apply when a beneficiary requests
immediate PRO review of a determination that he or she no longer needs
inpatient hospital care.
Sec. 417.602 [Amended]
2. In Sec. 417.602, the heading is revised to read ``Sec. 417.602
Definitions.'' and the definition of ``enrollee'' is removed.
3. Section 417.604 is revised to read as follows:
Sec. 417.604 General provisions.
(a) Responsibilities of the HMO or CMP. (1) The HMO or CMP must
establish and maintain--
(i) Appeals procedures that meet the requirements of this subpart
for issues that involve organization determinations; and
(ii) Grievance procedures for dealing with issues that do not
involve organization determinations.
(2) The HMO or CMP must ensure that all enrollees receive written
information about the grievance and appeals procedures that are
available to them.
(b) Limits on applicability of this subpart. (1) If an enrollee
requests immediate PRO review (as provided in Sec. 417.605) of a
determination of noncoverage of inpatient hospital care--
(i) The enrollee is not entitled to subsequent review of that issue
under this subpart; and
(ii) The PRO review decision is subject to the appeals procedures
set forth in part 473 of this chapter.
(2) Any determination regarding services that were furnished by the
HMO or CMP, either directly or under arrangement, for which the
enrollee has no further liability for payment are not subject to
appeal.
(3) Services included in an optional supplemental plan under
(Sec. 417.440(b)(2)) are subject only to a grievance procedure.
(4) Physicians and other individuals who furnish services under
arrangement with an HMO or CMP have no right of appeal under this
subpart.
(c) Applicability of other regulations. Unless otherwise provided
in this
[[Page 46234]]
subpart, regulations at 20 CFR, part 404, subparts J and R, (pertaining
respectively to conduct of hearings and representation of parties under
title II of the Act) are applicable under this subpart.
Sec. 417.628 [Removed]
4. Section 417.628 is removed.
5. In Sec. 417.632, paragraphs (c) and (d) are revised to read as
follows:
Sec. 417.632 Request for hearing.
* * * * *
(c) Parties to a hearing. (1) The parties to a hearing must be the
parties to the reconsideration and any other person or entity whose
rights with respect to the reconsideration may be affected by the
hearing, as determined by the ALJ.
(2) The HMO or CMP must be made a party to the hearing but does not
have a right to request a hearing.
(d) ALJ action when the amount in controversy is less than $100.
(1) If the request plainly shows that the amount in controversy is less
than $100, the ALJ dismisses the request.
(2) If, after a hearing is initiated, the ALJ finds that the amount
in controversy is less than $100, he or she discontinues the hearing
and does not rule on the substantive issues raised in the appeal.
F. Subpart R is amended as set forth below.
Subpart R--Medicare Contract Appeals
Sec. 417.644 [Amended]
1. In Sec. 417.644, the following changes are made:
a. In paragraph (a), ``will notify the HMO or CMP in writing'' is
revised to read ``gives the HMO or CMP written notice''.
b. In paragraph (c), ``Notice of an initial determination specified
in Sec. 417.640 is mailed to the HMO or CMP'' is revised to read ``HCFA
mails the notice to the HMO or CMP''.
2. Section 417.648 is revised to read as follows:
Sec. 417.648 Reconsideration: Applicability.
(a) Reconsideration is the first step for appealing an organization
determination specified in Sec. 417.640 (a) or (b).
(b) HCFA reconsiders either of the specified determinations if the
HMO or CMP files a written request in accordance with Sec. 417.650.
Sec. 417.652 [Amended]
3. In Sec. 417.652, ``will provide'' is revised to read
``provides''.
4. Section 417.656 is revised to read as follows:
Sec. 417.656 Notice of reconsidered determination.
(a) HCFA gives the parties written notice of the reconsidered
determination.
(b) The notice--
(1) Contains findings with respect to the HMO's or CMP's
qualifications to enter into a contract with HCFA under section 1876 of
the Act;
(2) States the specific reasons for the reconsidered determination;
and
(3) Informs the party of its right to a hearing if it is
dissatisfied with the determination.
Sec. 417.666 [Amended]
5. In Sec. 417.666, ``will designate'' is revised to read
``designates''.
Sec. 417.668 [Amended]
6. In Sec. 417.668, ``will designate'' is revised to read
``designates''.
Sec. 417.670 [Amended]
7. In Sec. 417.670, the following changes are made:
a. In paragraph (a), ``will fix'', ``send'', and ``must also
inform'' are revised to read ``fixes'', ``sends'', and ``also
informs'', respectively.
b. In paragraph (c), ``any change in time or place or of
adjournment'' is revised to read ``any change in time or place of
hearing, or of adjournment or postponement''.
Sec. 417.676 [Amended]
8. In Sec. 417.676, the following changes are made:
a. In paragraph (a), ``will be open'' is revised to read ``is
open''.
b. In paragraph (b), ``will inquire'' is revised to read
``inquires'', and ``must receive'' is revised to read ``receives''.
c. In paragraph (c), ``The parties will be provided'' is revised to
read ``The hearing officer provides the parties''.
d. In paragraph (d), ``will decide'' is revised to read
``decides''.
Sec. 417.678 [Amended]
9. In Sec. 417.678, ``will rule'' is revised to read ``rules''.
Sec. 417.680 [Amended]
10. In Sec. 417.680, paragraph (b), ``will be'' is revised to read
``are''.
Sec. 417.682 [Amended]
11. In Sec. 417.682, in paragraphs (a) and (c), ``will be'' is
revised to read ``is''.
Sec. 417.686 [Amended]
12. In Sec. 417.686, in paragraph (a), ``will be'' is revised to
read ``is''.
Sec. 417.690 [Amended]
13. In Sec. 417.690, the following changes are made:
a. In paragraph (a), ``will issue'' is revised to read ``issues''.
b. In paragraph (b), ``will provide'' is revised to read
``provides''.
Sec. 417.692 [Amended]
14. In Sec. 417.692, the following changes are made:
a. In paragraph (c)(1), ``will be'' is revised to read ``is''.
b. In paragraph (c)(2), ``will specify'' is revised to read
``specifies''.
Sec. 417.694 [Amended]
15. In Sec. 417.694, ``final and binding'' is revised to read
``binding''.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: July 31, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
[FR Doc. 95-21695 Filed 9-5-95; 8:45 am]
BILLING CODE 4120-01-P
