[Federal Register Volume 59, Number 4 (Thursday, January 6, 1994)]
[Rules and Regulations]
[Pages 679-682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-63]
[[Page Unknown]]
[Federal Register: January 6, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Part 421
[BPO-083-F]
RIN 0938-AF84
Medicare Program; Revisions to Criteria and Standards for
Evaluating Intermediaries and Carriers
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule.
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SUMMARY: This rule issues technical amendments to Medicare regulations
intended to simplify and improve our system for evaluating the
performance of fiscal intermediaries and carriers in the administration
of the Medicare program. Currently, we evaluate intermediaries using
performance criteria and standards announced in an annual notice in the
Federal Register. We are clarifying the methodology for establishing
these criteria and standards. For consistency, we establish comparable
regulation requirements for the evaluation of carrier performance.
These revisions are published in accordance with sections 1816(f)
and 1842(b)(2) of the Social Security Act which require us to develop
standards, criteria, and procedures to evaluate an intermediary's or
carrier's overall performance.
EFFECTIVE DATE: This final rule is effective February 7, 1994.
FOR FURTHER INFORMATION CONTACT: Larry Pratt, (410) 966-7403.
SUPPLEMENTARY INFORMATION:
I. Background
Under section 1816(a) 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 the Secretary of Health and Human Services (HHS). These agencies
or organizations are known as fiscal intermediaries, and they perform
bill processing and benefit payment functions for the Medicare program.
Under section 1842(a) of the Act, the Secretary is 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 the
services submit claims to these carriers that, in turn, make
appropriate payments.
Beginning in 1980 for intermediaries and in 1981 for carriers, we
have been evaluating the effectiveness and efficiency of contractor
operations through a system of criteria and standards called the
Contractor Performance Evaluation Program (CPEP).
We refer to the performance requirements we use to evaluate the
performance of intermediaries and carriers in meeting their contractual
obligations to HCFA in our regulations and program instructions as
criteria and standards. When we developed our regulations, criteria
were expected to be distinguished from standards; we intended to
measure broad categorizations of performance using criteria (42 CFR
421.120) and to measure statistical and performance data using
standards (Sec. 421.122). As planned, a contractor had to be evaluated
by and pass the requirements of the criteria before we evaluated
contractor performance using statistical standards. However, in
practice, the standards have been used to measure a contractor's
compliance with the requirements of the criteria. The separate reliance
on statistical standards diminished and we have developed a CPEP under
which standards are used to measure the performance of specific
activities in a defined criteria instead of ``statistical'' standards.
II. Summary of the Proposed Rule
On December 3, 1992, we published in the Federal Register (57 FR
57125) a proposed rule describing technical revisions we proposed to
make to Medicare regulations in order to simplify and improve our
system for evaluating the performances of fiscal intermediaries and
carriers in the administration of the Medicare program. These technical
revisions are necessary to bring our regulations up to date with our
actual use of criteria and standards in performance evaluations.
In the preamble to the proposed rule we described how the reliance
on statistical standards diminished and that current ``standards'' are
used to measure the performance of specific activities in a defined
criterion. That is, measurement and evaluation using criteria and
standards have evolved into a one-step process. In addition, we noted
that certain functions that were included in the original planned
evaluation structure have been transferred to more appropriate review
activities. We, therefore, proposed to amend Secs. 421.3, 421.112(b),
421.118(b) and 421.122 to delete reference to statistical standards and
to replace the general standards for the areas evaluated formerly by
statistical standards with a general explanation of the areas evaluated
by performance standards.
We also mentioned in the proposed rule that our regulations do not
contain requirements relating to measurement of carrier performance
that are parallel to those for intermediaries. For consistency, we
proposed to establish a new Sec. 421.201, ``Performance Criteria and
Standards,'' that would measure and evaluate carrier performance of
functional responsibilities, such as, accurate and timely processing of
claims, responsiveness to beneficiaries', physicians' and suppliers'
concerns, and proper management of administrative funds.
We proposed to base performance criteria and standards on the
experience of carriers nationwide, changes in carrier operations due to
fiscal constraints, and our objectives in achieving better performance.
Before the beginning of each CPEP evaluation period, we would publish
the performance criteria and standards as a notice in the Federal
Register.
We also announced that we would add a new Sec. 421.203, ``Carrier's
failure to perform efficiently and effectively,'' to explain the
adverse action that may be taken by the Secretary if the carrier fails
to meet criteria and standards specified at Sec. 421.201. The content
is parallel to Sec. 421.124, which applies to intermediaries. This new
Sec. 421.203 does not add or change carrier obligations. It merely
codifies in regulations a provision specific to carriers that has been
in effect since Public Law 98-369.
III. Analysis of and Response to Public Comments
We received 10 timely items of correspondence in response to the
December 3, 1992 proposed rule. The comments were from intermediaries,
carriers, contractor advocacy groups, and provider advocacy groups. A
summary of the comments and the Department's responses follow:
Comment: Several commenters suggested that a process be developed
by HCFA for receiving comments, complaints, or problems with carrier
performance by physicians or professional organizations and that the
information generated by this process be included in the overall
performance evaluation of a carrier.
Response: Beginning in Fiscal Year 1994, HCFA will review both
intermediaries' and carriers' efforts to enhance customer satisfaction
through the use of customer satisfaction surveys, including the
National Physician Survey. Results of the surveys will be used to
establish performance data on customer satisfaction and to identify
areas in need of improvement. The results will be summarized for
publication in the report of contractor performance.
Comment: A number of the commenters believe that certain of our
proposed changes at Secs. 421.124 and 421.203 are unnecessary. Those
changes would allow the Secretary to take adverse action if an
intermediary or carrier exceeds the amount the Secretary finds to be
reasonable and adequate to meet the costs which must be incurred by an
efficiently and economically operated intermediary or carrier,
notwithstanding whether the intermediary or carrier meets the published
criteria and standards. Both the intermediary and carrier contracts
currently have a provision to allow the Secretary to request a
committee of the contractors to assist in efforts to effect
improvements in the high cost contractor's performance. In addition,
the current Contractor Performance Evaluation Program (CPEP) contains
measures on contractor costs. If a contractor fails to meet the
applicable criteria, its CPEP score is reduced accordingly.
Response: We do not agree that the proposed changes are
unnecessary. This section of the regulation would authorize us to take
adverse action for deficient performance of a function not specifically
evaluated by CPEP. Currently, CPEP only measures contractor performance
in meeting the approved budget and the contractor's relative standing
among similar contractors. Moreover, beginning in FY 1993, CPEP
eliminated the concept of passing/failing the overall evaluation.
Passing/failing now is determined on a standard by standard basis. For
example, if a contractor fails to meet the approved budget, it will
fail one standard in CPEP, not the entire CPEP. Thus, despite CPEP, the
authority to take adverse contract action against high cost
intermediaries and carriers is necessary. As the commenters note,
current contracts allow the Secretary to request a committee of the
contractors to assist in efforts to effect improvements in the high
cost contractor's performance. The proposed regulatory change allows us
to take the next logical step in the event efforts to effect
improvement have failed. We will have authority to take adverse action
based on continued high cost performance.
Comment: Several commenters stressed that the proposed Sec. 421.124
and Sec. 421.203 were vague. They asked that HCFA further define
``reasonable'' amount, and how and when high cost would be calculated.
Response: We believe that the provisions at Sec. 421.124 and
Sec. 421.203 are clear and straightforward. It is our responsibility to
consider the funding levels that are reasonable and adequate to meet
the costs incurred by an efficiently and economically operated
contractor. To address this responsibility, we develop unit cost
targets for each contractor prior to the start of every fiscal year.
These unit cost targets are forwarded to the HCFA regional offices as
part of the Budget and Performance Requirements (BPRs) package and
represent the benchmark for the negotiations between the regional
offices and the contractors.
We believe that the composition of a contractor's workload (for
example, number of hospital inpatient bills versus number of outpatient
bills or laboratory bills, etc.) is an important factor in the amount
of costs it incurs since some claims are inherently more problematic
and difficult to resolve. In order to give full consideration of each
contractor's unique situation, we currently apply a ``complexity
index'' to develop the BPRs' unit cost targets. This methodology allows
us to correlate the contractor's costs with its individual workload
composition. The use of the complexity index allows us to identify the
contractors whose unit costs appear to be out of proportion to the type
and medium (electronic versus hardcopy) of workload they must process.
Use of the complexity index methodology allows us to evaluate each
contractor's costs with full consideration of its unique workload mix
and within the national forum of its peers. In this way, we identify
our high cost contractors. However, since the use of the complexity
index methodology is an administrative tool to identify contractors
with aberrant costs and can be changed or modified as required, we do
not believe it necessary to outline this methodology in the regulation.
Comment: Several commenters stated that the proposed
Secs. 421.124(a) and 421.203(a) on high cost contractors do not specify
the types of adverse action we may take on the grounds of excessive
cost. Contractors are uncertain about how we would go about the process
of applying sanctions and what these sanctions might be.
Response: Adverse contract actions are listed in Secs. 421.124(a)
and 421.203(a) of the proposed regulation, but we are not limited to
those. Adverse contract actions are further defined in the intermediary
and carrier manual issuances released within the HCFA Program Manual
Issuances System, which contain the details of the CPEP. Adverse
actions range in severity commensurate with relative performance and
include, but are not limited to, such actions as, Regional Office
Letter of Admonition; Central Office Letter of Admonition; deletion of
the automatic renewal clause from the contract without performance
goals established; deletion of the automatic renewal clause from the
contract with performance goals established; limited contract
automatic-renewal clause and provision for termination upon 90 days
notice; reduction in territory or ``carve-out''; non-renewal; and
termination.
Comment: A commenter was unsure whether, if HCFA does not publish
the CPEP standards during a fiscal year, there would be no performance
evaluation for that year or whether the previous year's CPEP would
apply.
Response: In general, the evaluation period which the criteria and
standards measure is the Federal fiscal year. We make every effort to
publish the criteria and standards prior to the beginning of the
Federal fiscal year, that is, October 1st. If we do not publish a
Federal Register notice before the new fiscal year begins, readers may
presume that, until and unless notified otherwise, the criteria and
standards which were previously in effect remain in effect. When a new
CPEP is published, it usually applies to a prospective period, as
stated in the Federal Register notice.
Comment: One commenter states that contractors participate in pilot
projects which may involve additional funding from HCFA. They assume
this ``additional funding'' would not be considered as ``excessively
high costs''.
Response: We encourage contractors to participate in pilot projects
which may result in improved quality, service or efficiency in the
administration of the Medicare program. Where a contractor's
participation in a pilot study or program adversely affects its
performance evaluation, appropriate adjustments are made to mitigate
the impact of the pilot study or program.
Comment: One commenter recommends that HCFA not base criteria and
standards on the sliding scale of available funding but on true
expectations of performance and therefore delete ``changes in fiscal
operations due to fiscal constraints'' as a basis for developing
criteria and standards.
Response: Each year the specific standards are revised and
developed in concert with the specific budget and performance
requirements, because that is the fiscally responsible approach to
develop uniform and fair performance standards for the Medicare
contractor community. We will continue to develop standards in
conjunction with budget and performance requirements.
Comment: One commenter notes that Secs. 421.124 and 421.203 do not
include the contract's provision for an extension of the contract,
subject to cost limitations. This would deprive high cost contractors
of the formal opportunity to choose between accepting limits on their
reimbursable costs and losing their Medicare contracts.
Response: The contract allows us to offer a high cost contractor
the option of submitting a lower budget or losing its Medicare
contract. Sections 421.124 and 421.203 would give us the authority to
determine the amount which is reasonable and adequate to efficiently
and economically operate as an intermediary and carrier. If we
determine that we cannot afford to contract with high cost
intermediaries or carriers, we may consider appropriate adverse
contract action.
IV. Provisions of the Final Rule
Based on our review of the comments submitted, we are making no
substantive changes to the proposed revisions to the rules affecting
criteria and standards for evaluating intermediaries and carriers as
published on December 3, 1992, (57 FR 233). Only minor editorial and
technical revisions have been made to the proposed rules.
List of Subjects in 42 CFR Part 421
Administrative practice and procedure, Health facilities, Health
professions, Medicare, Reporting and recordkeeping requirements.
42 CFR part 421 is amended as set forth below:
PART 421--INTERMEDIARIES AND CARRIERS
1. The authority citation for part 421 continues to read as
follows:
Authority: Secs. 1102, 1815, 1816, 1833, 1834(a) and (h), 1842,
1861(u), 1871, 1874, and 1875 of the Social Security Act (42 U.S.C.
1302, 1395g, 1395h, 1395l, 1395m(a) and (h), 1395u, 1395x(u),
1395hh, 1395kk, and 1395ll), and 42 U.S.C. 1395b-1.
2. Section 421.3 is revised to read as follows:
Sec. 421.3 Definitions.
Intermediary means an entity that has a contract with HCFA to
determine and make Medicare payments for Part A or Part B benefits
payable on a cost basis (or under the Prospective Payment System for
hospitals) and to perform other related functions. For purposes of
designating regional or alternative regional intermediaries for home
health agencies and of designating intermediaries for hospices under
Sec. 421.117 as well as for applying the performance criteria in
Sec. 421.120 and the performance standards in Sec. 421.122 and any
adverse action resulting from such application, the term intermediary
also means a Blue Cross Plan which has entered into a subcontract
approved by HCFA with the Blue Cross and Blue Shield Association to
perform intermediary functions.
Sec. 421.112 [Amended]
3. In Sec. 421.112(b), ``statistical standards'' is revised to read
``performance standards''.
Sec. 421.118 [Amended]
4. In Sec. 421.118(b) ``statistical standards'' is revised to read
``performance standards''.
5. Section 421.122 is revised to read as follows:
Sec. 421.122 Performance standards.
(a) Development of standards. In addition to the performance
criteria (Sec. 421.120), HCFA develops detailed performance standards
for use in evaluating intermediary performance which may be based on
historical performance, application of acceptable statistical measures
of variation to nationwide intermediary experience during a base
period, or changing program emphases or requirements. These standards
are also developed considering intermediary experience and evaluate the
specific requirements of each functional responsibility or criterion.
(b) Factors beyond intermediary's control. To identify measurable
factors that significantly affect an intermediary's performance, but
that are not within the intermediary's control, HCFA will--
(1) Study the performance of intermediaries during the base period,
and
(2) Consider the noncontrollable factors in developing performance
standards.
(c) Publication of standards. The development and revision of
standards for evaluating intermediary performance is a continuing
process. Therefore, before the beginning of each evaluation period,
which usually coincides with the Federal fiscal year period of October
1-September 30, HCFA publishes the performance standards as part of the
Federal Register notice describing the performance criteria issued
under Sec. 421.120(c). HCFA may not necessarily publish the criteria
and standards every year. HCFA interprets the statutory phrase ``before
the beginning of each evaluation period'' as allowing publication of
the criteria and standards after the Federal fiscal year begins, as
long as the evaluation period of the intermediaries for the new
criteria and standards begins after the publication of the notice.
6. Section 421.124 is revised to read as follows:
Sec. 421.124 Intermediary's failure to perform efficiently and
effectively.
(a) Failure by an intermediary to meet, or to demonstrate the
capacity to meet, the criteria or standards specified in Secs. 421.120
and 421.122 may be grounds for adverse action by the Secretary or by
HCFA, such as reassignment of providers, offer of a short-term
agreement, termination of a contract, or non-renewal of a contract. If
an intermediary meets all criteria and standards in its overall
performance, but does not meet them with respect to a specific provider
or class of providers, HCFA may reassign that provider or class of
providers to another intermediary in accordance with Sec. 421.114.
(b) In addition, notwithstanding whether an intermediary meets the
criteria and standards, if the cost incurred by the intermediary to
meet its contractual requirements exceeds the amount which HCFA finds
to be reasonable and adequate to meet the cost which must be incurred
by an efficiently and economically operated intermediary, those high
costs may also be grounds for adverse action.
7. In subpart C a new Sec. 421.201 is added to read as follows:
Sec. 421.201 Performance criteria and standards.
(a) Application of performance criteria and standards. As part of
the carrier evaluations mandated by section 1842(b)(2) of the Act, HCFA
periodically assesses the performance of carriers in their Medicare
operations using performance criteria and standards.
(1) The criteria measure and evaluate carrier performance of
functional responsibilities such as--
(i) Accurate and timely payment determinations;
(ii) Responsiveness to beneficiary, physician, and supplier
concerns; and
(iii) Proper management of administrative funds.
(2) The standards evaluate the specific requirements of each
functional responsibility or criterion.
(b) Basis for criteria and standards. HCFA bases the performance
criteria and standards on--
(1) Nationwide carrier experience;
(2) Changes in carrier operations due to fiscal constraints; and
(3) HCFA's objectives in achieving better performance.
(c) Publication of criteria and standards. Before the beginning of
each evaluation period, which usually coincides with the Federal fiscal
year period of October 1-September 30, HCFA publishes the performance
criteria and standards as a notice in the Federal Register. HCFA may
not necessarily publish the criteria and standards every year. HCFA
interprets the statutory phrase ``before the beginning of each
evaluation period'' as allowing publication of the criteria and
standards after the Federal fiscal year begins, as long as the
evaluation period of the carriers for the new criteria and standards
begins after the publication of the notice.
8. A new Sec. 421.203 is added to read as follows:
Sec. 421.203 Carrier's failure to perform efficiently and effectively.
(a) Failure by a carrier to meet, or demonstrate the capacity to
meet, the criteria and standards specified in Sec. 421.201 may be
grounds for adverse action by the Secretary, such as contract
termination or non-renewal.
(b) Notwithstanding whether or not a carrier meets the criteria and
standards specified in Sec. 421.201, if the cost incurred by the
carrier to meet its contractual requirements exceeds the amount that
HCFA finds to be reasonable and adequate to meet the cost which must be
incurred by an efficiently and economically operated carrier, those
high costs may also be grounds for adverse action.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: October 20, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: December 2, 1993.
Donna E. Shalala,
Secretary.
[FR Doc. 94-63 Filed 1-5-94; 8:45 am]
BILLING CODE 4120-01-P
