[Federal Register Volume 64, Number 230 (Wednesday, December 1, 1999)]
[Proposed Rules]
[Pages 67223-67235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31101]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 433 and 438
[HCFA-2015-P]
RIN 0938-AJ06
Medicaid Program; External Quality Review of Medicaid Managed
Care Organizations
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would establish requirements and procedures
for external quality review (EQR) of Medicaid managed care
organizations (MCOs). The rule would implement section 1932(c)(2) of
the Social Security Act (the Act), which was enacted in section 4705(a)
of the Balanced Budget Act of 1997 (BBA), and section 1903(a)(3)(C)(ii)
of the Act, which was enacted in section 4705(b) of the BBA. Under
section 1932(c)(2) each contract between a State Medicaid agency (State
agency) and an MCO must provide for an annual EQR of the quality
outcomes, the timeliness of, and access to, the services for which the
MCO is responsible under the contract. Section 1903(a)(3)(C) provides
enhanced matching for these activities.
This annual external review is to be conducted by an independent
entity that meets the qualifications set forth in this rule, using
protocols also set forth in this rule.
In addition, these BBA provisions allow State agencies to exempt
certain Medicare MCOs from all EQR requirements or from particular
review activities that would duplicate review activities conducted as
part of a Medicare MCO's external review or accreditation processes.
These BBA provisions require that the results of the EQR be made
available to participating health care providers, enrollees and
potential enrollees of the MCO, and also authorize the payment of
enhanced Federal financial participation at the 75 percent rate for the
administrative costs of EQRs that are conducted by approved entities.
DATES: Comment date. Comments will be considered if we receive them at
the appropriate address, as provided below no later than 5 p.m. on
January 31, 2000.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-2015-P, P.O. Box 7517,
Baltimore, MD 21207-0517.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC, or
Room C5-16-03, 7500 Security Boulevard, Baltimore, MD.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission. In commenting, please refer to file code
HCFA-2015-P. Comments received timely will be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, in Room 443-G of the
Department's office at 200 Independence Avenue, SW., Washington, DC, on
Monday through Friday of each week from 8:30 to 5 p.m. (phone: (202)
690-7890).
FOR FURTHER INFORMATION CONTACT: Sharon Gilles, (410) 786-1177.
SUPPLEMENTARY INFORMATION:
I. Background
In 1965, the Congress passed Title XIX of the Social Security Act
(the Act) which established the Medicaid program. Under this title, we
pay Federal financial participation (FFP) to State Medicaid agencies
(State agencies) to assist in the costs of health care for low-income
pregnant women, families, and aged, blind and disabled individuals. The
Medicaid program is administered by State agencies subject to Federal
statutory and regulatory requirements, which are implemented in
accordance with a ``State plan'' that must be approved by the Health
Care Financing Administration (HCFA).
In the early years of the Medicaid program, State agencies provided
most Medicaid coverage by paying health care providers on a fee-for-
service (FFS) basis. Beginning in the 1980s and continuing throughout
the 1990s, State agencies have increasingly provided Medicaid coverage
through managed care contracts, under which they pay a health
maintenance organization (HMO) or other similar entity a fixed monthly
capitation payment for each Medicaid beneficiary 1 enrolled
with the entity.
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\1\ The term ``beneficiary'', used throughout the preamble is
synonymous with the term ``recipient'', used in the text of the
regulation. Both refer to an individual who is eligible for and
receiving Medicaid benefits.
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As these managed care programs have grown in number and complexity,
so has Federal oversight, particularly oversight of quality of care.
Many studies conducted by health services researchers indicate that,
with few exceptions, the quality of care furnished by managed care
organizations 2 (MCO) is similar to that furnished by FFS
providers. Despite these findings, the quality of managed care has
received increased attention from the Congress, HCFA and the States.
This has been--
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\2\ Section 4701(b) of the Balanced Budget Act of 1997 (BBA)
established this term to encompass not only HMOs but also M+C
organizations, other types of organizations that may participate in
the Medicare program, and other public or private organizations that
meet specified statutory requirements.
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Prompted originally by the fact that, in the early years
of Medicaid managed care, there were highly publicized accounts of
Medicaid enrollees encountering barriers to accessing care, and other
quality-related problems;
Encouraged by developments in the private sector, such as
the use of ``continuous quality improvement'' and ``value-based
purchasing'', which can be applied in the public sector to obtain
[[Page 67224]]
high quality health care for Medicaid beneficiaries; and
Made feasible by the fact that an MCO that contracts to
furnish defined services to a defined population can be held
accountable in a way that is not possible under FFS Medicaid. For
example, under FFS Medicaid, if a child does not receive an
immunization, it is difficult to place responsibility on any of the
providers that may have treated that child for different illnesses.
As a result of the above, the number of legislative, regulatory,
and HCFA initiatives to improve health care quality have increased both
in number and in sophistication.
Federal statutes governing Medicaid managed care contracts did not
contain provisions explicitly addressing quality of care until 1986.
However, before that date, our regulations required HMOs to have an
internal quality assurance system and required State agencies to
conduct periodic medical audits to ensure the furnishing of quality
health care and access to that care. In the Omnibus Budget
Reconciliation Act of 1986 (OBRA '86), the Congress called for a new
approach that complemented an HMO's internal quality assurance program
and the periodic medical audits conducted by State agencies. OBRA '86
required that each State agency that contracted with an HMO use an
independent external organization to conduct an annual review of the
quality of services furnished to Medicaid beneficiaries served by each
HMO.
Between 1986 and 1997, we and the State agencies developed tools to
use in implementing these quality oversight responsibilities. In 1991,
we began the Quality Assurance Reform Initiative (QARI), which in 1993,
resulted in the publication of, ``A Health Care Quality Improvement
System for Medicaid Managed Care-A Guide for States.'' This document
contained: (1) A framework for quality improvement systems for Medicaid
managed care programs; (2) guidelines for internal quality assurance
programs of Medicaid HMOs and similar organizations; (3) guidelines for
clinical and health services focus areas and use of quality indicators
and clinical practice guidelines; and (4) guidelines for the conduct of
external quality reviews (EQRs) mandated in OBRA '86.
In 1995, HCFA in collaboration with the National Committee for
Quality Assurance (NCQA) and the American Public Human Services
Association (APHSA), produced a Medicaid version of the Health Plan
Employer Data and Information Set (HEDIS), a standardized quality
performance measurement system used by private sector purchasers of
managed care. We also contracted with NCQA to produce, ``Health Care
Quality Improvement Studies in Managed Care Settings--Design and
Assessment: A Guide for State Medicaid Agencies''.
II. The Balanced Budget Act of 1997
The Balanced Budget Act of 1997 (BBA) added to the Act a new
section 1932 that pertains to Medicaid managed care. Most of the
provisions of section 1932 would be implemented in accordance with a
proposed rule that was published in September, 1998 and is discussed
under part III C of this preamble.
Section 1932(c), added by section 4705 of the BBA, describes in
detail how quality measurement and performance improvement methods
should be applied to Medicaid managed care programs through two
specific approaches:
All State agencies must develop and implement a quality
assessment and improvement strategy that includes: (1) standards for
access to care; (2) examination of other aspects of care and services
related to improving quality; and (3) monitoring procedures for regular
and periodic review of the strategy. (This requirement was addressed in
the September proposal.)
State agencies that contract with Medicaid MCOs must
provide for an annual external, independent review of the access to,
timeliness of, and quality outcomes of the services included in the
contract between the State agency and the MCO. (This requirement is
addressed in this proposed rule.)
Section 1932(c) of the Act also requires the Secretary--
In consultation with the States, to establish a method for
identifying entities qualified to conduct EQR (section
1932(c)(2)(A)(ii)); and
In coordination with the National Governors' Association
(NGA), to contract with an independent quality review organization to
develop the protocols to be used in EQRs (section 1932(c)(2)(A)(iii)).
For the first requirement, we obtained the input of an expert panel
convened by the National Academy for State Health Policy (NASHP).
To meet the second requirement, on July 7, 1998, we issued a
Request for Proposal (RFP) for one or more contractors to develop a set
of review protocols for external quality review organizations (EQROs)
to use in the conduct of EQRs. Two State representatives selected by
the NGA were members of the panel which reviewed responding proposals.
As a result of this competitive procurement, a contract was awarded to
the Joint Commission on Accreditation of Healthcare Organizations
(JCAHO) to develop protocols for the activities we believed were most
frequently conducted by EQROs. Our belief was subsequently confirmed
through surveys conducted by the Department's Office of the Inspector
General (OIG) and the NASHP. The JCAHO has not completed development of
the protocols for EQR. Although the text of the protocols themselves
will not be included in regulations text, this proposed rule does
identify the areas to be covered by them and what is to be included in
such protocols.
The other section 1932 provisions that are pertinent to this
proposal are provisions that--(1) Require that the results of EQRs be
made available to participating health care providers, enrollees and
potential enrollees (section 1932(c)(2)(A)(iv)), and (2) Provide that a
State agency--
May, at its option, take steps to ensure that an EQR does
not duplicate a review conducted either by a private independent
accrediting organization or as part of an external review conducted
under the Medicare program (section 1932(c)(2)(B)); and
May exempt an MCO from EQR under certain specified
conditions (section 1932(c)(2)(C)).
Section 4705(b) of the BBA provides for increased FFP (75%) for the
costs of conducting EQR under Section 1932(c)(2)(A), providing the EQRO
meets the requirements set forth in regulations. Under the OBRA '86
provision, 75% FFP is available only if EQR is conducted by a
utilization and quality control peer review organization (PRO) or an
entity that meets the requirements to be a PRO but does not have a PRO
contract with Medicare. Accreditation organizations may also be used to
conduct EQR, but their review activities are matched at the 50 percent
rate under the current OBRA '86 rules.
III Development of the Proposed Rule
A. Major Purposes
In developing this proposed rule, we had two major purposes: (1) To
provide flexibility for State agencies; and (2) to reflect the well-
accepted advances in the technology of quality measurement and
improvement.
Flexibility is particularly important because the EQR requirement
is not new. States have been monitoring quality under the OBRA '86
requirements for which final regulations were never published.
Accordingly, this proposal would not require State
[[Page 67225]]
agencies to dismantle EQR mechanisms that they have used and found to
be effective and efficient. The BBA language calling for State agencies
to develop their own Quality Assessment and Improvement Strategies,
supports our approach of recognizing the unique characteristics of
States, their managed care programs and the sophistication of the
managed care marketplace within each State.
In addition, the BBA provides greater flexibility in the types of
entities that State agencies may use to conduct EQR. Consequently, this
rule allows State agencies to coordinate EQRs with other similar
quality reviews conducted for other purposes, thereby reducing the
burden to State agencies and EQROs in complying with the requirement.
Despite the necessary flexibility, the BBA ensures comparability
among State EQR results by requiring us to develop protocols to be used
by all State agencies and EQROs in conducting the reviews.
Although the definition of EQR (shown under part IV of this
preamble) makes clear that EQR must be conducted by an EQRO, it does
not preclude State agencies from using other entities to conduct
additional activities to monitor quality. For example, State agencies
may themselves collect performance measures or encounter data, or
monitor MCOs for compliance with structural and operational quality
standards, or contract with an entity other than an EQRO to perform
these projects. This approach allows State agencies considerable
flexibility in the conduct of quality review activities and permits
them to continue current practices at the 50% administrative match
rate.
With respect to the second purpose, there is growing acceptance of
the health care industry's ability to measure and improve health care
quality, as documented in the President's Advisory Commission on
Consumer Protection and Quality in the Health Care Industry, and the
development of stronger tools to accomplish this measurement (such as
the Consumer Assessment of Health Plans Study (CAHPS)). In developing
this rule, we have incorporated best practices in the assessment and
improvement of health care quality.
B. Information Used
In order to develop this proposal we needed information on--
How States have implemented EQR requirements under OBRA
'86; and
What qualifications to require for EQROs.
State Experience Under OBRA '86
Because a final regulation for the OBRA '86 requirement was never
published, State agencies have considerable latitude in defining the
activities conducted as part of EQR. We knew that State agencies were
using the EQR requirement to implement different approaches to quality
review. For example, some State agencies use EQR to monitor HMO
compliance with QARI standards, while others use EQRs to conduct
focused studies on defined clinical topics, such as immunizations, to
determine HMO performance. We did not know how widely State practices
varied.
In order to determine the extent and the success of each variation,
we relied on information from two sources. The first was a study
conducted by the Department's Office of Inspector General (OIG)
entitled, ``Lessons Learned From Medicaid's Use of External Quality
Review Organizations'' published in September, 1998. This study
reviewed the practices of seven States (Arizona, California,
Massachusetts, Minnesota, Missouri, Ohio and Washington) that had
considerable experience with Medicaid managed care or in working with
EQROs. The study documented that focused studies of quality of care,
that is, review of medical records to obtain information on services
delivered to a group of individuals with the same health care needs,
was the most frequent activity performed by EQROs. In these States,
focused studies accounted for nearly 80 percent of their budgets for
EQRO. However, in the OIG study, States expressed an awareness of the
limitations of the use of focused studies alone, stating that they fail
to offer a broad assessment of the care delivered to all those enrolled
in a State's Medicaid managed care program. As summarized by the study:
``At best they capture a slice of care delivered to one or two sub
populations. Even if a Medicaid agency designed the perfect system to
capture prenatal care visits or child immunizations, this is only a
tiny fraction of care provided to the Medicaid population.'' For this
reason, State agencies are beginning to use EQROs to undertake other
approaches to quality review, including: (1) Validation of encounter
data or aggregate MCO-level performance measures; (2) individual case
review; (3) evaluation of quality studies conducted by MCOs; (4)
conducting beneficiary surveys; and (5) provision of technical
assistance.
The OIG study also documented that these seven States had typically
used Medicare PROs to conduct the EQRO function. This was generally
satisfactory to the States, especially because most States use EQR to
conduct focused studies. However, some State agencies expressed
reservations about using PROs for other EQR functions, such as
processing and verifying encounter data or conducting consumer surveys.
As a result, all of the State agencies in this study contracted with
entities other than their EQRO contractors to perform additional
quality review activities even though the FFP rate for these services
was 50%, rather than 75%. These entities included: universities,
consulting groups, claims or data management groups, and survey firms.
In addition, four of the seven had additional arrangements with State
agencies other than the Medicaid agency, including Departments of
Health, Departments of Mental Health, or State data entities. The two
overall conclusions expressed by the OIG, report were that Medicaid
agencies find value in using a variety of quality oversight functions
in EQR, and that they would prefer to use several different types of
contractors.
To obtain additional information, we contracted with the NASHP to
conduct a more comprehensive survey of all State agencies using EQROs.
The NASHP survey reaffirmed the OIG survey finding that focused quality
of care studies were the most common EQRO activity, with additional
activities including: data validation, random medical record review,
surveys, data audits and validation, and contract compliance reviews.
The survey also affirmed the States' desire to contract with additional
types of organizations for their EQRs, although three State agencies
explicitly recommended that new entities not be permitted. Those State
agencies wishing to contract with new entities identified State
entities other than Medicaid such as public health or insurance
departments, and other entities such as universities, consulting firms
and research foundations, as desirable organizations.
EQRO Qualifications
OBRA '86 as amended by OBRA '87 specified the types of entities
State agencies could contract with to conduct EQR. The BBA, instead of
specifying types of entities, requires the Secretary to consult with
States and establish a method for the identification of entities that
are qualified to conduct EQR. To fulfill this requirement, we
contracted with the NASHP to convene an expert panel comprised of a
majority of State representatives but also including consumer advocates
and other stakeholders, an MCO representative, a
[[Page 67226]]
quality improvement expert and members of our staff. The expert panel
met for two days to discuss the following:
What is the skill set required to conduct the EQR scope of
work?
What does it mean for an EQRO to be ``independent''?
Who should be the authority to designate ``qualified''
entities to serve as EQROs?
Should these designations be made on a categorical or
case-by-case basis?
Must all EQR activities be conducted by a single entity or
may several entities conduct EQR activities, and may entities use
subcontractors?
We used the recommendations included as part of the NASHP report of
the meeting to develop the provisions of this proposed rule.
C. Relation to Other Proposed Rules
On September 29, 1998, at 63 FR 520220, we published a proposed
rule identified as HCFA-2001-P, Medicaid Managed Care Provisions
(September proposal). That rule proposed to add to the Medicaid
regulations a new part 438 that includes a subpart E--Quality
Assessment and Performance Improvement. Under subpart E, it is a
State's responsibility to arrange for an annual external independent
review of the timeliness, access, and quality of the services that each
contracting MCO furnishes to its Medicaid enrollees. The September
proposal did not include the specific EQR provisions because we had not
yet complied with the BBA's requirement to consult with States to
establish a method for identifying entities that are qualified to
conduct EQR. Now that we have complied with this requirement, we can
propose the rules for EQR.
The September proposal includes a Sec. 438.8(h) which lists those
requirements, set forth elsewhere in part 438, that also apply to
Prepaid Health Plans (PHPs). Prepaid Health Plans, like MCOs, are
organizations paid on a prepaid capitation basis for services furnished
to enrollees, but unlike MCOs, they do not always provide comprehensive
health care services nor do they always assume risk. (Examples of PHPs,
are managed dental or behavioral health plans.)
When part 438 is published in final form (following consideration
of comments received on both proposed rules), we plan to amend the
Sec. 438.8(h) list to include the EQR requirements as applicable to
PHPs, for the benefit of PHP enrollees. As in the case of PHP
requirements generally, this requirement would be promulgated under
section 1902(a)(4) of the Act which authorizes the Secretary to
establish requirements necessary ``for the proper and efficient
operation of the plan.'' We also believe that this is consistent with
Congressional intent. In the Joint Explanatory Statement of the
Committee of the Conference accompanying the BBA, the section entitled
``Current Law,'' includes the following: ``States are required to
obtain an independent assessment of the quality of services furnished
by contracting HMOs and prepaid health plans (those offering a non-
comprehensive set of services under partial capitation), using either a
utilization and quality control peer review organization (PRO) under
contract to the Secretary or another independent accrediting body.''
Although the OBRA '86 requirement did not apply to PHPs, the fact that
the Congress believed that it did and chose not to exempt PHPs, as it
did primary care case managers, we take as a sign that the Congress
perceives EQR requirements as appropriately applied to PHPs.
Currently, 42 CFR 434.53 requires States to have a system of
periodic medical audits to ensure that each HMO and PHP furnishes
quality and accessible health care to enrollees. Our September proposal
eliminates the periodic Medical Audit requirement. We intend this new
EQR requirement to replace the requirement on PHPs for periodic medical
audits.
Because PHPs do not always provide comprehensive services, we
intend that an EQR of a PHP will assess only the scope of services for
which the State has contracted. We invite comment on our decision to
apply the EQR requirement to PHPs. We will only consider comments that
pertain specifically to our proposal to include EQR requirements in
Sec. 438.8(h), and not on the broader issue of subjecting PHPs to other
MCO quality requirements. Comments on those other requirements would
have been appropriate in response to the September proposal.
In addition to proposing that these provisions apply to PHPs, we
are also proposing to apply the EQR provisions to organizations that
have comprehensive risk contracts but are exempt from 1903(m)
requirements, such as Health Insuring Organizations (HIOs) which began
operating prior to January 1, 1986, certain county-operated HIOs in
California, and entities described in section 1903(m)(2)(B). As
reflected in Sec. 438.6 of the September 29, 1998 proposed rule, only
contracts with HIOs that began operating on or after January 1, 1986
are subject to MCO requirements unless they have been specifically
exempted by statute from these requirements, as in the case of certain
county operated HIOs in California. As discussed above, pursuant to our
authority under section 1902(a)(4) to establish requirements necessary
for ``proper and efficient administration,'' we have proposed to apply
several beneficiary protections and quality-related requirements
(including the EQR requirement proposed in this rule) to PHPs, which do
not have comprehensive risk contracts.
Entities with comprehensive risk contracts that have been exempted
by statute from the MCO requirements in section 1903(m) and section
1932, however, were not included in our proposed revised definition of
PHP. As discussed above, we did not believe it was appropriate to
subject these entities, in effect, to virtually the full range of MCO
requirements (as we proposed to do in the case of PHPs) when Congress
had provided these entities with explicit statutory exemptions from
these requirements. We do not believe, however, that these entities
should be exempted entirely from any check on the quality of the
services they provide to their enrollees. We accordingly are proposing
in section Sec. 438.1 (c) to require compliance with EQR requirements
by entities with comprehensive risk contracts that are statutorily
exempt from the requirements in section 1903(m)(2)(A). We believe this
is consistent with Congressional intent to ensure quality outcomes and
timeliness of and access to services of all Medicaid beneficiaries
enrolled in capitated risk arrangements. We invite comment on our
decision to apply the EQR requirement to entities with statutory
exemptions from section 1903(m)(2)(A) requirements.
The final rule for part 438 will probably assign a separate subpart
for the rules specific to EQR.
IV. Provisions of the Proposed Rule
A. Definitions (Section 438.2)
Section 438.2 establishes ``EQR'' and ``EQRO'' as representing
``external quality review'' and ``external quality review
organization'' respectively. It also defines four terms frequently used
in the text:
``External quality review'' means the analysis and evaluation, by
an EQRO, of aggregated information on timeliness, access, and quality
of health care services furnished to Medicaid enrollees by each MCO,
and other related activities performed by an EQRO.
``External quality review organization'' means an organization
[[Page 67227]]
that meets the competence and independence requirements set forth in
Sec. 438.354, and performs EQR.
``Quality'', as it pertains to EQR, means the degree to which an
MCO maintains or improves the health outcomes of its enrollees through
its structural and operational characteristics and through the
provision of services. This definition recognizes structure, process,
and outcomes as the variables that affect and constitute the delivery
of appropriate health care and that have historically been used in the
review of quality of care.
``Validation'' means the review of information, data, and
procedures to determine the extent to which they are accurate,
reliable, free from bias, and in accord with standards for data
collection and analysis.
B. State Responsibilities (Section 438.350)
Section 438.350 sets forth the State's responsibilities related to
EQR. Each State agency that contracts with MCOs under section 1903(m)
of the Act must ensure that--
Except as provided in Sec. 438.362, an annual EQR is
performed by a qualified EQRO for each contracting MCO;
The EQRO has sufficient information to use in performing
the review;
The information that the State agency provides to the EQRO
is obtained through methods consistent with protocols specified by
HCFA; and
The results of the EQR are made available, upon request,
to specified groups and to the general public.
The information that the State agency must make available to the
EQRO is specified in Sec. 438.358. The information that constitutes the
``results'' of the EQR is specified in Sec. 438.364.
Section 1932(c)(2)(A) of the Act requires that each contract with
an MCO ``provide for an annual (as appropriate) external independent
review, conducted by a qualified independent entity* * *''. We have
interpreted the parenthetical statement (for which there is no
explanation in the legislative history) to be a reference to those MCOs
that may be exempted from EQR under section 1932(c)(2)(C) of the Act on
the basis of ``deemed compliance.'' We invite comment on other possible
interpretations.
C. External Quality Review Protocols (Section 438.352)
In our RFP for the development of protocols, we defined them as
``detailed instructions to be followed by personnel performing reviews
of health care quality.'' Protocols must specify: (1) The data to be
gathered, that is, the substantive areas to be covered by the protocol;
(2) the source of the data; (3) detailed procedures to be followed in
collecting the data to promote its accuracy, validity, and reliability;
(4) the proposed methods for valid analysis and interpretation of the
data; and (5) all instructions, guidelines, worksheets and any other
documents or tools necessary for implementing the protocol.
The protocols that the JCAHO is developing under the guidance of an
expert panel are reflected in proposed section 438.358 discussed below.
They will address: (1) Monitoring for compliance with structural and
operational quality standards; (2) validating client-level data; (3)
calculating performance measures; (4) validating performance measures
produced by MCOs; (5) conducting quality-assessment and performance-
improvement projects; (6) validating MCO-conducted quality-assessment
and performance-improvement projects; (7) conducting studies on
quality, focused on a particular aspect of clinical or non-clinical
services furnished at a particular time; (8) validating consumer or
provider surveys; and (9) administering consumer or provider surveys.
We have asked the JCAHO to draw from existing protocols that have
been tested for reliability and validity and that have been used in the
public and private sectors to conduct reviews of the quality of MCO
services, consistent with current industry practice. We have also
expressed a preference for protocols that are in the public domain.
We expect that the protocols will be detailed and many pages in
length. This is one reason for not including them in our regulations.
Another reason is the fact that quality measurement is a rapidly
changing technology. Protocols developed in the private sector for
validation of performance measures and administration of consumer
surveys are revised at least annually. The delays inherent in revising
regulations would make it difficult to make such frequent changes.
All activities that provide information for EQR must use protocols
that are consistent with those that we specify. This will ensure that
the conduct of the activities enhances the quality of EQR for State
agencies and that the conduct of the activities is methodologically
sound. However, by requiring protocols that are ``consistent'', rather
than ``identical'', with those that we specify, we leave the State
agencies free to improve their protocols continuously, as the art and
science of quality measurement improve.
D. Qualifications of External Quality Review Organizations (Section
438.354)
Section 438.354 sets forth the requirements that an entity must
meet in order to qualify as an EQRO. We worked in consultation with
States, consumer advocates, and other stakeholders, under the auspices
of NASHP, to determine how to ensure that EQROs are both ``competent''
and ``independent''.
This proposed rule does not define categories of entities that are
qualified to perform EQR. Rather, it proposes that in order to qualify,
entities must meet specified competence and independence standards. To
meet the competence standards, the entity must have at least the
following:
Staff with knowledge of (1) Medicaid beneficiaries,
policies, data systems, and processes; (2) managed care delivery
systems, organizations, and financing; (3) quality assessment and
improvement technologies; and (4) research design and methodology;
Sufficient physical, technological, and financial
resources to conduct EQR; and
Other clinical and nonclinical skills to carry out the
review and to supervise the work of any subcontractors.
To meet the independence requirement, we propose two tests:
The EQRO and any subcontractors must be independent from
the State Medicaid agency and from any MCO they review.
The relationship between the MCO and the EQRO must be such
as to preclude conflict of interest.
The first test would allow State entities to qualify as EQROs, with
the following limitations:
A State entity could not qualify if it (1) Has Medicaid purchasing
or managed care licensing authority; (2) delivers any health care
services to Medicaid beneficiaries; or (3) conducts, on the State's
behalf, any other ongoing Medicaid program operations related to
oversight of the quality of MCO services. In addition, the State entity
must be governed by a Board or similar body, the majority of whose
members are not government employees.
We were concerned about the limitation on board membership. We
wondered whether it was feasible to have a State entity with an
oversight body composed predominantly of non-State employees. We found
that a number of State entities do have such boards. For example,
Vermont's Program for Quality in Health Care is an organization
authorized by the Vermont
[[Page 67228]]
legislature to oversee the quality of care for both commercial and
public consumers. It is a non-profit organization that is governed by a
board of directors, the majority of whom, are not government employees
and which includes representatives of consumers, hospitals, insurers,
MCOs, employers, physicians, and State government. The organization is
charged with improving the quality, efficiency, and cost effectiveness
of Vermont's health care system. It measures health care quality
through data collection and analysis, and works with health care
providers and others to develop standards of care and indicators of
quality.
Maryland's Health Care Access and Cost Commission (HCACC), created
in 1993, is an independent commission with nine members who are
appointed by the governor with the advice and consent of the Senate.
The majority of the nine Board members are not government employees.
Among its responsibilities, the HCACC is required to establish and
implement a system to comparatively evaluate the quality and
performance of MCOs.
The NASHP expert panel also recommended that EQROs be required to
have participation by Medicaid beneficiaries. With respect to this
recommendation, we welcome such participation, however, we do not
propose to mandate it, for two reasons:
1. EQR is only one facet of the State's quality assessment and
performance improvement strategy.
2. We believe that stakeholder input on EQR might be more effective
if provided to the State agency (rather than the EQRO), as it develops
that strategy.
The second test of independence from the MCO applies to all
entities contracting under EQR. The NASHP summary report, based on its
expert panel's input, recommended providing that an EQRO may not review
an MCO if either has an ownership interest greater than 5 percent in
the other, or if they share management or corporate board membership.
That would be consistent with our disclosure of ownership and related
information requirements under our program integrity regulations (part
420 for Medicare, and part 455 for Medicaid). However, we are proposing
a broader approach that is consistent with other HCFA regulations on
contracting and is based on the concept of ``affiliation'',3
as the term is explained in 48 CFR 19.101.4 In accordance
with that regulation, an EQRO and an MCO would be considered to be
``affiliated'' if either one controls or has the power to control the
other, or another entity controls or has the power to control both. We
believe that this concept of ``control'' can better ensure that no
actual conflicts of interest exist between the EQRO and the MCO it
reviews. We request comments on how better to identify situations that
create conflict of interest, on our proposing to allow State entities
to qualify as EQROs, and on our decision to apply the ``independence ``
requirement to subcontractors as well as contractors.
---------------------------------------------------------------------------
\3\ That is the concept we propose to use in implementing the
Medicare Integrity Program (MIP) established by the Health Insurance
Portability and Accountability Act of 1996 (Public Law 104-191). The
MIP proposed rule published in March 1998, identifies offerors or
entities as having a conflict of interest if they are
``affiliated.''
\4\ Title 48 of the CFR contains the Federal Acquisition
Regulations (FAR) system, which ``is established for the
codification and publication of uniform policies and procedures for
acquisition by all executive agencies.'' Most government acquisition
is accomplished through contracting.
---------------------------------------------------------------------------
Another NASHP summary report recommendation based on its expert
panel's input was that EQROs be selected by State agencies through RFPs
that would not require prior approval by us, but would be subject to
review later to ensure that, as a condition for FFP at the 75 percent
rate, the State agency followed all applicable procedures and criteria.
We note that this recommendation requires no changes or additions to
current law because it is current practice for State agencies to use
RFPs to select EQROs. It is also standard practice for our regional
office staff to monitor implementation of Medicaid managed care
initiatives. With respect to EQR, Regional Office staff may review the
State's most recent RFP for external review services, the EQR contract,
or the EQR reports.
E. State Contract Options (Section 438.356)
Section 438.356 sets forth requirements that State agencies must
follow, and options that they may use in selecting EQROs. On the basis
of the NASHP expert panel's recommendations, as well as the findings of
the OIG report, we propose that State agencies may contract with more
than one EQRO and each EQRO may use subcontractors. EQROs that use
subcontractors are accountable for and required to oversee all EQR
activities performed by the subcontractors. In addition, each
contractor must meet the competency requirements and each contractor
and subcontractor must meet the independence requirement.
We considered requiring only the contractor to meet the test of
independence. We determined that such an approach would permit entities
with conflicts of interest to serve as subcontractors under a ``shell''
contractor, and thus not ensure a truly independent review.
This section also requires that State agencies follow an open
competitive procurement process that is in accordance with State law
and regulation and consistent with 45 CFR part 74, as it applies to
State procurement of Medicaid services.
F. Activities Related to External Quality Review (Section 438.358)
Section 438.358 requires that the EQR use information obtained from
specified mandatory activities that must be performed by the State
agency or the EQRO; and identifies other optional activities that the
State agency may wish to perform, or have the EQRO perform, to produce
additional information for use in the EQR. The mandatory activities are
consistent with the requirements set forth in the September proposal.
The optional activities were not included in that proposal. They are,
however, activities that both the OIG and the NASHP surveys identified
as activities that States have found useful in reviewing quality.
Inclusion of these optional activities would permit States to use their
EQROs for the full range of activities they are now conducting. This
section also authorizes States to use EQROs to provide technical
assistance to MCOs.
This rule proposes that each year, information to be used by the
EQRO be obtained from the validation of performance improvement
projects performed that year and the validation of performance measures
reported that year. However, we recognize that a State, or Medicare, or
a private accreditation organization may review MCO compliance with
structural and operational quality standards less frequently than once
a year. For example, NCQA and JCAHO generally perform their
accreditation reviews once every three years. Because of this, we
propose that the information used by the EQRO on this type of review
must be from the most recent review performed within the previous three
years.
G. Non-Duplication of Mandatory Activities (Section 438.360)
Section 438.360 is based on section 1932(c)(2)(B) of the Act which
provides the option for a State agency to exempt an MCO from specified
EQR-related activities that would duplicate activities conducted as
part of Medicare reviews or independent accreditation surveys.
[[Page 67229]]
For this provision, we had to determine how a State agency could obtain
information about the quality of care found through Medicare reviews or
accreditation if there was no EQR to provide information. Moreover,
because Medicare serves the elderly and disabled, while Medicaid
predominantly serves families and children, we needed to take into
account that review activities usually differ for these populations in
terms of the types of data collected, the measures used, and the
studies conducted. These differences limit the extent to which they can
be considered to duplicate each other. Accordingly, we propose that an
MCO that is a certified M+C organization with a current Medicare
contract--
Qualifies for exemption if it has had an independent
quality review under Medicare or is fully accredited by a private
accreditation organization; but
The exemption applies only to the activities specified in
Sec. 438.358(a)(2). Those are specific to reviewing compliance with
standards for (1) availability of services; (2) continuity and
coordination of care; (3) coverage and authorization of services; (4)
establishment of provider networks; (5) enrollee information; (6)
enrollee rights; (7) confidentiality; (8) enrollment and disenrollment;
(9) grievance systems; (10) subcontractual relationships and
delegation; (11) use of practice guidelines; (12) health information
systems; and (13) mechanisms to detect both underutilization and
overutilization of services as part of the quality assessment and
performance improvement programs.
We believe that these activities are essentially the same
regardless of the population served, but the activities specified in
Sec. 438.358(a)(1) are sensitive to the type of population served. For
example, performance improvement projects that target the elderly would
not be appropriate for addressing maternal and child health issues, and
would not be considered duplicative. The rule provides one exception to
this limitation: a State agency may exempt from all mandatory
activities (listed in paragraphs (a)(1) and (a)(2) of proposed
Sec. 438.358) any MCO that serves only individuals who are eligible for
both Medicare and Medicaid. In that situation, there is no reason for
concern, since the population served is the same for both programs.
The State agency must require each MCO exempted under this section
to make available to the State agency all reports and findings and the
results of the Medicare quality review or the accreditation survey, in
order to: (1) Provide that information to the EQRO; and (2) ensure that
State agencies and Medicaid beneficiaries have access to comparative
information on MCOs and M+C organizations.
H. Exemption From External Quality Review (Section 438.362)
This section implements section 1932(c)(2)(C) of the Act which
provides that a State agency may exempt an MCO from the EQR
requirements in section 1932(c)(2)(A) if the MCO has a current Medicare
contract under Part C of title XVIII or under section 1876 of the Act;
and, for at least two years, has had in effect a Medicaid contract
under section 1903(m) of the Act.
In developing this proposed rule, we asked ourselves (1) how to
interpret the statutory requirements for having a Medicare contract,
and having had a Medicaid contract for at least two years; (2) whether
the exemption should apply to an MCO whose Medicare and Medicaid
contracts do not cover the same geographic area; (3) whether the
Congress intended that the State agency grant an exemption without
consideration of the MCO's performance during the preceding 2-year
period; and (4) what information, if any, the State agency needs to
obtain with respect to an exempted MCO. On the basis of our responses
to those questions, we added three requirements. We particularly
request comments on these requirements because they are not based on
any explicit language in the statute or the Conference Committee
Report.
The first requirement is that the two contracts cover all or part
of the same geographic area. The purpose is to prevent exemption on the
basis of a Medicare contract that covers a geographic area, for
example, another State or a different part of the same State, that is
completely different from the area covered by the MCO's Medicaid
contract. (Sec. 438.362(a)(2))
We believe that an MCO that serves different areas typically has
different provider networks in each area. Since research has clearly
shown variations in practice patterns among physicians in different
geographic areas, it is reasonable to interpret the deemed compliance
provisions as requiring some common service areas.
The second added requirement is that, during each of the two years
preceding the granting of an exemption, the MCO has had an EQR that
found it to be performing acceptably with respect to the timeliness,
access, and quality of health care services provided to Medicaid
enrollees. (Sec. 438.362(a)(3)).
We considered several possible rationales for the statutory
provision that grants exemption on the basis of two-year participation
in the Medicaid program:
After two years of dealing with the MCO as a contractor,
the State agency is sufficiently familiar with its performance
generally, thus making EQR unnecessary.
Two years of serving the Medicaid population (a different
population than Medicare's) is sufficient to exempt the MCO from EQR.
During each of the two years of the Medicaid contract, the
MCO will have been subject to the section 1932(c)(2)(A) requirements,
and will have been able to demonstrate its performance through the
annual EQR, demonstrating that the MCO's ongoing Medicare compliance is
likely to remain predictive of high quality Medicaid services.
Given the importance that the Congress has placed on quality in the
BBA provisions, we are proposing to interpret the two year rule to have
been adopted based upon the third rationale above. Accordingly, we
propose that the State agency have the option to exempt the MCO if,
during the two preceding years of Medicaid contract under section
1903(m) it has been subject to EQR and been found to be performing
acceptably with respect to the timeliness, access, and quality of care
furnished to Medicaid enrollees. The State agency could not exempt an
MCO that, during the previous two-year period had been found to have
significant problems requiring corrective action. We note that our
interpretation would effectively delay exercise of the option until at
least two years after this rule is published in final.
The third added provision is that the State agency require each
exempted MCO to provide it, annually, with copies of all Medicare
reviews performed by us, or by any of our agents or any private
accreditation organization, with respect to the timeliness, access, or
quality of its services. (Sec. 438.362(b)) The rationale for this
requirement is that the statutory provision exempts the MCO from EQR
requirements specifically, but not from continued State agency
oversight of the quality of MCO services.
I. EQR Results. (Section 438.364)
Section 438.364 requires that the EQR produce the following
information:
A detailed technical report that describes the following
for each activity conducted under accordance with Sec. 438.358: (1) The
objectives; (2) the technical methods of data collection and analysis;
(3) the data obtained; and (4) the conclusions drawn from the data. In
addition, the report must also describe
[[Page 67230]]
the manner in which the data from all activities conducted in
accordance with Sec. 438.358 were aggregated, analyzed, and the
conclusions were drawn as to the quality of the care furnished by the
MCO.
A detailed assessment of each MCO's strength and
weaknesses with respect to timeliness, access, and quality of the
health care services furnished to Medicaid enrollees.
The recommendations for improving the quality of the
services furnished by each MCO.
Comparative data about all MCOs, as determined appropriate
by the State agency.
An assessment of the degree to which each MCO addressed
effectively the recommendations for quality improvement, as made by the
EQRO during the previous year's EQR.
We considered three alternatives for the level of detail of the
information to be released to the public as EQR ``results.''
1. Do not provide a Federal definition of what constitutes
``results'' but allow each State agency to develop its own definition.
This option would provide the greatest flexibility but was not selected
because we believe that the statute intended a Federal ``definition''
to ensure that all State agencies provide sufficient information.
2. Require that all validated data and information be made
available. Although this option would provide consumers with great
detail about every aspect of MCO performance, the information would
lack the sense of context necessary to ensure appropriate
interpretation. It would impose additional burdens on State agencies
for the release of large quantities of data, and would also be
inconsistent with what experts have advised us is the best way to share
information with consumers for their decision making, for example, to
help potential enrollees choose among available MCOs.
3. Require that State agencies provide copies only of the summary
findings, conclusions, and recommendations of the EQR. This would
include the highest level conclusions drawn from a synthesis of all
available information on MCO performance.
This proposed rule requires State agencies to provide information
sufficient to enable interested parties to evaluate the conclusions of
the EQR. To promote confidence in the validity of the conclusions,
States may wish to release, in addition to the technical report, the
more detailed underlying data to researchers or others as the States
deem appropriate. However, the proposed rule does not require the
States to do so. In addition, these data may be available through
State-based authorities similar to Freedom of Information Act
requirements for individuals to request and receive as much of the
detailed information that goes into an EQR analysis and report as they
want. (Sec. 438.364(a))
This section also (1) gives examples of groups of interested
parties to which State agencies would provide copies, of the EQR
results, upon request; (2) specifies that they must also give them to
members of the general public who request them (Sec. 438.364(b)); and
(3) provides that the information released may not disclose the
identity of any patient (Sec. 438.364(c)).
J. Federal Financial Participation (FFP) (Section 438.370)
Section 438.370 provides that FFP at the 75 percent rate is
available in expenditures for EQR, including the production of EQR
information, performed by EQROs and at the 50 percent rate in
expenditures for EQR-related activities performed by any entity that
does not qualify as an EQRO. The 50 percent rate applies even if the
activities are of the same type as those performed by EQROs.
V. Effective Date of the Final Rule
When this regulation is published as a final rule, we intend to
make it effective 60 days following publication. Provisions that must
be implemented through contracts with EQROs will be effective with
contracts entered into or revised on or after 60 days following the
effective data, but no longer than 12 months from the effective date.
VI. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement report is
submitted to the Office of Management and Budget (OMB) for review and
approval. In order to fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the PRA, requires
that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for
Secs. 438.360, 438.362 and 438.364 of this document that contain
information collection requirements.
Section 438.360 Nonduplication of Mandatory Activities
In order to avoid duplication, the State agency may exempt an MCO
from mandatory activities (as specified in Sec. 438.358) if the
conditions of paragraph (b) or paragraph (c) of this section are met.
To demonstrate compliance with these requirements an MCO must provide
to the State agency, all the reports, findings, and other results of
the Medicare review or the private accreditation survey.
The burden associated with these requirements is the time and
effort for an MCO to disclose all the reports, findings, and other
results of the Medicare review or the private accreditation survey to
the State agency. Our current data indicate that there are
approximately 420 MCOs and 90 PHPs providing Medicaid services. Of
these, approximately 135 are Medicaid only MCOs. We believe that there
is the potential for States to allow the remaining 285 MCOs to take
advantage of the non-duplication provision and that these MCOs will be
required to disclose the necessary information to each State agency. We
further estimate that it will take each MCO 4 hours to disclose the
necessary documentation to the State. Therefore, the total burden
associated with this requirement is 285 MCO's x 4 hours = 1140 annual
burden hours.
This section also requires that a State agency provide all the
reports, findings, and other results of the Medicare review or the
private accreditation survey to the appropriate EQRO. We estimate that
it will take, on average, 4 hours for a State to disclose the necessary
documentation to the appropriate EQRO. The total annual burden
associated with this requirement is 1140 hours.
Section 438.362 Exemption From External Quality Review
Each year, exempted MCO's must provide to the State agency the most
recent Medicare review findings reported to the MCO by HCFA or its
agent. This information must include (1) all data, correspondence,
information, and findings pertaining to the MCO's compliance with
Medicare standards for access, quality assessment and performance
improvement, health services, or delegation of these activities; (2)
all measures of the MCO's
[[Page 67231]]
performance; and (3) the findings and results of all performance
improvement projects pertaining to Medicare enrollees.
If an exempted MCO has been reviewed by a private accreditation
organization and the survey results have been used to either fulfill
certain requirements for Medicare external review under Subpart D of
part 422 of this chapter or to deem compliance with Medicare
requirements as provided in Sec. 422.156, the MCO must submit a copy of
all findings pertaining to its most recent accreditation survey to the
State agency. These findings shall include accreditation survey results
of evaluation of compliance with individual accreditation standards,
noted deficiencies, corrective action plans, and summaries of unmet
accreditation requirements.
The burden associated with these requirements is not applicable for
two years following the final publication of this regulation. After two
years, the time and effort for an exempted MCO to disclose the findings
of its most recent Medicare review or private accreditation survey to
the State agency will be the burden associated with these requirements.
We believe, of the approximately 285 MCOs that potentially may provide
Medicare services in addition to Medicaid services, State agencies will
allow for approximately 10% of the MCOs to be exempt from the EQR
requirement. We further estimate that it will take each MCO 8 hours to
prepare and submit the necessary documentation to the State agency.
Therefore, the total burden associated with this requirement is 10% of
285 MCO's x 8 hours = 228 annual burden hours.
Section 438.364 External Quality Review Results
Each EQRO is required to submit to the State agency a detailed
technical report that describes, for each EQR and each related
mandatory and optional activity undertaken by the EQRO, the objectives,
technical methods of data collection and analysis, data obtained,
conclusions drawn from the data, and the manner in which the
conclusions were drawn as to the quality of the care furnished by the
MCO. In addition, the report must include: (1) A detailed assessment of
each MCO's strengths and weaknesses with respect to the timeliness,
access, and quality of health care services furnished to Medicaid
beneficiaries; (2) recommendations for improving the quality of health
care services furnished by each MCO; (3) as the State agency determines
methodologically appropriate, comparative information about all MCOs,
and (4) an assessment of the degree to which each MCO has addressed
effectively the recommendations for quality improvement, as made by the
EQRO during the previous year's EQR.
The burden associated with this requirement is the time and effort
for a EQRO to submit to a State agency a detailed technical report for
each EQR conducted. It is estimated that it will take an EQRO 160 hours
to prepare and submit the necessary documentation to the State agency.
Therefore, the total burden associated with this requirement is, 510
technical reports (420 MCOs + 90 PHPs) x 160 hours = 81600 annual
burden hours.
This section also requires each State agency to provide copies of
technical reports, upon request, to interested parties such as
participating health care providers, enrollees and potential enrollees
of the MCO, beneficiary advocate groups, and members of the general
public.
The burden associated with this requirement is the time and effort
for a State agency to disclose copies of a given technical report to
interested parties. We estimate that on average, it will take a State
agency 4 hours to disclose the required information. Therefore, the
total burden associated with this requirement is 420 MCOs + 90 PHPs x
25 requests per MCO or PHP x 4 hours = 51000 annual burden hours.
We have submitted a copy of this proposed rule to OMB for its
review of the information collection requirements described above. We
will also submit the final EQR protocols upon their completion to OMB.
These requirements are not effective until they have been approved by
OMB. As stated in the preamble of this rule, the EQR protocols are
detailed instructions to be followed by personnel performing reviews of
health care quality. The JCAHO is developing these protocols under the
guidance of an expert panel. All activities that provide information
for EQR must use protocols that are consistent with the protocols being
developed. This will ensure that the conduct of the activities enhances
the quality of EQR for State agencies and that the conduct of the
activities is methodologically sound.
We anticipate that the protocols will be complete in the spring of
2000. Upon their completion, a Federal Register notice will be
published. To obtain a copy of the protocols when they become
available, access them on the HCFA Internet homepage at www.hcfa.gov,
or submit a request to the HCFA address below: Health Care Financing
Administration, Office of Information Services, Security and Standards
Group, Division of HCFA Enterprise Standards, Room N2-14-26, 7500
Security Boulevard, Baltimore, MD 21244-1850; Attention Julie Brown,
HCFA-2015-P.
If you comment on any of these information collection and record
keeping requirements, please mail 3 copies directly to the following:
Health Care Financing Administration, Office of Information Services,
Security and Standards Group, Division of HCFA Enterprise Standards,
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850;
Attention Julie Brown, HCFA-2015-P and
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Lori Schack, HCFA Desk Officer.
VII. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able 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 preamble, and, if we proceed with a subsequent
document, we will respond to the major comments in the preamble to that
document.
VIII. Impact Statement
A. Regulatory Impact Analysis
We have examined the impacts of this rule as required by Executive
Order 12866 and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, when regulation is
necessary, to select regulatory approaches that maximize net benefits,
including potential economic, environmental, public health and safety
effects, distributive impacts, and equity. A regulatory impact analysis
(RIA) must be prepared for major rules with economically significant
effects ($100 million or more annually). The RFA requires agencies to
analyze options for regulatory relief of small entities. For purposes
of the RFA, we prepare a regulatory flexibility analysis unless we
certify that a rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, non-profit organizations and governmental agencies. Most
hospitals and other providers and suppliers are
[[Page 67232]]
small entities, either by nonprofit status or by having revenues of $5
million or less annually. Individuals and States are not included in
the definition of a small entity.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis for any proposed rule that may have a significant
impact on the operations of a substantial number of small rural
hospitals. This analysis must conform to the provisions of section 603
of the RFA. For purposes of section 1102(b) of the Act, we define a
small rural hospital as a hospital that is located outside a
Metropolitan Statistical Area and has fewer than 50 beds.
The Unfunded Mandates Reform Act (Public Law 104-4) requires that
agencies prepare an assessment of anticipated costs and benefits before
proposing any rule that may result in an annual expenditure by State,
local and tribal governments, in the aggregate, or by the private
sector, of $100,000,000 or more (adjusted annually for inflation). This
rule does not impose any mandates on State, local, or tribal
governments, or the private sector that will result in an annual
expenditure of $100,000,000 or more.
The rule implements Medicaid provisions as directed by the BBA;
thus, alternatives were not considered. The only alternative would be
to seek repeal of the legislation. This would be inconsistent with the
major focus of the new provisions: protection of beneficiary rights in
a health care system in which MCOs have gained broad powers.
We do not anticipate that the provisions in this proposed rule will
have a substantial economic impact on most hospitals, including small
rural hospitals. The BBA provisions include some new requirements on
State agencies and MCOs, but not directly on individual hospitals. The
impact on individual hospitals will vary according to each hospital's
current and future contractual relationships with MCOs. Furthermore,
the impact will also vary according to each hospital's current
procedures and level of compliance with existing law and regulation
pertaining to Medicaid managed care. For these reasons, this proposed
rule would not have a significant impact on the operations of a
substantial number of hospitals. The only other small entity affected
by these regulations would be the EQROs. However, this rule does not
impose additional burdens on them. Instead, the rule offers these
organizations the benefit of opportunities for additional revenues.
Thus we certify that this rule will not have a significant economic
impact on a substantial number of small entities.
We do not anticipate a significant increase in Medicaid
expenditures as a result of the publication of these regulations for
the following reasons. First, 44 States, accounting for nearly 98
percent of Medicaid administrative expenditures, are currently
obtaining 75 percent enhanced FFP for EQR activities carried out by PRO
and PRO-like organizations. Permitting these State agencies to claim 75
percent matching for EQR activities conducted by the additional types
of entities allowed by these regulations would therefore not result in
increased costs to the extent that State agencies switch from PRO or
PRO-like organizations to these additional entities. Moreover, we
believe that, by expanding the pool of organizations available to
conduct EQR, these State agencies may be able to negotiate savings
compared to current costs of dealing with PRO and PRO-like
organizations. Additional savings may be realized through opportunities
afforded by the proposed rule to coordinate EQR activities with quality
reviews conducted for other purposes, as discussed above. Additional
costs may arise where State agencies currently conduct quality review
activities at 50 percent Federal matching rate that would now qualify
for 75 percent, and from new EQR activities undertaken as a result of
the BBA requirements.
In addition, even though we are proposing to extend this
requirement to PHPs, again we do not expect this to significantly
increase Medicaid expenditures. PHP costs account for approximately 5
percent of the payments we make to capitated arrangements. Furthermore,
State agencies currently conduct quality review activities on PHPs at a
50 percent Federal matching rate. Additional costs may arise for States
quality review activities that would now qualify for 75 percent and for
new quality review activities undertaken as a results of the activities
required in this proposed rule.
Although we cannot quantify these various cost and savings effects,
we believe that their net impact would be well below the $100 million
annual threshold for a major rule, and therefore that a regulatory
impact analysis is not required. The impact of this proposed regulation
is subsumed in estimates of the aggregate impact of the BBA, which have
already been included in Medicaid baseline projections for the
President's budget.
B. Federalism
Under Executive Order 13132, we are required to adhere to certain
criteria regarding Federalism in developing regulations. We have
determined that this proposed regulation will not significantly affect
States rights, roles, and responsibilities. Section 1903(a)(30)(C) of
the Act currently requires an EQR for each contract a State has with a
section 1903(m) organization. In accordance with section 4705 of the
BBA, this proposed rule would establish requirements and procedures for
EQR of Medicaid MCOs. We propose to require States to ensure that an
annual EQR is performed by a qualified EQRO for each contracting MCO,
the EQRO has adequate information to carry out the review, and that the
results of the reviews are made available to interested parties such as
participating health care providers, enrollees, advocate groups, and
the general public. We propose that these EQR requirements apply to
PHPs and certain entities with comprehensive risk contracts that have
been exempted from section 1903(m)(2)(A) requirements. We believe this
is consistent with the intent of the Congress in enacting the quality
provisions of the BBA. This proposed rule would not require State
agencies to dismantle EQR mechanisms that they have used to meet
section 1902 (a)(30)(C) of the Act and which they have found to be
effective and efficient. Rather, this proposed rule would provide
States greater flexibility in the types of entities they may use to
conduct EQR.
We worked closely with States in developing this regulation.
Specifically, in accordance with section 1932(c)(2)(A)(ii) of the Act,
which requires the Secretary to consult with States to establish a
method for identifying entities qualified to conduct EQR, we met with
States and other stakeholders under the auspices of the National
Academy of State Health Policy to establish a criteria to identify
qualified entities. Most of the recommendations made at this meeting
have been incorporated into this proposed rule. For recommendations not
accepted, an explanation has been provided.
In addition, section 1932(c)(2)(A)(iii) requires the Secretary to
coordinate with the NGA in contracting with an independent quality
review organization to develop protocols to be used in EQR. To meet
this requirement, we issued a RFP for one or more contractors to
develop a set of review protocols for EQROs to use in the conduct of
EQRs. Two State
[[Page 67233]]
representatives selected by the NGA were members of the panel that
reviewed and rated responding proposals. Moreover, part of the
development of the EQR protocols includes convening an expert panel for
review and comment of the protocols. State representatives are included
in this process.
List of Subjects
42 CFR Part 433
Administrative practice and procedure, Child support, Claims, Grant
programs-health, Medicaid, Reporting and record keeping requirements.
42 CFR Part 438
Grant Programs--health, Managed care entities, Medicaid, Quality
assurance, Reporting and record keeping requirements.
42 CFR Chapter IV would be amended as set forth below.
A. PART 433--STATE FISCAL ADMINISTRATION
1. The authority citation for part 433 is revised to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Sec. 433.15 [Amended]
2. In Sec. 433.15, the following change is made: A new paragraph
(b)(10) is added to read as set forth below.
Sec. 433.15 Rates of FFP for administration.
* * * * *
(b) * * *
(10) Funds expended for the performance of external quality review
or the related activities described in Sec. 438.358 of this chapter
when they are performed by an external quality review organization as
defined in Sec. 438.2 of this chapter: 75 percent.
B. A new part 438 is added, to read as set forth below.
PART 438--MANAGED CARE PROVISIONS
Subpart A--General Provisions
Sec.
438.1 Basis, scope and applicability.
438.2 Definitions.
Subparts B through D [Reserved]
Subpart E--External Quality Review
Sec.
438.350 State responsibilities.
438.352 EQR protocols.
438.354 Qualifications of EQROs.
438.356 State contract options.
438.358 Activities related to external quality review.
438.360 Non-duplication of mandatory activities.
438.362 Exemption from external quality review.
438.364 External quality review results.
438.370 Federal financial participation.
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart A--General Provisions
Sec. 438.1 Basis, scope and applicability.
(a) Statutory basis. This part is based on section 1932(c)(2) of
the Act.
(b) Scope. This part sets forth requirements for annual external
quality reviews of each contracting MCO, including--
(1) Criteria that States must use in selecting entities to perform
the reviews;
(2) Specifications for the activities related to external quality
review;
(3) Circumstances under which external quality review may use the
results of Medicare quality reviews or private accreditation surveys;
and
(4) Standards for making available the results of the reviews.
(c) Applicability. The provisions of this part apply to managed
care organizations (MCOs), prepaid health plans (PHPs), and entities
with comprehensive risk contracts that have been exempted by statute
from the requirements in section 1903(m)(2)(A).
Sec. 438.2 Definitions.
As used in this subpart--
EQR stands for external quality review;
EQRO stands for external quality review organization.
External quality review means the analysis and evaluation, by an
EQRO, of aggregated information on timeliness, access, and quality of
the health care services furnished to Medicaid recipients by each MCO
and other related activities performed by an EQRO.
External quality review organization means an organization that
meets the competence and independence requirements set forth in
Sec. 438.354, and performs external quality review.
Quality, as it pertains to external quality review, means the
degree to which an MCO maintains or improves the health outcomes of its
enrollees through its structural and operational characteristics and
through the provision of services.
Validation means the review of information, data, and procedures to
determine the extent to which they are accurate, reliable, free from
bias, and in accord with standards for data collection and analysis.
Subparts B through D--[Reserved]
Subpart E--External Quality Review
Sec. 438.350 State responsibilities.
Each State that contracts with MCOs must ensure that--
(a) Except as provided in Sec. 438.362, an annual EQR is performed
by a qualified EQRO for each contracting MCO;
(b) The EQRO has information, obtained from the related activities
described in Sec. 438.358, to carry out the review;
(c) The information provided to the EQRO in accordance with
paragraph (b) of this section is obtained through methods consistent
with the protocols established under Sec. 438.352; and
(d) The results of the reviews are made available as specified in
Sec. 438.364.
Sec. 438.352 EQR protocols.
Each protocol must specify--
(a) The data to be gathered;
(b) The sources of the data;
(c) The detailed procedures to be followed in collecting the data
to promote its accuracy, validity, and reliability;
(d) The proposed method or methods for validly analyzing and
interpreting the data once obtained; and
(e) All instructions, guidelines, worksheets, and any other
documents or tools necessary for implementing the protocol.
Sec. 438.354 Qualifications of EQROs.
(a) General rule. The State must ensure that each organization it
selects to perform EQR meets the requirements of this section.
(b) Competence. The organization must have at least the following:
(1) Staff with knowledge of--
(i) Medicaid recipients, policies, data systems, and processes;
(ii) Managed care delivery systems, organizations, and financing;
(iii) Quality assessment and improvement technologies; and
(iv) Research design and methodology, including statistical
analysis.
(2) Sufficient physical, technological, and financial resources to
conduct EQR.
(3) Other clinical and nonclinical skills to carry out the review
and to supervise the work of any subcontractors.
(c) Independence. The organization and its subcontractors are
independent from the State Medicaid agency and from the MCOs they
review. In order to qualify as ``independent'' and serve as an EQRO--
[[Page 67234]]
(1) A State agency, department, university, or other State entity
may not--
(i) Have Medicaid purchasing or managed care licensing authority;
(ii) Deliver any health care services to Medicaid recipients; or
(iii) Conduct, on the State's behalf, any other ongoing Medicaid
program operations related to oversight of the quality of MCO services.
(2) A State agency, department, university, or other State entity
must be governed by a Board or similar body the majority of whose
members are not government employees.
(3) An EQRO may not review a particular MCO if either the EQRO or
the MCO exerts control over the other. (As used in this paragraph,
``control'' has the meaning given the term in 48 CFR 19.101.)
Sec. 438.356 State contract options.
(a) The State must contract with one or more EQROs.
(b) Each contractor must meet the competence requirements as
specified in Sec. 438.354(b).
(c) Each contracting EQRO is permitted to use subcontractors. The
EQRO is accountable for, and must oversee, all subcontractor functions.
(d) Each contractor and subcontractor must meet the requirements
for independence, as specified in Sec. 438.354(c)
(e) For each contract, the State must follow an open, competitive
procurement process that is in accordance with State law and
regulations and consistent with 45 CFR part 74 as it applies to State
procurement of Medicaid services.
Sec. 438.358 Activities related to external quality review.
(a) Mandatory activities. The EQR must use information obtained
from the following activities which must be performed by the State or
its agent or, if they are not so performed, must be performed by the
EQRO:
(1) Each year, for each MCO, the EQR must use information obtained
from the following:
(i) Validation of performance improvement projects that were
required by the State and were performed during the preceding 12
months.
(ii) Validation of performance measures that the State required and
that the MCO reported during the preceding 12 months.
(2) Each year, the EQR must also use information obtained from a
review, conducted within the previous 3 year period, to determine the
MCO's compliance with standards established by the State for the
following:
(i) Availability of services.
(ii) Continuity and coordination of care.
(iii) Coverage and authorization of services.
(iv) Establishment of provider networks.
(v) Enrollee information.
(vi) Enrollee rights.
(vii) Confidentiality.
(viii) Enrollment and disenrollment.
(ix) Grievance systems.
(x) Subcontractual relationships and delegation.
(xi) Use of practice guidelines.
(xii) Health information systems.
(xiii) Mechanisms to detect both underutilization and
overutilization of services as part of the quality assessment and
performance improvement programs.
(b) Optional activities. The review may also use information
derived from the following optional activities performed by the State
or its agent, or the EQRO:
(1) The validation of client level data (such as claims and
encounters) reported by the MCO.
(2) The administration or validation of consumer or provider
surveys of quality of care.
(3) The calculation of performance measures in addition to those
reported by the MCO and validated by the EQRO.
(4) The conduct of performance improvement projects in addition to
those conducted by the MCO and validated by the EQRO.
(5) The conduct of studies on quality, focused on a particular
aspect of clinical or non-clinics services at a point in time.
(c) Technical assistance. The EQRO may, at the State's direction,
provide technical guidance to groups of MCOs to assist them in
conducting activities related to the mandatory and optional activities
that provide information for the EQR.
Sec. 438.360 Nonduplication of mandatory activities.
(a) General rule In order to avoid duplication, the State may
exempt an MCO from mandatory activities (as specified in Sec. 438.358)
if the conditions of paragraph (b) or paragraph (c) of this section are
met.
(b) Certified M+C organization. The State may exempt an MCO from
the mandatory activity specified in Sec. 438.358(a)(2), if the
following conditions are met:
(1) The MCO is also a certified M+C organization with a current
Medicare contract.
(2) The MCO meets either of the following conditions:
(i) The MCO's current structure and its compliance with the
standards established by the State under Sec. 438.358(a)(2) have been
evaluated and approved by HCFA or its contractor.
(ii) The MCO is currently fully accredited by a private accrediting
organization that HCFA approves and recognizes as having standards and
review procedures at least as stringent as those established by HCFA
for the mandatory activity specified in Sec. 438.358(a)(2).
(3) The MCO provides to the State all the reports, findings, and
other results of the Medicare review or the private accreditation
survey. The State provides the information to the EQRO.
(c) MCO serves only the dually eligible. The State may exempt an
MCO from the mandatory activities specified in Sec. 438.358(a)(1) and
(a)(2) if the following conditions are met:
(1) The MCO serves only individuals who receive both Medicare and
Medicaid benefits.
(2) The Medicare review activities are substantially comparable to
the State-specified mandatory activities in Sec. 438.358(a)(1) and
(a)(2).
(3) The MCO provides to the State all the reports, findings, and
other results of the Medicare review. The State provides the
information to the EQRO.
Sec. 438.362 Exemption from external quality review.
(a) Basis for exemption. The State may exempt an MCO from EQR if
the following conditions are met:
(1) The MCO has a current Medicare contract under part C of title
XVIII or under section 1876 of the Act, and a current Medicaid contract
under section 1903(m) of the Act.
(2) The two contracts cover all or part of the same geographic
area.
(3) The Medicaid contract has been in effect for at least two
consecutive years before the effective date of the exemption and during
those two years the MCO has been subject to EQR under this part, and
found to be performing acceptably with respect to the timeliness,
access, and quality of health care services it provides to Medicaid
recipients.
(b) Information on exempted MCOs. (1) Information on Medicare
review findings. Each year, the State must obtain from each MCO that it
exempts from EQR, the most recent Medicare review findings reported to
the MCO by HCFA or its agent including--
(i) All data, correspondence, information, and findings pertaining
to the MCO's compliance with Medicare
[[Page 67235]]
standards for access, quality assessment and performance improvement,
health services, or delegation of these activities;
(ii) All measures of the MCO's performance; and
(iii) The findings and results of all performance improvement
projects pertaining to Medicare enrollees.
(2) Information on accreditation surveys. (i) If an exempted MCO
has been reviewed by a private accreditation organization, the State
must require the MCO to ensure that the State receives a copy of all
findings pertaining to its most recent survey if the accreditation
survey has been used for either of the following purposes:
(A) To fulfill certain requirements for Medicare external review
under subpart D of part 422 of this chapter,
(B) To deem compliance with Medicare requirements, as provided in
Sec. 422.156.
(ii) These findings must include, but need not be limited to,
accreditation survey results of evaluation of compliance with
individual accreditation standards, noted deficiencies, corrective
action plans, and summaries of unmet accreditation requirements.
Sec. 438.364 External quality review results.
(a) Information that must be produced. The State must ensure that
the EQR produces at least the following information:
(1) A detailed technical report that describes the manner in which
the data from all activities conducted in accordance with Sec. 438.358
were aggregated, analyzed, and the conclusions were drawn as to the
quality of the care furnished by the MCO. The report must also include
the following for each activity conducted in accordance with
Sec. 438.358:
(i) Objectives;
(ii) Technical methods of data collection and analysis;
(iii) Data obtained; and
(iv) Conclusions drawn from the data.
(2) A detailed assessment of each MCO's strengths and weaknesses
with respect to the timeliness, access, and quality of health care
services furnished to Medicaid recipients.
(3) Recommendations for improving the quality of health care
services furnished by each MCO.
(4) As the State determines methodologically appropriate,
comparative information about all MCOs.
(5) An assessment of the degree to which each MCO has addressed
effectively the recommendations for quality improvement, as made by the
EQRO during the previous year's EQR.
(b) Availability of information. The State must provide copies of
the information specified in paragraph (a) of this section, upon
request, to interested parties such as participating health care
providers, enrollees and potential enrollees of the MCO, recipient
advocate groups, and members of the general public.
(c) Safeguarding patient identity. The information released under
paragraph (b) of this section may not disclose the identity of any
patient.
Sec. 438.370 Federal financial participation.
(a) FFP at the 75 percent rate is available in expenditures for EQR
(including the production of EQR information), performed by EQROs and
their subcontractors.
(b) FFP at the 50 percent rate is available in expenditures for
EQR-related activities performed by any entity that does not qualify as
an EQRO.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance)
Dated: August 2, 1999.
Michael M. Hash,
Deputy Administrator, Health Care Financing Administration.
Approved: September 9, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-31101 Filed 11-30-99; 8:45 am]
BILLING CODE 4120-01-P
