[Federal Register Volume 62, Number 83 (Wednesday, April 30, 1997)]
[Rules and Regulations]
[Pages 23368-23376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11182]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Part 417
[OMC-025-FC]
RIN 0938-AH62
Medicare Program; Establishment of an Expedited Review Process
for Medicare Beneficiaries Enrolled in Health Maintenance
Organizations, Competitive Medical Plans, and Health Care Prepayment
Plans
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Final rule with comment period.
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SUMMARY: This final rule with comment period establishes a new
administrative review requirement for Medicare beneficiaries enrolled
in health maintenance organizations (HMOs), competitive medical plans
(CMPs), and health care prepayment plans (HCPPs). This rule implements
section 1876(c)(5) of the Social Security Act, which specifies the
appeal and grievance rights for Medicare enrollees in HMOs and CMPs.
This rule requires that an HMO, CMP, or HCPP establish and maintain, as
part of the health plan's appeals procedures, an expedited process for
making organization determinations and reconsidered determinations when
an adverse determination could seriously jeopardize the life or health
of the enrollee or the enrollee's ability to regain maximum function.
This rule also revises the definition of appealable determinations to
clarify that it includes a decision to discontinue services.
DATES: Effective date: These regulations are effective June 30, 1997.
Compliance date: HMOs, CMPs, and HCPPs must comply with the
requirements of this final rule beginning August 28, 1997.
Comment date: Comments will be considered if we receive them at the
appropriate address, as provided under ADDRESSES, no later than 5 p.m.
on June 30, 1997.
ADDRESSES: Mail written comments (1 original and 3 copies) to the
following address:
Health Care Financing Administration, Department of Health and Human
Services, Attention: OMC-025-FC, P.O. Box 26688, Baltimore, MD 21207-
0488.
If you prefer, you may deliver your written comments (1 original
and 3 copies) to one of the following addresses:
Room 309/G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201, or
Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
Comments may also be submitted electronically to the following e-
mail address: [email protected] E-mail comments must include the full
name and address of the sender and must be submitted to the referenced
address to be considered. All comments must be incorporated in the e-
mail message because we may not be able to access attachments.
Electronically submitted comments will be available for public
inspection at the Independence Avenue address below.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code OMC-025-FC. 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 309-G of
the Department's offices at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.
(phone: (202) 690-7890).
Copies: To order copies of the Federal Register containing this
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FOR FURTHER INFORMATION CONTACT: Maureen Miller, (410) 786-1097.
SUPPLEMENTARY INFORMATION:
I. General Background
A. Program Background
Under title XVIII of the Social Security Act (the Act), Medicare
beneficiaries have a choice of whether to obtain Medicare-covered
services through the traditional fee-for-service program or through a
managed care entity or ``prepaid health care organization.'' This final
rule with comment period concerns appeal rights for Medicare
beneficiaries who choose a prepaid health care organization. Under the
prepayment method, health maintenance organizations (HMOs), competitive
medical plans (CMPs), and health care prepayment plans (HCPPs) enter
into contracts or agreements with us to provide a range of services to
Medicare beneficiaries who voluntarily enroll in these health plans.
Section 1876 of the Act provides the authority for us to enter into
contracts with HMOs and CMPs to furnish
[[Page 23369]]
Medicare-covered services to beneficiaries on either a ``risk'' or a
``cost payment'' basis. Section 1833 of the Act provides the basis for
regulations under which we enter into written agreements with HCPPs to
furnish covered Medicare Part B services on a cost payment basis.
Section 1876 specifies the requirements that eligible health plans
must meet in order to enter into and maintain a Medicare contract,
including the provision of appeal and grievance rights to Medicare
enrollees, as set forth under section 1876(c)(5) of the Act.
Regulations implementing the beneficiary appeals requirements are found
at 42 CFR, subpart Q, Secs. 417.600 through 417.638. These regulations
were most recently amended on November 21, 1994 with the publication of
the final rule entitled ``Medicare Program: Appeal Rights and
Procedures for Beneficiaries Enrolled in Prepaid Health Care Plans''
(59 FR 59933). That final rule (1) codified a program standard that
HMOs and CMPs complete reconsiderations requested by a Medicare
enrollee, referenced in this final rule as an ``enrollee,'' for denied
services or claims, within 60 days from the date of receipt of the
reconsideration request; (2) extended to HMO and CMP enrollees the
right to request immediate review by a Utilization and Quality Control
Peer Review Organization (PRO) of an HMO's, CMP's, or hospital's
determination that an inpatient hospital stay is no longer necessary;
and (3) required HCPPs to establish administrative review procedures
for their Medicare beneficiaries who are dissatisfied with decisions to
deny a service or a claim. In this final rule, we refer to HMOs, CMPs,
and HCPPs as ``health plans.''
B. Current Requirements
Medicare-contracting health plans are required to maintain
procedures for making ``organization determinations'' (decisions
concerning whether to provide a service or pay a claim) and for
reconsidering the organization determination. That is, if the
organization determination is adverse to the beneficiary, the health
plan also must provide a second level of review called a
``reconsideration'' upon request by the Medicare enrollee.
Current regulations, drafted in the early 1980's, permit health
plans up to 60 days to issue a formal notice of an adverse organization
determination if an enrollee's request for a service or payment is
denied. This notice informs the beneficiaries of the reason for the
determination and their right to file a request for reconsideration.
The health plan has an additional 60 days to conduct the
reconsideration and issue a reconsidered determination. These 60-day
time frames stem from the fee-for-service appeals process, a process
the Congress referenced in drafting section 1876 of the Act.
At the reconsideration stage, the health plan may uphold the
decision to deny a service or payment of a claim, or it may overturn
the decision and issue a reconsidered determination in favor of the
enrollee. If, upon reconsideration, a health plan upholds its decision
to deny, the appeal is automatically sent to an independent reviewer
under contract with and acting for HCFA. No written request from the
enrollee is necessary for this external review. The reconsideration
contractor, on our behalf, is responsible for issuing the reconsidered
determination. The reconsidered determination may uphold or overturn
the plan's determination. If the contractor's determination upholds the
plan's decision (in whole or in part) and if the amount in controversy
is $100 or more, the enrollee may request an Administrative Law Judge
hearing. At this point, the enrollee may pursue the same administrative
and judicial review processes that are available to beneficiaries in
fee-for-service. Thus, beneficiaries enrolled in HMOs, CMPs, and HCPPs
have appeal rights equivalent to those available in the fee-for-service
program.
II. Additional Background
A. Expedited Organization Determinations and Reconsiderations
The regulations pertaining to Medicare managed care appeals
requirements do not include a specific provision requiring expedited
organization determinations or reconsiderations in time-sensitive
situations. However, increased program experience resulting from the
growth and penetration of HMOs in the private insurance and Medicare
markets has prompted us, along with other groups, to recognize the
desirability of an expedited decision-making process for certain
services in certain situations. In fact, the National Association of
Insurance Commissioners (NAIC) has developed and recently adopted a
model Grievance Act setting forth standards for grievance procedures
that include provision for expedited appeals. (Although our regulations
make a distinction between appealable organization determinations and
``grievances,'' which are not appealable, the model ``Grievance'' Act
prepared by NAIC encompasses determinations of the type addressed in
this rule.)
The need for an expedited process to address certain preservice
denials, as well as reductions and discontinuations of service in
certain time-sensitive circumstances, is further supported by reports
and studies of the General Accounting Office (1995), the Physician
Payment Review Commission (1996), and the Institute of Medicine (1996).
Organizations that advocate for beneficiaries also have reported to us
the urgent need for expedited decision-making, particularly when
certain services are being discontinued. Therefore, we are amending
part 417, subpart Q to establish and incorporate provisions for
expediting organization determinations and reconsiderations in certain
time-sensitive situations.
In developing the provisions for this final rule, we looked for
guidance to the NAIC's model Grievance Act. This model act is the
result of more than 2 years of deliberation among State regulators, in
open consultation with consumer groups (including Medicare beneficiary
advocacy groups), provider and physician associations, insurance and
managed care representatives, HCFA staff, and others. We anticipate
that many States will adopt this model act or amend existing
regulations to conform with these new, state-of-the-art standards.
Because of the inclusive and exhaustive efforts invested in the
development of the NAIC's model Grievance Act as well as the importance
of acting rapidly to institute expedited appeals for the Medicare
population, we have drawn on the NAIC's time lines and definition in
developing the new Medicare requirement. In addition to the important
precedent of NAIC's accountability standards, we believe that
beneficiaries (particularly those enrolled in prepaid plans before
Medicare eligibility) would benefit from consistent standards regarding
appeal rights. We believe, too, that similar thresholds for expediting
a review process and similar time lines will lessen the margin for
error among health plan staff handling commercial as well as Medicare
enrollee appeals, and strengthen the ability of enrollees to exercise
appeal rights when making the transition to the Medicare managed care
plan.
Under the provisions of this rule, health plans are required to
incorporate into their appeals process a procedure for reviewing and
issuing certain organization determinations and reconsiderations within
a short time frame. Expedited reviews will be conducted for situations
in which the standard (60-day) time frame for issuing determinations
could jeopardize the life
[[Page 23370]]
or health of the enrollee or the enrollee's ability to regain maximum
function. Also, requests for reconsideration of noncoverage
determinations for inpatient stays, other than hospital discharges for
which immediate Peer Review Organization (PRO) review is available,
will be expedited, as well as requests for reconsiderations of
determinations to discontinue a service (such as physical therapy) in
the home or outpatient setting where a longer review time could
jeopardize the enrollee's life, health, or ability to regain his or her
maximum function. Health plans will be required to conduct the review
within a time period appropriate to the condition or situation of the
enrollee, but no more than 72 hours from the time of the request. Thus,
expedited reviews could occur in 24 hours, 48 hours, or other
appropriate time period. Similarly, an expedited organization
determination to deny a service could be issued in 48 hours, but the
expedited reconsideration could take the full 72 hours allotted for
making a determination.
Because of the time-sensitive nature of these situations, certain
requirements and conditions applicable to standard appeals are altered.
For instance, the Medicare enrollee, or his or her representative, will
be able to request an expedited review orally, such as by telephone. In
a similar manner, the health plan's determination will be given to the
enrollee or the representative, and to the appropriate physician or
provider as necessary, in an expeditious manner. When the determination
is given orally, a written follow-up version must be issued within 2
working days. Further, any physician will be permitted to request an
expedited review on behalf of the enrollee, and the health plan must
accept the physician's decision that the situation meets the criterion
for expedited review, that is, that a longer review period could place
the enrollee in jeopardy.
The health plan must receive the request for an expedited
determination or reconsideration, make the procedural decision whether
the determination will be made through the expedited process (or
redirect it to the standard process), conduct the review, and issue its
determination within the 72-hour time frame set forth in the
regulation. In limited circumstances, health plans will be allowed to
take more than 72 hours to issue a determination. Health plans will be
permitted up to 10 additional working days beyond the 72-hour standard
if the ``extension'' of time benefits the beneficiary, such as allowing
for additional diagnostic testing or consultations with medical
specialists, or if the beneficiary requests the extension in order to
provide the plan with additional information for making its decision.
Delays in meeting the 72-hour standard will also be permitted if an
expedited organization determination or reconsideration is requested by
a physician not affiliated with the health plan. In this case, the 72-
hour time standard will begin only when the medical information
necessary for making the determination has been communicated (orally or
in writing by the out-of-plan physician) to the health plan. If the
physician fails to provide necessary information, the health plan must
notify the enrollee (or attempt to notify the enrollee who is out of
the service area) in a timely manner, and no later than 72 hours after
the request, that the information has not been provided. When a small
amount of additional time is needed to make a determination and,
overall, is in favor of the beneficiary, the beneficiary must be kept
informed and written documentation made to the case file. However,
delays in the communication of medical record information between
affiliated physicians or providers and the health plan will not be
accepted as reason for extending the time standard.
In those instances in which the health plan determines that the
enrollee's request does not meet the criterion for expedited review,
the HMO or CMP must notify the enrollee as soon as possible and follow
up any oral communication with a written explanation. This is a
procedural decision, and because the enrollee has requested an
organization determination--or a reconsideration--the health plan must
handle the request through standard appeals procedures. We anticipate
that questions will arise on matters such as enrollee recourse and plan
procedures if a request is not granted, and we plan to consult
beneficiary advocacy groups and the managed care industry on needed
action and operational guidance in areas such as notification of
grievance rights, filing quality of care complaints with the local PRO,
and modifying procedures to carry out the standard review process.
If a decision is made by the health plan not to expedite an
organization determination, and at the completion of the standard
review process there is a determination adverse to the enrollee, the
enrollee could request an expedited reconsideration if he or she again
believes that a longer (standard) time frame could jeopardize life,
health, or functioning. On the other hand, a health plan may have a
protocol that any reconsideration will be expedited if the organization
determination was expedited.
If a health plan expedites a reconsideration, and upholds its
decision that is adverse to the enrollee in whole or in part, it must
forward the case to our reconsideration contractor in as expeditious
manner as possible and within 24 hours of its decision. Our contractor
will then conduct an expedited reconsideration. Currently, our
contractor has an expedited process for time-sensitive situations
involving preservice denials and terminations of coverage. As part of
this rulemaking, we will review this process for possible improvement
and assess the need for contract modification.
The expedited appeals process established by this rule, generally,
will not affect the handling of hospital discharge disputes because, as
noted earlier in this preamble, an ``expedited'' process is already in
place for these appeals, that is, the right to immediate PRO review.
The right to immediate PRO review for possible premature discharge
would extend, also, to instances in which an enrollee is preauthorized
for an inpatient procedure and only 1 or 2 days of hospital care. The
HMO or CMP must assure that it (or its delegated hospital) has
procedures in place that would allow an enrollee who is admitted for a
very short stay to exercise this right to immediate PRO review. This
independent review protection would not preclude a health plan from
establishing a procedure for appealing before hospitalization, although
this process could not replace the right to PRO review once
hospitalized. If the enrollee does not request PRO review, an
alternative appeals protection exists: The enrollee may remain in the
hospital for extra days of care then submit a request for the health
plan to pay the hospital charges.
Options Considered
In developing this rule, we consulted beneficiary advocacy groups
and the managed care industry concerning several policy options. In
particular, we considered several options before deciding to adopt a
72-hour time standard for expedited appeals. The beneficiary advocacy
groups we consulted indicated that the expedited review process should
take less, but no more, than 72 hours. Representatives of the HMO
industry estimated a need for 5 days. We chose the 72-hour time
standard because (1) it is consistent with the model standard recently
adopted by the NAIC, (2) agency staff estimate that a majority of these
cases could be reasonably resolved in this
[[Page 23371]]
time frame, and (3) the 72-hour time frame is similar to that
established by the Congress for completion of immediate PRO review of
fee-for-service and HMO hospital discharge decisions.
We also considered options regarding the procedural issue of
deciding whether to expedite a review. Beneficiary advocacy groups
recommended that the beneficiary decide whether determinations and
reconsiderations are expedited, not the health plan, in order to ensure
that these special appeal requests are granted. Representatives of the
HMO industry believe that health plans should make these decisions
because the criterion for expeditious treatment of a review requires
the judgment of trained persons and health professionals. HMOs are also
concerned that beneficiaries will overuse and misuse this process. In
this final rule, we are modifying the NAIC language from ``would
jeopardize * * *'' to ``could jeopardize'' the life, health, or
functioning of the beneficiary, and are adding the mandatory granting
of physician requests. We believe this language strikes the proper
balance and provides beneficiaries with an expedited appeal in most
cases, but allows HMOs some flexibility to refuse expedition in cases
in which the beneficiary is misusing the new right.
The beneficiary groups and the HMO industry both recommended that
our reconsideration contractor be held to similar expedited review
requirements. The current contractor already expedites its review of
preservice denial cases with a self-imposed time standard of 3 to 10
days. It is our intent to hold the contractor to a time limit of no
more than 10 days to complete time-sensitive reconsiderations.
After publication of this rule, we will issue implementation
instructions to all contracting health plans, including directives
concerning notification of enrollees on the new appeals right and
revising member documents. Furthermore, we will incorporate information
about this new appeal right in various materials, including the
Medicare Handbook.
We believe that the addition of regulations pertaining to an
expedited process to part 417, subpart Q will provide a needed
protection for beneficiaries while allowing health plans to manage
effectively the resources that must be available for expediting urgent
cases.
B. Clarification of Organization Determination Definition
In making payments to affiliated providers and physicians, prepaid
health plans (including Medicare-contracting HMOs, CMPs, and HCPPs)
commonly use financial arrangements that incorporate an incentive to
utilize health resources efficiently. Some believe these incentives,
which are designed to achieve quality outcomes without overutilizing
the health care system, could have the untoward result of
underutilization or failure to furnish medically necessary covered
services in some situations. Thus, an important protection for
beneficiaries enrolled in HMOs, CMPs, or HCPPs is the right to appeal
denials of care (also known as preservice denials) and to seek
reimbursement for the costs of services received out of plan following
a preservice denial.
Regulations set forth at Sec. 417.606 (``Organization
determinations'') define those actions that are organization
determinations and therefore subject to reconsideration and the
Medicare appeals process, as well as those actions that are not
organization determinations. These regulations do not expressly
identify as organization determinations those situations in which an
enrollee has been receiving services but the care is being
discontinued, although the intent is that enrollees have the right to
appeal decisions for which Medicare coverage is in dispute. These
disputes are not limited to preservice denials or postservice claims
for payment but must include situations in which services have been
furnished, but the enrollee disagrees with his or her health plan's
decision that continued care or the skilled level of care is no longer
medically necessary, appropriate, or covered.
We have received information that some enrollees do not fully
understand their appeal rights and that health plan administrators
themselves are confused about appeal rights in these situations. Most
recently, the Office of Inspector General of the Department of Health
and Human Services found that, while enrollees ``were knowledgeable
about their general right'' to register formal complaints, they were
less aware of specifically when to exercise appeal rights. (Medicare
HMO Appeal and Grievance Processes: Beneficiaries' Understanding,
December 1996, OEI-07-96-11281.) Therefore, we are revising
Sec. 417.606(a) to clarify that the definition of organization
determination includes discontinuations of covered services, when an
enrollee believes there is a continuing need for the service, or level
of service, that would be covered by Medicare. Examples of these
situations are discharges from skilled nursing facilities, decisions to
move an enrollee from a skilled level to custodial care in the nursing
facility, and exhaustion of skilled nursing facility benefits.
Options Considered
We believe that the current definition of organization
determination extends to reductions in services, such as changes in the
intensity and mix of home health services furnished to an enrollee.
However, because the definition in the regulations does not expressly
identify reductions in services furnished to an enrollee, we considered
including a clarification in this final rule. In assessing the
ramifications of this clarification, we became aware of the potential
scope and the complexity of addressing reductions in various medical
services, as well as the interaction of such a provision with other
improvements under consideration for improving appeals protections (see
section III. of this regulation). Therefore, we have decided to include
this provision in a subsequent rulemaking document. This will allow not
only beneficiary and managed care representatives to comment, but also
medical, other professional, and provider organizations. Commenters to
this final rule, however, are invited to submit their initial comments,
concerns, and ideas on establishing effective and efficient parameters
for giving notice and providing appeal rights when services are being
reduced (for example, in home health care, outpatient clinics, and
physician offices), when reconsiderations of a reduction should be
expedited, and when enrollees are participating in case management
programs or other innovative treatment modalities for which there are
pre-agreements regarding the services to be furnished.
C. Grijalva et al. and Balistreri et al. v. Shalala
Civ. 93-711 (D. Arizona) concerns the service denial appeal rights
of members of Medicare health maintenance organizations. The District
Court's October 17, 1996 decision and March 3, 1997 judgment are
subject to appeal on or before May 2, 1997.
III. Additional Pending Revisions to the Regulations
We have undertaken a broad review of the overall appeals program
and have identified a number of improvements that we believe are
warranted. Therefore, in addition to the two changes being made in this
rule, we intend to publish soon a separate proposed rule making a
variety of other
[[Page 23372]]
improvements in Medicare managed care appeals processes.
IV. Provisions of This Final Rule
The provisions of this final rule with comment period follow:
In Sec. 417.600 (``Basis and scope''), paragraph (b)(3)(ii) is
modified to require that the HMO or CMP must ensure that Medicare
enrollees have a complete written explanation of the availability of
expedited reviews.
In Sec. 417.604 (``General provisions''), paragraph (b)(4) is
modified to allow physicians and other health professionals to act on
behalf of an enrollee in time-sensitive situations when an organization
determination or reconsideration is being requested.
The definition of ``organization determination'' set forth at
Sec. 417.606 (``Organization determinations''), paragraph (a), is
revised to include discontinuations of services being furnished by an
HMO or CMP.
In Sec. 417.608 (``Notice of adverse organization determination''),
paragraph (a) is modified to incorporate expedited organization
determinations, and paragraphs (b)(2) and (c) are revised to require
that the HMO or CMP must inform the enrollee of his or her right to and
conditions for obtaining an expedited reconsidered determination and
that failure to provide the enrollee with timely notification (72 hours
in the case of certain expedited organization determinations)
constitutes an adverse organization determination and may be appealed.
A new Sec. 417.609 (``Expediting certain organization
determinations'') is added to provide that an enrollee may request that
certain organization determinations be expedited if the standard time
frames could jeopardize the life or health of the enrollee or the
enrollee's ability to regain maximum function. This new section also
sets forth the procedures for expediting certain organization
determinations. An extension of up to 10 working days is permitted if
requested by the enrollee or if the HMO or CMP finds that additional
information is necessary and the delay is in the interest of the
enrollee.
In Sec. 417.614 (``Right to reconsideration''), a modification is
made to extend the right to reconsideration to include expedited
reconsiderations in time-sensitive situations.
In Sec. 417.616 (``Request for reconsideration''), paragraph (a)
(``Method and place for filing a request'') is modified to provide for
an exception for expedited reconsiderations to the place for filing a
request for a reconsideration.
A new Sec. 417.617 (``Expediting certain reconsiderations'') is
added to require that an enrollee may request expedition of a
reconsideration of certain organization determinations when the longer
time frames in Sec. 417.620(c) could seriously jeopardize the life or
health of the enrollee or the enrollee's ability to regain maximum
function. This section also sets forth the procedures for health plans
to expedite reconsiderations. An extension of up to 10 working days is
permitted if requested by the enrollee or if the HMO or CMP finds that
additional information is necessary and the delay is in the interest of
the enrollee.
A modification is made to Sec. 417.618 (``Opportunity to submit
evidence'') to recognize and clarify the procedural limitation for
providing evidence by enrollees, their representatives, or a health
professional on the enrollee's behalf.
Section 417.620 (``Responsibility for reconsiderations; time
limits'') paragraphs (c) and (e) are revised to incorporate the time
limit for expediting certain reconsiderations. Paragraph (d) is revised
to correct typographical errors.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement 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 Paperwork Reduction Act
of 1995 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.
However, we believe that the information collection requirements
referenced in this rule, as summarized below, are exempt from the
Paperwork Reduction Act of 1995 for the following reasons:
Sections 417.608, 417.609, 417.616, 417.617, 417.618, and 417.620
of this rule, as well as the retention and possible audit of health
plan records related to expedited requests, are exempt because they are
performed in the conduct of an administrative action, investigation, or
audit involving an agency against specific individuals or
organizations, as outlined in 5 CFR 1320.4(a)(2).
Below is a summary of information collection requirements
referenced in this rule, which we believe are exempt from the Paperwork
Reduction Act of 1995:
Section 417.608 requires that the HMO or CMP must inform the
enrollee of his or her right to and conditions for obtaining an
expedited reconsidered determination and that failure to provide the
enrollee with timely notification (72 hours in the case of certain
expedited organization determinations) constitutes an adverse
organization determination and may be appealed.
Section 417.609 requires an HMO or CMP to establish and maintain
procedures for expediting certain organization determinations. This
section also requires an HMO or CMP to notify an enrollee of an
expedited organization determination as expeditiously as the enrollee's
health condition requires, but within 72 hours of the request. Finally,
the section requires an HMO or CMP to accept the request of a
physician, regardless of whether the physician is affiliated with the
organization or not, to expedite the process for making an organization
determination. Section 417.616 requires that an enrollee may request a
reconsideration of an organization determination and specifies the
method and place for filing a request, which, in the case of a request
for an expedited reconsideration, as provided for in Sec. 417.617
(concerning certain expedited reconsiderations), is the HMO or CMP.
Section 417.617 requires that an enrollee may request a
reconsideration of certain organization determinations. It also
requires an HMO or CMP to have and maintain procedures for expediting
reconsiderations when the longer time frames permitted in
Sec. 417.620(c) could seriously jeopardize the life or health of the
enrollee or the enrollee's ability to regain maximum function. This
section also requires an HMO or CMP to accept the request of a
physician, regardless of whether the physician is affiliated with the
organization or not, to expedite the reconsideration. Finally, this
section requires that, if the HMO or CMP defaults on its obligation to
provide an expedited reconsideration, it must forward the file to us.
Section 417.618 requires an HMO or CMP to provide the parties to
the reconsideration reasonable opportunity to present evidence and
allegations of fact or law, related to the issue in
[[Page 23373]]
dispute, in person as well as in writing. In the case of expedited
reconsiderations, the opportunity to present the evidence is more
limited, and the organization must inform the enrollee, or authorized
representative of the enrollee, of the conditions for submitting
evidence.
Section 417.620 requires an HMO or CMP to issue the reconsidered
determination to the enrollee, or submit the explanation and file to us
within the time frames specified. Failure by the HMO or CMP to provide
the enrollee with a reconsidered determination within the time limits
described constitutes an adverse determination, and the HMO or CMP must
submit the file to us.
Although we believe the information collection requirements
referenced in this document are exempt under 5 CFR 1320.4(a)(2), as
required by section 3504(h) of the Paperwork Reduction Act of 1995, we
have submitted a copy of this document to OMB for its review.
Organizations and individuals desiring to submit comments should send
to both of the following addresses:
Health Care Financing Administration, Office of Financial and Human
Resources, Management Planning and Analysis Staff, Room C2-26-17, 7500
Security Boulevard, Baltimore, MD 21244-1850.
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Allison Herron Eydt, HCFA Desk Officer.
VI. 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 comments in the preamble to that
document.
VII. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite prior public comment on proposed rules. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and substance
of the proposed rule or a description of the subjects and issues
involved. This procedure can be waived, however, if an agency finds
good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued.
For the reasons that follow, we believe that it would be contrary
to the public interest to delay the revisions made in this rule until
after a public notice and comment process has been completed. The first
provision concerns an expedited appeals process for certain preservice
denials. This expedited decision-making would occur if the
determination that services are not needed or no longer needed could
seriously jeopardize the life or health of the enrollee or could
jeopardize the enrollee's ability to regain maximum function. While a
number of Medicare-contracting plans have an expedited review process
in place for Medicare enrollees, not all do, and the opportunity to
obtain the reviews may not be consistently applied. For this reason,
the growing number of enrollees who could be adversely affected by a
slow process, and the fact that the situations addressed by this
provision are of such a serious nature, we find that there is good
cause to waive proposed rulemaking.
We have reached the same conclusion about the provision in this
rule that merely clarifies the original intent of the definition of an
organizational decision. This clarification, however, could help ensure
that a beneficiary has the appeal rights that the Congress intended
when services the beneficiary believes the HMO should provide are
terminated.
Clearly, the intent of section 1876(c)(5)(B) of the Act and
regulations set forth in part 417, subpart Q is that enrollees have the
opportunity to seek administrative review when they believe the health
plan is not furnishing any health service to which they are entitled.
The Medicare Health Maintenance Organization/Competitive Medical Plan
Manual indicates this intent in the ``Benefits'' chapter with a
requirement that health plans notify enrollees of their appeal rights
at discharge from a skilled nursing facility (see section 2112.1).
However, growing reports from beneficiaries and beneficiary advocacy
groups indicate that many enrollees are not being informed, or
appropriately informed, of appeal rights when services are being
discontinued and the enrollee disagrees that services are no longer
covered. When this occurs, the critical protection against
underutilization provided by the appeals process is not available to
enrollees.
We believe that it would be contrary to the public interest to
leave HMO enrollees at risk of being denied this critical protection in
cases in which health care service is being terminated while a notice
and comment process is being conducted.
Although we find that it is in the public interest to waive
proposed rulemaking in these two areas, there are a number of other
improvements to part 417, subpart Q that we are developing. While these
revisions are important, we did not believe that the standard for
waiving notice of proposed rulemaking was met or we found that public
comment is needed for the policy changes under consideration. We
anticipate that a second rule addressing improvements to the appeals
protections of Medicare enrollees will be issued as a proposed
regulation for comment in the near future.
VIII. Regulatory Impact Analysis
Consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), we prepare a regulatory flexibility analysis unless the
Secretary certifies that a rule will not have a significant economic
impact on a substantial number of small entities. For purposes of the
RFA, many Medicare-contracting HMOs, CMPs, and HCPPs are considered to
be small entities.
In addition, section 1102(b) requires the Secretary to prepare a
regulatory impact analysis if a rule 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 604 of the RFA. For
purposes of section 1102(b), we define a small rural hospital as a
hospital that is located outside of a Metropolitan Statistical Area and
has fewer than 50 beds.
We require all Medicare-contracting HMOs, CMPs, and HCPPs to
maintain systems for making initial organization determinations and
conducting reconsiderations. Systems must also be in place so that
hospitalized beneficiaries who disagree with an HMO's or CMP's
discharge determination are given a written notice of noncoverage with
instructions for requesting immediate review by a PRO. In addition, the
Medicare Health Maintenance Organization/Competitive Medical Plan
Manual requires that beneficiaries being discharged from a nursing home
be given advance written notice of noncoverage and procedures for
requesting an appeal.
The clarification in the regulations that organization
determinations include discontinuations of care, and are thus
appealable, could increase the number of written notices issued and the
number of reconsiderations that a
[[Page 23374]]
health plan must conduct. However, because the majority of services
provided by any health plan are ambulatory care and hospital care--
where it is already required by statute, as mentioned above, that
notices be given any time a beneficiary disagrees that the
hospitalization can be ``discontinued''--this regulation will primarily
affect discontinuations involving skilled nursing facility,
rehabilitation, and home health care. In addition, not all changes in
level of care or terminations of coverage are disputed by the
beneficiary. Having considered the limited applicability of this
important clarification, we believe the increased volume of notices and
reconsiderations, and the associated increase in expenses, will not
have a significant impact on contracting health plans and HCPPs.
The new process for making expedited determinations and
reconsiderations in certain circumstances requires a modification of
existing appeals processes. In particular, contracting health plans
that do not currently have the process must develop procedures, train
staff, and maintain a daily availability of health professionals
necessary to handle an anticipated but unpredictable volume of cases
and the diverse, complex coverage issues usually associated with
serious, time-sensitive situations. We anticipate a net increase in the
number of determinations and reconsiderations due to an increase in
standard cases as well as a new, but smaller volume of expedited
reviews. This will occur because of the public attention being given to
appeal and expedited review rights, and, to a lesser degree, because of
fewer disenrollments. The volume increase is anticipated despite the
substitution of expedited reviews for a number of standard
determinations and reconsiderations. We do not believe, however, that
the net increase in the cost of the appeals system resulting from this
modification will have a significant impact on HMOs, CMPs, and HCPPs as
set forth in the RFA.
We estimate, based on 450 health plans, that the clarification
regarding discontinuations will cost approximately $30 million across
all plans (100,000 new reconsiderations x $300 per notice). Our
estimates for the expedited review requirements for the same number of
plans are the following: $9 million for development and training
($20,000 per plan); $20 million for expedited organization
determinations (50,000 determinations x $400 per expedited
determination); and $10 million for expedited reconsiderations (12,500
reconsiderations x $800 per reconsideration). The total estimated
economic impact is $69 million in the first year and $60 million
annually thereafter.
There is no direct impact on the Medicare trust funds from these
costs to the plans because there is no payment adjustment to Medicare
managed care plans associated with this rulemaking.
We anticipate that, while this final rule will affect our
administrative costs associated with the Medicare reconsideration
contract, these costs will be negligible. The availability of expedited
reviews and the clarification regarding discontinuations of care may
have a significant impact on the reconsideration contractor's volume of
reviews. However, although it is difficult to estimate, we believe the
additional cost of this contract will not exceed $1 million per year.
The number of Medicare enrollees in health plans that also have
commercial (and often Medicaid) enrollments, varies greatly. Thus, it
is very difficult to estimate the average net costs to contracting
health plans. Given the degree of variability, we estimate average net
costs to entities to implement the provisions of this regulation to
range between $20,000 and $200,000 annually. Entities with revenues of
$5 million or less annually or nonprofit organizations are considered
small entities for purposes of this regulation. Although 99 of 353
current contracting health plans are nonprofit and considered small
entities for the purpose of preparing an RFA, we do not believe the
annual cost to prepaid plans of implementing these provisions will be
significant since net cost to these entities will not constitute a
substantial portion of their annual revenues.
Therefore, we are not preparing analyses of this final rule for
either the RFA or section 1102(b) of the Act because we have
determined, and the Secretary certifies, that this rule will not have a
significant economic impact on a substantial number of small entities
or a significant economic impact on the operations of a substantial
number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects in 42 CFR Part 417
Administrative practice and procedure, Grant programs-health,
Health care, Health facilities, Health insurance, Health maintenance
organizations (HMO), Loan programs-health, Medicare, Reporting and
recordkeeping requirements.
42 CFR chapter IV is amended as set forth below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
Part 417 is amended as set forth below:
1. The authority citation for part 417 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public
Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9); and 31
U.S.C. 9701.
2. In Sec. 417.600, the introductory text of paragraphs (b) and
(b)(3) is republished, and paragraph (b)(3)(ii) is revised to read as
follows:
Sec. 417.600 Basis and scope.
* * * * *
(b) Scope. This subpart sets forth--
* * * * *
(3) The responsibility of the HMO or CMP--
* * * * *
(ii) To ensure all Medicare enrollees have a complete written
explanation of their grievance and appeal rights, the availability of
expedited reviews, the steps to follow, and the time limits for each
procedure; and
* * * * *
3. In Sec. 417.604, paragraph (b)(4) is revised to read as follows:
Sec. 417.604 General provisions.
* * * * *
(b) Limits on applicability of this subpart.
* * * * *
(4) Physicians and other individuals who furnish services under
arrangement with an HMO or CMP have no right of appeal under this
subpart, except as provided in Secs. 417.609(c)(4) and 417.617(c)(4),
which allow physicians and other health professionals to act on behalf
of an enrollee in time-sensitive situations when an organization
determination or reconsideration is being requested.
* * * * *
4. In Sec. 417.606, the introductory text to paragraph (a) is
republished, and new paragraph (a)(4) is added to read as follows:
Sec. 417.606 Organization determinations.
(a) Actions that are organization determinations. An organization
determination is any determination made by an HMO or CMP with respect
to any of the following:
* * * * *
[[Page 23375]]
(4) Discontinuation of a service (such as a skilled nursing
facility discharge), if the enrollee disagrees with the determination
that the service is no longer medically necessary.
* * * * *
5. In Sec. 417.608, the introductory text of paragraph (b) is
republished, and paragraphs (a), (b)(2), and (c) are revised to read as
follows:
Sec. 417.608 Notice of adverse organization determination.
(a) If an HMO or CMP makes an organization determination that is
partially or fully adverse to the enrollee, it must notify the enrollee
of the determination--
(1) Within 60 days of receiving the enrollee's request for payment
for services; or
(2) As specified in Sec. 417.609(c)(3) for expedited organization
determinations.
(b) The notice must--
* * * * *
(2) Inform the enrollee of his or her right to a reconsideration,
including the right to and conditions for obtaining an expedited
reconsidered determination.
(c) The failure to provide the enrollee with timely notification of
an adverse organization determination as specified in paragraph (a) of
this section or in Sec. 417.609(b) (concerning time frames for
expediting certain organization determinations) constitutes an adverse
organization determination and may be appealed.
6. A new Sec. 417.609 is added to read as follows:
Sec. 417.609 Expediting certain organization determinations.
(a) An enrollee, or an authorized representative of the enrollee,
may request that an organization determination as defined in
Secs. 417.606(a)(3) and (a)(4) be expedited. The request may be made
orally to the HMO or CMP.
(b) The HMO or CMP must maintain procedures for expediting
organization determinations when, upon request from an enrollee or
authorized representative of the enrollee, the organization decides
that making the determination according to the procedures and time
frames set forth in Sec. 417.608(a)(1) could seriously jeopardize the
life or health of the enrollee or the enrollee's ability to regain
maximum function.
(c) The procedures must include the following:
(1) Receipt of oral requests, followed by written documentation of
the oral requests.
(2) Prompt decision-making regarding whether the request will be
expedited, or handled within the standard time frame set forth at
Sec. 417.608(a)(1), including notification of the enrollee if the
request is not expedited.
(3) Notification of the enrollee, and the physician as appropriate,
as expeditiously as the enrollee's health condition requires, but
within 72 hours of the request. An extension of up to 10 working days
is permitted if requested by the enrollee or if the HMO or CMP finds
that additional information is necessary and the delay is in the
interest of the enrollee.
(i) Notification must comply with Sec. 417.608(b), concerning the
content of a notice of adverse organization determination.
(ii) If the initial notification is not in writing, written
confirmation must be mailed to the enrollee within 2 working days.
(iii) In cases for which the HMO or CMP must receive medical
information from a physician or provider not affiliated with the HMO or
CMP, the time standard begins with receipt of the information.
(4) Granting the request of a physician, regardless of whether the
physician is affiliated with the organization or not, to expedite the
enrollee's request.
7. Section 417.614 is revised to read as follows:
Sec. 417.614 Right to reconsideration.
Any party who is dissatisfied with an organization determination or
with one that has been reopened and revised may request reconsideration
of the determination in accordance with the procedures of Sec. 417.616,
concerning a request for reconsideration, or Sec. 417.617, concerning
certain expedited reconsiderations.
8. In Sec. 417.616, the introductory text to paragraph (a) is
republished, and a new paragraph (a)(4) is added to read as follows:
Sec. 417.616 Request for reconsideration.
(a) Method and place for filing a request. A request for
reconsideration must be made in writing and filed with--
* * * * *
(4) In the case of a request for an expedited reconsideration, as
provided for in Sec. 417.617 (concerning certain expedited
reconsiderations), the HMO or CMP.
* * * * *
9. A new Sec. 417.617 is added to read as follows:
Sec. 417.617 Expediting certain reconsiderations.
(a) An enrollee, or an authorized representative of the enrollee,
may request that a reconsideration be expedited. The request may be
made orally to the HMO or CMP.
(b) The HMO or CMP must maintain procedures for expediting
reconsiderations when, upon request from an enrollee or an authorized
representative of the enrollee, the organization decides that the
longer time frames permitted in Sec. 417.620(c) could seriously
jeopardize the life or health of the enrollee or the enrollee's ability
to regain maximum function.
(c) The procedures must comply with the requirements for
reconsidered determinations set forth in Secs. 417.614 through 417.626
and include the following items:
(1) Receipt of oral requests, followed by written documentation of
the oral requests.
(2) Prompt decision-making regarding whether the request will be
expedited or handled within the standard time frame of Sec. 417.620(c),
including notification of the enrollee if the request is not expedited.
(3) Notification of the enrollee, and the physician as appropriate,
as expeditiously as the enrollee's health condition requires, but
within 72 hours of the request. An extension of up to 10 working days
is permitted if requested by the enrollee or if the HMO or CMP finds
that additional information is necessary and the delay is in the
interest of the enrollee.
(i) Notification must comply with Sec. 417.624(b), concerning the
content of a notice of a reconsidered determination.
(ii) If the initial notification is not in writing, written
confirmation must be mailed to the enrollee within 2 working days.
(iii) In cases for which the HMO or CMP must receive medical
information from a physician or provider not affiliated with the HMO or
CMP, the time standard begins with receipt of the information.
(4) Granting the request of a physician, regardless of whether the
physician is affiliated with the organization or not, to expedite the
request.
8. Section 417.618 is revised to read as follows:
Sec. 417.618 Opportunity to submit evidence.
The HMO or CMP must provide the parties to the reconsideration
reasonable opportunity to present evidence and allegations of fact or
law, related to the issue in dispute, in person as well as in writing.
In the case of an expedited reconsideration, the opportunity to present
evidence is limited by the short time frames for making decisions, and
[[Page 23376]]
the organization must inform the enrollee, or the authorized
representative of the enrollee, of the conditions for submitting the
evidence.
9. In Sec. 417.620, paragraphs (c), (d), and (e) are revised to
read as follows:
Sec. 417.620 Responsibility for reconsideration; time limits.
* * * * *
(c) The HMO or CMP must issue the reconsidered determination to the
enrollee, or submit the explanation and file to HCFA within 60 calendar
days from the date of receipt of the request for reconsideration. In
the case of an expedited reconsideration, the HMO or CMP must issue the
reconsidered determination as specified in Sec. 417.617(c)(3) or submit
the explanation and file to HCFA within 24 hours of its determination,
the expiration of the 72-hour review period, or the expiration of the
extension.
(d) For good cause shown, HCFA may allow extensions to the time
limit set forth in paragraph (c) of this section.
(e) Failure by the HMO or CMP to provide the enrollee with a
reconsidered determination within the time limits described in
paragraph (c) of this section or to obtain a good cause extension
described in paragraph (d) of this section constitutes an adverse
determination, and the HMO or CMP must submit the file to HCFA.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance)
Dated: March 19, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Dated: April 11, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-11182 Filed 4-29-97; 8:45 am]
BILLING CODE 4120-01-P
