[Federal Register Volume 59, Number 135 (Friday, July 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17221]
[[Page Unknown]]
[Federal Register: July 15, 1994]
BILLING CODE 4120-01-P
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
42 CFR Parts 417, 431, 434, and 1003
RIN 0991-AA44
Medicare and State Health Care Programs: Fraud and Abuse, Civil
Money Penalties and Intermediate Sanctions for Certain Violations by
Health Maintenance Organizations and Competitive Medical Plans
AGENCY: Office of the Secretary, HHS, Office of Inspector General (OIG)
and the Health Care Financing Administration (HCFA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule implements sections 9312(c)(2), 9312(f), and
9434(b) of Public Law 99-509, section 7 of Public Law 100-93, section
4014 of Public Law 100-203, sections 224 and 411(k)(12) of Public Law
100-360, and section 6411(d)(3) of Public Law 101-239. These provisions
broaden the Secretary's authority to impose intermediate sanctions and
civil money penalties on health maintenance organizations (HMOs),
competitive medical plans, and other prepaid health plans contracting
under Medicare or Medicaid that (1) substantially fail to provide an
enrolled individual with required medically necessary items and
services; (2) engage in certain marketing, enrollment, reporting, or
claims payment abuses; or (3) in the case of Medicare risk-contracting
plans, employ or contract with, either directly or indirectly, an
individual or entity excluded from participation in Medicare. The
provisions also condition Federal financial participation in certain
State payments on the State's exclusion of certain prohibited entities
from participation in HMO contracts and waiver programs. This final
rule is intended to significantly enhance the protections for Medicare
beneficiaries and Medicaid recipients enrolled in a HMO, competitive
medical plan, or other contracting organization under titles XVIII and
XIX of the Social Security Act.
EFFECTIVE DATE: These rules are effective September 13, 1994.
FOR FURTHER INFORMATION, CONTACT:
Zeno W. St. Cyr, II, Legislation, Regulations, and Public Affairs
Staff, OIG, (202) 619-3270 or
Marty Abeln, Office of Managed Care, HCFA, (202) 205-9582 or
Mike Fiore, Medicaid Bureau, HCFA, (410) 966-4460
SUPPLEMENTARY INFORMATION:
I. Background
A. Introduction
Managed care plans, such as health maintenance organizations
(HMOs), competitive medical plans (CMPs), and health insuring
organizations (HIOs) are entities that provide enrollees with
comprehensive, coordinated health care in a cost-efficient manner.
Payment for these plans is generally made on a prepaid, capitation
basis. The goal of prepaid health care delivery is to control health
care costs while at the same time providing enrollees with affordable,
coordinated, quality health care services. Titles XVIII and XIX of the
Social Security Act (the Act) authorize contracts with managed health
care plans for the provision of covered health services to Medicare
beneficiaries and Medicaid recipients.
B. Medicare
Section 1876 of the Act provides for Medicare payment at
predetermined rates to eligible organizations that have entered into
risk contracts with HFCA, or for payment of reasonable costs to
eligible organizations that have entered into cost contracts. Eligible
organizations include HMOs that have been federally qualified under
section 1310(d) of title XIII of the Public Health Service Act, and
CMPs that meet the requirements of section 1876(b)(2) of the Act.
Medicare enrollees of risk-contracting CMPs or HMOs are required to
receive covered services only through the organization, except for
emergency services and urgently needed out-of-area services. In the
case of a cost contract, the Medicare beneficiary may also receive
services outside the organization, with Medicare paying for the
services through the general Medicare fee-for-service system. If an HMO
or CMP fails to comply with a contract provision, the Secretary may
decide to not renew or to terminate the contract. Regulations governing
nonrenewal of a contract are found at 42 CFR 417.492, and regulations
governing termination of a contract are at 42 CFR 417.494.
C. Medicaid
Section 1903(m) of the Act contains requirements that apply to
State Medicaid contracts for the provision, on a risk basis, either
directly or through arrangements, of at least certain specified
services (``comprehensive services''). HCFA regulations at 42 CFR part
434 implement the requirements in section 1903(m) and contain other
requirements applicable to Medicaid contracts generally. Section 434.70
provides that HCFA may withhold Federal matching payments, known as
Federal financial participation (FFP), for State expenditures for
services provided to Medicaid recipients when either party to a
contract substantially fails to carry out the terms of the contract.
D. New Legislation
1. The Omnibus Budget Reconciliation Act of 1986
Section 9312(c)(2) of Public Law 99-509, the Omnibus Budget
Reconciliation Act of 1986 (OBRA 86), added section 1876(f)(3) to the
Act. This provision authorizes the Secretary to suspend enrollment of
Medicare beneficiaries by an HMO/CMP or to suspend payment to the HMO/
CMP for individuals newly enrolled, after the date the Secretary
notifies the organization of noncompliance with the requirement in
section 1876(f)(1) that limits enrollment to no more than 50 percent
Medicare beneficiaries and Medicaid recipients. Prior to OBRA 86,
HCFA's only recourse against an organization for noncompliance with any
contract provisions was to non-renew or initiate termination of the
contract. The new authority provides alternative remedies that may be
used in place of or in addition to contract nonrenewal or termination
for organizations that do not comply with the enrollment composition
requirement.
Additionally, sections 9312(f) and 9434(c) of OBRA 86 added
sections 1876(i)(6) and 1903(m)(5), respectively, to the Act. These
provisions authorize a civil money penalty not greater than $10,000 for
each instance of failure by an organization with a Medicare risk
contract, or certain organizations with a comprehensive risk contract
under Medicaid, to provide required medically necessary items or
services to Medicare or Medicaid enrollees if the failure adversely
affects (or has the likelihood of adversely affecting) the enrollee.
2. The Medicare and Medicaid Patient and Program Protection Act of 1987
Section 7 of Public Law 100-93, the Medicare and Medicaid Patient
and Program Protection Act of 1987 (MMPPPA), added section 1902(p) of
the Act, which grants States the authority to exclude individuals or
entities from participation in their Medicaid programs for any of the
reasons that constitute a basis for exclusion from Medicare under
sections 1128, 1128A, or 1866(b)(2) of the Act. In addition, section 7
of MMPPPA established a new condition that States must meet in order to
receive FFP for payments to HMOs or entities furnishing services under
a waiver approved under section 1915(b)(1) of the Act. The latter
provision conditioned FFP upon a State's providing that it will exclude
from participation, as an HMO or an entity furnishing services under a
section 1915(b)(1) waiver, any entity that could be excluded under
section 1128(b)(8) of the Act (that is, any individual or entity
against whom criminal or civil penalties have been imposed). FFP is
also conditioned upon a State excluding an entity that has, directly or
indirectly, a substantial contractual relationship with a person
described in section 1128(b)(8)(B) of the Act.
3. The Omnibus Budget Reconciliation Act of 1987
Section 4014 of Public Law 100-203, the Omnibus Budget
Reconciliation Act of 1987 (OBRA 87), provides the Department with
increased penalty amounts and greater statutory authority and
flexibility to take action against HMOs or CMPs that commit certain
abuses. This authority also may be exercised in addition to or in place
of initiating contract termination proceedings. Section 4014 of OBRA 87
amends section 1876(i)(6) of the Act to authorize the Secretary to
impose civil money penalties, suspend enrollment, and suspend payments
for newly enrolled individuals in the case of an organization with a
Medicare contract (both risk and cost contract) that the Secretary
determines has (1) failed substantially to provide required medically
necessary items and services to Medicare enrollees if the failure
adversely affects (or has the likelihood of adversely affecting) the
enrollee; (2) imposed premiums on Medicare enrollees in excess of
permitted premium amounts; (3) acted to expel or refused to reenroll an
individual in violation of section 1876 of the Act; (4) engaged in any
practice that can reasonably be expected to deny or discourage
enrollment (except as permitted under section 1876) by Medicare
enrollees whose medical condition or history indicates a need for
substantial future medical services; (5) misrepresented or falsified
information provided under section 1876 to the Secretary, an
individual, or any other entity; or (6) fails to comply with the
requirements of section 1876(g)(6)(A) regarding prompt payment of
claims. Under OBRA 87, the maximum allowable civil money penalty that
can be imposed for each determination of a violation is increased to
$25,000, or $100,000 in the case of a HMO or CMP determined to have
committed acts in (4) above or for misrepresenting or falsifying
information furnished to the Secretary under section 1876.
4. The Medicare Catastrophic Coverage Act of 1988
The Medicare Catastrophic Coverage Act of 1988 (MCCA), Public Law
100-360, amended sections 1876 and 1903(m) of the Act by adding new
civil money penalty authority for violations occurring within the
Medicare program and by applying the OBRA 87 HMO and CMP intermediate
sanction and civil money penalty authority to the Medicaid program.
Section 224 of MCCA amended section 1876(i)(6)(B)(i) of the Act. In
addition to other civil money penalties, in cases where Medicare
enrollees are charged more than the allowable premium, section 224
imposes a penalty which doubles the amount of excess premium charged by
the HMO or CMP. The excess premium amount is deducted from the penalty
and returned to the Medicare enrollee. Section 224 also imposes a
$15,000 penalty for each individual not enrolled if it is determined
that the HMO or CMP engaged in any practice which denied or discouraged
enrollment (except as permitted under section 1876 of the Act) by
Medicare enrollees whose medical condition or history indicated a need
for substantial future medical services.
Section 411(k)(12) of MCCA amended section 1903(m)(5) of the Act to
provide the Secretary with authority to impose civil money penalties on
contracting organizations, and to deny payments for new enrollees of
contracting organizations, in cases where the Secretary determines that
an organization has (1) failed substantially to provide required
medically necessary items and services to Medicaid enrollees if the
failure adversely affects (or has the likelihood of adversely
affecting) the enrollee; (2) imposed premiums on Medicaid enrollees in
excess of premium amounts permitted under title XIX of the Act; (3)
discriminated among individuals in violation of the provisions of
section 1903(m)(2)(A)(v) of the Act, including expelling or refusing to
reenroll an individual or engaging in any practice which could
reasonably be expected to deny or discourage enrollment (except as
permitted under section 1903(m)) by Medicaid recipients whose medical
condition or history indicates a need for substantial future medical
services; or (4) misrepresented or falsified information provided under
section 1903 of the Act to the Secretary, State, an individual, or any
other entity.
Under the amendments to section 1903(m)(5) made by MCCA, the
maximum allowable civil money penalty that can be imposed for each
determination of a violation is increased to $25,000, or $100,000 in
the case of a determination that a contracting organization has (1)
violated the provisions of section 1903(m)(2)(A)(v) by expelling or
refusing to reenroll an individual or by engaging in a practice which
denied or discouraged enrollment (except as permitted under section
1903(m)) by Medicaid recipients whose medical condition or history
indicated a need for substantial future medical services; or (2)
misrepresented or falsified information furnished to the Secretary or
State under section 1903(m).
Additionally, in cases where Medicaid enrollees are charged more
than the allowable premium, section 411(k)(12) of MCCA amended section
1903(m)(5) of the Act to authorize imposition of an additional penalty
which doubles the amount of excess premium charged by the contracting
organization, with the excess premium amount deducted from the penalty
and returned to the Medicaid enrollee. Imposition of an additional
$15,000 penalty is authorized for each individual not enrolled if it is
determined that the contracting organization has violated the
provisions of section 1903(m)(2)(A)(v) by expelling or refusing to
reenroll an individual or by engaging in any practice which denied or
discouraged enrollment (except as permitted under section 1903(m)) by
Medicaid recipients whose medical condition or history indicated a need
for substantial future medical services.
5. The Omnibus Budget Reconciliation Act of 1989
Public Law 101-239, the Omnibus Budget Reconciliation Act of 1989
(OBRA 89), amended sections 1876 and 1902(p) of the Act to provide the
Secretary with an additional civil money penalty and intermediate
sanction authority for violations occurring within the Medicare program
and with additional conditions for FFP.
Section 6411(d)(3)(A) of OBRA 89 amended section 1876(i)(6)(A) of
the Act to authorize the Secretary to restrict enrollment in, suspend
payment to, and impose a civil money penalty against an organization
with a risk contract that (1) employs or contracts with any individual
or entity excluded from Medicare participation under sections 1128 or
1128A of the Act for the provision of health care, utilization review,
medical social work, or administrative services; or (2) employs or
contracts with any entity for the provision of such services (directly
or indirectly) through an excluded individual or entity. The maximum
allowable civil money penalty that may be imposed for each
determination of a violation of this nature is $25,000.
Section 6411(d)(3)(B) of OBRA 89 amended section 1902(p)(2) of the
Act to condition FFP in payments to HMOs, or to entities furnishing
services under a Sec. 1915(b)(1) waiver, upon the State's barring the
following entities from participation as HMOs or section 1915(b)(1)
waiver participants: (1) Any organization that employs or contracts
with any individual or entity excluded from Medicaid participation
under sections 1128 or 1128A of the Act for the provision of health
care, utilization review, medical social work, or administrative
services; or (2) any organization that employs or contracts with any
entity for the provision of such services (directly or indirectly)
through an excluded individual or entity.
II. Provisions of the Proposed Rule
On July 22, 1991, we published a proposed rule with a 60-day
comment period (56 FR 33403) that would amend 42 CFR Part 417, Subpart
C; Part 431, Subpart B; Part 434, Subparts C, D, E, and F; and Part
1003 specifically by establishing sanctions and civil money penalties
which may be imposed on contracting organizations that substantially
fail to provide an enrollee with required medically necessary items and
services or that engage in certain marketing, enrollment, reporting,
claims payment, employment, or contracting abuses.
In the July 1991 proposed rule, we proposed to incorporate the
Medicare sanction provisions of OBRA 86, OBRA 87, MCCA, and OBRA 89
into agency regulations largely without substantial modifications.
Under the proposed regulations, after HCFA (or a State) determines that
a contracting organization has committed a violation under sections
1876(i)(6)(A) or 1903(m)(5)(A), information pertaining to the violation
would be provided to the OIG.
Briefly, our proposed changes to the regulations were designed to
implement the Department's new authorities by detailing HCFA's (and
States') role in imposing intermediate sanctions, and the OIG's role in
imposing civil money penalties, for certain abuses committed by
contracting organizations providing health care items or services to
Medicare beneficiaries or Medicaid recipients. We proposed that--
Once it is determined that a Medicare contracting
organization has committed a violation, and in place of initiating
contract termination proceedings, HCFA may:
--Require the contracting organization to suspend enrollment of
Medicare beneficiaries;
--Suspend payments to the contracting organization for individuals
enrolled after a specified date.
If a State Medicaid agency determines that a Medicaid
contracting organization has committed a violation, it may, in place of
terminating the contract, recommend to HCFA that HCFA's intermediate
sanction authority be exercised to deny payment to the contracting
organization for Medicaid recipients enrolled with the organization
after a specified date. This recommendation takes effect absent HCFA
action.
In addition to or in place of other remedies available
under law, the OIG may:
--Impose a penalty of up to $25,000 for each determination that a
contracting organization has--
(1) Failed substantially to provide an enrollee with required
medically necessary items and services, if the failure adversely
affects (or has the likelihood of adversely affecting) the enrollee; or
(2) Committed enrollment, marketing, claims payment, or certain
reporting violations;
--Impose a penalty of up to $25,000 for each determination that a
contracting organization with a Medicare risk-sharing contract employs
or contracts with--
(1) Individuals or entities excluded from participation in Medicare,
under sections 1128 or 1128A of the Act, for the provision of health
care, utilization review, medical social work, or administrative
services; or
(2) Any entity for the provision of such services (directly or
indirectly) through an excluded individual or entity; and
--Impose a penalty of up to $100,000 for each determination that a
contracting organization has--
(1) Misrepresented or falsified information furnished under the
provisions of the statute to the Secretary or State; or
(2) Expelled or refused to reenroll an individual or engaged in any
practice that would reasonably be expected to have the effect of
denying or discouraging enrollment (except as permitted by statute) by
enrollees whose medical condition or history indicates a need for
substantial future medical services.
In cases where a civil money penalty is imposed against a
plan for charging enrollees more than the allowable premium, the OIG
will impose an additional penalty equal to double the amount of excess
premium charged by the contracting organization. The excess premium
amount will be deducted from the penalty and returned to the enrollee.
The OIG will impose an additional $15,000 penalty for each
individual not enrolled if it is determined that a contracting
organization expelled or refused to reenroll an individual or engaged
in any practice that would reasonably be expected to have the effect of
denying or discouraging enrollment (except as permitted by statute) by
enrollees whose medical condition or history indicates a need for
substantial future medical services.
The provisions also condition FFP in certain State
payments on the State's exclusion of certain entities excluded (or
excludable) from Medicare.
III. Analysis of and Responses to Public Comments
In response to the July 22, 1991 proposed rule, we received 14
timely items of correspondence. The comments were from group health
associations, State agencies, health insurance plans, and law firms. A
summary of these comments are discussed below:
A. Intermediate Sanctions
Comment: Several commenters wanted clarification on how
Sec. 417.495(a)(1), which describes the first basis for the imposition
of intermediate sanctions, will be defined. There was particular
interest expressed about the criteria by which the terms ``fails
substantially'' and ``medically necessary'' will be evaluated.
Response: In determining if an organization has violated
Sec. 417.495(a)(1), HCFA and State Medicaid agencies will make a
comprehensive three-part evaluation. Specifically, this will involve
determining if the organization has: (1) Failed substantially to
provide medically necessary items or services and this has (3)
adversely affected (or has the substantial likelihood of adversely
affecting) the enrollee. To determine if the three principal
requirements of Sec. 417.495(a)(1) have been violated, HCFA and State
Medicaid agencies will have recourse to a number of sources of
information and guidance. For Medicare, the information sources include
the attending physician, other health care personnel, the HMO or CMP,
utilization reviewers, the Peer Review Organization (PRO), the Medicare
enrollee or authorized representatives, and internal or possibly third-
party expertise. Additional sources of guidance will include clinical
practice standards; guidelines or advisories promulgated by
authoritative bodies; and Medicare law, regulations, and manuals.
States, in making an initial finding on Medicaid contractor
violations, also have a number of sources of information available to
them. These include health care experts conducting the required
periodic medical audits; the health professionals under contract to the
State to perform the annual quality review of services delivered by
HMOs and HIOs; other health consultants to the State agency; clinical
practice standards, guidelines, or advisories promulgated by
authoritative bodies; and Medicaid law, regulations, and manuals.
In making determinations of ``substantial failure,'' consideration
will be given to the impact on the health status of a Medicare or
Medicaid enrollee of not having received covered items and services
and, in cases where patterns of withholding items and services are
identified, the frequency of the events and the resulting impact on the
health status of enrollees.
In making determinations of ``medical necessity,'' HCFA and the
States will rely on their respective coverage or payment requirements
but will also utilize various sources of expert opinion (as described
above) in order to determine if required medically necessary care has
either been denied or inappropriately provided.
Comment: A commenter asked whether the same criteria used for
``medical necessity'' for Medicare and Medicaid coverage of services
will be used to determine medical necessity under the final rule.
Response: In making medical necessity decisions, Medicare and
Medicaid will continue to utilize the current oversight processes and
coverage and payment criteria. Under the intermediate sanction,
however, HCFA and States will also have recourse, on a case by case
basis, to other sources of expert information and guidance (as
described in the previous response) in making medical necessity
decisions.
Comment: A number of commenters wanted changes made to the
definition of ``adverse affect.'' One commenter suggested that the
definition is too narrow, and unreasonably requires the patient to
suffer a high degree of risk to his or her health before a sanction can
be applied. Another commenter said that the definition was too vague
and suggested amending the definition to indicate that adverse effect
is limited to the withholding of or failure to provide medically
necessary care covered by the contract. Another commenter expressed
concern that the definition of adverse affect appears to be lacking in
that it addresses only those instances in which care has been withheld
and fails to address those instances where substandard or inappropriate
care has been delivered. Still another commenter believed the
regulation should provide a definition for ``adverse affect'' that
specifically includes sanctions against HMOs that fail to provide
timely and adequate prenatal and children's preventive care.
Response: The expertise needed to determine what constitutes
``adverse effect'' are similar to those previously discussed which are
needed to evaluate ``substantial failure'' and ``medically necessary.''
HCFA and States will rely on the same sources of information and
guidance (as previously described) to determine when an enrollee has
been adversely affected by the failure to provide the required
medically necessary services.
It should be noted that in addition to a substantial failure to
provide medically necessary services, ``adverse effect'' may also be
found to be the result of providing inappropriate or substandard care.
Specifically, for medical services that are Medicare or Medicaid
approved and are found to be medically necessary, if HCFA or the State
determines that a failure to appropriately provide required services
has adversely affected (or has a substantial likelihood of adversely
affecting) an enrollee, then this will constitute a violation. This
includes Medicaid required prenatal and children's preventive care.
Comment: One commenter stated that ``adversely affects'' should be
defined in terms of a detrimental effect on the condition(s) for which
the person is seeking treatment.
Response: HCFA and State Medicaid agencies will not limit a
determination of adverse effect to only those conditions for which the
person is seeking treatment. For example, instances may arise where
beneficiaries are seeking treatment for one condition and the physician
will determine that another condition is actually the cause of their
symptoms.
Comment: One commenter stated that the penalties should apply only
to instances where the plan acts negligently or with intent to
wrongfully deny medically necessary services. Similarly, a few
commenters believed that any sanctions and/or civil money penalties
should apply only when an organization has knowingly and willfully
violated the law. Two of those commenters suggested that we add a
requirement that any violations must be ``knowingly and willfully''
committed before we impose a sanction.
Response: Sanctions will not be limited to instances where plans
act negligently or with wrongful intent. Aggravating and mitigating
factors, such as the degree of culpability of the organization, will be
considered in determining any sanction or civil money penalty. As in
all our determinations on intermediate sanctions, the scope, and
duration of the violation, as well as the level of threat to enrollee
health and safety, will be evaluated in determining the severity of a
particular sanction. Further, we believe that an absolute requirement
for ``knowingly and willfully'' violations is more stringent than the
law anticipated. We will consider evidence that an organization has
willfully violated the statute as an aggravating circumstance.
Nevertheless, we will not add the requirement that violations must be
``knowingly and willfully'' committed before the imposition of a
sanction.
Comment: One commenter asked whether it would be considered a
failure to provide medically necessary services if an HMO determined,
according to its standard procedures, that a particular service did not
qualify as an emergency or out-of-area urgently needed care and denied
the service. This commenter recommended that the regulation exclude
from any definition of ``substantial failure to provide medically
necessary services'' those circumstances in which care is not provided
based upon a medical judgment made in accord with the HMO's standard
operating policies determining coverage. In addition, the commenter
asked under what circumstances the failure of a physician, with whom
the HMO contracts on an independent contractor basis, to furnish a
medically necessary item or service can be imputed to the HMO, absent a
clear showing that the HMO knowingly contracted with a physician (or
other provider) with a history of improper treatment of patients.
Response: In general, an organization which reasonably follows
approved guidelines and policies in making medical care decisions will
not be found to have denied medically necessary services. It is
important to emphasize that we expect medical care decisions to be made
judiciously and appropriately. There may be instances when the
organization's rules are inadequate; in such circumstances we expect
the organization to protect the welfare of the beneficiary.
With respect to an HMO contracting with an independent contractor
physician, we consider the HMO responsible for the quality of care its
members receive. The HMO has a duty to ensure that the care enrollees
receive is appropriate, whether the physician or provider is an
employee of the HMO or an independent contractor. If a HMO knowingly
contracts with a provider that has a history of improper treatment
toward patients, we would consider this a serious aggravating
circumstance in determining a sanction or civil money penalty.
Comment: One commenter pointed out that not all HMOs offer all
routine covered services in their own health care centers, and
therefore must contract out with other providers to offer those
services. If it occurs that routine services cannot be scheduled
without some minor delay, under what circumstances would such a delay
result in a determination that the HMO failed substantially to provide
medically necessary services?
Response: Such a situation will be evaluated based on the judgement
of experts with whom HCFA will consult and in accordance with Medicare
law and regulations. As previously noted, these experts include
physicians, other medical personnel, the PRO, and utilization
reviewers. Factors such as the effect of delays on the beneficiary's
health and whether such delays are reasonable given the type of service
and the needs of the beneficiary will be considered. An HMO that
contracts for various services remains responsible for the quality and
timeliness of those services.
Comment: Several commenters wanted more guidance as to what
constitutes an excess premium for purposes of imposing intermediate
sanctions in Sec. 434.67(a)(2). One commenter suggested that the
regulation include language stating that HCFA approval of the premium
amount is consistent with the statutory requirement. Another commenter
believed that penalties in premium setting should be limited to
instances in which plans knowingly and intentionally seek to overcharge
beneficiaries.
Response: In Medicare contracting organizations the premiums and
other charges for Medicare enrollees are required to be the actuarial
equivalent of what a Medicare beneficiary would pay in fee-for-service
for Medicare covered services (section 1876(e)). Premium charges in
excess of the HCFA approved amount would be considered excessive.
Although premiums are not typically employed for Medicaid
contracting HMOs for Medicaid enrollees, if the State and the HMO/HIO
agreed to do so, the use of the premiums would have to be explicitly
described in the HMO/HIOs contract with the State. The use of premiums
in this way would also have to be described in the State plan, and
could not exceed the actual value of deductibles and co-payment amounts
provided for under the State plan. Both the State plan provision and
the contract terms are required to have the approval of HCFA. Therefore
any use of premiums which is not explicitly provided for in an HMO's or
HIO's contract with the State, which has been approved by HCFA, would
be in excess of a permitted premium.
Comment: Proposed Sec. 417.495(a)(8), which we have designated as
Sec. 417.500(a)(8) in this final rule, prohibits Medicare risk
contractors from employing or contracting with or through individuals
or entities (either directly or indirectly) which have been excluded
from participating in Medicare. One commenter believed this provision
placed an onerous burden on the risk contractor to conduct extensive
inquiries into the background of each of its participating providers
and subcontractors, as well as imposing an obligation to obtain from
HCFA the most recent information regarding excluded entities. In
addition, this commenter wanted clarification of the meaning of
``employing or contracting * * * (directly or indirectly) through an
excluded individual or entity,'' so the risk contractor will know the
extent of background information it must require of participating
providers and others. Further, the commenter suggested that HCFA
implement this provision by, (1) providing the risk contractor with a
periodic listing of all excluded entities; and (2) specifying that the
statutory obligation is satisfied if the risk contractor requests the
background information, checks the information furnished by the
subcontractor against the most recent list of excluded entities
provided by HCFA, and the contracting entity or entities are not on the
list.
Response: As part of its current operating procedures, HCFA makes
available to Medicare contractors the Medicare/Medicaid Sanction-
Reimbursement Report, which lists entities, contractors, and providers
excluded from Medicare. While we consider review of the sanction report
a critical step in complying with the requirement prohibiting
contracting with an excluded individual or entity, it is not conclusive
proof of having satisfied the legal obligation. In general, beyond
reviewing the sanction report, we expect a reasonable effort to comply
with this requirement. This would include reasonable activities to
verify provider credentials, and review of other relevant State and
professional records. We do not require or expect contracting
organizations to go beyond making a reasonable and conscientious effort
to comply with this requirement.
Comment: Many commenters wanted more than 15 days to respond to the
notice of intermediate sanctions. The suggested time limits ranged from
30 to 60 days with the option of additional extensions.
Response: We agree that allowing more time for an organization to
respond to a notification of sanction may be necessary in some
instances. We have revised our regulations at Sec. 417.500(b)(2) and
Sec. 434.67(c) to permit a 15 day extension to the original 15 days if
HCFA approves a written request from the organization. The request for
an extension must provide a credible explanation of why additional time
is needed and must be received by HCFA or the State agency, as
appropriate, before the end of the 15 day period following the
organization's date of notification of sanction. An extension will not
be available in instances where HCFA, or HCFA in consultation with the
State agency, finds that the organization's conduct poses a serious
threat to an enrollees' health and safety or if HCFA or the State
agency, as appropriate, judges the additional 15 days to be unnecessary
for the organization to respond.
Comment: Two commenters wanted the regulation to specify the
information that would be provided in the notice of intermediate
sanctions. Another commenter suggested the following information be
provided: (1) The sanction or sanctions to be imposed; (2) the
effective date and duration of the sanction; (3) the authority for the
sanction; (4) the reason for the sanction; (5) specific information
regarding the organization's right to contest the determination,
including timeframes for submission of the organization's request for
reconsideration, the permissible content of the request and supporting
materials, and to whom the request should be submitted; and (6)
information regarding any rights to hearing or appeal, including
judicial review, that the organization may have if the sanction is
imposed. In addition, the organization should be provided with copies
of any documents on which HCFA or the State Agency relied in
determining that a violation occurred.
Response: Confidentiality may not allow the release of certain
documents which have influenced HCFA's decision to impose a sanction.
However, most of the information listed above will be provided to an
organization in the notification of sanction. Specifically, the notice
of sanction will provide: (1) The sanction or sanctions to be imposed,
(2) the reason for the sanction, (3) the authority for the sanction,
(4) the effective date of the sanction, and (5) the time available for
submission of the request for reconsideration and to whom the request
should be submitted.
HCFA will specify the above information in operating procedures
rather than in the regulations. Under the intermediate sanctions,
appeal rights will be limited to the reconsideration period.
Comment: One commenter wanted the following information provided by
HCFA following a reconsideration: (1) Whether the intermediate sanction
will be imposed; (2) the reasons for imposing the sanction, addressing
the evidence and arguments submitted by the organization; (3) the
effective date and duration of the sanction; and (4) specific
information regarding the organization's right to appeal the imposition
of a sanction.
Response: We will provide this information at the conclusion of a
reconsideration, with two exceptions. First, the duration of the
sanction will depend largely on the organization's corrective action
plan and willingness and ability to resolve the problem(s). An
organization that cannot immediately correct a deficiency for which it
has been sanctioned will be expected to submit a corrective action plan
to HCFA. This plan will be the organization's description of how and
when it will resolve the problems that caused the sanctions to be
imposed. Because each corrective action plan is unique, the duration of
the sanction cannot be specified at the time it is imposed. Second,
there will not be additional appeal steps beyond the initial
reconsideration. HCFA will, however, act as quickly as possible when an
organization believes it has resolved the violation(s) and wishes to be
re-evaluated.
Comment: One commenter recommended that the Medicaid regulations
contain minimum standards for the State review procedure. In addition,
this commenter believed that an organization sanctioned by a State
should have an opportunity for a separate review determination on the
Federal level which would supersede any State determination.
Response: State Medicaid agencies are currently responsible for
establishing and implementing procedures to monitor HMO and HIO
contracts. The areas States monitor through these procedures are
broader than the areas identified in this rule. Because States already
have these monitoring and review procedures in place, we prefer to
allow States to implement these additional responsibilities within
their current activities. We will not, in these regulations, specify
national standards for this one aspect of the overall monitoring and
review of HMO and HIO contracts conducted by States.
In response to the second comment, the Medicaid program is
administered by States as opposed to the Federal government. We stated
in the preamble of the proposed rule that we believe that States are in
the best position to monitor the identified violations and to make a
determinations as to whether a violation has occurred. The proposed
rule and this final rule offer an additional opportunity for an HMO or
HIO to receive a reconsideration of a State's determination. We do not
see the need for a third level of review and determination.
Comment: A commenter recommended that HCFA require States to
collect information quarterly from Medicaid participating HMOs on the
timeliness and frequency of prenatal visits for each Medicaid enrollee.
The commenter also recommended requiring States to annually submit data
to HCFA demonstrating that the State's rates for prenatal and Early
Periodic Screening Diagnosis and Testing (EPSDT) services are adequate
to ensure access under Medicaid's statutory requirements.
Response: This comment goes beyond the scope of this rulemaking,
which implements legislative authority for intermediate sanctions and
civil money penalties for HMOs (and some HIOs). HMOs and HIOs are not
yet obligated to pay EPSDT providers State rates. The adequacy of such
State rates is not relevant in the case of HMO enrollees. Note,
however, section 1926(a) of the Social Security Act requires that State
Medicaid agency payments must be sufficient to enlist enough providers
to ensure that obstetric and pediatric services are available to
Medicaid recipients at least to the same extent available to the
general population. HCFA is developing a proposed rule which would
implement the provisions of section 1926(a) in regulations.
Comment: One commenter believed that, without additional FFP, the
Federal requirements mandating additional specific monitoring functions
under this regulation would be burdensome for the States.
Response: HCFA expects States to integrate these new areas of
monitoring into their existing monitoring and review activities; for
example, those required for monitoring an HMO's enrollment and
termination practices and grievance procedures. There will continue to
be FFP in the costs for conducting these activities at each State's
current Federal matching rate.
Comment: One commenter recommended that HCFA affirmatively adopt
those State decisions with which it agrees. The commenter believes this
will mean that HCFA will more closely examine State agency
determinations or decisions if it is required to formally adopt them.
Response: The regulation at Sec. 434.67(b) provides for a mechanism
whereby HCFA must uphold or reject a State decision that a sanction be
or not be imposed. We believe that HCFA's consequent imposition of a
sanction or decision not to impose a sanction provides sufficient
formal affirmative adoption or rejection of a State's recommendation.
Comment: One commenter recommended that the final regulation should
specify that the informal appeal must be conducted by an official
``experienced and knowledgeable'' about contracting under sections 1876
or 1903(m) of the Act.
Response: HCFA will ensure that sanction reconsiderations are
evaluated by qualified HCFA officials. However, we do not believe it is
necessary to mandate specific qualifications in the regulation.
Comment: A number of commenters were interested in HCFA's approach
to beneficiary complaints. HCFA was encouraged to add provisions to the
intermediate sanctions establishing timeframes and methodologies for
the investigation of complaints. A specific recommendation was made to
amend 42 CFR part 417 to require HCFA to have procedures to monitor and
investigate violations of section 1876 of the Act. Other commenters
believed that HCFA should require contracting organizations to
publicize the availability of intermediate sanctions along with
information on how to file complaints. Another commenter suggested the
rules specify that the complainant receive: (1) Verification of receipt
of the complaint; (2) a copy of the notice of intermediate sanction;
(3) a copy of the HMOs response, if any, and; (4) a copy of the
reconsideration determination. Finally, two commenters wanted a time
limit placed on HCFA's investigation and review of beneficiary
complaints, suggesting a 60-day deadline for processing the initial
complaint and informing the complainant on the outcome of the
investigation.
Response: The purpose of the intermediate sanction is to provide
more tools and authority to protect the Medicare beneficiary or
Medicaid recipient. HCFA already has procedures in the regional offices
and State Medicaid agencies for reporting and responding to beneficiary
or recipient complaints. In addition, we already require that HMOs have
a formal appeals process through which Medicare enrollees may submit
complaints to HCFA. Information about this process must be included in
written marketing materials, as set forth in Sec. 417.426. Thus, if an
HMO or competitive medical plan denies a service or payment for a
service to a Medicare enrollee, the HMO or competitive medical plan
must advise the enrollee of his or her rights under Medicare that
afford the beneficiary the right to appeal the denial to HCFA.
Establishing a separate complaint mechanism for the intermediate
sanctions regulation would only serve to divert scarce resources from
oversight and enforcement activities. Nevertheless, enrollee complaints
will continue to be used as a key indicator of potential problems in
Medicare or Medicaid contracting plans as well as identifying potential
problems where intermediate sanctions or civil money penalties would be
effective.
Comment: One commenter stated that an appropriate sanction for
marketing abuse would be to require future marketing materials and/or
membership materials to publicize the imposition of sanctions.
Response: This goes beyond our legislative authority. We are
constrained, by the provisions of the enabling legislation, in the
sanctions we may apply.
Comment: Two commenters were concerned that if the informal
reconsideration results in a reversal of the initial determination,
there is no provision to ensure that notice of the decision to reverse
is provided to the OIG.
Response: We agree that it is important that OIG be notified by
HCFA if, in the course of reconsideration or at a later time, a
sanction is rescinded. The single determination applies to the initial
determination and HCFA will promptly forward to the OIG information on
reversals or termination of sanctions. Generally, HCFA will only notify
OIG of an intermediate sanction after HCFA has confirmed the imposition
of a sanction. This confirmation of sanction will occur at the
conclusion of the notification of sanction period or at the end of a
reconsideration.
Comment: One commenter believed that the sanctions available to
HCFA were too limited and recommended that this final regulation
include a third category of sanctions to include such additional
sanctions as HCFA considers appropriate and as justice requires.
Another commenter specifically suggested we broaden the intermediate
sanctions to include sanctions for inappropriate marketing activities
and noncompliance with appeal timeframes.
Response: We cannot broaden the intermediate sanctions regulation
by introducing a third new category of sanctions that would be
determined by what HCFA would consider ``appropriate and as justice
requires.'' To do so would exceed our statutory authority.
With regard to applying the intermediate sanctions to marketing
violations, section 1876(i)(6)(A)(V) of the Act authorizes HCFA to
impose sanctions if an HMO/CMP misrepresents or falsifies information
that it furnishes under section 1876 of the Act to HCFA, an individual,
or to any other entity. We believe this provides us authority to
address a wide range of potential marketing abuses. One of the
sanctions provided by the statute is the suspension of enrollment
Medicare beneficiaries by the HMO/CMP (section 1876(i)(B)(ii)). Because
we consider marketing activities to be an integral part of the
enrollment process, we believe the statute gives HCFA the authority to
require the offending HMO/CMP to suspend marketing activities directed
to Medicare beneficiaries. Therefore, in this final rule, we clarify
this by adding a new Sec. 417.500(d)(3). Accordingly, Secs. 417.500
(d)(1)-(d)(3) require the sanctioned HMO/CMP to stop accepting
applications for enrollment made by Medicare beneficiaries, suspend
payment to the HMO/CMP for Medicare beneficiaries enrolled during the
sanction period, and, finally, requires the HMO/CMP to suspend all
marketing activities to Medicare beneficiaries.
Additionally, we believe that, even in cases where HCFA imposes the
suspension of payment sanction, HCFA may require the HMO/CMP to suspend
marketing activities to Medicare beneficiaries. We believe that, if
HCFA could suspend all enrollment entirely at its discretion,
conditions could be attached to a decision to permit an HMO/CMP to
continue to enroll new members--namely that actual marketing to new
members cease until the sanction is lifted.
Noncompliance with appeal time frames may also be a violation of
section 1876(i)(6)(A)(v) if, for example, HCFA finds that an HMO/CMP is
misrepresenting information regarding its appeal process or is
providing beneficiaries inaccurate information regarding appeal time
frames. In addition, since the Medicare appeals process protects the
Medicare enrollee's right to appeal an HMO's or competitive medical
plan's decision not to furnish or pay for services, a violation of the
appeals process is a failure to substantially provide required
medically necessary items and services.
Comment: One commenter requested that an organization which is
under the sanction of suspension of new enrollment applications also be
prohibited from any new subscriber marketing activities. Another
commenter asked what the implications for the organization are if an
intermediate sanction of suspension of enrollment is imposed. Does the
organization still have an obligation to conduct the annual open
enrollment period if it occurs during the sanction period? Also, if the
sanction is the suspension of payments for new enrollees, will the
organization still be required to accept new enrollees and provide
health services for which they may not be paid?
Finally, one commenter asked for a specific definition of
``suspension.'' For example, if payments are suspended, the commenter
wanted to know whether the organization can recover for services
furnished during the sanction period after the sanction is lifted. The
commenter also asked whether the organization may engage in marketing
activities during the suspension period, holding applications in
abeyance until the sanction is removed.
Response: Based on the authority granted the Secretary under
section 1876(f)(3) of the Act and established in this regulation at
Secs. 417.500 (d)(1) through (d)(3), HCFA has the authority to impose
the following penalties on offending HMOs or CMPs:
1. Require the HMO or CMP to suspend the enrollment of Medicare
beneficiaries during the sanction period; or
2. Suspend payments to the organization for Medicare beneficiaries
enrolled during the sanction period.
Depending on the severity and nature of the violation, HCFA will
determine which of the two penalties available under the intermediate
sanctions is appropriate. A discussion of the two penalties under the
intermediate sanctions available to HCFA follows.
Suspension of new Medicare enrollments: Under this sanction, HCFA
requires the HMO or CMP to cease all enrollments of Medicare
beneficiaries. On the date the sanction is effective, the plan would be
prohibited from accepting applications or otherwise enrolling any new
Medicare beneficiaries in the plan. However, individuals already
enrolled in the plan and who become Medicare eligible (age in) while
the plan is under the suspension of new enrollments, may be enrolled,
if they choose, in the plan during the sanction period. Under this
sanction, the plan would also be prohibited from engaging in any
marketing activities directed to Medicare beneficiaries.
The organization would continue to be paid by HCFA for
beneficiaries enrolled before the imposition of this sanction.
Suspension of payments: Under the suspension of payments penalty,
the HMO or CMP may continue to enroll beneficiaries but would not be
paid for those beneficiaries during the sanction period. Once the
sanction period ends, there will be a retroactive payment for
beneficiaries enrolled during the sanction period. Thus, this penalty
is purely a financial one, affecting only the withholding of the HMO's
or competitive medical plan's capitation payment for new medicare
enrollees during the sanction period.
Enrollment of new members would be allowed to continue; thus the
plan would not necessarily ``lose'' potential enrollees who would
enroll with another HMO or CMP if enrollment was suspended under
section 1876(i)(6)(B)(iii) of the Act. As was described in a previous
response to a comment, at the time an HMO or CMP is notified that it is
subject to the intermediate sanctions, the notice of sanction will
inform the plan what specific intermediate sanction has been imposed,
including what the plan must do to comply with the sanction, and the
effective date of the sanction. In addition to whatever sanction HCFA
imposes, the HMO or CMP may also be subject to civil money penalties
levied by the Office of Inspector General.
Comment: Several commenters suggested that the informal
reconsideration be required to be conducted promptly, for example,
within 30 or 60 days of receipt of the organization's evidence. In
addition, one commenter requested that the review be expedited if the
organization demonstrates that there is a pressing need for swift
action.
Response: It is our intent to conduct reconsiderations promptly.
The purpose of an intermediate sanction is to allow us to resolve a
problem quickly. Nevertheless, we do not choose to specify a time
limit. We encourage organizations to inform us of any circumstances
that require expedited reconsideration.
Comment: One commenter stated that the language in proposed
Sec. 417.495(e)(1), now designated as Sec. 417.500(e)(1), implies that
HCFA's reconsideration will inevitably result in upholding the initial
determination. They recommended the language of this paragraph be
revised to clarify that the sanctions are effective only if HCFA
decides to uphold the initial determination.
Response: We disagree with the commenters interpretation of
Sec. 417.500(e)(1) and we do not believe the recommended clarification
is necessary. We believe it is clear that the provision on the
effective date for a sanction only applies when a final decision to
impose a sanction is made. The reconsideration process is meant to be a
serious assessment of the response by the sanctioned organization. As
such, HCFA will not inevitably uphold its initial decision. If HCFA
reverses its initial decision, Sec. 417.500(e)(1) would have no
applicability.
Comment: One commenter noted that the regulation allows HCFA to
make the intermediate sanction effective immediately if the
organization's conduct poses a serious threat to an enrollee's health
and safety. The commenter stated that if the health and safety of
enrollees is at issue, HCFA should take steps to terminate the contract
in its entirety, and that intermediate sanctions are not appropriate in
such critical circumstances.
Response: There may be instances in which HCFA will impose the
intermediate sanction to stop the organization from enrollment and
marketing activities at the same time a termination action is being
initiated. We believe it is in the best interest of the enrollee that
we maintain our authority to respond simultaneously with both actions.
Comment: Three commenters wanted to know if the intermediate
sanctions could be imposed retroactively.
Response: Intermediate sanctions will always be imposed
prospectively. Civil money penalties, on the other hand, may be imposed
for conduct which has already occurred.
Comment: One commenter asked that we clarify what ``generally''
means as it appears in proposed Secs. 417.495(e)--now Sec. 417.500(e)--
and 434.67(f)(1). These sections specify that if an HMO seeks
reconsideration of a HCFA sanction, ``the intermediate sanction
generally will be effective on the date the organization is notified of
HCFA's decision.''
Response: The notice of intermediate sanction, (or notice of
reconsideration of an intermediate sanction) will specify the effective
date. Usually this will be on the date of the reconsideration notice.
We have revised these sections, however, to more clearly state that the
sanction is effective on the date specified in the sanction notice or
reconsideration notice, respectively.
Comment: One commenter suggested a definition of ``substantial''
contractual relationship under a Medicaid contract. The commenter
proposed that the regulation define ``substantial'' as greater than 5
percent of the total annual volume of payments for categories of
services under the program.
Response: We considered use of a quantitative approach to defining
a ``substantial'' contractual relationship--either a numerical dollar
amount or, as suggested by the commenter, expressed as a percent. We
dismissed such approaches because contracts of seemingly small
financial value could still have a significant effect on Medicare or
Medicaid enrollees. Furthermore, if an organization is large, with a
substantial contracting budget, even a small percent, such as 5
percent, could involve substantial sums of money. We are therefore
adhering to the definition of a ``substantial'' contractual
relationship contained in the proposed rule. Nevertheless, we will
consider relative size as a factor in our determination of whether to
impose intermediate sanctions or civil money penalties.
Comment: A number of commenters believed that the imposition and
duration of sanctions in both Medicare and Medicaid should be subject
to a formal review instead of the proposed informal review process. One
commenter stated that the formal review steps should consist of an
independent review by an administrative law judge (ALJ), with review by
the Departmental Appeals Board and, finally, judicial review; with
sanctions not taking effect until all appeals are exhausted.
Response: The legislative intent for the intermediate sanctions is
to provide HCFA with the authority to respond in a flexible and timely
manner to violations of contracting organizations. Allowing the
sanction process to become linked to extended review procedures would
not serve the interests of the beneficiary or meet the intent of
legislation. We believe that the reconsideration process will provide
organizations ample opportunity to explain their position.
Comment: Two commenters stated that, if a pre-sanction hearing was
not allowed, there should be a post-sanction hearing before an ALJ or
other impartial body, held as soon as possible after the imposition of
any sanctions.
Response: As was stated previously, the intent of the statutory
provisions implemented in this regulation is to allow HCFA to respond
quickly to a problem. During the reconsideration process the decision
to impose or not impose a sanction will be made judiciously. In the
event a sanction is applied, HCFA will work with the organization to
resolve the problem as rapidly as possible. We expect sanctions to be
of short duration. If the violation persists, the likely outcome would
be termination of the contract rather than an indefinite sanction. We
believe that additional hearings would only serve to delay the
resolution of problems.
Comment: One commenter stated that an organization should have an
``opportunity to cure'' by which the organization could avoid the
imposition of sanctions by demonstrating not only that the alleged
violation had not occurred, but that any prior violation already had
been remedied.
Response: We agree that an organization which has received a notice
of sanction should have a reasonable opportunity to present its
position. In the event the risk contractor demonstrates during the
reconsideration period that the sanction is not appropriate, the
sanction will not be imposed. The organization's prior contract
performance will be considered as we determine whether to impose a
sanction and the amount of any civil money penalty.
Comment: One commenter requested than an organization be allowed to
submit both documentary evidence, including statements and affidavits,
and written arguments in response to a notice that HCFA intends to
impose an intermediate sanction.
Response: We agree. The rule provides for the submission of such
information as part of the reconsideration process. (See Secs. 417.500
(b) (proposed Sec. 417.495(b)) and 434.67(c))
Comment: One commenter expressed concern about the potential
duration of an intermediate sanction and recommended a procedure by
which, once a sanction is imposed, it will remain in effect until the
organization submits a credible allegation of compliance. The commenter
defined this as a senior officer's written statement that the
organization has taken steps to ensure alleged violations have been
examined and, where necessary, corrected. The commenter stated that
HCFA should then have 14 days to determine whether the sanction should
be terminated. If HCFA is unable to make a determination within 14
days, then the commenter believes that the intermediate sanction should
be removed.
Response: We disagree with the recommendation. Our review and
decision if we should end a sanction will be done as quickly as
possible, but the timing will depend largely on the complexity of the
problem and responsiveness of the organization. If a sanction is
imposed, the sanctioned organization will develop a corrective action
plan, effectively setting their own timetable for the removal of
sanctions. HCFA will respond as quickly as possible to review an
organization that believes it has corrected its deficiencies.
Comment: Several commenters wanted some means available to ensure
prompt reevaluation of an existing sanction and a time limit placed on
the duration of a sanction. A related comment was that any renewal of a
contract should constitute ratification of the organization's
performance under the contract and, thus, the end of the sanction
period.
Response: In the event a sanction is applied to an organization,
HCFA will respond as quickly as possible to their request for a re-
evaluation. We, however, will not set specific limits on the timing or
frequency of our reevaluations, or view contract renewal as HCFA's
acknowledgement that sufficient corrective action has been taken.
Comment: One commenter pointed out what was believed to be an error
in proposed Sec. 434.67(f)(1). The last sentence of this citation in
the proposed rule referred to ``the date the organization is notified
of HCFA's decision under paragraph (d)(1)(ii) of this section.''
However, paragraph (d)(1)(ii) of that section does not relate to a
notification of a decision following reconsideration by HCFA, but
rather to a decision by a State agency.
Response: We have modified Sec. 434.67(d)(2) to clarify that the
State agency decision to impose a sanction becomes HCFA's decision
except in instances where HCFA decides to modify or reverse that agency
decision. We also have revised Sec. 434.67(f) so that it, (1) refers in
paragraph (f)(1) to the date the HMO is ``notified * * * under
paragraph (c),'' rather than ``under paragraph (d)(1)(ii);'' and, (2)
refers in paragraph (f)(2) to ``the date specified in HCFA's
reconsideration notice.''
B. Factors To be Considered in Levying Civil Money Penalties
Comment: One commenter believed that the proposed ``Factors To Be
Considered in Levying Civil Money Penalties'' greatly dilutes the
effectiveness of the penalties by creating many opportunities for HMOs
to argue for minimal fines. The commenter stated that the imposition of
a full penalty is tied to proof that the HMO engaged in prohibited
behavior on a repeated and knowing basis--which is excessively
difficult to prove. The commenter suggested that the deterrent effect
of the civil money penalties should be preserved by imposing maximum
fines for all violations that come to light.
Response: The intent of penalties is to quickly bring about
corrective action on the part of a sanctioned organization and to deter
further violations. The OIG will use the ``Factors to Be Considered in
Levying Civil Money Penalties'' as a guide in determining the
appropriate amount of any civil money penalty. Organizations that have
made honest errors and are responsive to HCFA regulators will face less
severe penalties than organizations that demonstrate a pattern of
knowingly committing violations. We believe that, in performing our
oversight responsibilities, it is important to retain flexibility in
responding to violations. However, once all evidence has been evaluated
and weighed, the OIG will act on the facts of the case in the manner it
believes will best achieve the objectives of enrollee protection and
regulatory compliance.
Comment: One commenter had several suggestions regarding the
enumeration of specific mitigating and aggravating circumstances for
the imposition of civil money penalties.
The commenter stated that the statute and regulation establish
sanctions that can be imposed against organizations that charge
enrollees premiums in excess of those permitted. The commenter believed
it should be a mitigating circumstance if the premiums were only
incidentally in excess of those permitted; it should be an aggravating
circumstance if the premiums were greatly in excess of those permitted.
The commenter stated that the statute and regulations also provide
sanctions for contracting with excluded individuals or entities. The
commenter believed it should be an aggravating circumstance if the
entity was excluded because of its dealings with the HMO and the
excluded entity is contracting with the HMO for health care services.
The commenter believed it should be a mitigating circumstance if the--
(1) Entity was excluded because of activities unrelated to its
dealings with the HMO.
(2) Contract with the excluded entity is unrelated to the delivery
of health care services.
(3) Violation is confined to a particular service area of the HMO.
Response: We do not agree with these comments. We believe that the
current factors listed under proposed Sec. 1003.106(a)(4) provide for
sufficient consideration of the circumstances surrounding violations
where premiums in excess of the allowable amount are charged by a
contracting organization. Therefore, a separate factor addressing such
a violation is unnecessary. With regard to the second comment, we
believe that this goes beyond the scope of the statute. The enabling
legislation provides for imposition of a civil money penalty without
regard to the specific activities which resulted in an individual being
excluded from the Medicare program. Additionally, since the statute
provides that the penalty may be imposed in instances where excluded
individuals are contracted to provide other than patient care, we see
no need to mitigate this circumstance. Finally, we believe that the
current factors listed under Sec. 1003.106(a)(4) provide for sufficient
consideration of the scope of a violation. Therefore, an amendment
addressing violations that may be confined to a particular service are
not necessary.
Comment: One commenter wanted the OIG to consider prior offenses
for which the organization was not assessed any sanctions or money
penalties. The commenter believed that even if prior violations had not
been sanctioned, a pattern of violations should be considered more
serious and dealt with more harshly. The commenter also suggested that
proposed Sec. 1003.106(a)(4)(vii), which concerns the history of prior
offenses, should be amended to include, in the list of factors to be
considered, whether there were any prior offenses by the organization,
regardless of administrative or civil sanctions assessed.
Response: In making a determination on the imposition of sanctions
we will consider an organization's pattern of conduct. A background of
repeated violations would be considered an aggravating circumstance. We
believe the current provisions in proposed Sec. 1003.106 allow the OIG
to consider the prior conduct of an organization in levying civil money
sanctions. Therefore, an amendment is unnecessary.
Comment: One commenter stated that the standards in Sec. 1003.106
relating to determinations regarding the amount of the penalty and
assessment are subjective criteria which could result in arbitrary
determinations by the OIG.
Response: We disagree with this comment. Congress authorized a
maximum penalty amount for certain violations contained in the
underlying statutes. The proposed factors listed in Sec. 1003.106
represent an attempt to provide a measure for impartially determining a
penalty amount against a culpable organization. Moreover, the public is
afforded an opportunity to comment on the proposed factors before their
adoption in final regulations. This process is intended to inform the
public about what factors will be used in determining penalty amounts,
and, to the extent possible, remove subjectivity from penalty
determination decisions.
Comment: One commenter wanted to add the ``enrollee's compliance
with rules and protocols of the contracting organization'' as a factor
in our determination of imposing civil money penalties.
Response: We believe that the current factors listed under proposed
Sec. 1003.106(a)(4) provide for sufficient consideration of the
commenter's concerns. Specifically, in paragraph (a)(4)(ii) the factor
is the degree of culpability of the contracting organization. Under
this factor, in determining whether or not to impose a penalty, as well
as in determining the amount of any penalty which may be imposed,
consideration will be given to the enrollee's culpability for the
violation, including compliance with rules and protocols of the
contracting organization. Therefore, a separate factor addressing this
issue is unnecessary.
Comment: One commenter asked if proposed Sec. 1003.103(c)(1)(iv),
now designated as Sec. 1003.103(e)(1)(iv), establishes degrees or
levels of misrepresentation and falsification of information that will
be subject to varying amounts of civil money penalties. In addition,
the commenter wanted a distinction to be made in the regulation between
a misrepresentation and falsification and a mistake with no fraudulent
intent.
Response: Concerning a violation of this nature, we believe that
once all pertinent information is examined, any reasonable person could
discern the difference between a ``misrepresentation'' and ``a mistake
with no fraudulent intent.'' Therefore, we believe that the language in
Sec. 1003.103(c)(1)(iv) is sufficient as written.
Comment: Section 1003.103(c)(1)(v) specifies that the failure to
comply with prompt payment of claims as established in section
1876(g)(6)(A) of the Act is the basis for a money penalty. A commenter
asked what constitutes a violation of timely claims payment, whether it
is one late claim or a percentage of claims beyond the standard. In
addition, this commenter questioned whether late claims will be
determined from a monthly report, Medicare carriers, on-site review, or
beneficiary or provider complaints and asked whether this includes
claims from nonparticipating providers.
Response: Section 1876(g)(6)(A) of the Act contains a cross-
reference to sections 1816(c)(2) and 1842(c)(2) of the Act, which
describe prompt payment. These sections require that 95 percent of
claims be paid within a specified time period (currently 24 calendar
days after receipt). As a result, a definition in this regulation is
unnecessary.
Comment: One commenter questioned whether Qualified Medicare
Beneficiaries (QMBs) are subject to this rule.
Response: This rule applies to plans that have a Medicare or
Medicaid contract. QMBs could be enrolled (or want to enroll) in these
plans, and thus, could be affected by these rules.
Comment: One commenter wanted to know what constitutes
``discouraging enrollment.'' Another commenter stated that a penalty
should be imposed for discouraging enrollment only if a beneficiary is
discouraged from enrolling because of a medical condition or a future
need for substantial services.
Response: It is not possible to set out all the possible ways that
enrollments in a contracting organization might be discouraged.
Essentially, such a determination would be made after judging all the
facts and circumstances surrounding an alleged violation. We agree,
however, that violations of this nature pertain to certain
circumstances. The statute specifically authorizes imposition of a
penalty in those instances in which, except as permitted by law, a
contracting organization expels or refuses to reenroll an individual or
engages in any practice that would reasonably be expected to have the
effect of denying or discouraging enrollment by enrollees whose medical
condition or history indicate a need for substantial future medical
services.
Comment: One commenter stated that Sec. 434.80 would require a
State agency to exclude from participation, as a Medicaid contractor,
any HMO that is controlled or owned by an individual who has been
convicted of a criminal offense relating to financial misconduct. The
commenter said that this provision amounts to a lifetime ban on
participation in Medicaid for individuals who may have committed an
offense only marginally related to the delivery of health care. The
commenter recommended that this prohibition not be a lifetime ban, but
that the prohibitions be restricted in their effect to criminal
offenses which occurred within the past 10 years. The commenter also
stated that the relationship of the criminal offense to the delivery of
health care services should be a factor applied by the State agency in
determining the fitness of the HMO contractor.
Response: This requirement is based on the requirement in
1902(p)(2) of the Act. The law does not provide authority for the
Department to either grant exceptions to this requirement or make this
requirement effective for only a specified time period.
Comment: A commenter noted that proposed Sec. 1003.106(a)(1) refers
to determining the amount of a penalty under Sec. 1003.103(a), (b) and
(c)(1) through (c)(3), and proposed Sec. 1003.106(a)(4) refers to
factors for the OIG to consider in determining the penalty under
Sec. 1003.103(b)(4) [sic]. The commenter states that there is no
Sec. 1003.103(b)(4), and believes that both of these references are
incorrect.
Response: We agree. Several sections were incorrectly referenced in
Secs. 1003.106(a)(1) and 1003.106(a)(4) and we are revising the
regulations accordingly. Numerous revisions to referenced sections are
made in this final rule because of the publication of final OIG
regulations since this HMO regulation was published as a proposed rule.
IV. Provisions of the Final Regulations
After consideration of the comments received and our further
analysis of specific issues, we are publishing as final the July 22,
1991, proposed regulations with the revisions identified below. We have
also made numerous editorial changes to improve the readability of the
proposed text, without changing its substance.
On October 17, 1991 HCFA published a final rule (56 FR 51984) that
amended part 417 to simplify, clarify, and update regulations on
prepaid health care. Among other changes, that rule designated the
contents of Subpart C-- Health Maintenance Organization and Competitive
Medical Plans as Subpart L--Medicare Contract Requirements. In the July
1991 proposed rule, we proposed to add a new Sec. 417.495, ``Sanctions
against the organizations'' to subpart C. Therefore, as a change from
the proposed rule, we are designating proposed Sec. 417.495 as 417.500
and adding it to subpart L.
As discussed in section III of this preamble, we have revised
proposed Secs. 417.495(b) and 434.67(c), which concern the time limit
for seeking a reconsideration, to allow an additional 15 days under
certain circumstances. (Proposed Sec. 417.495(b) is now
Sec. 417.500(b).)
In addition to changes to improve its readability, proposed
Sec. 417.495(e), which concerns the effective date of a sanction, is
revised to replace the inexplicit phrase ``generally will be effective
on the date the organization is notified of HCFA's decision.'' In this
final rule, we specify that, if an organization seeks a
reconsideration, the sanction is effective on the date specified in
HCFA's notice of reconsidered determination. (Proposed Sec. 417.495(e)
is now Sec. 417.500(e). Proposed Sec. 431.55 is revised to improve its
readability.)
On January 29, 1992, the OIG published a final rule (57 FR 3298)
that amended, among other parts, part 1003. As a result of the
publication of the January 29, 1992 rule, we have made changes from our
July 22, 1991 proposed rule as follows:
The substance of proposed Secs. 1003.100(b)(1)(i) and
(b)(1)(ii), which concern the purpose of part 1003, were incorporated
into regulations at Secs. 100.100(b)(1)(i) and (b)(1)(iv),
respectively, by the January 29 rule. Therefore, proposed
Sec. 1003.100(b)(1)(i) is not included in this final rule. Section
1003.100(b)(1)(iv) is included in this final rule solely to make
technical corrections.
Proposed Sec. 1003.100(b)(1)(iii), which also concerns the
purpose of part 1003, is designated as Sec. 1003.100(b)(1)(vi) by this
final rule.
The substance of proposed Sec. 1003.102(b)(1), which
identifies those individuals against whom the OIG may impose a penalty,
was incorporated at Secs. 1003.102(b)(1) through (b)(3) by the January
29, 1992 rule. Therefore, it is not included in this rule.
Proposed Sec. 1003.102(b)(2), which concerns the
imposition of penalties against contracting organizations, is
designated as Sec. 1003.102(b)(8) by this final rule.
In Sec. 1003.103, which concerns the amount of a penalty,
proposed paragraph (c) is designated as paragraph (e). Further,
paragraph (a) as established by the January 29 rule is revised to
include a reference to the newly-established paragraph (e).
Also in Sec. 1003.103, subparagraph (e)(3)(ii) is revised
to more clearly reflect the penalty amount stipulated under the
statute.
In Sec. 1003.106, which concerns determining the amount of
a penalty and assessment, we have replaced the phrase ``person or
contracting organization'' with the phrase ``person.'' ``Person,'' as
it is broadly defined in Sec. 1003.101, includes contracting
organizations. Therefore, the phrase was replaced in the final rule.
As discussed in section III of this preamble, we have included, at
Sec. 1003.106(d), provisions regarding mitigating and aggravating
circumstances to be considered in determining the amount of any
penalty.
V. Information Collection Requirements
This final rule contains no information collection requirements.
Consequently, this final rule need not be reviewed by the Executive
Office of Management and Budget under the authority of the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501 et seq.).
VI. Regulatory Impact Statement
This final rule implements sections of OBRA 1986, sections of the
Medicare and Medicaid Patient and Program Protection Act of 1987,
sections of the Medicare Catastrophic Coverage Act of 1988, and a
section of OBRA 1989. This final rule will implement the Secretary's
broadened authority to impose intermediate sanctions and civil money
penalties on HMOs and other prepaid health plans contracting under
Medicare or Medicaid that substantially fail to provide an enrolled
individual with required medically necessary items and services, engage
certain marketing, enrollment, reporting, or claims payment abuses, or,
in the case of Medicare, employ or contract with, either directly or
indirectly, an individual or entity excluded from participation in
Medicare.
This regulation is the result of statutory changes and serves to
clarify departmental policy with respect to the imposition of
intermediate sanctions and civil money penalties. We believe the
majority of plans, practitioners and providers do not engage in the
prohibited activities and practices discussed in this final rule. In
addition, we believe this final rule will have a deterrent effect upon
providers and practitioners. Therefore, we expect that the aggregate
economic impact would be minimal, affecting only those engaged in the
prohibited behavior in violation of this final rule.
The Office of Management and Budget has reviewed this final rule in
accordance with the provisions of Executive Order 12866.
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612) 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, we consider all HMOs, competitive medical
plans and other contracting organizations to be small entities.
In addition, section 1102(b) of the Act requires the Secretary to
prepare a regulatory impact analysis if a final 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) of the Act, 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 do not have data to assist us in estimating the number of
contracting organizations that will be affected by this final rule or
the magnitude of any penalties that will be imposed. Nevertheless, any
impact will be minimal because we believe the number of providers and
practitioners engaged in prohibited activities are few. Therefore, we
are not preparing analyses for either the RFA or section 1102(b) of the
Act since we have determined, and the Secretary certifies, that this
final rule will not result in a significant economic impact on a
substantial number of small entities and will not have a significant
impact on the operations of a substantial number of small rural
hospitals.
List of Subjects
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 Part 431
Grant Programs--Health; Health facilities; Medicaid; Privacy;
Reporting and recordkeeping requirements.
42 CFR Part 434
Grant Programs--Health; Health Maintenance Organizations (HMO);
Medicaid; Reporting and recordkeeping requirements.
42 CFR Part 1003
Administrative practice and procedure; Fraud; Grant Programs--
Health; Health facilities; Health professions; Maternal and child
health; Medicaid; Medicare; Penalties.
A. 42 CFR part 417 is amended as set forth below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
1. The authority citation for part 417 is revised to read as
follows:
Authority: Secs. 1102, 1833(a)(1)(A), 1861(s)(2)(H), 1871, 1874,
and 1876 of the Social Security Act (42 U.S.C. 1302, 1395l(a)(1)(A),
1395x(s)(2)(H), 1395hh, 1395kk, and 1395mm); sec. 114(c) of Pub. L.
97-248 (42 U.S.C. 1395mm note); section 9312(c) of Pub. L. 99-509
(42 U.S.C. 1395mm note); and secs. 215, 353, and 1301 through 1318
of the Public Health Service Act (42 U.S.C. 216, 263a, and 300e
through 300e-17) and 31 U.S.C. 9701, unless otherwise noted.
Subpart L--Medicare Contract Requirements
2. In subpart L, a new section 417.500 is added to read as follows:
Sec. 417.500 Sanctions against HMOs and CMPs.
(a) Basis for imposition of sanctions. HCFA may impose the
intermediate sanctions specified in paragraph (d) of this section, as
an alternative to termination, if HCFA determines that an HMO or CMP
with a contract under this subpart does one or more of the following:
(1) Fails substantially to provide the medically necessary services
required to be provided to a Medicare enrollee and the failure
adversely affects (or has a substantial likelihood of adversely
affecting) the enrollee.
(2) Requires Medicare enrollees to pay amounts in excess of
premiums permitted.
(3) Acts, in violation of the provisions of this part, to expel or
to refuse to reenroll an individual.
(4) Engages in any practice that could reasonably be expected to
have the effect of denying or discouraging enrollment (except as
permitted by this part) by eligible individuals whose medical
conditions or histories indicate a need for substantial future medical
services.
(5) Misrepresents or falsifies information that it furnishes under
this part to HCFA, an individual, or to any other entity.
(6) Fails to comply with the requirements of section 1876(g)(6)(A)
of the Act relating to the prompt payment of claims.
(7) Fails to meet the requirement in section 1876(f)(1) of the Act
that not more than 50 percent of the organization's enrollment be
Medicare beneficiaries and Medicaid recipients.
(8) Has a Medicare risk contract and--
(i) Employs or contracts with individuals or entities excluded from
participation in Medicare under section 1128 or section 1128A of the
Act for the provision of health care, utilization review, medical
social work, or administrative services; or
(ii) Employs or contracts with any entity for the provision of
those services (directly or indirectly) through an excluded individual
or entity.
(b) Notice of sanction. (1) Before imposing the intermediate
sanctions specified in paragraph (d) of this section, HCFA--
(i) Sends a written notice to the HMO or CMP stating the nature and
basis of the proposed sanction; and
(ii) Sends the OIG a copy of the notice (other than a notice
regarding the restriction on Medicare and Medicaid enrollees as
described in paragraph (a)(7) of this section), once the sanction has
been confirmed following the notice period or the reconsideration.
(2) HCFA allows the HMO or CMP 15 days from receipt of the notice
to provide evidence that it has not committed an act or failed to
comply with a requirement described in paragraph (a) of this section,
as applicable. HCFA may allow a 15-day addition to the original 15 days
upon receipt of a written request from the HMO or CMP. To be approved,
the request must provide a credible explanation of why additional time
is necessary and be received by HCFA before the end of the 15-day
period following the date of receipt of the sanction notice. HCFA does
not grant an extension if it determines that the HMO's or CMP's conduct
poses a threat to an enrollee's health and safety.
(c) Informal reconsideration. If, consistent with paragraph (b)(2)
of this section, the HMO or CMP submits a timely response to HCFA's
notice of sanction, HCFA conducts an informal reconsideration that:
(1) Consists of a review of the evidence by a HCFA official who did
not participate in the initial decision to impose a sanction; and
(2) Gives the HMO or CMP a concise written decision setting forth
the factual and legal basis for the decision that affirms or rescinds
the original determination.
(d) Specific sanctions. If HCFA determines that an HMO or CMP has
acted or failed to act as specified in paragraph (a) of this section
and affirms this determination in accordance with paragraph (c) of this
section, HCFA may--
(1) Require the HMO or CMP to suspend acceptance of applications
for enrollment made by Medicare beneficiaries during the sanction
period;
(2) Suspend payments to the HMO or CMP for Medicare beneficiaries
enrolled during the sanction period; and
(3) Require the HMO or CMP to suspend all marketing activities to
Medicare enrollees.
(e) Effective date and duration of sanctions--(1) Effective date.
Except as provided in paragraph (e)(2) of this section, a sanction is
effective 15 days after the date that the organization is notified of
the decision to impose the sanction or, if the HMO or CMP timely seeks
reconsideration under paragraph (c) of this section, on the date
specified in the notice of HCFA's reconsidered determination.
(2) Exception. If HCFA determines that the HMO's or CMP's conduct
poses a serious threat to an enrollee's health and safety, HCFA may
make the sanction effective on a date before issuance of HCFA's
reconsidered determination.
(3) Duration of sanction. The sanction remains in effect until HCFA
notifies the HMO or CMP that HCFA is satisfied that the basis for
imposing the sanction has been corrected and is not likely to recur.
(f) Termination by HCFA. In addition to or as an alternative to the
sanctions described in paragraph (d) of this section, HCFA may decline
to renew a HMO's or CMP's contract in accordance with Sec. 417.492(b),
or terminate the contract in accordance with Sec. 417.494(b).
(g) Civil money penalties. If HCFA determines that a HMO or CMP has
committed an act or failed to comply with a requirement described in
paragraph (a) of this section (with the exception of the requirement to
limit the percentage of Medicare and Medicaid enrollees described in
paragraph (a)(7) of this section), HCFA notifies the OIG of that
determination. HCFA also conveys to the OIG information when it
reverses or terminates a sanction imposed under this subpart. In
accordance with the provisions of 42 CFR part 1003, the OIG may impose
civil money penalties on the HMO or CMP in addition to or in place of
the sanctions that HCFA may impose under paragraph (d) of this section.
B. 42 CFR part 431 is amended as set forth below:
PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION
1. The authority citation for part 431 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. Section 431.55 is amended by adding a sentence at the end of
paragraph (a) and adding new paragraph (h) to read as follows:
Sec. 431.55 Waiver of other Medicaid requirements.
(a) Statutory basis. * * *. Section 1902(p)(2) of the Act
conditions FFP in payments to an entity under a section 1915(b)(1)
waiver on the State's provision for exclusion of certain entities from
participation.
* * * * *
(h) Waivers approved under section 1915(b)(1) of the Act--(1) Basic
Rules. (i) An agency must submit, as part of it's waiver request,
assurance that the entities described in paragraph (h)(2) of this
section will be excluded from participation under an approved waiver.
(ii) FFP is available in payments to an entity that furnishes
services under a section 1915(b)(1) waiver only if the agency excludes
from participation any entity described in paragraph (h)(2) of this
section.
(2) Entities that must be excluded. The agency must exclude an
entity that meets any of the following conditions:
(i) Could be excluded under section 1128(b)(8) of the Act as being
controlled by a sanctioned individual.
(ii) Has a substantial contractual relationship (direct or
indirect) with an individual convicted of certain crimes, as described
in section 1128(b)(8)(B) of the Act.
(iii) Employs or contracts directly or indirectly with one of the
following:
(A) Any individual or entity that, under section 1128 or section
1128A of the Act, is precluded from furnishing health care, utilization
review, medical social services, or administrative services.
(B) Any entity described in paragraph (h)(2)(i) of this section.
(3) Definitions. As used in this section, substantial contractual
relationship means any contractual relationship that provides for one
or more of the following services:
(i) The administration, management, or provision of medical
services.
(ii) The establishment of policies, or the provision of operational
support, for the administration, management, or provision of medical
services.
C. 42 CFR part 434 is amended as set forth below:
PART 434--CONTRACTS
1. The authority citation for part 434 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart C--Contracts with HMOs and PHPs: Contract Requirements
2. In subpart C, a new Sec. 434.22 is added to read as follows:
Sec. 434.22 Application of sanctions to risk comprehensive contracts.
A risk comprehensive contract must provide that payments provided
for under the contract will be denied for new enrollees when, and for
so long as, payment for those enrollees is denied by HCFA under
Sec. 434.67(e).
Subpart D--Contracts With Health Insuring Organizations
3. In subpart D, a new Sec. 434.42 is added to read as follows:
Sec. 434.42 Application of sanctions to risk comprehensive contracts.
A risk comprehensive contract must provide that payments provided
for under the contract will be denied for new enrollees when, and for
so long as, payment for those enrollees is denied by HCFA under
Sec. 434.67(e).
Subpart E--Contracts With HMOs and PHPs: Medicaid Agency
Responsibilities
4. In subpart E, Sec. 434.63 is revised to read as follows:
Sec. 434.63 Monitoring procedures.
The agency must have procedures to do the following:
(a) Monitor enrollment and termination practices.
(b) Ensure proper implementation of the contractor's grievance
procedures.
(c) Monitor for violations of the requirements specified in
Sec. 434.67 and the conditions necessary for FFP in contracts with HMOs
specified in Sec. 434.80.
Subpart E--Contracts With HMOs and PHPs: Medicaid Agency
Responsibilities
5. In subpart E, a new Sec. 434.67 is added to read as follows:
Sec. 434.67 Sanctions against HMOs with risk comprehensive contracts.
(a) Basis for imposition of sanctions. The agency may recommend
that the intermediate sanction specified in paragraph (e) of this
section be imposed if the agency determines that an HMO with a risk
comprehensive contract does one or more of the following:
(1) Fails substantially to provide the medically necessary items
and services required under law or under the contract to be provided to
an enrolled recipient and the failure has adversely affected (or has
substantial likelihood of adversely affecting) the individual.
(2) Imposes on Medicaid enrollees premium amounts in excess of
premiums permitted.
(3) Engages in any practice that discriminates among individuals on
the basis of their health status or requirements for health care
services, including expulsion or refusal to reenroll an individual, or
any practice that could reasonably be expected to have the effect of
denying or discouraging enrollment (except as permitted by section
1903(m) of the Act) by eligible individuals whose medical conditions or
histories indicate a need for substantial future medical services.
(4) Misrepresents or falsifies information that it furnishes, under
section 1903(m) of the Act to HCFA, the State agency, an individual, or
any other entity.
(b) Effect of an agency determination. (1) When the agency
determines that an HMO with a risk comprehensive contract has committed
one of the violations identified in paragraph (a) of this section, the
agency must forward this determination to HCFA. This determination
becomes HCFA's determination for purposes of section 1903(m)(5)(A) of
the Act, unless HCFA reverses or modifies the determination within 15
days.
(2) When the agency decides to recommend imposition of the sanction
specified in paragraph (e) of this section, this recommendation becomes
HCFA's decision, for purposes of section 1903(m)(5)(B)(ii) of the Act,
unless HCFA rejects this recommendation within 15 days.
(c) Notice of sanction. If a determination to impose a sanction
becomes HCFA's determination under paragraph (b)(2) of this section,
the agency must send a written notice to the HMO stating the nature and
basis of the proposed sanction. A copy of the notice is forwarded to
the OIG at the same time it is sent to the HMO. The agency allows the
HMO 15 days from the date it receives the notice to provide evidence
that it has not committed an act or failed to comply with a requirement
described in paragraph (a) of this section, as applicable. The agency
may allow a 15-day addition to the original 15 days upon receipt of a
written request from the organization. To be approved, the request must
provide a credible explanation of why additional time is necessary and
be received by HCFA before the end of the 15-day period following the
date the organization received the sanction notice. An extension is not
granted if HCFA determines that the organization's conduct poses a
threat to an enrollee's health and safety.
(d) Informal reconsideration. (1) If the HMO submits a timely
response to the agency's notice of sanction, the agency conducts an
informal reconsideration that includes--
(i) Review of the evidence by an agency official who did not
participate in the initial recommendation to impose the sanction; and
(ii) A concise written decision setting forth the factual and legal
basis for the decision.
(2) The agency decision under paragraph (d)(1)(ii) of this section
is forwarded to HCFA and becomes HCFA's decision unless HCFA reverses
or modifies the decision within 15 days from the date of HCFA's receipt
of the agency determination. In the event HCFA modifies or reverses the
agency decision, the agency sends the HMO a copy of HCFA's decision
under this paragraph.
(e) Denial of payment. If a HCFA determination that a HMO has
committed a violation described in paragraph (a) of this section is
affirmed on review under paragraph (d) of this section, or is not
timely contested by the HMO under paragraph (c) of this section, HCFA,
based upon the recommendation of the agency, may deny payment for new
enrollees of the HMO under section 1903(m)(5)(B)(ii) of the Act. Under
Secs. 434.22 and 434.42, HCFA's denial of payment for new enrollees
automatically results in a denial of agency payments to the HMO for the
same enrollees. A new enrollee is an enrollee that applies for
enrollment after the effective date in paragraph (f)(1) of this
section.
(f) Effective date and duration of sanction. (1) Except as
specified in paragraphs (f)(2) and (f)(3) of this section, a sanction
is effective 15 days after the date the HMO is notified of the decision
to impose the sanction under paragraph (c) of this section.
(2) If the HMO seeks reconsideration under paragraph (d) of this
section, the sanction is effective on the date specified in HCFA's
reconsideration notice.
(3) If HCFA, in consultation with the agency, determines that the
HMO's conduct poses a serious threat to an enrollee's health and
safety, the sanction may be made effective on a date prior to issuance
of the decision under paragraph (d)(1)(ii) of this section.
(g) Civil money penalties. If a determination that an organization
has committed a violation under paragraph (a) of this section becomes
HCFA's determination under paragraph (b)(1) of this section, HCFA
conveys the determination to the OIG. In accordance with the provisions
of 42 CFR part 1003, the OIG may impose civil money penalties on the
organization in addition to or in place of the sanctions that may be
imposed under this section.
(h) HCFA's role. HCFA retains the right to independently perform
the functions assigned to the agency in paragraphs (a) through (f) of
this section.
(i) State Plan requirements. The State Plan must include a plan to
monitor for violations specified in paragraph (a) of this section and
for implementing the provisions of this section.
6. In subpart F, a new Sec. 434.80 is added to read as follows:
Subpart F--Federal Financial Participation
Sec. 434.80 Condition for FFP in contracts with HMOs.
(a) Basic rule. FFP in payments to an HMO is available only if the
agency excludes from participation as such an entity any entity
described in paragraph (b) of this section.
(b) Entities that must be excluded. (1) An entity that could be
excluded under section 1128(b)(8) of the Act as being controlled by a
sanctioned individual.
(2) An entity that has a substantial contractual relationship as
defined in Sec. 431.55(h)(2), either directly or indirectly, with an
individual convicted of certain crimes as described in section
1128(b)(8)(B) of the Act.
(3) An entity that employs or contracts, directly or indirectly,
with one of the following:
(i) Any individual or entity excluded from Medicaid participation
under section 1128 or section 1128A of the Act for the furnishing of
health care, utilization review, medical social work, or administrative
services.
(ii) Any entity for the provision through an excluded individual or
entity of services described in paragraph (b)(3)(i) of this section.
D. 42 CFR part 1003 is amended as set forth below:
PART 1003--CIVIL MONEY PENALTIES, ASSESSMENTS, AND EXCLUSIONS
1. The authority citation for part 1003 is revised to read as
follows:
Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7a, 1320b-10, 1395mm,
1395ss(d), 1395u(j), 1395u(k), 1396b(m), 11131(c) and 11137(b)(2).
2. Section 1003.100 is amended by revising paragraph (a);
republishing paragraph (b)(1) introductory text; revising paragraphs
(b)(1)(iv) and (b)(1)(v); and adding a new paragraph (b)(1)(vi) to read
as follows:
Sec. 1003.100 Basis and purpose.
(a) Basis. This part implements sections 1128, 1128(c), 1128A,
1140, 1842(j), 1842(k), 1876(i)(6), 1882(d), and 1903(m)(5) of the
Social Security Act, and sections 421(c) and 427(b)(2) of Public Law
99-660 (42 U.S.C. 1320a-7, 1320a-7a, 1320a-7(c), 1320b-10, 1395mm,
1395ss(d), 1395u(j), 1395u(k), 1396b(m), 11131(c) and 11137(b)(2)).
(b) Purpose. * * *
(1) Provides for the imposition of civil money penalties and, as
applicable, assessments against persons who--
* * * * *
(iv) Fail to report information concerning medical malpractice
payments or who improperly disclose, use or permit access to
information reported under part B of title IV of Public Law 99-660, and
regulations specified in 45 CFR part 60;
(v) Misuse certain Medicare and social security program words,
letters, symbols and emblems; or
(vi) Substantially fail to provide an enrollee with required
medically necessary items and services, or that engage in certain
marketing, enrollment, reporting, claims payment, employment, or
contracting abuses.
* * * * *
3. Section 1003.101 is amended by adding, in alphabetical order,
definitions for the terms ``adverse effect,'' ``contracting
organization,'' and ``enrollee'' to read as follows:
Sec. 1003.101 Definitions.
* * * * *
Adverse effect means medical care has not been provided and the
failure to provide such necessary medical care has presented an
imminent danger to the health, safety, or well-being of the patient or
has placed the patient unnecessarily in a high-risk situation.
* * * * *
Contracting organization means a public or private entity,
including of a health maintenance organization (HMO), competitive
medical plan, or health insuring organization (HIO) which meets the
requirements of section 1876(b) of the Act or is subject to the
requirements in section 1903(m)(2)(A) of the Act and which has
contracted with the Department or a State to furnish services to
Medicare beneficiaries or Medicaid recipients.
Enrollee means an individual who is eligible for Medicare or
Medicaid and who enters into an agreement to receive services from a
contracting organization that contracts with the Department under title
XVIII or title XIX of the Act.
* * * * *
4. Section 1003.102, paragraph (b) introductory text is republished
and a new paragraph (b)(8) is added to read as follows:
Sec. 1003.102 Basis for civil money penalties and assessments.
* * * * *
(b) The OIG may impose a penalty, and where authorized, an
assessment against any person (including an insurance company in the
case of paragraphs (b)(5) and (b)(6) of this section) whom it
determines in accordance with this part--
* * * * *
(8) Is a contracting organization that HCFA determines has
committed an act or failed to comply with the requirements set forth in
Sec. 417.500(a) or Sec. 434.67(a) of this title or failed to comply
with the requirement set forth in Sec. 434.80(c) of this title.
* * * * *
5. Section 1003.103 is amended by revising paragraph (a) and adding
new paragraph (e) to read as follows:
Sec. 1003.103 Amount of penalty.
(a) Except as provided in paragraphs (b) through (e) of this
section, the OIG may impose a penalty of not more than $2,000 for each
item or service that is subject to a determination under Sec. 1003.102.
* * * * *
(e)(1) The OIG may, in addition to or in lieu of other remedies
available under law, impose a penalty of up to $25,000 for each
determination by HCFA that a contracting organization has:
(i) Failed substantially to provide an enrollee with required
medically necessary items and services and the failure adversely
affects (or has the likelihood of adversely affecting) the enrollee;
(ii) Imposed premiums on enrollees in excess of amounts permitted
under section 1876 or Title XIX of the Act;
(iii) Acted to expel or to refuse to re-enroll a Medicare
beneficiary in violation of the provisions of section 1876 of the Act
and for reasons other than the beneficiary's health status or
requirements for health care services;
(iv) Misrepresented or falsified information furnished to an
individual or any other entity under section 1876 or section 1903(m) of
the Act; or
(v) Failed to comply with the requirements of section 1876(g)(6)(A)
of the Act regarding prompt payment of claims.
(2) The OIG may, in addition to or in lieu of other remedies
available under law, impose a penalty of up to $25,000 for each
determination by HCFA that a contracting organization with a contract
under section 1876 of the Act:
(i) Employs or contracts with individuals or entities excluded,
under section 1128 or section 1128A of the Act, from participation in
Medicare for the provision of health care, utilization review, medical
social work, or administrative services; or
(ii) Employs or contracts with any entity for the provision of
services (directly or indirectly) through an excluded individual or
entity.
(3) The OIG may, in addition to or in lieu of other remedies
available under law, impose a penalty of up to $100,000 for each
determination that a contracting organization has:
(i) Misrepresented or falsified information furnished to the
Secretary under section 1876 of the Act or to the State under section
1903(m) of the Act; or
(ii) Acted to expel or to refuse to reenroll a Medicaid recipient
because of the individual's health status or requirements for health
care services, or engaged in any practice that would reasonably be
expected to have the effect of denying or discouraging enrollment
(except as permitted by section 1876 or section 1903(m) of the Act)
with the contracting organization by Medicare beneficiaries and
Medicaid recipients whose medical condition or history indicates a need
for substantial future medical services.
(4) If enrollees are charged more than the allowable premium, the
OIG will impose an additional penalty equal to double the amount of
excess premium charged by the contracting organization. The excess
premium amount will be deducted from the penalty and returned to the
enrollee.
(5) The OIG will impose an additional $15,000 penalty for each
individual not enrolled when HCFA determines that a contracting
organization has committed a violation described in paragraph
(e)(3)(ii) of this section.
(6) For purposes of paragraph (e) of this section, a violation is
each incident where a person has committed an act listed in
Sec. 417.500(a) or Sec. 434.67(a) of this title or failed to comply
with a requirement set forth in Sec. 434.80(c) of this title.
6. Section 1003.106 is amended by adding new paragraph (a)(4);
redesignating paragraph (d) as paragraph (e) and republishing it; and
adding a new paragraph (d) to read as follows:
Sec. 1003.106 Determinations regarding the amount of the penalty and
assessment.
(a) * * *
(4) In determining the appropriate amount of any penalty in
accordance with Sec. 1003.103(e), the OIG will consider as
appropriate--
(i) The nature and scope of the required medically necessary item
or service not provided and the circumstances under which it was not
provided;
(ii) The degree of culpability of the contracting organization;
(iii) The seriousness of the adverse effect that resulted or could
have resulted from the failure to provide required medically necessary
care;
(iv) The harm which resulted or could have resulted from the
provision of care by a person that the contracting organization is
expressly prohibited, under section 1876(i)(6) or section 1903(p)(2) of
the Act, from contracting with or employing;
(v) The harm which resulted or could have resulted from the
contracting organization's expulsion or refusal to reenroll a Medicare
beneficiary or Medicaid recipient;
(vi) The nature of the misrepresentation or fallacious information
furnished by the contracting organization to the Secretary, State,
enrollee, or other entity under section 1876 or section 1903(m) of the
Act;
(vii) The history of prior offenses by the contracting organization
or principals of the contracting organization, including whether, at
any time prior to determination of the current violation or violations,
the contracting organization or any of its principals was convicted of
a criminal charge or was held liable for civil or administrative
sanctions in connection with a program covered by this part or any
other public or private program of payment for medical services; and
(viii) Such other matters as justice may require.
* * * * *
(d) In considering the factors listed in paragraph (a)(4) of this
section, for violations subject to a determination under
Sec. 1003.103(e), the following circumstances are to be considered, as
appropriate, in determining the amount of any penalty--
(1) Nature and circumstances of the incident. It would be
considered a mitigating circumstance if, where more than one violation
exists, the appropriate items or services not provided were:
(i) Few in number, or
(ii) Of the same type and occurred within a short period of time.
It would be considered an aggravating circumstance if such items or
services were of several types and occurred over a lengthy period of
time, or if there were many such items or services (or the nature and
circumstances indicate a pattern of such items or services not being
provided).
(2) Degree of culpability. It would be considered a mitigating
circumstance if the violation was the result of an unintentional,
unrecognized error, and corrective action was taken promptly after
discovery of the error.
(3) Failure to provide required care. It would be considered an
aggravating circumstance if the failure to provide required care was
attributable to an individual or entity that the contracting
organization is expressly prohibited by law from contracting with or
employing.
(4) Use of excluded individuals. It would be considered an
aggravating factor if the contracting organization knowingly or
routinely engages in the prohibited practice of contracting or
employing, either directly or indirectly, individuals or entities
excluded from the Medicare program under section 1128 or section 1128A
of the Act.
(5) Routine practices. It would be considered an aggravating factor
if the contracting organization knowingly or routinely engages in any
discriminatory or other prohibited practice which has the effect of
denying or discouraging enrollment by individuals whose medical
condition or history indicates a need for substantial future medical
services.
(6) Prior offenses. It would be considered an aggravating
circumstance if at any time prior to determination of the current
violation or violations, the contracting organization or any of its
principals was convicted on criminal charges or held liable for civil
or administrative sanctions in connection with a program covered by
this part or any other public or private program of payment for medical
services. The lack of prior liability for criminal, civil, or
administrative sanctions by the contracting organization, or the
principals of the contracting organization, would not necessarily be
considered a mitigating circumstance in determining civil money penalty
amounts.
(e) (1) The standards set forth in this section are binding, except
to the extent that their application would result in imposition of an
amount that would exceed limits imposed by the United States
Constitution.
(2) The amount imposed will not be less than the approximate amount
required to fully compensate the United States, or any State, for its
damages and costs, tangible and intangible, including but not limited
to the costs attributable to the investigation, prosecution, and
administrative review of the case.
(3) Nothing in this section will limit the authority of the
Department to settle any issue or case as provided by Sec. 1003.126, or
to compromise any penalty and assessment as provided by Sec. 1003.128.
Dated: March 30, 1994.
June Gibbs Brown,
Inspector General.
Dated: April 12, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Approved: July 7, 1994.
Donna E. Shalala,
Secretary, Department of Health and Human Services.
[FR Doc. 94-17221 Filed 7-14-94; 8:45 am]
BILLING CODE 4110-60-P
