[Federal Register Volume 67, Number 72 (Monday, April 15, 2002)]
[Notices]
[Pages 18209-18216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9196]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-4042-N]
RIN 0938-ZA32
Medicare Program; Solicitation for Proposals for Medicare
Preferred Provider Organization (PPO) Demonstrations in the
Medicare+Choice Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice for solicitation of proposals.
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SUMMARY: This notice informs interested parties of an opportunity to
apply for a cooperative agreement to develop a Medicare Preferred
Provider Organization (PPO) Demonstration. We are interested in making
the PPO health care option, which has been successful in non-Medicare
markets, more widely available to people with Medicare. Our objective
is to introduce more variety into the Medicare+Choice program so that
Medicare beneficiaries have broader choice and more options available.
We intend to use a competitive application process to select several
organizations to develop PPO demonstrations beginning January 1, 2003.
DATES: Applications will be considered timely if we receive them on or
before May 30, 2002.
ADDRESSES: Applications should be mailed to the following address:
Department of Health and Human Services, Centers for Medicare &
Medicaid Services, Center for Beneficiary Choices, Demonstration and
Data Analysis Group, Division of Demonstration Programs, Attn: Ron
[[Page 18210]]
Deacon, Mail Stop: C4-17-27, 7500 Security Boulevard, Baltimore,
Maryland 21244-1850.
Please refer to file code CMS-4042-N on the application. Because of
staffing and resource limitations, we cannot accept applications by
facsimile (FAX) transmission. Applications postmarked after the closing
date, or postmarked on or before the closing date but not received in
time for panel review, will be considered late applications.
FOR FURTHER INFORMATION CONTACT: Ron Deacon, CMS Project Officer, at
(410) 786-6622, or [email protected]. General information regarding
this initiative is available on CMS's web site (www.hcfa.gov/research/ppodemo.htm).
SUPPLEMENTARY INFORMATION:
Informational Meeting
We invite individuals from organizations interested in responding
to this solicitation to attend an informational meeting to be held at
CMS headquarters in Baltimore on April 24, 2002 from 1 p.m. to 4 p.m.
e.d.t. We will answer questions and provide guidance for the
application process. Telephone call-in will be available for
organizations unable to attend the meeting. More information on this
meeting will be available at our web site (http:www.hcfa.gov/research/ppodemo.htm). Please send any questions in advance to
[email protected]. We will answer the questions at the informational
meeting.
I. Background
A. Legislative Background
Section 402(a)(1)(A) of the Social Security Amendments of 1967
(Pub. L. 90-248), 42 U.S.C. 1395b-1(a)(1)(A), authorizes the Secretary
to develop and engage in demonstrations ``to determine whether, and if
so which, changes in methods of payment or reimbursement * * * for
health care and services under health programs established by the
Social Security Act, including a change to methods based on negotiated
rates, would have the effect of increasing efficiency and economy of
health services under such programs through the creation of additional
incentives to these ends without adversely affecting the quality of
such services. * * *''
Under section 402(b) of the Social Security Act Amendments of 1967,
the Secretary is authorized to waive requirements in title XVIII that
relate to reimbursement and payment in order to carry out
demonstrations authorized under section 402(a) of the Social Security
Act Amendments of 1967.
B. Problem
Medicare currently provides a choice of alternatives to fee-for-
service health care through its Medicare+Choice (M+C) program. While
the program has grown since its introduction in the Balanced Budget Act
of 1997 (BBA) (Pub. L. 105-33), enacted on August 5, 1997, plans
representing a wide range of options have not entered the program. The
Congress intended that the BBA give people with Medicare the
opportunity to choose, from a variety of private health plan options,
the health care plan that best suits their needs and preferences. The
options anticipated were coordinated care plans, including preferred
provider organizations (PPOs) and health maintenance organizations
(HMOs) (including HMOs with a point-of-service (POS) option);
unrestricted private fee-for-service plans; provider-sponsored
organizations (PSOs); and medical savings accounts. Currently, of the
179 M+C contracts, only 2 are PPO contracts, 1 is a PSO contract, and 2
are private fee-for-service plan contracts; the remainder are HMO
contracts (a relatively small number of these offer a POS option).
Over the long term, the M+C program has the potential to reduce
costs because of its strong emphasis on coordinated care and preventive
health. Moreover, because of its risk-based capitation payment system,
the program provides increased incentives over fee-for-service for
plans to control and even decrease the rate of growth in health care
expenditures. Several proposed Medicare reform initiatives include
financial components that encourage competition among health care
providers and plans to provide the best choice for Medicare
beneficiaries and the best price to Medicare. Today, participation by
plans nationally or locally in M+C is not sufficient to foster the
positive effects of competition in some areas.
People with Medicare currently have access to fewer health plan
models or choices than consumers with commercial insurance. Often, when
individuals become eligible for Medicare, they are unable to continue
medical coverage in widely available commercial options that were
available when they were employed. The cost of supplemental insurance
for fee-for-service Medicare is often much higher and the benefits are
fewer than with commercial insurance.
Our challenge is to increase participation in alternatives to
Medicare fee-for-service. Participation by plans in the M+C program is
declining. While there are several activities occurring that may
minimize this trend, we are placing a new emphasis on expanding options
and choices in the M+C program for people with Medicare. We are
conducting this demonstration initiative to facilitate this process.
Through independent contractors, we researched specific health care
models in the non-Medicare market, attempting to ascertain whether they
would be effective in the Medicare program. This research has guided
the development of this special solicitation.
C. Findings
Our research indicates that the success of the PPO concept is not
being replicated in the Medicare program. Several of the organizations
interviewed reported significant success with the PPO model and high
satisfaction from subscribers. While some M+C plans are currently
operating with aspects of the PPO concept, they have had minor impact.
Because there are so many variations of the PPO theme, clearly defining
the different types of PPO models is difficult. Industry experts
confirmed this difficulty, but also emphasized that the PPO concept
offers the potential for innovation in benefit design and the ability
to customize product offerings to customer needs.
These experts also stated that PPOs encourage efficient use of
health services through coordinated care and various types of
incentives. PPO enrollees may use any provider either within or outside
the PPO network, but have a financial incentive to use in-network
providers. Some interventions, for example, disease management,
counseling, health education, and such additional benefits as
prescription drugs, may be conditional upon use of providers within the
network.
Many organizations reported that they also offer closed panel HMOs,
and that PPOs are designed as an intermediate option to the traditional
HMO and traditional fee-for-service offerings. PPOs are popular with
employers who use that model to manage and stabilize costs and to
provide employees more flexibility and choice than in an HMO.
Point-of-service (POS) plans combine elements of both HMO and PPO
coverage. They maintain an integrated provider network, but also offer
benefits for out-of-network services. Several HMOs offer a POS option
within the HMO framework. An HMO enrollee has the option of staying in-
network or going out-of-network for care. Like PPOs, with this HMO POS
option, an individual who elects to go out-of-network will likely
absorb additional costs (that is, higher copayments or deductibles) and
less coverage. HMOs
[[Page 18211]]
with a POS option frequently use a gatekeeper to control out-of-network
use or to limit the amount of out-of-network use. Most PPOs do not use
a gatekeeper.
All PPOs or PPO-like models share one common characteristic--a
network of health care providers who have agreed to provide care to
patients subject to contractually established payment levels. Often
these networks are not as comprehensive as HMO networks because members
are not restricted to using in-network providers. Several organizations
expressed reservations about introducing a PPO model in Medicare
because of the current M+C payment system. Almost all organizations
expressed dissatisfaction with current payment amounts. The additional
risk associated with out-of-network service compounds the problem.
Our research asked organizations specific questions about barriers
to contracting with us. The organizations noted several administrative
and regulatory barriers in addition to low payment levels and the lack
of opportunity to share risk for higher-than-anticipated costs. Most
plans were familiar with constraints imposed by M+C regulations. Some
referred to barriers resulting from past policy decisions within our
agency. In summary, most plans wanted an opportunity to be more
innovative to use PPO concepts from their non-Medicare business. They
requested more flexibility on qualifying conditions, monitoring
requirements, and reporting requirements. They requested that we
consider the unique characteristics of a PPO model and that our
flexibility decisions be based on PPO characteristics and not reflect
only what occurs with HMOs, the predominant type of M+C plan.
D. PPO Demonstrations
Under this demonstration, we will be testing alternatives to the
current rules for payment to M+C organizations in section 1853 of the
Social Security Act (the Act). As noted above, these demonstrations
would be conducted under the authority under section 402(a)(1)(A) of
the Social Security Amendments of 1967, 42 U.S.C. 1395b1(a)(1)(A), to
test ``changes in methods of payment'' for Medicare services which may
be more efficient and cost effective without compromising the quality
of services. We would be waiving rules that relate to payment pursuant
to section 402(b) of the Social Security Act Amendments of 1967. These
PPO demonstrations will be considered M+C plans, although they will not
be subject to some of the usual M+C provisions.
We believe that the PPO model will introduce incentives that will
result in more efficient and cost-effective use of medical services.
Enrollees will experience incentives to select efficient providers and
to utilize services more effectively. Providers of care will experience
incentives to alter the mix and intensity of services to enrollees in a
cost-effective manner.
Based on the information received from private sector
organizations, we intend to use our waiver authority to overcome some
of the recognized barriers to increased participation in Medicare by
health care organizations. Our overall goal is to use these
demonstrations to assess the effects of new delivery models on various
aspects of the M+C program. We will determine how these new delivery
models impact Medicare beneficiaries and Medicare program expenditures
as well as administrative burden. Through a formal independent
evaluation, we will determine whether increasing the options available
to beneficiaries has a favorable impact.
II. Provisions of This Notice
A. Purpose
This notice solicits applications from organizations for
demonstration projects to offer the PPO model as an additional M+C
choice to people with Medicare. We are encouraging experienced
organizations to contract with us on a capitated payment basis and to
provide PPO products that will appeal to people with Medicare, both
those already familiar with some form of managed care and those
familiar only with fee-for-service. We are interested in increasing the
number of plan choices available so that more beneficiaries have
optimal opportunity to find and select a plan that meets their needs.
We anticipate that premium and other out-of-pocket costs for the PPO
product will be priced between HMO and fee-for-service supplemental
costs so that individuals will weigh these costs against the benefit
and provider access characteristics associated with currently available
plans.
We encourage organizations to propose innovative PPO models with
the appropriate payment requirements and operational processes required
to successfully implement the models. The quality of the proposals
received will determine the number and types of models to be tested.
Through this solicitation, we intend to award demonstrations in up to
12 geographic areas.
We intend to conduct the demonstrations for up to 3 years from the
date of implementation. For each selected demonstration, we will assign
a project officer who will serve as the point of contact with the
demonstration project staff and who will provide technical consultation
regarding waiver requirements, implementation and monitoring
activities, and also provide feedback to us on demonstration status.
B. Funding
Under this demonstration, payments will flow to contract
organizations as monthly capitation based on enrollment. We will use
the M+C payment system and are requesting that applicants become
familiar with this system. We will determine the actual payment amount
and any reconciled adjustments based on the unique characteristics of
each demonstration's payment terms.
Applicants may request minimal financial assistance for initial
implementation costs (one-time payment up to $100,000 per demonstration
project, subject to availability). We will consider requests for
assistance with the following initial implementation costs:
Modification of existing network contracts.
Adaptation of claims processing systems to incorporate
Medicare fee-for-service amounts.
Preparation of special education and outreach efforts
required for PPOs.
Development of expense reporting required for any risk
sharing or reconciliation processes.
Development of any special quality of care or patient
satisfaction data collection efforts unique to the demonstration.
A proposed project budget must illustrate the applicant's share of
start-up costs, as well as our proposed share.
III. Requirements for Submission
Organizations with current M+C plan contracts may submit
applications; however, existing contractors should offer the PPO model
as a new choice for Medicare beneficiaries in the area. We prefer that
organizations with an existing HMO product continue to offer the HMO
product while also making the PPO product available. Our intention is
to increase the number and types of choices available to people with
Medicare. In our evaluation process, we will assign higher priority to
proposals that create ``additional'' rather than ``substitute''
options.
The required application format is specified later in this
solicitation.
[[Page 18212]]
Within the application each of the following subjects must be
addressed:
A. Qualifications
We are interested in transporting successful models to the Medicare
program. Applicants must describe in detail their prior experience and
success in operating a PPO product. We will use our existing M+C
application review process, or modifications of the review process, to
determine if that organization is qualified to operate a PPO
demonstration. It is important that the applicant be familiar with
existing M+C qualification criteria. If the applicant believes that a
criterion or requirement should not apply to the demonstration, this
must be explicitly stated and sufficient rationale included for us to
make a decision on the request.
The applicant should discuss State licensing procedures for the
proposed demonstration site and indicate any potential problems in
obtaining the appropriate license for the PPO demonstration. If
potential problems exist, there should be a discussion of methods for
their resolution. The applicant should also discuss any other
requirements from local jurisdictions that could impact on the
implementation of the Medicare PPO demonstration.
B. Networks
Since the key to a successful PPO product is the composition of the
applicant's provider networks and the effectiveness of the network
providers' care management, the applicant should describe the structure
of the networks in its existing products. If possible, the applicant
should illustrate with a diagram the layering of networks (PPO, HMO,
PAR (participating network), etc.) and describe the important
differences in contracting provisions for each network. For the
proposed PPO demonstration, the applicant should describe which
existing networks will be used, how networks must be modified for
Medicare users, and if necessary, how networks will be expanded.
While PPOs in the private sector may not directly manage or
coordinate care within preferred networks, managing or coordinating
care within the Medicare population is likely to be productive and
cost-effective. The application should discuss any coordinated care
interventions planned by the PPO organization.
C. Payment Methodology/Risk Sharing
If the applicant proposes any variation from the traditional M+C
payment amount in the demonstration, the application must describe in
detail its proposed payment amount. Because we are maintaining budget
neutrality, we will not pay an amount that is higher than either 99
percent of the fee-for-service payment amount or the M+C payment amount
in an area. In addition, if the applicant is proposing any type of
financial protection, such as risk sharing or reinsurance, this should
also be described in detail. The applicant should include examples that
illustrate the risk sharing arrangement. The shared risk of gain and
loss between CMS and the PPO must be symmetrical and the PPO will
always remain at significant financial risk.
Because we intend to implement any approved demonstrations as soon
as possible, we do not intend to make any significant changes to the
existing M+C payment system. Thus, we will use the existing blend
methodology of risk-adjusted and demographic-adjusted payment. The
usual M+C reporting systems will remain in place. If the applicant
believes it is necessary to modify any aspects of the payment process,
the application should request the modification and provide a detailed
justification for the request.
D. Budget Neutrality
The PPO demonstrations awarded under this solicitation must be
budget neutral. This means that the expected cost that we incur under
the demonstration can be no more than the expected cost were the
demonstration not to occur. The applicant must submit a budget
neutrality calculation in the application. Using the proposed payment
methodology (including any risk sharing arrangements), the applicant
should estimate CMS payments with and without the demonstration for
each year of the demonstration. The calculation should indicate how the
estimates were derived. If risk sharing is proposed, there should be
three calculations of budget neutrality: optimistic or best-case
assumptions; expected or normal assumptions; and pessimistic or worst-
case assumptions.
The applicant should include a revenue and expense statement
showing CY 2003 estimated per member per month Medicare revenue and
member premium; benefit expenses (hospital inpatient, hospital
outpatient, professional, other Medicare services, and non-Medicare
services); and administrative expense (administration and profit). The
statement should show any copay credits for the various services.
If risk sharing is proposed, we will share risk only on medical
benefit expenses. Administrative expense must be reasonable and
consistent with prior practices. The applicant should describe a
reconciliation process to be used to determine savings or losses. A
reconciliation based on the PPO's accumulated medical claims expenses
must include an independent audit, funded by the PPO, verifying the
calculations.
We intend to carefully review each applicant's proposed payment
methodology. Our primary goal in this demonstration is to increase
choices for people with Medicare while maintaining budget neutrality.
Thus, before we make final decisions on demonstration awards, we will
negotiate with applicants the specific terms of their payment proposals
including our payment amount and any risk sharing arrangement, if
proposed. We will not pay an amount that is higher than the M+C payment
amount in an area or higher than 99 percent of the fee-for-service
payment amount. Following are some of the aspects of payment that we
consider important.
Whether the model is likely to draw enrollees from fee-
for-service or existing M+C products by considering existing M+C
enrollment penetration and the characteristics of supplemental
insurance available.
The potential for selection risk resulting from the
benefits offered, including member premium and cost sharing
requirements.
The reasonableness of revenue and expense estimates,
particularly the administrative component.
Any special enhancements for people with Medicare, such as
prescription drug coverage, broad preferred networks, and commitments
for quality improvement.
E. Provider Payments
The applicant should discuss its policies and procedures on in-
network contracting including its credentialing and recredentialing
process, level of payment, quality and other types of reporting
required, and financial incentives and rewards. The applicant should
compare these approaches to those in its commercial contracts. Any
special challenges to obtaining a sufficient network for Medicare
enrollees should be noted along with proposed solutions.
The applicant should describe its method of payment for out-of-
network providers for their care of PPO enrollees. The discussion
should include numerical examples showing dollar contributions from the
PPO organization and from the enrollee for Part A and Part B services.
The example
[[Page 18213]]
should include specific Medicare allowable amounts, enrollee cost
sharing, and the total amount received by the provider.
The applicant should also describe its method for conducting
provider relations, including the means by which it will address
questions, complaints, and appeals from out-of-network providers on
payments received. In addition, the applicant should describe its
procedures for enrollee complaints relating to any balance billing
requests received from providers.
F. Claims Processing
The application should contain a discussion of the methods for
processing and paying claims in the demonstration, including in-network
and out-of-network services. The applicant should indicate whether
existing claims processing systems used in commercial business will be
used or whether new systems must be developed for the Medicare
demonstration.
If there are any interface requirements for Medicare intermediaries
and carriers, this should be noted and discussed. Estimates of effort
required to establish required payment protocols should also be
included.
G. Enrollment Potential
The applicant should state the reasons it believes that the PPO
demonstration is a wise business decision, and in particular, the
reasons it believes people with Medicare will enroll in the PPO
product. If focus groups or other qualitative consumer-oriented studies
were completed, the findings should be described. The applicant should
also explain its method for computing enrollment projections. In
addition, the applicant should describe and provide estimates of its
target market including underlying enrollment trends, demographics, and
origin of potential enrollees (that is, fee-for-service, Medigap
supplement, Medicare managed care including M+C, employer group).
Benefits offered and cost-sharing requirements are important
considerations for those considering PPO enrollment. The application
should thoroughly describe the benefit design and cost-sharing
requirements for in- and out-of-network services. To the extent
possible, we encourage organizations to offer some level of
prescription drug coverage. If out-of-pocket caps are included for in-
and out-of-network services, the application should describe the
methods of calculation and implementation. Since the incentives to use
network services are critical to successful performance in a PPO
environment, the application should discuss the manner in which the
benefit design and cost-sharing characteristics contribute to the
desired incentives.
The application should also contain a description of the marketing
plan for the demonstration. We are interested in the approach that each
applicant will take to inform people with Medicare about a new PPO
option. Since the concept may be unknown to older Medicare
beneficiaries, the applicant should explain how it would attempt to
explain the unique features of the PPO, not only in the marketing plan,
but also after enrollment, when members begin to use services.
The application should discuss how the PPO organization will advise
its members of providers in the preferred network and how it intends to
update information as network changes occur.
H. Organizational Capabilities
Applicants must demonstrate that they have the basic infrastructure
to implement and carry out the demonstration. At a minimum, the
applicant must have adequate physical assets, trained staff,
information systems, and financial resources. Proposals must include a
detailed implementation plan describing tasks, time lines, and
resources required to implement the demonstration program. Since
applicants must demonstrate prior experience in operating successful
PPO or M+C programs, the implementation plan should focus on tasks and
a time line for modifying or adapting the existing systems and networks
to fit the Medicare demonstration program.
One of the tasks in the implementation plan must be preparation of
a ``Medicare Plus Choice PPO Application'' (OMB number 0938-0470) which
is different from this application for a PPO demonstration. If the
application for a PPO demonstration is approved, the awardee must
submit a M+C application before implementation of the demonstration.
Organizations with existing M+C contracts are familiar with the M+C
application process. We are requiring this information to assess the
organizational, health service delivery, financial, and quality aspects
of each PPO model before it becomes operational. We may suggest a site
visit to assist the applicant.
We intend to simplify and streamline the existing application
process and will require awardees only to supplement material and
information already included in the demonstration application. As part
of the application, applicants may request that normal M+C requirements
be waived or modified in the PPO demonstration. If we approve an
applicant's request, the qualification application should reflect any
waivers or modifications. During the implementation planning process,
the project officer and our staff will assist awardees in further
defining the process. It is our intent to make the qualification
process as streamlined as possible.
The plan must also include tasks and time lines associated with
other required implementation planning activities, such as network
contracting, claims processing design, risk-sharing reconciliation
process, marketing, and data reporting. The pre-implementation planning
phase should not exceed 4 months, since we anticipate that all
demonstrations will begin no later than January 1, 2003.
I. Waivers
The applicant must list and discuss all waivers of M+C requirements
that they have requested. The applicant should describe each waiver,
give the legal reference of the M+C requirement to be waived, and
present a rationale for the importance of the waiver to a successful
demonstration outcome. The applicant must distinguish, if possible,
between M+C requirements that are legally binding by statute or
regulation and those that are current M+C policy.
It is important to note that, while our waiver authority is limited
to provisions that relate to payment, we believe our existing waiver
authority will provide the opportunity to demonstrate innovative PPO
options that offer greater flexibility to plans. For example, while we
cannot waive quality assurance requirements, our payment-related waiver
authority could potentially have the effect of permitting an entity to
operate a PPO product under this demonstration without being subject to
quality assurance requirements that would otherwise apply. Some
potential demonstration participants may be M+C organizations that have
an HMO license. If so, they would not be eligible for the less
prescriptive quality assurance requirements under section 1852(e)(2)(B)
of the Act that apply to a PPO plan, since the definition of a PPO plan
in section 1852(e)(2)(D) of the Act requires that the plan be ``offered
by an organization that is not licensed or organized under State law as
a health maintenance organization.'' Private fee-for-service plans,
however, are subject to the same less prescriptive quality requirements
in section 1852(e)(2)(B) of the Act, and there is no restriction on an
entity with an HMO license offering a
[[Page 18214]]
private fee-for-service plan. Absent waiver authority under a
demonstration, however, there would be an impediment to carrying out a
PPO demonstration under the private fee-for-service plan rules, since
there is a requirement that all providers receive the same payment
amount for a service, without regard to whether they have a signed
contract with the entity offering the private fee-for-service plan. Our
authority to waive requirements that relate to reimbursement or payment
could allow us to waive these rules, and thus allow the organization to
have a different payment arrangement with a preferred provider network
than with providers outside the network. This would allow an M+C
organization with an HMO license to carry out the demonstration without
being subject to the quality assurance requirements that apply to HMOs,
while still establishing a PPO-type network for enrollees.
Other examples of M+C rules that potentially could be waived as
relating to payment might be rules applicable to enrollee cost-sharing
(for example, the current aggregate limit on cost-sharing under a
particular plan), and requirements in section 1854 of the Act relating
to the submission and approval of an ``adjusted community rate'' (ACR)
proposal. Virtually any payment requirement in section 1853 of the Act
could also be waived. We wish to emphasize, however, that we cannot
waive non-payment related requirements under our authority in section
402(b) of the Social Security Act Amendments of 1967, 42 U.S.C. 1395b-
1(b).
J. Submission of Applications
We must receive applications (original and 10 copies) as indicated
in the DATES and ADDRESSES sections of this notice. Only proposals that
are considered ``on time'' will be reviewed and considered for award.
Applications must be typed for clarity and should not exceed 40 double-
spaced pages, exclusive of the cover letter, executive summary,
resumes, forms, and documentation supporting the budget.
Application Contents Outline
To facilitate the review process, the application should include
the following:
1. Cover Letter--Must include a brief description of the proposed
demonstration, the demonstration site, a contact person, and contact
information.
2. Funding Request--If the applicant is requesting financial
assistance for start-up costs, it must include Standard Form 424--
Application for Federal Assistance (including SF-424a--``Budget
Information'' and SF-424b--``Assurances''). The form and information
are available at www.hcfa.gov/research/sf424.pdf, www.hcfa.gov/research/sf424a.pdf, and www.hcfa.gov/research/sf424b.pdf.
3. Executive Summary
4. Statement of the Problem
5. Demonstration Design
6. Rationale for Waivers
7. Organizational Capabilities
8. Budget Neutrality Calculations
9. Implementation Plan
10. Related Supplemental Materials
IV. Evaluation Process and Criteria
A panel of experts will conduct a review of responsive proposals.
This technical review panel will convene in the month following the due
date for submission of proposals. The panelist's recommendations will
contain numerical ratings based on the evaluation criteria, the ranking
of all responsive proposals, and a written assessment of each
applicant. In addition, we will conduct a financial analysis of the
recommended proposals and assess the budget neutrality of the proposed
projects.
A. Evaluation Criteria and Weights
1. Understanding the Problem (10 points)
The proposal should provide the following:
Discussion of the importance of creating additional
choices for people with Medicare.
Discussion of the health resource characteristics of the
proposed demonstration site, including existing M+C options, and
present a rationale for introduction of a PPO option.
Documentation of existing M+C constraints preventing or
discouraging PPO options in the proposed demonstration site.
2. Soundness of the Demonstration Design (25 points)
The applicant should provide an additional PPO option for Medicare
beneficiaries rather than a substitution for an existing M+C product.
In addition, the proposal should provide the following:
Clear and convincing evidence with supporting materials
that the proposed PPO option will be viable and will attract people on
Medicare.
Reasons that its benefit design and in-network and out-of-
network cost sharing requirements will encourage enrollees to
effectively utilize services and will not discourage enrollment or
deter use of necessary services.
Convincing evidence that the proposed payment
arrangements, including any risk sharing provisions, will ensure
financial stability and will be budget neutral.
Sufficient justification for any M+C waivers that the
applicant is requesting.
Sufficient explanation of all on-going operational
activities required in PPO models.
Evidence that the PPO network will be sufficiently
accessible and achieve the desired results.
Assurance that all State requirements will be met before
implementation.
3. Organizational Capabilities (20 points)
The proposal should provide the following:
Evidence of the availability and adequacy of facilities,
equipment, personnel, and data systems to successfully conduct the
proposed demonstration.
Sufficient information on the organization of personnel
during the project, to whom they are to report, and the methods for
using their services in implementation planning and in the operation of
the demonstration.
4. Ability to Implement the Demonstration (25 points)
The proposal should--
Present a thorough and well-documented implementation plan
projecting timely completion of required start-up activities;
Recognize the more difficult implementation issues
requiring resolution by both the organization and by us, presenting a
plan for that resolution; and
Indicate the organization's familiarity with Medicare
requirements in its qualification process and ongoing monitoring of M+C
plans.
5. Strength of the Financial Analyses (20 points)
The proposal should--
Provide a clear understanding of projected revenues and
expenses during the demonstration;
Provide sufficient examples and explanations of various
financial scenarios; and
Indicate that the applicant understands the budget
neutrality constraints and that the estimates that the applicant uses
in the budget neutrality calculations are sound.
B. Final Selection
Our Administrator will make final selections for demonstration
projects from among the most highly qualified applicants. Factors
including operational feasibility, special area
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characteristics, and program priorities will be considered in the final
selection process. Applicants should be aware that proposals may be
accepted in whole or in part. In evaluating applications, we rely on
our past experience with successful and unsuccessful demonstrations. We
expect to make awards during CY 2002.
V. Collection of Information Requirements
In compliance with the requirement of section 3506(c)(2)(A) of the
Paperwork Reduction Act of 1995, the Centers for Medicare and Medicaid
Services (CMS) (formerly known as the Health Care Financing
Administration (HCFA)), Department of Health and Human Services, is
publishing the following summary of proposed collections for public
comment. Interested persons are invited to send comments regarding this
burden estimate or any other aspect of this collection of information,
including any of the following subjects: (1) The necessity and utility
of the proposed information collection for the proper performance of
the agency's functions; (2) the accuracy of the estimated burden; (3)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (4) the use of automated collection techniques or
other forms of information technology to minimize the information
collection burden.
We are, however, requesting an emergency review of the information
collection referenced below. In compliance with the requirement of
section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, we have
submitted to the Office of Management and Budget (OMB) the following
requirements for emergency review. We are requesting an emergency
review because the collection of this information is needed before the
expiration of the normal time limits under OMB's regulations at 5 CFR
part 1320. We cannot reasonably comply with the normal clearance
procedures because these demonstrations would not be implemented in a
timely manner resulting in the potential loss of alternative and
flexible benefits for beneficiaries. As a result, beneficiaries may not
be provided health care choices that will produce the most beneficial
health care outcomes. In addition, this demonstration will provide
beneficiaries with an alternative health care choice that may alleviate
the need for supplemental health care coverage resulting in more cost-
efficient health care.
We are requesting OMB review and approval of this collection within
14 days of the date of this publication, with a 180-day approval
period. Written comments and recommendations will be accepted from the
public if received by the individuals designated below within 14 days
of this publication. During this 180-day period, we will publish a
separate Federal Register notice announcing the initiation of an
extensive 60-day agency review and public comment period on these
requirements. We will submit the requirements for OMB review and an
extension of this emergency approval.
Type of Information Collection Request: New collection; Title of
Information Collection: PPO Demonstration Proposal Solicitation
Package; Form No.: CMS-10063 (OMB# 0938-NEW); Use: CMS intends to use
the collection requirements referenced in this notice to collect
information needed to implement a high priority demonstration designed
to strengthen the Medicare program. The collection requirements will be
used to gather information about the characteristics of the applicant
organizations and the services and benefits they propose to offer;
Frequency: On Occasion; Affected Public: Business or other for profit
and not for profit; Number of Respondents: 20; Total Annual Responses:
20; Total Annual Hours: 400.
In addition, if an applicant is approved, the awardee must submit a
Medicare+Choice PPO application, approved under OMB number 0938-0470,
with a current expiration date of 11/30/2003, before implementation of
the demonstration. We intend to simplify and streamline the existing
application process and will require awardees only to supplement
material and information already included in the demonstration
application.
We have submitted a copy of this notice to OMB for its review of
these information collections. A notice will be published in the
Federal Register when approval is obtained.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced above, access CMS's
Web Site address at http://www.hcfa.gov/regs/prdact95.htm, or E-mail
your request, including your address, phone number, OMB number, and CMS
document identifier, to [email protected], or call the Reports
Clearance Office on (410) 786-1326.
Interested persons are invited to send comments regarding the
burden or any other aspect of these collections of information
requirements. However, as noted above, comments on these information
collection and recordkeeping requirements must be mailed and/or faxed
to the designees referenced below, within 14 days of the publication of
this notice:
Centers for Medicare and Medicaid Services, Office of Information
Services, Security and Standards Group, Division of CMS Enterprise
Standards, Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-
1850. Fax Number: (410) 786-0262, Attn: John Burke.
and,
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Fax Number: (202) 395-6974 or (202) 395-5167, Attn: Allison
Eydt, CMS Desk Officer.
VI. Regulatory Impact Statement
We have examined the impacts of this notice as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 19, 1980 Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more annually). We have determined
that this notice is not a major rule because it does not impose a
significant economic impact to preferred provider organizations or the
Medicare program.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and government agencies. For
purposes of the RFA, most preferred provider organizations are
considered to be small entities, either by nonprofit status or by
having revenues of $5 to $25 million or less annually. (For details,
see the Small Business Administration's regulation that set forth size
standards for health care industries (65 FR 69432).) Individuals and
States are not included in the definition of a small entity.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of
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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 100 beds.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in expenditure in any 1 year by State,
local, or tribal governments, in the aggregate, or by the private
sector, of $110 million. This notice will not mandate any requirements
for State, local, or tribal governments.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We have reviewed this notice under these requirements and
have determined that it will not impose substantial direct requirement
costs on State or local governments.
In accordance with Executive Order 12866, this notice was reviewed
by the Office of Management and Budget.
Authority: Section 402 of the Social Security Act Amendments of
1967 (42 U.S.C. 1395b-1) (Catalog of Federal Domestic Assistance
Program No. 93.779, Health Care Financing Research, Demonstrations
and Evaluations)
Dated: March 28, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 02-9196 Filed 4-12-02; 8:45 am]
BILLING CODE 4120-01-P