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AIS's Health Business Daily
Featured Story, June 30, 2010 Medicare Advantage Plans Fear CMS May Reject Bids Based on New Regulatory Powers, Past Performance Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs. By James Gutman, Managing Editor (jgutman@aishealth.com) Medicare Advantage plans and their attorneys increasingly worry that CMS will use new powers under the health reform law to reject entire 2011 bids — perhaps without the option of appeal — something that hasn’t happened before. They also fear that CMS increasingly may not approve applications for new service areas or products based on past performance issues in one perhaps small part of the organization, even if those problems have been remedied. And connected with both concerns is a problem plans cite in not getting information about CMS’s qualms until too late in the process, often after applications have been submitted and networks contracted.
While CMS spokesman Peter Ashkenaz told MAN June 14 that it was “too early” to address specific concerns regarding potential bid denials, a recent presentation by an agency official at a regional CMS conference for MA and Part D contractors seems to make clear the agency’s intent to use past performance as a basis for application denials. The May 10 presentation by Jennifer Shapiro, director of the Division of Benefit Purchasing and Monitoring in CMS’s Center for Medicare Services, said that regulatory authority supports CMS steps to disapprove expansions or new contracts for additional products for plans with past performance problems.
Shapiro’s presentation also noted that for 2011, CMS classified 21 organizations as “performance outliers.” Of that number, 10 had submitted applications for 2011. Of those 10, she said, eight eventually withdrew all pending applications, while the two others withdrew most of the applications. By comparison, according to the presentation, for 2010 there were nine identified outliers, seven of which had submitted applications, and all seven withdrew. For 2009, only two organizations were notified that their applications would be denied, and both withdrew, she added.
One new development strengthening CMS’s hand is the reform law’s Section 3209 saying that the HHS secretary has the authority not to accept “any or every” bid by an MA organization and may deny bids that “propose significant increases in cost sharing or decreases in benefits.” Those aren’t the only criteria for denials, and the reform law does not either limit the grounds for denial or establish an appeals process.
In the past, notes Washington, D.C., attorney Mark Joffe, who represents health plans, after MA organizations submit bids in early June, there has been a “negotiation process” in the summer through which plans attempt to deal with any concerns on those bids. There is no formal appeals process associated with this, but since HHS and CMS did not have explicit authority to deny bids, issues usually were worked out. When they couldn’t be, MA sponsors typically withdrew their applications.
For 2011, though, Joffe tells MAN, things could be a lot different. Not only does HHS have explicit denial authority, but there also is CMS’s April 16 guidance, partly stemming from the reform law, putting severe limits on MA plan members’ out-of-pocket obligations as well as requiring “meaningful differences” among products offered by the plans.
Sparked by concerns about such potential problems as high copayments for major utilizers of medical services, CMS is asserting significantly expanded authority over how benefits are designed, Joffe explains. “So I think we will see a shift in member payments from cost sharing to premiums,” he says, especially among not-for-profit plans with “lean margins” that have to generate additional revenue at a time when medical costs are increasing at a rapid rate.
Focus Now Shifts to What CMS Will Do
With concern augmented this month by letters from HHS Sec. Kathleen Sebelius to four MA plan operators warning about denials of bids that “appear to include excessive increases," “the issue has become more political,” observes Joffe. He says plans now are asking that if their bids to CMS show the need for a premium hike, “what will CMS do? It’s a big question.” Given the possibility “CMS will say no,” he adds, “then what happens?”
The law hasn’t changed regarding appeals, he notes, but what might have changed is “CMS’s posture….The really big issue this summer is will there be issues that you can work out with CMS?” If the agency decides not to renew or to terminate an entire contract, he continues, there is an appeal right. If CMS’s decision, however, is to deny one or more of several benefit plans but not others, then there still is a contract, and there may not be an appeal right, Joffe asserts.
CMS, though, could establish an informal grievance and appeals procedure, says one MA plan executive who asks not to be identified. There is precedent for that, he says, in such aspects as reconsideration of decisions by independent review entities. And CMS’s own new compliance regulation, effective June 7, for MA risk adjustment data validation (RADV) audits creates a formal appeals process. The executive says the bids situation merits a similar procedure.
There is a separate but related issue, according to the executive, regarding contracts denied by CMS on the basis of “demerits” accrued by an MA plan in the past. Those demerits could stem from such sources, typically much less severe than offenses resulting in full sanctions, as not reporting data on a timely basis. The problem concerning the executive relates to the fact that some MA organizations have a large number of small contracts with CMS, while others have a small number of big contracts. The latter, he says, have “more vulnerability” since they are more apt to have accrued demerits given the pacts’ size and because denial of these large contracts would have more impact on an MA organization than would denial of small ones.
Terming this a “high-stakes” issue, the executive would like CMS to publish the criteria it uses for determining demerits and deciding whether to deny contracts based on them.
This would be particularly helpful, he explains, because MA sponsors often don’t get information about demerits and their potential role in denying applications until too late in the process. MA sponsors filed 2011 letters of intent for their MA operations in November 2009. From then until the application due date in February 2010, the sponsor’s staff expends huge amounts of resources on such aspects as licensure, application preparation and field structure. Yet it is not till perhaps April that CMS says it intends to deny an application because of performance issues, according to the executive.
Earlier information on this would make CMS a “better business partner,” he contends.
Information on Evaluation Criteria Is Coming
Joffe puts some historical context on these concerns. In the past, he says, CMS has made contract-denial decisions mainly based on actual violations. Now, however, he asserts, the agency says it will look at past performance for contracting in the future, raising the prospect that an organization could be meeting requirements and still be penalized on their applications. He readily acknowledges that CMS is sensitive to the issue and has said it will provide information on evaluation criteria, perhaps through draft manual guidance with a comment period.
Overhanging all these issues, notes Joffe, is the backdrop of MA rates that under the reform law will start falling in 2012. With that plus the new regulatory thrusts, he says, “there are going to be a lot of difficulties.” |
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