We believe that more can be done to structure choices for seniors to aid them in making better plan choices.^{1 2} For example, studies have suggested that providing personalized drug utilization and cost information to beneficiaries can encourage seniors to switch to plans that better meet their medication needs while reducing their overall costs.\3\ Some have urged that the agency can do more to provide improved individual drug utilization and cost information to beneficiaries to encourage seniors to switch to lowercost plans. Other studies have found that some beneficiaries are not fully aware of the financial implications of deferring enrollment in drug plans,\4\ a finding that suggests that we could do more to make those implications more salient to beneficiaries. We invite comments on these possibilities and other improvements the agency can make, to help beneficiaries choose the plans that best suit their needs. We also invite comment on the type of research that might be undertaken to help inform future regulatory and programmatic improvements and how we can best support our partners, such as states, to assist them in helping beneficiaries enroll in the best possible plans. For example, we are interested in assessing the impacts of random autoassignments on low income beneficiaries. To the extent that States are interested in exploring nonrandom assignment methods, we invite comment on what type of information States would find most beneficial, including the types of data analyses we could potentially undertake with the data we already have from States who utilize nonrandom assignment methods. \1\ McFadden D (2006). Free Markets and Fettered Consumers. The American Economic Review 96(1), 529
\2\ Hanock Y, Rice T, Cummings J, Wood S (2009). How Much Choice is Too Much? The Case of the Medicare Prescription Drug Benefit. Health Services Research 44:4; 11571168.
\3\ See, for example, Wrobel MV, Kling J, Mullainathan S, Shafir E, Vermeulen L (2009). A Shot in the Arm for Medicare Part D: Four Ways for the Government to Boost its Customer Communications. http:/ /www.brookings.edu/papers/2008//media/Files/rc/papers/2008/1120_ medicare_kling/1120_medicare_kling.pdf.
\4\ Hargrave E, Piya B, Hoadley J, Summer L, Thompson J (2008). Experiences Obtaining Drugs under Part D: Focus Groups with Beneficiaries, Physicians, and Pharmacists. Final Report Submitted to the Medicare Payment Advisory Commission. National Opinion Research Center.

We also have found that in certain cases, we have been limited by existing program rules and regulations to implement actions that would improve sponsoring organization performance. Toward this end, we propose provisions that would limit the number of plan offerings by eliminating duplicative bids, and strengthen our program participation requirements.

We are proposing a number of additional provisions aimed at strengthening existing beneficiary protections. For example, we propose to strengthen plan transition process requirements to ensure maximum transparency regarding our expectations of Part D plans with respect to enrollees transitioning to the plan from other drug coverage and to ensure that current subregulatory practices are codified in regulation.

We are also proposing another set of provisions that are aimed at improving payment rules and processes, and improving data collection for oversight and quality assessment. For example, we are proposing to expand the collection of prescription drug event data that we currently collect for research and other nonpayment related purposes. Collecting these additional data, which are currently collected for payment purposes, would provide us additional information to conduct analyses that may be used to improve policies and assist in monitoring of Part D plan sponsors.

In addition, we are proposing significant new Part D policy in this rule. For example, in the area of Part D formulary policy, we propose a regulatory interpretation of MIPPA protected drug categories and classes provision in section 176 of MIPPA (Pub. L. 110275) that we previously addressed in a January 19, 2009 interim final rule with comment period (IFC). Based on comments received in response to that IFC, we believe that interpretation of statutory terms is needed. In addition, we believe that additional clarification is needed relative to the process that we intend to utilize to identify the protected categories and classes of drugs that must be listed on all Part D plan formularies.

Finally, we propose other provisions that are aimed at further clarifying existing policy and we make technical corrections where needed. For example, in some cases, we are addressing topic areas that were included in our 2010 call letter to Part C and D plans, the document that outlines policy clarifications and reminders for plans bidding on plan offerings in the coming contract cycle. In the spirit of transparency, we have outlined some of these clarifications within this rule so to ensure the public has a full opportunity to comment on our policies.

II. Provisions of the Proposed Regulations

In the sections that follow, we discuss the proposed changes to the regulations in 42 CFR parts 417, 422, 423, and 480 governing the MA and prescription drug benefit programs. To better frame the discussion of the specific regulatory provisions we are proposing, we have structured the preamble narrative by topic area rather than by subpart order. Accordingly, our proposals address the following eight specific goals as foreshadowed in the preceding introduction:
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Several of the proposed revisions and clarifications affect both programs. Within each section, we have provided a chart listing all subject areas that contain provisions affecting the Part C and D programs and the associated regulatory citations that would be revised. Please note that in our discussion of these provisions, we often refer to ``sponsoring organizations'' to refer to both Medicare Advantage organizations (MAOs) and Part D sponsors.
A. Changes To Strengthen Our Ability To Distinguish for Approval Strong Applicants for Part C and D Program Participation and To Remove Consistently Poor Performers

This section addresses a number of proposals designed to strengthen our ability to approve strong applicants and remove poor performers in the Part C and D programs. Since the implementation of revisions to the MA and initial implementation of the prescription drug programs in January 2006, we have steadily enhanced our ability to measure MAO and PDP sponsor performance through efforts such as the analysis of data provided routinely by sponsors and by our contractors, regular review of beneficiary complaints, marketing surveillance activities, and routine audits. This information, combined with feedback we have received from beneficiary satisfaction surveys, HEDIS data, and information from MAOs and PDP sponsors themselves, has enabled us to develop a clearer sense of what constitutes a successful Medicare organization capable of providing quality Part C and D services to beneficiaries. This information has also allowed us to identify and take appropriate action against organizations that are not meeting program requirements and not meeting the needs of beneficiaries.

As our understanding of Part C and D program operations has deepened over the past 4 years, our use of our authority to determine which organizations are qualified to offer MA and PDP sponsor contracts, evaluate their compliance with Part C and D requirements, and make determinations concerning intermediate sanctions, contract nonrenewals and contract terminations has evolved as well. As set forth below, we are proposing changes and clarifications to our regulations to make certain that all current and potential MAOs and PDP sponsors clearly understand and can reasonably anticipate how we measure sponsor performance, determine when there is noncompliance, and when enforcement actions are warranted. While we are pleased that so many organizations have elected to participate in the Part C and D programs, we have an obligation to ensure that only appropriate organizations are given the responsibility for providing quality medical care and drug coverage to Medicare beneficiaries.

Each year, since contract year 2006, we have solicited applications from organizations seeking to become qualified to enter into Part C or D sponsor contracts. We received hundreds of applications in each of those years. To properly manage a workload of that size, and to ensure that we conduct a fair review of every application, we have adopted an increasingly standardized, computerbased application submission process. At the same time, we have also become increasingly strict in the application of our regulatory authority to limit the number and timing of opportunities for applicants to resubmit materials to cure applications that do not initially demonstrate that the applicant meets Part C or D requirements.

Until 2 years ago, applicants may have found that we would accept as many corrected submissions as the applicants needed to make their materials (usually documents concerning provider/pharmacy networks, subcontracting arrangements, or riskbearing licenses) consistent with Part C or D requirements. We recognized that this was an inefficient process that afforded some applicants the opportunity to make more re submissions than others and arguably enabled less wellprepared and qualified applicants to enter the program. To improve the fairness of the application process, and to reduce the burden it imposes on applicants and CMS alike, we have, through our application instructions issued over the last 3 years, clarified to all applicants that we will only provide three opportunities to submit an approvable contract qualification application to CMS: The initial solicitation response, one courtesy opportunity to correct any identified deficiencies, and a final opportunity during the 10day cure period provided for specifically in the regulations.

Some organizations have expressed surprise during the last 2 years at our use of our authority to impose strict deadlines and standards of review on applications for qualification as an MAO or PDP sponsor. To reduce the opportunity for confusion about the application process, we are proposing some regulatory clarifications in furtherance of our goal of using a fair and efficient process for ensuring that only truly qualified organizations are offered Part C or D organization contracts. These provisions, described in greater detail below, include requiring applicants to demonstrate that they meet all (not a substantial number) of the Part C and D program requirements, prohibiting applicants from submitting additional curing materials after the expiration of the ten day period following their receipt of a notice of intent to deny their application, and requiring applicants to submit a nonbinding notice of intent to apply for a Part C or D contract.

Organizations should be aware that we will continue to exercise our authority to consider an organization's past Part C or D contract performance in evaluating whether it should be afforded the opportunity to obtain additional contracts or to serve a larger portion of the Medicare beneficiary population. Additionally, sponsoring organizations should be aware that we rely on data to evaluate compliance with program requirements in a number of ways. For example, we use data to evaluate adherence to requirements in the MMA statute or the Part C and D regulations (for example, retail pharmacy access). We also use data to evaluate adherence to the requirements outlined in our manual chapters and other guidance (for example, customer and provider call center performance standards). Finally, we conduct outlier analysis by comparing the performance across all organizations on a particular Part C or D requirement to identify organizations that appear to be poor performers. The most notable example of this kind of analysis is reflected in our performance metrics (that is, the Medicare Part D Plan Ratings). These ratings represent an effort to make additional information available to the public regarding the price and quality of services for which Medicare makes payments. The Plan
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Ratings are located on the Medicare Prescription Drug Plan Finder (MPDPF) Tool at (http://www.Medicare.gov) and are designed to provide a clear differentiation of the various Plan offerings to beneficiaries. Organizations receiving less than ``good'' ratings in any category should anticipate communication from us. Another example is our review of data in the Complaints Tracking Module (CTM), which can be a particularly strong indicator of a sponsor's inability to perform a required Part C or D function. An abnormally high complaint rate for a particular sponsor will likely prompt us to investigate other sources of information to determine whether the organization is complying with specific Part C or D requirements.

Our efforts are aimed at making certain that we have well functioning MAOs and PDP sponsors administering Part C and D benefits on our behalf. Just as we have become more sophisticated in our analysis of sponsor applications and compliance, we also continue to review our sanction and contract termination authority to ensure that we pursue actions when there is sufficient basis to support them. For example, we have developed an annual process for analyzing sponsor performance during the preceding contract year. We review each sponsor's compliance history, including CMSissued compliance notices, audit results, and performance ratings (for example, star ratings) to develop a full picture of that sponsor's ability to deliver Part C and D services to its members. If that picture indicates that a particular sponsor has a significant pattern of poor performance or even isolated incidences of noncompliance with crucial operational requirements (for example, enrollment processing), we will consider termination or nonrenewal of the contract of that sponsor.

With the clarifications we are proposing to the Part C and D regulations through this proposed rule and the background provided in this preamble section, MAOs and PDP sponsors should now be fully aware that we will continue to apply stricter scrutiny to sponsor qualifications and contract performance as our analytical capabilities and understanding of industry best practices improves. As the Part C and D programs have now reached a certain level of maturity and organizations' strong interest in participating in the programs has been established, it is appropriate for us to use the authority and evidence at our disposal to make certain that beneficiary plan choices are characterized more by their quality than their quantity. These provisions are described in detail in Table 1.
Table 1Provisions Strengthening Our Ability To Distinguish for Approval Strong Applicants and To Remove Consistently Poor Performers Part 422 Part 423 Provision
Subpart Section Subpart Section Notice of Intent to Apply........... Subpart K.............. Sec. 422.501......... Subpart K............. Sec. 423.502. Application Standards............... Subpart K.............. Sec. 422.502......... Subpart K............. Sec. 423.503. Compliance Measures/Analysis........ Subpart K.............. Sec. 422.502......... Subpart K............. Sec. 423.503. Compliance Programs................. Subpart K.............. Sec. Subpart K............. Sec. 423.504(b)(4)(vi). 422.503(b)(4)(vi). Network Adequacy of Coordinated Care Subpart C.............. Sec. 422.112......... N/A................... N/A. and NetworkBased PrivateFeeFor
Service plans under Part C.
Clarify programmatic elements that Subpart D.............. Sec. 422.156(b)(7), Subpart D............. Sec. 423.165(b), Sec. 423.165(f). are ``deemable''. Sec. 422.156(f). Procedures for termination and Subpart K.............. Sec. 422.510(c)(1), Subpart K............. Sec. 423.509(c)(1), Sec. Nonrenewals: Part C and D. Sec. 422.506(b)(3). 423.507(b)(3). Intermediate Sanctions: Procedures Subpart O.............. Sec. 422.756......... Subpart O............. Sec. 423.756. for imposing civil and money
penalties.
Contract Termination................ Subpart K.............. Sec. 422.510(a)...... Subpart K............. Sec. 423.509(a). Proper request for hearings......... Subpart N.............. Sec. 422.662......... Subpart N............. Sec. 423.651. Burden of Proof, Standard of Proof, Subpart N.............. Sec. 422.660, Sec. Subpart N............. Sec. 423.650, Sec. 423.658(d). Standard of Review and Conduct of 422.676(d). Hearing.
Postponement of effective date of Subpart N.............. Sec. 422.664......... Subpart N............. Sec. 423.652. determination when a request is
being filed.
Extending timeframe for contract Subpart N.............. Sec. 422.670......... Subpart N............. Sec. 423.655. determination hearings.
Appeal times: Require each party Subpart N.............. Sec. 422.682......... Subpart N............. Sec. 423.661. provide witness list and documents
5 calendar days before hearing.
Appeal times: Require request for a Subpart N.............. Sec. 422.692(a)...... Subpart N............. Sec. 423.666(a). review by the administrator must be
received with 15 days after receipt
of hearing decision.
Contract redeterminations and Subpart N.............. Sec. 422.696......... Subpart N............. Sec. 423.668. reopening.
Mutual termination of contract...... Subpart K.............. Sec. 422.503(b)(6)... Subpart K............. Sec. 423.504(b)(5). 1. Require Notice of Intent To Apply Under Part C and D Within the Application Requirements (Sec. 422.501 and Sec. 423.502)

Subpart K of part 422 and subpart K of part 423 set forth the requirements for contracts with MA Organizations and Part D sponsors including application procedures. Section 1871(a)(1) of the Act authorizes us to prescribe such regulations as may be necessary to carry out the administration of the Medicare program. We propose using that authority to establish an administrative requirement for both the Part C and D programs related to the submission to us of applications to qualify as MA and PDP sponsor contractors.

Beginning with the applications for the 2009 contract year, the Medicare Advantage, Part D Prescription Drug benefit, and Employer/ UnionOnly Group Waiver Plan (Direct Contract or ``800 Series'') sponsor applications are
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submitted via a paperless process. Each application is completed through the CMS Health Plan Management System (HPMS). As a result of the fully electronic submission process and restrictions on access to HPMS, every applicant must complete a Notice of Intent to Apply as described in the HPMS memo dated October 10, 2008. This includes current contractors seeking to expand their organization's service area, and current contractors adding a Special Needs Plan (SNP) or an Employer Group/UnionSponsored Waiver Plan (EGWP) to their existing contract.

The Notice of Intent to Apply provides us with critical information for generating a pending contract number and providing User ID connectivity. Submitting a Notice of Intent to Apply does not bind that organization to submit an application for the following year. However, without a pending contract number and completed CMS User ID connectivity, an organization will not be able to access the appropriate modules in HPMS to complete the application materials. We propose codifying in Sec. 422.501 and Sec. 423.502 our existing guidance that initial applicants and existing contractors seeking to expand complete a nonbinding Notice of Intent to Apply.
2. Application Requirements (Sec. 422.501(c) and Sec. 423.502(c)) and Evaluation and Determination Procedures for Determining Whether Applicants Are Qualified for a Contract Under Parts C and D (Sec. 422.502 and Sec. 423.503)

Subpart K of Part 422 and subpart K of Part 423 set forth the requirements for contracts with MA organizations and Part D sponsors, respectively, including application procedures. Section 1860D12(b)(3) of the Act states that we must apply certain specified provisions of section 1857 of the Act including the procedures for termination in section 1857(h) of the Act in the same manner as they apply to contracts under section 1857(a) of the Act. Therefore, we are making a single proposal that applies to both MA organizations and Part D sponsors related to our application evaluation procedures and appeals of our determinations regarding applications.

During the first four years of the Medicare Advantage and Part D programs, several unsuccessful applicants contested our denial of their applications for MA organization or Part D sponsor contracts. At hearings, some of those applicants were successful in arguing that the regulations were not clear in stating that an applicant needed to demonstrate that it met all program requirements to qualify for a contract. Accordingly, we are proposing to revise Sec. 422.502 and Sec. 423.503 to make it explicit that we will approve only those applications that demonstrate that they meet all (not substantially all) Part C and D program requirements.

The application requirements and evaluation and determination procedures for MA organizations and Part D sponsors are set forth in subpart K of Parts 422 and 423, respectively. The application process in each instance requires an applicant to submit for CMS review a combination of attestations that it will comply with stated program requirements, as well as contracts with organizations the applicant has contracted with to perform key Part C or D functions, evidence of the applicant's riskbearing licenses, and data documenting that the applicant can provide its members access to Part C and D services consistent with the programs' requirements. As we have proposed to clarify at Sec. 422.501(c)(1) and (2), Sec. 422.502(a)(2), Sec. 423.502(c)(1) and (2), and Sec. 423.503(a)(2), we require that applicants demonstrate that they meet all requirements outlined in the MA organization and Part D sponsor applications.

Under the current regulations at Sec. 422.502(a)(1) and Sec. 423.503 (a)(1), we evaluate an entity's application on the basis of information contained in the application itself and any additional information that we obtain through onsite visits, publicly available information, and any other appropriate procedures. We propose to simplify and clarify the process by modifying Sec. 422.502(a)(1) and Sec. 423.503(a)(1) and limiting the evaluation of an entity's application to information contained in the application and any additional information that we obtain through onsite visits. Limiting our review to this information ensures that we will afford all applicants (numbering in the hundreds each of the last four years) a fair and consistent review of their qualifications. Organizations can be assured that we will not consider additional sources of information regarding one applicant's qualifications that we do not consider for others.

We are also proposing a clarification of our authority to decline to consider application materials submitted after the expiration of the 10day period following our issuance of a notice of intent to deny an organization's contract qualification application. Under Sec. 422.502(c) and Sec. 423.503(c), we notify applicants of our determination on the application and the basis for the determination. If the applicant does not appear qualified to contract as an MA organization or Part D sponsor and has not provided enough information to permit us to evaluate the application, the applicant receives a notice of intent to deny the application and a summary for the basis for the finding. As provided in Sec. 422.502(c)(2) and Sec. 423.503(c)(2), within 10 days from the date of the notice, the applicant can respond in writing to the issues or other matters that were the basis for our findings and revise its application to correct any deficiencies.

The purpose of the proposed regulatory change is to clarify that information submitted after 10 days from the notice will under no circumstances be reviewed for the purpose of approving an application. Further, consistent with the proposed revisions to Sec. 422.650(b)(2) and Sec. 423.660(b)(2), which are discussed elsewhere in this proposed rule, the applicant would not be permitted to submit additional revised application material to the Hearing Officer for review should the applicant elect to appeal the denial of its application. To allow for the submission and review of such information as part of the hearing would, in effect, extend the deadline for submitting an approvable application. Moreover, the proposed change would further clarify the standard for the disposition of applications for which either revisions are not provided within the 10 days or are inadequate.

Specifically, we propose to clarify Sec. 422.502(c)(2) and Sec. 423.503(c)(2) by adding a new paragraph (iii) to establish that if we do not receive a revised application within 10 days from the date of the intent to deny notice, or if after timely submission of a revised application the applicant still appears unqualified to contract as an MA organization or Part D sponsor and/or has not provided enough information to allow us to evaluate the application, we will deny the application.
3. Deny Contract Qualification Applications Based on Past Contract Performance (Sec. 422.750 and Sec. 423.750)

As described in Sec. 422.502(b) and Sec. 423.503(b), we may deny an application based on the applicant's failure to comply with the terms of a prior contract with CMS even if the applicant currently meets all of the application requirements. However, we propose to modify Sec. 422.502(b) and Sec. 423.503(b) to state that we will review past performance across all of the contracts held by the applicant. The provision as currently drafted mentions a ``prior contract'' with CMS. Today,
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contracts are ``evergreen'' and some organizations hold multiple MA and/or PDP sponsor contracts; therefore the concept of ``prior contract'' is outdated, as the prior performance issues could have occurred in any other contract currently or formerly held by an applicant. Therefore, we propose to revise the language in Sec. 423.503(b) and Sec. 422.502(b) to refer to ``any current or prior contract'' held by the organization, instead of the current language referring to a ``previous year's contract.'' We also propose to clarify that the period that will be examined for past performance problems be limited to those identified by us during the 14 months prior to the date by which organizations must submit contract qualification applications to CMS. Fourteen months covers the time period from the start of the previous contract year through the time that applications are received for the next contract year.

Indicia of performance deficiencies that might lead us to conclude that an organization has failed to comply with a current or prior contract include, but are not limited to, poor performance ratings as displayed on the Medicare Options Compare and MPDPF web sites; receipt of requests for corrective action plans (CAPs) unrelated to an audit (as these types of CAPs generally involve direct beneficiary harm); and receipt of one or more other types of noncompliance notices from CMS (for example, notices of noncompliance or warning letters).

Additionally, as indicated by the changes to Sec. 422.503(b), Sec. 422.508(c), Sec. 423.504(b), and Sec. 423.508(e), we consider withdrawal of Part C or D operations from some or all of an organization's newly contracted service area prior to the start of a benefit year (through mutual termination or otherwise) an indication of poor performance. Such a situation can arise when, for example, an organization, after it has signed its Medicare contract for the upcoming program year, loses a contract with a significant number or type of providers, jeopardizing its ability to provide its members adequate access to services. Also, an organization may suddenly face financial difficulties that threaten its ability to offer the benefit packages approved by CMS throughout the upcoming contract year. In such instances, we could simply leave the contract in place and take enforcement actions against the organization. Under such an approach, we would knowingly be permitting beneficiaries to remain enrolled with an organization that cannot effectively deliver the benefit. Instead, we act(s) in the best interests of the beneficiaries by agreeing with the organization to terminate its contract and work(s) with the organization to make certain that beneficiaries receive uninterrupted access to Medicare services through another MA organization, PDP sponsor, or original Medicare. But for our acting to protect beneficiaries by agreeing to the contact termination, the organization would have faced significant compliance and enforcement actions once its failure to comply with program requirements became apparent. Also, the organization's failure to conduct the proper due diligence on its contracted provider network or its finances represents itself a significant failure to have in place the administrative capability to operate a Medicare benefit plan worthy of compliance and enforcement actions. Accordingly, we believe(s) it is appropriate to consider an organization's withdrawal from its contract prior to the start of the benefit year to be a strong indication of poor performance worthy of our consideration under Sec. 422.750 and Sec. 423.750.

We will review performance in accordance with these examples and other evidence of noncompliance, and will deny applications for initial contracts and service area expansions on the basis of noncompliant past performance. By specifically providing these examples and clarifying that we intend to exercise this authority, we believe that organizations will be motivated to enhance their compliance operations in order to avoid being out of compliance with program requirements, and this will significantly deter noncompliance leading to improved overall performance of organizations in the Part C and D programs. 4. Use of Data To Evaluate Continued Ability To Act as a Qualified Sponsoring Organization Under Parts C and D (Sec. 422.504, and Sec. 423.505)

Sections 1857(e)(1) and 1860D12(b)(3)(D) of the Act provide broad authority for the Secretary to add terms to the contracts with MA and Part D sponsors including terms that require the sponsor to provide the Secretary ``with such information * * * as the Secretary may find necessary and appropriate.'' Under that authority, we established Sec. 422.516 and Sec. 423.514, Reporting Requirements. Consistent with sections 1857(a) and 1860D12(b)(1) of the Act, we established that we will oversee an MA organization's and Part D sponsor's continued compliance with Part C and Part D requirements under Sec. 422.502(d)(1) and Sec. 423.503(d)(1).

Some of the data acquired through Sec. 422.516 and Sec. 423.514 are used for the purpose of monitoring an organization's or sponsor's continued compliance with MA and/or Part D requirements. For example, under Sec. 423.514(a)(5), Part D sponsors must have an effective procedure to develop, compile, evaluate, and report to CMS particular matters, such as low income subsidy (LIS) contract data, that we require. At the contract level, the sponsor's LIS data is compared to our LIS data and a match rate is calculated. Under our guidance, the match rate between our data and the sponsor's should exceed 95 percent. Sponsors who fail to exceed the 95 percent match rate are notified of their noncompliance and are expected to come into compliance with Part D instructions. In some instances, we may use an outlier analysis to determine a MA organization's or Part D sponsor's performance relative to industry standards established by the performance of all the other organizations and sponsors as described earlier in the preamble in our discussion of the development of our policies concerning the awarding, monitoring, and enforcement of Medicare contracts. For example, Part D plans report grievance data to CMS. We conduct outlier analysis to identify plans with the highest numbers of reported grievances for the purpose of identifying plans needing some type of compliance action. To conduct these types of outlier analysis, we usually perform the following steps:

We also use the Performance Metrics (Plan Star Ratings), some of which are determined by relative ranking, for oversight and monitoring purposes to ensure plan quality. As stated in the 2009 Call Letter, organizations and sponsors with less than ``good'' ratings should expect to be the subject of our monitoring and compliance actions. Likewise, if after an analysis of data submitted under Sec. 422.516 or Sec. 423.514 an organization's or sponsor's performance is found to be an outlier based on relative ranking, the organization or sponsor may be considered out of compliance with MA and Part D requirements. [[Page 54643]]

We propose to add paragraphs Sec. 422.504(m)(1) and (2) and Sec. 423.505(n)(1) and (2) to make explicit our existing authority to find organizations or sponsors out of compliance with MA and/or Part D requirements when the organization's or sponsor's performance fails to meet performance standards articulated in statutes, regulations, and guidance or when an organization's or sponsor's performance represents an outlier relative to the performance of other organizations or sponsors.
5. Compliance Programs Under Parts C and D (Sec. 422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi))

Section 1857(a) of the Act provides the Secretary with the authority to enter into contracts with MA organizations and section 1860D12(b)(1) of the Act provides the Secretary with the authority to enter into contracts with PDP sponsors. The current regulatory provisions provide that any entity seeking to contract as an MA organization or PDPsponsor must have administrative and management arrangements satisfactory to us as demonstrated by (among other requirements) having a compliance plan that consists of seven basic elements. These seven elements of the compliance plan outline fundamental requirements such as written policies and procedures, a compliance officer and committee that is accountable to senior management, effective compliance training and communication, enforcement of disciplinary standards, and procedures for internal monitoring and auditing and ensuring prompt responses to detected offenses. In addition, a compliance plan must include measures to detect, correct, and prevent fraud, waste, and abuse.

Compliance programs have long been recognized as key to achieving adherence with contract requirements and to protecting against fraud, waste, and abuse. The recent focus on the importance of these programs has been heightened not only by CMS through our ongoing audit and oversight efforts but also by several of our oversight bodies. For example, over the last several years, the U.S. Department of Health and Human Services Office of Inspector General (OIG) and the Government Accountability Office (GAO) have each focused specific oversight efforts on MA organizations' and PDP sponsors' compliance programs and have requested that we take actions to evaluate and oversee these programs to ensure entities have effective programs in place. Similarly, like the Medicare Part C and D programs, other state programs, includin

FOR FURTHER INFORMATION CONTACT

Alissa Deboy, (410) 7866041, General information and Part D issues.

Sabrina Ahmed, (410) 7867499, Part C issues.

Chris Eisenberg, (410) 7865509, Risk adjustment data validation issues.

Terry Lied, (410) 7868973, Collection of information requirements and regulatory impact analysis issues.

Kristy Nishimoto, (410) 7868517, Part C and D enrollment and appeals issues.

Christine Reinhard, (410) 7862987, Part C and D compliance and sanction issues.

Frank Szeflinski, (303) 8447119, Part C payment issues.