100-16 Medicare Managed Care Manual: Chapter 6 - Relationships With Providers

Medicare Managed Care Manual
Chapter 6 - Relationships With Providers
Table of Contents
(Rev. 82, 04-27-07)
Transmittals for Chapter 6
10 - Introduction
20 - Provider Involvement in Policy-Making
20.1 - Physician Consultation in Medical Policies
20.2 - Consultation in Development of Credentialing Policies
30 - Written Information on Physician Participation
40 - Interference With Health Care Professionals’ Advice to Enrollees Prohibited
50 - Provider Anti-Discrimination
60 - Provider Participation
60.1 - Notice of Reason for Not Granting Participation
60.2 - Confirmation of Eligibility for Participation in Medicare: Excluded and
Opt-Out Provider Checks
60.3 - Credentialing, Monitoring, and Recredentialing
60.4 - Suspension, Termination, or Nonrenewal of Physician Contract
70 - Institutional Provider and Supplier Certification
80 - Physician Incentive Plans
80.1 - Requirements and Limitations
80.2 - Disclosure of Physician Incentive Plans
90 - Provider Indemnification of MA Organization Prohibited
100 - Special Rules for Services Furnished by Non-Contract Providers

10 - Introduction
(Rev. 24, 06-06-03)
Chapter 6 of this manual focuses on the requirements for relationships between Medicare
Advantage organizations (MA organizations) and the physicians and other health care
professionals and providers with whom they contract to provide services to Medicare
beneficiaries enrolled in an MA plan. This chapter also contains some requirements that
apply to non-contract providers that furnish services to beneficiaries enrolled in an MA
organization. The policies in this chapter are derived from Subpart E of Part 422 of the
Code of Federal Regulations, and include additional instructions intended to provide
further guidance on implementation of regulatory requirements. The statutory basis for
the regulations at 42 CFR, Part 422 is set forth in the preambles to three final rules
published in the “Federal Register”: a June 26, 1998, Interim Final Rule requesting
public comment (63 FR 35068), and two final rules responding to public comments on
the interim final rule, published on February 17, 1999 (64 FR 7980) and June 29, 2000
(65 FR 40316).
Note that other policies relevant to providers are addressed in other chapters:
See Chapter 11, “Contracts with Medicare Advantage Organizations,” for information
on:
• 	MA organization oversight responsibility for contractors, subcontractors, and
related entities (see 42 CFR 422.502(i)): It is the responsibility of the MA
organization to ensure through written arrangements that all applicable laws,
regulations, and other instructions are followed.
• 	Prompt payment by MA organizations to contracting and non-contracting
providers (see 42 CFR 422.502(c), 422.520).
• 	Beneficiary financial protections from inappropriate liability in the event of
provider terminations (see 42 CFR 422.502(g)).
See Chapter 4, “Benefits and Beneficiary Protection,” for information on:
• 	When the MA organization must pay non-contract providers (see
42 CFR 422.100(b)). Section 100 of this chapter also contains information on
what non-contract providers must accept as payment in full (see
42 CFR 422.214).
• 	Notice to beneficiaries in the event of provider terminations (see
42 CFR 422.111(e)).

See Chapter 10, “ Organization Compliance With State Law and Preemption By Federal
Law,” for information on:
• 	Federal preemption of state law (see 42 CFR 422.402). Pursuant to
§1856(b)(3)(ii) of the Social Security Act, state laws or regulations relating to
inclusion or treatment of providers are specifically superseded by Federal law.
Note that 42 CFR 422.216, Special rules for MA private fee-for-service plans, is not
included in this chapter.
20 - Provider Involvement in Policy-Making
(Rev. 24, 06-06-03)
20.1 - Physician Consultation in Medical Policies
(Rev. 24, 06-06-03)
The MA organization must establish a formal mechanism to consult with the physicians
who have agreed to provide services under the MA plan offered by the organization
regarding the organization’s medical policy, quality assurance/improvement programs
and medical management procedures and ensure that the following standards are met:
1. 	Practice guidelines and utilization management guidelines:
• 	Are based on reasonable medical evidence or a consensus of health care
professionals in the particular field;
• 	Consider the needs of the enrolled population;
• 	Are developed in consultation with contracting physicians; and
• 	Are reviewed and updated periodically.
2. 	The guidelines are communicated to providers, and, as appropriate, to enrollees.
3 	Decisions with respect to utilization management, enrollee education, coverage of
services, and other areas in which the guidelines apply are consistent with the
guidelines.
An MA organization that operates an MA plan through subcontracted physician groups
must provide that these policies apply equally to physicians within those subcontracted
groups.

(Source: 42 CFR 422.202(b) and (c).)
20.2 - Consultation in Development of Credentialing Policies
(Rev. 24, 06-06-03)
Credentialing and recredentialing standards for types of providers and for specialists
should be reviewed by clinical peers, through establishment of a credentialing committee
or other mechanism. In addition, there should be a process for peer review when the MA
organization is considering employing or contracting with a provider who does not meet
its established credentialing standards.
(Source: 42 CFR 422.204(b)(2)(iii) and additional instructions.)
30 - Written Information on Physician Participation
(Rev. 24, 06-06-03)
An MA organization that operates a coordinated care plan or network Medical Saving
Account (MSA) plan must provide for the participation of individual physicians and the
management and members of groups of physicians, through reasonable procedures that
include:
1. Written notice of rules of participation including terms of payment, credentialing,
and other rules directly related to participation decisions;
2. Written notice of material changes in participation rules before the changes are put
into effect; and
3. Written notice of adverse participation decisions and a process for appeal (see
§60.4).
An MA organization that operates an MA plan through subcontracted physician groups
must provide that these participation procedures apply equally to physicians within those
subcontracted groups.
(Source: 42 CFR 422.202(a) and (c))
40 - Interference With Health Care Professionals’ Advice to Enrollees
Prohibited
(Rev. 24, 06-06-03)
An MA organization may not prohibit or otherwise restrict a health care professional,
acting within the lawful scope of practice, from advising, or advocating on behalf of, an
individual who is a patient and enrolled under an MA plan about:

1. 	The patient’s health status, medical care, or treatment options (including any
alternative treatments that may be self-administered), including the provision of
sufficient information to provide an opportunity for the patient to decide among
all relevant treatment options;
2. 	The risks, benefits, and consequences of treatment or non-treatment; or
3. 	The opportunity for the individual to refuse treatment and to express preferences
about future treatment decisions.
Health care professionals must provide information regarding treatment options in a
culturally-competent manner, including the option of no treatment. Health care
professionals must ensure that enrollees with disabilities have effective communications
with participants throughout the health system in making decisions regarding treatment
options.
The general rule prohibiting an MA organization from interfering with providers’ advice
to enrollees does not require the MA plan to cover, furnish, or pay for a particular
counseling or referral service if the MA organization that offers the plan:
1. Objects to the provision of that service on moral or religious grounds; and
2. Through appropriate written means, makes available information on these policies
as follows:
• 	To CMS, with its application for a Medicare contract, within 10 days of
submitting its adjusted community rate (ACR) proposal or, for policy
changes, in accordance with 42 CFR 422.80 (concerning approval of
marketing materials and election forms) and with 42 CFR 422.111
(concerning disclosure requirements).
• 	To prospective enrollees, before or during enrollment.
• 	With respect to current enrollees, the MA organization is eligible for this
exception if it provides notice of such change within 90 days after
adopting the policy at issue; however, under regulatory disclosure
requirements, notice of such a change must be given in advance.
Nothing in this provision may be construed to affect disclosure requirements under state
law or under the Employee Retirement Income Security Act of 1974.
An MA organization that violates provisions of this section is subject to intermediate
sanctions.

(Source: 42 CFR 422.206)
50 - Provider Anti-Discrimination
(Rev. 24, 06-06-03)
Consistent with the requirements of this section, the policies and procedures concerning
provider selection and credentialing, and the requirement that all Medicare-covered
services be available to all MA plan enrollees, an MA organization may select the
practitioners that participate in its plan provider networks. In selecting these
practitioners, an MA organization may not discriminate, in terms of participation,
reimbursement, or indemnification, against any health care professional who is acting
within the scope of his or her license or certification under state law, solely on the basis
of the license or certification.
If an MA organization declines to include a given provider or group of providers in its
network, it must furnish written notice to the affected provider(s) on the reason for the
decision.
This prohibition does not preclude any of the following actions by an MA organization:
1. Refusal to grant participation to health care professionals in excess of the number
necessary to meet the needs of the plan’s enrollees (except for MA private-fee-
for-service plans, which may not refuse to contract on this basis).
2. Use of different reimbursement amounts for different specialties or for different
practitioners in the same specialty.
3. Implementation of measures designed to maintain quality and control costs
consistent with its responsibilities.
(Source: 42 CFR 422.205)
60 - Provider Participation
(Rev. 24, 06-06-03)
60.1 - Notice of Reason for Not Granting Participation
(Rev. 24, 06-06-03)
As noted directly above, if an MA organization declines to include a given provider or
group of providers in its network, it must furnish written notice to the affected
provider(s) on the reason for the decision.

60.2 - Confirmation of Eligibility for Participation in Medicare:
Excluded and Opt-Out Provider Checks
(Rev. 24, 06-06-03)
Excluded Providers
The Office of the Inspector General (OIG) maintains a sanction list that identifies those
individuals found guilty of fraudulent billing, misrepresentation of credentials, etc. The
MA organizations employing or contracting with health providers have a responsibility to
check the sanction list with each new issuance of the list, as they are prohibited from
hiring, continuing to employ, or contracting with individuals named on that list. The MA
organizations should check the Office of the Inspector General (OIG) Web site at
http://www.oig.hhs.gov/fraud/exclusions/list of excluded.html for the listing of excluded
providers and entities. The OIG has a limited exception that permits payment for
emergency services provided by excluded providers under certain circumstances. See
42 CFR 1001.1901.
Opt-Out Providers
If a physician or other practitioner opts out of Medicare, that physician or other
practitioner may not accept Federal reimbursement for a period of 2 years. The only
exception to that rule is for emergency and urgently needed services where a private
contract had not been entered into with a beneficiary who receives such services. See
42 CFR 405.440. An MA organization must pay for emergency or urgently needed
services furnished by a physician or practitioner to an enrollee in their MA plan who has
not signed a private contract with a beneficiary, but may not otherwise pay opt-out
providers. Information on providers who opt-out of Medicare may be obtained from the
local Medicare Part B carrier. The MA organization must check this list on a regular
basis.
(Source: 42 CFR 422.204(b)(4) and 42 CFR 422.220 and additional instructions.)
60.3 - Credentialing, Monitoring, and Recredentialing
(Rev. 24, 06-06-03)
An MA organization must have written policies and procedures for the selection and
evaluation of health care professionals that conform with the following credentialing
requirements and the provider anti-discrimination policy discussed directly above.
Credentialing is the review of qualifications and other relevant information pertaining to
a health care professional who seeks appointment (in the case of an MA organization
directly employing health care professionals) or who seeks a contract or participation
agreement with the MA organization. Note that MA organization oversight of
credentialing in contracted, subcontracted, and other related entities is an MA
organization contract requirement imposed by 42 CFR 422.502(i)(4)(iv) and is addressed
further in Chapter 11, “Contracts With Medicare Advantage Organizations.”

Credentialing is required for:
• 	All physicians who provide services to the MA organization’s enrollees,
including members of physician groups; and
• 	All other types of health care professionals who provide services to the MA
organization’s enrollees, and who are permitted to practice independently under
state law.
Credentialing is not required for:
• 	Health care professionals who are permitted to furnish services only under the
direct supervision of another practitioner;
• 	Hospital-based health care professionals who provide services to enrollees
incident to hospital services, unless those health care professionals are separately
identified in enrollee literature as available to enrollees; or
• 	Students, residents, or fellows.
Initial Credentialing
Procedures for initial credentialing involve a written application; verification of
information from primary and secondary sources; confirmation of eligibility for payment
under Medicare; and site visits as appropriate. A limited set of procedures for newly
trained health care professionals permits initial credentialing for a period of up to 60
days.
Written Application
The credentialing process begins with the completed application and attestation of
correctness signed by the health care professional. The application must be signed, dated
and include an attestation by the applicant of the correctness and completeness of the
application. The information collected must be no more than six months old on the date
on which the health care professional is determined (for example, by a credentialing
committee) to be eligible for appointment or contract. All items must be verified prior to
the appointment of the health care provider, with the exception being in the case of a
pending Drug Enforcement Agency (DEA) number.
The application includes a work history covering at least 5 years and a statement by the
applicant regarding: (1) Any limitations in ability to perform the functions of the
position, with or without accommodation; (2) History of loss of license and/or felony
convictions; and (3) History of loss or limitation of privileges or disciplinary activity.

(NOTE: Work history refers to relevant work that is applicable to the position being
sought. If the applicant is a new health care professional, he/she may not have 5 years of
relevant work history.)
Verification of Information
Some information may be verified from a primary source and some information may be
verified from secondary sources. A “primary source” is an organization or entity with
legal responsibility for originating a document and ensuring the accuracy of the
information it conveys. Primary source verification may be achieved through the use of
industry-recognized verification sources. The nationally recognized accrediting
organizations specify which sources they consider to be appropriate primary sources for
verifying credentials. In some instances, except for licensure, a secondary source will be
considered acceptable provided that the secondary source verifies the information from
the originator. If the MA organization uses one of the primary sources identified by one
of these nationally recognized accrediting organizations, CMS will consider that source
acceptable. If questioned, the MA organization should be able to reference which
organization identified that source. In addition, although the National Practitioner Data
Bank (NPDB) does not have any legal responsibility for issuing a document, it is
generally considered an appropriate source of verification by most private accrediting
organizations as well as by CMS.
Primary Source Verification Required
An MA organization must verify the following from primary sources and include in the
credentialing records:
1. A current valid license to practice: Verification must show that the license was in
effect at the time of the credentialing decision.
2. Education and training records, including evidence of graduation from the
appropriate professional school and completion of a residency or specialty
training, if applicable: Verification is required only for the highest level of
education or training attained. For example, health care professionals who have
completed residency, then the verification from the residency program is the
highest credential to be verified, and for those who only completed medical
school, the medical school verification must be obtained. When verifying the
highest level of education or training through primary sources, the assumption is
that all other education or training requirements prior to the highest level
achieved have been met. This assumption is consistent with current credentialing
practices.
3. Board certification in each clinical specialty area for which the health care
professional is being credentialed if he/she states that he/she is board certified on
the application: If board certification is verified, CMS will accept this as also

satisfying the requirement to verify education and training, provided that board
uses primary source verification for education and training.
Primary Source Verification Not Required
Following are other credentialing requirements that must be verified and included in the
credentialing files. Previously, these requirements also stipulated primary source
verification. This change from primary source to secondary source aligns these
requirements with current industry standards. Secondary sources of information for these
requirements are widely accepted and appropriate. The sources of and methods for
obtaining the designated credentialing requirements listed below are suggested
appropriate sources/methods; however, this is not intended as an all-inclusive listing of
sources/methods that an MA organization may employ to acquire the requisite
information.
1. Clinical privileges in good standing at the hospital designated by the health care
professional as the primary admitting facility if the physician or other health care
professional has admitting privileges: Health care professionals who have the
ability to have admitting privileges may choose not to have them, as they may not
manage care in the inpatient setting. However, if a health care professional does
have admitting privileges, he/she is required to list those privileges. Lack of
privileges does not exclude a health care professional from participation in a MA
organization. Information obtained by an MA organization on applications from
physicians and other health care professionals that lists the current status and type
of admitting privileges would meet this requirement. (This information may be
obtained by contacting the facility, obtaining a copy of the practitioner directory
or attestation by the health care professional.)
2. Current, adequate malpractice insurance meeting the MA organization’s
requirements: (This information may be obtained via the malpractice carrier, a
copy of the insurance face sheet or attestation by the health care professional.)
3. A valid Drug Enforcement Agency (DEA) or Controlled Dangerous Substances
(CDS) certificate in effect at the time of the credentialing decision: However, if a
health care professional’s DEA certificate is pending, the MA organization may
credential the practitioner provided the MA organization has adopted and
implemented a process under which other DEA-certified contracted practitioners
write all prescriptions that require a DEA number. The process must also include
verification of the newly issued DEA certificate. If a health care professional
states that he/she does not prescribe, this requirement is not applicable. (This
information can be obtained through confirmation with CDS, entry into the
National Technical Information Service (NTIS) database, or by obtaining a copy
of the certificate.)

4. A history of professional liability claims that resulted in settlements or judgments
paid by or on behalf of the health care professional: (This information can be
obtained from the malpractice carrier or from the National Practitioner Data
Bank.)
5. For physicians, any other information from the National Practitioner Data Bank.
6. Information about sanctions or limitations on licensure from the applicable state
licensing agency or board, or from a group such as the Federation of State
Medical Boards.
7. Eligibility for participation in Medicare. (See excluded and opt-out provider
checks above.)
Site Visits
The MA organization must establish a policy for conducting site visits. It is the
responsibility of the MA organization to decide the frequency of site visits, as part of its
site visit policy. The CMS does not, however, require MA organizations to conduct
initial credentialing or recredentialing site visits. Each MA organization’s site visit
policy will be reviewed pursuant to CMS’ monitoring protocol.
An MA organization’s site visit policy must include procedures for detecting deficiencies
and have mechanisms in place to address those deficiencies. At a minimum, the MA
organization should consider requiring initial credentialing site visits of the offices of
primary care practitioners, obstetrician-gynecologists, or other high-volume providers, as
defined by the MA organization. If the organization chooses to conduct site visits for
“high volume” providers, the organization’s procedures may specify the criteria for
determining that a provider is “high-volume”. The organization may also consider
developing criteria that target high-volume providers, or those against whom grievances
have been filed.
The site visit should include an evaluation of the site’s accessibility, appearance, and
adequacy of equipment, using standards developed by the MA organization. Each MA
organization must send appropriately qualified personnel to conduct site visits. Those
personnel may or may not be clinicians, depending on the focus of the evaluation and the
evaluation criteria established by the MA organization.
In addition, the visits should include a determination of whether the site conforms to the
MA organization’s standards for medical record keeping practices and the confidentiality
requirements discussed in Chapter 4. Although CMS is not establishing a methodology
for conducting medical record reviews, each MA organization is directed to verify that its
practitioners’ enrollee health records meet its own standards.

Initial Requirements for a Newly Trained Health Care Professional
In an effort to promote access to services for beneficiaries and allow a newly trained
healthcare professional to begin providing care at an earlier date, CMS has established a
temporary, streamlined credentialing guideline for these newly trained individuals. In the
case of a newly trained health care professional who has completed all appropriate
training and education within the last 12 months, the MA organization may establish a
policy that permits initial credentialing for a period of up to 60 days if the MA
organization:
1. Verifies that the practitioner has a current, valid license from primary sources;
2. Verifies malpractice settlements from the last 5 years. (This may be done by
verifying with the malpractice carrier or the National Practitioner Data Bank;
attestation is not accepted.);
3. Has a policy and procedure which ensures that the practitioner meets all standard
credentialing requirements after 60 days; and
4. Ensures that the Credentialing Committee has reviewed the case and makes the
final determination about granting such an initial 60-day credentialing period.
Monitoring
The MA organization must develop and implement policies that address the ongoing
monitoring of sanctions and grievances filed against health care professionals. The MA
organization must regularly obtain and review reports and other documentation as
indicated below. The MA organization must also provide, through documentation,
evidence that its policies have been implemented.
The CMS requires ongoing monitoring of lists of practitioners who have been sanctioned
and of practitioners who opt-out of accepting Federal reimbursement from Medicare (see
above for details), as well as ongoing monitoring and resolution of beneficiary
grievances. In addition to these standing requirements, MA organizations are also
required to monitor sanctions and limitations on licensure on a regular basis between
recredentialing cycles.
In the event that an MA organization finds an incidence of poor quality or any type of
sanction activity against a health care professional, it should intervene and correct the
situation appropriately.
If the MA organization becomes aware of conditions at a site that suggest compromised
safety or other concerns related to the delivery of care, the MA organization will be

expected to perform a site visit as soon as possible to assess the facility and identify
corrective actions.
While the MA organization is required to ensure that all credentialing requirements are
current at the time of initial credentialing and/or recredentialing, the MA organization is
not required to monitor and account for any expiration dates on a continuous basis unless
required to do so by the state.
Recredentialing
The MA organization must have procedures for recredentialing, at least every 3 years,
through a process that updates information obtained in initial credentialing, considers
performance indicators such as those collected through the QAPI program, the utilization
management system, the grievance system, enrollee satisfaction surveys, and other
activities of the MA organization, and that includes an attestation of the correctness and
completeness of the new information.
Licensure must be re-verified from primary sources. Board certification must be re-
verified only if the provider was due to be recertified or states that he/she has become
board certified since the last time he/she was credentialed or recredentialed. The
following must also be re-verified in the same manner as performed under the Initial
Credentialing Requirements: admitting privileges; malpractice coverage; and DEA/CDS
certificate. In addition, the MA organization must perform another search of the National
Practitioner Data Bank and obtain updated sanction or restriction information from
licensing agencies and Medicare (see above for details). If a provider is confirmed
eligible to participate in Medicare, the MA organization should require that a provider,
who has been otherwise disciplined, have a corrective action plan in place, and the MA
organization should have procedures to ensure that the provider’s plan is followed and is
effective. The MA organization is not required to conduct site visits as part of its
recredentialing policies, but may choose to do so at its own discretion.
(Source: 42 CFR 422.204(b)(2)(i) and (ii) and additional instructions)
60.4 - Suspension, Termination, or Nonrenewal of Physician Contract
(Rev. 24, 06-06-03)
Advance Notice for Suspension or Termination
An MA organization and a contracting provider must provide at least 60 days written
notice to each other before terminating a contract without cause.

Reporting of Suspensions or Terminations Due to Quality Deficiencies
An MA organization that suspends or terminates a contract with a physician because of
deficiencies in the quality of care must give written notice of that action to licensing or
disciplinary bodies or to other appropriate authorities.
Suspension, Termination, or Nonrenewal of Physician Contracts
Specific requirements for an MA organization that operates a coordinated care plan or
network MSA plan providing benefits through contracting physicians and that suspends,
terminates, or non-renews a physician’s contract are as follows:
1. The MA organization must give the affected physician written notice of the
reasons for the action, including, if relevant, the standards and profiling data used
to evaluate the physician and the numbers and mix of physicians needed by the
MA organization.
2. The MA organization must allow the physician to appeal the action, and give the
physician written notice of his/her right to a hearing and the process and timing
for requesting a hearing.
3. The MA organization must ensure that the majority of the hearing panel members
are peers of the affected physician.
Preamble to the February 17, 1999, final rule responded to public comment that notice
and appeal requirements apply regardless of whether suspension or termination of the
physician contract is due to quality deficiencies or not, unless the physician voluntarily
agreed to leave the organization’s network. In addition, it was clarified that these
requirements apply to nonrenewal of contracts.
An MA organization that operates an MA plan through subcontracted physician groups
must provide that these procedures apply equally to physicians within those
subcontracted groups.
(Source: 42 CFR 422.202(c) and (d) and preamble of February 17, 1999, rule.)
70 - Institutional Provider and Supplier Certification
(Rev. 82, Issued: 04-25-07, Effective/Implementation: N/A)
Regardless of the MA organization’s usual policies for determining that an institutional
provider or supplier is qualified to serve its enrollees, the MA organization must
determine that each institutional provider or supplier that has signed a contract or
participation agreement with the MA organization has met the following three
requirements. Current documentation should be obtained at least every 3 years, and

contracts should provide for notice from the provider of any change in its Medicare
approval, state licensure, or accreditation status.
1. Medicare Approval
An MA organization must ensure that Medicare-covered basic benefits are
provided only by providers that have signed participation agreements (“provider
agreements”) with CMS, and by suppliers approved by CMS as meeting
conditions for coverage of their services. The following types of providers and
suppliers must have met requirements for participation in Medicare (also
specified at 42 CFR 498.2):
• 	Hospitals (either JCAHO accreditation or Medicare certification). Note
that Medicare also certifies organ procurement organizations (OPOs) and
that organ transplants must generally be performed in certified organ
transplants centers;
• 	Home Health Agencies (HHAs);
• 	Hospices;
• 	Clinical laboratories (a CMS-issued CLIA certificate or a hospital-based
exemption from CLIA);
• 	Skilled Nursing Facilities (SNFs);
• 	Comprehensive Outpatient Rehabilitation Facilities (CORFs);
• 	Outpatient Physical Therapy and Speech Pathology Providers;
• 	Ambulatory Surgery Centers (ASCs);
• 	Providers of end-stage renal disease services;
• 	Providers of outpatient diabetes self-management training;
• 	Portable x-ray Suppliers; and
• 	Rural Health Clinic (RHCs) and Federally Qualified Health Center
(FQHCs).
Inquiries regarding the Medicare participation of specific providers and suppliers
can be directed to the regional office plan manager.

In addition, MA plans must also comply with all CMS requirements related to an
approved benefit, including the use of approved facilities, as applicable. Note
that being certified as a Medicare approved facility is required for performing
certain procedures, such as carotid artery stenting, VAD destination therapy,
bariatric surgery, certain oncologic PET scans in Medicare-specified studies, and
lung volume reduction surgery. For lists of approved facilities for these
procedures, please see link:
http://www.cms.hhs.gov/MedicareApprovedFacilitie/BSF/list.asp#TopOfPage.
For lists of approved organ transplants facilities, please see links:
http://www.cms.hhs.gov/ApprovedTransplantCenters/ and
http://www.cms.hhs.gov/esrdgeneralinformation/02_data.asp.
2. Is licensed to operate in the state, and is in compliance with any other applicable
state or Federal requirements.
3. Is reviewed and approved by an appropriate accrediting body, or meets the
standards established by the MA organization itself. Accrediting bodies include
the Joint Commission on Accreditation of Healthcare Organizations (JCAHO),
the Accreditation Association for Ambulatory Health Care, the Commission on
Accreditation of Rehabilitation Facilities, the Council on Accreditation, the
Community Health Accreditation Program (CHAP), and the Continuing Care
Accreditation Commission. This standard does not require that an MA
organization accept the findings of an accrediting body in determining whether to
contract with a provider, or that it reject providers that are not accredited.
However, an MA organization that does not rely on independent accreditation
must develop its own standards for approval of institutional providers and
determine that such providers meet those standards before including them in its
network. Primary source verification of accreditation and licensure is not
required, unless otherwise provided in the MA organization’s Medicare contract.
Accordingly, an MA organization may rely on documentation supplied by the
institutional provider.
(Source: 42 CFR 422.204(b)(1) and (3) and additional instructions.)
80 - Physician Incentive Plans
80.1 - Requirements and Limitations
(Rev. 67, Issued: 08-12-05; Effective: 08-01-05)
Definitions
Bonus means a payment made to a physician or physician group beyond any salary, fee-
for-service payments, capitation, or returned withhold.

Capitation means a set dollar payment per patient per unit of time (usually per month)
paid to a physician or physician group to cover a specified set of services and
administrative costs without regard to the actual number of services provided. The
services covered may include the physician’s own services, referral services, or all
medical services.
Physician Group means a partnership, association, corporation, individual practice
association, or other group of physicians that distributes income from the practice among
members. An individual practice association is defined as a physician group for this
section only if it is composed of individual physicians and has no subcontracts with
physician groups.
Physician Incentive Plan means any compensation arrangement to pay a physician or
physician group that may directly or indirectly have the effect of reducing or limiting the
services provided to any plan enrollee.
Potential Payments means the maximum payments possible to physicians or physician
groups including payments for services they furnish directly, and additional payments
based on use and costs of referral services, such as withholds, bonuses, capitation, or any
other compensation to the physician or physician group. Bonuses and other
compensation that are not based on use of referrals, such as quality of care furnished,
patient satisfaction or committee participation, are not considered payments in the
determination of substantial financial risk.
Referral Services means any specialty, inpatient, outpatient, or laboratory services that a
physician or physician group orders or arranges, but does not furnish directly.
Risk Threshold means the maximum risk, if the risk is based on referral services, to
which a physician or physician group may be exposed under a physician incentive plan
without being at substantial financial risk. This is set at 25 percent risk.
Substantial Financial Risk, for purposes of this section, means risk for referral services
that exceeds the risk threshold.
Withhold means a percentage of payments or set dollar amounts deducted from a
physician’s service fee, capitation, or salary payment, and that may or may not be
returned to the physician, depending on specific predetermined factors.
Applicability
The requirements in this section apply to an MA organization and any of its
subcontracting arrangements that utilize a physician incentive plan in their payment
arrangements with individual physicians or physician groups. Subcontracting
arrangements may include an intermediate entity, which includes, but is not limited to, an

individual practice association that contracts with one or more physician groups or any
other organized group, such as those specified at 42 CFR 422.4.
Note that there is a statutory prohibition on physician incentive plans for MA private fee-
for-service plans. Accordingly, an MA private fee-for-service plan may not operate a
physician incentive plan.
(Source: §1859(b)(2)(A); 42 CFR 422.208(e).)
Basic Requirements
Any physician incentive plan operated by an MA organization must meet the following
requirements:
1. The MA organization makes no specific payment, directly or indirectly, to a
physician or physician group as an inducement to reduce or limit medically
necessary services furnished to any particular enrollee. Indirect payments may
include offerings of monetary value (such as stock options or waivers of debt)
measured in the present or future.
2. If the physician incentive plan places a physician or physician group at substantial
financial risk (as determined below) for services that the physician or physician
group does not furnish itself, the MA organization must assure that all physicians
and physician groups at substantial financial risk have either aggregate or per-
patient stop-loss protection (as described below
3. For all physician incentive plans, the MA organization provides to CMS the
information specified in §80.2.
Determination of Substantial Financial Risk
Substantial financial risk occurs when risk is based on the use or costs of referral
services, and that risk exceeds a risk threshold of 25 percent of potential payments.
(Payments based on other factors, such as quality of care furnished, are not considered in
this determination.)
The following incentive arrangements cause substantial financial risk within the meaning
of this section, if the physician’s or physician group’s patient panel size is not greater
than 25,000 patients (shown in the table below):
1. Withholds greater than 25 percent of potential payments.

2. Withholds less than 25 percent of potential payments if the physician or physician
group is potentially liable for amounts exceeding 25 percent of potential
payments.
3. Bonuses that are greater than 33 percent of potential payments minus the bonus.
4. Withholds plus bonuses if the withholds plus bonuses equal more than 25 percent
of potential payments. The threshold bonus percentage for a particular withhold
percentage may be calculated using the formula:
Withhold % = -0.75 (Bonus %) +25%.
5. Capitation arrangements, if:
a. The difference between the maximum potential payments and the
minimum potential payments is more than 25 percent of the maximum
potential payments; and
b. The maximum and minimum potential payments are not clearly explained
in the contract with the physician or physician group.
6. Any other incentive arrangements that have the potential to hold a physician or
physician group liable for more than 25 percent of potential payments.
Stop-Loss Protection Requirements
The MA organization assures that all physicians and physician groups at substantial
financial risk have either aggregate or per-patient stop-loss protection in accordance with
the following requirements:
1. Aggregate stop-loss protection must cover 90 percent of the costs of referral
services that exceed 25 percent of potential payments.
2. For per-patient stop-loss protection if the stop-loss protection provided is on a per-
patient basis, the stop-loss limit (deductible) per patient must be determined based
on the size of the patient panel and may be a combined policy or consist of
separate policies for professional services and institutional services. In
determining patient panel size, the patients may be pooled (as described below).

3. Stop-loss protection must cover 90 percent of the costs of referral services that
exceed the per patient deductible limit. The per-patient stop-loss deductible limits
are as follows:
Panel Size 	Single
Combined
Deductible
Separate
Institutional
Deductible
Separate
Professional
Deductible
1-1,000 	$6,000 	$10,000 	$3,000
1,001-5,000 	30,000 	40,000 	10,000
5,001-8,000 	40,000 	60,000 	15,000
8,001-10,000 	75,000 	100,000 	20,000
10,001-25,000 	150,000 	200,000 	25,000
>25,000 	None 	None 	None
Pooling of Patients
Any entity that meets the pooling conditions of this section may pool commercial,
Medicare, and Medicaid enrollees or the enrollees of several MA organizations with
which a physician or physician group has contracts. The conditions for pooling are as
follows:
1. 	It is otherwise consistent with the relevant contracts governing the compensation
arrangements for the physician or physician group;
2. The physician or physician group is at risk for referral services with respect to
each of the categories of patients being pooled;
3. 	The terms of the compensation arrangements permit the physician or physician
group to spread the risk across the categories of patients being pooled;
4. 	The distribution of payments to physicians from the risk pool is not calculated
separately by patient category; and
5. 	The terms of the risk borne by the physician or physician group are comparable
for all categories of patients being pooled.

Sanctions
An MA organization that fails to comply with the requirements of this section is subject
to intermediate sanctions.
(Source: 42 CFR 422.208.)
80.2 - Disclosure of Physician Incentive Plans
(Rev. 67, Issued: 08-12-05; Effective: 08-01-05)
Disclosure to CMS
Each organization will provide assurances satisfactory to the Secretary that physician
incentive plan requirements are met. MA organizations must provide to CMS
information concerning physician incentive plans as requested.
Disclosure to Medicare Beneficiaries
Each MA organization must provide the following information to any Medicare
beneficiary who requests it:
1. Whether the MA organization uses a physician incentive plan that affects the use
of referral services;
2. The type of incentive arrangement; and
3. Whether stop-loss protection is provided.
In addition, MA organizations that are included in the Consumer Assessments of Health
Plans Study (CAHPS) Survey should give Medicare enrollees a copy of the CAHPS
enrollment survey results available on the www.medicare.gov website or direct enrollees
to where on the website CAHPS survey results for their plan may be found.
(Source: 42 CFR 422.210.)
90 - Provider Indemnification of MA Organization Prohibited
(Rev. 24, 06-06-03)
An MA organization may not contract or otherwise provide, directly or indirectly, for any
of the following individuals, organizations, or entities to indemnify the MA organization
against any civil liability for damage caused to an enrollee as a result of the MA
organization’s denial of medically necessary care:
1. 	A physician or health care professional;

2. 	Provider of services;
3. 	Other entity providing health care services; and
4. 	A Group of such professionals, providers, or entities.
(Source: 42 CFR 422.212.)
100 - Special Rules for Services Furnished by Non-Contract Providers
(Rev. 24, 06-06-03)
Consistent with §1852(a)(2) and §1852(k)(1) of the Social Security Act, non-contract
providers must accept as payment in full payment amounts applicable in Original
Medicare. Thus, this provision of law imposes a cap on payment to non-contract
providers of provider payment amounts plus beneficiary cost-sharing amounts applicable
in Original Medicare, and ensures that non-contract providers not balance bill MA plan
enrollees for other than MA plan cost-sharing amounts.
• 	Note that non-contract facility providers identified at §1861(u) of the Social
Security Act (the Act), which includes hospitals, skilled nursing facilities and
home health agencies, must accept as payment in full payment amounts
applicable in Original Medicare less any payments under 42 CFR 412.105(g)
concerning indirect medical education payment to hospitals for managed care
enrollees and 42 CFR 413.86(d) concerning payment for direct graduate medical
education costs.
• 	In cases where the MA organization has not arranged for the services, if the non-
contract provider’s bill is less than the Original Medicare amount, the MA
organization is only required to pay the billed amount.
In addition, under Federal law, non-contract providers are subject to penalties if they
accept more than Original Medicare amounts.
(Source: 42 CFR 422.214 and preamble to June 29, 2000, rule.)

Transmittals Issued for this Chapter
Rev # 	Issue Date 	Subject 	Impl Date CR#
R82MCM 	04/25/2007 	Revision to Chapter 6, Relationships with
Providers
N/A 	N/A
R67MCM 	08/12/2005 	Changes in Requirements for Periodic
Surveys of Current and Former Enrollees, and
in the CMS Method for Calculating Interest
on Overpayments and Underpayments to
HMOs, CMPs and HCPPS.
N/A 	N/A
R44MCM 	01/09/2004 	Revised Physician Incentive Reporting
Requirements
N/A 	N/A
R24MCM 	06/06/2003 	Initial Issuance of Chapter 	N/A 	N/A