100-11 Programs of All-Inclusive Care for the Elderly (PACE)Manual: Chapter 15 - Organization Monitoring and Auditing

Programs of All-Inclusive Care for the
Elderly (PACE)
Chapter 15 – Organization Monitoring and Auditing
Table of Contents
(Rev. 2, Issued: 06-09-11)
Transmittals for Chapter 15
10 - Introduction
20 - General Monitoring and Auditing Requirements
20.1 - PACE Organization Responsibilities
20.2 - Technical Assistance
30 - Audit
30.1 - Pre-Audit Activities
30.2 - Audit Process
30.3 - Audit Team
30.4 - Audit Categories
30.5 - Trial Period
30.6 - Trial Period Review
30.7 - Scope of Review
30.8 - Biennial
30.9 - Focused
40 - Post Audit
40.1 - CAR/CAP
40.2 - Release from Corrective Action Plan

50 - Disclosure of Results
60 - State Administering Agency
60.1 - Readiness Review
60.2 - Monitoring During Trial Period
60.3 - Annual Monitoring
60.4 - Monitoring of Corrective Action Plans
70 - Financial Recordkeeping and Reporting Requirements
70.1 - Accurate Reports
70.2 - Accrual Accounting
70.3 - Accepted Reporting Practices
70.4 - Trial Period Reporting Requirements
70.5 - Annual Reporting Requirements
80 - HPMS Quality Data Submission

10 - Introduction
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
The PACE program agreement is a three-way agreement between the PACE
organization, CMS and the State Administering Agency. Monitoring and auditing are the
responsibility of CMS and the State Administering Agency.
[42 CFR §§ 460.30, 460.112]
20 - General Monitoring and Auditing Requirements
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
As noted above, the State Administering Agency and CMS have primary responsibility to
ensure that every PACE organization maintains compliance with State and Federal
requirements. This function includes the monitoring and effectiveness evaluation of
organizational structure, procedures, protocols, and policies of each PACE organization.
20.1 - PACE Organization Responsibilities
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
• 	The PACE organization shall collect data, maintain records and submit reports
as required by CMS and the State Administering Agency. A PACE
organization must submit to CMS and the State Administering Agency all
reports that CMS and the State Administering Agency require to monitor the
operation, cost, quality, and effectiveness of the program and establish
payment rates. The PACE organization shall allow CMS and the State
Administering Agency access to data and records including, but not limited to,
participant health outcomes data, financial books and records, medical
records, personnel records, any aspect of services furnished, reconciliation of
participants‘ benefit liabilities and determination of Medicare and Medicaid
amounts payable;
• 	The PACE organization agrees to require that all related entities, contractors
or subcontractors agree that the State Administering Agency, the U.S.
Department of Health and Human Services, CMS, or their designee(s) have
the right to inspect, evaluate and audit any pertinent contracts, books,
documents, papers, and records of any related entity contractor(s) or
subcontractor(s) involving transactions related to the PACE Program
Agreement.
[42 CFR §§ 460.70, 460.200(a), (b), and (c), 460.204(d); 71 FR 71324 (Dec. 8, 2006)]
20.2 - Technical Assistance
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)

CMS or the State Administering Agency may perform conference calls, webinars, or
onsite visits to assist the PACE organization with operational or clinical issues. A PACE
organization may request this assistance, or CMS or the State Administering Agency may
provide technical assistance as a result of identified issues or opportunities for
improvement.
30 - Audit
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
30.1 - Pre-Audit Activities
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
The pre-audit activities are very similar to those required for a Technical Advisory Visit
(TAV). The PACE organization is required to provide operational and policy documents
for review. Staff must be scheduled to be available for interview regarding
administrative, clinical and Part D elements. In addition, documentation to validate
actions performed concerning findings from the TAV, prior audits, Level Two Reporting,
monitoring outcomes and compliance actions may be requested during this phase or
during the course of the audit. This aspect may include the results of previous routine and
focused audits, including audits the State Administering Agency or other State and
Federal entities may have conducted. A notice including the audit date, draft agenda,
documentation request and other additional requirements will be sent to the PACE
organization.
30.2 - Audit Process
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
30.3 - Audit Team
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
The audit team consists of administrative and clinical staff from CMS and the State
Administering Agency. The team reviews clinical, administrative and Part D elements as
noted within the PACE Audit Guide. An external version of the guide is located on the
CMS website at:
http://www.cms.hhs.gov/PACE/Downloads/2008%20PACE%20Audit%20Guide.pdf.
30.4 - Audit Categories
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
Every PACE organization must have, as required by Sections 1894(a)(9) and (e)(4) and
1934(a)(9) and (e)(4), an annual audit during the PACE organization’s trial period -
the first three contract years following the PACE organization program’s effective date.
Routine or Biennial audits are conducted at least every two years following a PACE
organization’s successful completion of the trial period audits. A Focused audit may be
performed if CMS or the State Administering Agency determines that additional
monitoring or auditing is required due to identified issues of non-compliance, operational

deficiencies or significant audit findings. Focused audits may occur during the trial
period or thereafter.
CMS does not share its method of evaluation or protocols with PACE organizations.
PACE organizations must comply with all PACE regulations and preparations for audits
should focus on a self-evaluation of the organization’s compliance with PACE
regulations. The PACE organizations must comply with local policies and procedures and
performance on monitoring requirements such as quarterly HPMS reporting elements.
The elements covered include, but are not limited to, the following:
Element 	Title
Section 1 – Clinical PACE Elements
PRS 02 	Personnel Training
PRS 04 	Oversight of Direct Patient Care
ENV 01 	Physical Environment
ENV 02 	Infection Control
TRS 01 	Transportation Services
DTY 01 	Dietary Services
SDY 01 	Service Delivery
SDY 02 	Emergency Care
SDY 03 	Interdisciplinary Team
SDY 04 	Participant Assessment
SDY 05 	Plan of Care
QAP 04 	Internal Quality Assessment and Performance Improvement
Activities
Section 2 A – Administrative PACE Elements
CTS 01 	Contracted Services
FIN 01 	Fiscal Soundness
PRT 04 	Explanation of rights
PRT 06 	Grievance Process
PRT 07 	PACE Organization’s Appeals Process
PRT 08 	Additional Appeal Rights Under Medicare or Medicaid
MKT 03 	Enrollment Process
MKT 08 	Voluntary Disenrollment
MKT 09 	Involuntary Disenrollment
Section 2B – Operational Part D Elements
ER 13 	Confirmation of Enrollment for Members of 	Employer
Group/Union
PR 02 	Use of SSN/HICN
EP01
CB 01
Electronic Prescribing
Collecting/Updating 	Enrollees’ 	Other 	health 	Insurance
Information
CB03 	TrOOP Status at Disenrollment
CP06 	Internal Monitoring and Auditing Procedures
CP07 	Response to Detected Offenses and Corrective Action Plan
CP08 	Comprehensive Fraud and Abuse Plan

Element 	Title
CL01
CL02
Online Claims Processing System
Data Elements Needed to Link Medicare Parts A, B and D
Data
CL03 	Processing Systems
CL04 	Disputed Claims
CL06
PA 01
Certification of Claims Data
Certification of Monthly Enrollment and Payment Data
Relating to CMS Payment
PA02 	Submission of Prescription Drug Event Data
PA03 	Overpayment and Underpayment Requirements
30.5 - Trial Period
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
Trial period means the first three contract years in which a PACE organization operates
under a PACE Program Agreement, including any contract year during which the entity
operated under a PACE demonstration waiver program. The first contract year can extend
from 12 months up to 23 months for purposes of the audit period, that is, to December
31st of the year following the effective date of the contract. The first trial period audit can
be conducted at any point during this 12 to 23-month period.
[42 CFR §§ 460.6, 460.190(a)]
30.6 - Trial Period Review
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
During the trial period, CMS, in cooperation with the State Administering Agency,
conducts comprehensive annual reviews of the operations of a PACE organization to
ensure compliance.
[42 CFR § 460.190(a)]
30.7 - Scope of Review
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
As noted above, the review includes the utilization of the PACE Audit Guide. In addition,
the review may include performance of the following:
• 	An onsite visit to the PACE organization, which may include, but is not
limited to, the following:
ο 	Review of participants’ charts;
ο 	Interviews with staff;

ο 	Interviews with participants and caregivers; and,
ο 	Interviews with contractors;
• 	Observation of program operations, including marketing, participant services,
enrollment and disenrollment procedures, grievances, and appeals;
• 	A comprehensive assessment of an organization’s fiscal soundness;
• 	A comprehensive assessment of the organization’s capacity to furnish all
PACE services to all participants; and
• 	Any other elements that CMS or the State Administering Agency find
necessary.
[42 CFR § 460.190(b)]
30.8 - Biennial
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
At the conclusion of the trial period, CMS, in cooperation with the State Administering
Agency, continues to conduct reviews of a PACE organization, as appropriate. These
reviews take into account the performance level of the PACE organization with respect to
the quality of care provided and compliance of the organization in meeting the PACE
program requirements. Such reviews include an on-site visit at least every two years.
[42 CFR § 460.192]
30.9 - Focused
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
After the trial period, CMS or the State Administering Agency may determine that a
PACE organization has some areas of their program that need further monitoring. In
these situations, CMS or the SAA may perform Focused Audits on these or other areas.
These audits may be announced, unannounced, onsite or offsite.
[42 CFR § 460.192]
40 - Post Audit
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
CMS, the State Administering Agency or their designees will deliver an audit report
containing findings, deficiencies, corrective action required, recommendations, notes and
conclusions to the PACE organization concerning the audit. A letter detailing
instructions, as noted below, is mailed to the primary contact for the PACE organization.

[42 CFR § 460.196(a)]
40.1 - CAR/CAP
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
A PACE organization must take action to correct deficiencies identified during reviews.
Corrective Action Required (CAR) and Corrective Action Plan (CAP) are formal
processes where CMS informs PACE organizations that they are out of compliance with
CMS requirements. Corrective Action Required (CAR)/Corrective Action Plan (CAP)
may result from a PACE audit or result from other ad-hoc compliance events unrelated to
an audit. For example, CMS issues a compliance warning letter to a PACE organization
and the PACE organization fails to satisfactorily resolve the matter cited in the warning
letter.
More specifically, Corrective Action Required (CAR) letters are issued when CMS
identifies an area of concern that requires a formal plan for a demonstrated cure. A
Corrective Action Required (CAR) should be considered when a PACE organization has
not provided a satisfactory response to a single warning letter on a specific subject (an
egregious single event) or the issue is of a highly serious nature.
A Corrective Action Required (CAR) letter may also be issued by CMS directly to the
PACE organization when CMS has identified an ad hoc compliance event. Once a PACE
organization receives a CAR letter, they would respond to CMS with either a dispute of
findings or a Corrective Action Plan (CAP).
The PACE organization must provide a plan containing actions, activities, policies and
procedures that will be implemented to correct the deficiencies and to be in compliance.
The PACE organization must respond promptly to the deficiencies following receipt of
formal notice from CMS via an HPMS email. The Corrective Action Plan is promptly
reviewed by CMS following receipt of the PACE organization’s submission of the
Corrective Action Plan. If the Corrective Action Plan is unacceptable, the PACE
organization will be provided an opportunity to promptly resubmit a revised Corrective
Action Plan. CMS will review the revised Corrective Action Plan and provide a prompt
response.
Corrective Action Plans are public documents which are posted on the CMS website at
http://www.cms.hhs.gov/MCRAdvPartDEnrolData/.
[42 CFR § 460.196(b)]
40.2 - Release from Corrective Action Plan
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
Once CMS accepts the Corrective Action Plan, the PACE organization must implement
the CAP. The amount of time allowed to implement a Corrective Action Plan depends on
the number of deficiencies and the complexity of the deficiencies. CMS or the State

Administering Agency monitors the implementation and effectiveness of corrective
actions to determine if adequate progress is being made on the CAP before giving
consideration to releasing the PACE organization from its Corrective Action Plan.
The Corrective Action Plan process ends when the PACE organization has fully
implemented the CAP and CMS formally releases the PACE organization from the
Corrective Action Plan. The Corrective Action Plan release process occurs via an HPMS-
generated notice.
CMS or the State Administering Agency may take enforcement action if the PACE
organization fails to submit an acceptable Corrective Action Plan to CMS or if the PACE
organization fails to satisfactorily implement an accepted Corrective Action Plan. Failure
to develop and implement a Corrective Action Plan within the timeframes specified by
CMS may result in sanctions or termination of a PACE organization’s contract by CMS
or the State Administering Agency.
[42 CFR § 460.194(b) and (c)]
50 - Disclosure of Results
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
CMS and the State Administering Agency promptly report the results of reviews to the
PACE organization, along with any recommendations for changes to the organization’s
program. The results are made available to the public upon request and are posted on the
CMS website. In addition, CMS and the State Administering Agency require that the
PACE organization post a notice of the availability of the results of the most recent
review and any Corrective Action Plans or responses related to the most recent review.
The PACE organization must also make the results available for examination in a place
readily accessible to participants.
[42 CFR § 460.196]
60 - State Administering Agency
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
The State Administering Agency assures that its responsibilities under Sections 1894 and
1934 of the Social Security Act will be met. All relevant provisions are included in the
contract with the PACE entities, either as a contractor or State Administering Agency
responsibility. Both scheduled and unscheduled on-site reviews will be conducted by
State Administering Agency staff.
[42 CFR §§ 460.30, 460.32, 460.190, 460.192]
60.1 - Readiness Review
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)

The State Administering Agency will perform a Readiness Review of the applicant entity
that assures the entity has fully developed its policies and procedures, obtained
commitments from key staff, developed its solvency plan and has a facility that meets
State and Federal requirements at the time of the application.
[42 CFR § 460.12(b)(1); 71 FR 71252 (Dec. 8, 2006)]
60.2 - Monitoring During Trial Period
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
During the trial period, the State Administering Agency, in cooperation with CMS, will
conduct comprehensive reviews of a PACE organization to ensure compliance with State
and Federal requirements. At the conclusion of the trial period, the State Administering
Agency, in cooperation with CMS, will continue to conduct reviews of a PACE
organization, as appropriate, taking into account the quality of care furnished and the
organization’s compliance with State and Federal requirements.
[42 CFR §§ 460.190, 460.192(a)]
60.3 - Annual Monitoring
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
The State Administering Agency assures that at least annually it will reevaluate whether a
participant meets the level of care required under the State Medicaid plan for coverage of
nursing facility services. The State Administering Agency understands that this
determination may be waived if there is no reasonable expectation of improvement or
significant change in the participant’s conditions because of the severity of a chronic
condition or the degree of impairment of functional capacity. The State Administering
Agency assures that it will make reviews conducted in accordance with 42 CFR §§
460.190 and 460.192 available to the public upon request.
[42 CFR §§ 460.160(b)(a), 460.196(b)]
60.4 - Monitoring of Corrective Action Plans
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
CMS works in partnership with the State Administering Agency to monitor the
effectiveness of corrective actions required to be taken by the PACE organization.
[42 CFR § 460.194]
70 - Financial Recordkeeping and Reporting Requirements
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
70.1 - Accurate Reports
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)

A PACE organization must provide CMS and the State Administering Agency with
accurate financial reports that are:
• 	Prepared using an accrual basis of accounting; and
• 	Verifiable by qualified auditors.
[42 CFR § 460.204(a)]
70.2 - Accrual Accounting
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
A PACE organization must maintain an accrual accounting recordkeeping system that
does the following:
• 	Accurately documents all financial transactions;
• 	Provides an audit trial to source documents;
• 	Generates financial statements.
[42 CFR § 460.204(b)]
70.3 - Accepted Reporting Practices
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
Except as specified under Medicare principles of reimbursement, a PACE organization
must follow standardized definitions, accounting, statistical, and reporting practices that
are widely accepted in the health care industry.
[42 CFR § 460.204(c)]
70.4 - Trial Period Reporting Requirements
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
Throughout a trial period, the PACE organization is required to submit a quarterly
financial statement to CMS within forty-five days after the last day of each quarter of the
organization’s fiscal year. These statements are not required to be certified by an
independent certified public accountant. After the trial period, CMS and/or the State
Administering Agency may require a PACE organization to submit monthly and/or
quarterly financial statements, or both, if there are concerns about the fiscal soundness of
the organization.
[42 CFR § 460.208(c)]

70.5 - Annual Reporting Requirements
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
CMS requires the PACE organization to submit an annual financial statement with
appropriate footnotes no later than 180 days after the end of the organization’s fiscal
year. The financial statement must be certified by an independent certified public
accountant and, at a minimum, include the following items:
• 	Certification statement;
• 	Balance sheet;
• 	Statement of revenues and expenses; and
• 	Source and use of funds statement.
[42 CFR § 460.208(a) and (b)]
80 - HPMS Quality Data Submission
(Rev. 2, Issued: 06-09-11; Effective: 06-03-11; Implementation: 06-03-11)
PACE organizations are required to maintain a health information system that collects,
analyzes, integrates, and reports data necessary to measure their performance and to
develop their QAPI.
HPMS is a CMS internal health information system that collects, analyzes, integrates,
and reports data to measure the organization’s performance and to develop and
implement procedures to furnish data pertaining to the provision of care to external
oversight entities in the manner and at the time intervals specified by CMS and the State
Administering Agency. A PACE organization must submit to CMS and the State
Administering Agency all reports required to monitor the operation, costs, quality, and
effectiveness of the PACE program and established payment rates.
In developing procedures for external reporting, the PACE organization must include the
submission of CMS monitoring data which is specified as “participant data” in Appendix
L of the PACE Program Agreement. CMS requires the data to be reported
quarterly/seasonally through the HPMS system. A listing of the nine data elements can
be found in Chapter 10 Section 30.
PACE programs are required to submit Data Elements for Monitoring on a quarterly
basis via the HPMS. HPMS information may be used by CMS and State Administering
Agencies in the time period before or after signing the program agreement which
contains these reporting requirements. PACE organizations are provided with instructions
on the HPMS: The HPMS Connectivity Guide, HPMS User’s Guide and HPMS
Connectivity for States. These materials can also be found on the CMS Web site at
http://www.cms.hhs.gov/PACE/09_AdditionalResources.asp.

[42 CFR §§ 460.134, 460.140, 460.200, 460.202, 460.204; 71 FR 71307 (Dec. 8, 2006)]

Transmittals Issued for this Chapter
Rev # 	Issue Date 	Subject 	Impl Date CR#
R2PACE 06/09/2011 	Initial Publication of Manual 	06/03/2011 NA
R1_SO 06/03/2011 	Initial Publication of Manual - Rescinded and
replaced by Transmittal 2
06/03/2011 NA
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