[31 Pa.B. 3043]
[Continued from previous Web Page] Section 9.710. Approval of plan enrollee complaint and enrollee and provider grievance systems.
The Department received several comments on this proposed subsection.
IRRC requested that the Department clarify whether approvals of complaint and grievance systems were required prior to implementation. IRRC asked how the changes initiated by the plan were to be approved. IRRC recommended that the Department add specific time frames and requirements for the Department's approval of complaint and grievance systems.
The Department is not requiring prior approval of the entire systems for complaint and grievance review, but only of changes to those systems for existing plans that have the potential to impact the process or the outcome of the complaint or the grievance process. See subsection (b). Consequently, the Department's review of the system will not interrupt or delay the current grievance and complaint processes and appeals. The Department will work with plans that are not in compliance with Act 68 and the regulations through the corrective action plan process to arrive at a complaint and grievance process that meets the terms of Act 68 and the regulations.
One commentator recommended deleting the portions of this proposed subchapter related to complaints since Insurance has the authority over complaints under Act 68.
The Department and Insurance both have responsibilities under Act 68; the Department has not changed the language of this section with respect to this comment.
One commentator requested that the Department clarify whether a plan would be required to submit its complaint and grievance process to the Department after that process had been approved by Insurance.
The Department has the responsibility to require compliance with the regulations governing grievance systems, and both agencies have the responsibility to require compliance with their regulations governing complaint systems. The Department will need to review and approve both complaint and grievance systems, even if Insurance has already reviewed them, since both agencies have jurisdiction over complaints, and the Department has sole jurisdiction over grievances.
IRRC and another commentator recommended that the Department delete the requirement that the grievance process be satisfactory to Secretary, as the only goal should be compliance with Act 68.
The Department has deleted this language since the regulations themselves describe the standards that complaint and grievance systems must meet in order to be acceptable to the Secretary.
One commentator recommended that proposed subsection (b)'s requirement that a plan submit changes to its complaint and grievance systems to the Department for review, should apply only to material changes. The commentator also stated that the Department should require filing only, since the Department had no authority for prior approval.
The Department has authority to require prior approval of complaint and grievance systems. Act 68 gives the Department the authority to ensure compliance with its provisions. See section 2181(d) of Article XXI. The Department also has authority to review complaint and grievance systems under section 364(e) of the HMO Act and section 630(e) of the PPO Act, which provide that a grievance resolution system must be acceptable to the Secretary. The Department has the discretion to determine how it will ensure compliance. The most appropriate way to ensure compliance with all three acts is to ensure that the complaint and grievance systems meet the requirements of those acts before they are implemented, and before enrollees are harmed by procedures not compliant with Act 68, the HMO Act or the PPO Act. The Department is only, however, requiring prior approval of changes to the existing systems that have the potential to impact the processes or the outcome. This is intended to prevent disruption to existing processes, as it explained earlier. The Department will ensure compliance for existing systems by audits and reviews, and by requiring plans of correction as necessary.
IRRC requested that the Department state how far in advance it expects filings.
The Department will require plans to provide it with copies of proposed changes to the complaint and grievance processes 60 days prior to their implementation. The Department has included this language in subsection (b).
One commentator asked that the Department recognize that materials have already been submitted to and approved by DPW.
The Department is aware that DPW has contracted with certain HMOs for services to enrollees, including for complaint and grievance systems. However, the Department is one of the two regulatory agencies charged with ensuring complaint and grievance processes comply with Act 68, the HMO Act and the PPO Act. DPW approval cannot be considered to be a waiver of the plan's required compliance with the Department's regulations. As discussed earlier, there are many ''stop-gap'' measures that can be brought to bear to ensure the most necessary forms of compliance when full compliance may take some time. The Department will work with plans to ensure that enrollees have the necessary information as quickly and thoroughly as possible.
One commentator expressed concern with the term ''special populations'' in proposed subsection (c). The commentator was concerned that the term was broad and potentially problematic. The commentator recommended that the Department clarify its intent in the Preamble or delete the term.
The term is defined in the regulation by the listing of the examples, Medicare and Medicaid HMOs. See subsection (c). Other populations similar to these would be covered, for example, enrollees covered by self-funded employers plans subject to ERISA.
Section 9.711. Informal dispute resolution system and alternative dispute resolution system.
The Department received several comments on this proposed section.
One commentator recommended changing the title of the proposed section to ''Alternative dispute resolution systems'' so that it would not appear to be talking about alternative providers.
One commentator commented that administrative denials were confusing and appeared to extend an alternative dispute resolution system to nongrievance issues, something not provided for in Act 68.
The Department has changed the title to ''Informal dispute resolution system and alternative dispute resolution system,'' as more descriptive of the substance of the section. The Department's intention is to make it clear that this section involves other types of resolution systems as well as the alternative dispute resolution systems referenced in section 2162(f) of Article XXI. Act 68 does not prohibit alternative mechanisms for nongrievance related issues, and the Department will not prohibit them, as long as the mechanisms are entered into voluntarily, and are approved by the Department through its approval of provider agreements.
One commentator recommended that the Department create a new section on alternative dispute resolution systems (ADR) to the external grievance review process, which would include requirements and standards for ADRs. The commentator stated that this new section should make it clear that an ADR for external review cannot be used for grievances brought by enrollees. The commentator recommended that the informal dispute resolution mechanism should be included under § 9.702. The commentator noted that the ADR was voluntary and involved a waiver of provider rights, so that the Department had no valid reason to make the decision binding.
The Department will break up this section into two subsections, one dealing with informal dispute resolution mechanisms (see subsection (a)), and one dealing with alternative dispute resolution systems (see subsection (b)) as referenced in section 2162(f) of Article XXI. The Department has required alternative dispute resolution systems to be impartial, include specific and reasonable time frames in which to initiate appeals, receive written information, conduct hearings and render decisions, and provide for final review and determination of disputes. See subsection (b)(1). The Department has also required that these ADRs be included in the provider contracts, and be final and binding both on the plan and on the provider. See subsection (b)(2). The Department has also included language, as recommended by the commentator and included in Act 68, that an ADR may not be used when an enrollee files an external grievance. See subsection (b)(3).
The Department agrees with the commentator that both types of systems are voluntarily entered into by the parties. The Department reviews both by virtue of its authority over provider contracts, and by virtue of the Secretary's authority over grievance resolution systems, in the HMO Act, the PPO Act and Act 68.
The Department also agrees with the commentator that an informal process should not necessarily be final and binding on the parties. Therefore, the parties still have the option of going to the formal grievance process if the enrollee's consent can be obtained by the health care provider, although it need not be obtained for the informal process. The Department has deleted proposed subsection (d), which stated that nothing would preclude the parties from having an informal process, since the Department has specified in this section that such a process is permissible.
Several commentators supported proposed subsection (b), which would create a mechanism to correct routine procedural errors and denials between the plan and the provider without the need of enrollee consent.
One commentator commented that the substance of this subsection was inappropriate for this section.
Two commentators recommended that the dispute resolution not require written consent from the patient to allow the provider to seek resolution of procedural errors and administrative denials.
The Department's intent in allowing for an informal dispute mechanism was to alleviate the need for enrollee consent when the enrollee has no real interest in the matter, since the enrollee has been held financially harmless or has received all the services the enrollee requested. The Department has attempted to clarify this point in its revisions to this section, and has included an informal dispute mechanism in subsection (a).
One commentator asked whether proposed subsection (b) meant that plans would not have to accept member grievances where there was no member liability. The commentator asked whether these complaints would be handled through the alternative provider dispute resolution system because the issue was with the provider and not the enrollee. The commentator recommended that plans not have to accept an enrollee complaint or grievance where there was no member financial liability. The commentator recommended that if the provider was not satisfied with the payment, then the plan should have an alternative dispute resolution process to allow the provider to file a complaint or grievance.
The Department cannot remove the enrollee's right to file a grievance under Act 68 despite the existence of the informal dispute mechanism. Arguably the enrollee, who is held harmless, will have no reason to appeal, since the enrollee has not been denied a service or been required to pay out of pocket. However, if the enrollee chooses to appeal, the plan must accept the matter under Act 68.
One commentator recommended that the subsection be clarified to state that the availability of a provider appeal for member hold-harmless matters precludes use of an Act 68 grievance appeal.
The Department cannot take away the provider's right to appeal through the grievance process. However, if a plan and its providers negotiate that the use of the informal process waives the provider's ability to use the Act 68 process, the Department would not refuse to approve the informal dispute resolution system based on that fact.
One commentator requested that the Department clarify that proposed subsection (c) would apply only if a plan establishes an ADR. Proposed subsection (c) would require that, if a plan had an alternative dispute resolution procedure, it be included in the provider-plan contract.
Although the Department believes that the clarification is unnecessary, the Department has added language to clarify that the informal dispute system must be agreed upon by a plan and its providers. See subsection (a)(3).
IRRC noted a typographical error, and pointed out that proposed subsection (c) should use the phrase ''alternative dispute resolution system.''
The Department has deleted this part of the subsection, in making revisions to address the informal dispute resolution system previously discussed.
One commentator commented that proposed subsection (e) should refer to compliance with Act 68 and not to the satisfaction of the Department.
The Department has deleted proposed subsection (e), and included its substance in subsection (b), which includes requirements for alternative dispute resolution systems. The Department has included the phrase in question in subsection (b), and so will respond to the comment. The Department promulgates these regulations not only under Act 68, but also under the HMO Act and the PPO Act, both of which require plans to have grievance resolution systems acceptable to the Secretary. The Department included this language in the section to indicate its authority under all three of these acts.
Subchapter J. Health Care Provider Contracts The Department received several comments on this proposed subchapter.
One commentator commented that under this proposed subchapter, health care providers could be deselected by plans at will.
The Department acknowledges that fact. Under general contracting terms, either party may refuse to renew a contract or may terminate without cause. This allows both parties to deselect at will, binding neither the provider nor the plan to a relationship that is no longer acceptable, regardless of reason. The Commonwealth does not have an ''any willing provider'' statute that would require a plan to contract with any provider willing to enter into a contract. Therefore, the Department does not have the authority to require plans to contract with certain providers. This would be a significant change in contracting law and would require a specific statutory mandate.
IRRC commented that the Preamble for the proposed rulemaking and the regulatory analysis form did not include information regarding cost of the requirements in this subchapter for plans or for the Department. IRRC requested that this information accompany the final-form regulation. IRRC also recommended that the Department consider whether there were less cumbersome and expensive alternatives for implementing Act 68.
The Department has addressed these issues in the section of this Preamble relating to cost and paperwork estimates.
Another commentator raised concerns that the Department was creating required provider provisions from its longstanding informal list of required provisions. The commentator requested that the Department consider costs associated with requiring plans to renegotiate contracts, distribute amendatory riders, inform providers of reasons for changes and related implementation issues. The commentator requested that the Department provide sufficient ''lead time'' for the plan to implement these changes.
The Department must be able to review the contracts discussed in this subchapter, to ensure compliance with Act 68 and to protect enrolleess. The Department did not include information relating to cost for this subchapter, since it is not requiring plans to resubmit all currently approved contracts. The Department is already reviewing contracts for most of the requirements contained in this subchapter. The Department, therefore, did not anticipate great additional cost to the plans for this purpose, as discussed in the Department's response to the previous comment.
Two commentators commented that the proposed subchapter would not specify a time frame for the Department's approval of standard form provider contracts. They recommended that plans should be given notice as to length of time the Department would need to review and respond. One of these commentators also recommended that the Department include a provision that would permit plans to deem that the contracts were approved. The commentator recommended a 45-day time frame for review and approval, after which the contract would be deemed approved if not acted upon by the Department. The commentator also recommended inclusion of language stating that the Department would use reasonable efforts to request all additional information or clarifications at one time. Further, it was recommended that language be added providing that if the Department did not take additional action in the form of specific approval within 30 days after receipt of additional information or a written request for clarification, the contract would be deemed approved.
The Department has not included ''deemer'' language in the regulations. The Department has the responsibility under statute to review and approve provider contracts, as well as implementing certain provisions of Act 68, including, for example, provisions prohibiting financial incentives, prohibiting gag clauses and requiring confidentiality of medical records. For the Department to require itself to deem as acceptable a contract containing illegal language, simply because a regulatory, not statutory, time frame has run, is an abdication of the Department's responsibility under Act 68 and the HMO Act. The Department has added a provision to the regulations that states that the Department will review contracts within a 45-day period, and that if the Department fails to approve or disapprove the contract within that time frame, the plan may use the contract. The contract will be presumed to meet the requirements of all applicable laws. If the Department finds at any time that the contract contains violations of law, the plan must correct those violations. The plan is, of course, responsible for ensuring that it complies with Act 68 and any other law applicable to it, for example, the HMO Act.
Another commentator commented that, although it did not support the Department's attempt to regulate IDS arrangements formally, both Insurance and the Department should simultaneously regulate IDSs.
The Department and Insurance do both regulate IDS arrangements through the licensed entity. Insurance has not repealed its policy statement on IDS arrangements. See 31 Pa. Code Chapter 301, Subchapter I.
One commentator stated that its concerns were too numerous to include in comments. Its main concern, however, was that the proposed regulations would fail to limit the conflict of interest which could be found to exist between health care providers and their patients. The commentator stated that the proposed regulations would permit plans to give large financial incentives to providers who limit the care that they provide. The commentator stated that mere appearance of impropriety created a conflict of interest between patient and physician. Another commentator expressed the same concern.
The topic of conflict of interest is too broad to be defined, reviewed or disposed of in regulations. Act 68 is clear that a plan may not compensate a provider for providing less than medically necessary and appropriate care. Act 68 does, however, allow capitation arrangements. See section 2112 of Article XXI. At one extreme, fee-for-service reimbursements (payment made for services being provided) can be viewed as an absolute volume incentive to provide more care than may be necessary or appropriate, thereby creating an inherent conflict between the patient's needs and the provider's desire to generate more income. To the extent the patient is covered by insurance, the conflict may indeed be greater, as there is no ''financial'' harm done to the patient, only to the insurance company. At the other extreme, capitation can be viewed as an absolute volume disincentive, that is, to provide fewer services than medially necessary or appropriate.
In both scenarios, there is reliance on the provider and the health care profession to do ''what is right'' for the patient regardless of economic incentive, neither doing more nor doing less for economic gain. The Department cannot regulate the ethics of the provider to safeguard against all possible economic incentives in either a fee-for-service or a capitated scenario. Further, one person's incentive may not be incentive enough to another. It is impossible to know where to draw the line for each individual provider. In reviewing financial reimbursement terms, the Department reviews the overall economic structure, oversight mechanisms and safeguards the plan proposes to implement to detect and protect against under or over utilization.
Section 9.721. Applicability.
IRRC asked why the terms ''health care providers'' and ''IDSs'' are repeated twice in the section.
The terms were repeated because there are three contractual arrangements being addressed: the first arrangement is between the manage care plan and health care providers in general, whether organized is an IDS or not; the second arrangement is between a plan and an IDS; and the third arrangement is between an IDS and the providers who make up the IDS.
IRRC also commented generally on §§ 9.723, 9.724 and 9.725 (relating to IDS; plan-IDS contracts; and IDS-provider contracts), and questioned why the Department had used the term ''HMO'' rather than ''plan,'' when the definition of IDS in proposed § 9.602 references ''plans.''
The Department is changing the references to ''HMO'' in the section to ''plan,'' which is what it had initially intended.
Section 9.722. Plan and health care provider contracts.
The Department received over 40 comments on this proposed section.
IRRC commented that this proposed section would mirror existing regulations that cover HMO contracts with providers, but would extend the requirements to other managed care plans. IRRC commented that although the Department cited Act 68 for its authority to do so, Act 68 does not contain specific language allowing the Department to review contracts. Two other commentators also commented that the Department did not have the authority to extend these requirements to managed care plans generally. One of these commentators also stated that the Department did not have the authority for prior approval of contracts under the HMO Act.
The Department has the statutory authority to review and approve provider contracts prior to their implementation. This authority comes from several sources (Act 68, the HMO Act and the PPO Act), not simply from Act 68, as the Department has already stressed in its Preamble to proposed rulemaking. Section 8(a) of the HMO Act (40 P. S. § 1558(a)) gives the Secretary the authority to require renegotiation of provider contracts when they require excessive payments, fail to include reasonable incentives, or contribute to cost escalation. The PPO Act also requires that Insurance consult with the Department in determining whether arrangements and provisions for a PPO which assumes financial risk which may lead to under-treatment or poor quality care are adequately addressed by quality and utilization controls as well as by a formal grievance system. See section 630(e) of the PPO Act.
It is not necessary for Act 68 to specifically state that the Department has the authority to review provider contracts for the Department to be able to do so. Section 2111(1) of Article XXI requires a managed care plan to assure availability and access to adequate health care providers to enable enrollees to have access to quality and continuity of care. Section 2112 of Article XXI (relating to financial incentives prohibition) prohibits financial incentives to providers for providing less than medically necessary and appropriate care. Section 2113 of Article XXI (relating to medical gag clause prohibition) prohibits gag clauses, and lists specific activities a provider may engage in without reprisal from the plan. Section 2121 of Article XXI prohibits termination of providers in specific instances and requires notice if a provider is terminated due to a nonrenewal of credentials. Section 2131 of Article XXI governs medical record confidentiality and who may have access to the medical information the provider has. Section 2152 of Article XXI governs the process of plans reviewing and communicating UR decisions to providers. Section 2161 of Article XXI governs the grievance process and a provider's rights and responsibilities in pursuing a grievance on behalf of an enrollee. Section 2166 of Article XXI concerns prompt payment of claims to providers. Section 2171 of Article XXI prohibits exclusion, discrimination or a penalty against a provider by a plan for refusing to allow, participate, perform or refer for health care services based on moral or religious grounds, provided the enrollee was adequately informed. These sections cover extensive duties and obligations of plans and providers to each other and to patients. Not all of these areas will be, or should be, addressed in provider contracts; however, the Department has an obligation to ensure that there is no language in the contract which serves to obfuscate, obviate or obstruct the obligations of the plan or the provider in the performance of its duties. See section 2181(d) of Article XXI. For this reason, the Department has the authority and the duty to review all standard form contracts for all managed care plans, not just HMOs.
One commentator recommended that the title of the proposed section include pharmacy benefits manager (PBM) contracts, since a plan was responsible for all its contracts, including PBM contracts, according to the proposed regulations. The commentator felt that this required clarification since PBMs are not specifically defined as health care providers under Act 68.
The Department has made no change to the title of the proposed section. A PBM that has a contracted network of pharmacies, and, through a contract with a plan, makes that network available to the plan, is an IDS under the regulatory definition. A PBM that provides non-UR functions, including claims administration or pricing negotiations, is essentially a management services contractor, and is not considered to be an IDS. A PBM that performs medical management, with or without a pharmacy network, must adhere to the requirements of § 9.675 and the applicable requirements of Subchapter K. PBMs are reviewed by the Department according to their function and relationship with the plan. The Department has not listed PBMs in the title of each specific section of the regulations that apply to PBMs.
One commentator recommended that the Department require renegotiation when reimbursement rates appeared to be inadequate and could jeopardize quality of care. This commentator recommended adding a paragraph to proposed subsection (f) to state that a provider contract could include no reimbursement system that would lead to undertreatment or jeopardize the quality of care.
The Department has not changed proposed subsection (f). As the Department has discussed in its response to the general comments on this proposed subchapter, the Department cannot guarantee that any reimbursement mechanism is completely and totally free from an incentive to do more or less than is medically necessary and appropriate. The duty to provide necessary and appropriate services rests largely with the ethics of the providers. The Department has not added the suggested language, since it is unenforceable.
Further, the HMO Act allows for renegotiation if the contract provides for excessive payment, fails to include reasonable incentives for cost-control, otherwise substantially and unreasonably contributes to the escalation of the costs of providing health care services or is otherwise inconsistent with the purposes of section 8(a) of the HMO Act. Clearly, from this language the financial viability of a hospital is not the purpose of the HMO Act. It is also not the purpose of Act 68. The Department's purpose in reviewing contracts from all plans is to ensure compliance with Act 68. Further, the Department only reviews and approves a standard contract and not the specific terms between plans and individual providers.
Two commentators raised issues concerning time frames in proposed subsection (a) for a plan to submit the standard form for each type of contract to the Department. One commentator commented on the lack of language allowing a contract to be deemed approved after a certain length of time, and recommended that it be included. The other commentator recommended the addition of time lines for reviews. This commentator also recommended the addition of language stating that nothing superseded review and approval by Insurance of those contracts subject to their review under section 40 Pa.C.S. § 6124 (relating to rates and contracts).
The Department has added language to subsection (a) of this regulation as discussed in its response to general comments on this subchapter.
With respect to the language regarding Insurance, to the extent that a contract is to be used by a hospital plan corporation, it must be reviewed by Insurance. If the same contract includes or incorporates related entities, subsidiaries or affiliates, and any of these associated or related entities is a managed care plan under Act 68, the contract must also be reviewed and approved by the Department.
IRRC noted that several commentators had stated that many contracts simply require general compliance with State and Federal regulations and laws, and a provider manual published by the plan. For some plans, provisions of this section may be included in provider manuals. IRRC suggested that rather than requiring each contract form to be submitted, it may reduce paper work requirements if the Department reviews and approves provider manuals referenced in the contracts.
For the Department's purposes, language concerning general compliance with State and Federal laws is not sufficient, and a review of provider manuals is not sufficient. The Department does review provider manuals that are referenced in the contracts. Most providers are not aware of the vast number of statutory and regulatory provisions applicable to plan-provider contracts. In some circumstances, the contract must be explicitly clear and cannot rely on a reference to requirements that may be detailed elsewhere in provider manuals. In some circumstances, the contract may include language that could be viewed as inconsistent with the HMO Act or Act 68. Additionally, provider manuals may be nonbinding on either party when not incorporated by reference in the contract and cannot therefore be relied upon as contractual obligations and responsibilities. The Department has made no change to the proposed subsection to address this concern.
IRRC also recommended that the Department use the word ''before'' instead of the word ''prior.'' The Department has made this change.
IRRC commented that requirements of this proposed section may be duplicative for HMOs under contract to DPW. IRRC asked if the MA requirements were similar, since the Department might be able to reduce paperwork costs by allowing HMOs to use the same documents they submit to DPW, or accept DPW's notice of approval rather than undertake a separate review. Another commentator also commented that submission of standard provider forms to the Department is duplicative of submission to DPW for HMOs participating in MA programs, because DPW already reviews and approves those contracts.
The Department cannot delegate its responsibility to determine compliance with the HMO Act and Act 68 to any other agency. DPW reviews and approves the contracts in question for its own purposes as a purchaser, and not specifically to ensure that the plans are in compliance with the act. The Department, not DPW, is the regulatory body with responsibility for ensuring managed care plans comply with the HMO Act and Act 68. DPW does not accept the Department's review and approval as sufficient for its purposes, nor should it given its different requirements and responsibilities. To suggest the reverse as appropriate is to suggest that both agencies have the same purpose and function. They do not. As a matter of practicality, nothing in the regulations prohibits a plan from simultaneously sending a contract to both agencies. Further, the Department always coordinates its review with appropriate DPW staff.
One commentator recommended that the Department add the word ''standard'' before the phrase ''health care provider contract'' to clarify that the section does not apply to amendments to contracts affecting only an individual provider.
The Department agrees that this was the intent of the proposed regulation, and has included the word ''standard'' in subsection (a). The Department has added the recommended language to subsection (b) as well, for purposes of clarity. The Department does not look at individual contracts on a preapproval basis, but only as needed to investigate a complaint or for compliance auditing.
Several commentators, including IRRC, commented that it would be burdensome for plans handling and mailing paperwork to the Department, as would be required by proposed subsection (b), whenever a minor change was processed. They recommended that the Department consider limiting types of changes for which a prior review is required to avoid unnecessary filing and review costs.
One of these commentators requested that the Department clarify that the required filings would not include new rates of reimbursement, because this too, would cause a significant and unnecessary staffing and resource burden on the plans as well as the Department. This commentator recommended language stating that the plan must submit any change or amendment to a standard form of health care provider contract, except new rates of reimbursement, to the Department no later than 10 days prior to implementation of the change or amendment.
The Department has added the word ''standard'' to clarify that the Department did not intend to review every deviation from the standard form contract, and has emphasized this by also adding the word ''material'' to describe the type of change or amendment that must be presented to it for review. The Department has also added language to subsection (b) excepting any change required by Federal or State laws or regulations. With respect to the issue raised concerning rates, the Department does not now require rates to be provided to it. What the Department requires, and what the plans provide are reimbursement methodologies. If the methodology submitted with a standard contract were to change, the plan would be required to provide the applicable amendment to the Department for review and approval.
Further, the Department has clarified its understanding of the term ''contract'' in subsections (a) and (b) by requiring that plans submit to it for review all documents incorporated by reference into the contract, and thus made a part of the contract. The Department is also requiring submission of all material changes to the documents incorporated by reference into the contract.
One commentator also recommended that the Department require that any changes to provider contracts be mutually agreed upon and communicated to providers within 30 days notice.
The Department cannot require plans to make changes only after mutual agreement between the plan and provider. This is beyond the Department's authority. The Department does require plans to give advance notice of the change prior to implementation to allow providers time for review and consideration, so that enrollees do not become caught in the middle between the plan and the providers, and face out-of-pocket costs.
IRRC recommended that the Department include in subsection (c) a reference to section 2121(e) of Article XXI, which prohibits exclusion or termination of a health care provider for having a practice that includes substantial numbers of expensive patients or for objecting to providing a service on religious or moral grounds. The Department agrees, and has added in subsection (c)(4) not only a reference to section 2121(e) of Article XXI, but also to section 2171 of Article XXI.
IRRC also asked what mechanisms are in place to ensure that these provisions are not violated.
The Department will perform compliance monitoring, which is based on provider complaint reporting, and auditing of credentialing files, which is done as part of the external quality assurance review. The Department may also conduct investigations beyond an original complaint if the Department finds that other providers have also been treated improperly under these sections.
One commentator commented that subsection (c)(4) should state that no contract may exclude or terminate a provider for any of the reasons enumerated in section 2113(e) of Article XXI, except as that might violate the rights of the plan under section 2113(d) of Article XXI.
The Department has not changed the proposed paragraph to address this concern. The reference in the regulation is to section 2113 of Article XXI generally, and it includes subsection (d).
One commentator commented that proposed subsection (e)(1)(i) was not usual and customary for inclusion in nonHMO contracts, and related to enforcement of State and Federal laws that are outside the scope of managed care.
One commentator commented that the statutory authority for this provision applied only to HMOs.
Under 31 Pa. Code § 154.104(a)(3)(i) (relating to filing requirements), any gatekeeper PPO product filing must include NAIC/National Association of HMO Regulators (now called the National Association of Managed Care Regulators) hold harmless language.
One commentator commented that the historical intent and interpretation of the language in proposed subsection (e)(1)(iii) was to protect enrollees only in cases of plan insolvency and plan breach of plan-provider contract.
The language of the proposed paragraph was written as the Department intended.
One commentator commented that proposed subsection (e)(2) would require confidentiality, and it has pointed out the practice of PBMs sending out enrollee names and prescription information to drug manufacturers and preferred chain pharmacies. The commentator stated that this was a clear violation of confidentiality. The commentator recommended that the regulations state PBMs or other contractors should prohibit release of identifiable patient information.
Act 68 leaves to State and Federal laws the issue of whether or not information is confidential. See section 2131(a) of Article XXI. The act does not give the Department the authority to create a new category of confidential information. Further, it is likely that regulations proposed by the United States Department of Health and Human Services, known colloquially as the HIPAA regulations, and dealing with confidentiality of medical records in certain instances, will address this issue. See proposed rule regarding Standards for Privacy for Individually Identifiable Health Information. 64 FR 59967 (November 3, 1999).
Two commentators commented on this proposed subsection (e)(2)(ii). One commented that the language was inconsistent with the requirements that the Department has placed on plans to date, and notes that the term ''agents with direct responsibilities'' is undefined. It recommended replacing ''Department employees or agents with direct responsibilities'' with ''regulating agencies and their agents or designees.''
Another commentator strongly recommended that the language be removed as unnecessary and inappropriate for addition to existing managed care contracts. The commentator stated that the language might be appropriate for internal Department standards, but not for managed care contracts.
The Department has not changed the regulation. The Department took this language directly from section 2131(c)(ii) of Article XXI. The Department does not find the language ''Department employees or agents with direct responsibilities for the purpose of quality assurance, investigation of complaints or grievances, enforcement, or other activities relating to compliance'' to be unclear. The language states for providers what persons may or may not have access to records, and, therefore, has a place in the contracts in question, particularly if existing contracts limit access to Department employees.
IRRC questioned the purpose of the general reference to State and Federal laws and regulations in proposed subsection (e)(5), and recommended that the Department reference specific laws with which providers must comply.
Another commentator noted that the majority of plan provider contracts require general compliance with State and Federal regulatory requirements. The commentator suggested that this was sufficient, and that the language could be included in a provider manual, rather than in the contract itself. The commentator noted that most plans require providers to comply with provider manuals.
The Department believes that this language, which addresses general compliance with State and Federal regulations relating to the business of the health care provider, should be stated specifically in the provider contract to underscore the importance of the matter. The Department does not intend to list all State and Federal laws and regulations regarding the provision of services by a health care provider, since these could vary by types of service. These could include relating to fraud and abuse issues, licensure requirements, payment issues and other matters of this nature. Further, the provider providing the service is charged with knowing what laws and regulations apply to that provider. The Department would be satisfied with a general statement of this nature in the contract for its purposes; providers, of course, may choose to negotiate specific requirements in any particular provider contract.
With respect to the comment concerning inclusion of the language in the provider manual, compliance with the provider manual may not be a requirement of the contract. The Department believes, however, that the inclusion in the contract of State reporting requirements for diseases is unnecessary. That language has been deleted, as plans do not enforce reporting requirements.
IRRC asked what type of information concerning prompt payment of claims would be required under proposed subsection (e)(6). It further asked whether this was a reference to prompt payment provisions of Act 68 or in Insurance's regulations, and recommended that the Department should reference the statute and regulations if this was the case.
The Department agrees, and has added references to section 2166 of Article XXI and 31 Pa. Code § 154.18.
One commentator noted that proposed subsection (e)(7) would require the provider to provide 60-days advance written notice to the plan of termination of the contract, and that plans should also be required to provide notice. The commentator stated that, to the extent terminations without cause were lawful and not violative of public policy, a plan should be required to provide 60-days advance written notice to providers of termination without cause.
The Department has made changes to subsection (e)(7). The Department has revised the subsection to state that if the parties agree to include a termination without cause provision in the contract, neither party shall be permitted to terminate the contract without cause upon less than 60-days prior written notice. This allows for negotiation of the clause, rather than requires its inclusion, and also takes into account the plan's need to negotiate long-term contracts for the purposes of obtaining better rates for its enrollees.
Another commentator commented that the language should be revised so that plans would not be able to circumvent Act 68 protections by inappropriately deselecting health care providers at will at the end of the contract term. The commentator recommended that the regulations require that plans provide a reason for nonrenewal of the contract. The commentator also recommended that the regulations require an opportunity for health care providers to appeal nonrenewal decisions from the plan. The commentator stated that this language was needed to actualize the consumer and provider protection against plan retaliation in Act 68.
The Department has not made these changes. The Department can and will investigate any allegation by a provider that a plan has penalized, restricted or terminated that provider inappropriately for reasons prohibited under Act 68. This does not take the form of a provider appeal, however, but rather is an investigation of the plan for violations of Act 68. If the Department were to find a violation of Act 68, it would most likely fine the plan, although the Department could move to revoke the certificate of authority of an HMO, depending upon the nature of the violation. The Department is not in a position to require a plan to contract in perpetuity with any particular provider.
Nonrenewal of a contract is not the same as termination or refusal to grant renewed credentials, both of which prematurely end the term of the agreed to contractual relationship. A regulatory requirement that would prohibit a party to a contract from choosing not to renew a contract would have to be extended equally to both parties. This would prevent a provider from ending an unsatisfactory relationship with a health plan. In fact, neither party could choose to end an unsatisfactory relationship. The Department has and will continue to approve contracts with ''evergreen'' clauses, whereby the contract is continuously renewed until either party actively terminates the contract. There are many other contracting mechanisms available to arrive at long-term relationships. Prohibiting one party from nonrenewing an unsatisfactory relationship is not a balanced or appropriate regulatory requirement and could jeopardize enrollee care in the long run.
One commentator recommended several language additions to proposed subsection (e). The commentator recommended requiring the plan to give at least 30-days advance written notice of any changes to contracts, policies or procedures affecting health care providers and the provision and payment of health care services to enrollees.
The commentator also recommended requiring that any amendment to the contract must be mutually agreed to and confirmed in writing, except in the event of an amendment that is required by court order or by Federal or State laws.
Finally, the commentator recommended adding language stating that a contract is voidable by the provider if it is not approved by the Department prior to the contract's implementation.
The Department agrees that addition of some of the language recommended would be useful. The Department has added a subsection (e)(8) requiring plans to give 30-day advance notice prior to implementation, because implementation could affect provision of service and therefore affect enrollee coverage. The Department has, however, excepted from the notice requirement those changes that are required by law or regulation. The Department has no authority to require amendment by mutual agreement, however. If the Department finds that a plan has implemented a contract prior to approval, the Department will take action to review the document, and order correction of any deficiencies. Plans using contracts not approved by the Department may be sanctioned in accordance with § 9.606. Allowing parties to declare a contract void is not a penalty the statute affords.
IRRC questioned the level of detail the Department would require of plans concerning reimbursement methodology under proposed subsection (f)(1). IRRC recommended that, as part of the description of the reimbursement method, the Department should require details concerning the amounts and percentages used in the methods.
Another commentator recommended that the proposed paragraph be revised to require not just reimbursement methodology, but the amount and percentage of each method of reimbursement. This commentator stated that the method of reimbursement was not instructive. According to this commentator, all plans could list monthly capitation and bonus incentive systems, but the amounts and degrees to which these systems would corrupt the physician patient relationship could be very different.
Two commentators commented that the proposed paragraph lacked an objective standard to determine if a financial incentive compensated a health care provider for providing less than medically necessary and appropriate care to an enrollee.
The Department does not have the responsibility or jurisdiction to determine if the rates of payment represent fair and adequate reimbursement; therefore, the Department does not require plans to submit specific dollar amounts or rates. The Department does, however, review the methodology to determine if there are any theoretical incentives to under or over serve and what safeguards plans have in place to monitor performance under the contract and ensure that corrective action is taken. With respect to specific dollar amounts and percentages, the Department has stated its position in its discussion with respect to conflict of interest. The Department is not in a position to determine what specific dollar amount would corrupt each contracted provider. This is a completely subjective concept, since what corrupts one person may not corrupt others. There is no objective standard that could reasonably be set by regulation. Any methodology or rate of payment could corrupt at least one unscrupulous provider. Health care providers are first and foremost responsible for their own conduct in the performance of their duties including the degree to which financial terms influence them to do more or less than the patient requires.
As the Department stated previously in its discussion on conflict of interest, any reimbursement methodology can be corrupted by providers who place economic consideration over the needs of the patient. While the Department is concerned with over and under utilization, it is not possible to regulate every provider/patient relationship, nor is it possible to detect every instance in which a provider is providing more or less than medically necessary care. The concern of the Department is that the plan has a reasonable method for reimbursement that includes performance monitoring and the ability to take corrective action whenever providers are providing more or less services than is medically necessary or appropriate. The Department disagrees with the comment that disclosure of reimbursement methodology is not useful and favors disclosure of exact dollar amounts and percentages. There is no possible way for the Department to determine if a laboratory capitation rate of $1.23 or 1% of the overall health care dollar is reasonable or if $52 for an established patient office visit is a fair rate of reimbursement for some or all providers in some or all parts of this Commonwealth. The Department does not have the authority to regulate commerce between health plans and providers.
Further, reasonableness of specific reimbursement rates to some extent is reviewed by Insurance within the context of the benefits to be covered, the costs to the plan of covering the benefits and the anticipated usage of covered services for the proposed covered population. All of these factors are included in an actuarial model that ensures, in theory, that the plan charges enough premium to cover the contracted benefits. Periodic plan financial performance reporting to Insurance is closely monitored to determine if the actuarial model is borne out.
One commentator requested that proposed subsection (f)(1) be clarified to require the IDS to submit its PBM contracts to the Department for review, including all financial arrangements with the PBM, and the PBM's reimbursement to its pharmacy providers.
As the Department discussed with respect to § 9.722 (relating to plan and health care provider contracts), to the extent that a PBM contracts with a plan and includes in its services a pharmacy network, the PBM falls within the definition of an IDS, and is required to comply with all sections of the regulations which apply to IDSs.
The Department received several comments relating to proposed subsection (f)(2) concerning the percentage at which utilization performance could be weighed in determining incentives.
IRRC commented that this proposed paragraph would allow low utilization to equal nearly 1/2 of the incentive. It requested an explanation of how the Department determined these proportions, and recommended that the Department consider the standards promulgated by the HCFA in 42 CFR 417.479.
Another commentator also noted that the HCFA defines substantial risk as 25% of potential payments for covered services. The commentator recommended that the Department include objective standards that would ensure that the protections in Act 68 are realized and applied uniformly.
The same commentator recommended that the Department change the proposed paragraph because it would permit plans to make inappropriately large payments to providers for low utilization rates. This commentator commented that plans could offer up to 49% of the total incentive reimbursement for low utilization rates. The commentator stated that this would allow plans to create an unacceptable conflict of interest between a provider and a patient by sanctioning substantial financial incentives to providers by the plans to limit care. The commentator stressed that the incentives would constrain physicians to limit communication with patients about treatment options to protect their own financial interests.
Another commentator noted that under the Department's proposed regulations, a physician could receive 51% of total payment in bonuses and other compensation, which could be linked to low utilization. According to the commentator, this would put the physician in conflict of interest with patients.
One commentator raised concerns that the Department's proposed UR provisions might negatively impact children with disabilities. The commentator complained that the Department would allow a plan to base up to half its risk pool distribution based on utilization. According to this commentator, this would have the potential effect of creating an underclass of the people who needed greater care, and for whom accessing care was an ongoing battle. The commentator stated that the Department should aggressively oversee UR practices to assure that they would not have a chilling effect on health care.
One commentator recommended changing the proposed paragraph because it would allow financial disincentives to serve and treat expensive patients by permitting plans to base economic incentives and disincentives on nonrisk adjusted factors. The commentator stated that economic incentives and disincentives should be prohibited unless they were risk adjusted. The commentator expressed concern that plans would use these incentives to drive out providers who specialize in treatment of patients with expensive conditions for financial reasons.
The Department has not changed this proposed paragraph. HCFA's Physician Incentive Program (PIP) rules (42 CFR 417.479) relate the 25% of the total potential payments to the most recent year's utilization and anticipated factors that will affect current year's utilization. In short, the maximum amount of money that can be used in an incentive plan is 25% of the total maximum payments that could be received. This limits the amount of the risk up or down to 25% of the value of the total of potential payments. Payments are defined for these purposes as amounts paid for services furnished directly, administration and costs of referral services. The total dollars payable to even a single provider over the course of a year is generally a considerable amount of money. Under the PIP rule, the physician can not be at risk (lose more or earn more) than 25% of the total yearly amount. This is a very different arrangement from what the Department is proposing.
The Department is not setting limits on the percentage of risk (up and down), but is stating that any incentive reimbursement system (money above and beyond that paid for services provided) must not include utilization as its sole criteria. The Department is requiring the plan to use other factors, and weigh those other factors (for example, patient satisfaction, provider cooperation with the plan) at least equal to utilization. The PIP rules, on the other hand, exclude payment for nonutilization factors from the formula entirely. The Department is insisting that nonutilization factors are important, are appropriate performance incentive measures and must be considered the equal of utilization factors.
Section 9.723. IDS.
The Department received five comments on this proposed section.
One commentator stated that the Department should expressly recognize the right of all plans to enter into IDS contracts, and that the Department should replace the term ''HMO'' with ''plan.'' The commentator stated that the requirements of this section would provide sufficient oversight and protection to permit plans to subcontract for delivery of health care services on a risk transfer basis.
The Department has replaced the term ''HMO'' with ''plan.'' The Department sees no need to explicitly state that plans may contract with IDSs. Nothing in State law or regulation absolutely prohibits this type of contract. The Department, recognizing the ability of plans to subcontract with IDSs, is attempting, through this and the other sections of this subchapter, to maintain some regulatory control over this arrangement, which has the potential to harm enrollees and providers.
One commentator commented that proposed subsection (a) was in conflict with proposed § 9.724(b) (relating to plan-IDS contracts), and requested that the Department clarify whether all IDS contracts were to be filed, or whether the plan could file form agreements.
The Department is adding the word ''standard'' to the proposed subsection to clarify its intent to review and approve standard contracts only.
The Department received three comments on proposed subsection (b), all concerning the question of whether a plan would be able to comply with the proposed notice requirements.
IRRC commented that the proposed 60-day notice requirement might not be possible with respect to litigation, since a plan might not have 60 days notice of litigation, and, in turn, could not provide 60 days notice to the Department. It recommended that the Department consider revising the proposed subsection to allow for flexibility when a plan did not receive 60 days advance notice of litigation.
Another commentator suggested eliminating the word ''proposed,'' as well as final phrase ''including the institution of litigation, termination, or nonrenewal notice by either party.'' The commentator commented that the reason for providers being unable to deliver services was irrelevant to the Department. The commentator stated it would be onerous for plans to have to submit all proposed actions to the Department.
The third commentator also commented that many times a plan would not know 60 days in advance of these events. The commentator recommended that the Department require the plan or IDS to notify the Department within a certain number of days of acquiring knowledge of a proposed action or institution of litigation. The commentator stated that any other requirement would be difficult to meet.
The Department agrees that plans and IDSs could have had difficulty in complying with this proposed subsection under certain conditions. The Department has, therefore, changed this subsection to require notification in advance of any action that could prevent IDS participating providers from providing services. The 60-day time period has been deleted, as have the references to the reasons for which this disruption may have occurred. The Department has also deleted the requirement that it be notified of proposed actions. The Department's only concern is that it be given warning of a situation that could result in enrollees losing access to providers.
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