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PA Bulletin, Doc. No. 01-1032




[28 PA. CODE CH. 9]

Managed Care Organizations

[31 Pa.B. 3043]

   The Department of Health (Department) hereby amends Chapter 9 (relating to managed care organizations) by repealing the existing regulations in Subchapter A (relating to health maintenance organizations), the statement of policy in Subchapter D (relating to PHOs, POs and IDSs) and the statement of policy in Subchapter E (relating to quality health care accountability and protection). The Department replaces these regulations and statements of policy with the final-form regulations set forth in Annex A.

Purpose of the Amendments

   The final-form regulations revise outdated regulations relating to health maintenance organizations (HMO) and implement the accountability and protection provisions of Article XXI of The Insurance Company Law of 1921 (40 P. S. §§ 991.2101--991.2193) (Article XXI), added by the Act 68 of 1998 (P. L. 464, No. 68) (40 P. S. §§ 991.2001--991.2361) (Act 68). In 1996, Governor Ridge issued Executive Order 1996-1, which required State agencies under the Governor's jurisdiction to review their existing regulations. In response to Executive Order 1996-1, the Department convened managed care policy work groups on the following seven topics: consumers; providers; special needs; behavioral health; data collection; and standards; quality assurance, utilization and credentialing; and risk assignment, fiscal and financial issues. The Department was in the process of developing amendments to the regulations relating to HMOs when Act 68 was signed into law.

   The Department and the Insurance Department (Insurance) were required by Act 68 to promulgate regulations to implement the portions of Act 68 for which each is responsible. In 1998, the Department published a statement of policy concerning the implementation of Article XXI. See Subchapter E. On March 11, 2000, Insurance promulgated final-form regulations implementing its responsibilities under Article XXI. On December 18, 1999, the Department published notice of proposed rulemaking, incorporating much of its statement of policy on health care accountability and protection, as well as its statement of policy addressing issues relating to HMO contracting. See 29 Pa.B. 6409 (December 18, 1999). The Department provided a 30-day public comment period.

Discussion Of Comments

   During the public comment period, the Department received nearly 1,400 individual comments from approximately 77 commentators, including members of the legislature, the public, advocacy groups and trade associations of both providers and the insurance industry. Many of these comments were not directed to any specific section of the proposed amendments, but were general comments concerning the nature of managed care and HMOs. To address these comments, the Department has taken the liberty of responding to them in the discussion of the sections to which they most closely relate.

   Many of the comments were critical of some aspect of the Department's proposed amendments, although some commentators did express support for specific provisions of the proposed amendments. Many commentators expressed concern that the proposed amendments did not incorporate what were referred to as the ''fundamental fairness'' requirements for complaint and grievance reviews, originally issued by the Department as guidelines in 1991. Many of the same commentators expressed concern over what they viewed as a lack of specific and concrete quality assurance standards and definitions for adequate networks. Commentators also complained about the absence of explicit ratios for providers to enrollees.

   Other commentators expressed concern over the Department's proposed application of certain requirements to managed care plans (plans) which it had proposed to apply solely to HMOs, for example, reporting requirements. Commentators also complained that the Department was proposing to omit language included in its policy statement that permitted plans to deem submissions approved should the Department fail to act on those submissions within a specific time period.

   The Department received many comments on the issue of a definition for ''medical necessity.'' Almost all commentators on this provision, including the Independent Regulatory Review Commission (IRRC), recommended that the Department either add a definition or include in the regulations the standards for the development of a definition.

   Many commentators, including IRRC, commented on apparent conflicts between the Department's regulations and Insurance's regulations.

   The Department has made considerable changes to its proposed amendments in an attempt to address many of these issues. The Department has revised the procedures regarding complaint and grievance reviews. The Department has added more specific credentialing requirements in Subchapter L (relating to credentialing). The Department has clarified the section on adequacy of networks, revised the section on direct access to obstetrical and gynecological services to address issues concerning perceived limitations on access, and changed language relating to enrollee rights to reflect current requirements of National Committee for Quality Assurance (NCQA). The Department has not, however, included language permitting contracts to be deemed approved if they are not reviewed by a certain date, setting provider/enrollee ratios, or defining ''medical necessity.''

   The Department has made changes throughout the regulations when the changes were necessary to ensure consistency with the regulations promulgated by Insurance. The Administrative Code of 1929 (71 P. S. §§ 51--732) requires that ''departments . . . devise a practical and working basis for cooperation and coordination of work . . .'' (71 P. S. § 181). Both agencies are currently, and will continue to, work together to ensure an effective and efficient application of Article XXI and its implementing regulations.

   The Department's response to the comments received on specific provisions of its proposed amendments follow:

Subchapter F. General

Section 9.602.  Definitions.

   IRRC objected to the Department's reiteration of definitions contained in the statute. One commentator also recommended that the Department be consistent with Insurance's regulations and reference the statute where necessary.

   To make the document more user friendly, the Department has decided to keep the statutory definitions in the regulations. In this way, the regulations are as self-contained as possible. Cross-references to the statute would be, in the Department's opinion, unwieldy. It would tend to make the regulations more difficult to read and require the reader to switch between the statute and the regulations to understand the regulations.

   Several commentators requested the addition of definitions to this proposed section.

   Several commentators commented that there was no definition of ''adequate network'' in the proposed amendments, and recommended that the Department add a definition. The Department has not added a specific definition for network adequacy to this section, since the requirements for network access in § 9.679 (relating to access requirements in service areas) define the term.

   One commentator recommended that the Department add a definition of ''utilization review entity.'' The proposed amendments did include Act 68's definition of ''utilization review entity.'' The definition appeared under the term ''certified utilization review entity'' or ''CRE.''

   One commentator recommended that the Department add the definition of ''active clinical practice'' from the statute. The Department agrees that the inclusion of this definition would make § 9.708 (relating to external grievance reviews by CREs) clearer, and has added that definition.

   One commentator recommended that the Department include a definition of ''primary care.'' The Department has declined to add that definition, because it is unnecessary given the definition of ''primary care provider.''

   Two commentators recommended that the Department include a definition of ''preferred provider organizations (PPOs).'' The Department has declined to add that definition because the term is adequately defined in the act of June 11, 1986 (P. L. 226, No. 64) (40 P. S. § 764a) (PPO Act). Further, the Department is concerned that adding that definition here could create confusion.

   Several commentators questioned the Department's clarifications of the language of Act 68, or have requested additional changes to definitions:

   One commentator recommended that the proposed definition of ''ancillary service plan'' be limited to plans and exclude individual or group health insurance plans, since the substance of the proposed regulations would not pertain to vision or dental services not offered by a plan.

   The Department has not changed the language of the proposed definition. The definition of ''ancillary service plan'' in Act 68 includes vision and dental plans offered by any insurer, not just a managed care plan. See definition of ''ancillary service plan'' in section 2102 of Act 68 (40 P. S. § 991.2102). The definition in Act 68 excludes these single service plans from coverage under Act 68. If the language were changed as the commentator recommends, the Department would be expanding the definition of managed care plan from what the act contemplates.

   Another commentator supported the Department's proposed definition, but expressed concern that there could be the potential for confusion with respect to the phrase ''or an indemnity arrangement that is primarily fee for service.'' See section 2102 of Article XXI (managed care plan). The commentator recommended clarifying the proposed definition by stating that when a primarily fee-for-service plan requires management for the broad range of conditions treated by a particular medical specialty, for example, treatment for mental health diagnoses, that portion of the plan would be subject to Act 68 if it would have been subject to the act as a freestanding plan.

   The commentator appears to be concerned that behavioral health plans could be excluded from coverage under Act 68 and these regulations. Behavioral health plans are generally licensed as risk assuming nonlicensed insurers (RANLIs) under the PPO Act. When they incorporate gatekeeping, integration of financing and delivery of services through providers selected based on specific standards and utilization of financial incentives for enrollees to obtain services from participating providers, such plans meet the definition of a managed care plan and would be subject to Act 68 and these regulations.

   IRRC objected that the proposed definition of ''complaint'' differed from the statutory one, and asked that the Department explain the change.

   The Department included two phrases in the proposed definition that were not found in the statute. It defined a complaint to be a dispute or objection ''by an enrollee;'' and it clarified that coverage includes contract exclusions and noncovered benefits. The Department has not changed the proposed definition since the addition of the language clarifies the statutory definition of complaint. Section 2141 of Article XXI (40 P. S. § 991.2141) requires a plan to establish and maintain a process for enrollee complaints. Section 2142 of Article XXI (40 P. S. § 991.2142) pertains to enrollee complaints and agency reviews. Inclusion of ''by an enrollee'' in the Department's definition adds clarity. By adding the terms ''contract exclusions'' and ''noncovered benefits'' to its definition, the Department is not only clarifying what is a complaint, but also conforming this definition to Insurance's definition of ''complaint.'' See 31 Pa. Code § 154.17(a)(2) (relating to complaints). Further, this language aids in distinguishing complaints from grievances.

   Several commentators commented that the Department's definition of ''enrollee'' was too narrow. Two commentators recommended that the proposed definition include representatives of members who are incapacitated and the parents of minors. Two commentators commented that the regulation differs from Insurance's definition. One of these commentators took issue with Insurance's definition as well, objecting that it only expanded the definition of ''enrollee'' for the purpose of complaint and grievance cases, but not for other parts of Insurance's regulations.

   The Department agrees that the definition should be altered, and has added language to match Insurance's regulations.

   Several commentators expressed support for the Department's definition of ''emergency services.'' One commentator noted that the regulation recognized the importance of the prudent layperson standard. One commentator endorsed the clarification in the definition relating to coverage of ambulance services under the prudent layperson standard.

   One commentator recommended that the Department make changes to the proposed definition, for example, changing the word ''so'' to ''such,'' to conform the regulation to the language in the statute. The Department has made these changes. The commentator also pointed out that a medical condition could be of a chronic nature that could suddenly worsen, and recommended that the Department revise the proposed regulation to reflect this. The Department believes that the definition, as proposed, accounts for the sudden worsening of a chronic condition.

   IRRC objected to the Department's deletion of the word ''emergency'' from the phrase ''emergency transportation'' in paragraph (3) of Act 68's definition. See definition of ''emergency service'' in section 2102 of Act 68. IRRC also questioned the Department's substitution of the word ''care'' for ''service,'' and the addition of the phrase ''if the condition is as described in subparagraph (i)'' in subparagraph (ii) of the proposed amendment.

   The Department has replaced the word ''so'' with ''such'' and the word ''care'' with the word ''service.'' The word ''emergency'' was deleted as redundant in the definition, as the definition itself explains what emergency transportation is. The Department has not reintroduced ''emergency'' or deleted subparagraph (ii). Subparagraph (ii) clarifies that mere use of an ambulance does not qualify the event as an emergency for coverage purposes. This preserves the prudent layperson standard without creating the unintended consequence of mandating coverage for the use of ambulances in nonemergency situations. The Department's additions to the statutory language do not violate the intention of Act 68, they merely clarify that intent.

   The Department received several comments on its proposed definition of ''gatekeeper,'' all recommending revisions. One commentator raised concerns that the term would imply that physicians intentionally restrict access to needed services, and recommended that it be deleted. This commentator recommended that ''gatekeeper'' be replaced by the term ''primary care physician,'' arguing that the implication of the proposed regulation is that nonphysician providers can practice independently of physicians, which is against the law.

   Several commentators took issue with the Department's inclusion of health care providers and managed care plans as gatekeepers. One commentator recommended that the reference to managed care plans be removed from the definition, as it was incorrect to include plans as gatekeepers. Two commentators recommended that the regulations state that only a primary care provider could be a gatekeeper. One of these commentators expressed concern that the proposed definition would fail to require a gatekeeper to be a provider of services to an enrollee, but would permit it to be source of referral or approval of services.

   Two commentators recommended that the Department use Insurance's definition, and two raised concerns that the Department's proposed definition conflicted with Insurance's regulation.

   After reviewing these comments, the Department has determined to adopt the language promulgated by Insurance. The term ''gatekeeper'' must remain in the regulations because it is required to define the term ''managed care plan'' which, in turn, defines what entities are covered by Act 68. See section 2102 Article XXI (''Managed care plan. A health care plan that uses a gatekeeper . . . ''). The Department has defined ''gatekeeper'' to include plans and agents of plans because plans and providers that are not primary care providers may provide gatekeeping functions (for example, social worker intake to get behavioral health referrals or nurse triage call centers). Therefore, to ensure that enrollees are protected as Act 68 intended when services cannot be obtained except by going through a gatekeeper (physician, provider, entity or plan), it is essential that such plans are included in the definition of managed care plan.

   The Department received several comments on the proposed definition of ''gatekeeper PPO.'' One commentator again recommended deleting the term ''gatekeeper'' as pejorative. The Department has not deleted the term. Again, the term ''gatekeeper'' must remain in the regulations because it is necessary to define the term ''managed care plan.'' ''Managed care plan'' must be defined carefully, as previously discussed. With respect to the comment concerning the inclusion of nonphysicians as potential gatekeepers, this decision was deliberate, so that the regulation would encompass managed behavioral health plans, which may not use a physician as a gatekeeper.

   One commentator recommended that the Department include in the definition a statement that a gatekeeper PPO is a managed care plan. The Department has not done so, since so long as a gatekeeper PPO meets the definition of ''managed care plan'' under Act 68 and the regulations, the gatekeeper PPO is a managed care plan.

   IRRC recommended that the Department use Insurance's definition. The Department has used Insurance's definition of ''gatekeeper.'' Insurance's regulations do not include a definition for the term ''gatekeeper PPO.''

   One commentator requested that the Department either clarify how a point-of-service (POS) plan differs from a gatekeeper PPO or merge the two proposed definitions.

   The Department has not merged the two definitions but has added language that a POS plan can be offered by managed care plan.

   The Department received several comments on the proposed definition of ''grievance.'' Three commentators recommended that the Department remove the word ''solely'' from the proposed definition. According to these commentators, this would eliminate the concern that enrollees who file grievances which also contain complaints or other issues would be rejected by plans because they do not solely contain issues of medical necessity. One commentator recommended that the definition affirm that any claim of medical necessity is a grievance.

   The Department has not removed the word ''solely'' from the definition, since the proposed definition was taken from Act 68. If, however, a matter should be a complaint rather than a grievance, and it is sent to the Department or Insurance as a complaint, it will be rerouted into the appropriate process. See § 9.702(c) (relating to complaints and grievances). If a plan somehow misclassifies or ignores the real issue involved in the case, the Department and Insurance will have the ability for correction and reclassification.

   One commentator recommended that the Department reference the definition of ''HMO'' in the Health Maintenance Organization (HMO) Act (40 P. S. §§ 1551--1568), rather than restating the definition. The Department has made no change. For reader convenience, the regulations repeat the definition rather than simply citing to it.

   Several commentators, including IRRC, raised the concern that the Department's definition of ''IDS'' differs from Insurance's definition. After reviewing the comments, the Department agrees to use Insurance's language.

   Several commentators raised issues that need to be addressed even though the Department is adopting Insurance's language. One commentator suggested that the definition of ''IDS'' should be consistent with the Department's IDS statement of policy. The commentator stated that language relating to risk sharing arrangements needed to be added to the proposed definition.

   This language stated that the IDS would assume, to some extent, through capitation reimbursement or other risk-sharing arrangements, the financial risk for provision of the services to HMO members. This language does not appear in either the Department's proposed regulations or Insurance's final-form regulations. The language concerning risk-sharing was deliberately excluded by both agencies as too limiting. The Department is concerned that ''risk-transference'' is too narrow a term to use when dealing with the wide range of financial arrangements between parties which may not be labeled risk-transference but that have the effect of limiting a plan's financial exposure. These would include, for example, fixed budgets and performance incentives.

   One commentator supported the Department's proposal to apply the regulations to any IDS that subcontracted with an HMO or other managed care plan. One commentator commented that the coverage of the regulations should be limited to HMO-IDS contracts, since the Department did not have authority over contracts between any entity other than an HMO and a health care provider.

   The Department's decision to include IDS arrangements with managed care plans covered by Act 68 within the scope of its regulations is consistent with Insurance's regulations. Further, the PPO Act and section 2111(1) of Act 68 (40 P. S. § 991.2111(1)), which require the Department to ensure effective and efficient provision of services and operations, and the requirements of Act 68 that the Department ensure compliance with it (40 P. S. § 991.2181(d)), provide the Department with the necessary authority. To the extent that an IDS is performing utilization review, credentialing, grievance reviews and managing formulary exceptions, and to the extent that there are issues relating to prohibitions against financial incentives and gag clauses, the Department has responsibility to ensure that the IDS's services comply with Act 68. The Department, therefore, has a need to review these contracts to meet its responsibility under Act 68.

   Further, the IDS statement of policy (§§ 9.401--9.416) recognized that the Department had authority over gatekeeper-PPO provider contracts. The definition of ''IDS'' in these regulations does not broaden the Department's authority beyond its existing authority.

   Several commentators raised concerns about the Department's inclusion of skilled nursing facilities within the meaning of ''inpatient services.'' The commentators appeared to be concerned that care offered in skilled nursing facilities was different from acute care hospital inpatient care, and so reference to skilled nursing facilities should be removed from the definition of ''inpatient services'' and should be defined separately. According to these commentators, skilled nursing care differs from inpatient services, and could not be substituted for inpatient acute or rehabilitative care.

   Although the Department understands the concerns raised by commentators, it has declined to alter the definition. The definition of inpatient services in § 9.72(a)(3) (relating to basic health services), which is being repealed, did not have a separate definition for ''skilled nursing care'' or ''skilled nursing facilities.'' Skilled nursing facility care can and should be considered an inpatient benefit. The Department is not comparing a skilled nursing facility to an acute care facility. To create a separate definition of skilled nursing facility or skilled nursing facility care could be perceived as creating a new basic benefit and new coverage requirements. This could raise significant opposition among plans, and possibly result in a loss of current coverage for skilled nursing facility care.

   One commentator requested that the Department add ''and all diagnostic and treatment services provided by health care practitioners'' after the term ''diagnostic testing'' in the proposed definition. Another commentator also pointed out that in the Department's Preamble to its proposed rulemaking, the Department said it was adding physicians' services to the definition of ''inpatient services,'' but did not do so in the definition. The commentator requested clarification.

   The Department has added language to its definition of ''inpatient services'' to clarify that coverage afforded by a plan must extend beyond fees for use of the facility to fees for related professional services which generally are not billed by the facility.

   Two commentators raised the issue that the definition of ''managed care plan'' would neither comport with Act 68's definition, nor match the definition of Insurance. The Department has changed its definition to match the language included in Act 68. The Department will consult with Insurance prior to taking a position that an entity is a managed care plan.

   Two commentators raised concerns that the proposed definition of ''medical management'' would include the phrase ''or providing'' health care services. One commentator stated that the use of the word ''provide'' would imply that any plan that performed medical management functions would also provide health care, which could create liability issues for plans. This commentator recommended the substitution of the phrase ''arrange for the provision of'' for ''providing for'' in the definition of ''medical management.''

   The Department has not changed the proposed language of the definition. The language states that medical management is a function that includes ''other activities for the purpose of determining, arranging, monitoring or providing effective and efficient health care services.'' This language makes ''providing'' one of the types of activity that qualifies as medical management. Providing services is not the sole component of medical management, nor does the language imply that every plan that provides medical management functions also directly provides health care services.

   One commentator recommended that the patient's home be included in the definition of ''outpatient setting.'' The commentator noted that providers do make house calls and home visits, and therapeutic care is often provided in the patient's home. The Department agrees with this comment, and has made the necessary change to the regulations.

   One commentator supported the proposed definition of ''primary care provider.'' Several commentators raised concerns with it.

   Two commentators commented that the proposed definition would describe only duties and not medical credentials of the primary care provider. One commented that the proposed definition would conflict with Act 68 and with Insurance's proposed regulation. The other commented that enrollees should know the medical background and experience of primary care providers, and there should be uniform requirements across plans for who can be considered to be a primary care provider.

   Another commentator strongly objected to the proposed amendments not using the term ''primary care physician'' that was included in the regulations being repealed, and the replacement of that term with the term ''primary care provider.'' The commentator stated that there were significant and substantial differences between an appropriately trained and experienced primary care physician and a primary care provider as defined by Act 68. The commentator stated that these two terms were not interchangeable, and to treat them as such could dilute health care in this Commonwealth. The commentator recommended that the Department retain the term ''primary care physician'' even though the proposed definition of ''primary care provider'' would track the statutory definition.

   The commentator stated that Act 68 did not alter requirements under the HMO Act, and the Department's regulations promulgated under the HMO Act required primary care physicians to be made available. Therefore, it contended that the Department's final-from regulations must be changed to state that a primary care physician should supervise and coordinate care. The commentator argued that certified registered nurse practitioners (CRNP) and physician's assistants should not expressly or by implication be permitted to possess supervisory and coordination authority because Act 68 did not expand their scope of practice. Therefore, the commentator urged, they could not practice independently of a physician. The commentator stated that neither a CRNP nor a physician's assistant should be permitted to be a primary care provider, and recommended that the regulations be revised to prohibit that from occurring.

   One commentator pointed out that § 9.77(a)(2) (relating to subscriber rights) of the regulations that are being repealed requires a primary care provider to spend half the provider's time as a primary care provider, or to have limited the provider's practice for at least 2 years to general practice, family medicine, internal medicine or pediatrics. The commentator strongly suggested that, at minimum, the Department's final-form regulations maintain these standards. The commentator stated that the Department should require minimum levels of experience and schooling for primary care providers, and claimed that without guidance or credentials, enrollees could not tell whether a plan's primary care provider network consists of appropriately qualified providers.

   The Department has considered these comments and has decided not to change the definition of ''primary care provider.'' The definition matches the language in Act 68 and in Insurance's regulations.

   With respect to the comments concerning use of the word ''provider'' rather than ''physician,'' Act 68 did not alter the HMO Act, but it does broaden the scope of permissible primary care providers by defining a primary care provider as a health care provider. This definition encompasses practitioners other than physicians. See definition of ''primary care provider'' in section 2102 of Act 68. However, the provider is still limited by the scope of practice defined by the provider's license. Licensing boards and statutes determine the scope of practice, education and training requirements. The Department cannot set Statewide standards for minimum primary care provider credentials. Further, Act 68 did not make disclosure of a provider's credentials automatic or available upon request.

   Also, because Act 68 expanded the definition of ''primary care provider'' to include specialists in certain situations (see section 2111(6) of Act 68), a requirement that a primary care provider must practice a minimum number of hours per week or have a certain number of years of practice as a primary care provider would serve to disqualify most specialists from serving as a primary care provider. This may indirectly prevent an enrollee from having a specialist serve as the enrollee's primary care provider.

   One commentator recommended adding the sentence, ''a POS plan is a managed care plan,'' to the end of the definition of ''POS.'' This language is not definitional, and the Department has not made the change.

   The Department has changed the definition and added language to clarify that a POS plan is offered by a plan and may require an enrollee to choose and use a gatekeeper to obtain the highest level of benefits with the least out-of-pocket expense. Further, a POS plan may allow enrollees to use providers either inside or outside the network without the referral of a gatekeeper.

   Three commentators, including IRRC, objected to the proposed definition of ''service area'' as differing from the definition of ''service area'' included in Act 68.

   The Department has not changed the proposed definition. The Department does not agree that the language conflicts with Act 68. The Department expanded the Act 68 definition to further define the requirements for service areas under the HMO Act because the Department certifies an HMO initially on a limited geographic basis. The Department then approves expansions of the service area on a county-by-county basis, following a determination by the Department that the HMO has an adequate provider network in that proposed county. The initial certificate of authority is granted based on the original proposed service area. As HMOs expand, a new certification is not required, but the new network must be approved by the service area expansion request process. The Department's additions to the Act 68 definition reflect this.

   Two commentators commented that the Department's proposed definition of ''UR'' would go beyond Act 68's definition, because it would allow utilization review (UR) to be performed by any health care plan, and not just a CRE. One of these commentators recommended deleting the term ''health care plan'' from the definition. The commentator recommended that the Department reference CREs, since they were defined earlier in the proposed amendments, and add the word ''certified'' before the word ''utilization review entity.''

   The Department included the term ''health care plan'' in the proposed definition of UR deliberately because section 2151(e) of Article XXI (40 P. S. § 991.2151(e)) states that managed care plans with certificates of authority need not be certified to conduct UR. Therefore, Act 68 clearly contemplated certain managed care plans would be performing UR. The Department has not deleted the term ''health care plan'' from the definition, but has changed the term to ''managed care plan'' to more accurately reflect the statutory language.

   One commentator recommended that the Department add time frames for reviews and standards for how a plan should test for reviewer reliability, and include in the definition what a CRE should include in its written complaint and grievance review decisions.

   The Department agrees that the issues of timeliness and the content of complaint and grievance review decisions should be addressed, and has done so in other sections of the regulations. Time frames are addressed in the operational standards section, § 9.751 (relating to time frames for UR) and the content of complaint and grievance review decisions are addressed in §§ 9.703 and 9.705 (relating to internal complaint process; and internal grievance process), as well as § 9.750 (relating to UR system standards).

Section 9.603.  Technical advisories.

   The Department received eight comments on this proposed section. One commentator supported this section as an advantageous undertaking because it would foster the working relationship of plans and the Department.

   Several commentators commented that the Department had not provided for public review and comment of technical advisories. IRRC commented that the proposed regulation would not address how the Department would notify interested parties that a technical advisory was being issued. Several commentators, including IRRC, recommended that the advisories be published in the Pennsylvania Bulletin with information on how to obtain copies. One commentator commented that the technical advisories should be available in advance, to permit public comment. Several commentators stated that the Department should specify in regulation that purchasers, the public, and providers have access to its advisories.

   The Department uses technical advisories to provide guidance. They are not binding. They represent the Department's interpretation of a regulation or of a statute. Since these are not binding statements, the Department sees no need to provide a time period for public comment. However, to notify all interested parties, the Department will publish notice of the availability of a technical advisory in the Pennsylvania Bulletin.

   One commentator commented that the Department's explanation of the effect of a technical advisory as nonbinding was appropriate. The commentator commented that a technical advisory could not be used as a waiver mechanism, as the Department had done in the past to permit plans to use CRNPs as primary care providers. The commentator stated that a technical advisory could not be used to secure waiver of statutory and regulatory requirements.

   With respect to the comment regarding CRNPs, the Department may choose to waive enforcement of a regulation, so long as that regulation is not also a statutory requirement. The Department's issuance of a technical advisory to explain that it would grant a waiver of its then current regulation requiring plans to make primary care physicians available, and, instead, allow the use of CRNPs, was appropriate.

Section 9.604.  Plan reporting requirements.

   The Department received approximately 30 comments regarding this proposed section. Two commentators commended the Department for establishing reporting requirements that would help ensure effective oversight as well as provide the public with data on plan practices. Another commentator commented that the reporting requirements that would be imposed by the proposed amendments were insufficient to demonstrate to the Department that a plan was in compliance with Act 68.

   Two commentators provided the Department with a list of elements that should be included as reportable information. One of these commentators suggested that the Department add UR time lines, explanations of how a plan will test for reviewer reliability, and a summary of the content of complaints and grievances, to the reporting requirements.

   The Department has not added these recommended data elements. The Department will consider adding them in future reporting years, but at the present time it prefers to verify this data through onsite reviews and auditing, rather than plan self-reporting.

   The other commentator recommended that the Department add the following data elements: quality improvement reports; changes in utilization data since the last report; formularies and process to obtain prior authorization or an exception; a report on monitoring activities for IDS and medical management contracts; the number, type and reason for payment procedures to out of network providers; a report on activities to accommodate access needs for persons with disabilities to provide services to persons with limited English and to accommodate persons with sensory disabilities; a report on the provider complaint process, including the number of complaints filed by type of provider and outcome; if applicable, a report on utilization for persons seeking drug and alcohol abuse treatment services, by type of service provided; and a copy of the annual financial report given to the Insurance Commissioner.

   The Department reviewed these suggestions, but has determined not to add any additional reporting requirements. The Department believes the reporting requirements are sufficient for its purposes, and notes that the reports are not the only way in which the Department will verify and ensure compliance with Act 68.

   The Department has the following response to the data elements recommended. The quality assurance report is already required as part of a plan's annual report. A change in utilization data can be calculated by the Department from the data requested, and does not need to be self-reported. Formularies are extremely large and too subject to change to require that they be reported, particularly as the Department does not need this information to ensure compliance with the regulations or with Act 68. Requirements related to the formulary exceptions process are included in § 9.673 (relating to plan provision of prescription drug benefits to enrollees) and need not be reported here. Out-of-network information could be useful to the Department in monitoring network adequacy but is a difficult element to accurately capture and analyze given the proliferation of open access plans that allow enrollees to obtain services from a nonparticipating provider. The Department will, however, consider this for future reporting requirements. The Department will also consider adding a report on accommodations for disabilities and non-English accommodations in the future. Act 68 did not create a provider complaint process other than for timely payment, which is a matter addressed by Insurance. Drug and alcohol abuse treatment requests and services provided will more likely be addressed through external quality assurance reviews of managed behavioral health plans, but the Department will consider requiring plan reporting on this in the future. The Department has access to financial statements from Insurance. The Department will review them as it finds a review necessary to ensure compliance under the regulations and statutes. Additionally, a copy of the financial annual report to Insurance is currently included in the annual report submission to the Department.

   One commentator also commented that the Department lacked the statutory authority to require all plans to report as HMOs are required to do. The commentator stated that the Department should limit plan reporting to what is required in section 2111 of Article XXI.

   The Department has the authority to require plan reporting. Section 2111 of Article XXI requires that plans report to the Department what is necessary for the Department to determine compliance with Act 68, including information relating to complaints and grievances. See section 2111(13) of Article XXI. The section leaves it to the Department's discretion to determine what information the Department needs to be reported to enable it to ensure a plan's compliance with Act 68. The Department has included in § 9.604 (relating to plan reporting requirements) a listing of reportable items. The reporting of these items will allow the Department to monitor compliance with the various parts of Act 68, for example: timely access and availability to health care providers, section 2111(1) of Article XXI; institution of appropriate complaint and grievance processes, section 2111(8) and (9) of Article XXI; and direct access requirements, section 2111 of Article XXI. The commentator in question has not pointed to any required reporting element that is inappropriate under Act 68.

   IRRC commented that the proposed requirement that key utilization, enrollment, and complaint and grievance system data should be reported was vague and should be clarified. IRRC recommended that the Department specify what data would be required. The Department agrees, and has done so.

   IRRC also commented that the proposed section did not specifically reference penalties if reporting requirements were not met. Two other commentators also commented on the lack of a specific penalty for late reports. One of these commentators recommended adding subsection (c), to establish penalties for late filing of reports.

   The Department has the authority under Act 68 and the HMO Act to impose certain fines. That authority is included in the regulations in § 9.606 (relating to penalties and sanctions). These fines may be charged against plans which fail to report in a timely fashion. That language need not be repeated in this section to be applicable. The Department cannot, however, create penalties that are not provided for in statute.

   IRRC also recommended cross-referencing § 9.606 for the purposes of clarity. The Department considered making a cross-reference, however, it has determined not to reference the section because if the Department were to do so here, it would be necessary to cross-reference § 9.606 in every instance where a penalty could be applied. Since a violation of nearly every section could result in a penalty, this could become excessive.

   Several commentators noted that there was no requirement in this proposed regulation for use of the Health Plan Employer Data and Information Set (HEDIS) data collection elements. One commentator noted that the section would not require plans to provide information as to outcomes in any manner. The commentator stated that such information was a crucial set of data needed by consumers to choose health plans. The commentator also recommended the establishment of an advisory panel on data; and that quarterly and annual data be made available in user friendly reports to purchasers, providers and the public to allow comparisons of different managed care plans and providers in terms of costs, quality and outcomes. Several other commentators commented that the proposed regulation would fail to require that annual data about the plan to be made available in a user-friendly format for public review.

   The Department's objective in requiring plan reporting is for regulatory oversight and compliance. The Department is aware of the public interest in obtaining information for public review, and is looking into whether the reported data can be used to generate the user-friendly information in question. Outcome criteria is currently not recorded, tracked or analyzed in the same manner by all health plans. HEDIS data is expensive to collect, validate and report. While most health plans in this Commonwealth currently collect, validate and report HEDIS data to the National Committee on Quality Assurance (NCQA), not all health plans do. Mandated collection of HEDIS data could be an extensive undertaking, expensive and potentially burdensome on the managed care industry. Additionally the Department does not want to limit itself to HEDIS data should alternate data elements be determined to more accurately reflect outcomes and performance. At the moment, the data requested by the Department is sufficient for its regulatory purposes; however, the Department is considering ways in which it can in the future provide information which would be useful to consumers in evaluating health plans.

   Several commentators had comments regarding specific data elements required by the Department in proposed subsection (a). One commentator recommended deletion of the reference to county disenrollment data from proposed subsection (a), which would set requirements for plan annual reports, since it was not reportable by plans, and since its usefulness to the Department, according to the commentator, was questionable.

   The Department believes that if plans are able to report enrollment by county, they should be able to report disenrollment by county. Because, however, the Department can calculate this information from comparisons with previously reported enrollment data by county, the Department will delete the reference disenrollment data by county from subsection (a)(1).

   IRRC and several other commentators commented that the requirement in proposed subsection (a)(2) that plans report health utilization data was vague, since it did not list specific types of data required.

   The Department agrees that the language should be clarified, and has included language from the Department's regulations that are being repealed to specify what information is required.

   IRRC and several other commentators raised concerns that the reference to data relating to complaints and grievances in proposed subsection (a)(3) was vague, and could result in the reporting of substantially less information than the Department would desire. One commentator commented that reporting of this data was missing altogether.

   Proposed subsection (a)(3) would have required reporting of complaint and grievance data. Complaint and grievance data would have also been required to be reported quarterly in proposed subsection (b). The Department has, however, added language from Insurance's regulation to provide more detail. See 31 Pa. Code § 154.13 (relating to managed care plan reporting of complaints and grievances).

   One commentator also recommended reporting by categories of complaints and grievances, for example, quality of care, days to appointment, specialists referrals, requests for interpreter services and denials of emergency room claims. The commentator also recommended reporting by medical/nonmedical categories, as well as by total provider appeals.

   The Department currently categorizes all third-level complaints and grievances, but has not required that plans do so. The Department is exploring standard reporting categories (for example, quality of care, access, noncovered benefit, cosmetic procedure) for use by all plans in future reports to be consistent with the Department's own reporting categories.

   The Department has also added language to the proposed paragraph to make it clear that plans must obtain and report activity by subcontractors. This is necessary since Act 68 allows grievances to be delegated to CREs.

   Two commentators recommended that the Department change proposed subsection (a)(6) to require a plan to report the number of primary care providers, specialists and pharmacists joining and leaving the plan. The proposal would require only the reporting of physicians joining or leaving a plan.

   Any potential exodus of a hospital or primary care provider that serves large numbers of enrollees must be reported to the Department under § 9.679 as an early warning system which the Department feels is preferable to retroactive reporting. The number of physicians in the network provides a quick and useful indicator of the status of a network; however, the Department currently reviews network adequacy through the entire provider directory and investigations of complaints made to the Department. The Department cannot necessarily take action against a plan because of the migration of providers into and out of the network. Therefore, the usefulness of the information is questionable. Because listing every type of provider and the totals of providers moving in and out of the network would be burdensome for the plan, and would not alleviate the need for the Department to validate the information through the network, the Department has not added this requirement to the regulation.

   Two commentators took issue with the Department's proposed requirement in subsection (a)(8) that plans provide reimbursement methodologies to the Department for the Department's review. There is a concern on the part of plans that the information, which they consider to be proprietary and confidential, would become public. Further, one of the commentators stated that it would become difficult for plans to negotiate appropriate contractual modifications with providers with this requirement in place.

   The Department is aware of the plans' concern regarding their proprietary and confidential information. However, Act 68 requires that no managed care plan use any financial incentive that compensates a health care provider for providing less than medically necessary and appropriate care to an enrollee. See section 2112 of Article XXI. To ensure compliance with this requirement, the Department must review reimbursement methodologies, as well as any changes to those methodologies. The Department is sensitive to the plans' concerns, however, and will take every step possible to ensure the confidentiality of the information in question. The Department is adding language to this provision, and to several other sections of the regulations, on which it intends to rely for protection of the confidentiality of the information if requests are made for the information's release. The Department will provide the plan with notice of the request and allow it to either consent to the release, or to take action to prevent the release. The Department will support the plan's action.

   IRRC and another commentator raised concerns about the catch-all provision in proposed subsection (a)(11) intended to allow the Department flexibility to request additional information in the annual report upon advance notice. IRRC recommended that the Department either clarify the subsection to specify the type of information it might request, and the length of the advance notice period, or delete it.

   The Department understands the commentators' concerns, and has deleted subsection (a)(11).

   One commentator has requested changes to subsection (b) similar to those the Department has made to subsection (a)(2) to clarify the data elements. The Department has revised this proposed subsection, but has chosen not to reiterate the language in subsection (a)(2). The Department has, instead, referenced that provision, requiring the data as specified in that paragraph be reported on a quarterly basis. The Department has also referenced subsection (a)(6) to make it clear that the Department must also receive network information on a quarterly basis.

Section 9.605.  Department investigations.

   Three commentators, including IRRC, commented concerning inconsistencies in the wording in this section. All three noted that proposed subsection (a) would apply to all plans, while proposed subsections (b)--(e) would apply only to HMOs. All three commentators requested that the Department reconcile this inconsistency, although one commentator stated that this should not be done by extending the Department's investigatory powers to all plans. The commentator further stated that the Department had no need for or authority to investigate and review plan information generally.

   The Department agrees the section should be applied consistently to all plans, not only HMOs. The Department has the authority to enforce Act 68 (see section 2181 of Article XXI (40 P. S. § 991.2181)), as well as the HMO Act.

   Two commentators requested that the Department add language to proposed subsection (a) allowing the Department to investigate provider complaints regarding quality of care, and provider grievances. The commentator noted that the proposed subsection would only reference enrollee grievances and complaints.

   The Department agrees that language referencing enrollee and provider grievances should be included in this subsection, and has made the change. The Department will investigate alleged violations of Act 68, but has no general authority with respect to provider complaints, nor does it have the authority to become involved generally in disputes between providers and plans so long as there are no Act 68 or HMO issues in question. The Department has also changed the language of subsection (a) to clarify that its authority to investigate whether a plan is complying with Act 68, the HMO Act, the PPO Act and the regulations is not limited to annual, quarterly and special reports, grievances and enrollee complaints.

   One commentator commented that the investigations referenced in this proposed subsection (b) should include all subcontractors regardless of whether they take risk.

   The Department has made no change to proposed subsection (b). The Department has the authority to investigate issues regardless of which entity performs the actual function. The plan retains ultimate authority and responsibility for compliance under Act 68, and should the Department need to investigate a subcontractor, it has the authority to do so by virtue of its authority over the plan. Further, since the definition of ''IDS'' does not contain any reference to risk, this is no longer an issue.

   Two commentators expressed concern that the Department exempted financial business from review in proposed subsection (c), which would provide the Department and its agents to all books, records, papers and documents that would relate to the business of the HMO other than financial business. One commentator was concerned that this information could be directly related to quality of care or services, or deficiencies found in those areas. The commentator stated that business practices and solvency could have an impact on the provision of services and benefits, provider contracting and credentialing. The commentator did not believe that the Department could monitor without this information.

   The Department has made no change to the proposed subsection. The Department is aware of the linkages between solvency and plan operations as it affects quality of care and service. However, Insurance has jurisdiction over the financial aspects of managed care plans and the documents related to those issues. If the Department needs the information, the Department will be able to obtain the information from Insurance.

   Two commentators have recommended that proposed subsection (d), which would provide the Department with access to medical records for certain purposes, be modified. One commentator recommended the addition of the language ''to the extent permitted by law'' after the phrase ''The Department will have access to medical records of HMO enrollees . . . .'' The other commented that not all HMOs have medical records available, only staff model HMOs do. This commentator recommended altering the language to provide the Department with access to medical records ''only to the extent available.''

   The Department has made no change to the proposed subsection. Section 2131(c)(2)(ii) of Article XXI (40 P. S. § 991.2131(c)(2)(ii)) provides the Department with access to records for certain purposes, despite the general confidentiality provisions in section 2131(a) of Article XXI. Subsection (d) tracks the language of section 2131(c)(2)(ii) of Article XXI.

Section 9.606.  Penalties and sanctions.

   Several commentators have requested additions to this proposed section. Although one commentator commented that the section had been substantially revised and had improved draft regulations the Department circulated in May of 1999, it recommended that the Department add language that would permit it to recoup its costs upon obtaining injunctive relief. Another commentator noted that the experience of other State regulators has demonstrated that regulators need to have available to them strong administrative penalties taken in conjunction with injunctive relief to ensure that plans comply with regulations.

   Although the Department agrees that these recommendations would be helpful in enforcing the statutes and regulations, the Department is unable to create penalties that do not exist in either the HMO Act or Act 68. Therefore, the Department has not changed the regulation.

   One commentator commented that any penalties or sanctions should be governed by the appeals processes in 2 Pa.C.S. Chapter 5, Subchapter A (relating to practice and procedure of Commonwealth agencies). The Department has changed subsection (e) of the regulation to clarify that, with respect to penalties and sanctions under Act 68, the requirements of 2 Pa.C.S. Chapter 5, Subchapter A apply. The language of subsection (c) reflects the language of the HMO Act, and has not been changed.

   One commentator recommended that the Department publish annually a list of plans, by area served, which had no deficiencies and were not required to file plans of correction for the year.

   The Department decided against making this change to the regulations. Under the regulations, plans are required to be reviewed by an external review organization and to maintain a continuous quality improvement program that reports on its activities annually to the plan board of directors and to the Department. Quality improvement is the continuous and systematic advancement toward goals designed in pursuit of the very best that can be achieved. No plan, even the very best performer, achieves a perfect score on the external review or a perfect outcome on every quality improvement initiative undertaken. The Department makes available to the public the annual quality improvement work plan and those portions of external reviews that result in Department-requested plans of correction, along with those plans of correction. No plan has received perfect scores or achieved 100% on every quality initiative undertaken. Therefore, the Department questions the usefulness of a listing of virtually every plan as a ''nonperfect'' plan. The Department prefers to make available to the public those reports where the Department is requiring corrective action. They provide more meaningful information.

   Two commentators requested that the Department clarify the proposed subsection (a)(1) by adding a reference to Article XXI in paragraphs (1) and (2). The Department has not done so, since Article XXI is referenced in subsection (a), and it is clear that all the penalties and sanctions in subsection (a) are for violations of Article XXI.

   One commentator recommended that the Department add to proposed subsection (a)(3) language that a ban on enrollment shall continue ''until the plan comes into compliance with law and regulations.''

   The Department has not added this language to proposed paragraph (3). The Department reserves the right to determine what the timeframe for such a ban should be. Depending upon the nature of the violation, it may be possible to lift the ban when the violation has been substantially corrected. For example, if a plan failed to have a medical director, and the Department banned enrollment to the plan, the Department might lift the ban if the plan obtained a medical director on a temporary basis until one could be located and hired. Technically, the problem would not be resolved since the plan would not have hired a medical director, but the potential harm to the enrollees would have been alleviated.

   One commentator recommended that the Department add language to subsection (a)(4), which would require a plan to notify enrollees of the existence of a plan of correction within 60 days of its approval by the Department. Further, the commentator recommended the addition of language stating that the Department will monitor the plan of correction.

   The Department has not changed the substance of proposed paragraph (4) to reflect this comment. The Department has the responsibility to monitor the plan of correction, without including any additional language in the regulations. The Department will not require notice to enrollees of a corrective action plan. This is burdensome financially for plans, given the number of enrollees in a plan, and the questionable utility of the knowledge. For example, the Department may determine that a plan with 500,000 enrollees, which processed 250 first level complaints in a year, had in 5% or 13 cases failed to issue its decision letters within the statutory time limits of Act 68. In those 13 cases, the plan was 1 day late. The Department then required a plan of correction to address the problem. To require the plan to provide notice of this plan of correction to 200,000 households for an issue that affected 13 households would be hugely expensive. The information would be essentially useless to the vast majority of enrollees, most of whom will never file a complaint. (These numbers represent the actual volume of first level complaints for a plan with this size enrollment, as based on data from the 1999 annual reports).

   The Department has moved the substance of proposed paragraph (4) to subsection (d), and has added language to clarify that the Department may request a plan of correction for violations of the HMO and PPO Acts, Act 68 and the regulations. The Department has also added language to clarify that failure to comply with a plan of correction could result in the Department's taking action under subsection (a) or (b), as appropriate.

   IRRC recommended that the Department clarify the proposed section by defining a plan of correction, and explaining what must be in it.

   The Department has not added a definition for ''plan of correction.'' The Department believes that the concept of a plan of correction is self-explanatory. The Department provides the plan with the list of issues to which the plan must respond, or face other action, and the plan either responds with sufficient explanations and actions, or does not. No definition for this term exists in the Department's other licensing regulations, although it is used extensively in the regulations for both long term care facilities and hospitals.

   One commentator commented that, since HMOs do not provide services, proposed subsection (b)(1) should be revised to include the words ''arranging for'' services rather than the words ''providing inadequate services'' in proposed paragraph (1). The Department agrees that the word ''arranging'' should be added to the paragraph, to clarify that HMOs can provide for or arrange for services. It has included that word to state that an HMO may be fined if the Department finds that the HMO is providing or arranging for inadequate or poor quality care. See subsection (b)(1).

   The Department has deleted subsection (b)(3), since Insurance is the agency with authority over fraudulent insurance practices. See generally the Unfair Insurance Practices Act (40 P. S. §§ 1171.1--1171.15).

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