Proposed Rule CMS-4190-P: Past Performance

Today I want to focus on another aspect of the Centers for Medicare & Medicaid Services (CMS) proposed rule 4190-P, which deals with the review of past performance. This is covered in Title 42 of the Code of Federal Regulations, in Section 422.502 for Medicare Advantage (MA) and 423.503 for Part D. 

In 2005, CMS established that they may deny an application submitted by an organization seeking an MA or Part D contract if the organization had failed to comply with the requirements of a previous MA or Part D contract – meaning, their past performance could influence the decision of CMS to approve a submission, including new applications and expansion requests. About nine years ago, CMS established a rule to place a limit on the time period CMS would review, which ended up being a 14-month window.

2011 was quite a busy year for the agency (when is it not busy!); they released some plans from intermediate sanctions, they provided detailed trainings and clarification on marketing guidelines and expectations, and as a boon for enrollees and well-performing organizations, it was the first year a beneficiary could use a special election to join a 5-star plan. How far we have come!

More recently, CMS reduced the look-back period for past performance to 12 months. The most recent review methodology published on January 25, 2019 for the 2020 application cycle consists of 11 performance categories: compliance letters; star ratings; multiple ad-hoc corrective action plans (CAPs); ad hoc CAPs with beneficiary impact; failure to maintain a fiscally sound operation; one-third financial audits; program audits; exclusions; enforcement actions, terminations and non-renewals, and documented significant compliance issues awaiting formal CMS clearance. 

In the proposed rule, CMS suggests adopting three categories: imposition of Civil Money Penalties (CMPs); low star ratings scores, and the failure to maintain a fiscally sound operation. If finalized, they propose to add these three items to their already codified authority. (They state they “decline to consider” an application from an organization still covered by the 2-year prohibition period they agreed to as part of a mutual termination agreement entered into CMS, though the 2021 MA application still includes a waiver request an applicant may complete.)

What would this finalized provision mean for a beneficiary? Medicare beneficiaries should arguably not feel the impact of this change should it be finalized as written. CMS may be narrowing down the categories but the spirit of the past performance review remains the same. As a former colleague once told me about plan expansions, “if you don’t treat your current members right, you do not deserve to grow.” The agency has talked about the importance of beneficiary choice in conferences, and this change, in theory, should only eliminate the possibility of a beneficiary choosing a plan that still needs to get its house in order.

What would this finalized provision mean for a plan? New applicants and existing contract-holders take note: application reviewers are looking at corporate structure and ownership. They ask if any covered person (defined in regulations) served as a covered person for an entity that non-renewed or terminated within the past 2 years. They request organizational charts of the legal entity’s parent organization, affiliates, subsidiaries, and related entities. This is not anticipated to change, and past performance will be applied to applicants that have ties to plans with performance issues.

If finalized with no modifications, I still expect sub-regulatory guidance to be published to provide the industry clarification on whose past performance may be evaluated as part of the application review. Current guidance makes it clear the agency is not intending to be punitive in this process, allowing legal entities with good performance to continue to expand even if the parent organization holds another poor performing contract.