As a final addition to our series on the 2016 Draft Call Letter, we highlight some of the MA contracting issues raised by the Centers for Medicaid and Medicare Services (“CMS”). Specifically, CMS (1) recommends Medicare Advantage Organization (“MAO”) contract consolidation, (2) MA application changes related to MAOs operating contracts that may not meet minimum enrollment standards, and (3) a two-year prohibition for terminated or non-renewed contracts.

Contract Consolidation

CMS used the Call Letter to encourage MAOs operating more than one contract of the same product type under the same legal entity to consolidate the contracts under a single contract for CY 2016.  Note though, that MAOs are not permitted to consolidate contracts of different product types.

MAOs seeking to consolidate multiple contracts under the same legal entity should submit a formal request that follows the specific guidance provided via an HPMS memorandum dated February 6, 2015 and includes the following:

1. How the MAO came to operate more than one contract of the same plan type;

2. The contract(s) to be consolidated and the contract ID into which the MAO wishes to consolidate the contract(s);

3. The service area covered by the contracts;

4. The plan types under the contracts; and

5. Any pending applications under the contracts.

Requests to consolidate contracts for CY 2016 must be received by April 15, 2015 and MAOs can expect to be notified regarding the approval or denial of consolidation requests by May 2015.

MA/MA-PD Application Changes

MAOs must meet specific administrative requirements in order to hold an MA contract and meet minimum enrollment thresholds. In the Call Letter, CMS recognizes that new applicants may believe they are capable of administering an MA contract even though they are not able to meet minimum enrollment standards. CMS also acknowledges that there are reasonable factors, such as specific populations served or geographic location, that can impact enrollment.

As a result, CMS developed a minimum enrollment waiver request attestation and a minimum enrollment waiver request template as part of the CY 2016 MA applications. The attestations and supporting documentation must demonstrate (to CMS’ satisfaction) an MAO’s ability to administer and manage the level of risk associated with the contract, without meeting the minimum enrollment requirements.

Two-Year Prohibition

MAOs who request to terminate a contract are prohibited from re-entering the MA program for a two-year period. In the CY 2016 Medicare Program final rules published last month, CMS adopted a final rule expanding the application of the two-year prohibition to avoid (1) unnecessarily narrowing the scope of the two-year prohibition, or (2) precluding CMS from preventing poor performing MAOs from re-entering the MA program.

CMS interprets the new rules as authorizing denial of new contracts and service area expansions, regardless of the contract type, product type, or service area of the previous non-renewal. CMS will apply this interpretation to all MAOs that mutually terminate or do not renew a contract beginning in April 2015.

The final rule also clarifies that the two-year prohibition is applied at the legal entity level and the two-year ban is applicable for two contract years following the year of termination or non-renewal.

CMS did acknowledge that there are many reasons an MAO may decide to terminate or not renew a contract and then want to re-enter the program. Because of this, they will consider whether circumstances warrant special consider on a case-by-case basis.