CMS Pub. 100-16, ch. 11, § 110.4

Groups' Administrative and Fiscal Capacity to Manage Financial Risk

(Rev. 79, Issued 02-17-06, Effective Date 02-17-06)

Before an MA organization contracts with an entity to perform functions that are

otherwise the responsibility of the MA organization under its contract with CMS, the MA

organization should develop, implement, and maintain policies and procedures for

assessing contracting provider groups' administrative and fiscal capacity to manage

financial risk prior to delegating MA-related risk to these groups. Suggested policies and

procedures include:

• Establish minimum net worth, adequate liquidity and reserve requirements that

the delegated entity must meet before the MA organization contracts with a

group;

• Conduct on-site audits to assess the delegated entity's administrative capabilities.

Audit activities would include, but are not limited to: assessment of claims

processing capabilities; financial planning and oversight capabilities; assessing a

group's capacity to measure and accurately report incurred but not reported

(IBNR) claims estimates.

After an MA organization has entered a contract with an entity to perform delegated

functions it must develop policies and procedures for monitoring the fiscal soundness of

at-risk delegated entities on an ongoing basis. These policies and procedures should

specify thresholds that trigger MA organization intervention. Suggested policies and

procedures include:

• Periodic collection of at-risk entity's financial statements and claims timeliness

reports;

• Periodic auditing of claims payment timeliness and accuracy;

• Periodic administrative performance assessments;

• Listing of interventions that the MA organization will take and corrective actions

it will require when an at-risk delegated entity falls below minimum standards or

other thresholds; and

• Develop, maintain, and implement contingency plans to enable the MA

organization to quickly respond to delegated entity financial failures. Particular

emphasis should be placed on assessing the availability, accessibility, and

continuity of care for Medicare beneficiaries enrolled in an MA plan, and for

preventing inappropriate beneficiary billing for services that are the legal

obligation of the MA organization. See §110.4.1 for suggested elements of a

contingency plan.