The final rule implementing “Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs” is now available for review, and set for publication in the May 9, 2022 Federal Register.   The final rule adopts the proposed change that requires initial and service area expansion applicants to submit their proposed contracted networks during the application process.  The final rule delays this change from contract year 2023 to contract year 2024.

In making this change, CMS is basically reverting to its process prior to 2019, when it began allowing plans to attest to network adequacy for new contract or service area expansion applications, and relied on its triennial network review process to evaluate compliance with network adequacy standards for new and expanded contracts.

CMS expressed concern based on three years of experience that the attestation-only process could affect the integrity of the bidding process.  It specifically noted that a number of plans have requested to reduce the service area identified in their bid proposal once they realized that they did not have a sufficient network for one or more counties included in the service area.  The number identified as seeking such changes is small: since 2019, five organizations requested to make changes to the service area of a total of 10 plans after bid submission deadlines.  However, in CMS’ view, when a plan has to revise its bid to remove a county, it is likely that the initial bid submission was not complete, timely, or accurate.

CMS also noted that its post-application network adequacy reviews showed a pattern of organizations continuing to have inadequate networks even after their contract became operational.  CMS found a total of 19 plans that fell into this category.

The original issue that prompted the change in 2019 has not gone away, which is the potential challenge of applicants securing a full provider network almost a year in advance of the contract becoming operational.  The application is typically submitted in February – around 10 months prior to the contract year that begins on January 1.  CMS received many comments about the difficulty of obtaining final contracts in time for the application process, especially in underserved areas or those with relatively few providers.

CMS acknowledged the validity of plan comments, and did not fully explain why it decided to change the application process for all plans, rather than using its authority to take measures against the small number of plans that have demonstrated a problem with network adequacy compliance – such as disapproving a request for a new contract or service area expansion for a plan that seeks to change its service area after bid submission, or suspending enrollment until an operational plan comes into compliance with network adequacy standards.   Instead, CMS will provide two types of fairly limited flexibility for organizations to mitigate the impact of the change:

  1. CMS will allow a 10-percentage point credit towards the percentage of beneficiaries residing within published time and distance standards for the contracted network in the pending service area, at the time of application and for the duration of the application review.
  2. CMS will allow plans to use letters of intent (LOIs) in lieu of signed provider contracts, at the time of application and for the duration of the application review. The LOI must be signed by both the MA organization and the provider.  Applicants must notify CMS of their use of LOIs to meet network standards.

At the beginning of the contract year (that is, January 1), this flexibility would no longer apply, and plans would need to meet network adequacy standards for the entire service area with final, signed provider and facility contracts.