Settlement Agreement Grijalva, et al. v. Shalala,
CIV 93-711 TUC ACM (D. Ariz.)
Notice of Proposed Rulemaking implementing this settlement
The parties to this Settlement Agreement, Donna E. Shalala, in her official capacity as Secretary, U. S. Department of Health
and Human Services, and Gregoria Grijalva et al., on behalf of a class of individuals similarly situated and certified by the
court in its Order of July 14, 1995, by and through their undersigned counsel, in the interest of resolving the lawsuit
Gregoria Grijalva, et al. v. Shalala, Civ. Action No. 93-711-TUC (D. Ariz.), hereby, in consideration of the mutual promises
contained herein, the receipt and sufficiency of which are acknowledged, agree to the following in settlement of this
matter 1 :
A number of changes have already been made in the notice and appeals processes for Medicare managed care plans
since March 3, 1997, which have resolved some of the plaintiffs' concerns.
A. Definitions. Terms that are not specifically defined in this document shall have the meanings assigned to them in
the Medicare Act, 42 U. S. C. D 1395 et seq. For the purposes of this settlement agreement only, the following terms used
herein are defined as follows:
- 1. Provider ` a skilled nursing facility (SNF), home health agency (HHA), or comprehensive outpatient
rehabilitation facility (CORF).
- 2. Enrollee ` a Medicare+ Choice (M+ C)-eligible individual who has elected and enrolled in an M+C
plan offered by an M+ C organization (M+ CO).
- 3. Authorized Representative ` a person named and authorized to act on the enrollee's behalf in any
proceeding or communication relating to the Medicare appeals process under 42 C. F. R. part 422,
subpart M, or the enrollee's legal guardian, attorney, or other person or entity authorized
under state or local law to act on the enrollee's behalf in any proceeding or communication relating
to the Medicare appeals process.
- 4. Termination ` the discontinuation or discharge of an enrollee from covered provider services where
the enrollee has been authorized by the M+ CO to receive an ongoing course of treatment from that
provider. Termination includes cessation of coverage at the end of a course of treatment
´ preauthorized´ in a discrete increment.
- 5. Day( s) ` Unless otherwise indicated, the word "day" or "days" refers to calendar day( s) and not
business or working day(s).
B. Notice of Proposed Rulemaking ` `` ` Independent Fast Track Review of M+ CO Decisions to Terminate Provider Services
- 1. Defendant agrees to promulgate a Notice of Proposed Rulemaking (NPRM) addressing notice and appeal
procedures for M+ CO decisions to terminate coverage for provider services to an enrollee. The NPRM will set
forth the following proposed procedures and requirements to supplement existing notice and appeal
requirements for M+ COs:
- a. Notices
- i. advance written notice of termination ` `` ` For enrollees receiving provider services, M+ COs
would be required to provide to them or their authorized representatives written notice of
a decision to terminate such covered service four days in advance of termination.
- ii. standardized notice ` `` ` The termination notice for provider services would be standardized.
The content of a proposed notice would be developed in accordance with existing federal
rules and policies relating to requesting public input and advice.
- iii. contents of termination notice ` `` ` The
termination notice would contain:
- --a specific and detailed explanation why services either are no longer medically
necessary, or are no longer covered;
- --the Medicare coverage rule, if applicable, and/ or other M+ CO policy or
reason upon which the decision is based, with applicable citations to the
Medicare coverage rules or instructions about how to obtain them from the M+ CO;
- --facts specific to the enrollee and relevant to the coverage determination
that are sufficient to advise the enrollee of the applicability of the
coverage rule or policy to his/ her case;
- --a description of the fast-track Independent Review Entity (IRE) appeals
process, and the existence of an enrollee right (but not obligation) to
submit evidence showing that his/ her services should continue.
- iv. delivery ` The written notice of termination of services must be delivered to the enrollee
or authorized representative in the same manner, and with the same requirements,
established for the delivery of Medicare's Home Health Agency Advanced Beneficiary
Notice (See Program Memoranda A-99-52 and A-99-54; 42 C. F. R. 484.10( c) & (e)). Notice
would be considered given upon the enrollee's (or authorized representative's) receipt of
- b. Appeals ` The NPRM will set forth a new fast track independent review process for M+ COs'
decisions to terminate provider services. Under that process, an enrollee who wishes to appeal an
M+CO's termination decision must file an oral or written request for an expedited appeal by an
Independent Review Entity (IRE) by noon of the day following receipt of the notice that services will
terminate. In the case of an emergency where the IRE is closed on the day the enrollee requests an
expedited appeal, the request can be filed by noon of the next day that the IRE office is open.
Covered provider services would continue until noon on the day after the enrollee or authorized
representative receives notice of the IREZs final decision, or until the date and time designated in
the notice for termination of services, whichever is later.
- i. burden of production/ burden of proof ` When an enrollee appeals an M+ CO's decision to
terminate provider services to an IRE, the burden is on the M+ CO to prove that
termination of coverage is the correct decision, either on the basis of medical
necessity or of other Medicare coverage policies. The M+ CO would be required to
supply any and all information that the IRE would require to sustain the M+ CO's
termination decision. The enrollee is under no obligation to gather evidence to submit to
the IRE in support of the enrollee's appeal; however, the enrollee may be required to
authorize access to medical records in order to pursue the appeal.
- ii. IRE contact with enrollee ` Notwithstanding the burden of production outlined in
B(1)(b)(i) above, the IRE would be required to solicit the enrollee's (or authorized
representative's) views regarding the reason( s) for termination of services
specified on the written termination notice provided by the M+ CO as part of the IRE's
decision making process and before rendering its final decision. The IRE would also be
required to solicit the views of the enrollee (or authorized representative) regarding any
reason other than the reason( s) specified on the written notice if the IRE intends to use
this reason as the basis for its review determination. The enrollee will have the
right to submit evidence to be considered by the IRE in making its decision.
- iii. IRE review of termination notices ` When an enrollee elects to do a fast track appeal of
a termination decision, the IRE would review the notice of termination from which the
enrollee is appealing to ensure that the M+ CO gave the enrollee or authorized
representative proper notice. Notices that do not include mandatory language, are not in
the mandatory format, are untimely, or are not provided at all, would constitute
improper notification to the enrollee. If the IRE finds that the M+ CO failed to give
proper notice, the M+CO would be required to continue services until a proper notice has
been received by the enrollee or authorized representative and the enrollee has had the
opportunity to appeal the termination decision to the IRE. Continuation of
provider services would not be required in these circumstances, however, if the IRE
finds that continuation could pose a threat to the enrollee's health or safety. The IRE
shall forward to HCFA information about every case in which proper termination notice was
- iv. enrollee access to documentation ` As part of a request for an appeal, an enrollee or
authorized representative would be permitted to request a copy of the documentation that
was, or would be, sent to the IRE. If the enrollee or authorized representative
requests it, the M+ CO would be required to provide such a copy no later than the end of
the first full day immediately following the day the material is requested.
- v. termination of "preauthorized" course of treatment ` A course of treatment for a
continuing spell of illness or medical condition that has been "preauthorized" by an
M+CO in a discrete increment would be considered terminated whenever coverage for
the services ceases, including when it comes to its "preauthorized" end, and is subject to
the same notice and appeal procedures as a course of treatment that has not been
- c. Continuation of Coverage if No IRE Appeal ` If the enrollee elects not to appeal the M+ CO's
termination decision through the IRE procedure, Medicare coverage would continue for four days
after the date that the termination notice was received by the enrollee or authorized
representative, or the date designated for termination in the notice, whichever date is
- d. Availability of Other Appeal Processes
- i. if no appeal to IRE ` `` ` If an enrollee fails to meet the noon deadline to utilize the IRE
appeal process, then such enrollee would be permitted to seek review of the M+ CO's
termination decision using any and all appeal processes otherwise available under 42 U. S. C.
D 1395w-22( g) and 42 C. F. R., part 422,
subpart M. Under those non-IRE appeals processes, the enrollee will not have a right
to continued coverage for services during the pendency of the appeal. If the enrollee
continues to receive services during this period and prevails on appeal, the M+ CO would
be required to reimburse the enrollee for the costs of those services for which the
enrollee has already paid the M+ CO or other provider.
- ii. if unsuccessful appeal to IRE ` `` ` If an enrollee utilizes the IRE appeal process, and
is unsuccessful in the appeal, the enrollee may request a reconsideration from the IRE.
The enrollee would be permitted to appeal the IRE's reconsidered determination to an
Administrative Law Judge, pursuant to 42 C. F. R. D 422.600 et seq. The enrollee would
not be entitled to reconsideration of the M+ CO decision under 42 C. F. R. DD 422.578
- 2. Proposed Procedure and Forms Subject to Notice and Comment ` `` ` The proposed fast track appeal for M+ CO
terminations of provider services will be subject to notice and comment procedures as required by the
Administrative Procedure Act, 5 U. S. C. D 553, and 42 U. S. C. D 1395hh. The proposed standardized termination
notice will be subject to notice and comment procedures under the Paperwork Reduction Act, 44 U. S. C. D 3501 et
seq. Nothing in this Agreement shall be construed as a promise or predetermination regarding the content of a
final rule or mandatory form, if any, on notice and appeal procedures for M+ CO decisions to terminate
- 3. Solicitation of Comments on Notice and Appeal Procedures for Reductions ` In the NPRM proposing new
notice and appeal procedures for M+ CO decisions to terminate provider services described above, defendant
will solicit comments on how to provide new notice and appeal procedures for M+ CO decisions to reduce, while
not terminating altogether, provider services.
- 4. Timing of NPRM ` Defendant will make best efforts to publish the NPRM in the Federal Register on or before
December 31, 2000.
- 5. Civil Monetary Penalties for Noncompliance ` Defendant will include in the preamble of the NPRM a statement
explaining that the requirements set forth in the NPRM, or any new or modified requirements developed after
analysis of comments on the NPRM received during the rulemaking process, will, when finalized, be codified
in 42 C. F. R. part 422 subpart M, and therefore a violation of the requirements would be subject to
defendant's existing intermediate sanction and civil monetary penalty authority (42 U. S. C. D 1395w-27( g) and
42 C. F. R. part 422, subpart 0).
C. Notice and Appeal Enforcement Mechanisms
- 1. Civil Monetary Penalties/ Intermediate Sanctions ` Defendant will issue guidance clarifying that an M+CO's
failure to comply with notice or appeal procedures in only one or two cases could constitute a "substantial
failure" to comply with grievance and appeal requirements for purposes of imposing sanctions under
42 C. F. R. DD 422.510( a)( 6), 422.752( b) and 422.758, depending on seriousness (i. e., degree of risk to
health it poses) and/ or severity (i. e., magnitude) of the violation(s).
- 2. Monitoring Strategies
- a. Analysis of CAHPS data ` Using data from the
Consumer Assessment of Health Plans Surveys (CAHPS), defendant will develop a formula to
identify M+ COs that should undergo a focused review of their compliance with notice and appeal
- b. Analysis of data from proposed disenrollment survey ` Defendant will develop an M+ CO
disenrollment survey, and, using data it expects to acquire through that survey, defendant will
devise a formula to identify M+COs that should undergo a focused review of their compliance with
notice and appeal requirements.
- c. New survey questions ` `` ` Defendant will propose, subject to Paperwork Reduction Act approval, the
inclusion of questions in both the current enrollment CAHPS and the new disenrollment CAHPS
that specifically address enrollee knowledge about appeal rights and the appeals process; whether the
enrollee ever was denied care; whether the enrollee was given written notice of the right to
file a formal complaint (that is, appeal such a denial of care) and whether the enrollee ever
filed a complaint with his/ her M+CO.
Because these questions are new, Defendant will assess the quality of data collected from these
questions and their effect on response rates through 12/ 31/ 2001. Based on this assessment,
Defendant may make changes in the survey questions if warranted.
- 3. Focused Review ` If, based on application of the formulas described in 2( a) or (b), as well as
information about inadequate notices forwarded from the IREs pursuant to Part B, Paragraph 1. b. iii. above, and
complaints received directly from enrollees, HCFA determines that an M+ CO should undergo a focused review
to determine its compliance with appeal rights and notice requirements, HCFA will examine operational
areas of the M+ CO that are likely to produce evidence of noncompliance with these requirements, including
claims processing, quality assurance, utilization management functions, and appeals functions.
D. Automatic Expedited Review with Physician Justification ` Defendant will issue guidance clarifying that, to implement
the existing standard for granting expedited review, (1) M+COs must notify enrollees in their annual
instructions/ notices that an enrollee is automatically entitled under 42 C. F. R. D 422.570( c)( 2)( ii) to an expedited
organization determination, and under 42 C. F. R. D 422.584( c)( 2)( ii) to expedited review of an M+ CO decision
to deny, reduce or terminate a Medicare-covered service if the enrollee timely submits a statement from a physician
that the standard for expedited review has been met; and (2) if a request for expedited review is rejected by the
M+CO, the M+CO must again notify the enrollee that the enrollee would be permitted to resubmit a request for
expedited review, and would be automatically entitled to expedited review, if the request includes a statement from a
physician that the standard for expedited review has been met.
E. Enrollee Access to Evidence
- 1. Defendant will issue guidance clarifying that M+COs
should include notice of the enrollee right of access to his/ her case file, see 42 C. F. R. D 422.118( c), in
its marketing materials (e. g., in the initial and annual updates of the evidence of coverage).
- 2. Defendant will ensure that the Medicare & You handbook will contain appropriate information about where
enrollees can learn how to obtain access to their case files.
F. Timing of Implementation of Parts C. 1, D, and E -Defendant will make best efforts to implement Parts C. 1., D, and E on
or before June 30, 2001.
G. Notification to Plaintiffs of Modification ` Defendant retains her authority to modify forms, regulations, rules,
requirements, or procedures that are implemented as a result of this settlement agreement to the extent permitted by law.
Defendant agrees to notify plaintiffs, through counsel, upon implementation of any significant modification that
relates directly to a term of this settlement agreement if such modification occurs within 2 years after the date of
execution of this settlement agreement.
H. Attorneys Fees ` For purposes of this agreement, defendant agrees that plaintiffs are entitled to reasonable attorneys
fees for legal work performed on their behalf in furtherance of their claims in this litigation to the extent permitted
- 1. The parties will attempt to reach agreement regarding
the amount of attorneys fees plaintiffs are entitled to receive.
- 2. If, after good faith efforts to reach agreement regarding the amount of attorneys fees, the parties
agree that they cannot reach such agreement, plaintiffs may file a petition to determine the amount of such
attorneys fees before the District Court.
I. Enforcement of Settlement Agreement ` The parties will attempt to resolve, by negotiation among counsel, any
disputes arising under this agreement. If negotiation fails, neither party will seek to enforce this settlement
agreement in Court until 30 days after counsel for the complaining party has contacted opposing counsel in writing,
stating the specific basis for the complaining party's belief that a violation of this agreement has occurred.
J. Dismissals/ Stay of Claims
- 1. Immediately upon approval and execution of this
settlement agreement, counsel for the parties will file a joint motion requesting dismissal, with prejudice, of
all claims raised in the Complaint or otherwise raised at any stage of this litigation or its appeal, except
- (1) claims for which relief would be provided by implementation of the notice and appeal procedures
described in part B of this settlement agreement; and
- (2) claims regarding the adequacy of notice provided in
the case of a reduction in services, which shall be dismissed without prejudice; and (3) claims regarding
defendant's alleged failure to enforce M+ COsZ obligation to provide coverage of the full range of
Medicare covered services, which shall be dismissed without prejudice.
- 2. For claims that are dismissed with prejudice, individuals in the class, and their heirs and assigns,
shall be barred and enjoined forever from prosecuting any claims or causes of action that have been asserted
by reason of, or with respect to, or in connection with, any of the matters alleged in this action.
Nothing in this Agreement, however, shall prevent any class member from pursuing an individual administrative
appeal, a request for reopening, or a judicial appeal, or from asserting that a legal standard was not
applied, or was improperly applied, in his or her individual case.
- 3. The defendant, her successors, and any department, agency, or establishment of the United States and any
officers, employees, agents, or successors of any such department, agency, or establishment, are hereby
discharged and released from any claims and causes of action that are due to be dismissed with prejudice
pursuant to J( 1) above.
- 4. Also immediately upon approval and execution of this settlement agreement, counsel for the parties will file
a joint motion requesting dismissal, without prejudice, of all claims regarding (1) the adequacy of notice
provided where the M+ CO has decided that a reduction in covered services is warranted, and (2) defendant's
alleged failure to enforce M+ COsZ obligation to provide coverage of the full range of Medicare covered
- 5. The parties will jointly move the Court (1) to stay any
claims for which relief would be provided by implementation of the notice and appeal procedures
described in part B of this settlement agreement until 30 days after the date of promulgation of any Final
Rule relating to fast track review of M+ CO decisions to terminate provider services to an enrollee, or until
December 31, 2002 if no Final Rule has been promulgated by that date; and (2) to dismiss all remaining claims
with prejudice at the expiration of this stay, if plaintiffs have not filed an appropriate pleading to
bring before the Court claims for which relief would be provided by implementation of the notice and appeal
procedures described in Part B of this settlement agreement.
K. This settlement agreement does not constitute an admission by the defendant of any practice that violates or fails to
comply with any law, rule, or regulation dealing with any matter within the scope of the allegations contained in the
complaint or otherwise raised by plaintiffs in this action.
L. This Settlement Agreement contains the entire agreement of the parties concerning the subject matter of this
SHEILA M. LIEBER
ANDREA G. COHEN
Attorneys, U. S. Department of Justice
COUNSEL FOR DEFENDANT
SALLY HART Center for Medicare Advocacy, Inc.
LENORE E. GERARD Legal Assistant to the Elderly
CAROL S. JIMENEZ, GILL W. DEFORD, JUDITH A. STEIN Center for Medicare Advocacy, Inc.
COUNSEL FOR PLAINTIFFS