(a) Applications. This subpart sets forth the application procedures for the following:

(1) An entity that seeks approval from CMS as a PACE organization.

(2) A PACE organization that seeks to expand its service area or to add a new PACE center.

(3) A PACE organization that seeks to expand its service area and to add a new PACE center.

(b) Waiver. This subpart sets forth the process by which a PACE organization may request waiver of certain regulatory requirements. The purpose of the waivers is to provide for reasonable flexibility in adapting the PACE model to the needs of particular organizations (such as those in rural areas).

(a) Submission of application. (1) An individual authorized to act for an entity that seeks to become a PACE organization or a PACE organization that seeks to expand its service area or add a PACE center site must submit to CMS a complete application in the form and manner, including timeframes for submission, specified by CMS, that describes how the entity or PACE organization meets all requirements in this part.

(2) An individual authorized to act for an entity that seeks to become a PACE organization must submit an application to qualify as a Part D sponsor in the form and manner required by CMS in accordance with 42 CFR part 423, subpart K.

(b) State assurance. (1) An entity's application to become a PACE organization must include an assurance from the State administering agency of the State in which the program is located indicating that the State considers the entity to be qualified to be a PACE organization and is willing to enter into a PACE program agreement with the entity.

(2) A PACE organization's application to expand its service area and/or add a PACE center site must include an assurance from the State administering agency of the State in which the program is located indicating that the State is willing to amend the PACE program agreement to include the new site and/or expand the PACE organization's service area.

(3) Any PACE application that does not include a signed and dated State assurances document that includes accurate service area information and the physical address of the PACE center, as applicable, is considered incomplete and invalid and will not be evaluated by CMS.

(c) Service area designation. (1) An entity submitting an application to become a PACE organization or a PACE organization submitting an application seeking to expand its service area must describe the proposed service area in its application.

(2) CMS, in consultation with the State administering agency, may exclude from designation an area that is already covered under another PACE program agreement to avoid unnecessary duplication of services and avoid impairing the financial and service viability of an existing program.

(d) Service area and/or PACE center site expansion. CMS and the State administering agency will only approve a service area expansion or PACE center site expansion after the PACE organization has successfully completed its first trial period audit and, if applicable, has implemented an acceptable corrective action plan.

CMS evaluates an application on the basis of the following information:

(a) Information contained in the application.

(b) Information obtained by CMS or the State administering agency through on-site visits or any other means.

(c) Use of information from a current or prior PACE program agreement. (1) If, during the 12 months preceding the deadline established by CMS for the submission of an application or submission of a response to a CMS request for additional information, a PACE organization fails to comply with the requirements of the PACE program under any current or prior PACE program agreement or fails to complete a corrective action plan during the applicable 12-month period, CMS may deny an application based on the applicant's failure to comply with the requirements of the PACE program under any current or prior PACE program agreement even if the applicant currently meets all of the requirements of this part.

(i) An applicant may be considered to have failed to comply with the requirements of the PACE program under a PACE program agreement for purposes of an application denial under paragraph (c)(1) of this section if any of the following conditions apply with respect to the applicant during the applicable 12-month review period:

(A) Was subject to the imposition of an enrollment or payment sanction under § 460.42(a) or (b) for one or more of the violations specified in § 460.40.

(B) Failed to maintain a fiscally sound operation consistent with the requirements of § 460.80(a) after the end of the trial period.

(C) Filed for or is currently in State bankruptcy proceedings.

(D) Met or exceeded 13 points for compliance actions for any one PACE program agreement.

(1) CMS determines the number of points accumulated during the performance period for compliance actions based on the following point values:

(i) Each corrective action plan issued under § 460.19(c)(3) during the performance period counts for 6 points. Corrective action requests issued under § 460.194 are not included in the point calculations.

(ii) Each warning letter issued under § 460.19(c)(2) during the performance period counts for 3 points.

(iii) Each notice of non-compliance issued under § 460.19(c)(1) during the performance period counts for 1 point.

(2) CMS adds all the point values for each PACE organization's program agreement to determine if the 13-point threshold described in paragraph (c)(1)(i)(D) of this section has been reached.

(ii) CMS may deny an application submitted by an organization that does not hold a PACE program agreement at the time of the submission if the applicant's parent organization or another subsidiary of the parent organization meets the criteria for denial stated in paragraph (c)(1)(i) of this section. This paragraph does not apply to a parent organization that completed the acquisition of a subsidiary that meets the criteria for denial within the 24 months preceding the application submission deadline.

(d) If CMS has terminated a PACE program agreement under § 460.50, or did not renew a PACE program agreement, and that termination or non-renewal took effect within the 38 months preceding the submission of an initial or expansion PACE application from the same organization, CMS may deny the application based on the applicant's substantial failure to comply with the requirements of the PACE program, even if the applicant currently meets all of the requirements of this part.

(a) CMS may take compliance actions as described in paragraph (c)(1) of this section if CMS determines that the PACE organization has not complied with the terms of a current or prior PACE program agreement with CMS and a State administering agency.

(1) CMS may determine that a PACE organization is out of compliance with requirements when the organization fails to meet performance standards articulated in sections 1894 and 1934 of the Act and regulations in this chapter.

(2) If CMS has not already articulated a measure for determining non-compliance, CMS may determine that a PACE organization is out of compliance when its performance in fulfilling requirements represents an outlier relative to the performance of other PACE organizations.

(b) CMS bases its decision on whether to issue a compliance action and what level of compliance action to take on an assessment of the circumstances surrounding the non-compliance, including all of the following:

(1) The nature of the conduct.

(2) The degree of culpability of the PACE organization.

(3) The actual or potential adverse effect on beneficiaries which resulted or could have resulted from the conduct of the PACE organization.

(4) The history of prior offenses by the PACE organization or its related entities.

(5) Whether the non-compliance was self-reported.

(6) Other factors which relate to the impact of the underlying non-compliance or to the PACE organization's inadequate oversight of the operations that contributed to the non-compliance.

(c) CMS may take one of three types of compliance actions based on the nature of the non-compliance.

(1) Notice of non-compliance. A notice of non-compliance may be issued for any failure to comply with the requirements of the PACE organization's current or prior PACE program agreement with CMS and a State administering agency, as described in paragraph (a) of this section.

(2) Warning letter. A warning letter may be issued for serious and/or continued non-compliance with the requirements of the PACE organization's current or prior PACE program agreement with CMS and a State administering agency, as described in paragraph (a) of this section and as assessed in accordance with paragraph (b) of this section.

(3) Corrective action plan. (i) Corrective action plans are issued for particularly serious or continued non-compliance with the requirements of the PACE organization's current or prior PACE program agreement with CMS and a State administering agency, as described in paragraph (a) of this section and as assessed in accordance with paragraph (b) of this section.

(ii) CMS issues a corrective action plan if CMS determines that the PACE organization has repeated or not corrected non-compliance identified in prior compliance actions, has substantially impacted beneficiaries or the program with its non-compliance, or must implement a detailed plan to correct the underlying causes of the non-compliance.

(a) Time limit for notification of determination. Within 90 days, or 45 days for applications set forth in § 460.10(a)(2), after an entity submits a complete application to CMS, CMS takes one of the following actions in the form and manner specified by CMS:

(1) Approves the application.

(2) Denies the application and notifies the entity in writing of the basis for the denial and the process for requesting reconsideration of the denial.

(b) Complete application. An application is only considered complete when CMS receives all information necessary to make a determination regarding approval or denial.

(c) Incomplete application due to the lack of required State assurances documentation. An application that, upon submission, is determined to be incomplete under § 460.12(b)(3) is withdrawn by CMS and the applicant is notified accordingly. The applicant is not entitled to a fair hearing when CMS withdraws an incomplete application on this basis.

(d) Additional information requested. If CMS determines that an application is not complete because it does not include sufficient information to make a determination, CMS will request additional information within 90 days, or 45 days for applications set forth in § 460.10(a)(2), after the date of submission of the application.

(1) The time limits in paragraph (a) of this section do not begin until CMS receives all requested information and the application is complete.

(2) If more than 12 months elapse between the date of initial submission of the application and the entity's response to the CMS request for additional information, the entity must update the application to provide the most current information and materials related to the application.

(e) Deemed approval. An entity's application to become a PACE organization is deemed approved if CMS fails to act on the complete application within 90 days, after the later of the following dates:

(1) The date the application is submitted by the organization.

(2) The date CMS receives all requested additional information.

(f) Date of submission. For purposes of the time limits described in this section, the date that an application is submitted to CMS is the date on which the application is delivered to the address designated by CMS.

(a) Numerical limit. Except as specified in paragraph (b) of this section, CMS does not permit the number of PACE organizations with which agreements are in effect under this part or under section 9412(b) of the Omnibus Budget Reconciliation Act of 1986, to exceed the following:

(1) As of August 5, 1997—40.

(2) As of each succeeding August 5, the numerical limit for the preceding year plus 20, without regard to the actual number of agreements in effect on a previous anniversary date. (For example, the limit is 60 on August 5, 1998 and 80 on August 5, 1999.)

(b) Exception. The numerical limit does not apply to a private, for-profit PACE organization that meets the following conditions:

(1) Is operating under a demonstration project waiver under section 1894(h) and 1934(h) of the Act.

(2) Was operating under a waiver and subsequently qualifies for PACE organization status in accordance with sections 1894(a)(3)(B)(ii) and 1934(a)(3)(B)(ii) of the Act.

(a) A PACE organization, or an entity submitting an application to become a PACE organization, must submit its waiver request through the State administering agency for initial review.

(1) The State administering agency forwards a PACE organization's waiver requests to CMS along with any concurrence, concerns or conditions regarding the waiver.

(2) Entities submitting an application to become a PACE organization may:

(i) Submit a waiver request as a document separate from the application by submitting it first to the State administering agency which, in turn, will forward the waiver request to CMS indicating the State's concurrence, concerns or conditions regarding the waiver request; or

(ii) Submit a waiver request directly to CMS in conjunction with the application. This request must include a letter from the State administering agency indicating the State's concurrence, concerns or conditions regarding the waiver request.

(b) CMS evaluates a waiver request from a PACE organization or PACE applicant on the basis of the following information:

(1) The adequacy of the description and rationale for the waiver provided by the PACE organization or PACE applicant, including any additional information requested by CMS.

(2) Information obtained by CMS and the State administering agency in on-site reviews and monitoring of the PACE organization.

(c) Requirements related to the following principles may not be waived:

(1) A focus on frail elderly qualifying individuals who require the level of care provided in a nursing facility.

(2) The delivery of comprehensive, integrated acute and long-term care services.

(3) An interdisciplinary team approach to care management and service delivery.

(4) Capitated, integrated financing that allows the provider to pool payments received from public and private programs and individuals.

(5) The assumption by the provider of full financial risk.

(a) General. Within 90 days after receipt of a complete waiver request, CMS takes one of the following actions, in the form and manner specified by CMS:

(1) Approves the waiver request.

(2) Conditionally approves the waiver request and notifies the PACE applicant.

(3) Denies the waiver request and notifies the PACE organization or PACE applicant of the basis for the denial.

(b) Additional information requested. A waiver request is only considered complete when CMS receives all information necessary to make a determination regarding approval or denial. If CMS determines that the waiver request is not complete because it does not include sufficient information to make a determination, CMS will request additional information from the PACE organization or PACE applicant. The 90-day time limit in paragraph (a) of this section will start when CMS receives the complete waiver request.

(c) Waiver approval. A waiver request is deemed approved if CMS fails to act on the request within 90 days after CMS receives a complete waiver request.

(d) Withdrawal of CMS approval for good cause. (1) CMS in consultation with the State administering agency may withdraw approval of a waiver for good cause.

(2) If the waiver approval is withdrawn, CMS must notify the PACE organization or PACE applicant and the State administering agency that approval of a waiver has been withdrawn and the reason for doing so and must specify the effective date of the withdrawal in the notice.