DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid 
Services 7500 Security Boulevard, Mail 
Stop S2-26-12 Baltimore, Maryland 
21244-1850 
CMCS Informational Bulletin 
DATE:  November 8, 2019 
FROM:  Calder Lynch, Acting Deputy Administrator and Director 
SUBJECT:  Managed Care Contract Review Redesign Project 
The Centers for Medicare & Medicaid Services (CMS) is collaborating with the National 
Association of Medicaid Directors (NAMD), an organization whose members are state Medicaid 
directors from all states, the District of Columbia, and U.S territories, to improve CMS managed 
care plan contract review process by increasing efficiencies and transparency, and decreasing 
administrative burden. Both CMS and states have identified the contract review process as an 
area in need of significant improvement. The volume of state managed care contract submissions 
has risen steadily over the past several years without significant process improvements to offset 
the increased workload. Under the current process, contract reviews are taking an average of 254 
days to approve, and are consuming a growing proportion of CMS resources. The redesign 
project will address these issues by expediting the review process so that states and CMS can 
rebalance their resources, and focus on assuring accessible, high quality health care, and 
improving health outcomes for Medicaid beneficiaries.  
The managed care contract redesign project is one of many CMS initiatives designed to shift the 
agencys resources away from administrative processes, and toward activities that monitor and 
improve health outcomes. Like the State Plan Amendment (SPA) and 1915 Waiver Project 
implemented in 2017, CMS has worked closely with NAMD over the last 9 months to identify 
changes to the contract review process that are feasible for both CMS and states to implement, 
and that will improve the overall review process. This effort compliments the process 
improvements that have already been undertaken by CMS and the Office of the Actuary to 
reduce the timeframes and administrative burdens associated with managed care rate reviews. 
The contract redesign will build upon these initiatives to achieve substantial gains throughout the 
contract and rate review process.  
In this bulletin, CMS shares short-term, intermediate and long-term strategies to improve the 
contract action review process and to reduce the timeframes for approval. This bulletin also 
introduces a pilot project that CMS has developed to test a risk-based accelerated contract review 
process for which state participation will be solicited separately. The results of the pilot will 
inform a long-term strategy for streamlining the contract review process.   Background 
 
Federal regulations at  438.3, 438.4, and 438.7 require CMS to review and approve states 
Medicaid managed care contracts and capitation rates paid to managed care plans as actuarially 
sound. Regulations at 457.1201 require CMS to review CHIP managed care contracts. While 
CMS works to review contract actions expeditiously, the complexity and variation between 
contracts often results in a time consuming process for both CMS and states. In addition, the 
resource intensity of this process has been amplified by the steady growth of managed care 
programs, the increasing complexity of state delivery system programs, and the increasing 
number of contract actions submitted by states annually. In Federal Fiscal Year 2018, CMS 
received 461 contract actions and 259 actuarial certifications. This constituted a 10% increase 
from the number of contract actions submitted during Federal Fiscal Year 2017. At the same 
time the number of contract action submissions was increasing, states were expressing concerns 
about the long review times and administrative burdens associated with CMS current review 
process. An internal data analysis found that contract actions were taking an average of 254 days 
to approve, which prompted CMS to conduct a detailed analysis of contract actions to understand 
why the reviews were so lengthy and to identify strategies for reducing the approval time.  
 
Managed Care Contract Redesign Framework 
 
To inform the redesign project, CMS collected information from internal and external 
stakeholders throughout the first six months of 2019. We used multiple mediums to collect data, 
including a detailed analysis of a sample of approved contract actions; a national survey on 
states contracting and rate-setting practices; internal focus groups with analysts from the Center 
for Medicaid and CHIP Services and the Office of the Actuary (OACT); and technical 
consultation with states through NAMD. The information collected was used to identify the key 
variables driving lengthy review times and causing administrative burden.  
 
CMS reviewed a sample of contract actions that included submissions from 40 states and the 
District of Columbia, representing 15% of the actions submitted and approved between January 
1, 2017 and December 31, 2018. To better understand where and why process delays were 
occurring, we included in the sample a majority of contract actions that had longer review times 
than the national average, and included an actuarial certification. Each contract action in the 
sample was examined on a large number of measures, including overall review time, the number 
of days between states initial and final contract submissions, the number of questions sent to 
states, and other additional metrics. The analysis showed four primary factors driving lengthy 
timeframes: 1) an absence of Federal requirements documented in the contract action; 2) a prior, 
unapproved contract action (preceding the pending contract action); 3) missing documentation in 
the states submission; and 4) approval of the rate certification. 
 
The information CMS collected through state survey responses and internal focus groups further 
supported the results of the contract analysis. States and analysts identified all four factors as 
commonly contributing to delayed approvals and identified two additional factors: 5) a non-
standardized submission process that can create confusion for states in their understanding of 
what is needed for CMS review and approval; and 6) a thorough CMS process for evaluating 
compliance with Federal regulations.  
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  Process Improvements 
 
CMS has developed short-term, intermediate and long-term process improvements to address the 
factors driving lengthy review times. These process changes were developed in consultation with 
NAMD and were informed by successful strategies used in previous process improvement 
projects. In addition to the process improvements proposed for the future, CMS has already 
begun two reform efforts to expedite the contract and rate approval process. 
 
 
Process Improvements Currently Underway  
 
Non-sequential Approval of Amendments 
 
CMS released a letter to State Medicaid Directors during the week of June 10, 2019, which 
modified our policy requiring contract amendments to be approved in sequential order. CMS 
changed this policy to decrease the backlog of contract actions that were held up by a preceding 
contract action under review. Under the new policy, CMS approves amendments out of 
sequential order when the following criteria are met: the contract action is amending an approved 
initial base contract; the amendment meets all applicable Federal regulations; the amendment 
does not modify the contract in a way that assumes an unapproved amendment has been 
implemented, nor is the amendment related to or modifying the same provision in an unapproved 
contract action. This policy change has successfully reduced the backlog of unapproved 
amendments, and assures that contract actions will not be unnecessarily delayed in the future. 
 
Actuarial Review of Medicaid Capitation Rates 
 
CMS has worked collaboratively with states and NAMD to take significant steps to improve our 
actuarial review of Medicaid capitation rates to reduce state administrative burden, improve 
efficiency in our review and ensure fiscal integrity. This effort has resulted in a 39% reduction in 
CMS review time to-date. In 2018, the average CMS review time was 130 days, which 
represented a strong improvement from the 193 day average for CMS review in 2015. Some 
examples of the process improvements, include: (1) creating a central CMS mailbox for 
submission and communication with states on Medicaid rate reviews to eliminate internal CMS 
processing time; (2) implementing a cover sheet to accompany state submissions to allow CMSs 
contract and rate review processes to begin more quickly; (3) focusing our actuarial review on 
the most significant issues to reduce the number and rounds of questions with states; (4) utilizing 
more technical assistance calls with states to work through complex issues; and (5) pilot testing 
an accelerated rate review process. CMS also issues an annual rate development guide outlining 
our documentation expectations for actuarial rate certifications so that states know which 
documentation to gather and submit in order to avoid requests for expected documentation.  
 
CMS is committed to continuing our work with states to further fine-tune this process. CMS is 
currently gathering state feedback and evaluating the accelerated rate review pilot conducted in 
2018 to further improve our review process. Once CMS completes our evaluation of the pilot, we 
will be communicating changes, if any, to our rate review process in the annual Medicaid 
managed care rate development guide. 
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  Short-Term Process Improvements 
 
Short-term process improvements will become effective over the next several months. They are 
designed to be implemented quickly with minimal effort and little, if any, disruption to states 
internal processes. While the short-term process changes are currently voluntary, CMS strongly 
encourages states to implement them as we believe the short-term improvements will 
significantly streamline the review process.  
 
15 Day Call 
 
CMS will be asking states to participate in a call within 15 days of submitting a contract action. 
The call will provide states the opportunity to review the intent of the submission and any critical 
timelines, and will allow CMS the opportunity to request missing documentation and identify 
known major policy issues. This strategy has been used to successfully reduce SPA and 1915 
waiver processing times, as discussed in a CMS Informational Bulletin issued in August 2018. 
 
Contract & Rate Certification Submission Cover Sheet 
 
On October 3, 2017, CMS and NAMD released a cover sheet for states to complete when 
submitting a contract action. The cover sheet provides general information about the states 
managed care program and its contracted entities; the name and type of documents included in 
the submission; and detailed information on the scope and purpose of the amendment submitted 
for approval. When completed accurately and comprehensively, the cover sheet streamlines the 
review process by ensuring CMS has the necessary information at the outset to begin an efficient 
review of the submission.  
 
Clear Identification of Contract Modifications 
 
States are encouraged to identify the modifications implemented by contract amendments 
through submission of a red-lined version of the contract or other mechanism that clearly 
identifies the contract language that is being changed. The marked-up version should be 
submitted along with a clean copy of the contract action.  
 
Tip Sheet for Complete Contract Action Submissions 
 
CMS is often delayed in finalizing the review of states contract submissions due to missing 
documents necessary for approval. Based on technical consultation with states through NAMD, 
CMS is providing the appended tip sheet to assist states in providing complete contract action 
submissions. The tip sheet provides guidance on requirements for a complete contract 
submission, including when approval of a contract action requires submission of additional 
documentation such as a rate certification, medical loss ratio (MLR) summary report, mental 
health/substance use disorder (MH/SUD) parity analysis, and/or readiness review results.  
 
   
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  Intermediate and Long-Term Process Improvements 
 
CMS long-term goal is to reduce the amount of resources spent on contract review, so that states 
and CMS can rebalance their efforts, and focus on producing meaningful health outcomes. The 
intermediate process improvements are intended to substantially change the contract review 
process by modifying the submission process and developing a new approach to contract 
compliance. Within the next several months, CMS will be piloting a risk-based review of 
managed care contracts that focuses on a subset of managed care provisions. Under this 
approach, CMS anticipates spending significantly less time evaluating only written contract 
compliance and instead focus on outcomes-based oversight. In the meantime, CMS also will 
prioritize development of state and CMS resources for additional outcomes-based oversight, 
including toolkits on MLR reporting and annual oversight reporting. Such resources are in 
addition to existing toolkits on provider network adequacy and encounter data. Our goal is to 
implement a new review process nationally. CMS also hopes to supplement its contract 
monitoring with activities that strengthen our support of states oversight activities. As part of 
this effort, CMS will be developing toolkits, disseminating best practices, and increasing data 
transparency to provide states with additional resources designed to improve state oversight of 
managed care delivery systems.  
 
Pilot Project: Risk-Based Accelerated Contract Review Process 
 
CMS acknowledges that we do not currently utilize a consistent timeline for review and approval 
of Medicaid managed care contracts. One key factor impacting CMS ability to review contracts 
is a large variability in state submissions. CMS is committed to working in partnership with 
states to move toward a standardized submission and review process, including a clear timeline 
that assures adequate oversight in CMS review and approval of states contracts with managed 
care plans. As CMS works in partnership with states to move toward this goal, CMS is interested 
in piloting a risk-based accelerated contract review process. Our goal is to use the results of this 
pilot to inform CMS implementation of a more streamlined and standardized contract review 
process that, potentially, can be implemented on a national level. CMS will pilot the risk-based 
accelerated review process with 7-10 states who are interested in testing and evaluating the new 
process. Pilot states operating multiple managed care programs may opt to include only contracts 
pertaining to a specific program(s) in the pilot. To be considered for the pilot, a states most 
recently approved contract action must comply with all applicable Federal requirements, and the 
state cannot have any significant compliance or capitation rate development issues that are 
known to CMS. 
 
Under the pilot, volunteer states will commit to utilizing a standardized contract submission 
process that aligns with the short-term process improvements discussed in the previous section, 
completing a streamlined checklist that documents compliance with key Federal requirements, 
and providing an assurance that the contract action is compliant with all applicable federal 
requirements. CMS and OACT will then conduct a review of the contract action under the risk-
based accelerated review process, and send initial questions to the state within 30-45 days of 
receiving a contract amendment or initial base contract. For purposes of the pilot, CMS will not 
be accepting contract actions that authorize a new managed care program, a new managed care 
plan into an existing program, or a new population or benefit that is considered complex or high 
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  risk. We will share additional information about the pilot through an upcoming solicitation directed to 
State Medicaid Directors 
 
The pilot project will address the absence of Federal requirements in the contract action, missing 
documentation in the states submission, the non-standardized submission process and the time-
consuming process for evaluating compliance with Federal regulations. Additionally, this 
strategy increases transparency and efficiency related to CMS approval of managed care 
contracts; acknowledges the crucial, frontline role states currently play in the operation and 
oversight of managed care programs; ensures appropriate Federal oversight; and focuses Federal 
oversight on high risk areas that are critical to the fiscal integrity and delivery of quality and 
accessible Medicaid and CHIP benefits. 
 
 
Oversight Tools for States and CMS 
 
As CMS rebalances its oversight strategy, we will expand our efforts to develop resources that 
states can use to strengthen their own oversight mechanisms. Federal regulations require states to 
have robust oversight activities, several of which have recently gone into effect, or will soon go 
into effect. To meet these new requirements, CMS will be developing external toolkits for states; 
some examples include toolkits on creating medical loss ratio reports, annual oversight reporting, 
and other new tools focused on managed long-term services and supports. This work will build 
upon other resources CMS has developed for states, including a toolkit outlining state strategies 
for ensuring provider network adequacy and service availability, and an encounter data toolkit 
for collecting, validating and reporting Medicaid managed care data. CMS will also be 
developing internal toolkits to ensure CMS is reviewing the new information and data required 
under the Medicaid managed care regulations in a standardized and consistent manner across all 
states.  
 
Increased Transparency in Program Administration  
 
CMS has recently begun tracking a significant number of managed care metrics, with the aim of 
quantifying our progress toward greater efficiency and effectiveness. These data will help inform 
further enhancements to the managed care contract review process and enable CMS to provide 
external data on contract review timeframes as part of our Medicaid and CHIP Scorecard.  
 
Next Steps for Managed Care Contract Review Process Redesign Project 
 
The managed care contract review and approval processes represent a substantial workload for 
both states and CMS, and we are invested in continuing to collaborate with states to identify 
additional ways to enhance efficiency and reduce administrative burden. We look forward to 
receiving feedback from states as we move forward to implement the short-term and 
intermediate strategies. If you have questions or need additional information, please contact Hye 
Sun Lee, Regional Operations Group, or Alissa Deboy, Disabled and Elderly Health Programs 
Group.  
 
   
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  Addendum: Tip Sheet for Complete Contract Action Submissions 
 
Before CMS can approve Medicaid managed care contracts in accordance with  
42 CFR  438.3(a) and finalize our review of CHIP managed care contracts in accordance with  
457.1201, all contract submission packages must include:  
1.  Contract actions signed and dated by all parties which include all pages, appendices, and 
attachments, as well as any documents that are incorporated into the contract by 
reference, and  
 
2.  The following additional documentation, as described in the chart below. 
 
 
When the Contract Action:  Additional documentation  Regulatory 
required  Reference 
Implements Medicaid capitation rates  Rate certification and all  Medicaid: 438.7 
supporting documentation, 
when required 
Implements capitation rates for the  In addition to documentation  Medicaid: 438.74(a) 
states annual rating period  noted elsewhere for 
Medicaid capitation rates:  CHIP: 457.1203(e) 
Annual summary of 
managed care plan medical 
loss ratio (MLR) reports 
Provides any services to MCO enrollees  MH/SUD parity analysis   Medicaid: 
using a delivery system other than the  438.3(n)(2), 
MCO and 1) a change in benefits  438.920 
provided by the MCO, PIHP, PAHP or 
FFS is occurring or 2) the State is  CHIP: 457.496(f), 
contracting with a new MCO(s)  457.1201(l) 
 
Implements in Medicaid 1) a new  Readiness review results  Medicaid: 
managed care program, 2) a new  438.66(d)(2)(iii) 
managed care plan not previously 
contracted with the state, or 3) the 
provision of covered benefits to new 
eligibility groups. 
 
 
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