Medicare Managed Care Manual 
Chapter 15 - Intermediate Sanctions 
 
 
Table of Contents 
(Rev. 73, 09 30 05) 
 
Transmittals for Chapter 15 
 
10 - Types of Intermediate Sanctions 
20 - General Basis for Imposing Intermediate Sanctions on MA Organizations 
30 - Imposing Sanctions for Specific MA Contract Violations 
40 - CMPs for MA Organizations That Improperly Terminate the MA Contract 
50 - CMS Process for Suspending Marketing, Enrollment, and Payment 
60 - Contract Termination by CMS 
 
 
10 - Types of Intermediate Sanctions 
 
(Rev. 73, Issued: 09-30-05, Effective Date: 09-30-05) 
In general, and in accordance with 42 CFR 422.752, and 42 CFR 756, CMS may impose 
the following intermediate sanctions on Medicare Advantage (MA) organizations that 
have contracts in effect: 
  Civil Money Penalties (CMPs) ranging from $10,000 to $100,000 depending on 
the violation; 
  Suspension of enrollment of Medicare beneficiaries;  
  Suspension of payment to the MA organization  
  Suspension of marketing activities to Medicare beneficiaries  
While there are separate requirements regarding the imposition of CMPs, it is important 
to recognize that CMPs are but one of the four types of intermediate sanctions available 
to CMS. 
 
20 - General Basis for Imposing Intermediate Sanctions on MA 
Organizations 
 
(Rev. 73, Issued: 09-30-05, Effective Date: 09-30-05) 
 
CMS may impose certain intermediate sanctions on an MA organization for the following 
violations identified in 42 CFR 422.752(a):    Failing substantially to provide, to an MA enrollee, medically necessary services 
that the organization is required to provide (under law or under the contract) to an 
MA enrollee, and that failure adversely affects (or is substantially likely to 
adversely affect) the enrollee;  
  Imposing on MA enrollees premiums in excess of the monthly basic and 
supplemental beneficiary premiums permitted under 1854 of the Social Security 
Act (the Act) and the Federal Regulations at 42 CFR 422 Subpart F; 
  Expelling or refusing to re-enroll a beneficiary in violation of the provisions of 
this part;  
  Engaging in any practice that could reasonably be expected to have the effect of 
denying or discouraging enrollment of individuals whose medical condition or 
history indicates a need for substantial future medical services;  
  Misrepresenting or falsifying information that it furnishes:  
i.  To CMS; or  
ii.  To an individual or to any other entity.  
  Failing to comply with the requirements of Federal Regulations at 42 CFR 
422.206, which prohibit interference with practitioners' advice to enrollees;  
  Failing to comply with Federal Regulations at 42 CFR 422.216, which require the 
organization to enforce the limit on balance billing under a private fee-for-service 
plan;  
  Employing or contracting with an individual who is excluded from participation 
in Medicare under 1128 or 1128A of the Act (or with an entity that employs or 
contracts with such an individual) for the provision of any of the following:  
i.  Health care;  
ii.  Utilization review;  
iii.  Medical social work; and  
iv.  Administrative services.  
For the violations described above, CMS may impose one or more of the intermediate 
sanctions listed in the Federal Regulations at 42 CFR 422.750(a)(2) through (4) - 
suspension of marketing, enrollment and payment.  For these violations, the DHHS/OIG - 
and not CMS - independently maintains authority to impose CMPs, in addition to, or in 
place of, sanctions that CMS may impose.   
 
30 - Imposing Sanctions for Specific MA Contract Violations 
 
(Rev. 73, Issued: 09-30-05, Effective Date: 09-30-05) 
CMS may impose certain intermediate sanctions, including CMPs, on MA organizations 
for  the  same  reasons  that  we  can  terminate  an  MA  organization's  contract  under  422.510(a).  In cases involving fraud and abuse DHHS/ OIG, and not CMS, maintains 
the authority to impose CMPs.   
Federal Regulations at 42 CFR 422.510(a)(1) through (a)(12) permit CMS to terminate 
an MA organization's contract or impose intermediate sanctions if the Agency determines: 
  The MA organization has failed substantially to carry out the terms of its contract 
with CMS;  
  The MA organization is carrying out its contract with CMS in a manner that is 
inconsistent with the effective and efficient implementation of this part;  
  CMS determines that the MA organization no longer meets the requirements of 
this part for being a contracting organization;  
  The MA organization commits or participates in fraudulent or abusive activities 
affecting the Medicare program, including submission of fraudulent data (as 
mentioned above, only DHHS/OIG can impose a CMP for this violation);  
  The MA organization experiences financial difficulties so severe that its ability to 
make necessary health services available is impaired to the point of posing an 
imminent and serious risk to the health of its enrollees, or otherwise fails to make 
services available to the extent that such a risk to health exists;  
  The MA organization substantially fails to comply with the requirements of the 
Federal Regulations at 42 CFR 422 Subpart M of this part relating to grievances 
and appeals;  
  The MA organization fails to provide CMS with valid data as required under 
Federal Regulations at 42 CFR 422.310;  
  The MA organization fails to implement an acceptable quality improvement  
program as required under Federal Regulations at 42 CFR 422 Subpart D of this 
part;  
  The MA organization substantially fails to comply with the prompt payment 
requirements in the Federal Regulations at 42 CFR 422.520;  
  The MA organization substantially fails to comply with the service access 
requirements in the Federal Regulations at 42 CFR 422.112 or the Federal 
Regulations at 42 CFR 422.114;  
  The MA organization fails to comply with the requirements of the Federal 
Regulations at 42 CFR 422.208 regarding physician incentive plans; or  
  The MA organization substantially fails to comply with the marketing 
requirements in the Federal Regulations at 42 CFR 422.80.  
CMS may impose CMPs for the reasons outlined at 422.510(a), other than fraud or 
abuse, if the deficiency on which the sanction determination is based has directly 
adversely affected (or has the substantial likelihood of adversely affecting) one or 
more MA enrollees.  In such cases the amount of the CMS-imposed CMP is $25,000 
for each determination.  For each week that a deficiency remains uncorrected after the  week in which the MA organization receives CMS's notice of the determination to 
impose a CMP, CMS may further impose CMPs in the amount of $10,000.  
 
40 - CMPs for MA Organizations That Improperly Terminate the MA 
Contract  
 
(Rev. 73, Issued: 09-30-05, Effective Date: 09-30-05) 
 
Under 623 of the Benefits Improvement and Protection Act of 2000 (BIPA), when CMS 
determines that an MA organization terminates its MA contract in a manner that violates 
MA termination requirements described in the Federal Regulations at 42 CFR 422.512, 
CMS may levy a CMP of $250 per enrollee from the terminated plan or $100,000, 
whichever is higher. 
 
50 - CMS Process for Suspending Marketing, Enrollment, and Payment 
 
(Rev. 73, Issued: 09-30-05, Effective Date: 09-30-05) 
If CMS determines that an MA organization has acted or failed to act, as specified above 
under Federal Regulations at 42 CFR 422.752, CMS sends a written notice to the MA 
organization stating the nature and basis of the proposed sanction, and also sends the 
DHHS/OIG a copy of the notice. The MA organization has 15 days from receipt of the 
notice to respond to the notice of intent to impose sanctions; otherwise the sanction(s) 
goes into effect. 
Upon receipt of the sanction notice, the MA organization has several other options: 
  The MA organization may request an additional 15 days to respond, which is 
granted at CMS's discretion.  The request must provide a credible explanation of 
why additional time is necessary and must be received by CMS before the 15-day 
period expires.   CMS does not grant an extension if it determines that the MA 
organization's conduct poses a threat to an enrollee's health and safety.  
  If the MA organization submits a response, as described above, a CMS official 
not involved in the original determination conducts an informal 
reconsideration.  The reconsideration includes a review of the evidence and a 
written decision that affirms or rescinds the original determination. If CMS's 
original determination is rescinded by the reconsideration official, the 
intermediate sanction process terminates.  
  If the MA organization requests that CMS reconsider its original determination 
and CMS affirms this determination in accordance with the informal 
reconsideration process described above, the sanction is effective on the date 
specified in the notice of CMS's reconsidered determination.  However, if CMS 
determines that the MA organization's conduct poses a serious threat to an 
enrollee's health and safety, CMS may make the sanction effective on a date 
before issuance of CMS's reconsidered determination.   If the MA organization does not seek to have CMS reconsider its decision, a sanction is 
effective 15 days after the date that the organization is notified by CMS of its decision to 
impose the sanction.  The MA organization must submit a corrective action plan (CAP) 
that includes a timetable for completion. The purpose of the CAP is to explain to CMS 
how the sanctionable action will be corrected and avoided in the future. .The CMS-
imposed intermediate sanctions remain in effect until CMS notifies the MA organization 
that CMS is satisfied that the basis for imposing the sanction has been corrected and is 
not likely to recur.  CMS notifies the DHHS/OIG when CMS reverses or terminates a 
sanction. 
60 - Contract Termination by CMS 
 
(Rev. 73, Issued: 09-30-05, Effective Date: 09-30-05) 
In addition to or as an alternative to freezing marketing, enrollment or suspending 
payments to a sanctioned MA organization, CMS may decline to authorize the renewal of 
an organization's contract in accordance with the Federal Regulations at 42 CFR 
422.506(b), or terminate the MA organization's contract in accordance with Federal 
Regulations at 42 CFR 422.510. 
NOTE:  For more information on termination of contracts see Chapter 11 of this manual, 
Medicare Advantage Application Procedures and Contract Requirements. 
  Transmittals Issued for this Chapter 
 
Rev #  Issue Date  Subject  Impl Date  CR# 
R73MCM 09/30/2005  Changes in Manual Instructions for  N/A  N/A 
Intermediate Sanctions 
R37MCM 10/31/2003  Miscellaneous Clarification  N/A  N/A 
R19MCM 02/28/2003  Initial Issuance of Chapter  02/28/2003 N/A