Editorial Note on Part 422
Editorial Note: Nomenclature changes to part 422 appear at 70 FR 4741, Jan. 28, 2005.

§ 422.500 Scope and definitions. ( a ) *Scope.* This subpart sets forth application requirements for entities seeking a contract as a Medicare organization offering an MA plan, including MA organizations offering a specialized MA plan for special needs individuals. MA organizations offering prescription drug plans must, in addition to the requirements of this part, follow the requirements of part 423 of this chapter specifically related to the prescription drug benefit.
( b ) *Definitions.* For purposes of this subpart, the following definitions apply: *Business transaction* means any of the following kinds of transactions: ( 1 ) Sale, exchange, or lease of property.
( 2 ) Loan of money or extension of credit.
( 3 ) Goods, services, or facilities furnished for a monetary consideration, including management services, but not including— ( i ) Salaries paid to employees for services performed in the normal course of their employment; or
( ii ) Health services furnished to the MA organization's enrollees by hospitals and other providers, and by MA organization staff, medical groups, or independent practice associations, or by any combination of those entities.
*Clean claim* means— ( 1 ) A claim that has no defect, impropriety, lack of any required substantiating documentation (consistent with § 422.310(d)) or particular circumstance requiring special treatment that prevents timely payment; and
( 2 ) A claim that otherwise conforms to the clean claim requirements for equivalent claims under original Medicare.
*Downstream entity* means any party that enters into an acceptable written arrangement below the level of the arrangement between an MA organization (or contract applicant) and a first tier entity. These written arrangements continue down to the level of the ultimate provider of both health and administrative services.
*Final settlement adjustment period* means the period of time between when the contract terminates and the date the MA organization is issued a notice of the final settlement amount.
*Final settlement amount* is the final payment amount that CMS owes and ultimately pays to an MA organization, or that an MA organization owes and ultimately pays to CMS, with respect to an MA contract that has consolidated, nonrenewed, or terminated. The final settlement amount is calculated by summing final retroactive payment adjustments for a specific contract that accumulated after that contract ceases operation but before the calculation of the final settlement amount and the following applicable reconciliation amounts that have been completed as of the date the notice of final settlement has been issued, without accounting for any data submitted after the data submission deadlines for calculating these reconciliation amounts: ( 1 ) Risk adjustment reconciliation (described in § 422.310);
( 2 ) Part D annual reconciliation (described in § 423.343);
( 3 ) Coverage Gap Discount Program annual reconciliation (described in § 423.2320) and;
( 4 ) MLR remittances (described in §§ 422.2470 and 423.2470).
*Final settlement process* means for a contract that has been consolidated, nonrenewed, or terminated, the process by which CMS calculates the final settlement amount, issues the final settlement amount along with supporting documentation in the notice of final settlement to the MA organization, receives responses from the MA organization requesting an appeal of the final settlement amount, and takes final actions to adjudicate an appeal (if requested) and make payments to or receive payments from the MA organization. The final settlement amount is calculated after all applicable reconciliations have occurred after a contract has been consolidated, nonrenewed, or terminated.
*First tier entity* means any party that enters into an acceptable written arrangement with an MA organization or contract applicant to provide administrative services or health care services for a Medicare eligible individual.
*Fraud hotline tip* is a complaint or other communications that are submitted through a fraud reporting phone number or a website intended for the same purpose, such as the Federal Government's HHS OIG Hotline or a health plan's fraud hotline.
*Inappropriate prescribing* means that, after consideration of all the facts and circumstances of a particular situation identified through investigation or other information or actions taken by MA organizations and Part D plan sponsors, there is an established pattern of potential fraud, waste, and abuse related to prescribing of opioids, as reported by the plan sponsors. Beneficiaries with cancer and sickle-cell disease, as well as those patients receiving hospice and long term care (LTC) services are excluded, when determining inappropriate prescribing. Plan sponsors may consider any number of factors including, but not limited to the following: ( 1 ) Documentation of a patient's medical condition.
( 2 ) Identified instances of patient harm or death.
( 3 ) Medical records, including claims (if available).
( 4 ) Concurrent prescribing of opioids with an opioid potentiator in a manner that increases risk of serious patient harm.
( 5 ) Levels of morphine milligram equivalent (MME) dosages prescribed.
( 6 ) Absent clinical indication or documentation in the care management plan or in a manner that may indicate diversion.
( 7 ) State-level prescription drug monitoring program (PDMP) data.
( 8 ) Geography, time, and distance between a prescriber and the patient.
( 9 ) Refill frequency and factors associated with increased risk of opioid overdose.
*Party in interest* includes the following: ( 1 ) Any director, officer, partner, or employee responsible for management or administration of an MA organization.
( 2 ) Any person who is directly or indirectly the beneficial owner of more than 5 percent of the organization's equity; or the beneficial owner of a mortgage, deed of trust, note, or other interest secured by and valuing more than 5 percent of the organization.
( 3 ) In the case of an MA organization organized as a nonprofit corporation, an incorporator or member of such corporation under applicable State corporation law.
( 4 ) Any entity in which a person described in paragraph (1), (2), or (3) of this definition: ( i ) Is an officer, director, or partner; or
( ii ) Has the kind of interest described in paragraphs (1), (2), or (3) of this definition.
( 5 ) Any person that directly or indirectly controls, is controlled by, or is under common control with, the MA organization.
( 6 ) Any spouse, child, or parent of an individual described in paragraph (1), (2), or (3) of this definition.
*Related entity* means any entity that is related to the MA organization by common ownership or control and— ( 1 ) Performs some of the MA organization's management functions under contract or delegation;
( 2 ) Furnishes services to Medicare enrollees under an oral or written agreement; or
( 3 ) Leases real property or sells materials to the MA organization at a cost of more than $2,500 during a contract period.
*Significant business transaction* means any business transaction or series of transactions of the kind specified in the above definition of “business transaction” that, during any fiscal year of the MA organization, have a total value that exceeds $25,000 or 5 percent of the MA organization's total operating expenses, whichever is less.
*Substantiated or suspicious activities of fraud, waste, or abuse* means and includes, but is not limited to, allegations that a provider of services (including a prescriber) or supplier— ( 1 ) Engaged in a pattern of improper billing;
( 2 ) Submitted improper claims with suspected knowledge of their falsity;
( 3 ) Submitted improper claims with reckless disregard or deliberate ignorance of their truth or falsity; or
( 4 ) Is the subject of a fraud hotline tip verified by further evidence.
[63 FR 35099, June 26, 1998, as amended at 65 FR 40327, June 29, 2000; 70 FR 4736, Jan. 28, 2005; 70 FR 52027, Sept. 1, 2005; 77 FR 22167, Apr. 12, 2012; 86 FR 6098, Jan. 19, 2021; 89 FR 30823, Apr. 23, 2024]