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(a) In the case of a for-profit private entity, the applicant must demonstrate that at least 10 percent of the projected membership of the HMO to be established or expanded will be from medically underserved populations.

(b) Only HMOs qualified under §§ 417.140 through 417.144 of this subpart are eligible to apply for projects for the significant expansion of their membership or of their service areas or for the expansion of their services.

[45 FR 6059, Jan. 24, 1980, as amended at 47 FR 19341, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987]

§ 417.122 Project elements for planning. An approvable application must provide:

(a) Statements which describe in detail:

(1) The goals and objectives of the proposed health maintenance organization;

(2) The administrative, managerial, and organizational arrangements;

(3) The resources to be used including consultants whose tasks must be defined adequately to permit an evaluation of the need for such consultants;

(4) The existing or proposed composition of the Board of Directors of the applicant organization and its duties;

(5) The proposed service area and the surrounding community, the number of employed persons and number of primary care physicians located in the proposed service area; and

(6) The intended financial participation of the applicant, specifying the type of contribution such as cash or services, loans of full- or part-time staff, equipment, space, materials, facilities, or other contributions.

(b) An assurance that the applicant will cooperate with the appropriate health systems agency and State health planning and development agency.

(c) Written evidence of notification to the local medical society or societies of the applicant's intention to apply for assistance.

(d) Evidence that there is support for the project by organizations, or institutions, or employer groups which may participate in the development of

the proposed health maintenance organization.

(e) A detailed report of the results of the activities performed during the feasibility survey or study which established the feasibility of developing the health maintenance organization, as well as of any other activities relating to the development of the health maintenance organization undertaken prior to application for planning assistance. With regard to the report of the feasibility survey, information on the following must be included:

(1) Status of the applicant in terms of pertinent State laws, regulations, and practices relating to operating as a health maintenance organization;

(2) Organizational structure of the proposed health maintenance organization;

(3) The types of population groups which would be sources of prepayment for an operational health maintenance organization and other potential sources of payment for services when operational;

(4) Providers of basic health services who have agreed or might reasonably be expected to agree to provide health benefits;

(5) Sources of payment and operational support including:

(i) Preliminary estimate of the amount to be charged for basic health benefits when the proposed health maintenance organization becomes operational; and

(ii) Estimate of enrollment and income required to reach the financial breakeven point; and

(6) A preliminary estimate of facilities required for operational status.

(f) Concise plans for accomplishing planning stage activities, which must include at a minimum, a description of tasks for each activity listed below, accompanied by a time-phased milestone chart indicating proposed funding and manpower to be allocated to each such activity (where circumstances indicate that it would be appropriate and consistent with the intent of the Public Health Service Act, additional activities may be proposed):

(1) Recruitment of key project staff which shall include the employment of a full-time project director;

(2) Planning for, and when appropriate, initiation of action relating to compliance with all applicable State requirements, including State certificate of need programs, and with section 1513(e) of the Public Health Service Act;

(3) Development of formal organization;

(4) Establishment and documentation of community support;

(5) Development of a marketing plan which must include the following: (i) Market assessment:

(A) Precise description of the service area;

(B) Information about prospects for enrollment of groups, including analysis of competing health benefits plans; (C) Evidence of a willingness on the part of key prospects to offer the health maintenance organization when operational;

(D) An estimate of market potential for a five year period, including a five year enrollment projection.

(ii) Marketing strategy:

(A) Select the major prospects for enrollment;

(B) Develop alternatives to meet the enrollment projections;

(C) Estimate the level and type of marketing effort required to meet the enrollment projection;

(D) Develop a marketing effort and a detailed budget including staffing requirements.

(iii) Marketing materials:

(A) Develop detailed description of specifications for marketing and enrollment literature;

(B) Develop prototype membership materials including membership cards, subscriber agreements, handbooks and certificates, health questionnaires, etc. (6) Definition of the health services and options, if any to be offered;

(7) Identification of providers of basic health services needed to provide those services to the projected enrollment, and drafting of proposed agreements to negotiate with these providers;

(8) Planning for necessary facilities and equipment and their financing;

(9) Development of premium structure;

(10) Development of budget and financial plan, including alternative

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(h) In addition, in the case of a qualified health maintenance organization requesting assistance for significant expansion:

(1) Data on prepaid membership totals for annual intervals over the past five years, or if the health maintenance organization has not been operating for five years, such data on a quarterly basis for the time during which it has been in operation;

(2) A description of the current health service delivery facilities, including an estimate of their capacity;

(3) The number and specialties of current health professionals serving its members; and

(4) The plans for the proposed significant expansion which demonstrate that the definition of significant expansion in § 417.111(c) will be met.

§ 417.123 Project elements for initial development.

An approvable application must provide:

(a) Written evidence satisfactory to the Secretary that the feasibility of the establishment and operation or expansion has been established by the applicant and that sufficient planning for the establishment or expansion has been conducted by the applicant. In addition, applicants must provide the information, assurances and evidence required by § 417.122 (a), (b), (c), (d), and (e), and must report all other activities relating to the development of the health maintenance orga

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(a) In the case of a for-profit private entity, the applicant must demonstrate that at least 10 percent of the projected membership of the HMO to be established or expanded will be from medically underserved populations.

(b) Only HMOs qualified under §§ 417.140 through 417.144 of this subpart are eligible to apply for projects for the significant expansion of their membership or of their service areas or for the expansion of their services. [45 FR 6059, Jan. 24, 1980, as amended at 47 FR 19341, May 5, 1982. Redesignated at 52 FR 36746, Sept. 30, 1987]

8 417.122 Project elements for planning. An approvable application must provide:

(a) Statements which describe in detail:

(1) The goals and objectives of the proposed health maintenance organization;

(2) The administrative, managerial, and organizational arrangements;

(3) The resources to be used including consultants whose tasks must be defined adequately to permit an evaluation of the need for such consultants;

(4) The existing or proposed composition of the Board of Directors of the applicant organization and its duties; (5) The proposed service area and the surrounding community, the number of employed persons and number of primary care physicians located in the proposed service area; and

(6) The intended financial participation of the applicant, specifying the type of contribution such as cash or services, loans of full- or part-time staff, equipment, space, materials, facilities, or other contributions.

(b) An assurance that the applicant will cooperate with the appropriate health systems agency and State health planning and development agency.

(c) Written evidence of notification to the local medical society or societies of the applicant's intention to apply for assistance.

(d) Evidence that there is support for the project by organizations, or institutions, or employer groups which may participate in the development of

the proposed health maintenance or ganization.

(e) A detailed report of the results of the activities performed during the feasibility survey or study which es tablished the feasibility of developing the health maintenance organization as well as of any other activities relat ing to the development of the health maintenance organization undertaken prior to application for planning & sistance. With regard to the report of the feasibility survey, information on the following must be included:

(1) Status of the applicant in terms of pertinent State laws, regulations and practices relating to operating as a health maintenance organization;

(2) Organizational structure of the proposed health maintenance organzation;

(3) The types of population groups which would be sources of prepayment for an operational health maintenence organization and other potential sources of payment for services whe operational;

(4) Providers of basic health services who have agreed or might reasonably be expected to agree to provide health benefits;

(5) Sources of payment and oper ational support including:

(i) Preliminary estimate of the amount to be charged for basic health benefits when the proposed health maintenance organization becomes operational; and

(ii) Estimate of enrollment and income required to reach the financial breakeven point; and

(6) A preliminary estimate of facil ties required for operational status.

(f) Concise plans for accomplishing planning stage activities, which must include at a minimum, a description of tasks for each activity listed below, & companied by a time-phased milestone chart indicating proposed funding and manpower to be allocated to each such activity (where circumstances indicate that it would be appropriate and consistent with the intent of the Public Health Service Act, additional activi ties may be proposed):

(1) Recruitment of key project staff which shall include the employment of a full-time project director;

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Planning for, and when approprinitiation of action relating to liance with all applicable State rements, including State certifiof need programs, and with sec513(e) of the Public Health Serv

t;

Development of formal organiza

Establishment and documentaof community support;

Development of a marketing plan must include the following: Market assessment:

Precise description of the service

Information about prospects for lment of groups, including analycompeting health benefits plans; Evidence of a willingness on the of key prospects to offer the th maintenance organization

ʼn operational;

An estimate of market potential five year period, including a five enrollment projection.

) Marketing strategy:

) Select the major prospects for llment;

) Develop alternatives to meet the llment projections;

) Estimate the level and type of keting effort required to meet the llment projection;

>) Develop a marketing effort and tailed budget including staffing rerements.

ii) Marketing materials:

A) Develop detailed description of cifications for marketing and enment literature;

3) Develop prototype membership terials including membership cards, scriber agreements, handbooks and tificates, health questionnaires, etc. 6) Definition of the health services d options, if any to be offered;

7) Identification of providers of sic health services needed to provide ose services to the projected enrollent, and drafting of proposed agreeents to negotiate with these provid3;

8) Planning for necessary facilities d equipment and their financing; (9) Development of premium strucre;

(10) Development of budget and fiincial plan, including alternative

plans if enrollment varies significantly from projections;

(11) Obtaining of required health systems agency or agencies and State health planning and development agency determinations; and

(12) Establishment of the individual practice association entity if appropriate to the intended organizational structure when operational as a health maintenance organization.

(g) In addition, in the case of an operational prepaid health plan which proposes to become a qualified health maintenance organization, an identification of gaps between its current operation and the requirements of §§ 417.100 through 417.109 of this subpart.

(h) In addition, in the case of a qualified health maintenance organization requesting assistance for significant expansion:

(1) Data on prepaid membership totals for annual intervals over the past five years, or if the health maintenance organization has not been operating for five years, such data on a quarterly basis for the time during which it has been in operation;

(2) A description of the current health service delivery facilities, including an estimate of their capacity;

(3) The number and specialties of current health professionals serving its members; and

(4) The plans for the proposed significant expansion which demonstrate that the definition of significant expansion in § 417.111(c) will be met.

§ 417.123 Project elements for initial development.

An approvable application must provide:

(a) Written evidence satisfactory to the Secretary that the feasibility of the establishment and operation or expansion has been established by the applicant and that sufficient planning for the establishment or expansion has been conducted by the applicant. In addition, applicants must provide the information, assurances and evidence required by § 417.122 (a), (b), (c), (d), and (e), and must report all other activities relating to the development of the health maintenance orga

nization undertaken prior to application for initial development assistance.

(b) Detailed plans, which must include, at a minimum, tasks designed to accomplish the activities listed below, accompanied by a time-phased milestone chart indicating proposed funding and manpower to be allocated to each (where circumstances indicate that it would be appropriate and consistent with the intent of the Public Health Service Act, additional activities may be proposed in the application):

(1) Development of a schedule to meet the requirements of §§ 417.100 through 417.109 of this subpart;

(2) Completion of activities related to resolution of legal issues;

(3) Recruitment and training of personnel essential for operation as a health maintenance organization;

(4) Development of a comprehensive financial plan;

(5) Organization of physician health services;

(6) Organization of other basic health services;

(7) Development of a schedule to construct, lease, renovate or otherwise obtain health maintenance organization facilities;

(8) Organization of ambulatory care facility;

(9) Implementation of a staffing plan that demonstrates compliance with the appropriate 15 or 30 percent limitation on contracts for basic and supplemental health services (see § 417.103(a)), and formalization of contract arrangements;

(10) Further refinement of the projected market to be served by obtaining specific evidence of employer or union willingness to offer the health maintenance organization option on specific dates;

(11) Initiation of enrollment plan; and

(12) Establishment of any working capital or reserves or both as may be required by State authorities.

(c) Evidence from physicians and from one or more hospitals indicating that they intend to become providers of basic health services for the proposed health maintenance organization:

(1) In the case of an individual prac tice association-type health maintenance organization, there must be such evidence from a number of physicians adequate to serve the proposed enrollment; and

(2) In the case of a non-individual practice association-type health maintenance organization, there must be such evidence from at least three physicians, indicating that they are willing to be employed by or to contract with the proposed health maintenance organization.

(d) In the case of an applicant which intends to serve Title XIX eligibles or Title XVIII beneficiaries as a part of the planned enrollment, as appropriate:

(1) Evidence that the State title XIX agency is willing to negotiate a prepaid capitation contract in the form of a letter or other document from the State Title XIX agency; or

(2) Evidence that the applicant is planning to or has entered into a contract under title XVIII as a health maintenance organization.

(e) In addition, in the case of an operational prepaid health plan which proposes to become a qualified health maintenance organization, an identification of gaps between its current operation and the requirements of §§ 417.100 through 417.109 of this subpart.

(f) In addition, in the case of qualified health maintenance organizations requesting assistance for expansion:

(1) Data on prepaid membership totals for annual intervals over the past five years, or if the health maintenance organization has not been operating for five years, such data on a quarterly basis for the time during which it has been in operation;

(2) A description of the current health service delivery facilities, including an estimate of their capacity;

(3) The number and specialties of current health professionals serving its members; and

(4) The plans for the proposed expansion which demonstrate that the definition of "expansion of services" or of "significant expansion" of membership or service area in § 417.111 will be met.

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