(a) Coverage. Each contract with an MCO, PHP, or PCCM must identify, define, and specify each service that the MCO, PHP, or PCCM is required to offer, and each contract with an MCO or PHP must meet the following requirements:

(1) Require that the MCO or PHP make available the services it is required to offer at least in the amount, duration, and scope that—

(i) Are specified in the State plan; and

(ii) Are sufficient to reasonably be expected to achieve the purpose for which the services are furnished.

(2) Provide that the MCO or PHP—

(i) May not arbitrarily deny or reduce the amount, duration, or scope of a required service solely because of the diagnosis, type of illness, or condition; and

(ii) May place appropriate limits on a service—

(A) On the basis of criteria such as medical necessity; or

(B) For the purpose of utilization control, provided the services furnished can reasonably be expected to achieve their purpose, as required in paragraph (a)(1)(ii) of this section.

(3) Specify what constitutes “medically necessary services” in a manner that—

(i) Is no more restrictive than the State Medicaid program as indicated in State statutes and regulations, the State Plan, and other State policy and procedures; and

(ii) Addresses the extent to which the MCO or PHP is responsible for covering services related to the following:

(A) The prevention, diagnosis, and treatment of health impairments.

(B) The ability to achieve age-appropriate growth and development.

(C) The ability to attain, maintain, or regain functional capacity.

(4) Provide that the MCO or PHP furnishes the services in accordance with the specifications of paragraph (a)(3) of this section.

(b) Processing of requests. With respect to the processing of requests for initial and continuing authorizations of services, each contract must require—

(1) That the MCO or PHP and its subcontractors have in place, and follow, written policies and procedures that reflect current standards of medical practice;

(2) That the MCO or PHP—

(i) Not have information requirements that are unnecessary, or unduly burdensome for the provider or the enrollee;

(ii) Have in effect mechanisms to ensure consistent application of review criteria for authorization decisions; and

(iii) Consult with the requesting provider when appropriate.

(3) That any decision to deny a service authorization request or to authorize a service in an amount, duration, or scope that is less than requested, be made by a health care professional who has appropriate clinical expertise in treating the enrollees's condition or disease.

(c) Notice of adverse action. Each contract must provide for the MCO or PHP to notify the requesting provider, and give the enrollee written notice of any decision by the MCO or PHP to deny a service authorization request, or to authorize a service in an amount, duration, or scope that is less than requested. The notice must meet the requirements of § 438.404, except that the notice to the provider need not be in writing.

(d) Timeframe for standard authorization decisions. Each contract must provide for the MCO or PHP to make a standard authorization decision and provide notice—

(1) As expeditiously as the enrollee's health condition requires and within State-established timeframes that may not exceed 14 calendar days following receipt of the request for service, with a possible extension of up to 14 additional calendar days, if—

(i) The enrollee, or the provider, requests extension; or

(ii) The MCO or the PHP justifies (to the State agency upon request) a need for additional information and how the extension is in the enrollee's interest.

(e) Timeframe for expedited authorization decisions. (1) For cases in which a provider indicates, or the MCO or PHP determines, that following the standard timeframe could seriously jeopardize the enrollee's life or health or ability to attain, maintain, or regain maximum function, each contract must provide for the MCO or PHP to make an expedited authorization decision and provide notice as expeditiously as the enrollee's health condition requires and no later than 72 hours after receipt of the request for service.

(2) The MCO or PHP may extend the 72-hour time period by up to 14 calendar days if the enrollee requests extension.

(f) Compensation for utilization management activities. Each contract must provide that, consistent with § 438.6(g), and § 422.208 of this chapter, compensation to individuals or entities that conduct utilization management activities is not structured so as to provide incentives for the individual or entity to deny, limit, or discontinue medically necessary services to any enrollee.