SMD # 22-001 RE: Updated Medicaid Information Technology

DEPARTMENT OF HEALTH & HUMAN SERVICES

Centers for Medicare & Medicaid Services

7500 Security Boulevard, Mail Stop S2-26-12

SMD # 22-001

RE: Updated Medicaid Information

Technology Systems Guidance: Streamlined

Modular Certification for Medicaid

Enterprise Systems

April 14, 2022

Dear State Medicaid Director:

This State Medicaid Director Letter (SMDL) provides updated Medicaid Information Technology

(IT) project guidance and discusses requirements for states as the Centers for Medicare & Medicaid

Services (CMS) continues to streamline the certification approach and move toward Outcomes-

Based Certification (OBC) for Medicaid Enterprise Systems (MES). This SMDL introduces a

Streamlined Modular Certification (SMC) process and, effective immediately, sunsets the existing

processes known as the Medicaid Enterprise Certification Toolkit (MECT) and the Medicaid

Eligibility and Enrollment Toolkit (MEET).

Pursuant to 42 CFR § 433.116, Federal Financial Participation (FFP) is available at 75 percent of

expenditures for operation of a Mechanized Claims Processing and Information Retrieval Systems

(MCPIRS) approved by CMS. To obtain approval for any MES or MES component going forward,

states should follow the guidance for the streamlined modular certification process described

herein, including the supporting Streamlined Modular Certification (SMC) for MES Guidance

(Certification Guidance) document. The Certification Guidance document provides a detailed

description of the certification process and the regulatory citations for all certification requirements.

States should not use MECT and MEET, which are discussed in the State Medicaid Director Letter

released August 16, 2016,

for MES IT projects initiated after the publication date of this SMDL.

CMS has been working with states to test and refine proposed processes and tools while

incrementally expanding the use of OBC across the entire MES. CMS views Streamlined Modular

Certification as the next interim step in that evolutionary process that will promote effective

stewardship of Medicaid funding, well into the future.

Overview

In an effort to provide consistency and accountability in CMS’s certification processes, this SMDL

establishes a MES certification process for each modular component system of the MES. In

general, each MES module is an integral component of a state’s mechanized claims processing and

information retrieval system (MCPIRS) (as defined at 42 C.F.R. § 433.111(b)). The MES represents

a system composed of the sum total of MES modules, which are the discrete Medicaid IT systems

or services used by the Medicaid agency to manage, monitor, and administer the state’s Medicaid

program. The MES modules that support a state’s Medicaid operations typically include the

modules described in Table 1 and their general functions (non-exhaustive list):

https://www.medicaid.gov/federal-policy-guidance/downloads/smd16010.pdf.

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

Table 1: Examples of MES Modules

Module (Typical Function)

Eligibility and Enrollment (including online application, verification, and renewal processing)

Claims Processing (including validations, prior authorizations, and submission status)

Financial Management (including provider payments, capitation payments, value-based payments,

and drug rebates)

Decision Support/Data Warehouse (including data analytics and reporting)

Encounter Processing (including encounter data reporting, and calculation of capitation rates)

Long-term Services and Supports (including home and community-based services (HCBS) waiver

enrollment, person-centered plans, and grievance tracking)

Member Management (including managed care enrollment, enrollee information)

Prescription Drug Monitoring Program (including prescribing history, and provider workflow

integration)

Pharmacy Benefit Management (including pharmacy claims, manufacturer rebates, and prior

authorization)

Provider Management (including provider screening and enrollment, provider communications, and

network adequacy)

Third-party Liability (including collection of information, electronic data exchanges, and avoidance

and recovery)

Program Integrity (including claims validation, recoupments, improper payment recoveries)

Health Information Exchange (including patient identification, data standards and security)

For all systems that comprise the MES, the SMC approach is designed to:

• Demonstrate measurable improvements to a state’s Medicaid program resulting from the

delivery of a new module or enhancement to an existing module;

• Leverage data and testing to inform CMS’s assessment of the success of delivered systems

and system investments, and inform decisions about future MES investments;

• Enable operational data reporting for system performance, operations monitoring, and

functionality to demonstrate the continuous achievement of required outcomes measures;

• Reduce burden on states and CMS during the certification process without compromising

CMS’s responsibility to ensure that federally supported systems satisfy all applicable

statutory and regulatory requirements; and

• Advance incrementally toward a fully realized, OBC process for the entirety of the MES.

Background

Under section 1903(a)(3)(A)(i) of the Social Security Act (the Act) and 42 C.F.R. § 433.112, states

are eligible to receive enhanced 90 percent FFP for their expenditures attributable to the design,

development, or installation (DDI) of MCPIRS.

For expenditures for DDI activities for an MES

module to qualify for this enhanced match, all applicable requirements, including the conditions at

Section 1903(a)(3)(A)(i) also specifies that such systems are those that “the Secretary determines are likely to provide

more efficient, economical, and efficient operation of the plan. . .”.

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

42 C.F.R § 433.112 and 45 C.F.R. part 95, subpart F, must be met. After the system has been in

production for at least six months, states may request system certification by CMS in order to be

eligible to receive enhanced 75 percent FFP for operations. After a system is certified, states may

submit an Operations Advanced Planning Document (OAPD) requesting approval for 75 percent

operations funding on the basis of successful certification, as provided under section 1903(a)(3)(B)

of the Act and 42 C.F.R. § 433.116, as long as required conditions continue to be met, as described

in 42 C.F.R. § 433.119.

Elements of Streamlined Modular Certification

Streamlining the modular certification process depends on an engagement model that a) relies on a

close, ongoing partnership between CMS and the state throughout the IT investment lifecycle, and

b) involves regular discussions and check-ins on state progress toward achieving shared goals for

the project. In piloting this model for Electronic Visit Verification system certification, both states

and CMS found tremendous value in ongoing collaboration. CMS will continue working with states

to enhance the ongoing partnership model on which OBC depends. States should regularly engage

with their CMS State Officers throughout the IT investment lifecycle, especially as states begin to

plan their IT investments.

The streamlined modular certification process for MES is structured around the following three

elements:

• Conditions for Enhanced Federal Matching – As a condition of receiving enhanced

federal matching funds for state expenditures on MES as described above, states must

ensure that the system complies with all of the conditions for enhanced DDI matching as

provided in 42 C.F.R. § 433.112 and that the system remains compliant with federal

Medicaid requirements for enhanced operations matching once it is in operation as provided

in 42 C.F.R. § 433.116.

• Outcomes – Outcomes describe the measurable improvements to a state’s Medicaid

program that should result from the delivery of a new module or enhancement to an existing

module. Outcomes should support Medicaid program priorities, be directly enabled by the

state’s IT project, and be clearly stated in the Advance Planning Document (APD) as

required under 45 C.F.R. part 95, subpart F. CMS will work closely with the state to identify

and ensure that intended project outcomes are achieved. CMS encourages states to develop

measurable, achievable outcomes that reflect the MES project’s goals.

The SMC process identifies two types of outcomes, CMS-Required and State-Specific:

o CMS-required outcomes are based on statutory or regulatory requirements and

provide a baseline for what is required of an MES, including its contribution to the

efficient, economical, and effective administration of the state’s Medicaid program.

o State-specific outcomes reflect the unique circumstances or characteristics of the

state or territory and its Medicaid program and focus on improvements to the

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

program and its administration that are not specifically addressed by the CMS-

required outcomes.

• Metrics – Metrics provide evidence about whether the intended outcomes are achieved

through the delivery of a new module or enhancement to an existing module. States must

submit operational reports to CMS containing metrics annually in support of a state’s

Operational Advanced Planning Documents (OAPD) request. CMS may determine the need

for some metrics requiring states to report more frequently; this will be coordinated with the

state through the State Officer. In accordance with 42 C.F.R. §§ 433.112(b)(15) and

433.116(b), (c), and (i), states must be capable of producing data, reports, and performance

information from and about their MES modules to facilitate evaluation, continuous

improvement in business operations, and transparency and accountability, as a condition for

receiving enhanced federal matching for MES expenditures. Metrics reporting enhances

transparency and accountability of IT solutions, to help ensure the MES and its modules are

meeting statutory and regulatory requirements, as well as the state’s program goals. State

reporting also gives states and CMS early and ongoing insight into program evaluation and

opportunities for continuous improvement.

States will be required to provide the following data, reports, and performance information,

pursuant to 42 C.F.R. §§ 433.112(b)(15) and 433.116(b), (c), and (i), as applicable. This

documentation will help demonstrate whether conditions for enhanced federal matching are met,

intended outcomes are being achieved, and metrics are being successfully collected and reported.

• Evidence to support production-ready status and outcome achievement may include, but is

not limited to:

o Demonstrations of system functionality;

o Testing results;

o Production reports; and

o Plans for organizational change management (e.g., managing stakeholders and users,

training, help desk).

States should provide the evidence they use to determine their module is production-ready

(that is, ready to be put into operation; this could include test results and other data

illustrating the module’s capability of achieving intended outcomes). States should also

demonstrate that their operations staff are implementation-ready (e.g., documentation of

trainings and other relevant organizational change management activities that have been

conducted and/or are ongoing) to support the successful delivery of the module and ongoing

operations. In addition, once the module is in operations, states should provide the evidence

that they continue to comply with applicable regulations and meet programmatic outcomes.

• Evidence from the metrics that are collected and reported from the state will be evaluated by

CMS to determine whether the system is achieving the identified outcomes. As required by

42 C.F.R. §§ 433.112(b)(15) and 433.116(b), (c), and (i), throughout the IT investment

lifecycle, states will continue reporting on metrics to ensure that solutions meet regulatory

requirements and are measurably supporting desired program outcomes. CMS State Officers

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

will collaborate with states to conduct reviews and assessments based on metric reports,

helping to ensure continued success and improvement of MES solutions. CMS will

coordinate with states to use existing data sources and reporting systems, such as

Transformed Medicaid Statistical Information System (T-MSIS) and

Medicaid and CHIP

Performance Indicators,

to avoid redundancy and minimize administrative burden

whenever possible.

In addition, CMS has found that properly tested systems – and, in particular, those tested by actual

users throughout the entire development process – have a better chance of successful

implementation. Therefore, CMS is putting an emphasis on testing in the certification process. The

Testing Guidance Framework document, which accompanies this SMDL within the appendices,

offers specific MES testing expectations and recommendations. CMS plans to release additional

materials describing updated software development best practices in the future, which CMS

anticipates states will incorporate into their future MES development efforts.

Operational Reporting

To efficiently demonstrate ongoing, successful system operations, states must submit operational

reports to CMS containing data and/or other evidence that modules are meeting all applicable

requirements for the state’s claimed federal matching funds. States should submit these reports

annually in support of the OAPD request; however, more frequent reporting on key operational

metrics may be necessary. CMS may require more frequent reporting for key operational metrics

such as timely eligibility determinations or timely claims payment, wherein early detection for

problems is critical. This is especially critical for COVID unwinding, when major system changes

and eligibility redeterminations are occurring in tandem. State operational reports should include

metric data corresponding to the agreed-upon intended outcomes for each applicable MES module.

In addition to operational reports, states must submit an OAPD per 45 C.F.R. §§ 95.610(c)(3) and

96.611(c), for enhanced funding authorized through certification at 42 C.F.R. § 433.116 for any

module or system for which the state requests enhanced federal matching funds for the state’s

expenditures on operations of an existing system.

States should coordinate with their CMS State Officers to determine which modules and metrics

may need more frequent reporting. The operational reports should include the same level of

streamlined information described above, including compliance with the conditions for enhanced

funding required under 42 C.F.R. §§ 433.112 and 433.116, outcomes, metrics, and related

supporting evidence.

States should look to standardize frequency of reported metrics over time. States should submit all

data in table form, with numerators and denominators present, that can be tracked longitudinally

with new columns added each reporting period and which explains contextual information about the

metric and data used in the calculation. CMS will leverage an online repository through GitHub

See the CMCS Informational Bulletin dated January 24, 2013, for information on Performance Indicators for

Medicaid and CHIP Business Functions, available at: https://www.medicaid.gov/Federal-Policy-

Guidance/downloads/CIB-01-24-13.pdf

GitHub is a hosting platform for version control and collaboration. No coding is necessary; however, users mus t

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

provide an example template for operational reporting, along with additional certification materials.

More information on use of GitHub is provide in this letter below.

For previously certified systems, those operating as a system of record, and/or those for which the

state is claiming enhanced federal matching funds for DDI or operations, states should coordinate

with their respective CMS State Officers to agree upon an approach and timeline to begin

operational reporting.

Regulations at 42 C.F.R. § 433.119 indicate that CMS may periodically review and reapprove each

system initially approved under 42 C.F.R.§ 433.114 for 75 percent enhanced federal matching for

state expenditures on the system’s ongoing operations. CMS may review an entire system’s or

module’s operation or focus the review on the operation of limited parts of the system or module.

However, at a minimum, CMS reviews under 42 C.F.R. § 433.119 will look to validate that the

system is operating in alignment with all applicable regulatory requirements, and may give

particular attention to regulatory reapproval conditions on which the system or module

demonstrated weakness in previous reviews. In general, the reapproval process will be consistent

with the streamlined modular certification process outlined in this SMDL.

Transition

Replacing the MECT and MEET

The MECT was first implemented in 2007 through CMS guidance, which was updated in 2016

and contains business areas relevant to the Medicaid Management Information System (MMIS)

functions to process claims for services furnished to beneficiaries and to perform other functions

necessary for the Medicaid program’s economic and efficient operations, management, monitoring,

and administration. CMS guidance on MECT was also designed to assist states as they plan,

develop, test, and implement their MMIS. In 2017, CMS issued the MEET to assist states in

streamlining and modernizing their Eligibility and Enrollment (E&E) systems.

Since the release of the MECT and MEET, feedback to CMS provided by states through system

reviews, certifications, and other channels have indicated that the MECT and MEET have been

overly burdensome for states. CMS learned that MECT and MEET lack the flexibility states need to

best implement systems to support program priorities, and are not adequately focused on how the

projects will improve a state’s Medicaid program. As a result of this state feedback, as well as

lessons learned from the OBC experience (which significantly reduced burden for states and CMS),

similar lessons learned from state pilots, and other CMS experience, CMS will no longer be relying

on the MECT and MEET frameworks for system certification.

With the release of the updated Certification Guidance accompanying this SMDL replacing the

https://www.medicaid.gov/medicaid/data-systems/medicaid-enterprise-certification-toolkit/index.html.

https://www.medicaid.gov/medicaid/data-systems/medicaid-eligibility-enrollment-toolkit/index.html.

Based on evidence gathered during a pilot test of the initial OBC process, the pilot state saw an 87% burden reduction

in terms of staff time for certification. CMS anticipates that the SMC process will see similar levels of burden

reductio n.

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

MECT and MEET, CMS and states will begin transitioning to the Streamlined Modular

Certification process for current and future MES projects. CMS understands and acknowledges the

MES environment is not static. In addition to the activities necessary to support responding to the

current public health emergency (PHE), states often having several competing system projects and

program priorities. In order to minimize impact, states should work with their CMS State Officers

to determine the best path forward and smoothest transition process. States that are significantly far

along in their preparations for module certification under the MECT or MEET framework may

elect to proceed with certification under the relevant legacy certification toolkit. However, states

that elect to do so will also be expected to produce and submit operational reports for their systems,

as discussed in this SMDL and outlined in the updated Certification Guidance.

This updated Certification Guidance contains several key elements that were not present in the

MECT and MEET. These elements include outcomes, metrics, and operational reporting

requirements (including indicators of project health). In addition, milestone reviews under

streamlined modular certification differ substantially from those required under the legacy toolkits.

As such, states should consider these key elements and differences in transition planning efforts.

States should work with their CMS State Officers to coordinate the transition to streamlined

modular certification.

Certification Guidance

The Certification Guidance accompanying this SMDL is a critical component in further

streamlining and improving the certification process and promoting better outcomes for state and

federal investments in each state’s MES. It reflects the reduced burden and increased flexibility that

CMS seeks to foster in collaboration with states, while ensuring states meet all applicable federal

requirements and are best positioned to achieve state-specific intended outcomes for these systems

and modules. Adherence to these improved processes will not only help ensure that state and

federal investments are worthwhile, but also that Medicaid beneficiaries and other stakeholders

benefit from the efficient, economical, and effective administration of the state’s Medicaid program

through a modern and highly capable MES.

The full Streamlined Modular Certification (SMC) Guidance can be found on Medicaid.gov at the

following URL:

https://www.medicaid.gov/medicaid/data-systems/certification/streamlined-modular-

certification/index.html

As shown in Figure 1, engagement during each phase of the IT investment lifecycle might include

the following touchpoints:

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

Figure 1. Streamlined Modular Certification Process Timeline

CMS Certification Repository

Because intended outcomes and metrics are likely to evolve over time, CMS will leverage a

Certification Repository on GitHub

for additional materials, including identifying the specific

outcomes derived from regulatory requirements, state-proposed outcomes, and metrics.

The CMS Certification Repository on GitHub will provide a collaborative space where states can

learn, share, and contribute information about the MES Certification process and its related

documentation. CMS created this repository for CMS, states, and vendors to:

• Access current information about CMS-required outcomes and recommended metrics;

• Create and contribute to a community of state-specific outcomes and metrics; and

• Access examples of well-defined outcomes and metrics.

States can visit the Certification Repository on GitHub to access resources such as the Certification

Guidance, information about the regulatory conditions for enhanced funding, outcomes, metrics,

and related supporting evidence/examples to help inform how states approach their IT investment

planning, development, operations, and certification.

Please access the CMS Certification Repository on GitHub at:

https://cmsgov.github.io/CMCS-

DSG-DSS-Certification/

Requesting A Certification Review

To request a Certification Review (CR), states must submit a formal Certification Request Letter.

The letter should include:

GitHub is a hosting platform for version control and collaboration. No coding is necessary; however, users must

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The contents of this document do not have the force and effect of law and are not meant to bind the public in any way,

unless specifically incorporated into a contract. This document is intended only to provide clarity to the public

regarding existing requirements under the law.

• Date at which the state formally began operating the system as the system of record,

• Retroactive certification date (date back to which the state is requesting the system be

certified), and

• Proposed date for CMS to begin its certification review.

The CR letter should be accompanied by evidence that demonstrates the system is properly

prepared for the certification review process to begin. To demonstrate the system is properly

prepared, the state should have:

• Established a document repository that has been successfully tested by the CMS State

Officer (the default repository is CMS Box),

• Sub mitted a copy of the System Acceptance Letter (the state’s letter to the vendor contractor

or state development team accepting the system/modules(s)),

• Submitted all required operational metrics related to the module, beginning from the time

the system became operational as the system of record and up until the end of the most

recent quarter, and

• Demonstrated that the system/module for which the state is requesting certification complies

with most current T-MSIS requirements, when applicable.

The CR will also focus on system demonstrations, review of testing results, and outcomes and

metrics. Outcomes and metrics, along with any underlying data and explanatory or contextual

information, should be sent to the CMS State Officer and to MES@cms.hhs.gov

. The state and

CMS State Officer will agree upon the format for reporting. In the future, CMS may issue a

template for reporting on metrics. CMS may send questions about the metrics to the state prior to

beginning or completing the CR. If after the review it is determined the States system does not meet

certification requirements, CMS will work with the state on remediation of the findings and next

steps, and will coordinate with the state to determine any impact to the certification decision. This

does not constitute a change from how such instances have been handled under MEET & MECT.

CMS continues to work with states to gain more experience and inform OBC development. States

are encouraged to discuss MES plans with their CMS State Officers, who can provide state-specific

advice for the SMC process. As this process evolves, CMS will continue to provide guidance and

work collaboratively with states.

Additional Information

For additional information about this SMDL, please contact Edward Dolly, Director Division of

State Systems at Edward.Dolly@cms.hhs.gov

Sincerely,

Daniel Tsai

Deputy A

dministrator and Director