A Medicaid managed care operational readiness review is the State's assessment of whether a managed care plan can perform before a program starts, before a new plan joins, or before a current plan takes on new eligibility groups. This page is for the compliance, operations, claims and systems leaders of a managed care organization (MCO) that will be reviewed. Integral Healthcare Solutions (IHS) prepares the MCO: we build the document set, the evidence index and the interview outlines, and we run a mock desk and interview review. The State conducts the review, and the MCO and the State deal with each other directly.
Last reviewed: October 2026.
What is a Medicaid managed care operational readiness review?
The regulation calls it a readiness review, the State's assessment of an MCO under 42 CFR 438.66(d) in Part 438, Subpart B (42 CFR 438.66, page opened October 4, 2026). The regulation says: "The State must assess the readiness of each MCO, PIHP, PAHP or PCCM entity with which it contracts as follows:" and then lists the triggers covered below.
The review "must assess the ability and capacity of the MCO, PIHP, PAHP, and PCCM entity (if applicable) to perform satisfactorily" in four areas, each with listed subjects (438.66(d)(4)):
- Operations and administration, including administrative staffing and resources, delegation and oversight of MCO responsibilities, enrollee and provider communications, grievance and appeals, member services and outreach, provider network management, and program integrity and compliance.
- Service delivery, including case management, care coordination and service planning, quality improvement, and utilization review.
- Financial management, including financial reporting and monitoring, and financial solvency.
- Systems management, including claims management, and encounter data and enrollment information management.
On timing, the regulation says the review must be "(i) Started at least 3 months prior to the effective date of the events described in paragraph (d)(1) of this section", "(ii) Completed in sufficient time to ensure smooth implementation of an event described in paragraph (d)(1) of this section", and "(iii) Submitted to CMS for CMS to make a determination that the contract or contract amendment ... is approved under § 438.3(a)." (438.66(d)(2)).
The same section requires a State monitoring system that addresses at least 14 listed areas (438.66(b)). This page covers the federal frame. The regulation does not list the documents a desk review covers. IHS's reading, October 2026: each State's contract and review tool set them. IHS has not reviewed any State's tool for this page.
Who needs it and what triggers it
The plan that will be reviewed is the one that needs to prepare, and the triggers are in 42 CFR 438.66(d)(1) (438.66(d)(1)). The State must assess readiness in three situations:
- "(i) Prior to the State implementing a managed care program, whether the program is voluntary or mandatory."
- "(ii) When the specific MCO, PIHP, PAHP, or PCCM entity has not previously contracted with the State."
- "(iii) When any MCO, PIHP, PAHP, or PCCM entity currently contracting with the State will provide or arrange for the provision of covered benefits to new eligibility groups."
The Illinois HFS release dated June 15, 2026 says "Contracts were formally awarded on June 8" to six MCOs, calls the awards "the first competitive procurement of these contracts under the Illinois Procurement Code and the first procurement of the HCI contracts since 2018," and says "The initial contract term is 4.5 years, with an opportunity to renew for an additional 5.5 years." (Illinois HFS release, page opened October 4, 2026). The release does not mention readiness reviews or effective dates, and this page does not say whether or when Illinois will run them. Whether a particular plan's award or expansion triggers a review under paragraph (d)(1) is a question for the plan's counsel and its State contract.
How IHS helps
IHS works through a process, applied to your State contract and the State's review tool once you hold them. It is part of our compliance services. The steps are:
- A gap assessment of your operations against the four areas in 438.66(d)(4).
- Document and evidence mapping, which produces the desk-review binder and an evidence index tied to each area.
- Drafting the policies and procedures and the interview preparation outlines for your leaders. IHS drafts the program, policies and clinical content for your clinicians to review and approve, and your organization adopts and runs it.
- A mock desk review and interview review of the same set.
- Updates to the document set while your leaders handle the State's review.
You supply your State contract or draft contract, the State's review tool and requests, your current policies and organization chart, and your operations, claims, systems, grievance and appeals, provider network and finance leaders.
The limit: Your leaders own the content and any system configuration, and IHS does not configure claims, encounter or enrollment systems. IHS gives no legal opinion on contract terms. IHS's reading, October 2026: the State's tool sets what the review asks for. You and the State handle all contact with each other, and IHS does not contact the State Medicaid agency or CMS. For the service delivery area, our case management and utilization management page describes that work in more detail.
What to have ready
- Your State contract or draft contract and the State's review tool and schedule, since, in IHS's reading, they set the specific documents (42 CFR 438.66).
- A calendar counted back from the effective date, because the State's review must start at least 3 months before it (438.66(d)(2)(i)).
- For operations and administration, your staffing plan, delegation and oversight documents, enrollee and provider communications, and member services and outreach materials (438.66(d)(4)(i)).
- Grievance and appeals, provider network management, and program integrity and compliance policies, with records showing them in use (438.66(d)(4)(i)).
- For service delivery, your case management, care coordination and service planning documents, quality improvement program and utilization review procedures (438.66(d)(4)(ii)).
- For financial management, your financial reporting and monitoring documents and your solvency materials (438.66(d)(4)(iii)).
- For systems management, your claims management documents and your encounter data and enrollment information management procedures (438.66(d)(4)(iv)).
- A list of every delegate and the evidence of how you oversee each one (438.66(d)(4)(i)).
- A roster of the staff and leaders who manage key operational areas, who the State may interview (438.66(d)(3)).
- Logistics for an on-site review, which the regulation requires for a new program or a plan new to the State and allows at the State's option for new eligibility groups (438.66(d)(3)).
Printable version of this checklist (PDF)
If you want help assembling these, the free introductory call is the place to start.
How does it compare?
The rows set out the regulation's review types and the preparation routes.
| Option | What it involves |
|---|---|
| Desk review, with on-site at the State's option | Required for new eligibility groups. The State may add an on-site review (438.66(d)(3)). |
| Desk review plus on-site review | Required for a new managed care program or a plan that has not previously contracted with the State, with interviews of staff and leadership who manage key operational areas (438.66(d)(3)). |
| Preparing in-house | IHS's reading: your leads know your systems and can assemble the set, at the cost of their time. |
| Preparing with outside support | IHS's reading: outside drafting and a mock review add capacity, and your leaders own the content. |
| Accreditation, a separate question | Accreditation is not the State's readiness review. Our URAC Medicaid health plan page and URAC health plan page cover that route. |
What it costs
The regulatory text we read attaches no authority fee to a readiness review, and we did not read any State's contract or review tool. Verify current requirements with your State Medicaid agency. IHS scopes each engagement after a free introductory call.
What this is not
- IHS does not conduct the readiness review, make or influence the State's or CMS's determination, or guarantee an outcome. The State runs the review.
- IHS does not contact, submit to or speak for your organization to the State Medicaid agency or CMS. IHS drafts, and your organization adopts, runs and submits.
- IHS is a consulting firm, not a law firm, and this page is not legal advice. IHS gives no opinion on whether a rule applies to your organization. Ask your counsel.
Frequently asked questions
When does a state have to run a readiness review of an MCO?
Under 42 CFR 438.66(d)(1), as read October 4, 2026, the State must assess readiness before it implements a managed care program, when an MCO has not previously contracted with the State, and when a contracting MCO will provide or arrange covered benefits for new eligibility groups. The rule covers each MCO, PIHP, PAHP or PCCM entity the State contracts with. Whether it applies to your organization is a question for your counsel.
What triggers one: a new state, a new program, a new eligibility group?
The regulation names a new managed care program, a plan that has not previously contracted with the State, and new eligibility groups for a plan that already contracts. IHS's reading is that a plan entering a new state has not previously contracted with that State, which fits the second trigger. Your counsel decides how the triggers apply to your plan.
How early must the review start before the effective date?
Paragraph (d)(2) requires the review to be started at least 3 months before the effective date of the triggering event and completed in sufficient time to ensure smooth implementation. IHS's planning view is that your own preparation should be finished before the State's review starts.
What is the difference between the desk review and the on-site review?
A desk review is a review of documents. For a new program or a plan new to the State, paragraph (d)(3) requires both a desk review and on-site reviews. For new eligibility groups it requires a desk review and lets the State decide whether to add an on-site review.
What areas does the state assess?
Paragraph (d)(4) names four areas: operations and administration, service delivery, financial management, and systems management. Each has listed subjects, such as grievance and appeals and claims management. The review assesses the plan's ability and capacity to perform satisfactorily in those areas.
What documents belong in a desk-review binder?
The regulation requires a desk review of documents but, in the text we read, does not list which documents. IHS's reading, October 2026: each State's contract and review tool set that list. IHS builds a binder and an evidence index mapped to the four areas in 438.66(d)(4), then adjusts it to your State's tool once you supply it.
Who is interviewed during an on-site review?
Paragraph (d)(3) says on-site reviews must include interviews with MCO, PIHP, PAHP or PCCM entity staff and leadership who manage key operational areas. IHS drafts interview preparation outlines for those leaders, and they own what they say.
Who submits the results to CMS?
Paragraph (d)(2)(iii) says the review must be submitted to CMS so that CMS can determine whether the contract or contract amendment is approved. The rule sits in the subpart on State responsibilities, so IHS's reading is that the State submits and the MCO does not. IHS does not submit anything to CMS or to a State.
What does a delegated administrator or vendor need to show?
Delegation and oversight of MCO responsibilities is one of the subjects listed under operations and administration in paragraph (d)(4)(i). IHS's reading is that a plan that delegates work should be ready to show how it oversees the delegate. IHS drafts delegation and oversight policies and an evidence index for the plan to review, adopt and run.
How should an expanding MCO prepare for new eligibility groups?
For new eligibility groups the regulation requires a desk review and leaves an on-site review to the State's option. IHS assesses the added population against the four areas, updates the desk-review binder, prepares interview outlines in case the State adds an on-site review, and runs a mock review. Your operational, claims and systems leaders own the content and any system change.