This week, our In Focus section reviews a wide-ranging proposed rule issued by the Centers for Medicare & Medicaid Services (CMS) on November 6, 2023. The rule would update various policies governing Medicare Advantage (MA, or Part C), the Medicare Prescription Drug Benefit (Part D), Medicare cost plans and Programs of All-Inclusive Care for the Elderly. These proposed policy reforms would implement changes related to Star Ratings, marketing and communications, agent/broker compensation, health equity, dual eligible special needs plans (D-SNPs), utilization management, network adequacy, and other programmatic areas. The proposals reflect the agency’s continuing focus on increasing program transparency, improving health equity, reducing the cost of care for Medicare beneficiaries, and expanding access to behavioral health services.

MA and Part D stakeholders are encouraged to provide CMS with feedback and analysis regarding the potential impact of these changes. Comments on the proposed rule are due by January 5, 2024. The final rule would take effect in contract year 2025.

Improving Access to Behavioral Health Care Providers

CMS proposes regulatory changes intended to improve access to behavioral healthcare by adding certain provider specialties to the MA network adequacy standards as follows.

• CMS proposes to add a new facility-specialty type to the existing list of facility-specialty types evaluated as part of its plan network adequacy reviews. The new facility-specialty type, outpatient behavioral health, would be included in network adequacy evaluations, including marriage and family therapists (MFTs), mental health counselors (MHCs), opioid treatment programs, community mental health centers, and/or other behavioral health and addiction medicine specialists and facilities.
• MFTs and MHCs will be eligible to enroll in Medicare and start billing for services beginning January 1, 2024, because of the new statutory benefit category established in the Consolidated Appropriations Act (CAA) of 2023. CMS proposes to make corresponding changes to its network adequacy requirements for MA organizations.
• For purposes of the network adequacy requirements, the new facility-specialty type would be evaluated using time and distance and minimum number standards in the proposed regulation.

Increased Transparency for Special Supplemental Benefits for the Chronically Ill

In 2018, Congress enacted new authorities pertaining to supplemental benefits for MA members with chronic health conditions. CMS refers to this category of benefits as Special Supplemental Benefits for the Chronically Ill (SSBCI). These services are available only to enrollees with ongoing conditions and who meet certain criteria established in the statute. In contrast to the general policy that MA benefits should be offered uniformly to all plan members, MA plans may offer SSBCI tailored to a qualifying individual’s specific medical diagnosis and needs.

Supplemental benefits, including SSBCI, are generally funded with MA plan rebate dollars. CMS notes that the number of MA plans that offer SSBCI—and the number and scope of SSBCI that individual plans provide—has increased since their introduction in 2019.

Under the proposed rule:

• MA organizations would be required to demonstrate, through relevant and acceptable evidence, that an item or service offered as SSBCI has a reasonable likelihood of improving or maintaining the health or overall function of chronically ill beneficiaries. MA plans also must, by the date on which they submit a bid to CMS, include a bibliography of evidence supporting this position. According to CMS, this expectation would shift the burden of proof from the agency to MA organizations, requiring plans to demonstrate compliance with this standard and that SSBCI items and services are evidence-based.
• MA plans must follow their written policies based on objective criteria for determining enrollee eligibility for SSBCI when making determinations.
• Require that MA plans document denials of SSBCI eligibility rather than its approvals.
• CMS would codify its authority to review and deny approval of an MA organization’s bid if the plan cannot demonstrate, through relevant and acceptable evidence, that its proposed SSBCI has a reasonable expectation of improving or maintaining the health or overall function of a chronically ill enrollee.
• CMS also would codify its authority to review SSBCI offerings annually for compliance and in light of the available evidence.

According to CMS, these proposals, if implemented, would better ensure that the benefits offered as SSBCI are reasonably expected to positively affect the health and well-being of chronically ill beneficiaries and guard against the use of MA rebate dollars for SSBCI that unsubstantiated.

In addition, CMS is proposing new policies to improve transparency regarding SSBCI so that beneficiaries are aware that SSBCI are only available to enrollees who meet the eligibility criteria. More specifically, CMS proposes to:

• Modify the current requirements for the SSBCI disclaimer that MA organizations must use whenever SSBCI are mentioned. The SSBCI disclaimer would have to list the relevant chronic condition(s) that qualify for the benefits that MA organizations offer.
• Establish specific font and reading pace parameters for the SSBCI disclaimer in print, television, online, social media, radio, other voice-based ads, and outdoor advertising, including billboards. Finally, it would clarify that MA organizations must include the disclaimer in all marketing and communications materials that mention SSBCI.

Requiring Mid-Year Enrollee Notification of Available Supplemental Benefits

As noted previously, over the past several years, the number of MA plans offering supplemental benefits has increased. The benefits offered are broader in scope and variety, and an increasing amount of MA rebate dollars are being directed toward these benefits. At the same time, plans have reported that the number of enrollees who use many of these benefits is low.

• CMS proposes requiring MA plans to notify enrollees mid-year of the unused supplemental benefits available to them. The notice would list any supplemental benefits that a beneficiary does not use during the first six months of the year (January 1−June 30).
• At present, MA plans are not required to send any communication specific to an enrollee’s usage of supplemental benefits. This policy is intended to educate enrollees on their access to supplemental benefits and encourage greater use of these benefits.

Enhancing “Guardrails” for Agent and Broker Compensation

For many years, CMS has set upper limits on the compensation that agents and brokers can receive for enrolling Medicare beneficiaries in MA and Part D plans. CMS believes that many MA and prescription drug payment plans, as well as third-party entities with which they contract, make structured payments to agents and brokers that circumvent these compensation caps.

• In this regulation, CMS proposes to generally prohibit contract terms between MA organizations and agents, brokers, or other third party marketing organizations (TPMOs) that may interfere with the agent’s or broker’s ability to objectively assess and recommend the plan that best-suited to a beneficiary’s healthcare needs; to set a single reimbursement rate for all plans; to revise the scope of items and services included within agent and broker compensation; and to eliminate the regulatory framework that currently allows for separate payment to agents and brokers for administrative services.
• The agency would make conforming changes to the Part D agent broker compensation rules.

Requiring an Annual Health Equity Analysis of Utilization Management Policies and Procedures

CMS proposes several regulatory changes to the composition and responsibilities of an MA organization’s utilization management (UM) committee.

• The new rules would require that a member of the UM committee have expertise in health equity and that the UM committee conduct an annual health equity analysis of the use of prior authorization.
• The proposed analysis would examine the impact of prior authorization on enrollees with one or both of the following social risk factors (SRFs): receipt of the low-income subsidy, dual eligibility for Medicare and Medicaid (LIS/DE), or a disability.
• The proposed analysis must compare metrics related to the use of prior authorization for enrollees with the specified SRFs with enrollees without the specified SRFs. The results of the analysis must be made publicly available on the MA organization’s website in an easily accessed manner.

Enhancing Enrollees’ Right to Appeal an MA Plan’s Decision to Terminate Coverage for Non-Hospital Provider Services

Beneficiaries enrolled in traditional Medicare and MA plans have the right to a fast-track appeal by an independent review entity (IRE) when their covered skilled nursing facility (SNF), home health agency (HHA), or comprehensive outpatient rehabilitation facility (CORF) services are being terminated. At present, quality improvement organizations (QIOs) function as IREs and conduct these reviews.

Furthermore, MA enrollees do not have the same access to QIO review of a fast-track appeal as traditional Medicare beneficiaries.

CMS proposes to:

• Require that QIOs, instead of MA plans, review untimely fast-track appeals of an MA plan’s decision to terminate HHA, CORF, or SNF services
• Fully eliminate the provision requiring the forfeiture of an enrollee’s right to appeal a termination of services decision when they leave the facility

According to CMS, these proposals would align MA regulations with the parallel reviews available to beneficiaries in traditional Medicare and expand the rights of MA beneficiaries to access the fast-track appeals process.

Increasing the Percentage of Dually Eligible Managed Care Enrollees Who Receive Medicare and Medicaid Services from the Same Organization

In the proposed rule, CMS expresses concern that a significant number of dually eligible enrollees receive Medicare services through one managed care entity and Medicaid services through another (misaligned enrollment), rather than from one organization (aligned enrollment. The proposed rule states that in the long run, “for dually eligible individuals who are in Medicare and Medicaid managed care, we believe that we should continue to drive toward increasing aligned enrollment until it is the normative, if not only, managed care enrollment scenario…. For dually eligible individuals that elect MA plans, we are focused on increasing enrollment in integrated D-SNPs: fully integrated dual eligible special needs plans (FIDE SNPs), highly integrated dual eligible special needs plans (HIDE SNPs), and applicable integrated plans (AIPs) [pages 286-287].”

To move in this direction, CMS offers several interconnected proposals as follows:

• Replace the current quarterly special enrollment period (SEP) with a monthly SEP for dually eligible individuals and others enrolled in the Part D low-income subsidy program to elect a standalone PDP
• Create a new integrated care SEP to allow dually eligible individuals to elect an integrated D-SNP on a monthly basis
• Limit enrollment in certain D-SNPs to individuals who are also enrolled in an affiliated Medicaid managed care organization (MCO)
• Limit the number of D-SNP plan benefit packages an MA organization, its parent organization, or an entity that shares a parent company with the MA organization, can offer in the same service area as an affiliated Medicaid MCO

According to CMS, these initiatives would increase the percentage of dually eligible MA enrollees who are in plans that are also contracted to cover Medicaid benefits, thereby expanding access to integrated materials, unified appeal processes across Medicare and Medicaid, and continued Medicare services during an appeal.

Impose New Contracting Standards for Dual Eligible Special Needs Plan (D-SNP) Look-Alikes

Under existing regulations, CMS does not contract with and will not renew the contract of a D-SNP look-alike; that is, an MA plan that is not a SNP but in which dually eligible enrollees account for 80 percent or more of total enrollment. CMS proposes to lower the D-SNP look-alike threshold from 80 percent to 70 percent in 2025 and to 60 percent in 2026. CMS states that this proposal is intended to help address the continued proliferation of MA plans that serve high percentages of dually eligible individuals without meeting D-SNP requirements.

Other Topics in the Proposed Rule

In addition, the proposed rule calls for:  

• Providing greater flexibility for Part D plan sponsors to substitute biosimilar products during the plan year
• Limiting out-of-network cost sharing for D-SNP PPOs
• Standardizing the MA risk adjustment data validation appeals process
• Expanding permissible data use and data disclosure for MA encounter data including for support for Medicaid and state Medicaid agencies to better coordinate care for dually eligible individuals

The Health Management Associates Medicare team will continue to analyze these proposed changes. We have the depth and breadth of expertise to assist with tailored analysis, to model policy impacts, and to support the drafting of comment letters to this rule. For more information or questions about the policies described, contact Amy Bassano ([email protected]), Julie Faulhaber ([email protected]), Andrea Maresca ([email protected]), or John Richardson ([email protected]).

This week’s In Focus centers on the U.S. Department of Health and Human Services (HHS) August 29, 2023, announcement of the first 10 prescription medications that will be subject to price negotiation for Medicare coverage. This week, Health Management Association (HMA) experts offer their perspective on what this change means and what to expect next.

Background

Medicare was granted the authority to negotiate prescription drug prices through the Inflation Reduction Act (IRA), which the president signed into law on August 16, 2022. HHS, acting through the Centers for Medicare & Medicaid Services (CMS), will lead negotiations and enter into agreements with manufacturers for these products, negotiating a maximum fair price (MFP) for each selected drug in the Medicare program. HHS is required to negotiate on a certain number of drugs each year: 10 drugs in 2026, 15 drugs in 2027 and 2028, and 20 drugs in 2029 and subsequent years. Up to 60 drugs could be negotiated by 2029. Manufacturers that are noncompliant will face an excise tax that could far exceed the cost of drugs sold over time and civil monetary penalties.

Medicare Drug Negotiations: The Latest Development

Since passage of the IRA, CMS has been working to establish the regulatory infrastructure and policies to support implementation of Medicare’s new drug price negotiation authority on an expedited timeline. Guidance on the approach the agency will take in negotiating MFPs, along with other provisions of the act, has been issued.

With this week’s action, CMS will begin the first round of negotiations. Table 1 lists the drugs CMS has identified for the first round of negotiations. Products selected for negotiation (with prices effective in 2026) are medications that represent the highest spending in the Part D drug benefit, excluding products with generic or biosimilar competition as well as certain orphan drugs and other products that qualify for a small biotechnology exemption.

Alongside CMS’s announcement, HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE) released its analysis of prescription drug use and out-of-pocket spending for each of the 10 drugs for all Part D enrollees and separately by whether an enrollee receives the low-income subsidy (LIS). The report also examines demographic information about enrollees who use the selected products.

Takeaways

The products selected were largely in line with initial modeling that Moran Company analysts and others performed, but with some surprises. Variation from earlier projections could be expected for a number of reasons, including:

• The June 2022−May 2023 data CMS used were not generally available to outside analysts, and it is clear that several products had spending increases (whether because of volume or price increases) relative to prior years that moved them up the list.
• Some higher spending products have seen generic or biosimilar competitors launch, making them ineligible for selection for negotiation.
  • For the top 30 products identified in previous dashboard data, at least 10 have evidence of generic or biosimilar competition.
• CMS’s decision to treat multiple products together for purposes of negotiations also affected the products included on the list.
• For a few other products, it is still unclear how CMS decisions were made.

What to Expect Next

The drug negotiation policy is highly controversial and is the subject of litigation that could delay the process. If litigation does not affect the timeline for implementation, manufacturers of selected drugs have until October 1 to agree to negotiate and provide initial information to CMS. If a manufacturer opts out of the negotiations, the company must pay either an excise tax or withdraw all its products from the Medicare and Medicaid programs. CMS and participating companies will then meet to discuss manufacturer submissions, and CMS will receive information from other stakeholders. Several listening sessions will take place.

CMS will make initial price offers by February 1, 2024. After a counteroffer process, negotiations may continue into the summer of 2024, but final determinations will be made by August 1, 2024. CMS plans to publish any agreed-upon negotiated prices for the selected drugs by September 1, 2024. Those prices take effect starting January 1, 2026.

In addition to the short-term impact on prices for specific drugs, several questions about the potential effects of the policy are worth monitoring over the long-term:

• How will research and development of new products and trends in the type of products prioritized change as a result of these policies?
• How will the policies affect pricing for competitor products and the launch prices of products in the future?
• Beyond the Medicare population, for whom the prices are directly applicable, how will MFPs affect negotiations on costs and supplemental rebates for other payers. including state Medicaid programs, state employee programs, drug purchasing pools, and commercial insurers?
• Will negotiations affect the design of standalone Prescription Drug Plans (PDPs) and Medicare Advantage PDPs.

The IRA included several other changes to the Medicare program, which we discussed in a previous In Focus.

In this week’s In Focus, we continue our review of Medicare developments from this summer and look ahead at Centers for Medicare & Medicaid Services (CMS) activities to watch for this fall.

CMS ACO Strategy Update

In a July 31, 2023, Health Affairs Forefront blog, CMS leaders outlined the agency’s plan to further accelerate the growth and accessibility of accountable care organizations (ACOs), especially for beneficiaries in rural and underserved areas. The article signals the agency’s continued commitment to increasing participation in ACOs and future policy and model initiatives that CMS could undertake to achieve those goals.

In particular, the CMS Innovation Center is considering testing models and features to support Medicare Shared Savings Program (MSSP) ACOs in increasing investments in primary care. This initiative might include piloting ACO-based primary care models that provide prospective payments in an effort to reduce reliance on fee-for-service (FFS), support innovations in care delivery, and increase access to advanced primary care in underserved communities.

CMS leaders point to a second component of its ACO strategy in the calendar year (CY) 2024 proposed Medicare Physician Fee Schedule (PFS) rule. The proposed PFS includes technical updates to the Advance Investment Payment (AIP), which provides financial support for providers who participate in the MSSP. The proposed PFS rule also includes several opportunities for the public to inform CMS’s ongoing ACO work, including considerations for adding higher-risk participation options in the MSSP, ways to better support collaboration between ACOs and community-based organizations to meet health-related social needs, and other initiatives. HMA discussed the PFS changes in an earlier In Focus.

CMS also announced refinements to the ACO Realizing Equity, Access, and Community Health (REACH) Model on August 18. The agency’s three goals in making these changes are to:

• Increase predictability for model participants (e.g., policies to change certain beneficiary alignment requirements and refinements to eligibility criteria for high-need ACOs
• Protect against inappropriate risk score growth (e.g., revisions to the risk-adjustment methodology)
• Advance health equity (e.g., revisions and expansions to the health equity benchmark adjustment)

These topics are of importance to CMS across its model portfolio and are, in part, based on experience the agency has gained in running the ACO REACH model. Below is a summary of several key policy changes that will take effect in 2024. The entire list can be found on the CMS website.

Finally, CMS released the request for applications (RFA) for the Innovation Center’s Making Care Primary (MCP) model previously announced in June. This voluntary model is scheduled to begin in June 2024 and run for 10.5 years. It will have three participation tracks that build upon previous Innovation Center primary care initiatives.

The MCP model is designed to improve care for beneficiaries by supporting the delivery of advanced primary care services. This framework provides a pathway for primary care clinicians who have varying levels of experience with value-based care to gradually adopt prospective, population-based payments while building the infrastructure to improve behavioral health and specialty integration and drive more equitable access to care. CMS is working with Medicaid agencies in eight states—Colorado, North Carolina, New Jersey, New Mexico, New York, Minnesota, Massachusetts, and Washington—to engage in full care transformation across payers, with plans to engage private payers in the coming months.

The RFA provides additional details about the model’s payment, care delivery, quality, and other policies. The application period opens September 4, 2023, and closes November 30, 2023. CMS plans to select participants in winter 2024. Onboarding for participants will take place April−July 2024.

The HMA team continues to review the RFA and is available to assist clients in determining whether this model may be a good fit as well as with assistance in submitting the application.

What to Watch

Comments on the Medicare CY payment rules (home health, end stage renal disease, physician, and outpatient hospital) are due in early fall. CMS will review the comments on each of the proposals and finalize each rule by November 1. Some stakeholders, such as physicians and home health suppliers, may seek congressional action to mitigate payment cuts that CMS has proposed.

In addition, CMS is expected to continue implementing the drug pricing related provisions of the Inflation Reduction Act (IRA). The agency already has released several guidance documents about the process. The list of the first 10 drugs to be negotiated is due to be published September 1, 2023, and manufacturers of selected drugs will have one month to sign agreements to participate in negotiations and provide information for CMS’s consideration in the negotiation process.

The HMA team will continue to evaluate Innovation Center opportunities, CMS payment regulations, and IRA implementation. If you have questions about these topics, contact Amy Bassano ([email protected]), Kevin Kirby ([email protected]), or Andrea Maresca ([email protected]).

This week, our In Focus section continues analysis and insights from Health Management Associates (HMA) and its affiliate The Moran Company on recent Medicare payment and policy developments. Today, we review the policy changes that the Centers for Medicare & Medicaid Services (CMS) released August 1, 2023, for the fiscal year (FY) 2024 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) final rule (CMS-1788-F).

This year’s IPPS final rule includes several important policy changes that will alter hospital margins and change administrative procedures beginning October 1, 2023. More specifically, the IPPS rule increases payments to hospitals, enhances the wage index policy for rural hospitals, reduces Medicare disproportionate share payments, and modifies the New Technology Add-on Payment (NTAP) program.

Key provisions of the FY 2024 Hospital IPPS and LTCH Final Rule

We highlight four policies that will significantly affect Medicare beneficiaries, hospitals, health systems, payers, and manufacturers:

1. The annual inpatient payment update
2. Medicare disproportionate share hospital (DSH) payments
3. Hospital wage index adjustments
4. NTAP policy changes

Hospital market basket update and the inpatient standardized amount

CMS’s Medicare 2024 IPPS final rule will increase payments to acute care hospitals by an estimated $2.2 billion from 2023. The primary driver of this increase is CMS’s 3.1 percent increase in the annual update to inpatient operating payment rates. The update is the sum of the hospital market basket update of 3.3 percent and a statutorily required 0.2 percentage point reduction for productivity growth.

HMA/Moran analysis: Between the time CMS released the 2024 proposed IPPS rule and the final rule, the inpatient payment update for 2024 increased to 3.1 percent from 2.8 percent. This spike occurred because of the effects of an increase in estimated inflation on the cost of a standard basket of hospital goods (hospital market basket) throughout 2022 and 2023. Although economy-wide inflation slowed in mid-2023, inflation was higher in late 2022 and early 2023—the period in which the market basket is measured for the final rule.

For beneficiaries, increasing payment rates eventually will lead to a higher Medicare inpatient deductible and greater out-of-pocket costs for many other services. For hospitals and healthcare systems, payers, and manufacturers, a payment increase of 3.1 percent falls below economy-wide inflation (5−6 percent in recent months).

Despite the publicized 3.1 percent payment update for 2024, after factoring in various policy adjustments the actual change between 2023 and 2024 to inpatient payments per case will be roughly 2 percent. The primary reason per-case payments will increase only 2 percent is a budget-neutrality adjustment that CMS finalized for 2024 to account for hospital wage index reclassifications. This adjustment will reduce payments to all hospitals by more than 1 percent to neutralize the added program spending associated with payments to hospitals that choose to reclassify into higher paying wage index areas. The final rule states, “[T]he geographic reclassification budget neutrality adjustment is significantly larger than in prior years.”

Medicare Disproportionate Share Hospital Payments

CMS finalized two Medicare disproportionate share hospital (DSH)-related policies for 2024. First, DSH payments and Medicare uncompensated care payments combined will decrease in FY 2024 by approximately $957 million. Second, CMS finalized its proposal to limit the number of patient days included in the Medicare DSH calculation to only those days when the patient’s Medicaid Section 1115 Demonstration health insurance covers inpatient hospital services or the patient’s premium assistance program covers 100 percent of the premium cost for patients who buy health insurance that covers inpatient hospital services, if the patient is ineligible for Medicare Part A.

HMA/Moran analysis: CMS’s $957 million reduction in DSH and uncompensated care payments stems from the agency’s estimate of the percentage of individuals without insurance in the United States. Between the 2024 proposed and final rules, CMS estimates the percentage of individuals without insurance will decline from 9.3 percent to 7.7 percent in 2023 and from 9.2 percent to 8.5 percent in 2024. As a result, the pool of uncompensated care dollars available to hospitals for 2024 was reduced from roughly $6.7 billion to $5.9 billion.

CMS’s estimated decline in the rate of uninsured beneficiaries is somewhat surprising given the common projection that Medicaid enrollment will drop following the end of Medicaid’s COVID-19 related continuous coverage policy. However, HMA/Moran colleagues believe state-level Medicaid enrollment changes will vary in the year ahead. Consequently, hospitals located in states where levels of Medicaid enrollment are sustained will benefit from CMS’s uninsured rate estimates and hospitals in states where Medicaid enrollment drops will not.

With regard to the Section 1115 demonstration related DSH policy, hospitals located in states that have not expanded Medicaid under the Accountable Care Act and instead rely on Section 1115 Demonstrations to expand health coverage, are likely to receive lower DSH payments. In addition to the Medicare DSH payment adjustments, reductions in the Medicaid DSH program are scheduled to begin October 1, 2023. The $8 billion reduction in FY 2024 is the first time CMS has planned to make cuts in the program.

Hospital Wage Index Adjustments

CMS finalized two wage index policies for FY 2024. First, CMS will extend the low-wage index hospital policy, which boosts the wage index of hospitals in geographic areas with low wages relative to other areas. Second, CMS finalized a policy to begin including labor data from urban hospitals that choose to reclassify as providers in rural areas to maximize their payment into the calculation of rural wage index areas.

HMA/Moran analysis: These two wage index policies for FY 2024 will increase payment to rural hospitals. Under the first policy, hospitals with wage indexes below 0.8667 (the 25^th percentile across all hospitals) will automatically receive an increase in their wage index and therefore their payment rates for inpatient cases. Under the second policy, the inclusion of labor data for geographically urban hospitals that choose to reclassify into rural wage index areas within the calculation of state-level rural wage indexes and the state-level rural floor will increase payments to rural hospitals in many states. The overall impact of both proposed wage index policy changes for FY 2024 will be an increase in inpatient payment rates for rural hospitals.

New Technology Add-On Payments (NTAP)

Citing the increased number of applications for NTAP over the past several years and noting the need for CMS staff to have time to review and analyze the applications, CMS finalized two changes to the NTAP application requirements. First, CMS will require that all applicants have a complete and active U.S. Food and Drug Administration (FDA) market authorization request in place at the time of NTAP application submission, if not already FDA approved. The FDA’s acceptance letter will serve as proof of a full and complete application. In addition, CMS proposes to move the FDA approval deadline from July 1 to May 1, beginning with applications for FY 2025.

HMA/Moran analysis: The stated aim of these CMS policy changes is to “increase transparency, facilitate public input, and improve the review process.” As a result of these modifications, products will need to be on the market longer before the NTAP payment begins, and fewer products will be eligible for the three full years of NTAP payments. Taken together, hospitals will have a shorter NTAP payment window for most products. The further tightening of FDA application and approval requirements runs counter to the efforts of various stakeholders to establish more flexible or additional NTAP application windows.

HMA and The Moran Company collaborate to monitor legislative and regulatory developments in the inpatient hospital space and assess the impact of inpatient policy changes on the hospital sector. HMA’s Medicare experts interpret and model inpatient policy proposals and use these analyses to help clients develop their strategic plans and their comments on proposed regulations. Moran replicates the methodologies CMS uses in setting hospital payments and models alternative payment policies to help support stakeholder comment letters and strategies. Moran also assists clients with modeling diagnosis-related group reassignment requests and to support innovative NTAP applications.

For more information or questions about the policies described above, contact Zach Gaumer ([email protected]), Amy Bassano ([email protected]), Clare Mamerow ([email protected]), or Kevin Kirby ([email protected]).

This week, our In Focus section is the second in a summer series of analysis and insights from Health Management Associates (HMA) on recent Medicare payment and policy developments. This week we dig deeper into the potential changes to the Medicare Shared Savings Program (MSSP) that were included in the 2024 Medicare Physician Fee Schedule proposed rule released earlier this month. Specifically, we highlight the impact these modifications could have on financial and operational decisions across the healthcare industry.

The proposed rule builds on the changes CMS finalized last year with the goal of increasing participation in the MSSP. The recommended changes are designed to appeal to more clinicians who treat a high proportion of underserved individuals. CMS estimates that the proposal will increase participation in MSSP by 10−20 percent. These changes are technical in nature and include:

• Expanding the physician lookback window for beneficiary assignment (also known as the pre-step) for primary care service to 24 months from 12 months
• Adding a third step to the claims-based beneficiary assignment methodology to recognize the role of nurse practitioners (NPs), physician assistants (PAs), and clinical nurse specialists (CNSs) in delivering primary care services
• Modifying the definition of “assignable beneficiary” to reflect the changes above

The overall impact of these modifications, which augment the existing methodology, is to increase the number of beneficiaries assigned to accountable care organizations (ACOs) under MSSP. More assignable beneficiaries could mean:

• More ACOs will meet minimum beneficiary requirements.
• Changes in assignable population may affect the hierarchical condition category (HCC) risk scores for the national assignable population, as well as the factors used to normalize risk scores and other risk adjustments.
• Changes in population distribution within regions that result in adjustments to ACO market share, benchmark trends, and update factors.

For ACOs participating in multiple programs, expanded assignment rules for MSSP, combined with the MSSP superseding other programs in assignment, may have downstream effects on programs in terms of assignment and performance.

Following is a more detailed explanation of the proposed changes.

24-Month Lookback for Primary Care Services

Extending the lookback for primary care services with a physician to 24 months from 12 will allow providers to capture additional primary care services codes related to the COVID-19 public health emergency (PHE) for benchmark and performance years. If the assignment window for a benchmark or performance year includes any month(s) during the PHE, then the additional primary care services codes must apply to all months in that window.

Three-Step Assignment Process

CMS plans to update its current two-step claims-based beneficiary assignment process to a three-step process, which would be effective for performance years beginning January 1, 2025. The proposed third step only would apply to beneficiaries who do not meet the pre-step requirement contingent upon whether they received at least one primary care service during the expanded window for assignment from an ACO-participating primary care or specialist physician or received at least one primary care service from a non-physician ACO healthcare professional during the 12-month assignment window.

Assignable Beneficiary Definition

The proposed rule includes updates to the definition of an assignable beneficiary to reflect the expanded 24-month lookback window for assignment and the new third step of a primary care service within the 12-month assignment window from a non-physician ACO professional (i.e., NP, PA, CNS).

The table below compares the current and proposed assignment processes.

Comparison of the Two- and Three-Step Processes

Financial Considerations

The proposed rule outlines that the expenditure lookback will remain 12 months. With a 24-month primary care service window and a 12-month expenditure lookback, ACO revenues could change. As a result, minimum savings rates could drop and the per-member per-month amount might change. In addition, the extended lookback could affect the regional average risk-adjusted spending, expenditure thresholds, and more.

Enhanced MSSP Track

CMS is seeking comment on a new track in MSSP with a higher level of risk and potential reward (e.g., somewhere between 80−100 percent). The purpose of the new MSSP track is to encourage ACOs that would not have otherwise participated in MSSP because of limitations on upside rewards. Higher potential rewards may also incentivize ACOs to develop new strategies, focus on specialty care integration, and reduce healthcare fragmentation to achieve savings.

CMS is seeking comment on the following:

• Policy/model design elements that could be implemented so that CMS could offer a higher risk track without increasing program expenditures
• Approaches to protect ACOs that serve high-risk beneficiaries from expenditure outliers and reduce incentives for ACOs to avoid high-risk beneficiaries
• The impact that higher risk sharing could have on care delivery redesign, specialty integration, and ACO investment in healthcare providers and practices

The HMA Medicare and value-based care experts will continue to analyze these proposals alongside other policy and reimbursement changes that affect Medicare providers. We have the depth and breadth of expertise to assist with tailored analysis, to model policy impacts, and to support clients that intend to draft comment letters on this proposed rule. For more information or questions about these policies and other changes in the 2024 Medicare physician fee schedule proposed rule, contact Amy Bassano ([email protected]), Andrea Maresca ([email protected]), and Melissa Mannon ([email protected]).