This week, our In Focus section reviews recently announced major policy updates from the Centers for Medicare & Medicaid Services (CMS) that affect the Medicare Advantage (MA) and Part D programs. First, on January 30, CMS released the final Risk Adjustment Data Validation Final Rule, a highly anticipated and controversial policy that establishes the agency’s approach to auditing MA Organizations’ (MAOs) risk-adjustment payments and collecting overpayments as needed.

Then, on February 1, CMS published the Calendar Year (CY) 2024 Advance Notice for the MA (Part C) and Part D Prescription Drug Programs. Between these two directives and the proposed MA policy changes CMS announced in December 2022, the Administration continues its efforts to actively manage Medicare Advantage and strengthen quality and oversight of the program. HMA’s summary of the December 2022 proposed rule is available here.

Below are some highlights of the 2024 Advance Notice. By law, CMS must notify the public of planned changes in the MA capitation rate methodology and risk adjustment methodology annually. The deadline for submitting comments to CMS is Friday, March 3, 2023.

Payment Impact in MA: CMS is projecting an average increase in revenue of 1.09 percent in plan payments from last year. This percentage increase is based on a net number that reflects multiple factors including growth rates, change in STAR ratings, and risk score trends.

Risk Adjustment: CMS is seeking to make some refinements to the Part C risk-adjustment model. For example, CMS will begin using the International Classification of Diseases (ICD)-10 classification system (instead of the ICD-9 classification system) and updated underlying fee for service data years. More specifically, diagnoses data years are being updated from 2014 to 2018, and expenditure years are being updated from 2015 to 2019 to reflect changes in costs.

Star Ratings: CMS is proposing updates and refinements to the Star Ratings program, including:

• Retiring the diabetes care-kidney disease monitoring and Medication Reconciliation Post-Discharge
• Expanding the age range for colorectal cancer screening measure to 45−75 years old to align with the preventive task force
• Adding the Care for Older Adults (COA)—Functional Status Assessment measure back to the Star Ratings, and introducing Kidney Health Evaluation for Patients with Diabetes (KED), Concurrent Use of Opioids and Benzodiazepines (COB), Polypharmacy Use of Multiple Anticholinergic Medications in Older Adults (Poly-ACH), and polypharmacy Use of Multiple Central Nervous System Active Medications in Older Adults (Poly-CNS)
• Introducing a case-mix adjustment to Part D medication adherence measures for diabetes, hypertension, and cholesterol.

CMS also is seeking to potentially align measures with other CMS programs. Specifically, the agency is introducing a “Universal Foundation” of quality measures, which is a core set of metrics aligned across programs. Additional information can be found in this New England Journal of Medicine “Perspective”.

Part D Impact

The Advance Notice also notifies plans on the changes to the Part D benefit occurring in 2024 as a result of the Inflation Reduction Act (IRA), including:

• Beginning in CY 2024, CMS will eliminate cost-sharing for Part D drugs prescribed to beneficiaries in the catastrophic phase of coverage.
• Beginning in CY 2024, the Low-Income Subsidy program (LIS) under Part D will be expanded so that beneficiaries who earn 135−150 percent of the federal poverty level and meet statutory resource limit requirements will receive the full LIS subsidies that were available only to beneficiaries earning less than 135 percent of the federal poverty level prior to 2024.
• During CY 2024, CMS will prohibit Part D plans from applying the deductible to any Part D covered insulin product and from charging more than $35 for each month’s supply of a covered insulin product in the initial coverage phase and the coverage gap phase.
• During CY 2024, CMS will prohibit Part D plans from applying the deductible to an adult vaccine recommended by the Advisory Committee on Immunization Practices and from charging any cost-sharing payments at any point in the benefit for these vaccinations.
• Beginning in CY 2024, CMS will cap the growth in the Base Beneficiary Premium at 6 percent. The Base Beneficiary Premium for Part D is limited to the lesser of a 6 percent annual increase or the amount that would otherwise apply under the prior methodology had the IRA not been enacted.

The HMA 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 across the multiple rules, and to support the drafting of comment letters on this notice.

If you have questions about the contents of CMS’s MA advance notice and how it will affect MA plans, providers, and patients, contact Julie Faulhaber (jfaulhaber@healthmanagement.com), Amy Bassano (abassano@healthmanagement.com), or Andrea Maresca (amaresca@healthmanagement.com).

This week, our In Focus section reviews the remaining Medicare payment and policy rules, finalized over the last several days by the Centers for Medicare & Medicaid Services (CMS), that will shape the landscape for the Medicare program in 2023 and beyond. These include the Physician Fee Schedule (PFS), the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System, the Home Health Prospective Payment System and Home Infusion Therapy Services updates, and the End Stage Renal Disease (ESRD) payment rules.

The final Medicare rules are directionally aligned with the agency’s policy priorities, including improving health equity and addressing the health and health-related needs of rural and underserved communities, promoting value-based, whole-person care, and removing barriers to behavioral health services, among other issues.

Across these rules, CMS took some steps where they have authority to mitigate reductions in payment rates for some provider types. Final payment and policy changes, however, will inform stakeholders’ federal advocacy efforts with Congress. Specifically, as part of an end of year legislative package lawmakers are considering legislative proposals to address the 2023 payment levels and their relationship to general inflation and the scheduled payment cuts for physicians. These issues and Medicare program solvency are expected to remain hot topics throughout 2023.

For today’s blog our HMA experts highlight a few of the finalized policy changes contained in the aforementioned regulations that will take effect on or after January 1, 2023. The HMA Medicare team will continue to analyze these policies for their immediate implications. Additionally, final policies and CMS’ response to commenters offer important insights that providers, vendors, and other stakeholders will want to incorporate in their future policy, financial, and operational strategies.

Medicare Physician Fee Schedule Final Rule

On November 1, 2022, CMS released final updates and policy changes for Medicare payments under the PFS, and other Medicare Part B issues. This rule largely finalizes many of the policies described in HMA’s earlier summary of the PFS proposed rule. Notably, CMS finalized updates to the Medicare Shared Savings Program (MSSP) largely as proposed. The agency expects these changes will renew and broaden provider interest in participating in the Medicare Shared Savings Program (MSSP). The new MSSP opportunities will support CMS’ work towards its goal that by 2030 100 percent of Medicare beneficiaries will be in a care relationship with accountability for quality and total cost of care. As expected, CMS also finalized proposals intended to enhance access to behavioral health services and strengthen the behavioral health model within the Medicare program. The changes represent a major shift in traditional Medicare’s coverage of services to identify and treat mental health conditions and substance used disorders. CMS plans to address payment for new codes that describe caregiver behavioral management training in CY 2024 rulemaking.

Notable policies that will be of interest to Medicare stakeholders include:

• Payment Rates and Inflation: The conversion factor used to determine payments to physicians through the PFS will be $33.06 in 2023, a decrease of $1.55 from the 2022 conversion factor. The final payment update reflects the following dynamics:
  • Expiration of a statutory one-year 3 percent increase in payments,
  • A statutory 0 percent payment update for CY 2023, and
  • A budget neutrality adjustment across all billing codes resulting from modifications to PFS weights which increased the relative value of primary care billing codes.

This cut to the conversion factor is driven by statutory requirements. The physician community is actively advocating to Congress that they need an update to their payments given the high levels of inflation and the lack of automatic updates built in to the PFS.

CMS also updated the information under the PFS to account for current trends in the delivery of health care, especially concerning independent versus facility-based practices. CMS indicated the updates and improved public use files respond to requests the agency has received to provide more granular information that separates the specialty-specific impacts by site of service. According to CMS, stakeholders are seeking to better understand how Medicare payment policies are directly responsible for the consolidation of privately-owned physician practices and freestanding supplier facilities into larger health systems.

• Medicare Shared Savings Program: CMS finalized significant updates to MSSP that are aligned with the agency’s overall value-based care strategy of growth, alignment, and equity. These policies include paying advance shared savings to certain new ACOs that can be used to support their participation in the Shared Savings Program, a health equity adjustment to an ACO’s quality score, a revised benchmarking methodology, and allowing longer periods of time for ACOs to transition to downside risk. This package of changes are intended to increase participation in MSSP and in particular participation in rural and underserved areas.
• Behavioral health: The final rule expands the types of behavioral health providers eligible for reimbursement under Medicare Part B. Marriage and family therapists, licensed professional counselors, addiction counselors, certified peer recovery specialists, and others will be able to provide behavioral health services while being under general supervision rather than “direct” supervision. Psychologists and social workers that are part of a primary care team will also be eligible for payment to help manage behavioral health needs. Additionally, CMS confirmed that Opioid Treatment Programs may bill Medicare for services performed by mobile units without obtaining a separate registration and increasing payment rates to Opioid Treatment Programs.
• Telehealth: CMS finalized several policies related to Medicare telehealth services, reflecting statutory requirements of the Consolidated Appropriations Act (CAA) of 2022 and the agency’s ongoing evaluation of temporarily available services. The changes related to the CAA of 2022 include extending for 151 days beyond the end of the Public Health Emergency (PHE) the following coverage provisions: allowing telehealth services to be furnished in any geographic area and in any originating site setting (including the beneficiary’s home); allowing certain services to be furnished via audio-only telecommunications systems; allowing physical therapists, occupational therapists, speech-language pathologists, and audiologists to furnish telehealth services; delaying the onset of the in-person visit requirements for mental health services furnished during the PHE; and making policy changes consistent with those named above under the payment systems for Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHC).
• Ground Ambulance: CMS affirmed that its expanded list of covered destinations for ground ambulance transports was for the duration of the COVID-19 PHE only. The regulation also finalized changes to the long awaited Medicare Ground Ambulance Data Collection Instrument, including clarifying to process for requesting exemption from reporting cost data through this collection device.

Outpatient Prospective Payment System and Ambulatory Surgical Care Payment System Final Rule

Also on November 1, 2022, CMS published the calendar year 2023 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System final rule. The rule presents new opportunities to address access to emergency services in rural communities and updates other outpatient and ASC policies.

• Payment rates and Inflation: CMS increased hospital outpatient and ambulatory surgical center payments by 3.8 percent in 2023 above 2022 rates. This reflects a 4.1 percent hospital market basket increase plus a 0.3 percentage point reduction for productivity and is consistent with Medicare’s 2023 hospital inpatient payment increase. The hospital industry has expressed deep concern to Congress and CMS that although the 4.1 percent market basket increase is as high as it has been in many previous years, it lags behind the measure of general inflation (October 2022 consumer price Index = 8.2 percent)
• Remote Behavioral health: CMS finalized its proposal to cover as an outpatient service remote behavioral health services provided by clinical staff of hospital outpatient departments, including critical access hospitals (CAHs), to beneficiaries in their homes. This policy was initially permitted under CMS’ COVID-19 PHE emergency rulemaking but this is now covered on a more permanent basis.
  • In 2023 beneficiaries would need to receive an in-person service within the 6 months prior to the first time hospital clinical staff provide the remote behavioral health services. CMS also is requiring an in-person service without the use of communications technology within 12 months of each behavioral health service furnished remotely.
  • The agency also finalized coverage of audio-only telehealth services in instances where the beneficiary is unable to use, does not wish to use, or does not have access to two-way, audio/video technology.
• Algorithm driven services: CMS finalized policy to pay separately (rather than bundle payment) for Algorithm-driven services that assist practitioners in making clinical assessments. This includes clinical decision support software, clinical risk modeling, and computer aided detection (CAD).
• Rural Emergency Hospitals (REH) : CMS finalized conditions of participation, payment rates, and Medicare enrollment procedures for the new REH provider type largely as proposed. The new REH program will be effective January 1, 2023. Federal policymakers believe the REH provider type could provide a more sustainable option for rural hospitals facing closure and to support access to care in rural and underserved communities. A previous HMA blog explains the payment and service parameters for the REH option.
  • Hospitals and health systems and the rural communities they serve will want to analyze the final requirements for health and safety standards, staffing, and physical environment and emergency preparedness and other expectations and balance these with community perspectives to determine the feasibility of this pathway.
• Site neutral payment policy: CMS finalized its proposal to exempt Rural Sole Community Hospitals (SCHs) from the Medicare policy which pays clinic visit services 40 percent of the OPPS payment rate when provided at hospital outpatient departments. Instead, CMS will pay these providers full OPPS rates for clinic visits.
• 340B Drug Program: CMS finalized a payment rate of Average Sales Price plus 6 percent under the 340B program.

Home Health Prospective Payment System Rate Update and Home Infusion Therapy Services Requirements

On October 31, 2022, CMS finalized the calendar year 2023 Home Health Prospective Payment System (HH PPS) payment rates. CMS projects that aggregate spending for home health agencies in 2023 will increase by 0.7 percent, compared to 2022. This is a significant update as compared to the 4.2 percent decrease the agency proposed earlier this year. The originally proposed payment cut was in part due to CMS’s requirement to implement at statutory budget neutrality requirement for the Patient-Driven Groupings Model. While there was fervent industry pushback and advocacy to eliminate the proposed payment adjustments, CMS instead used its discretionary authority to implement a phased approach to payment reductions. The first half will be effective in 2023, and the remaining permanent adjustment and any other potential adjustments needed to account for behavior change will be proposed in future rulemaking. CMS’ payment approach is expected to factor heavily in the overall stability and market dynamics within the home health agency industry in the months ahead.

Other notable final rule Home Health policies include:

• CMS finalized a permanent cap on wage index decreases to promote predictability in payments and smooth year-to-year changes. This was also implemented within the Inpatient Prospective Payment System.
• CMS finalized the Expanded Home Health Value-Based Purchasing (HHVBP) Model home health agency baseline year to CY 2022 and the Model baseline year to CY 2023.
• CMS will begin collecting data on the use of telecommunications technology on home health claims voluntarily starting on January 1, 2023, and on a mandatory basis beginning on July 1, 2023. Further details are expected to be issued in January 2023.

ESRD Prospective Payment System Final Rule

Also on October 31, 2022, CMS released the calendar year 2023 ESRD Prospective Payment System Final Rule. In addition to updating the payment rates, the rule updates requirements for the ESRD Quality Incentive Program (QIP). Looking ahead CMS plans to consider comments in response to several requests for information as it updates the ESRD QIP, works to align resource use with payment, ensure equitable access to technologies that improve health and quality of life.

Additional impactful policies for providers and stakeholders include:

• CMS did not approve any of the three new technologies which applied for pass-through payment. While CMS has created a payment mechanism to promote innovation, it has proved challenging to actually access this payment mechanism. That may slow investment in the space if CMS continues to set such a high bar.
• As laid out in the final rule, CMS remains on track to fold all oral drugs including phosphate binders into the bundle when the statutory ban expires in 2025.
• CMS received many comments for its RFI regarding TDAPA, the new drug pass-through payment program in ESRD. It is likely that CMS will dedicate significant attention to this topic in the next rulemaking cycle. In particular, the RFI focused on how CMS might add new money to the ESRD bundle when new drugs exit pass-through, including the potential for accounting for other drugs which are replaced by the new products.

While providers and stakeholders must analyze the immediate impact of the final rules, it is also essential to consider the broader context of CMS’ reimbursement and policy decisions.

Notably, there is more urgency for the provider community, Medicare Advantage plans, and the broader Medicare stakeholder community to prepare for the imminent end of the federal COVID-19 Public Health Emergency (PHE) declaration. Congress and the Administration have already begun to identify and make permanent certain flexibilities afforded during the COVID-19 PHE. Other flexibilities will be phased out or ended. Looking ahead to this transition, thoughtful preparation and consideration of the Medicare policy context and opportunities will be critical.

For additional information, please contact Amy Bassano, Mark Desmarais, Zach Gaumer, Andrea Maresca, and Aaron Tripp.