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.

This week, our In Focus section reviews the request for information (RFI) on ways to strengthen the Medicare Advantage (MA) program, released by the Centers for Medicare & Medicaid Services (CMS) on July 28, 2022. CMS’s intent is to better align the MA program with the agency’s Vision for Medicare and the CMS Strategic Pillars. The agency is strongly emphasizing the importance of stakeholder comments for this process. This openness to feedback presents MA plans, providers, and other stakeholders an opportunity to inform the agency’s early thinking as it considers potential regulatory actions impacting supplemental benefits, value-based contracting arrangements, risk adjustment, prior authorization, and marketing among other issues.

The questions are grouped into five categories. Throughout each section CMS seeks to better understand operational issues and insights from past or ongoing experiences tackling health equity issues in states and communities. Below we describe several of the questions and themes within each category:

1. Advance Health Equity: This extensive set of questions is intended help CMS better understand MA plans’ specific programs, screenings, benefits, and data that are components of addressing health equity and how the agency can better ensure that all MA enrollees receive the care they need. CMS also is seeking to better understand the collaborations and reimbursement arrangements between MA plans and providers that partner with community-based organizations, particularly as these arrangements become more central to efforts to address social drivers of health. The agency continues to focus on the dual eligible population, and asks specifically how it can support efforts by Special Needs Plans to provide targeted, coordinated care for enrollees.
2. Expand Access: Coverage and Care: In this section CMS explores MA plans’ marketing efforts, including the tools beneficiaries use and how plans differentiate themselves to beneficiaries, as well as factors for building and changing plan networks. Additionally, CMS poses many questions about supplemental benefits, including questions about how MA plans design supplemental benefits, how they inform beneficiaries about these benefits and whether there are evaluations or data elements that are used. CMS also anticipates receiving information on how it can ensure that enrollees have access to the covered behavioral health services they need, access and use of telehealth services.
3. Drive Innovation to Promote Person-Centered Care: Last year, CMS committed to ensuring that 100 percent of Medicare beneficiaries were in accountable care relationships by 2030. This will require changes for more than 30 percent of Medicare beneficiaries. To date, much of the attention around this goal has been focused on fee-for-services arrangement. With this RFI, CMS is turning its attention to value-based arrangements in MA. Specifically, it asks stakeholders about the factors driving MA plans and providers participating in value-based contracting. The agency wants to better understand the data that is crucial for value-based contracting and the experiences of MA plans in trying to align with value-based contracting in other Medicare programs/models, Medicaid, and the commercial payers. Stakeholders also have an opportunity to provide input on how CMS could better support efforts of MA plans and providers to appropriately and effectively collect, transmit, and use appropriate data as well as potential new tops of payment or service delivery models that could be tested.
4. Support Affordability and Sustainability: This set of questions turns to payment and competition in the marketplace. Specifically, the agency asks for input on potential methodologies to ensure risk adjustment is accurate and sustainable. CMS also wants to understand how stakeholders are thinking about the relationship between risk adjustment and health equity and addressing social determinants of health SDOH. The agency also wants to consider specific local market barriers to entry and advantages and disadvantages in different markets.
5. Engage Partners: This group of questions provides an opportunity for stakeholders to address information gaps for Medicare beneficiaries. The agency also is interested in how it could promote collaboration among MA stakeholders.

Why It Matters:

As the urgent issues with the pandemic continue to ease, CMS is turning its attention to proposals that could help refocus the Medicare program, including Medicare Advantage, to address health equity, quality, and affordability.

Stakeholders will want to carefully consider how they could use their RFI responses to shape the agency’s potential future proposals. Health plans, providers, community organizations, and vendors have an opportunity to highlight concepts, tools, and other innovations that have proven successful and scalable.

Specific concrete examples of the impact on Medicare beneficiaries would be highly valued by the agency. It will also be important to focus responses on regulatory policy changes and actions that CMS can advance with its existing authority.

HMA experts can assist stakeholders with their responses on these impactful issues including but not limited to:

• Innovations stakeholders have tried, barriers to concepts and needs they have identified, and other ideas on flexibilities for local partnerships and technology.
• Approaches to improve the MA experience for the Medicare and Medicaid dually eligible population and rural communities.
• New risk adjustment methods.
• Potential improvements to the MA quality program.
• Strategies for improving the beneficiary enrollment process.
• The value and opportunity of using technology and telehealth and how these impact the design of provider networks.
• Framing the factors and dynamics around MA plan and provider value-based contracting.

What’s Next

CMS is accepting comments on this RFI until August 31, 2022. The agency could use input it receives to develop proposals for at least the next two regular rulemaking cycles for the Medicare Advantage program, issue policy proposals outside of the normal rulemaking, or both.

HMA experts are available to provide strategic assistance with framing and developing responses as well as analysis to reinforce points and recommendations to the agency for this expedited RFI response timeline.

For questions please contact Amy Bassano, Managing Director, Medicare; Julie Faulhaber, Managing Director, Medicare and Dual Eligibles; Zach Gaumer, Principal; Andrea Maresca, Principal.

Meena Seshamani, deputy administrator and director of the Center for Medicare at the Centers for Medicare & Medicaid Services, will deliver a virtual keynote address on The Future of Medicare Value-Based Payments at the HMA conference, October 10-11, 2022, at the Fairmont Chicago, Millennium Park.

To register, visit https://conference.healthmanagement.com/.  For details on sponsorships and group discounts, contact Carl Mercurio, [email protected].

The overall theme of this year’s conference is How Medicaid, Medicare, and Other Publicly Sponsored Programs Are Shaping the Future of Healthcare in a Time of Crisis. More than 40 speakers are confirmed, and more than 400 people are expected to attend.

Today’s blog is the next in our series highlighting significant developments in the Medicare program. In our first article we covered the Centers for Medicare and Medicaid Services’ (CMS) calendar year 2023 Medicare Physician Fee Schedule (MPFS) proposed rule. This week we are highlighting a few key policy developments in the proposed rule that governs payment levels and policy updates for hospital outpatient departments and ambulatory surgical centers (ASCs).

As we discussed last week, this is a pivotal moment for the Biden Administration’s Medicare policy agenda. Because the rulemaking cycle takes about 18 months, CMS needs to begin the process of collecting input on new proposals this year if it intends to finalize proposals before the end of the President’s first term. Additionally, the CY2023 rule represents an important transition year for CMS as it navigates the COVID-19 related anomalies in the data used to calculate payment levels.

Health care plans, providers, and facilities are continuing to transition to value based payment strategies, making it increasingly important to assess the entire environment of Medicare payment rules as these payment systems are the basis of financial benchmarks, quality incentives, and other key components of value-based payments. In addition, these payment rules provide insight into the cost pressures, incentives, and areas of misalignment throughout the health care system.

HMA experts are analyzing and closely tracking several issues in the CY 2023 hospital outpatient prospective payment system (OPPS) proposed rule. A brief summary of some of the most important proposed policy changes for the outpatient hospital setting are included below and highlight many of the Administration’s top health care priorities.

1. Policies to sustain access and address health disparities in rural communities.
2. Enhancing Medicare’s behavioral health payment and access policies beyond the COVID-19 public health emergency.
3. Uncertainty in the hospital outpatient prospective payment system (OPPS) rate increase due to future implementation of changes in 340B payment.
4. Increasing transparency of consolidation and mergers in the marketplace to help advance quality and affordability.

The remainder of our post delves into these issues and other notable proposals. Our post also includes analysis of the implications of these policies for stakeholders deserving.

Key Action Items for Stakeholders

The CY 2023 OPPS Proposed Rule was published on July 15, 2022, and all comments from stakeholders are due to CMS by September 13, 2022. We anticipate CMS will release their Final Rule in late fall 2022, before the new rules are implemented January 1, 2023.

The public comment period is also an important window of opportunity during which stakeholders can analyze the impact of CMS’s proposed policies, assess the proposals against other applicable pending federal and state payment policies, and consider how the proposals may impact business decisions. Further, the public comment period is essential for CMS to deepen its understanding of the impact of its policies on stakeholders. The agency benefits from hearing stakeholder’s perspectives, viewing their quantitative and legal analyses, and understanding the general stakeholder environment.

Rural Emergency Hospitals: Definition and Payment

The Consolidated Appropriations Act of 2021 (CAA) established a new provider type called Rural Emergency Hospitals (REHs) beginning in 2023. REHs are facilities that convert from either a critical access hospital (CAH) or a rural hospital with less than 50 beds, by choosing to close their inpatient capacity. Instead, these facilities provide emergency department services, outpatient services, post-hospital extended care services, and other defined services.

While the statute specifies many foundational aspects of REHs, CMS was given the authority to further define REH eligibility status and to specify the unique reimbursement mechanisms for REHs. All of these components will be vital to a provider or entity’s decision to pursue REH status.

On June 30, CMS released the first component: Conditions of Participation (CoPs) for REHs, which defined REH status within the Medicare program. Within the CY 2023 OPPS Proposed Rule CMS proposed to define reimbursement and several other key components of REHs. Below we detail the key elements of REH reimbursement. In HMA’s blog next week we will offer greater detail on the COP and reimbursement policies.

REH policies proposed in the CY 2023 OPPS Proposed Rule:

• REHs will receive a monthly facility payment of approximately $268,000 (or more than $3 million per year) beginning in CY 2023. 
• REHs will receive a 5 percent payment increase for all services covered under the Medicare OPPS.  
• REHs may provide outpatient services that are not otherwise paid under the OPPS (e.g., the Clinical Lab Fee Schedule) as well as post-hospital extended care services furnished in a unit of the facility that is a distinct part of the facility licensed as a skilled nursing facility (SNF).
• Beneficiaries served at REHs will not be charged a copayment on the additional 5 percent OPPS payments, but standard OPPS cost-sharing requirements would still apply.
• REHs must comply with all applicable provider enrollment provisions in order to enroll in Medicare.
• REHs will have a unique quality reporting program distinct to REHs, in order to reduce reporting burden on these smaller facilities. CMS seeks feedback from stakeholders on the measures used for the REH quality reporting program.
• REHs will be provided an exception from the Physician Self-Referral Law (commonly known as the “Stark Law”).

Takeaway: The creation of REHs is both a significant change for the Medicare program and potentially a unique opportunity for small rural hospitals and health systems which own/operate rural hospitals. The Congress and CMS believe this model will address access to care concerns and health disparities present in rural communities. Many assert that under the REH approach, hospitals and health system providers serving rural communities may have greater flexibility to support the rural communities they serve.

Look for our additional analysis of the set of proposed REH policies next week.

Mental Health Services Furnished Remotely by Hospital Staff

For CY 2023, CMS proposes several updates to its remote services policy to plan for a transition from temporary policies enacted during the PHE to when the PHE is declared over. CMS proposes to:

• Allow clinical staff of a hospital to conduct remote mental health and substance abuse services and to designate these services as hospital outpatient department services for purposes of reimbursement. Patients will be permitted to be in the homes and hospital clinical staff must conduct the service from inside the hospital facility. Further, CMS proposes new hospital outpatient codes for these services, and CMS will not permit these outpatient services to be conducted (and billed) in tandem with physician fee schedule services.
• The agency will require an in-person service within 6 months prior to the initiation of the remote service and then every 12 months thereafter. CMS will allow exceptions to the in-person visit requirement based on beneficiary circumstances.
• The agency is also proposing that audio-only interactive telecommunications systems may be used to furnish these services when the beneficiary is not capable of, or does not consent to, the use of two-way, audio/video technology.

Takeaway: As CMS wrote in the proposed rule, many beneficiaries may be receiving mental health services in their homes from hospital or critical access hospital staff during the COVID-19 PHE. The policy update could help minimize disruptions in continuity of care that might otherwise occur following the end of the PHE. The proposals also reflect CMS’ desire to adapt to changing beneficiary preferences and new methods of providing services that have evolved during the COVID-19 PHE.

Hospitals and health systems may benefit from these proposals because it will maintain and expand patient-provider access points and care coordination after the patient has left the hospital. Stakeholders will need to continue to assess beneficiary utilization of services furnished remotely, potential staffing changes to support these services, and community-specific access needs for remote mental health services. Stakeholders may have important perspectives to offer CMS through the regulatory comment proceed as the agency determines whether to finalize a requirement that hospital clinical staff be physically located in the hospital when furnishing services remotely using communications technology.

Payment Policies  

CMS is proposing to update OPPS payment rates for hospitals and ASCs that meet their respective applicable quality reporting requirements by 2.7 percent. This update reflects the following factors:

• Projected hospital market basket percentage increase of 3.1 percent; and  
• A 0.4 percentage point reduction for projected multifactor productivity.

In the context of the OPPS, CMS proposes to increase the OPPS conversation factor by 2.7 percent from CY 2022 to CY 2023, from $84.18 to $86.79. CMS estimates this will increase OPPS payments to providers from CY 2022 to CY 2023 by $1.8 billion.

In the context of ASCs, CMS estimates a proposed increase to the ASC conversation factor by 2.7 percent from CY 2022 to CY 2023, from $49.91 to $51.31. CMS estimates this change will increase industry-wide payments from CY 2022 to CY 2023 by $130 million. In addition, CY 2023 is the final year in which CMS will apply the productivity-adjusted hospital market basket update to ASC payment system rates for an interim period of 5 years (CY 2019 through CY 2023).

Consistent with CMS’s methods for updating other Medicare prospective payment systems during the 2023 regulatory cycle, the agency proposes to use claims data from CY 2021 and hospital cost report data from the June 2020 Healthcare Cost Report Information System (HCRIS) to update payment rates for CY 2023. Some stakeholders have expressed concern during this regulatory cycle that claims data continue to include anomalous trends influenced by covid cases and the cost data do not accurately reflect covid-related costs because the data primarily are associated with pre-COVID time period. 

340B Payment Policy

CMS’s proposed rule acknowledges the recent Supreme Court decision in American Hospital Association v. Becerra (No. 20-1114, 2022 WL 2135490), which will have a significant impact on the 340B program. However, given the recency of this decision the agency formally proposed to maintain the current payment rate of Average Sale Price (ASP) minus 22.5 percent for drugs and biologics acquired through the 340B program.

In response to the decision, CMS stated that the agency will adjust 340B payment rates within the CY 2023 final rule. In its recent ruling, the Supreme Court held that HHS may not vary payment rates for drugs and biologicals among groups of hospitals without having surveyed hospitals’ acquisition costs. The decision relates to payment rates for CYs 2018 and 2019 but has implications for the CY 2023 rates.

CMS also stated that it anticipates applying a 340B payment rate of ASP plus 6 percent for specified drugs and biologics in the CY 2023 final rule. This would likely result in a budget neutrality reduction approaching 5% in the OPPS conversion factor.

Takeaway: Hospitals and federally qualified health centers (FQHCs) receiving 340B reimbursements will view the court ruling and potential increase to 340B payment rates as positive. However, it remains unclear at what exact level 340B payments will be set. Therefore, stakeholders may want to comment on the CY2023 policy options CMS is considering. Additionally, stakeholders should plan for CMS to conduct a survey of acquisition costs as it considers newly proposing changes to the payment rates. It remains possible that CMS will continue to apply the 340B cut for 2023 in light of a 2020 survey of hospital acquisition cost that it conducted. Future budget neutrality adjustments may also be necessary for any payments that are returned to hospitals due to the overturning of the 340B cut for 2018 and 2019.

Additional Issues for Stakeholder Consideration

In addition to the financing and policy issues discussed above, the wide-ranging rule contains numerous other policy proposals with direct and indirect implications on Medicare providers, beneficiaries, and other stakeholders. Table 1 provides a snapshot of some of the issues that warrant further consideration.

 Table 1. Other Notable Proposed Changes Impacting Health Care Providers and Stakeholders

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, and to support the drafting of comment letters to this rule.

Over the course of three weeks CMS has made a series of Medicare announcements that arguably contain the most sweeping changes to the Medicare program proposed thus far by the Biden Administration. With final Medicare payment rules on the horizon, CMS is poised to further the Biden Administration’s directional imprint on the Medicare program. The recent releases include:

• A new opportunity focused on rural hospitals designed to preserve –and likely expand – access to services in rural communities;
• A proposed payment and policy rule for outpatient and ambulatory care services also lays the groundwork for new transparency and competition initiatives;
• Significant updates to most aspects of Medicare’s accountable care organizations; and
• New opportunities to support oncology providers in moving towards a whole person approach to services through the Enhancing Oncology Model.

For this blog our HMA experts focus on the 2,000+ page Calendar Year (CY) 2023 Medicare Physician Fee Schedule (PFS) proposed rule released to the public on July 7, 2022. The Medicare Physician Fee Schedule and its accompanying proposed policy changes is a significant tool CMS uses to advance annual updates in reimbursement policy and to consider other policy changes in traditional Medicare that have implications for the program writ large.

Generally, in the CY 2023 proposed rule the Administration is continuing to broaden and deepen the way it applies its health equity framework to the entirety of the proposals, strengthens access to behavioral health services, and reinvigorates value-based care through the Medicare Shared Savings Program’s (MSSP) Accountable Care Organizations (ACOs) structure.

The rule includes a myriad of other policy proposals. We highlight a few of the key ones below. For example, CMS must make updates to the physician fee schedule conversion factor which has ripple effects throughout the Medicare program. The agency is also proposing updates to reimbursement for certain telehealth services and coverage enhancements for hearing and dental services, among many others proposals.

Key Action Items for Stakeholders

All comments to the rule are due to CMS by September 6, 2022. CMS plans to publish the final rule in late fall 2022.

The public comment opportunity is essential for CMS to deepen its understanding of the impact of the proposals. The agency considers stakeholders’ concerns, questions, and other feedback as it makes decisions on which proposals to finalize, modifications to the proposals, or to defer implementation.

This is also an important window of opportunity during which stakeholders can analyze the impact of the proposals and the business decisions these may require, plan advocacy around the proposed changes, and prepare for implementation which generally will occur on January 1, 2023.

Many leading national provider organizations are making their concerns with the annual payment update a central piece of their advocacy agenda in Congress. These concerns will add to the long list of structural issues that Congress is expected to debate leading up to and well after this year’s mid-term elections. However, providers still need to weigh the inflation pressures and uncertainty surrounding Congress’ ability to intervene with new opportunities in the Medicare program and Medicare Advantage market.

Medicare Shared Savings Program

CMS proposes significant changes to the Medicare Shared Savings Program (MSSP), which aredesigned to accelerate provider and Medicare beneficiary participation in accountable relationships. Last year, CMS established a goal of all Medicare beneficiaries will be in a care relationship with accountability for quality and total cost of care by 2030. These proposals are designed to make further progress on achieving that goal. First, CMS proposes several changes to MSSP which respond to criticisms that the program is not sufficiently flexible to support Medicare providers who may have different levels of sophistication with respect to risk-sharing and available capital for practice transformation. Additionally, it reflects federal officials understanding of the impact social care services can have on Medicare beneficiary health and well-being.

Proposed changes to the MSSP include the following:

• Investment in New Accountable Care Organizations (ACOs): CMS proposes to provide a one-time fixed payment of $250,000 and quarterly payments for the first two years of the 5-year agreement period for certain ACOs. Eligible ACOs are those that are low revenue ACOs, inexperienced with performance-based risk Medicare ACO initiatives, new to MSSP and that serve underserved populations.
  • The initial application cycle to apply for advance investment payments will occur during CY 2023 for a January 1, 2024, start date.
  • The advance investment payments would increase when more beneficiaries who are dually eligible for Medicare and Medicaid or who live in areas with high deprivation or both, are assigned to the ACO.
  • The advance investment payments would be recouped once the ACO begins to achieve shared savings in their current agreement period and in their next agreement period, if a balance persists. If the ACO doesn’t achieve shared savings, CMS would not recoup the funding.
  • Funds would be available to address the social and other needs of people with Medicare.
• CMS would also provide greater flexibility in the progression to performance-based risk for new ACOs to ease the transition to and likelihood of success under risk arrangements. Specifically, for ACOs with agreement periods beginning on January 1, 2024, and in subsequent years, ACOs inexperienced with performance-based risk could participate a one-side risk model for up to 7 years.
• Current ACO Participants: For performance years beginning January 1, 2023, and in subsequent years, CMS may allow certain currently participating ACOs to elect to continue in their glide path agreement.
  • CMS intends to incorporate an adjustment for prior savings that would apply in the establishment of benchmarks for renewing ACOs and re-entering ACOs
• CMS also is proposing several changes to the benchmark methodology to better support long term participation in MSSP and less capitalized ACOs for agreement periods beginning January 1, 2024.  This includes adjusting the benchmark for prior savings and reducing the impact of the negative regional adjustment.
  • CMS also plans to include a fixed, prospectively projected administrative growth factor (referred to in this proposed rule as the Accountable Care Prospective Trend (ACPT)), into a three-way blend with national and regional growth rates to update an ACO’s historical benchmark for each performance year (PY) in the ACO’s agreement period.
• CMS requested comments on alternative benchmarking policies: a) exclude the ACO’s own assigned beneficiaries from the assignable beneficiary population used in regional expenditure calculations, b) expand the definition of the ACO regional service area to use a larger geographic area to determine regional FFS expenditures, or c) both.
• Beginning on January 1, 2023, and subsequent years, CMS is planning to change the all-or-nothing approach to determining an ACO’s eligibility for shared savings based on quality performance to allow for scaling of shared savings rates for ACOs that fall below the 30th/40th percentile quality standard threshold required to share in savings at the maximum sharing rate. To be eligible ACOs must meet minimum quality reporting and performance requirements.
• CMS also plans to update MSSP quality-measurement policies, including a new health equity adjustment that would award bonus points for high quality measure performance and serving higher proportions of underserved or dually eligible beneficiaries.

Behavioral Health Changes

The CY2023 MPFS also seeks to enhance access to behavioral health services and strengthen the behavioral health model within the Medicare program. The proposals include:

• Creating an exception to supervision requirements, allowing marriage and family therapists, licensed professional counselors, addiction counselors, certified peer recovery specialists, and others to provide behavioral health services while being under general supervision rather than “direct” supervision.
• Paying psychologists and social workers to help manage behavioral health needs as part of the primary care team.
• Establishing new payments for team-based, comprehensive management and treatment of chronic pain.
• Enhancing the ability of ACOs to address social, behavioral, and physical health care needs, by making advanced shared savings payments to new, smaller ACOs. CMS states these funds could be used to hire behavioral health practitioners and address the social needs, such as food and housing.
• Clarifying 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.

These proposed changes represent a major shift in traditional Medicare’s coverage of behavioral health services. If finalized and in combination with changes to coverage for telehealth services, these could have a meaningful impact for Medicare beneficiaries including those in rural communities. ACOs, health systems, and other providers may have greater opportunities to include behavioral health practitioners in their model of care.

Payment Issues

Payments to physicians through the PFS are proposed to decline by roughly 4 percent from CY 2022 to CY 2023. The bulk of this decline stems from CMS’s proposal to reduce the PFS conversion factor (CF) by nearly 4.5 percent.  In dollar terms the proposed 2023 CF would be $33.08, which is $1.53 lower than the 2022 CF. This policy change to the CF reflects three dynamics, two of which are changes directly mandated by the U.S. Congress:

• 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.

Payment changes contained within the CY 2023 proposed rule result in differential impacts for individual physician service codes and physician specialties. While payment rates for many codes are proposed to decline uniformly by roughly 4 percent, payment rates for some services codes may decline more, such as for some physician inpatient hospital care codes that may decline more than 10 percent. In the context of physician specialty type, CMS estimates 5 percent payment increases on average for infectious disease and a 3 percent increases on average for internal medicine and geriatrics. By contrast, CMS estimates a 2 percent decline on average for clinical psychology and a 3 percent decline on average for radiology.   

Notable Issues for Stakeholder Consideration

In addition to the major structural and financing issues discussed above, the wide-ranging rule contains numerous other policy proposals with direct and indirect implications on Medicare providers, and beneficiaries, and other stakeholders. Table 1 provides a snapshot of some of the issues that warrant further consideration.

 Table 1. Other Notable Proposed Changes Impacting Health Care Providers and Stakeholders

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, and to support the drafting of comment letters to this rule.