Medicare

Medicare

CMS proposes regulation for rural emergency hospitals

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On June 30, 2022, the Centers for Medicare & Medicaid Services (CMS) released a proposed regulation establishing the Conditions of Participation (CoPs) for a new hospital provider type, Rural Emergency Hospitals (REHs). The REH concept was first developed by the Medicare Payment Advisory Commission (MedPAC) and subsequently mandated by Congress through the Consolidated Appropriations Act (CAA) of 2021 to address the growing concern over closures of rural hospitals.

REHs provide an opportunity for Critical Access Hospitals (CAHs) and rural hospitals to improve the way care is delivered in their communities, maintain access, and avert potential closure by choosing to focus on the service offerings that are most essential to their communities, such as emergency services, observation care, and additional medical, behavioral, and maternal outpatient services. Importantly, the REH concept enables facilities to maintain a hospital designation absent inpatient capacity thereby ensuring that rural communities retain access to services. This proposed regulation is a significant milestone in CMS’ work to implement the REH designation and their novel payment methodology by their mandated start date of January 1, 2023.

The REH concept is expected to help address the observed health inequities that arise when rural communities lack access to hospitals and other providers. Obtaining an REH designation could be an opportunity for many independent hospitals and delivery systems to strategically reshape themselves in line with their community’s needs while receiving payments from Medicare for doing so.

Within CMS’ proposed regulation, the agency proposes to establish a novel set of REH CoPs which will define the parameters of the REH designation. The REH CoPs closely align with the current CAH CoPs in most cases, while considering the uniqueness of REHs and the statutory requirements. In some instances, the proposed REH policies closely align to the current hospital and ambulatory surgical center standards, such as the polices for outpatient services’ requirements and life safety code, respectively.

As a part of this proposed regulation, CMS seeks input from the rural community on a few key aspects of the REH designation, including:

  • The specific proposed REH standards, including the ability of an REH to provide low-risk childbirth-related labor and delivery services and whether the agency should require REHs to provide outpatient surgical services in the event that surgical labor and delivery intervention is necessary.
  • Whether it is appropriate for an REH to allow a physician, physician associate, nurse practitioner, or clinical nurse specialist, with training or experience in emergency medicine, to be on call and immediately available by telephone or radio contact and available on site within specified timeframes.

Updates to CoPs for Critical Access Hospitals

Also within this draft regulation CMS proposes to update the CoPs for CAHs by: (1) adding a definition of primary roads to the location and distance requirements; (2) establishing a patient’s rights CoP; and (3) allowing CAHs that are a part of a larger health system (containing other hospitals and/or CAHs) to unify and integrate their infection control and prevention and antibiotic stewardship programs, medical staff, and quality assessment and performance improvement programs (known as QAPI) to ensure consistent and safe care.

What’s Next

CMS is accepting comments on this rule until August 29, 2022. CMS intends to propose additional policies related to Medicare enrollment, payment, and quality reporting in the upcoming Calendar Year 2023 Outpatient Prospective Payment System/Ambulatory Surgery Center proposed rule. CMS will develop final policies for this program later this year.

For more information about this proposed regulation including how to submit comments and how the REH concept may impact the hospital industry and patients in rural communities please contact our Medicare team who have knowledge in Congressional, MedPAC and CMS policy and operations featured below.

View CMS’s proposed Rural Emergency Hospital and Critical Access Hospital Conditions of Participation.

Ohio releases next generation MyCare Ohio program RFA

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This week’s In Focus section delves into the Next Generation MyCare Ohio managed care program, spotlighting the request for applications (RFA) that the Ohio Department of Medicaid (ODM) released on May 31, 2024. The MyCare Ohio Program, which serves people who are dually eligible for both Medicaid and Medicare, is undergoing a substantial transformation. Transitioning from the financial alignment initiative (FAI) demonstration model used in 29 counties, it is evolving into a statewide, fully integrated dual eligible special needs plan (FIDE-SNP) model. This shift is more than procedural; it signifies a pivotal moment of transition to new federal D-SNP requirements.  

Background 

The MyCare Ohio Program launched in May 2014 as a Centers for Medicare & Medicaid Services (CMS) FAI demonstration. MyCare Ohio integrates Medicare and Medicaid benefits for dually eligible members enrolled in competitively selected MyCare Ohio managed care plans, providing one care coordinator and streamlined communication and services. It serves 150,000 individuals in 29 counties.  

CMS is sunsetting all FAI demonstration programs on December 31, 2025, prompting ODM to convert to the FIDE-SNP model.  

Next Generation RFA 

The MyCare Ohio Program will convert to the Next Generation MyCare Ohio Program in January 2026. ODM is modeling portions of the program after the state’s Next Generation Medicaid managed care program. The Next Generation MyCare Ohio Program initially will be implemented in the 29 currently participating counties and then expand statewide, covering a total of 250,000 eligible individuals. Medicaid managed care organizations (MCOs) that serve the program will need to become CMS-approved FIDE-SNPs. MCOs awarded a Next Generation MyCare Ohio contract will need to notify CMS of their intent to establish a statewide FIDE-SNP in Ohio by fall 2024 to begin operations in January 2026. 

ODM anticipates selecting up to four Next Generation MyCare Ohio MCOs to serve enrollees statewide, though a decision on the number of plans will be finalized as awards are made and based on what is most advantageous to the state.   

MCOs will need to develop a member-focused strategy with care coordination as a priority. MCOs will also increase focus on behavioral health coordination. According to ODM, goals for the Next Generation program include: 

  • Focusing on the individual 
  • Improving individual and population wellness and health outcomes 
  • Creating a personalized care experience 
  • Supporting providers in continuously improving care 
  • Improving care for people with complex needs to promote independence in the community 
  • Increasing program transparency and accountability 

Next Generation MyCare will advance these goals through a population health approach, designed to address inequities and disparities in care.  

The program will enroll dually eligible individuals ages 21 and older. This is a change from the current program, which enrolls dual eligibles who are 18 years old and older. The eligible age increase is being made to align with the Medicaid early and periodic screening, diagnostic, and treatment (EPSDT) benefit.  

The new program also will continue to offer all the same services available through Ohio’s home care, PASSPORT (long-term services and supports), and assisted living waivers. 

Evaluation 

Applications initially will be reviewed to confirm the applicant meets the mandatory requirements. Applicants who meet the mandatory requirements will proceed to review and evaluation of responses to application questions that fall into seven topic areas, with a total of 1,000 available points (see Table 1).  Of note, if an applicant is not currently serving as either a Next Generation MCO or a MyCare Ohio MCO, the applicant will receive zero points for qualifications and experience. Organizations that have yet to participate in at least one of these programs should consider the effect on their total score.  

Table 1 

Current Market 

Five MCOs—CVS/Aetna, CareSource, Centene/Buckeye, Molina, and United—participate in the current MCOP, with two or three of them participating in each of the seven regions. 

Timeline 

MCOs should submit a notice of intent to apply by June 21. Proposals are due August 2, and awards will be issued October 8. Implementation is scheduled for January 1, 2026.  

Link to RFP 

Connect With Us  

Ohio is one of several states transitioning from a FAI demonstration at the end of December 2025. Additionally, the 2025 Medicare Advantage Final Rule includes new policies affecting D-SNPs that could reshape the integrated care plan landscape in many states.  

Health Management Associates (HMA) will host a webinar on June 20, 2024 titled “D-SNP growth and integration: key implications of the 2025 CMS final rule” to review the current landscape and federal changes that will affect D-SNPs in 2025 and beyond. The session will feature an analysis of the new regulations and a discussion of the critical strategic and product impacts on Medicare organizations that offer D-SNPs or are considering offering D-SNPs. Attendees also will have the opportunity to engage with the panelists during a Q&A session. Watch the replay now.

Contact our experts below for details about the nationwide D-SNP rules and landscape.  

Federal healthcare quality initiatives: recent developments shaping the landscape

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This week, our In Focus section considers the increasing emphasis on quality at all levels of our healthcare system, especially for work that affects federally funded health insurance programs.  

The Universal Foundation Measure Set  

The 2024 Centers for Medicare & Medicaid Services (CMS) Quality Conference, April 8−10, in Baltimore, MD, continued to highlight the harmonizing of quality measures across CMS programs and promotion of CMS’s universal foundation measures. These metrics capture quality across six domains for adults and four domains for children. By promoting and integrating these well-established measures across all CMS programs, end users can align priorities across programs and help to reduce burden on providers and health plans being assessed.   

Medicaid has long been a leader in incorporating the universal foundation measures, having used many of them in managed care contracts, health homes, and other arrangements that include a quality assessment component for the past 20 years. Earlier this year, many universal foundation measures, including those pertaining to behavioral health, became part of the mandatory core measure set that all states must report to CMS as required in the SUPPORT for Patients and Communities Act—comprehensive federal legislation that addresses the opioid epidemic. Mandatory reporting will allow Congress, the Medicaid and CHIP Payment and Access Commission (MACPAC), and other stakeholders to better understand the impact of federal investments on quality of care for Medicaid and CHIP enrollees. 

New Developments in Medicaid’s Approach to Quality  

Forward momentum is evident in other areas of healthcare quality as well. A significant federal milestone in quality of care was included in the Medicaid Managed Care Rule released in April 2024, which required states to design a quality rating system (QRS) and submit their methodology to CMS for approval. The QRS is intended to be user-friendly and help Medicaid members to pick a plan and monitor its quality performance. States will be able to use the QRS as a monitoring and oversight tool to compare plan performance. Not only will a QRS help improve Medicaid’s accountability to states, enrollees, and policymakers, but it also promotes transparency for all end users and the public. At present, Medicaid quality measures are reported by state rather than by plan. Plan performance in Medicaid is typically captured in a state’s external quality review organization (EQRO) annual report, which may impede the ability of most users to extract, compare, and digest information.   

Another federal initiative is the Medicaid Access Rule, also released in April 2024, to help state Medicaid programs move toward public reporting of quality and compliance measures in home and community-based services (HCBS). In 2022, CMS released more than 90 measures that could be used to assess quality of care in Medicaid HCBS waiver populations. Under the rule, CMS will identify a subset of HCBS quality measures in 2026 and the technical specifications for these measures will be made available publicly and updated as needed. Similar to the CMS Child and Adult Core Sets, states will have an opportunity to implement these measures and CMS can use those outcomes to create HCBS scorecards by state. 

Medicare Advantage Star Ratings Program 

Finally, CMS is incorporating the health equity index (HEI) into the Medicare Advantage Star Rating system. The HEI contributes to a plan’s potential bonus and helps level the playing field for plans that enroll and provide services to underrepresented or at-risk populations. The HEI will account for enrollees who are dually eligible for Medicare and Medicaid, individuals with disabilities, or members with a low-income subsidy (LIS). The HEI also assesses plan-level performance for these specialized populations. Allowing plans to earn a better bonus for delivering high-quality services to these populations helps to mitigate adverse selection and reward plans for care that may be resource intensive. 

What’s Next 

Accountability for quality is beginning to emerge in the form of value-based contracting, incentive payments, and other forms of reimbursement focused on reducing disparities and improving outcomes. Health plans, providers, state agencies, vendors and other interested stakeholders need to have a strategy for quality improvement that reflects evolving federal and state quality priorities, reporting systems, and improvement processes.  

HMA’s quality and accreditation team includes experts in the quality space from a variety of backgrounds, including National Committee for Quality Assurance (NCQA) surveyors, former HEDIS auditors, health plan and provider senior quality staff (vice presidents and chief quality officers), and former Medicare/Medicaid leaders. To learn more about implementing quality programs or to explore options for leveraging quality measures to maximize your organization’s value-based contracts, win requests for proposals, increase membership, and optimize member experience, contact our featured expert below.

Election-driven shifts in healthcare innovation 

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Innovation is the source of progress, driving advancements across industries and shaping the way we live, work, and interact. However, the landscape of innovation is not static—it ebbs and flows, influenced by various factors including political leadership. This year’s presidential election may bring forth significant shifts in priorities, policies, and funding that directly impact innovation efforts like Center for Medicare & Medicaid Innovation (CMMI), state waivers and the Advanced Research Projects Agency for Health (ARPA-H). 

CMMI serves as a catalyst for testing innovative payment and service delivery models within Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). With a new administration comes the potential for shifts in CMMI’s focus and funding priorities. For instance, a president (or his/her appointees) can direct CMMI to design payment models, reimbursement structures that can lead to higher quality outcomes and more cost-effective healthcare delivery. The policy priorities and values that undergird a president’s healthcare agenda can shape the kinds of innovation that CMMI drives. Current CMMI initiatives have prioritized value-based care approaches linking payment to outcomes, improving equity of care across race, gender, and geography, and patient-centered care models designed to support particularly high cost, complex conditions; the priorities of the previous administration included focus on substance abuse disorders, kidney disease, and diabetes.  

CMS also grants waivers to states, such as Section 1115 waivers for Medicaid or 1332 waivers for insurance marketplaces, that offer flexibility to experiment with innovative healthcare solutions. The values and policy approaches of a new president will influence the degree of regulatory flexibility and the types of experimentation that will be approved. For example, several states have recently received approval on Medicaid waivers that encourage community-based approaches to whole person care, wrapping together healthcare coverage, benefits, delivery, with new support services that address upstream barriers to health. 

ARPA-H, a new unit within the National Institutes of Health focuses on investments in “break-through technologies and broadly applicable platforms, capabilities, resources, and solutions that have the potential to transform important areas of medicine and health for the benefit of all patients,” holds immense potential for driving breakthroughs in healthcare by funding innovation that “cannot readily be accomplished through traditional research or commercial activity.” The types of projects funded by ARPA-H could be directly impacted by the policy and budget priorities of whomever is president in 2025 and their interest in promoting collaboration between government, academia, and industry to address complex health challenges. A prime example of a potentially impacted area is the emphasis on cancer research by the Biden Administration. This focus may shift drastically with a change in leadership.  

For healthcare innovators looking to stay informed and adaptable amidst these potential policy changes, HMA has two opportunities of interest: The HMA Fall conference, and a DC Direct subscription.  On October 7-9, healthcare leaders and HMA experts will gather for the 2024 Fall Conference: Unlocking Solutions in Medicaid, Medicare and Marketplace, focused on innovation in public programs. Our keynote speaker Darshak Sanghavi, MD is, a foundational leader at ARPA-H tasked with developing health programs that challenge how we think about healthcare innovation inside and outside government. Conference registration is now open – register today.

Leavitt Partners (LP), an HMA Company, guides clients who need to more closely track federal policy and regulatory activity and know when and how to influence the process. DC Direct, an exclusive offering from LP, provides timely information and insights to elevate your knowledge from simply scratching the surface of understanding to becoming part of the fabric of change. 

HMA opens registration for fall conference, “Unlocking Solutions in Medicaid, Medicare, and Marketplace”

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Unlock Solutions in Medicaid, Medicare, and the Marketplace at HMA’s Fall Conference, October 7−9 

This week, we preview what to expect at the 7th annual Health Management Associates, Inc. (HMA) Fall Conference “Unlocking Solutions in Medicaid, Medicare, and Marketplace,” October 7−9, 2024, at the Marriott Marquis Chicago, IL. Learn more about our Keynote Speaker and take advantage of our Early Bird Registration. 

Keynote Speaker Announced 

We are pleased to announce our Keynote Speaker will be Darshak Sanghavi, MD, program manager at the Advanced Research Projects Agency for Health (ARPA-H)—a newly created multibillion dollar federal agency tasked with developing health programs that are “so bold no one else, not even the private sector, is willing to give them a chance.” His talk, “Unlocking Health Solutions through Innovation,” will highlight the innovative collaborations and projects ARPA-H is advancing. A trained clinician who has served in high level public and private sector advisory roles, Dr. Sanghavi will discuss how this new wave of research and innovations is changing how we think about healthcare’s challenges and will address why the agency is so important at this time. He will highlight ARPA-H investments and commitments and the timeline for impact, including how healthcare systems and states should be thinking about ARPA-H funded innovations and preparing for scaling breakthroughs that improve outcomes.  

Before joining ARPA-H, Dr. Sanghavi was global chief medical and clinical operating officer for Babylon, the global end-to-end digital healthcare provider serving more than a dozen countries and 24 million-plus people, with the mission of bringing “affordable and accessible healthcare to everyone on earth.” He also has served in senior roles at UnitedHealthcare’s Medicare & Retirement, OptumLabs, the R&D hub of UnitedHealth Group, and in the Obama Administration as the Director of Preventive and Population Health at the Center for Medicare and Medicaid Innovation, where he directed the development of large pilot programs designed to improve the nation’s healthcare costs and quality. He is an award-winning medical educator, who has worked in medical settings around the world. He will draw on these diverse experiences to inspire and challenge attendees to unlock solutions to some of our healthcare system’s most complex issues. 

Network with Leaders in Healthcare 

This is an important moment for ever-changing publicly sponsored healthcare programs like Medicaid, Medicare, and the Marketplace, with greater focus on value and federal initiatives that encourage improved health equity, affordability, quality, and outcomes. Don’t miss out on this opportunity to form new partnerships as you dig into today’s urgent issues and immerse yourself in insightful discussions, networking opportunities, and engaging workshops on the new Medicaid managed care rule, applications for AI in healthcare, approaches to meet rural workforce needs, value-based care contracting, and insights from state Medicaid services.  

Preconference tactical workshops will focus on exclusive tools, insights, and strategies to guide program design, navigate new regulatory frameworks, and advance value-based care. HMA’s premier national conference plenary and breakout sessions will focus on the landscape for innovation in healthcare, emerging service delivery models, and growth strategies in pursuit of improved value, quality, and better outcomes. 

Who should attend? 

Executives and leaders from federal, state, and local government agencies, health plans, payers, managed care, hospitals and health systems, provider and provider enablement organizations, community-based organizations, IT companies, life sciences organizations, investment firms, foundations, and associations. 

Analysis of five key proposals in CMS’s FY2025 Medicare hospital IPPS rule

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Our second In Focus section reviews the policy changes proposed by the Centers for Medicare & Medicaid Services (CMS) on April 10, 2024, for the Fiscal Year (FY) 2025 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Proposed Rule (CMS-1808-P). This year’s IPPS Proposed Rule includes several policy changes that will alter hospital margins and change administrative procedures, beginning as soon as October 1, 2024. 

We highlight five proposed policies that are likely to have the greatest impact on Medicare beneficiaries, hospitals and health systems, payors, and manufacturers:  

  • Annual inpatient market basket update  
  • New technology add-on payments (NTAP) policy changes  
  • Transforming Episode Accountability Model (TEAM) 
  • Hospital wage index and labor market adjustments 
  • Revision to housing-related diagnosis coding  

Stakeholders have until June 10, 2024, to submit comments to CMS on the contents of this regulation and request for information. 

Market Basket Update  

Proposed rule: Overall CMS’s Medicare 2025 Hospital Inpatient Proposed Rule will increase payments to acute care hospitals by an estimated $3.2 billion in 2024−2025; however, recent trends in economy-wide inflation may alter this estimate by the time the agency releases the final regulation in August 2024.  

HMA/Moran analysis: CMS’s 2.6 percent increase is based largely on an estimate of the rate of increase in the cost of a standard basket of hospital goods—the hospital market basket. For beneficiaries, this payment rate increase will lead to a higher standard Medicare inpatient deductible and increase out-of-pocket costs. For hospitals and health systems, payors, and manufacturers the proposed payment increase (2.6%) falls below economywide inflation over the past year (3.5%) and below what Medicare Advantage plans will receive for 2025 (3.7%).1,2 Importantly, based on our expertise with the calculation of the hospital market basket, we anticipate the proposed 2.6 percent increase will increase slightly by the time rates are finalized later this year.  

New Technology Add-on Payments (NTAPs)  

Proposed Rule: CMS proposes three changes to the NTAP program and discusses NTAP applications for FY 2025: 

  • CMS proposes to shift the date used to determine whether an otherwise qualifying product is within its newness period. As proposed, if the product’s three-year anniversary occurs after the beginning of the fiscal year on October 1, the product will receive NTAP payments that year. 
  • CMS proposes to allow products with a hold on their FDA marketing authorization application to be considered eligible for NTAP. 
  • Beginning with applications approved in the current FY 2025 cycle, the NTAP add-on percentage for gene therapies treating sickle cell disease would increase to 75 percent.  

HMA/Moran Analysis: The first two proposed changes are in response to concerns about more restrictive application requirements finalized last year. When CMS shifted the FDA approval deadline to May 1 last year, commenters noted that fewer products would be eligible to receive NTAPs in their third year of the newness period. Allowing all products with a third anniversary that falls within a fiscal year (rather than only those with expirations in the second half of the fiscal year) to receive NTAPs narrowly addresses this concern. More products will qualify for NTAPs during their third year of newness, but that does not necessarily mean that more products will receive three years of NTAPs.   

The second proposal tweaks last year’s change requiring a “complete and active” FDA application at the time an NTAP application is submitted to ensure that NTAP applications were far enough along in the FDA review process that information about the product would be available to the public and for CMS staff review. CMS proposal acknowledges that the original bright line rule may have inappropriately excluded potential applicants.   

Finally, CMS’s proposal to increase the NTAP percentage for gene therapies treating sickle cell disease aligns with the Cell and Gene Therapy Access Model’s focus on sickle cell therapies. Of note, CMS seeks comment on whether the increased NTAP percentage should be applied only to applicants that have entered value-based purchasing agreements or are “otherwise engaging in behaviors that promote access to these therapies at lower cost.” CMS seems willing to increase NTAP payments in limited situations to boost selected policy goals, but the proposals in this regulation do not represent widespread NTAP payment increases. 

Transforming Episode Accountability Model (TEAM) 

Proposed Rule: CMS proposes to establish a new mandatory episode-based CMS Innovation Center model, Transforming Episode Accountability Model (TEAM). In the TEAM model, selected acute care hospitals would coordinate care for people with traditional Medicare who undergo one of the five specified surgical procedures: 

  • Lower extremity joint replacement 
  • Surgical hip femur fracture treatment 
  • Spinal fusion 
  • Coronary artery bypass graft 
  • Major bowel procedure 

Hospitals in the model will assume responsibility for the cost and quality of care from surgery through the first 30 days after the Medicare beneficiary leaves the hospital. Hospitals also must refer patients to primary care services to support optimal long-term health outcomes.  

In a first of its kind program, CMS has created a voluntary decarbonization and resilience initiative through which participating hospitals can report metrics related to greenhouse gas emissions to CMS. CMS will provide individualized feedback reports and public recognition of participation and potential performance in the initiative. 

HMA/Moran Analysis: The critical aspect of the TEAM model that stakeholders need to understand is that it will be mandatory. TEAM will begin in 2026 and continue for five years. The TEAM model builds on and combines previous models such as the Bundled Payment for Care Improvement (BPCI) model and the Comprehensive Care for Joint Replacement (CJR) model. Hospitals will be required to report various quality measures, and payment will be based on spending targets and include retroactive reconciliation. TEAM also seeks to integrate specialty and primary care. The model complements existing accountable care organization (ACO) models such as ACO REACH or the Medicare Shared Savings Program as beneficiaries would be able to be assigned to both TEAM and ACO programs.  

Hospital Wage Index Adjustments and Labor Market Changes:  

Proposed Rule: CMS proposes two wage index policies for FY 2025. First, CMS proposes to extend the temporary policy finalized in the FY 2020 IPPS/LTCH PPS final rule for three additional years to address wage index disparities affecting low-wage index hospitals, which includes many rural hospitals. Second, as required by law, CMS proposes to revise the labor market areas used for the wage index based on the most recent core-based statistical area delineations issued by the Office of Management and Budget (OMB) based on 2020 Census data. 

HMA/Moran analysis: The two wage index policies that CMS proposes for FY 2025 will have important positive and potentially negative consequences for hospital payment. The policy to extend the low-wage index policy for three additional years will allow many hospitals with low wage indexes to increase their wage index and their payment rates across all MS-DRGs. This policy will bring millions of additional dollars to rural hospitals in FY 2025.  

The second policy is a statutorily required update to the labor markets used to establish CMS’s hospital wage indexes. CMS will redefine 53 counties from urban to rural and 54 counties from rural to urban, which will disrupt various hospital payment policies for hospitals in the affected counties. The overall impact of both proposed geographic policy changes for FY 2025 will be to increase inpatient payment rates for rural hospitals.  

Revision to Housing-Related Diagnosis Coding  

Proposed Rule: CMS proposes to change the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability from non-complication or comorbidity (non-CC) to complication or comorbidity (CC).  

HMA/Moran Analysis: In proposing this change, CMS is building on its previous policy of including diagnosis codes for describing when a beneficiary is homeless (e.g., unspecified, sheltered, unsheltered). Importantly, this new policy proposal will enable hospitals to be paid higher inpatient payment rates when patients with inadequate or unstable housing are served. Specifically, this proposal would result in cases involving patients to whom these codes apply to be coded in a higher-level MS-DRG within a given family of MS-DRG codes. If finalized, this change in coding policy will result in higher payment rates for hospital patients who are experiencing housing insecurity.  

Connect with Us 

HMA’s Medicare Practice Group, including consultants from The Moran Company, works to monitor legislative and regulatory developments in the inpatient hospital space and to assess the impact of inpatient payment, quality, and policy changes on the hospital sector. Our Medicare experts interpret and model inpatient policy proposals and use these analyses to assist clients in developing their strategic plans and commenting on proposed regulations. We replicate the methodologies CMS uses in setting hospital payments and model alternative payment policies using the most current Medicare (100%) claims data. We assist clients with modeling for DRG reassignment requests and to support NTAP applications.  We also support clients in analyzing CMS Innovation Center alternative payment models.  

For more information or questions about the policies described above, contact our featured experts.

CMS finalizes major changes to Medicare Advantage and Part D for 2025

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This week, our In Focus section reviews a wide-ranging and comprehensive final rule released April 4, 2024, by the Centers for Medicare & Medicaid Services (CMS). The regulation revises and updates policies that affect Medicare Advantage (MA) and Medicare Part D coverage beginning in the upcoming plan year. 

The policies adopted in the final rule aim to strengthen consumer protections and guardrails, promote fair competition, and ensure MA and Part D plans can best meet the healthcare needs of Medicare beneficiaries, including individuals dually eligible for Medicare and Medicaid. In addition, the final rule includes important new policies to expand access to behavioral health providers, promote equity in healthcare coverage, and improve access to and use of Medicare Advantage supplemental benefits. These policy changes complement payment policy changes that were recently finalized in the April 1, 2024, CMS CY 2025 Rate Announcement and will take effect June 3, 2024.  

Below HMA experts walk through the major policies CMS finalized. 

Expanding Access to Behavioral Health Providers 

CMS finalized several regulatory changes to improve Medicare beneficiaries’ access to behavioral health services through strengthened MA network adequacy standards. These changes include: 

  • Establishing network evaluation standards for a new facility-specialty provider category, called outpatient behavioral health. This category includes a range of behavioral health providers, including marriage and family therapists (MFTs), mental health counselors (MHCs), opioid treatment programs, community mental health centers, addiction medicine specialists and facilities. Outpatient behavioral health will be included in network adequacy evaluations. 
  • Permitting MFTs and MHCs to enroll and start billing Medicare—as a result of statutory changes established in the Consolidated Appropriations Act (CAA) of 2023—and establishing corresponding changes to network adequacy standards for MA plans. 
  • Requiring MA plans to independently verify that behavioral health providers added to their network furnish services to at least 20 patients within a 12-month period. 
  • Adding outpatient behavioral health facility-specialty to the list of the specialties that will receive a 10 percent credit toward meeting network adequacy time and distance standards. 

Impact: Adding the outpatient behavioral health category is expected to enhance Medicare beneficiaries’ access to a broader scope of behavioral health specialists. As result of the new policy and network expectations, MA plans may need broaden their networks, and providers that contract with MA plans may need to strengthen their capacity to address Medicare billing and reporting requirements, including quality reporting initiatives.  

Require Mid-Year Enrollee Notification of Supplemental Benefits 

The number of MA plans that offer supplemental benefits to beneficiaries is increasing, with the most frequently offered supplemental benefits including coverage for vision, dental, and hearing services.  Moreover, many MA plans also are offering supplemental benefits to address unmet social determinants of health needs, including home meal delivery, transportation, and in-home services and supports. At the same time, use of these benefits is reportedly low, and there are gaps in research and data analysis about how these benefit offerings are affecting beneficiaries’ cost and health outcomes.   

As a result, CMS is finalizing policies that require MA plans to engage in outreach to beneficiaries. Specifically, the final rule requires MA plans to send enrollees a mid-year notification regarding their unused supplemental benefits. The notification must include information on the scope of the benefit, patient cost-sharing, and detailed instructions on how beneficiaries can access their unused benefits.  

Impact: This change is intended to improve beneficiary awareness of plans’ supplemental benefit offerings and encourage greater use of these benefits. As a result of the regulatory changes, MA plans may look to further refine and adjust their MA supplemental benefit offerings to further improve the healthcare experience for Medicare beneficiaries. 

New Standards for Supplemental Benefits under SSBCI 

MA plans also offer supplemental benefits to beneficiaries through the Special Supplemental Benefits for the Chronically Ill (SSBCI) program, whereby people with ongoing and complex chronic conditions can receive supplemental benefits that are tailored to their specific health and social needs. In the final rule, CMS establishes new requirements for MA plans to demonstrate the value of these services by submitting evidence that the item or service will improve or maintain the overall health of chronically ill beneficiaries.   

Impact: This new reporting requirement is intended to ensure that SSBCI items and services are evidence-based and meaningful. As these regulatory changes are implemented under tight timelines, plans will need to move quickly to compile clinical data and evidence on the effectiveness of these targeted benefits, while also considering changes in their benefit offerings to better meet the needs of beneficiaries with complex and chronic conditions. 

MA Star Rating Changes 

In the final rule, CMS describes its ongoing work to streamline quality measures, including the agency’s progress in moving toward the Universal Foundation of core quality measures that are aligned across CMS’s quality and value-based programs. CMS notes that MA plans are beginning to report additional measures that are part of the Universal Foundation. Under previous regulations, CMS proposed to make the following changes to specific measures in the Star Ratings system: 

  • Remove the standalone Part C medication reconciliation post-discharge measure
  • Add the updated Part C colorectal cancer screening measure with the NCQA (National Committee for Quality Assurance) specification change 
  • Add the updated Part C care for older adults−functional status measure with the NCQA specification change. 

Impact: These changes build on earlier CMS efforts to improve the Star Rating system, including adding a health equity index and reducing the weight of patient experience and access measures to better align with the CMS Quality Strategy. 

Ensure More Dual-Eligible Managed Care Beneficiaries Receive Medicare and Medicaid Services from the Same Organization 

CMS finalized several significant changes designed to improve access to integrated care for dually eligible beneficiaries, including the following:  

  • CMS is limiting enrollment in certain Dual Eligible Special Needs Plans (D-SNPs) to individuals who are also enrolled in an affiliated Medicaid managed care organization (MCO).  
  • CMS also limits the number of D-SNP benefit packages that an MA organization can offer in the same service area as an affiliated Medicaid MCO. If a state Medicaid agency requires it, MA plans may offer more than one D-SNP for full-benefit dually eligible individuals in the same service area as the MA organization’s affiliated Medicaid MCO.  
  • Dually eligible beneficiaries will have an opportunity to enroll in an integrated D-SNP monthly under a new integrated care special enrollment period (SEP). 
  • CMS is lowering the D-SNP look-alike threshold from 80 percent to 70 percent for plan year 2025 and to 60 percent for plan year 2026 and into the future.  

Impact: These are considerable changes that are designed to increase the percentage of dually eligible beneficiaries enrolled in MA plans that also are contracted to cover Medicaid benefits. In addition, these changes will expand access to integrated member materials, unified appeals processes across Medicare and Medicaid, and continued beneficiary access to Medicare services during an appeal.  

Require Health Equity Assessments of Utilization Management Practices and Procedures 

CMS finalized several regulatory changes to the composition and responsibilities of MA plans’ utilization management (UM) committees, including the following:  

  • At least one member of the UM committee must have expertise in heath equity. 
  • The UM committee must conduct an annual assessment of UM practices and procedures on health equity, with a particular focus on the impact on beneficiaries who are low-income, dually eligible for Medicare and Medicaid, or have a disability. 
  • MA plans must make the health equity analysis publicly available on the plan’s website. 

Impact: These policy changes are aimed at assessing the impact of utilization management through a health equity lens and ensuring that these policies and procedures do not have a disproportionate impact on access to medically necessary care for underserved populations.  

Other Provisions 

The final rule makes several other notable regulatory changes to MA and Part D, which include: 

  • Allowing Part D plans to substitute biosimilars for the reference biologic product during the plan year as part of formulary maintenance changes, which is expected to expand access to lower cost biosimilars for Medicare beneficiaries  
  • Limiting out-of-network cost sharing for D-SNP PPOs 
  • Standardizing the MA risk adjustment data validation appeals process 
  • Establishing new guardrails for plan compensation to agents and brokers to prevent anti-competitive steering of beneficiaries and new requirements to third-party marketing organizations   
  • Changes to Medicare Part D medication therapy management (MTM) eligibility criteria 

What’s Next  

CMS continues its work to incorporate requirements for consumer engagement and transparency of data to address health equity. This final rule is poised to have a significant impact on plan benefit design and the landscape of health insurance markets in states and regions of states. CMS has created additional opportunities for states to advance integrated care initiatives that align with Medicaid, which will have downstream implications for MA and Medicaid plans, providers, and partnering organizations.  

The Health Management Associates team will continue to analyze and assess these regulatory changes that CMS has finalized. We have the depth, experience, and expertise to assist in tailored analysis and model policy impacts of the recently finalized changes.  For more information or questions about the policies described, contact our featured experts.

CMS releases Medicare Advantage and Part D payment policies for CY 2025

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This week, our In Focus section reviews the recently announced policy and payment updates from the Centers for Medicare & Medicaid Services (CMS) that will affect Medicare Advantage (MA) and Medicare Part D programs in calendar year (CY) 2025. We also take a look at the CY 2025 Part D Redesign Program Instructions. 

Both the rate announcement and program instructions include important technical updates and payment policy changes that will affect MA and Part D plans. CMS previously released a proposed rule in November 2023 that included proposed policy changes to MA and Part D. Health Management Associates, Inc., colleagues are closely monitoring how the final Rate Notice will shape the industry’s approach to the separately proposed policies for supplemental benefits, integrated dual eligible special needs plans (D-SNPs), and encounter data policies among others.  

The following are highlights from the CY 2025 Rate Announcement and significant changes CMS made from the Advance Notice released earlier this year. 

Payment Impact on MA 

CMS estimates that the final ate announcement will lead to a 3.70 percent increase in average payments to MA plans in CY 2025. This reflects the net payment impact of policy changes and updates to MA plan payments relative to 2024 and is the same amount as proposed in the CY 2025 Advance Notice released on January 31, 2024. As a result, MA plans will receive an estimated $16 billion increase in payments for CY 2025, and according to CMS, the federal government is expected to make $500−$600 billion in payments to MA plans in 2025. This reimbursement increase—which include all the various elements affecting MA plan payments, including the MA risk score trend—represents the average payment increase across all MA plans, although the actual impact on each plan will vary. 

Effective Growth Rate 

The effective growth rate finalized in the CY 2025 rate announcement is 2.33 percent, down slightly from 2.44 percent in the advance notice. The effective growth rate is driven largely by growth in Medicare fee-for-service expenditures, and the CY 2025 Rate Announcement was updated to include program payments during the fourth quarter of 2023. In addition, the technical medical education adjustment has declined from 67 percent in the Advance Notice to 52 percent in the Rate Announcement. 

Medicare Advantage Risk Adjustment and Coding 

The rate announcement continues to phase in the updated risk adjustment model by blending 67 percent of the risk score calculated using the updated 2024 MA risk adjustment model with 33 percent of the risk score calculated using the 2020 MA risk adjustment model.  These revisions to the MA risk adjustment model, which include important technical updates to improve the model’s predictive accuracy, were finalized last year under the CY 2024 Rate Announcement with a three-year phase-in. The Rate Announcement also finalizes that CMS will adopt a new methodology for normalizing risk scores to more accurately address the effects of the COVID-19 pandemic. 

Consistent with what the agency proposed in the Advance Notice, in CY 2025, CMS will apply the statutory minimum 5.90 percent MA coding pattern difference adjustment. 

Star Ratings 

CMS continues work toward implementing the “Universal Foundation” of quality measures—a subset of metrics aligned across public programs. CMS invites stakeholder feedback as it continues to explore adding measures to the Star Ratings, which are components of the Universal Foundation. 

For the CY 2025 rate announcement, Star Ratings changes include the types disasters that are included in the adjustment, updates to the non-substantive measure specification, and the list of metrics for inclusion in the MA and Part D improvement measures and Categorical Adjustment Index for 2025 Star Ratings. 

Part D Design and Part D Risk Adjustment Changes 

The Rate Announcement details several important changes to the standard Part D drug benefit for CY 2025 as required by the Inflation Reduction Act (IRA). These adjustments include eliminating the coverage gap phase from a three-phase benefit (deductible, initial coverage, and catastrophic) and setting the annual cap on patient out-of-pocket prescription drug costs at $2,000. The changes in Part D coverage design will have a significant impact on liability for Medicare beneficiaries, Part D plans, drug manufacturers, and CMS.  

CMS also finalized updates to the Part D risk-adjustment model to reflect Part D design changes included in the IRA and to ensure Part D plan sponsors can develop accurate bids for CY 2025. These changes include calibrating the Part D risk model using more recent data years and updating the normalization factor to reflect differences between MA-PD plan and standalone Part D plan risk score trends. 

Key Considerations 

Overall the final rate notice maintains stability and the opportunity for beneficiary choices in the MA program even as it continues to implement noteworthy changes in risk adjustment. The payment policies finalized in the CY 2025 Rate Announcement will have varying effects across MA plans, with some experiencing larger or smaller impacts in CY 2025. Plans should assess these effects as they prepare their bid submissions for 2025. 

In the CY 2025 rate announcement, CMS indicates that the 3.70 percent increase will provide continued stability in beneficiary access, choice, and benefits while ensuring accurate, appropriate payments to Medicare Advantage organizations. 

Looking ahead, CMS also has proposed policy and technical changes to the MA and Part D programs, which are expected to be finalized in the coming days. HMA’s summary analysis homes in on key issues that likely will be included in the final rule. CMS continues to solicit feedback from stakeholders on ways to reinforce and improve transparency in the MA program through the CMS Request for Information on MA data collection. Comments are due May 29, 2024. 

The HMA team will continue to analyze the important payment and technical changes finalized in the CY 2025 rate announcement. We have the depth, experience, and subject matter expertise to assist with tailored analysis and the modeling capabilities to assess the policy impacts across the multiple rules and guidance. 

If you have questions about the comments of the CY 2025 Rate Announcement and payment policies that impact MA plans, providers, and beneficiaries, contact our featured experts.

CMS Innovation Center announces ACO PC Flex model to enhance Medicare access

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This week, our In Focus section looks at the voluntary Accountable Care Organization Primary Care Flex (ACO PC Flex) Model, which the Centers for Medicare & Medicaid Services (CMS) Innovation Center announced on March 19, 2024. This model is designed to increase the number of low revenue ACOs in the Medicare Shared Savings Program (MSSP). Model participants will receive a one-time advanced shared savings payment and monthly prospective population-based payments. The ACO PC Flex Model is intended aims to support care delivery transformation, innovation, and team-based approaches to improve quality and reduce costs of care.

The ACO PC Flex Model is structured to increase the number of low revenue ACOs (i.e., ACOs composed of physicians, a small hospital, and/or serve rural areas). CMS published results in August 2022 indicating  that low revenue ACOs generated $113 more per capita savings than their high revenue counterparts.  CMS wrote in July of 2023 that the agency was seeking new opportunities for ACOs to serve Medicare beneficiaries. With this model, the Innovation Center is providing flexible payment to support innovative, team-based, person-centered, and proactive approaches to care for a subset of ACOs that have historically generated savings.

ACO PC Flex Model payments are structured to provide advanced shared savings to support administrative activities necessary for the model and ongoing payments specifically for primary care. The payment approach includes:

  • A monthly prospective primary care payment consisting of 1) a county base rate determined by average primary care spending, and 2) payment enhancements to support increased access to primary care, provision of care, and care coordination, which are exempt from CMS recoupment
  • An advanced shared savings payment as a one-time advance the changes needed to support needed operations and administration

With the approach, the Innovation Center anticipates CMS will be able to improve access to primary care services, particularly for underserved communities, and empower providers through flexible, stable payments to innovate care delivery to better meet their patients’ needs.

The demonstration will start January 1, 2025, and run for five years. The request for applicants (RFA) is expected in the second quarter of 2024, and ACOs must apply for participation in MSSP as a new or renewing organization to be eligible for ACO PC Flex. Applications for MSSP close June 17, 2024.

More details are expected to be included in the RFA. If you are interested learning more about the ACO PC Flex Model, please contact our featured experts.

HMA 2024 Spring Workshop summary and key takeaways

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On March 6, HMA convened a spring workshop of 100 healthcare stakeholders interested in making value-based care delivery and payment work better. This event was designed for those engaging in value-based care and payment transformation, but who are looking to learn from peers to overcome challenges; participants included insurers, health systems, data and tech innovators, service providers, and trade associations.

The event’s name implored people to “Get Real” about the challenges we all face, while reminding ourselves of the imperative of making this transition to ensure the sustainability of our uniquely American healthcare system. In between plenary panels, participants were engaged in cohort discussions exploring the opportunities for progress in areas critical to making value-based care work.  While a summary cannot recreate the real-time discussions and simulations from the event, our discussions delivered insights on several critical themes that we believe are important to track. 

EMPLOYERS ARE LEANING IN: For all employers pay, they are getting less value over the past decade; the changes made to ERISA that hold the C-suite accountable for paying fair prices for healthcare benefits is a seismic shift in making healthcare purchasing a more strategic priority for employers.

  • Elizabeth Mitchell of the Purchaser Business Group on Health illustrated the shift in employers’ awareness – due to data transparency rules – that they aren’t getting the quality they thought they were getting for all that they pay. Transparency, plus a recent change to the Employee Retirement Income Security Act of 1974 (ERISA), is bringing employers back to the table with very specific requests for better outcomes, which they are increasingly pursuing through direct contracting and specific quality frameworks for primary care, maternal care, and behavioral health. Participants continued to reflect on this dynamic in all subsequent discussions, underscoring that this could be a really big deal.
  • Cheryl Larson of the Midwestern Business Group on Health talked about the cost pressure on her members leading them to partner in new and different ways, expressing optimism about all payer solutions and other innovative approaches to leverage the cost data that are now available. In her closing plenary session, she said “this issue of accountability on employers…I am excited and optimistic that there are things we can do to get there faster now.”

Data & Technology HAVE TO IMPACT DECISION MAKING: Patients are using the system the way it is designed today, so we can’t just blame them for poor outcomes…we have to actually stop doing things that don’t work and start measuring things the right way.

  • Dr. Katie Kaney opened with a dinner keynote discussing her efforts to create metrics that give purchasers a better measurement of whole person care, including clinical, genetic, behavioral, and social factors. Audience members remarked that this was a novel approach to quantify what has become accepted correlation in adverse health outcomes.
  • Ryan Howells, Dave Lee, and Stuart Venzke led discussions on Data & Technology, diving into updated federal regulations that present both opportunities and challenges for stakeholders, as well as ways to create corporate strategies that include data and technology, as these issues are no longer optional for anyone in this business. The breakout discussions talked about where we are today vs where we need to be – bridging the gap between data and decision making.

Payment & Risk TOOLS ARE ALIGNING INFORMATION TO ACTION:  Achieving meaningful risk-based contracts is possible but the details matter…mismatched data and information leads to unequal buying power, which cannot be the case in value-based care.

  • Kelsey Stevens, Scott Malan, Hunter Schouweiler, and Kate de Lisle led discussions on Payment & Risk, including an exciting hands-on simulation exercise that helped participants understand ways to increase premium scores by implementing risk-based payment approaches within the care delivery system; this session provided very concrete takeaways for those who attended by combining a simulation with a discussion on measures of success to improve risk-based contracting strategies.
  • Amy Bassano and Kate de Lisle discussed their recent publication on the expanded ecosystem of value-based care entities, looking at the “enablers” who are working with providers and payers to manage risk. This groundbreaking landscape of this market segment highlighted a set of Guiding Principles to ensure these entities are aligned with CMS, provider, and patient goals. Participants had lots of questions for the presenters and were anxious to read the HMA full report.

CARE DELIVERY MEASURES MUST BE TANGIBLE TO PROVIDERS AND PATIENTS: Value-based care requires aligning the right metrics with the right incentives, ensuring providers understand not only WHY but HOW they help improve patient outcomes.

  • Rachel Bembas, Dr. Jean Glossa, and Dr. Elizabeth Wolff led discussions on Care Delivery Measures, underscoring the importance of involving clinicians in the establishment of outcomes measures, as well as ensuring that the diversity of patient experiences are included. Participants remarked that we have a lot of “messy” data today, so we now have to ask the next set of questions on how we best use the messy data to make an impact?
  • Former Congresswoman Allyson Schwartz talked about the continuing promise of Medicare Advantage, and the opportunity to convene a new alliance around Medicare quality metrics as well as the increasing pressure to align these metrics across payers. In the closing plenary, she said “We need to define what we want healthcare in America to look like and then go out and get it…. We have to align the measurements and the standards we use so that providers understand what’s needed and it benefits government, taxpayers, and beneficiaries…we should require plans to have risk-based contracting with providers.”

Policy & Strategy HAVE TO STAY THE COURSE TO ALIGN INCENTIVES: Policymakers can help or hinder movement forward to ensure success…value-based care has to be more than a section in an RFP, but part of the entire scope of paying for outcomes-based care delivery.

  • Governor and former HHS Secretary Mike Leavitt reminded us of the political and policy journey that got value to where it is today, and the unique moment we are in right now that gives us hope as we enter this post-pandemic phase of healthcare spending and policy. He reflected, “We are beginning to see regulations and mechanisms to hold people accountable for healthcare costs…we have to integrate value and caregiving or we will never get to value.”
  • Theresa Eagelson, former Illinois Director of Healthcare and Family Services, talked about the opportunity for states to expand value-based care by setting strong expectations through contracting and by thinking differently about policy choices. She reflected on the role of state administrators, “When we sit here and talk about value-based care, do we know what our north star is? Have we mastered what we want to see in RFPs (for Medicaid)?  We’re working on a good FQHC model in Illinois, but should it be just for FQHCs? We need to spend more time together, across payers, across plans and providers and consumers to figure out what success looks like.”
  • Caprice Knapp and Teresa Garate led a discussion on state and local Policy & Strategy to support integrated care and services that are required to achieve better outcomes. There is a need for services to better coordinate and manage care across social and health services, bringing contracting and payment expertise to more efficiently serve patients. The highly anticipated Medicaid managed care rule can help guide states in updating their approach. Federal analysis of Medicaid data is needed to set benchmarks before we can get to total cost of care approaches.
  • Amy Bassano and Anne Marie Lauterbach led a discussion on federal policy alignment of Medicare FFS and Medicare Advantage, particularly looking at drug spending and the very real burden of medical debt as a driver of policy change. Participants reflected that half the country is indirectly covered through some public insurance. It’s just being done hyper-inefficiently.

HMA is leading the way on value-based care and is committed to continuing these dialogues to drive local, state, and national change. HMA’s value-based care expertise draws from our acquisition of Leavitt Partners and Wakely Consulting Group, two firms with deep ties and expertise on policy, strategy and risk-based pricing strategies, as well as recruitment of clinicians and operational experts who have led organizations through this transition. We will continue to advance the dialogue – and the work – to drive value as a critical way to ensure that our systems of health and healthcare are more affordable, equitable, and sustainable.

Let’s keep the conversation going! Learn more about how HMA can help you succeed with value-based payments and check out the newly released value-based payment readiness assessment tool for behavioral health providers.

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