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Blog

FY 2025 Medicare hospital inpatient final rule will alter hospital margins and change administrative procedures

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This week, our In Focus section reviews the policy changes that the Centers for Medicare & Medicaid Services (CMS) finalized on August 1, 2024, in the fiscal year (FY) 2025 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Final Rule (CMS-1808-F). This year’s IPPS final rule will impact hospital margins and administrative processes beginning October 1, 2024. 

The remainder of our article delves into five of the key policy changes included in the final rule. 

Key provisions in the FY 2025 Hospital IPPS and LTCH Final Rule 

For FY 2025, CMS will modify several hospital inpatient payment policies. We highlight five of these policies because they will have the most significant impact on Medicare beneficiaries, hospitals and health systems, payors, and manufacturers:  

  1. The annual inpatient market basket update and changes to the standardized payment amount  
  2. New technology add-on payment (NTAP) policy changes 
  3. Implementation of the Transforming Episode Accountability Model (TEAM) bundled payment model in 2026 
  4. Hospital wage index changes and labor market adjustments 
  5. Severity of illness increase for housing insecurity social determinants of health (SDOH) codes  

Several of these and other policy changes for FY 2025 will become effective October 1, 2024.  

Market basket update 

Final rule: Overall CMS’s Medicare 2025 Hospital IPPS Rule will increase hospital inpatient payments to acute care hospitals by 2.9 percent from 2024 to 2025, an estimated increase of approximately $2.9 billion after other policy changes are included.  

Health Management Associates (HMA) analysis: CMS’s 2.9 percent increase is largely based 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. The finalized payment increase (2.9 percent) is larger than the increase included in CMS’s IPPS Proposed Rule (2.6 percent) but continues to fall below economy-wide inflation over the past year (3.5 percent).1,2 Importantly, after accounting for the various policy changes made within the final rule (e.g., wage index reclassifications) we anticipate individual cases will experience an average payment increase of 1.7 percent.  

Transforming Episode Accountability Model 

Final rule: CMS finalized the creation of a new mandatory episode-based CMS Innovation Center methodology—TEAM. Under TEAM, selected acute care hospitals will coordinate care for people with traditional Medicare who undergo one of the following 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 surgical care through the first 30 days after a Medicare beneficiary leaves the hospital. Hospitals also must refer patients to primary care services to support optimal long-term health outcomes. Hospitals will be assigned to different risk tracks to allow a graduated path to ease in to full-risk participation.  

HMA analysisThe mandatory nature of this model requires hospitals in the selected geographic areas to begin to prepare for implementation of the model requirements in 2026. TEAM builds on and combines previous models such as the bundled payment for care improvement (BPCI) and the comprehensive care for joint replacement (CJR) models. Hospitals in roughly 23 percent (188 of 925) of the nation’s core-based statistical areas (CBSAs) are required to participate in this advanced payment model, with some exceptions, such as hospitals in Maryland and Sole Community Hospitals. Participating hospitals will be required to report various quality measures, and payment will be based on spending targets and include retroactive reconciliation. Reimbursement under the model will follow four different tracks, which vary by the level of upside and downside risk that the hospital accepts and with a specific track for safety net hospitals. 

Hospital Wage Index Adjustments and Labor Market Changes  

Final rule: CMS finalized two wage index policies for FY 2025. First, CMS extended 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 revised the labor market areas used for the wage index based on the most recent CBSA delineations issued by the OMB based on 2020 Census data. 

HMA analysis: The two wage index policy changes for FY 2025 will have important positive and potentially negative consequences on hospital payment. The policy to extend the low wage index policy for three more years will allow many hospitals with low wage indexes to increase their wage index and their payment rates across all Medicare severity diagnosis-related groups (MS-DRGs). 

Specifically, the roughly 800 hospitals with wage indexes below 0.9007 (the 25th percentile across all hospitals) will automatically receive an increase in their wage index and payment rates for all inpatient cases. This policy will bring additional millions of dollars to individual 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. To implement this policy, CMS will use US Census Bureau data to redefine urban and rural markets. As a result, CMS will redefine 53 urban counties as rural and will newly redefine 42 rural counties containing a hospital as urban. These changes will disrupt various hospital payment policies for hospitals in these counties. The overall impact of both geographic policy changes for FY 2025 will be to increase inpatient payment rates to rural hospitals.  

Revision to Social Determinants of Health Housing Insecurity Diagnosis Coding 

Final rule: CMS finalized a change in the severity designation of the seven ICD-10-CM diagnosis codes that describe inadequate housing and housing instability. Under the final rule, these codes are changing from non-complication or comorbidity (non-CC) to complication or comorbidity (CC) based on the higher average resource costs of cases compared with similar cases without these codes.  

HMA analysis: This new policy will enable hospitals to receive higher inpatient payment rates when they provide care for patients with inadequate housing or housing instability are served. Specifically, this policy change will result in assigning cases involving patients with one of these codes to a higher-level MS-DRG. Hospital staff will want to ask patients about their housing upon admission and discharge to accurately document this critical SDOH characteristic.  

New technology add-on payments 

Final rule: CMS finalized three changes to the NTAP program and approved several products for NTAPs in FY 2025.  

HMA analysisCMS seems willing to increase NTAP payments in certain limited situations to boost selected policy goals but rejects comments seeking to increase the percentage for sickle cell products or expand the higher payments to other medical conditions. In addition, portions of the final rule indicate that CMS is applying some of the criteria for NTAPs more strictly than in recent years. If this trend continues, it may be more difficult for future new technologies to be approved for NTAPs. 

Connect with Us

HMA’s Medicare Practice Group works to monitor legislative and regulatory developments in the inpatient hospital space and assess the impact of inpatient payment, quality, and policy changes on the hospital sector. We will continue to follow these and other changes happening to hospitals and are available to provide additional detail on these or other policies in the final rule. If you have any questions, please contact Zach Gaumer ([email protected]), Amy Bassano ([email protected]), Kevin Kirby ([email protected]), or Clare Mamerow ([email protected]).  

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Don’t just grab the shiny new thing: integrating IT and business strategies to optimize technology ROI

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The emergence of generative artificial intelligence (Gen AI) and large language models, like OpenAI’s ChatGPT or Google Gemini, has spurred a renewed focus on the use of cutting-edge technology in healthcare. Healthcare payers, providers, and state Medicaid agencies are racing to deploy Gen AI and other technologies to improve patient outcomes, reduce costs, improve patient engagement, streamline administrative operations, and simplify compliance. While Gen AI holds tremendous potential to improve healthcare, we should heed the lessons learned by recent waves of technology: deploying technology—including Gen AI—in isolation of a broader business strategy is a recipe for underperformance. Optimizing the return on technology investment requires taking a structured approach to integrate technology strategy with business strategy.

Investing in health IT is essential to meet innovation challenges. Technology can enable the scale, reach, speed, and the consistency needed to thrive in today’s fast-changing landscape. Moreover, as workforce shortages persist, technology must become a “force multiplier,” allowing healthcare practitioners and other healthcare staff to focus on what they do best. In today’s changing business and social environment, there is no choice but to embrace health IT.

Investments in health technology, however, have often fallen short of expectations. For years, CEOs and chief information officers (CIOs) have lamented the poor return on substantial investments in health IT. For example, in a recent EY study, 70% of hospital executives report they have not seen an ROI from investments in digital health. A few years ago, only 10% of health professionals surveyed by Health Catalyst assessed the ROI on Electronic Health Records (EHR) investments as positive or better. Mis-investing in technology has long-term implications for any organization. Over-investment in technology reduces ROI and diverts resources from more productive uses. Under-investment in technology can undermine effectiveness, reduce productivity, and weaken patient engagement. So, optimizing technology ROI is essential to driving effective outcomes.

One challenge with IT investment is that measuring ROI in healthcare is an inherently difficult calculation. In addition to financial returns, the hoped-for return on technology investments is an improvement in patient outcomes, which may not translate into immediate financial benefits. Another challenge is that fragmented healthcare systems make it difficult for any single organization to gain system-wide efficiencies that drive a positive ROI.

However, an often-overlooked challenge to optimizing IT investment is thinking of IT strategy as something separate from, rather than integrated with, the business strategy. In healthcare, executing nearly every business strategy requires leveraging IT. To optimize the ROI in health tech investments, organizations must align and integrate their health IT strategy with their business strategy.

Organizations often take one of two different approaches to technology. In some cases, they cede responsibility for the IT strategy to the CIO, perhaps because technology can seem imposing, and the CIO speaks the language of IT. In these cases, the IT strategy may reflect imperatives important to the IT shop—for example, consolidating on a common tech stack or replacing a software component—that do not support or advance the business strategy.

In other cases, organizations develop a business strategy in isolation of a technology strategy—they define their business strategy, then look for technology to support it. This approach leads to a business strategy that either cannot be realistically supported by available technology or does not exploit technology effectively. Under either approach the result is the same: Failing to integrate and align your tech strategy with your business strategy will undermine the value of your technology investments.

To optimize the return on their technology investments, healthcare organizations should take a structured approach to aligning their technology strategy with their business strategy. HMA works with health care organizations to:

  • develop or refine their business strategy,
  • develop an integrated technology strategy fully aligned with that business strategy,
  • assess their existing technology,
  • develop a strategic roadmap to modernize technology,
  • support technology procurements, and
  • support technology implementations.

HMA will be at MESC 2024 August 12-15, and if interested in learning more about this approach, come see us at Booth 450. Or for more hands-on exploring of how this can work for an organization, join us at these two pre-conference sessions at HMA’s Fall Conference on Unlocking Solutions in Medicaid, Medicare, and Marketplace, October 7-9 in Chicago. The session on Navigating the Medicaid 1115 Demonstration Processes will give nuanced understanding of CMS’ criteria concerning budgeting, implementation, evaluation frameworks and administrative supports, along with strategies to effectively navigate through the approval process. Another session on A Framework for Thinking About – and Using – AI Effectively will share real-world examples of successful AI implementation, their impact on business outcomes, and lessons learned. Both will examine how HMA works with clients to integrate their technology strategy into the overall company strategy.

For more information, contact our IT experts.

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HMA celebrates 59th anniversary of Medicaid and Medicare

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This week, Health Management Associates (HMA) shifts In Focus from a newsworthy development to commemorate a seminal event in the expansion and strengthening of healthcare access in the United States. On July 30, 1965, Medicaid and Medicare were signed into law under Title XVIII and Title XIX of the Social Security Act. Today we celebrate the 59th anniversary of this pivotal moment in America’s healthcare journey.

Medicaid: A Critical Safety Net that Remains Strong

All states, the District of Columbia, and the U.S. territories have Medicaid programs designed to provide health insurance coverage for low-income individuals. As of March 20241, 82,751,338 people, including eligible low-income adults, children, pregnant women, older adults, and people with disabilities are covered under their state’s Medicaid program in accordance with federal requirements. The COVID-19 pandemic underscored just how important this safety net program is for American families, as it continued to deliver vital services during unprecedented times.

Beyond its traditional role, Medicaid also drives significant innovations in care for people with complex conditions and challenges. States have implemented various programs and initiatives to improve healthcare quality and outcomes. These include:

  • Managed Care Expansion: Many states have expanded Medicaid managed care programs to enhance care coordination and improve health outcomes.
  • Value-Based Care Models: Innovations in value-based care are being tested, aiming to link reimbursement to quality of care and patient outcomes rather than volume of services.
  • Integration of Behavioral Health: Several states are integrating behavioral health services into Medicaid to address mental health and substance use disorders more effectively.
  • Telehealth: The pandemic accelerated the adoption of telehealth services in Medicaid, expanding access to care and reducing barriers for patients.

Medicare: Leading in Innovation and Coverage

Medicare provides coverage to more than 60 million seniors and people with disabilities. In addition to being a lifeline for so many Americans, Medicare is a force for innovation in health policy, piloting changes to payment and care delivery through the Innovation Center and through Medicare Advantage plan design. Key innovations include:

  • Alternative Payment Models: The Innovation Center has been at the center of piloting various alternative payment models to improve quality and reduce costs.
  • Medicare Advantage Enhancements: Medicare Advantage plans continue to evolve, offering more comprehensive benefits that include mental health and substance use disorder services and integrating additional services such as dental, vision, and wellness programs.
  • Chronic Care Management: Medicare is expanding its focus on chronic care management, providing additional resources and support for individuals with chronic conditions.

HMA’s Commitment to Medicaid and Medicare

Since HMA’s founding, our experts have helped states, plans, providers, and other stakeholders deliver the full spectrum of Medicaid and Children’s Health Insurance Program (CHIP) services. As HMA has evolved, we have built a leading-edge Medicare team that includes former agency officials, plan leaders, policy and data analysts, and actuaries. Healthcare plans, providers, and innovators call upon our colleagues to anticipate policy and regulatory change, develop and support Medicare Advantage business, transform fee-for-service programs, and support access to new technologies and treatments that can both improve quality patient outcomes and reduce costs of care.

Our growing team of includes 10 former state Medicaid directors and many more former state agency leaders, hospital and health plan executives, senior officials from the Centers for Medicare & Medicaid Services (CMS), and public health leaders.

HMA Colleagues Who Are Former Medicaid Directors Looking Ahead

HMA’s Top Medicare Experts

Looking Ahead

As Medicaid and Medicare near their seventh decade, the programs will continue to evolve and change to better support covered individuals and meet the demands of policymakers and taxpayers. HMA experts are committed in service of this important mission, and we are excited about building their future together with our clients to create more innovative, high-quality care that improves health outcomes for all.

  1. April 2024 Medicaid & CHIP Enrollment Data Highlights | Medicaid ↩︎
Blog

Raising the Bar: Improving Health Equity through Actionable Frameworks

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This week, our In Focus section highlights an initiative, Raising the Bar: Healthcare’s Transforming Role (RTB), which is designed to strategically address inequities in the healthcare system. Leading this effort is the National Alliance to Impact the Social Determinants of Health (NASDOH), an alliance convened by Leavitt Partners, a Health Management Associates (HMA) Company, with support from the Robert Wood Johnson Foundation (RWJF).  

Overview  

There is significant and increasing demand across health and human services to address health inequities and eliminate disparities in service delivery and positive health outcomes. Organizations are asked to provide healthcare in holistic ways that recognize both individual and population-level needs. 

Raising the Bar is a framework and a call to action for the healthcare sector to embrace all levers, resources, and opportunities available to advance equity and excellence. Raising the Bar seeks to accelerate the healthcare sector’s efforts to achieve equity and to improve the healthcare experience and well-being of individuals, families, and communities. 

The Framework for Driving Action  

The RTB project worked with healthcare leaders and people who have experienced inequities in the system to develop an actionable framework for the entire healthcare sector, which would embed equity and excellence throughout its work. The NASDOH convened extensive discussions with providers, hospitals, payers, and community leaders to develop foundational principles, essential roles, and concrete actions for the sector to achieve equity goals, big and small.  

Raising the Bar Principles. The project generated five principles that put the priorities of individuals, families, and communities at the center of healthcare. They were informed by discussion with organizations and people who give, get, and pay for care. 

Raising the Bar also identified four essential roles for individual contributors to the healthcare system and provide concrete actions they can take to transform how care is delivered.  

Embedding Approaches to Address Health Inequities  

Now in the next phase of this work, HMA consultants are working one-on-one with five organizations committed to embedding approaches to address health inequities by implementing the framework within their own systems of care. Participating organizations include a multi-site, multi-state Catholic health system, an academic medical center, an independent health system, one certified community behavioral health clinic, and one county public health department. The entities vary by geography, demographics, population size, and rural and urban location.  

Each of the following sites is using the Raising the Bar framework and individualized coaching to meet their equity goals: 

  • Charles County Department of Health, White Plains, MD
    Charles County is working to develop and strengthen trusting partnerships with local community organizations representing diverse populations to address health inequities in the county. 
  • CHRISTUS Health, Texas, Arkansas, and Louisiana 
    CHRISTUS is developing an enterprise-wide six-year health equity road map that includes a strategy to build a community health worker sustainability. 
  • Gaudenzia, Baltimore, MD
    Gaudenzia is working to develop and implement a road map for establishing a Consumer Advisory Committee (a Substance Abuse and Mental Health Services Administration requirement for certified community behavioral health centers) that other Gaudenzia sites can use and spread nationwide.  
  • Jefferson Health, Philadelphia, PA
    Jefferson is conducting an enterprise-wide assessment and creating a governance structure for its health equity initiatives across multiple healthcare and medical education sites throughout their catchment area, which crosses state lines.  
  • Sturdy Health, Attleboro, MA
    Sturdy is creating an enterprise-wide health equity dashboard with measures that align with organizational goals and strategies and developing staff training to improve service delivery for populations who experience inequities in care. 

The five entities are receiving individualized coaching from HMA health equity experts over a one-year period using the Raising the Bar framework and each organization’s self-identified goals and objectives. At the project’s completion, findings from the project will be published in the Raising the Bar implementation guidance, developed in partnership with the Health Care Transformation Taskforce. 

Continue the Conversation  

Raising the Bar will be featured in discussions during the HMA Fall conference in Chicago, October 7-9. In the opening plenary session on social determinants of health, Leticia Reyes-Nash and Sara Singleton will describe some of the work, and during a breakout session, speakers from some the organizations participating in this project will share their experiences.

CLICK HERE TO REGISTER

For more information about Raising the Bar or the types of technical assistance that HMA can provide to organizations seeking to further develop equity in their practices and communities, contact project director Sara Singleton, Principal, Leavitt Partners, or any of the HMA coaching leaders on this project: Debra Carey, PrincipalAkiba Daniels, Senior ConsultantLeticia Reyes-Nash, PrincipalMaddy Shea, Principal; and Doris Tolliver, Principal

Learn more at rtbhealthcare.org

For details about HMA’s work in health equity, go to: 

Continue the Conversation  

Raising the Bar will be featured in discussions at Unlocking Solutions in Medicaid, Medicare, and Marketplace, a conference powered by HMA taking place in Chicago, October 7-9.

Blog

CMS’s newly released CY 2025 Medicare Physician and Hospital Outpatient Proposed Rules include proposals supporting primary care, care coordination, and increased access to care for Medicare Beneficiaries

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This week, our In Focus section provides an overview of the two key Medicare proposed payment rules that the Centers for Medicare & Medicaid Services (CMS) released last week—the Physician Fee Schedule (PFS) and the Hospital Outpatient Prospective Payment System (OPPS). These two rules include policies that will affect a variety of providers. Below we highlight some key provisions. Comments on these proposals are due to CMS in early September.

PFS Proposed Rule for 2025

Released on July 10 and with comments due by September 9, this wide-ranging regulation proposes policy changes for many different types of providers.

PFS Payment Update: The estimated 2025 PFS conversion factor is $32.36, a $0.93 or 2.80 percent decrease from the calendar year (CY) 2024 level of $33.29, which included a one-time update required by statute. In previous years with cuts like this one looming, Congress has stepped in and adjusted the payment update in the positive direction. Congress is now considering approaches to do so again for this year.

Caregiver training services (CTS): CMS is proposing a new code for caregiver training for direct care services and supports such as wound dressing changes, infection control, and medication administration. These services could be provided via telehealth.

Telehealth services: CMS is proposing to add several new codes to the telehealth list and to refine a variety of policies related to the type of technology that must be used and what supervision must be provided for telehealth services and other requirements such as removing frequency limitations. Nonetheless, several telehealth flexibilities will end December 31, 2024, because of the expiration of pandemic era expansions unless Congress extends or makes telehealth flexibilities permanent.

Advanced primary care management services (APCM): CMS proposes to create a new set of APCM codes that would incorporate parts of several existing care management and communication technology-based services into a monthly bundle of services. The billing codes are differentiated by three levels based on a person’s number of chronic conditions and enrollment as a qualified Medicare beneficiary to reflect patient medical and social complexity. These APCM services could be provided by advanced primary care teams and are tied to primary care quality measures.

CMS seeks feedback on whether the agency should consider additional payment policies to recognize the delivery of advanced primary care, including on potential changes to coding and payment policies within traditional Medicare such as for additional bundles of services.

Behavioral health servicesCMS is proposing new codes for behavioral health crisis services, including safety planning and interventions for patients at risk of suicide or overdose, follow-up contact after a crisis emergency department (ED) visit, for digital mental health treatment (DMHT) services, and for nonphysician practitioners to bill for interprofessional consultations.

Screening and risk assessment: The agency updates and expands coverage for screening and preventive services, including proposals to cover screening computed tomography colonography (CTC) for colorectal cancer, drugs covered as additional preventive services, the hepatitis B vaccine, and cardiovascular risk assessment and risk management.

Dental and oral health servicesCMS proposes to add services provided to Medicare beneficiaries with end-stage renal disease to the list of clinical scenarios in which Medicare payment may be made for dental services. CMS also seeks comments on other clinical conditions appropriate for coverage.

Improving ambulatory specialty care: CMS seeks stakeholder feedback about a potential Innovation Center model that would increase specialist participation in value-based care through Merit-based Incentive Payment System (MIPS) Value Pathways (MVPs) and expand incentives for primary and specialty care coordination.

Medicare Shared Savings Program (MSSP): CMS is proposing several refinements to the permanent accountable care program. These include a prepaid shared savings option that lets eligible accountable care organizations that have previously earned shared savings to receive advanced earned shared savings to make investments that support beneficiaries, the addition of a health equity benchmark adjustment (HEBA) that increases an ACO’s historical benchmark based on proportion of beneficiaries who are enrolled in the Medicare Part D low-income subsidy (LIS) or dually eligible for Medicare and Medicaid, changes to the MSSP quality measure set to align the measure with the universal foundation measure set and seeking comment on creating a risk track that is higher than what currently exists.

Rural health clinics and federally qualified health centers: CMS proposes several changes to update payment and coverage of services provided in these facilities including care coordination services, vaccines, and dental services.

Payment for major surgical procedures: CMS makes coding proposals to address scenarios in which follow-up care for beneficiaries who have undergone major surgical procedures is provided by different clinicians in different group practices.

Opioid treatment programs: CMS makes several proposals related to opioid treatment programs, including allowing assessments conducted via audio-only telecommunications, and increasing payments for social determinants of health (SDOH) risk assessments. CMS also proposes to pay for new FDA-approved opioid agonist and antagonist medications.

2025 Medicare Hospital OPPS Proposed Rule

CMS released the Medicare Hospital OPPS proposed rule on July 10, 2024, with comments due by September 9, 2024. This regulation proposes policy changes that largely impact hospital outpatient departments and ambulatory surgery centers (ASCs).

OPPS and ASC Updates: CMS proposes to update OPPS rates for hospitals that meet applicable quality reporting requirements as well as ASCs by 2.6 percent.

Access to non-opioid pain relief: The Consolidated Appropriations Act (CAA) of 2023, provides temporary additional payments for certain non-opioid treatments for pain relief in hospital outpatient department (HOPD) and ASC settings from January 1, 2025, through December 31, 2027. CMS proposes to implement this law with proposals on the evidence requirements for medical devices and the Food and Drug Administration (FDA)-approved indications that would meet the criteria for the temporary additional payments. CMS has identified seven drugs and one device that would qualify as non-opioid treatments for pain relief and proposes that they receive separate payment in 2025. CMS also is soliciting comments on other products that may qualify for these payments.

Justice-involved individuals: To support individuals returning to the community from incarceration, CMS proposes to narrow the definition of “custody” in Medicare’s payment exclusion rule and to revise the Medicare special enrollment period (SEP) for formerly incarcerated individuals. These modifications would remove real or perceived barriers to Medicare access for individuals who have recently been released from incarceration or are on parole, probation, or home detention.

Maternal health: CMS is proposing several new maternal health related requirements for hospitals and critical access hospitals (CAHs). The proposed changes to conditions of participation, include new requirements for maternal quality assessment and performance improvement; baseline standards for the organization, staffing, and delivery of care within obstetrical units; and annual staff training on evidence-based maternal health practices. CMS further proposes changes to the emergency services requirements related to emergency readiness for hospitals and CAHs that provide emergency services.

Connect with Us

HMA’s Medicare policy experts collaborate to monitor legislative and regulatory developments in the physician, outpatient, and ASC policy arenas and to assess the impact of changes in these reimbursement systems. HMA’s Medicare experts interpret and model policy proposals and use these analyses to assist clients in developing their strategic plans and comment on proposed regulations.

For more information or questions about the policies described below, please contact Amy Bassano, Zach Gaumer, Kevin Kirby, or Rachel Kramer.

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CMS invites states to apply for transforming maternal health model

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This week, our In Focus section reviews the notice of funding opportunity (NOFO) for the Transforming Maternal Health (TMaH) Model, which the Centers for Medicare & Medicaid Services (CMS) Center for Medicaid and Medicare Innovation (the Innovation Center) announced on December 15, 2023. States interested in participating in this model must submit an application to CMS during the competitive application process.  

As described in a December 2023 In Focus, pregnancy-related deaths have more than doubled since 1987 to 17.6 deaths per 100,000 live births, with health disparities only worsening outcomes for different racial and ethnic groups. For example, the pregnancy-related mortality rates for Black and Native American and Alaska Native people are approximately two to three times higher than the rate for White people. In recent years, 38 states have extended postpartum coverage, and 11 states now offer doula coverage for Medicaid enrollees. This initiative accelerates the focus on maternal outcomes and, with Medicaid paying for nearly 43 percent of births, has the potential to affect health across generations. 

This model is designed exclusively to improve maternal healthcare for people enrolled in Medicaid and the Children’s Health Insurance Program (CHIP). The TMaH model takes a whole-person approach to pregnancy, childbirth, and postpartum care, addressing the physical, mental health, and social needs people experience during pregnancy. 

Model Overview 

Up to 15 participating state Medicaid agencies (SMAs) will receive as much as $17 million over the 10-year period to develop a value-based alternative payment model for maternity care services, with the intention of improving quality and health outcomes and promoting the long-term sustainability of services. TMaH will focus on three pillars: 

  • Access to care, infrastructure, and workforce capacity 
  • Quality improvement and safety 
  • Whole-person care delivery  

The TMaH model is designed to support birthing persons along their care journey, expanding continuity, and improving outcomes. 

During the model’s first three years, states will receive targeted technical assistance to achieve pre-implementation milestones. The table below highlights the key activities in the pre-implementation phase. 

Following pre-implementation, participants will enter a seven-year implementation period during which the SMAs will implement the program with partners, such as managed care organizations (MCOs), perinatal quality collaboratives, hospitals, birth centers, health centers and rural health clinics, maternity care providers, and community-based organizations. 

In year four, states will offer partnering providers and care delivery sites upside-only performance payments from state funds (no cooperative funds may be used). In year five, states will transition partner provider and partner care delivery locations to a new value-based payment model. CMS will lead the development of the value-based model, and it will be finalized during the pre-implementation period. 

The model also requires a health equity plan, which has been a consistent requirement across models from the Innovation Center. Awardees must develop a plan that addresses disparities among underserved populations, such as racial and ethnic groups and people living in rural areas, who are at higher risk for poor maternal outcomes. 

State Medicaid Agency Requirements 

For states considering TMaH, the NOFO outlines the requirements for participating SMAs, which include: 

  • States must include CHIP if pregnant people receive services through CHIP 
  • States that have managed care plans must contract with at least MCO for implementation 
  • Collaborate with partner providers (e.g., OBs, midwives, doulas), care delivery location (e.g., hospitals, birth centers, federally qualified health centers), and partner organizations 
  • Collaborate in the process to create cost and quality benchmarks with CMS 
  • Be actively involved in technical assistance activities, including attending regularly scheduled calls, providing input and working on portions of documents as appropriate 
  • Execute the data-sharing agreements necessary to support the exchange of data and information related to the TA activities and completion of milestones 
  • Provide CMS and contractors the necessary information and data to support the development of documents to help reach milestones 
  • States must demonstrate their ability to meet these requirements as part of the NOFO process, and CMS will evaluate their responses as part of the selection process 

TMaH Opportunities and Considerations 

The model offers states resources and technical assistance to develop value-based alternative payment models to support whole-person pregnancy, birth, and postpartum care and improved outcomes. Many SMAs already are working on programs to innovate care and payment, and the TMaH is an opportunity to expand and accelerate those programs. 

The model offers an opportunity for states that have yet to expand postpartum coverage or added doula benefits to adopt these policies with the funding and technical assistance they may need to support their efforts. 

SMAs interested in this opportunity should evaluate their application readiness and pre-plan for the application. 

What’s Next? 

States interested in TMaH should submit a letter of intent by August 8, 2024. Applications are due by September 20, 2024, and the model is expected to start January 2025. 

The Health Management Associates team will continue to evaluate the TMaH model as more information becomes available. For more information, contact Amy Bassano ([email protected]), Melissa Mannon ([email protected]), and Andrea Maresca ([email protected]). 

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Unwinding recent Supreme Court rulings: impact on healthcare and beyond

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This week, our In Focus section provides an initial overview of recent US Supreme Court rulings that reshape the landscape of national healthcare policy and operations. These decisions, ranging from redefining federal agency powers to addressing local ordinances that will affect people who are unhoused, are poised to have far-reaching implications across the federal and state governments. 

The Decisions  

A significant ruling came on June 29, 2024, with the Court overturning the precedent established in the 1984 Chevron v. Natural Resources Defense Council ruling. This year’s decision in Loper Bright Enterprises v. Raimondo marks a pivotal shift by eliminating the deference traditionally granted to federal agencies’ interpretations of ambiguous statutes. By empowering courts to clarify vague legislation, the ruling raises fundamental questions about the future of existing regulations and may lead to a surge in litigation challenging federal agency interpretations. The Court did state this ruling would have no impact on past decisions regarding the Chevron doctrine. The decision would apply only to current, pending, and future cases. When read in conjunction with the “major questions doctrine” announced in 2022 in West Virginia v. Environmental Protection Administration, agencies now face more challenges to regulations under a legal structure that does not provide deference to the agency.  

The Court in Corner Post, Inc. v. Board of Governors of the Federal Reserve System also significantly reduced the ability of agencies to rely on statutes of limitations to avoid challenges to older regulations.  

In a separate ruling that garnered attention, the Supreme Court upheld local ordinances in Grants Pass, OR, that restrict individuals experiencing homelessness from using blankets, pillows, or cardboard boxes for shelter in public spaces. The majority opinion in City of Grants Pass, Oregon v. Johnson supported the city’s stance that these ordinances, aimed at prohibiting camping on public property, do not constitute cruel and unusual punishment under the Constitution. This decision has sparked considerable debate over the balance between municipal governance and constitutional protections for people who are unhoused. 

Also portending effects for the healthcare industry is the Court’s decision that defendants facing civil monetary penalties from the US Securities and Exchange Commission have a right to a jury trial. The Securities and Exchange Commission v. Jarkesy decision presents new considerations for healthcare and life sciences companies facing civil monetary penalties from the US Department of Health and Human Services. 

What’s Next  

The implications of these rulings are poised to reverberate throughout both federal and state governments. Stakeholders across healthcare and beyond must prepare for a period of adjustment and adaptation. Numerous questions regarding implementation and enforcement will likely emerge. The outcomes could trigger a wave of legal challenges and legislative responses as stakeholders navigate the evolving regulatory landscape. 

Future In Focus sections will dive deeper into the potential impacts these decisions will have on healthcare policies and partnerships with related sectors. These insights will be pivotal in guiding strategic decisions amid the evolving legal framework. 

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The case for a state-based marketplace

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Former Speaker of the House Tip O’Neill made famous the phrase “all politics is local,” meaning electoral success is related directly to a politician’s understanding of and ability to address the local issues that matter most to constituents. The Commonwealth Fund applied this notion to health care in conclusions of a 2017 study of state year-over-year improvements in their rankings on the organization’s Scorecard on Local Health System Performance. This concluded that local knowledge of health care challenges and collaboration among local organizations to find solutions were major contributors to communities’ improvement on scorecard rankings.

One state-level decision that can boost responsiveness to local needs is whether to establish a state-based marketplace (SBM) for health insurance. Health insurance marketplaces are required in every state under the Affordable Care Act (ACA). Under the ACA, states were given a choice about whether to establish an SBM and receive some federal funding to do so or rely on the federally facilitated marketplace (FFM) to serve their residents. Marketplaces are designed to do two basic things: (1) enroll individuals and families who do not have access to Medicaid, Medicare, or employer-sponsored health insurance coverage in private coverage and (2) connect eligible individuals with financial assistance (premium tax credits and cost-sharing reductions) to reduce their cost of coverage. To date, 19 states have established SBMs and others continue to entertain the possibility of establishing one.

Why would states want to establish and operate a new agency of government to administer coverage for people who are receiving federal tax credits for their health insurance coverage? Surely this could create redundant and/or uncoordinated functions between states and the federal government and place an unwanted burden on capacity-strapped state governments. However, states that have established SBMs have not found this to be the case. Instead, in evaluating the FFM versus SBM decision, and in operating SBMs, states have found that SBMs offer distinct advantages over the FFM. These include:

  • Lower Costs: States have historically demonstrated that they can operate SBMs at a lower overall cost than they would pay in fees through the FFM which has led, in part, to the recent reductions to the Healthcare.gov user fee. States also directly benefit through their ability to retain marketplace revenue and spend it locally. Lastly, SBMs can claim federal financial participation for functions they perform supporting and facilitating Medicaid enrollment.
  • Better Service: States have an almost 60-year history of enrolling low-income individuals and families enroll in and stay enrolled in Medicaid. Many of these individuals cycle in and out of Medicaid eligibility due to changes in income. States can coordinate between SBMs and Medicaid to reduce gaps in coverage. They also can simplify eligibility and enrollment through SBMs that deliver a better customer experience through knowledge of their markets and residents and on the ground enrollment assistance and initiatives.
  • More Policy Influence: SBMs can be launchpads for access and affordability innovations not possible with the FFM. State innovations to date include public option plans, state-funded subsidies such as premium and cost-sharing wraparound support, basic health plans, undocumented immigrant coverage programs, and collaborative enrollment initiatives with Medicaid agencies, unemployment programs, and tax departments.

In addition to states, managed care organizations (MCOs), particularly local and regional MCOs, can also reap the benefits of an SBM:

  • Local Governance: With governance for an SBM taking place at the state level (versus the federal level), MCOs have the opportunity for more thorough engagement with state officials around operational and policy decisions and issues.
  • Aligned Market Expectations: MCOs participating in both the marketplace and Medicaid will benefit from a higher probability of aligned expectations and priorities across both markets with those expectations and priorities being uniformly set at the state level with an SBM.
  • Local Market Sensitivity: MCOs that operate and are rooted locally can count on market-specific dynamics being better reflected in decision-making with an SBM.

Establishing a SBM is not an easy or straightforward decision, but state policymakers and MCOs should consider the benefits that have accrued to other states and the role that SBMs can serve in addressing local health priorities.

If you have questions about how HMA can support your state or MCO related to SBMs, please contact Managing Director Zach Sherman, Principal Lauren Ohata or Principal Anya Wallack.

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Zeroing in on Medicare Advantage policies set to transform the SNP landscape beginning in 2025

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Regulatory policy changes finalized by CMS aim to increase the percentage of dual-eligible individuals enrolled in integrated plans 

This week, our In Focus section delves into important and complex regulatory policy changes that affect coverage and services for the 12.9 million individuals who are dually enrolled in both Medicare and Medicaid. These policy changes—which were finalized as part of a broader final rule that the Centers for Medicare & Medicaid Services (CMS) released on April 4, 2023—are designed to increase the percentage of dually eligible people who are enrolled in integrated Medicare Advantage (MA) Dual Eligible Special Needs Plans (D-SNPs). The modifications will be phased in gradually, with certain provisions affecting D-SNPs starting in 2025. These adjustments forge a stronger connection between state-level policy and operational decisions, shaping the future landscape of D-SNPs. 

Overview 

Amid rapid growth of D-SNP plan offerings and increased enrollment of dually eligible individuals into D-SNPs, CMS has finalized an interconnected set of regulatory policy changes to increase enrollment in integrated plans while simplifying coverage and plan options for this population.   

By promoting enrollment in integrated plans, CMS seeks to improve the care experience and outcomes for dually eligible individuals, with the ultimate goal of making integrated plan enrollment the standard. Integrated D-SNP plans, which consolidate Medicare and Medicaid services under one managed care organization, offer uniform consumer protections (including unified grievance and appeals process), integrated plan materials, and more coordinated care. 

Key policy changes include:  

  • Replacing the current quarterly special enrollment period (SEP) with a monthly SEP for dually eligible and other low-income subsidy (LIS) individuals to enroll into a standalone prescription drug plan (PDP) 
  • Establishing a new integrated care SEP that will enable dually eligible individuals to choose an integrated D-SNP plan on a monthly basis 
  • Restricting enrollment in certain D-SNPs to individuals also enrolled in an affiliated Medicaid managed care organization (MCO) 
  • Limiting the number of D-SNPs an MA organization can offer in the same service area as an affiliated Medicaid MCO to reduce and simplify plan offerings for dually eligible individuals. 

What Issue is CMS Trying to Solve? 

CMS intends to make it easier for dually eligible people make enrollment decisions. Simplified plan options and more integrated care could prevent beneficiaries from inadvertently selecting plans that fail to provide the comprehensive Medicare and Medicaid benefits they need. 

This shift toward aligned enrollment could improve beneficiary experiences, enhance outcomes, and streamline administrative processes for CMS. The introduction of a monthly SEP specifically for dually eligible individuals enrolled in Medicaid managed care plans underscores CMS’s commitment to facilitating enrollment in affiliated D-SNP plans throughout the year. Health Management Associates (HMA) experts expect these changes to affect the sales cycle for dual eligibles and potentially increase member satisfaction, expand access to care, and improve overall health outcomes for this population. 

Timeline of Regulatory Changes 

Considerations for Health Plans  

The impact on individual health plans hinges on state-specific approaches to dually eligible beneficiaries and D-SNPs, as well as each plan’s strategy for integrating Medicare and Medicaid services.  HMA experts identified the following key factors as essential for understanding and monitoring these interconnected dynamics:  

  • Does the state administer managed Medicaid, and if so, does it include the dually eligible population? 
  • Does the Medicare D-SNP (or an affiliated/ related company) hold a state Medicaid contract that covers dually eligible individuals?  
  • What is the state’s vision regarding duals and D-SNPs? 
  • Does the state require its Medicaid contractors to offer a D-SNP? 
  • Does the state currently or plan to restrict D-SNPs to their Medicaid contractors? 
  • Is the state moving toward an exclusively aligned enrollment model? 

What’s Next  

The changes in D-SNPs present opportunities and risks for beneficiaries, MA and Medicaid health plans, and states. Successful navigation of these changes requires proactive planning and anticipation of forthcoming federal and state regulations. Health plans operating within the D-SNP space must actively engage with state Medicaid agencies to understand and potentially help shape this evolving environment. For example, health plan strategies may include: 

  • Understanding the state’s priorities and its current and planned approach to integrated care for dually eligible individuals 
  • Participating in and/or advocating for stakeholder meetings with the state regarding dually eligible members and D-SNPs to ensure the opportunity to shape regulations 
  • Developing internal integration strategies that align product design, operations, quality, clinical, and member experience capabilities for D-SNPs and Medicaid 
  • Strategically planning actions, such as participating in Medicaid procurements, to achieve the plan’s objectives 

Connect with Us  

These regulatory changes significantly affect dually eligible beneficiaries, states, and both Medicare and Medicaid health plans. Though some changes may disrupt the duals’ market, others align state objectives with plan strategies. Ultimately, dually eligible individuals with full benefits will gain the most, experiencing improved opportunities to choose suitable plans, access necessary care, and achieve optimal health outcomes and well-being.  

For further insights into these upcoming changes, view the D-SNP Growth and Integration: Key Implications of the 2025 CMS Final Rule webinar, featuring the HMA team—Dara Smith, Holly Michaels Fisher, Greg Gierer, and Tim Murray. Join these and other experts at HMA’s Fall Conference to stay informed about the strategic directions plans and states are pursuing.

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Unlocking Solutions in the Medicaid, Medicare, and Marketplace Programs

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HMA is hosting its 2024 Fall Conference October 7−9 in Chicago, IL. Unlocking Solutions in Medicaid, Medicare, and Marketplace Programs promises to enhance your ability to navigate and shape healthcare programs and systems, focusing on improving health and well-being. 

In a landscape dominated by endless video meetings, the HMA Fall Conference offers a refreshing change. Join us for an enriching experience featuring: 

  • Engagement with healthcare experts and thought leaders who are actively collaborating with stakeholders 
  • Participation in face-to-face discussions to exchange ideas and receive valuable feedback 
  • Opportunities to connect with peers who are committed to strengthening public programs and enhancing health outcomes 

Keynote Address and Sessions 

Darshak Sanghavi, MD, from the Advanced Research Projects Agency for Health (ARPA-H), will deliver the Keynote Address. He and other speakers will inspire attendees to explore innovative healthcare programs and their potential impacts on healthcare delivery, reimbursement, and health outcomes. 

The conference will feature a diverse array of speakers and participants, including C-suite executives from national, regional, and local health plans. Federal and state leaders joining panels will include: 

  • State Medicaid directors from New York, Iowa, New Mexico and Alabama  
  • State insurance commissioners  
  • Behavioral health agency officials 
  • State housing agencies 
  • Leaders from the US Interagency Council on Homelessness  

The conference will include a revamped pre-conference workshop on October 7, featuring hands-on exercises and interactive sessions led by HMA leaders. Sessions will include a value-based care contracting exercise, a value-based purchasing assessment discussion for providers, tips and tricks on navigating Medicaid section 1115 demonstrations, AI applications in healthcare, and more. 

View the agenda and event details, including speakers confirmed to date.

Registration 

Early bird registration is open until July 31. Don’t miss this opportunity to gain actionable knowledge, forge valuable connections, and discover fresh insights and best practices. Register now to secure your spot at the forefront of healthcare innovation. 

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HMA’s Medicare team brings together consultants from several HMA companies to assist clients in all facets of Medicare

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As HMA has grown, we have added significant breadth and depth to our Medicare team to better offer our clients comprehensive expertise on Medicare, Medicare Advantage, Dual-Eligibles, payment systems, pricing, and more. When looking for a partner to help navigate the complexities and changes of Medicare, our clients know that by engaging HMA experts they are engaging former CMS officials, former plan executives, payment system and coding experts, policy analysts, and many others. We draw on the resources of experts from our HMA companies to provide comprehensive and end-to-end solutions, including Wakely Consulting Group and Cirdan Health Systems and Consulting for actuarial services, and Leavitt Partners for political and policy engagement. Together we bring considerable expertise in all things Medicare and can leverage our more than 700 consulting colleagues across HMA.

Our world-class Medicare team partners with clients to meet their needs, address their challenges and improve their bottom line. We provide a variety of services such as:

  • Significant support for Medicare Advantage (MA) plans and stakeholders seeking to understand MA policy and operational issues including strategy, market assessment, models of care, evaluation, and audit support.
  • Support MA special needs plans (D-SNP, I-SNP, C-SNP, etc.) and programs for dual eligible beneficiaries.
  • Medicare regulatory, analytics and thought leadership consulting services for MA plans, providers, suppliers, value-based organizations, associations, and foundations.
  • Design, implementation, evaluation and analysis of Medicare value-based payment systems and policy issues.
  • Program of All-Inclusive Care for the Elderly (PACE) strategy and operations.
  • Strategic advice, policy development, and budgetary analysis for clients seeking assistance with Medicare reform efforts.
  • Medicare coverage and reimbursement for device, drug and biotechnology manufacturers and other stakeholders in the life sciences community.
  • Assistance for clients seeking to commercialize new technologies.
  • MA and fee-for-service claims analysis and actuarial services with support from actuaries within HMA plus actuaries from Wakely Consulting Group and Cirdan Health Systems and Consulting.
  • Consulting and federal policy analysis, including Congressional Budget Office (CBO) scoring and legislative policy development with our colleagues from Leavitt Partners.

In 2021, HMA acquired The Moran Company (TMC), which provides extensive expertise in the design, implementation, and evaluation of various healthcare payment systems, with a particular focus on the Medicare program. As we approach the 26th anniversary of TMC’s founding and the third anniversary of joining the HMA portfolio, we want to honor the history and contributions of The Moran Company and remember the late Donald Moran who founded TMC in July 1998. He spent almost 50 years in the health policy community, including many years in government service, serving as executive associate director for Budget and Legislation at the U.S. Office of Management and Budget during the Reagan Administration.

Many of our TMC colleagues worked with Moran for more than a decade, benefiting from his mentoring and exhaustive knowledge of the industry. Since joining, TMC consultants have worked closely with our HMA colleagues and the Medicare team in particular.

As of July 1, we are retiring the Moran brand and logo and fully integrating the company into HMA as part of the Medicare team. We may be dropping the Moran brand name, but not the approach and diligence for which TMC is well known. In particular, HMA will continue to use the same methodologies for Congressional Budget Office scores and Medicare data analyses that have characterized Moran’s work for more than 25 years.

View some of our recent work from our combined team:

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The Health Equity & Access for Rural Dually Eligible Individuals Toolkit: Raising Rural Voices

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Download the Toolkit

A public health crisis is growing more acute in rural America, disproportionately impacting individuals with both Medicaid and Medicare (the “dually eligible”). Dually eligible individuals residing in rural areas represent about 5 percent of all rural residents. They reside at the intersection of a public health crisis and a fragmented Medicaid and Medicare care delivery system. As HMA wrote in Health Affairs, this small population is at risk of falling through the cracks of this crisis and suffering a steep rural mortality penalty.

With support from Arnold Ventures, HMA prepared “The Health Equity & Access for Rural Dually Eligible Individuals (HEARD) Toolkit: Raising Rural Voices from New Mexico, North Dakota, and Tennessee to Create Action. The toolkit contains eight actionable solutions for federal and state policymakers to use and tailor to states’ needs. Ellen Breslin, Samantha Di Paola, and Susan McGeehan authored the toolkit, with research contributions from Rebecca Kellenberg and Andrea Maresca.

Download the toolkit.