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Blog

The basics of evaluating PBM contracts

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This week, our In Focus section highlights an issue brief from Wakely, an HMA Company, The Basics of Evaluating PBM Contracts, published September 2022. The brief provides an overview of the basic financial elements of a pharmacy benefit manager (PBM) contract. Evaluation of a traditional request for proposals (RFP) or PBM contract should begin with financial analysis of the following four key elements: discount guarantees (typically understood as point-of-sale ingredient costs), dispensing fees, rebate guarantees, and PBM administrative fees. This paper addresses various points of consideration when attempting a financial analysis of these contract elements.

Payors today face unprecedented degrees of complexity when conducting a PBM RFP or evaluating PBM contracts. To stay competitive, payors must navigate an ambiguous and changing pricing environment. That requires a solid understanding of PBM contracting. In a proposal, some PBMs may offer better AWP discounts while other PBMs offer better rebate guarantees. Alternatively, a payor may find a PBM that offers the best discounts and rebates but charges significantly higher administrative fees. Such analysis will consider the impacts of these key components together with historical and projected drug mix. While any PBM analysis must start with the elements discussed in this paper, a complete analysis must dive below the surface and into the fine print underlying these items.

Link to Issue Brief

Blog

Delaware substance use disorder treatment system needs assessment

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This week, our In Focus highlights a Health Management Associates Institute on Addiction (HMA IOA) report, Delaware Substance Use Disorder Treatment System Needs Assessment, published in June 2022. HMA IOA conducted a statewide three-county substance use disorder (SUD) treatment system needs assessment in Delaware. This project began in November 2021 and was primarily funded by New Castle County with contributions from Kent and Sussex counties. The goal was to review the current state of the SUD treatment ecosystem, identify strengths and gaps collecting input from as many Delawareans across multiple sectors as possible, and make actionable recommendations to build a more robust and sustainable future state system.

The final analysis included interviews with key stakeholders, focus groups, a survey of all licensed SUD providers, claims data analysis, and a comparison of Delaware’s public (e.g., Medicaid) outpatient and residential SUD reimbursement rates with selected regional states. This approach provided a unique cross-sector view of where the most significant opportunities for improvement and investment may rest.

The areas of greatest experienced need in the system were reported as: inadequate treatment beds, especially for some populations, like children and youth; lack of residential services for adults, especially those on Medicare and without insurance; needed supports for those experiencing negative impacts from social determinants of health (SDOH), like transportation and housing needs; lack of consistent access and care coordination; lack of adequate reimbursement to sustain the system or expand the treatment system; the need for trauma-informed care (TIC); and the need for more harm reduction and prevention strategies, including greater access specifically to Narcan 4mg Nasal Spray or its generic equivalent.

The study found that Delaware is meeting only 15 percent of SUD treatment needs and only meeting five percent of the need for the highest-intensity services, including inpatient treatment.

The results also showed an apparent discrepancy between what the state is working hard to implement to address the SUD and overdose crisis in Delaware and the community’s perception of, or lived experience with, those SUD treatment services and supports. Additionally, HMA IOA heard about many treatment system strengths from interviewees, town hall participants, and focus groups and included recommendations that are meant to leverage those existing strengths in the future treatment system.

Click here to read the report.

Blog

How can Medicare and Medicaid providers utilize CMS’ COVID-19 roadmap?

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On August 18, 2022, the Centers for Medicare and Medicaid Services (CMS) released a roadmap to support healthcare providers with preparing for the eventual end of the COVID-19 public health emergency (PHE) declaration. CMS also published a series of fact sheets summarizing the status of Medicare Blanket waivers and flexibilities by provider type as well as flexibilities applicable to the Medicaid providers and stakeholders.

In its announcement, CMS expressed concern that the continued PHE flexibilities could contribute to further decline in patient, resident, and client safety beyond what has already been observed. As a result, the agency is cautiously working to balance ongoing PHE needs while conveying more urgency for providers to prepare for the eventual end of the PHE flexibilities and waivers.

CMS has already ended certain flexibilities and waivers. The agency could phase out other flexibilities as it prepares to let the PHE declaration lapse. This means that providers and health plans should act now to assess flexibilities and waivers in use and develop a plan to transition to post-PHE environment.

Phase-out of COVID-19 Flexibilities

During the COVID-19 PHE, CMS has utilized Medicare and Medicaid waivers and flexibilities extensively. For example, Medicare has not enforced certain federal requirements during this time to allow hospitals to utilize off-site locations to screen and treat patients when needed as well as to minimize certain reporting requirements. The agency’s flexibilities also have accelerated adoption of telehealth and audio only services, particularly for behavioral health services.

Medicare and Medicaid providers across the states utilized PHE flexibilities to varying degrees, in part depending on experiences in individual communities, capacity, and other provider specific factors. Additionally, over the course of the PHE health plan and provider staffing and workflows have changed dramatically. This means health plans and providers will need a tailored plan to support the transition to the post PHE environment.

HMA’s experts are working with hospitals, health systems, clinics, and other providers as well as health plans on the steps they need to take now to prepare for multiple transitions. Our experts identified six immediate steps that Medicare and Medicaid plans and providers can be undertaking now to ensure they can effectively return to normal operations, including:  

  • Review performance on the patient and clinician safety metrics cited in the new CMS resources. In instances where providers have gaps and suboptimal safety and quality outcomes they will need assistance developing and implementing mitigation and quality improvement plans.
  • Utilize CMS’ tailored fact sheets to identify specific flexibilities and waivers in use now and the “normal” federal regulations that will be in effect once the PHE lapses. This assessment should include the blanket waivers and provider specific flexibilities, including:
    • Flexibilities around the requirements and timing for practitioner training
    • Expansion of allowable sites of service that permitted more expansive use of telehealth and virtual services as well as screening and treatment provided at alternative sites
    • Relaxation of federal requirements pertaining to surge capacity protocols
    • Flexibilities for staffing requirements, including medical records departments, nursing facilities, among others
    • Waiver of requirement for hospitals to submit occupational mix surveys and to have a utilization review plan with a UR committee focused on services furnished to Medicare and Medicaid enrollees
    • Applicable of the Extreme and Uncontrollable Circumstances Policy in Medicare’s Shared Savings Program and use of other flexibilities for MSSP Accountable Care Organizations (ACOs)
    • Non enforcement of certain physician self-referral laws
    • Waiver of numerous reporting requirements including those pertaining to verbal orders, discharge planning, HEDIS and STARs measure reporting, among others
  • Project impact of ending Medicaid’s continuous coverage policy and support individuals with actions they may need to take at the end of the PHE. Once the PHE ends, Medicaid’s enhanced federal funding for states and continuous coverage policy will end. HMA is working with health plans, providers and other stakeholders to project how this change will impact the enrollment and payer mix on state and local levels. Additionally, patients and their caregivers will need support from plans, providers, and consumer groups to ensure they renew their coverage or transition to other coverage programs when needed.HMA’s experts have written extensively about our work to support the Medicaid unwinding activities here and here.
  • Develop a plan to transition from “PHE” to “post-PHE” expectations that is informed by the assessment of flexibilities in use. Key components of the plan include:
    • Anticipated resource needs to reflect changes in staffing and workflows during the PHE
    • Articulation of specific compliance procedures and regular reporting requirements that will resume and the process for this transition
    • Develop training and education opportunities for staff that may be new or need refresher on normal policies and procedures as well as timeframes for making these changes
  • Update budgets projections to account for changes in reimbursement rates for certain services post-PHE. Certain reimbursement amounts and payment methodologies will change post-PHE, such as payment for administering the COVID-19 vaccine in a Medicare patient’s home among other changes. Providers will need to project the financial impact of these payment changes and update coding and billing manuals and procedures where applicable.
  • Build strategies to sustain changes to care models implemented during the COVID-19 PHE while also addressing health disparities. Some providers and facilities adopted care models and modified existing ones during the PHE that may have improved patient outcomes and experiences, maximized expertise of practitioners, and improved value-based care. For example, some providers have embraced the Medicare Hospital Without Walls Initiative and will need to assess their options as some of those flexibilities are phased out. Other federal opportunities have newly emerged during the pandemic, such as the Rural Emergency Hospital designation and pending changes to the Medicare Shared Savings Program (MSSP).

What’s Next

The COVID-19 PHE declaration next expires on October 12, 2022. While a renewal of the PHE declaration is possible into early 2023, providers should be using this time to prepare for resumption of normal policies and procedures.

The expiration of PHE flexibilities and waivers are not, however, happening in a vacuum. Providers need to make this transition amidst a dynamic healthcare sector with high expectations for continuous improvement in quality, patient experiences, and value. During this transitional period HMA’s experts are working with health plans and providers to develop or revisit strategic plans and investments to refocus attention on improving models of care and value-based payment approaches, including strategies that will help mitigate health disparities.

For questions, please contact Melinda Estep, Mary Walter, and Andrea Maresca.

Blog

Medicaid managed care spending tops $420 billion in 2021

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This week, our In Focus section reviews preliminary 2021 Medicaid spending data collected in the annual CMS-64 Medicaid expenditure report. After submitting a Freedom of Information Act request to the Centers for Medicare & Medicaid Services (CMS), HMA received a draft version of the CMS-64 report that is based on preliminary estimates of Medicaid spending by state for federal fiscal year (FFY) 2021. Based on the preliminary estimates, Medicaid expenditures on medical services across all 50 states and six territories in FFY 2021 was nearly $710.2 billion, with over 59 percent of the total now flowing through Medicaid managed care programs. In addition, total Medicaid spending on administrative services was $30.8 billion, bringing total program expenditures to $741 billion.

Total Medicaid Managed Care Spending

Total Medicaid managed care spending (including the federal and state share) in FFY 2021 across all 50 states and six territories was $420.5 billion, up from $359.6 billion in FFY 2020. This figure includes spending on comprehensive risk-based managed care programs as well as prepaid inpatient health plans (PIHPs) and prepaid ambulatory health plans (PAHPs). PIHPs and PAHPs refer to prepaid health plans that provide only certain services, such as dental services or behavioral health care. Fee-based programs such as primary care case management (PCCM) models are not counted in this total. Below we highlight some key observations:

  • Total Medicaid managed care spending grew 16.9 percent in FFY 2021. The rate of growth has been increasing since the COVID-19 pandemic. Prior to 2020, the rate had decelerated since FFY 2016.
  • Managed care spending growth was due in large part to the COVID-19 pandemic and the resulting higher Medicaid enrollment.
  • In terms of dollars, the increase in Medicaid managed care spending from FFY 2020 to FFY 2021 was $60.9 billion, compared to $46.1 billion from FFY 2019 to FFY 2020.
  • Medicaid managed care spending has increased at a compounded annual growth rate (CAGR) of 16.1 percent since FFY 2007, compared to a 6.6 percent growth in total Medicaid spending.
  • Compared to FFY 2020, Medicaid managed care spending as a percent of total Medicaid spending in FFY 2021 increased by 3.8 percentage points to 59.2 percent.

Figure 1: Medicaid MCO Expenditures as a Percentage of Total Medicaid Expenditures FFY 2007-2021 ($M)

As the table below indicates, 69.4 percent of FFY 2021 spending came from federal sources, which is 12 percentage points higher than the pre-Medicaid expansion share in FFY 2013, and 1.8 percentage points higher than FFY 2020.

Figure 2: Federal vs. States Share of Medicaid Expenditures, FFY 2013-2021 ($M)

State-specific Growth Trends

Forty-five states and territories report managed care organization (MCO) spending on the CMS-64 report, including Alaska, which utilizes a PIHP/PAHP model exclusively. Oklahoma is expected to implement a Medicaid managed care program in 2023. Of the remaining 44 states and territories that contract with risk-based MCOs, average MCO spending in FFY 2021 increased 17.6 percent. On a percentage basis, North Carolina experienced the highest year-over-year growth in Medicaid managed care spending at 63.3 percent due to the implementation of its risk-based Medicaid managed care program. Among states with more mature programs, Colorado experienced the fastest growth in FFY 2021 at 59 percent, followed by Nebraska at 55.6 percent.

The chart below provides additional detail on Medicaid managed care spending growth in states with risk-based managed care programs in FFY 2021.

Figure 3: Medicaid Managed Care Spending Growth on a Percentage Basis by State FFY 2020-21

Source: CMS-64; *Note: Not all states are included in the table.

Looking at year-over-year spending growth in dollar terms, Illinois experienced the largest increase in Medicaid managed care spending at $5.5 billion. Other states with significant year-over-year spending increases in dollar terms included Texas ($5.2 billion), California ($5.2 billion), and New York ($5.1 billion). The chart below illustrates the year over year change in spending across the states.

Figure 4: Medicaid Managed Care Spending Growth on a Dollar Basis by State FFY 2020-21 ($M)

Source: CMS-64; *Note: Not all states are included in the table.

The percentage of Medicaid expenditures directed through risk-based Medicaid MCOs increased by more than  five percentage points in 14 states from FFY 2020 to FFY 2021. The managed care spending penetration rate rose 13.4 percentage points in the District of Columbia, 9.7 percentage points in Indiana, 9.5 percentage points in Nebraska, 9.2 percentage points in North Carolina, and 9.1 percentage points in Illinois.

Figure 5: Medicaid MCO Expenditures as a Percentage of Total Medicaid Expenditures in States with a 5 percent or Greater Increase from FFY 2020 to FFY 2021 ($M)

Source: CMS-64

The table below ranks the states and territories by the percentage of total Medicaid spending through Medicaid MCOs. Iowa reported the highest percentage at 97.2 percent, followed by Puerto Rico at 95 percent, and Hawaii at 94.4 percent.

We note that in many states, there are certain payment mechanisms which may never be directed through managed care, such as supplemental funding sources for institutional providers and spending on retroactively eligible beneficiaries. As a result, the maximum achievable penetration rate in each state will vary and may be below that achieved in other states. The Medicaid managed care spending penetration rate is greatly influenced by the degree to which states have implemented managed long-term services and supports (MLTSS) programs.

Figure 6: Medicaid MCO Expenditures as a Percent of Total Medicaid Expenditures, FFY 2016-2021

Non-MCO Expenditures

Despite the rapid growth in Medicaid managed care over the last 10 years, program spending still represented approximately 59 percent of total Medicaid expenditures in FFY 2021. So where is the remaining fee-for-service (FFS) spending (approximately $291 billion) going? First, as noted above, there are many states/territories with Medicaid managed care programs in which certain beneficiaries or services are carved-out of the program, and these are typically associated with high-cost populations. The total amount of non-MCO spending in the 44 states with risk-based managed care in FFY 2021 was $260.4 billion. Assuming an average “full penetration” of 85 percent of total Medicaid spending, then HMA estimates that an additional $221 billion in current FFS spending could shift to a managed care model just in the states that already employ managed care for a subset of services and/or beneficiaries.

Thirteen states/territories did not utilize a comprehensive risk-based managed care model in FFY 2020. In general, the 13 states/territories that do not utilize managed care today are smaller states. Oklahoma, with $5.3 billion in Medicaid spending is expected to shift to risk-based Medicaid managed care in 2023. Total Medicaid spending across all 13 non-managed care states/territories was $29.8 billion. The 13 states/territories that did not employ a risk-based comprehensive Medicaid managed care model in FFY 2021 were Alabama, Alaska, American Samoa, Connecticut, Guam, Maine, Montana, Northern Mariana Islands, Oklahoma, South Dakota, Vermont, Virgin Islands, and Wyoming.

In terms of spending by service line, the largest remaining FFS category is home and community-based services at $69.5 billion, which accounts for 24 percent of FFS spending. Inpatient hospital services represent 21 percent of FFS spending at $60.8 billion.

Figure 7: Fee-for-Service Medicaid Expenditures by Service Line, FFY 2021

While the CMS-64 report provides valuable detail by service line for all FFS expenditures, it does not capture how spending directed to Medicaid MCOs is allocated by category of service. Therefore, it is not possible to calculate total MCO spending by service line, a challenge that will only intensify as more spending runs through MCOs.

Blog

Bolstering the youth behavioral health system: innovative state policies to address access & parity

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This week, our In Focus section highlights an HMA Issue Brief, Bolstering the Youth Behavioral Health System: Innovative State Policies to Address Access & Parity, published in August 2022. The brief examines policies aiming to advance access and availability of behavioral health services (encompassing mental health and substance use disorders) for youth. Below we explore opportunities for states to adopt levers to ensure access to the full continuum of children’s behavioral health services. States should consider developing a multi-faceted strategy to address accessibility issues including:

  • A policy mechanism for insurance coverage and funding for infrastructure, support and services across behavioral health, child welfare and Medicaid
  • A robust delivery system for provision of services
  • Comprehensive benefit design
  • A mechanism to monitor network adequacy, access, and parity

The COVID-19 pandemic has exacerbated rates of depression, anxiety, and other behavioral health issues among youth – with suicide now the second leading cause of death among ages 10-12. Pre-pandemic, 1 in 5 children experienced a mental health condition every year and only 54 percent of non-institutionalized youth enrolled in Medicaid or CHIP received mental health treatment. Between March 2020 to October 2020, mental health–related emergency department visits increased 24 percent among youth ages 5 to 11 and 31 percent among ages 12 to 17, compared with 2019 emergency department visits.

Youth covered by Medicaid and the State Children’s Health Insurance Program (CHIP), and the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) of the Medicaid Act require state Medicaid agencies to provide enrollees under age 21 with access to periodic and preventive screenings, and services that are necessary to “correct or ameliorate” medical conditions, including other additional health care services such as behavioral health conditions. It remains the responsibility of states to determine medical necessity on a case by-case basis. As of 2020, states are mandated to submit a CHIP state plan amendment to demonstrate compliance with the new behavioral health coverage provisions. However, behavioral health services are not a specifically defined category of benefits in federal Medicaid law and coverage of many services is at state discretion. The 2008 Mental Health Parity and Equity Act (MHPAEA) requires that Medicaid managed care and private health insurers who do reimburse for behavioral health services provide behavioral health benefits to cover mental health and substance use services that is no more restrictive than the coverage generally available for medical and surgical benefits. While MHPAEA was designed to reduce inequities in coverage between behavioral and physical health services, it does not reduce inequities in reimbursement as payers are not required to cover behavioral health services.

Ambitious efforts are underway to prioritize behavioral health services for youth. The Department of Health and Human Services (HHS) recently called for states to prioritize and maximize efforts to strengthen youth mental health. The American Academy of Pediatrics (AAP), American Academy of Child and Adolescent Psychiatry (AACAP) and Children’s Hospital Association declared a national emergency in children’s mental health. In addition, passage of the Bipartisan Safer Communities legislation includes significant funding for mental health screening, expansion of community behavioral health center (CCBHC) model; improving access to mental health services for children, youth, and families through the  Medicaid program and CHIP; increasing access to mental health services for youth and families in crisis via telehealth; and investments to expand provider training in mental health, supporting suicide prevention, crisis and trauma intervention, and recovery.

Click here to read the Issue Brief.

For questions, please contact:

Caitlin Thomas-Henkel
Uma Ahluwalia
Devon Schechinger
Debbi Witham

Blog

Innovative state policy solutions to enhance the youth behavioral health system

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With suicide now the second leading cause of death among children, adolescents, and young adults (aged 15-24 years old) in the United States, it is apparent that the COVID-19 pandemic has not only exacerbated rates of depression and anxiety, but also illuminated the fractures in our youth behavioral health system. In response, states are focusing on ways to advance policies that aim to expand coverage for youth mental health services.

Individuals suffering from mental health conditions or substance use disorders (SUDs) face many challenges accessing care and often do not seek treatment. Even before the COVID-19 pandemic, Centers for Disease Control and Prevention (CDC) data found 1 in 5 children were diagnosed with a mental health disorder, yet only 20% of those children received appropriate care.

In the past two years, over 100 laws in at least 38 states have been enacted with a focus on supporting schools to act as a primary access point for youth behavioral health care. At least half of all states are applying the co-location approach, where both types of care are delivered at the same site, to better integrate physical and behavioral health care. According to the Kaiser Family Foundation report, more than four-fifths of states launched initiatives related to screening for behavioral health needs, an effective strategy for Medicaid to connect those with behavioral health needs to the appropriate services.

Medicaid plays a pivotal role as the largest payer of behavioral health services, including both mental health and SUD services.  Efforts to address these issues have been a focus in Medicaid at the federal level, including in the 2018 SUPPORT Act and more recently in the 2021 American Rescue Plan Act (ARPA), which provided enhanced Medicaid funding for certain behavioral health providers and mobile crisis services. The Center for Medicare & Medicaid Services (CMS) under the Biden Administration has highlighted behavioral health policy and investments as a federal Medicaid priority.

During National Mental Health Awareness Month, the Department of Health and Human Services (HHS) called for states to prioritize and maximize efforts to strengthen youth mental health and detailed HHS’ plans to support state-wide coordination across federal funding streams to expand youth mental health services. This blog highlights California’s approach and spotlights other states’ efforts to bolster the children’s behavioral health system.

State Strategies to Strengthen the Youth Behavioral Health System

There has been significant work underway in California for years to address youth behavioral health services, but up until recently it did not include substantial investments to redesign the mental health system for youth, and families. California exemplifies ways to leverage policy levers and make significant state investments to cultivate and strengthen the youth behavioral health system. 

In 2021, Californiaenacted groundbreaking legislation by making significant investments to reimagine its youth behavioral health system. The Children and Youth Behavioral Health Initiative is a $4.4B investment intended to enhance, expand, and redesign the systems that support behavioral health for youth, children and families. This initiative, administered by the California Health and Human Services Agency and its departments, aims to evolve California’s behavioral health system in which all children (25 years of age and younger) regardless of payer, are served for new and existing behavioral health needs.

This multi-year strategy seeks to enhance and redesign the current behavioral health system by integrating behavioral health into physical health, education, and other areas that support children and families. With a stronger focus on prevention and early intervention, the Initiative will distribute school-linked partnership, capacity, and infrastructure grants to support implementation of the initiative for behavioral health services in schools and school-linked settings.

The Initiative will also provide incentive payments to qualifying Medi-Cal (Medicaid) managed care plans to establish interventions that expand access to preventive, early intervention, and behavioral health services for children in publicly funded childcare and preschool, as well as pre-K-12 children in public schools. Also included are efforts to submit a State Plan Amendment to incorporate the dyadic services benefit under Medi-Cal, whereby screening for behavioral health problems, interpersonal safety, tobacco and substance misuse and social determinants of health are provided for the child and caregiver or parent during medical visits. A key piece of the Initiative stipulates that every component outlined in the Children and Youth Behavioral Health Initiative Act may only be implemented if the Department of Health Care Services confirms that federal financial participation under the Medi-Cal program will not be jeopardized. Indeed, the intricate design and implementation of the Initiative would not be possible without partnerships from other State agencies, education stakeholders, subject matter experts, and community partners to deliveressential services from prevention to treatment and recovery.

California’s commitment to address youth behavioral health services at a statewide level illustrates the various efforts emerging across the country.  California is one state that is advancing multi-faceted strategies through legislation and Medicaid, but other states have used various Medicaid authorities including 1115 demonstrations, State Plan Amendments (SPAs), and 1915(c) Waivers to remove accessibility roadblocks and enhance youth behavioral health services. States have taken a variety of approaches in their commitments to bolster the system of care around the country that include:

  • New York amended its state plan amendment to expand the EPSDT benefit to enable a greater focus on prevention, early intervention, and expansion of behavioral health services. 
  • New Jersey amended its state plan to make Mobile Response and Stabilization Services (MRSS) for youth up to age 21 reimbursable under Medicaid’s EPSDT benefit.
  • Ohio RISE (Resilience through Integrated Systems and Excellence) for youth with complex behavioral health needs was enacted through a Medicaid 1915c waiver. Through this program, a single managed care organization provides new, targeted behavioral health services and intensive care coordination
  • Washington State passed the Behavioral Health Emergency Services legislation E2SHB 1688 (Chap. 263, Laws of 2022) to ensure coverage for all emergency behavioral health services (adult and children) to protect consumers from charges for out-of-network health care services by addressing coverage of emergency BH services.

Moving Ahead

States can combine the power of their policy levers along with the cascade of forthcoming federal dollars to strengthen the youth mental health system of care. The Bipartisan Safer Communities legislation includes significant funding for mental health screening, among other critical services. The Bipartisan legislation seeks to foster the tremendous opportunity for states and schools to increase behavioral health capacity for students and mental health professionals, evidenced by the School Based Mental Health Services (SBMHS) Grant Program, the School Based Mental Health Service Professionals Demonstration Grant, and several other investments for supportive services in schools.

Ensuring equitable access to a plethora of high-quality behavioral health services for youth requires the individual and collective commitment of states. The children’s mental health crisis has reached unprecedented levels and the opportunity for states to lead by example has arrived. Fortunately, states have significant tools to address the youth mental health crisis through the design and deployment of innovative policies and mission-aligned collaborations. Federal funds and state policy levers will help advance a robust and accessible children’s behavioral health system. As our communities work to rebuild in a post-pandemic world, states have the unique opportunity to provide today’s youth with compassion, essential behavioral health resources, and integrated systems to meet them where they are.

For additional information, please read our Bolstering the Youth Behavioral Health System: Innovative State Policies to Address Access & Parity brief, which explores state policy levers to advance access and availability of behavioral health services (encompassing mental health and substance use disorders) for youth.

Blog

Congress approves major health care proposals but the work is just beginning for CMS and stakeholders

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On August 7, 2022, the Senate passed the Inflation Reduction Act of 2022 (the IRA). The House approved the bill on August 12, and President Biden is expected to sign the IRA into law in the coming weeks.

The IRA addresses a range of policy topics across health care climate, energy, and taxation. Regarding health care, the IRA makes structural changes to the Medicare Part D prescription drug benefit and provides new authority for the Medicare program to address the pricing of prescription drugs in the Part B and Part D programs. The measure also extends the temporary enhanced assistance for health coverage purchased from Marketplaces, which was first approved in the American Rescue Plan Act (ARPA). In addition, the IRA updates vaccine coverage policies in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). 

While the IRA provides a critical framework for the structural changes to the nation’s largest public health insurance programs, the U.S. Department of Health and Human Services will be responsible for building out the policy and operational components necessary to support implementation.  

Notably, the Centers for Medicare and Medicaid Services (CMS) will lead implementation of the IRA’s Medicare and Marketplace provisions. The changes to the Part D benefit and the development of entirely new processes and policies to support the IRA’s drug pricing provisions require significant resources and consideration of direct as well as indirect impacts for the health care market. The agency can use a variety of regulatory tools to support implementation, including issuing standalone Requests for Information (RFIs), convening stakeholder engagement sessions, updating policy manuals, and undertaking notice and comment via the formal rulemaking process, among others.

CMS’ strategic plan emphasizes the value of stakeholder engagement, and this is likely to lead to multiple opportunities for public input, particularly as CMS implements the new Medicare provisions of the IRA. For example, the agency must develop the policy parameters for reforming the Part D benefit design and is likely to seek input from Medicare Advantage (MA) and MA Prescription Drug Plans (MA-PDPs), providers, vendors, and consumer advocacy groups among others to inform its approach. CMS will also need input from the stakeholder community as it establishes the timelines, reporting, and negotiating mechanisms impacting Part B and D prescription drugs pricing and how it will implement the inflation penalty policies outlined in the IRA.

The IRA’s extension of the American Rescue Plan Act’s (ARPA) enhanced eligibility for premium assistance through 2025 provides more near certainty around eligibility and enrollment for this market. This may led to renewed momentum for CMS to engage with states and stakeholders on Marketplace policies and structures.

Many of the details around how the IRA’s health care policies will be implemented are unknown at this time. Stakeholders will want to monitor CMS’ progress and provide feedback with data-informed analysis and concrete and practical recommendations as these opportunities are announced. 

An overview of many of the IRA’s health care provisions follows. Our team of experts can provide tailored analysis and support to clients as they begin to unpack the full breadth of the IRA’s policy changes and implications for Medicare Advantage and Part D plans, providers, vendors, consumer advocacy groups and other stakeholders.

  • Part B and Part D Drug Pricing. Requires the Secretary of HHS to select a list of drugs eligible for negotiation, and enter into agreements with select manufacturers, negotiating a “maximum fair price” (MFP) for each selected drug in the Medicare program. The Secretary is required to negotiate on a certain number of drugs per year, 10 drugs in 2026; 15 drugs in 2027 and 2028, and 20 drugs in 2029 and subsequent years.  The number of drugs negotiated will accumulate over the years, such that up to 60 drugs could be negotiated by 2029.  Manufacturers who are not in compliance will face an excise tax that could far exceed the cost of drugs sold over time and civil monetary penalties.
  • Prescription Drug Inflation Rebates. Requires manufacturers to pay rebates for Medicare Part B and D drugs with prices rising faster than inflation. The rebate calculation would be based on units and pricing in Medicare and would determine an inflation-adjusted payment amount based on the percentage by which the price exceeds the inflation benchmark, as determined by the Consumer Price Index for All Urban Consumers (CPI-U). If a manufacturer fails to pay the rebate, then they would be subject to a civil monetary penalty either equal to or at least 125 percent of the rebate amount for the quarter.
    • The Part D inflation rebate takes effect October 2022 for Part D drugs and biologics.
    • The Part B inflation rebate begins January 2023 for single-source drugs or biologics and certain biosimilar products. The IRA also includes an inflation growth cap on beneficiary coinsurance in Part B, beginning April 2023.
  • Part B Payment for Biosimilar Biological Products. Amends Medicare’s Average Sales Price (ASP) payment methodology in cases where the ASP during the first quarter of sales is unavailable to establish a payment rate for biosimilars. The IRA also updates Medicare Part B reimbursement for certain biosimilar products for a five-year period beginning on October 1, 2022, by increasing the add-on payment from six percent of the reference product’s ASP to eight percent of the reference product ASP.
  • Medicare Part D Assistance for Beneficiaries and Benefit Design. Increases the qualifying income amount (federal poverty level (FPL)) for the full Low-Income Subsidies (LIS) under Part D, from 135 percent of the FPL to 150 percent of the FPL, starting in 2024. The IRA also adjusts the cost-sharing requirements in the Part D benefit by:
    • Eliminating cost sharing in the catastrophic phase of the benefit in 2024;
    • Setting an annual out-of-pocket (OOP) limit for enrollees at $2,000 beginning in 2025;
    • Capping monthly premium increases for a prescription drug plan in 2024 through 2029 at six percent per year.  The Secretary may make a one-time adjustment to the beneficiary Part D premium contribution percentage in 2030 to ensure longer-term beneficiary premium reduction; and  
    • Adjusting the benefit coverage liabilities for the initial coverage phase and catastrophic coverage phase.
  • Coverage for Insulin. Requires Medicare to cover select insulin products and not apply a deductible or impose cost-sharing more than $35 or 25 percent of the negotiated price (including all discounts) for a 30-day supply. Beginning in July 2023, Medicare must exempt from beneficiary deductibles insulin provided through durable medical equipment (DME) and ensure that coinsurance for a month’s supply of insulin administered through DME does not exceed $35. High-deductible health plans (HDHPs) will be able to cover selected insulin products with no deductible without impacting their status as a HDHP, starting in 2023.
  • Medicare, Medicaid, and CHIP Coverage for Vaccines. Requires full coverage of Advisory Committee on Immunization Practices (ACIP)-recommended adult vaccines under Medicaid and CHIP without cost-sharing. The IRA also increases the Federal Medical Assistance Percentage (FMAP) by one percentage point, for adult medical assistance for such vaccines and their administration, during the first eight fiscal quarters on or after the date of the IRA’s enactment.
    • Requires Medicare Part D provide full coverage without cost sharing of ACIP-recommended adult vaccines for plan years beginning on or after January 1, 2023.
  • Enhanced Temporary Assistance for Marketplace Coverage. Extends the ARPA’s expansion of Advanced Premium Tax Credit (APTC) eligibility and amounts through 2025. ARPA modified the affordability percentages used for the calculation of APTC to increase subsidy amounts for individuals eligible for assistance.

Experts from HMA and HMA companies are supporting clients as they begin to strategize and formulate initial recommendations for federal agencies and plan for implementation.  We will continue to monitor developments in this area and provide additional updates as more information becomes available. 

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HMA Identifies Key Trends for Emerging Medicaid Section 1115 Demonstration Proposals

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As the urgent needs of COVID-19 Public Health Emergency (PHE) continue to subside, state Medicaid agencies are exploring pathways and concepts to further address the historic inequities and health disparities laid bare by the pandemic. These efforts are closely aligned with the current Administration’s policy objectives for the Medicaid program, specifically:

  1. Addressing health equity
  2. Improving access and coverage
  3. Promoting whole person care

For several decades, Medicaid Section 1115 demonstration programs have provided a powerful lever for federal and state policymakers to design, implement, and evaluate transformative initiatives. All states administer at least one Section 1115 demonstration program. Some demonstrations are narrowly tailored to address services or populations while others capture broader features pertaining to coverage, benefits, and payment and delivery system innovations.

Notably, a new wave of comprehensive and transformative Medicaid Section 1115 demonstration proposals is emerging.

Working closely with the Centers for Medicare and Medicaid Services (CMS), states are developing proposals that place individuals at the center of health care in an entirely new way – by recognizing their medical needs as well as the complexity of circumstances and environmental factors that shape the individual’s medical, physical, and behavioral care needs and outcomes.

Teams of experts from across the HMA family of companies are supporting state agencies, counties, health plans, providers, community and consumer organizations, and other stakeholders with translating federal goals and parameters into concrete proposals as these move through the stages of concept paper, application and negotiation, and implementation. Demonstrations will reflect each state’s unique political and policy landscapes, but the programs will be grounded in certain federal goals and expectations to enhance accountability and improve outcomes.

Our experts identified three trends in state 1115 demonstration programs. In this and subsequent In Focus posts we will share our team’s initial insights and considerations for stakeholders based on our collective “on the ground” expertise. We include illustrative examples from some states with approved and pending Section 1115 proposals.

Section 1115 Trend #1: States are advancing a new vision for Medicaid’s role in addressing health equity, influenced by social drivers and grounded in a community’s needs.

CMS is strongly encouraging states to consider initiatives that address health inequities and community specific social drivers of health. As evidenced by the current state initiatives, Section 1115 demonstration programs will be a primary — but not the only — pathway states utilize to design strategies to address health inequities driven by non-health systems and circumstances. Based on our work with states and stakeholders, it is critical that states ensure the services are directly linked to factors that impact health outcomes for Medicaid enrollees and that they have mechanisms to evaluate the impact of community and social care services.

Several state proposals already signal CMS’ current vision for using Section 1115 authority to test new types of assistance within service categories to include non-medical services, services tailored to populations, and assistance that is linked to desired outcomes. For example:

North Carolina’s Section 1115 pilot program will provide support to certain groups of consumers for an array of community supports ranging from housing related services and transportation access to interpersonal violence and access to food and nutrition services. The program includes help for consumers related to utility set up and moving costs, and support to connect with community services to address legal issues impacting housing and thereby impacting health.

In December 2021, CMS approved California’s Section 1115 demonstration program and linked this to a separate waiver approval allowing the state to further enhance services and accountability within its managed care program. As part of California’s implementation of its statewide whole person care initiative, the state will be able to pay for housing navigation and tenancy services and assistance with first month deposits for certain populations enrolled in its statewide managed care program. This proposal is grounded in the state’s commitment to ensure that the non-medical services were clearly defined and clinically oriented for the intended population.

CMS’ approval of the North Carolina and California programs is paving the way for conversations in other states, including New York, New Jersey, and Oregon among others. Negotiations on similar initiatives to address health equity in other states, include:

New York, like North Carolina, plans to seek CMS’ approval to offer a range of community services that would be provided through newly established networks of community-based organizations in all regions of the state. The state envisions that the CBO networks will include small neighborhood organizations familiar with their communities’ needs and the capacity to address multiple social risk factors as well as larger county or regionally focused entities. In addition, New York is asking CMS to support a health equity focused proposal which would provide certain “in-reach” services for incarcerated individuals before they are released.

Oregon submitted a request to use federal Medicaid spending authority to address community-based health inequities and to establish statewide health equity investments (HEIs). The state is especially focused on supporting consumers during disruptions in coverage, life transitions, or disruptions caused by climate events. Community-based investments will reflect empirical evidence and community assessments and may include efforts to improve building environments and expand culturally and linguistically. Addressing climate events may be of particular interest as it addresses multiple priorities for Administration.

Conclusion

North Carolina and California offer important insights into what may be possible and as importantly, what may be beyond the bounds of CMS’ Medicaid authority. Chief among the outstanding issues for states and stakeholders is whether additional innovative programs for addressing health disparities among justice-involved populations is possible under Medicaid’s demonstration authority.

CMS may use the experience with initial states to provide more concrete information on these general parameters and expectations. Formal guidance would prove helpful to states and stakeholders seeking to apply new knowledge and experiences with health inequities into practice within the Medicaid programs.

HMA’s interdisciplinary teams of Medicaid, human services, and actuarial experts are assisting states as well as stakeholders as they conceptualize, develop, and implement Section 1115 programs. To learn more about our work and the breadth of our services please contact HMA consultant Andrea Maresca, Principal.

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CMS Requests Input on Improving Medicare Advantage: Stakeholders Have a Brief Window to Offer Ideas to Inform Agency’s Initial Proposals

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

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

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

Why It Matters:

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

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

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

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

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

What’s Next

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

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

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

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Center for Medicare Director Meena Seshamani to Deliver Virtual Keynote Address on The Future of Medicare Value-Based Payments at HMA Conference in Chicago, October 10-11

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

To register, visit https://conference.healthmanagement.com/.  For details on sponsorships and group discounts, contact Carl Mercurio, cmercurio@healthmanagement.com.

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

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Medicare Hospital Outpatient Rule Proposes Details for New Rural Emergency Hospitals, Creates New Questions for Other Payment Policies

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

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

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

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

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

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

Key Action Items for Stakeholders

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

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

Rural Emergency Hospitals: Definition and Payment

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

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

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

REH policies proposed in the CY 2023 OPPS Proposed Rule:

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

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

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

Mental Health Services Furnished Remotely by Hospital Staff

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

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

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

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

Payment Policies  

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

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

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

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

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

340B Payment Policy

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

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

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

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

Additional Issues for Stakeholder Consideration

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

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

TopicSummary
Provider TransparencyCMS issues a request for information linked to the President’s July 2021 Executive Order (E.O.) on Promoting Competition in the American Economy. CMS currently manages a database of nursing homeowners and operators, and the agency has begun to leverage that data to support hospital and nursing home patients and their families. The agency solicits feedback on whether it should release additional data that is already being collected “to help identify the impact of provider mergers, acquisitions, consolidations, and changes in ownership on the affordability and availability of medical care.” CMS also invites comments on whether the agency should release similar data for other types of providers. The solicitation represents the next phase in CMS’ expansive portfolio of work to address the impact of market consolidation on health care prices, consumer costs, and quality in the healthcare industry writ large. Medicare providers and stakeholders should be tracking how federal health care regulators, including CMS, are working to respond to the E.O. There is a strong likelihood that CMS will begin to include data on other types of providers and stakeholders will need to understand this shifting landscape and how it could impact their current and potential future business decisions.
SaaSCMS discusses its desire to address the novel and evolving nature of Software as a medical Service (Saas) procedures. The agency is seeking comments on the specific payment approach we might use for these services under the OPPS as SaaS-type technology becomes more widespread. We are also concerned about the potential for bias in algorithms and predictive modeling, and are seeking comments on how we could encourage software developers to prevent or mitigate the possibility of bias in new applications of this technology.
Inpatient Only ListRemoves ten services from the Inpatient Only (IPO) list.While the IPO list has previously been targeted for major reforms, this year’s narrower set of proposed changes signal CMS’ is deprioritizing IPO list reform.  
Payment for surgical N95 RespiratorsCMS recognizes that hospitals may incur additional costs when purchasing domestic NIOSH-approved surgical N95 respirators. CMS is proposing payment adjustments under the IPPS and OPPS that would reflect, and offset, the additional marginal resource costs that hospitals face in procuring domestically made NIOSH-approved surgical N95 respirators. Under this proposal, these payments would be provided biweekly as interim lump-sum payments to the hospital and would be reconciled at cost report settlement. The rule outlines the information providers need to include on the cost report to determine payments for cost reporting periods beginning on or after January 1, 2023.
Ambulatory Surgery CentersCMS requests stakeholder feedback on methods that could be implemented to collect cost data from ASCs that minimize reporting burden.This could be the beginning of a process to implement cost reports for ASCs.

The HMA Medicare team will continue to analyze these proposed changes. We have the depth and breadth of expertise to assist with tailored analysis, to model policy impacts, and to support the drafting of comment letters to this rule.

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CMS Picks Up the Pace on Transforming the Medicare Landscape

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

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

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

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

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

Key Action Items for Stakeholders

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

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

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

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

Medicare Shared Savings Program

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

Proposed changes to the MSSP include the following:

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

Behavioral Health Changes

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

  • Creating an exception to supervision requirements, allowing marriage and family therapists, licensed professional counselors, addiction counselors, certified peer recovery specialists, and others to provide behavioral health services while being under general supervision rather than “direct” supervision.
  • Paying psychologists and social workers to help manage behavioral health needs as part of the primary care team.
  • Establishing new payments for team-based, comprehensive management and treatment of chronic pain.
  • Enhancing the ability of ACOs to address social, behavioral, and physical health care needs, by making advanced shared savings payments to new, smaller ACOs. CMS states these funds could be used to hire behavioral health practitioners and address the social needs, such as food and housing.
  • Clarifying Opioid Treatment Programs may bill Medicare for services performed by mobile units without obtaining a separate registration and increasing payment rates to Opioid Treatment Programs.

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

Payment Issues

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

  • Expiration of a statutory one-year 3 percent increase in payments,
  • A statutory 0 percent payment update for CY 2023, and
  • A budget neutrality adjustment across all billing codes resulting from modifications to PFS weights which increased the relative value of primary care billing codes.

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

Notable Issues for Stakeholder Consideration

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

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

TopicSummary
TelehealthThe Proposed Rule makes a number of potential changes to telehealth policies: Implements several of the policies mandated by the Consolidated Appropriations Act (CAA) of 2022, which extended telehealth flexibilities CMS adopted during the public health emergency (PHE) for 151 days after the end of the PHE. The rule also confirms Medicare telehealth services performed with dates of service occurring on or after the 152nd day after the end of the PHE will revert to pre-PHE rules and the appropriate place of service (POS) indicator will be required to be included on the claim.Permanently adds three new services to the list of reimbursable telehealth services: prolonged inpatient hospital, prolonged skilled nursing, and prolonged home services. Adds several additional services to the Medicare Telehealth Temporarily (through the end of CY 2023) adds several telehealth services: new therapy services, audiology, and new behavior assessment/treatment services. Temporarily (during PHE plus 151 days) requires practitioners to use billing modifier code ‘95’ and either provider of service code ‘02’ (not in home) or ‘10’ (home) for all telehealth services. At the end of the PHE-plus-151 days, billing requirements will revert to pre-PHE methods. Permanently (beginning in 2023) requires practitioners to use billing modifier ‘93’ for all audio-only services, and requires RHCs, FQHCs, and OTPs to use modifier ‘93’ for eligible mental health services furnished via audio-only services. However, CMS specifically did not propose to extend audio-only evaluation and management visits beyond the 151 days after the PHE. 
DentalMedicare pays for a limited number of dental services when the dental care is an integral part of a beneficiary’s medical treatment. CMS is proposing to add to the list of conditions where that may be appropriate such as dental exams and necessary treatments prior to organ transplants, cardiac valve replacements, and valvuloplasty procedures. CMS is also seeking feedback on other clinical conditions where the dental services are linked to the clinical success of the medical services.
HearingCMS is proposing to allow audiologists to perform and bill for certain diagnostic hearing tests for patients with non-acute conditions without a physician order.
Wound CareCMS is proposing several policies to update payment, coding and billing for skin substitutes which are commonly used in the treatment of diabetic foot ulcers and venous leg ulcers. CMS is proposing to change the terminology of skin substitutes to ‘wound care management products’ in order to reflect how clinicians use these products, to provide a more consistent approach to coding for these products, and to treat and pay for these products as a physician supply instead of a separately paid product under the Average Sales Price methodology beginning on January 1, 2024.
MIPSCMS continues to update and refine the quality measures used in the different aspects of the programs under MIPS including the addition of certain health equity related measures.  CMS also is proposing five additional MIPS Value Pathways (MVPs) (Advancing Cancer Care, Optimal Care for Kidney Health, Optimal Care for Patients with Episodic Neurological Conditions, Supportive Care for Neurodegenerative Conditions, and Promoting Wellness) CMS also proposed several ways to reduce the burden for physicians participating in advanced alternative payment models (AAPMs) including permanently establishing the 8% minimally Generally Applicable Risk Standard for AAPM qualification and proposing to apply the eligible clinician limit to the entity participating in the medical home model rather than the parent organization.  

The HMA Medicare team will continue to analyze these proposed changes. We have the depth and breadth of expertise to assist with tailored analysis, to model policy impacts, and to support the drafting of comment letters to this rule.