Insights

This week, our In Focus section reviews several calendar year (CY) 2024 Medicare payment final rules that the Centers for Medicare & Medicaid Services (CMS) issued in recent weeks, including those pertaining to:

• The Physician Fee Schedule and Other Changes to Medicare Part B Policies
• The Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) reimbursement
• The Home Health Prospective Payment System Rate Update, Quality Reporting Program Requirements, and Value-Based Purchasing Expanded Model Requirements
• The End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)

CMS also announced the OPPS Rule for 340B-Acquired Drug Payment Policy in response to court-invalidated payment rates and on November 6, 2023, released the 2025 Contract Year Policy and Technical Changes to Medicare Advantage. The latter regulation addresses guardrails for brokers, behavioral health expansions, and several dual eligible-related policies. We will analyze these provisions in next week’s In Focus.

These final rules set the payment rates and other Medicare payment policies for services that applicable providers provide under the fee-for-service Medicare program and take effect January 1, 2024. Additionally, the final rules, particularly the Physician Fee Schedule, are expected to further inform Congress’ discussions and, ultimately, any action on healthcare policies in a possible year-end legislative package.

For example, the Senate Finance Committee has released draft language that would mitigate the projected physician payment reduction, among other policy changes. Provider organizations and interested stakeholders will want to analyze the impact of the final policies across the rules, including new codes, payment rates, and opportunities to participate in accountable care organizations (ACOs).

Overall, Health Management Associates (HMA) notes several trends across these three Medicare payment regulations:

• Health equity remains a significant focus of CMS under the Biden Administration.
• The agency continues to expand its coverage of behavioral health services under Medicare and enhance payment for and access to these services.
• Medicare is moving toward incrementally supporting care delivered in accordance with beneficiaries’ preferences, such as moving away from reimbursing largely for in-person services and toward supporting telehealth services.
• CMS is creating pathways for reimbursement for a broader range of clinicians and caregivers who are addressing Medicare beneficiaries’ needs.
• CMS continues its efforts to improve hospital price transparency with policies aimed at encouraging providers to publicly report data.

2024 Medicare Physician Fee Schedule and Other Part B Payment Policies Final Rule

On November 2, 2023, CMS released the final rule for the Medicare Physician Fee Schedule (MPFS) for CY 2024. CMS finalized an overall 1.25 percent decrease in MPFS payment rates from 2023 to 2024. The final 2024 PFS conversion factor remains largely unchanged ($32.74) from the proposed rule ($32.75) but will result in a 3 percent decrease from the CY 2023 conversion factor ($33.89). Among the most important policy changes in the final rule is the establishment of a new add-on code (G2211) for complex care provided in the primary care setting.

In addition, CMS will begin allowing additional behavioral health providers to participate in Medicare (described further below) and make numerous telehealth policy changes mandated in the Consolidated Appropriations Act of 2023. CMS also finalized changes to the Medicare Shared Savings Program (MSSP), which CMS estimates will increase ACO participation in MSSP by roughly 10−20 percent.

CMS finalized several policies to address health equity, including coding and payment changes focused on providing access to new services and addressing Medicare beneficiaries’ unmet health-related social needs (HRSNs). The final changes affect mental health and substance use disorder (SUD) treatment providers, address payment accuracy for primary care in the context of whole-person care, and expand access to dental care for cancer patients. The changes for 2024 include:

• Caregiver training: Medicare will now pay practitioners who train caregivers to support patients with certain diseases (e.g., dementia) in carrying out a treatment plan. Services must be furnished by a physician or a non-physician practitioner or therapist.
• Community health integration (CHI) services: The final rule includes separate coding and payment for CHI services, including person-centered planning, health system coordination, and facilitating access to community-based resources to address unmet social needs that interfere with a practitioner’s diagnosis and treatment plan.
• Principal illness navigation (PIN) services: The final coding and payment rules for PIN services describe care navigation services for individuals with high-risk conditions. CMS included a subset of PIN services to support individuals with severe mental illness and SUD through use of auxiliary personnel (i.e., peer support specialists). The definition of a serious, high-risk condition is dependent on clinical judgment. CMS will monitor utilization across beneficiaries and specialties to ascertain how PIN services are best used going forward.
• Social determinants of health risk assessments: This evaluation can be provided and billed as an add-on service to an annual wellness visit or with an evaluation and management or behavioral health visit.
• Marriage and family therapists and mental health counselors, including eligible addiction, alcohol, or drug counselors who meet qualification requirements for mental health counselors: These types of providers may now enroll in Medicare and bill for their services starting January 1, 2024. The rule expands coverage and increases payment for crisis care (including mobile units), SUD treatment, and psychotherapy as well as psychotherapy performed in conjunction with an office visit and for health behavior assessment and intervention services.

2024 Hospital OPPS and ASC Final Rule

On November 2, 2023, CMS released a final rule for hospital OPPS and ASCs. The following policies are included in the final rule:

• A 3.1 percent increase in payment rates for hospitals and ASCs that meet certain quality reporting requirements. This amount is based on the projected 3.3 percent increase in the hospital market basket and is consistent with the 2024 payment increase for inpatient services.
• No services will be removed from the inpatient-only (IPO) list, but 10 procedures will be added to the IPO.
• The list of ASC-covered surgical procedures will be updated to include 37 additional surgical procedures.
• Drugs and biologicals acquired through the 340B program will have the same payment rate as those not acquired under the 340B program—the average sales price plus 6 percent.
• CMS will pay for intensive outpatient program services. The final rule includes the scope of benefits, physician certification requirements, coding and billing, and payment rates.

340B Rule

Section 340B of the Public Health Service Act (340B) allows participating hospitals and other providers to purchase certain covered outpatient drugs or biologicals from manufacturers at discounted prices. Until 2018, the Medicare payment rate for Part B-covered outpatient drugs provided in outpatient hospitals was generally the average sales price (ASP) plus 6 percent. From 2018 through September 2022, CMS paid for these drugs at ASP (22.5 percent). After extensive litigation and a Supreme Court ruling, CMS returned payment for 340B drugs to ASP plus 6 percent in late 2022, and payment has continued at that level since. Consequently, payment for other services was reduced slightly more than 3 percent in 2023 to meet statutory budget neutrality requirements.

In this rule, CMS finalizes a remedy for 2018−22 payments in light of the court rulings. The agency will provide lump sum payments to 340B hospitals to cover the difference between ASP + 6 percent and ASP – 22.5 percent. Lump sum payments to 340B hospitals will result in roughly $9 billion in payouts to these facilities, in addition to the $1.5 billion they already have received through resubmitted claims. CMS had proposed that beginning in 2025, non-drug OPPS payments would be reduced by 0.5 percent to recover the budget neutrality-based payment increases resulting from the rescinded 340B cuts. According to CMS, hospitals received approximately $7.8 billion in additional spending on non-drug items and services because of budget neutrality. Earlier this year, CMS proposed a 0.5 percent pay cut to all hospitals, which would be in place for 16 years to fully adjust for the payment changes. CMS is finalizing the budget neutrality adjustment but will defer implementing these cuts to 2026 based on public comments about hospital budgetary pressures.

CY 2024 Home Health Prospective Payment System Final Rule

On November 1, 2023, CMS issued the CY 2024 Home Health Prospective Payment System (HH PPS) Rate Update final rule, which informs Medicare payment policies and rates for home health agencies (HHAs). This rule includes routine revisions to the Medicare Home Health PPS payment rates for CY 2024 in accordance with existing statutory and regulatory requirements. According to CMS estimates, Medicare payments to HHAs in CY 2024 will increase in the aggregate by 0.8 percent, or $140 million, from CY 2023.

However, CMS also finalized a permanent prospective payment adjustment to the CY 2024 home health 30-day period payment rate that reduces the update. This adjustment is intended to account for any increases or decreases in aggregate expenditures that result from the implementation of the Patient-Driven Groupings Model (PDGM) and 30-day unit of payment as required in the Bipartisan Budget Act of 2018. The finalized −2.890 percent adjustment is half the total projected adjustment of negative 5.779 percent. As a result, CMS estimates that Medicare payments to HHAs in CY 2024 will increase in the aggregate by 0.8 percent, rather than the 2.2 percent decrease as initially proposed.

CMS’ decision to implement only half of the permanent prospective payment adjustment in CY 2024 was in response to concerns from public commenters about the magnitude of implementing the proposed large single-year payment reduction. However, CMS also maintains that it will have to account for the remaining permanent adjustment it chose not to apply in CY 2024 and make other potential adjustments to the base payment rate in future rulemaking.

Other Proposals

CMS also is finalizing proposals to:

• Rebase and revise the home health market basket to adopt a 2021-based home health market basket, including proposed changes to the market basket cost weights and price proxies
• Reduce the labor-related share of the market basket to 74.9 percent based on the 2021-based home health market basket compensation cost weight (down from 76.1 percent)
• Recalibrate the PDGM case-mix weights using CY 2022 data
• Update the low utilization payment adjustment thresholds, functional impairment levels, and comorbidity adjustment subgroups for CY 2024
• Codify statutory requirements for disposable negative pressure wound therapy
• Establish regulations to implement payment for items and services under two new benefits: lymphedema compression treatment items and home intravenous immune globulin
• Establish several enrollment provisions for hospices and other provider types and create a new informal dispute resolution process for hospice programs and a special focus program to provide enhanced oversight of the poorest-performing hospices
• Implement various changes to the Home Health Quality Reporting Program and Home Health Value-Based Purchasing Model

2024 End-Stage Renal Disease Prospective Payment System Final Rule

On October 27, 2023, CMS issued a final rule that updates payment rates and policies under ESRD PPS for renal dialysis services furnished to Medicare beneficiaries on or after January 1, 2024. This rule also updates the acute kidney injury (AKI) dialysis payment rate for renal dialysis services that ESRD facilities furnish in CY 2024.

For CY 2024, CMS will increase the ESRD PPS base rate to $271.02, upping total payments to ESRD facilities by approximately 2.1 percent. The CY 2024 ESRD PPS final rule also includes several changes related to ESRD PPS payment policies.  First, the rule includes a payment adjustment that will increase payment for certain new renal dialysis drugs and biological products after the transitional drug add-on payment adjustment period ends. According to CMS, the increase will ensure payment is not a barrier to accessing innovative treatments for Medicare ESRD beneficiaries.

For more details about the policies described herein, contact Amy Bassano ([email protected]), Zach Gaumer ([email protected]), Andrea Maresca ([email protected]), John Richardson ([email protected]), Kevin Kirby ([email protected]), or Rachel Kramer ([email protected]).

This week, our In Focus section highlights a white paper that Wakely, a Health Management Associates company, released in October 2023, “Cut to the Point: A Summary of 2024 Star Rating Cut Point Changes”. The paper reviews 2024 Medicare Star Rating data, including the Star Rating Technical Notes, which the Centers for Medicare & Medicaid Services (CMS) released October 13, 2023.

The data summarizes how Medicare Advantage Organizations (MAOs) performed on various quality measures during the 2022 measurement year and serves as an indication of changing Medicare Advantage spending in 2025 as a result of changes in Medicare Advantage Prescription Drug (MA-PD) Overall Star Ratings. The publication of the 2024 Star Rating Technical Notes provided an opportunity for Wakely to analyze measure-level cut point changes. This paper looks at the latest cut point changes to determine how the Tukey Outlier Deletion methodology and changes in the overall quality performance have affected Star Rating cut points.

Link to White Paper

Wakely will also host a webinar, Stars and Strikes: 2024 Star Ratings and the Impact of Tukey, at 2:30 pm ET on November 14, 2023. The webinar will cover the recently released 2024 Star Ratings, including an analysis of the expected impact on 2025 Medicare payments. Attendees should expect to hear discussions about the latest program changes and resulting impact on the contract-level star ratings, including implementation of the Tukey outlier deletion methodology. In addition, Wakely colleagues will cover the upcoming changes to the Star Rating program and discuss their potential impact on Medicare Advantage Organizations.

For questions, please contact Suzanna-Grace Tritt, [email protected], or Lisa Winters, [email protected].

This week, our In Focus section reviews the new States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model, which the Centers for Medicare & Medicaid Services (CMS) Center for Medicaid and Medicare Innovation (the Innovation Center) announced on September 5, 2023. AHEAD is the third major model that the Innovation Center has introduced to its payment portfolio since July, clearly signaling that CMS has transitioned from conducting its internal review to laying the groundwork for action on approaches that will be tested over the next decade.

CMS views this model as the next iteration of earlier total cost of care (TCOC) models that were designed and tested in three states—Maryland, Vermont, and Pennsylvania. The AHEAD model includes several important updates based on its experience with these earlier models. For example, the AHEAD model is designed to be scalable in multiple states. Although it most certainly will be adapted to state-specific markets, landscapes, and provider needs, CMS intends to apply a consistent framework across participating states.

Additionally, though Medicare has been involved in formulating some state-level total cost of care initiatives, the AHEAD model promises specific investments in primary care and enhanced member engagement to support all-payer movement toward patient-centered care.

AHEAD Model Parameters

The goal of the AHEAD Model is to improve population health and health equity in states that apply and that CMS selects for participation. CMS plans to select up to eight pilot states, each eligible to receive up to $12 million to support statewide implementation over a six-year period. States will be accountable for constraining overall growth in healthcare expenditures. Requirements centered on health equity mirror other CMS policies and are integrated throughout the model.

The model focuses heavily on strengthening primary care. The primary care AHEAD component includes Medicare reimbursement for care management, a commitment to align with ongoing Medicaid transformation efforts, and expectations for primary care practices to achieve certain goals on quality measures.

The investments in primary care are paired with global budgets for hospitals. Participating hospitals will receive a fixed payment that will include both Medicare fee-for-service and Medicaid. States will need to ensure participation among other payers, including at least the state employee health plan, Marketplace Qualified Health Plans, or other commercial payers in the state or sub-state region. Other payers will have the option to pay participating hospitals based on a global budget.

All-Payer Health Equity Approaches and Developments (AHEAD)

The model will be in operation 2024−2034, and three cohorts will be to accommodate variation in readiness among participating states and providers. The first cohort pre-implementation period is scheduled to begin in summer 2024, and the performance period is scheduled to begin as soon as January 2026. CMS expects to release additional details in fall 2023.

AHEAD Opportunities and Considerations

The AHEAD Model will need significant gubernatorial leadership and possibly from state legislators, depending upon the particular state’s related healthcare laws, and the model does provide flexibility for interested states and relevant stakeholders to develop programs that are adaptable to their needs.

Health Management Associates (HMA) experts have identified the following list of policies and considerations that states; hospitals, health systems, and provider organizations; other payers, including employers; and other stakeholders will need to bear in mind when determining whether to participate in the program.

• States will need to describe their partners and provide an assessment of their readiness to implement the AHEAD model. CMS will expect states to address whether they have legislation in place related to primary care investment and/or cost growth. Potential participating states should be able to describe their vision for population health improvement and primary care transformation, a proposed strategy for hospital and primary care provider recruitment, a plan for Medicaid and multi-payer alignment, and their current population health and health equity activities. Interested states will need early input from hospitals and health systems, providers, and other payers to define, develop, and implement a model that accommodates their healthcare landscape.
• States will develop a Medicaid hospital global budget methodology that must have CMS approval. Medicaid hospital global budgets must be implemented in the first performance year. CMS will develop a standardized Medicare fee-for-service (FFS) hospital global budget methodology, that also accommodates critical access hospitals (CAHs).
• CMS will set the parameters for quality measurement, but states will have significant flexibility to establish the metrics that will be applied for accountability and bonus purposes. CMS will use the current CMS hospital quality programs as the basis for determining eligibility for a health equity improvement bonus. CAHs will have a similar opportunity. States will work with CMS to set quality measures for participating primary care practices.
• The model requires a statewide health equity plan. Additionally, participating hospitals will need to create their own health equity plans in alignment with statewide priorities and activities.
• Participating states will need to generate savings. CMS will identify state-specific factors to determine the level of expected savings. All-payer cost growth targets include Medicare FFS, Medicare Advantage, Medicaid, commercial, state employee health plans, and marketplace-qualified health plans. States will also be responsible for performance on all-payer and Medicare FFS primary care investment targets.

The HMA team will continue to evaluate the AHEAD model as more information becomes available. We also can answer questions about the Innovation Center’s other recently announced models and the linkages with new Medicare and Medicaid regulations. For more information, contact Amy Bassano ([email protected]), Caprice Knapp ([email protected]), and Andrea Maresca ([email protected]).