Insights

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

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

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

Why It Matters:

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

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

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

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

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

What’s Next

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

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

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

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

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

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

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

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

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

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

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

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

Key Action Items for Stakeholders

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

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

Rural Emergency Hospitals: Definition and Payment

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

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

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

REH policies proposed in the CY 2023 OPPS Proposed Rule:

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

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

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

Mental Health Services Furnished Remotely by Hospital Staff

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

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

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

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

Payment Policies  

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

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

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

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

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

340B Payment Policy

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

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

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

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

Additional Issues for Stakeholder Consideration

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

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

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