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Insights and Trends

Headlines from the Hill: June Edition

Stay ahead of the latest regulatory shifts and healthcare breaking news with Headlines from the Hill.

In this month’s edition you will find:

IPPS Proposed Rule: Comments submitted to adopt an error adjustment.

The Federation of American Hospitals submitted comments urging CMS to adopt a one-time forecast error adjustment to the FY 2024 IPPS operating update based on the 3.0%-point difference in the hospital market basket in FY 2022. Among other comments:

  • Medicare DSH: Detailed concerns with the continued contraction of the Uncompensated Care DSH Pool; in particular, CMS’s reliance on a projected FY 2024 uninsured rate that significantly underestimates expected contractions in Medicaid enrollment.

  • Safety Net Hospital RFI: Urged CMS to ensure that any action for safety-net hospitals maintains stability in rather than destabilizes existing programs for safety-net hospitals by enhancing rather than replacing those programs, and uses additional funds (e.g., the $2 billion in additional funding recommended by MedPAC) to achieve these goals.

    In addition, cautioned against criteria based on ownership or 340B program participation as well as unreasonable eligibility and payment cliffs.

  • Physician-Owned Hospitals: Strongly supported and urged CMS to finalize its proposals (1) clarifying CMS’s discretion to deny expansion requests, (2) adjusting the process for obtaining community input on and approving or denying expansion exception requestions, and (3) reinstating key program integrity restrictions with respect to high Medicaid facilities.

  • Long-Term Care Hospitals: Recommended the same 3.0%-point forecast error adjustment to the FY 2022 LTCH market basket that we recommended for IPPS hospitals. In response to CMS’s proposed staggering 150% increase to $94,378 in the LTCH outlier threshold, Lifepoint Health offered three alternative methodologies, each of which would produce more appropriate outlier projections for FY 2024.

  • Quality Reporting: It was noted that it is too soon to require a measure on COVID-19 vaccinations for healthcare personnel since the underlying evidence for this measure is still emerging and the current specifications are flawed given the lack of a stable definition of “up to date,” which could negatively impact the reliability and validity of the measure.

    A standardized way to collect this information must be made available before required reporting of the measure. Should CMS move forward, we recommended, among other improvements, alignment with the requirements of the Hospital Conditions of Participation.

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CMS announces multi-state initiative to strengthen primary care.

On June 8, CMS announced the creation of the Making Care Primary (MCP) Model that will be tested in eight states: Colorado, Massachusetts, Minnesota, New Jersey, New Mexico, New York, North Carolina, and Washington. Beginning in July 2024, The MCP Model will provide participating primary care organizations‎ – particularly, small, independent, rural and safety net organizations – with additional revenue to build infrastructure and increase accessibility of primary care services and coordination with specialists. The program will run from July 1, 2024, to December 31, 2034.

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CMS releases National Health Expenditure projections.

On June 14, CMS Office of the Actuary announced the release of the National Health Expenditure projections and health insurance enrollments for 2022 to 2031.

CMS reports that national health expenditures in 2022 grew 4.3%, up from 2.7% in 2021. The average annual growth in national health spending is projected to outpace the average annual growth in gross domestic product in the next decade.

Additionally, hospital spending growth is projected to average 5.8% annually, however hospital spending growth slowed from 4.4% in 2021 to 0.8% in 2022. CMS notes that declining growth in utilization is partially attributable to COVID-19-related hospital staffing issues. However, in 2023 hospital spending growth is expected grow to 9.3%, and hospital price growth is projected to increase partially due to rising labor costs.

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Medicaid Managed Care: CMS established new Managed Care Group.

CMS announced it will establish a new group, called the Managed Care Group, within the Center for Medicaid and CHIP Services to take point on Medicaid managed care access and accountability, and to help oversee managed care 1115 waivers.

A Federal Register notice lays out the wide-ranging responsibilities for the new group, which will provide national leadership in the development and management of Medicaid program policy and operations for managed care programs as well as provide technical assistance and guidance to stakeholders.

The office will also handle Medicaid access and accountability policy for all managed care programs – regardless of the authority used and including all populations, such as dual eligibles and those who need long-term services and support.

The group will also be charged with providing expertise and technical support for the review, approval and oversight of managed care in 1115 demonstrations, as well as reviewing policy for 1915(b) waivers and 1932(a) state plan amendments, including the review and approval of new managed care programs, renewals and amendments.

CMS says the new group will lead reviews of state contracts and amendments with managed care organizations, prepaid inpatient health plans, prepaid ambulatory health plans, primary care case management entities, enrollment brokers and external quality review organizations to make sure contracts and capitation rates meet the necessary statutory and regulatory requirements.

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IRF and Psych PPS Rules: FAH responds.

The Federation of American Hospitals (FAH) submitted comments to CMS on its proposed rules for the FY 2024 Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the Inpatient Psychiatric Facility (IPF) PPS.

The letters raised concerns about inadequate market basket (MB) payment update of only 3% for both payment systems. The letters also urged CMS to use its authority to implement a payment correction for last year’s market basket (MB) forecast errors of 2.7% for IRFs and 2.6% for IPFs.

Additionally, the IRF letter included comments on IRF facility payment adjusters, quality measures, and allowing new units to open at any time during the cost reporting year.

The IPF letter provided additional comments on outliers, the benefits of all-inclusive reporting for some IPFs, and quality measures. Final rules are expected on or near August 1.

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IRF Review Choice Demonstration (RCD): CMS posted new Operation Guide document.

CMS posted a new Review Choice Demonstration (RCD) Operations Guide document to the CMS website. There are several key issues that are not addressed in the document, including the length of time for which IRFs may be subject to the less intensive stage of review if they meet the target compliance thresholds, and CMS’ processes of overseeing MAC behavior during the demonstration.

Notable highlights include:

  • CMS does not provide any specific dates or even general timeframes for the expansion of the demonstration outside of Alabama.

  • IRFs will need to meet a certain compliance threshold over the course of a 6-month review cycle, which will increase from 80% in the first 6-month cycle, to 85% in the second cycle, and to 90% in the third cycle. The compliance threshold facing new IRFs will be based on the number of cycles that have occurred in the IRF’s state, rather than the IRF’s own exposure to the demonstration.

    • In today’s guidance, CMS indicates that an IRF that does not meet the target compliance threshold during a 6-month review period can opt for either the 100% pre-claim or 100% post-payment review for the following cycle.  CMS had not previously indicated that an IRF could change its review track during the course of the demonstration.

    • IRFs that do meet the target compliance threshold rate in a given 6-month review cycle will move to a more selective stage of review, electing either a statistically valid random sample for post-payment review or a 5% “spot-check” prepayment review (unless the IRF wishes to remain in 100% pre-claim review).

    • If the IRF does not meet or exceed the target affirmation rate in the more selective stage of review, the document indicates that the IRF will need to revert to the more intensive stage of review on a pre-claim or post-payment basis.  We intend to seek significantly more clarity on the process for moving between threshold cycles and review tracks given the lack of clear explanation in the Operations Guide.

  • For IRFs in the pre-claim track, CMS outlines the various processes that the Medicare Administrative Contractors (MACs) will use to communicate whether a decision is provisionally affirmed or non-affirmed, as well as how MACs will work with IRFs to address “incomplete” requests.

  • Of note, the document confirms that there will be no special appeals system for IRFs subject to the demonstration (regardless of the review track that they select). CMS does not address any plans to increase capacity to handle any additional volume of appeals. 

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