Providers are asking the CMS to withdraw a rule that would block billions in supplemental funding that helps safety net and Medicaid providers care for their poorest patients.
The payments are paid to Medicaid managed care plans on top of the base capitation rate. The plans are required to pass these payments to contracted providers that treat a disproportionate share of Medicaid or uninsured patients with complex or costly cases.
The CMS estimates that at least 16 states have paid out $3.3 billion in pass-through payments on average annually. Another three have distributed about $50 million a year for nursing facilities.
The agency says the additional payments are not actuarially sound since they are not directly related to contracted services.
In a final mega-rule issued this past summer updating federal regulation of Medicaid managed care, the CMS told states to stop making such payments but said they could be phased out over 10 years for hospitals and five years for physicians and nursing facilities.
That raised questions about whether new contracts could include pass-through agreements. In response, the CMS issued a proposed rule last month that said only states with contracts submitted to the agency by July 5, 2016, would be able to continue pass-through payments during the transition period. The CMS also banned states from boosting payments before the July 5 deadline.
Hospitals say they were counting on that transition period as they prepare for the payments to end. “State Medicaid programs and hospitals would face substantial new payment restrictions with little time to make adjustments,” Tom Nickels, AHA's executive vice president of government relations and public policy, said in a comment.
Dr. Janis M. Orlowski, chief health care officer at the Association of American Medical Colleges called the rule "retroactive policymaking" and said it "makes state and provider planning impossible.”
Paul Lorenz, CEO of Santa Clara Valley Medical Center in California, said safety net hospitals rely on extra Medicaid funding because the base rates don't cover the costs of care. “The transition period for pass-through payments is critically important to ensuring stable funding for safety net hospitals,” Lorenz said in a statement.
Regulatory experts, however, don't expect the CMS to withdraw the rule in response to the industry's efforts.
“It's always possible but we don't expect any further changes in the near-term,” said Lisa Kaplan Howe, senior adviser at the Public Consulting Group.
But James Scott, CEO of Applied Policy, a reimbursement consulting firm, said it's possible that President-elect Donald Trump's administration may choose not to finalize the regulations.
