HHS Issues Proposed Rule on Medicaid Program for Use of New or Increased Pass-Through Payments in Medicaid Managed Care Delivery Systems
Medicaid Program; The Use of New or Increased Pass-Through Payments in Medicaid Managed Care Delivery Systems
A Proposed Rule by the
Printed version: PDF
Publication Date:
Agencies:
Dates: To be assured consideration, comments must be received at one of
Document Type: Proposed Rule
Document Citation: 81 FR 83777
Page: 83777-83786 (10 pages)
CFR: 42 CFR 438
Agency/Docket Number: CMS-2402-P
RIN: 0938-AT10
Document Number: 2016-28024
AGENCY:
ACTION:
Proposed rule.
SUMMARY:
This proposed rule addresses changes, consistent with the CMCS Informational Bulletin (CIB) concerning "The Use of New or Increased Pass-Through Payments in Medicaid Managed Care Delivery Systems," published on
DATES:
To be assured consideration, comments must be received at one of the addresses provided below, no later than
ADDRESSES:
In commenting please refer to file code CMS-2402-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.Start Printed Page 83778
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I. Background
In the
In the
A. Summary of the Medicaid Managed Care
We finalized a policy to limit state direction of payments, including pass-through payments at section 438.6(d) in the
In an effort to provide a smooth transition for network providers, to support access for the beneficiaries they serve, and to provide states and managed care plans with adequate time to design and implement payment systems that link provider reimbursement with services covered under the contract or associated quality outcomes, we finalized transition periods related to pass-through payments for specified provider types to which states make most pass-through payments under
As finalized, section 438.6(d) limits the amount of pass-through payments to hospitals as a percentage of the "base amount," which is defined in paragraph (a) and calculated pursuant to rules in paragraph (d)(2). Section 438.6(d)(3) specifies a schedule for the phased reduction of the base amount, limiting the amount of pass-through payments to hospitals. For contracts beginning on or after
We believe that states will be able to more easily transition existing pass-through payments to physicians and nursing facilities to payment structures linked to services covered under the contract. Consequently, the
B. Questions About the Final Rule
Since publication of the
The transition periods under the final rule provide states, network providers, and managed care plans significant time and flexibility to move existing pass-through payment arrangements (that is, those in effect when the final rule was published) into different, permissible payment structures under actuarially sound capitation rates, including enhanced fee schedules or the other approaches consistent with section 438.6(c)(1)(i) through (iii). We did not intend states to begin additional or new pass-through payments, or to increase existing pass-through payments, notwithstanding the adjustments to the base amount permitted in section 438.6(d)(2), after the final rule was published but before
Under the final rule, we provided a delayed compliance date for section 438.6(c) and (d); we will enforce compliance with section 438.6(c) and (d) no later than the rating period for
The transition periods provided under section 438.6(d) are for states to identify existing pass-through payments and begin either tying such payments directly to services and utilization covered under the contract or eliminating them completely in favor of other support mechanisms for providers that comply with the requirements in section 438.6(c). The transition periods for current pass-through payments minimize disruption to local health care systems and interruption of beneficiary access by permitting a gradual step down from current levels of pass-through payments: (1) At the schedule and subject to the limit announced in the
Recent questions from states indicate the transition period and delayed enforcement date have caused some confusion regarding our intent for increased and new pass-through Start Printed Page 83780payments for contracts prior to
II. Provisions of the Current Proposed Rule
For reasons discussed above, we propose to revise section 438.6(d) to better effectuate the intent of the
Second, we propose to prohibit retroactive adjustments or amendments, notwithstanding the adjustments to the base amount permitted in section 438.6(d)(2), to managed care contract(s) and rate certification(s) to add new pass-through payments or increase existing pass-through payments defined in section 438.6(a). In this proposed rule, we clarify that we would not permit a pass-through payment amount to exceed the lesser of the amounts calculated pursuant to paragraph (d)(3).
Third, we propose to establish a new maximum amount of permitted pass-through payments for each year of the transition period. For hospitals, a state would be limited (in the total amount of permissible pass-through payments) during each year of the transition period to the lesser of either: (A) The percentage of the base amount applicable to that contract year; or (B) the pass-through payment amount identified in proposed paragraph (d)(1)(i). Thus, the amount of pass-through payments identified by the state in order to satisfy proposed paragraph (d)(1)(i) would be compared to the amount representing the applicable percentage of the base amount that is calculated for each year of the transition period. For pass-through payments to physicians and nursing facilities, we also propose to limit the amount of pass-through payments during the transition period to the amount of pass-through payments to physicians and nursing facilities under the contract and rate certification identified in proposed paragraph (d)(1)(i). In making these comparisons to the pass-through payments under the managed care contract(s) in effect for the rating period covering
Under our proposed rule, the aggregate amounts of pass-through payments in each provider category would be used to set applicable limits for the provider type during the transition period, without regard to the specific provider(s) that receive a pass-through payment. For example, if the pass-through payments in the contract identified under paragraph (d)(1)(i) were to 5 specific hospitals, the aggregate amount of pass-through payments to those hospitals would be relevant in establishing the limit during the transition period, but different hospitals could be the recipients of pass-through payments during the transition. As an alternative, we also considered whether the state should be limited by amount and recipient during the transition period; in our example, this would mean that only those 5 hospitals that received pass-through payments could receive such payments during the transition period. However, we believe this narrower policy would be more limiting than originally intended under the
We propose to revise paragraph (d)(1) to clarify that a state may continue to require an MCO, PIHP, or PAHP to make pass-through payments (as defined in section 438.6(a)) to network providers that are hospitals, physicians, or nursing facilities under the contract, provided the requirements of paragraph (d) are met. We are proposing to retain the regulation text that provides explicitly that states may not require MCOs, PIHPs, or PAHPs to make pass-through payments other than those permitted under paragraph (d).
Under proposed paragraph (d)(1)(i), a state would be able to use the transition period for pass-through payments to hospitals, physicians, or nursing facilities only if the state can demonstrate that it had pass-through payments for hospitals, physicians, or nursing facilities, respectively, in both the managed care contract(s) and rate certification(s) that meet the requirements in either proposed paragraph (d)(1)(i)(A) or (B). We recognize that states may have multiple managed care plans and therefore multiple contracts and rate certifications that are necessary to establish the existence and amount of pass-through payments. We propose in paragraph (d)(1)(i)(A) that the managed care contract(s) and rate certification(s) must be for the rating period that includes
Under proposed paragraph (d)(1)(ii), we would not approve a retroactive adjustment or amendment, notwithstanding the adjustments to the base amount permitted in section 438.6(d)(2), to managed care contract(s) and rate certification(s) to add new pass-through payments or increase existing pass-through payments defined in section 438.6(a). We clarify that we would not permit a pass-through payment amount to exceed the lesser of the amounts calculated pursuant to paragraph (d)(3) of this proposed rule. We are proposing paragraph (d)(1)(ii) to prevent states from undermining our policy goal to limit the use of the transition period to states that had pass-through payments in effect as of the effective date of the
As an alternative to proposed paragraphs (d)(1)(i) and (ii), we considered linking eligibility for the transition period to those states with pass-through payments for hospitals, physicians, or nursing facilities that were in approved (not just submitted for our review and approval) managed care contract(s) and rate certification(s) only for the rating period covering
In proposed paragraph (d)(3), we propose to amend the cap on the amount of pass-through payments to hospitals that may be incorporated into managed care contract(s) and rate certification(s) during the transition period for hospital payments, which will apply to rating periods for contract(s) beginning on or after
This proposed language would prevent increases of aggregate pass-through payments for hospitals during the transition period beyond what was already in place when the pass-through payment limits and transition periods were finalized in the
In addition, we are proposing to amend paragraph (d)(3) to provide that states must meet the requirements in paragraph (d)(1)(i) to continue pass-through payments for hospitals during the transition period. We believe this additional text is necessary to be consistent with our intent, explained above, for the proposed revisions to paragraph (d)(1). As in the
Finally, we are proposing to revise section 438.6(d)(5) to be consistent with the proposed revisions in section 438.6(d)(1)(i) and to limit the total dollar amount of pass-through payments that is available each contract year for physicians and nursing facilities. We are not proposing to implement a phase-down for pass-through payments to physicians or nursing facilities. We propose that for states that meet the requirements in paragraph (d)(1)(i), rating periods for contracts beginning on or after
III. Collection of Information Requirements
This rule would not impose any new or revised information collection, reporting, recordkeeping, or third-party disclosure requirements or burden. Our proposed revision of section 438.6(d) would not impose any new or revised IT system requirements or burden because the existing regulation at section 438.7 requires the rate certification to document special contract provisions under section 438.6. Consequently, there is no need for review by the
IV. Regulatory Impact Analysis
A. Statement of Need
As discussed throughout this proposed rule, we have significant concerns that pass-through payments have negative consequences for the delivery of services in the
We realize that some pass-through payments have served as a critical source of support for safety-net providers who provide care to
However, as noted previously, the transition period and delayed enforcement date caused some confusion regarding increased and new pass-through payments. The
We noted in the CIB that the transition from one payment structure to another requires robust provider and stakeholder engagement, agreement on approaches to care delivery and payment, establishing systems for measuring outcomes and quality, planning efforts to implement changes, and evaluating the potential impact of change on
As we noted in the CIB and throughout this proposed rule, we believe that adding new or increased pass-through payments for hospitals, physicians, or nursing facilities, beyond what was included as of
B. Overall Impact
We have examined the impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866 defines a "significant regulatory action" as an action that is likely to result in a rule: (1) Having an annual effect on the economy of
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects (
The
A number of states have integrated some form of pass-through payments into their managed care contracts for hospitals, nursing facilities, and physicians. In general, the size and number of the pass-through payments for hospitals has been more significant than for nursing facilities and physicians. We noted in the final rule (81 FR 27589) a number of reasons provided by states for using pass-through payments in their managed care contracts. As of the effective date of the final rule, we estimate that at least eight states have implemented approximately
Since the publication of the final rule, we received a formal proposal from one state regarding
Since we cannot produce a detailed quantitative analysis, we have developed a qualitative discussion for this RIA. We believe there are many benefits with this regulation, including consistency with the statutory requirements in section 1903(m) of the Start Printed Page 83784Act and regulations for actuarially sound capitation rates, improved transparency in rate development processes, stronger payment approaches that are based on the utilization or delivery of services to enrollees covered under the contract, or the quality and outcomes of such services, and improved support for delivery system reform that is focused on improved care and quality for
Relative to the current baseline, this rule is likely to prevent increases in or the development of new pass-through payments, which would reduce state and federal government transfers to hospitals, physicians, and nursing facilities. Because we lack sufficient information to forecast the eventual overall impact of the
C. Anticipated Effects
The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and small governmental jurisdictions. Small entities are those entities, such as health care providers, having revenues between
In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis for any rule that may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 603 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside a Metropolitan Statistical Area and has fewer than 100 beds. We do not anticipate that the provisions in this proposed rule will have a substantial economic impact on small rural hospitals. We are not preparing analysis for either the RFA or section 1102(b) of the Act because we have determined, and the Secretary certifies, that this proposed rule will not have a significant economic impact on a substantial number of small entities or a significant impact on the operations of a substantial number of small rural hospitals in comparison to total revenues of these entities.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of
Executive Order 13132 establishes certain requirements that an agency must meet when it issues a proposed rule that imposes substantial direct requirements or costs on state and local governments, preempts state law, or otherwise has federalism implications. Since this proposed rule does not impose any costs on state or local governments, the requirements of Executive Order 13132 are not applicable. In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the
D. Alternatives Considered
During the development of this proposed rule, we assessed all regulatory alternatives and discussed in the preamble a few alternatives that we considered. First, in discussing our proposed revisions to paragraphs (d)(1)(i) and (ii) in this proposed rule, we considered linking eligibility for the transition period to those states with pass-through payments for hospitals, physicians, or nursing facilities that were in approved (not just submitted for CMS review and approval) managed care contract(s) and rate certification(s) only for the rating period covering
Second, in discussing our proposed revisions to paragraphs (d)(3) and (d)(5) in this proposed rule, we described that the aggregate amounts of pass-through payments in each provider category would be used to set applicable limits for the provider type during the transition period, without regard to the specific provider(s) that receive a pass-through payment. As an alternative, we considered whether the state should be limited by amount and recipient during the transition period; however, we believe this narrower policy would be more limiting than originally intended under the
E. Accounting Statement
As discussed in this RIA, the benefits, costs, and transfers of this regulation are identified in table 1 as qualitative impacts only.Start Printed Page 83785
Table 1--Accounting Statement
Category ..... Primary estimate ..... Low estimate ..... High estimate ..... Units
Year dollars ..... Discount rate ..... Period covered
Benefits
Non-Quantified ..... Benefits include: Consistency with the statutory requirements in section 1903(m) of the Act and regulations for actuarially sound capitation rates; improved transparency in rate development processes; stronger payment approaches that are based on the utilization or delivery of services to enrollees covered under the contract, or the quality and outcomes of such services; and improved support for delivery system reform that is focused on improved care and quality for
Costs
Non-Quantified ..... Costs to state or federal governments should be negligible.
Transfers
Non-Quantified ..... Relative to the current baseline, this rule is likely to prevent increases in or the development of new pass-through payments, which would reduce state and federal government transfers to hospitals, physicians, and nursing facilities. Given these avoided transfers, we believe this rule is economically significant as defined by Executive Order 12866.
List of Subjects in 42 CFR Part 438
* Grant programs--health
*
* Reporting and recordkeeping requirements
For the reasons set forth in the preamble, the
1. The authority citation for part 438 continues to read as follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302).
2. Section 438.6 is amended by revising paragraphs (d)(1), (3), and (5) to read as follows:
section 438.6 Special contract provisions related to payment.
* * * * *
(d) * * * (1) General rule. States may continue to require MCOs, PIHPs, and PAHPs to make pass-through payments (as defined in paragraph (a) of this section) to network providers that are hospitals, physicians, or nursing facilities under the contract, provided the requirements of this paragraph (d) are met. States may not require MCOs, PIHPs, and PAHPs to make pass-through payments other than those permitted under this paragraph (d).
(i) In order to use a transition period described in this paragraph (d), a State must demonstrate that it had pass-through payments for hospitals, physicians, or nursing facilities in:
(A) Managed care contract(s) and rate certification(s) for the rating period that includes
(B) If the managed care contract(s) and rate certification(s) for the rating period that includes
(ii) CMS will not approve a retroactive adjustment or amendment, notwithstanding the adjustments to the base amount permitted in paragraph (d)(2) of this section, to managed care contract(s) and rate certification(s) to add new pass-through payments or increase existing pass-through payments defined in paragraph (a) of this section.
* * * * *
(3) Schedule for the reduction of the base amount of pass-through payments for hospitals under the MCO, PIHP, or PAHP contract and maximum amount of permitted pass-through payments for each year of the transition period. For States that meet the requirement in paragraph (d)(1)(i) of this section, pass-through payments for hospitals may continue to be required under the contract but must be phased out no longer than on the 10-year schedule, beginning with rating periods for contract(s) that start on or after
(i) A percentage of the base amount, beginning with 100 percent for rating periods for contract(s) beginning on or after
(ii) The total dollar amount of pass-through payments to hospitals identified in the managed care contract(s) and rate certification(s) used to meet the requirement of paragraph (d)(1)(i) of this section.
* * * * *
(5) Pass-through payments to physicians or nursing facilities. For States that meet the requirement in paragraph (d)(1)(i) of this section, rating periods for contract(s) beginning on or after
* * * * *
Dated:
Acting Administrator,
Dated:
Secretary,
Footnotes omitted. It can be viewed at: https://www.federalregister.gov/documents/2016/11/22/2016-28024/medicaid-program-the-use-of-new-or-increased-pass-through-payments-in-medicaid-managed-care-delivery
[FR Doc. 2016-28024 Filed 11-18-16;
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