Los Angeles County Health Care Department Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, Feb. 10 -- Los Angeles County Health Care Services Director Christina R. Ghaly, California, has issued a public comment on the Centers for Medicare and Medicaid Services' proposed rule entitled "Medicaid Program: Medicaid Fiscal Accountability Regulation". The comment was written on Jan. 31, 2020, and posted on Feb. 6, 2020:

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The Los Angeles County Department of Health Care Services (LAC DHS) appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services (CMS) proposed rule, Medicaid Program; Medicaid Fiscal Accountability Regulation (MFAR), 84 Fed. Reg. 63722 (November 18, 2019). As detailed in our comments, we have serious concerns with the proposed rule and its impact on the ability of safety net providers, such as LAC DHS, to continue to provide access to care for the state's most vulnerable populations. For the reasons more specifically set forth below, we urge CMS to withdraw the rule, and instead work directly with states to develop workable and transparent implementation and oversight processes that will address the financial accountability concerns raised by CMS, strengthen the federal-state partnership, and avoid unnecessary disruptions to patient access to care.

LAC DHS, governed and operated by the County of Los Angeles, is the second largest municipal health system in the nation. We are a major provider of comprehensive services to the Medicaid population, as well as to other low-income individuals. Our system of care directly serves 500,000 unique insured and uninsured patients through an integrated system of 4 hospitals, 24 clinics, plus a constellation of community-based entities. LAC DHS operates two level 1 trauma centers and a specialized burn unit, trains physicians completing their medical education, and stands at the ready in the event disasters occur. We oversee the largest multi-jurisdictional Emergency Medical Services (EMS) system in the county. In addition, we have created pediatric medical hubs that provide core medical services to children involved in the welfare system; over the past year, we have expanded access to those in need of initial medical evaluation, medical clearance, sexual abuse evaluation, and forensic evaluation.

Our mission is to advance the health of our patients and communities by providing and supporting extraordinary care. To that end, we have worked in collaboration with the state and CMS over the past 25 years, on a number of innovations for patient-care improvement.

* Sharing CMS perspective that value-based care is central to delivering the best services, LAC DHS has made data, along with appropriate quality and performance metrics, the keystones of optimization and accountability efforts. LAC DHS now performs above the 90thpercentile nationally in colon cancer screening, breast cancer screening, diabetes control, blood pressure control, caesarean section rates, reduction of hospital acquired C. dif Infections, and avoidance of antibiotic use in adults with acute bronchitis.

* We are working to capitalize on new technologies for telehealth, patient scheduling, and post-appointment outreach (both web and mobile-based).

* Finally, with your encouragement, and the state as our partner, we have been investing in a continuity-of-care model that focuses on serving the whole person in the most appropriate setting. Integration is key to accomplishing that goal--a large portion of our vulnerable population faces a suite of health issues, ranging from substance use disorders to physical and mental illnesses.

While our dedicated workforce of physicians, non-physician practitioners, and staff animate our goals, the financial infrastructure sustains our initiatives. In addition to our role as a direct provider of health care services to Medicaid beneficiaries, we also serve a significant role in financing care and innovations.

Disruptive changes, such as the MFAR, will reverse the progress we have been making. To prevent retrenchment, we ask that you rescind the MFAR and instead pursue a collaborative approach--one that acknowledges the interdependent ecosystem in which we operate, and simultaneously furthers the transparency necessary to cultivate intergovernmental cooperation and promote public confidence.

The Proposed Rule Should Be Withdrawn For At Least Three Critical Reasons

As a significant participant in the Medicaid program, LAC DHS understands some of CMS' expressed concerns regarding the need for financial accountability. However, the MFAR goes well beyond these purposes, and risks severely disrupting well-established financial support for the Medicaid program nationwide, which in turn will jeopardize access and coverage for millions of low-income people.

Our objection to finalizing the proposed rule is rooted in the following core concerns:

1. The proposed revisions to Medicaid rules governing the sources of non-federal share reverse long-standing federal interpretations, are inconsistent with past CMS approvals, and contradict Congressional intent.

The MFAR proposes fundamental changes to the fiscal partnership between the states and federal government, particularly in the regulations addressing sources of non-federal share. CMS' explanation of its legal authority for the proposed changes materially omits and misconstrues provisions of the law, resulting in an inappropriately narrow view of public funding sources. We strongly oppose these changes, which are inconsistent with long-standing policy and would have grave near-term ramifications for service provision.

Since the beginning of the Medicaid program, Congress has recognized and protected the ability of public agencies within a state to contribute public funds as the non-federal share of Medicaid expenditures, and has allowed states or local agencies to impose health-care related taxes to fund enhanced Medicaid payments to providers. Further, CMS has authorized arrangements that rely on such local financing for decades. The significant restrictions proposed by the MFAR on these activities represent a dramatic departure from current and past CMS practices--a departure that was not contemplated by Congress and that undermines the careful balances struck in the Medicaid statute between federal oversight and state autonomy. Congress, not CMS, has the authority and responsibility for managing these fundamental areas of the Medicaid program, and it is imperative that Congress authorize any proposed changes in this area.

2. CMS's regulatory impact assessment is perfunctory at best, and inexplicably does not evaluate the impact of the proposed MFAR on patient access to care.

The regulatory impact assessment included in the MFAR neither meets CMS obligations under the Administrative Procedure Act, applicable Executive Orders, nor Department of Health and Human Services (HHS) guidelines. Indeed, CMS fails to consider relevant factors and offer a rational basis for its rulemaking. CMS essentially acknowledges this deficiency when it writes that the "fiscal impact on the Medicaid program from the implementation of the policies in the proposed rule is unknown," and focuses its impact analysis of only one of its provisions--the proposed limitation of practitioner supplemental payments to 150% of base payments.

This oversight is especially troubling because the magnitude of the potential changes is enormous. CMS is proposing significant changes to fundamental areas of Medicaid policy, which, if implemented, will have far-reaching and immediate impact on Medicaid programs across the country, and on patient access to care. The MFAR's failure to consider these impacts at all is wholly inadequate to place the public on notice and to meet CMS' minimum procedural obligations to regulate from an informed and reasoned basis. The MFAR must be withdrawn so that the impact of the potential changes can be assessed in a more deliberate manner to guide the development of policy that does not place Medicaid beneficiaries at risk.

3. The proposed MFAR would undermine Medicaid's state-federal partnership, chill innovation, and interfere with state and local control over health care decisions.

LAC DHS is deeply concerned about how the MFAR would significantly expand CMS' capacity to review and evaluate the arrangements of health care providers. For example, the rule would grant CMS sweeping authority to review "arrangements" to determine if they have an impact on health care-related taxes or provider-related donations, or to determine a violation of a proposed new requirement for providers to "retain" revenue. In each instance, the scope of CMS' inquiry is vague and unbounded, and the rule does not provide sufficient clarity for states and providers to determine what arrangements are permitted, or even what aspects of the inquiry are relevant. These proposed changes exceed the Secretary's authority and would vest CMS with impermissibly broad discretion. (See, e.g., Oglala Sioux Tribe of Indians v. Andrus, 603 F.2d 707, 718 (8th Cir. 1979); Phelps Dodge Corp. v. Federal Mine Safety & Health Review Commission, 681 F.2d 1189, 1192 (9th Cir. 1982).)

If finalized, the kinds of reviews contemplated by these sections--including evaluations of the "net effect" of an arrangement, the "totality of the circumstances," and all "associated arrangements"--would thrust CMS into the role of policing ordinary business interactions and relationships among health care providers, potentially and inexplicably including relationships without any clear connection to the Medicaid program. The Medicaid statute does not contemplate these kinds of expansive and unconstrained reviews; Congress never intended CMS to insert itself into everyday aspects of the health care industry. (See Merck & Co. v. United States HHS, 385 F. Supp. 3d 81, 92 (July 8, 2019) (Secretary's delegated authority to administer Medicare and Medicaid does not authorize HHS "to regulate the health care market itself or market actors that are not direct participants in the insurance programs").)

This enhanced federal discretion undermines the vision of local-state-federal partnership Congress wove into the Medicaid statute--and sets the non-federal players adrift. Congress intended for states to innovate within federal parameters, and design and finance programs suited to local circumstances. The MFAR's unprecedented expansion of federal discretion over internal state arrangements would undermine this framework, shifting control over how public services are funded and organized from more local decision makers to the federal government, bureaucratizing the process and magnifying uncertainty along the way.

This shift of control will create very real costs and concerns for state and local partners. Reduced certainty about Medicaid payment methodologies, coupled with the potential for expanded federal involvement, poses a significant threat to the fiscal and programmatic stability of large systems that rely on Medicaid funding. The absence of clarity about key standards, and the potential for different administrations to raise new objections to previously acceptable arrangements, will have a chilling effect on the continued ability to invest in Medicaid programs.

Nor is this issue limited to concerns about federal involvement--in many cases, it is not CMS that will be interpreting or applying its own regulations, but other actors, including the OIG, state officials, or auditors, each of whom may reach different conclusions about applicable standards or requirements. Of particular concern is that the MFAR's policy changes could be applied to arrangements that began prior to the rule being effective; in these cases a provider may not be able to modify its historical processes, but could still be expected to certify compliance with the new standards for past periods. Should the MFAR be finalized, it is imperative that CMS address these implementation concerns to avoid sparking unpredictable legal and financial ramifications.

Specific Comments

A. State share of financial participation (42 C.F.R. Sec. 433.51)

The proposed MFAR seeks to substantially alter the regulation governing public funds that may be considered as a state's share in claiming federal financial participation (FFP). Specifically, the proposed revisions would eliminate the term ``public funds" and substitute it with the term "state or local funds," which is narrowly restricted to:

* State general fund dollars appropriated by the State legislature directly to the State or local Medicaid agency (433.51(b)(1).)

* Intergovernmental transfer of funds from units of government within a State (including Indian tribes), derived from State or local taxes (or funds appropriated to State university teaching hospitals), to the State Medicaid Agency and under its administrative control... (433.51(b)(2).)

* Certified Public Expenditures, which are certified.bya unit of government within a State as representing expenditures eligible for FFP under this section...(433.51(b)(3).)

1. The proposed restrictions are based on a misinterpretation of the Medicaid statute, and would make changes Congress did not intend.

CMS defends these proposed changes as necessary to conform with the language in section 1903(w)(6)(A) of the Social Security Act (Act). This rationale is based on an incomplete and misleading interpretation of the Medicaid statute. Particularly troubling is CMS statement that:

IGTs derived from sources other than state or local tax revenue (or funds appropriated to state university teaching hospitals) . . . is not permitted under the statute in section 1903(w)(6)(A) of the Act.

(84 Fed. Reg. 63737.) This statement is patently incorrect. First, the plain text of section 1903(w)(6)(A) upon which CMS is relying does not support this conclusion. The statute actually reads:

[T]he Secretary may not restrict States' use of funds where such funds are derived from State or local taxes (or funds appropriated to State university teaching hospitals) transferred from or certified by units of government within a State as the non-Federal share of expenditures under this title, regardless of whether the unit of government is also a health care provider, except as provided in section 1902(a)(2), unless the transferred funds are derived by the unit of government from donations or taxes that would not otherwise be recognized as the non-Federal share under this section.

This language limits the Secretary's authority to restrict IGTs and CPEs when they are derived from tax revenues (or appropriations to a State university teaching hospital) to instances where the local funds are the result of a provider-related donation or impermissible health-care related tax. That is, these particular sources of IGTs and CPEs are insulated from the tax and donation restrictions of section 1903(w), unless the Secretary has specific evidence that the funds transferred or certified are themselves derived from an impermissible source (i.e., a non bona-fide provider-related donation or impermissible health-care related tax). In issuing this section, Congress intended to provide protection for certain types of IGTs and CPEs, but did not in any way establish that IGTs or CPEs from sources other than tax revenue are "not permissible."

Second, there is strong evidence in the Medicaid statute and Congressional history to indicate that Congress intended for public entities to be able to contribute a broad range of public funds as the non-federal share of Medicaid payments. Most notably, the authority for states to use local financing has been affirmatively provided for since the inception of the Medicaid program by section 1902(a)(2) of the Social Security Act, which allows for up to 60 percent of the non-federal share of Medicaid expenditures to be "derived from local sources." (Social Security Act Sec. 1902(a)(2), 42 U.S.C. Sec. 1396a(a)(2).) Local public agencies have had access to public funds from a variety of sources since before the Medicaid program was enacted, and the Medicaid statute's affirmative recognition of contributions "derived from local sources" was understood to expressly permit these financial arrangements to continue as part of the adoption of federal Medicaid standards. Accordingly, states have relied on a broad range of public funds from local governmental agencies for decades.

Contrary to the interpretations in the 1V1FAR, the 1991 law that enacted section 1903(w) indicates that Congress intended to protect the ability to utilize these public funds as the non-federal share. (Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991, Pub. Law 102-234 (1991), the "1991 Provider Tax and Donation Law.") The law not only enacted section 1903(w)(6)(A) to limit the ability of the Secretary to modify the treatment of certain types of public funds, it also enacted a provision--section 5 of the law--that prohibits the Secretary from issuing any "interim final regulation that changes the treatment (specified in section 433.45(a) of title 42, Code of Federal Regulations [recognizing IGTs and CPEs]) of public funds as a source of State share of financial participation under title XIX of the Social Security Act, except as may be necessary to permit the Secretary to deny Federal financial participation" for public funds derived from impermissible provider-related donations or health-care related taxes. (See Public Law No. 102-234, Section 5 (Dec. 12, 1991).) This language indicates a clear intent to protect then-existing contributions of public funds from the Secretary's scrutiny and oversight.

This history undermines the interpretation set forth in the WAR that public funds not derived from tax revenue are impermissible. It also calls into question CMS rationalization for replacing the term "public funds" with more restrictive categories, which asserted that the phrase "public funds" is not used in section 1903(w) of the Act. To the contrary, Congress itself used the term "public funds" in section 5 of the 1991 Tax and Donation Law, and referred to "public funds" throughout both the associated House Energy and Commerce Committee Report and House Conference Report (H.R. Rep. No. 102-310 (1991); (H.R. Rep. No. 102-409 (1991).) Congress understood that under then-current law, "any public funds" received by the State Medicaid agency from other public agencies or local units of government could be used as the non-federal share without limitation, consistent with long-standing practice, except to the extent derived from restricted provider taxes or donations (see e.g., H.R. Rep. No. 102-310 at p. 15 (1991); H.R. Rep. No. 102-409 at 17-18 (1991).) Notably Congress did not change the definition or scope of "public funds" in the 1991 Provider Tax and Donation Law, or at any time subsequent.

This history was acknowledged at the time by CMS (then HCFA) when it published regulations indicating it was not changing the treatment of either CPEs or IGTs as the source of the non-federal share, which affirmatively stated that "States may continue to use, as the State share of medical assistance expenditures, transferred or certified funds from any governmental source (other than impermissible taxes or donations derived at various parts of the State government or at the local level)." (57 Fed. Reg. 55118 (Nov. 24, 1992) (as corrected 58 Fed. Reg. 6096, Jan. 26, 1993).) CMS new statements that the same statute directs a different conclusion cannot be squared with this long-standing history, and marks a drastic change in policy that undermines Congressional understanding and intent.

2. The proposed restrictions on state (non-federal) share are misguided and should not be finalized.

In addition to being based on a misinterpretation of the applicable law, the proposed restrictions on the ability to use "public funds" will also have foreseeably disastrous impacts on the social safety net. The proposed limitations on available public funds would undermine Medicaid when it is most needed--in times of economic distress. During a recession, higher rates of unemployment and scaled-back employee health benefits combine to produce a larger pool of eligible beneficiaries, increasing Medicaid enrollment./1

And, when Medicaid enrollment goes up, spending goes up with it./2

Changes proposed by MFAR would require localities to draw solely on tax revenue to meet these increased costs, yet those revenue streams would likely also be decreasing. State governments would face similar challenges, making the federal government (which, unlike state and local governments, has the ability to deficit finance) the only entity that could meet the enhanced need.

The restrictions could also prompt intrusive new administrative burdens for governmental entities attempting to demonstrate that specific expenditures are "derived from" tax revenue. As Congress has long recognized, public providers have access to funds from a variety of sources, including hospital operating revenues and bond proceeds from revenue anticipation notes, which typically are commingled with tax revenue and placed in an enterprise fund. When the governmental provider incurs an expenditure, it would expend cash from this fund; it cannot trace which specific dollars it has expended to specific sources. Indeed, CMS has long understood this basic financial principal that, once earned, "money is fungible." (Englund v. Los Angeles County, 2006 U.S. Dist. LEXIS 82034, at *26 (E.D. Cal. 2006).) Requirements to segregate funds would significantly impact the finances of governmental providers, and would represent an unprecedented intrusion on local governmental accounting and financing.

3. Language in proposed section 433.51(d) exceeds the Secretary's authority.

Section 433.51 also includes a new requirement, located in subsection (d), that would grant new authority for the Secretary to conclude that certain funds transferred to the state in an IGT are a non-bona fide provider-related donation. This proposed authority is inconsistent with the 1991 Provider Tax and Donation Law, which makes clear that to the extent CMS believes a unit of government has received a non bona-fide provider related donation, it must follow the mechanisms prescribed by Congress for evaluating donations. The Secretary has no authority to conclude a source of funding is the result of a non-bona fide provider-related donation without following the prescribed steps, nor to impose alternative consequences from those laid out in the statute. The insertion of concepts related to donations into the question of whether a funding source is allowable in the first instance conflates two separate issues in a way that distorts Congressional intent.

Similar to other provisions of MFAR, the new language is also problematic in its vagueness. The subsection uses novel terms--"contingent upon the receipt of funds by" or "are actually replaced in the accounts of"--that are not found in the Medicaid statute nor in the other provisions addressing provider-related donations. This language offers no guidance for local governmental providers to determine when funds used as an IGT will be considered "actually replacer or contingent on other funds. This overreach is particular problematic given the express language in section 1903(w)(6)(A) of the Act that limits the Secretary's authority to restrict IGTs or CPEs. By granting itself open-ended authority to determine that a donation has occurred, the Secretary would create a loophole that swallows up the protection Congress deemed important.

B. Non-State government provider definition (42 C.F.R. Sec. 447.286)

The proposed rule would add a new definition of "Non-State government provider to subpart C of Part 447, which contain the provisions that relate to payment for inpatient hospital and long-term care facility services. A "Non-State government provider is proposed to be defined as:

[A] unit of local government in a State, including a city, county, special purpose district, or other governmental unit in the State that is not the State, which has access to and exercises administrative control over State funds appropriated to it by the legislature or local tax revenue, including the ability to dispense such funds. In determining whether an entity is a non-State government provider, CMS will consider the totality of the circumstances . . .

The "totality of the circumstances" determination is outlined as consisting of two broad inquiries that attempt to assess the identity and character of "other entities that may share responsibilities with the provider and of other "relevant" entities.

These inquiries would create unnecessary confusion about fundamental classifications-- whether a provider is a public entity or not. As one example, the first inquiry--into the "identity and character of other entities that share responsibilities of ownership and operation of the provider--assumes there is one or more entities different from the "provider." The term "provider" itself is confusingly defined by reference to two other pre-existing definitions that, when cobbled together, include an "individual," "entity," or "institution" that receives payment for services or furnishes services. The lack of specifics as to how such "other entities are identified and subjected to this analysis is of particular concern, as LAC DHS is an integrated health care system, governed and operated by the County of Los Angeles. The proposed rule would give the overarching latitude, for example, to separate a licensee from the provider, a hospital-based component from the main hospital, freestanding clinics and hospitals within an integrated public health system, or employed physicians from the public entity employer. The ambiguities in the proposed definition will cause critical delays if the local government must first consult with a federal agency, which is under no time obligation, on whether and how the standards would apply and financially affect them.

The proposed definition also provides no parameters as to the number of factors or what combinations thereof should be met by non-state government providers. There is no way for a public provider to know with any certainty whether or not it is at risk of being stripped of its longstanding payment status if the Secretary is making individualized determinations across the country, with no process for public review or scrutiny of the decisions or standards by which they are made. And, if the Secretary makes a provider-specific determination that would impact a provider's Medicaid reimbursement, the provider should have a direct legal right to appeal the adverse determination before it takes effect.

For all of the above reasons, the proposed definition falls far short in providing sufficient and fair notice to public providers of the requirements necessary to retain their government provider payment status.

C. Supplemental payments (42 C.F.R. Sec. 447.252(d), 447.286, 447.302(c), 447.406)

The MFAR proposes a number of new provisions that seek to enhance CMS oversight of Medicaid supplemental payments, even though the Secretary currently has authority to evaluate aggregate level payments for many categories of services, including through the use of upper payment limits. While LAC DHS understands CMS' concerns about states' increasing reliance on supplemental payments, we oppose the proposal to draw a distinction between base and supplemental payments and to impose heightened scrutiny on those payments determined to be supplemental.

1. -The proposed distinction between supplemental payments and base payments is arbitrary, and would hamper meaningful assessment of rate adequacy and patient access. (42 C.F.R. Sec.447.286)

The MFAR proposes new definitions intended to identify supplemental payments, which in turn would be applied to trigger additional reporting and state plan renewal processes. LAC DHS objects to this arbitrary distinction. As an initial matter, the proposed definitions are ambiguous and unhelpful. Two definitions--for base payments and supplemental payments--are provided:

"Base payment" means a payment, other than a supplemental payment, made to a provider in accordance with the payment methodology authorized in the State plan or that is paid to the provider through its participation with a Medicaid managed care organization. Base payments are documented at the beneficiary level in MSIS or T-MSIS and include all payment made to a provider for specific Medicaid services rendered to individual Medicaid beneficiaries, including any payment adjustments, add-ons, or other additional payments received by the provider that can be attributed to a particular service provided to the beneficiary, such as payment adjustments made to account for a higher level of care or complexity of services provided to the beneficiary.

"Supplemental payment" means a Medicaid payment to a provider that is in addition to the base payments to the provider, other than disproportionate share hospital (DSH) payments under subpart E of this part, made under State plan authority or demonstration authority. Supplemental payments cannot be attributed to a particular provider claim for specific services provided to an individual beneficiary and are often made to the provider in a lump sum.

This proposed standard for distinguishing base from supplemental payments--whether the payment can be attributed to a Medicaid beneficiary and service--does not provide an adequate means to classify payments because "attributed to" does not have any clear meaning in this context. In general, all payments can be attributed to an individual and service, even if they are paid in a lump sum. The claims that are most difficult to attribute to individual services would be value-based payments that do not vary with the amount of services provided, such as a case rate or bundled rate to treat a specific health care condition. The proposed definitions simply do not provide sufficient clarity as to which payments are intended to be treated as "supplemental" and which as base.

More generally, the proposed rule does not offer an explanation for its sole focus on payments classified as supplemental. There is no legal or policy significance to whether a payment is explicitly linked to a particular service or bundled together in a compensation package to a provider for aggregated services. Indeed, section 1902(a)(30)(A) of the Act, which CMS acknowledges as authority for supplemental payments (84 Fed. Reg. 63722) makes no such distinctions. What matters is whether the payment is consistent with the approved Medicaid methodology for reimbursing the service, and otherwise meets the statutory requirements of section 1902(a)(30)(A)--that payment be "consistent with efficiency, economy, and quality of care" and "sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area." The proposed scrutiny for supplemental payments fails to advance this standard in any meaningful way. Additionally, it could have the unintended consequence of moving providers away from value-based payments, which runs counter to policies CMS has been supporting for years.

2. The required State Plan renewals will create payment uncertainties for providers and hamper long-term planning. (42 C.F.R. Sec.Sec. 447.252(d), 447.302(c))

LAC DHS is also deeply concerned with the proposal to require payments classified as supplemental to be re-approved every three years. If the supplemental payments are limited to three years, states will need to request renewals on a regular basis, with no guarantee that a payment approved in the past will be approved again in the future. The result of these re-approvals will be an entirely avoidable disruption of payments while review and approval is pending, imposing unnecessary cash flow limitations and burdens on Medicaid providers.

The risks posed by the re-approval requirement is exacerbated by the reality that federal administrations will often change from one renewal period to the next, forcing states to justify the same payment to multiple versions of CMS, which are likely to have multiple perspectives, priorities, and agendas. The combination of expansive agency discretion, frequent renewals and lack of standards, coupled with the uncertainties of administrative feasibility, will make it all-but impossible for states and providers to plan effectively. A lack of assurances that payment methodologies will be allowed to run their natural course will hamper long-term planning and undercut efforts to align payment policy to incentivize delivery system reform and innovation.

3. Proposed standards for evaluating Medicaid practitioner supplemental payments lac a rational basis (447.406)

The MFAR proposes to create a new payment limitation for Medicaid physician and non-physician practitioners. This limit is riot based on the aggregate payments the state makes to such practitioners, but instead is based on the ratio of payments classified as "supplemental" to the ratio of payments that are classified as "base" payments. This ratio, by itself, is not tied in any way to the standards in section 1902(a)(30)(A). The murky distinction between base and supplemental payments, and the lack of predictability that CMS proposed approval process creates for state and provider planning, reveals that this proposal lacks any basis in policy, statute, or practicality. As such, LAC DHS opposes the new payment limitations.

In particular, we disagree with CMS' apparent concern that average commercial rates (ACR) may in some circumstances not be "economic and efficient, consistent with section 1902(a)(30)(A) of the Act." Commercial rates are undeniably connected with the requirement in section 1902(a)(30)(A) that rates be sufficient to enlist enough providers to ensure that care and services are available "at least to the extent that such care and services are available to the general population in the geographic area." Payment of average commercial rates in a geographic area, or a reasonable approximation thereof, straightforwardly meets this standard.

To this end, we encourage the Secretary to allow states to develop methodologies to approximate such rates or to reference commercial benchmarks as a tool for evaluating payment levels. Commercial rates represent the best available estimates of the fair market value of furnished services. The Secretary should affirm the essential role practitioners and non-physician practitioners have in the effective management and delivery of services to Medicaid beneficiaries and develop more comprehensive methodologies for evaluating whether payments to such practitioners meet Medicaid requirements.

D. Payments Funded by Certified Public Expenditures (42 C.F.R. Sec. 447.206)

The MFAR proposes a new regulatory section that, for the first time, would specifically address required processes for states utilizing certified public expenditure ("CPE") methodologies. As an initial matter, this new language is not necessary to finalize; currently-approved CPE methodologies are generally consistent with the proposed parameters. However, the proposed new language appears, perhaps unintentionally, to make some significant policy changes that would impose new burdens for entities utilizing CPEs. To avoid unnecessarily cabining the use of CPEs, the proposed regulation should be withdrawn in favor of the continuation of the current policies.

For example, 42 C.F.R. Sec. 447.206(c)(3) would require "final settlement" of CPE claims to occur no more than 24 months from the cost report year-end, except in certain circumstances. The process for finalizing CPEs includes the development and submission of the cost report (typically 5 months after the cost report year-end), the acceptance of the cost report as complete, the reconciliation of the filed cost report to reflect adjustments to costs or approved Medicaid units of services that occur on a retroactive basis. Following the reconciled cost report's development and acceptance, it is subject to state audit and review, which typically triggers a provider appeal process. The state claims federal financial participation (FFP) at various times through this process, including for interim and final payments. It is unclear under the proposed rule whether all of these steps must be complete within the 24 month timeframe outlined as part of "final settlement." Under current standards, timeframes for the resolution of these steps takes longer than this proposed timeline, and even the initial steps--the filing of the reconciled cost report--may not be achievable within 24 months if that cost report is to accurately reflect final costs. CMS should remove or extend this timeframe to allow CPE-based providers sufficient time to process their cost reports and complete related audits and appeals.

The new regulatory text would also introduce language that could potentially lead to confusion about the use of CPEs. Proposed subsection (a) states that the regulation applies only with regard to payments made to a government provider (either State or non-State) under a CPE methodology. The regulatory text in multiple paragraphs also refers to a "certifying entity." We are unclear about the intended distinction between the certifying entity and the provider, which in most cases would be the same governmental entity. There are some cases where a governmental entity may not be the provider, for example when a governmental entity is certifying expenditures it has incurred (consistent with applicable CPE protocols) in paying a separate Medicaid provider (which may not be a government provider) to furnish services. In these cases, the regulatory text introduces unnecessary confusion by emphasizing that the section only applies when payments are made to a government provider, which in this example would not be the case. Similarly, proposed 42 C.F.R. Sec. 447.206(b)(1) would limit payments under a CPE methodology to the provider's "actual, incurred cost." This language should be clarified to ensure it focuses on the cost incurred by the government entity, which may not necessarily be the cost of a separate provider that receives payment from the government entity.

Similarly, the proposed text's references to payments and reimbursement could create unnecessary confusion, as these terms could each refer to either the expenditure being certified by a governmental entity or to the payment of federal financial participation (FFP) associated with that expenditure. When a governmental provider utilizes an approved CPE methodology, the provider incurs an expenditure recognized under the state plan or demonstration project, and the state claims based on that expenditure. To avoid confusion between these two different "payments," we suggest that (if the proposed regulatory text is retained) it be modified to address the amount of payments that can be recognized under a CPE methodology (based on the government provider's cost) rather than the amount that can be "reimbursed" based on the recognition of those costs.

The following edits address this concern and the concern raised in the prior paragraphs:

(b) General Rules. (1) Expenditures recognized under a CPE methodology are limited to the government provider's actual, incurred cost of providing covered services to Medicaid beneficiaries using reasonable cost allocation methods as specified in 45 CFR part 75 and 2 CFR part 200, or, as applicable, to Medicare cost principles specified in part 413 of this chapter.

Conclusion

LAC DHS appreciates the opportunity to submit these comments. As a critical safety-net and governmental provider, we urge CMS to rescind this harmful proposal so that we can continue to effectively operate, provide care to our patients, and maintain our mission to serve our community. If you have questions, please contact Allan Wecker at 213-288-7882.

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Footnotes:

1/ See, e.g., Kaiser Commission on Medicaid Facts, (February 2011) ("From December 2007 to December 2009, Medicaid monthly enrollment rose by nearly 6 million.... Enrollment is the primary driver of Medicaid spending growth.").

2/ Medicaid and CHIP Payment and Access Commission (2017); MACStats: Medicaid and CHIP Data Book, December 2017. Retrieved from https://www.macpac.gov/wp-content/uploads/2015/12/MACStats-Medicaid-CHIP-Data-BookDecember-2017.pdf

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2019-0169-0001

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