Baker Tilly’s The pulse of healthcare for June 24, 2015


At the agencies

On May 26, the Centers for Medicare and Medicaid Services (CMS) issued a far-reaching proposed rule revising the Medicaid managed care regulations, which have not been significantly changed for over a decade. The overall goal of these revisions (the Mega Regs) was not only to modernize them, but to more closely align them with other regulations of similar federally-regulated plans such as the Medicare Advantage plan and other qualified plans offered on the marketplace. Some of the most significant propositions in the Mega Regs are the following:

  • Medical Loss Ratio: A medical loss ratio of at least 85 percent would be imposed on Medicaid managed care plans, meaning that plans would be required to use at least that much of their premiums on claims and efforts that specifically improve healthcare quality.
  • Network Adequacy: States would need to determine and publish both time and distance standards for different classes of providers, as a means of determining network adequacy.  States would then need to build network adequacy standards into their contracts with Medicare managed care entities. 
  • Quality Ratings Systems: The agency would have the authority to specify performance measures around issues impacting quality of care, and Medicaid managed care entities would undergo performance reviews before contracting with a state. Additionally, the agency proposed that states be required to create and implement quality ratings systems similar to those established for Medicare Advantage. These quality ratings systems would rate a plan’s overall performance based upon member experience, plan affordability and management, and clinical quality management.
  • 340B Covered Outpatient Drugs: Medicaid managed care organizations that offer outpatient drug coverage would be required to collect information and provide it to the state. The state would then use this information to apply for rebates from drug manufacturers that the state is eligible for under the Medicaid Drug Rebate Program.
  • Marketing: The Mega Regs would revise the rules on marketing to Medicaid beneficiaries with the goal of improving communication between states and beneficiaries.
  • Value-Based Purchasing: Managed care plans would be incentivized to develop value-based purchasing models for reimbursing providers and to participate in activities that promote quality.

On June 1, CMS made publicly available two sets of data showing how much Medicare paid providers for common services, one on Part B payments to individual doctors nationwide in 2013 and the other on charges and payments for the 100 most common Medicare inpatient stays. With the information provided, analyses can be done of how service patterns vary by physicians and specialties, across geographic areas, and over time since data for 2012 and 2013 are now available.

On June 4, CMS released a new final rule on the Accountable Care Organizations (ACOs) Medicare Shared Savings Program. ACOs will be allowed to stay in “Track 1” of the program for three years without penalty. Also, this final rule establishes a new “Track 3” on which there is a higher rate of shared savings, but also downside risk. Those ACOs that are under “Track 3” would be eligible to apply for a waiver of the Skilled Nursing Facility 3-day stay rule. Lastly, in response to concerns expressed by providers, the agency promised a forthcoming rule that will change ACO benchmarks and comparisons to providers, which will in turn help ACOs meet their spending targets. Despite these improvements, the President and CEO of the National Association of ACOs Clif Gaus stated he believes many ACOs will drop out of the program because the changes will not improve earned bonuses for the ACOs. The modifications continue the agency’s efforts to push ACOs towards taking on more risk, a move which will help some but hurt others.


On the Hill

On June 2, the House Ways & Means Committee passed ten pieces of healthcare legislation.  Several, if passed by Congress, would impact providers. One of these is H.R. 2580, which would remove the moratorium on new openings and expansions of long-term care hospitals, but pay for the expansion by cutting outlier payments to other long-term care hospitals. Another, H.R. 1190, would repeal the Independent Payment Advisory Board, eliminating the Affordable Care Act-created mechanism aimed at reining in excessive costs. 

Of the ten bills passed by the Committee, five reform Medicare Advantage and were supported by the American Hospital Association. Of these, two are of note to providers. H.R. 2506 would give hospitals with low star ratings more time (until after 2018) before CMS could terminate their Medicare contracts because of the ratings. And H.R. 2579 would require CMS to take into account the number of chronic conditions beneficiaries have in setting the Medicare risk adjustment system. These bills would help healthcare providers that care for higher numbers of poor patients. All of the recent Ways & Means bills are likely to come to a vote in the House the week of June 15, as that week has been designated by House leadership as a time to focus on healthcare legislation. 

On June 3, the Senate Finance Committee passed the Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act, a bipartisan bill that is aimed at improving the Medicare appeals process. Included are reforms that give $127 million per year to the Office of Medicare Hearings and Appeals and the Departmental Appeals Board, establish a voluntary alternate dispute resolution process to allow similar claims to be settled jointly, and create magistrates for the third level of appeals. The legislation should not create an additional bureaucratic burden for providers.


In the courts

On June 10, a federal judge concluded that Medicare beneficiaries suing the Department of Health and Human Services for failing to abide by the 90-day requirement for hearing Medicare appeals represent a nationwide class. The Medicare program’s problems with rendering decisions at the administrative law judge level within the mandated 90 days is well documented, and although some beneficiaries’ appeals have been prioritized so that individuals do not wait as long as providers, the timeliness of the appeals is still far from what is required. In the case of Lesler v. Burwell (now called Exley v. Burwell), plaintiffs had all waited six months to close to two years for a hearing, and shortly after filing a complaint in court, they received hearings and decisions. Judge Jeffrey Meyer ruled that regardless of the resolution of their appeals, these individuals are certified as a national class. 

On June 11, CMS disclosed that they had paid $1.3 billion dollars to hospitals as a result of last August’s settlement over disputed billing claims in the Medicare appeals process. In recent years, the number of appeals over inpatient billing claims overwhelmed the agency’s ability to adjudicate the appeals, resulting in a settlement that paid approximately 1900 hospitals 68 cents on the dollar to drop roughly 300,000 of the claims. A spokesman for the agency has said that the settlement is largely complete, although a few more payments may be made. 

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.