The pulse of healthcare: Baker Tilly healthcare update April 7, 2015


At the agencies

On March 23, the Department of Health and Human Services (HHS) released a report that showed a decrease in hospital uncompensated care costs due to Medicaid expansion as a result of the Affordable Care Act (ACA). HHS released the report on the fifth anniversary of the ACA. According to the report, uncompensated care costs at hospitals decreased by $7.4 billion, or 21 percent, in 2014. States that chose to expand Medicaid saw a $5 billion decrease in uncompensated care costs, while those states that did not participate in Medicaid expansion saw only a $2.4 billion decrease.

On April 1, the Centers for Medicare and Medicaid Services (CMS) announced that it would delay implementation of the “two-midnight” rule until April 30. Enforcement of the rule was to begin on April 1. The “two midnight” rule requires physicians to determine whether or not a patient will need to stay in the hospital overnight for two nights in order for that patient to be considered inpatient. CMS has delayed the rule in anticipation of the sustainable growth rate (SGR) repeal bill that the Senate is expected to vote on when they return from recess on April 13. The SGR repeal bill, in its current form, includes a six-month delay of the “two-midnight” rule. 

On April 6, CMS announced the rate changes and a few programmatic adjustments to Medicare Advantage (MA) Plans for 2016. In a reversal of a February announcement that had proposed a 0.9 percent cut to MA provider payments, CMS stated that MA provider rates would actually increase by 1.25 percent in 2016. According to CMS, the increase in provider rates was due to changes in the agency’s statistical risk assessment for MA plans and the assumption that the Senate will pass the sustainable growth rate repeal bill when it returns from its spring recess. CMS also announced that it would not be making changes to the star ratings system to account for low-income and dual-eligible MA beneficiaries. In the same announcement, CMS also made more comprehensive changes to the requirements for provider directories used in MA plans including a new requirement that an MA provider directory must indicate whether a provider is accepting new patients.


On the Hill

The Senate is still expected to vote on the SGR repeal bill upon their return from recess. Senate Majority Leader Mitch McConnell has stated that the Senate will “move it very quickly” to the floor for a vote. One issue that has emerged is a push by outpatient rehabilitation service providers that are requesting that the annual Medicare payment limits placed on their services be repealed and that such a provision should be included in the final SGR bill that the Senate votes on. A permanent repeal of these “caps” was not included in the version that passed the House and therefore if it was included in a new Senate version, the bill would have to return to the House for a vote and would ultimately slow its passage. Although CMS has indicated that it can delay the SGR created 21 percent decrease in Medicare payments to providers until April 15, any delay in the bill’s passage is a cause for concern for both the agency and providers.


In the courts

On March 31, the Supreme Court issued a ruling in Armstrong v. Exceptional Child Center, determining that Medicaid providers do not have the right to sue states over low Medicaid reimbursement rates. The case was initially brought in 2009 by a group of Idaho providers that treat disabled Medicaid beneficiaries. In a reversal of the lower court’s decision, the Supreme Court ruled that providers must now appeal directly to HHS if they feel their state’s healthcare compensation scheme is inadequate and therefore challenges their ability to provide services to Medicaid beneficiaries. From that point, the Secretary of HHS can notify the state that their scheme is in violation of the statute, and if necessary, withhold federal Medicaid funding to that state. Justice Antonin Scalia, writing the majority opinion on the 5-4 decision, cited the Supremacy Clause as well as the need for consistency and coherency in the administration of the Medicaid statute as the primary drivers of the decision.

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