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Centers for Medicare and Medicaid Services Issues Two Sets of Regulations with Widespread Impact

June 12, 2015

Managed care plans, including providers contracting with managed care plans, and participants in the Medicare Shared Savings Program are impacted by two sets of significant regulations (one proposed and the other final) recently issued by the Centers for Medicare and Medicaid Services (CMS).

  1. Proposed Regulations to Modernize Medicaid and Children’s Health Insurance Program Managed Care

    On June 1, CMS published proposed regulations to update the state Medicaid and Children’s Health Insurance Program (CHIP) managed care programs (Proposed Regulations). In issuing its first major revision to the Medicaid managed care regulations since 2002, CMS cited the changing health care delivery landscape and acknowledged the need to modernize the Medicaid managed care regulation structure. Several provisions of the Proposed Regulations seek to align the Medicaid managed care regulations with those recently issued for Qualified Health Plans under the Affordable Care Act, as well as existing regulations governing Medicare Advantage. Many of the proposed changes, which are expected to generate significant comment, will require state action to adopt new programs or requirements within the federal regulatory guidelines.

    In various states, such as Michigan, substantially the entire Medicaid population is enrolled in a managed care plan. If adopted in final form, the Proposed Regulations will indirectly impact the hospitals, physicians and other providers with which managed care plans contract.

    Among their many provisions, the Proposed Regulations include: 

    • Parameters for establishing a quality rating system. CMS set forth fairly broad parameters in the Proposed Regulations for establishing a quality rating system and is seeking comment on the best way to monitor the type and volume of care provided to Medicaid managed care beneficiaries.       
    • New technical requirements signaling increased federal scrutiny over rate setting, network adequacy and beneficiary access to care.      
    • Updates to marketing regulations, a streamlined process for beneficiary enrollment and shortened time frames for grievance and appeal processes.       
    • A provision requiring state Medicaid agencies to set a minimum medical-loss ratio (MLR) of 85% for Medicaid managed care plans. This provision initially generated significant attention when the Proposed Regulations were released. This change, however, may be less significant for several states, such as Michigan, that already have established MLR requirements for Medicaid managed care organizations.      
    • For certain health facilities the Proposed Regulations may expand reimbursement opportunities. Specifically, they would increase Medicaid reimbursement for inpatient facility behavioral health care, and provide flexibility by allowing long-term care beneficiaries to receive care from out of network providers. Under these changes, states may also choose to provide meaningful use funding to certain facilities that previously were excluded from this incentive program.

    Although most state Medicaid programs, including Michigan’s, have yet to formally respond to these proposed changes, they likely will substantially impact the structure and function of Medicaid managed care programs across the country once the notice and comment period ends and the Proposed Regulations become final. We anticipate that these reforms will continue to impact program operations over the next several years.

    Given the sweeping impact of the Proposed Regulations if adopted in final form, managed care programs are well advised to review and submit comments on them to CMS. Comments to the Proposed Regulations are due on July 27, 2015. Please contact us for assistance in drafting comments or with any questions about how the Proposed Regulations are likely to impact your organization.

  2. Final Regulations for the Medicare Shared Savings Program

    CMS also finalized several updates to the Medicare Shared Savings Program (MSSP) on June 4, when it published final regulations (Final Rule) to update and improve the rules governing participating accountable care organizations (ACOs). According to CMS, the MSSP has grown to include over 400 ACOs currently serving over 7 million Medicare beneficiaries since its initial inception in the Affordable Care Act. The Final Rule’s changes seek to encourage participation in the MSSP by streamlining existing processes, creating additional flexibility for participating ACOs and building on the early success of the program.

    Highlights from the Final Rule include: 

    • The introduction of a performance-based risk model as Track 3, which offers a higher sharing rate for savings than Tracks 1 and 2 and incorporates elements of the Pioneer ACO model. Beneficiaries participating in an ACO under Track 3 will be assigned prospectively to the ACO rather than being assigned preliminarily with a retrospective reconciliation.      
    • The option for eligible ACOs participating under Track 1 (the one-sided, shared savings only model) to continue participating in Track 1 for an additional three year renewal period, if the ACO has met quality performance standards in at least one of its first two years of participation in the MSSP. Prior to issuance of the Final Rule, an ACO was required to transition to Track 2 (the two-sided, shared savings and losses model) for its second agreement period.     
    • Finalized methodology for resetting an ACO’s financial benchmark (used in determining shared savings or losses) at the start of the ACO’s second MSSP participation agreement. CMS also plans to further improve benchmarking through additional rulemaking this year.      
    • Several revisions to the beneficiary assignment methodology to strengthen the emphasis on primary care services as a means of properly assigning beneficiaries to participating ACOs.      
    • Changes to streamline the process for ACOs to access beneficiary claims data for their health care operations and to eliminate confusion of beneficiaries offered the opportunity to opt out of data sharing.

    The Final Rule offers greater flexibility and incentives for participating ACOs and prospective MSSP participants. Please contact a Honigman attorney listed on this alert with any questions about the MSSP or how these changes impact your organization.  

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