CMS strategies to reward Medicaid providers that improve care and lower costs

CMS has provided information for states interested in implementing Medicaid payment initiatives designed to reward providers that, for example, cut costs, improve access to care, or raise care quality. Under the Medicaid managed care rules, states are permitted to direct specific payments made by managed care plans to providers under certain circumstances, if the state first obtains CMS approval for the program (CMCS Informational Bulletin, November 2, 2017).

Managed care rules

Under 42 C.F.R. Sec. 438.6(c) there are three categories of state plans to implement delivery system and provider payment initiatives for managed care contracts:

1. Value-based purchasing models, which include bundled payments, episode-based payments, accountable care organizations, or other alternative models intended to recognize value or outcomes.
2. Performance improvement initiatives, which include pay-for-performance arrangements, quality-based payments, or population-based payment models.
3. Provider payment parameters, which include minimum fee schedules, a uniform dollar or percentage increase, and maximum fee schedules.

CMS approval

The regulation also requires that CMS approve these state-directed payment initiatives prior to implementation. To be approved, the initiatives must (1) be based on utilization and delivery of services to Medicaid beneficiaries covered under the contract and (2) contain payments that are directed equally, using the same terms of performance across a class of providers.

Plan components

The directed payments must advance at least one of the goals and objectives in the state’s Medicaid managed care quality strategy. States must also have a plan for evaluating whether the directed payment arrangement achieved the objectives. The evaluation plan should include: (1) identification of the performance criteria used to assess progress, (2) baseline data for performance measures, and (3) improvement targets for performance measures. States are generally free to determine which performance measures are most appropriate. If a state’s initiative is from either of the first two categories listed above (value-based purchasing models or performance improvement initiatives), the directed payments must make provider participation available across all payers and providers, using the same terms of performance and a common set of performance measures. In these two approaches, states cannot set the amount or frequency of the expenditures, nor can they recoup any unspent funds.

Multi-year arrangements

Directed payment arrangements cannot be automatically renewable, for example, annually, because CMS wants states to monitor the arrangements at least annually. CMS understands, however, that some states may want to implement multi-year payment arrangements to achieve longer-term goals. As a result, CMS has said that a multi-year arrangement will be permitted if the following conditions exist: (1) the state explicitly identifies the payment arrangement as a multi-year payment effort, (2) the state develops and describes a plan for pursuing a multi-year payment effort and the impact of the multi-year arrangement on the state’s goals, (3) no changes will be made to the payment methodology during the multi-year project, and (4) CMS approves the multi-year payment arrangement.

Plans not covered

Not all payment arrangements fall within the 42 C.F.R. 438.6(c) requirements. If a payment arrangement does not meet the regulations criteria, it need not, of course, obtain CMS approval. CMS has provided two examples:

1. States implementing a general requirement for managed care plans to increase provider reimbursement for services to Medicaid beneficiaries, as long as the state is not mandating specific payment methodology or amounts, and managed care plans retain the discretion for the amount, timing, and method for making provider payments.
2. States contractually implementing a general requirement for managed care plans to use value-based purchasing or alternative payment arrangements but the state does not mandate a specific payment methodology, and managed care plans retain the discretion to negotiate with network providers on specific terms.

Compliance date

The compliance date for obtaining 42 C.F.R. 438.6(c) approval is the rating period for Medicaid managed care contracts beginning on or after July 1, 2017. If states use a preprinted form that CMS has prepared, CMS commits to process the request within 90 calendar days of receipt.

Pilot program

The 42 C.F.R. 438.6(c) approval process has already been implemented in a pilot program. Three examples of state programs that were approved under the pilot program are:

1. A state plan to require managed care plans to pay an enhanced minimum fee schedule for professional services provided to Medicaid beneficiaries in an academic medical center by faculty physicians through a sub-capitated payment arrangement, to ensure that all Medicaid managed care enrollees have timely access to high-end specialty care.
2. A state plan to require managed care plans to pay quality incentive payments to acute care hospitals rendering services to Medicaid beneficiaries, to reduce potentially preventable readmissions.
3. A state plan to require managed care plans to pay Accountable Care Organizations (ACOs) operating in their networks a per-member per-month rate for Medicaid beneficiaries, to incentivize providers to form ACOs that will be accountable for the total cost of care and the quality of care.

CMS seeks feedback on ‘new direction’ for Innovation Center

The Center for Medicare and Medicaid Innovation (CMMI) is seeking feedback on a potential “new direction” to promote patient-centered care and test market-driven reforms that empower beneficiaries as consumers, provide price transparency, and increase choices and competition. To be considered, comments on the informal Request for Information must be submitted online or through email by November 20, 2017.

CMMI develops new payment and service delivery models in accordance with the requirements of Sec. 1115A of the Social Security Act, as added by Sec. 3021 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), in an effort to reduce program expenditures while preserving or enhancing the quality of care furnished to individuals. However, CMMI has recently come under fire; HHS Secretary Tom Price criticized CMMI for dictating the type of care physicians are to provide for patients. In August 2017, CMS proposed to eliminate the Episode Payment Models and Cardiac Rehabilitation incentive payment model and revise aspects of the Comprehensive Care for Joint Replacement model (see Out with the old models, CJR model gets revamped, August 16, 2017).

In the Request for Information, CMMI sought feedback on testing models in eight areas: (1) increased participation in Advanced Alternative Payment Models (APMs); (2) consumer-directed care and market-based innovation models, which could empower beneficiaries to make choices from among competitors in a market-driven health system; (3) physician specialty models; (4) new models for prescription drug payment, in both Medicare Part B and Part D and Medicaid, that incentivize better health outcomes for beneficiaries at lower costs and align payments with value; (5) Medicare Advantage (MA) innovation models; (6) state-based and local innovation, including Medicaid-focused models; (7) potential models focused on behavioral health, including opioids, substance use disorder, dementia, and improving mental health provider participation in Medicare, Medicaid, and CHIP; and (8) program integrity.

In an op-ed piece, CMS Administrator Seema Verma called CMMI a “powerful tool” for improving quality and reducing costs. House Ways and Means Committee Chairman Kevin Brady (R-Tex) lauded CMMI’s issuance and said that the Obama Administration at times used the Innovation Center’s authority “in a top-down manner through mandatory, national ideas that received little to no input from those actually providing care to patients,” resulting in bipartisan Congressional concern for patients and stakeholders.

Arnold & Porter welcome back attorney after 7-year tenure with CMS

Following a seven-year tenure as the CMS Director of the Division of Outpatient Care, Dr. John McInnes, has rejoined Arnold & Porter Kaye Scholer LLP as counsel in the firm’s Life Sciences and Healthcare Regulatory practice.

CMS

McInnes served in several roles at CMS, including management roles as the Director of the Division of Outpatient Care and Acting Director of Practitioner Services. Those divisions are responsible for the development of national hospital outpatient department, ambulatory surgery center, and physician service payment policies for Medicare. He recently served as a Medical Officer at the Center for Medicare and Medicaid Innovation at CMS, which was created under Section 3021 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148).

Arnold & Porter

Prior to his tenure at CMS, as an associate with Arnold & Porter Kaye Scholer LLP, McInnes focused his practice on Medicare regulatory matters and healthcare fraud and abuse defense. He will use the experience he gained at CMS regarding Medicare coverage, coding, and payment policy to bolster the firm’s healthcare department.

HHS to receive $73.5B under House funding bill, ACA left out

The 2017 Omnibus Appropriations bill allocates a total of $73.5 billion to HHS for the 2017 Fiscal year, ending September 30, 2017. The House Appropriations Committee released the fiscal year 2017 Omnibus Appropriations bill on May 1, 2017. The bill provides discretionary funding for the federal government and prioritizes health while cutting funding for “ineffective or wasteful programs.”

HHS

The HHS funding represents an increase of $2.8 billion above the 2016 enacted funding level and $3.8 billion above the Obama Administration’s budget request. The budget is split among various agencies within HHS to fund what the bill calls “effective, proven programs.”

Funding

The bill allocates $34 billion to the National Institutes of Health (NIH) for research related to Alzheimer’s, antibiotic resistance, and precision medicine. The legislation includes funding for critical disease prevention and biodefense activities by allocating $7.3 billion for the Centers for Disease Control and Prevention (CDC). The bill provides the Substance Abuse and Mental Health Administration (SAMHSA) with $3.6 billion for 2017, with a focus on prevention and treatment of opioid and heroin use. The legislation provides $6.4 billion for HRSA Health Resources and Services Administration (HRSA), in part to fund Community Health Centers.

CMS and the ACA

The bill allocates $3 billion for CMS program management and operations and, notably, does not provide funding to implement Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) programs. The bill continues prohibitions and restrictions on use of federal funds related to the ACA.