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May 8, 2024

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In Focus

New HMA Report Outlines Proposed Reforms for Medicare Physician Fee Schedule

This week, our In Focus section highlights a new Health Management Associates, Inc. (HMA), report released on May 7, 2024, titled Medicare Physician Fee Schedule Reform: Structural Topics and Recommendations to Strengthen the System for the Future. This in-depth analysis of the Medicare physician fee schedule (PFS) outlines stakeholder perspectives on the need for reform and proposed reforms, identifies major structural issues with the system, and proposes recommendations for improving the $90 billion-plus payment system. 

It is the latest in a series examining the drivers of Medicare spending and potential approaches to changing some of the program’s financing and structural policies. HMA recently released a report analyzing the expanding landscape of value-based entities and a site neutral payment report outlining issues related to proposed changes in reimbursement policies under consideration. 

Overview  

Many stakeholders assert that the PFS is misaligned with today’s practice patterns and market dynamics, embeds known pricing distortions, and does not appropriately effectuate value-based care principles, such as providing cost-conscious, high-quality care that prioritizes performance measurement and patient experience. Also of concern is the PFS’s impact on the viability of independent physician practices, including implications of consolidation and private equity acquisition of physician offices leading to reduced competition and quality of service.  

Congress is now grappling with the question of how to reform the PFS in the context of this evolving ecosystem. Potential solutions include providing an automatic payment adjustment similar to the market basket updates hospitals and other facilities receive, incentivizing participation in alternative payment models (APMs), extending neutrality of payments between physician offices and hospital outpatient departments, addressing workforce issues, and promoting high-quality, comprehensive, and coordinated care for beneficiaries with chronic conditions. 

Structural Challenges with the PFS  

Though these efforts are under way, the Centers for Medicare & Medicaid Services (CMS) can use its authority to take incremental steps to strengthen the PFS and facilitate change through regulatory and sub-regulatory processes. The new report on the PFS identifies several key structural issues within the physician fee schedule that should be considered and balanced when making policy changes to the payment system, outlined below. 

The first major persistent challenge to the PFS is the requirement for budget neutrality. Legislation requires CMS to offset large-scale valuation changes, or the introduction of new procedures or services with anticipated high-volume utilization with other areas of the fee schedule. Proponents of the budget neutrality requirement view it as an important budget control mechanism, whereas opponents view it as harmful, pitting medical specialties against each other as advancements for one specialty leads to losses for another. 

Another issue deals with valuation and pricing distortions. Ever-changing trends in the practice of medicine necessitate the regular review of the value of specific services. The evolution in care delivery over time and bias in the way services are valued—in some stakeholders’ view—may result in incorrect valuation compared with other services. 

Adequate support for primary care and behavioral health services is a third area of concern, with historic undervaluation of these services contributing to income differentials between primary care and other specialties and exacerbating existing workforce shortages. CMS has publicly acknowledged the need to increase support for primary and behavioral health services and has made efforts to do so, including through new codes, but many stakeholders maintain that larger scale overhaul is needed.  

The fourth area, emerging technologies, explores innovative approaches, such as digital health/telehealth, remote patient monitoring, software as a medical service, and artificial intelligence in medicine. Appropriate reimbursement for new technologies, including whether each new application receives discrete payment, if a single payment level for a range of solutions and associated costs is appropriate, or if bundled payments are desirable, is an unresolved area of discussion. 

Recommendations  

Given these concerns, the report outlines a series of recommendations that CMS has the authority to implement as Congress considers longer-term structural modifications to the system including: 

  • Taking immediate action to evaluate services where indicators suggest a review is warranted 
  • Improving transparency and increasing stakeholder engagement 
  • Employing aggregations in rate setting, measurement, and service level payments 
  • Incentivizing the transition to AAPMs (Advanced APMs) with additional flexibilities and different approaches to payment 

The full report includes more detail on the background of the PFS, structural issues raised, and recommendations for strengthening the system.  

Connect with Us  

The HMA team will continue to analyze and assess federal legislative and regulatory changes impacting the PFS. We have the depth, experience, and expertise to assist in tailored analysis and model policy impacts of potential changes.   

For more information or questions about this research and the policies described, contact our expert team members and authors of the report:  

Rachel Kramer, Principal
Amy Bassano, Managing Director, Medicare
Rachel Matthews, Consultant
Jared Staheli, Consultant 

Related resources: 

HMA Roundup

Alabama

Alabama House Approves Fiscal 2025 Budget with Increased Funding for Medicaid. 1819 News reported on May 3, 2024, that the Alabama House unanimously passed the $3.4 billion General Fund Budget bill for fiscal 2025, which allocates $955 million toward the state’s Medicaid program, a $92 million increase over the past year. Medicaid expansion was not included in the budget. The bill will return to the Senate. Read More

Arizona

Arizona Restructures Medicaid Agency, Expands Leadership Roles. The Arizona Health Care Cost Containment System (AHCCCS) announced May 6, 2024, a restructuring of its leadership teams, including additional positions and divisions, effective April 15. The former Division of Health Care Services (DHCS) will be separated into the Division of Managed Care Services (DMCS) and the Division of Managed Care Compliance (DMCC), each being led by an assistant director. The Clinical Resolution Unit and the Policy and Contracts teams will move to the new Division of Managed Care Compliance. The Clinical Resolution Unit and the Policy and Contracts teams will move to the new Division of Managed Care Compliance. Read More

Arkansas

Arkansas Launches Four Preventative Pilot Programs for Children with Behavioral Health Disorders. Arkansas Department of Human Services announced that it is launching four new preventative pilot programs aimed at supporting early diagnosis and prevention of crisis for Medicaid eligible children struggling with mental and behavioral health disorders. The four programs include Prevention, Stabilization, and Support Project for Young Children; Families in Transitions Team; Comprehensive Screening and Assessment for Children; and Family Centered Treatment. The pilots will run through March 2025. Read More

Colorado

Colorado Places NEMT Providers on Revalidation Process Amid Fraud Scheme Investigation. KRDO reported on May 6, 2024, that the Colorado Department of Health Care Policy and Financing (HCPF), has found that several non-emergency medical transportation (NEMT) providers were filing false or fraudulent Medicaid claims. The state has placed some NEMT providers on a payment review and implemented a temporary moratorium on approving new and pending applications, which was extended on April 1 for six months. The state is requiring revalidation and re-credentialing for over 200 NEMT providers. Read More

Community Health Centers Struggle Financially Amid Medicaid Redeterminations. The Denver Post reported on May 5, 2024, that Colorado community health centers are facing financial issues amid Medicaid redeterminations as patients lose coverage and become uninsured. The number of patients covered by Medicaid in the state has dropped by almost 30 percent since eligibility redeterminations began last year. The combined loss of Medicaid revenue and increased labor costs have forced some community health centers to make cuts to their services. Read More

Florida

Florida Receives Seven Protests Over Medicaid Managed Care Awards. Health Payer Specialist reported on May 3, 2024, that Florida’s Agency for Health Care Administration (AHCA) received seven protests over the Medicaid managed care award announced April 12. Plans submitting protests were Aetna, AmeriHealth Caritas, Florida Community Care, ImagineCare, Molina Healthcare, Sentara Care Alliance, and UnitedHealthcare. Previously, eight plans submitted notices of intent to protest, including South Florida Community Care Network. Read More

Illinois

Illinois Anticipates Receiving Decision on 1115 Behavioral Health Demonstration in June. Health News Illinois reported on May 6, 2024, that Illinois Medicaid Administrator Kelly Cunningham is expecting to receive a federal decision in June on the state’s Section 1115 behavioral health demonstration, which aims to link behavioral health, case management, and other services together under a Certified Community Behavioral Health Clinics (CCBHCs) program. The program will have a prospective reimbursement system. The state has already provisionally certified 19 locations to participate. If approved, the program could be operational by the fall. Read More

Indiana

Indiana FSSA Continues with Attendant Care Transition as Planned. WBOI News reported on May 6, 2024, that the Indiana Family and Social Services Administration (FSSA) will proceed with the planned transition to the Structured Family Caregiving program. Starting July 1, 2024, under the Structure Family Caregiving program Medicaid will no longer pay family caregivers to provide attendant care for medically complex children. Instead the state will pay legally responsible individuals for providing this care based on a three-tiered system. Read More

Iowa

Iowa Disenrolls 283,000 Medicaid Beneficiaries During First Year of Redeterminations. Iowa Public Radio reported on May 3, 2024, that Iowa has completed its first year of Medicaid redeterminations with at least 283,000 Medicaid beneficiaries disenrolled as of March, surpassing the state’s initial disenrollment projection of 150,000. Of those disenrolled 87,000 were children. The state has claimed actual disenrollment numbers are lower than these figures show due to omitting about 44,100 beneficiaries that had coverage reinstated through November 2023. Read More

Massachusetts

Massachusetts Submits Amendment Request for MassHealth Section 1115 Demonstration. The Center for Medicaid and CHIP Services announced on May 3, 2024, that Massachusetts has submitted a request to amend its MassHealth Medicaid and Children’s Health Insurance Plan Section 1115 demonstration, which includes new initiatives supported by the Commonwealth with Designated State Health Programs funding. Proposed initiatives include Medicaid services for up to 90 days prior to release from correctional facilities; short-term post hospitalization housing of up to six months for individuals meeting risk-based criteria; and expenditure authority to increase the income limit for Medicare Saving Program benefits. The federal public comment period will be open through June 5. Read More

Michigan

Michigan Requests Section 1115 Demonstration Extension Including SUD Pilot Program. The Centers for Medicare & Medicaid Services announced on May 7, 2024, that Michigan has requested a five year extension for its Medicaid section 1115 Behavioral Health demonstration. Under the extension, the state is seeking to include contingency management (CM) in a comprehensive treatment model for Medicaid beneficiaries with substance use disorders (SUD), including stimulant use disorder and/or opioid use disorder. The state initially intends to offer the CM initiative through a two-year pilot program from October 1, 2024, through September 30, 2026. The federal comment period will run through June 6. Read More

Michigan Organization Receives Competitive Grant to Support Food Security in Medicaid Programs. The Food Bank Council of Michigan announced on May 1, 2024, that it was awarded an 18-month competitive grant to support the implementation of food security policy initiatives within Michigan’s Medicaid program as part of the Medicaid Food Security Network. In addition to Michigan, Share Our Strength, also awarded grants to the Federation of Virginia Food Banks, Oklahoma Policy Institute, and Voices for Georgia’s Children. Read More

Minnesota

Minnesota Releases Grant Applications for HCBS Providers in Rural Communities RFP. The Minnesota Department of Human Services released on May 6, 2024, a request for proposals (RFP) to provide a third round of grants for existing or new providers of home and community-based services (HCBS) in rural and underserved communities. The maximum grant award may not exceed $150,000. The term of the initial grant period is anticipated to be from December 1, 2024, through May 31, 2026, with an optional one-year extension of awards. Proposals must be submitted by June 28, 2024. Read More

Montana

Montana Medicaid Expansion Helps Decrease Inpatient, Emergency Service Costs. The Daily Montanan reported on May 6, 2024, that emergency and inpatient service costs dropped by nearly 20 percent on average for those enrolled in Montana’s Medicaid expansion program for at least three years, with costs shifting to less expensive primary care services, according to a Montana Healthcare Foundation report. Since expansion began in 2015, state spending on Medicaid has remained stable, accounting for about 13 percent of general fund spending annually. Additionally, no rural hospitals in Montana have closed since Medicaid expansion launched and uncompensated care costs for critical access hospitals declined by 59 percent between 2016 and 2022. The report also found that behavioral health services access increased for Medicaid patients, with 6,100 people receiving treatment for substance use disorders and 35,000 accessing mental health services using Medicaid in 2022. Read More

Mississippi

Mississippi Legislators Fail to Reach Compromise on Medicaid Expansion Bill. The Associated Press reported on May 2, 2024, that Mississippi legislators were unable to reach a compromise on Medicaid expansion legislation. The discord between legislators stemmed from a work requirement that was included in the Senate bill. House members countered by proposing a ballot initiative on the issue of expansion and work requirements, which senators opposed. Read More

Missouri

Missouri Governor to Sign Bill Ending Medicaid Payments to Planned Parenthood. The Missouri Independent reported on May 8, 2024, that Missouri Governor Mike Parson has agreed to sign a bill prohibiting Medicaid from paying for health care services from any organization that affiliates with abortion providers, including Planned Parenthood. The new law will go into effect on August 28. Read More

Senate to Vote on Medicaid Hospital Tax Renewal Following Filibuster. Fox News reported on May 2, 2024, that Missouri senators gave initial approval to a bill renewing the state’s Medicaid hospital tax, which initially had been blocked by a filibuster effort. The hospital tax needs a second vote of approval in the Senate. Read More

Nebraska

Nebraska Seeks Input on Medicaid Enterprise System Modernization. The Nebraska Department of Health and Human Services released on May 1, 2024, a request for information (RFI) regarding capabilities in Medicaid data management and analytics services to be used to inform the state’s Medicaid Enterprise System modernization planning efforts. Nebraska seeks to develop a strategy and roadmap that focuses on modularity, return on investment, opportunities for reuse, and value. Nebraska expects to develop a competitive solicitation for one or more commercial off-the-shelf solutions without the need for a custom build. Written questions will be accepted through May 14 and responses are due by June 6. Read More

New Hampshire

New Hampshire House to Vote on Medicaid Reimbursement, Certification Program for Community Health Workers. NHPR reported on May 2, 2024, that the New Hampshire House will vote on legislation to address health care workforce shortages by creating a voluntary certification program for community health workers and allowing their services to be reimbursed by Medicaid. The bill previously passed the Senate; however the House Health, Human Services and Elderly Affairs Committee failed to reach a recommendation on it. Read More

Pennsylvania

Pennsylvania House Passes Medicaid Doula Bill Aimed at Addressing Maternal Mortality. The Pennsylvania Capital-Star reported on May 6, 2024, that the Pennsylvania House passed a bill that would expand Medicaid maternal care to cover doula services and create an advisory board to ensure proper doula accreditation. The bill is one of many in a legislative package called “Momnibus,” which is aimed at improving Black maternal health. The bill now heads to the Senate for review. Read More

Rhode Island

Rhode Island Medicaid Paid More Than $7 Million to MCOs for Deceased Beneficiaries. The Rhode Island General Assembly reported on May 1, 2024, that the state’s Medicaid program paid more than $7.1 million to managed care organizations (MCOs) for deceased beneficiaries and identified 3,298 deceased members still active in fiscal 2023, according to an annual audit report by the Joint Committee on Legislative Services. The audit also found that approximately $5.4 million in reimbursements for certain psychiatric residential treatment facility services provided to children were not charged to Medicaid under the approved state plan methodology. Read More

National

House Committee Introduces Legislation to Extend Expiring Medicare Telehealth Policies. Fierce Healthcare reported on May 7, 2024, that the House Committee on Ways and Means held a committee markup and advanced legislation to extend Medicare telehealth flexibilities for two years, including coverage of audio-only telehealth services, allowing telehealth visits to be conducted from anywhere, and delaying the in-person requirement for the provision of telemental health services. The bill also includes a proposed five-year extension for the Centers for Medicare & Medicaid Services’ Hospital at Home waiver program, which allows enrolled hospitals to receive payment for acute-level hospital care provided at home. The current policies in place are set to expire December 31, 2024. Read More

Joint Commission to Launch Rural Health Clinic Accreditation Program. Modern Healthcare reported on May 7, 2024, that the Joint Commission is launching a Rural Health Clinic Accreditation Program for rural health clinics requesting participation in the Medicare program, effective June 3, 2024, through June 3, 2028. The program aims to improve and standardize the safety and quality of primary care and personal health services, including for requirements related to emergency preparedness, medical error reduction, and health information and medication management. Read More

CMS Issues Draft Guidance for Second Cycle of Medicare Drug Price Negotiations. The Centers for Medicare & Medicaid Services (CMS) issued on May 3, 2024, draft guidance for the second round of 15 drugs that will be selected for negotiation under the Medicare Drug Price Negotiation Program. Drugs selected for negotiation will be announced by February 1, 2025, and negotiated maximum fair prices will be effective January 1, 2027. CMS is also creating policies outlining how eligible Medicare beneficiaries will have ensured access to the negotiated maximum fair prices. Public comments will be accepted through July 2. Read More

Senate Finance Committee Introduces Legislation to Create Medicare Drug Shortage Prevention, Mitigation Program. The Hill reported on May 3, 2024, that the Senate Finance Committee introduced a bipartisan proposal aimed at reducing generic drug shortages by creating a Medicare Drug Shortage Prevention and Mitigation Program beginning in 2027. The program would require Medicare providers to adopt new standards for generic drug purchasing in order to receive Medicare payment incentives, including a minimum three-year contract with manufacturers, purchase volume commitments, requirements for contingency contracts with alternate manufacturers, and transparency around manufacturer quality control issues. Providers who meet core standards will be eligible to receive quarterly incentive payments. Read More

U.S. Lawmakers Scrutinize Nursing Home Providers’ Corporate Spending. USA Today reported on May 6, 2024, that a group of U.S. lawmakers sent a letter to National Healthcare Corp., the Ensign Group, and Brookdale Senior Living questioning the nursing home providers’ spending on executive pay, stock buybacks, and dividends that totaled $650 million since 2018. The letter asks for answers to how executive pay and bonuses are determined; requests any complaints submitted by nurses over staffing levels or pay; and detailed lobbying or advocacy spending that may have been used to lobby against a minimum federal staffing rule. Read More

CMS Published Final Rule to Allow Health Coverage Under ACA for DACA Recipients. The Centers for Medicare & Medicaid Services (CMS) published on May 3, 2024, a final rule that would allow undocumented immigrants in the Deferred Action for Childhood Arrivals (DACA) program to receive health coverage and subsidies through the Marketplaces or a Basic Health Program, effective November 1. It is estimated that about 100,000 uninsured immigrants could obtain health insurance under the new rule. Read More

HHS Finalizes Rule with Protections for Individuals with Disabilities in Hospitals. Modern Healthcare reported on May 2, 2024, that the U.S. Department of Health and Human Services (HHS) finalized a rule that aims to broaden nondiscrimination protections for individuals with disabilities in healthcare environments, effective July 1. Healthcare organizations will be required to have elevators and ramps that meet federal standards and medical equipment such as examination tables, scales, and mammogram machines with modifications to accommodate patients using wheelchairs. Healthcare organizations must also ensure websites, mobile apps, and virtual care programs are user-friendly for people with disabilities and remove disability status as a factor in clinical support tools. Read More

GAO Names Verlon Johnson MACPAC Chair, Appoints Two New Members. The U.S. Government Accountability Office announced on May 2, 2024, that the Medicaid and CHIP Payment and Access Commission (MACPAC) has appointed Verlon Johnson to serve as the Commission’s Chair. Doug Brown and Michael Nardone were also appointed as commissioners, with their terms expiring in April 2027. Read More

Industry News

Steward Healthcare Files For Chapter 11 Bankruptcy. Modern Healthcare reported on May 6, 2024, that Texas-based Steward Health Care System filed for Chapter 11 bankruptcy protection, but pledged to maintain daily operations. The filing lists assets and liabilities of between $1 billion and $10 billion, and lists 30 unsecured creditors who are owed more than $600 million. Massachusetts Governor Maura Healey has previously suggested Steward Health Care imminently transfer its hospitals in the state to new operators unless sufficient staffing and supply levels are met. Steward Health Care operates in eight states. Read More

Justice Department Advances Cigna’s Medicare Advantage Sale. Modern Healthcare reported on May 2, 2024, that the U.S. Justice Department finished reviewing Cigna Group’s $3.3 billion Medicare Advantage sale to Health Care Service Corp. The deal is expected to close in the first quarter of fiscal 2025. With the sale of Medicare Advantage, Cigna intends to focus more on its Evernorth Health Services. Read More

Ensign Group Acquires Seven Skilled Nursing Facilities in Six States. Modern Healthcare reported on May 1, 2024, that Ensign Group has acquired seven skilled nursing facilities and a long-term acute care hospital across six states – Arizona, Iowa, Kansas, Tennessee, Texas, and Utah. Ensign now has 310 skilled nursing operations across 14 states. Financial terms of the deals were not disclosed. Read More

Cyberattack at UnitedHealth Group’s Change Healthcare Caused in Part by Lack of Multifactor Authentication. The New York Times reported on May 1, 2024, that during a hearing with the Senate Finance Committee and the House Energy and Commerce Committee, UnitedHealth attributed the cyberattack on Change Healthcare to a server that lacked standard multifactor authentication. Lawmakers raised concerns around the corporation’s enormous scale and questioned whether the cyberattack was magnified due to how deeply embedded UnitedHealth is in the nation’s medical care. Currently all of UnitedHealth’s external-facing systems are implementing multifactor authentication. Read More

RFP Calendar

HMA News & Events

Wakely, an HMA Company, White Papers:

Navigating Medicare Advantage Risk in a Changing Landscape: Inflation Reduction Act Implications for ACOs. In the ever-evolving landscape of healthcare policy, the Inflation Reduction Act (IRA) of 2022 initiates significant changes aimed at curbing prescription drug costs and reshaping Medicare Part D. Signed into law by President Biden on August 16, 2022, the IRA’s provisions are set to transform the Medicare Advantage (MA) landscape, particularly through a significant restructuring of the Part D benefit design slated for 2025. This brief delves into the profound implications of the IRA on MA plans and Accountable Care Organizations (ACOs), illuminating the complex interplay between policy reforms, plan dynamics, and provider risks. Read More

ACA HCC Recapture Rate Study. Risk adjustment plays a critical role in the operations and profitability of ACA health plans. Therefore, health plans’ ability to accurately capture and recapture HCCs is critical to financial success. HCC recapture rates is one window into the performance of a health plans’ risk adjustment performance. This study provides HCC and RxC recapture rates for participating health plans and the study-wide benchmarks at key drill downs such as year, region, and metal tier. Read More

NEW THIS WEEK ON HMA INFORMATION SERVICES (HMAIS):
Medicaid Data
Medicaid Enrollment:

  • Georgia Medicaid Managed Care Enrollment is Down 7.6%, May-24 Data
  • Illinois Medicaid Managed Care Enrollment is Down 1.4%, Feb-24 Data
  • Illinois Dual Demo Enrollment is Down 6.8%, Feb-24 Data
  • Missouri Medicaid Managed Care Enrollment is Down 7.4%, Apr-24 Data
  • Nevada Medicaid Managed Care Enrollment is Flat, Jan-24 Data
  • Puerto Rico Medicaid Managed Care Enrollment is Down 7.9%, Mar-24 Data
  • Wisconsin Medicaid Managed Care Enrollment is Down 1.3%, Jan-24 Data

Public Documents: 

Medicaid RFPs, RFIs, and Contracts:

  • Minnesota HCBS Provider Capacity Grants RFP, May-24
  • Nebraska Medicaid and Long-Term Care Data Management and Analytics RFI, May-24

Medicaid Program Reports, Data, and Updates:

  • State Medicaid Agency Provider Fee Schedule Website Inventory
  • Federal Regulatory Tracker
  • Arizona Appropriation Status Report, FY 2024
  • Florida Annual External Quality Review Reports, 2014-24
  • Florida Medical Care Advisory Committee Meeting Materials, 2021-24
  • Florida Comprehensive IDD Managed Care Pilot Program Status Report, 2023
  • Florida Medicaid MLTC Program Care Setting Transition Analysis Summary, 2020-23
  • Florida Medicaid Managed Care Encounter Data Validation Studies, 2019-23
  • Kentucky PHE Medicaid Redeterminations Monthly Report to CMS, Mar-24
  • Maine TANF State Plan, 2024-26
  • Updated Maryland State Overview
  • Massachusetts MassHealth Section 1115 Waiver Documents, 2021-24
  • Michigan PHE Medicaid Redeterminations Monthly Reports to CMS, Mar-24
  • Michigan Section 1115 Behavioral Health Waiver (Formerly Pathways to Integration) Documents, 2016-24
  • Texas Medicaid CHIP Data Analytics Unit Quarterly Reports, 2018-24
  • Texas STAR Kids Advisory Committee Annual Reports, 2019-23

A subscription to HMA Information Services puts a world of Medicaid information at your fingertips, dramatically simplifying market research for strategic planning in healthcare services. An HMAIS subscription includes:

  • State-by-state overviews and analysis of latest data for enrollment, market share, financial performance, utilization metrics and RFPs
  • Downloadable ready-to-use charts and graphs
  • Excel data packages
  • RFP calendar

If you’re interested in becoming an HMAIS subscriber, contact Andrea Maresca at [email protected].

Edited by:

Alona Nenko
Andrea Maresca
Mary Goddeeris
Gabby Palmieri
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