May 2, 2016

On April 25, 2016, Centers for Medicare and Medicaid Services (CMS) published a final rule significantly updating regulations governing the Medicaid program’s use of capitated managed care plans. The full rule is massive and addresses a wide variety of other issues, including medical loss ratio, network adequacy, beneficiary protections, managed long term services and supports, and capitation rates. It was intended by CMS to better align Medicaid managed care with Medicare Advantage plans and Qualified Health Plans.

Since its release, Sellers Dorsey has studied the rule and its potential impact on the industry. Based on our preliminary analysis, the rule recognizes the critical nature of supplemental payments to safety net providers. As such, CMS has given states and safety net hospitals more than a decade to phase out explicit supplemental payment programs that do not meet one of their three expectations. These expectations include that the payments are made using a value-based payment model, through initiatives that reform a delivery system, or through performance improvement initiatives. The final rule does sunset the use of supplemental payments through managed care contracts for physicians and nursing facilities by July 1, 2022. However, supplemental payments that meet one of the three aforementioned expectations can continue beyond the sunset date.

The recently released rule also recognizes that states may have a legitimate policy interest in treating certain classes of providers differently, and specifically cites public hospitals as one example of a provider that could have different minimum fee schedule or value-based purchasing incentives than private hospitals. In discussing the sunset of the use of supplemental payments not tied to quality metrics or value-based purchasing, the rule makes no distinction between new supplemental payment programs a state might wish to start now and existing programs. As a result, it is undetermined at this point in time if CMS will seek to treat new state supplemental payment programs differently than existing state programs before the sunset date.
Sellers Dorsey has conducted a high-level analysis of the rule providing insight on the impact upon current and future supplemental payment programs across the country. We will also continue monitoring new developments as the rule is interpreted by CMS in future proposed programs.

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Additionally, Sellers Dorsey will be hosting a webinar on the final Medicaid managed care rule and the understanding of key components. Details on this webinar will be available soon.