CMS Announces Final Rule Limiting Pass-Through Payments

The Centers for Medicare and Medicaid Services (CMS) recently released a final rule limiting pass-through payments in Medicaid managed care, in order to entice providers to see more Medicaid beneficiaries.

According to recent reports, it is expected that thousands of hospitals, doctors, and clinics will be impacted.

Under the newly finalized rule, payments are sent to Medicaid managed care plans on top of the base capitation rate. The Medicaid managed care plans are required to pass the payments to contracted providers that treat a large number of Medicaid or uninsured patients with costly cases.

It is estimated that 16 states pay a total of approximately $3.3 billion in pass-through payments each year. Further, another three states have distributed about $50 million a year for nursing facilities.

According to CMS, the additional pass-through payments are “not consistent with their regulatory standards for actuarially sound rates because they do not tie provider payments with the provision of services.” For this reason, the CMS is reigning in the use of pass-through payments.

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Following the announcement of the final rule, many organizations, included the American Hospital Association (AHA), expressed concern.

“We are disappointed that CMS chose to finalize a rule that further limits pass-through payments, and could adversely affect both those hospitals dependent on supplemental payments and the patients they serve,” Tom Nickels, executive vice president of AHA said in a press release. “Hospitals and state Medicaid programs should have been allowed the full 10-year transition period for phasing down supplemental payments as had been established in prior regulation.” 

Despite receiving negative feedback, CMS disagreed and said it would finalize the rule as they originally intended. By finalizing the rule, CMS also dismissed requests to wait for the incoming administration to review the proposed rule.

According to CMS, “A delay in finalizing this rule is contrary to our goals and policy so we do not accept this recommendation.”

—Julie Gould 

Reference:

Department of Health and Human Services, Centers for Medicare and Medicaid Services. Medicaid Program; The Use of New or Increased Pass-Through Payments in Medicaid Managed Care Delivery Systems. https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-00916.pdf. Published online January 17, 2017. Accessed January 17, 2017.