CMS finalizes rule on Medicaid managed care pass-through payments: 5 things to know

CMS issued a final rule Tuesday preventing states from increasing or adding pass-through payments for hospitals, physicians or nursing homes contracted with Medicaid managed care organizations.

Here are five things to know about the final rule on Medicaid managed care organization pass-through payments.

1. Pass-through payments act as "add-ons" states pay to contracted Medicaid managed care plans. The pass-through payments supplement the base capitation rate managed Medicaid programs pay to contracted providers. One reason the payments are issued is to ensure safety-net hospitals and providers avoid disruption of payment during transition from fee-for-service managed care to value-based care, according to CMS.

2. In a final rule issued last year, CMS said managed care regulations prohibit states from making payments to providers for services available under a contract between the state and a managed care organization. As a matter of policy, CMS said it interpreted those regulations to also prohibit states from making supplemental payments to providers through a managed care plan. At that time, CMS said it would allow 10 years for hospitals to make the transition.

2. The final rule issued Tuesday limits increased or additional pass-through payment programs to those in place when final Medicaid managed care regulations took effect July 5, 2016. Under the final rule, only states with managed care contracts submitted to CMS by July 5 would be allowed to continue pass-through payments during the specified transition period.

3. In a previous final rule issued May 6, 2016, CMS estimated 16 states dispensed approximately $3.3 billion in pass-through payments annually. In addition, CMS estimated each year at least eight provided roughly $105 million in pass-through payments for physicians and at least three states issued about $50 million in pass-through payments for nursing facilities. The states were unidentified. 

4. The AHA, which had requested CMS withdraw the proposed regulation, was disappointed with CMS' decision. Tom Nickels, AHA executive vice president, said in a statement, "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. Hospitals and state Medicaid programs should have been allowed the full 10-year transition."

5. The final rule is effective in 60 days.   

More articles on payer issues:
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