CMS Proposes Regulations Regarding Medicaid Payment Rates – Potential Game Changer for Hospitals, Nursing Homes and Other Medicaid Providers

(May 24, 2011) - On May 6, CMS proposed to amend its rules governing the adequacy of provider payment rates under Medicaid.  This proposed rule, may be the most important regulatory action to protect providers and beneficiaries from draconian rate reductions since the repeal of the Federal standard known as the Boren amendment, in 1997.

Currently, Federal rules require states to provide only minimal notice to providers and the public, and to develop and maintain only minimal information before making any significant changes to their Medicaid payment methodologies.  The proposed rules, if adopted, would appear to require states to monitor the adequacy of current Medicaid payment rates, provide significantly more information to CMS about any proposed payment rate decreases, and to signify a far more active role for CMS in addressing the adequacy of Medicaid payment rates than it has taken since the enactment and repeal of  the Boren amendment.

Specifically, prior to 1990, Federal law required states to pay hospital, nursing home, and several other provider categories at their “reasonable costs” or for nursing home, at rates that were reasonable cost related.  For all other provider types, states were required to pay at rates that were consistent with efficiency, economy, and quality of care, and sufficient to enlist enough providers so that care and services are available to Medicaid beneficiaries at least to the extent that such care and services were available to the general public.  During this period, at least with respect to hospitals and nursing homes, CMS and its predecessor component agencies took an active role in approving changes to state payment methodologies under Medicaid.

In 1990, Congress enacted the Boren amendment.  The Boren amendment required states to pay hospitals and nursing homes at rates that were reasonable and adequate to cover the costs that must be incurred by efficiently and economically operated providers.  During the period in which the Boren amendment was in effect, the United States Department of Health and Human Services (‘HHS”) and its principal operating component that ran the Medicaid program at the Federal level, construed their role to be extraordinarily minimal, and in essence, to simply ensure that states made certain advance findings before changing their Medicaid payment rates.  Except in the most extreme cases, the Federal government did not perceive its role as looking behind these findings to determine their substantive adequacy, and Medicaid payment rates for these classes of providers were predominantly the product of negotiation between the states and providers.

When states attempted to change their payment methodologies to pay at rates that provider groups considered inadequate, providers would generally challenge those methodologies by bringing actions in Federal and State courts, and would frequently succeed either in those actions, or by using the Boren amendment standard to negotiate an acceptable alternative.  One of Liles Parker’s attorneys was involved extensively in representing providers and their trade associations in a number of those actions.

As part of the Balanced Budget Act of 1997, Congress repealed the Boren Amendment, and replaced it with a limited standard for providing public notice.  Thus, the only provision that governed most provider payment levels was the “equal access” standard at section 1902 (a)(30)(A).  This provision requires states to assure that payments are consistent with efficiency, economy, and quality of care, and sufficient to enlist enough providers so that care and services are available to the general population.

Since 1997, HHS has continued its “hands off” role in its involvement with state payment methodologies.  Also, there has been a significant amount of litigation over whether the equal access provision provides a Federal cause of action for providers to challenge states in the manner in which they set their Medicaid payment levels.  For the most part, providers have been left at the mercy of state regulators and legislatures.

More recently, as a result of the economic downturn, states have contemplated far more draconian rate reductions.  Also, in 2009, Congress created the Medicaid and CHIP Payment and Access Commission (“MACPAC”) to study and make recommendations on beneficiary access under the Medicaid and CHIP programs.  Finally, under the Accountable Care Act, beginning in 2014, a significant number of new beneficiaries will fall under the ambit of the Medicaid program.

In the May 9 proposed rule, CMS is proposing to require states to collect and publish far more information in determining whether their payment rates are consistent with efficiency, economy, and quality of care and sufficient to enlist enough providers so that care and services are available under Medicaid to the extent that they are available to the general public.  Additionally, CMS appears to be proposing to take a far more active role than it has since 1990 in approving or disapproving state plan amendments that would decrease payment rates for providers.

The proposed rule, if adopted, would appear to offer potentially the first effective vehicle in years to provide hospitals, nursing homes, and other providers with any leverage at the Federal level to address grossly inadequate payment rates and draconian rate reductions under the Medicaid program.  It may also provide a vehicle under which providers can access the Federal courts.  As such, the proposed rule could be one of the most significant rule making actions in years for providers that serve a large portion of Medicaid beneficiaries as well as for their trade associations.

For these reasons, providers and their trade associations should consider seriously submitting comments to the proposed rule.  To be considered, comments must be considered by no later than July 5, 2011.

Liles Parker attorneys have extensive experience with Medicaid payment issues, and at least one of our attorneys, Michael Cook, has more than 30 years experience in negotiating and litigating the adequacy of Medicaid provider rates.  Anyone seeking additional information on this issue should contact Michael Cook at (202) 298-8750 or mcook@lilesparker.com.

Health Care Reform- The Independent Payment Advisory Board (IPAB) And Its Implications on Health Care Providers

(September 14, 2010): As one of the most controversial provisions in the recently enacted health care reform legislation, Congress created the IPAB – a board that is independent from Congress and the United States Department of Health and Human Services (“HHS”) as a mechanism to control Medicare – and potentially all – health care expenditures. Specifically, beginning January 2015, for any year in which the Chief Actuary of the Centers for Medicare and Medicaid Services (“Chief Actuary”) projects that the increase in per capita Medicare expenditures will exceed a defined target level, the IPAB is to develop a detailed proposal to scale back Medicare expenditures for that year. With limited exceptions, unlike the Medicare Payment Advisory Committee, these “recommendations” become binding unless Congress affirmatively acts in an expedited fashion and with a super majority vote to prevent them from becoming law. Additionally, the IPAB is to make non-binding recommendations on controlling expenditures for non-Federal health care programs.

The IPAB provision was developed because the administration and certain members of Congress were concerned that Congress did not have the political will to impose fiscal discipline upon itself. The IPAB has the potential to be a significant player in controlling health care costs overall. However, because some believe that it usurps Congress’ authority, it is also extremely controversial. Complicating the process is the fact that certain provider classes, such as hospitals, are exempted from cost reductions in the IPAB process during the early years, thus placing greater pressure to reduce expenditures for other provider and payor classes. This provision, coupled with a number of incentives in the health reform legislation to change the manner in which providers deliver care, will place strong incentives for the health care community to develop new methods to constrain cost increases without adversely affecting care. These include such mechanisms as coordinating care through such vehicles as Accountable Care Organizations and Medical Homes, bundling of services, and enhanced methods of disease management for high cost patients, as well the use of electronic medical records and more frequent use of email between practitioners and their patients.

Health care entities seeking advice on strategies for adapting to the new health care reform legislation should contact Michael Cook at (202) 298-8750. Also, Mr. Cook has authored a more detailed article on the IPAB and its likely impact on health care entities that is scheduled to be published in October issue of the American Health Lawyers Association Journal on Health and Life Sciences Law. Once that article is published, this website will include an abstract and a link to the article. Additionally, Mr. Cook will be presenting at the Healthcare Reform: Dealing with Hurdles and Building up Success Conference, sponsored by GTCbio, on November 8 and 9, 2010, in Washington, DC.

Liles Parker attorneys represent health care providers in connection with a wide variety of health care projects.  Michael Cook has extensive experience as a health lawyer and is a nationally-recognized attorney.  For more information, please contact Mr. Cook.  He can be e-mailed at: mcook@lilesparker.com  Alternatively, call Mr. Cook for a complimentary consultation at: 1 (800) 475-1906.

States Are Taking Aim at Home Health Providers

(July 19, 2010): Home health care providers are in the crosshairs again.  On July 15, HHS granted Florida a waiver of the anti-data mining provisions of federal Medicaid program regulations that will allow its Medicaid Fraud Control Unit (MFCU) to begin seeking out reasons to investigate home health and other providers for fraud.  While Florida is the first and currently the only state to obtain a waiver of this type, if Florida’s pilot program “succeeds”, the other 49 MFCUs could soon be doing the same thing.

MFCU “strike forces” are designed to investigate referred cases of fraud.  They are prohibited by 42 CFR §1007.19(e)(2) from receiving federal funding for conducting analysis to independently identify Medicaid fraud.  In their formal July 7^th request, the Florida Attorney General and Florida Agency for Health Care Administration Secretary requested an expedited waiver of those protections.

The pilot program, intended to be effective January 1, 2011, will allow the state MFCU to use data mining to “identify situations in which a question of fraud may exist, including the screening of claims, analyses of patterns of practice, or routine verification with recipients of whether services billed by providers were actually received.”  The Florida officials’ request makes a point of calling out home health providers in justifying this expansion of the MFCU’s powers, declaring that:

“[S]ome services such as durable medical equipment and home health are frequent targets of fraudulent activity…” and

“areas of particular concern that the demonstration would address include …home and community based waivers, payments to assisted living facilities, and home health services.” (Emphasis added).

We are greatly concerned by the continued targeting of home health providers by state and Federal officials.  Given the explicit program goals of increasing the number of leads and cases, the number of arrests and convictions, the number of overpayment and abuse referrals, and the recovery of funds and then serving as a model for other states, this program warrants close monitoring.

Should you have any questions regarding these issues, don’t hesitate to contact us.  For a complementary consultation, you may call Robert W. Liles or one of our other attorneys at 1 (800) 475-1906.