Medicaid Managed Care – Final CMS Rule 2390 and Nursing Home Pass-Thoughs
Indiana currently receives Medicaid Supplemental Payments for nursing facilities that are operated by Non-State Government Owners that increase the amount of Medicaid payments to the Upper Payment Limit for participating providers, with the state portion funded by Intergovernmental Transfers. Texas and Utah have similar programs while Oklahoma and Iowa are just two of the states currently pursuing similar programs. We have a number of clients who indirectly participate in these programs by managing skilled nursing facilities for county owned hospitals. After CMS released its 1,400 page Final Rule 2390 regarding Medicaid Managed Care, our clients are concerned about the elimination of the pass-throughs to the county owned hospitals operating the nursing homes affecting their revenues as management companies to these hospitals.
The final rule, among other things, eliminates pass-through payments not directly linked to care, but also lists important phase-out requirements for payments received by hospitals, nursing homes and physicians. Pass-through payments are supplemental payments added to the rates for managed care plans paid to the providers that are not for a specific service or benefit to the resident, but basically made with the purpose of increasing quality of care. In the final rule, CMS commented that pass-through payments do not meet “actuarial soundness” standards because they are not directly related to the costs of providing services under the contract. The rule then in Section 438.6(c) permits states to direct payments based only on utilization, delivery of services covered under contract and quality and outcomes of services, essentially removing the ability of the states to collect pass-through payments as currently received.
CMS, recognizing that the pass-through payments represent an important revenue source for providers, have delayed implementation of Section 438.6(c) until July 1, 2022 for nursing homes with contracts entered into after July 1, 2017 so that the states, providers and managed care plans can transition to a compliant payment structure. Although hospitals have 10 years before the pass-through payments are eliminated, the payments are phased out over the ten year period. For nursing homes, the pass-through payments are allowed in full until July 1, 2022 with no annual phase outs. It is unclear, but possible, under Section 438(d) that contracts entered into prior to July 1, 2017 may be allowed even later than the 2022 phase out. As a practical matter, however, the pre-2017 contract would need to be for a period greater than 6 years for this work, which would be unusual. For now, our clients should know that pass-through payments will be permitted for 6 more years, which is more guidance on this program than we’ve had previously.