Standard for Total Payment Rates for Each SDP
CMS is proposing several requirements regarding the totality of provider payment rates under SDPs to ensure proper fiscal and programmatic oversight in Medicaid managed care programs. First, CMS is proposing to codify its direction provided in SMDL #21-001 that requires states to demonstrate that SDPs result in provider payments rates that are reasonable, appropriate, and attainable as part of the preprint review process. States would be required to provide documentation demonstrating this for each service and provider class. CMS proposes to define “total payment rate” as the aggregate for each managed care plan of:
- The average payment rate paid by all managed care plans to all providers included in the specified provider class for each service identified in the SDP.
- The effect of the SDP on the average rate paid to providers included in the specified provider class.
- The effect of any and all other SDPs on the average rate paid to providers included in the specified provider class.
- The effect of all allowable pass-through payments as defined in § 438.6(a) paid to providers included in the specified provider class.
The proposed language includes a requirement that states must provide documentation demonstrating the total payments upon CMS request.
Establishment of Payment Rate Limits for Certain SDPs
To address concerns regarding the growth of SDPs and the lack of a regulatory payment ceiling CMS proposes the following:
1. Historical Use of the Average Commercial Rate (ACR) Benchmark for SDPs.
CMS proposes to allow total payment rates in an SDP up to the ACR for certain services. Using the ACR allows states to ensure that Medicaid managed care enrollees have access to care that is comparable to access for the broader general public. It also provides for the least amount of disruption for states transitioning existing, and often long-standing pass-through payments, into SDPs. In addition, the ACR provides parity with Medicaid fee-for-service payment policy for qualified practitioners affiliated with and furnishing services at academic medical centers, physician practices, and safety-net hospitals where CMS has approved rates up to the ACR. States would be required to document the total payment rate specific to each service type included in the SDP and specific to each provider class identified in comparison with ACR.
2. Proposed Payment Rate Limit for Inpatient Hospital Services, Outpatient Hospital Services, Qualified Practitioner Services at Academic Medical Centers, and Nursing Facilities.
CMS proposes imposing the ACR as the regulatory limit on the projected total payment rate for inpatient hospital services, outpatient hospital services, qualified practitioner services at an academic medical center, and nursing facility services. The proposed total payment limit would apply across all SDPs in a managed care program; for example, states would not be able to create multiple SDPs that applied, in part or in whole, to the same provider classes and be projected to exceed the ACR. CMS is not proposing to establish ACR payment ceilings on other types of services as states have found it difficult to obtain data on commercial rates for services such as HCBS, which are generally not covered by commercial payers. Similar concerns exist with behavioral health services and substance use disorder services, where Medicaid is the most common payer.
A definition for inpatient hospital (42 CFR § 440.10), outpatient hospital (§ 440.20(a)), nursing facility (§ 440.40(a)), and academic medical center (§ 438.6(a)) services defined in other CFR sections would be added to the language.
The language also includes other limits that under consideration if ACR is not selected (for providers noted above and other provider types), including:
- Limiting to the Medicare rate.
- Limiting to a rate between the Medicare rate and the ACR.
- Limiting to the ACR for certain types of SDPs with value-based arrangements and the Medicare rate for other SDPs.
CMS is seeking comment on these limit considerations, as well as, if a transition period should be implemented to phase in the limits applied for existing SDPs.
3. Average Commercial Rate Demonstration Requirements.
To monitor compliance with the ACR limit proposal, CMS proposes states be required to provide two pieces of documentation: (1) an ACR demonstration; and (2) a total payment rate comparison to ACR. The ACR proposal would be submitted with the initial preprint submission (new, renewal, or amendment) following the applicability date and then updated every three years, so long as the state continues to include the SDP in one or more managed care contracts, but would only be applicable to SDPs requiring prior written approval. CMS is not proposing to use a specific template for the demonstration and comparison to ACR. Nor is it requiring a specific source of data for the ACR analysis.
4. Average Commercial Rate Demonstration and Total Payment Rate Comparison Compliance.
The ACR demonstration and total rate comparison would be required for SDPs needing written prior approval as part of the initial submission or renewal starting with the first rating period beginning on or after the effective date of the rule. The rate comparison would need to be updated with each subsequent renewal. The ACR demonstration would need to be updated once every three years, as long as the SDP continues to be included in the MCO contracts.
CMS is considering (and seeking comments for) applying an overall expenditure limit to SDPs to help address and improve program and fiscal protections and oversight risks. Examples considered include:
- Limit SDP expenditures similar to the five cost limit for In Lieu of Services.
- Limit SDP expenditures to 10 to 25 percent of cost limit, or something within a reasonable range.
- Apply SDP limits as a portion of total costs for each MCO plan.
- Apply SDP limits as a portion of only inpatient, outpatient, nursing facility, and qualified practitioner costs for each MCO plan.
- Apply SDP limits on a rate-cell basis.
Proposed applicability date § 438.6(c)(2)(ii)(I): Upon effective date of the final rule.
Proposed applicability date § 438.6(c)(2)(iii): No later than the first rating period for contracts beginning on
or after the effective date of the final rule.
Although CMS did not propose a specific overall SDP limit, imposition of such a limit would significantly affect many states’ SDP arrangements.