CMCS Informational Guidance on Section 71116 of the Big Beautiful Bill Act (H.R.1): State Directed Payments (SDP)

To aid in state planning efforts for SDPs and clarify the applicability of the SDP grandfathering requirements in H.R. 1, CMS released guidance for states to utilize prior to the release of proposed rulemaking that is in process for 42 CFR 438.

Key elements of the communication include:

• CMS anticipates considering SDP limits for provider groups other than hospital, nursing facility, and qualified practitioners at an academic medical center.
  • In addition to the proposed limits for SDPs in managed care, the Office of Management and Budget (OMB) summary of the proposed rule currently under review by OMB states that there will also be limits for Medicaid practitioner payments in Medicaid fee-for-service.
• To be eligible for grandfathering certain SDP payments and to utilize SDP average commercial rate (ACR) limits, the SDP must be within an applicable rating period and meet preprint status criteria:
  • The SDP must be for a rating period occurring within 180 days of July 4, 2025.
    • CMS interprets the statutory requirement of 180 days to mean 180 days before or after July 4, 2025.
    • Eligibility is limited to rating periods for State Fiscal Year (SFY) 2025, Calendar Year (CY) 2025, and SFY 2026.
  • The SDP must have written prior approval or good faith effort (submission of completed preprint form) to obtain approval prior to May 1, 2025 (other than for rural hospitals), or
  • The SDP must have written prior approval or good faith effort (submission of completed preprint form) to obtain approval prior to July 4, 2025 for rural hospitals, or
  • The SDP must have a completed preprint submission (preprint form and any applicable preprint addendum tables) to CMS prior to July 4, 2025.
• Until the phase down of the grandfathered SDP effective January 1, 2028, the total dollar amount of the SDP (item 4 of the current SDP preprint form) cannot increase through revision or amendment. The amount may be decreased if the state chooses.
• Grandfathered SDPs are still subject to the total payment rate limit and must not exceed 100 percent of the average commercial rate as detailed in 42 CFR § 438.6(c)(2)(iii).
• For states that have submitted a pre-print but do not meet the grandfathering rule, a pre-print must be revised and re-submitted before CMS will consider pre-print approval.

States should review current submitted pre-prints to determine if a re-submission is necessary to apply limits to the appropriate SDP grandfathering period.  Additional guidance will be issued once the proposed rule is published.