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Date ArticleType
8/1/2016 Payment/Reimbursement
CMS Issues Medicaid Managed Care Pass-Through Payment Guidance

On Friday, CMS released initial guidance related to the use of new or increased pass-through payments in Medicaid managed care. This guidance applies to states with Medicaid managed care delivery systems in place, or those that are in the process of implementing managed care. States without Medicaid managed care will not be impacted by this guidance, though AHCA expects CMS to release a proposed rule related to supplemental payment made in the fee-for-service environment. 

As you may recall, the final Medicaid managed care rule released this spring restricts the authority of states to direct how Medicaid managed care plans pay providers, which includes pass-through payments, for contracts on or after July 1, 2017, except to:

  1. advance value-based purchasing models; 
  2. participate in delivery system reform or performance improvement initiatives (including multi-payer or community-wide initiatives); or
  3. adopt a minimum fee schedule, a uniform dollar or percentage increase or maximum fee schedule for classes of network providers. 

In the final rule, CMS did allow transition periods for pass-through payments to certain providers, including a 5-year transition period for nursing centers. To view the AHCA webinar on the Medicaid managed care final rule, which describes this provision in greater detail, click here. This provision raised the question of whether new pass-through payment programs or changes to existing programs would be permitted during this transition period. The guidance released today clarifies that adding new or increasing existing pass-through payments beyond what was included as of July 5, 2016 (when the final rule went into effect) will not be permitted. 

Going forward, states seeking to implement one of these payment arrangements must first receive federal approval. To obtain approval, states must demonstrate that the arrangement: 

  • Is based on the utilization and delivery of services;
  • Directs expenditures equally for a classes of providers;
  • Expects to advance at least one of the goals and objectives in the state's quality strategy;
  • Has an evaluation plan that measures the degree to which the arrangement advances at least one of the goals and objectives in the state's quality strategy;
  • Does not condition network provider participation in the arrangement on the network provider entering into or adhering to intergovernmental transfer agreements; and
  • May not be renewed automatically.