Medicare Payment and Reimbursement

News Briefs: Medicare’s proposed FY24 update to inpatient payments falls short, hospitals say

As published in the May 2023 issue of hfm, this roundup presents the top news stories for healthcare finance professionals.

April 28, 2023 9:01 am

Hospitals are less than pleased with Medicare’s proposed FY24 payment increase for inpatient care.

In regulations released April 10, the net inpatient payment update is 2.8% after factoring in a mandatory productivity adjustment of -0.2 percentage points. As usual, the update would be reduced for any hospital that does not fulfill quality-reporting requirements or qualify as a meaningful user of electronic health records.

The market basket update of 3% was derived from input data as of 2022 Q3. Assuming more recent data becomes available, the update can be adjusted in the final rule.

CMS projects the update will be 3.3% for rural hospitals after factoring in geographic reclassifications.

In addition, hospitals in some regions will fare better than those in others based largely on budget-neutral updates to the wage index and payment adjustments stemming from the rural wage floor (which ensures that an urban hospital’s wage index is not lower than the wage index for rural hospitals in the same state).

Among urban hospitals, for example, those in the Pacific region are in line for a 6.4% update, compared with 0.1% for those in the Mountain region and -0.2% for those in the New England region.

The overall update is “woefully inadequate,” Ashley Thompson, senior vice president for public policy analysis and development with the American Hospital Association, said in a written statement that highlighted “the near-decades-high inflation and increased costs for labor, equipment, drugs and supplies.”

The comment period for the rule runs through June 9 at, with the final draft to be issued in August.

CMS and others take steps to improve prior authorization in MA and beyond

Recent developments point to an industrywide effort to ease the burden of prior authorization.

Most notably, CMS on April 5 finalized a rule that includes provisions designed to improve prior authorization in Medicare Advantage (MA) starting with the 2024 plan year.

The rule addresses prior authorization in a few ways, including by requiring MA health plans to comply with national and local coverage determinations that are applicable in Medicare fee-for-service (FFS). MA plans can apply internal coverage criteria in scenarios where no Medicare FFS guidelines are available, but they must publicly post a summary of the evidence that went into the decision.

With the new regulations looming, UnitedHealthcare, the nation’s largest health insurer, is modifying its prior authorization policies. The company announced March 29 that it would remove prior authorization from nearly 20% of nonurgent items and services starting in Q3. The changes will apply to the company’s commercial, MA and Medicaid managed care members.

In addition, a Gold Card Program will allow participating providers to avoid prior authorization for most procedures starting in 2024.

“We need to continue to make sure the system works better for everyone, and we will continue to evaluate prior authorization codes and look for opportunities to limit or remove them while improving our systems and infrastructure,” Anne Docimo, MD, chief medical officer with UnitedHealthcare, said in a written statement. “We hope other health plans will make similar changes.”

Medicare trustees project 3 additional years of solvency for Part A

Medicare’s assets should last a little longer than previously anticipated.

The 2023 annual report of the Medicare Boards of Trustees projects that the Hospital Insurance (HI) trust fund, which subsidizes Part A services, will be insolvent in 2031. That’s three years later than the estimate in last year’s report.

The change stems from lower costs and higher revenues in 2022, relative to expectations.  Nonetheless, the trustees estimate that expenses will exceed revenue starting in 2025, leading to HI fund depletion six years later if the underlying trends aren’t addressed.

If the fund becomes insolvent, Medicare spending would need to be slashed to match revenues. The Committee for a Responsible Federal Budget puts the required reduction in spending at 11% for 2031.

“The result would likely be a disruption in health services,” the organization stated in an analysis.

Court decision means cost sharing could be reinstated for some preventive healthcare services

Comprehensive coverage of some preventive care services could be jeopardized by a recent court ruling.

Since its passage, the Affordable Care Act had required health plans to cover the full cost of services that received an “A” or “B” rating from the U.S. Preventive Services Task Force. Judge Reed O’Connor of the Northern Texas federal court district ended that requirement with a March 30 decision.

There are numerous such services, among them colonoscopies; screenings for diabetes, high cholesterol and hypertension; and tobacco cessation counseling. Other preventive services are not affected because the ruling is inapplicable to services that have been approved by the Health Resources and Services Administration or the CDC’s Advisory Committee on Immunization Practices.

The short-term impact of the decision, which is under appeal, may be muted.

“Although the ruling is effective immediately, in many cases, health plan contracts are in place for the calendar year, and employers do not typically make changes to coverage or cost midyear,” analysts with the Kaiser Family Foundation wrote after the ruling.

Latest guidance for No Surprises Act arbitration looks like an improvement for providers

Responding to a recent court ruling, the U.S. Department of Health and Human Services (HHS) has updated the application of criteria for deciding No Surprises Act independent dispute resolution (IDR) cases.

Certified IDR entities (i.e., arbitrators) received guidance in March instructing them to consider multiple factors more directly when deciding on an out-of-network payment amount. Relative to past guidance, including a final rule that took effect in October 2022, the instructions give less weight to the qualifying payment amount as a factor in arbitration cases.

New language states that arbitrators “must consider all information submitted” by either party within the established categories of criteria when determining which side’s offer is appropriate. This is the first guidance to clarify that additional factors must be considered if submitted.

Earlier this year, the Texas Medical Association’s second court victory in as many years left HHS and the Departments of Labor and Treasury with little recourse but to rewrite the regulations to mirror the No Surprises Act legislative text more closely.


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