Reimbursement

MAOs Anticipate All-In Pay Increase of 8.5%, Await Final Rule

Perhaps the biggest headline from the largely uneventful 2023 final rate notice for Medicare Advantage and Part D plans is that they will, on average, receive a slightly higher-than-anticipated pay bump next year. Also, risk scores will not be reduced by any more than the statutory minimum adjustment of 5.9%. However, MAOs are still waiting on the final version of an MA and Part D rule containing some provisions that could impact 2023 bids, and sources at press time suggested its release was imminent.

With the April 4 release of the 2023 Rate Announcement, CMS finalized most aspects of its rate proposal for next year but increased the effective growth rate from 4.75% to 4.88%, bringing the expected average change in revenue to 8.50% — one of the highest updates in recent history. CMS maintained an estimated risk score coding trend of 3.5% and a fee-for-service normalization factor — which is used to offset the trend in risk scores and keep the FFS risk score at the same average level over time — of -0.81%. CMS also said it would continue to apply an across-the-board adjustment of 5.9% to offset the effects of higher levels of coding intensity in MA relative to FFS Medicare. That coding intensity adjustment generated much discussion in comment letters on the Advance Notice.

Walgreens Faces Another ‘Usual and Customary’ Fraud Suit

Several Blue Cross and Blue Shield affiliates sued Walgreens Boots Alliance Inc. on March 15, alleging that the retail pharmacy giant fraudulently overcharged them and their members for generic drugs over the course of “more than a decade.” The suit follows years of similar allegations from multiple payers, including federal health insurance programs. One legal expert tells AIS Health, a division of MMIT, that the current litigation has the potential to expose Walgreens to years of legal risk.

In the suit, three Blues affiliates — CareFirst, Blue Cross and Blue Shield of South Carolina and Blue Cross and Blue Shield of Louisiana — allege that Walgreens systematically and fraudulently charged the health plans inflated prices for generic prescription fills. The health plans claim that their contracts with Walgreens entitled them to reimburse the pharmacy for drug fills at the lowest price that Walgreens charged for the drug in question, an arrangement called “usual and customary” pricing. The plans allege that, despite those agreements, Walgreens allowed members of its prescription drug savings club to pay less than Blues plan members for the same drug — and intentionally withheld information from the plans to avoid changing the usual and customary price.

MA Stakeholders Take Issue With Bevy of Risk-Related Proposals

From payment related to the growing number of Medicare Advantage enrollees with end-stage renal disease (ESRD) to the proposed exclusion of 2020 data from risk score assumptions, several commenters responding to the 2023 preliminary rate notice questioned various factors that will be used to determine MA plan reimbursement next year. And while AHIP and other MA stakeholders voiced strong support for CMS keeping the coding intensity adjustment at the statutory minimum for 2023, the Medicare Payment Advisory Commission (MedPAC) took the opportunity to reiterate its contention that MA organizations are overpaid and that the adjustment does not adequately account for the differences in coding between MAOs and fee-for-service (FFS) Medicare.

In the 2023 Advance Notice for MA and Part D plans, CMS said it intended to continue to apply an across-the-board adjustment of 5.9% — the statutory minimum — to offset the effects on MA risk scores of higher levels of coding intensity in MA relative to FFS. AHIP, in its March 4 letter to CMS, said it strongly supports retaining that overall risk score reduction but asked for more detail around CMS’s proposal to exclude 2020 data in its annual “FFS normalization” adjustment, its assumption that 2023 FFS risk scores would return to pre-pandemic trends, how it will incorporate 2021 utilization data into the normalization factor for 2024, and how CMS arrived at the MA risk score trend of 3.5% for 2023.

Ongoing DOJ Lawsuits Heighten MA Risk Adjustment Scrutiny

Health care fraud was the largest driver of False Claims Act recoveries last year, the Dept. of Justice (DOJ) recently reported. Of the more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government for the fiscal year ending Sept. 30, 2021, more than $5 billion related to matters involving the health care industry, including drug and medical device manufacturers, managed care providers and hospitals, the DOJ estimated. Medicare Advantage-related recoveries included a $90 million settlement with Sutter Health to resolve allegations that it submitted unsupported diagnosis codes that led to inflated payments to MA plans and the health system and a $6.3 million settlement with Kaiser Foundation Health Plan of Washington (formerly Group Health Cooperative) over similar allegations.

In Latest Report to Congress, MedPAC Maintains MA Plans Are Overpaid

Serving as a timely companion to its comment letter on the 2023 Advance Notice for Medicare Advantage and Part D plans, the Medicare Payment Advisory Commission (MedPAC) on March 15 released its 2022 March Report to the Congress: Medicare Payment Policy. The first of two annual reports containing policy recommendations, it echoed many of MedPAC’s prior points regarding MA plan reimbursement, namely that plans are overpaid for delivering services at below the cost of fee-for-service (FFS) Medicare.

MedPAC observed that MA plan bids continue to trail FFS, with the average plan bid coming in at 15% below FFS Medicare costs for 2022. When accounting for coding intensity, Medicare payments to MA plans this year will average 104% of FFS spending, like 2021, MedPAC estimated. In other words, “Medicare currently pays 4% more to MA plans for the average enrollee than it would have had that enrollee remained in traditional fee for service,” explained MedPAC Executive Director Jim Mathews, Ph.D., during a March 15 press briefing on the new report.

Calif. Fines L.A. Care $55 Million for Prior Auth, Appeals Issues

L.A. Care, the Medicaid-focused health plan owned by Los Angeles County, has been fined $55 million by the state of California for allegedly mishandling prior authorizations and coverage appeals. According to state regulators, L.A. Care — the largest nonprofit Medicaid managed care organization (MCO) in the country — mishandled more than 67,000 grievances filed by plan members, which caused sick patients to be denied proper care or wait months for urgent treatment.

Two California agencies, the Dept. of Managed Health Care (DMHC) and Dept. of Health Care Services (DHCS), launched an investigation into L.A. Care’s prior authorization and denial appeals processes after a September 2020 Los Angeles Times article revealed that extremely ill L.A. Care members faced dangerous delays when they tried to see a specialist. The combined $55 million in fines assessed by the agencies far outstrips the previous record fine in California, $10 million, for similar violations, according to the news outlet.

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Industry Trade Groups Sound Off About Proposed DIR Overhaul

The main health insurer and PBM trade groups are not fans of CMS’s proposal to reform the direct and indirect remuneration (DIR) system in Medicare Part D, judging by their recently submitted comment letters and interpretation of a recently published actuarial analysis.

The policy in question is part of the 2023 Medicare Advantage and Part D proposed rule, which CMS issued in January. Among a slew of other provisions, the agency is seeking to require part D plan sponsors to apply all price concessions that they receive from network pharmacies at the point of sale. Smaller pharmacies have long complained that the current system — in which Part D plan sponsors can recoup price concessions (i.e., DIR) from pharmacies for dispensed drugs if the pharmacies do not meet certain metrics — makes it difficult if not impossible to do business.

Pricier Hospitals Can Mean Higher Quality, With Big Caveat

With the cost of hospital-based services rising ever higher — and sometimes varying dramatically between different institutions — the concept of regulating prices has become a perennial political issue. However, a new study suggests that certain markets are much better suited for price regulation than others: namely, those where there is little hospital competition.

In those concentrated markets, higher hospital prices do not appear to lead to lower patient mortality, meaning cost isn’t correlated with quality, according to a new working paper published by the National Bureau of Economic Research (NBER). But in hospitals in less concentrated markets, pricier hospitals are indeed associated with increased health care quality — and as a result, patients are 47% less likely to die than if they attended lower-priced facilities.

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Patients Love Telehealth, but Could Doctors Dislike It?

Virtual care has become a mature industry during the COVID-19 pandemic, with insurers and investors pouring money into telehealth startups. But the telehealth boom has changed how practitioners deliver care in ways that they don’t necessarily like, according to a new survey from McKinsey & Co. Though telehealth is here to stay, much remains unsettled about the way physicians use virtual care tools — and how they are paid to do so.

Nearly every physician now uses telehealth, according to McKinsey, and the change happened fast: 83% of physicians that the consulting firm surveyed in 2021 offered virtual services, versus 13% in 2019. The survey also found that by May 2021, 88% of consumers had used virtual care since the start of the pandemic.

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Revamped Direct Contracting Model Still Holds Promise for MAOs

After progressive Democratic lawmakers urged CMS to shut down a fee-for-service Medicare model aimed at fostering more value-based care arrangements, the agency’s Center for Medicare and Medicaid Innovation (CMMI) on Feb. 24 unveiled a revamped version that it said more closely aligns with its “vision of creating a health system that achieves equitable outcomes through high quality, affordable, person-centered care.” While the three types of Accountable Care Organizations (ACOs) that may participate starting next year appear to largely mirror the Direct Contracting Entities (DCEs) of the current Global and Professional Direct Contracting (GPDC) Model, CMS aims to ensure that participants in the new model operate as provider-led organizations, have a proven track record of providing care in underserved communities and will not be shifting any enrollees into Medicare Advantage — a key concern expressed by lawmakers and advocates.