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7 Things to Know About Medicaid Managed Care Contracting Today

At more than 90 million people, Medicaid sits near the top of the list of the United States’ largest insurers. It covers not just low-income families, but also pregnant women, disabled people, children with complex health situations, and older adults. It delivers services through both fee-for-service and capitated managed care systems. Most states use the capitation model in the delivery of some level of their Medicaid benefits – as of 2021, around 72% of Medicaid members were enrolled in comprehensive managed care. 

The details of this delivery are covered in payer contract negotiations and a contract between the Medicaid agency and the managed care organization (MCO) [1]. While these contracts last at least three to five years, changes should be tracked carefully to ensure revenue cycle health. Here are some of the most important things to be aware of in managed care contracting and payer provider contract management today [2]. 

1. Risk-Based MCOs Make Up Most Medicaid Spending

Of the $804 billion in federal spending on Medicaid services, around 52% was made to comprehensive MCOs. Proportions vary by state, but three out of four MCO states have been found to funnel at least 40% of their total Medicaid funding to MCO payments. State variation is a result of factors including:

  • Medicaid population health profile
  • Whether long-term supports and services are included in MCO contracts
  • Proportion of the state Medicaid population that’s enrolled under MCOs
  • Whether high-cost/high-risk beneficiaries are included in MCO enrollment

It’s likely that the share of funds going to MCOs could increase, especially as states expand Medicaid to cover higher-cost and higher need beneficiaries, as well as long-term services and adults who fall under ACA coverage. 

2. Social Determinants Are a Priority in Payor Contracting

Many MCOs are working to address social determinants of health (SDoH) in an effort to reduce health disparities and improve health equity. To start 2023, CMS launched guidance on “in lieu of” services (ILOS) under the Medicaid program to address unmet health-related social needs and reduce health disparities. Health leaders responsible for payor contracting should keep up with this evolving trend. 

3. Capitation Rates Have to Be Actuarially Sound

Federal law requires that the payments made to Medicaid MCOs must be actually sound – meaning that the capitation rates “are projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the managed care plan for the time period and the population covered under the terms of the contract.”

The COVID-19 pandemic opened the door to increased enrollment along with drops in utilization. Because of this, CMS gave states the option to modify their managed care contracting agreements. Many states implemented risk corridors that allowed for recoupment of funds. Over three out of every four of the states that implemented a risk corridor reported recoupments for payments that were made between 2020 and 2022 or that they expected future recoupments. Since the unwinding of Medicaid, these plans and states face the chance of more fiscal uncertainty, increasing the likelihood they’ll engage in further risk mitigation behaviors around payor contracting. 

4. States Actively Make Decisions About the Services They Carve In and Out of MCO Contracting Agreements

While MCOs largely feature comprehensive services for their beneficiaries, they also sometimes carve out specific services from MCO contracts to limited benefit plans or fee-for-service systems. These often include services like: 

But these carve outs vary. Most states that engage in managed care contracting with an MCO report that pharmacy benefits are carved into managed care, while eight report they are carved out of MCO contracts (reported as of July 2023). 

5. MCO Enrollment Is Concentrated Within Five Firms

In total, states contract with 287 Medicaid MCOs. These are a mix of government, private for-profit and private non-profit plans. Of these firms, five made up 50% of all enrollment to Medicaid MCOs. They are:

  • Centene
  • Anthem (“Elevance” as of 2022)
  • Aetna/CVS
  • UnitedHealth Group
  • Molina

These are all publicly traded organizations that fall under the Fortune 500 and four of the companies are ranked as Fortune 100. Even through the unwinding, the three firms, UnitedHealth, Molina, and Centene have reported growth in Medicaid revenue. 

6. CMS Has Strengthened Access Standards

In early 2024, CMS finalized rules with the goal of strengthening access standards along with state enforcement and monitoring. Prior to this release, states had significant flexibility in their ability to define network adequacy standards, as well as in their determination of how MCO compliance and access was monitored and enforced. This new rule contained a few provisions worth highlighting.

 

  • It established national maximum wait time standards around routine appointments (including OB/Gyn services and outpatient substance use disorder and outpatient mental health). 
  • States must not implement remedy plans. These are required to address areas where managed care plans need to address areas of improvement to support better access. 
  • States are now required to conduct “secret shopper” surveys in order to validate the accuracy of provider directories and compliance with wait time standards. These surveys must be independent and will go into effect in 2028. 
  • States now also are required to submit payment analysis annually. This analysis compares certain managed care provider rates against Medicare with the goal of illustrating how payment rights could be impacting access. These go into effect in 2026.

7. Financial Incentives Are Tied to Quality Measures

States across the country use quality metrics in monitoring their programs. This includes capitation withholds, value-based state-directed payments to quality measures, and performance bonuses and penalties. More than three out of every four MCO states have reported that they use at least one incentive to promote improved quality of care. As things stand, performance information at the plan-level hasn’t often been publicly available, a blow to transparency.  

The coming years in healthcare payer contract negotiations promise to be full of changes in managed care contracting. To get support from an experienced vendor that can help you navigate the growing complexities of healthcare payer contract negotiation, start here. 

 

References
[1] H. Maniates, “Why did they do it that way? Understanding managed care,” NAMD, 22 January 2024. Available: https://medicaiddirectors.org/resource/understanding-managed-care/.
[2] E. Hinton and J. Raphael, “10 Things to Know About Medicaid Managed Care,” KFF, 1 May 2024. Available: https://www.kff.org/medicaid/issue-brief/10-things-to-know-about-medicaid-managed-care/.

How the No Surprises Act Has Impacted Providers and Physician Billing Services
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How the No Surprises Act Has Impacted Providers and Physician Billing Services

The No Surprises Act (NSA) brought with it large amounts of speculation on its impact on physician billing services, and now, in 2024, it’s been in play long enough to finally understand how it’s affecting providers and how they’re responding. 

Two years in, the industry is seeing results that anyone responsible for physician coding and billing services should consider – and information they should evaluate as they consider their relationship with physician billing companies as a potential solution. 

Looking Back at the No Surprises Act

The No Surprises Act went into effect on January 1, 2022, shaking up physician billing services around the country. It was intended to address “surprise medical bills” – the issue of insured consumers receiving care with an out-of-network provider they didn’t choose. They’re then shouldered with a bill they weren’t expecting and didn’t authorize. This issue happens in 20% of emergency department visits and around 9-16% of in-network hospitalizations in relation to services from providers like an anesthesiologist. Since the bill took effect, there have been developments around the arbitration process, dispute resolution, and the impact on patients. 

When the act first took hold, the American Medical Association stepped in to help physicians understand their rights when caring for patients who obtained out-of-network services without their knowledge [1]. It put together a toolkit that focused on three operational challenges that physicians would need to address. 

  • Notice-and-consent requirements which physicians are now required to make publicly available for all patients enrolled in commercial health coverage
  • Rules around emergency services and post-stabilization for hospitals
  • Their obligation to provide good faith estimates for their uninsured and self-pay patients 

Impact of the No Surprises Act on Physicians

While consumers have generally celebrated the outcomes of the NSA, many are realizing that providers are now experiencing financial hardships and other burdens. Out of all providers, physicians’ groups and air medical transportation companies have shouldered much of the burden in their work to provide emergency services. This is reflected in the fact that bankruptcies in healthcare jumped 84% between 2021 and 2022, with many in the industry directly blaming the NSA along with other factors like payer contracts and higher costs of debts [2]. By November 2023, 30 public companies had pointed to the NSA as a risk to their financial performance [3]. 

Today, providers are open about emerging issues that are affecting them and their efforts in physician coding.

Claims Are Backlogged

One of the downstream effects of the NSA is the impact of the dispute and settlement process. When the law was created, it included requirements to address negotiations and settlements between providers and payers to handle services rendered outside contractual agreements. This falls under the “open negotiation” process, meaning that if the parties don’t come to an agreement within 30 business days of open negotiation, the decision then falls to the Independent Dispute Resolution (IDR) process which involves submission to an independent third party. The case can vary depending on the insurance plan type, sometimes following federal rules and sometimes falling under a process determined by the state. 

The result has been increased complexity and slower processing in the healthcare revenue cycle. The U.S. Government Accountability Office (GAO) reports that while federal departments expected around 22,000 disputes through the IDR process in 2022, over 490,000 were submitted between April 2022 and June 2023. As of June 2023, a full 61% of the disputes were unresolved [4]. 

Increased Resource Use of Physician Billing Services

Of course, these new requirements don’t exist in a vacuum. Physicians have had to employ additional resources to meet the requirements of the act. Providers are required to inform every patient about protections against balance billing and have an obligation to provide good faith estimates for their uninsured and self-pay patients. 

All this is happening in the midst of a healthcare revenue cycle staffing shortage that is affecting physician coding and billing across the board. According to Becker’s Hospital Review, 32% of revenue cycle leaders report challenges with hiring and training staff in 2024 [5]. This issue directly impacts provider revenue cycle outcomes, since shortages contribute to already growing denial rates. 

Processes That Are More Complex

Complexity is an ongoing concern in physician medical billing. Offices face falling reimbursement rates, shifting payer relationships, and increasing costs. In addition, many are inundated with pressures to use data to make increasingly productive decisions. The NSA only increased many of these demands. 

Leaders in charge of physician billing services have to adapt their revenue cycle to document and address low payments from payers they’re not contracted with. They also have to augment their staff with professionals who understand physician billing services and have the physician revenue cycle management and contract management skills that align with NSA processes. 

In response to pressures from legislation like the NSA, many healthcare leaders are looking into the support of physician billing companies. These partners can help improve revenue cycle results, increase efficiency, and manage the future impact of the act. To explore some of your options, contact us today. 

 

References
[1] A. Robeznieks, “The No Surprises Act is in effect. What physicians need to know.,” American Medical Association, 14 January 2022. Available: https://www.ama-assn.org/health-care-advocacy/access-care/no-surprises-act-effect-what-physicians-need-know.
[2] F. J. Thomas, “84% Increase of Healthcare Bankruptcies Due to No Surprises Act,” WorkersCompensation.com, LLC, 8 October 2023. Available: https://www.workerscompensation.com/daily-headlines/84-increase-of-healthcare-bankruptcies-due-to-no-surprises-act/.
[3] S. Biswas and B. Yerak, “Surprise Medical Billing Law Heaps Pressure on Healthcare Providers,” Dow Jones & Company, Inc, 28 November 2023. Available: https://www.wsj.com/articles/surprise-medical-billing-law-heaps-pressure-on-healthcare-providers-f9583485.
[4] U.S. Government Accountability Office, “Roll out of Independent Dispute Resolution Process for Out-Of-Network Claims Has Been Challenging,” 12 December 2023. Available: https://www.gao.gov/products/gao-24-106335.
[5] A. Cass, “The biggest challenges facing revenue cycle departments in 2024,” Beckers Hospital Review, 24 January 2024. Available: https://www.beckershospitalreview.com/finance/the-biggest-challenges-facing-revenue-cycle-departments-in-2024.html.

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February 2024 Newsletter

We’ve assembled the latest news for healthcare revenue cycle leaders to help you stay on top of industry challenges and adapt your revenue cycle management services. 

Participation in ACO Initiatives Growing 
CMS has announced that it is seeing increased participation in the accountable care organization (ACO) initiatives of 2024. It believes that this will increase the quality of care that people with Medicare receive. [1]

CMS Announces new ICD-10-PCS Codes
CMS has announced a plan to implement 41 new procedure codes, effective April 1, 2024. The Grouper software package is effective for discharges on or after April 1, 2024, something to note for anyone concerned about medical coding in the USA. [2]

Hospitals Call for More Insight into Payer Negotiation Calculations
Hospital leaders have asked the Biden-Harris administration to facilitate more insight into payer behavior around calculation of starting points for negotiations and into payers who delay payouts post dispute. These changes, a potential impact on hospital coding, were a result of implementation complaints from across the industry, as well as successful legal pushback from provider groups. [3]

CMS Proposes Accrediting Organization Rule Updates
Recent complaints have sparked a review of Accrediting Organizations (AOs). As a result, CMS is stepping in to improve their AO performance review process. AOs are required to meet or exceed CMS health and safety standards in their responsibility to maintain the quality of care that patients receive. Accreditation is required for medical billing to Medicare and Medicaid. [4]

Quarterly Update to HCPCS Codes for SNFs
CMS has published Medicare Claims Processing Transmittal 12449, which covers HCPCS medical coding under the SNF PPS. These will be effective April 1, 2024. Changes will be used to revise CWF edits and thereby allow MACs to make payments that align with SNF consolidated billing policy. [4]

Final Evaluation Report for Next Generation Accountable Care Organization Model Now Available
As of January 11, 2024, CMS has posted the final evaluation report for its Next Generation ACO Model, building on the Pioneer ACO model and Medicare Shared Savings Program. The interactive map allows visitors interested in physician medical billing to explore current participants. [5]

HHS Announces Support to Meet EMTALA Obligations
HHS has announced that it is working with CMS to launch actions to educate the public about rights to emergency medical care, as well as supporting hospitals in meeting their obligations under the Emergency Medical Treatment and Labor Act (EMTALA). The plan was developed in response to increasing inquiries from patients and providers and could impact hospital billing. [6]

Payment Updates for 2025 Medicare Advantage and Part D Released
CMS has released CY 2025 Advance Notice for the Medicare Advantage and Medicare Part D Prescription Drug programs as a complement to a proposed rule released in 2023. If finalized, it has the potential to strengthen protections for patients who rely on Medicare Advantage and Medicare Part D drug coverage and could impact medical coding and billing. [7]

Improving Prior Auth Through Expanded Information Access
CMS has finalized the CMS Interoperability and Prior Authorization Final Rule (CMS-0057-F), which sets requirements for Medicare Advantage organizations, Medicaid and the Children’s Health Insurance Program fee-for-service programs, Medicaid managed care plans, CHIP managed care entities, and issuers of Qualified Health Plans offered on the Federally-Facilitated Exchanges. HHS Secretary Xavier Becerra expressed concerns that too many Americans are left waiting on insurance companies for approval for a procedure, an issue that is also connected to medical billing denials. [8]

Hospital at Home Data Fact Sheet Released
CMS has released public data as part of the Acute Hospital Care at Home Initiative as of January 16, 2024. This initiative was launched in response to the burdens hospitals took on as a result of the spread of COVID-19, and could possibly impact home health care coding. [9]

 

References
[1] CMS, “Participation Continues to Grow in CMS’ Accountable Care Organization Initiatives in 2024,” 29 January 2024. Available: https://www.cms.gov/newsroom/press-releases/participation-continues-grow-cms-accountable-care-organization-initiatives-2024.
[2] CMS, “ICD-10 MS-DRGs Version 41.1 Effective April 01, 2024,” 1 April 2024.
[3] D. Muoio, “Proposed out-of-network billing overhaul needs stronger payer oversight, hospitals say,” 8 February 2024. Available: https://www.fiercehealthcare.com/regulatory/proposed-out-network-billing-overhaul-needs-stronger-payer-oversight-hospitals-say.
[4] CMS, “Accrediting Organization Proposed Rule Fact Sheet,” 8 February 2024. Available: https://www.cms.gov/newsroom/fact-sheets/accrediting-organization-proposed-rule-fact-sheet.
[5] CMS, “Pub 100-04 Medicare Claims Processing (Transmittal 12449),” 11 January 2024. Available: https://www.cms.gov/files/document/r12449cp.pdf.
[6] CMS, “Next Generation ACO Model,” January 2024. Available: https://www.cms.gov/priorities/innovation/innovation-models/next-generation-aco-model.
[7] CMS, “CMS Announces New Actions to Help Hospitals Meet Obligations under EMTALA,” 22 January 2024. Available: https://www.cms.gov/newsroom/press-releases/cms-announces-new-actions-help-hospitals-meet-obligations-under-emtala.
[8] CMS, “CMS Releases Proposed Payment Updates for 2025 Medicare Advantage and Part D Programs,” 31 January 2024. Available: https://www.cms.gov/newsroom/press-releases/cms-releases-proposed-payment-updates-2025-medicare-advantage-and-part-d-programs.
[9] CMS, “CMS Finalizes Rule to Expand Access to Health Information and Improve the Prior Authorization Process,” 17 January 2024. Available: https://www.cms.gov/newsroom/press-releases/cms-finalizes-rule-expand-access-health-information-and-improve-prior-authorization-process.
[10] CMS, “Acute Hospital Care at Home Data Release Fact Sheet,” 16 January 2024. Available: https://www.cms.gov/newsroom/fact-sheets/acute-hospital-care-home-data-release-fact-sheet.

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