CMS Could Soon Crack Down on States’ Medicaid Payment-Boosting Programs for Nursing Homes

In multiple states, supplemental programs help skilled nursing facilities offset the low reimbursement for their services from Medicaid.

But the federal government is starting to take a closer look at the programs, with an eye to increasing transparency, Andrea Maresca, senior vice president at the consulting firm Thorn Run Partners, said during a presentation on Medicaid issues at the American Health Care Association convention and expo in Orlando, Fla., earlier this month.

“These types of programs have come under a fair amount of scrutiny over the last decade or more,” she said.


Specifically, the Centers for Medicare & Medicaid Services (CMS) is concerned with the way supplemental payment programs — the non-hospital, non-Medicaid disproportionate share hospital payments used to pay long-term care providers when base rates are considered too low – have evolved, she explained.

CMS has specific issues surrounding oversight of the programs — including concerns that have come from several governmental agencies other than CMS, Maresca added. The problems essentially relate to the way the supplemental payment programs have evolved over time, and the fact that multiple government entities believe CMS is unable to effectively conduct oversight of the payments to providers.

“All of this is driving work in the agency to come up with a regulation that will put more parameters about how supplemental payment programs would work in the future,” Maresca said. “The agency is also concerned about the lack of a clear link between how payments are made to providers, and whether these are made based on services delivered or somehow tied to quality and outcomes.”


But at this point in time, the agency can’t effectively evaluate those factors with the information available, making the issue a high priority for CMS, “folks at the department level,” and the Office of Management and Budget, who want to see regulations addressing the gaps, she added.

The impact is likely to vary by state, so SNFs in states that have significant supplemental payment programs might see “significant change and negotiation with the state in the years ahead,” she said.

Supplemental payment programs exist in multiple states as a means for SNFs to bolster low Medicaid rates. States with particularly low reimbursement rates have implemented ways of transferring funds via inter-governmental transfer, with about 10 total making some such move, Eddie Parades, senior vice president of Lewisville, Texas-based StoneGate Senior Living, told Skilled Nursing News in April.

Indiana and Texas are two such states, though Texas’s program has undergone several shifts since it was first conceived. Under Texas’s Quality Incentive Payment Program (QIPP), providers can earn Medicaid payment increases by launching quality-improvement initiatives. In Indiana, under that state’s upper payment limit program, ownership of nursing homes is transferred to local hospitals, to take advantage of a difference in reimbursement rates for acute-owned facilities — while the SNF operator continues managing the facilities.

And Oklahoma, which had several cities buy up nursing homes as part of a bid to break into the upper payment limit program, was rejected by CMS because officials had issues with the way the ownership of the SNFs was transferred.

“The public-private partnerships created by the cities’ contracts with the private nursing home operators appear designed to allow the participants to qualify for Intergovernmental Transfers (lGTs), and split the resulting federal supplement payments without any significant net expenditures by the state or cities,” CMS Deputy Administrator and Director Mary Mayhew wrote in the January letter.

The Oklahoma cities’ move wasn’t the only one to cause concern at CMS, but it was a factor in the focus on the programs, Maresca told SNN in an interview after the convention.

“The way that situation played out is one of the reasons CMS feels like it needs to update its regulations, to have the standing to push back on states,” she said.

The agency is still working on the regulation, and it’s not likely to completely eliminate supplemental payment programs, Maresca said. But the “rules of the road” might be different: Some of the changes that could affect providers would have to do with the characteristics of ownership and the ways in which the provider receives payment.

“The details and definitions are going to be so important in this regulation,” she said in her presentation. “If and when it comes out, as we expect it to, we expect there to be a number of definitions around what is a base payment, what is a supplemental payment, what is the definition of ‘provider’ in this context.”

The rule is currently in the final stages of the review process at the federal level, and it could be released soon, Maresca said at the convention. CMS has signaled that it would like to release it before the national conference of the National Association of Medicaid Directors, scheduled for November 11 to 13, she said.

Though it’s hard to predict the impact, given that the regulation hasn’t yet come out, there are some indicators of where CMS will be focused, Maresca told SNN. One key area will be transparency on how funds have been flowing — in terms of who is making payment, who is receiving payment, and what types of services the payments fund. Getting a handle on the amounts, and how the non-federal share of funds is generated appears to be another major issue for the agency.

“That doesn’t mean it’s going to result in stopping payments from flowing,” Maresca noted to SNN. “But any state with a supplemental payment program is going to have do something, and providers will have to do something, to comply.”

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