CMS Announces Proposed 2024 IPPS Rulemaking that Impacts Physician-Owned Hospitals

Centers for Medicare and Medicaid Services (“CMS”) recently announced proposed rulemaking regarding changes to the 2024 Inpatient Prospective Payment System (“IPPS”). The proposed rule, 88 FR 26658, would institute a wide variety of modifications for facilities under IPPS. Most of the attention of this proposed rule has been focused on physician-owned hospitals. The proposed rule would require such hospitals to satisfy all of the requirements of either the whole hospital exception or the rural provider exception to the Stark Law to qualify for Medicare payments for services referred by a physician owner or investor. The proposed rule further specifies that physician-owned hospitals may not increase the aggregate number of operating rooms, procedure rooms and beds above the level it was licensed for as of March 23, 2010, unless specifically granted an exception by CMS.

The comment period for the 2024 IPPS proposed rulemaking closes on June 9, 2023. A fact sheet may be accessed here.

CMS Announces Successful Payment Models

The Center for Medicaid and Medicare Innovation (“CMS Innovation Center”) released its biennial 2022 Report to Congress, which details progress on various savings programs. CMS Innovation Center was established to test innovative payment and service delivery models to reduce program costs while preserving or enhancing quality of care to individuals who receive benefits from Medicare, Medicaid, or Children’s Health Insurance Programs. Section 1115A(g) of the Social Security Act requires the Secretary of Health and Human Services to submit to Congress a report on the CMS Innovation Center’s activities under Section 1115A at least once every other year beginning in 2012. The 2022 Report is the 6th biennial report submitted by CMS to Congress.

During the period between October 1, 2020 and September 30, 2022, the CMS Innovation Center tested, announced or issued proposed rulemaking notices for 32 payment models. During that time period, CMS estimates that more than 41.5 million Medicare and Medicaid beneficiaries and individuals with private insurance in multi-payer model tests have received care from, or will soon receive care from, one of the more than 314,000 healthcare providers and/or plans participating in the CMS Innovation Center payment models. Since the CMS Innovation Center was established in 2010 and in the last decade, the CMS Innovation Center has launched over 50 model tests, with about 33 models operational during the two years covered by the 2022 Report.

According to the 2022 Report, six of the model tests have delivered statistically significant savings, net of any incentive or operational payments:

    1. Pioneer ACO Model;
    2. ACO Investment Model;
    3. Medicare Prior Authorization Model: Repetitive Scheduled Non-Emergent Ambulance Transport;
    4. Home Health Value-Based Purchasing Model;
    5. Maryland All-Payer Model; and
    6. Medicare Care Choices Model.

Further, two models showed significant improvements in care quality: the Home Health Value-Based Purchasing Model and the Medicare Care Choices Model.

The 2022 Report also showed that the following four models led to gross (but not net) savings:

    1. Comprehensive Care for Joint Replacement Model;
    2. Comprehensive End-Stage Renal Disease Care Model;
    3. Oncology Care Model; and
    4. Million Hearts: Cardiovascular Disease Risk Reduction Model.

These four models have been or will be phased out or replaced with enhanced models. For example, the Oncology Care Model ended in June 2022 but is being replaced by the Enhancing Oncology Model, which begins in July 2023. The full 2022 Report can be accessed here.

Insulin Price Cap

A price cap on copays for insulin for Medicare enrollees took effect January 1, 2023. Under the Inflation Reduction Act (“IRA”), the price of insulin copays is capped at $35/month for each insulin prescription that is covered by a Medicare Part D plan. For Medicare enrollees who use an insulin pump, which is covered by Medicare Part B, a $35 copay cap will begin on July 1, 2023. According to CMS, about 3.3 million Medicare Part D enrollees used insulin in 2020.

Just as important, the IRA allows the federal government, starting in 2026, to negotiate prices for some drugs covered under Medicare Part B and Part D. In addition, the IRA requires drug manufacturers to pay rebates to Medicare if prices rise faster than inflation for drugs used by Medicare beneficiaries.

The full text of the IRA can be found here and a PDF version here.