The policy pleased some providers by eliminating a controversial 25% policy for long-term care hospitals.
The Centers for Medicare & Medicaid Services finalized a collection of payment rules Thursday for fiscal year 2019, including several policy changes related to the Trump administration's regulatory-reduction efforts.
The final Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital (LTCH) Prospective Payment System rule offers an average payment increase of 3% to acute care hospitals, and it updates the federal payment rate by 1.35% for LTCH recipients, according to the CMS announcement.
"There are a number of policies CMS finalized today that will reduce regulatory burden and help ensure America's hospitals and health systems can continue to provide high-quality, efficient care for the patients and communities they serve," American Hospital Association Executive Vice President Tom Nickels said in a statement Thursday.
The final rules officially eliminate a policy that had reduced reimbursement for long-term care hospitals in which more than 25% of the patient population came from a single general acute care hospital. Nickels said the AHA welcomes the move but opposes the reduction in payments made to offset the change.
The final rules also eliminate certain reporting requirements deemed to be unnecessary, keeping with the administration's deregulatory push.
"We’ve listened to patients and their doctors who urged us to remove the obstacles getting in the way of quality care and positive health outcomes," CMS Administrator Seema Verma said.
While commending CMS for removing the lower-value quality measures, Premier Senior Vice President of Public Affairs Blair Childs said his organization is "very disappointed" that CMS dropped its plan to do away with redundant penalties for hospital-acquired conditions (HAC).
"We have long felt that all of the five hospital quality and payment programs overseen by CMS need to be mutually exclusive to ensure that hospitals are not inappropriately hit with double or triple penalties for the same event," Childs said in a statement.
"In leaving the HAC penalties the same, CMS missed an opportunity to harmonize measurement around indicators that truly matter, and avoid duplication across programs."
California formally urged the DOJ to block one blockbuster PBM deal, and a powerful investor came out against the other.
Two planned mergers involving some of the largest pharmacy benefit managers in the country hit separate snags Wednesday that could derail the potentially industry-shifting proposals.
California Insurance Commissioner Dave Jones formally urged the U.S. Department of Justice to block CVS Health's planned $69 billion purchase of Aetna on anti-competitive grounds, and news broke that activist investor Carl Icahn plans to vote against Cigna's planned $54 billion purchase of Express Scripts.
The two separate developments threw cold water on the closely watched deals, which observers had said could dramatically change the healthcare industry.
California's Concerns
Although the verticality of the CVS-Aetna acquisition prompted some analysts to say the deal would sail through the regulatory review process without much trouble, Jones wrote in a letter Wednesday that the combination of an insurer with a PBM and retail pharmacy chain could still raise anti-competitive concerns.
When a seller owns its own supplier, it may be tempted to make it more difficult for other sellers to work with that supplier, Jones wrote, adding that the problem is especially pronounced in a case involving a market player as powerful as CVS Health.
News reports last month indicated the DOJ would not challenge the CVS-Aetna merger, but how the Trump administration will ultimately respond remains to be seen. One thing that's clear is that Jones has successfully blocked these sorts of deals in the past.
Jones reviewed three proposed health insurance mergers in 2016 alone, concluding that two of them were anti-competitive. He asked the DOJ to block the proposed Anthem-Cigna and Aetna-Humana mergers, and federal judges obliged.
That flurry of activity was a prologue of sorts to the proposed PBM deals on the table today.
Icahn's Concerns
A report by The Wall Street Journal on Wednesday suggested the proposed Cigna–Express Scripts deal may be on shaky footing as well.
Icahn, a hedge fund manager and one of the wealthiest people in America, plans to vote against the merger, believing $96.03 per share is too-high-a-price for Cigna to pay for Express Scripts, as the Journal reported.
Although the billionaire owns less than 5% of Cigna's outstanding shares, he reportedly may seek to persuade fellow shareholders to join him in opposing the deal. Icahn has cited fears of increased competition from Amazon in the healthcare industry, the Journal reported.
A state appellate court cited the terms of a medical malpractice settlement the hospital had signed with the boy's parents.
NewYork-Presbyterian Hospital must return nearly $4.9 million in Medicaid funding it received for one child's inpatient stay that spanned six years and four months at the facility, a state appellate court ruled Thursday.
The five-judge panel's decision was based on the terms of a medical malpractice settlement agreement the hospital reached in 2008 with the boy's parents.
In the agreement, NewYork-Presbyterian had stipulated it "will assume full responsibility for any monies … ultimately found to be due to Medicaid" in connection with the child's lengthy hospitalization. That means it must return nearly $4.9 million to the New York City Department of Social Services (DSS), which is the relevant Medicaid administrator, the appellate judges determined.
The decision overruled a lower court's 2016 decision to the contrary.
What made this case so tricky was the fact that two different agencies are tasked with issuing payments and collecting recoupments under Medicaid: After the New York State Department of Health (DOH) issued payment, the DSS called for the funds to be recouped.
Thursday's decision determined DSS was "an intended third-party beneficiary" of the hospital's settlement agreement.
Here's an overview of key events pertinent to this case, as recounted in court records:
November 8, 2003: An 18-month-old boy was hospitalized at NewYork-Presbyterian Hospital with a congenital condition. Later that month, the boy suffered injuries that allegedly resulted from negligence.
2004: A medical malpractice lawsuit was filed while the boy remained hospitalized.
2008: The hospital signed a settlement agreement that included $6 million for the child's post-discharge care, among other provisions.
March 20, 2010: The child died in the hospital without ever having been discharged.
November 2010: The hospital billed DOH for the costs incurred in caring for the child.
2012: "After substantial downward adjustment of the invoiced sums," DOH paid nearly $4.9 million to the hospital. The payment then drew scrutiny from DSS.
2014 & 2015: DSS claims against trustees of the deceased child's estate were dismissed.
September 2016: The final DSS claim, against the hospital, was dismissed. That decision was overturned by Thursday's appellate ruling.
A spokesperson for NewYork-Presbyterian Hospital did not respond to requests for comment from HealthLeaders Media.
A final rule expands access to non-ACA-compliant plans, which the Trump administration has touted as cheaper alternatives to full coverage.
Beginning this fall, consumers will be allowed to buy short-term limited-duration health plans renewable for up to three years, the Trump administration announced Wednesday morning with a newly finalized rule.
The policy change expands access to lower-grade coverage options the Obama administration had restricted to three months, without a renewal option, in light of the Affordable Care Act. The looser rules finalized Wednesday allow terms up to 12 months, renewable up to 36 months.
While critics contend the short-term options will pull younger healthier beneficiaries out of ACA-compliant exchange plans, driving up premiums for sicker populations left behind, the administration says any negative effects will be minimal and outweighed by the market benefits of having more options.
James Parker, MBA, a former Anthem executive who serves as director of the Health and Human Services Office of Health Reform and as one of four key senior advisors to HHS Secretary Alex Azar, said the administration doesn't expect a mass exodus from the ACA exchanges to these short-term options.
"What we do believe, however, is that there will be significant interest in these policies from individuals who today are not in the exchange and, in many cases, have been priced out of coverage as insurance premiums have significantly increased over the past four to five years," Parker said during a call with reporters Tuesday evening.
Randy Pate, a deputy administrator of the Centers for Medicare & Medicaid Services who oversees individual and small-group markets as director of the Center for Consumer Information and Insurance Oversight, said the administration expects about 600,000 people to enroll in the short-term plans next year as a result of the expanded access. Only an estimated 200,000 will leave the exchange market in 2019 as a result of the final rule, he said.
As the increased enrollment in short-term plans swells to an estimated 1.6 million in 2021 and 2022, however, the number of participants expected to leave the ACA exchanges as a result of the final rule is projected to swell to 600,000, according to a 10-year impact analysis included in the final rule.
This shift is expected to increase gross premiums for exchange plans by 1% next year and 5% in 2021. Because this change is expected to result in fewer unsubsidized enrollees on the exchanges, net premiums are projected to decrease 6% next year and 14% in 2021. (This net decrease would not affect the amount paid by individual consumers.)
The wrong direction? When the administration announced its plans earlier this year to expand access to short-term coverage options, American Hospital Association President and CEO Rick Pollack called it "a step in the wrong direction for patients and health care providers." If consumers are unaware of the limits on their skimpy coverage, it could ultimately drive bad debt for hospitals, he said.
Disclosure requirements beefed up: The final rule includes additional language to make sure consumers know what they are buying, Pate said. "We fully recognize these products are not necessarily for everyone, but we do think they will provide an affordable option to many, many people who have been priced out of the current market under the Obamacare regulation," he said.
There's an opportunity for insurers. As consumers gain interest in their short-term options, insurers will have an opportunity to meet the rising demand. "The impact is going to vary depending on the insurer, whether this is a business they have been in in the past and whether they have been longing to get back into it when consumer interest reached an acceptable level," Christopher Holt, director of healthcare policy with D.C.-based think tank American Action Forum, told HealthLeaders Media. "There also could be some who see it as a new opportunity to claim a share of the marketplace they're not reaching."
But insurers have some skepticism. Matt Eyles, president and CEO of America's Health Insurance Plans, wrote a letter to HHS in April. "We are concerned that substantially expanding access to short-term, limited duration insurance will negatively impact conditions in the individual health insurance market, exacerbating problems with access to affordable comprehensive coverage for all individual market consumers," Eyles wrote. In a follow-up statement Wednesday, Eyles said AHIP remains concerned that consumers who enroll in these plans will be stuck with high medical bills, but he commended the final rule's clearer disclosure requirements and deference to state-level regulatory authority.
Trump administration boosters: Beyond simply opening a door to longer short-term plans, the Trump administration has touted these and other non-ACA-compliant options as viable rescue mechanisms for individuals squeezed by rising premiums. Navigators, who have been tasked in past years with helping people sign up for exchange coverage, will now be encouraged to provide information on short-term and association health plans as well.
States can block: The final rule released Wednesday addresses the federal government's definition of short-term limited-duration health insurance, but states retain the authority to impose stricter regulations, Pate said. They can limit or even ban the plans altogether.
While lawmakers seem to have backburnered their aspirations for broad healthcare reform in the near-term, Parker said the administration will continue taking incremental steps to improve affordability of coverage.
Editor's note: This story was updated to include additional information from AHIP President and CEO Matt Eyles and the 10-year impact analysis from the final rule.
The reinsurance program, which the state operated in 2012 and 2013 before the ACA's transitional reinsurance took effect, is expected to reduce costs in Maine's individual insurance market.
The federal government approved another waiver application Monday under the Affordable Care Act, giving Maine the go-ahead to reinstate a reinsurance program it had operated briefly before the ACA took effect.
Maine is the fifth state to secure a Section 1332 waiver to establish a state-run reinsurance program, following closely on the heels of Wisconsin's waiver request being granted Sunday. Alaska, Minnesota, and Oregon won their waivers last year, and two other states—Maryland and New Jersey—have similar applications pending.
Although the Trump administration has taken a number of actions that would appear to harm the individual market, approving these waivers seems to be a positive step in the opposite direction, says Matthew Fiedler, PhD, a fellow with the Brookings Institution Center for Health Policy who served as chief economist of the Council of Economic Advisers during the Obama administration.
"Reinsurance waivers will reduce premiums in the individual market in these states and will result in more people being covered. I think they're a reasonable way for states to spend money," Fiedler tells HealthLeaders Media. "There may be better ways to spend money to improve the individual market, but this is certainly an actionable one and one that states can implement more or less on their own."
Maine projects that premiums will be 9% lower in 2019 than they would be without reinsurance. Those lower premiums are expected to encourage more people to sign up for coverage, reducing Maine's uninsured population by 1.7%, according to independent actuarial projections cited by the state and federal governments.
A modest gain in enrollment could translate to a slight benefit for insurers and could reduce the burden of uncompensated care on hospitals, Fiedler says.
'Invisible High-Risk Pool'
In a letter submitted last May to Health and Human Services Secretary Alex Azar, Maine Bureau of Insurance Senior Staff Attorney Thomas M. Record said the program, which is known formally as the Main Guaranteed Access Reinsurance Association (MGARA), had "become popularly known as Maine's ' invisible high risk pool.'"
Record described the program as a key feature of health reform legislation Maine lawmakers passed in 2011. The program, which was active in 2012 and 2013, successfully reduced premiums in the individual market by about 20%, he said.
Despite that success, MGARA was suspended at the beginning of 2014, when the ACA's transitional reinsurance program rendered it redundant, according to Maine's waiver application. The federal reinsurance program ended as scheduled on the final day of 2016.
Material released by the Centers for Medicare & Medicaid Services describe MGARA as operating a hybrid-model reinsurance program that includes traditional and conditions-based components. High-risk patients with any of eight conditions will be ceded automatically. Other high-risk enrollees will be ceded voluntarily. The program will offer 90% coinsurance for claims in the $47,000-77,000 range and 100% coinsurance for higher claims up to $1 million.
For claims above $1 million, the program will cover the amount left uncovered by the federal government's high-cost risk-adjustment program.
Maine estimates that its program will result in a net spending reduce of more than $33 million per year, for 2019 through 2023, with that federal savings to be passed along to the state to fund the program.
The program's total expenses are projected to cost $90-104 million annually during the five-year waiver period.
Insurers and providers have responded positively to the prospect of state-run reinsurance programs, seeing the development as good news for business and patients alike. But the benefits should not be overstated.
"The one downside of these programs is that because tax credits fall dollar-for-dollar when premiums fall, they don't really do anything to make coverage more affordable for people with incomes below 400% of the poverty line," Fiedler says.
"That doesn't mean they're a bad thing. But they can only be one part of an overall strategy for making individual market insurance affordable."
The five-year innovation waiver, under Section 1332 of the ACA, is the nation's fifth and the first to be granted this year.
Beginning next year, Wisconsin will roll out a $200 million reinsurance program designed to stabilize premiums in the state's individual health insurance market.
The program, which will be jointly funded by the state and the federal government, was authorized by a five-year waiver granted Sunday by the U.S. departments of the Treasury and Health & Human Services under the Affordable Care Act. Insurers and providers alike have hailed the program as a positive step.
"People in the individual market saw their premiums go up by 44% on average last year, and some saw much larger increases—that's unsustainable and unacceptable," Gov. Scott Walker said in a statement Sunday after formally accepting the waiver at HSHS St. Mary's Hospital in Green Bay.
With the reinsurance program, premiums on the state's individual market are estimated to drop by a weighted average of 3.5% next year, Walker said, citing initial 2019 rate filings received by Wisconsin's insurance commissioner. The decrease would place premiums 11% lower in 2019 than they would be without the program, he said.
The program—known as the Wisconsin Healthcare Stability Plan (WIHSP)—will cover claims in the $50,000-250,000 range, paying 50% of the costs up to the $200 million cap.
Who Funds What
Wisconsin expects its plan will save the federal government $166 million in 2019, based on an actuarial report prepared by the Wakely Consulting Group. Those savings would be used as pass-through funding for the program, leaving Wisconsin to pay the remaining $34 million for 2019.
Exactly how much the program will cost Wisconsin, however, remains to be seen. If the plan saves the federal government less than expected, resulting in less pass-through funding, it will be up to Wisconsin to take up the slack. (The state law authorizing the reinsurance program defines the state's subsidy as "a sum sufficient" to cover the reinsurance cap after the federal funds are accounted for.)
Bobby Peterson, executive director of the Madison-based nonprofit law firm ABC for Health, described Walker's support for this reinsurance program as especially noteworthy in light of his past opposition to another jointly funded healthcare program.
"Curiously, Governor Walker rejected federal Medicaid Expansion funds for fear that the state would be left 'holding the bag' for the full cost of expansion, should the feds 'renege' on their funding share. Here, the statue directs the state to 'pay the bill,' should the feds not pay its share," Peterson wrote in a public comment on Wisconsin's waiver application.
Just Playing Politics?
Democrats rejected Walker's reinsurance plan as an attempt to score political points on healthcare during an election year without accepting additional federal funding through the ACA for Wisconsin's BadgerCare Plus program, as the Milwaukee Journal Sentinel reported.
Walker, a Republican, is seeking reelection this fall to a third term. He has railed against the ACA, and his administration cast the WIHSP waiver as a state-led initiative to shield Wisconsinites from a broken federal law.
"If Congress continues to avoid action, states will need to continue to take the lead to protect our citizens from the negative consequences of the ACA," Wisconsin Commissioner of Insurance Ted Nickel said in a statement.
For their part, insurers and providers in the state seem to welcome the Walker administration's move—even if it doesn't fix the market's biggest problems.
"A state-based reinsurance program does not address the root causes of the rising costs of health care, but it is the best stabilization program that Wisconsin can implement in the short term to have a significant impact on rates for 2019 and beyond," Marty Anderson, chief marketing officer for Security Health Plan, and Ryan Natzke, chief external affairs officer for Marshfield Clinic Health System, wrote in a joint public comment responding to the state's application.
Others on the state and national level voiced their support as well:
Wisconsin Hospital Association President and CEO Eric Borgerding: "We support using the tools available under the ACA to put forward a plan aimed at stabilizing premiums, increasing competition in the insurance market and sustaining coverage gains for the foreseeable future or until the ACA is repaired or replaced."
Wisconsin Medical Society CEO Clyde "Bud" Chumbley, MD: "Reinsurance programs have been demonstrated to lower insurer risk, which can incentivize insurers to participate in the ACA marketplaces. … By stabilizing and lowering premiums, the Wisconsin Healthcare Stability Plan could help incentivize younger, healthier patients to acquire coverage, rather than risking a potential catastrophic event."
America's Health Insurance Plans President and CEO Matthew D. Eyles: "We believe the proposal will allow health plans to continue offering more affordable products in the individual market leading to increased competition and more affordable health plan options for Wisconsin residents."
Wisconsin's waiver is the first to be granted this year and only the fifth since the waiver process began, according to records compiled by the Kaiser Family Foundation.
Wisconsin's reinsurance program bears some similarity to reinsurance programs established in Alaska, Minnesota, and Oregon, all of which had their waivers granted last year. (Hawaii's waiver, which was approved under the Obama administration, dealt with the ACA's Small Business Health Options Program.)
At least three more states—Maine, Maryland, and New Jersey—have pending applications for waivers that would allow pass-through funded reinsurance programs of their own, according to the KFF records.
Same-hospital admissions rose slightly over last year. Provision for income taxes dropped $7.4 million.
On the heels of announcing plans this week to be acquired by a private-equity firm, LifePoint Health reported quarterly earnings Friday morning that include a significant bump in income.
The rural hospital operator, based in Brentwood, Tennessee, reported net income of $54.8 million in the second quarter of 2018, up about 19% from the $46 million it reported this time last year. That translates to $1.33 in earnings per diluted share, up 29% from $1.03 in the second-quarter of 2017.
Excluding adjustments, LifePoint reported second-quarter net income of $52.4 million attributable to the company, up about 23% from the $42.5 million it reported the same time last year. That translates to adjusted diluted earnings per share attributable to the company of $1.27, up 32% from $0.96 reported in the second-quarter of 2017.
Same-hospital revenues were $1.57 billion, up 0.6% from $1.56 billion from second-quarter 2017.
Same-hospital equivalent admissions rose 0.5%.
LifePoint's revised guidance for 2018 projects revenues of $6.25-6.32 billion, with same-hospital revenue growth between 0.5% and 1.6%.
LifePoint's provision for income taxes dropped $7.4 million, from $24.4 million in the second quarter of 2017 (1.5% of revenues) to $17.0 million in the second quarter of 2018 (1.1% of revenues).
In a separate disclosure to the Securities & Exchange Commission, LifePoint released a message Executive Vice President and Chief Administrative Officer John Bumpus sent to certain employees regarding the $5.6 billion deal with private-equity firm Apollo Global Management to take the company private and merge it with RCCH HealthCare Partners.
"This merger is an opportunity for LifePoint to meaningfully extend its mission and explore new ways to develop what the future of non-urban healthcare looks like in America, with the added resources and partnership of Apollo and RCCH," Bumpus wrote. "We determined we could achieve this more effectively by moving to a private setting and at the same time achieve significant value for our current shareholders."
"Remember your tone as a leader will be your team's tone," Bumpus added. "This is an exciting time and important milestone for our company’s ability to achieve our mission."
More detail on LifePoint's second-quarter earnings are available in its SEC filing.
One observer praised CMS for 'picking a fight with powerful hospitals' in the agency's annual update to payment proposals for outpatient services.
In a slate of proposals released late Wednesday afternoon, the Centers for Medicare & Medicaid Services proposed significant cuts to the payment hospitals receive for care they provide to Medicare patients.
The proposals call for Medicare to move away from a system that pays more for a clinic visit in the hospital outpatient setting than in a doctor's office. The idea is to move to what CMS described as "site neutral payments for clinic visits."
The proposed change—which is part of the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rulemaking for 2019—would lower reimbursements for hospital outpatient department services to match rates set by the physician fee schedule for clinic visits, according to a CMS fact sheet.
Medicare pays about $116 for a clinic visit in an outpatient hospital setting. The change would reduce that amount by about 60% to $46, according to the agency's fact sheet. Clinic visits are the most common service billed under OPPS.
During a moderated discussion Wednesday afternoon following her speech at the Commonwealth Club of California, CMS Administrator Seema Verma addressed the disparity between reimbursements for services in outpatient hospital settings and those provided in physician offices, arguing that such an arrangement motivates consolidation among hospitals and health systems, which then buy up physician offices.
"It doesn't make sense," she said. "It doesn't make sense for taxpayers, and it certainly doesn't make sense for patients because they end up having to pay more depending on the site of service."
"It's a great example of some of the bizarre things in the Medicare program that just don't make sense and that are actually having a perverse incentive on the entire healthcare delivery system," Verma added.
University of Michigan health law professor Nicholas Bagley was among the observers who praised the Trump administration for the proposal, saying CMS is "picking a fight with powerful hospitals because it's the right thing to do."
Hospitals, however, are not pleased with the proposal.
American Hospital Association
Tom Nickels, executive vice president of the American Hospital Association, said in a statement that CMS "has once again showed a lack of understanding about the reality in which hospitals and health systems operate daily to serve the needs of their communities," adding that CMS misconstrued the intent of the law behind the payment systems.
"While the agency inappropriately characterizes these clinic visits as 'check-ups,' the reality is that hospitals serve some of the sickest, most medically complex patients in our clinics, evaluating them for everything from metastatic breast cancer to heart failure," Nickels said.
Combined with another cut to 340B hospitals, these CMS proposals appear to cut nearly $1 billion from hospitals' reimbursements, Nickels said.
America's Essential Hospitals
Bruce Siegel, MD, MPH, president and CEO of America's Essential Hospitals, said the proposed rule for Medicare's outpatient payments "would make bad policies worse." The cuts are "draconian" and could imperil healthcare access for vulnerable groups, he added.
"The [CMS] frames its proposals as empowering patients and providing more affordable choices and options," Siegel said in a statement. "But we believe these proposals only would create road blocks to care in communities across the country—communities that already struggle with care shortages and severe economic and social challenges."
Siegel took particular issue with the proposals' plan to extend reimbursement reductions under the 340B Drug Pricing Program.
"These proposals would hurt the patients and hospitals least able to afford this wrongheaded approach to cost savings," Siegel added, calling on CMS to withdraw its proposals altogether.
340B Health
The advocacy group 340B Health released a statement Wednesday echoing the sentiment that the proposals "would make a bad rule worse," adding that the organization is "deeply disappointed" in what CMS has proposed to do.
"In 2018, CMS slashed $1.6 billion from Medicare outpatient drug payments to many 340B hospitals, a reduction of nearly 30 percent," the organization said. "CMS now plans to make a bad rule worse by extending the cuts to drugs provided in certain off-campus hospital clinics, including facilities providing infusion therapy for cancer patients and other high-cost drug therapies to treat chronic and life threatening conditions."
The organization pointed to bipartisan support for a bill to undo the 2018 cuts and preserve funding for 340B hospitals in the future and called on CMS to withdraw its proposals.
Premier
Blair Childs, senior vice president of public affairs for Premier, released a statement saying the group purchasing organization opposes the site-neutral payment proposal.
"This proposal will undermine high quality, cost effective care," Childs said.
The agency's proposal "fails to recognize the substantial differences between physician practices and provider-based outpatient clinics that translate into higher overhead expenses for provider-based outpatient clinics," Childs added.
Furthermore, Premier shares the AHA's concern over cuts to the 340B program, Childs said.
Long-Term Benefit?
Farzad Mostashari, MD, co-founder and CEO of Aledade, said in a series of tweets Wednesday night that hospitals will fight the OPPS rule "bitterly" but that there could be a long-term benefit for them in it.
"The truth is that this proposal could help hospitals be more competitive in value-based contracts/ alternative payment models, and they should embrace the changes," Mostashari wrote. "If rural hospitals or AMCs need subsidies, then we should do it directly, not through distorting payment policies."
Editor's note: This story was updated to include a comment from CMS Administrator Seema Verma's moderated discussion Wednesday at the Commonwealth Club of California.
With a final rule, CMS restarted the permanent program it had halted over a federal judge's ruling.
Two-and-a-half weeks of heightened uncertainty for insurers came to a close Tuesday evening, when the Centers for Medicare & Medicaid Services announced a final rule to resume risk-adjustment payments under the Affordable Care Act for the 2017 benefit year.
After halting the program on Saturday, July 7, the agency said Tuesday that it issued the final rule because it determined "immediate action" is "imperative to maintain stability and predictability in the individual and small group health insurance markets."
Insurers had warned that putting the payments in limbo could prompt premium hikes for the 2019 benefit year.
Resuming the financial transfers—which amount to billions of dollars for the 2017 benefit year alone—in this way should satisfy the qualms of a federal judge in New Mexico who ruled in February that the government's methodology for calculating risk-adjustment payments was illegal insofar as it relied on statewide average premiums, the agency said.
"This rule will restore operation of the risk adjustment program, and mitigate some of the uncertainty caused by the New Mexico litigation," CMS Administrator Seema Verma said in a statement.
"Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today," she added. "Alleviating concerns in the market helps to protect consumer choices."
America's Health Insurance Plans (AHIP) President and CEO Matt Eyles commended the Trump administration for its "swift action," saying the move does, in fact, provide stability and predictability in the run-up to the 2019 benefit year.
"By quickly resolving the uncertainty regarding risk adjustment transfers, the Administration has taken an important step to ensuring more affordable coverage choices are available for all Americans, including high-need patients and those with pre-existing conditions," Eyles said in a statement Wednesday.
Frederick Isasi, executive director of Families USA, expressed a sense of relief in the news.
"Without risk adjustment in place, plans will have a strong financial incentive to cherry-pick patients who cost less to insure and put up as many barriers as possible for people with preexisting conditions and others with high health care costs," Isasi said in a statement.
Although several benefit years were affected by the judge's order, the final rule does not apply to all of them in the same ways:
2014-2018: The judge's ruling vacated the risk-adjustment methodology for benefit years 2014 through 2018, according to the final rulereleased Tuesday.
2017: The rule resumes the payments for the 2017 benefit year. It adopts the previous methodology, "with an additional explanation regarding the use of statewide average premium and budget neutral nature of the program," the rule states.
2018: The final rule includes an announcement that CMS intends to solicit comments on future rulemaking regarding the CMS risk-adjustment methodology for the 2018 benefit year.
2019: The agency has already sought comment on its draft payment notice for the 2019 benefit year and thereafter. "We finalized that approach as proposed in the final 2019 Payment Notice published on April 17, 2018," the CMS announcement said.
Although some critics saw the decision to freeze risk-adjustment payments as another act of "sabotage"directed at the ACA, others suggested the panic could be overblown. Even those in the latter group, however, questioned why CMS would halt the entire program, even temporarily, since the New Mexico judge's decision contradicted the opinion of another federal judge in Massachusetts.
"It's a little puzzling why, with the conflicting court decisions, they decided now that they can't make the payments any longer," Robert H. Iseman, JD, partner with the Rivkin Radler law firm in Albany, New York, told HealthLeaders Media earlier this month. "There must be a line of reasoning that led them to see the New Mexico decision as more authoritative, but they have not said what that might be."
The agency had signaled last week that it was at least considering the possibility of reworking the risk-adjustment methodology as a means to resume the payments, as HealthLeaders Media reported.
The move comes as AHIP and the Blue Cross Blue Shield Association urged the judge in New Mexico to alter his February ruling. The judge is expected to weigh in on the matter again by the end of the summer.
Editor's note: This story has been updated to include a statement from AHIP President and CEO Matt Eyles and Families USA Executive Director Frederick Isasi.
The FTC signed off on private-equity firm KKR's plan to buy Envision for $46 per share.
A plan to turn Envision Healthcare Corp. into a private company has cleared a key regulatory hurdle.
The company, which provides physicians to hospitals, is moving forward with the $9.9 billion deal after the Federal Trade Commission signed off last week on the plan. The arrangement must still secure the go-ahead from holders of a majority of Envision's common stock before it can be finalized.
Envision has yet to announce the date of its annual meeting, when shareholders are expected to vote on the plan. But the company said last month that it would hold the meeting no later than October 1, with the expectation that the deal would be completed by the end of the year.
In a preliminary proxy statement filed Friday with the Securities and Exchange Commission, Envision President and CEO Christopher A. Holden and Board Chairman William A. Sanger urged shareholders to vote in favor of the deal, which calls for private-equity firm KKR & Co. to pay $46 per share—about 5.4% more than closing price on the Friday before the deal was announced.
Since there are more than 125 million shares of Envision common stock, the cash deal is valued at $5.6 billion. The valuation is $9.9 billion, counting debt, as Reuters reported.
Envision was one of two healthcare companies to break onto the Fortune 500 list in May, ranking 198th, behind Tenet Healthcare Corp and Community Health Systems but ahead of Universal Health Services, LifePoint Health, and Kindred Healthcare.
