McDermottPlus Check-Up: February 25, 2022 - McDermott+Consulting

McDermottPlus Check-Up: February 25, 2022

This Week’s Dose

Foreign policy dominated the conversation in Washington, DC, as Russia invaded and launched attacks on Ukraine, and the U.S. and other nations responded with a series of sanctions against Russia. These events will likely shift the focus of official Washington in the near term. The House and Senate were in recess this week, while congressional appropriators and staff continued work on the FY 2022 omnibus appropriations bill.


FY 2022 Appropriations Work Ongoing. After Congress approved, and the President signed, another short-term continuing resolution (CR) last week to keep the government funded and operating until March 11, House and Senate appropriators now have just two weeks to finalize an omnibus appropriations bill to fund the government for the rest of FY 2022.

Conversations around additional COVID relief funds continue following the Administration’s recent requests for an additional $30 billion focused on domestic testing and vaccine procurement and development, and an additional $5 billion for international COVID relief efforts. Lawmakers will also need to make decisions whether to include other policy and spending provisions. In particular, stakeholders are pushing Congress to extend healthcare-related flexibilities tied to the Public Health Emergency (PHE). Telehealth flexibilities are perhaps the most likely to be extended.

These decisions will hinge—at least to some extent—on their cost. Pandemic-related flexibilities, such as those related to telehealth, come with a price tag, so the Congressional Budget Office’s estimates will be a significant factor in determining the fate and duration of an extension.

We expect additional details after Congress returns next week.

State of the Union Open to Full Congress. On February 17, the office of House Speaker Nancy Pelosi (D-CA) released State of the Union guidelines. All Members of Congress are now invited to attend the President’s March 1 address in the House Chamber—an update that marks a change from what some were anticipating when the date was set several weeks ago.

Those attending next week’s speech must present a negative COVID test that was taken at the Capitol Visitors Center within 24 hours of attending, and attendees are required to wear a KN95 or N95 mask. Attendees will also be required to attest to being symptom free and practice social distancing, with the galleries—usually used to seat guests—being used to seat lawmakers in order to allow for such distancing. These restrictions may prove to be a political flashpoint leading up to the President’s speech.


Still Awaiting the President’s FY 2023 Budget Request. With work still ongoing on a comprehensive FY 2022 omnibus appropriations package, the Biden Administration is not expected to release its full FY 2023 budget request until late-March or early-April, according to recent reports.

While the President’s annual budget request is not binding, it serves as a blueprint for the Administration’s spending priorities and is typically the starting point that kicks off each year’s budget and appropriations processes. Next week’s State of the Union address may offer a preview of the Administration’s top health-related budgetary priorities for FY 2023.

CMS Announces Direct Contracting Redesign Model. On February 24, the Centers for Medicare & Medicaid Services (CMS) announced a new approach to its Direct Contracting model portfolio, in an effort to address criticisms from progressives on Capitol Hill and to better reflect the Administration’s health equity agenda.

The CMS announcement had three core components: cancelling the Geographic component of Direct Contracting which would have featured random alignment of beneficiaries in certain markets and participation by any HIPAA covered entity; allowing stability for Global and Professional Direct Contracting participants in 2022; and transitioning to a new model called Accountable Care Organization (ACO) Realizing Equity, Access and Community Health (REACH) in 2023.

The ACO REACH model represents a redesign of the Global and Professional Direct Contracting (GPDC) Model. The changes to the GPDC Model reflected in the ACO REACH Model include efforts to advance equity and bring the benefits of accountable care to underserved communities, efforts to promote provider leadership and governance, and protecting beneficiaries through additional participant vetting, monitoring and greater transparency.

The application period for performance year 2023—along with an optional implementation period running August 1, 2022 through December 31, 2023—begins March 7 and runs through April 22. Organizations currently participating in the GPDC Model will be permitted to participate in the ACO REACH Model if they maintain a strong compliance record and agree to meet the ACO REACH Model requirements by January 1, 2023.

A fact sheet on the ACO REACH Model can be found here, additional details on the Model can be found here, and comparison table of ACO REACH and GPDC can be found here. The request for applications can be found here.


First Ruling on the No Surprises Act Favors Providers. On February 23, a federal judge for the Eastern District of Texas ruled in favor of the Texas Medical Association (TMA) in their suit challenging parts of the regulations implementing the federal No Surprises Act.

The new law became effective on January 1, 2022, but Plaintiffs in the case filed suit challenging, among other things, the government’s directive that Independent Dispute Resolution (IDR) arbiters give outsized weight to the Qualifying Payment Amount when resolving payment disputes between providers and payers. Plaintiffs also challenged various procedural aspects of the rule, including the government’s choice to issue the implementing regulations as Interim Final Rules without notice and comment.

With respect to the substantive issue, the court found that the “Act is unambiguous,” and because the rule rewrites clear statutory terms, it must be held unlawful and set aside on this basis alone. On the procedural issue, the court found that the Departments of Health and Human Services (HHS), Labor, and Treasury were not excused from providing notice and comment rulemaking and that the error was not harmless. The court further found that that the Departments lacked good cause to bypass notice and comment rulemaking.

In light of these findings, the District Court vacated the challenged provisions, which affects only the challenged aspects of IDR regulations and process.

The federal government can and likely will appeal the decision, and it likely will also request a stay of this decision pending appeal. Notably, there are about a half-dozen similar cases pending in other federal courts, including two in the District Court for the District of Columbia. Those cases were not filed as early as the TMA case, but they are moving along quickly as well. District Courts can reach different decisions; one court’s decision is not necessarily precedential. Nonetheless, the issues challenged and arguments levied are similar, and many observers expect similar results in at least some of the other cases.

Quick Hits

  • HHS announced on February 24 that more than 4,100 providers will receive $560 million in the next distribution from the Provider Relief Fund (PRF). This latest release of funds leaves $5.5 billion in the PRF and comes amid calls from providers to replenish the fund as health care workers continue to battle the COVID-19 pandemic. HHS’ press release and an accompanying PDF note that the funds can be used for workforce recruitment and retention efforts.
  • CMS will hold a stakeholder call on March 1 on the recently-released request for information (RFI) on access in Medicaid and CHIP. This session will provide additional information on the RFI, review how to access the online form, and outline the importance of providing feedback on this topic. Register here.
  • The Senate approved the House-passed Dr. Lorna Breen Health Care Provider Protection Act (H.R. 1667) by voice vote, sending the legislation to the President’s desk to be signed into law. The bill provides additional resources to health care professionals to address burnout and mental health challenges through grants, training programs, and a comprehensive study on mental health impacts.

Next Week’s Diagnosis

The House and Senate return next week, in what promises to be a busy legislative stretch as lawmakers work toward a final agreement on an FY 2022 appropriations package and address whether additional provisions—such as COVID relief funds and extensions of healthcare policies tied to the PHE—will be included in the package. All eyes will be on the House Chamber the evening of March 1, as President Biden gives his State of the Union address.


For more information, contact Debra Curtis, Madeline Hodge, Rachel Kosh, Kristen O’Brien or Erica Stocker.

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