McDermottPlus Check-Up: November 3, 2023 - McDermott+Consulting

McDermottPlus Check-Up: November 3, 2023


  • Recent Congressional Letters: Members of Congress wrote to the US Department of Health and Human Services (HHS) on issues including nurse staffing standards, improper Medicaid payments, laboratory safety and Medicare Advantage (MA) oversight.
  • CMS Rules: The Centers for Medicare & Medicaid Services (CMS) released the No Surprises Act independent dispute resolution (IDR) process proposed rule, an information blocking disincentives proposed rule, the home health final payment rule, the end-stage renal disease (ESRD) final payment rule, the physician fee schedule (PFS) final rule, the outpatient prospective payment system (OPPS) final rule and the 340B-remedy final rule.
  • AI Executive Order: President Biden released an executive order (EO) on safe, secure and trustworthy artificial intelligence (AI).


House Ways & Means Chair Smith, House Energy & Commerce Chair Rodgers and Senate Finance Ranking Member Crapo Call for Withdrawal of Nurse Staffing Mandate. Rep. Smith (R-MO), Rep. Rodgers (R-WA) and Sen. Crapo (R-ID) sent a letter to HHS Secretary Becerra and CMS Administrator Brooks-LaSure expressing concerns about the Administration’s nurse staffing standards proposed rule. The rule would impose minimum nurse staffing standards of 0.55 hours per resident day (HPRD) for registered nurses (RNs) and 2.45 HPRD for nurse aides; require an RN onsite 24 hours a day, seven days a week; and establish enhanced facility assessment requirements. Smith, Rodgers and Crapo noted that the mandate is unfunded and would jeopardize access to care. They called on the Administration to immediately withdraw the proposed rule, and expressed concern that it would force many nursing homes to close, threatening resident access to direct care services. This letter follows another letter from almost 100 House members also expressing concern over the proposed rule.

House Energy & Commerce Republicans Voice Concern on Improper Medicaid Payments, Laboratory Safety. Chair Rodgers, Oversight and Investigations Subcommittee Chair Griffith (R-VA), and Health Subcommittee Chair Guthrie (R-KY) sent a letter to the HHS Office of Inspector General (OIG) regarding improper Medicaid payments, including a significant number of payments made to deceased enrollees. They requested answers to four questions:

  • How will the OIG work with CMS to implement recommendations made in its recent audit report?
  • Does CMS advise states to regularly check the public Death Master File?
  • Does CMS advise states to regularly check the Public Assistance Reporting Information System to ensure recipients of Medicaid are not receiving benefits in more than one state?
  • Will the OIG commit to reviewing current CMS practices and policies for interacting with states on eligibility determination systems?

The three members also sent a letter to the US Food and Drug Administration (FDA) commissioner outlining concerns with how the agency has treated laboratory safety. The letter followed up on the FDA’s responses to the chairs’ May 24, 2023, letter and reiterated document requests made in the previous letter. The members noted that the committee is prepared to issue a subpoena if the FDA does not produce the requested documents by November 15.

House Energy & Commerce and Ways & Means Ranking Members Urge MA Oversight. Rep. Pallone (D-NJ) and Rep. Neal (D-MA) sent a letter to the CMS administrator calling for increased oversight and transparency of broker participation and compensation in the MA market. They urged the Administration to build on recent efforts to address deceptive marketing practices and broker compensation to better protect Medicare beneficiaries and the program overall. They also demanded that the Administration reform the total amount brokers can receive in compensation per enrollee.

Senate Finance Committee Releases Markup Discussion Draft. The markup is scheduled to take place on November 8. The discussion draft includes policies aimed at expanding mental healthcare under Medicaid and Medicare and reducing prescription drug costs for seniors. The package also includes extensions of Medicaid and Medicare provisions that will expire this year, changes to Medicare payment to support physicians and other professionals, and pharmacy benefit manager (PBM) reforms. Read the Senate Finance Committee press release here.


CMS Releases PFS Final Rule. CMS finalized a CY 2024 Conversion Factor (CF) of $32.7442, which represents an approximately 3.37% reduction from the final CY 2023 CF of $33.8872.  The final CF for Anesthesia is $20.4349, which represents an approximately 3.27% reduction from the final CY 2023 Anesthesia Conversion Factor of $21.1249. The finalized CF update is primarily based on three factors: a statutory 0% update scheduled for the PFS in CY 2024, a negative 2.18% budget neutrality adjustment, and a funding patch passed by Congress at the end of CY 2022 through the Consolidated Appropriations Act, 2023, which partially mitigated a cut to the CY 2023 CF and offset part of the reduction to the CY 2024 CF.  Initially, CMS had proposed a 3.36% CF reduction and a 3.26% reduction from the final CY 2023 Anesthesia Conversion Factor.  While this final rule represents a slight increased reduction over the proposed, Congress is still considering potential relief in an end-of-year legislative package.

Read the CMS press release here. Our team is reviewing the rule and will publish a more detailed summary soon.

CMS Releases OPPS Final Rule. For CY 2024, CMS increased payment rates under the Hospital OPPS and the Ambulatory Surgical Center (ASC) Payment Systems by a factor of 3.1%. In continuation of an existing policy, hospitals and ASCs that fail to meet their respective quality reporting program requirements are subject to a 2% reduction in the CY 2024 fee schedule increase factor.

Read the CMS press release here and fact sheet here. Our team is reviewing the rule and will soon publish a more detailed summary.

CMS Releases 340B Remedy Final Rule. This rule is responsive to a Supreme Court of the United States opinion finding that the 2018 payment cuts were not consistent with CMS authority to set Medicare payments to hospitals for outpatient drugs.

CMS is finalizing its policy to make an additional payment to affected providers for 340B-acquired drugs as a one-time lump sum payment. Providers will not be able to bill beneficiaries for any cost sharing. CMS is also maintaining its budget neutral policy and implementing a $7.8 billion offset by adjusting the OPPS conversion factor by -0.5% starting in CY 2026 (which is a change from the proposed rule which had the offset starting in 2025). CMS will make this adjustment until the $7.8 billion is recouped, which CMS estimates will take 16 years.

Read the CMS fact sheet here. Our team is reviewing the rule and will publish a more detailed summary soon.

CMS Releases IDR Proposed Rule. The proposed rule results from recent federal district court litigation challenging batching rules and other aspects of the No Surprises Act’s implementation. The rule is open for comment until January 2, 2024.

Overall, the proposed rule would revise batching rules; require parties to improve communication during the open negotiation period; and make changes to the information that plans, issuers, providers, facilities and providers of air ambulance services must share before initiating the federal IDR process. The rule would also require plans and issuers to register with the federal IDR portal to help determine whether their coverage of an item or service is subject to a specified state law, an All-Payer Model Agreement or the federal IDR process.

Read the CMS press release here and the fact sheet here. Read our +Insight here.

CMS Releases Provider Information Blocking Disincentives Proposed Rule. The proposed rule would establish disincentives for providers who knowingly and unreasonably interfere with the access, exchange or use of electronic health information (called information blocking), as established under the 21st Century Cures Act. While the requirements have been effect for some time, to date no penalties have been established for providers determined by the OIG to have committed information blocking. Comments are due on January 2, 2024.

With respect to the disincentives, CMS proposed the following:

  • Hospitals and critical access hospitals (CAHs) would not be meaningful electronic health record (EHR) users under the Medicare Promoting Interoperability Program in an EHR reporting period if OIG determines that the hospital or CAH committed information blocking. As a result, a hospital would not be able to earn the three quarters of the annual market basket increase associated with qualifying as a meaningful EHR user, while a CAH would have its payment reduced to 100% of reasonable costs, from the 101% of reasonable costs it might have otherwise earned. CMS estimates that this proposal could result in a median disincentive amount of $394,353.
  • Clinicians would not be meaningful EHR users under the Promoting Interoperability performance category of the Merit-based Incentive Payment System (MIPS) in a performance period if OIG determines that the clinician committed information blocking. Therefore, clinicians who are subject to MIPS and are required to report on the Promoting Interoperability performance category of MIPS would receive a zero score (the Promoting Interoperability category is 25% of the total MIPS score). CMS estimates that the median individual disincentive amount could be $686 for a clinician, while an estimated median group of six clinicians could see a loss of $4,116, with a range of $1,372 to $165,326 for group sizes ranging from two to 241 clinicians.
  • For MSSP, CMS proposes that a healthcare provider that is an accountable care organization (ACO) or part of an ACO, if determined by OIG to have committed information blocking, would be barred from participating in the Shared Savings Program for at least one year. This may result in a healthcare provider being removed from an ACO or prevented from joining an ACO. Where a healthcare provider is an ACO, this would prevent the ACO’s participation in the Shared Savings Program.

CMS Releases ESRD Final Rule. CMS released the calendar year (CY) 2024 ESRD Prospective Payment System (PPS) final rule, which finalized a CY 2024 ESRD PPS base payment rate of $271.02. This increases total payments to ESRD facilities by approximately 2.1%. The rule also updated add-on payments related to ESRD care and made new quality program changes.

Read the CMS fact sheet here. Read our +Insight here.

CMS Releases Home Health Final Rule. CMS finalized a permanent prospective payment adjustment to the CY 2024 home health 30-day payment rate as required by the Bipartisan Budget Act of 2018. In this final rule, the permanent adjustment is reduced to -2.890% compared to the proposed rule reduction of -5.779%. This adjustment accounts for any increases or decreases in aggregate expenditures due to the implementation of the Patient-Driven Groupings Model and 30-day unit of payment. Because CMS finalized roughly half of the full permanent adjustment projected, Medicare payments to home health agencies in CY 2024 will increase in the aggregate by 0.8%, rather decreasing by 2.2% as initially proposed. Read the CMS fact sheet here.

CMS Releases Direct Contracting Results. CMS released participant-level financial and quality results for the Global and Professional Direct Contracting (GPDC) Model for performance year (PY) 2022, the second year of the model. The model’s net savings to CMS was $371.5 million, and the net savings to direct contracting entities (DCEs) was $484.1 million. This is an increase from the $70.4 million in net savings to CMS and the $46.5 million in net savings to DCEs in PY 2021. The total financial savings increased from PY 2021 to PY 2022 because of growth in model participation, a longer performance period in PY 2022 (12 months compared to nine months in PY 2021) and performance improvements by model participants as they gained experience. In PY 2022, 99 DCEs (up from 53 DCEs in 2021) with 21 million beneficiary months (up from three million in PY 2021) participated in the program.

Administration Releases AI EO. The executive order (EO) is broad-reaching, crossing many different sectors, and includes certain directives that impact healthcare stakeholders. The EO requires the establishment of an HHS AI Task Force to develop a strategic plan on responsible deployment and use of AI and AI-enabled technologies in the health and human services sector. The EO also requires the establishment of an AI safety program to develop a common framework for approaches to identifying and capturing clinical errors resulting from AI. In addition, the EO requires that developers of the most powerful AI systems share their safety test results and other critical information with the US government. Reaction to the executive order has been broadly positive, but the hard work will come with implementation. Read the White House fact sheet here, and read our +Insight here.

On a related note, Vice President Harris attended the Global Summit on AI Safety in London this week and spoke on the future of AI, stressing concerns about the unsafe use of AI in the health arena. Read her full remarks here. Discussion on AI will continue at a Senate Health, Education, Labor & Pensions (HELP) hearing to examine policy considerations for the use of AI in healthcare next week.

To learn more on this topic, register for our AI webinar on November 8, 2023.


  • MedPAC Holds November Meeting. The Medicare Payment Advisory Commission hosted its November meeting and discussed rural emergency hospitals, dual-eligible special needs plans, hospice care, Medicare coverage of medical software and MA.
  • MACPAC Holds November Meeting. The Medicaid and CHIP Payment and Access Commission hosted its November meeting and discussed managed care appeals, Medicaid language proficiency data collection, Medicaid unwinding, beneficiary engagement, school-based behavioral health services, home- and community-based services, and State Medicaid Agency Contracts.
  • HHS Launches Effort to Promote Adolescent Health. HHS issued Take Action for Adolescents: A Call to Action for Adolescent Health and Well-Being, outlining a vision, key principles, eight goals and initial steps to promote collaboration and spur action to improve the wellness of adolescents across the United States.
  • GAO Releases Report on VA Disability Benefits. The US Government Accountability Office (GAO) released a report finding that the US Department of Veterans Affairs (VA) approved 11% to 20% fewer initial disability compensation claims from members of the reserve components than the active components each year from 2012 through 2021. GAO made 14 recommendations to the US Department of Defense and the VA to help alleviate the issue.
  • CBO Releases Report on Fiscal Effects of Medicaid Spending on Children. The report notes that in the short run, costs for Medicaid are paid upfront when children (or their mothers) receive healthcare. In the long run, Medicaid enrollment during childhood has been shown to increase earnings in adulthood. Those higher earnings imply greater tax revenues and lower transfer payments by the federal government in the future.


Healthcare activity is expected at the committee level next week, including a Senate HELP hearing on AI and a Senate Finance markup of Medicare payment, mental health, PBM and healthcare extender legislation.

For more information, contact Debra CurtisKristen O’Brien, Priya Rathakrishnan or Erica Stocker.

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