/ en Sat, 14 Jun 2025 15:47:53 -0500 Tue, 10 Jun 25 15:41:20 -0500 /news/headline/2025-06-10-aha-comments-cms-fy-2026-ipps-proposal <p>The AHA <a href="/system/files/media/file/2025/06/aha-comments-on-cms-fy-2026-inpatient-prospective-payment-system-proposed-rule-letter-6-10-2025.pdf" target="_blank">commented</a> to the Centers for Medicare & Medicaid Services June 10 on the fiscal year 2026 <a href="/news/headline/2025-04-11-cms-issues-hospital-ipps-proposed-rule-fy-2026" target="_blank">inpatient prospective payment system proposed rule</a> (/news/headline/2025-04-11-cms-issues-hospital-ipps-proposed-rule-fy-2026), expressing support for several provisions, including a proposed increase in disproportionate share hospital payments and several aspects of the agency’s quality-related proposals. However, the AHA said it was strongly concerned about proposed payment updates.</p><p>“The proposed net payment update of 2.4% is simply inadequate given the unrelenting financial headwinds faced by hospitals and health systems,” the AHA wrote. “We are particularly concerned with the inappropriately large productivity cut that is being proposed. We urge the agency to re-examine the magnitude of this adjustment and its impact on Medicare payments.”</p><p>The AHA was also concerned about CMS’ proposal to include Medicare Advantage patients in the Hospital Readmissions Reduction Program, saying that including MA patients in calculating readmissions penalties would effectively hold hospitals accountable for excessive and inappropriate coverage delays and denials on the part of MA plans.</p> Tue, 10 Jun 2025 15:41:20 -0500 Medicare /news/headline/2025-06-10-reduced-fy-2026-ltch-payment-updates-inadequate-aha-tells-cms <p>The AHA expressed <a href="/system/files/media/file/2025/06/aha-comments-on-cms-long-term-care-hospital-fy-2026-proposed-payment-rule-letter-6-10-2025.pdf" target="_blank">concerns</a> (LINK) to the Centers for Medicare & Medicaid Services today on payment updates for the fiscal year 2026 proposed rule for the <a href="/news/headline/2025-04-11-cms-releases-fy-2026-proposed-rule-long-term-care-hospitals" target="_blank">long-term care hospital prospective payment system</a>. The updates include an insufficient market basket update and reduced overall payments to LTCHs due to an increase in the high-cost outlier fixed-loss amount.</p><p>“The inadequate market basket updates, including the misguided productivity adjustment, combined with the untenable rise in the HCO FLA, threatens to lead to further closures in a field that has already seen the number of hospitals decrease by 25% over the last 10 years,” the AHA wrote.</p><p>The AHA commented separately on the rule’s <a href="/system/files/media/file/2025/06/aha-comments-on-cms-fy-2026-inpatient-prospective-payment-system-proposed-rule-letter-6-10-2025.pdf" target="_blank">inpatient PPS</a> and <a href="/system/files/media/file/2025/06/aha-comments-on-cms-team-payment-model-in-fy-2026-proposed-inpatient-payment-rule-letter-6-10-2025.pdf" target="_blank">Transforming Episode Accountability Model</a> proposals.</p> Tue, 10 Jun 2025 15:37:12 -0500 Medicare /news/headline/2025-06-10-aha-provides-comments-team-proposed-rule-asks-cms-make-voluntary <p>The AHA <a href="/system/files/media/file/2025/06/aha-comments-on-cms-team-payment-model-in-fy-2026-proposed-inpatient-payment-rule-letter-6-10-2025.pdf" target="_blank">commented</a> on proposed changes to the Transforming Episode Accountability Model, a new, mandatory, episode-based payment model scheduled to begin Jan. 1, 2026.</p><p>The five-year program will require acute care hospitals in selected geographic areas to participate in five surgical episodes. The AHA expressed concerns that the model would not meet its goals of improving quality and lowering costs due to its current design and may hamper access to care instead by overburdening providers who do not have the infrastructure or population to be successful. The AHA requested the Centers for Medicare & Medicaid Services to make TEAM voluntary.</p><p>“Mandatory participation is inappropriate given that many of the selected organizations are neither of an adequate size nor in a financial position to support the investments necessary to transition to mandatory bundled payment models,” AHA wrote. “Requiring hospitals to take on large, diverse bundles would require more risk than many can manage, threatening their ability to maintain access to quality care in their communities.”</p><p>The AHA also recommended other model design changes, including the establishment of a low-volume threshold of 200 cases for individual episode categories. Hospitals not meeting this threshold should be excluded from participation.</p> Tue, 10 Jun 2025 15:33:24 -0500 Medicare /news/headline/2025-06-10-aha-comments-ipf-proposed-rule-fy-2026 <p>The AHA June 10 <a href="/system/files/media/file/2025/06/aha-comments-on-cms-inpatient-psychiatric-facility-fy-2026-proposed-payment-rule-letter-6-10-2025.pdf" target="_blank">commented</a> on the fiscal year 2026 <a href="/news/headline/2025-04-11-inpatient-psychiatric-facilities-rule-would-increase-payments-24" target="_blank">inpatient psychiatric facility proposed rule</a>, expressing support for several provisions such as increases in the facility-level adjustments. The AHA also told the Centers for Medicare & Medicaid Services that it supports several of the rule's quality-related proposals, including the proposed removal of four measures from the quality reporting program. The AHA expressed concerns on payment updates, saying the proposed 2.4% net payment update is inadequate and that it will be a challenge for IPFs to maintain access to essential psychiatric services, particularly in underserved areas and other areas where services are already limited.</p> Tue, 10 Jun 2025 15:29:05 -0500 Medicare /news/headline/2025-06-09-white-house-memo-directs-hhs-eliminate-waste-fraud-and-abuse-medicaid <p>The White House June 6 issued a <a href="https://www.whitehouse.gov/presidential-actions/2025/06/eliminating-waste-fraud-and-abuse-in-medicaid/" target="_blank">memorandum</a> directing the Secretary of the Department of Health and Human Services “to take appropriate action to eliminate waste, fraud, and abuse in Medicaid, including by ensuring Medicaid payments rates are not higher than Medicare, to the extent permitted by applicable law.” In the memo, the administration expresses its view that rapid growth in state directed payment programs is a threat to the nation’s long-term stability, and that the “imbalance between Medicaid and Medicare payment rates under these programs jeopardizes access to care for seniors.”  </p><p>The memo is in addition to the ongoing congressional reconciliation deliberations, which also include provisions impacting SDPs.</p> Mon, 09 Jun 2025 15:21:26 -0500 Medicare /news/headline/2025-05-15-cms-releases-draft-guidance-third-cycle-medicare-drug-price-negotiations <p>The Centers for Medicare & Medicaid Services May 12 released <a href="https://www.cms.gov/newsroom/press-releases/cms-releases-draft-guidance-third-cycle-medicare-drug-price-negotiation-program-lower-drug-prices" title="guidance">draft guidance</a> for the third round of negotiations for the Medicare Drug Price Negotiation Program. The guidance includes policies incorporating drugs payable under Medicare Part B into the program for the first time and is soliciting comments on how to facilitate access to any negotiated maximum fair price for Part B drugs. The guidance also explains how CMS would choose certain drugs for renegotiation that were initially negotiated for applicability in 2026 and 2027. Additionally, it includes clarifications on how participating drug manufacturers would make negotiated MFPs available in 2026 and 2027 and extends those policies to drugs covered under Part D in 2028. <br> <br>CMS is accepting comments on the draft guidance until 11:59 p.m. PT June 26. </p> Thu, 15 May 2025 15:12:08 -0500 Medicare <div class="container"><div class="row"><div class="col-md-8"><p>The House Energy and Commerce Committee May 11 released <a href="https://d1dth6e84htgma.cloudfront.net/Subtitle_D_Health_ae3638d840.pdf" target="_blank" title="Providing for reconciliation pursuant to H. Con. Res. 14, the Concurrent Resolution on the Budget for Fiscal Year 2025. Title IV—Energy and Commerce. Subtitle D—Health. Part 1—Medicaid. PDF">bill text</a> in advance of its May 13 markup. The committee has been instructed to reduce deficits by $880 billion, with significant Medicaid cuts being considered.</p><p>See below for key highlights (as of 12 p.m. ET on May 13) in the draft bill text.</p><h2>Subpart A: Reducing Fraud and Improving Enrollment Processes</h2><h3>Section 44101: Moratorium on implementation of rule relating to eligibility and enrollment in Medicare Savings Programs (Effective from enactment through Jan. 1, 2035)</h3><p>Prohibits the Department of Health and Human Services (HHS) Secretary from implementing, administering or enforcing the Medicare Savings Program (MSP) rule for 10 years. This would rollback requirements that states 1) automatically enroll certain Supplemental Security Income recipients in the qualified Medicare beneficiary eligibility group of the MSP program, 2) use data from the low-income subsidy program as an application for MSPs and align the family size definitions between the MSP and Low Income Subsidy programs, and 3) accept self-attestation for certain types of income and resources.</p><h3>Section 44102: Moratorium on implementation of rule relating to eligibility and enrollment for Medicaid, CHIP and the Basic Health Program (Effective from enactment through Jan. 1, 2035)</h3><p>Prohibits the HHS secretary from implementing, administering or enforcing the eligibility and enrollment rule for 10 years. This would limit states’ ability to use other data sources (such as payroll or state vital statistics data) to determine an individual’s eligibility for Medicaid and limit states’ use of prepopulated renewal forms. It would also allow states to impose annual and/or lifetime limits on Children’s Health Insurance Program (CHIP) benefits and to disenroll CHIP beneficiaries for failure to pay premiums or enrollment fees.</p><h3>Section 44103: Ensuring appropriate address verification under the Medicaid and CHIP programs</h3><p>Requires regular (no less than once each month) enrollee address verification and is intended to prevent individuals from enrolling in two state Medicaid or CHIP programs simultaneously. This section would require state Medicaid agencies to establish a process to collect address information for Medicaid enrollees and report certain identifying information to the HHS secretary by Jan. 1, 2027. The secretary would be required to establish a system that would identify when an individual is enrolled in two state programs simultaneously, determine in which state the individual resides, and disenroll the individual from other state Medicaid or CHIP programs. The section appropriates $10 million for fiscal year 2026 to establish a system and $20 million for fiscal year 2029 to maintain that system.</p><h3>Section 44104: Modifying certain state requirements for ensuring deceased individuals do not remain enrolled (Effective Jan. 1, 2028)</h3><p>Requires states to review the Social Security Administration’s Death Master File to determine whether any enrollees are deceased. If a beneficiary is disenrolled in error, the state must re-enroll them retroactively to the date of disenrollment.</p><h3>Section 44105: Medicaid provider screening requirements (Effective Jan. 1, 2028)</h3><p>Requires states to regularly (no less frequently than monthly) check provider eligibility to determine whether HHS or the state has terminated the provider’s participation.</p><h3>Section 44106: Additional Medicaid provider screening requirements (Effective Jan. 1, 2028)</h3><p>Requires states to regularly (no less than quarterly) check the Death Master File to determine whether providers are deceased.</p><h3>Section 44107: Removing good faith waiver for payment reduction related to certain erroneous excess payments under Medicaid (Effective fiscal year 2030)</h3><p>Limits the authority of the HHS secretary to waive payment reductions and requires HHS to reduce federal funding to states derived from states making erroneous excess payments for ineligible individuals or services.</p><h3>Section 44108: Increasing frequency of eligibility redeterminations for certain individuals (Effective Oct. 1, 2027)</h3><p>Requires states to redetermine eligibility once every six months for beneficiaries enrolled through the Medicaid expansion eligibility pathway.</p><h3>Section 44109: Revising home equity limit for determining eligibility for long-term care services under the Medicaid program (Effective Jan. 1, 2028)</h3><p>Revises the permissible home equity interest limit to $1,000,000 to determine allowable assets for nursing facility services and long-term care. Asset disregards are prohibited.</p><h3>Section 44110: Prohibiting federal financial participation under Medicaid and CHIP for individuals without verified citizenship, nationality or satisfactory immigration status (Effective Oct. 1, 2026)</h3><p>Prohibits federal financial participation for Medicaid and CHIP enrollees in a reasonable opportunity period unless the individual successfully verifies their citizenship or immigration status. It is optional for states to provide coverage during the verification period.</p><h3>Section 44111: Reducing expansion Federal Medical Assistance Percentage for certain states providing payments for health care furnished to certain individuals (Effective Oct. 1, 2027)</h3><p>Reduces the Federal Medical Assistance Percentage (FMAP) to 80% for the expansion population in states that use state funds to cover aliens who are not qualified aliens or otherwise lawfully residing in the U.S. (i.e., undocumented immigrants). “Coverage” is not limited to Medicaid and may include other programs established by the state to offer financial assistance to purchase health insurance coverage or to provide comprehensive health benefits coverage.</p><h2>Subpart B: Preventing Wasteful Spending</h2><h3>Section 44121: Moratorium on Minimum Staffing Rule for long-term care facilities (Effective immediately)</h3><p>Prohibits HHS from implementing the Minimum Staffing Standards for long-term care facilities and the Medicaid Institutional Payment Transparency Reporting regulation for 10 years.</p><h3>Section 44122: Modifying retroactive under the Medicaid and CHIP programs (Effective Oct. 1, 2026)</h3><p>Limits the timeframe for retroactive Medicaid eligibility to 30 days prior to the date of application, as opposed to the current 90 days.</p><h3>Section 44123: Ensuring accurate payments to pharmacies under Medicaid</h3><p>Expands transparency requirements regarding Medicaid payments to pharmacies for covered outpatient drugs. The secretary is required to conduct a survey to determine, and make publicly available, national average drug acquisition prices and cost benchmarks. Monetary penalties may be imposed on retail community pharmacies or non-retail pharmacies for failing to comply with a survey request, providing false information or otherwise failing to comply with requirements.</p><h3>Section 44124: Preventing the use of abusive spread pricing in Medicaid</h3><p>This section requires that payment for drugs and related administrative services is based on a transparent prescription drug pass-through pricing model and prohibits any form of spread pricing. Payment made by the entity or pharmacy benefit manager (PBM) is limited to ingredient cost and a professional dispensing fee. The payment must be passed through in its entirety by the entity or PBM to the pharmacy or provider dispensing the drug.</p><h3>Section 44125: Prohibiting federal Medicaid and CHIP funding for gender transition procedures for minors</h3><p>Prohibits states from receiving federal funds for specified gender transition procedures for individuals under 18 years of age. This does not apply to certain services provided by a health care provider with parental/legal guardian consent, including puberty suppression, blocking prescription drugs for the purpose of normalizing puberty or an individual experiencing precocious puberty, and certain medically necessary procedures.</p><h3>Section 44126: Federal payment to prohibited entities (Effective from enactment for 10 years)</h3><p>Prohibits states from receiving federal matching funds for services rendered by providers that provide abortions (other than Hyde Amendment exceptions) and receive more than $1 million in Medicaid payments in 2024. This applies to not-for-profit, essential community providers primarily engaged in family planning services, reproductive health and related medical care. This provision would apply for 10 years, beginning on the date of enactment.</p><h2>Subpart C: Stopping Abusive Financing Practices</h2><h3>Section 44131: Sunsetting eligibility for increased FMAP for expansion states (Effective Jan. 1, 2026)</h3><p>Repeals the ability for states that have not yet expanded Medicaid to receive 5% enhanced FMAP funds should they later choose to expand.</p><h3>Section 44132: Moratorium on new or increased provider taxes (Effective from enactment)</h3><p>Disallows federal matching funds for state provider taxes imposed after the date of enactment or any provider taxes that were increased (in amount or rate) after the date of enactment. The draft legislation also includes a provision that prohibits states from increasing the tax base by expanding items or services, or expanding the tax base to include providers that were previously not included. This would effectively cap provider taxes at the dollar amount in place on the date of enactment.</p><h3>Section 44133: Revising the payment limit for certain directed payments (Effective from enactment)</h3><p>Limits state-directed payments (SDPs) to no more than 100% of the published Medicare payment rate, except for those states with previously approved SDPs or with a preprint submitted to the HHS secretary prior to the date of enactment. However, states with SDPs in place could not increase the amount, and they would be required to submit a preprint for new or modified SDPs for CMS approval.</p><h3>Section 44134: Requirements regarding waiver of uniform tax requirement for Medicaid provider tax</h3><p>Modifies the requirements regarding uniformity of provider taxes and, specifically, whether a state’s tax is considered “generally redistributive.” Under the draft legislation, a tax is not considered generally redistributive if:</p><ol type="a"><li>Lower volume Medicaid health care entities are taxed at a lower rate than higher volume Medicaid health care entities.</li><li>High Medicaid volume health care entities are taxed more heavily than non-Medicaid health care entities.</li><li>The tax establishes any target or exclusion related to a health care entity’s Medicaid participation status.</li></ol><h3>Section 44135: Requiring budget neutrality for Medicaid demonstration projects under Section 1115</h3><p>Codifies CMS practice of requiring that Section 1115 waivers not increase federal spending compared to what a state would have spent without the waiver. It also requires the secretary to specify a methodology for using waiver savings for subsequent approvals.</p><h2>Subpart D: Increasing Personal Accountability</h2><h3>Section 44141: Community engagement (work) requirements (Effective Jan. 1, 2029)</h3><p>Establishes work requirements for certain Medicaid beneficiaries. Beginning Jan. 1, 2029, states are required to establish work requirements for non-exempt expansion adults aged 19-64. Individuals must work or engage in qualifying activities (e.g., community service, educational programs, job training) for no less than 80 hours/month. Mandatory exceptions include individuals under the age of 19, pregnant or post-partum women, individuals enrolled in Medicare Part A or Part B, and institutionalized individuals. Optional exceptions for short-term hardship events include individuals receiving inpatient hospital services, nursing facility services or inpatient psychiatric services; individuals in disaster zones; and individuals in areas with high unemployment. Compliance is verified during the initial eligibility determination, as well as part of subsequent eligibility redetermination, or more frequently as determined by the state. States may use data sources like payroll data to verify compliance. If the state is unable to verify that the individual has met the community engagement requirements, the individual will have 30 days to demonstrate compliance before they are disenrolled. States must determine whether an individual would qualify for Medicaid under other eligibility pathways before disenrolling. Grants totaling $100 million are provided in fiscal year 2026 for system development.</p><h3>Section 44142: Modifying cost-sharing requirements for certain expansion individuals under the Medicaid program (Effective Oct. 1, 2028)</h3><p>Requires states to impose cost-sharing requirements at an amount greater than $0 and not exceeding $35 on Medicaid expansion enrollees, as determined by the state. Total cost sharing may not exceed 5% of family income. States may allow providers to require payment as a condition of providing services. Providers may waive cost-sharing requirements on a case-by-case basis.</p><h2>Other Provisions Unrelated to Medicaid</h2><h3>Section 44304: Modifying update to the conversion factor under the physician fee schedule under the Medicare program</h3><p>Creates a single conversion factor for Physician Fee Schedule services under the Medicare program starting in 2026 (as opposed to the two distinct ones in place today: one for physicians participating in alternative payment models and another for those who are not). For 2026, the update to the single conversion factor would be 75% of the Medicare Economic Index (MEI) and, for 2027, it would be 10% of the MEI. This provision would not be retroactive.</p><h3>Section 44201: Addressing waste, fraud and abuse in the Accountable Care Act exchanges</h3><p>Codifies most of the proposed policies in the 2025 Marketplace Integrity rule, including:</p><ul><li>Shortening the Health Insurance Marketplace open enrollment period.</li><li>Removing the low-income special enrollment period.</li><li>Changes to the premium adjustment percentage methodology.</li><li>Allowing insurers to require that enrollees pay past-due premiums before renewing coverage.</li><li>Disallowing DACA recipients to receive premium tax credits or cost-sharing reductions.</li><li>Prohibiting gender-affirming care as an essential health benefit.</li><li>Greater eligibility verification processes.</li></ul><p>The draft legislation does not include the proposal to improve transparency of agency, broker and web-broker behavior, and varies in its language regarding the <em>de minimus</em> range, which impacts the value of coverage within each metal tier.</p><h2>Further Questions</h2><p>If you have further questions, please contact AHA at <a href="tel:1-800-424-4301">800-424-4301</a>.</p></div><div class="col-md-4"><a href="/system/files/media/file/2025/05/aha-summary-of-house-energy-and-commerce-legislative-language.pdf"><img src="/sites/default/files/inline-images/Legislative-Advisory-AHA-Summary-of-House-Energy-and-Commerce-Legislative-Language.png" data-entity-uuid="63b4a0af-22b3-4e00-8b0e-daef14ff0475" data-entity-type="file" alt="Legislative Advisory: AHA Summary of House Energy and Commerce Legislative Language page 1." width="695" height="900"></a></div></div></div> Tue, 13 May 2025 13:30:00 -0500 Medicare <div class="container"><div class="row"><div class="col-md-8"><p>The Centers for Medicare & Medicaid Services (CMS) April 11 issued its hospital inpatient prospective payment system (PPS) and long-term care hospital (LTCH) PPS <a href="https://www.federalregister.gov/documents/2025/04/30/2025-06271/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the" target="_blank" title="Inpatient PPS and LTCH PPS proposed rules">proposed rule</a> for fiscal year (FY) 2026. The proposed rule included changes to the Transforming Episode Accountability Model (TEAM). Comments on the proposed rule are due to CMS by June 10. The final rule will be published on or around Aug. 1, with TEAM scheduled to begin on Jan. 1, 2026.</p><p>The proposed changes to TEAM address certain model design features that had not yet been finalized. Modifications also incorporate lessons learned from previous episode-based payment models like the Comprehensive Care for Joint Replacement (CJR) model and the Bundled Payments for Care Improvement Advanced (BPCI-A) model.</p><p>The AHA issued a separate advisory on the <a href="/advisory/2025-05-07-inpatient-pps-proposed-rule-fy-2026" target="_blank" title="AHA Inpatient PPS advisory">inpatient PPS</a> and will issue an LTCH PPS advisory soon. </p><div class="panel module-typeC"><div class="panel-heading"><p><strong>KEY HIGHLIGHTS</strong></p><p>CMS’ proposed changes to TEAM would:</p><ul><li>Allow certain new hospitals to defer or delay participation for one year.</li><li>Add one new quality measure — the Information Transfer Patient Reported Outcome-based Performance measure.</li><li>Apply a neutral quality measure score for TEAM participants with insufficient quality data.</li><li>Expand the Skilled Nursing Facility (SNF) 3-day Rule Waiver.</li><li>Not establish a low-volume policy but rather seek feedback on potential policy options.</li><li>Remove the voluntary health equity plan and the health-related social needs data policies.</li><li>Remove the voluntary decarbonization and resilience initiative.</li></ul></div></div><h2>AHA TAKE</h2><p>We appreciate that CMS continues to gather stakeholder feedback and make modifications to the TEAM. The AHA has long supported the adoption of value-based and alternative payment models to deliver high-quality care at lower costs; however, we are concerned that TEAM, even with the proposed changes, may force some hospitals to assume more risk than they can manage, threatening their ability to maintain access to quality care. Thus, we continue to urge the agency to make TEAM voluntary.</p><p>The need for this model to be voluntary is underscored by certain proposals in the rule, including not establishing a low-volume threshold. This approach would put at particular risk the many hospitals that are not of adequate size or in a position to support the investments necessary to succeed.</p><p>We look forward to continuing to work with CMS to update TEAM model design features.</p><h2>WHAT YOU CAN DO</h2><ul><li><strong>Determine</strong> if your organization is included in the model by reviewing the list of selected CBSAs and <a href="https://www.cms.gov/team-model-participant-list" target="_blank" title="List of selected hospitals">hospitals</a>.</li><li><strong>Share </strong>this advisory with your chief financial officer and other members of your senior management team, as well as key physician leaders and nurse managers, to examine potential changes for your hospital.</li><li><strong>Register</strong> to participate in AHA’s member-only <a href="https://aha-org.zoom.us/webinar/register/WN_Wc8sa6GRRoeAsoBwmloTyA#/registration" target="_blank" title="AHA Member Only Webinar">webinar</a> on May 14 from 2:00-3:00 p.m. ET to discuss the proposed rule.</li><li><strong>Assess </strong>the potential impact of the proposed payment and quality changes on your Medicare revenue and operations.</li><li><strong>Submit comments to CMS with your specific concerns by June 10 at </strong><a href="http://www.regulations.gov" target="_blank" title="Website to submit comments"><strong>www.regulations.gov</strong></a><strong>. </strong>A final rule will be published on or around Aug. 1, with TEAM currently scheduled to begin on Jan. 1, 2026.</li></ul><h2 class="text-align-center">FY 2026 TRANSFORMING EPISODE ACCOUNTABILITY MODEL PROPOSED RULE<br>TABLE OF CONTENTS<br> </h2><p><strong>Key Highlights ............................................................................................................... 1</strong><br><strong>AHA Take ........................................................................................................................ 1</strong><br><strong>What You Can Do ........................................................................................................... 2</strong><br><strong>Background .................................................................................................................... 4</strong><br><strong>Participation ................................................................................................................... 4</strong><br><strong>Use of Quality Measures In Payment Determination .................................................. 6</strong><br><strong>Pricing and Payment Methodology .............................................................................. 7</strong><br><strong>Health Data Reporting ................................................................................................. 12</strong><br><strong>Referral to Primary Care ...............................................................................................13</strong><br><strong>Waivers of Medicare Program Rules — SNF 3-DAY RULE ........................................13</strong><br><strong>Voluntary Decarbonization and Resilience Initiative..................................................13</strong></p><h2>Background</h2><p>CMS has tested episode-based payment models for over a decade through BPCI, CJR, and BPCI-A. In the <a href="/system/files/media/file/2024/09/transforming-episode-accountability-model-final-rule-advisory-9-16-2024.pdf" target="_blank" title="FY 2025 IPPS final rule">FY 2025 IPPS final rule</a>, CMS established a mandatory alternative payment model, TEAM, with the intent of building upon lessons learned from these past models. TEAM is scheduled to begin on Jan. 1, 2026.</p><p>CMS proposes several modifications to TEAM in this rule.</p><h2>PARTICIPATION</h2><p><strong>Participation Deferment for New Hospitals. </strong>CMS previously finalized two ways that hospitals could be designated as TEAM participants. First, if a hospital is located in one of 188 selected core-based statistical areas (CBSAs), it will be required to participate. In total, 741 <a href="https://www.cms.gov/team-model-participant-list" target="_blank" title="741 hospitals selected for TEAM">hospitals</a> are located in the CBSAs selected for TEAM and are therefore required to participate. Second, if a hospital participates in CJR or BPCI-A, it may opt into TEAM participation until the last day of the last performance period of the respective model. In both instances, hospitals will be required to participate in all five surgical episode categories for TEAM.</p><p>While CMS did not change these two underlying ways that hospitals participate in TEAM, it does propose a deferment period for certain new hospitals. Specifically, any new hospital established in a TEAM CBSA or any hospital that begins to meet the TEAM participant definition after Dec. 31, 2024, would be eligible for a one-year deferment from participation. These hospitals would be required to participate in TEAM starting on Jan. 1 of the subsequent performance year (PY) after the one-year period expires. For example, if a new hospital opens in a TEAM CBSA on June 1, 2026, which is in the middle of PY 1, then it would not be required to begin participation in TEAM until Jan. 1, 2028 (PY 3).</p><p>Conversely, for hospitals that stop meeting the definition of a TEAM participant once the model is underway, CMS would end participation as soon as the hospital stops meeting the definition. For example, if an inpatient PPS hospital changes status to a Critical Access Hospital, then the hospital would no longer be eligible for participation in TEAM, and participation would conclude the day prior to the status change. CMS proposes to notify hospitals that they are no longer participants within 30 days of the status change.</p><p>CMS also proposes to monitor markets for potential patient shifting between TEAM participants and non-participant hospitals.</p><p><strong>Participation Tracks.</strong><em> </em>CMS previously finalized three participation tracks for TEAM, with an optional one-year glidepath to two-sided risk (safety-net hospitals have a three-year glidepath). Details of the three tracks are below.</p><table border="1" cellspacing="0" cellpadding="0"><tbody><tr><td width="94"><p class="text-align-center"><strong>Track</strong></p></td><td width="144"><p class="text-align-center"><strong>Eligible Hospitals</strong></p></td><td width="52"><p class="text-align-center"><strong>PYs</strong></p></td><td width="86"><p class="text-align-center"><strong>Type of risk</strong></p></td><td width="76"><p class="text-align-center"><strong>Stop-Gain</strong></p></td><td width="71"><p class="text-align-center"><strong>Stop-Loss</strong></p></td><td width="101"><p class="text-align-center"><strong>Composite Quality Score (CQS) Adj.</strong></p></td></tr><tr><td rowspan="2" width="94"><p>Track 1</p><p>“Glidepath”</p></td><td width="144"><ul><li>All</li></ul></td><td width="52">PY1 Only</td><td width="86">Upside Only</td><td width="76">10%</td><td width="71">N/A</td><td width="101">10%</td></tr><tr><td width="144"><ul><li>Safety-net hospitals</li></ul></td><td width="52">PY1-PY3</td><td width="86">Upside Only</td><td width="76">10%</td><td width="71">N/A</td><td width="101">10%</td></tr><tr><td width="94"><p class="text-align-center">Track 2</p></td><td width="144"><ul><li>Safety-net</li><li>Rural</li><li>Medicare-dependent</li><li>Sole community</li><li>Essential access community</li></ul></td><td width="52">PY2-PY5</td><td width="86">Two-sided</td><td width="76">5%</td><td width="71">5%</td><td width="101"><p>10% for positive adjustments</p><p>15% for negative adjustments</p></td></tr><tr><td width="94"><p class="text-align-center">Track 3</p></td><td width="144"><ul><li>All others outside Track 1 and Track 2</li></ul></td><td width="52">PY1-PY5</td><td width="86">Two-sided</td><td width="76">20%</td><td width="71">20%</td><td width="101">10%</td></tr></tbody></table><p> </p><p><strong>Medicare-dependent Hospitals.</strong><em> </em>As noted, MDHs will be eligible for track 2 of the model. However, the MDH program is currently scheduled to expire on Sept. 30, 2025. For FY 2026, CMS proposes that participants who are classified as MDHs would be eligible for track 2 participation as long as the MDH program is active at the time the participation track selections are due to CMS. The form, manner and dates for participants to select tracks are not specified in the rule but will be provided by CMS. For example, if CMS requests participants to select tracks by Nov. 15, 2026, for PY 2 and the MDH program was scheduled to expire on Dec. 31, 2026, then TEAM participants with an MDH designation that select track 2 prior to Nov. 15, 2026, would be eligible for track 2 in PY 2 regardless of whether the MDH program expired in 2026. In addition, the agency believes the impacts to be small, as many of the MDHs would still be eligible for track 2 given their location in rural areas, even if the MDH program were to expire. Specifically, CMS estimates that of the 741 hospitals that were selected for TEAM, 25 have an MDH designation, and of the 25, 21 would remain eligible for track 2 for other factors (such as being located in a rural area). The agency requests feedback on this proposal.</p><p><strong>Indian Health Service Hospitals. </strong>In the FY 2025 inpatient PPS final rule<strong>, </strong>CMS did not exempt Indian Health Service (IHS) hospitals from participating in TEAM. However, the agency did receive questions about eligibility since IHS hospitals are not paid under the outpatient PPS, and two of the TEAM episode categories (lower extremity joint replacement and spinal fusion) include outpatient episodes. The agency considered but did not propose several alternatives for IHS hospitals. For example, CMS considered but did not propose excluding IHS hospitals from episode categories that may be initiated in both inpatient and outpatient settings. The agency also considered but did not propose excluding IHS hospitals from the model. CMS seeks comments on potential options for IHS hospitals.</p><h2>USE OF QUALITY MEASURES IN PAYMENT DETERMINATION</h2><p>Last year, CMS finalized proposals to tie the performance of selected quality measures to existing hospital quality reporting and value programs (including the Hospital Inpatient Quality Reporting (IQR) program and Hospital Acquired Condition (HAC) reporting program). Specifically, the agency finalized that for the first TEAM PY, CMS will use the following three measures:</p><ul><li>For all TEAM episodes: Hybrid Hospital-Wide All-Cause Readmission Measure with Claims and Electronic Health Record Data (CMIT ID #356).</li><li>For all TEAM episodes: CMS Patient Safety and Adverse Events Composite (CMS PSI 90) (CMIT ID #135).</li><li>For LEJR episodes: Hospital-Level Total Hip and/or Total Knee Arthroplasty (THA/TKA) Patient Reported Outcome-Based Performance Measure (PRO-PM) (CMIT ID #1618).</li></ul><p>Beginning with the second PY, CMS finalized that it will no longer use the PSI 90 measure, but will instead add three other patient safety-focused measures applicable to clinical episodes:</p><ul><li>Hospital Harm eCQM: Postoperative Respiratory Failure (CMIT ID# 1788).</li><li>Hospital Harm eCQMs: Falls with Injury (CMIT ID #1518).</li><li>30-day death rates among surgical inpatients with preventable complications (Failure to Rescue, CMIT ID #134).</li></ul><p>In the FY 2026 proposed rule, CMS proposes several changes to the quality measure set, as outlined below.</p><p><strong>Alignment of Hybrid Hospital-Wide Readmission Measure to Hospital IQR Program. </strong>To better align the TEAM hospital-wide readmission (HWR) measure performance period with the Hospital IQR program, CMS proposes to change the performance period for this measure for PY 1.</p><p>In the CY 2025 outpatient PPS final rule, CMS delayed mandatory reporting of the HWR measure for the Hospital IQR program. Specifically, mandatory reporting of the HWR measure in the Hospital IQR program will begin with the period of July 1, 2025, through June 30, 2026. This would impact TEAM PY1 as the TEAM HWR performance period for PY1 was July 1, 2023, through June 30, 2024. </p><p>CMS proposes to use the mandatory reporting period from July 1, 2025, to June 30, 2026, as the TEAM PY1 performance period for the HWR measure. The agency seeks feedback on this proposal and others that should be considered.</p><p><strong>Information Transfer Patient Reported Outcome-based Performance Measure (PRO-PM). </strong>In the FY 2025 IPPS final rule, CMS indicated a desire to incorporate more patient-reported outcomes measures into TEAM. The agency also wanted to add measures capturing care in the outpatient setting for lower extremity joint replacement (LEJR) and spinal fusion episodes.</p><p>In this rule, the agency proposes to add the Information Transfer PRO-PM measure to the quality measure set. CMS proposes to include this measure starting in PY 3 (2028). The agency indicated that this timing would align with reporting for the hospital outpatient quality reporting (OQR) program, as the Information Transfer PRO-PM is scheduled for mandatory reporting beginning in CY 2027.</p><p><strong>Approach for When TEAM Participant Has No Quality Measure Performance Data. </strong>In the FY 2025 IPPS final rule, CMS did not address how quality measures would be adjusted in instances where quality measure performance data are not available for certain measures. For example, for new hospitals or for hospitals that are not voluntarily reporting the Hospital Harm-Falls with Injury or Hospital Harm-Postoperative Respiratory Failure measures, the agency did not address how quality scores would be adjusted.</p><p>In this rule, CMS proposes to assign a neutral quality score for participants who have no or incomplete quality measure data for specific quality measures. Specifically, participants would be assigned a scaled quality measure score of 50 for those measures, which is the midpoint on the Composite Quality Score scale of 0-100. The agency seeks feedback on this proposal.</p><h2>PRICING AND PAYMENT METHODOLOGY</h2><p>To calculate target prices by episode type and region, TEAM will use three years of baseline data trended forward prospectively to the performance year. Episodes will be capped at the 99th percentile for each episode type and across nine regions (identified by U.S. census divisions) to exclude outlier spending. Average standardized spending for each episode type in each region will be used as the benchmark price.</p><p>This rule proposes several policies for TEAM pricing and payment methodology.</p><p><strong>Accounting for Future Changes to MS-DRGs and HCPCS. </strong>In the FY 2025 inpatient PPS final rule, CMS acknowledged that changes to Medicare-severity Diagnosis-related Groups (MS-DRGs) and Healthcare Common Procedure Coding System (HCPCS) may impact episode pricing. Specifically, the agency received comments regarding modifications to the spinal fusion episode category, including the deletion of MS-DRGs 453-455 and the addition of eight new MS-DRGs, and how these modifications would be addressed in the TEAM. The agency indicated it would issue subsequent rulemaking to address this issue.</p><p>As such, CMS proposes a three-step approach to account for MS-DRG or HCPCS changes by remapping and adjusting episode types during the baseline period to estimate performance year costs. Specifically, the three-step process would include:</p><ul><li><u>Step 1.</u> Identify the diagnosis or procedure codes being moved from one MS-DRG to another, and then map these codes to the new MS-DRG or HCPCS code. In other words, baseline period episodes would be reassigned to the MS-DRG or HCPCS they would have received had the episode occurred in the PY. Baseline inpatient stays and outpatient procedures would be grouped into three categories:</li></ul><p>1) existing MD-DRGs or HCPCs that would be deleted and mapped to new or existing MS-DRGs.</p><p>2) existing MS-DRGs or HCPCS that would be retained, but portions of them would be mapped to new or existing MS-DRGs or HCPCS.</p><p>3) MS-DRGs or HCPCS where there would be no changes.</p><ul><li><u>Step 2.</u><em> </em>Construct episodes and target prices using the remapped MS-DRGs and HCPCSs.</li><li><u>Step 3.</u> Adjust standardized allowed amounts used in target price calculations to account for changes in fee-for-service rates between the baseline period and performance year due to changes in MS-DRG and HCPCS weights. CMS would use a scaling factor to account for differences in the relative weights of the original and re-mapped MS-DRGs.</li></ul><p>Unlike BPCI-A, CMS is not proposing a fourth step to account for setting-specific update factors. Additionally, the agency is not proposing preliminary target price updates based on FY payment rule updates. Therefore, the three-step process may not address MS-DRG changes that are implemented in the last quarter of a calendar year or the TEAM performance year.</p><p><strong>U.S. Territories and Census Division 9.</strong> CMS will provide target prices for each MS-DRG/HCPCS and region. This will result in 261 benchmark prices (29 MS-DRG/HCPCS episode types and nine regions). Benchmark prices will be calculated using all hospitals in a region, regardless of TEAM participation status. This rule proposes to formalize that hospitals in the five U.S. territories (including American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands) will be grouped in Census Division 9 for regional target price construction.</p><p><strong>Calculation and Application of Normalization Factor. </strong>Last year, CMS finalized a policy to calculate a prospective normalization factor during the creation of preliminary target prices. This will be calculated as the ratio of the average total risk-adjusted preliminary target price to the average total non-risk-adjusted preliminary target price for each episode type.</p><p>In this rule, CMS proposes to update language to clarify that the prospective normalization factor will be calculated using the benchmark prices (that is, the average non-risk-adjusted preliminary benchmark price divided by the average risk-adjusted preliminary benchmark price) rather than target prices.</p><p>Additionally, CMS proposes to calculate normalization factors at the regional level as well as at the MS-DRG and HCPCS levels. Specifically, the agency proposes to calculate normalization factors as the average regional non-risk-adjusted benchmark price divided by the average regional risk-adjusted preliminary benchmark price for each MS-DRG/HCPCS episode type. This would produce a unique normalization factor for each region and MS-DRG/HCPCS episode type for a total of 261 normalization factors (versus the 29 normalization factors previously proposed).</p><p>Finally, CMS proposes to provide two separate preliminary target prices to participants: 1) the regional average target price for each MS-DRG/HCPCS episode type before application of risk adjustment or normalization factors and 2) a TEAM participant specific preliminary target price including the TEAM participant’s average risk adjustment factors and the regional MS-DRG/HCPCS normalization factors.</p><p><strong>Prospective Trend Factor.</strong> CMS previously finalized its policies for a prospective trend factor and added a 3% capped retrospective trend factor as a guardrail. However, it now proposes several changes to the prospective trend factor. First, CMS proposes to change the calculation of the prospective trend factor from a percentage change between baseline year 1 (BY1) and BY3 to a log-linear model that would fit the model to logarithmically transformed values of average regional MS-DRG spending for each of the BYs. Second, the agency adds two years of episode spending data to the calculation of the prospective trend factor. The two years would be the two years immediately prior to the three-year baseline period. The two additional years would only be used for the calculation of the prospective trend factor.</p><p align="left">In addition, the agency proposes to use a blend of regional and national trend factors in the calculation of preliminary target prices. The national prospective trend factor would be calculated in the same manner as the regional trend factors using a linear regression of logarithmically transformed national average MS-DRG spending.</p><p>Finally, CMS proposes changes to the application of the outlier spending cap. In the FY 2025 inpatient PPS final rule, CMS finalized that the high-cost outlier spending cap would be applied to the 99<sup>th</sup> percentile of regional spending for a given MS-DRG/HCPCS episode type in a given region <em>across all 3 years of the baseline period. </em>However, it now proposes to calculate the 99<sup>th</sup> percentile for a given MS-DRG/HCPCS episode type in a given region for <em>each of the baseline and trend years</em>. The agency requests feedback on this proposed change as well as other approaches to calculating the 2-year trend factor and weighting the trend factor.</p><p><strong>Standardizing Area Deprivation Index (ADI).</strong> Last year, CMS finalized a social need risk adjustment factor to account for multiple beneficiary markers of social risk. This would be a binary measure if beneficiaries met any one of three categories to include:</p><ul><li>Dual-eligibility status.</li><li>Residing in a census block group that exceeded the threshold for ADI (80th  percentile nationally or 8th decile for the state).</li><li>Eligibility for Part D Low-income Subsidy.</li></ul><p>CMS proposes several changes to this social-need risk adjustment factor. First, the agency proposes to rename the social need risk adjustment factor to the beneficiary-economic risk adjustment variable. Additionally, CMS proposes to modify the deprivation index methodology from the ADI to the Community Deprivation Index (CDI). The CDI would be a factor-weighted composite measure of 18 variables from the Census Bureau and is being constructed as part of the Accountable Care Organization Realizing Equity, Access, and Community Health model. The agency proposes to maintain the use of percentile rankings relative to the nation and the 80th percentile threshold for the measure.</p><p>With the proposed transition to the CDI, the agency also proposes to only use national-level CDI rankings as opposed to national and state-level rankings, as would have been the case with the ADI.</p><p>The agency seeks comment on renaming the social need risk adjustment factor to the beneficiary-economic risk adjustment variable and transitioning from ADI to the CDI. CMS also requests feedback on whether it should remove dual eligibility from the economic risk adjustment factor.</p><p><strong>Hierarchical Condition Categories (HCC) in Risk Adjustment. </strong>CMS previously proposed but did not finalize the look-back period for the HCC to be used in the TEAM risk adjustment calculation. As such, it now has a 180-day look-back for each beneficiary beginning the day prior to the anchor hospitalization or anchor procedure. CMS also proposes that the beneficiary must meet criteria for TEAM inclusion for the entire 180-day look-back period.</p><p>The agency considered several other timeframes, including 90-day, 120-day, 270-day or 365-day look-back periods. The agency did not consider periods longer than one year, although it acknowledges that there is limited research about the most appropriate timeframe for HCC look-back. Therefore, CMS solicits feedback on the proposed 180-day look-back period and alternatives that should be considered.</p><p>The agency also proposes to use HCC version 28 instead of HCC version 22. HCC version 22 was the version used for BPCI-A and is the basis for which the TEAM risk adjustment was originally constructed. However, it is not the most recent version and was based on ICD-9 data. CMS proposes an updated mapping of episode category-specific risk adjustors in table XI.A.-011 (page 1018 of the display copy of the rule).</p><p><strong>Low-volume Thresholds. </strong>CMS previously proposed that participants with fewer than 31 episodes across all episode categories would still be included in the model but would be subject to track 2 beginning in PY 2 (lower stop-gain/stop-loss thresholds). However, based on stakeholder comments that this policy was insufficient, it did not finalize this low-volume hospital policy and instead indicated it would propose a new policy in future rulemaking.</p><p>In this rule, CMS proposes to have no low volume policy given that PY1 is upside only. It is seeking comments on potential future low-volume policies, including:</p><ul><li>A uniform low-volume threshold for across episode categories in the baseline period for a given PY (similar to BPCI-A).</li><li>Different low-volume thresholds for each episode category. CMS stated it is considering 91, 61, 51, 41, 21 and 11 cases.</li><li>Limiting the scope of the low-volume policy to safety net and rural hospitals only.</li><li>Not holding TEAM participants that meet low-volume criteria accountable for that episode category for the performance year.</li><li>Lowering stop-loss/stop-gain limits for low-volume hospitals (e.g., to 5%, 3%, 2% or 1%).</li></ul><p><strong>Aligning Date Range in the Baseline and Performance Years and Timing of Reconciliation. </strong>In the FY 2025 IPPS final rule, CMS finalized that TEAM preliminary target prices would be based on a 3-year rolling baseline period with episodes attributed based on the episode start date. So, an episode beginning in December 2022 with a discharge date of January 2023 would be attributed to BY 1 for PY 1. However, for PYs, CMS finalized that attribution would be based on the date of discharge for the anchor hospitalization or procedure to assign target prices. </p><p>To better align BY and PY methodologies, the agency proposes to use the same methodology for baseline year attribution to calculate preliminary target prices and align attribution based on the date of discharge. For example, an episode with an anchor hospitalization beginning in December 2022 with an anchor hospitalization discharge date in January 2023 would be included in the baseline for both PY1 (BY2 of baseline from Jan. 1, 2022, to Dec. 31, 2024) and PY2 (BY1 of baseline from Jan. 1, 2023, to Dec. 31, 2025).</p><p><strong>Converting Target Prices and Reconciliation Amounts to Real Dollars. </strong>TEAM uses standardized allowed dollar amounts in the calculation of performance year spending and reconciliation, as opposed to real nominal dollar amounts reflected on claims. This removes adjustments to payment amounts for Medicare incentive programs (like the HAC reduction program) and geographic factors (like the hospital wage index). However, the agency did not create policies for converting standardized target prices and reconciliation amounts back to real dollars. As such, CMS requests feedback on whether alternatives should be considered.</p><p>Similarly, CMS requests feedback on whether it should convert post-episode spending amounts to real dollars. In the FY 2025 inpatient PPS final rule, CMS finalized that if a TEAM participant’s average 30-day post-episode spending is greater than three standard deviations above the regional average 30-day post-episode spending, then the amount above the threshold would be subtracted from the reconciliation amount for that PY. In the FY 2026 inpatient PPS proposed rule, CMS solicits feedback on whether the post-episode spending amounts should be converted to real dollars to maintain consistency with the target price and reconciliation. In instances where a TEAM participant’s average post-episode spending in the MS-DRG/HCPCS episode type exceeds the region’s threshold, CMS solicits feedback as to whether or not the amount above the threshold should be converted from standardized to real dollars using a hospital-level real-to-standardized spending ratio. </p><p>Finally, the agency requests feedback on its consideration to determine post-episode spending at the MS-DRG-<em>hospital</em> level rather than the episode spending level. The agency stated that this was considered because average post-episode spending is more representative of consistent patterns in the delay of medically necessary services in the post-discharge period by a hospital, and hospitals do not have the same incentives to not exceed expected post-episode spending that they have with in-episode spending.</p><h2>HEALTH DATA REPORTING</h2><p>CMS proposes several changes in health data reporting to reflect administration priorities and address concerns about placing additional burdens on TEAM participants in a mandatory model.</p><p>Specifically, the agency proposes to:</p><ul><li>Remove the voluntary health equity plan and the health-related social needs data policies from TEAM, including all references to health equity plans.</li><li>Remove the “health equity reporting” title and replace it with “health data reporting.”</li><li>Remove the definition for “health equity goal,” “health equity plan,” “health equity plan strategy,” “health equity plan performance measure,” and “underserved community.”</li><li>Remove the voluntary collection of health-related social needs screening and reporting, including the screening for social drivers of health measure and the screen-positive rate for social drivers of health measure.</li><li>Update the name of a beneficiary identifiable data variable from “gender” to “sex.”</li></ul><p>CMS does not propose any changes to the voluntary collection of demographic data. While the agency does not specify the exact variables that TEAM participants will report for demographic data collection, the agency does clarify that it will not be collecting variables such as sexual orientation, race, ethnicity or gender identity.</p><h2>REFERRAL TO PRIMARY CARE</h2><p>Currently, TEAM participants will be required to include a referral to a supplier of primary care services as part of hospital discharge planning. Referrals will need to be made prior to discharge from the anchor hospitalization or procedure and will need to be in accordance with beneficiary choice requirements. However, the agency seeks feedback on whether or not requiring beneficiaries to be referred back to a supplier of primary care services with whom they have an established relationship could disrupt competition and/or limit access to high-value care.</p><h2>WAIVERS OF MEDICARE PROGRAM RULES — SNF 3-DAY RULE</h2><p>TEAM includes a waiver of the three-day SNF rule to allow TEAM participants to send eligible TEAM beneficiaries to qualified SNFs without meeting the requirement for a three-day inpatient hospital stay. This waiver excludes swing beds. However, stakeholders have continued to express concerns surrounding post-acute access in rural and underserved areas. As such, CMS proposes to allow TEAM participants to use the SNF three-day waiver for TEAM beneficiaries discharged to hospitals and critical access hospitals providing post-acute care under swing bed arrangements. CMS clarifies that the minimum three-star rating requirement applies only if the provider furnishing SNF services is eligible for the CMS five-star quality rating system.</p><h2>VOLUNTARY DECARBONIZATION AND RESILIENCE INITIATIVE</h2><p><u></u></p><p>CMS proposes to remove the voluntary Decarbonization and Resilience Initiative from TEAM.</p><h2>FURTHER QUESTIONS</h2><p>Please contact Jennifer Holloman, AHA’s senior associate director of physician and alternative payment policy, at (202) 626-2320 or <a href="mailto:jholloman@aha.org">jholloman@aha.org</a>.</p></div><div class="col-md-4"><a href="/system/files/media/file/2025/05/fy-2026-transforming-episode-accountability-model-proposed-rule-advisory-5-7-2025.pdf"><img src="/sites/default/files/2025-05/cover-fy-2026-transforming-episode-accountability-model-proposed-rule-advisory-5-7-2025.png" data-entity-uuid data-entity-type="file" alt="Advisory Cover Image" width="NaN" height="NaN"></a></div></div></div> Wed, 07 May 2025 11:11:54 -0500 Medicare /lettercomment/2025-05-01-aha-comments-medicare-transaction-facilitator-under-medicare-drug-price-negotiation-program <p>May 1, 2025<br><br>Kim Brandt<br>Chief Operation Officer and Deputy Administrator of the Center for Medicare <br>Centers for Medicare & Medicaid Services <br>7500 Security Boulevard <br>Baltimore, MD 21244</p><p><em><strong>Re: Medicare Transaction Facilitator for 2026 and 2027 under Sections 11001 and 11002 of the Inflation Reduction Act (IRA) Information Collection Request under the Paperwork Reduction Act (PRA) (CMS-10912)</strong></em></p><p>Dear Ms. Brandt:</p><p>On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, and our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the ���������� Association (AHA) appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services (CMS) information collection request regarding the Medicare Transaction Facilitator (MTF) under the Medicare drug negotiation program. </p><p>The AHA strongly supports the goal of reining in the exorbitant costs of prescription drugs in the U.S. However, <strong>we remain concerned that the retrospective process established by the prior administration to effectuate the maximum fair price (MFP) for selected drugs undermines congressional intent and impedes the agency’s goals of lowering drug prices for patients and providers. We believe that a prospective approach requiring all parties to participate in one standardized process overseen by CMS is the most efficient and effective way to advance the goals of the Inflation Reduction Act (IRA) and the 340B program.</strong> </p><p>The MTF is intended to support the exchange of data among dispensing entities, plan sponsors and drug companies to implement drug discounts. Under guidance adopted by the prior administration, the MTF also serves as an optional mechanism to facilitate payment between drug manufacturers and dispensing entities. Although dispensing entities are required to participate in the MTF payment module, drug manufacturers are not.  </p><p><strong>The retrospective process is complex, overly burdensome and operationally unworkable, particularly with respect to the critical 340B Drug Pricing Program.</strong> By allowing drug manufacturers to deny upfront access to the MFP or the 340B price and forcing dispensing entities to participate in a retrospective process designed by the manufacturers themselves, this process unfairly disadvantages patients and the providers who serve them in favor of the drug manufacturers whose pricing practices necessitated legislative intervention in the first place. Requiring providers to pursue rebates and 340B discounts after the fact, rather than mandating that manufacturers offer the lower negotiated prices upfront, runs counter to the established structure and intent of the 340B program. This needlessly complicated framework has already triggered a wave of avoidable litigation by creating a direct and unnecessary conflict between the drug price negotiation and 340B programs — an outcome not required, nor contemplated, by the statute. </p><p>Fortunately, CMS can now course correct the previous administration’s misguided approach and help ensure the Medicare drug discount program fully achieves its goals of delivering lower prices to the patients and providers who count on these critical drugs. We appreciate the Trump administration’s efforts to reduce unnecessary administrative burden and promote efficiency across the federal government and private sector. Building on that intent, CMS can simplify the complex retrospective process by requiring all parties to participate in a single, standardized payment system administered by the MTF. This approach would promote strong oversight while ensuring both efficiency and accountability. <strong>We strongly urge CMS to finalize a process that ensures efficient and prospective access to the MFP and 340B price for all dispensing entities furnishing selected drugs to eligible Medicare patients. In addition, we urge the agency to impose strict accountability measures to ensure drug manufacturer compliance with applicable laws.</strong></p><h2>CONCERNS WITH THE IMPLEMENTATION OF THE DRUG PRICE NEGOTIATION PROGRAM</h2><p>The Inflation Reduction Act of 2022 (IRA) included several provisions authorizing the secretary of Health and Human Services (HHS) to establish a drug price negotiation program (the program) under which the secretary enters into agreements with manufacturers to negotiate lower prices for certain prescription drugs on behalf of individuals enrolled in the Medicare program. While the AHA supports CMS’ efforts to negotiate lower prices for certain high expenditure drugs on behalf of Medicare beneficiaries, we believe a prospective, standardized approach administered under the oversight of the MTF is the most effective way to meet the program’s goals and ensure timely patient access to needed medications.  </p><p>The IRA directs the HHS secretary to establish procedures to ensure the MFP of a drug is applied before “ … any coverage or financial assistance under other health benefit plans or programs that provide coverage or other financial assistance for the purchase or provision of prescription drug coverage on behalf of maximum fair price eligible individuals … and any other discounts.”<sup>1</sup>   These administrative requirements are best satisfied through a process that ensures prospective access to the MFP. Unfortunately, the guidance issued by CMS focused on two retrospective processes, with little mention of a prospective process. The retrospective process finalized by the agency to effectuate the MFP is counter to the intent and goals of the program and unfairly disadvantages providers and other entities that care for Medicare patients in favor of drug manufacturers, which are the entities responsible for setting high drug prices. In short, this approach amounts to a “pay and chase” model in which providers serving the most vulnerable populations will be forces to pay excess amounts to multi-billion dollar drug companies only to have to attempt to recoup their statutorily-owed discount later. </p><p>We appreciate the agency’s efforts to balance the interests of a diverse set of stakeholders by devising a mechanism that would enable dispensing entities to access the MFP. We also appreciate the agency addressing hospitals’ concerns about sharing data directly with drug companies by establishing a neutral third-party MTF to facilitate the exchange of data and payment between dispensing entities, plan sponsors and drug companies. We remain concerned, however, that this elaborate process will put providers in the position of chasing rebates from drug manufacturers instead of requiring manufacturers to make the lower negotiated prices available upfront. </p><p>We are further concerned that CMS’ current approach will allow each drug company to establish a unique payment arrangement — and unilaterally change the scope of any such arrangement, so long as 90-day notice is given — creating excessive burden and uncertainty for hospitals and other dispensing entities. While the agency requires drug companies to participate in the MTF data module (DM), it does not require them to participate in the MTF payment module (PM). As a result, each drug company can set up its own unique payment process and then change the process on a whim, leaving hospitals and other dispensing entities with the administrative burden of managing each unique process to access discounts. This approach could prove especially untenable for hospitals and other dispensing entities that may have established annual or longer-term contracts with vendors and third-party administrators to assist with claims processing. </p><p>In addition to massive operational costs and related burdens, having so many different processes and also frequently changing processes will complicate hospitals’ ability to track whether they were actually paid within the 14-day payment window and paid the full amount owed. Hospitals report that tracking this information across multiple different systems would be costly technologically and extremely burdensome on staff, as in many cases it would need to be done manually. If these barriers left hospitals unable to identify and act on delayed payments, they could face cash flow and budgetary constraints.</p><p><strong>To avoid these issues, we urge CMS to require drug companies to participate in the MTF PM to standardize the payment process across drug companies, and enable dispensing entities to track refund receipts using a less burdensome and more timely process. Alternatively, we urge the agency to disallow drug companies from unilaterally changing alternative payment arrangements once established and approved by CMS.</strong></p><p>In addition to the unnecessary complications created by the process finalized earlier by CMS, the agency’s retrospective approach increases the risk of noncompliance on the part of drug manufacturers and diminishes the value and impact of the drug negotiation process. By not requiring drug manufacturers to participate in the MTF PM, we are concerned there will not be sufficient oversight to ensure drug manufacturers are complying with the law. We urge CMS to establish a more robust oversight and enforcement mechanism that conforms with specific penalties for noncompliance. <sup>2</sup></p><h2>RETROSPECTIVE MFP PROCESS ENABLES DRUG COMPANY MISUSE OF THE 340B PROGRAM</h2><p>The retrospective process fundamentally changes the 340B program, stripping vital resources from providers caring for the most vulnerable communities. The 340B program is a critical resource for participating hospitals and other covered entities to stretch their resources to maintain, improve and expand access to care for the patients and communities they serve. From the start of the 340B program, participating entities purchased covered outpatient drugs at an upfront discounted price, which enables the entity to generate price savings that are used to support a range of patient programs and services, such as behavioral health, medication-assisted treatment and diabetes education. However, any retrospective model to access 340B discounted pricing would jeopardize the ability of 340B covered entities to support access to these important patient programs. <strong>We remain deeply concerned that the prior administration’s final guidance on the Medicare drug negotiation program has allowed drug companies to wrongly justify fundamental changes to the 340B program, changing it from an upfront discount to a retrospective rebate. <sup>3</sup></strong></p><p>The IRA requires that drug manufacturers allow dispensing entities that participate in the 340B program access to the lower of the 340B price or the MFP for selected drugs.<sup>4</sup>  However, the federal government has long interpreted 340B statute as a prospective discount program, authorizing the secretary to enter into pharmaceutical pricing agreements (PPA) with manufacturers where the amount paid by 340B covered entities to the manufacturer to acquire a covered outpatient drug does not exceed the 340B ceiling price<sup>.5</sup>  Long-standing federal guidance interpreting its responsibilities under the 340B statute sets up a process that allows 340B covered entities to purchase covered outpatient drugs at an upfront discounted price.<sup>6  </sup></p><p>In its final guidance, CMS acknowledged potential implications for access to 340B pricing given that drug companies can choose to make access to the MFP available prospectively or retrospectively; however, the agency does not address this issue any further. CMS’ silence on this issue appears to have been perceived by drug companies as a “green light” to pursue a 340B rebate model whereby drug companies will make the 340B price available in a retrospective manner similar to the agency’s process for making the negotiated MFP available through the MTF DM and PM. To date, we have seen five drug companies (Johnson & Johnson, Novartis, Eli Lilly, Bristol Meyers Squibb and Sanofi) announce they will no longer provide the upfront 340B discounted price and instead will unilaterally implement a retrospective rebate model. We anticipate more drug companies will pursue a similar approach.<sup>7</sup>  </p><p>The 340B statute authorizes only the secretary of HHS to approve any model that alters access to 340B pricing for covered entities. Though the secretary has not approved any of these rebate models and HRSA has notified these companies that their efforts violate the 340B statute, all five companies have sued the federal government to pursue their rebate model. In those lawsuits, all five companies cited the prior administration’s final guidance as a reason necessitating the establishment of a 340B rebate model. </p><p>We do not see a viable path under the statutory requirements of both the IRA and 340B programs that allow for retrospective access to the MFP but prospective access to the 340B price. It appears that CMS does not either since it does not provide such a process in its guidance. We believe that implementing a prospective process is the only viable way to protect upfront access to the 340B price while also ensuring that 340B covered entities receive the lower of the 340B price or the MFP. <strong>We urge CMS to implement a process for prospective access to the MFP, aligning with the federal government’s historic interpretation of the 340B statutory requirements and balancing the interests of Medicare patients, dispensing entities and manufacturers under the program.</strong></p><h2>IMPACT ON THE 340B PROGRAM</h2><p><strong>We cannot underscore enough the damage a retrospective 340B rebate would have on 340B hospitals and the patients they serve, including undermining the purpose of the program and the benefits it affords to patients and communities across the country. </strong></p><p>The AHA conducted a survey in March 2025 to better understand the impact of a retrospective 340B rebate model on its members. The findings from this survey include: </p><ol><li>Ninety-nine percent of hospitals indicated that a retrospective rebate model would limit their ability to fund critical patient programs and services. The rebate models would create access issues for patients who are unable to access certain 340B drugs because the hospital would be unable to stock them. Many hospitals reported that the requirement to purchase drugs at a higher price could lead to an inability to purchase certain drugs in the quantities required to meet patient demand. </li><li>The rebate model would require 340B hospitals to subsidize millions of dollars to drug companies by purchasing certain outpatient drugs at a higher price (e.g. wholesale acquisition cost). Some hospitals have indicated this alone could result in more than $10 million in added costs. Shifting this kind of financial liability to organizations operating on thin or negative margins and on the front lines of serving our most vulnerable populations, including millions of Medicare beneficiaries, could directly impact their ability to meet patient needs. This could harm patient access to care while also directly undermining the purpose of the 340B program. </li><li>More than 200 hospitals reported that floating millions of dollars to drug companies would reduce their cash on hand enough to risk violating their bond covenants. 340B hospitals rely on bond financing to raise money for new projects that enhance patient care. Those bonds typically include covenants requiring hospitals to maintain a certain amount of days of cash on hand. Violating those covenants would have calamitous effects on 340B hospitals, including downgrades in credit ratings, increased borrowing costs, lack of access to state-of-the-art medical equipment, and more.</li><li>One hundred percent of hospitals reported increased costs due to operational impacts of the rebate model. The model would create an enormous administrative burden for 340B covered entities, which would bear the responsibility of providing claims-level data elements to drug companies or risk not getting paid. Some hospitals have indicated that establishing the infrastructure for sharing these data is not only costly to establish, but some of the data being required by drug companies may be impossible to provide in their required timeframes. It effectively floats millions of dollars to drug companies without any assurance of being paid the discounts that are owed under the law. In addition, the 340B rebate models proposed so far are each markedly different, requiring different data elements and creating different timelines for 340B covered entities. If implemented, this will create an additional layer of burden and uncertainty for 340B hospitals.</li></ol><p>An unapproved 340B retrospective rebate model wrests oversight of the program away from HHS and places it in the hands of self-interested drug companies in ways neither Congress nor the department intended. The model is also in direct opposition to the administration’s goals of reducing burdensome administrative requirements that prevent Americans from accessing the care they need to live their healthiest lives.<strong> We strongly urge CMS to revisit its guidance and make clear that drug companies cannot misuse their obligations under the IRA to create an unlawful rebate model in the 340B program.</strong><br> </p><h2>PROPOSED APPROACH TO ENSURING PROSPECTIVE ACCESS TO MFP AND 340B PRICING </h2><p>Given the concerns outlined above, we urge the agency to adopt an approach that ensures prospective access to the MFP for any dispensing entity furnishing drugs to an eligible Medicare patient. In the case of a dispensing entity that is eligible and participating in the 340B program, we ask the agency to ensure that the 340B entity retains its ability to access the upfront 340B discounted price. Below, we propose one such process that would achieve these goals, is operationally feasible, and adheres to the statutory requirements, including the need to protect against the 340B nonduplication provision in section 1193(d)(1) of the Act. </p><p><em>Purchasing at the prospective MFP or 340B price</em>. Under our proposed approach, any dispensing entity would have prospective access to the MFP price when purchasing a selected drug for any eligible Medicare patient. Any dispensing entity participating in the 340B program would retain its ability to purchase a selected drug at the 340B price for all eligible Medicare patients. This likely would likely require dispensing entities to maintain separate inventories for these selected drugs. Dispensing entities, particularly those that participate in 340B, already operate separate 340B and non-340B inventories for their drugs either through separate physical inventories or through a virtual replenishment model facilitated by a third-party administrator (TPA). Since the statute requires the HHS secretary to publish the list of selected drugs far in advance of the applicability period, it would be feasible for dispensing entities to establish a separate physical or virtual inventory for these drugs, which could be facilitated by their TPAs if necessary.</p><p><em>MTF facilitates refund payments from manufacturers to dispensing entities</em>. If the MFP is lower than the 340B price for the selected drug, the MTF should then transmit to the manufacturer only the data required to verify the pricing. It is important that the MTF limits the ability of the manufacturer to receive data that is beyond the scope of effectuating the MFP and could be used by the manufacturer for its own financial advantage. Upon receipt of the data elements from the MTF, the manufacturer would have a 14-day timeframe, as proposed in section 40.4 of the agency’s draft guidance, to verify the pricing data and direct the MTF to facilitate payment to the dispensing entity. For the MTF to facilitate timely payment, we propose that dispensing entities share banking information only with the MTF. At the same time, we propose the MTF require each drug manufacturer to submit funds necessary to process any required refunds for the difference between the 340B price and MFP in a non-interest-bearing escrow account to be held by the MTF. The concept of CMS facilitating an escrow account is not without precedent as the agency uses escrow accounts in managing refunds under the Medicare shared savings program. Upon manufacturer verification of pricing or the 14-day timeframe, whichever occurs sooner, the MTF should be automatically authorized to deduct the appropriate amount from the manufacturers escrow account and issue payment to the dispensing entity. We believe this both ensures timely payment and minimizes burden for dispensing entities by not requiring them to share banking information with multiple manufacturers. As a final step, the MTF would notify the dispensing entity that the MFP price of the drug has been verified by the manufacturer and a refund has been issued so that the covered entity and/or TPA can ensure proper inventory management under a physical or virtual replenishment model.</p><p><strong>In conclusion, we appreciate the opportunity to provide feedback on this critically important program. We urge this administration to reconsider the approach previously developed, and simplify the payment process to better align with current law and congressional intent. It is of the utmost importance that the program is implemented in a way that carefully balances the interests of patients, providers, the government and manufacturers. We believe that a prospective approach requiring all parties to participate in one standardized process overseen by CMS is the most efficient and effective way to ensure patients will benefit from access to lower cost drugs. </strong></p><p>We welcome the opportunity to discuss our comments or any other aspects of this program in greater detail. If you have any further questions, please feel free to contact Megha Parikh, AHA associate director of policy and analytics, at <a href="mailto:mparikh@aha.org" target="_blank" title="Megha Parikh">mparikh@aha.org</a>.</p><p>Sincerely,</p><p>Ashley Thompson<br>AHA Senior Vice President, Public Policy Analysis and Development <br>__________</p><p><sup>1</sup> Section 1196(a)(1) of the Social Security Act (42 U.S.C. 1320f-5(a)(1)).<br><sup>2</sup> See section 1197 of the Social Security Act (42 U.S.C. 1320f-6).   <br><sup>3</sup> <a href="https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf" target="_blank">https://www.cms.gov/files/document/medicare-drug-price-negotiation-final-guidance-ipay-2027-and-manufacturer-effectuation-mfp-2026-2027.pdf</a> <br><sup>4</sup> See section 1193(d) of the Social Security Act (42 U.S.C. 1320f-2(d))  <br><sup>5</sup> See section 340B(a)(1) of the Public Health Service Act (42 U.S.C. 256b(a)(1)).  <br><sup>6</sup> Limitation on Prices of Drugs Purchased by Covered Entities, 58 Fed. Reg. 27289, 27291 (May 7, 1993); Final Notice Regarding Section 602 of the Veterans Health Care Act of 1992 Entity Guidelines, 59 Fed. Reg. 25110, 25113 (May 13, 1994).  <br><sup>7 </sup>For example, see Sanofi’s proposed model: <a href="https://www.statnews.com/wp-content/uploads/2024/11/Sanofi_Credit_Model_Policy_Letter_11.22.2024_.pdf" target="_blank">https://www.statnews.com/wp-content/uploads/2024/11/Sanofi_Credit_Model_Policy_Letter_11.22.2024_.pdf</a><br><br> </p> Thu, 01 May 2025 15:36:00 -0500 Medicare /news/headline/2025-04-30-report-hospitals-and-health-systems-squeezed-persistent-economic-challenges <p>The AHA April 30 released a <a href="/costsofcaring">report</a> highlighting how hospitals and health systems continue to experience significant financial headwinds that can challenge their ability to provide care to their patients and communities. The report outlines the financial burden of heightened expenses hospitals have faced in recent years in caring for patients, as well as the increasing strain on the field.  <br> <br>It explains how hospitals have raised wages to recruit and retain staff amid workforce shortages and how Medicare and Medicaid continue to underpay hospitals for patient care as shortfalls worsen. Other findings include how practices of certain Medicare Advantage plans exacerbate hospitals’ financial burden, and that tariffs on medical imports could significantly raise costs for hospitals as nearly 70% of medical devices marketed in the U.S. are manufactured exclusively overseas. <br><br>“This report should serve as an alarm bell that a perfect storm of rising costs, inadequate reimbursement, and certain corporate insurer practices are jeopardizing the ability of hospitals to deliver high-quality, timely care to their communities,” <a href="/press-releases/2025-04-30-new-aha-report-hospitals-and-health-systems-squeezed-persistent-economic-challenges">said</a> AHA President and CEO Rick Pollack. “With so much at stake, policymakers must recommit to making preserving access to hospital care a national priority.” </p> Wed, 30 Apr 2025 14:52:51 -0500 Medicare