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Sign Hospital Letter to Stop DSH Cuts

Association Urges CMS to Delay, Reconsider New Directed Payment Policies

September 16, 2024
Julie Kozminski

America’s Essential Hospitals has urged the Centers for Medicare & Medicaid Services (CMS) to delay and reconsider two new policies that create barriers to Medicaid state directed payments (SDPs) and disproportionately harm essential hospitals and other safety net providers.

The association shared its concerns in a Sept. 16 letter on the Medicaid and CHIP Managed Care Access, Finance, and Quality final rule, which unexpectedly eliminated separate payment terms and prohibited interim payments based on historical utilization in SDP programs. The changes in the April 22 final rule are scheduled to take effect for rate years that begin after July 9, 2027.

In its letter, the association describes the important role SDPs play helping to close payment equity gaps for essential hospitals. Separately, in a Sept. 12 policy brief on SDPs, the association detailed other examples of how SDPs enable hospitals to invest in initiatives to improve access and quality.

The association’s letter describes why allowing states to maintain separate terms for SDP payments to health plans is more accurate, efficient, and effective. In 2021, more than half (55 percent) of SDPs used separate payment terms, and CMS noted that commenters reported that these arrangements “provide greater transparency, ensure that payments flow to providers as intended, minimize administrative burden for states, and make it easier for states to track SDPs.”

America’s Essential Hospitals also describes how interim payments based on historic utilization help states make more timely and predictable payments to providers. These interim payments ultimately are reconciled to actual utilization, so eliminating them does not change the amount of SDPs providers are eligible to receive. However, eliminating interim payments would substantially delay payments, causing an additional financial burden on safety net providers that already operated on narrow or negative margins, such as essential hospitals.

The letter urges CMS to delay enforcement of these new barriers and to develop a workable alternative more consistent with the administration’s health equity goals. In particular, the association calls on CMS to consult with essential hospitals to better understand the practical implications of new SDP policies.

Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.

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