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CMS Finalizes 2016 Medicare Advantage Payment Policies

The Centers for Medicare & Medicaid Services (CMS) has finalized payment policies for Medicare Advantage (MA) plans for calendar year 2016. In particular, CMS finalized its proposal to adjust fee-for-service (FFS) claims from 2009-2013 when calculating 2016 MA payment rates. This adjustment will account for the Medicare disproportionate share hospital (DSH) payment methodology that was mandated by the Affordable Care Act (ACA).

The methodology, which was implemented in 2014, bases 75 percent of Medicare DSH payments on a formula that takes into account each hospital’s level of uncompensated care relative to other hospitals. Because this portion of the Medicare DSH payment is no longer tied to services provided, it would be excluded from determining MA rates, rendering them artificially low. To adjust for this, CMS will use historical claims from 2009-2013 to calculate the 2016 MA capitated payments. This adjustment improves the accuracy of the payments to hospitals.

Additionally, CMS was considering reducing the weights of a number of measures in the MA star rating system based on evidence indicating sociodemographic status (SDS) risk-adjustment may be warranted. The star rating system rates MA plans’ performance on select quality measures. However, in response to a number of comments against risk-adjusting for SDS, the agency did not finalize its proposal. The agency did reaffirm its commitment to further study and assess the appropriateness of adjusting for SDS in the future.

Please contact Beth Feldpush, DrPH, senior vice president, advocacy and policy, at bfeldpush@essentialhospitals.org or 202.585.0111 with questions.

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About the Author

Gontscharow is a senior policy analyst for America's Essential Hospitals.