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CMS Further Restricts Pass-Through Payments

The Centers for Medicare & Medicaid Services (CMS) on July 29 issued an informational bulletin regarding states’ ability to increase or add new pass-through payments under Medicaid managed care plan contracts.

The bulletin also describes the agency’s plan to monitor the transition of pass-through payments to provider reimbursement based on delivery of services, utilization, and the outcomes and quality of the delivered services.

In the Medicaid managed care final rule, CMS maintained its prohibition on directed payments to providers. However, the agency allowed for a 10-year transition period in which states still could make pass-through payments to hospitals. CMS did not specify in the final rule whether pass-through payments must currently exist to qualify for the transition. As such, the agency has received inquiries about the integration of new or increased payments into managed care contracts.

Noting concerns with actuarial soundness and other complications, the agency will address limitations to the transition period in future rule-making, linking pass-through payments to the transition period amounts that were in place at the time the managed care final rule went into effect — July 5.

CMS will also use its contract and rate certification approval processes to closely monitor pass-though payments. CMS will require states to provide details showing that these payments still ensure that plan capitation rates are consistent with applicable rules and are actuarially sound.

Contact Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

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

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