Ending Point of PHE: Preventing Disintegration While Unwinding
The end of the COVID-19 pandemic has ushered in a new era for the healthcare sector, with significant changes to funding and policies looming on the horizon.
States are being urged to adjust their fiscal forecasting, programme utilization, staffing, and other elements that may be affected by the anticipated reduction in Medicaid populations and possible Medicare cuts. Workforce shortages and training gaps, exacerbated by high turnover and wage adjustments for staff retention and traveling nurse parity, are also anticipated.
The Centers for Medicare & Medicaid Services (CMS) have announced several measures to minimise the economic impact of lifting waivers and permission changes. These include finalising updated Medicare Advantage and Part D payment policies to ensure stable premiums and benefits, expanding procedural payment adjustments such as phasing out the hospital inpatient-only list and revising criteria for ambulatory surgery centre procedures, increasing payments to skilled nursing facilities by 3.2%, and implementing changes to Part D benefits under the Inflation Reduction Act, including capping out-of-pocket prescription drug costs at $2,000.
Hospitals, health systems, and other providers should assess their front-end revenue cycle preparedness for coverage changes, including enhancing real-time eligibility capabilities and updating self-pay policies. CMS has been holding monthly calls with stakeholders and providing overall guidance. Its provider-specific fact sheets indicate which waivers and flexibilities have already expired, have been made permanent, or will sunset when the Public Health Emergency (PHE) ends.
However, the possibility of hospital-at-home services and telehealth flexibilities going away in 2025 is a concern. The unwinding of these changes will impact various sectors of the healthcare ecosystem, including states, patients, healthcare providers, Medicaid agencies, hospitals, home- and community-based services providers, skilled nursing facilities, individuals without commercial health insurance, and more.
Loss of emergency funding, including funds targeted for safety net hospitals, rural hospitals, and ones that treated large numbers of COVID-19 patients is expected. States should develop an implementation plan that improves data collection, analysis, and reporting to meet eligibility requirements for the enhanced Federal Medical Assistance Percentage (FMAP). Without proper planning, the unwinding of the pandemic-related provisions may exert even more pressure on states' healthcare ecosystems, resulting in more uninsured individuals and less money available to address complex, evolving demands.
Hospitals, health systems, and other providers should prepare for audits regarding already received funding. They should also act as a facilitator to ensure continuity of care by educating existing Medicaid beneficiaries on how to maintain coverage or apply for other insurance coverage.
The American Medical Association is calling for efforts to sustain access to care for Medicaid patients, streamline processes, invest in outreach and enrollment assistance, and support health insurance auto-enrollment (with safeguards). The healthcare ecosystem was fragile before the pandemic hit, and the loss of supplemental funds may threaten its sustainability.
States with Medicaid Managed Care Organisations (MCOs) should determine how changing service mix and PMPM rates will affect future MCO rate-setting and budgeting, then revisit their capitation rate-setting process to adjust for the loss of pandemic-related funding. Hospitals, health systems, and other providers should determine their exposure to reimbursement changes post-PHE and create a path forward that limits the impact to their financial sustainability.
Much of the allocated funds are being gradually reduced or eliminated, with timetables dictated by original expiration dates, the 2023 Omnibus Appropriations Bill, and the end of the PHE on May 11, 2023. States should decide whether to request CMS-offered waivers, such as supervision requirements for certified registered nurse anesthetists. Hospitals, health systems, and other providers should confirm their eligibility for post-waiver 340B drug payments and assess how payment changes will affect their budgets.
The legislation also created a new rural emergency hospital (REH) designation, which will give rural hospitals most at risk of closing the option to change their service delivery, eliminate inpatient care, and receive an additional facility payment each month to ensure emergency services remain available to rural populations. Much of the regulatory flexibility and supplemental funding afforded to states was directly tied to pandemic-related needs such as COVID-19 testing and treatment, telehealth appointments, and additional benefits.
The loss of eligibility for 340B drug pricing program discounts affecting disproportionate share hospitals (DSH) and others as waivers end for providers that are no longer considered covered entities under the program is a concern. Increased administrative costs and inaccurate rates due to Medicaid assumptions of larger-than-actual membership enrollments or utilization are also a worry.
A website analysis identified approximately $78 billion in aggregate state savings from January 2020 to March 2022 resulting from FMAP increases. Proposed Medicare rate cuts, Medicare reimbursement changes for certain types of telehealth services, and out-of-pocket cost-sharing changes for Medicare beneficiaries are expected.
The 2023 Omnibus Appropriations Bill includes reductions in negotiated physician fee cuts, a one-year delay for lab test payment reductions, a two-year extension for critical rural Medicare programmes, continued telehealth flexibility, and extended provisions for the CMS Acute Hospital Care at Home program. The expected impact on individual state health programs is multi-pronged and varies based on a program's pre-pandemic performance and financial health.
The PHE unwinding will bring major changes in payments related to COVID-19 services for hospitals, including the return of previously waived regulatory requirements and administrative reporting to retain supplemental payment streams. The AHA is lobbying government agencies and Congress to permanently authorise some of the temporary pandemic-related policies that provided needed resources, better access to care, and delivery efficiencies.
States should generate an end-to-end financial impact analysis based on accurate payer-provider mix data. They will need to determine how they can use existing waivers and/or demonstration projects within CMS to maintain healthcare access, benefits, and high-quality care for Medicaid beneficiaries and other stakeholders. The AHA is urging government agencies and Congress to take action to ensure a smooth transition and maintain the stability of the healthcare ecosystem.
