CMS Posts MLR Guidance: Payments to Entities such as IPAs, PHOs, and ACOs

CMS posted additional sub-regulatory guidance regarding the Medicare Loss Ratio (MLR) under Section 2718 of the Public Health Service Act, as added by the Affordable Care Act (ACA).  The MLR requires health insurance issuers to submit a MLR report to the Secretary of Health and Human Services and issue a rebate to enrollees if the issuer’s MLR is less than the applicable percentage threshold established in Section 2718.  

This additional guidance provides an important clarification sitting at the intersection of the MLR, payment reform, and more collaborative approaches to payment and care coordination arrived at between private payers and providers. 

The new guidance specifically addresses the question of whether “payments by issuers to clinical risk-bearing entities, such as Independent Practice Associations (IPAs), Physician Hospital Organizations (PHOs), and Accountable Care Organizations (ACOs), are incurred claims under 45 CFR 158.140.” 

The answer under the guidance is “generally yes,” provided that both the payment and risk-bearing entity meet four factors set out in the guidance.  The four factors are as follows...

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