Happy New Year! As we enter 2024, we want to lay out some of the main regulatory issues (both new and old) that McDermott+Consulting will be tracking over the next year. While these may evolve, we think they are still important to flag—and we will continually provide updates throughout the coming months. We also plan to release a more comprehensive health policy outlook for 2024 in within the next couple of weeks.

I’m bringing in several members of the McDermottPlus team—Rachel Stauffer, Kayla Holgash and Deborah Godes—to help highlight these issues.

Medicare Physician Fee Schedule: We start the year still awaiting a possible fix to the Medicare physician fee schedule (PFS) conversion factor. We should know whether Congress will act relatively early in the year, as Congress may include a fix to the 3.4% conversion factor cut in the next appropriations bill (the first continuing resolution expires on January 19, 2024).We also have to ask the perennial question: Is this the year that Congress will permanently reform how Medicare physician payments are updated? There is one factor that differentiates this year from previous ones. Several key legislators who have focused on physician issues—Reps. Michael Burgess (R-TX) and Brad Wenstrup (R-OH), for example—will retire at the end of the year and may push hard to leave a permanent mark on the PFS before they make their exit.

No Surprises Act Policy and Operational Issues: Stakeholders (including the US Government Accountability Office) have identified many issues with the way the US Departments of Health and Human Services (HHS), Labor and the Treasury have implemented the No Surprises Act, especially around the construction and execution of the dispute resolution process. In the first few months of 2024, providers will have the opportunity to initiate batched disputes in the federal independent dispute resolution (IDR) process. Providers will have until March 14, 2024, to initiate disputes that became eligible for the IDR process since the IDR portal initially closed on August 3, 2023. The deadline originally was in January but was extended to March after provider groups advocated for additional time and the Departments granted the extension. In the view of many providers, it would have been difficult to sort through the big backlog of disputes in such a short period of time, especially when that period mostly fell during the holiday season. Although providers have until March to initiate batched disputes, there is an artificial deadline of January 22, 2024, when higher IDR fees come into effect. The Departments finalized the higher fees in the IDR fee final reg that was released at the end of 2023.

Comments on another major reg, the IDR operations proposed reg, also are due in early 2024 (the comment period initially closed on January 2, but will be reopened). The Departments will likely finalize this reg in 2024, as the proposed effective dates for many policies fall during the year. The proposed modifications to the batching and IDR processes would apply to disputes with open negotiation periods beginning on or after August 15, 2024, or 90 days after the effective date of the final reg, whichever is later. However, the requirement for health plans to register on the IDR portal would take effect immediately upon publication of the final reg, and the changes to IDR fees would apply to disputes initiated on or after January 1, 2025. The Departments also sought comment on whether the proposed reg’s new disclosure requirements should be effective six months or a year after additional subregulatory guidance is provided.

Besides this final reg, we may finally see regs implementing other provisions of the No Surprises Act, such as those related to advanced explanation of benefits, continuity of care requirements, provider directory requirements and information to be included on patients’ insurance identification cards.

And finally, we can’t forget about the lawsuits. The Departments have appealed or plan to appeal two out of the four major Texas Medical Association (TMA) lawsuits, TMA II and TMA III. TMA II, which has already been appealed, relates to how certified IDR entities can apply information they receive about a dispute to the qualifying payment amount (QPA). Under the No Surprises Act final reg published in August 2022, certified IDR entities were not allowed to consider information that they believed to be already incorporated in the QPA (known as the “double counting” provision). The US District Court for the Eastern District of Texas overturned this double counting provision, and currently certified IDR entities must weigh all information separately without assuming it is already included in the QPA. The TMA III decision by the same district court overturned most of the methodology that the Departments established for calculating the QPA, and the Departments have stated that they intend to appeal this decision as well. Expect more legal updates throughout the year!

Merit-Based Incentive Payment System: Because of the COVID-19 PHE, hardship exemptions were in place for the 2019–2023 Merit-based Incentive Payment System (MIPS) performance periods. Therefore, 2024 is a big year for MIPS—for some providers, this may be the first time in five years that they actually participate in MIPS.

MIPS participation can have a significant impact on providers’ overall revenue. The maximum negative payment adjustment in 2026 (based on performance in 2024) is a reduction of 9% on providers’ Medicare covered professional services. There is a high performance threshold of 75 points (out of 100) in the 2024 performance year, meaning that providers must perform extremely well across the different categories of MIPS to receive any type of bonus and avoid a penalty. There also is no opportunity for an additional bonus for exceptional performance.

Finally, 2024 is the second year of a new reporting option called the MIPS Value Pathways (MVPs). Providers can register to report MVPs from April 1 to December 2, 2024. Providers who decide to register can report on the MVP pathway relatively risk free. If providers report on both MVPs and traditional MIPS measures, they will receive the higher of the two performance scores.

Artificial Intelligence and Virtual Care: We expect significant progress in the implementation of the President’s executive order on artificial intelligence (AI). Deadlines for some agencies are fast approaching and will give stakeholders insight into how the administration will tackle complex issues around AI utilization in healthcare. Congress will likely continue hearings to help identify areas for legislation, including broad regulation of AI and/or bills specific to AI in healthcare. It will be important to analyze and understand potential implications of both approaches.

Virtual care will also be in the spotlight. Many extensions end on or before December 31, 2024, including almost all Medicare telehealth flexibilities and certain private market access waivers. Congressional action therefore is necessary for access to virtual care to continue beyond the end of this year. Given the December 31 deadline, these congressionally mandated extensions will likely clash with annual payment from the Centers for Medicare & Medicaid Services (CMS) and coverage decisions for virtual care through the PFS rulemaking (proposed reg in July and final reg around November 1). Stakeholders should be prepared for a high level of uncertainty heading into the last quarter of 2024.

Laboratory Developed Test Regulation: In the first half of 2024, we could see the US Food and Drug Administration (FDA) finalize its reg related to laboratory developed test (LDTs). In September 2023, the FDA issued a proposed reg that would end its existing enforcement discretion and engage in more direct oversight of LDTs. The proposed reg seeks to amend the FDA’s regulations to make explicit that in vitro diagnostic products (IVDs) are considered devices under the Federal Food, Drug, and Cosmetic Act, including when the manufacturer of the IVD is a laboratory. If the reg is finalized as proposed, the FDA would phase out its existing general enforcement discretion approach for most LDTs in five stages over four years. Tests currently offered as LDTs could remain on the market until the FDA completed its review of the lab’s application, although the FDA noted its authority to pursue enforcement action against “violative IVDs” at any time.

Some stakeholders have questioned the FDA’s authority to regulate in this space. Congress has drafted legislation (Verifying Accurate, Leading-edge IVCT Development (VALID) Act) to clarify the FDA’s authority and provide a framework for regulation of LDTs. While a compromise was close at the end of 2022, no final agreement was reached, and no significant changes were made to the legislation at the end of 2023 following publication of the FDA’s proposed reg. It will be interesting to see whether Congress has the opportunity to enact any version of the VALID Act before the FDA has a chance to finalize the reg in 2024.

Substance Use Disorder Treatment: Over the years, a major policy debate around 42 CFR Part 2 has centered on whether this regulation should be modified to align more closely with the Health Insurance Portability and Accountability Act (HIPAA). Under 42 CFR Part 2 requirements, sharing medical records for patients seeking substance use disorder (SUD) treatment requires patient consent except under limited circumstances, including bona fide medical emergencies. Conversely, under HIPAA, healthcare “providers” and other “covered entities” can use protected health information about a patient for treatment, payment or healthcare operations without the patient’s consent. Many stakeholders believe that these inconsistent rules between Part 2 and HIPAA create barriers to information sharing by patients and clinicians. In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which aligned certain Part 2 requirements more closely with HIPAA. Section 3221 of the CARES Act modified Part 2 by permitting uses and disclosures for treatment, payment or healthcare operations and by establishing certain patient rights with respect to patients’ Part 2 records. Section 3321 also restricts the use and disclosure of Part 2 records in legal proceedings and sets out civil and criminal penalties for violations. Section 3221 requires HHS to modify the Notice of Privacy Practices requirements so that HIPAA covered entities and Part 2 programs provide notice to individuals regarding privacy practices related to Part 2 records, including patients’ rights and the uses and disclosures that are allowed or required without authorization.

In December 2022, HHS issued a proposed reg that included the following provisions:

• Permitting the use and disclosure of Part 2 records based on a single patient consent given once for all future uses and disclosures (patients thus would not need to give their consent every time they agree to share their information)
• Permitting redisclosure of Part 2 records in any manner permitted by the HIPAA Privacy Rule, with certain exceptions
• Creating new patient rights under Part 2 to obtain an accounting of disclosures and to request restrictions on certain disclosures, as also granted by the HIPAA Privacy Rule
• Expanding prohibitions on the use and disclosure of Part 2 records in civil, criminal, administrative and legislative proceedings
• Creating new HHS enforcement authority, including the imposition of civil money penalties for violations of Part 2
• Updating breach notification requirements to HHS and affected patients
• Updating HIPAA Privacy Rule Notice of Privacy Practices requirements to address uses and disclosures of Part 2 records and individual rights with respect to those records.

The final reg will likely be released soon, as it is in the final stages of clearance at the Office of Management and Budget.

Speaking of major regs related to SUD treatment, we expect the US Drug Enforcement Agency (DEA) to release revised requirements this year regarding the use of telehealth to prescribe controlled substances. This rulemaking would have significant implications for access to appropriate healthcare professionals and medications for patients struggling with SUD and other mental health issues. The DEA initially proposed more restrictive rules for prescribing controlled substances via telehealth compared to the policies in place during the COVID-19 PHE. After receiving public input, however, the DEA decided to extend the COVID-19-era telehealth policies twice, with the latest extension ending December 31, 2024. The DEA will have to finalize permanent telehealth policies for prescribing controlled substances by November 2024, 60 days before the current extension ends.

Medicaid Unwinding: According to the Kaiser Family Foundation’s analysis of state and CMS data as of December 20, 2023, more than 13 million people have been disenrolled from Medicaid through the eligibility redetermination process currently underway in every state and Washington, DC. This process began in April 2023 and is the first time that states have officially reviewed the eligibility of current enrollees since the COVID-19 public health emergency began in March 2020 (when states ensured continuous coverage for Medicaid enrollees in exchange for an increase in federal matching funds).

States have varying approaches and timelines for completing this redetermination process, but 71% of all people disenrolled from Medicaid had their coverage terminated for procedural reasons. Many of the individuals disenrolled for these paperwork reasons may still be eligible for Medicaid coverage. CMS noted that 29 states plus Washington, DC, have self-identified as erroneously making administrative renewal decisions on a household level rather than on an individual level as federal regulations require, resulting in inappropriate disenrollment of many children in particular.

As described in a previous Regs & Eggs post, the Consolidated Appropriations Act (CAA) of 2023 established guardrails for unwinding the COVID-19-era regulations. CMS also released guidelines in State Health Official letters (SHOs) and enforcement actions relating to unwinding. For example, the SHO released in January 2023 detailed the reporting requirements and enforcement provisions established through the CAA. That letter specified monthly reporting requirements and the implementation of corrective action plans and civil monetary penalties. CMS later released an interim final regulation codifying these requirements and seeking comment on them.

States are required to submit monthly reports detailing activities related to eligibility determinations through June 30, 2024. CMS has already taken enforcement action, including requiring many states to pause procedural terminations, reinstate coverage, implement mitigation strategies, and fix their systems and processes. We’ll be watching to see how CMS further engages states during this process and responds to comments on the interim final reg, which are due February 2, 2024.

Medicaid Access and Managed Care Regs: Sticking on the topic of Medicaid, on April 27, 2023, CMS published two complementary proposed Medicaid regs. The first, known as the Medicaid access reg, seeks to increase transparency in payment rates, standardize data and monitoring, and create new opportunities for states to promote active beneficiary engagement in their Medicaid programs, with the goal of improving access to care. The reg has a particular focus on home- and community-based services (HCBS), including direct care worker compensation requirements, grievance process development, critical incident reporting definitions and HCBS quality reporting.

The second reg, the Medicaid managed care reg, would make transparency-related updates to state directed payments. It would also require states to submit an annual payment analysis that compares managed care plans’ payment rates for routine primary care services, obstetrical and gynecological services, and outpatient mental health and substance use disorder services as a proportion of Medicare’s payment rates. The proposal would establish a framework for states to implement a Medicaid or Children’s Health Insurance Program (CHIP) quality rating system to create a “one-stop-shop” for enrollees to compare Medicaid or CHIP managed care plans based on quality of care, access to providers, covered benefits and drugs, cost and other plan performance indicators. The reg would also require states to submit an annual payment analysis that compares managed care plans’ payment rates for homemaker services, home health aide services and personal care services as a proportion of the state’s Medicaid plan payment rate.

CMS received thousands of written comments and responses during listening sessions and webinars that highlighted several concerns about implementation of the regs as proposed. A leading stakeholder concern relates to the proposal that at least 80% of Medicaid payments for personal care, homemaker and home health aide services be spent on compensation for direct care workers (as opposed to administrative overhead or profit). Many stakeholders expressed support for the intent to bolster the direct care workforce but noted a need for greater clarity in definitions of relevant terms and suggested that the 80% threshold should be reconsidered and aligned with evidence-based standards that account for factors such as differences in provider size, rural/urban status and risk of closure.

Stakeholders also voiced concerns about increased burden from the proposed reg’s creation of additional reporting and evaluation requirements, and significantly increased costs for states and providers. We await CMS’s response to these concerns and its final decision on these proposed regs.

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These are some of the regulatory issues on our radar for now, but there are plenty of others worth watching, such as the implementation of the Inflation Reduction Act, site-neutral payments, price transparency, and 340B policies, just to name a few!

As noted, McDermottPlus plans to release a health policy outlook soon, so please watch for that.

And finally, always remember that you can rely on Regs and Eggs throughout 2024 to keep you informed!

Until next week, this is Jeffrey saying, enjoy reading regs with your eggs!

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