81 FR 83777 - Medicaid Program; The Use of New or Increased Pass-Through Payments in Medicaid Managed Care Delivery Systems

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services

Federal Register Volume 81, Issue 225 (November 22, 2016)

Page Range83777-83786
FR Document2016-28024

This proposed rule addresses changes, consistent with the CMCS Informational Bulletin (CIB) concerning ``The Use of New or Increased Pass-Through Payments in Medicaid Managed Care Delivery Systems,'' published on July 29, 2016, to the pass-through payment transition periods and the maximum amount of pass-through payments permitted annually during the transition periods under Medicaid managed care contract(s) and rate certification(s). The changes prevent increases in pass-through payments and the addition of new pass-through payments beyond those in place when the pass-through payment transition periods were established in the final Medicaid managed care regulations.

Federal Register, Volume 81 Issue 225 (Tuesday, November 22, 2016)
[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Proposed Rules]
[Pages 83777-83786]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-28024]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 438

[CMS-2402-P]
RIN 0938-AT10


Medicaid Program; The Use of New or Increased Pass-Through 
Payments in Medicaid Managed Care Delivery Systems

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule addresses changes, consistent with the CMCS 
Informational Bulletin (CIB) concerning ``The Use of New or Increased 
Pass-Through Payments in Medicaid Managed Care Delivery Systems,'' 
published on July 29, 2016, to the pass-through payment transition 
periods and the maximum amount of pass-through payments permitted 
annually during the transition periods under Medicaid managed care 
contract(s) and rate certification(s). The changes prevent increases in 
pass-through payments and the addition of new pass-through payments 
beyond those in place when the pass-through payment transition periods 
were established in the final Medicaid managed care regulations.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. December 22, 2016.

ADDRESSES: In commenting please refer to file code CMS-2402-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.

[[Page 83778]]

    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2402-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2402-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: John Giles, (410) 786-1255.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

    In the June 1, 2015 Federal Register (80 FR 31098), we published 
the ``Medicaid and Children's Health Insurance Program (CHIP) Programs; 
Medicaid Managed Care, CHIP Delivered in Managed Care, Medicaid and 
CHIP Comprehensive Quality Strategies, and Revisions Related to Third 
Party Liability'' proposed rule (``June 1, 2015 proposed rule''). As 
part of the actuarial soundness proposals, we proposed to define 
actuarially sound capitation rates as those sufficient to provide for 
all reasonable, appropriate, and attainable costs that are required 
under the terms of the contract, including furnishing of covered 
services and operation of the managed care plan for the duration of the 
contract. Among the proposals was a general rule that the state may not 
direct the MCO's, PIHP's, or PAHP's expenditures under the contract.
    In the May 6, 2016 Federal Register (81 FR 27498), we published the 
``Medicaid and Children's Health Insurance Program (CHIP) Programs; 
Medicaid Managed Care, CHIP Delivered in Managed Care, and Revisions 
Related to Third Party Liability'' final rule (``May 6, 2016 final 
rule''), which finalized the June 1, 2015 proposed rule. In the final 
rule, we finalized, with some revisions, the proposal which limited 
state direction of payments, including pass-through payments as defined 
below.

A. Summary of the Medicaid Managed Care May 6, 2016 Final Rule

    We finalized a policy to limit state direction of payments, 
including pass-through payments at Sec.  438.6(d) in the May 6, 2016 
final rule (81 FR 27587 through 27592). Specifically, under the final 
rule (81 FR 27588), we defined pass-through payments at Sec.  438.6(a) 
as any amount required by the state to be added to the contracted 
payment rates, and considered in calculating the actuarially sound 
capitation rate, between the MCO, PIHP, or PAHP and hospitals, 
physicians, or nursing facilities that is not for the following 
purposes: A specific service or benefit provided to a specific enrollee 
covered under the contract; a provider payment methodology permitted 
under Sec.  438.6(c)(1)(i) through (iii) for services and enrollees 
covered under the contract; a subcapitated payment arrangement for a 
specific set of services and enrollees covered under the contract; GME 
payments; or FQHC or RHC wrap around payments. We noted that section 
1903(m)(2)(A) of the Social Security Act (the Act) requires that 
capitation payments to managed care plans be actuarially sound; we 
interpret this requirement to mean that payments under the managed care 
contract must align with the provision of services to beneficiaries 
covered under the contract. We provided that these pass-through 
payments are not consistent with our standards for actuarially sound 
rates because they do not tie provider payments with the provision of 
services. The final rule contains a detailed description of the policy 
rationale (81 FR 27587 through 27592).
    In an effort to provide a smooth transition for network providers, 
to support access for the beneficiaries they serve, and to provide 
states and managed care plans with adequate time to design and 
implement payment systems that link provider reimbursement with 
services covered under the contract or associated quality outcomes, we 
finalized transition periods related to pass-through payments for 
specified provider types to which states make most pass-through 
payments under Medicaid managed care programs: Hospitals, physicians, 
and nursing homes (81 FR 27590 through 27592). As finalized, Sec.  
438.6(d)(2) and (3) provide a 10-year transition period for hospitals, 
subject to limitations on the amount of pass-through payments. For MCO, 
PIHP, or PAHP contracts beginning on or after July 1, 2027, states will 
not be permitted to require pass-through payments for hospitals. The 
final rule also provides a 5-year transition period for pass-through 
payments to physicians and nursing facilities. For MCO, PIHP, or PAHP 
contracts beginning on or after July 1,

[[Page 83779]]

2022, states will not be permitted to require pass-through payments for 
physicians or nursing facilities. These transition periods provide 
states, network providers, and managed care plans significant time and 
flexibility to integrate current pass-through payment arrangements into 
allowable payment structures under actuarially sound capitation rates, 
including enhanced fee schedules or the other approaches consistent 
with Sec.  438.6(c)(1)(i) through (iii).
    As finalized, Sec.  438.6(d) limits the amount of pass-through 
payments to hospitals as a percentage of the ``base amount,'' which is 
defined in paragraph (a) and calculated pursuant to rules in paragraph 
(d)(2). Section 438.6(d)(3) specifies a schedule for the phased 
reduction of the base amount, limiting the amount of pass-through 
payments to hospitals. For contracts beginning on or after July 1, 
2017, the state may require pass-through payments to hospitals under 
the contract up to 100 percent of the base amount, as defined in the 
final rule. For subsequent contract years (contracts beginning on or 
after July 1, 2018 through contracts beginning on or after July 1, 
2026), the portion of the base amount available for pass-through 
payments decreases by 10 percentage points per year. For contracts 
beginning on or after July 1, 2027, no pass-through payments to 
hospitals are permitted. The May 6, 2016 final rule noted that nothing 
would prohibit a state from eliminating pass-through payments to 
hospitals before contracts beginning on or after July 1, 2027. However, 
the final rule provided for a phased reduction in the percentage of the 
base amount that can be used for pass-through payments, because a 
phased transition would support the development of stronger payment 
approaches while mitigating any disruption to states and providers.
    We believe that states will be able to more easily transition 
existing pass-through payments to physicians and nursing facilities to 
payment structures linked to services covered under the contract. 
Consequently, the May 6, 2016 final rule, in Sec.  438.6(d)(5), 
provided a shorter time period for eliminating pass-through payments to 
physicians and nursing facilities and did not require a prescribed 
limit or phase down for these payments; states have the option to 
eliminate these payments immediately or phase down these payments over 
the 5 year transition period if they prefer. As noted in the final 
rule, the distinction between hospitals and nursing facilities and 
physicians was also based on the comments from stakeholders during the 
public comment period (81 FR 27590).

B. Questions About the Final Rule

    Since publication of the May 6, 2016 final rule, we have received 
inquiries about states' ability to integrate new or increased pass-
through payments into Medicaid managed care contracts. As explained in 
the CMCS Informational Bulletin (CIB) published on July 29, 2016,\1\ 
adding new or increased pass-through payments for hospitals, 
physicians, or nursing facilities complicates the required transition 
of these pass-through payments to permissible provider payment models.
---------------------------------------------------------------------------

    \1\ The Use of New or Increased Pass-Through Payments in 
Medicaid Managed Care Delivery Systems; available at: https://www.medicaid.gov/federal-policy-guidance/downloads/cib072916.pdf. 
CMCS also noted in this CIB that it intended to further address in 
future rulemaking the issue of adding new or increased pass-through 
payments to managed care contracts.
---------------------------------------------------------------------------

    The transition periods under the final rule provide states, network 
providers, and managed care plans significant time and flexibility to 
move existing pass-through payment arrangements (that is, those in 
effect when the final rule was published) into different, permissible 
payment structures under actuarially sound capitation rates, including 
enhanced fee schedules or the other approaches consistent with Sec.  
438.6(c)(1)(i) through (iii). We did not intend states to begin 
additional or new pass-through payments, or to increase existing pass-
through payments, notwithstanding the adjustments to the base amount 
permitted in Sec.  438.6(d)(2), after the final rule was published but 
before July 1, 2017; such actions are contrary to and undermine the 
policy goal of eliminating pass-through payments. We clarify that we 
would not permit a pass-through payment amount to exceed the lesser of 
the amounts calculated pursuant to paragraph (d)(3) of this proposed 
rule. For states to add new or to increase existing pass-through 
payments is inconsistent with longstanding CMS policy, the proposal 
made in the June 1, 2015 proposed rule, and the May 6, 2016 final rule, 
which reflects the general policy goal to effectively and efficiently 
transition away from pass-through payments.
    Under the final rule, we provided a delayed compliance date for 
Sec.  438.6(c) and (d); we will enforce compliance with Sec.  438.6(c) 
and (d) no later than the rating period for Medicaid managed care 
contracts beginning on or after July 1, 2017. Our exercise of 
enforcement discretion in permitting delayed compliance was not 
intended to create new opportunities for states to add or increase 
existing pass-through payments before July 1, 2017. This delay was 
intended to address concerns articulated by commenters, among them 
states and providers, that an abrupt end to directed pass-through 
payments could cause damaging disruption to safety-net providers. As 
discussed in the final rule and this proposal, pass-through payments 
are inconsistent with our interpretation and implementation of the 
statutory requirement for actuarially sound capitation rates because 
pass-through payments do not tie provider payments to the provision of 
services under the contract (81 FR 27588). Further, such required 
payments reduce managed care plans' ability to control expenditures, 
effectively use value-based purchasing strategies, and implement 
provider-based quality initiatives. The May 6, 2016 final rule made 
clear our position on these payments and our intent that they be 
eliminated from Medicaid managed care delivery systems, except for the 
directed payment models permitted by Sec.  438.6(c), or the payments 
excluded from the definition of a pass-through payment in Sec.  
438.6(a), such as FQHC wrap payments.
    The transition periods provided under Sec.  438.6(d) are for states 
to identify existing pass-through payments and begin either tying such 
payments directly to services and utilization covered under the 
contract or eliminating them completely in favor of other support 
mechanisms for providers that comply with the requirements in Sec.  
438.6(c). The transition periods for current pass-through payments 
minimize disruption to local health care systems and interruption of 
beneficiary access by permitting a gradual step down from current 
levels of pass-through payments: (1) At the schedule and subject to the 
limit announced in the May 6, 2016 final rule for hospitals under Sec.  
438.6(d)(3); and (2) at a schedule adopted by the state for physicians 
and nursing facilities under Sec.  438.6(d)(5). By providing states, 
network providers, and managed care plans significant time and 
flexibility to integrate current pass-through payment arrangements into 
different payment structures (including enhanced fee schedules or the 
other approaches consistent with Sec.  438.6(c)(1)(i) through 
(c)(1)(iii)) and into actuarially sound capitation rates, we intended 
to address comments that the June 1, 2015 proposed rule would be 
unnecessarily disruptive and endanger safety-net provider systems that 
states have developed for Medicaid.
    Recent questions from states indicate the transition period and 
delayed enforcement date have caused some confusion regarding our 
intent for increased and new pass-through

[[Page 83780]]

payments for contracts prior to July 1, 2017, because the final rule 
did not explicitly prohibit such additions or increases. While we 
assumed such a prohibition in the final rule, we believe that 
additional rulemaking is necessary to clarify this issue in light of 
these comments. Under this proposed rule, we are linking pass-through 
payments permitted during the transition period to the aggregate 
amounts of pass-through payments that were in place at the time the May 
6, 2016 final rule became effective on July 5, 2016, which is 
consistent with the intent under the final rule to phase out pass-
through payments under Medicaid managed care contracts.

II. Provisions of the Current Proposed Rule

    For reasons discussed above, we propose to revise Sec.  438.6(d) to 
better effectuate the intent of the May 6, 2016 final rule. First, we 
propose to limit the availability of the transition periods in Sec.  
438.6(d)(3) and (5) (that is, the ability to continue pass-through 
payments for hospitals, physicians, or nursing facilities) to states 
that can demonstrate that they had such pass-through payments in 
either: (A) Managed care contract(s) and rate certification(s) for the 
rating period that includes July 5, 2016, and that were submitted for 
our review and approval on or before July 5, 2016; or (B) if the 
managed care contract(s) and rate certification(s) for the rating 
period that includes July 5, 2016 had not been submitted to us on or 
before July 5, 2016, the managed care contract(s) and rate 
certification(s) for a rating period before July 5, 2016 that had been 
most recently submitted to us for review and approval as of July 5, 
2016.
    Second, we propose to prohibit retroactive adjustments or 
amendments, notwithstanding the adjustments to the base amount 
permitted in Sec.  438.6(d)(2), to managed care contract(s) and rate 
certification(s) to add new pass-through payments or increase existing 
pass-through payments defined in Sec.  438.6(a). In this proposed rule, 
we clarify that we would not permit a pass-through payment amount to 
exceed the lesser of the amounts calculated pursuant to paragraph 
(d)(3).
    Third, we propose to establish a new maximum amount of permitted 
pass-through payments for each year of the transition period. For 
hospitals, a state would be limited (in the total amount of permissible 
pass-through payments) during each year of the transition period to the 
lesser of either: (A) The percentage of the base amount applicable to 
that contract year; or (B) the pass-through payment amount identified 
in proposed paragraph (d)(1)(i). Thus, the amount of pass-through 
payments identified by the state in order to satisfy proposed paragraph 
(d)(1)(i) would be compared to the amount representing the applicable 
percentage of the base amount that is calculated for each year of the 
transition period. For pass-through payments to physicians and nursing 
facilities, we also propose to limit the amount of pass-through 
payments during the transition period to the amount of pass-through 
payments to physicians and nursing facilities under the contract and 
rate certification identified in proposed paragraph (d)(1)(i). In 
making these comparisons to the pass-through payments under the managed 
care contract(s) in effect for the rating period covering July 5, 2016 
as identified in proposed paragraph (d)(1)(i)(A), or the rating period 
before July 5, 2016 as identified in proposed paragraph (d)(1)(i)(B), 
we will look at total pass-through payment amounts for the specified 
provider types. Past aggregate amounts of hospital pass-through 
payments will be used in determining the maximum amount for hospital 
pass-through payments during the transition period; past aggregate 
amounts of physician pass-through payments will be used in determining 
the maximum amount for physician pass-through payments during the 
transition period; and past aggregate amounts of nursing facility pass-
through payments will be used in determining the maximum amount for 
nursing facility pass-through payments during the transition period.
    Under our proposed rule, the aggregate amounts of pass-through 
payments in each provider category would be used to set applicable 
limits for the provider type during the transition period, without 
regard to the specific provider(s) that receive a pass-through payment. 
For example, if the pass-through payments in the contract identified 
under paragraph (d)(1)(i) were to 5 specific hospitals, the aggregate 
amount of pass-through payments to those hospitals would be relevant in 
establishing the limit during the transition period, but different 
hospitals could be the recipients of pass-through payments during the 
transition. As an alternative, we also considered whether the state 
should be limited by amount and recipient during the transition period; 
in our example, this would mean that only those 5 hospitals that 
received pass-through payments could receive such payments during the 
transition period. However, we believe this narrower policy would be 
more limiting than originally intended under the May 6, 2016 final rule 
when the transition periods were finalized. We request comment on our 
proposed approach. To implement our proposal, we propose to amend the 
existing regulation text to revise paragraph (d)(1) (including new 
(d)(1)(i) and (ii)), revise paragraph (d)(3) (including new (d)(3)(i) 
and (ii)), and revise paragraph (d)(5) as described below.
    We propose to revise paragraph (d)(1) to clarify that a state may 
continue to require an MCO, PIHP, or PAHP to make pass-through payments 
(as defined in Sec.  438.6(a)) to network providers that are hospitals, 
physicians, or nursing facilities under the contract, provided the 
requirements of paragraph (d) are met. We are proposing to retain the 
regulation text that provides explicitly that states may not require 
MCOs, PIHPs, or PAHPs to make pass-through payments other than those 
permitted under paragraph (d).
    Under proposed paragraph (d)(1)(i), a state would be able to use 
the transition period for pass-through payments to hospitals, 
physicians, or nursing facilities only if the state can demonstrate 
that it had pass-through payments for hospitals, physicians, or nursing 
facilities, respectively, in both the managed care contract(s) and rate 
certification(s) that meet the requirements in either proposed 
paragraph (d)(1)(i)(A) or (B). We recognize that states may have 
multiple managed care plans and therefore multiple contracts and rate 
certifications that are necessary to establish the existence and amount 
of pass-through payments. We propose in paragraph (d)(1)(i)(A) that the 
managed care contract(s) and rate certification(s) must be for the 
rating period that includes July 5, 2016 and have been submitted for 
our review and approval on or before July 5, 2016. If the state had not 
yet submitted MCO, PIHP, or PAHP contract(s) and rate certification(s) 
for the rating period that includes July 5, 2016, we propose in 
paragraph (d)(1)(i)(B) that the state must demonstrate that it required 
the MCO, PIHP, or PAHP to make pass-through payments for a rating 
period before July 5, 2016 in the managed care contract(s) and rate 
certification(s) that were most recently submitted for our review and 
approval as of July 5, 2016. We propose to use the date July 5, 2016 
for the purpose of identifying the pass-through payments in managed 
care contract(s) and rate certification(s) that are eligible for the 
pass-through payment transition period because it is consistent with 
the intent of the May 6, 2016 final rule that the transition period be 
used by states

[[Page 83781]]

that had pass-through payments in their MCO, PIHP, or PAHP contracts 
when we finalized that rule. These are the states for which we were 
concerned, based on the comments to the June 1, 2015 proposed rule, 
that an abrupt end to pass-through payments could be disruptive to 
their health care delivery system and safety-net providers. We believe 
that limiting the use of the transition period to states that had pass-
through payments in effect as of the effective date of the May 6, 2016 
final rule provides for the achievement of the policy goal of 
eliminating these types of payments. We did not intend for the May 6, 
2016 final rule to incentivize or encourage states to add new pass-
through payments, as we believe that these payments are inconsistent 
with actuarially sound rates.
    Under proposed paragraph (d)(1)(ii), we would not approve a 
retroactive adjustment or amendment, notwithstanding the adjustments to 
the base amount permitted in Sec.  438.6(d)(2), to managed care 
contract(s) and rate certification(s) to add new pass-through payments 
or increase existing pass-through payments defined in Sec.  438.6(a). 
We clarify that we would not permit a pass-through payment amount to 
exceed the lesser of the amounts calculated pursuant to paragraph 
(d)(3) of this proposed rule. We are proposing paragraph (d)(1)(ii) to 
prevent states from undermining our policy goal to limit the use of the 
transition period to states that had pass-through payments in effect as 
of the effective date of the May 6, 2016 final rule. This proposed 
change also supports the policy rationale under the May 6, 2016 final 
rule and the July 29, 2016 CMCS Informational Bulletin (CIB) by 
prohibiting new or increased pass-through payments in Medicaid managed 
care contract(s), notwithstanding the adjustments to the base amount 
described above. As stated in the final rule and CIB, we believe that 
pass-through payments are not consistent with the statutory 
requirements in section 1903(m) of the Act and regulations for 
actuarially sound capitation rates because pass-through payments do not 
tie provider payments with the provision of services. The proposed 
change also addresses our concern that new or increased pass-through 
payments substantially complicate the required transition of pass-
through payments to permissible provider payment models, as such 
additions or increases by states will further delay the development of 
permissible, stronger payment approaches that are based on the 
utilization or delivery of services to enrollees covered under the 
contract, or the quality and outcomes of services.
    As an alternative to proposed paragraphs (d)(1)(i) and (ii), we 
considered linking eligibility for the transition period to those 
states with pass-through payments for hospitals, physicians, or nursing 
facilities that were in approved (not just submitted for our review and 
approval) managed care contract(s) and rate certification(s) only for 
the rating period covering July 5, 2016. However, we believe that such 
an approach is not administratively feasible for states or CMS because 
it does not recognize the nuances of the timing and approval processes; 
we believe our proposed approach provides the appropriate parameters 
and conditions for pass-through payments in managed care contract(s) 
and rate certification(s) during the transition period. We request 
comment on our proposed approach.
    In proposed paragraph (d)(3), we propose to amend the cap on the 
amount of pass-through payments to hospitals that may be incorporated 
into managed care contract(s) and rate certification(s) during the 
transition period for hospital payments, which will apply to rating 
periods for contract(s) beginning on or after July 1, 2017. 
Specifically, we propose to revise Sec.  438.6(d)(3) to require that 
the limit on pass-through payments each year of the transition period 
be the lesser of: (A) The sum of the results of paragraphs (d)(2)(i) 
and (ii),\2\ as modified under the schedule in this paragraph (d)(3); 
or (B) the total dollar amount of pass-through payments to hospitals 
identified by the state in the managed care contract(s) and rate 
certification(s) used to meet the requirement in paragraph (d)(1)(i). 
This proposed language would limit the amount of pass-through payments 
each contract year to the lesser of the calculation adopted in the May 
6, 2016 final rule (the ``base amount''), as decreased each successive 
year under the schedule in this paragraph (d)(3), or the total dollar 
amount of pass-through payments to hospitals identified by the state in 
managed care contract(s) and rate certification(s) described in 
paragraph (d)(1)(i). For example, if a state had $10 million in pass-
through payments to hospitals in the contract and rate certification 
used to meet the requirement in paragraph (d)(1)(i), that $10 million 
figure would be compared each year to the base amount as reduced on the 
schedule described in this paragraph (d)(3); the lower number would be 
used to limit the total amount of pass-through payments to hospitals 
allowed for that specific contract year.
---------------------------------------------------------------------------

    \2\ The portion of the base amount calculated in Sec.  
438.6(d)(2)(i) is analogous to performing UPL calculations under a 
FFS delivery system, using payments from managed care plans for 
Medicaid managed care hospital services in place of the state's 
payments for FFS hospital services under the state plan. The portion 
of the base amount calculated in Sec.  438.6(d)(2)(ii) takes into 
account hospital services and populations included in managed care 
during the rating period that includes pass-through payments which 
were in FFS two years prior.
---------------------------------------------------------------------------

    This proposed language would prevent increases of aggregate pass-
through payments for hospitals during the transition period beyond what 
was already in place when the pass-through payment limits and 
transition periods were finalized in the May 6, 2016 final rule. As an 
alternative to our proposal here, we considered stepping down both the 
base amount (as provided in paragraph (d)(3)) and the total dollar 
amount of pass-through payments to hospitals identified by the state in 
managed care contract(s) and rate certification(s) described in 
paragraph (d)(1)(i), as part of the lesser of calculation. The lower 
stepped-down amount would be used as the cap each year of the 
transition period. However, we believe such an approach would require a 
state to phase down their pass-through payments more quickly than 
originally intended under the May 6, 2016 final rule. Our proposal here 
is not intended to speed up the rate of a state's phase down of pass-
through payments; rather, we are intending to prevent increases in 
pass-through payments and the addition of new pass-through payments 
beyond what was already in place when the pass-through payment limits 
and transition periods were finalized given that this was the final 
rule's intent. We request comment on our proposed approach.
    In addition, we are proposing to amend paragraph (d)(3) to provide 
that states must meet the requirements in paragraph (d)(1)(i) to 
continue pass-through payments for hospitals during the transition 
period. We believe this additional text is necessary to be consistent 
with our intent, explained above, for the proposed revisions to 
paragraph (d)(1). As in the May 6, 2016 final rule, pass-through 
payments to hospitals must be phased out no longer than on the 10-year 
schedule, beginning with rating periods for contracts that start on or 
after July 1, 2017. We added the phrase ``rating periods'' to be 
consistent with our terminology in the final rule; we made this 
clarifying edit throughout proposed paragraphs (d)(3) and (d)(5). We 
request comment on our proposed amendments to paragraph (d)(3).

[[Page 83782]]

    Finally, we are proposing to revise Sec.  438.6(d)(5) to be 
consistent with the proposed revisions in Sec.  438.6(d)(1)(i) and to 
limit the total dollar amount of pass-through payments that is 
available each contract year for physicians and nursing facilities. We 
are not proposing to implement a phase-down for pass-through payments 
to physicians or nursing facilities. We propose that for states that 
meet the requirements in paragraph (d)(1)(i), rating periods for 
contracts beginning on or after July 1, 2017 through rating periods for 
contracts beginning on or after July 1, 2021, may continue to require 
pass-through payments to physicians or nursing facilities under the 
MCO, PIHP, or PAHP contract; such pass-through payments may be no more 
than the total dollar amount of pass-through payments for each category 
identified in the managed care contracts and rate certifications used 
to meet the requirement in paragraph (d)(1)(i). We added the phrase 
``rating periods'' to be consistent with our terminology in the final 
rule; we made this clarifying edit throughout proposed paragraphs 
(d)(3) and (d)(5). This approach is consistent with the general goal of 
not increasing pass-through payments beyond what was included as of the 
effective date of the final rule when the pass-through payment limits 
and transition periods were finalized and creating a consistent 
standard in alignment with the proposed changes in Sec.  438.6(d)(3) to 
limit increasing pass-through payments made to hospitals, physicians, 
and nursing facilities under Medicaid managed care contracts. We 
request comment on our proposal as a whole and the specific proposed 
regulation text.

III. Collection of Information Requirements

    This rule would not impose any new or revised information 
collection, reporting, recordkeeping, or third-party disclosure 
requirements or burden. Our proposed revision of Sec.  438.6(d) would 
not impose any new or revised IT system requirements or burden because 
the existing regulation at Sec.  438.7 requires the rate certification 
to document special contract provisions under Sec.  438.6. 
Consequently, there is no need for review by the Office of Management 
and Budget under the authority of the Paperwork Reduction Act of 1995 
(44 U.S.C. 3501 et seq.).

IV. Regulatory Impact Analysis

A. Statement of Need

    As discussed throughout this proposed rule, we have significant 
concerns that pass-through payments have negative consequences for the 
delivery of services in the Medicaid program. The existence of pass-
through payments may affect the amount that a managed care plan is 
willing or able to pay for the delivery of services through its base 
rates or fee schedule. In addition, pass-through payments make it more 
difficult to implement quality initiatives or to direct beneficiaries' 
utilization of services to higher quality providers because a portion 
of the capitation rate under the contract is independent of the 
services delivered and outside of the managed care plan's control. Put 
another way, when the fee schedule for services is set below the normal 
market, or negotiated rate, to account for pass-through payments, 
moving utilization to higher quality providers can be difficult because 
there may not be adequate funding available to incentivize the provider 
to accept the increased utilization. When pass-through payments 
guarantee a portion of a provider's payment and divorce the payment 
from service delivery, it is more challenging for managed care plans to 
negotiate provider contracts with incentives focused on outcomes and 
managing individuals' overall care.
    We realize that some pass-through payments have served as a 
critical source of support for safety-net providers who provide care to 
Medicaid beneficiaries. Several commenters raised this issue in 
response to the June 1, 2015 proposed rule.\3\ Therefore, in response 
to some commenters' request for a delayed implementation of the 
limitation on directed payments and to address concerns that an abrupt 
end to these payments could create significant disruptions for some 
safety-net providers who serve Medicaid managed care enrollees, we 
included in the May 6, 2016 final rule a delay in the compliance date 
and a transition period for existing pass-through payments to 
hospitals, physicians, and nursing facilities. These transition periods 
begin with the compliance date, and were designed and finalized to 
enable affected providers, states, and managed care plans to transition 
away from existing pass-through payments. Such payments could be 
transitioned into payments tied to covered services, value-based 
payment structures, or delivery system reform initiatives without 
undermining access for the beneficiaries; alternatively, states could 
step down such payments and devise other methods to support safety-net 
providers to come into compliance with Sec.  438.6(c) and (d).
---------------------------------------------------------------------------

    \3\ Available at: https://www.thefederalregister.org/fdsys/pkg/FR-2015-06-01/pdf/2015-12965.pdf.
---------------------------------------------------------------------------

    However, as noted previously, the transition period and delayed 
enforcement date caused some confusion regarding increased and new 
pass-through payments. The May 6, 2016 final rule created a strong 
incentive for states to move swiftly to put pass-through payments into 
place in order to take advantage of the pass-through payment transition 
periods established in the May 6, 2016 final rule. Contrary to our 
discussion in the May 6, 2016 final rule regarding the statutory 
requirements in section 1903(m) of the Act and regulations for 
actuarially sound capitation rates, some states expressed interest in 
developing new and increased pass-through payments for their respective 
Medicaid managed care programs as a result of the May 6, 2016 final 
rule. In response to this interest, we published the July 29, 2016 CMCS 
Informational Bulletin (CIB) to quickly address questions regarding the 
ability of states to increase or add new pass-through payments under 
Medicaid managed care plan contracts and capitation rates, and to 
describe our plan for monitoring the transition of pass-through 
payments to approaches for provider payment under Medicaid managed care 
programs that are based on the delivery of services, utilization, and 
the outcomes and quality of the delivered services.
    We noted in the CIB that the transition from one payment structure 
to another requires robust provider and stakeholder engagement, 
agreement on approaches to care delivery and payment, establishing 
systems for measuring outcomes and quality, planning efforts to 
implement changes, and evaluating the potential impact of change on 
Medicaid financing mechanisms. Whether implementing value-based payment 
structures, implementing other delivery system reform initiatives, or 
eliminating pass-through payments, there will be transition issues for 
states coming into compliance; adequately working through transition 
issues, including ensuring adequate base rates, is central to both 
delivery system reform and to strengthening access, quality, and 
efficiency in the Medicaid program. We stressed that the purpose and 
intention of the transition periods is to acknowledge that pass-through 
payments existed prior to the final rule and to provide states, network 
providers, and managed care plans time and flexibility to integrate 
existing pass-through payment arrangements into permissible payment 
structures.

[[Page 83783]]

    As we noted in the CIB and throughout this proposed rule, we 
believe that adding new or increased pass-through payments for 
hospitals, physicians, or nursing facilities, beyond what was included 
as of July 5, 2016, into Medicaid managed care contracts exacerbates a 
problematic practice that is inconsistent with our interpretation of 
statutory and regulatory requirements, complicates the required 
transition of these pass-through payments to stronger payment 
approaches that are based on the utilization or delivery of services to 
enrollees covered under the contract, or the quality and outcomes of 
such services, and reduces managed care plans' ability to effectively 
use value-based purchasing strategies and implement provider-based 
quality initiatives. In the CIB, we signaled the possible need, and our 
intent, to further address this policy in future rulemaking and link 
pass-through payments through the transition period to the amounts of 
pass-through payments in place at the time the Medicaid managed care 
rule was effective on July 5, 2016.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) Having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). We estimate that this rule is ``economically significant'' as 
measured by the $100 million threshold, and hence a major rule under 
the Congressional Review Act.
    The May 6, 2016 final rule included a RIA (81 FR 27830). During 
that analysis, we did not project a significant fiscal impact for Sec.  
438.6(d). When we reviewed and analyzed the May 6, 2016 final rule, we 
concluded that states would have other mechanisms to build in the 
amounts currently provided through pass-through payments in approvable 
ways, such as approaches consistent with Sec.  438.6(c)(1)(i) through 
(iii). If a state was currently building in $10 million in pass-through 
payments to hospitals under their current managed care contracts, we 
assumed that the state would incorporate the $10 million into their 
managed care rates in permissible ways rather than spending less in 
Medicaid managed care. While it is possible that this would be more 
difficult for states with relatively larger amounts of pass-through 
payments, the long transition period provided under the May 6, 2016 
final rule to phase out pass-through payments should help states to 
integrate existing pass-through payments into actuarially sound 
capitation rates through permissible Medicaid financing structures, 
including enhanced fee schedules or the other approaches consistent 
with Sec.  438.6(c)(1)(i) through (iii).
    A number of states have integrated some form of pass-through 
payments into their managed care contracts for hospitals, nursing 
facilities, and physicians. In general, the size and number of the 
pass-through payments for hospitals has been more significant than for 
nursing facilities and physicians. We noted in the final rule (81 FR 
27589) a number of reasons provided by states for using pass-through 
payments in their managed care contracts. As of the effective date of 
the final rule, we estimate that at least eight states have implemented 
approximately $105 million in pass-through payments for physicians 
annually; we estimate that at least three states have implemented 
approximately $50 million in pass-through payments for nursing 
facilities annually; and we estimate that at least 16 states have 
implemented approximately $3.3 billion in pass-through payments for 
hospitals annually. These estimates are somewhat uncertain, as before 
the final rule, we did not have regulatory requirements for states to 
document and describe pass-through payments in their managed care 
contracts or rate certifications. The amount of pass-through payments 
often represents a significant portion of the overall capitation rate 
under a managed care contract. We have seen pass-through payments that 
have represented 25 percent, or more, of the overall managed care 
contract and 50 percent of individual rate cells. The rationale for 
these pass-through payments in the development of the capitation rates 
is often not transparent, and it is not clear what the relationship of 
these pass-through payments is to the provision of services or the 
requirement for actuarially sound rates.
    Since the publication of the final rule, we received a formal 
proposal from one state regarding $250-275 million in pass-through 
payments to hospitals; we have been working with the state to identify 
permissible implementation options for their proposal, including under 
Sec.  438.6(c), and tie such payments to the utilization and delivery 
of services (as well as the outcomes of delivered services). We heard 
informally that two additional states are working to develop pass-
through payment mechanisms to increase total payments to hospitals by 
approximately $10 billion cumulatively. We also heard informally from 
one state regarding a $200 million proposal for pass-through payments 
to physicians. We also continue to receive inquiries from states, 
provider associations, and consultants who are developing formal 
proposals to add new pass-through payments, or increase existing pass-
through payments, and incorporate such payments into Medicaid managed 
care rates. While it is difficult for us to conduct a detailed 
quantitative analysis given this considerable uncertainty and lack of 
data, we believe that without this proposed (and a subsequent final) 
rulemaking, states would continue to ramp-up pass-through payments in 
ways that are not consistent with the pass-through payment transition 
periods established in the final rule.
    Since we cannot produce a detailed quantitative analysis, we have 
developed a qualitative discussion for this RIA. We believe there are 
many benefits with this regulation, including consistency with the 
statutory requirements in section 1903(m) of the

[[Page 83784]]

Act and regulations for actuarially sound capitation rates, improved 
transparency in rate development processes, stronger payment approaches 
that are based on the utilization or delivery of services to enrollees 
covered under the contract, or the quality and outcomes of such 
services, and improved support for delivery system reform that is 
focused on improved care and quality for Medicaid beneficiaries. We 
believe that the costs of this regulation to state and federal 
governments will not be significant; CMS currently reviews and works 
with states on managed care contracts and rates, and because pass-
through payments exist today, any additional costs to state or federal 
governments should be negligible.
    Relative to the current baseline, this rule is likely to prevent 
increases in or the development of new pass-through payments, which 
would reduce state and federal government transfers to hospitals, 
physicians, and nursing facilities. Because we lack sufficient 
information to forecast the eventual overall impact of the May 6, 2016 
final rule on state pass-through payments, we provide only a 
qualitative discussion of the impact of this rule on avoided transfers. 
Given these avoided transfers, we believe this rule is economically 
significant as defined by Executive Order 12866.

C. Anticipated Effects

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Small entities are those entities, such as health care 
providers, having revenues between $7.5 million and $38.5 million in 
any 1 year. Individuals and states are not included in the definition 
of a small entity. We do not believe that this proposed rule would have 
a significant economic impact on a substantial number of small 
businesses.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for any rule that may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 603 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside a 
Metropolitan Statistical Area and has fewer than 100 beds. We do not 
anticipate that the provisions in this proposed rule will have a 
substantial economic impact on small rural hospitals. We are not 
preparing analysis for either the RFA or section 1102(b) of the Act 
because we have determined, and the Secretary certifies, that this 
proposed rule will not have a significant economic impact on a 
substantial number of small entities or a significant impact on the 
operations of a substantial number of small rural hospitals in 
comparison to total revenues of these entities.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2016, that 
is approximately $146 million. This proposed rule does not mandate any 
costs (beyond this threshold) resulting from (A) imposing enforceable 
duties on state, local, or tribal governments, or on the private 
sector, or (B) increasing the stringency of conditions in, or 
decreasing the funding of, state, local, or tribal governments under 
entitlement programs.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule that imposes 
substantial direct requirements or costs on state and local 
governments, preempts state law, or otherwise has federalism 
implications. Since this proposed rule does not impose any costs on 
state or local governments, the requirements of Executive Order 13132 
are not applicable. In accordance with the provisions of Executive 
Order 12866, this proposed rule was reviewed by the Office of 
Management and Budget.

D. Alternatives Considered

    During the development of this proposed rule, we assessed all 
regulatory alternatives and discussed in the preamble a few 
alternatives that we considered. First, in discussing our proposed 
revisions to paragraphs (d)(1)(i) and (ii) in this proposed rule, we 
considered linking eligibility for the transition period to those 
states with pass-through payments for hospitals, physicians, or nursing 
facilities that were in approved (not just submitted for CMS review and 
approval) managed care contract(s) and rate certification(s) only for 
the rating period covering July 5, 2016. However, we believe that such 
an approach is not administratively feasible for states or CMS because 
it does not recognize the nuances of the timing and approval processes; 
we believe our proposed approach provides the appropriate parameters 
and conditions for pass-through payments in managed care contract(s) 
and rate certification(s) during the transition period.
    Second, in discussing our proposed revisions to paragraphs (d)(3) 
and (d)(5) in this proposed rule, we described that the aggregate 
amounts of pass-through payments in each provider category would be 
used to set applicable limits for the provider type during the 
transition period, without regard to the specific provider(s) that 
receive a pass-through payment. As an alternative, we considered 
whether the state should be limited by amount and recipient during the 
transition period; however, we believe this narrower policy would be 
more limiting than originally intended under the May 6, 2016 final rule 
when the pass-through payment transition periods were finalized.

E. Accounting Statement

    As discussed in this RIA, the benefits, costs, and transfers of 
this regulation are identified in table 1 as qualitative impacts only.

[[Page 83785]]



                                                              Table 1--Accounting Statement
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Units
                     Category                          Primary      Low estimate    High estimate ------------------------------------------------ Notes
                                                      estimate                                      Year dollars    Discount rate  Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified...................................  Benefits include: Consistency with the statutory requirements in section 1903(m) of the Act and
                                                   regulations for actuarially sound capitation rates; improved transparency in rate development
                                                   processes; stronger payment approaches that are based on the utilization or delivery of services to
                                                   enrollees covered under the contract, or the quality and outcomes of such services; and improved
                                                   support for delivery system reform that is focused on improved care and quality for Medicaid
                                                   beneficiaries.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified...................................                       Costs to state or federal governments should be negligible.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Non-Quantified...................................   Relative to the current baseline, this rule is likely to prevent increases in or the development of
                                                     new pass-through payments, which would reduce state and federal government transfers to hospitals,
                                                         physicians, and nursing facilities. Given these avoided transfers, we believe this rule is
                                                                       economically significant as defined by Executive Order 12866.
--------------------------------------------------------------------------------------------------------------------------------------------------------

List of Subjects in 42 CFR Part 438

    Grant programs--health, Medicaid, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

PART 438--MANAGED CARE

0
1. The authority citation for part 438 continues to read as follows:

    Authority:  Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).

0
2. Section 438.6 is amended by revising paragraphs (d)(1), (3), and (5) 
to read as follows:


Sec.  438.6   Special contract provisions related to payment.

* * * * *
    (d) * * * (1) General rule. States may continue to require MCOs, 
PIHPs, and PAHPs to make pass-through payments (as defined in paragraph 
(a) of this section) to network providers that are hospitals, 
physicians, or nursing facilities under the contract, provided the 
requirements of this paragraph (d) are met. States may not require 
MCOs, PIHPs, and PAHPs to make pass-through payments other than those 
permitted under this paragraph (d).
    (i) In order to use a transition period described in this paragraph 
(d), a State must demonstrate that it had pass-through payments for 
hospitals, physicians, or nursing facilities in:
    (A) Managed care contract(s) and rate certification(s) for the 
rating period that includes July 5, 2016, and were submitted for CMS 
review and approval on or before July 5, 2016; or
    (B) If the managed care contract(s) and rate certification(s) for 
the rating period that includes July 5, 2016 had not been submitted to 
CMS on or before July 5, 2016, the managed care contract(s) and rate 
certification(s) for a rating period before July 5, 2016 that had been 
most recently submitted for CMS review and approval as of July 5, 2016.
    (ii) CMS will not approve a retroactive adjustment or amendment, 
notwithstanding the adjustments to the base amount permitted in 
paragraph (d)(2) of this section, to managed care contract(s) and rate 
certification(s) to add new pass-through payments or increase existing 
pass-through payments defined in paragraph (a) of this section.
* * * * *
    (3) Schedule for the reduction of the base amount of pass-through 
payments for hospitals under the MCO, PIHP, or PAHP contract and 
maximum amount of permitted pass-through payments for each year of the 
transition period. For States that meet the requirement in paragraph 
(d)(1)(i) of this section, pass-through payments for hospitals may 
continue to be required under the contract but must be phased out no 
longer than on the 10-year schedule, beginning with rating periods for 
contract(s) that start on or after July 1, 2017. For rating periods for 
contract(s) beginning on or after July 1, 2027, the State cannot 
require pass-through payments for hospitals under a MCO, PIHP, or PAHP 
contract. Until July 1, 2027, the total dollar amount of pass-through 
payments to hospitals may not exceed the lesser of:
    (i) A percentage of the base amount, beginning with 100 percent for 
rating periods for contract(s) beginning on or after July 1, 2017, and 
decreasing by 10 percentage points each successive year; or
    (ii) The total dollar amount of pass-through payments to hospitals 
identified in the managed care contract(s) and rate certification(s) 
used to meet the requirement of paragraph (d)(1)(i) of this section.
* * * * *
    (5) Pass-through payments to physicians or nursing facilities. For 
States that meet the requirement in paragraph (d)(1)(i) of this 
section, rating periods for contract(s) beginning on or after July 1, 
2017 through rating periods for contract(s) beginning on or after July 
1, 2021, may continue to require pass-through payments to physicians or 
nursing facilities under the MCO, PIHP, or PAHP contract of no more 
than the total dollar amount of pass-through payments to physicians or 
nursing facilities, respectively, identified in the managed care 
contract(s) and rate certification(s) used to meet the requirement of 
paragraph (d)(1)(i) of this section. For rating periods for contract(s) 
beginning on or after July 1, 2022, the State cannot require pass-
through payments for physicians or nursing facilities under a MCO, 
PIHP, or PAHP contract.
* * * * *


[[Page 83786]]


    Dated: November 10, 2016.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 10, 2016.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2016-28024 Filed 11-18-16; 11:15 am]
BILLING CODE 4120-01-P


Current View
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionProposed rule.
DatesTo be assured consideration, comments must be received at one of
ContactJohn Giles, (410) 786-1255.
FR Citation81 FR 83777 
RIN Number0938-AT10
CFR AssociatedGrant Programs-Health; Medicaid and Reporting and Recordkeeping Requirements

2024 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR