The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.

The CMS Cost Sharing Reduction Reconciliation Delay: What Does It Mean For Health Plans?

By Marie Bowker/Friday, February 20, 2015

Last week, the Centers for Medicare & Medicaid Services (CMS) announced they would delay reconciling 2014 benefit year cost-sharing reductions (CSRs) until April 2016, rather than the previously stated April 2015.

Under the Affordable Care Act, all issuers of qualified health plans (QHPs) must provide cost-sharing reductions to eligible enrollees and will be reimbursed for the value of the CSRs. For health plans, cost-sharing reduction plans present one of the most complicated compliance tasks to come out of the ACA. The law requires that health plans:

·         Determine advance payments to approximate the value of the cost-sharing subsidy

·         Declare, before the start of a plan year, which reconciliation methodology (Simplified or Standard) they’ll use

·         Reconcile all advance payments and actual subsidies at the end of the year

·         Complete an actuarial validation process and certify all results (if using Simplified method)

·         Re-adjudicate 100 percent of claims (if using Standard method)

Now, CMS will reconcile 2014 benefit year cost-sharing reductions for all issuers beginning on April 30, 2016, along with the 2015 plan year reconciliation. CMS also announced that it will allow those that had selected the Simplified methodology to switch to the more accurate Standard methodology. In announcing the move, CMS acknowledged that the Simplified methodology was yielding inaccurate CSR estimates for a number of issuers, and that many issuers using the Standard methodology were facing difficulties upgrading their systems in time for the reconciliation deadline.

This news is a mixed bag for health plans, depending on where they are in their CSR process. Some health plans were ready for the April 2015 deadline, while others were still scrambling to comply.

With all of the other ACA and market pressures plans are under, pushing CSR to the back burner will certainly seem tempting in light of this change. However, as data and analytics experts partnering with a number of plans on CSR solutions and with deep knowledge of the CMS regulations, we at Truven Health advise against this.

Health plans: use this additional time to ensure that your reconciliation projections are accurate and your data and processes are working correctly.  Your CFO and finance team will want this information for accurate accounting now and going forward ― so use this time well! 

If you’ve started the process with Simplified, embrace this chance to switch to the Standard method. If you’ve yet to select a partner, use this as your chance to choose your best fit. Take this time to work out wrinkles in your reconciliation process and get it just right well before the 2016 deadline, to ensure clear vision on your financial outlook.

As always, we’ll continue to monitor these events and share information that impacts your CSR status.

Marie Bowker, Senior Director, Practice Leadership
Bryan Briegel, Director of Operations

The CMS Readmission Program — Plus or Minus for Seniors and Hospitals?

By Michael L. Taylor/Thursday, February 19, 2015

Michael Taylor photoAs CMS expands its 30-day readmission penalty program, more financial pressure is placed on hospitals and seniors. This program has driven hospitals to increase the use of outpatient observation services. Inpatient stays are paid by Medicare Part A, but outpatient observation is paid by Medicare Part B which covers only 80 percent of the bill. Here is what is happening in some markets. Let’s say a person is admitted to a hospital for heart failure. The length of stay might be 3-4 days and then the patient is discharged. If that same person has a recurrence of heart failure within 30 days of the initial discharge, the hospital will not be paid for that episode. However, if the 2nd episode is handled under outpatient observation status, the hospital is paid, but the patient (who probably didn’t realize he/she was not admitted to the hospital) receives a bill for 20 percent of the charges. 

This is an issue, but the larger issue is how the law assigns all the risk to the hospital. Perhaps the thought was that poor inpatient care is the cause for readmissions, but the reality is that many other factors not under the hospital's control can drive readmissions. The patient has some responsibility — the patient needs to be compliant with medications, follow up with his/her primary care physician, and follow all discharge instructions. In some cases, a primary care physician might not be available, or the patient might not be able to travel to pharmacies and doctors offices, thus not getting needed follow-up care.

Another issue is that heart failure is a complex clinical condition, and despite the best level of care, sometimes symptoms recur and patients need to be re-admitted. The 30-day provision doesn’t seem fair to hospitals in the case of heart failure; if the patient is readmitted on day 29, the hospital is not paid, but if the 2nd episode occurs on day 31, the hospital is fully paid. The 30-day rule makes more sense for certain surgeries such as hip and knee replacements. With those surgeries, a readmission within 30 days could be avoided.

Given these issues, I believe the 30-day rule should be modified. Certain medical diagnoses could use a “sliding scale” based on number of days since discharge. I don’t think the rule should be dropped, however. This rule is forcing hospitals to consider continuity of care issues, ensuring that appropriate post-discharge planning and care does occur. It also further encourages ACO and patient centered medical home approaches, which are designed to provide continuity.  It discourages fee-for-service approaches, which are typically not structured to provide these services very well. For these reasons, I think the 30-day rule is (and should be) here to stay.

Michael L. Taylor, MD
Chief Medical Officer