'Fair warning': New Medicaid 'pass-through' payments for SNFs may be blocked

So-called “pass-through” Medicaid payments may soon find themselves in the crosshairs of federal regulators, according to a recent bulletin from the Centers for Medicare & Medicaid services.

Pass-through payments, additional payments given to providers by managed care plans, are “inconsistent” with the goals laid out for Medicaid in the massive final rule for the program released in April, Center for Medicaid and CHIP Services Director Vikki Wachino wrote in the July 29 bulletin.

The final rule included plans to phase out pass-through payments through “transition periods” for different providers. Payments to nursing facilities would be phased out over five years, compared to 10 years for hospitals. The rule also put limits on such payments as the Medicaid program transitions to value-based payments, which aren't compatible with the pass-through system.

Although the final rule didn't include a provision barring new pass-through payments entirely, CMS believes adding new payments would “exacerbate a problematic practice” and complicate the transition from pass-through payments to value-based models, Wachino wrote.

While the recent bulletin isn't binding — states may still create new payments if they wish — it serves as a warning that the agency may change regulations at some point during the transition periods.

“They are forewarning states that this is their intent, so states don't set up systems and then find out the CMS has put out another regulation that changes policy,” Anil Shankar, an attorney with Foley & Lardner LLP, told Bloomberg BNA. “[CMS is] trying to be transparent about intent and giving fair warning. It doesn't end the opportunity for states, but lets them know the path may not be open indefinitely.”