Health Headlines – May 27, 2025

CMS Issues New Guidance and Request for Information on Hospital Price Transparency Regulations

Last week, CMS published new guidance and issued a Request for Information on the Hospital Price Transparency Rule in response to President Trump’s February 25, 2025 Executive Order titled, “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information.” (The Executive Order is discussed in greater detail in the March 3, 2025 edition of Health Headlines). CMS’s guidance provides updated instructions to hospitals on how to calculate the “estimated allowed amount,” a newer data element established in the FY 2024 Outpatient Prospective Payment System Final Rule. (The changes to the hospital price transparency regulations stemming from the FY 2024 Final Rule are discussed in greater detail in the November 6, 2023 edition of Health Headlines). The Request for Information seeks to gather feedback on how to boost hospital compliance and enforcement and ensure data shared is accurate and complete.

Updated Guidance

CMS’s guidance reminds hospitals that they must encode a standard charge dollar amount in the machine-readable file if it can be calculated, including the amount negotiated for the item or service, the base rate negotiated for a service package, and a dollar amount if the standard charge is based on a percentage of a known fee schedule. The guidance also refers hospitals to the CMS HPT – Data Dictionary GitHub Repository for examples of how to encode standard charge data.

Additionally, CMS’s guidance provides undated instructions on how to calculate the “estimated allowed amount,” which is the “average dollar amount that the hospital has historically received from a third-party payer for an item or service” when the standard charge is expressed as a percentage or algorithm. Because there are infrequent scenarios where a hospital has limited historical claims to derive the estimated allowed amount, CMS has previously recommended that hospitals facing such scenarios encode “999999999” in the data element value to indicate that the hospital does not have sufficient reimbursement history to derive the estimated allowed amount. CMS’s new guidance, however, informs hospitals to discontinue the use of “999999999.”

In calculating the “estimated allowed amount,” hospitals should instead encode the average dollar amount the hospital has received for an item or service, derived from electronic remittance advice transaction data using data from items or services rendered within the 12 months prior to posting the file. CMS provides the following scenario to illustrate its guidance:

1. If the currently negotiated percentage or algorithm was only used for a portion of the 12- month time period prior to posting the file, the hospital should encode the average dollar amount from the electronic remittance advice transactions for only the portion of time that the percentage or algorithm was used.
2. If an item or service that is negotiated as a percentage or algorithm was used or performed one or more times within the 12-month time period prior to posting the file, the hospital should encode the average of those charges derived from electronic remittance advice transaction data as the “estimated allowed amount,” and remark in the “notes” data element that there was “one or more instances of the item or service in the 12 months prior to posting the file.”
3. If an item or service that is negotiated as a percentage or algorithm was not used within the 12-month time period prior to posting the file, the hospital should encode a value in dollars and cents related to their expectation of what the charge would be for that item or service, and remark in the “notes” data element that there were “zero instances of the item or service in the 12 months prior to posting the file.”

Request for Information  

The Request for Information seeks “public input to identify challenges and improve compliance and enforcement processes related to the transparent reporting of complete, accurate, and meaningful pricing data by hospitals.”  Specifically, CMS is seeking comments on the following questions:

1. Should CMS specifically define the terms “accuracy of data” and “completeness of data” in the context of HPT requirements, and, if yes, then how? 
2. What are your concerns about the accuracy and completeness of the HPT MRF data? Please be as specific as possible. 
3. Do concerns about accuracy and completeness of the MRF data affect your ability to use hospital pricing information effectively? For example, are there additional data elements that could be added, or others modified, to improve your ability to use the data? Please provide examples. 
4. Are there external sources of information that may be leveraged to evaluate the accuracy and completeness of the data in the MRF? If so, please identify those sources and how they can be used. 
5. What specific suggestions do you have for improving the HPT compliance and enforcement processes to ensure that the hospital pricing data is accurate, complete, and meaningful? For example, are there any changes that CMS should consider making to the CMS validator tool, which is available to hospitals to help ensure they are complying with HPT requirements, so as to improve accuracy and completeness? 
6. Do you have any other suggestions for CMS to help improve the overall quality of the MRF data?

Responses can only be submitted using CMS’s online form and must be submitted by 11:59 P.M. ET on July 21, 2025.  

Reporter, Ahsin Azim, Washington, D.C., + 1 202 626 5516, aazim@kslaw.com

CMS Expands Auditing of Medicare Advantage Plans

On May 21, 2025, CMS announced that it plans to increase its auditing efforts for Medicare Advantage (MA) plans.  Effective immediately, CMS will audit all eligible MA contracts for each payment year in all newly initiated audits, and it will increase resources to complete audits for payment years 2018 through 2024 given that CMS is several years behind in completing these audits. 

MA plans receive risk-adjusted payments based on the diagnoses they submit for enrollees, which results in higher payments for patients with more serious or chronic conditions.  CMS’s auditing process involves confirming that the diagnosis codes used by MA plans are actually supported by patient medical records.  These audits are known as Risk Adjustment Data Validation (RADV).

Dr. Mehmet Oz, CMS Administrator, said that CMS has a duty to ensure that MA plans are “billing the government accurately for coverage they provide to Medicare patients.”  The Medicare Payment Advisory Commission estimates that MA plans may overbill the government as much as $43 billion a year.

Although CMS is backlogged with RADV audits (and the last major one that occurred was for payment year 2007), the Trump Administration aims to complete the remaining ones by early 2026.  To meet this goal, CMS will roll out enhanced technology that can flag unsupported diagnoses and increase the number of medical coders from 40 people to 2,000 people beginning in September 2025.  CMS will also work with HHS Office of Inspector General to recoup overpayments identified in past audits.

A copy of the CMS Press Release can be found here.

Reporter, Brittni Hamilton, Los Angeles, CA, +1 213-218-4083, bhamilton@kslaw.com

House Passes Reconciliation Bill Impacting Medicaid Financing, Programs, and Eligibility

On May 22, 2025, the House passed H.R. 1, the One Big Beautiful Bill Act (the Bill), its budget reconciliation legislation that upheld most of the Medicaid-related provisions originally approved by the House Energy and Commerce Committee (the Committee) on May 15, 2025 (the Committee-Approved Version). While many of the Medicaid-related provisions remained intact, the final version of the Bill includes several modifications to key Medicaid provisions.

Last week’s Health Headlines included an article examining several key Medicaid provisions in the Committee-Approved Version that affect state Medicaid financing mechanisms (i.e., provider taxes), state directed payment (SDP) programs, and Medicaid eligibility. The following provisions were modified prior to the Bill’s full passage:

• Revising the payment limit for certain SDPs (Sec. 44133): The Bill included an increased upper payment limit for non-expansion states, raising it from the 100% of the published Medicare payment rate (or equivalent Medicare payment rate if no published rate) established in the Committee-Approved Version to up to 110% for states that have not expanded Medicaid coverage under the ACA.  These percentages are still lower than the current payment limit for SDPs, which is based on the average commercial rate. The Bill also specified that the upper payment limit would be based on an equivalent Medicare payment rate to the extent there is no specified published Medicare payment rate for a specific service. The Bill also introduces a definition for “equivalent Medicare payment rate,” which means “amounts calculated as payment for specific services comparable to the service furnished that have been developed under part A or part B of title XVIII of the Social Security Act (42 U.S.C. 1396 et seq.).” 
• Work and Community Engagement Requirements (Section 44141): The implementation date for the work and community engagement requirements, which require able-bodied adults without dependents to meet community engagement criteria (e.g., working, volunteering, attending educational programs, etc.) for at least 80 hours per month, was accelerated from January 1, 2029 to December 31, 2026. 

There were no changes to the other Medicaid-related provisions highlighted in last week’s Health Headlines article, including the (i) moratorium on new or increased provider taxes (Sec. 44132), (ii) HHS’s evaluation of whether a Medicaid provider tax is “generally redistributive” for purposes of waiving the uniform tax requirement (Sec. 44134), (iii) Medicaid eligibility provisions requiring more frequent redeterminations (Sec. 44108), and limiting retroactive coverage to 30 days (Sec. 44122).

Other Medicaid-related provisions introduced in the Committee-Approved Version and retained in the Bill include:

• Section 44111: Beginning October 1, 2028 (i.e., FY2028), the Federal Medical Assistance Percentage is reduced by 10% for Medicaid expansion states that use Medicaid or another state-based program to provide health care coverage to individuals who are not lawfully residing in the United States.
• Section 44125: Prohibits Medicaid or CHIP payments for specified gender transition procedures, subject to certain exceptions. 
• Section 44126: Prohibits Medicaid payment for 10 years to nonprofit essential community providers (i) primarily engaged in family planning services, reproductive health, and related medica care and (2) that provides for abortions in cases other than that of rape, incest, or life-threatening conditions for the woman; and (3) that received federal and state Medicaid payments totaling more than $1 million in in FY2024.
• Section 44131: Requires states that have not elected to expand Medicaid pursuant to the ACA to do so by January 1, 2026, in order to receive the corresponding 5% enhanced federal matching rate authorized under the American Rescue Plan Act.
• Section 44142: Beginning October 1, 2028 (i.e., FY2029), states will need to institute cost-sharing requirements for the Medicaid expansion population. Cost sharing for Medicaid expansion enrollees may not exceed $35 for an item or service and total cost sharing may not exceed 5% of the family’s income. 

The reconciliation bill now moves to the Senate, which will make changes to the legislation that will likely include amending some of the House-passed Medicaid provisions.  Any Senate-approved changes must return to the House for a vote before the bill can be enacted.

The final version of the Bill is available here, and the amendments to the Committee-Approved Version is available here.

Reporters, Dennis Mkrtchian, Los Angeles, + 1 213 218 4046, dmkrtchian@kslaw.com; Christopher Kenny, Washington, D.C., + 1 202 626 9253, ckenny@kslaw.com; Allison Kassir, Washington, D.C., + 1 202 626 5600, akassir@kslaw.com.

Editors: Chris Kenny and Ahsin Azim
Issue Editors: Christopher Jew and Catherine Behnke