CMS Lifts Medicare Claims Hold Amid Government Shutdown
On October 21, 2025, CMS released a Medicare Learning Network (MLN) Connects Newsletter announcing that the claims hold previously implemented due to the federal government shutdown had been lifted for the majority of Medicare claims with dates of service on or after October 1, 2025.
Background
On October 1, CMS issued an MLN Connects Newsletter stating that certain legislative payment provisions were set to expire absent congressional action. As a result, CMS directed all Medicare Advantage Contractors (MACs) to implement a temporary 10-day claims hold, which is standard practice. CMS said that the claims hold would prevent the need for reprocessing large volumes of claims should Congress act. CMS noted the claims hold should have a minimal impact on providers due to the 14-day payment floor.
The same October 1 MLN Connects Newsletter also stated that many of the statutory limitations that were suspended during the COVID-19 Public Health Emergency would take effect again without congressional action. These include the prohibition on services provided to beneficiaries in their home and outside of rural areas, as well as hospice recertifications that will require face-to-face encounters. The newsletter recommended that absent legislative action, telehealth providers who provide services that are not covered by Medicare after October 1, 2025, may want to 1) evaluate providing beneficiaries with an Advance Beneficiary Notice of Noncoverage (ABN), or 2) consider holding claims that are no longer payable by Medicare.
October 15, 2025 MLN Connects Newsletter
On October 15, CMS published another MLN Connects Newsletter stating that CMS instructed the MACs to continue to temporarily hold claims with dates of service on or after October 1, 2025 for services impacted by legislative payment provisions that expired. CMS said that the claims hold applied to all claims paid under the Medicare Physician Fee Schedule, ground ambulance transport claims, and all Federally Qualified Health Center (FQHC) claims. CMS clarified later that day that the claims hold applied only to services impacted by the expired legislative payment provisions.
October 21, 2025 MLN Connects Newsletter
On October 21, CMS published another MLN Connects Newsletter in which CMS instructed all MACs to lift the claims hold and process claims with dates of service on or after October 1, 2025. The directive applies to claims paid under the Medicare Physician Fee Schedule, ground ambulance transport claims, and FQHC claims. CMS also directed MACs to lift the claims hold for telehealth claims that CMS can confirm are definitively for behavioral and mental health services. The claims hold is still in effect for claims for telehealth services that CMS cannot confirm are definitively for behavioral and mental health services and for acute Hospital Care at Home claims.
The October 1, 2025 MLN Connects Newsletter can be found here. The October 15, 2025 MLN Connects Newsletter can be found here. The October 21, 2025 MLN Connects Newsletter can be found here.
Reporter, Priya Sinha, Atlanta, +1 404 572 3548, psinha@kslaw.com.
Key Takeaways from K&S Annual Health Law & Policy Forum West
On October 15, 2025, King and Spalding hosted its annual Health Law & Policy Forum West in Marina Del Rey. The full-day program covered trending topics in the healthcare industry and featured a keynote session with Chad Golder, general counsel of the American Hospital Association, and Rob Hur, former special counsel and U.S. attorney. Insights from the panels are captured below.
Inside the Watchtower: Conversations With Former Federal Program Integrity Leaders About Oversight in Changing Times
- Fraud and Abuse Oversight and Enforcement Under the New Administration. The new administration has introduced a distinct blend of deregulatory goals and aggressive fraud enforcement. With Dr. Mehmet Oz, a physician with no prior government experience but emphasizing physician and patient-centric thinking, leading CMS and a new Department of Government Efficiency (DOGE) tasked with cutting wasteful spending, the government is still pushing aggressively on program integrity while cutting administrative red tape. The leadership team, which includes many individuals with private sector backgrounds, has approached oversight with a focus on measurable financial impact.
- AI, Advanced Data Analytics, and Program Integrity. CMS and DOGE are increasingly deploying real-time analytics and AI to identify outlier billing patterns and prevent improper payments before claims are processed. For example, DOGE and CMS are deploying predictive models to identify suspect billing patterns and intervene before payments are issued. While these tools are influencing oversight, they raise due process concerns when used to affect payments solely based on data predictions.
Government agencies view analytics as both an enforcement mechanism and a compliance expectation, in that health care entities that can demonstrate internal data monitoring and self-auditing will be better positioned to mitigate scrutiny. In other words, providers that understand their own data, monitor trends, and can explain anomalies will be better positioned to defend against government scrutiny. Still, OIG recognizes that analytics should be paired with field intelligence to avoid overreliance on AI or algorithms.
- Expanding Oversight of Managed Care. Managed care, particularly Medicare Advantage, has moved to the forefront of federal enforcement priorities. For example, the DOJ-HHS FCA Working Group included Medicare Advantage at the top of the list of priority enforcement areas. Increased emphasis on managed care marks a significant policy shift. This shift is expected to create downstream impacts for providers, including heightened scrutiny of the diagnoses submitted flow of funds and diagnoses submitted for purposes of risk-adjustment.
- Evolving Compliance Demands. Providers are encouraged to invest in robust compliance programs that identify, quantify, and resolve potential issues internally before government intervention. Providers that proactively assess their own data are expected to fare better in enforcement and oversight environments increasingly driven by analytics. Providers are encouraged to review their own data from an “outlier” perspective and be prepared to justify variances under applicable coverage criteria.
Panelists: Rob DeConti (Partner, King & Spalding); Dara Corrigan (Former Deputy Administrator and Director, Center for Program Integrity, CMS); Kyle Gotchy, Moderator (Partner, King & Spalding)
Tailwinds and Headwinds: The Current Healthcare Deal Landscape
- 2025 Deal Trends: Panelists provided an overview of deal trends, explaining that overall deal volume has remained flat between 2023 and the first half of 2025 – but a breakdown by subsector reveals that hospital and health system deals have fallen off (and without the Steward bankruptcy, activity would have been even lower). d solve the issues that the current market is posing.
- Regulatory Scrutiny: The panelists discussed the state of regulatory scrutiny, highlighting the fact that the regulatory space, particularly concerning the challenging of hospital mergers, hasn’t changed much from the first Trump presidency term through Biden’s presidency. Panelists also discussed state-level “mini HSR” laws which require parties to certain healthcare transactions (that in many cases weren’t previously subject to review) to submit detailed filings to state authorities. This has created some hesitancy in the market, particularly with private equity sponsors. Private equity firms are very focused on public relations (PR) risks when they are making investments and avoiding sectors altogether that pose higher PR risks. Similarly, private equity firms are not publicizing their transactions as much and maintaining a lower profile. Lastly, the panelists highlighted the increasing focus by legislators and regulators on payors, including a recently proposed Senate bill to ban insurers from owning Part B and C providers.
- Tailwinds: The panelists discussed the most prominent tailwinds in the market, focusing on the improvement of market sentiment and the mentality of buyers, a strong consumer demand in healthcare due to an aging population requiring more services, and the fact that private credit is readily available to do deals, and is getting cheaper as interest rates decrease. They noted that they have seen the private equity space getting more creative, like partnering with AI companies. They also discussed the age of assets in PE portfolios, as the majority of assets in portfolios are over 10 years old, which increases pressure for PE sponsors to sell.
- Headwinds: The panelists also discussed the headwinds in the market including federal activity (tariffs, regulatory scrutiny, etc.), cuts to Medicaid and ACA subsidies, labor shortages, and provider cost pressures. However, the panelists noted that cuts can drive deal activity as distressed hospitals may need to partner with other entities to obtain capital.
- Areas of Interest: The panelists provided insight into areas of interest, including high demand physician specialties, value-based care, ambulatory surgery centers, home health and hospice, and AI driven platforms. There was an emphasis on the ambulatory space, where a lot of players are getting into this market, including through more creative structures devised by private equity sponsors seeking long term value.
- Outlook: Finally, the panelists provided an overview of the future outlook, explaining that most industry observers are predicting the recent uptick to continue, driven by the expectation that interest rates will come down. Additionally, the mentality of buyers in the market is improving and costs are going down. There is also an expectation to understand the focus of the Trump administration and what will happen in response to state laws. The panelists also noted that private equity sponsors have come to recognize that health systems and physician groups are the backbone of the delivery system and therefore it is better to join forces with them instead of trying to compete with them in the marketplace.
Panelists: Richard Zall (Partner King & Spalding); Gardner Armsby (Partner King & Spalding); J.J. Brown (Managing Director Houlihan Lokey)
Medicare Reimbursement Inside and Out: Looking at Payment Issues From All Perspectives
- Today’s Challenging Reimbursement Landscape: California hospitals are facing unprecedented financial pressures, with average operating margins down by nearly seven percent since 2019. Medicare payments to California hospitals are projected to increase in 2026, but the estimated rate of increase trails behind the national average by over three percent for IPPS and one percent for OPPS. The financial situation for California hospitals is expected to get worse before it gets better due to recent statutory and regulatory changes. The Medicaid changes in the Big Beautiful Bill will limit provider taxes and reduce the Medicaid rolls, resulting in lower DSH payments and potentially affect eligibility for the 340B program. And California’s newly minted spending limits for certain “high-cost” hospitals are yet another pressure point.
- Weathering the Storm with Medicare Appeal Opportunities: There are several Medicare revenue opportunities that California hospitals should consider pursuing to soften the financial impact of today’s challenging reimbursement landscape.
- Wage Index: In FY 2024, CMS changed its methodology for calculating the Medicare rural wage index and the rural floor and admitted that its new methodology was consistent with the “best reading” of the statute. Data shows that if CMS had implemented the “best reading” six years earlier, Medicare would have paid an additional $4 billion to California hospitals between 2018 and 2023. Affected hospitals should consider filing appeals for their cost reporting periods overlapping with 2018 and 2023.
- Standardized Amount: CMS made two errors around the time it first implemented IPPS. First, in 1984, CMS miscalculated the inaugural standardized amount by including transfer cases in the computation of the average cost per discharge. The estimated impact of this error is one percent of IPPS payments. Second, in 1986, CMS carried forward a budget neutrality adjustment that was supposed to expire in 1985. That adjustment remains in the rates to this day. The estimated impact is approximately six percent of IPPS payments. Last year, the D.C. District Court noted in passing that the second error violated the plain meaning of the statute.
- Unpaid SSI Days: The Medicare fraction requires CMS to calculate the percentage of a hospital’s Medicare patients that are eligible for supplemental security income (SSI). Hospitals are challenging CMS’s policy of excluding SSI-eligible individuals from the Medicare fraction if they do not receive payment in a given month for various administrative reasons, e.g., address unknown or check returned as undeliverable.
- Part C Days: Hospitals are challenging the inclusion of Part C days in the Medicare fractions for periods prior to 2013. Recently, the D.C. District Court ruled that CMS lacked authority to implement its Part C policy retroactively.
- Loper Bright Generally Improves the Odds of Medicare Appeals: The Supreme Court’s decision in Loper Bright Enterprises v. Raimondo overturned the landmark 1984 decision in Chevron USA v. Natural Resources Defense Council. Under the Chevron doctrine, when confronted with an ambiguous statute, federal courts had to defer to the agency’s interpretation if it was “reasonable.” Under the new Loper doctrine, courts must exercise their “independent judgment” to determine the “best reading” of the statute—the antithesis of Chevron.
- Loper Already Making a Difference: In Lake Regional Healthcare Corp. v. Becerra, the D.C. Circuit applied Loper in holding that CMS’s methodology for calculating the volume decrease adjustment for sole community and Medicare-dependent hospitals was not consistent with the “best reading” of the statute. The Eighth Circuit had previously upheld the same methodology under Chevron.
- CMS’s Litigation Strategy After Loper Bright: In defending its policies in Federal court, CMS will argue, where possible, that Congress expressly empowered CMS to fill gaps left in the statute. This is because the Supreme Court preserved deference for express delegations of power. In the absence of an express delegation of authority, the agency will argue that its position is the best reading of the statute. This substantially restricts the government’s ability to adopt different interpretations, since the agency will be forced to admit that its prior interpretation was not predicated on the best reading of the statute.
- Other Considerations when Challenging CMS Policies: CMS has significant discretion to defend its policies challenged in District Court. But to appeal an unfavorable district court decision, CMS must seek approval of the Department of Justice. The Solicitor General personally authorize the filing of merits briefs before Courts of Appeal. CMS will always look for procedural errors to get a case kicked out, even if CMS would admit error on the merits. When appealing new rules, CMS will invoke the waiver defense if nobody objected to the policy during notice-and-comment rulemaking.
Panelists: Dan Hettich (Partner, King & Spalding); Chris Kenny (Partner, King & Spalding); David Hoskins (Partner, King & Spalding); and Fred Fisher (VP Service Development, Toyon Associates, Inc.).
The Trifecta in Healthcare Contracting — Indemnification, Insurance and Subrogation: Are You Getting It Right?
- Indemnification and Risk Allocation: Indemnification is an agreement to save or hold harmless another party. Too narrow an indemnification clause may leave parties unprotected; too broad may create unmanageable liability.
- Interplay Between Indemnification and Insurance: Insurance helps with ensuring the indemnified can financially support that risk. It is important to clarify how indemnification interacts with available insurance coverage and to agree in advance whether indemnification is limited to insurance coverage or extends beyond it. For example, commercial general liability policies often exclude contractual liabilities; contractual liability coverage may not cover the entire indemnity; thus, contracting parties should verify policy terms, reference specific rating levels and minimum coverage levels, require qualified actuaries to set reserves, secure waiver of subrogation endorsements, and obtain proof of additional insurance status.
- Waiving Subrogation: Waivers of subrogation prevent insurers from suing other potentially responsible parties after paying a claim. These waivers help keep losses with insurers and are common and usually affordable. Note: Without a waiver, the insured typically cannot settle claims against third parties without insurer involvement.
- Certificates of Insurance: Certificates of Insurance provide evidence of insurance but are not issued by insurers and may be inaccurate. Certificates often omit waiver or subrogation details. Contracting parties should always reserve the right to review full policies or, at a minimum, request redacted copies with relevant policy terms for confirmation.
- Important Questions When Negotiating Indemnification Provisions:
- Indemnitees—Who is protected?
- Defense—Who controls and pays for defense?
- Losses—What damages are covered?
- Claims—What triggers indemnification?
- Scope—Whose conduct or acts are covered?
- Insurance—How does insurance interact with the indemnity? Who has the primary insurance and who has the excess insurance?
- Joint & Several Liability—How is liability allocated among multiple parties?
- Processes—What are the notice and procedural requirements?
- Separate Waiver of Liability—Is the waiver consistent with other terms?
- Survival—Do the obligations survive agreement termination?
- Indemnification in M&A Agreements: Sellers typically indemnify buyers for losses. Scope can be tailored; parties can adjust the scope of the indemnity provision to fit the situation. An indemnified party (the buyer) will want to expand the scope to include affiliates and key personnel of the affiliates. Common limitations on indemnification include: survival periods for claims; deductibles/baskets before indemnity applies; caps on liability; carveouts for specific issues; mitigation obligations; sandbagging provisions (buyer’s knowledge of breaches); materiality scrapes in the form of representations and warranties; and third-party payment reductions. Fraud is universally excluded from limitations; thus, it is important for parties to define it carefully in the agreement.
Panelists: Jack Fontham (Partner, King & Spalding); Kristin Roshelli (Partner, King & Spalding); Tom Hawk (Partner, King & Spalding).
Using Antitrust Tools to Combat Unfair Payor Tactics
- Antitrust Background: The panelists provided an overview of the relevant statutory background, including Sections 1 and 2 of the Sherman Act (prohibiting agreements that restrain trade and prohibiting monopolization or attempted monopolization) and Section 5 of the FTC Act (prohibiting unfair or deceptive methods of competition).
- Key Enforcement Priorities: The panelists also discussed key enforcement priorities in this administration, highlighting the new antitrust leadership (Gail Slater in the DOJ and Andrew Ferguson in the FTC), President Trump’s revocation of the Biden Administration’s 2021 executive order on competition policy, and the Trump administration’s focus on healthcare competition.
- FTC Activism in Healthcare: The panelists discussed the appointment of Emma Mittelstaedt Burnham as the Associate Director for Healthcare in the Bureau of Competition and the FTC’s focus on competitors sharing directors (in violation of the Clayton Act). The FTC has also focused on employee non-competes – sending letters to large healthcare employers and staffing firms urging a review of their agreements and any non-competes to ensure they comply with the law.
- Making the Antitrust Laws Work for You: The panelists then discussed the opportunities to use antitrust laws through private litigation or arbitration, or through the DOJ, FTC, State Attorneys General or European Union. There are several benefits of private litigation (asserting claims under the Sherman Act, Clayton Act, or other parallel state claims) including that there is control over the narrative, timing, and potential for a quick settlement or significant damages. The potential costs include that the process can take years, be expensive, time consuming, face challenging pleading standards, and may include potential counterclaims. There is also the opportunity to use the DOJ or FTC – which are receptive to learning about anticompetitive conduct, though the panelists warned to wait until you are fully prepared and frame the story as protective competition (not protecting your company).
- Antitrust Cases Combatting Unfair Payor Behaviors: The panelists then focused antitrust cases aimed at unfair payor behaviors – particularly in the context of network lease agreements. The panelists provided an overview of network lease agreements and explained that because they involve one payor “piggybacking” off of another payor’s provider networks and contracted rates, they may violate Section 1 of the Sherman Act as an agreement between competitors. The panelists provided several examples of this issue, including where Kaiser contracted with Cigna to piggyback on Cigna’s provider networks in states where Kaiser doesn’t currently have networks – effectively giving Cigna the state in exchange for Cigna giving Kaiser its rates. The panelists concluded by providing a couple of other example cases reflecting unfair payor behaviors including through alleged nationwide market allocations and price fixing agreements and monopoly attempts against payors.
Panelists: Glenn Solomon (Partner, King & Spalding); Bob Cooper (Partner, King & Spalding); Chris Yook (Partner, King & Spalding); Lohr Beck (Partner; King & Spalding)
Managed Care: Developments in Managed Care Litigation and Contracting
- Post-Acute Delayed Placement: The Panel discussed issues that arise when an acute inpatient hospital patient’s treating physician deems the patient safe to receive a lower level of care at, say, a skilled nursing facility, acute rehabilitation facility, or to receive home health services, for example, but the patient is unable to be discharged to such “post acute” care due to difficulties finding an available and accepting post-acute facility, or failures or delays by a payor in authorizing the patient’s transfer to such a facility, thereby requiring the hospital to continue rendering acute inpatient care to the patient. Payors often deny payment, or pay substantially lower rates, for inpatient days where the Payor determines that the patient could have received a lower level of care. This ignores the reality that hospitals cannot simply discharge patients who still require some level of care into the streets.
The Panelists discussed possible workarounds for these situations, such as negotiating language in contracts with payors that identify a specific rate to be paid for such post-acute days (such as an administrative day rate) or to include language requiring the Payor to promptly arrange for post-acute care when the patient’s treating physician deems it medically necessary.
- ED Downgrades: The Panel discussed how health plans often avoid outright denying claims (because providers typically win appeals and lawsuits over denials) and instead downcode emergency department visits from higher to lower levels. Such downcoding is often done without notice and can be harder for providers to identify than denials.
Often Payors attempt to include language in provider contracts that purportedly allow them to perform such downgrades. These include contract provisions permitting claim edits and claim review, as well as language that requires compliance with the Payor’s manuals and policies. The Payor then updates its policies to permit this sort of downcoding and argues that the policy was incorporated into the contract.
Often, these policies may ignore the actual services rendered as well as industry standards for coding and billing. These policies also may rely entirely on the final diagnosis rather than considering the provider’s medical decision making. Moreover, Payors are increasingly using algorithms and auto pay lists to downcode automatically rather than considering all pertinent patient information.
The Panel discussed strategies for combating downcoding, such as keeping records of appeals, and educating clinical personnel on the importance of documenting care. Strong documentation makes for a strong case during litigation. Additionally, the Panel proposed minimizing downcoding issues on the front-end by negotiating provisions in contracts requiring Payors to provide notice that they have downcoded.
- AI in Managed Care Claims Processing & Payment: The Panel discussed the increase in payors using AI, blanket prepay reviews and algorithmic edits to identify and automatically downcode claims. In particular, the Panel discussed common tools being used by payors like the “EDC Analyzer,” which systematically downcodes emergency department claims, as well certain third-party vendors being like Cotiviti that perform algorithmic downcodes on the Payors’ behalf.
The Panel noted that CMS has taken steps to combat this sort of automated readjusting for Medicare Advantage plans. In particular, CMS has stated that algorithms or AI alone cannot be used as the basis to deny admission or downgrade to an observation stay.
Colorado, Maryland and California have also begun implementing laws on the state level to restrict payers’ use of AI in payment and authorization decisions.
The Panel discussed strategies for combatting the use of AI and algorithms, such as tracking denial codes and closely monitoring actual payments relative to expected payments in order to catch the practice early, as well as negotiating contract terms that incorporate CMS’ Medicare Advantage language regarding the use of algorithms and AI into contracts, but applying such language not just to MA but to all lines of business.
- Managed Care Dispute Resolution: The Panel discussed pitfalls to avoid when negotiating dispute resolution provisions with Payors. For example, Payors will attempt to include language limiting the numbers of claims at issue in an arbitration, language that imposes strict time limitations on when a dispute must be initiated before, as well as strict requirements to exhaust administrative remedies or engage in pre-litigation dispute resolution procedures. The Panel also noted that Payors are attempting to negotiate language to make arbitration more like court, thereby destroying its efficiencies, such as permitting arbitration appeals and allowing extensive discovery.
The Panel also discussed the pros and cons of pursuing litigation against a Payor while negotiating a contract, including whether litigation can improve or hinder negotiations.
Panelists: Stacy Bratcher (Senior Vice President and General Counsel, Cottage Health); Amanda Hayes-Kibreab (Partner, King & Spalding); Rob Keenan (Partner, King & Spalding).
A View From Washington: What’s Next From Congress on the Legislative and Investigative Fronts
- 2026 Midterm Election Outlook: With regards to the Senate, Republicans flipped four seats in 2024 to reclaim a 53-seat majority, meaning Democrats must net four seats to win back control in 2026, as Vice President JD Vance holds the tiebreaking vote. With regards to the House, Republicans currently hold a 219-213 majority with three vacancies (expected to enter 2026 at 220-215), meaning Democrats likely need a net gain of three seats to flip the House.
- Government Shutdown: We are entering the third week of a full federal government shutdown, meaning none of the 12 Fiscal Year 2026 appropriations bills have been enacted. The House passed a “continuing resolution” (CR) in September, and, despite multiple votes, the Senate has failed to reach the 60 vote threshold, as at least seven Democrats would need to join with Republicans to support the CR. There is no clear resolution in sight, and, in fact, both sides appear to be digging in. The central disagreement relates to the enhanced advanced premium tax credits which expire on December 31. Democrats insist any CR must extend the subsidies; Republicans insist that they will not negotiate on Democratic health priorities until the government is reopened. In addition to furloughs of the HHS workforce, the Administration has begun a series of Reductions in Force (RIF), and authorizations for several health functions, including telehealth flexibilities and acute hospital at home, are currently expired.
- Unified Government: During times of unified government (one party control), the focus turns to legislating and delivering on campaign promises, as we saw with enactment of H.R. 1, the One Big Beautiful Bill Act. Currently seeing greater activity directly from the Executive Branch through Executive Orders. Coordinated activity, regardless of outcome, can create internal disruption, external costs, and increased time commitment.
- Deregulation and Enforcement: President Trump has signed over 200 executive orders since taking office, using these directives to advance deregulation across federal agencies and indicate immediate administrative action. In turn, deregulation has produced a patchwork of state policies. States have filled enforcement gaps left by federal rollbacks, and state activity indicates that these gaps have been filled by the enforcement of state consumer protection statutes. In this space, state Attorneys general act as quasi-federal regulators by (1) leading multistate litigation and consumer-protection enforcement and (2) pursuing preemption disputes to define the scope of state authority amid reduced federal oversight.
Panelists: Allison Kassir (Senior Government Relations Advisor, King & Spalding); Thomas J. Spulak (Partner, King & Spalding); Jamie Lang (Partner, King & Spalding); Ahsin Azim (Associate, King & Spalding).
Upcoming Events
Life Sciences & Healthcare Roundtable Webinar: Data Security Incident Response: How to Plan for It, Deal With It and Survive It
- Thursday, November 20, 12:30 p.m. – 1:30 p.m. ET
Join us for a webinar focused on data security incident response for healthcare industry companies. Our expert panel will explore key challenges and best practices, including how to prepare for a security incident, engage the board effectively, manage response efforts, preserve attorney-client privilege and develop a strong communications strategy. The discussion will also cover navigating HIPAA and state law requirements, notification protocols, credit monitoring, cyber insurance considerations, and dealing with the aftermath of an incident.
You do not have to be a client to attend, and there is no charge. RSVP by November 19. For questions, contact Sydney Forte.