Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

The Centers for Medicare & Medicaid Services (CMS) proposed on April 23, 2023 two rules that would affect Medicaid managed care: Ensuring Access to Medicaid Services (CMS 2442-P) and Medicaid and Children’s Health Insurance Program (CHIP) Managed Care Access, Finance, and Quality (CMS-2439-P). The proposed rules recognize the growth of managed care, which currently constitutes more than 70% of the Medicaid population.

New network adequacy standards proposed by CMS in CMS-2439-P are based on recent studies that have found that managed care plans overstate the availability of physicians in Medicaid. Assuming these changes go into effect, managed care organizations (MCOs) will need to bolster their networks by adding more providers, which will raise enrollment issues based on the 21st Century Cures Act (as discussed below). Plans should consider these issues as the July 3 deadline to submit comments to the proposed rule is quickly approaching.

Proposed Network Adequacy Standards

Although the federal regulations require states to establish network adequacy standards, states have had discretion and flexibility since 2020 to establish their own quantitative measures, provided that they consider certain factors (e.g., anticipated Medicaid enrollment, utilization of services). Quantitative standards implemented by different states include the following:

  • Time and Distance Standards: California requires MCOs to maintain a network of primary care physicians located within 30 minutes or 10 miles of beneficiaries.
  • Provider/Patient Ratios: In New York, an MCO must have at least one physician for every 1,500 beneficiaries or one physician for every 2,400 beneficiaries if the physician practices in combination with a PA or NP.
  • Appointment Wait Times: Texas requires MCOs to provide urgent care within 24 hours, primary care within 14 days, and specialty care within 21 days.

Many states use multiple quantitative standards to ensure network adequacy (e.g., California also establishes minimum provider/patient ratios and maximum appointment wait times).

Prior to the 2020 rule that allowed for greater flexibility, states were required to establish time and distance standards for specified types of providers. Rather than returning to this standard, CMS is proposing adding the following maximum appointment wait time standards:

  • 10 business days for routine outpatient mental health and substance use disorder appointments;
  • 15 business days for routine primary care appointments;
  • 15 business days for routine OB/GYN appointments; and
  • A maximum appointment wait time standard for an additional type of service determined by the state to address an access challenge in the local market.

Importantly, the above wait times would supplement, not supplant, the states’ requirement to establish quantitative network adequacy standards for the provider types listed at 42 CFR § 438.68(b)(1). In other words, CMS’s proposed wait time standards would be in addition to the states’ current quantitative network adequacy standards.

CMS proposed that MCOs would have until the first rating period that begins on or after three years after the effective date of the final rule to comply with the new appointment wait time standards.

Managed Care Enrollment

In 2016, the 21st Century Cures Act, at Section 5005(b)(2), amended the Social Security Act to require state Medicaid programs to screen and enroll all Medicaid managed care providers by January 1, 2018. Subsequently, CMS established implementing regulations at 42 CFR § 438.602(b) requiring states to screen, enroll, and periodically revalidate “all network providers” of MCOs.

Network providers are providers or entities that have an agreement with an MCO and receive Medicaid funding (directly or indirectly) “to order, refer[,] or render covered services” under the MCO’s contract with the state. Providers are defined as individuals and entities legally authorized by the state to engage in the delivery, ordering, or referring of services.

In its Medicaid Provider Enrollment Compendium, CMS instructed that state Medicaid agencies must enroll network providers by executing a provider agreement with each individual or entity, but also have flexibility to use the same provider agreement used to enroll fee-for-service (FFS) providers or a more streamlined network-only provider agreement. Importantly, enrollment does not mean that network providers must render services to FFS beneficiaries.

In sum, individuals and entities that contract with MCOs as in-network providers to render covered services to beneficiaries must undergo the same screening and enrollment processes as FFS providers. This means out-of-network providers (i.e., single-case agreements) and providers rendering services not covered by Medicaid are exempt from the federal managed care enrollment requirement. Some states interpreted the requirement as only applying to provider types that can enroll in FFS Medicaid.

Nevertheless, states have struggled to fully implement the federal managed care enrollment requirement even after the 2018 implementation deadline. According to a 2019 Government Accountability Office report, one state indicated that the new requirement to screen network providers more than doubled the number of individuals and entities the state needed to screen and enroll. Another state spent $5.9 million in three years to develop a system with an online provider application portal and automated screening activities.

Other states indicated they needed financial resources, leadership support, and time. In 2020, the HHS Office of Inspector General (OIG) reported that 21 states had not enrolled all providers in Medicaid managed care, four of which had not attempted to enroll any MCO network providers.

Despite the finding that states could not report the exact federal dollars that went to unenrolled MCO network providers, OIG recommended that CMS take steps to disallow federal reimbursement for noncompliance. CMS concurred but acknowledged that it does not have the legislative authority to do so. CMS indicated that noncompliant states are put under corrective action plans.

Next Steps

If the new network adequacy standards go into place, MCOs will likely need to add providers to their networks, which could present difficulties based on provider shortages that have persisted since the COVID-19 public health emergency began and enrollment delays at the state level.

Once the comment period has ended on July 3, 2023, CMS will review questions and suggestions from the industry and decide whether and how to finalize the rule. In the meantime, MCOs may consider reviewing their compliance with current state network adequacy standards in anticipation of greater enforcement.