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Exchange Regulations Released – Essential Providers Play Leading Role

Last week, the Department of Health and Human Services (HHS) released regulations governing the establishment of Exchanges, set to begin in 2014. The rules offer guidance to states on how to establish an Exchange and provide opportunities for customizing the model to best meet the needs of state residents.

The rule requires that a Qualified Health Plan (QHP) contract with a sufficient number of essential community providers. Essential community providers are FQHCs, CHCs, critical access hospitals and other suppliers usually thought of as “safety net” providers. HHS did not establish any parameters surrounding what constitutes network sufficiency for essential providers, either by stipulating a provider to member ratio or with requirements related to geographic distribution. In fact, the regulations discuss that HHS considered requiring QHPs to contract with all essential community providers in their service area or with “any willing provider.” For now, the regulations leave states to determine participation requirements, but the rule does ask for comments on how HHS should define “sufficient.”

In addition to the sufficiency debate, there are two contradictory provisions in the reform law regarding the payment of essential community providers. One provision states that nothing should be construed to require a QHP to contract with an essential community provider if they refuse to accept generally applicable payment rates of the plan. While another provision requires that a QHP reimburse FQHCs at each facility’s Medicaid prospective payment system (PPS) rate. HHS considered two approaches, the first to require QHPs to reimburse FQHCs at the Medicaid PPS rate and the second which would have required QHPs to negotiate rates with FQHCs that were at least equal to the issuer’s generally applicable rates. No decision was made regarding payment rates, but HHS did solicit comments on the matter.

While we acknowledge that the confusion in the law is not the fault of HHS, nonetheless, we’re perplexed by their reasoning. We have trouble understanding the need to require QHPs to contract with “any willing” or all essential providers in a service area. Essential providers will certainly play a role in the Exchange. But what is the value of requiring a QHP to contract with ALL essential providers if Medicaid is run separate and apart from the Exchange?

The overall concept erodes some of the fundamental principles echoed throughout health reform, which seeks to reward higher quality, cost effective providers. However, in this case, the federal government might mandate that every FQHC in a service area be in a QHP and that they receive one hundred percent of their costs as reimbursement. The combination of “any willing provider” and cost based reimbursement takes away the bargaining power of a QHP and limits its ability to demand accountability and quality.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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