March 29, 2016

CMS Suspends Automatic Star-Ratings Reductions in Surprise Memo

A recent Health Plan Management System (HPMS) memo from the Centers for Medicare and Medicaid Services (CMS) caught the Medicare Advantage industry off-guard. 

The memo announced the agency’s suspension of its automatic star-ratings reductions policy for Medicare Advantage organizations (MAO) currently facing CMS’s “intermediate sanctions.” Organizations under sanction would have otherwise incurred ratings reductions at the end of March. The reductions are particularly punitive for highly-rated MAOs; 4- and 5-star organizations would have been slashed to a 2.5-star rating. 

Experts say the move will directly benefit Cigna Corp., a highly-rated MAO with more than 550,000 Medicare Advantage enrollees. Cigna is under intermediate sanctions for “a longstanding history of noncompliance” in a number of matters, including coverage determinations and appeals and grievances. 

Mike Adelberg, senior director for FaegreBD Consulting, told Medicare Advantage News that CMS likely changed its star-rating reductions because today’s market features a larger proportion of highly rated MAOs, and slashing their ratings could upset market stability.

“As more beneficiaries come into 4- and 5-star-rated contracts, the impact of dropping those contracts to 2.5 [stars] grows,” Adelberg said. “This is not just an issue for the MAO, but also for the beneficiaries when the MAO submits bids based on the payment reductions. Large numbers of beneficiaries with reduced benefits creates difficulties for everyone.”

While some critics wondered if this move would diminish the authority of CMS sanctions, Adelberg said “the potential of missing an open-enrollment season forces appropriate attention from the sanctioned MAO.”

Adelberg also noted that this was an unusual announcement for CMS to release in a memo.

“This was not a ho-hum HPMS memo,” Adelberg said. “Most HPMS memos offer new technical or administrative guidance. This was about policy.”

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