Hospitals cheer demise of Medicaid Fiscal Accountability Rule

Hospital groups praised the Trump administration's decision Monday to pull a Medicaid rule aimed at fiscal accountability, which providers warned could lead to massive cuts in reimbursement.

Tom Nickels, executive vice president of the American Hospital Association, said in a statement that "up to $50 billion in annual funding for the Medicaid program was on the line" if the rule had been finalized.

"We appreciate CMS for acknowledging the harmful consequences this rule would have for patients," Nickels said. "Hospitals and health systems will be greatly relieved when the proposed rule is formally withdrawn."

The Centers for Medicare & Medicaid Services first unveiled the Medicaid Fiscal Accountability Rule (MFAR) in November, with the goal of tamping down on schemes used by states to boost federal matching funds in the program.

RELATED: Trump administration pulls controversial Medicaid fiscal accountability rule

It was met with significant pushback from providers and state Medicaid regulators.

One of the key points of contention was the rule's sheer breadth, which would impact payments in myriad ways, Anne Karl, partner at Manatt Health, told Fierce Healthcare. 

In addition, the scope of the rule prevented CMS from offering compete estimates on the economic impacts.

"Rather than just addressing some of those targeted concerns the proposed rule was really sweeping. It touched on almost every element of Medicaid financing," she said. "I think that’s why you saw such tremendous pushback as people started to grapple with potential implications of this rule."

She said the COVID-19 pandemic amplified those concerns. Providers were already financially struggling, and states would have to significantly overhaul their approach to financing while dealing with the far-reaching economic impacts from the virus, leaving additional money to make changes slim.

Public hospitals in particular would have felt the strain, Karl said, because of their large Medicaid patient population.

RELATED: CMS rolls out guidance to help states convert Medicaid funding into block grant

Bruce Siegel, M.D., CEO of America's Essential Hospitals, commended the decision to pull the rule in a statement, saying the move was especially crucial in light of COVID-19.

"We thank CMS Administrator Seema Verma for hearing our concerns and recognizing the potential for this rule to undermine Medicaid and harm access to care," he said. "We appreciate her leadership and willingness to acknowledge the unintended consequences of this approach to regulating state Medicaid financing."

Could the rule be revived? Karl said she doubts that such reforms would be brought back in such a far-reaching regulation, but overhauling Medicaid financing has been of interest to the White House under both Republican and Democrat presidencies.

She said the decision to nix the rule indicates an understanding of the need to fully map out the impacts of such an overhaul.

"I think MFAR was just so far-reaching, and again they didn’t have the data needed to understand what the the impact of the rule would be," Karl said. "It’s possible that this administration or another would want to look at this, but I don’t know that it would be quite so wide-ranging as a first go."