A federal court on Aug. 20 struck down the Federal Trade Commission’s sweeping noncompete ban, claiming that it was “unreasonably overbroad” and that the FTC lacks authority to implement nationwide rules defining unfair methods of competition. 

The rule, which was initially set to take effect Sept. 4, would have invalidated tens of millions of existing noncompete agreements and banned hospitals and other employers from entering into or attempting to enforce any new noncompetes. 

The FTC told Becker’s it is considering a potential appeal of the federal court’s ruling, which has received mixed reactions from hospital and physician groups. 

Chip Kahn, president and CEO of the Federation of American Hospitals, stands by the federal court’s decision to prevent the noncompete rule from taking effect. 

“We have been clear from the start that this rule would threaten patient access to care by making it more difficult for hospitals to recruit and retain physicians and invest in training and technology,” Mr. Khan said in a statement shared with Becker’s. “In addition, this rule would create an unlevel playing field for tax-paying hospitals, an outcome completely at odds with FTC’s mission to promote competition. Especially at a time of workforce shortages and other challenges, this was the right decision.”

Some physician groups take the opposite view, arguing that noncompete agreements create an unlevel playing field for providers and hurt their ability to provide long-term, high quality care for their patients. 

The American Academy of Family Physicians, which has more than 130,000 members, said it is disappointed by the decision to block the rule nationwide. 

“Noncompetes harm family physicians and their patients by jeopardizing long-term patient-physician relationships and creating an uneven playing field for physicians,” AAFP President Steven Furr, MD, said in a statement, “The AAFP will continue to support the FTC’s mission to eliminate noncompetes in healthcare that prioritize the interests of organizations over those of patients and their physicians.”

Noncompete agreements can be more nuanced for other providers, such as anesthesiologists, who often employ other anesthesiologists. 

Most of the American Society of Anesthesiologists’ members supported bans on noncompete agreements, but small and mid-sized groups said they would be disadvantaged by a general ban on noncompetes, a spokesperson for the ASA told Becker’s. Those same anesthesia groups also expressed that the noncompete structure should be addressed in a more targeted way to rid such clauses of unreasonable and sometimes egregious practices.

The American Hospital Association, which filed an amicus brief in July urging the federal court to vacate the noncompete rule, said the FTC decision was an overreach of the agency’s power and argued that it did not attempt to understand the disruptive effect the ban would have on hospital, health systems and their patients. 

“We are pleased that Judge Brown vindicated what the AHA predicted when this unlawful regulation was first released — the ‘only saving grace is that this rule will likely be short-lived, with courts almost certain to stop it before it can do damage to hospitals’ ability to care for their patients and communities,'” Mr. Golder said in a statement.

Becker’s has also reached out to the American Medical Association, America’s Essential Hospitals and the American Academy of Orthopaedic Surgeons for comment.

Hospitals and other health providers will shift their attention to how states opt to police non-compete agreements now that a federal court has blocked a Federal Trade Commission ban on the widely used contracts.

Why it matters: The FTC’s contentious effort had far-reaching implications for health care — and raised the profile of an issue that was already getting attention in statehouses, experts say.

The big picture: The wide-ranging ban blocking employers from restricting workers’ ability to work for rivals would have taken effect Sept. 4.

• Large employers, including health systems, were largely expecting an injunction before then, but were making some preparations as the deadline closed in.
• But the ruling, alongside previous preliminary injunctions in Pennsylvania and Florida, are likely to be appealed.
• Beyond the legal machinations, the FTC “managed to bring this issue to the fore” by showing how the arrangements affected about 1 in 5 U.S. workers, or around 30 million people, Faegre Drinker labor and employment partner Matt Fontana told Axios.

Driving the news: California, Minnesota, North Dakota and Oklahoma have blanket noncompete bans.

• Starting in 2025, Pennsylvania and Louisiana will see limits to noncompetes specifically for certain health care workers.
• They’re following the lead of Iowa, Kentucky and Massachusetts, which saw health care-specific noncompete bans take effect within the last two years.
• Even though New York Gov. Kathy Hochul vetoed late last year a measure that would’ve outlawed noncompetes in her state, it’s expected a narrower version of that law could come back up, Fontana said. New York City began considering its own legislation earlier this year.

Between the lines: Law firms have been advising health systems and other health care clients with the uncertainty to review and “future proof” their agreements as more states “look to take up the banner,” Kevin Goldstein, lead antitrust lawyer for Winston & Strawn, told Axios.

• That’s particularly important with “increasing judicial skepticism” of the traditional noncompete, Peter Steinmeyer of Epstein Becker Green told Axios.
• They may want to consider alternative arrangements such as non-solicitation agreements, confidentiality agreements or an arrangement known as garden leave, or a period during which an employee is paid while being required to stay away from work.
• They may also want to more narrowly tailor noncompetes to a shorter duration of time or smaller geographic areas.

What they’re saying: This week’s ruling was praised by the industry, with the American Hospital Association saying the judge was right to set aside the FTC’s “breathtaking assertion of regulatory power.”

• “Commissioners did not attempt to understand the disruptive impact it would have on hospitals, health systems, and the patients they serve,” the AHA said in a statement.

The other side: The FTC is weighing an appeal. “Today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions,” a spokesperson said.

A Health Affairs study released this week, says nurse staffing legislation is becoming increasingly diverse across the country, and some of the state solutions could provide a guide for federal policy. The study, titled “Hospital Nurse Staffing Legislation: Mixed Approaches In Some States, While Others Have No Requirements,” identified state policies across the country that dealt with staffing mandates as of January 2024.

California and Oregon had the most detailed policies, with required minimum staff-to-patient ratios for multiple specific hospital units. Five other states — Arizona, Massachusetts, New York, Ohio and Oklahoma — mandate ratios for only one unit type each.

Nithya Krishnamurthy, one of the study’s authors, says federal legislation is trending toward California and Oregon’s multi-ratio model. The Nurse Staffing Standards for Hospital Patient Safety and Quality Care Act of 2023, House bill introduced by Democrats in the House Energy & Commerce Committee last year, includes minimum staffing ratios for multiple different hospital units.

Eight states require nurse staffing committees, and 11 states have adopted staffing plans. Out of the 23 states without final staffing mandate policies, five have introduced such legislation. Idaho, however, has passed a statute prohibiting minimum staffing ratios.

But none of the state bills touch on funding, which Krishnamurthy and co-author Neha Mukherjee, both at the Icahn School of Medicine at Mount Sinai, see as a solution to factors that drive the nurse staffing issue. Staffing mandate policies should include stipulations about how funds should be acquired and used, Mukherjee told Inside Health Policy.

“Without any adjustment to reimbursement systems, it may remain continually difficult for hospitals to invest in nurse staffing or to comply with legislation requiring minimum staffing ratios,” the study claims. “Cost considerations are particularly relevant, given the national legislation on the horizon.”

Krishnamurthy told IHP she hopes the research will serve as a resource for policymakers looking to implement staffing mandates at the federal level. The study argues the diversity of state staffing mandate policies provides opportunity for comparison when evaluating efficacy of different types of policies.

Washington, D.C. – Energy and Commerce Committee Ranking Member Frank Pallone, Jr. (D-NJ) released the findings of a 10-month-long Committee investigation into the impact of the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization on health care providers and the patients they serve. The report is titled, “It Will Only Get Worse”: How the Supreme Court’s Dobbs Decision Will Decimate Reproductive Health Care for Generations.

In September 2023, Pallone launched an investigation to examine how providers, and by extension their patients, are being impacted by the Dobbs decision. In conducting the investigation, Democratic Committee staff interviewed obstetrician-gynecologists (OBGYN) educators and residents to learn how Dobbs has impacted the study and practice of obstetrics and gynecology.   

“I began this investigation to take a hard look at the impact the Dobbs decision is having on reproductive health care providers and their patients across the country,” Pallone said. “What we found was deeply disturbing. The Dobbs decision has created chaos and confusion for OBGYNs and their patients. 

“Doctors are overextended and terrified about the risks of criminal prosecution, patients are sicker with greater complications because needed care is delayed, residents are not receiving required training, and many patients are not receiving the information they need to make informed health care decisions. In some restrictive states, reproductive medical training has been practically eliminated or limited to simulations and textbooks, which has forced many residents to travel out-of-state to receive essential training,” Pallone continued.

“I am deeply concerned about the long-term consequences of the Dobbs decision detailed in this report. I fear that over time the stark differences in training between OBGYNs in protective and restrictive states will effectively create two different pools of OBGYNs with entirely different sets of training, knowledge, and ways of caring for their patients,” Pallone concluded. “In no uncertain terms, the Dobbs decision has put the future of doctors and patients in grave peril not in just restricted states but every state in America, and that’s why we must restore access to reproductive health care for all.”

The investigation found a number of alarming effects in the wake of the Dobbs decision on health care providers and their patients, including:

• Providers are seeing sicker patients suffering from greater complications due to delayed care caused by Dobbs;
• The Dobbs decision has harmed the training of OBGYN residents in restrictive states;
• Residency applicants are increasingly concerned about the quality of abortion training that programs can offer in restrictive states;
• Residency directors are finding that restrictions on clinical communication is degrading trust between providers and patients and robbing patients of the ability to make informed decisions about their health;
• The training of OBGYN residents in protective states has been harmed as programs in those states strain their capacity and resources to help train out-of-state residents from restrictive states;
• Restrictive state laws are already leading us to a future with a provider workforce less prepared to provide comprehensive reproductive health care;
• OBGYN residents and program directors are increasingly frustrated, discouraged, and experiencing negative mental health effects in the aftermath of the Dobbs decision;
• Residency program leaders who participated in the report universally agreed that abortion care is integral to other components of reproductive health care and cannot be eliminated or isolated from residency training;
• After Dobbs, OBGYN residency applicants more strongly prefer programs in states that permit abortion access; and,
• A patchwork of state restrictions is leading to disparate systems of reproductive health care, worsening reproductive and maternal health care shortages, and a fractured OBGYN workforce. 

Key Excerpts and Quotes from the Report from OBGYN Directors and Residents:

Abortion Restrictions Are Causing Lasting Harm to the Next Generation of Doctors:

“Several providers explained that certain skills learned in abortion training are the same skills required to treat pregnancy complications including premature rupture of membranes, ectopic pregnancy, and miscarriage management. Residents understand that developing these skills will make them more competent doctors and is key to serving patients with pregnancy complications and other routine reproductive health care needs.”

“Several states that allowed access to abortion before Dobbs enacted abortion restrictions after Dobbs that weakened abortion training for residents in those states. In some cases, training has been practically eliminated, and in other cases, it has been limited to simulations and textbooks, forcing residents to travel out-of-state to receive essential training.” 

“One resident described her concern about abortion training in a restrictive state as, ‘I’m never going to see it, get to counsel, or learn the standard of care. For other niche procedures, we get simulation, but I don’t think I’m going to ever get to [perform one] on a person and not a dragon fruit.’” 

“As one provider shared, the concern is ‘when you don’t do a procedure, you no longer have the skills to pick it up again. It’s not just the future workforce but maintaining [the skills] in the current workforce in the restricted states.’ Another echoed this concern, saying ‘it’s going to look different in 20, 30, 40 years. You don’t want to lose that workforce; you don’t want to lose the gains women had; you don’t want to lose the compassion. It is a hard enough lifestyle and profession to be in that you don’t want to lose the next generation.’”

“A residency director from the Northeast, describing the need for residents to have comprehensive procedural training, said those ‘who didn’t have the opportunity…won’t be able to take care of a patient in an emergency.’”

“One residency program director ominously predicted that, ‘I think we’re just going to have a bunch of untrained providers and they’re going to shy away from [complex family planning] care.’”

State restrictions are preventing doctors from caring for and endangering the lives of their patients:

“One residency program director in a Southern restrictive state described a case where a pregnant woman was admitted to the hospital with serious pregnancy complications, but her physicians were prohibited from discussing and providing appropriate medical care. Despite requesting an abortion weeks before the fetus’s viability, ‘her doctor couldn’t talk to her about it; couldn’t tell her she could get it in another state.’ The program director said that every resident that participated in this case had cried and was traumatized because the woman would likely die, and the fetus may not survive due to the delay in appropriate care.”   

“Another residency program director in a protective Northeastern state agreed that their patients were increasingly delaying care and presenting in the hospital with more complications. These cases would have been easily treated if the necessary care was provided earlier in the pregnancy.”

“A residency program director in a restrictive state noted that laws restricting abortion and preventing communication with patients gives the patient less of a say in their own health care, adding ‘if we stop listening to patients, we’re not treating them well.’” 

“One residency program director observed that years of political efforts to isolate abortion care from other obstetric care has reduced access to abortion in many areas of the country because providers do not have the necessary skills to provide comprehensive care. They described the sobering reality that if more patients seek care in areas ‘without a trained person, someone is going to die.’”       

Laws in restrictive states are causing harmful spillover effects in protective states:

“[A]nother resident educator said that their ‘colleagues in [nearby protective states] are inundated with patients from [restrictive states] and the workload has tripled…they’re taking care of everyone from multiple states.’ The caseload in protective states can be overwhelming.”

“One residency program director said that taking on extra trainees has required extensive after-hours administrative work with no additional resources or financial compensation and has ‘stretched everyone thin.’”

Restricting doctors from caring for their patients is leading to burnout:

“‘[T]hey see what it should be and then you come back to [a restrictive state] and you’re back in the situation where you can’t and it leads to burnout, frustration…I talk about moral injury all the time. To be back in a place where you have the skills, but you can’t do it.’ Guiding residents through the uncertainty, legal jeopardy, and care limitations imposed after Dobbs has felt like a burden to many educators, with one program director describing it as a ‘black cloud…constantly following you.’”    

“One program director said their OBGYN residents and colleagues are ‘terrified’ about risks of criminal prosecution and that ‘we didn’t go to medical school to be lawyers, detectives, or police officers.’” 

The latest example? Intermountain Health, the Salt Lake City-based system with 33 hospitals and hundreds of clinics, recently announced its investment in solar energy to offset the electrical needs of 17 of its facilities, including nine hospitals.

The health giant estimates $500,000 in reduced energy costs from the move and pointed to the environmental benefit of resource-intensive health systems changing their practices.

Why it matters: A significant number of health systems signed a 2022 pledge, coordinated by the Department of Health and Human Services and the White House, to cut their greenhouse gas emissionssignificantly by 2030 and to reach net-zero emissions by 2050.

Even so: Parts of the health sector have experienced financial troubles in recent years, making major infrastructure investments difficult to afford.

The bill shaves funding for the department, curbs an NIH reorganization proposed by House Republicans, and restores money for HIV/AIDS programs.

The Senate Appropriations Committee voted on Thursday to advance the fiscal 2025 HHS budget. The bill, which passed 25-3, shaves funding for the department, curbs an NIH reorganization proposed by House Republicans, and restores money for HIV/AIDS programs.

The Senate bill summary released ahead of a committee hearing on Thursday comes after the House Appropriations Committee advanced its version of the budget earlier this summer. The House bill includes $107 billion for HHS — a 7 percent cut from fiscal 2024. The deepest cuts are at the CDC and agency programs that focus on gun control and climate change.

However, House leadership yanked the bill from the House floor before a vote because controversial abortion and contraceptive provisions made it unlikely to pass.

According to the Senate bill summary, its version includes $122.8 billion for HHS, slightly below what President Joe Biden requested: $130.7 billion. It retains funding for certain programs that House Republicans want to cut, including for teen pregnancy prevention and Title X.

The Senate bill also retains funding for HIV/AIDS initiatives, including the Ryan White HIV/AIDS program, which the House version proposed cutting. And it includes $613 million for the Ending the HIV Epidemic Initiative, which the House bill would eliminate.

Additionally, the Senate bill increases funding for the CDC by $173 million, with funding increases aimed at wastewater surveillance, data modernization, cancer prevention, and public health infrastructure, per the summary.

Here’s what else is in the bill:

National Institutes for Health: While House appropriators have voted to keep NIH funding level and restructure the agency, the Senate bill curbs the restructuring and increases NIH funding by about $2 billion to $50 billion in fiscal 2025. It keeps level funding of $1.5 billion for the Advanced Research Projects Agency for Health. The Senate bill also increases funding for certain research programs, including for Alzheimer’s disease, Biden’s cancer moonshot, the Office of Research on Women’s Health, and mental health. It also includes a $20 million increase for artificial intelligence programs at the NIH.

It also includes provisions to address sexual harassment reporting at the NIH.

Substance use and mental health: The Senate bill increases funding for substance use and mental health programs by $215 million. That includes a $40 million increase from fiscal 2024 for state substance use block grants. The House bill also includes an increase for state grants.

The budget also includes:

— $13 billion for Head Start, a $700 million increase from fiscal 2024

— A $25 million increase for a loan repayment program for providers in the mental health workforce

— A $20 million increase for the 988 suicide prevention lifeline

— A $400 million increase for mental health clinics

— $1.86 billion to sustain funding for community health centers

— A $10 million increase in cybersecurity efforts at HHS

— A $13 million increase in funding for the organ transplant system overhaul

— A $100 million increase for heating and cooling support for lower-income people

— A $200 million boost for the Administration for Strategic Preparedness and Response, with increases focused on the Strategic National Stockpile and the Biomedical Advanced Research and Development Authority.

Chair Bernie Sanders’ bill reauthorizing the Older Americans Act would permit Congress to appropriate more than $2.7 billion in funding in the next fiscal year and boost spending by 44 percent over the next five years.

The Older Americans Act, enacted in 1965, supports programs that deliver meals and medical services like health screenings and transportation to a doctor’s office. Nearly half of the funding goes to continuing meal delivery services, like Meals on Wheels, and other meal programs in senior centers.

“Seniors throughout our country, particularly in rural areas, lack the transportation they need to get to a doctor’s office, to a grocery store or the dentist. That should not be happening in the United States, the richest country in the history of the world,” said Sanders, a Vermont independent.

Sen. Rand Paul (R-Ky.), who voted by proxy, was the only senator to vote no.

Separately, the committee also approved legislation to reauthorize funding for autism research and the effects of traumatic brain injury.

Sen. Ben Ray Luján (D-N.M.), the sponsor of the autism research bill, said it would support and develop programs that benefit children with autism throughout their lives.

It would also support workforce programs that educate health care professionals on how to treat neurodivergent patients.

“This bill will continue the successful programming across HHS that helps us better understand the causes and symptoms of the autism spectrum disorder and improve the lives of families affected by it,” said bill co-sponsor Sen. Susan Collins (R-Maine).

Sen. Markwayne Mullin (R-Okla.) sponsored the traumatic brain injury research bill, which targets at-risk populations, like young people who play sports and domestic violence victims.

Senators approved both the autism and brain injury bills 20-1, with Paul opposed.

What’s next? The measures can now go to the Senate floor. If they pass there, the House would still need to take up the legislation to enact it.

Even if the Senate and House reach agreement on the programs, appropriations legislation will ultimately determine how much Congress spends.

A conservative think tank is floating Medicaid financing reforms that would phase out the higher federal match for the expansion population and reduce the floor for all payments in order to end what the group views view as more favorable treatment of able-bodied adults over traditional beneficiaries and of wealthier states over those with lower income residents, while saving the federal government billions.

Paragon has presented the proposals on Capitol Hill, and is receiving a good amount of interest, according to Paragon Founder and President Brian Blase.

But, Democratic stakeholders say attacks on the expansion population are misguided and the cuts proposed by Paragon Health Institute — as well as other GOP proposals, like work requirements and block grants — would be harmful to all enrollees and would devastate state budgets.

With the Republican Study Committee already recommending Medicaid transition to block grants, and the Heritage Foundation’s Project 2025 also backing block grants and other limits to care, Paragon’s report is another sign that Medicaid would be a target under a second Trump administration, Joan Alker of Georgetown says in a blog published the day after Paragon’s report. The centrist think tank The Third Way also released a brief stating Medicaid is crucial for working adults and arguing the GOP’s opposition to extending Medicaid to adults, both working and unable to work, is misguided.

In the July 23 paper, Blase and Senior Research Fellow Drew Gonshorowski contend that that no government program has grown as much over the past generation — and with such poor results — as Medicaid, largely due to the program’s open-ended reimbursement for state spending and the 50% minimum federal match for wealthier states.

The ACA’s expansion of Medicaid to adults earning up to 138% of the federal poverty level — which has been taken up by all but 10 states — worsened the program’s structural problems, the authors say, by diverting resources away from the traditional Medicaid enrollees including low-income children and people with disabilities — which reduces their access and has resulted in a near quadrupling of Medicaid improper payments as of 2021, a spending surge that has contributed to debt.

Paragon proposes two policy solutions that it says would redirect funding to traditional enrollees and lower income states while saving federal dollars.

First, starting in 2026, the 90% federal match for the expansion population would be phased down until it is level with each state’s traditional enrollees in 2034. States would still be able to maintain the expansion population, but with a new cutoff of 100% poverty — while those earning more would be eligible for ACA plans.

“This policy would better protect services for traditional enrollees, better align state incentives to get value from expenditures and eliminate their incentive to enroll as many people under the expansion as possible, and significantly increase enrollment in the exchanges relative to Medicaid,” Blase and Gonshorowski argue.

Under the second proposal, the minimum amount of spending covered by federal dollars would be reduced from 50% to 40%, also starting in 2026 and ending as of 2034. According to Paragon, the District of Columbia, which has the highest per-capita income, would be the most affected by the policy as its federal match would drop to 40%. Other wealthier states, like New York, California and Massachusetts, would have matches rates between 45% and 50%.

Paragon estimates the first policy would cost states about $110 billion from 2026 through 2024, and the second would increase states’ costs to $171.5 billion. Federal savings would be about $251 billion from the first proposal, according to Paragon’s estimate, yet that would climb to $314.2 billion should Congress also lower the minimum floor, per the second proposal.

Both of Paragon’s estimates presume no states would drop the expansion and that all people eligible for ACA plans would enroll.

The savings increase significantly once Paragon accounts for the behavioral changes that the Congressional Budget Office would assume under the policies, which include about one-quarter of the states dropping their expansion population and about a fifth of the consumers eligible to enroll in an Affordable Care Act plan failing to do so.

Paragon thus expects CBO would score the first proposal as saving $529 billion over the eight-year period, which would increase to $592 billion over the same period should the second proposal be implemented.

The report mentions a proposal that would allocate federal Medicaid dollars based on the number of residents living in poverty, and it also discuss transitioning Medicaid into a block grant or per-capita caps, a longstanding GOP idea that the Republican Study Committee has also endorsed. Neither of those policies is fully analyzed in the paper. However, Paragon notes that the allocation of federal funds across states is one of three key areas that policymakers must consider when developing a block grant proposal. Paragon plans to address the other two elements, including what requirements should be placed on states to receive the federal dollars and how to grow the funding over time, in future papers and growth models.

Alker of Georgetown says Paragon’s major proposals are similar to past calls by conservatives for “sharply shifting costs to states to roll back the Medicaid expansion with additional cuts to higher income states which would overwhelmingly affect blue states.”

“We are not surprised by this — after all Medicaid has long been a target for Republicans,” she writes. “And while it is doubtful that former President Trump will hold to statements that he will not cut Medicare and Social Security, as Project 2025 includes radical cuts to both, Medicaid is the obvious remaining target for massive spending cuts.”

She further argues that despite what she views as the author’s “preposterous” claim that the proposals would protect children, pregnant women and people with disabilities, nothing could be further from the truth as the proposal explicitly lowers federal spending in 11 states that have the 50% match rate, and states that want to maintain the Medicaid expansion would have to cut other parts of their program that those populations rely on.

“Or states would have to cut other parts of their budget, and the largest general fund spending item is K-12 education,” she adds.

Third Way’s report is focused on “setting the record straight” about working age adults enrolled in Medicaid.

“The far right sees Medicaid as a welfare program, and they continue to push for penalties against Medicaid enrollees without a job. The problem is that the view of Medicaid as welfare is divorced from reality,” Third Way’s David Kendall writes in the short brief, What the Far Right Gets Wrong on Medicaid. “Adults with Medicaid need coverage as much if not more than others due to challenging health issues,” he adds.

The brief uses data from the Behavioral Risk Factor Surveillance System to show that Medicaid is often adults’ only source of affordable coverage because many employers do not provide health insurance. Those who are out of work often have health-related obstacles, and those who cannot work need Medicaid because they do not have any other source of coverage, the brief finds.

“That’s why far-right proposals for Medicaid make no sense,” Third Way says. “Threatening adults with the loss of health care coverage is not going to make them more likely to work. Instead, it will reduce the access to care they need to work. Ending Medicaid’s guarantee of coverage through a block grant proposal threatens everyone with Medicaid coverage, regardless of employment status,” the paper concludes.

CMS on Wednesday (July 31) finalized a 4.2 %, or $1.4 billion, pay hike for skilled nursing facilities (SNFs) that received mixed reviews, but stakeholders quickly blasted the agency’s decision to allow additional civil monetary penalties (CMPs) for health and safety violations — with some suggesting the move to be agency overreach.

CMS says the 4.2% pay hike in the Skilled Nursing Facility Prospective Payment System (SNF PPS) Final Rule reflects a 3% market basket update, a 1.7 percentage point increase to balance the agency’s fiscal 2023 market basket error, and a 0.5% cut for productivity. The final pay rate is slightly higher than the 4.1% increase the agency proposed in April. Still, the update received mixed reviews from industry.

Mark Parkinson, the president and CEO of the American Health Care Association (ACHA), said in an emailed statement to Inside Health Policy on Wednesday that his organization appreciates the 4.2% increase in Medicare rates “so that nursing homes can meet escalating needs to invest in their workforce, care services, and more.”

But LeadingAge, which represents nonprofit providers of aging services, says the pay bump is still “insufficient.”

“Given the operational challenges that our mission-driven and nonprofit provider members navigate–including a very competitive labor market–today’s announced increase of 4.2% from CMS is insufficient,” Katie Smith Sloan, president and CEO of LeadingAge, said in a statement.

The final rule also revises CMS’ policy on CMPs, by allowing the agency to impose penalties for health and safety violations, both per-day, until the non-compliance is corrected, and per-instance. The agency says its previous policy that allowed only one CMP for the same deficiency had limited CMS and state authorities’ ability to use multiple penalties, and CMS believes the new policy will encourage quicker and sustained compliance.

“These revisions will provide CMS flexibility in determining the mix and number of penalties in response to situations that put residents’ health and safety at risk and, therefore, encourage facilities to promptly correct and maintain lasting compliance with CMS’ health and safety requirements,” the agency says in the rule’s fact sheet.

Though they feel differently about the pay hike, both the ACHA and LeadingAge passionately rebuked the revisions to CMS’ enforcement authority. ACHA suggested the expansion could be a case of agency overreach and argued that excessive fines risk pushing already-struggling nursing homes to close.

“In particular, we are deeply troubled by CMS’ statement that it is ‘expanding its ability to impose financial penalties,’ as this is a clear indication of agency overreach when it comes to enforcement,” Parkinson said. “We have long emphasized that CMPs divert critical resources away from necessary improvements by imposing fines without providing constructive support for residents or addressing root causes.”

“By expanding this punitive enforcement authority, CMS and the Administration propagate a mistaken belief that financial penalties are an effective means of quality improvement,” Sloan said. “We urge them to refocus and to take steps to actively engage in quality improvement in a productive way, choosing the carrot instead of a larger, stronger stick.”

CMS also announced that it’s adding four new social determinants of health (SDOH) items to the Skilled Nursing Facility Quality Reporting Program (SNF QRP) in FY 2027: Living Situation, Food (two items), and Utilities. CMS now requires SNFs to participate in a data validation process, with those failing to meet reporting requirements facing a 2% reduction in their Annual Payment Update.

CMS has also finalized operational and administrative updates for the Skilled Nursing Facility (SNF) Value-Based Purchasing (VBP) Program, which withholds 2% of Medicare Part A payments from SNFs and redistributes 50-70% as incentive payments based on performance.

The agency says it’s adopting policies for measure retention, removal, and selection to ensure that metrics remain focused on assessing care quality. Plus, CMS is adjusting the review and corrections policy to allow SNFs to review and correct data used in calculating their measure rates.

Inpatient rehabilitation facilities will receive a 3% increase in pay for fiscal 2025 while inpatient psychiatric facilities will have a 2.8% pay bump for the next fiscal year, CMS says in its finalized pay rules released Wednesday (July 31), which also expand new social determinants of health reporting metrics and rebase the wage indexes.

The Biden administration had proposed a lower pay hike earlier this year, adjusting it 0.2% up from 2.8% for inpatient rehabilitation facilities and 2.6% for inpatient psychiatric facilities after CMS reviewed the IHS Global Inc.’s second quarter 2024 forecast.

Like it did for the fiscal 2025 hospice final pay rule, CMS used the White House Office of Management and Budget’s core-based statistical areas to update the wage index for both facilities. CMS assures providers the permanent cap will keep facilities from losing more than 5% of their pay due to the change.

Facilities that will transition from rural to urban status under the new base will have their rural adjustments phased out over three years beginning in fiscal 2025, CMS says. Eight inpatient rehabilitation facilities will be affected, and up to 68 inpatient psychiatric facilities could be reclassified under the new system, the administration estimates.

Inpatient Rehabilitation Facilities

In addition to approving a 3% payment increase, CMS finalized updates to the outlier threshold to maintain outlier payments at 3% of total payments. It estimates these final technical rate setting changes will net IRF payments $280 million, or a $300 million increase in payment rates minus $20 million due to the update for the outlier threshold.

CMS also finalized the addition of three new areas to the IRF Quality Reporting Program under the social determinants of health category: living situation, food and utilities. This will bring the IRF requirements in line with the housing instability, food insecurity and utility difficulties data that hospitals began reporting in January 2024 and that inpatient psychiatric facilities are scheduled to begin reporting in January 2025. IRFs will be required to report this data in 2028.

“[T]he collection of the proposed SDOH assessment items will support IRFs that wish to understand the health disparities that affect their populations, facilitate coordinated care, foster continuity in care planning, and assist with the discharge planning process from the IRF setting,” CMS’ final IRF rule says.

Some commenters on the proposed rule were worried these new reporting requirements could increase administrative burdens on providers, but other stakeholders commended CMS for the additional data points and said many providers already collect this information as part of their intake activities.

Inpatient Psychiatric Facilities

Psychiatric facilities’ pay increase for fiscal 2025 is more complicated. The outlier threshold update adjusts the 2.8% increase in pay next fiscal year down to a 2.5%, or $65 million, pay bump. While this is less than the proposed 2.6% pay hike from earlier this year, CMS raised the proposed market basket increase by 0.2% after stakeholders raised concerns that it was less than previous years and might be insufficient to meet skyrocketing costs.

“They stated that with the significant increase in the costs of labor, pharmaceuticals, and supplies, the payment update is inadequate,” the final rule says. “Commenters stated that labor-related inflation has been driven in large part by a severe workforce shortage. The commenters also stated that hospitals are turning to costlier contract labor to sustain operations; one commenter noted that they believed that contract labor costs increased 258 percent from 2019 through 2023.”

CMS should give inpatient psychiatric facilities a more robust payment update in fiscal 2025 until the administration can adopt a more accurate prospective payment system, stakeholders said. They also cited the Medicare Payment Advisory Commission report, which found Medicare has failed to cover the cost of caring for patients in hospital-based and freestanding nonprofit psychiatric facilities since at least 2016.

CMS did not directly address stakeholders’ requests to adopt a more accurate prospective payment system, but it pointed out the company CMS contracts to forecast the price proxies of the market basket considers labor cost trends.

The rule finalized Wednesday also changes certain reporting requirements so only government or tribally owned IPFs will file all-inclusive cost reports beginning Oct. 1, 2024.

“By improving the reporting of ancillary costs and charges, CMS will be able to increase accuracy of future payment refinements to the IPF PPS, which will further advance behavioral health treatment and support IPFs that provide care to people with more complex and costlier conditions,” a CMS fact sheet says.

CMS also finalized a new measure in the IPF Quality Reporting Program: the 30-Day Risk-Standardized All-Cause Emergency Department Visit Following an Inpatient Psychiatric Facility Discharge measure. This claims-based measure will quantify how many adults had an emergency department visit, including observation stays, within 30 days of discharge from an inpatient psychiatric facility without subsequent admission. CMS says this new measure will provide a better assessment of post-discharge acute care and encourage improvements in discharge planning and care coordination.

The final pay rule includes a significant bump in reimbursements for electroconvulsive therapy — or as Medicare claims still call it “electroshock therapy” — going from $385.58 in fiscal 2024 to $661.52. CMS says while pay for the mental health treatment has been updated annually, it has not been recalculated based on more recent cost data since the inpatient psychiatric facility pay rule was created in 2005.

The prevalence of ECT therapy has declined from 6% of all stays in 2002 to 1.7% in 2022, though a total of 288 facilities had stays with ECT treatment in 2022. These stays are three times more costly than ones without the therapy — $44,687.50 per stay vs. $15,432.30 per stay, CMS estimates.

The agency decided not to finalize its proposal to have facilities submit patient-level quality data more frequently, instead keeping the report annual.