CMS, TX Dispute Over Medicaid Pay Programs Could Affect Provider Pay

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The CMS reneging on the approved TX DSRIP waiver will gut provider payment rates in a month.


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Texas providers worry they could face pay cuts if Texas Medicaid officials and CMS don’t promptly hash out an agreement on a state-directed payment proposal that CMS earlier said it wouldn’t approve.

CMS’ notice that it wouldn’t okay the plan as proposed came after a judge ordered the agency to tell Texas it either planned or did not plan to approve the payment programs. Though the payment programs require CMS approval separate from the state’s 1115 waiver, Texas said CMS was violating the terms and conditions of the waiver by dragging its feet on the payment programs.

The judge’s order is part of an ongoing lawsuit Texas filed over the Biden CMS’ decision to revoke a 10-year extension of the state’s 1115 uncompensated care waiver that was granted in January in the final days of the Trump administration. The judge has since placed a temporary injunction on CMS’ rescission of the waiver extension, though CMS previously maintained that it has been acting as though the January waiver was still in effect since May due to Texas also having filed an appeal with the HHS Departmental Appeals Board.

The 1115 waiver as extended in January includes a transition program for Texas’ Delivery System Reform Incentive Program (DSRIP), which rewards performance bonuses to safety net providers that improved health metrics and is set to expire Sept. 30. The transition program, known as the Public Health Providers Charity Care Pool, would still provide incentives but from a smaller pool of money than DSRIP. Texas designed state-directed payment programs to recoup about 80% of the remaining funds that will be lost when DSRIP expires.

John Hawkins, senior vice president of government relations at the Texas Hospital Association, said that not having the state-directed payment programs would hurt provider payments, since some of the payment programs were created as a substitute for a hospital rate increase program in the state. Authority to operate the rate increase program, made possible through the budget neutrality savings from the 1115 waiver, is set to run out at the end of the month, Hawkins said.

The situation also presents challenges for the state’s mental health safety net providers. DSRIP funding was instrumental in building out state mental health capacity. State-directed payment programs — and specifically the behavioral health directed payment program — need to be approved because Medicaid rates alone are not enough to support the level of service delivery Texas wants it providers to sustain, said Danette Castle, CEO of the Texas Council of UHC Community Centers, which represents behavioral health centers across the state.

CMS, in an Aug. 13 letter to Texas, listed areas where the payment programs needed to be altered and offered to extend for one year the DSRIP program. Texas has known since 2017 that funding for the DSRIP program would be phased out by this year. The program is would expire Sept. 30 if not extended for a year.

In an Aug. 16 response to CMS, Texas indicated it believed a one-year DSRIP extension was inconsistent with the Jan. 15 waiver extension.

The Texas Hospital Association hasn’t taken a formal position on whether it would support extending DSRIP for a year, but Hawkins said it is pushing for whichever solution keeps the most capacity in the system with the least amount of disruption. Given that goal, trying to get the state-directed payment programs approved is preferable to a DSRIP extension, he said.

Castle, whose organization petitioned prior to the January extension approval for a DSRIP extension, said if it were between no funding and a DSRIP extension, continuing DSRIP would be the right move. But she doesn’t think the state will have to make that choice.

“We remain confident that the Health and Human Services Commission or state leadership and CMS will be able to come to agreement, whether that is through direction of the court, whether that is through the extension that has been in essence resubmitted, whether it’s through the negotiations going on right now,” she said. “It’s too important not to and I think all parties understand how important it is to do that.”

Hawkins also said he thinks the state is still hopeful that the state-directed payment programs can be approved soon because extending DSRIP isn’t a long-term solution.

The Texas Health and Human Services Commission said it was unable to comment on whether discussion between the state and CMS have begun on the state-directed payment programs because of ongoing litigation. CMS also did not respond to an inquiry by publication. — Maya Goldman (

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