CMS proposed payment rule aims to cut waste, boost chronic disease management

A proposed payment rule unveiled Monday by CMS aims to reduce unnecessary spending and boost quality measures, as well as launch a new payment model centered on chronic disease management.

“This rule modernizes CMS payment systems, eliminates perverse incentives, and harnesses better data to improve care for patients with chronic disease while protecting the future of hometown doctors,” HHS Secretary Robert F. Kennedy Jr. said in a statement.

One of the ways the rule proposes to reduce waste is by cutting spend on skin substitutes, which CMS says has jumped from $256M in 2019 to more than $10B in 2024, based on Medicare Part B claims data. The agency attributed the dramatic rise to “abusive pricing practices”

The rule would cover skin substitutes as incident-to supplies instead of biologics as they are today, which CMS says would cut spending in the area by ~90%.

MiMedx Group (MDXG) and Organogenesis Holdings (ORGO), two significant players in the skin substitutes space, are down, respectively, 20% and 33%, in after-hours trading.

The rule also aims to improve prevention and wellness by eliminating ten quality measures that CMS said did not directly improve outcomes, and replacing them with five new measures focused on the chronic disease prevention, such as prescreening for diabetes.

The agency is also issuing a request for information on recommendations for nutrition counseling and physical activity.

The rule also introduces the Ambulatory Specialty Model, which is centered on upstream management of Medicare beneficiaries with heart failure and low back pain. The model “rewards specialists who detect signs of worsening chronic conditions early, enhance patients’ function, reduce avoidable hospitalizations, and use technology that allows them to communicate and share data electronically with patients and their primary care providers,” according to a news release.

CMS also wants to reduce payment differentials for physicians across different care settings by using hospital data to determine more accurate payment rates for some services. The agency is also aiming to make more services available via telehealth.

Insurers offering Medicare Advantage plans include UnitedHealth Group (NYSE:UNH), Humana (NYSE:HUM), Elevance Health (NYSE:ELV), Cigna (NYSE:CI), and CVS Health’s (NYSE:CVS) Aetna.

Comments on the proposed rule are due by Sept. 12.