CMS Considers MAC Consolidation

On Wednesday, September 4, 2024, the Centers for Medicare & Medicaid Services released a Request for Information (RFI)[1] to solicit feedback on the potential consolidation of four Medicare Administrative Contractor (MAC) jurisdictions into two jurisdictions.[2] There are twelve A/B MAC jurisdictions, four of which process home health and hospice (HH+H) claims in addition to Medicare Part A and Medicare Part B claims. There are also MACs that process claims for durable medical equipment (DME). CMS is specifically considering combining A/B MAC J5 (Wisconsin Physicians Services (WPS)) with A/B HH+H MAC J6 (National Governmental Services (NGS)) and A/B MAC J8 (WPS) with A/B HH+H MAC J15 (CGS Administrators) (CGS)). CMS also requested feedback on extending MAC contracts from the current seven years to 10 years. Comments are due October 4, 2024. In this article, Applied Policy explores how the RFI raises important questions surrounding the impacts of consolidation on the healthcare system, including considerations for patient access, healthcare costs, cybersecurity.

Background on MAC Consolidation

MACs are multi-state, regional contractors awarded contracts by CMS to process claims for Medicare fee-for-service (FFS) beneficiaries in geographic jurisdictions. They have numerous responsibilities, including claims processing, enrolling providers in the Medicare program, handling redetermination requests, establishing Local Coverage Determinations (LCDs) and other coverage policies, and reviewing medical records for certain claims.[3] MACs have a broad reach, serving more than 1.2 million healthcare providers, processing more than 1.1 billion Medicare FFS claims, and paying out approximately $431.5 billion in FFS benefits in Fiscal Year (FY) 2023.[4]

MAC consolidation had been planned previously, but was paused in 2014, and a permanent jurisdiction consolidation pause was announced in 2016. CMS stated that “after evaluating the impact of the consolidation… CMS concluded that further consolidation is not in the best interest of the MAC program.”[5] CMS began revisiting this topic in 2023, specifically looking at consolidating A/B J5 and A/B HH+H J6 into new MAC “Jurisdiction G” and A/B J8 and A/B HH+H J15 into new MAC “Jurisdiction Q.”

The potential consolidation of these MACs requires CMS to revisit its longstanding A/B MAC prime contract award limitation of 26 percent. CMS’s goals with this award limitation were to manage program risks associated with an entity taking on more responsibility than can be managed, and to maintain a healthy level of competition. CMS has solicited feedback on several questions, which relate to issues of concern/challenges, advantages and disadvantages of consolidation, security and system-related implementation impacts, and additional issues.

MAC Contract Award Performance Period

Medicare law initially required that MAC contracts be re-competed every five years. The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 included language extending MAC maximum periods of performance from five years up to ten years. The reason for this extension was because of the belief that longer-term contract awards would incentivize MACs to make long-term investments into innovations and efficiencies, and based on CMS’s experience that longer contracts have positively correlated with higher contractor performance scores. Since 2016, CMS has awarded seven-year (1 base year with 6 potential option years) contracts for MAC procurements. Noting that long-term program stability has been achieved, CMS is considering extending MAC contact awards to the full 10-years as authorized. CMS has solicited feedback on several questions, which relate to advantages/disadvantages, impacts of a longer contract period on MAC performance, evaluative criteria for MACs, and additional issues that should be considered.

Key Issues

Changes to Coverage Policies

One role of MACs is to implement policies and coverage articles. While CMS sets out coverage policies for some services through National Coverage Determinations (NCDs), these policies do not exist for all services. In the absence of an NCD, or if a MAC determines there is a need to further define an NCD, a MAC may develop a LCD. These policies outline how the contractor will review claims to ensure that provided services meet Medicare coverage requirements, and can impact patient access to services and medications, as they can pose restrictions or additional requirements.

CMS has outlined processes for MACs to follow when a contract transitions from one MAC to another.[6] When a new MAC takes over for a previous MAC, the new MAC evaluates the LCDs and chooses the most clinically appropriate policy. However, it is up to the MAC’s discretion to involve providers in these decisions. MACs are also supposed to give providers 45 days’ notice of any policy changes, but if circumstances do not permit this timeline, CMS will use its discretion to make a determination. Depending on how the MAC implements the transition process, MACs may choose not to involve the provider community in the LCD selection process, and providers may also not have adequate notice of any changing policies.

While these issues would apply during any contract transition, and not only if MACs were consolidated, a smooth transition process is particularly important when transitions impact a greater number of patients and providers.

Consolidation

The RFI comes at a time when consolidation in other areas of the healthcare system has been in the spotlight due to concerns with patient access and cost. Consolidation of pharmacy benefit managers (PBMs) is one area where federal agencies such as the Federal Trade Commission (FTC), as well as members of Congress, have expressed concerns regarding the impacts of consolidation on patient access to medications. Most recently, the FTC announced that it is suing three PBMs, as well as affiliated group purchasing organizations (GPOs), for engaging in anticompetitive and unfair rebating practices in the insulin market.[7] These PBMs and GPOs collectively administer about 80 percent of all US prescriptions.[8] In a statement on the lawsuit, FTC states the PBMs and their GPOs, “have abused their economic power by rigging pharmaceutical supply chain competition in their favor.”[9] The lawsuits follow the FTC’s interim report Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies regarding PBMs and their impact on the accessibility and affordability of prescription drugs, which is in response to a 2022 inquiry launched by the FTC.[10]^,[11]In the report, the FTC found “PBMs wield enormous power over patients’ ability to access and afford their prescription drugs,” which can have “dire consequences.”[12]

Hospital consolidation has also faced increasing scrutiny, as it becomes increasingly common.[13] Initially predicted to decrease costs due to increased efficiencies, research has shown that consolidation has led to increased healthcare costs.[14]^,[15],[16] Although the impacts of provider consolidation on patient access and quality of clear are unclear, the topic has been the subject of several studies.[17] Related to consolidation, the FTC, Department of Justice (DOJ), and the U.S. Department of Health and Human Services (HHS) have recently looked to examine the role of private equity firms in the healthcare system via an RFI, noting that “preserving competition in health care markets is a priority.”[18]^,[19] More broadly, FTC, DOJ, and HHS have announced their intent to promote competition in the healthcare system.[20]

As federal agencies continue to examine the role of consolidation in other areas of the healthcare system, findings may be relevant to the potential impact of MAC consolidation, which has the potential to reduce competition at a time when federal agencies are actively looking to promote it. Stakeholders will likely raise these concerns to CMS in response to the RFI, which will inform whether CMS moves forward with consolidation the MACs, or whether consolidation is paused, as it was nearly a decade ago.

Cybersecurity

There are also cybersecurity issues that may arise with the consolidation of MACs. CMS recently notified the public MAC WPS experienced a data breach, impacting 946,801 beneficiaries, as the result of a cybersecurity incident involving a third-party application used by WPS.[21]

Change Healthcare, a healthcare claims process that handles 15 billion transactions annually, disclosed a cyberattack on February 21, 2024. The cyberattack resulted in significant disruptions across the healthcare system, impacting hospitals, physician groups, and pharmacies.[22] Change Healthcare is a subsidiary of UnitedHealth Group’s Optum division and merged with the company in 2022.

Ransomware and hacking are growing threats to the healthcare system. HHS has reported a 256 percent increase in large breaches involving hacking and a 264 percent increase in ransomware over five years.[23] This rising threat underscores the need for caution and careful planning as CMS considers whether to consolidate the MACs, as with fewer MACs, a data breach or cyberattack would potentially impact a greater number of beneficiaries.

Looking Forward

Applied Policy will be watching closely to see whether CMS moves forward with consolidating MACs and/or extending contract lengths and is ready to assist clients in navigating potential changes. While CMS has not provided an estimated timeline for when either of these changes could occur, WPS’s contract for Jurisdiction J8 is anticipated to end in October 2025, while the other three jurisdictions considered for consolidation have contracts ending between August 2026 and December 2030.[24] Of all current A/B MAC contracts, the earliest anticipated end date is July 2025 for Jurisdiction J8, which is currently awarded to Noridian.[25] The anticipated end dates of these contracts will likely play a role in the timing of the next steps CMS takes as it prepares for future contract procurement.

[1] https://sam.gov/opp/b551fa990aed4abea0d0cbce1e7eadc4/view

[2] https://sam.gov/opp/b551fa990aed4abea0d0cbce1e7eadc4/view

[3] https://www.cms.gov/medicare/coding-billing/medicare-administrative-contractors-macs/whats-mac

[4] https://www.cms.gov/medicare/coding-billing/medicare-administrative-contractors-macs/whats-mac

[5] https://www.cms.gov/medicare/medicare-contracting/medicare-administrative-contractors/downloads/mac-frequently-asked-questions-faqs.pdf

[6] https://www.cms.gov/files/document/medicare-administrative-contractor-workload-transition-handbook-v3012112019.pdf

[7] https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices

[8] https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices

[9] https://www.ftc.gov/news-events/news/press-releases/2024/09/ftc-sues-prescription-drug-middlemen-artificially-inflating-insulin-drug-prices

[10] https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf

[11] https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry

[12] https://www.ftc.gov/system/files/ftc_gov/pdf/pharmacy-benefit-managers-staff-report.pdf