CMS Releases the Proposed 2027 Medicare Advantage and Part D Rules
Last week, the Centers for Medicare & Medicaid Services (CMS) released its proposed Contract Year 2027 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, and Medicare Cost Plan Program (Proposed 2027 Rules).
As is common for the annual proposed rules, the Proposed 2027 Rules cover a broad range of topics. In the last few years, the agency has lost multiple legal cases challenging the validity of its rules and/or how it implements its rules – it has lost cases relating to Star Ratings, its updated marketing and communications rules that were adopted for 2025, and most recently, the risk adjustment extrapolation rule. The Proposed 2027 Rules broadly touch on all of these regulatory areas. In its very brief summary of the Proposed 2027 Rules, CMS also highlights changes to Part D drug coverage, the enrollment process, and special needs plans. The Proposed 2027 Rules also include multiple Requests for Information (RFI). Below are some initial takeaways.
Star Ratings
With the Proposed 2027 Rules, CMS explains that its aim is to simplify and refocus on the Star Ratings system. It proposes to refocus the measure set on clinical care, outcomes, and patient experience measures where plans have not topped out performance and believes that decreasing the number of measures will allow more focus on the measures that remain, including those aligned with the Make America Healthy Again initiative. Specifically, CMS is seeking to remove 12 measures: seven focused on operational and administrative performance, three focused on the process of care, and two focused on patient care experience. CMS also does not intend to move forward with the Health Equity Index rewards under the Star Ratings program. As discussed below, CMS is also seeking interested parties’ thoughts on the quality bonus payment system that is driven by Star Ratings.
Marketing and Communications
The Proposed 2027 Rules include both proposed changes to the Medicare Advantage and Part D rules addressing marketing and communications and an RFI relating to this area. For regulatory changes, CMS proposes changes to the definition of third-party marketing organizations (TPMOs) and changes to rules regarding translations, enrollment verification, and the use of testimonials, among other things. CMS requests that interested parties provide information regarding ways to modernize the agency’s marketing oversight that will help reduce the general burden, but at the same time ensure beneficiaries continue to receive accurate information. CMS is specifically interested in finding ways that it can take appropriate actions against TPMOs that are “bad actors” in a manner that does not hinder organizations that are operating appropriately.
Risk Adjustment
CMS proposed changes to the permissible uses for risk adjustment data. Historically, CMS has been limited in the ways that it can use risk adjustment data, and many of those permitted uses were adopted in regulation. The Proposed 2027 Rules propose to remove the enumerated permitted uses and instead recognize CMS’s ability to more broadly use and release the data to government entities and external parties. CMS specifically states that “CMS does not believe the statute restricts our use of risk adjustment data.” The proposed changes also allow risk adjustment data to be released prior to reconciliation, much more broadly than the current rules. CMS intends to continue to protect beneficiary confidentiality. CMS does not directly address the court decision that invalidated its extrapolation methodology.
IRA
Over 25% of the Proposed 2027 Rules address the many changes that aim to fully implement the redesign of Medicare Part D that was adopted in the Inflation Reduction Act (IRA). Similar to past years, many of the changes that CMS is proposing have been previously introduced through sub-regulatory guidance over the last few years. Some of the changes include formally sunsetting the Coverage Gap Discount Program, further implementing the Manufacturer Discount Program, clarifications regarding medical loss ratio, and changes relating to amounts that accrue towards TrOOP.
Reporting and Data Simplification
CMS is exploring ways that current Medicare reporting obligations can be simplified. Some of the referenced considerations would appear to reduce the burden on Medicare Advantage organizations and Part D plan sponsors, and others aim to reduce the burden on the agency. CMS gives examples of reporting obligations relating to provider networks, medical loss ratios, the utilization of benefits, and special needs plans’ models of care. CMS is specifically looking for ways that the reporting can be streamlined, potentially through the use of automated data sharing and different technology solutions that would make the import and use of the data less burdensome.
Very Broad RFI
The Proposed 2027 Rules include a broad RFI regarding the future direction of the Medicare Advantage program and specifically focus on risk adjustment and quality bonus payments. The agency is looking for ways to improve the program and positively impact the following areas: data transparency, beneficiaries’ ability to select the best plan for them, overall quality, enhance competition, reduce fraud, waste and abuse, and generate taxpayer savings.
Court Hands Policyholder Win in Prior Notice Exclusion Case
The Northern District of California recently rejected an insurer’s attempt at avoiding its duty to defend the insured based on erroneous application of a prior knowledge exclusion. The case highlights the breadth of an insurer’s duty to defend and reiterates that to avoid this duty, “it is the insurer’s burden to demonstrate there is no possible theory that would bring a single issue within coverage.”
Case Background
After purchasing BetterHelp in 2015, BetterHelp’s owner purchased an insurance policy from CNA in 2016 that included coverage for any “Enterprise Liability” claim brought against an insured, including Network Security Liability, Privacy Injury Liability, Privacy Regulation Proceedings, and Privacy Regulation Fines. This coverage was continuously renewed, providing coverage through August 1, 2022.
On June 8, 2022, the FTC sent BetterHelp a draft administrative complaint which alleged that BetterHelp violated the FTC Act by disclosing consumer health information to third-parties without consent. BetterHelp promptly provided notice of the complaint to CNA. BetterHelp and the FTC then entered into a consent agreement in March 2023 in which BetterHelp agreed to pay a fine. Five days after the FTC settlement, BetterHelp was sued in a putative class action lawsuit (“Class Action”) alleging violations under state and federal law, including alleged violations of the Electronic Consumer Privacy Act between January 2017 and September 2021 based on the disclosure of confidential user information to third parties.
BetterHelp tendered the Class Action to CNA for a defense, but CNA denied coverage for both the Class Action and the FTC complaint based on two coverage defenses. First, CNA argued that Section D of the policy precluded coverage because the insured had “executive knowledge of wrongful acts prior to the policy period” based on a civil investigative demand from the FTC in 2020. Section D conditions coverage on “prior to the inception date of [the] Policy or the first such policy issued and continuously renewed by the Insurer, of which this Policy is a renewal, whichever is earlier: no Executive Officer knew or should have known that any such Wrongful Act, or Related Wrongful Acts, might result in such Claim.” Second, CNA argued that the Class Action alleged wrongful acts occurring before the policy period so that the Prior Wrongful Acts exclusion applied.
BetterHelp and its corporate parent, Telacom, brought suit against CNA, seeking coverage for the Class Action. The policyholders moved for judgment on the pleadings.
The Court’s Decision
The court rejected CNA’s arguments and ruled that CNA had a duty to defend. The court first reiterated California law on the duty to defend. Like in all other states, in California, the duty to defend is broader than the duty to indemnify. It is triggered whenever the underlying complaint raises the possibility that there may be coverage. The burden then shifts to the insurer to show that an exclusion applies and that there is “no conceivable theory” that can bring the lawsuit within coverage.
Turning to the exclusions that CNA raised, the court rejected CNA’s contention that Section D applied to bar coverage. The court found that CNA had not conclusively proven that BetterHelp executives had knowledge of the alleged wrongful acts at issue in the Class Action prior to the inception of the policy in August 2021. While CNA pointed to a publicly available report stating that the FTC had served a civil investigative demand (CID) on BetterHelp in July 2020, the court pointed out that the public notice did not state the subject matter of the investigation so CNA could not conclusively show that the CID was, in fact, connected to the Class Action or that executives had knowledge of the wrongful acts alleged in the Class Action at that time.
Second, the court turned to prior knowledge exclusion and rejected CNA’s arguments there as well. This exclusion applies if the claim arises out of wrongful acts that occurred before the named insured purchased BetterHelp on January 23, 2015. The court stated that the exclusion does not apply because the Class Action “does not completely arise out of pre-2015 acts given the ECPA claims, which arise in 2017.” The court explained that the draft FTC complaint and the Class Action distinguished between two ways that BetterHelp improperly disclosed user health information, one of which began before 2015 and the other of which began in 2017. Because there was no link between the pre-2015 events and the entire action did not arise out of the pre-2015 conduct, the court held that the exclusion does not apply.
Takeaways for Insureds
The court’s decision underscores the in-depth factual analysis required for application of a prior knowledge or prior notice exclusion to avoid coverage. Policyholders should push back on insurer attempts to broadly apply prior knowledge or prior notice exclusions to distinct claims and distinct wrongful acts. Further, policyholders and insurers alike should be cognizant of the in-depth factual analysis required for a court to rule on application of these exclusions. Finally, the decision highlights a procedural practice pointer for the insurance coverage bar, noting that “[a]lthough a 12(c) motion mirrors a 12(b)(6) motion and inferences should be drawn in favor of the nonmoving party, the duty to defend still places the burden on the insurers … to establish that policy exclusions apply and that there is no possibility that a claim can fall within policy coverage.”
Healthcare Preview for the Week of- December 1, 2025 [Podcast]
First Day of the Last Month
The end of the calendar year is a month away, and the continuing resolution under which Congress approved funding for most of the government ends on January 30, 2026.
We will be watching for signals of an “outbreak of cooperation,” particularly around the Affordable Care Act (ACA) enhanced premium tax credits, which are set to expire December 31, 2025. There is currently no sign of a bipartisan deal. Senate Republicans have hinted at possible alternatives to extending the tax credits, but it is unclear whether there is enough support among Republicans to initiate bipartisan negotiations. It is also unclear whether President Trump will choose to insert himself again after congressional Republicans nixed the administration’s attempt last month before it was even formally proposed.
The Senate Committee on Health, Education, Labor, and Pensions will meet Wednesday on the broad topic of healthcare affordability, which will provide another avenue to publicly discuss the pending expiration of the ACA enhanced premium tax credits. The conversation may mirror the November 19, 2025, Senate Committee on Finance hearing on the rising cost of healthcare, where committee Democrats and two of the witnesses argued that extending the tax credits this month is essential before considering potential long-term solutions.
On Monday evening, the House passed HR 4313, the Hospital Inpatient Services Modernization Act. The bill, passed under suspension of the rules (which requires the support of two-thirds of the House), would extend the Acute Hospital Care at Home program for five years. We will watch to see whether the Senate decides to take it up via unanimous consent. If not, the legislation may be included in negotiations around the January 30, 2026, expiration of the government funding package, which also includes health extenders such as the hospital at home program extension.
In the administration, the Centers for Medicare & Medicaid Services (CMS) announced the ACCESS (Advancing Chronic Care with Effective, Scalable Solutions) Model today. The model is intended to test “an outcome-aligned payment approach designed to give people with Original Medicare new options to improve their health and prevent and manage chronic disease with technology-supported care.” Many groups that have participated in the White House healthcare and technology ecosystem initiative will attend a private event with CMS on Thursday to discuss the model and any other Innovation Center models announced this week.
The Medicare Payment Advisory Committee will also meet on Thursday and Friday for the first time since missing meetings during the government shutdown.
Although we typically focus on previewing the week ahead, we wanted to draw your attention to a few rules the administration released last week that you may have missed because of the Thanksgiving holiday. On November 25, 2025, CMS issued a proposed rule that would make policy and technical changes to the Medicare Advantage and Part D programs for 2027 and beyond. CMS announced the agreed-upon maximum fair prices for 15 drugs selected for the 2027 Medicare Drug Price Negotiation Program. On November 28, 2025, the calendar year 2026 home health final rule, which forecasts plans for competitive bidding, was posted for public inspection.
Today’s Podcast
In this week’s Healthcare Preview podcast, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the congressional calendar for this week and the rest of the year, including upcoming suspensions and hearings, and ongoing discussions of the enhanced Advance Premium Tax Credits.
Federal Court Holds That Button-Click Data from Public Website Can Disclose Patient Status in Violation of the ECPA
In early October, a federal court in the Northern District of Illinois refused to dismiss a privacy litigation brought against a healthcare website operator for claims under the Electronic Communications Privacy Act (ECPA). The court held that the plaintiff plausibly alleged that Defendant violated the Health Insurance Portability and Accountability Act (HIPAA) by revealing to a third party that she clicked on the login button to the healthcare provider’s patient portal, and, as a result, disclosed her individually identifiable healthcare information—even though no third-party data collection tools were installed on the patient portal itself. Hartley v. Univ. of Chi. Med. Ctr., Case No. 22-cv-5891, 2025 WL 2802317 (N.D. Ill. Oct. 1, 2025). However, at the same time, the court dismissed certain claims arising out of Plaintiff’s use of a “find-a-physician feature,” rejecting the full scope of Plaintiff’s theories. On the balance, this decision unfortunately broadens the scope of potential liability under the ECPA and will likely result in ECPA suits being brought against website operators in the healthcare sector.
ECPA and HIPAA Background
The ECPA imposes criminal and civil liability on persons who “intentionally intercept[] . . . any wire, oral, or electronic communication.” 18 U.S.C. § 2511(1)(a), (4); § 2520. A party is not liable under the ECPA unless they intercept the communication “for the purpose of committing any criminal or tortious act in violation of the Constitution or laws of the United States or of any State,” such as disclosing individually identifiable health information in violation of HIPAA. § 2511(2)(d). HIPAA criminalizes “knowingly . . . disclos[ing] individually identifiable health information to another person.” 42 U.S.C. § 1320d-6(a)(3). Individually identifiable health information includes “any information” that “is created or received by a health care provider” and “relates to the past, present, or future physical or mental health or condition of an individual, [or] the provision of healthcare to an individual” and “identifies the individual” or “with respect to which there is a reasonable basis to believe that the information can be used to identify the individual.” § 1320d(6).
Plaintiff’s Allegations
Plaintiff alleges that the University of Chicago Medical Center (UCMC) disclosed her individually identifiable health information and therefore violated HIPAA, subjecting UCMC to liability under the ECPA. UCMC operates a non-profit hospital network and maintains a public website to communicate with patients. Patients can log in to UCMC’s MyChart patient portal from its public website.
In her Complaint, Plaintiff claims that UCMC deploys third-party computer code from Meta Platforms on its public website. Every time a patient clicks on a page within UCMC’s public website, the collection tools link the patient’s identity to the communication and transmit the data to Meta for commercial use. The tools capture and transmit a website visitor’s IP address, Facebook ID, cookie identifiers, device identifiers, and account numbers, among other things.
Clicks on the login button for the MyChart patient portal from the public website are captured in this button-clicking data transmitted to Meta as well. Plaintiff claims that UCMC disclosed her individually identifiable health information when it transmitted that she used UCMC’s website to log in to the MyChart patient portal, revealing her status as a patient at UCMC. Plaintiff also alleges that UCMC disclosed her individually identifiable health information by disclosing her visit to UCMC’s “find-a-physician” page and by disclosing general information about the webpages she viewed related to her medical providers, conditions, and treatments.
Court Denies UCMC’s Motion to Dismiss, finding that UCMC Disclosed Individually Identifiable Health Information
The court denied Defendant’s Motion to Dismiss, holding that the plaintiff plausibly alleged that UCMC intentionally intercepted her communications with UCMC’s public website. The court held that Plaintiff’s act of clicking the login button on the public website for the MyChart patient portal sufficiently identified her as a patient. The act of clicking “login” on the public website, when combined with individual identifiers such as an IP address or a Facebook ID, can reveal patient status, qualifying as individually identifiable health information and falling within the ambit of HIPAA. Although UCMC argued that Meta’s data collection tools were not installed on the MyChart portal itself, the court found the presence of data collection tools on the public website alone were enough to identify Plaintiff as a patient.
The court limited its holding to the button-click data from the MyChart portal. In finding that Plaintiff did not plausibly allege that UCMC disclosed her individually identifiable health information through the disclosure of the “find-a-physician” click and her general browsing of webpages related to her providers and conditions, the court reasoned that the transmission of this button-click data did not convey individually identifiable health information. The court explained that general information accessed on a publicly accessible website stands in “stark contrast” to patient records, patient status, and medical histories. Plaintiff failed to allege that UCMC disclosed that she accessed information about specific doctors or conditions, breaking the connection between her sensitive medical status and the information actually disclosed. The court emphasized that “what matters is whether the information ‘provides a window into an individual’s medical history.’” Here, mere disclosure of data revealing that Plaintiff clicked and viewed non-specific webpages related to her providers, conditions, and treatments does not amount to individually identifiable health information. The court also denied UCMC’s Motion for Summary Judgment and granted UCMC’s Motion to Strike Plaintiff’s class allegations based on contractual issues.
Ultimately, given the court’s holding regarding the MyChart patient portal button-click data, this decision broadens liability under the ECPA. The disclosure of a single click on a login button on a public website can subject a website operator to ECPA liability because that click can reveal an individual’s patient status. The court also explicitly left the door open for future claims under the ECPA, warning that information collected from a webpage—like clicks related to a patient’s medical providers, conditions, and treatments—could amount to the disclosure of individually identifiable health information if more specifically pled. Although a fact-specific decision, the principles set forth in this opinion will undoubtedly guide consumer privacy litigations going forward.
Dueling Umbrellas- What to Do When Policy Interpretation Gets Metaphysical
Case Citation: Johnson v. Reliance Standard Life Insurance Company, No. 23-13443, 2025 WL 3251015 (11th Cir. Nov. 21, 2025)
The Situation: By a 2-1 vote, the Eleventh Circuit has held that a policy interpretation (1) endorsed by the dissenting opinion, (2) suggested by a prior Eleventh Circuit panel, and (3) adopted by other courts around the country was not just wrong, but so unreasonable that it failed arbitrary-and-capricious review. The case is a cautionary tale in several respects.
The dispute arose under a long-term-disability (LTD) policy that excluded coverage for pre-existing conditions, defined as “any Sickness or Injury for which the Insured received medical Treatment, consultation, care or services, including diagnostic procedures, or took prescribed drugs or medicines.” For two years pre-policy, the plaintiff had symptoms of a rare auto-immune disease, scleroderma. She received treatment, took medicines, and underwent diagnostic procedures. But none of her doctors could figure out what it was, diagnosing her with nearly a dozen other ailments instead. After the policy kicked in, her doctors landed on the correct diagnosis. The question for the Court was whether something counts as a preexisting condition if the insured was treated for it pre-policy but her doctors didn’t name it correctly.
The Result: The majority answered no, holding that the insurer thus wrongly denied coverage. This outcome was unlikely for two main reasons. First, this was an ERISA LTD policy that granted the insurer “discretionary authority” to interpret it. The insurer could lose only if its interpretation was not just wrong, but so unreasonable as to be “arbitrary and capricious.” Second, multiple judges already had interpreted similar policy language in line with the insurer’s interpretation.
Starting with the deferential standard of review, it may have been diluted in part due to a quirk of the Eleventh Circuit. In contrast to other circuits that apply regular abuse-of-discretion review to an insurer’s discretionary interpretation of its own ERISA policy, the Eleventh Circuit uses a bespoke six-step sequence that starts by asking whether the insurer’s interpretation is wrong under de novo review, then only later asks if it is so wrong as to be arbitrary and capricious. This sequence triggers what influence scholar and renowned psychologist Robert Cialdini calls commitment-and-consistency bias: someone is more likely to agree with a stance if they first agree with it a little. Here, once a judge convinces themself that an interpretation is wrong, there is a stronger cognitive temptation to believe it is also very wrong. By contrast, leading with the abuse-of-discretion question creates a more level playing field.
Second, at the policy interpretation stage, things got metaphysical. The majority viewed the pre-policy doctors’ activities as treating symptoms rather than a medical condition. Because they repeatedly misdiagnosed the plaintiff with other ailments instead of scleroderma, the majority reasoned, they could not have been treating her “for” scleroderma. The “symptoms are not the disease” and “an indication of something is not the thing itself,” just as “a wet umbrella is [not] ‘the same thing’ as a hurricane.”
The dissent saw it differently. The plaintiff had been treated, prescribed medication, and undergone diagnostics “for the ‘various symptoms and conditions of scleroderma.’” There was “more than mere ‘consistency’ between what [she] was treated for and scleroderma; they are the same thing.” Borrowing an umbrella of its own, the dissent reasoned that if one “us[es] an umbrella to stay dry without knowing whether the current rainstorm is a hurricane or quick summer shower,” either way, “the umbrella fends off the rains.”
Since both majority and dissent found different dictionaries and prior cases siding with their respective interpretations, one would expect the insurer to prevail under arbitrary-and-capricious review. Instead, the majority seized on a stray answer at oral argument, construing it as an admission that the insurer would deny coverage if any pre-policy symptom was not inconsistent with the later diagnosis. The majority held that that position, albeit taken from another party in a different case, “is unreasonable—full stop.” So, it reversed the judgment of the district court.
Looking Ahead: This appeal seems ripe for rehearing en banc (although quite rare, especially in insurance coverage cases). As to standard of review, even the majority acknowledged that the Eleventh Circuit’s six-step sequence “is likely unnecessarily complex (and may even obscure the lawful result in certain cases)”—the result here is a prime example. If not now, then when the right case comes along, insurers may consider investing in overturning this framework and the subtle cognitive bias it creates.
As to the merits policy interpretation, how lower courts apply the majority’s test is key. That test seems to be that the right disease need not be formally diagnosed pre-policy so long as it at least is “suspected.” The majority suggests that “strong indications” of the particular illness, “reasonable cause” to diagnose the particular illness, or “a distinct symptom or condition from which one learned in medicine can diagnose the disease” all qualify but were not satisfied on these facts. Whether that blurry line will yield consistent results in practice remains to be seen.
KEY TAKEAWAYS FOR INSURERS
Look out for interpretive frameworks that create commitment-and-consistency bias. Experiments have shown that judges are susceptible to this type of cognitive effect. Although hard to prove in any given case, the long-term effect can be significant. Investing in reshaping the law into a more level playing field affects not just the individual cases but also their broader ripples into adjacent caselaw.
Issue framing and careful answers at oral argument matter. Insurers often are held to a higher standard, even when the law requires more lenient treatment. The impact of this can be mitigated by having a firm theory of the case and knowing exactly when one can, cannot, or must cede ground.
Federal Court Reinforces Safe-Harbor Protection for Insurers in Mass. Chapter 93A Litigation
In Gretzky v. AmGuard Insurance Co., the United States District Court for the District of Massachusetts evaluated how insurers facing a 176D demand letter post-judgment may limit exposure under the safe-harbor provisions of Chapter 93A, § 9(3). The court reaffirmed that a timely, well-supported written tender may successfully invoke the safe harbor provisions and prevent exposure to punitive damages in post-judgment allegations of bad faith.
In Gretzy, after settling the underlying lawsuit for the full policy limit (and payment of the policy limit), the plaintiff sent a demand letter to the insurer alleging unfair claim-handling practices and alleging entitlement to additional damages, including prejudgment interest. The defendant insurer responded with a written tender of $232,769 representing the full 12% statutory prejudgment interest accrued on the one-million-dollar policy limit from the date the underlying tort claim was filed. The plaintiff rejected the offer and filed suit.
Massachusetts General Laws Chapter 93A, § 9(3) provides a “safe harbor” provision to recipients who timely tender a written settlement tender that was reasonable in relation to the injury the petitioner actually suffered. Thus, defendant sought to limit damages under this safe harbor provision, asserting that its written tender was reasonable. The court rejected plaintiff’s position that the written tender should have included a multiplier of the underlying judgment pursuant to the punitive damages statutory scheme and include damages for emotional distress and litigation stress.
Instead, the court reaffirmed that in Chapter 176D/93A cases arising from the alleged failure to effectuate a prompt and equitable settlement, the appropriate benchmark for a written tender is the “loss of use damages.” This “loss of use” damages based on the loss of use of the wrongfully withheld settlement funds is the proper standard. In this case, the written tender fully compensated the plaintiff for the loss of use based on the full policy limit. The offer, therefore, was reasonable as a matter of law. As to the plaintiff’s contentions that the settlement should have included damages for emotional distress, such request was not included in the demand letter. Therefore, the defendant could not have been expected to include compensation for such damages in its written tender.
Insurers who act promptly and make a timely reasonable written tender to a plaintiff might avoid punitive damages exposure under Chapter 93A.
Abby Druhot contributed to this article
The CCPA and Automated Decision-Making Technologies (ADMT)
As artificial intelligence (AI), particularly generative AI, becomes increasingly woven into our professional and personal lives—from personalized travel itineraries to reviewing resumes to summarizing investigation notes and reports—questions about who or what controls our data and how it’s used are ever present. AI systems survive and thrive on information and that intersection of AI and privacy elevates the need for data protection.
Recent regulations issued by the California Privacy Protection Agency (CPPA) under the California Consumer Privacy Act (CCPA) begin to erect those protections. Among its various provisions, the CCPA now specifically addresses automated decision-making technologies (ADMT), attempting to bring transparency and consumer rights to, among other things, push back on algorithms making significant decisions about them.
As a starting point, it is important to define ADMT. Under the CCPA, it means any technology that processes personal information and uses computation to replace human decision-making or substantially replace human decision-making. For this purpose, “replace” means to make decision without human involvement. To be considered human involvement, a human must:
know how to interpret and use the technology’s output to make the decision;
review and analyze the output of the technology, and any other information that is relevant to make or change the decision; and
have the authority to make or change the decision based on their analysis in (B).
CCPA-covered businesses that use ADMT to make “significant decisions” about consumers have several new compliance obligations to navigate. A “significant decision” is defined as a decision that has important consequences for a consumer’s life, opportunities, or access to essential services. CCPA regulations define these decisions as those that result in the provision or denial of:
Financial or lending services (e.g., credit approval, loan eligibility)
Housing (e.g., rental applications, mortgage decisions)
Education enrollment or opportunities (e.g., admissions decisions)
Employment or independent contracting opportunities or compensation (e.g., hiring, promotions, work assignments)
Healthcare services (e.g., treatment eligibility, insurance coverage)
These decisions are considered “significant” because they directly affect a consumer’s economic, health, or personal well-being.
When such businesses use ADMT to make significant decisions, they generally must do the following:
Provide an opt-out right for consumers.
Provide a pre-use notice that clearly explains the business’s use of ADMT, in plain language.
Provide consumers with the ability to request information about the business’s use of ADMT.
Businesses using ADMT for significant decisions before January 1, 2027, must comply by January 1, 2027. Businesses that begin using ADMT after January 1, 2027, must comply immediately when the use begins.
Businesses will need to examine these new requirements carefully, including how they fit into the existing CCPA compliance framework, along with exceptions that may apply. For example, in the case of a consumer’s right to opt-out of ADMT, a business may not be required to make that right available.
If a business provides consumers with a method to appeal the ADMT decision to a human reviewer who has the authority to overturn the decision, opt-out is not required. Additionally, the right to opt-out of ADMT in connection with certain admission, acceptance, or hiring decisions, is not required if the following are satisfied:
the business uses ADMT solely for the business’s assessment of the consumer’s ability to perform at work or in an educational program to determine whether to admit, accept, or hire them; and
the ADMT works as intended for the business’s proposed use and does not unlawfully discriminate based upon protected characteristics.
Likewise, the right to opt-out of ADMT is not required for certain allocation/assignment of work and compensation decisions, if the business:
uses the ADMT solely for the business’s allocation/assignment of work or compensation; and
the ADMT works for the business’s purpose and does not unlawfully discriminate based upon protected characteristics.
As many businesses are realizing, successfully deploying AI requires a coordinated approach to achieve more than getting the desired output. It includes understanding a complex regulatory environment of which data privacy and security is a significant part.
CMS Adds New Requirements to Hospital Price Transparency Reporting
On November 21, 2025, the Centers for Medicare & Medicaid Services (CMS) published the CY 2026 Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center Final Rule (the Rule), which includes several significant changes to hospital price transparency regulations. The changes follow from Executive Order 14221, entitled “Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information,” which directs the Department of Health & Human Services (HHS) to take steps to require more uniform, accurate pricing information from hospitals. Key provisions of the Rule’s new requirements are summarized below. Although these new requirements become effective on January 1, 2026, CMS is delaying enforcement until April 1, 2026.
New MRF Data Reporting Requirements
Allowed Amounts
Currently, where a hospital’s standard charge is based on an algorithm or percentage, CMS requires hospitals to report an “estimated allowed amount” in their machine-readable file (MRF). The Rule removes this requirement and instead requires hospitals to report the following four elements:
Median allowed amount (which replaces estimated allowed amount);
The 10th percentile allowed amount;
The 90th percentile allowed amount; and
The number of allowed amounts used to calculate the prior three amounts.
The median allowed amount and the 10th– and 90th-percentile allowed amounts must be calculated based on amounts the hospital has historically received from a third-party payer (less certain contractual adjustments) over the 12 to 15 months prior to posting the MRF. If an allowed amount falls between two amounts, hospitals are required to report the higher amount. To calculate these data points, hospitals must use electronic data interchange (EDI) 835 electronic remittance advice (ERA), or an equivalent, alternative source of remittance data.
Hospital NPI
The Rule also adds a requirement that hospitals encode in their MRF their organizational (i.e., Type 2) National Provider Identifier or NPI.
Modification of MRF Attestation Statement
Current regulations require each hospital to attest to the accuracy and completeness of the information encoded in its MRF. Beginning January 1, 2026, the Rule replaces the existing affirmation statement with a new, strengthened requirement at 45 C.F.R. § 180.50(a)(3)(iii) (reproduced below).
To the best of its knowledge and belief, this hospital has included all applicable standard charge information in accordance with the requirements of 45 CFR 180.50, and the information encoded is true, accurate, and complete as of the date in the file. This hospital has included all payer-specific negotiated charges in dollars that can be expressed as a dollar amount. For payer-specific negotiated charges that cannot be expressed as a dollar amount in the machine-readable file or not knowable in advance, the hospital attests that the payer-specific negotiated charge is based on a contractual algorithm, percentage or formula that precludes the provision of a dollar amount and has provided all necessary information available to the hospital for the public to be able to derive the dollar amount, including, but not limited to, the specific fee schedule or components referenced in such percentage, algorithm or formula.
The Rule also adds a requirement that hospitals include with the attestation statement the name of the hospital’s CEO, president, or senior official designated to oversee the data encoding process for the MRF.
Changes to Civil Monetary Penalties
Finally, the Rule makes available a 35% reduction to Civil Monetary Penalties (CMP) imposed for certain violations of hospital price transparency requirements, which hospitals can request in exchange for the hospital waiving its right to an administrative hearing. However, the 35% reduction will not apply if the CMP is imposed due to the hospital failing to make its MRF or any shoppable services public.
Conclusion
Hospitals would be well advised to proactively assess their price transparency practices and update their processes and disclosures to align with the enhanced requirements of the new Rule.
This article was co-authored by Ivy Miller
McDermott+ Check-Up- November 21, 2025
THIS WEEK’S DOSE
Congressional disagreements on addressing healthcare costs continue. The looming expiration of the enhanced advanced premium tax credits (APTCs) continues to be a major topic of discussion for lawmakers, with no bipartisan agreement in sight.
Numerous congressional hearings on healthcare. The Senate Finance Committee examined the rising cost of healthcare and the Senate Aging Committee analyzed domestic production of medicine. In the House, the Ways and Means Committee reviewed chronic disease prevention and treatment, the House Energy and Commerce Committee examined the risks associated with AI chatbots, and the Budget Committee held an oversight hearing on the Congressional Budget Office (CBO).
Senate advances nomination for HHS inspector general. The nomination of Thomas Bell to be inspector general of the US Department of Health and Human Services (HHS) was advanced through both the Senate Committee on Homeland Security & Governmental Affairs and the Senate Finance Committee, which means it is ready for full Senate consideration.
CMS issues guidance on Medicaid provider and MCO tax provisions of OBBBA. The Centers for Medicare & Medicaid Services (CMS) clarified two tax provisions, applicable to providers and managed care organizations (MCOs), included in the One Big Beautiful Bill Act (OBBBA).
CMS announces 2026 premiums and deductibles for Medicare Parts A and B. In 2026, Medicare Parts A and B premiums and deductibles will increase.
HHS advances caregiver support efforts. HHS announced new initiatives aimed at strengthening caregiver support and expanding the caregiving workforce.
DHS releases proposed rule on public charge determinations. The Department of Homeland Security (DHS) proposed rule would revise how immigration officers assess public-charge determinations, potentially affecting enrollment in programs like Medicaid.
CMS updates Medicare claims processing guidance. CMS’ updated guidance reflects the end of the government shutdown and the restoration of certain payment waivers and flexibilities.
CMS releases final CY 2026 ESRD rule. The final rule updates payment rates and policies under the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for calendar year (CY) 2026.
CONGRESS
Congressional disagreements on addressing healthcare costs continue. With the record-setting 43-day government shutdown in the rearview mirror, the House and Senate were back in full swing this week, and the fast-approaching expiration of the enhanced APTCs kept healthcare affordability issues front and center. While part of the deal to reopen the government included Senate Majority Leader Thune’s (R-SD) promise of a floor vote on an enhanced APTC extension bill of the Democrats’ choosing by the second week of December, a path forward has yet to be determined. While Democrats have continued to advocate for a straightforward enhanced APTC extension, many Republicans appear to be in favor of an approach that sends money directly to consumers, such as through health savings accounts (HSAs). President Trump issued a statement to this end, and Republican lawmakers are also touting this concept, though the exact language and mechanics of such a proposal has yet to be put forward. Additionally, on the topic of HSAs, the Government Accountability Office (GAO) released a report following their interviews with nine HSA providers and other stakeholders looking at features of HSAs, how they are marketed, how HSA holders use their accounts, and the characteristics of individuals who use HSAs and other tax-advantage savings accounts. The issue of HSAs and APTCs was front and center at the Senate Finance Committee’s hearing on healthcare costs (see next story) and will likely remain so into December.
Numerous congressional hearings on healthcare. With both the House and Senate in session this week for the first time since mid-September, committees on both sides of the Capitol held a number of healthcare-focused hearings.
Senate:
Finance Committee hearing on healthcare costs. In this hearing, Republican members of the committee generally supported the concept of providing funds to individuals using HSAs instead of offering discounted coverage on the marketplace through the APTCs as a solution to rising healthcare costs. In contrast, Democratic senators, and the witnesses invited by the Democrats, argued that the extension of the enhanced APTCs is the crisis facing millions of Americans come January 1, 2026, and that needs to be the immediate focus. Democratic senators and some of the witnesses also agreed that longer-term health reforms aren’t possible before that date.
Aging Committee hearing on restoring trust in medicines. Witnesses in the Senate Aging Committee hearing shared the regulatory and financial barriers they face as US-based drug manufacturers, and expressed concerns with the increasing dependence on foreign-made medicines leading to drug shortages and threats to national security and patient health. Senators on the committee emphasized the importance of improving quality and reliability of the nation’s medical supply and asked the witnesses to identify policy changes would most benefit them and patients. Additionally, Chair Scott (R-FL) shared plans to introduce legislation that would require country-of-origin information on drug labeling to ensure patients know where their medications are coming from.
House:
Energy and Commerce Oversight and Investigations Subcommittee hearing on AI chatbots. During this hearing, committee members expressed concerns about the potential harmful effects AI chatbots could pose as they become increasingly popular. Their questions focused on issues related to mental health, child safety, and privacy, emphasizing the importance of mitigating the risks of misinformation and disinformation in AI chatbots. Witnesses shared insights on negative mental health outcomes from AI chatbots and emphasized that AI chatbots should not replace human relationships.
Ways and Means Health Subcommittee hearing on care coordination. During this hearing on chronic disease prevention and treatment, Democrats on the committee expressed concerns over Americans who might lose their health insurance because of the rise in health insurance premiums. They emphasized that without extending the APTCs, many Americans would not be able to access health services. Republican members of the committee emphasized that the ACA must be replaced and noted that HSAs would be an affordable option for people to access care. Both parties emphasized that telehealth services should be expanded and highlighted the benefits rural communities experience with telehealth.
House Budget Committee hearing with CBO director. This hearing included a focus on the recent cyberattack at CBO and calls for an independent audit, and many members focused their questions on CBO’s scoring of OBBBA’s healthcare provisions and the expiration of the enhanced APTCs. CBO Director Swagel noted that during negotiations for OBBBA, CBO had to decide between timeliness and transparency when releasing information. Now that the bill has been enacted, he affirmed CBO will release a more in-depth analysis on OBBBA in February 2026, including budget estimates. Democratic members expressed concerns about the enhanced APTCs’ expiration and asked Director Swagel about CBO’s analysis of OBBBA’s impact on the national debt and number of uninsured Americans. Chair Arrington (R-TX) indicated that the committee may hold a healthcare-related hearing in the future.
Senate advances nomination for HHS inspector general. This week the Senate Committee on Homeland Security & Governmental Affairs held a hearing to consider the nomination of Thomas Bell to be HHS inspector general. The committee then held a business meeting where they advanced his nomination by a vote of 8-7, along party lines. With the Senate Finance Committee also moving the nomination forward this week by a vote of 14-13 along party lines, it will now proceed to the Senate floor.
ADMINISTRATION
CMS issues guidance on provider and MCO tax provisions of OBBBA. In a Dear Colleague letter, the Center for Medicaid and CHIP Services (CMCS) provided guidance on implementing certain Medicaid provisions from the OBBBA.
Providers. Section 71115 of OBBBA specifies the requirements for an expansion or non-expansion state that “has enacted a tax and imposes such tax,” referring to the healthcare-related provider taxes. CMS’ guidance clarifies the definitions of “enacted” and “imposed” under new rules in the OBBBA. The guidance outlines that non-expansion states may maintain existing “hold harmless” arrangements, while expansion states must gradually reduce their thresholds starting in fiscal year 2028. CMS is also collecting data on current tax structures to support consistent application of the new thresholds and to inform future rulemaking and state planning.
MCOs. Section 71117 of OBBBA addresses provider tax waivers by tightening rules around the federal requirements that provider taxes be uniform and broad-based, meaning they must be applied at the same level and to all providers in the state. States have been allowed to seek CMS waivers if their tax structures were redistributive and not directly tied to Medicaid payments, but CMS grew concerned that this allowed states to tax Medicaid MCOs at higher rates than others. To close this loophole, Section 71117 empowered CMS to phase out non-compliant taxes through a transition period of up to three fiscal years. Before OBBBA was enacted, CMS had proposed a similar rule in May 2025, though it offered a more limited transition period – only for states whose waiver approvals were granted more than two years before the final rule’s effective date.
In this guidance, CMS also provides the following transition periods, which differ from the May proposed rule:
States with MCO taxes that use this loophole and received a waiver approval before the July 4, 2025, enactment of OBBBA will have until the end of the applicable state’s fiscal year ending in calendar year 2026.
States with all other taxes that use this loophole and received a waiver approval before the July 4, 2025, enactment of OBBBA will have until the end of the applicable state’s fiscal year ending in calendar year 2028, but no later than October 1, 2028.
While the information provided in the letter is preliminary in nature, CMS plans to release a rule with more formal guidance.
CMS announces 2026 premiums and deductibles for Medicare Parts A and B. Key changes for 2026 include:
Part B. The Part B standard monthly premium for 2026 will be $202.90, an increase of 9.7% over the 2025 Part B standard monthly premium of $185.00. The annual Part B deductible for 2026 will be $283.00, an increase of 10.1% over the 2025 Part B deductible of $257. CMS noted that the increase in the 2026 Part B standard premium and deductible is mainly due to projected price changes and assumed utilization increases that are consistent with historical experience. Additionally, CMS reported that as a result of reductions in payment amounts for skin substitutes finalized in the recent Medicare Physician Fee Schedule final rule, the 2026 Part B premium is about $11 less than it would otherwise have been.
Part A. The Part A monthly premium will be $565, an increase of 9.1% over the 2025 Part A monthly premium of $518. While most Part A enrollees do not pay a monthly premium for Part A coverage, certain individuals who do not qualify for premium-free coverage are eligible for coverage subject to a monthly premium and are therefore impacted by the premium increase for 2026. The Part A inpatient deductible will be $1,736, an increase of 3.6% over the 2025 deductible of $1,676. The 2026 cost sharing for inpatient stays that exceed 60 days will be $434 per day for days 61 – 90 and $868 per day for lifetime reserve days.
HHS advances caregiver-support efforts. During an event in which experts in caregiving and family caregivers discussed the financial and emotional challenges facing caregivers and their families, HHS highlighted the need to strengthen the workforce through financial support. Additionally, HHS Secretary Kennedy announced the Caregiver Artificial Intelligence Prize Competition and called upon innovators to develop AI caregiver tools that support family members, friends, and the direct-care workforce in providing safe, person-centered care at home, as well as AI caregiver workforce tools that help employers improve efficiency, scheduling, and training. The Administration for Community Living (ACL) will award innovators who can harness the power of AI to reduce the administrative burden on caregivers. The ACL will provide up to $2 million in prizes to 10 awardees over a three-year period to help scale the initiative.
DHS releases proposed rule on public-charge determinations. The proposed rule would change how immigration officers determine whether noncitizens are likely to become dependent on government assistance. Under federal immigration law, noncitizens applying for a visa, admission to the United States, or an adjustment of status to lawful permanent resident can be denied if they are deemed likely to become reliant on the government, known as being a “public charge.” The statute states that immigration officers, at a minimum, must consider an individual’s “age; health; family status; assets, resources, and financial status; and education and skills” when making a public-charge determination.
The proposed rule would rescind the 2022 final rule and give officers greater discretion to consider all statutory and case-specific factors when determining inadmissibility under the public charge standard. DHS also plans to develop new policy and interpretive tools to guide these determinations and is seeking public input on their design. DHS now estimates that the proposed rule could reduce federal and state spending on public programs by at least $8.97 billion annually, due to an expected disenrollment or forgone enrollment of about 950,000 individuals from programs such as Medicaid, the Children’s Health Insurance Program (CHIP), SNAP, Temporary Assistance for Needy Families, and Supplemental Security Income.
CMS updates Medicare claims processing guidance. CMS released updated Medicare claims processing guidance to reflect the end of the shutdown and the restoration of certain payment waivers and flexibilities, including Medicare telehealth flexibilities and the Acute Hospital Care at Home (AHCAH) waiver. In this guidance, CMS clarified that all telehealth claims are now payable if they meet applicable requirements and directed clinicians to resubmit returned or held claims. Similarly, hospitals participating in the AHCAH program may now resubmit claims for services on or after October 1, 2025. CMS also instructed the Medicare Administrative Contractors (MACs) to make adjustments to claims affected by the recent congressional action to retroactively restore lapsed programs, including low-volume hospital adjustment and the Medicare-dependent hospital program. CMS expects normal processing operations to resume shortly and advised providers to contact their MACs only if discrepancies arise.
Separately, CMS posted revised frequently asked questions (FAQs) on Medicare telehealth services. The FAQs state that the Medicare telehealth waivers and flexibilities now expire on January 30, 2026. Providers can submit Medicare telehealth claims for dates of service on or after October 1, 2025. CMS states in the FAQs that it will continue to pay telehealth claims in the “same way they had been paid before October 1, 2025. Telehealth flexibilities will apply retroactively as if there hadn’t been a temporary lapse in the application of the telehealth flexibilities through January 30, 2026.” CMS also discussed the issue of using a provider’s home address when the clinician provides telehealth services from their home, stating that “practitioners can provide telehealth services from their home and in many cases do not need to report their home address.”
CMS releases final CY 2026 ESRD rule. The rule finalizes the following:
The final CY 2026 ESRD PPS base rate is set at $281.71, an increase from the CY 2025 ESRD PPS base rate of $273.82. The final amount reflects the application of the wage index budget neutrality adjustment factor, the budget neutrality factor for the final non-contiguous areas payment adjustment (NAPA) (0.99860), and a final ESRD Bundled market basket update of 2.1%
CMS modifies the timeframe for Transitional Drug Add-on Payment Adjustment (TDAPA) eligibility to provide that a new renal dialysis drug or biological product must have been approved by the Food and Drug Administration within the past three years at the time of submission of the TDAPA application. This revised eligibility timeframe will apply for all new drugs and biological products for which a TDAPA application is submitted on or after January 1, 2028.
CMS will terminate the End-Stage Renal Disease Treatment Choices Model, ending December 31, 2025.
A fact sheet from CMS can be found here.
QUICK HITS
Republican House committee leaders release letter on Organ Procurement and Transplantation Network. Energy and Commerce Committee Chair Guthrie (R-KY) and Energy and Commerce Oversight and Investigations Subcommittee Chair Joyce (R-PA) sent a letter to CMS Administrator Oz requesting a briefing by December 1, 2025, to better understand HHS’ recent actions and ongoing work to enhance safety within the Organ Procurement and Transplantation Network.
House and Senate release 2026 legislative calendars. The House 2026 legislative calendar and the Senate 2026 legislative calendar show the days each chamber plans to be in session in the new year. While the calendars are generally similar, there are weeks in which one chamber will be in session while the other will be in recess. Additionally, both chambers will be out of session for most of October 2026, due to the approaching midterm elections.
HHS releases updated report on pediatric gender-affirming care. The previously published report is critical of pediatric gender-affirming care, focusing on the potential risks and long-term health impacts associated with treatments such as puberty blockers, hormones, and surgeries. This update shows that the report was peer-reviewed.
GAO releases report on Medicaid enrollment across state lines. The GAO found that the federal government and six states overpaid MCOs in fiscal year (FY) 2023 and recommends CMS implement controls to prevent duplicate Social Security numbers on marketplace policies receiving APTC benefits and require marketplaces and Medicaid/CHIP agencies to submit enrollment data for frequent interstate matching and resolve discrepancies to verify eligibility or terminate coverage.
NEXT WEEK’S DIAGNOSIS
Congress will be in recess next week for the Thanksgiving holiday. Lawmakers are set to return the week of December 1, 2025, at which time we expect the Senate’s plans to become clearer on timing for an APTC vote, along with potential progress on the next package of the nine remaining FY 2026 appropriations bills, which must be addressed prior to the new January 30, 2026, funding deadline.
CMS Finalizes Mandatory Ambulatory Specialty Model for Cardiology and Low-Back Pain
The Centers for Medicare & Medicaid Services (“CMS”) recently finalized a rule establishing the new Ambulatory Specialty Model (“ASM”)— a mandatory value-based payment model that could apply to nearly one-quarter of all physicians in select specialties starting January 1, 2027. The ASM applies to physicians providing services to address two high-expenditure chronic conditions among Medicare patients: heart failure (cardiology) and low-back pain (pain management, interventional pain, neurosurgery, orthopedic surgery, and physical medicine and rehabilitation). Participation will be mandatory for eligible clinicians practicing in geographic areas selected by CMS that will likely encompass approximately one-quarter of U.S. Core-Based Statistical Areas (“CBSAs”) or metropolitan divisions nationwide. Published in connection with the Calendar Year (“CY”) 2026 Medicare Physician Fee Schedule (“PFS”), this alternative payment model represents a significant step in CMS’s transition toward specialty-specific accountability for cost, quality, and care coordination in ambulatory care. The model has significant implications for specialty practices, particularly those participating in or aspiring to join Accountable Care Organizations (“ACOs”). Additionally, the ASM will leverage components of the existing Merit-based Incentive Payment System (“MIPS”)/Medicare Value Pathways (“MVPs”) frameworks. For clinicians subject to MIPS/MVP, this model introduces a revised approach to performance scoring under a familiar framework.
ASM in Brief
Beginning January 1, 2027, participating specialists will be evaluated based on their performance in four domains or “performance categories” based on the MIPS scoring framework—Quality, Cost, Improvement Activities, and Interoperability—and scored relative to peers within their geographic region. The ASM involves two-sided risk, meaning that clinicians may receive positive, neutral, or negative payment adjustments to future Medicare Part B claims depending on their composite score based on the performance categories. Unlike MIPS, however, the ASM will require clinicians to report on measures and activities clinically relevant to their specialty type and chronic condition of focus (heart failure or low-back pain). Additionally, under the MIPS framework, CMS assesses a clinician’s performance against an entire pool of all MIPS participating clinicians, regardless of specialty type or service provided. However, the ASM modifies this approach, assessing individual clinical performance scores against only clinicians treating the same chronic condition.
The ASM will be tested over five performance years, from January 1, 2027, through December 31, 2033, with performance measured during those years and corresponding payment adjustments applied to Medicare Part B claims on a two-year lag (i.e., performance in CY 2027 will affect payment rates in CY 2029). In the first payment adjustment year (2029), adjustments will range from approximately –9 percent to +9 percent, with larger potential adjustments in subsequent years. To ensure that the ASM results in savings, ASM will retain a percentage of the payments rather than distributing all funds as payment adjustments to the clinicians.
To participate in the model, clinicians must have historically treated at least 20 applicable episodes per year. CMS will also identify participants based on historical claims data, publishing final participant lists and selected geographies in 2026.
Performance Categories
The four performance categories for the ASM are the same performance categories required for clinicians participating in MIPS, except that the ASM will measure quality and cost at the individual clinician level (except for small practices), while continuing to measure practice transformation and EHR interoperability at the group level:
Quality: The quality measurement strategy for the ASM focuses on three domains related to utilization– (1) excess utilization, (2) evidence-based care and outcomes, and (3) patient-reported outcomes and experience. The specific measures are intended to elevate the patient’s voice and be clinically relevant for each specialty type for each of the two conditions (hearth failure and low-back pain).[1] Any addition or removal of a quality measure for an ASM cohort would be prospective only and will occur through notice and comment rulemaking.[2]
Cost: CMS will assess efficiency and cost-effectiveness of care by leveraging existing MIPS episode-based cost measures (“EBCMs”). For the ASM heart failure participant cohort, CMS will use the heart failure EBCM to assess a specialist’s cost ASM performance category score. Similarly, CMS will use the low-back pain EBCM to determine an ASM low-back pain to calculate the ASM performance category score.[3]
Improvement Activities: CMS will evaluate clinical care coordination and patient engagement by whether a clinician (1) is connecting to primary care and ensuring completion of health-related social needs screening, and (2) establishing communication and collaboration expectations with primary care through Collaborative Care Agreements.[4]
Interoperability: To measure specialist performance in the interoperability performance category, CMS will review use of certified electronic health record technology (“CEHRT”), which also align with MIPS requirements. ASM participants must provide CMS evidence of their use of CEHRT by providing their EHR’s CMS identification ID from CMS’s Certified Health IT Product List.
Insights
The ASM aims to drive participating specialists to transition from a volume-based to a value-based care model by emphasizing early intervention, evidence-based treatment, and strong collaboration with primary care clinicians and ACOs.
Clinicians will need to redesign workflows around longitudinal patient management, adopt tools for capturing functional outcomes, and ensure accurate documentation of conditions, interventions, and coordination efforts. Given the model’s two-sided risk, practices should consider modeling potential financial exposure and planning accordingly. The shift also presents opportunities for those who proactively embrace data-driven management and conservative, outcomes-oriented care. Because each individual clinician’s performance will be assessed relative to regional peers, understanding cost drivers and practice variation will be essential to success.
The ASM’s introduction also intersects with other value-based frameworks, most notably ACOs and the MIPS and its evolving MVPs. For specialists affiliated with ACOs, the ASM adds a layer of accountability that may overlap with total cost of care benchmarks. Coordination will be critical to align incentives and avoid attribution conflicts. We also note that not only will ASM participation be assessed yearly, but MIPS-eligible clinicians that participate in the ASM will be exempt from MIPS reporting requirements for the performance years they are also included in ASM. Clinicians participating in MIPS or MVP reporting will need to harmonize measure selection and reporting strategies, as ASM domains closely mirror MIPS categories but operate under distinct benchmarks.
Beyond the ASM, the final rule includes separate conversion factors for Qualifying APM Participants (QPs) and non-QPs, efficiency adjustments for technology adoption, and site-neutral payment and telehealth expansion policies. These updates reinforce CMS’s goal of linking reimbursement to care outcomes rather than service volume. Further technical guidance, including episode definitions and risk adjustment details, is expected in 2026.
Healthcare organizations and specialty practices should consider preparing for ASM participation immediately. Practices may assess eligibility, conduct readiness evaluations, and review CEHRT capabilities. Specialty clinicians already participating in ACOs or MIPS would benefit from mapping existing quality measures to ASM domains to avoid duplication. Financial modeling is essential to anticipate exposure under two-sided risk, while governance structures should incorporate compliance oversight and value-based strategy alignment.
Key Client Takeaways for Consideration
Assess eligibility – Confirm whether your practice meets the 20-episode threshold and monitor CMS’s participant list.
Readiness planning – Conduct operational gap analyses focusing on data, CEHRT, care coordination, and outcome measurement.
Align value-based strategies – Coordinate ASM implementation with ACO participation and existing value-based contracts to ensure alignment with required performance categories under the ASM.
Harmonize reporting frameworks – Identify overlaps between ASM and MIPS/MVP reporting to streamline compliance, which may require clinicians to modify measures they report to conform to required ASM performance standards.
Model financial exposure – Project the impact of the ±9% adjustment range in early years to inform investment decisions.
Governance and compliance oversight – Update governance charters to oversee ASM participation and clinician engagement.
Conclusion
The ASM underscores CMS’s intent to expand value-based accountability into specialty care. By prioritizing care coordination, interoperability, and outcomes measurement, CMS aims to reduce costs and improve care quality for high-spend conditions such as heart failure and low-back pain. Practices should evaluate their readiness from a data, workflow, risk management, and strategic alignment perspective. Specialists who proactively prepare will be best positioned to mitigate downside risk and achieve performance-based gains.
FOOTNOTES
[1] 42 CFR §§ 512.725(b) and (c).
[2] 42 CFR §§ 512.725(d).
[3] 42 CFR §§ 512.730.
[4] 42 CFR § 512.735(c).
Listen to this article
Joel Dankwa contributed to this article
Update on Processing of Telehealth Claims Impacted During the Government Shutdown
The recent government shutdown caused multiple Medicare statutory payment provisions to lapse on October 1, 2025, due to the absence of Congressional action. With the passage of the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (Pub. L. 119-37), (discussed here), Congress has retroactively restored many of these provisions. The looming question at the time of the passage was whether there would be retroactive payments.
On November 21, 2025, Centers for Medicare and Medicaid Services (CMS) issued a Special Edition to clarify retroactive processing of claims.
Telehealth and Acute Hospital Care at Home Claims
On November 6, 2025, CMS instructed Medicare Administrative Contractors (MACs) to return certain telehealth claims submitted on or before November 10, 2025, that were previously non-payable after the lapse of statutory provisions. These claims are now payable if they meet all Medicare requirements.
Practitioners should resubmit returned claims and any held telehealth claims. Refund any beneficiary payments for services now retroactively covered. The prior instructions to append the “GY “modifier are rescinded.
Similarly, beginning November 10, 2025, MACs returned claims for the Acute Hospital Care at Home initiative for dates of service on or after October 1, 2025. Hospitals may resubmit these claims.
Next Steps for ProvidersFacilities, practitioners, and suppliers should expect a return to normal processing operations soon.
A Doorbuster Deal for Policyholders: NC Business Court Finds Policyholder-Friendly State Law Applies to COVID-19 Coverage Dispute
The North Carolina business court recently handed a win to policyholders in a COVID-19 business interruption lawsuit arising from the pandemic-related closure of Tanger outlet centers across the country. Tanger Props. Ltd. P’ship v. ACE Am. Ins. Co., 2025 NCBC 66 (Oct. 27, 2025). Tanger’s insurers moved to dismiss the lawsuit on the basis that the insurance policies are governed by Georgia law, not North Carolina law, where the Supreme Court has held that all-risk policies must cover loss resulting from COVID-19 interruptions. Unpersuaded by the insurers, the court denied the motion finding that Tanger established a sufficiently close connection to North Carolina law.
Background
Tanger Outlets owns and operate thirty-nine outlet centers throughout twenty states and is headquartered in North Carolina. Tanger obtained coverage for its operations under all-risk policies, which insured against “all risks of direct physical loss of or damage to property described” in the policies and resulting business interruption loss.
Following the COVID-19 outbreak, governmental entities in the various states in which Tanger operates outlets issued orders restricting business activities. As a result, Tanger took action, including physically modifying its properties, temporarily shutting down locations and suspending business activities. Tanger provided notice of this loss to its insurers in April 2020. Its insurers denied coverage contending that Tanger did not sustain any direct physical loss of or damage to the property.
The North State Deli Decision
In late 2024, the Supreme Court of North Carolina issued an opinion in N. State Deli, LLC v. Cincinnati Insurance Co., in which it held that an all-risk insurance policy with no virus exclusion provided coverage for virus-related shutdowns due to government orders.
Following the decision, Tanger filed the coverage action against its insurers challenging their coverage denial. Tanger also sent a renewed demand letter to its insurers requesting reconsideration in light of the North State decision.
Thereafter, the insurers moved to dismiss Tanger’s claims.
The Motions to Dismiss
The Breach of Contract Claim
The insurers’ motion to dismiss focused on whether North Carolina law applied to the interpretation of the policies. The court explained that North Carolina courts consistently apply the principle of lex loci contractus in addressing conflict of law issues. The principle mandates the application of the substantive law of the state where the last act to make a binding contract occurred. The insurers argued that this act occurred in Georgia when Tanger’s broker received the policies and accordingly, mandated the application of Georgia law.
Tanger disagreed, arguing that N.C.G.S. § 58-3-1 mandated that the insurance contracting occurred in North Carolina and, thus, North Carolina law must apply to the dispute. The statute provides in pertinent part:
All contracts of insurance on property, lives, or interest in this State shall be deemed to be made therein, and all contracts of insurance the applications for which are taken within the State shall be deemed to have been made within this State and are subject to the laws thereof.
The court noted that application of N.C.G.S. § 58-3-1 requires a close connection between North Carolina and the interest insured. The insurers argued that because only two of the thirty-nine outlets owned by Tanger are in North Carolina, there was not a close connection.
The court articulated and then analyzed the factors essential to determining whether the requisite close connection exists. These factors include:
the extent of the insured’s operations/contacts in North Carolina;
whether the policy is a commercial policy;
the insurer’s awareness that it is insuring a North Carolina company;
whether the insurance policy contains a choice of law provision; and
whether the insurer is registered to do business in North Carolina.
The court explained that the greatest weight is placed on the first factor. Thus. the fact that Tanger’s headquarters is located in Greensboro, North Carolina weighed heavily in favor of finding close contacts. Additionally, Tanger is organized under the laws of North Carolina, operated two outlets in the state, and served over 1,300,000 customers in North Carolina during the policy period. As a result, the court found that Tanger indeed had a close connection to the state.
The court also found that the remaining factors to weigh in favor of Tanger. The policies were commercial policies, the insurers were aware that Tanger’s headquarters is located in North Carolina, there was no choice of law provision in the policies, and ACE and Liberty Mutual are licensed to do business in North Carolina.
Accordingly, with all of the factors weighing in favor of Tanger, the court denied the insurers’ motions to dismiss the claims for breach of contract and declaratory judgment.
The UDTPA Claim
The court also separately considered whether Tanger’s claims for violations of North Carolina’s Unfair and Deceptive Trade Practices act based on the insurers’ alleged violation of North Carolina’s Unfair Claims Settlement Act could continue. Tanger alleged that the insurers violated seven subparts of N.C.G.S. § 58-63-15(11), which stemmed from the insurers’ refusal to reconsider their initial denial after the North State Deli decision was issued.
The court found that the claim could proceed because the insurers failed to show that case law clearly established that North Carolina did not permit a UDTPA claim under the circumstances. The court also pointed to two North Carolina federal courts that denied Rule 12 motions in cases alleging a breach of N.C.G.S. § 58-63-15(11) where the plaintiff alleged the insurer failed to revise its earlier position based on new information. Thus, the UPTPA claim could also proceed.
Takeaways
While the decision is not surprising in light of North State Deli, the decision underscores the significant role that choice of law has in an insurance coverage dispute. It is essential, therefore, that policyholders evaluate their claim under all potentially applicable states’ laws to aid in setting the most advantageous strategy should it become necessary to fight for coverage.