On December 29, 2022, President Biden signed the Consolidated Appropriations Act, 2023 (the “Act”). The Act provides for nearly $1.7 trillion in funding across a range of domestic initiatives, including certain appropriations to healthcare and related programs. In addition to funding, the Act modifies certain telehealth provisions, expands and extends components of the Medicare and Medicaid programs, and supports initiatives within the behavioral health and substance use treatment spaces. The high level summary below of some of the Act’s more notable components that are significant in the healthcare arena is not meant to be an exhaustive list of all health policy changes or provisions included in the Act.
In 2020, specific restrictions on Medicare coverage and reimbursement for telehealth services were waived for the duration of the COVID-19 Public Health Emergency (“PHE”) in the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 and the Coronavirus Aid, Relief, and Economic Security Act. The Act extends certain flexibilities for Medicare coverage and payment for telehealth services through December 31, 2024. By extending these flexibilities, the Act takes steps to ensure continuity of care for Medicare beneficiaries, provides regulators with additional time to determine which flexibilities will be made permanent, and also allows providers to adapt to a changing regulatory landscape. The Act, however, does not extend the waiver of the Ryan Haight Act’s requirement for an in-person exam for the prescription of controlled substances.
Definition of “Originating Site”
The Act extends the definition of “originating site” to mean any site in the United States, including the home of an individual, until December 31, 2024. An “originating site” is the location at which the telehealth eligible individual is located at the time the service is furnished via a telecommunications system.
Definition of “Practitioner”
The Act extends the definition of “practitioner” to also include a qualified occupational therapist, qualified physical therapist, a qualified speech-language pathologist, and a qualified audiologist until December 31, 2024. Prior to the PHE, a “practitioner” only included a physician assistant, nurse practitioner, clinical nurse specialist, certified registered nurse anesthetist, certified nurse-midwife, clinical social worker, clinical psychologist, and registered dietitian or nutrition professional.
RHC and FQHC Telehealth Services
The Act extends the authorization for Rural Health Clinics (“RHCs”) and Federally Qualified Health Centers (“FQHCs”) to provide and reimburse for telehealth services until December 31, 2024.
In-Person Visit Requirement for Telehealth Mental Health Services
The Act delays the reimbursement requirement for physicians and practitioners to conduct in-person exams within six months before an initial telehealth service for purposes of diagnosis, evaluation, or treatment of a mental health disorder until January 1, 2025, or the first day after the end of the PHE, whichever date occurs later.
In the event the PHE ends before December 31, 2024, the Act provides that telehealth services furnished using audio-only telecommunications technology will continue to be covered and reimbursable from the end of the PHE until December 31, 2024.
Recertification of Eligibility for Hospice Care
The Act extends the permissible use of telehealth for conducting face-to-face encounters prior to recertification of eligibility for hospice care until December 31, 2024.
HDHP/HSA Safe Harbor for Telehealth Services
For plan years beginning between December 31, 2022 and January 1, 2025, the Act extends the ability of health savings account-qualifying high-deductible health plans to cover telehealth services on a pre-deductible basis.
Medicare Extension & Adjustments
Extension of Key Programs
The Act extends funding for many current Medicare programs, a move which is likely motivated in part by the ongoing COVID-19 PHE. In addition, the Act establishes a new section of the Social Security Act to extend Acute Hospital Care At Home waivers and flexibilities, and appropriates $5 million for the Secretary of the Department of Health and Human Services (“HHS”) to publish a report on the Acute Hospital Care At Home Initiative by 2024. In addition, medical devices impacted by COVID-19 whose pass-through status would have expired at the end of 2022 will receive a one-year extension of status. 
Extension of Increased Inpatient Hospital Payment Adjustment for Certain Low-Volume Hospitals
Low-volume hospitals receive percentage-based payments for discharges occurring during each fiscal year in addition to discharge payments given to hospitals in general. Previously, “low-volume hospitals” were defined as hospitals that fall within a maximum number of discharges per fiscal year and are located 15 road miles from another hospital, ending on December 23, 2022. The Act alters this definition to extend the additional payments to hospitals that meet the distance requirement and have fewer than 3,800 discharges during each fiscal year through 2024, and to hospitals with fewer than 800 discharges during the fiscal year 2025.
Extension of Add-on Payments for Ambulance Services
The Act provides for a percentage increase in the base rate fee schedule for ground ambulance services furnished for which the transportation originates in a qualified rural area (as determined by the population density each year). Rural providers of ambulance services in these areas are entitled to the increased payments for services furnished before January 1, 2023. The Act extends these payments for an additional two years – for services provided before January 1, 2025.
Extension of Other Payments Specific to Rural Areas
Under the Medicare-Dependent Hospital Program, discharge payments to Medicare-dependent small rural hospitals were set to end on December 22, 2022. The Act extends these payments through October 1, 2024. The Act also provides for a 1% increase in payments for home health services furnished in a rural area for visits through 2023.
The 2023 Medicare Physician Fee Schedule final rule provides for an approximately 4.5% reduction of the Medicare conversion factor. The Act partially alleviates this cut in physician reimbursement and provides for a 2.5% increase in the Medicare conversion factor for CY 2023 and a 1.25% increase for CY 2024 for physician services. The Act also waives the 4% reduction in Medicare reimbursement under the Statutory Pay-As-You Go Act of 2010 sequester in 2023 and 2024.
Incentive Payments for Participation in Eligible Alternative Payment Models
To incentivize physicians to participate in Alternative Payment Models (“APMs”), eligible clinicians who are deemed Qualifying APM Participants may receive an incentive payment of up to 5% of the estimated aggregate payment amounts for Medicare Part B covered professional services furnished in the preceding year. The Act extends this 5% incentive through 2025.
Other Updates to Coverage and Payment Structures
Due to the COVID-19 pandemic, authorized prescription oral antiviral drugs will be covered as a Part D drug through the end of 2024. Beginning in 2024, in-home intravenous immune globulin (“IVIG”) services and certain lymphedema compression treatments will receive coverage.
The Act details changes to the payment structures for several programs. For instance, Medicaid will pay for non-opioid pain relief treatments separately from and in addition to a payment for a covered outpatient department service provided in 2025 through 2028. In addition, the Act modifies the methods for calculating the separate payments for disposable negative pressure wound therapy devices for each of the next three years. The Act amends the timeline of payment rates for durable medical equipment in certain geographic areas, and pushes back the timeline to phase-in reductions to Medicare clinical laboratory test payments by one year. Finally, the Act also implements a provision intended to increase transparency for home health payments by requiring the Secretary to (1) post certain electronic data on the CMS website that compares results before and after the Patient Driven Groupings Model, and (2) use an appropriate forum to gather feedback from stakeholders related to payment rate development.
The Act implements a number of budget offsets under the Medicare program. For example, the Act extends the current adjustment to the calculation of the hospice cap amount under Medicare through 2032, rather than 2031. Similarly, the Act reduces the Medicare Improvement Fund by over $7 billion.
Medicaid & CHIP Adjustments
Medicaid Improvement Fund
The Act provides $7 billion in additional funding for the Medicaid Improvement Fund, which is intended to be used by CMS to improve management of the Medicaid program.
Transitioning from FMAP Increase Requirements
The Act provides State Medicaid programs with financial support to transition from the temporary enhanced funding and continuous coverage requirements originally implemented in the Families First Coronavirus Response Act in 2020. Of particular interest, the Act modifies the Federal Medical Assistance Percentages (the “FMAPs”), which are used to determine the amount of federal funds to be paid as a match to State-specific expenditures for certain social programs, such as Medicaid and the Children’s Health Insurance Program (“CHIP”). Specifically, the Act provides for a “phase down” of the FMAPs from a standard 6.2% as follows:
- 5% for April 1, 2023 through June 30, 2023
- 2.5% from July 1, 2023 to September 30, 2023
- 1.5% October 1, 2023 through December 31, 2023.
The Act also imposes certain public reporting requirements for all States to address activities related to eligibility re-determinations, beneficiary renewals, coverage terminations, and certain other items. States that do not comply with these reporting obligations may be subject to penalties, including reduction of the State’s FMAP, corrective action plans, and civil monetary penalties.
Continuous Eligibility for Children Under Medicaid and CHIP
The Act requires that States provide continued eligibility for benefits to qualifying children under both the Medicaid and CHIP programs. Specifically, under the Medicaid program, States must provide benefits to an eligible individual under the age of 19 until the earlier of:
- the end of the 12 month period beginning on the date eligibility was determined;
- the time the individual turns 19 years of age; or
- the date the individual is no longer a resident of the respective State.
Under the CHIP program, eligible children must receive one year of continuous benefits eligibility, subject to being transferred to the Medicaid program.
The Act requires managed care organizations, prepaid inpatient health plans, prepaid ambulatory health plans, and certain primary case management entities to implement accurate, updated, and searchable provider directories by July 1, 2025. Among other items, the directory must identify the provider’s name, specialty, address, telephone number, and cultural or linguistic capabilities. Such directories are intended to allow patients to readily identify and contact providers.
Continuum of Crisis Response
The Act requires that HHS publish guidance for Medicaid and CHIP to assist States in developing and implementing effective continuum of crisis response services. In particular, the guidance must address use and implementation of “crises call centers” with emergency hotlines, mobile crisis teams, as well as crisis response services delivered in a variety of settings, and follow-on mental health and substance use disorder-related services. The Act proceeds to outline a number of other components to be addressed in the guidance, such as suicide risk assessments and screenings, meeting the needs of differing patient populations, including minorities, use of telehealth services, among numerous other items.
Apart from the required guidance, HHS is tasked with establishing a technical assistance center which should assist States under the Medicaid and CHIP programs to design and implement a continuum of crisis response services for their respective populations. HHS also must develop a compendium of best practices, which are to be made available to States.
At its core, the Act takes steps to promote access to mental health and substance use disorder services in a crisis setting, and appropriates $8 million to facilitate those goals.
Services for Eligible Juveniles in Public Institutions
The Act requires that States offer certain services for juvenile children incarcerated in public institutions. Specifically, the Act requires that State child health plans implement plans that provide for services such as screenings, diagnostic services, referrals, and case management for eligible low-income children who are within 30 days of release from a public institution following adjudication.
In addition, the Act obligates States to take specific steps to determine eligibility and coverage. Specifically, the Act requires that State Medicaid and CHIP programs implement a plan to conduct eligibility determinations for juveniles scheduled to be released from a public institution and to restore coverage based on the determination. if appropriate. Further, the Act prohibits States from terminating the eligibility for child health assistance under a State child health plan for targeted low-income children due to the fact that the child is an inmate of a public institution, provided that the State may suspend coverage during the child’s time as an inmate. In addition, the Act allows States to provide Medicaid and CHIP coverage as well as to receive federal matching funds for juvenile youth while incarcerated in public institutions.
Medicaid permits the coverage of services furnished by a religious nonmedical health care institution if an individual makes an effective election to receive those benefits, but an election will be deemed revoked if the individual receives nonexcepted medical treatment. The Act adds the COVID-19 vaccine to the definition of excepted medical treatment to clarify that an individual will not be deemed to have revoked their religious benefits election by receiving a COVID-19 vaccine.
Key Funding of Related Healthcare Programs
The Act provides funding to a number of ancillary programs that are worthy of note, including:
- The Pediatric Quality Measures Program
- The Outreach and Enrollment Program
- Child Enrollment Contingency Fund
- The Maternal, Infant, and Early Childhood Home Visiting Program
- The Temporary Assistance for Needy Families Program
- The Child and Family Services Programs
- The World Trade Center Health Program.
Behavioral Health & Substance Use Treatment
The Act implemented a host of provisions to address behavioral health and substance use treatment, including reforms aimed at the mental health of beneficiaries and providers. Below, are high level summaries of some of the most significant provisions.
The Act provides substantial funding to facilitate behavioral health services. For example, the Act reauthorizes a block grant for community mental health services while also authorizing a new grant for Peer-Supported Mental Services. Both programs are intended to facilitate crisis care, coordination across providers, and increased availability of support. In addition, the Act provides additional funding to Opioid Overdose Reversal Medication Access and Education Grant Programs and other recovery-oriented and opioid treatment programs. Independent of those programs, the Act supports a number of other programs with similar initiatives.
Supporting Offices and Committees (Medicaid)
The Act requires that the Secretary of HHS establish a number of supporting offices and committees intended to address components of the behavioral health spectrum. For example, the Secretary must establish a Behavioral Health Crisis Coordinating Office within the Substance Abuse and Mental Health Services Administration. The Office is intended to coordinate behavioral health crises care across HHS and its supporting platforms to better consolidate efforts and outcomes. Similarly, the Act requires that the Secretary also establish an Interdepartmental Serious Mental Illness Coordinating Committee, which is charged with preparing a report addressing, among other items, advances in serious mental illnesses research related to the prevention and diagnosis of such illnesses. In addition, the Committee is tasked with conducting an evaluation of federal programs related to serious mental illnesses and their corresponding impact. The Act also addresses a number of other committees and programs that are intended to support mental health-related initiatives and treatment, including by way of example, a Mental Health Crisis Response Partnership Pilot Program, an Assertive Community Treatment Grant Program, programs to provide education and training on eating disorders, and studies on the costs of serious mental illnesses.
Crisis Response Continuum of Care (Medicaid)
The Act requires that HHS publish guidance on the best practices for a crisis response continuum of care related to mental health and substance use disorders, which is intended for use by healthcare providers, crisis services administrators, and related providers, among others. The Act specifies that the guide should cover a host of issues, such as identification of resources for referrals, protocols for transfer and receipt of individuals within the continuum, qualifications for crisis services, collaborative meetings, and service level capacities. Separately, the Act requires that HHS develop a plan and compile certain data to support certain suicide prevention hotlines, technical assistance, and related local suicide prevention efforts.
Programs Supporting Maternal Mental Health (Medicaid)
The Act implements a number of provisions intended to address maternal mental health as a systemic issue. Specifically, the Act requires that the Secretary of HHS establish a task force to develop recommendations to better coordinate and refine federal activities targeting maternal mental health conditions. The Act outlines the purposes of the task force, meetings, and reports on findings. In addition, the Secretary must maintain a national maternal mental health hotline to provide, among other items, emotional support, intervention, and related information. The hotline is intended to serve as a touchpoint for resources as to both mental health and substance use disorders for pregnant and postpartum women. The Act also supports a number of programs specific to the maternal healthcare space, such as the Into the Light for Material Mental Health and Substance Use Disorders Act program.
New Coverage and Funding (Medicare)
The Act initiated several reforms in favor of the mental health of beneficiaries and providers in the Medicare space. Specifically, Medicare Part B added coverage for marriage and family therapist services, mental health counselor services, and intensive outpatient services. For 2026, the total number of residency positions available in psychiatry and psychiatry subspecialties increased to 200, with each hospital limited to 10 additional residents. Beginning in 2024, the payments for psychotherapy for crisis services in an applicable service site (as defined) increase, budget neutrality will be waived for that year, and the Secretary of HHS must convene stakeholders to discuss Medicare policies regarding services for a beneficiary experiencing a mental or behavioral health crisis.
Data Collection and Reporting (Medicare)
This year, the Secretary of HHS must collect data needed to revise payments for psychiatric hospitals and units, which will also be responsible for submitting additional patient assessment data in 2028. The Secretary must also educate physicians and other appropriate practitioners regarding behavioral health integration services and opioid use disorder treatment programs, and report certain data related to both types of services.
Anti-Kickback Act Updates (Medicare)
A new exception to the prohibition on physician referrals permits an entity to offer a physician with whom the entity has a financial relationship a program for the improvement or maintenance of mental or behavioral health if the program meets certain requirements. Within one year, the HHS Office of Inspector General must conduct a review to determine whether to implement a safe harbor to the Anti-Kickback Act for evidence-based contingency management incentives.
The Act will undoubtedly usher in tremendous changes within the healthcare space. Our team will continue to monitor implementation of the Act and will provide updates to keep you apprised of the latest developments. If you have any questions about these laws or their impact on you or your business, please contact a member of the Sheppard Mullin Healthcare Team.
 H.R. 2617 § 4113(a)(2).
 42 U.S.C. § 1395m(m)(4)(C).
 42 U.S.C. 1395m(m)(4)(E).
 H.R. 2617 § 4113(c).
 H.R. 2617 § 4113(d)(1).
 H.R. 2617 § 4113(e).
 H.R. 2617 § 4113(f).
 H.R. 2617 § 4140.
 H.R. 2617 § 4141.
 42 U.S.C. 1395ww(d)(12)(A).
 42 U.S.C. 1395ww(d)(12)(C).
 H.R. 2617 § 4101.
 42 U.S.C. 1395m(l)(12)(A).
 42 U.S.C. 1395m(l)(12)(A).
 H.R. 2617 § 4103.
 H.R. 2617 § 4102.
 H.R. 2617 § 4137.
 H.R. 2617 § 4112.
 H.R. 2617 § 4163.
 42 U.S.C. 1395l(z).
 H.R. 4111(a).
 H.R. 2617 § 4131.
 H.R. 2617 § 4133-34.
 H.R. 2617 § 4135.
 H.R. 2617 § 4136.
 H.R. 2617 § 4139.
 H.R. 2617 § 4114.
 H.R. 2617 § 4142.
 H.R. 2617 § 4162.
 H.R. 2617 § 4161 (Amending 42 U.S.C. § 1395iii(b)(1)) by replacing $7,278,000,000 with $180,000,000).
 H.R. 2617 § 5141.
 H.R. 2617 § 5131.
 H.R. 2617 § 5131.
 H.R. 2617 § 5132(tt)(1).
 H.R. 2617 § 5132(tt)(2).
 H.R. 2617 § 5112(a).
 H.R. 2617 § 5112(b).
 H.R. 2617 § 5123(a)(2)(E)(i).
 H.R. 2617 § 5123(a)(2)(E)(i).
 H.R. 2617 § 5124(a).
 H.R. 2617 § 5124(b)(1).
 H.R. 2617 § 5124(b)(2).
 H.R. 2617 § 5121(d)(2).
 H.R. 2617 § 5121(d)(1).
 . H.R. 2617 § 5121(d)(1)).
 H.R. 2617 § 5122(a)(1).
 42 U.S.C. 1395i–5.
 H.R. 2617 § 4138.
 H.R. 2617 § 5111.
 H.R. 2617 § 5111.
 H.R. 2617 § 5111.
 H.R. 2617 § 6101.
 H.R. 2617 § 6102.
 H.R. 2617 § 6103.
 H.R. 2617 § 7701, et seq.
 H.R. 2617 § 1141.
 H.R. 2617 § 1151.
 H.R. 2617 §§ 1220-1273.
 H.R. 2617 § 1101.
 H.R. 2617 § 1101.
 H.R. 2617 § 1121.
 H.R. 2617 § 1121.
 H.R. 2617 § 1122.
 H.R. 2617 § 1123.
 H.R. 2617 § 1131.
 H.R. 2617 § 1124.
 H.R. 2617 § 1101(a).
 H.R. 2617 § 1101(b).
 H.R. 2617 § 1113.
 H.R. 2617 § 1113.
 H.R. 2617 § 1112.
 H.R. 2617 § 1112.
 H.R. 2617 § 1111, et seq.
 H.R. 2617 § 4121.
 H.R. 2617 § 4124.
 H.R. 2617 § 4122.
 H.R. 2617 § 4123.
 H.R. 2617 § 4125.
 H.R. 2617 § 4128-29.
 H.R. 2617 § 4126.
 H.R. 2617 § 4127.