Accountability Guidance

Guidance on Annual Upper Payment Limit Demonstration

On March 18, 2013, CMS issued a State Medicaid Director’s Letter (SMDL #13-003) describing the mutual federal and state obligations and accountability on the part of the state and federal governments for the integrity of the Medicaid program. Among the obligations include ongoing consistency with the applicable federal upper payment limit (UPL) requirements described in regulation for certain services. The regulations implement, in part, section 1902(a)(30)(A) of the Social Security Act which requires that Medicaid rates are consistent with efficiency, economy and quality of care.    

Starting in 2013, states are required to submit UPL demonstrations on an annual basis. Previously this information was collected or updated only when a state was proposing an amendment to a reimbursement methodology in its Medicaid state plan. Beginning in 2013, states must submit UPL demonstrations for inpatient hospital services, outpatient hospital services, and nursing facilities. In 2014 and annually thereafter, states will be required to submit annual UPL demonstrations for the services listed above and clinics, physician services (for states that reimburse targeted physician supplemental payments), intermediate care facilities for the developmentally disabled (ICF/DD), private residential treatment facilities and institutes for mental disease (IMDs).   

As discussed in the SMDL, the guidance documents below intend to provide states with assistance in developing upper payment limit demonstrations that are consistent with the regulations and federal policies. In addition to a narrative description of a state’s UPL demonstration methodology, states must submit supporting data by provider that demonstrated compliance with the applicable regulations.

Guidance Materials for UPL Submissions

Beginning in 2013, and annually thereafter, UPL demonstrations must be submitted by the state prior to the start of the state fiscal year for the services below:  

• Inpatient Hospital Services UPL Guidance
• Inpatient Hospital Services UPL Instructions
• Outpatient Hospital Services UPL Guidance
• Outpatient Hospital Services UPL Instructions
• Nursing Facility Services UPL Guidance
• Nursing Facility Services UPL Instructions

Beginning in 2014, and annually thereafter, UPL demonstration must be submitted by the state prior to the start of the state fiscal year for the services below:

• Clinic Services UPL Guidance A
• Clinic Services UPL Guidance B
• Clinic Services UPL Instructions
• Intermediate Care Facility for Individuals with Intellectual Disabilities UPL Guidance
• Intermediate Care Facility for Individuals with Intellectual Disabilities UPL Instructions
• Other Inpatient and Outpatient Facility UPL Guidance
• Other Inpatient and Outpatient Facility UPL Instructions
• Qualified Practitioner Services Average Commercial Rate Guidance
• Qualified Practitioner Services Average Commercial Rate Instructions

States are also asked as part of the submissions to identify the source of non-federal funding for the service payments described in the UPL demonstrations. States are asked to respond to the following questions to describe the source of the non-federal share for payments made under each service category:  

• Non-federal Funding Questions

For inquiries related to the guidance material provided above, please direct them to the CMS resource mailbox at:  CMCSPPACAquestions@cms.hhs.gov