The Centers for Medicare & Medicaid Services (CMS) released new guidance related to Medicaid State Directed Payments (SDPs).
SDPs are a mechanism for states to direct Medicaid managed care plan expenditures in connection with implementing delivery systems and provider payment initiatives. Section 71116 of Public Law 119-21 directs CMS to reduce payment limits for SDPs covering inpatient and outpatient hospital services, nursing facility services, and certain practitioner services at academic medical centers, and it permits a temporary grandfathering period for certain SDPs.
The letter discusses the grandfathering provisions, including those involving rural hospitals. This new letter rescinds and replaces the September 9, 2025 guidance, and CMS notes that this guidance is preliminary. Final policies will be established through future notice and comment rulemaking.