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4
Medicare payment policy changes for 2027: Key signals from Kennedy hearings
Amid ample rancor, some of the rhetoric during congressional appearances Thursday by HHS Secretary Robert F. Kennedy Jr. had substantive implications for healthcare industry stakeholders. During two House hearings to discuss his department’s proposed FY27 budget, Kennedy and members of the Ways and Means Committee and a subpanel of the Appropriations Committee touched on a few key policy points. Payment models Kennedy was asked about converting his Make America Healthy Again principles of preventive care to payment models through the Center for Medicare & Medicaid Innovation. For example, a bundled payment could promote prescriptions for healthy food, medically tailored meals, nutrition counseling and remote patient monitoring. Rep. Lloyd Smucker (R-Pa.) said he is set to release legislation that would codify some of those approaches. “There’s growing evidence that they can really improve outcomes for patients with chronic disease,” Smucker said. Consideration should be given to expanding Medicare coverage of medical nutrition therapy, said Rep. Carol Miller (R-W.Va.). Such reimbursement could be geared toward hospitals and federally qualified health centers that integrate dietitians and nutrition programs in care models. Miller expressed concern with the prospective payment system for end-stage renal disease. She said the model, which amounts to a bundled payment, may discourage the development and adoption of new therapies, and touted legislation that would strive to better balance innovation and cost control. Rural healthcare Some discussion centered on the five-year, $50 billion Rural Health Transformation Program, which made its initial $10 billion allocation to the 50 states going into 2026. Proponents said the funding can stabilize rural hospitals while also supporting telehealth, AI and workforce retention. Rural communities stand to be especially affected by consolidation in healthcare, said Rep. Jason Smith (R-Mo.), chair of the Ways and Means Committee. He said the committee “is focused on addressing consolidation and vertical integration in the healthcare industry to expand access and lower cost,” promising to conduct an upcoming hearing with health system executives (which perhaps would echo the one held recently by a House subcommittee). Kennedy said expanded site-neutral payment policies can help “end the disparity between what’s paid to rural providers and what’s paid to urban providers, and hopefully dampen the appetite for consolidations that are destroying rural economies and rural healthcare.” Kennedy also said he would try to accelerate the approval process for hospitals seeking to convert to rural emergency hospitals. A recently introduced bipartisan bill would codify an adjustment to the Medicare area wage index in an effort to stabilize reimbursement for rural and low-wage hospitals. “Only Congress can fix [the issue],” Kennedy said, because of statutory budget-neutrality requirements for the wage index. Smith touted the need for HHS and Congress to collaborate on changes to geographic reclassification policy under the wage index, saying excessive numbers of hospitals are reclassifying to higher-wage areas in search of a higher reimbursement rate. Medicare Advantage Payments to Medicare Advantage (MA) are 114% higher than those for the same services in traditional Medicare, according to statistics compiled by the Medicare Payment Advisory Commission and cited during the Ways and Means hearing. Rep. David Schweikert (R-Ariz.) said the gap equates to $1.75 trillion over 10 years and criticized health plan upcoding and corresponding risk-score inflation, with recently issued regulations purporting to partially address that issue going into 2027. “How do we use Medicare Advantage, a managed care model, to have your vision of: They make a profit because [they] helped people be healthier? It may require a multiple-year enrollment so there’s a payoff for the investment,” Schweikert said to Kennedy. CMS should do away with the MA risk adjustment model and the program’s Star Ratings, “and then design a system where, as [they] help the enrollee get healthier, they benefit,” he added. Kennedy said MA is a positive force in the healthcare system, on balance, and the administration is taking steps to stanch upcoding. Healthcare coverage Regarding coverage rollbacks, Kennedy said there are no looming cuts to Medicaid because the One Big Beautiful Bill Act (OBBBA) slows spending growth in future years rather than decreasing spending. He said the pending cutbacks largely are about removing ineligible enrollees. “Obviously, there’s tremendous waste in Medicaid,” Kennedy said. Democrats said the impacts on constituents, such as the risk of coverage loss and increased financial strain, should not be downplayed. “That mans fewer doctor visits, delayed care and more people showing up in already overcrowded emergency rooms,” said Rep. Mike Thompson (D-Calif.). Rep. Max Miller (R-Ohio) noted he was one of 17 Republicans to vote to extend the Affordable Care Act (ACA) enhanced subsidies. A three-year extension passed the House but was not taken up by a divided Senate, allowing the higher subsidies to expire in 2026. “I just want to go back home and be able to look at my constituents and just say, ‘This is what we’re doing. Here’s the plan,’” Miller said. In response, Kennedy touted President Donald Trump’s healthcare plan to improve individual choice and competition through health savings accounts and an expansion of direct primary care, in tandem with catastrophic-coverage plans. “We have to figure out a way, a plan, and actually incentivize good [health] behavior rather than bad behavior,” Kennedy said. Prior authorization The costs and benefits of a new layer of prior authorization in traditional Medicare came up during questioning about the first-year Wasteful and Inappropriate Service Reduction (WISeR) Model. The six-state pilot model implements AI-driven prior authorization for 17 services. “President Trump said multiple times on the campaign trail that he would not cut Medicare, but this program does exactly that,” said Rep. Suzan DelBene (D-Wash.), whose state is in WISeR. DelBene said the model thwarted one of her constituents from receiving a needed injection for a herniated disc. “I think that’s a terrible outcome,” Kennedy replied. “It’s one that was not intended by the system. Obviously, the problem is there’s tremendous waste.” He said that over a five-year period, annual Medicare reimbursement for skin substitutes increased from roughly $250 million to a range in the billions “because there was no prior authorization in the Medicare program.” Adverse patient outcomes are happening “all because of a model put in place for no reason and doing exactly what you said shouldn’t happen, which is pitting patients and their doctors against massive companies,” DelBene said. No Surprises Act Smith pressed Kennedy to expedite publication of a final rule on the No Surprises Act’s independent dispute resolution (IDR) process. His hope is that the rule will ensure IDR more closely hews to the legislative language of the NSA, specifically in the criteria for determining arbitration outcomes when providers and insurers cannot agree on an out-of-network payment for applicable services. In the minds of critics, including some legislators on both sides of the aisle, regulations dating back to the Biden administration overly emphasize the qualifying payment amount (QPA), i.e., the median inpatient rate for a given service in a particular market. Although updated data shows providers already win most IDR cases, legislators say the NSA is meant to promote a system in which market-based negotiation determines fair value for out-of-network services, rather than a system that revolves around the QPA and IDR. If provider payments are undermined because of what’s perceived to be a skewed approach, the further result could be provider exits from networks or markets. Said Smith, “Will you commit to me now to finalize this rule as it was written by Congress, as a top priority for your department?” “We’re working as fast as we can to finalize that rule now,” Kennedy said. The post Medicare payment policy changes for 2027: Key signals from Kennedy hearings appeared first on HFMA.

Medicare payment policy changes for 2027: Key signals from Kennedy hearings
Amid ample rancor, some of the rhetoric during congressional appearances Thursday by HHS Secretary Robert F. Kennedy Jr. had substantive implications for healthcare industry stakeholders. During two House hearings to discuss his department’s proposed FY27 budget, Kennedy and members of the Ways and Means Committee and a subpanel of the Appropriations Committee touched on a few key policy points. Payment models Kennedy was asked about converting his Make America Healthy Again principles of preventive care to payment models through the Center for Medicare & Medicaid Innovation. For example, a bundled payment could promote prescriptions for healthy food, medically tailored meals, nutrition counseling and remote patient monitoring. Rep. Lloyd Smucker (R-Pa.) said he is set to release legislation that would codify some of those approaches. “There’s growing evidence that they can really improve outcomes for patients with chronic disease,” Smucker said. Consideration should be given to expanding Medicare coverage of medical nutrition therapy, said Rep. Carol Miller (R-W.Va.). Such reimbursement could be geared toward hospitals and federally qualified health centers that integrate dietitians and nutrition programs in care models. Miller expressed concern with the prospective payment system for end-stage renal disease. She said the model, which amounts to a bundled payment, may discourage the development and adoption of new therapies, and touted legislation that would strive to better balance innovation and cost control. Rural healthcare Some discussion centered on the five-year, $50 billion Rural Health Transformation Program, which made its initial $10 billion allocation to the 50 states going into 2026. Proponents said the funding can stabilize rural hospitals while also supporting telehealth, AI and workforce retention. Rural communities stand to be especially affected by consolidation in healthcare, said Rep. Jason Smith (R-Mo.), chair of the Ways and Means Committee. He said the committee “is focused on addressing consolidation and vertical integration in the healthcare industry to expand access and lower cost,” promising to conduct an upcoming hearing with health system executives (which perhaps would echo the one held recently by a House subcommittee). Kennedy said expanded site-neutral payment policies can help “end the disparity between what’s paid to rural providers and what’s paid to urban providers, and hopefully dampen the appetite for consolidations that are destroying rural economies and rural healthcare.” Kennedy also said he would try to accelerate the approval process for hospitals seeking to convert to rural emergency hospitals. A recently introduced bipartisan bill would codify an adjustment to the Medicare area wage index in an effort to stabilize reimbursement for rural and low-wage hospitals. “Only Congress can fix [the issue],” Kennedy said, because of statutory budget-neutrality requirements for the wage index. Smith touted the need for HHS and Congress to collaborate on changes to geographic reclassification policy under the wage index, saying excessive numbers of hospitals are reclassifying to higher-wage areas in search of a higher reimbursement rate. Medicare Advantage Payments to Medicare Advantage (MA) are 114% higher than those for the same services in traditional Medicare, according to statistics compiled by the Medicare Payment Advisory Commission and cited during the Ways and Means hearing. Rep. David Schweikert (R-Ariz.) said the gap equates to $1.75 trillion over 10 years and criticized health plan upcoding and corresponding risk-score inflation, with recently issued regulations purporting to partially address that issue going into 2027. “How do we use Medicare Advantage, a managed care model, to have your vision of: They make a profit because [they] helped people be healthier? It may require a multiple-year enrollment so there’s a payoff for the investment,” Schweikert said to Kennedy. CMS should do away with the MA risk adjustment model and the program’s Star Ratings, “and then design a system where, as [they] help the enrollee get healthier, they benefit,” he added. Kennedy said MA is a positive force in the healthcare system, on balance, and the administration is taking steps to stanch upcoding. Healthcare coverage Regarding coverage rollbacks, Kennedy said there are no looming cuts to Medicaid because the One Big Beautiful Bill Act (OBBBA) slows spending growth in future years rather than decreasing spending. He said the pending cutbacks largely are about removing ineligible enrollees. “Obviously, there’s tremendous waste in Medicaid,” Kennedy said. Democrats said the impacts on constituents, such as the risk of coverage loss and increased financial strain, should not be downplayed. “That mans fewer doctor visits, delayed care and more people showing up in already overcrowded emergency rooms,” said Rep. Mike Thompson (D-Calif.). Rep. Max Miller (R-Ohio) noted he was one of 17 Republicans to vote to extend the Affordable Care Act (ACA) enhanced subsidies. A three-year extension passed the House but was not taken up by a divided Senate, allowing the higher subsidies to expire in 2026. “I just want to go back home and be able to look at my constituents and just say, ‘This is what we’re doing. Here’s the plan,’” Miller said. In response, Kennedy touted President Donald Trump’s healthcare plan to improve individual choice and competition through health savings accounts and an expansion of direct primary care, in tandem with catastrophic-coverage plans. “We have to figure out a way, a plan, and actually incentivize good [health] behavior rather than bad behavior,” Kennedy said. Prior authorization The costs and benefits of a new layer of prior authorization in traditional Medicare came up during questioning about the first-year Wasteful and Inappropriate Service Reduction (WISeR) Model. The six-state pilot model implements AI-driven prior authorization for 17 services. “President Trump said multiple times on the campaign trail that he would not cut Medicare, but this program does exactly that,” said Rep. Suzan DelBene (D-Wash.), whose state is in WISeR. DelBene said the model thwarted one of her constituents from receiving a needed injection for a herniated disc. “I think that’s a terrible outcome,” Kennedy replied. “It’s one that was not intended by the system. Obviously, the problem is there’s tremendous waste.” He said that over a five-year period, annual Medicare reimbursement for skin substitutes increased from roughly $250 million to a range in the billions “because there was no prior authorization in the Medicare program.” Adverse patient outcomes are happening “all because of a model put in place for no reason and doing exactly what you said shouldn’t happen, which is pitting patients and their doctors against massive companies,” DelBene said. No Surprises Act Smith pressed Kennedy to expedite publication of a final rule on the No Surprises Act’s independent dispute resolution (IDR) process. His hope is that the rule will ensure IDR more closely hews to the legislative language of the NSA, specifically in the criteria for determining arbitration outcomes when providers and insurers cannot agree on an out-of-network payment for applicable services. In the minds of critics, including some legislators on both sides of the aisle, regulations dating back to the Biden administration overly emphasize the qualifying payment amount (QPA), i.e., the median inpatient rate for a given service in a particular market. Although updated data shows providers already win most IDR cases, legislators say the NSA is meant to promote a system in which market-based negotiation determines fair value for out-of-network services, rather than a system that revolves around the QPA and IDR. If provider payments are undermined because of what’s perceived to be a skewed approach, the further result could be provider exits from networks or markets. Said Smith, “Will you commit to me now to finalize this rule as it was written by Congress, as a top priority for your department?” “We’re working as fast as we can to finalize that rule now,” Kennedy said. The post Medicare payment policy changes for 2027: Key signals from Kennedy hearings appeared first on HFMA.
Federal scrutiny of contracting continues
A new Federal Trade Commission (FTC) task force will include healthcare contracting among its priorities, according to attorneys. The FTC Healthcare Task Force was announced in March to coordinate existing healthcare enforcement and advocacy efforts across the agency. “Consolidation and anticompetitive conduct have distorted the economic landscape in many healthcare markets,” Andrew Ferguson, chairman of the FTC, wrote in an authorizing memo. “The results are disturbing: higher prices, decreased quality, less access and transparency and stifled innovation.” The task force aims to coordinate and ease information‑sharing across the FTC’s bureaus and related offices but likely will have a modest impact on providers, according to a Hall Render analysis. “The task force may facilitate closer coordination between merger review and nonmerger enforcement efforts, including scrutiny of related conduct such as contracting practices, data use or marketing claims,” stated the analysis. Contracting also was identified in a McGuireWoods analysis as one of the areas likely to draw the new task force’s attention. The announcement memo’s spotlighting of recent merger challenges and references to “distorted” healthcare markets “reinforces that consolidation will remain a core concern,” stated an analysis by Troutman Pepper Locke. “Transactions involving hospitals, physician groups, payers, pharmacy benefit managers (PBMs), device manufacturers, and other healthcare players — especially those affecting innovation or vulnerable patient populations — are likely to receive sustained scrutiny,” stated the analysis. Contracting focus The new task force comes as the U.S. Department of Justice (DOJ) brought litigation against two health systems for anticompetitive behavior in contracting. Among the contracting approaches DOJ targeted in its lawsuits are requirements for insurers to include the health system in all their health plans, including in favored benefit tiers. The DOJ states that such approaches constrain the ability of insurers to guide members toward cost-effective providers, including lower-cost sites of service, through products and approaches such as narrow networks, tiered-network plans, centers of excellence and site-of-service steering. In both cases, the DOJ sought bans on anti-steering and anti-tiering clauses as negotiated by the two health systems. A November 2018 settlement was cited as “the leading case against anti-steering and anti-tiering clauses in healthcare contracts,” according to a 2020 legal analysis. The new lawsuits differ from many prior hospital antitrust cases in that they apply to contracting practices specifically rather than focusing on a health system’s market share more broadly. Historic role Previously, the FTC has taken few actions to oversee nonmerger anticompetitive practices among not-for-profit health care providers, such as any use of contract clauses deemed anticompetitive, according to a KFF analysis. That lack of action likely reflects legal limits that exclude not-for-profit entities from FTC’s authority to challenge and regulate nonmerger anticompetitive practices, according to the analysis. However, it did note FTC actions in some nonmerger instances, such as cases alleging price fixing among separate physician groups. The new FTC task force aims to expand participation to other government entities, including the DOJ, which does enforce nonmerger anticompetitive practices, according to its launch memo. “Increased interagency coordination with HHS and DOJ also suggests the commission may have more resources at its disposal, including greater access to data, which may increase the likelihood of parallel inquiries,” stated the McGuireWoods analysis. Legislative push The focus on hospital and health system contracting also was echoed in recently introduced legislation. In March, Sen. Jon Husted (R-Ohio) introduced the Healthy Competition for Better Care Act, which aims to ban anticompetitive clauses in healthcare contracting between payers and healthcare providers and hospitals. Specifically banned contracting provisions were: All-or-nothing clauses, which require payers to include all providers and hospitals in an organization’s network Anti-steering and anti-tiering clauses, which can eliminate low-cost providers Most-favored-nation clauses, which require that certain insurers get the best price Gag clauses, which bar providers from sharing cost information for comparison shopping Identical legislation was introduced in the House with bipartisan support by Rep. Jodey Arrington (R-Texas), chairman of the powerful Budget Committee. Arrington currently is crafting the instructions for a new reconciliation bill. The reconciliation law enacted last year, the One Big Beautiful Bill Act, included extensive healthcare provisions. “The Healthy Competition for Better Care Act proposes comprehensive reforms to improve our flawed system by increasing transparency, fostering greater competition, expanding access to quality care and lowering skyrocketing healthcare costs,” Arrington said in a press release. The legislation would have the Treasury Department lead its enforcement. The post Federal scrutiny of contracting continues appeared first on HFMA.
Federal scrutiny of contracting continues
A new Federal Trade Commission (FTC) task force will include healthcare contracting among its priorities, according to attorneys. The FTC Healthcare Task Force was announced in March to coordinate existing healthcare enforcement and advocacy efforts across the agency. “Consolidation and anticompetitive conduct have distorted the economic landscape in many healthcare markets,” Andrew Ferguson, chairman of the FTC, wrote in an authorizing memo. “The results are disturbing: higher prices, decreased quality, less access and transparency and stifled innovation.” The task force aims to coordinate and ease information‑sharing across the FTC’s bureaus and related offices but likely will have a modest impact on providers, according to a Hall Render analysis. “The task force may facilitate closer coordination between merger review and nonmerger enforcement efforts, including scrutiny of related conduct such as contracting practices, data use or marketing claims,” stated the analysis. Contracting also was identified in a McGuireWoods analysis as one of the areas likely to draw the new task force’s attention. The announcement memo’s spotlighting of recent merger challenges and references to “distorted” healthcare markets “reinforces that consolidation will remain a core concern,” stated an analysis by Troutman Pepper Locke. “Transactions involving hospitals, physician groups, payers, pharmacy benefit managers (PBMs), device manufacturers, and other healthcare players — especially those affecting innovation or vulnerable patient populations — are likely to receive sustained scrutiny,” stated the analysis. Contracting focus The new task force comes as the U.S. Department of Justice (DOJ) brought litigation against two health systems for anticompetitive behavior in contracting. Among the contracting approaches DOJ targeted in its lawsuits are requirements for insurers to include the health system in all their health plans, including in favored benefit tiers. The DOJ states that such approaches constrain the ability of insurers to guide members toward cost-effective providers, including lower-cost sites of service, through products and approaches such as narrow networks, tiered-network plans, centers of excellence and site-of-service steering. In both cases, the DOJ sought bans on anti-steering and anti-tiering clauses as negotiated by the two health systems. A November 2018 settlement was cited as “the leading case against anti-steering and anti-tiering clauses in healthcare contracts,” according to a 2020 legal analysis. The new lawsuits differ from many prior hospital antitrust cases in that they apply to contracting practices specifically rather than focusing on a health system’s market share more broadly. Historic role Previously, the FTC has taken few actions to oversee nonmerger anticompetitive practices among not-for-profit health care providers, such as any use of contract clauses deemed anticompetitive, according to a KFF analysis. That lack of action likely reflects legal limits that exclude not-for-profit entities from FTC’s authority to challenge and regulate nonmerger anticompetitive practices, according to the analysis. However, it did note FTC actions in some nonmerger instances, such as cases alleging price fixing among separate physician groups. The new FTC task force aims to expand participation to other government entities, including the DOJ, which does enforce nonmerger anticompetitive practices, according to its launch memo. “Increased interagency coordination with HHS and DOJ also suggests the commission may have more resources at its disposal, including greater access to data, which may increase the likelihood of parallel inquiries,” stated the McGuireWoods analysis. Legislative push The focus on hospital and health system contracting also was echoed in recently introduced legislation. In March, Sen. Jon Husted (R-Ohio) introduced the Healthy Competition for Better Care Act, which aims to ban anticompetitive clauses in healthcare contracting between payers and healthcare providers and hospitals. Specifically banned contracting provisions were: All-or-nothing clauses, which require payers to include all providers and hospitals in an organization’s network Anti-steering and anti-tiering clauses, which can eliminate low-cost providers Most-favored-nation clauses, which require that certain insurers get the best price Gag clauses, which bar providers from sharing cost information for comparison shopping Identical legislation was introduced in the House with bipartisan support by Rep. Jodey Arrington (R-Texas), chairman of the powerful Budget Committee. Arrington currently is crafting the instructions for a new reconciliation bill. The reconciliation law enacted last year, the One Big Beautiful Bill Act, included extensive healthcare provisions. “The Healthy Competition for Better Care Act proposes comprehensive reforms to improve our flawed system by increasing transparency, fostering greater competition, expanding access to quality care and lowering skyrocketing healthcare costs,” Arrington said in a press release. The legislation would have the Treasury Department lead its enforcement. The post Federal scrutiny of contracting continues appeared first on HFMA.