More Potential Budget Obstacles for Private Safety-Net Hospitals

Part two of the Trump administration’s proposed FY 2020 budget brought more potential bad news for private safety-net hospitals.

 

Last week’s “lean budget” released by the White House included a number of challenges for private safety-net hospitals and this week’s release, intended to fill in some of the blanks that last week’s document left, brought more of the same.

Proposed Medicare challenges include:

  • a call for establishing a new process for calculating Medicare disproportionate share (Medicare DSH) uncompensated care payments
  • slashing Medicare bad debt reimbursement from 65 percent to 25 percent
  • continued movement toward site-neutral payments for outpatient services provided at hospital outpatient facilities

Newly proposed Medicaid challenges include:

  • extending Medicaid disproportionate share (Medicaid DSH) cuts beyond the currently planned six years
  • redesigning the formula for allocating Medicaid DSH funds to the states
  • authorizing states to verify beneficiaries’ Medicaid eligibility more than once a year
  • permitting states to apply means tests to Medicaid eligibility

The latest FY 2020 budget proposal also calls for:

  • consolidating Medicare, Medicaid, and children’s hospital medical education payments into single new capped medical education grant program
  • reduced 340B prescription drug discount program payments for some hospitals
  • reducing the grace period for payment of premiums for health insurance purchased on an insurance exchange
  • income-based increases in premiums for low-cost insurance purchased on those exchanges

All of these changes, if implemented, would pose problems for NASH members and most private safety-net hospitals.

Learn more from this week’s White House budget document.

MedPAC Offers Recommendations on FY 2020 Rates, More

Last week the Medicare Payment Advisory Commission released its annual report to Congress.  Included in this report are MedPAC’s Medicare rate recommendations for the coming year.  They are:

  • hospital inpatient rates – a two percent increase
  • hospital outpatient rates – a two percent increase
  • physician and other health professional services rates – no update
  • skilled nursing facilities – no 2020 increase
  • home health agencies – a five percent rate reduction
  • inpatient rehabilitation facilities – a five percent rate reduction
  • long-term-care hospital services – a two percent increase
  • hospice services – a two percent rate reduction

MedPAC also recommended that the Centers for Medicare & Medicaid Services replace its current array of hospital quality programs with a new, streamlined “hospital value incentive program,” or HVIP, that would replace the Hospital Inpatient Quality Program, the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition Reduction Program, and the Hospital Value-Based Purchasing Program.

MedPAC’s recommendations are binding on neither the administration nor Congress but its views are highly respected and often find their way into new laws, new policies, and new programs.

Learn more about MedPAC’s annual recommendations to Congress in the full MedPAC report or the MedPAC fact sheet that accompanies the recommendations’ release.

Trump Budget Brings Bad News for Private Safety-Net Hospitals

The FY 2020 federal budget proposed by the Trump administration this week would bring pain for private safety-net hospitals if adopted.

Highlights of the proposed spending plan include:

  • More than $135 billion in cuts in Medicare uncompensated care payments (Medicare DSH) and Medicare bad debt reimbursement over the next 10 years.
  • Continued extension of Medicare site-neutral payment outpatient policies.
  • $48 billion in cuts in graduate medical education spending over the next 10 years.
  • $26 billion in new Medicaid disproportionate share (Medicaid DSH) cuts.
  • Repeal of the Affordable Care Act’s Medicaid expansion and all funding to pay for that expansion.
  • Support for legislation to introduce Medicaid block grants and limits on spending per recipient.
  • New restrictions on the 340B program.

Responsibility for adopting a budget rests with Congress, not the president, and this proposed budget is considered unlikely to gain much support in Congress.

As appropriate, NASH will engage in advocacy in support of the needs of the nation’s private safety-net hospitals.

Learn more about the administration’s proposed budget from numerous media reports or by going directly to the source:  fact sheets the White House has prepared offering budget highlights and the budget document itself.

 

Stark Changes Coming to Facilitate Value Care?

At a Washington, D.C. conference, Centers for Medicare & Medicaid Services Administrator Seema Verma announced that changes coming in Stark law requirements will enable Medicare to make better use of value-based purchasing in its reimbursement system.

In addition to addressing cybersecurity and electronic health record system issues, changes in the anti-self-referral law will seek to facilitate better coordination of care for Medicare patients.  Verma explained the underlying rationale for the anticipated changes, noting that

…in a system where we’re transitioning and trying to pay for value, where the provider is ideally taking on some risk for outcomes and cost overruns, we don’t have nearly as much of a need to interfere with who’s getting paid for what service.

Learn more from the Fierce Healthcare article “Verma promises hospital industry ‘significant’ Stark Law changes later this year.”

800 Hospitals Face Medicare Penalties

800 hospitals will see their Medicare payments reduced one percent this year because they are among the 25 percent of hospitals in the U.S. with the highest rate of hospital-acquired conditions.

Among the 800 hospitals are 110 that are being penalized for the fifth year in a row.

Medicare’s hospital-acquired condition reduction program tracks a variety of medical problems, including infections, blood clots, sepsis, hip fractures, bedsores, and others.  Every year, the 25 percent of eligible providers – the program excludes significant numbers of hospitals – are penalized even if their performance for hospital-acquired conditions is superior to the previous year.

Critics of the program say it creates unachievable goals and  penalizes hospitals that are doing an excellent job of reducing hospital-acquired conditions and that there is virtually no statistical difference in performance between some hospitals that are and some hospitals that are not penalized.  Program proponents maintain that all hospitals can and should do an even better job than they already are of reducing their patients’ hospital-acquired conditions.

NASH has long been concerned about the degree to which private safety-net hospitals are at a disadvantage in such programs because of the disproportionately large numbers of low-income patients they serve who pose special health and socio-economic challenges when hospitalized.

Learn more about Medicare’s hospital-acquired conditions reduction program, the penalties some hospitals face in the coming year, and the arguments for and against the program in the Kaiser Health News article “Medicare Trims Payments To 800 Hospitals, Citing Patient Safety Incidents.”

Safety-Net Hospitals Struggle in Medicare Joint Replacement Model

Non-safety-net hospitals are outperforming safety-net hospitals in the Comprehensive Care for Joint Replacement model introduced in 2016.

According to a new study published in Health Affairs,

…in comparison to non-safety-net hospitals, 42 percent fewer safety-net hospitals qualified for rewards based on their quality and spending performance (33 percent of safety-net hospitals qualified, compared to 57 percent of non-safety-net hospitals), and safety-net hospitals’ rewards per episode were 39 percent smaller ($456 compared to $743). Continuation of this performance trend could place safety-net hospitals at increased risk of penalties in future years.

What might be done to address this disparity?  The study suggests that

Medicare and hospital strategies such as those that reward high-quality care for vulnerable patients could enable safety-net hospitals to compete effectively in CJR.

Learn more in the Health Affairs article Performance of Safety-Net Hospitals in Year 1 of the Comprehensive Care for Joint Replacement Model.

 

Government More Effective Than Private Sector at Controlling Health Care Costs

For the past dozen years, Medicare and Medicaid have done a better job of controlling rising health care costs than private insurers.

Since 2016, according to a new report from the Urban Institute, private insurers’ costs per enrolled member have risen an average of 4.4 percent a year.  By contrast, Medicare costs have risen an average of 2.4 percent per enrollee and Medicaid costs have risen just 1.6 percent per enrollee.

The primary driver of Medicare cost increases has been prescription drug spending.  For Medicaid the primary driver has been physician services and administrative costs.  For private insurers, the main reason for increasing costs has been spending for hospital care.

Learn more about the differences in cost containment in these different sectors and the implications of those differences in the Urban Institute report “Slow Growth in Medicare and Medicaid Spending Per Enrollee Has Implications for Policy Debates.”

MedPAC: Overhaul Medicare Quality Programs

Medicare would implement major changes in its hospital quality programs under a proposal approved by the Medicare Payment Advisory Commission.

Fierce Healthcare reports that the proposal adopted by MedPAC for recommendation to Congress and the Centers for Medicare & Medicaid Services

…would essentially lump together several existing programs that measure quality—the Hospital Readmissions Reduction Program, the Hospital Value-Based Purchasing Program and the Hospital-Acquired Condition Reduction Program—into the Hospital Value Incentive Program (HVIP). 

It would also eliminate the existing Inpatient Quality Reporting Program.

Under the MedPAC proposal,

Performance across five domains—readmissions, mortality, spending, patient experience and hospital-acquired conditions—would be converted to HVIP “points.” Those points would be used to distribute the pool of funds instead of penalizing hospitals as the current system does. 

MedPAC estimates that hospitals might experience a 3.3 percent net increase in Medicare payments under its proposal; the current, multi-program approach would yield as much as a 2.8 percent increase.

MedPAC will encourage Congress and CMS to act quickly and implement its proposal in 2020.

Private safety-net hospitals have not always felt fairly treated by some of these quality programs, maintaining that their patients face socio-economic obstacles that make them more challenging to serve than the patients most community hospitals serve and that comparisons with most community hospitals – often the basis for quality ratings and either financial penalties or rewards – are inappropriate.

MedPAC is an independent congressional agency that advises Congress on issues involving the Medicare program.  While its recommendations are not binding on either Congress or the administration, MedPAC is highly influential in governing circles and its recommendations often find their way into legislation, regulations, and new public policy.

Learn more about the MedPAC hospital quality proposal and other recent MedPAC proposals in the Fierce Healthcare article “MedPAC recommends overhaul to Medicare’s hospital quality programs.”

Feds Urge States to Do More for Dually Eligible

In a formal guidance letter to state Medicaid directors, the Centers for Medicare & Medicaid Services has outlined ten ways that states can better serve individuals who are enrolled in both Medicare and Medicaid.

Noting that such dually eligible individuals represent 20 percent of Medicare enrollees but 34 percent of Medicare spending while also constituting 15 percent of Medicaid beneficiaries but 33 percent of Medicaid spending, the letter from CMS administrator Seema Verma to state Medicaid directors explains that

This letter describes ten opportunities – none of which require complex demonstrations or Medicare waivers – to better serve individuals dually eligible for Medicare and Medicaid, including through new developments in managed care, using Medicare data to inform care coordination and program integrity initiatives, and reducing administrative burden for dually  eligible individuals and the providers who serve them. A number of these opportunities are newly available to states through Medicare rulemaking or other CMS burden reduction efforts. We are happy to engage with you and your staff on one, many, or all of the items described in this letter. The CMS Medicare-Medicaid Coordination Office (MMCO) works across CMS and with states to better serve dually eligible individuals, including through efforts to better align the Medicare and Medicaid programs and demonstrations to test new approaches to integrated service delivery and financing.

Those ten ways are:

  • state contracting with dual eligible special needs plans (D-SNPs)
  • default enrollment into a D-SNP
  • passive enrollment to preserve continuity of integrated care
  • integrating care through the Program of All-inclusive Care (PACE)
  • reducing the administrative burden in accessing Medicare data for use in care coordination
  • program integrity opportunities
  • Medicare Modernization Act of 2003 file timing
  • state buy-in file data exchange
  • improving Medicare Part A buy-in
  • opportunities to simplify eligible and enrollment

Private safety-net hospitals serve especially large numbers of dually eligible, Medicare-Medicaid patients and will be interested to see whether CMS’s recommendations translate into action at the state level.

To see the entire letter, including additional information about these ten opportunities, go here.

CBO Targets Health Care in Options for Reducing Deficit

Every year the Congressional Budget Office publishes a menu of options for reducing federal spending and the federal budget deficit.  As in the past, this year’s compendium includes a number of options to reduce federal health care spending and raises federal revenue through health care initiatives.

The cost-cutting options include:

  • establish caps on federal spending for Medicaid
  • limit states’ taxes on health care providers
  • reduce federal Medicaid matching rates
  • change the cost-sharing rules for Medicare and restrict Medigap insurance
  • raise the age of eligibility for Medicare to 67
  • reduce Medicare’s coverage of bad debt
  • consolidate and reduce federal payments for graduate medical education at teaching hospitals
  • use an alternative measure of inflation to index social security and other mandatory programs

Options to raise additional revenue include:

  • increase premiums for Parts B and D of Medicare
  • reduce tax subsidies for employment-based health insurance
  • increase the payroll tax rate for Medicare hospital insurance

Many of these proposals, if implemented, would be damaging for private safety-net hospitals.

Learn more about the CBO’s recommendations, how they might be implemented, and their potential implications in the CBO report Options for Reducing the Deficit: 2019 to 2028.