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Good News and Bad for Hospitals on Outpatient Payments

A federal court has provided relief to hospitals that saw reduced Medicare payments for some outpatient services in 2019.

But that relief is only partial.

In response to a suit filed by several hospital groups, a federal court ruled that the Centers for Medicare & Medicaid services had illegally reduced Medicare payments for services provided in some hospital off-campus outpatient departments beginning on January 1, 2019 and ordered the federal government to repay the hospitals for the Medicare revenue they lost.  The reduced payments were part of a new Medicare site-neutral payment policy for outpatient services, and CMS has announced a plan for reimbursing affected hospitals for their losses.

At the same time, however, CMS announced that despite the court’s ruling, it will implement the same policy of reduced payments for outpatient care provided in some hospitals’ off-campus outpatient departments in 2020, and an effort by hospitals to persuade the court to ban this payment reduction was rejected by the same court that ruled against CMS on the 2019 payments.

Learn more about the ruling that CMS must reimburse  hospitals for lost payments in the Healthcare Dive article “Hospital group cheers CMS move to pay back outpatient payment cuts.”  Learn about the court decision not to impose the same decision on 2020 payments in the Fierce Healthcare article “Judge strikes down AHA’s bid to halt CMS’ site-neutral payment cuts for 2020.”

Hospital Groups Critical of CMS 340B Proposal

The federal government should not survey providers to determine their costs for drugs covered by the section 340B prescription drug discount program, hospitals and hospital groups have told the Centers for Medicare & Medicaid Services.

Their comments came in response to a regulation CMS proposed in September that would require hospitals to report their acquisition costs for 340B-covered drugs.  CMS proposed such data collection after federal courts ruled against its attempt to reduce 340B reimbursement to hospitals that participate in the program.  Among the court’s objections were CMS’s lack of data about those drug acquisition costs.

Among the reasons hospitals conveyed in expressing their opposition were the cost of reporting the data in question; the design of the survey; the flawed premise underlying the survey; and the proposed rule’s requirement that all hospitals complete the survey and not just those that participate in the 340B program.

Among the groups criticizing the proposed regulation were the Association of American Medical Colleges, which wrote in its comment letter that

Congress did not design the 340B program to pay hospitals at acquisition costs…Congress designed the program so that eligible hospitals could purchase covered drugs at a discounted rate below the Medicare reimbursement rate and use the difference to reach more eligible patients and provide more comprehensive services.

The National Alliance of Safety-Net Hospitals was among the groups commenting on the proposed regulation.  Writing on behalf of private safety-net hospitals, NASH observed in its November 27, 2019 formal comment letter that

The 340B program was created by Congress to enable hospitals (and other providers) that serve low-income communities to maximize their resources when working to serve those communities.  The program helps improve access to high-cost prescription drugs for low-income patients and helps put additional resources into the hands of qualified providers so those providers can do more for their low-income patients:  provide more care that their patients might otherwise not be able to afford, offer more services that might otherwise be unavailable to such patients, and do more outreach into communities consisting primarily of low-income residents.  This was the purpose of the 340B program when Congress created it in 1992 and Congress has done nothing to modify that purpose since that time:  it has not directed that special assistance to qualified providers be reduced; it has not insisted that participating providers document the expenditure of their savings in service to their communities; and it most certainly has not dictated that 340B payments to eligible providers be reduced so that payments to non-340B providers could be increased.  NASH believes that through this proposed data collection CMS is seeking to exert authority it does not have to demand of providers information to which the agency is not entitled.

Learn more about hospital industry opposition to the proposed 340B regulation in the Fierce Healthcare article “Hospitals blast CMS’ proposed 340B survey.”

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.”

MedPAC Offers Provider Rate Recommendations for FY 2018

The Medicare Payment Advisory Commission has submitted its annual Medicare payment rate recommendations to Congress.

The recommendations, required by law, include:

  • rate increases as required by current law for hospital inpatient payments, hospital outpatient payments, physicians, other health professional services, and outpatient dialysis payments;
  • no updates for ambulatory surgical centers, skilled nursing facilities, long-term-care hospitals, and hospices; and
  • five percent rate reductions for home health agencies and inpatient rehabilitation facilities.

MedPAC continued its past practice of recommending reform of the manner in which Medicare pays for post-acute-care services, maintaining that the unified payment system it has proposed would save $30 billion over the next ten years.

The report also addresses the status of the Medicare Advantage program and the Medicare prescription drug program (Medicare Part D).

While MedPAC’s recommendations to Congress are not binding, they are highly influential and often form the basis for future public policy.

Learn more about MedPAC’s recommendations in this fact sheet with highlights of the agency’s March 2017 report to Congress or the report itself, which can be found here.

MedPAC Talks Payments

At public meetings in Washington, D.C. last week, members of the Medicare Payment Advisory Commission discussed the adequacy of current Medicare payments and whether they need updating in the next fiscal year.

Among the payment areas MedPAC reviewed were inpatient services, outpatient services, physician and health professional services, ambulatory surgical center services, skilled nursing facilities, home health services, inpatient rehabilitation hospitals, long-term-care facilitiies, outpatient dialysis services, and hospices.

Find the issue briefs and presentations used to guide these discussions here, on MedPAC’s web site.