Do Hospitals Have a Target on their Back?

The headlines have been coming fast and furious:

Does anyone see a pattern here? Hospitals, known for their multi-million-dollar budgets and $10 million CEOs, may need to change their income strategy, with the government and other agencies finally realizing that their monopoly on the healthcare reimbursement system has been out of control for decades.

The AHA (American Hospital Association) has been fighting these mandates and changes, as it feels the hospitals should have the power to control the system. However, regulators have been pushing for greater transparency in all business dealings since the Bush administration. A portion of the Patient Protection and Affordable Care Act required that hospitals publish transparent pricing: a list of standard charges for items and services. States also pushed hospitals to publish these chargemasters, which provide list prices for each service.

But while chargemaster prices may be useful for negotiating with insurers, the listed prices bear little resemblance to what patients actually pay — or should pay. That was the argument that the AHA and hospitals used against the price transparency war.

When the Centers for Medicare & Medicaid Services (CMS) revisited pricing rules, it added that not only must hospitals publish list prices, but they also must post negotiated rates with insurers, cash discount prices, as well as the minimum and maximum negotiated charges for 300 “shoppable” services. The AHA is fighting this mandate as well. It is set to go into effect Jan. 1, 2021.

Last month, hospitals challenged the neutral site payment law Congress passed in 2015, declaring that new off-campus departments would not be paid at the same rate as other outpatient providers. But hospitals were still getting paid far more than other providers for services at departments that existed prior to that change.

The opinion by Sri Srinivasan, Chief U.S. Circuit Judge of the U.S. Court of Appeals for the District of Columbia, notes that without site neutrality, off-campus outpatient departments can get paid up to 114 percent more than freestanding physician offices.

In an attempt to combat continued rising costs, the U.S. Department of Health and Human Services (HHS) in the 2019 Outpatient Prospective Payment System (OPPS) rule reduced evaluation and management (E&M) visit payments for off-campus departments to put them in line with those of freestanding offices, thus making them site-neutral. AHA then sued HHS. The court’s opinion was that “the lower the reimbursement rate for a service, the less the incentive to provide it, all else being equal. Reducing the reimbursement rate thus is naturally suited to addressing unnecessary increases in the overall volume of a service provided by hospitals,” as reported by HHS. If the service is already being provided for and is accessible to patients, from independent physicians, why aren’t there equal or neutral payments? That is where the hospitals lose their position, in not being able to respond to that question beyond citing their “more highly regulated” site. The quality and access to care is still there for the patient.

On Aug. 4, CMS published its proposal to eliminate their “inpatient only” list of services that can be done on an inpatient-only basis for Medicare patients. The process would unfold over the next three years, beginning by removing about 300 musculoskeletal-related services. This would devastate hospital revenues as never before.

The OPPS, if finalized, would continue a move of care away from the hospital setting by eliminating the requirement that hundreds of services be done only on an inpatient basis for Medicare beneficiaries. CMS stated it has received stakeholder requests for that action in previous rulemaking, and determined that “significant developments in the practice of medicine” have allowed more procedures to be done safely on an outpatient basis – and it should be up to physicians to determine when inpatient care is required.

Last year, CMS proposed removing certain services from the inpatient-only list and making them available on an outpatient basis, which it said would help lower costs. According to the proposal, ambulatory surgical centers (ASCs) would get a payment increase of 2.6 percent, and CMS estimated total payments to them for 2021 will be about $5.45 billion, an increase of $160 million from this year.

The COVID-19 pandemic has “highlighted the need for more healthcare access points throughout the country,” and CMS suggested that more flexibility for patients to choose ASCs as a site of care will alleviate concerns of access for elective procedures and emergency services at hospital outpatient departments. Many patients have had to wait or put their “elective” (but also lifesaving, and indicative of long term quality of care) surgeries on hold during the quarantine, and due to the shutdown to slow the spread of COVID-19, those surgeries could only be done (approved) as an inpatient procedure.

This proposal would not only benefit patients, but physicians would see a projected increase in payments while experiencing lower overall costs due to no hospital inpatient stays being required. The AHA and hospital lobbying agencies will definitely have something to say about this, however.

Comments on the proposed OPPS are due by Oct. 5, and a final draft will be released later this year. If this passes, hospitals’ income, as they currently see it, would be a thing of the past. For now, it appears that hospitals are the target of many changes that will be directly tied to reimbursement.