Healthcare Business News

Details of SGR deal released

By Jessica Zigmond
Posted: February 16, 2012 - 4:30 pm ET

(Story updated at 3:50 p.m. ET.)

Federal lawmakers on Thursday agreed on a payroll tax holiday bill that would prevent a 27.4% cut in Medicare physician payment rates scheduled for March 1 and would freeze current payment rates through Dec. 31, 2012. The provision also requires that the Government Accountability Office and HHS submit reports to help Congress develop a long-term replacement of the existing Medicare physician payment system.

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Meanwhile, the Middle Class Tax Relief and Job Creation Act of 2012 would extend certain Medicare programs set to expire and terminate others. For instance, the agreement would extend higher wage payments to eligible facilities known as Section 508 hospitals through March 31, 2012, after which time the program will end. Special payments for these hospitals were established in 2003 and intended to last three years, but have since been extended.

Another provision would extend the outpatient hold-harmless payments for qualifying rural hospitals and sole community hospitals with fewer than 100 beds through Dec. 31, 2012. The hold-harmless payment provides a payment that is equal to 85% of the difference between an eligible hospital's outpatient prospective payment system and the hospital's costs, according to a summary of the bill prepared by the staffs of the House Ways and Means and Energy and Commerce Committees.

The bill would also extend the outpatient therapy cap exceptions process through Dec. 31 and extend—also through the end of December—the following ambulance add-on payments: 2% for urban ground ambulance services, 3% for rural ground ambulance services, and an increase to the base rate for ambulance trips that start in so-called “super rural” areas.

As expected, lawmakers had to agree on ways to pay for the Medicare spending in the bill, which amounts to about $21 billion over 10 years. One so-called “offset” in the agreement would lower the reimbursement level that Medicare pays hospitals for bad debt payments. Currently, Medicare reimburses hospitals and skilled nursing facilities for 70% of the beneficiary cost-sharing they are unable to collect, while community health centers and dialysis centers are reimbursed at 100%. The bill agreed in conference would decrease the reimbursement level to 65% starting in fiscal 2013 for those providers currently reimbursed at 70% and phase in the 65% level over three years for those other providers who now receive 100% reimbursement. These changes are expected to reduce spending by about $6.9 billion over 10 years.

Another provision would reduce payment rates for clinical laboratory services by 2% in 2013. Then, as that reduction is applied after the update is calculated, the 2013 amount would become the new “reset base” on which to apply the 2014 update. According to the summary, the bipartisan Congressional Budget Office estimates this provision could cut spending by about $2.7 billion over 10 years. This provision is expected to take a serious toll on small, independent labs that deliver testing in the nation's nursing homes, according to Julie Allen, government relations director at Drinker, Biddle & Reath in Washington. And these labs will already face a 1.75% cut in reimbursement for 2013, Allen explained.

“I think it's a matter of not being considered on the merits of health policy and healthcare business, but a matter of trying to scrape together dollars in the midnight hour,” Allen said of the measure. “We talk so much about seniors' access to their physician providers, but we're talking about patients with high level of chronic disease managed by physicians who need to run lab tests.”

The American Hospital Association weighed in on the agreement, saying Congress has put seniors' access to hospital services in jeopardy.

“Today's proposal would add an unnecessary strain to hospitals that care for vulnerable populations,” Rich Umbdenstock, the AHA's president and CEO, said in a statement. “It limits therapy services provided in hospitals and assistance that helps defray Medicare and Medicaid costs to low-income seniors,” he continued. “This is shortsighted and overlooks the critical role hospitals play in supporting a broad range of services to the elderly.”

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