(This story has been updated with a correction.)
House Republicans are circulating a proposal to overhaul the way Medicare pays hospitals for short stays, including a plan to eliminate the widely criticized “two-midnight rule.”
The timing of the document, described as a “discussion draft” might seem strange. It arrives in the middle of a lame-duck session in which Congress is expected to do little but fund the federal government before it runs out of money on Dec. 11. And it was put forward by the House Ways and Means Committee, which will have a new chairman when the House reconvenes in January.
But close watchers of Washington healthcare policy say they believe it's an important marker that could provide insight into the contours of the Medicare debate. In addition, provisions of the bill could resurface during Congress' next effort to repeal Medicare's sustainable growth-rate formula for paying physicians, with the latest patch set to expire at the end of March. That annual exercise has become a vehicle for other healthcare proposals, in part because it's one of the few bills that's virtually guaranteed to gain traction.
“This should be viewed as the latest step in the long-running and very difficult debate about how to deal with short stays at hospitals,” said Eric Zimmerman, a principal with McDermott + Consulting. “It is meant to start a discussion around how to resolve some of these issues.”
Ilisa Halpern Paul, president of Drinker Biddle's district policy group, sees the release of the Medicare payment proposal as a sign that the Way and Means Committee plans to “take the reins in an effort to unscramble this very messy egg.”
Although Ways and Means Chairman Rep. Dave Camp (R-Mich.) is losing his gavel because of term limits—he'll be replaced by Rep. Paul Ryan (R-Wis.)—the House Subcommittee on Health, which released the draft legislation, will still be chaired by Rep. Kevin Brady (R-Texas). “It has been over four years since the last major legislation was passed that made payment changes that impact the way hospitals deliver care in the Medicare program,” the committee said in a fact sheet about the bill. “It is imperative that we address and consider these priorities as soon as possible.”
Medicare payments for short-term hospital stays have been contentious for a number of reasons. Chief among them is the two-midnight rule. Under that policy, an admission is presumed to be appropriate if the patient's stay lasts over two midnights. Providers, however, argue that the rule undermines their clinical judgment and has created more confusion than clarity. Congress this year delayed enforcement of the policy and the CMS has solicited ideas to improve it. And the Medicare Payment Advisory Commission has also debated whether it has the authority to do away with the two-midnight rule.
Intertwined with that debate is the Recovery Audit Contractor program. More than $3 billion in Medicare overpayments to providers was recouped last year through the program. But appeals of those decisions can take more than five years and there's a backlog of more than half a million appeals. In response, the American Hospital Association filed a lawsuit earlier this year seeking to force the CMS to meet its statutory requirement to decide Medicare-payment appeals within 90 days.
The Ways and Means discussion draft proposes creating a new payment system for hospital stays that would be adopted for fiscal year 2020. It would combine the current payment systems for inpatient and outpatient care to create a unified system. In the interim, the CMS would be directed to develop a transitional per-diem payment system for short hospital stays. It would also place restrictions on RAC audits until the new payment system can be adopted.
The bill also contains a host of other proposals from Republican legislators that are likely to become part of the healthcare debate in the coming months. Among them is a partial lifting of the moratorium on expansion of physician-owned hospitals that was part of the Patient Protection and Affordable Care Act. That was included at the behest of Rep. Sam Johnson (R-Texas). Another proposal, sponsored by Rep. Diane Black (R-Tenn.), would establish a nationwide bundled-payments program, expanding a cost-control initiative that was part of the ACA.
Halpern Paul said those other proposals are carrots to bring members on board with the broader discussion about overhauling Medicare hospital payments. “You don't want to weigh it down so much that it buckles over,” she said. “You have to find this very fine balance.”
Hospitals have been muted in their response to the proposal. A spokesperson for the American Hospital Association said that it was still studying the proposal and declined to comment on its specifics.
The Federation of American Hospitals, which represents investor-owned hospitals, released a statement lauding the committee for taking on the difficult issue of Medicare payments. But it raised concerns about lifting the moratorium on physician-owned hospitals. “We are seriously concerned with efforts to roll back the self-referral law, which runs the risk of bringing back arrangements which will increase utilization and health care spending and threaten patient safety,” the trade group said.
In recent years, any healthcare legislation has been politically toxic, owing to the stalemate over Obamacare. That viewpoint has discouraged serious discussions about healthcare policies. Halpern Paul views it as welcome news that Republicans are seriously engaging on the Medicare hospital payment front. “The issues that are in it are obviously very complex,” she said of the draft legislation. “It's clear that a lot of thought and work went into the construction of the bill.”
Follow Paul Demko on Twitter: @MHpdemko
(This story has been corrected to reflect that Rep. Dave Camp is from Michigan.)
