Although the CMS relaxed some controversial provisions in its final rule on how off-campus facilities will be reimbursed by Medicare, experts say the change will still put pressure on hospitals' relationships with commercial payers and prevent them from bringing care closer to patients.
Under the final rule released Tuesday, hospital off-campus facilities will no longer be paid the same as hospital-based outpatient departments if they started billing Medicare after Nov. 2, 2015. While the change will save the federal government $9.3 billion over 10 years, hospitals' costs for running and setting up the outpatient facilities will remain the same. Legal experts say the new payment environment sets hospitals up for a tough battle with commercial payers as they try to cover their costs and bring care closer to patients.
“Site-neutrality, while it sounds attractive, it's actually just a cost-shifting exercise,” said Larry Vernaglia of Foley & Lardner. “The need to move services off campus remains every bit as strong today as it was two years ago, maybe more so. All they're going to say is we'll short pay you for those sites.”
Hospitals still have to cover the costs of running off-site facilities some way, which Vernaglia says means they'll either subsidize the programs within the health system budget or they'll turn to commercial insurers for more money.
Payers "are going to fight that too,” he said. “This is a cage fight between payers and providers. Payers don't want to pay anymore, and providers want their overheads covered.”
Vernaglia blames Congress, not the CMS, for that pressure. Congress called for the payment policy change in the Bipartisan Budget Act of 2015 on recommendations from the Medicare Payment Advisory Commission and HHS' Office of Inspector General. MedPAC noted the government was paying significantly more for the same procedures at hospital-owned ambulatory centers. The difference appeared to be a factor in the flurry of health systems buying physician practices.
While the site-neutral pay rule was intended to prevent physician practices from being swallowed up by larger health systems, Alston & Bird's Michael Park says the final rule may do just the opposite. Under the new payment scheme, some procedures will be reimbursed at higher rates to physician practices rather than hospital-owned off-campus facilities. “That incentive is still there,” he said.
But the final rule did alleviate some hospital concerns. The CMS ultimately changed the proposed payment scheme so off-campus facilities built after Nov. 2, 2015, will be able to bill Medicare directly for their services in 2017 and 2018 rather than attempt to wrest payment from the physicians at the offices.
Although the payments will be less than half of what off-campus facilities used to get from Medicare, it will still provide hospitals with some cash flow for their investments.
“Call it half a loaf,” Vernaglia said. “I'm not going to say that I approve of it, but it's a reasonable approach to getting it done fast. They'll probably tinker with those rates over time.”
That payment change also alleviates concerns that health systems could run afoul of federal anti-kickback laws by providing physicians with equipment and facilities for less than fair market value under the new scheme. After receiving several comments about fraud and anti-kickback concerns, the CMS ultimately didn't finalize the payment methodology for the rule and decided to provide payments directly to the hospitals in 2017 as it evaluates the plan.
The CMS also made it clear that it didn't want to prevent facilities from remaining eligible for Medicare's 340B drug-pricing program, Vernaglia said, which was a hot-button issue for hospitals. The program was designed to help hospitals serving disproportionately large numbers of low-income patients. It gives participants steep discounts from manufacturers on outpatient drugs.
Still, the final rule will likely discourage hospitals from developing new off-campus facilities due to the diminishing returns. Only grandfathered facilities that started billing Medicare prior to Nov. 2, 2015, will continue to receive robust Medicare reimbursements, even for new services they provide—a new provision in the final rule.
“From our hospital clients' perspective, their overarching concern has been being able to meet the growing and changing needs of their communities,” Park said. “These concerns remain.”