In addition to Medicaid cuts that continue to be part of the GOP's plan to repeal and replace the Affordable Care Act, a 1,500-page Medicare payment rule and next year's physician fee pay rule released last week tighten reimbursement for providers, and mostly that spells trouble for hospitals.
The change that seemed to most ruffle industry feathers was a proposal last week to halve what Medicare pays when patients receive services at facilities that are owned by hospitals but located off campus.
While the Obama administration last year finalized a rule that paid most hospital off-campus facilities the same as hospital-based outpatient departments, the Trump administration last week proposed dropping that rate from 50% of the outpatient payment rate providers once received to 25% to save $25 million next year.
"At a time when the nation is moving toward value-based payments, this proposal makes no sense. In essence, it removes all incentives to provide care out in the communities rather than at the hospital, and ultimately will lead to higher overall Medicare spending," said Blair Childs, senior vice president of public affairs for Premier.
Hospitals say off-campus facilities give patients more entry points to care, especially in underserved areas.
Congress passed what's called the site-neutral policy after a federal report found Medicare was paying 141% more for an echocardiogram in an outpatient setting than for the same service in a doctor's office.
According to the American Hospital Association, 17.2 million hospital visits included invasive, therapeutic surgeries in 2014. Over half of these visits occurred in a hospital-owned ambulatory surgery setting.
That's likely why the CMS now also is considering expanding Medicare payment for hip and knee replacement procedures at ambulatory surgical centers, according to another proposal released last week.
The Ambulatory Surgery Center Association said nearly 40 centers around the country perform outpatient joint replacements, and outpatient surgery companies such as Surgical Care Affiliates are aiming to increase them.
That's threatening one of the largest and most profitable service lines at many hospitals. In 2014, more than 400,000 Medicare beneficiaries received a hip or knee replacement, costing the government more than $7 billion for the hospitalizations alone—over $50,000 per case.
The move to outpatient settings also raises questions about the future of Medicare's mandatory bundled-payment initiative for inpatient procedures in 67 markets around the country, called the Comprehensive Care for Joint Replacement program, which began last April. The CMS rule appears to undermine that initiative.
Another threat to hospitals' finances proposed last week would pay hospitals 22.5% less than the average sales price for drugs acquired under the 340B program. The federal program is intended to lower operating costs for hospitals with disproportionate numbers of low-income patients.
The 340B program is controversial because it does not specify or restrict how hospitals can use money generated by the pro- gram and critics say that leads to some hospitals taking advantage of the savings.
The current 340B payment for drugs, Medicare's long-standing method, is 6% on top of the average sales price. With the proposed changes, if a drug costs $84,000, the CMS would pay just over $65,000, instead of the current $89,000. Vaccines would continue to be paid at the current rate.
The change, HHS Secretary Dr. Tom Price said in a news release, is a significant step toward fulfilling President Donald Trump's promise to address rising drug prices.
"This proposal has the potential to reduce drug costs for seniors, by at least an estimated $180 million per year. If it is adopted, Medicare would pay hospitals for drugs purchased through the 340B discount program at a price more consistent with the actual cost hospitals and other providers pay to acquire those drugs. Seniors would see those savings passed on to them in the form of lower copays," he said.
The proposal is budget-neutral and savings would return to the Medicare program. Hospitals in the 340B program provide 60% of uncompensated care, even though they make up only 36% of the nation's hospitals.
"The data show 340B hospitals provide significantly higher levels of care to low-income patients, including low-income Medicare beneficiaries," Ted Slafsky, CEO of 340B Health, an association of more than 1,300 participating hospitals, said in a statement. "With the uninsured rate rising again and so much uncertainty about the healthcare marketplace, this is no time to cut reimbursement to hospitals that serve patients in need."
In one bright note for providers, the CMS is looking to expand coverage of telemedicine and provided new billing codes for some services including psychotherapy and consultations for chronic-care management.