Senate committee eyes global budgets for rural providers

A key Senate committee on Thursday promised to rethink Medicare payment policy for rural hospitals, acknowledging that Congress will have to help those providers facing ever-tightening margins and potential closures.

Members of the Senate Finance Committee homed in on global budget demonstrations as witnesses blamed the financial struggles of critical access hospitals on outdated Medicare payments that were designed around high volume and frequency of inpatient stays. But it may take a long time to see any changes to the policies.

The committee's Ranking Democrat Ron Wyden (Ore.) gave a five-year window, basing that timeline on the recent funding of Medicare programs for rural hospitals known as extenders, such as a payment adjustment for low-volume hospitals. The extenders passed with the Bipartisan Budget Act earlier this year, along with Wyden's co-sponsored CHRONIC Care Act.

The funded extenders buy time by giving near-term predictability for hospitals, Wyden said, but Congress will need to plan for what comes next.

"It seems to me that we have heavy lifting to do in next five years," Wyden said. "We understand this calamity did not arrive on us in 15 minutes and it won't be resolved in 15 minutes."

Karen Murphy of Pennsylvania's Glenn Steele Institute of Health Innovation touted the global payment model. Murphy—a former official at the Center for Medicare & Medicaid Innovation—led Pennsylvania's demonstration when she was secretary of health in Pennsylvania. The CMS gave the state $25 million over five years for the pilot.

The demo, modeled after Maryland's longstanding all-payer system, sets a fixed sum hospitals receive for inpatient and outpatient services by all payers including Medicare. Pennsylvania has the third-largest rural population in the country.

The model addresses one of rural hospitals' greatest pain points: dependency on fee for service payments by Medicare and Medicaid.

"The combination of declining inpatient admissions, resulting in decreased reimbursement and a payer mix that yields a lower price per service has greatly contributed to the current crisis in rural hospitals," Murphy said. A total of 83 rural hospitals have closed in the past eight years.

Global budgets aim to give rural hospitals the resources they need to test ways to build up population health. While Pennsylvania's model is new, Murphy said the state is closely monitoring whether hospitals are moving toward efficiency while offering the right services for their respective patients.

Testimony from a rural hospital system and small insurance plans whose networks focus on rural areas called for different Medicare payment models that give critical access hospitals room to change their operating model to limit inpatient beds. They pressed lawmakers to recognize how hard it is for rural hospitals to recruit and keep physicians.

Wyden encouraged more concreate ideas on forming federal policy and said he would keep the hearing record open for stakeholders to comment.

Sen. Pat Roberts (R-Kan.), who co-chairs the Senate's rural healthcare caucus with Democratic Sen. Heidi Heidkamp (N.D.), did offer one caveat as witnesses urged flexibility for critical access hospitals: that Congress shouldn't push them toward a model without considering potential unforeseen consequences.

The hearing follows the release by the CMS earlier this month of an eight-page rural healthcare strategy that promises the Trump administration will focus its regulatory agenda on rural communities when it comes to rolling back regulatory barriers to telehealth and reaching out directly to rural hospitals and physicians to help them with CMS programs and policies.

The outline did not include any new policies, however.

In his introduction to the hearing, Senate Finance Chair Orrin Hatch (R-Utah) called on HHS Secretary Alex Azar to do more for rural providers, particularly when it comes to regulatory relief. Witnesses on the panel echoed this theme, urging relaxation of Medicare regulations in rural communities.