House committee calls for more scrutiny of hospital consolidations
Months after holding a hearing to discuss hospital consolidations, a key congressional health committee is asking the Medicare Payment Advisory Commission to study how these consolidations affect Medicare costs.
GOP leaders of the House Energy and Commerce Committee called on MedPAC to analyze federal policies that might be speeding the rate of hospital consolidations, the implications of those consolidations and whether markets where more hospitals have consolidated have driven up healthcare prices for patients.
They also asked whether hospital acquisition of independent physician clinics is costing Medicare more money. In line with their recent legislative activities, the lawmakers also want to probe whether the 340B drug discount program drives hospitals to opt for pricier drug options, and if Medicare patients' cost-sharing rises accordingly.
The committee held a hearing in February to examine consolidation, and this is the first strong signal Republican leaders want to look at policy change. House Energy and Commerce Chair Greg Walden (R-Ore.) signed the letter Thursday with Health Subcommittee Chair Michael Burgess (R-Texas) and Oversight Committee Chair Gregg Harper (R-Miss.).
The lawmakers highlighted the 2018 Medicare trustees report that showed hospitals billed Medicare nearly $200 billion in fiscal 2018.
Analysts have reached varying conclusions about the economic impact of consolidations—one estimated that mergers can lead to 15% to 30% in cost reductions and another that they can lead to an average 20% increase, the letter said. Another study from the Journal of Law & Economics found that merging hospitals charge 40% more for services than hospitals that haven't merged.
The letter follows a summer of significant proposals for Medicare payments from the Trump administration aimed at trying to curb the hospital cost burden on Medicare. These include a proposal on site-neutral payments, lambasted by providers, that would pay the same rate to an off-campus hospital outpatient department or independent physician's office. The CMS estimated that if the rule is finalized, Medicare would save $610 million and patients about $150 million in lower co-pays.
The CMS has also proposed extending Medicare Part B reimbursement cuts to outpatient facilities; $1.6 billion in Part B cuts have already been imposed on 340B hospitals. The Trump administration said Medicare patients have saved about $230 million in drug co-pays from the change in 2018 and predicts extending the cuts will save another $48.5 million.
The GOP lawmakers referred to a May hearing on Medicare payment reforms that looked at potential changes to site-neutral payments and noted one witness' argument that site-neutral payment policies "could not be viewed in a vacuum," but need to be considered in light of quality regulations with which hospitals need to comply.
"However, other witnesses have made data-driven arguments that much hospital consolidation can increase spending for the program and patients," Walden, Burgess and Harper wrote.
They quoted testimony from their hearing in February that consolidation between direct competitors "leads to substantial price increases for hospitals, insurers and physicians, without offsetting gains in improved quality or enhanced efficiency."
"The witness noted that 'evidence shows that patient quality of care suffers from lack of competition' and suggested 'policies are needed to support and promote competition in healthcare markets (which) includes policies to strengthen choice and competition, and ending distortions that unintentionally incentivize consolidation,' " the lawmakers wrote.
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