AHA Urges Congress to Pass Healthcare Payment Reform Bills

November 21, 2016 - The American Hospital Association (AHA) recently called on Congress to pass several healthcare payment reform bills, such as the Helping Hospitals Improve Patient Care Act and the Sustaining Healthcare Integrity and Fair Treatment Act of 2016, during the lame duck session.

The “crucial must-pass legislation” according to the AHA includes provisions on site-neutral payments for developing provider-based clinics, the addition of socioeconomic adjustment in value-based penalty calculations, rural hospital program extensions, 25 percent rule relief for long-term care hospitals, and physician supervision flexibilities for critical access hospitals.

Addressing site-neutral payments for developing provider-based clinics

Earlier this month, CMS finalized implementation of Section 603 of the 2015 Bipartisan Budget Act, which required site-neutral payments for off-campus provider-based hospital outpatient departments.

The new rule mandates that services provided at these facilities on or after Nov. 2, 2015 no longer be billed under the Medicare Outpatient Prospective Payment System. Instead, providers will be reimbursed at a newly established rate under the Physician Fee Schedule in 2017, which is typically about 50 percent of the outpatient rate.

Certain off-campus provider-based hospital outpatient departments however, are grandfathered in and will not abide by site-neutral payment rules. CMS stated that facilities operating before Nov. 2, 2015 will continue to be paid at the outpatient rate.

The AHA expressed concerns for provider-based clinics that were under development when the act was passed. The Helping Hospitals Improve Patient Care Act, if approved, would move the grandfather date for developing off-campus hospital departments from Nov. 2, 2015 to Dec. 31, 2016, or 60 days after enactment, whichever is later.

In October, the AHA told Congress that site-neutral payment reform should account for healthcare organizations that already spent millions to build new off-campus hospital outpatient departments based on higher Medicare reimbursement rates. Therefore, the grandfather date should be changed to reflect long completion times that come with most construction projects.

Including socioeconomic adjustments for value-based penalties

The Helping Hospitals Improve Patient Care Act would also add a socioeconomic adjustment to the Medicare Hospital Readmissions Reduction Program’s value-based penalty methodology.

Currently, the value-based reimbursement initiative financially penalizes hospitals with excessive hospital readmissions. Participants face up to a three percent decrease in Medicare reimbursement if 30-day readmission rates are higher than expected for heart attack, heart failure, pneumonia, chronic obstructive pulmonary disease, and hip and knee replacement.

Under the act, value-based penalties would be determined using comparisons between hospitals with similar Medicare and Medicaid patient populations to account for socioeconomic factors that affect readmission rates.

Researchers have found that socioeconomic factors, such as income and dual eligible status, significantly impact readmission rates. A Health Affairs study from September showed that safety net hospitals faced more value-based penalties in the Hospital Readmissions Reduction Program because they were compared to a national average rate.

Safety-net hospitals fared worse in the program because many of the readmission factors were beyond their control, such as patient homelessness and lack of family support.

The AHA supports the inclusion of socioeconomic adjustment in the program to help hospitals improve patient care, especially for vulnerable patients, without imposing hefty value-based penalties on them.

Another industry group, America’s Essential Hospitals, also recently launched a campaign to include socioeconomic status as an adjustment in the Hospital Readmissions Reduction Program. The group supports the Helping Hospitals Improve Patient Care Act’s section on socioeconomic adjustment.

“Section 102, or legislation like it, would level the playing field for essential hospitals so that they can continue to accept the hardest cases and deliver better health outcomes for all people, including the most vulnerable,” stated America’s Essential Hospitals.

Extending rural community hospital support

The AHA also backed legislation that would extend the Rural Community Hospital Demonstration program for another five years. The organization urged Congress to pass the extension to further support rural hospitals in sparsely-populated states with maintaining quality care while operating with negative Medicare margins in inpatient services.

Under the program, CMS aims to provide increased Medicare reimbursement to rural hospitals that are too large to be considered a critical access hospitals, which receive higher rates. These hospitals are also too small to offset lower Medicare payment rates with increased patient volumes or revenue from other non-Medicare services.

To help support the rural hospitals, CMS reimburses them based on actual healthcare costs for inpatient services.

“This program has become vital to participating hospitals and is providing valuable data on potential new models for these vulnerable hospitals,” the AHA stated in May.

Enacting 25 Percent Rule relief for long-term care hospitals

Congress should also pass the Sustaining Healthcare Integrity and Fair Treatment Act of 2016 that would extend 25 Percent Rule relief for long-term care hospitals, the AHA stated. For long-term care hospitals that exceed a set referral threshold, the 25 Percent Rule decreases Medicare reimbursement from the long-term care hospital rate to the lower inpatient rate.

CMS designed the rule to reduce inappropriate admissions to long-term care hospitals, but the AHA stated that its emphasis on referral source rather than a patient’s clinical status has caused CMS to reduce hospital payment for medically-appropriate care.

“This policy arbitrarily penalizes LTCH [long-term care hospital] admissions based on the origin of an LTCH referral, with complete disregard for the patient’s medical necessity for LTCH services,” the AHA wrote in October.

Under the Sustaining Healthcare Integrity and Fair Treatment Act of 2016, the 25 Percent Rule would not apply to long-term care hospital discharges between Oct. 1, 2016 and June 30, 2017, giving these hospitals regulatory relief from the financial penalties.

Delaying physician supervision policy implementation

The AHA also called on Congress to support a proposed bill that would extend the enforcement date of a new direct supervision policy. Under the policy, all hospitals, including critical access hospitals, will need a physician to supervise outpatient therapeutic services starting on Jan. 1, 2016.

The legislation, however, would delay the policy’s enforcement until the end of 2016 for critical access and small rural hospitals.

Enforcement delays would provide necessary relief for critical access and small rural hospitals that do not have the staff to implement the policy, the AHA stated.

“Given the shortage of medical professionals, this policy may force small and rural hospitals and CAHs to limit their hours of operation or cut services to comply with the provision, resulting in reduced access to outpatient care in communities across America,” the organization wrote in October.

In addition to urging Congress to pass these bills, the AHA will also host an Advocacy Day on Dec. 6 to inform hospital and health system leaders in Washington DC on its efforts to further these healthcare payment reform bills.

After the briefing, the AHA plans to work with legislators on passing these key hospital bills.

Dig Deeper:

• Understanding the Value-Based Reimbursement Model Landscape

• What Is Value-Based Care, What It Means for Providers?