Hospital Orgs Oppose Site-Neutral Medicare Reimbursement Cuts

July 17, 2017 - Several hospital groups recently spoke out against proposed 2018 Medicare reimbursement updates that would reduce site-neutral payments to off-campus provider-based departments from 50 percent of the outpatient rate to 25 percent.

CMS recently released a proposed rule to update the Medicare Physician Fee Schedule for 2018. Under the potential regulation, the federal agency would change site-neutral Medicare reimbursement implementation for off-campus provider-based departments.

The federal agency established site-neutral Medicare reimbursement to the facilities in Section 603 of the Bipartisan Budget Act of 2015. The act mandated that certain items and services furnished by some off-campus hospital outpatient provider-based departments no longer receive higher Medicare outpatient rates starting on Jan. 1, 2017.

The rule applied to facilities that began billing under the Medicare Outpatient Prospective Payment System (OPPS) on or after Nov. 2, 2015. Exceptions to the rule included facilities that billed at the outpatient rate prior to the deadline and dedicated emergency department services.

CMS designed the rule to reduce Medicare spending on services that could be performed in a physician’s office at a lower rate. Medicare used to pay two separate claims for services furnished at off-campus provider-based departments. Facilities received reimbursement for institutional services at the outpatient rate and professional services under the physician rate.

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To replace the outpatient rate for new off-campus provider-based departments, CMS decided in 2016 to reimburse the facilities under the Physician Fee Schedule starting in 2017. Although the federal agency announced plans to develop new rates for the facilities, which would be about half the outpatient amounts.

However, the most recent proposed rule would further reduce site-neutral Medicare reimbursement to the facilities by 2018.

In response to the proposed rule, the American Hospital Association (AHA) expressed concerns that the Medicare reimbursement cuts would decrease patient access to care at the facilities.

“CMS at the same time is proposing further cuts to Medicare rates for services hospitals provide in 'new' off-campus hospital outpatient departments,” stated Tom Nickels, AHA Executive Vice President. “This proposal also appears to have a questionable policy basis and is yet another blow to access to care for patients, including many in vulnerable communities without other sources of healthcare.”

The hospital group called on CMS in 2016 to increase site-neutral Medicare reimbursement rates to about 64 percent of the outpatient rate, instead of 50 percent.

READ MORE: Will Site-Neutral Payment Reform Rule Cause Hospital Closures?

America’s Essential Hospitals agreed with the AHA that site-neutral payment reductions would negatively impact patient care access.

“CMS’ proposal to pay new, off-campus PBDs [provider-based departments] only 25 percent of the OPPS rate will result in an unsustainable payment rate that will further reduce access for people in chronically underserved communities—healthcare deserts—and the hospitals on which they rely,” wrote Bruce Siegel, MD, MPH, America Essential Hospitals President and CEO. “Hospitals that otherwise would seek to enhance access by establishing clinics in healthcare deserts will not do so if they determine this damaging payment policy makes new outpatient centers economically unsustainable.”

The industry group called on CMS to “withdraw these proposals and seek only changes that protect support for vulnerable patients and their essential hospitals.”

Other hospital groups argued that the proposed rule could impede the value-based reimbursement transition.

“At a time when the nation is moving toward value-based payments, this proposal makes no sense,” said Blair Childs, Premier Senior Vice President of Public Affairs. “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.”

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Additionally, the three hospital groups issued statements against proposed prescription drug rate reductions under the 340B Drug Pricing Program.

In another recently proposed rule pertaining to hospital outpatient and ambulatory surgical center reimbursement updates for 2018, CMS released potential changes to some prescription drug rates under the drug discount program.

Hospitals that acquire prescription drugs at a discount through the program would see their reimbursement drop from average sales price plus 6 percent to average sales price less 22.5 percent.

CMS proposed the payment cut based on Medicare Payment Advisory Commission (MedPAC) recommendations to reduce Medicare spending on prescription drugs. The federal agency reported in 2016 that Medicare spent $24.6 billion in 2015 on Part B prescription drugs, showing an increase from $21.5 billion the previous year.

However, the AHA pointed out that targeting 340B prescription drug rates for reductions would only harm safety-net hospitals rather than decrease Medicare spending. Nickels stated that the proposed rule’s provision is a move to “punitively target 340B safety-net hospitals serving vulnerable patients, including those in rural areas, rather than addressing the real issue: the skyrocketing cost of pharmaceuticals.”

He added, “For 25 years, the 340B Drug Pricing program – which enjoys broad, bipartisan support – has been critical in expanding access to life-saving prescription drugs to low-income patients in communities across the country. The patients who benefit from the much-needed 340B program are the ones who will have their access to care threatened.”

America’s Essential Hospitals also noted that the 340B drug cuts may undermine the program’s goals of helping hospitals use their resources wisely and provide additional services to disadvantaged patients. Seigel wrote:

“The Centers for Medicare & Medicaid Services (CMS) states a desire to mitigate rising drug prices, but this policy would badly undermine that goal. The 340B program provides a buffer for patients and taxpayers against skyrocketing drug prices. The proposed OPPS policy would cripple 340B’s value as a tool for lowering drug prices and disrupt access to care for those in greatest need, including low-income Medicare beneficiaries. The proposal also runs counter to Congress’ intent for the 340B program: to help hospitals stretch scarce resources.”

Premier echoed the sentiments from other hospital groups, stating that the policy would “have devastating consequences for safety net hospitals and thus the vulnerable populations they serve.”

CMS will accept comments on both proposed rules until Sept. 11, 2017. The federal agency expects to release a final ruling on the 340B payment changes around Nov. 1, 2017. It did not announce its plans for a final rule on the 2018 Medicare Physician Fee Schedule rule.