Healthcare Business Trends

New Briefs, December 2019

December 2, 2019 6:54 pm

OPPS final rule keeps site-neutral payments and 340B cuts, leaves out transparency requirement

Medicare kept two major hospital payment cuts in a 2020 final payment rule, released Nov. 1, but removed a proposal to require hospitals to release privately negotiated health plan payment rates.

The controversial major hospital payment cuts in the final rule for the Outpatient Prospective Payment System (OPPS) were retained from the proposed rule even though hospitals have successfully challenged them in federal court.

However, CMS split off the highest-profile provision, which would have required hospitals to make public a list of their standard charges, which the agency defined as both gross charges and payer-specific negotiated charges. For the latest developments, visit

CMS completed a two-year phase-in of an $800 million cut for clinic visits furnished in off-campus hospital outpatient departments, which constitute the most common service billed under the OPPS.

Although CMS said it will pay back the 2019 cuts after they were struck down by the U.S. District Court for the District of Columbia, the agency will continue them for 2020, pending its possible appeal of the ruling.

CMS also will continue the 340B program’s reduced Medicare and health plan payments, which were cut from average sale price (ASP) plus 6% to ASP minus 22.5% for separately payable drugs or biologicals.

The cut is being maintained even though a federal court previously rejected the policy. The administration is appealing the decision to the U.S. Court of Appeals for the D.C. Circuit.

Why the Trump administration is pursuing hospital payment cuts that courts have rejected

The senior White House official on healthcare policy said there was a clear rationale for pursuing two major hospital payment cuts even after courts ruled them illegal.

Hospital advocates were bewildered when the Trump administration retained the two controversial hospital payment cuts in the final rule for the Medicare OPPS.

“The policy is solid, and we think we can win,” Joseph Grogan, JD, assistant to the president and director of the Trump administration’s Domestic Policy Council, said.

Additionally, he said, pursuing the cuts in the face of court opposition illustrates the need for Congress to act.

“We can go to Congress and say, ‘Hey listen, the courts have [blocked] us here and here; you need to clarify the law because we’re on the right track here,’” Grogan said. “‘Here’s the policy we’re pursuing, and it’s probably not going to be as robust as it could be without a legal change.’”

Grogan said the administration expected its “aggressive” policymaking to risk court reversals. Grogan acknowledged that shrinking from the fights would make their lives easier, but they were not going to do that.

Federal policy drives hospital-practice deals but not M&A between hospitals, MedPAC finds

Federal payment policies are not driving mergers and acquisitions (M&A) between hospitals but are encouraging hospital acquisition of physician practices, according to an analysis by staff of the Medicare Payment Advisory Commission (Med- PAC), Congress’s primary Medicare advisory body.

Other key conclusions of a hospital M&A analysis by MedPAC staff included the following:

  • M&A is associated with higher commercial health plan prices.
  • It is unclear how consolidation affects hospital costs and quality.
  • Mergers have little effect on beneficiary cost sharing.

The analysis came to very different conclusions about hospital acquisitions of practices, which included the following:

  • Such activity leads to higher prices in Medicare and among commercial health plans.
  • The activity also increases beneficiary cost sharing.
  • Deals can be disincentivized by site-neutral payment policies.

Legislative fight over surprise billing is nearing an end, congressional aides say

Members of Congress are close to finalizing surprise medical bill legislation by resolving differences that have split health plans and providers during the process, aides say.

The Senate committee overseeing the issue is “closer than healthcare stakeholders would have you believe,” said Adam Buckalew, a senior aide on the committee.

The Senate Health, Education, Labor and Pensions (HELP) Committee and two House committees have passed differing legislation to mitigate unexpected bills for services obtained from out-of-network providers working at in-network facilities. The anticipated next step is House consideration of a combined bill. Most of the advancing legislation would resolve surprise bills by using some type of rate-setting approach, which is backed by health plans and opposed by most providers. One House bill included a provider-favored amendment to allow arbitration for some larger charges. Some senators are pushing for a more robust arbitration process to be required.

According to senators and staff representing various sides of the debate, remaining areas of disagreement among members of Congress involve:

  • Determining the minimum dollar amount needed for disputed charges to qualify for arbitration
  • Deciding whether to allow many small charges to be combined to qualify for arbitration
  • Addressing health plan concerns that arbitration would fuel cost inflation
  • Preventing adverse financial effects that could close rural hospitals
  • Extending the bill’s authority to cover air ambulance charges

Amid lagging hospital risk-taking, value-based payment advocates try to woo CFOs

Hospitals and health systems have been an obstacle to the spread of risk-based payment, some healthcare leaders say. Now leaders are trying to appeal to CFOs to increase adoption. Christopher Chen, MD, the CEO of ChenMed, a primary care provider that takes on full risk for Medicare Advantage patients, urged health plans to make fee-for-service (FFS) “less comfortable.”

“If you talk to large systems, many of the people who are running those systems are actually thinking the exact opposite: ‘How do we slow down the progress so that way we don’t have to jump into value-based care because we’re very comfortable in pulling the lever and getting the cookie,’” said Chen.

Another issue is the financial challenges hospitals face.“When you don’t have assets and you’re a primary care doctor and you’ve got six seats in your reception area and three [staff] in your office, it’s a lot easier to change than if you have 4,000 beds that you’ve got to keep filled,” said Bruce Broussard, president and CEO of Humana.

That challenge was underscored by a September Moody’s Investors Service report finding that, among the 284 not-for-profit hospitals it tracks, only 1.9% of net patient revenue came from risk-based payment in 2018. Similarly, an as-yet-unpublished hospital survey by HFMA and GHX found 2.7% of hospitals’ net patient revenue came from risk-based arrangements.

The share of healthcare payments tied to quality and value through “shared accountability payment models,” according to the Health Care Payment Learning & Action Network, includes the following categories:

  • Commercial health plans, 10.6%
  • Medicare Advantage, 24.3%
  • Traditional Medicare, 18.2%
  • Medicaid, 8.3%

Hospital payment cuts fund state public-option plans

A growing number of states and federal lawmakers have proposed versions of governmentbacked insurance plans as ways to lower costs for consumers and curb overall healthcare spending growth. But advocates only now are detailing the mechanisms to fund such plans, which some healthcare leaders describe as a way to undercut commercial insurance plans and move to a single-payer model.

A proposal issued in October by several Colorado agencies, which were tasked by a recent state law with developing a public-option insurance plan, would limit provider payments to between 175% and 225% of Medicare rates. The plans would be managed and sold by private insurance carriers. The rates would represent a sharp reduction from the approximately 289% of Medicare facility-fee rates that commercial insurance plans currently pay, according to a report commissioned by the state.

The proposal drew concerns from the Colorado Hospital Association that it “appears to be the first step toward price control or rate setting, as well as an intent to make provider participation mandatory,” said Chris Tholen, executive vice president.

A law enacted in Washington state requires state-created plans to be sold by commercial health plans on the state’s Affordable Care Act marketplace, along with those carriers’ own plans. The state-backed plans will pay healthcare providers 160% of Medicare rates.


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