A quick holiday week news update with Nick and Shawn

Erika Grotto: A news update with Nick Hut and Shawn Stack, today on HFMA’s Voices in Healthcare Finance podcast. Hello, and welcome to the podcast. I’m your host, Erika Grotto. Since it’s Thanksgiving week, we decided to keep this episode short and sweet with a quick news update. Here’s HFMA Senior Editor Nick Hut and HFMA Policy Director Shawn Stack. Have a great Thanksgiving.

Nick Hut: Hey, folks. Today, we’re talking about the 2023 Medicare Final Rule for the Outpatient Prospective Payment System. As always, there’s a lot to digest for hospitals. The rule runs more than 1,700 pages, so we’re just going to dive in and examine it page by page. No. We’re actually just going to go over a few quick highlights. One is that the payment update—as was the case with inpatient payments in the FY23 Final Rule—went quite a bit relative to the proposed rule from earlier this year. It’s going to be a 3.8% update as opposed to 2.7% in the proposed rule. The change is due to rising prices of the inputs in the market basket based on updated data. It’s not really enough to help hospitals keep up with rising costs, especially with looming reductions through a few different mechanisms. But if nothing else, this OPPS payment update is better than what it initially appeared to be. Shawn, is there anything you wanted to add about the update? And then tell us, if you would, about the 340B payment update and the implications of that.

Shawn Stack: Yeah, Nick, I mean I agree. I think most of our hospital community and provider community agree that while the 3.8% is better than the proposed 2.7%, it doesn’t even come close to keep up with inflation and most importantly wage increases that hospitals and providers and organizations are facing right now. It just doesn’t come close. And as operating margins fall drastically the last two years or mostly the last year, providers are finding themselves in a precarious situation of, how do we continue to cut costs without cutting community benefits and cutting access to care and really operate as lean as we can without really impacting the health of our communities. So that is definitely of top concern for providers as these rules compound where the increases to payment models don’t even keep up with inflation, let alone the rising cost of labor. That being said, a little bit of good news for the 340B program: The calendar year 2023 final rule solidifies the ASP plus 6% reimbursement for 340B drugs. However, some other things to model, there’s so much to model in this rule because it’s a yin and yang on many fronts. The negative 3.09% reduction to the non-drug services payment rates for the OPPS to achieve budget neutrality needs to be vested to see what that negative impact on the non-drug services is going to make on hospitals’ bottom line on the OPPS side. So lots to model there. There’s going to be some winners and some losers, but probably quite a few losers here in this budget neutrality application to the 340B program.

Hut: Yeah, that’s absolutely the case that Medicare payment rate increase for 340B drugs, just to clarify, actually has been in effect since late September. It was ordered to go into effect then by a federal court, but this final rule of course confirmed that it will be in effect for all of 2023, and like you said, it remains to be seen exactly who’s going to come out ahead and who’s going to come out behind. For those that don’t get many of their drugs from the program, their net gain from all of these changes stands to be significantly less than it would have been without any 340B rate change. For example, according to the projections posted in the rule, if you’re a hospital with fewer than 100 beds, you’re looking at a rate increase that will be 1.3 percentage points lower than it would be if there were no change to the 340B rate. So if anyone has time, I recommend going to the final rule and searching for Table 110 to see a full breakdown of the impact, and the impact not just from 340B but from several other policy changes.

Stack: Right, Nick, and this is just an area where smaller providers are going to be even more so at a disadvantage in this space as well, at less than 100 beds.

Hut: Yeah. So it’s just the gap between hospitals in terms of performance appears like it’s only going to widen as a result of this rule and the many changes that it contains. And we don’t have a whole lot of time left in this segment, but CMS has finalized the payment rates and policies for the new rural emergency hospital designation, which is available starting January 1. So that’s worth taking that, and we’re going to be talking about that in a future episode. But Shawn, what are maybe just one or two things to watch for if you’re potentially interested in participating as an REH?

Stack: Yeah, Nick, there’s a lot of impacts moving here if you’re actually looking at enrolling as a rural emergency hospital—you know, that provider type, beginning January 1. The rule finalizes the provider and rural procedures and payment rates, as you just talked about, along with the REH conditions of participation. It talks about physician self-referral law and updates that, and rural emergency hospital quality reporting program is mentioned and covered in that section of the rule as well. So lots to unpack there, lots of analysis for folks to do, what’s the impact to their 340B programs if they become a rural emergency hospital. Just a lot of moving parts to take into consideration before making that jump. And then in addition to that, keep in mind that the rural community hospitals exemption for clinic visit policy came out in the rule, so another area to focus on for our rural members functioning in that area.

Hut: For sure. So like we’ve said, there’s a ton to unpack in this rule. We’ll be talking about the REH designation coming up in the next couple of episodes I would think. So stay tuned for that, but in the meantime, as always, stay tuned to HFMA for news and analysis on the many implications of Medicare payment policies pertaining to outpatient payments and payments for all other settings. So thanks, everybody, and we will talk to you soon.

Stack: Thanks, Nick.

Grotto: Voices in Healthcare Finance is a production of the Healthcare Financial Management Association and written and hosted by me, Erika Grotto. Sound editing is by Linda Chandler. Brad Dennison is the director of content strategy. Our president and CEO is Joe Fifer. Registration is now open for our Revenue Cycle Conference in March. It’s going to be in Phoenix, so if you’re looking out your window at snow right now like I am, maybe book those tickets and think about how you’ll enjoy the pleasant Arizona. And if you’d like to talk with our team, reach out at [email protected].