Medicare Payment and Reimbursement

Medicare Extenders and DSH Delay Face Uncertain Future

February 7, 2018 9:55 am

The funding plans come as CMS prepares to release its overall rural strategy, which would include a rural provider impact analysis of all new programs and policy changes.

Feb. 6—Hospitals have faced a range of payment cuts since a regularly renewed package of Medicare funding lapsed at the end of 2017. But those cuts soon could be reversed.

The House of Representatives passed a continuing resolution, which would fund the operations of the federal government through late March, and the bill includes the so-called Medicare extenders package and a two-year delay in cuts to Medicaid disproportionate share hospital (DSH) payments. A funding package must be passed by Feb. 8, when the previous temporary funding measure for the federal government expires. However, the bill’s fate was uncertain because the Senate rejected it Thursday shortly before the deadline for this update.

“We’re very pleased with that,” Brock Slabach, senior vice president for member services at the National Rural Health Association (NRHA), said in reference to the inclusion of the Medicare extenders in the latest federal funding bill. “Now if we can just get it through Congress by Thursday night, that will be the next significant step that we are thinking about.”

An estimated 830 rural hospitals were financially impacted by the expiration of Medicare extenders, which specifically focus on such institutions.

Hospitals also were pleased that the funding bill did not implement modifications to payments for critical access hospital swing beds to pay for either the Medicare extenders or the delay in DSH cuts.

“Essential hospitals depend on Medicaid DSH to meet this safety-net mission,” Bruce Siegel, MD, president and CEO of America’s Essential Hospitals, said in a written statement. “These cuts, underway since Oct. 1, put that mission at risk.”

Although the $2 billion in FY18 Medicaid DSH cuts began in October, much of the impact was going to be felt later this year. The cuts were required by the Affordable Care Act (ACA) and scheduled to total $43 billion by FY25.

The Medicare extenders and other healthcare provisions include:

  • Renewal of the Medicare Dependent Hospital Program, which expired Sept. 30
  • Renewal of the enhanced Low-Volume Adjustment Program, which expired Sept. 30
  • Renewal for five years of the ambulance add-on payment program, which expired Sept. 30
  • Repeal of the Medicare payment cap on therapy services
  • Removal of the rental cap for durable medical equipment under Medicare for speech-generating devices
  • Extension on a permanent basis of special needs plans in Medicare Advantage
  • Extension for two years of the work geographic practice cost index (GPCI) floor, which boosts payments for the work component of physician fees in areas where labor costs are lower than the national average
  • Extension for five years of the Home Health rural add-on payment
  • Extension for two years of funding for Federally Qualified Health Centers (FQHCs)
  • Extension for two years of funding for the National Health Service Corps, Teaching Health Center Graduate Medical Education, Family-to-Family Health Information Centers, the Sexual Risk Avoidance Education Program, and the Personal Responsibility Education Program

The funding offsets to the bill’s healthcare provisions include cuts to the ACA’s Prevention and Public Health Fund, modifications to long-term care hospital payments, and cancellation of unspent money in the Medicare and Medicaid improvement funds.

Hospital Impacts

Organizations that qualify for payments in the Medicare Dependent Hospital program have the lowest profits of any type of rural hospital and have particularly struggled since some of the extenders expired Sept. 30, said Diane Calmus, government affairs and policy manager for NRHA.

“We keep getting hit with cuts at these rural hospitals that are most vulnerable,” Calmus said in an interview.

Eighty-three rural hospitals have closed since 2010, and 674 additional facilities—one-third of rural hospitals—are vulnerable to closure, according to iVantage Health Analytics.

“And we already know which rural hospital is going to be number 84,” Calmus said, referring to a Tennessee hospital that has announced plans to close.

Rural hospitals also are bracing for the impact of cuts to the 340B discount drug program after those reductions took effect Jan. 1, Calmus said.

Other Priorities

Assuming the healthcare provisions in the continuing resolution are enacted, among the next legislative priorities for rural hospitals is passage of the Save Rural Hospitals Act. That bill would create a new Medicare funding model that better funds alternatives to inpatient hospitals, in keeping with a shift of many services to outpatient settings.

“But we haven’t changed the way we pay for that care,” Calmus said. “So we’re still relying on inpatient bed days to cross-subsidize other necessary care, such as emergency rooms.”

The push for the bill is part of rural hospitals’ efforts to get federal legislators to look at health care as infrastructure.

“Not all communities want to give up their inpatient capacity, but some communities don’t need it,” Calmus said, noting that some hospitals have very low daily censuses or are located near other inpatient facilities.

CMS’s Rural Strategy

The inclusion of key rural hospital provisions in the federal funding bill came as the Centers for Medicare & Medicaid Services (CMS) revealed its plans to launch an overall rural health strategy.

The strategy aims to “help us achieve a vision for equitable rural health,” Seema Verma, administrator for CMS, said at an NRHA meeting this week in Washington, D.C.

Among the five overall objectives of the strategy is the application of “a rural health lens” to all CMS programs and policies, she said.

“Anytime anyone brings me a policy or program, they have to say in their presentation how this is going to impact rural communities,” Verma said. “What challenges will they face and how are we going to overcome and address those issues?”

Slabach saw that plank of the CMS strategy as particularly important for rural providers.

“It’s an important step along the way of CMS’s recognition of rural priorities and treating us not separate but distinct in terms of the approach to policymaking,” he said.

The second component of the CMS strategy aims to improve access to care through “provider engagement and support,” Verma said. That means expanding opportunities for allied healthcare professionals to provide more care in rural and frontier communities. CMS also plans expanded technical assistance to providers.

“As we’re putting out policies, we know that rural providers may need more support in order to implement those policies,” Verma said.

Other parts of the strategy include expanding the use of telehealth, increasing the provision of Medicare information to patients, and increasing the use of partnerships to achieve rural health goals.

“Taken together, these objectives will help address the unique healthcare challenges facing rural America,” Verma said.

This article was updated Feb. 8 with legislative developments.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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