Medicare Payment and Reimbursement

Hospital Cuts in Trump Budget Called ‘Troubling’

February 13, 2018 3:30 pm

Although the cuts and policies included in the budget would require congressional passage of a separate appropriation bill, individual administration budget proposals frequently appear in such bills.

Feb. 13—Adverse impacts from federal spending cuts were just one type of concern that hospital advocates raised this week about the Trump administration’s proposed budget.

The administration on Feb. 12 proposed a $4.4 trillion budget that would target the opioid epidemic and high drug costs but also affect hospitals in a variety of ways. Although budgets need to be approved by Congress and frequently are extensively changed, it is common for some of the specific proposals to end up in congressional funding bills.

The budget calls for repealing the Affordable Care Act (ACA)—along the lines of the so-called Graham-Cassidy-Heller-Johnson bill—and shifting Medicaid to block grants and per capita caps. The budget estimates $675 billion in net mandatory savings from enactment of the ACA repeal-and-replace bill.

“This two-part approach in the budget ensures that states have the financial support they need to transition away from Obamacare, while allowing greater choice and competition in healthcare mar­kets and more sustainable government health spending over the long term,” the budget states.

However, the reductions in planned future spending increases, as included in the repeal-and-replace legislation that was rejected in 2017 by the Senate, drew renewed concerns from hospital advocates.

“Unfortunately, this budget proposal would weaken the important safety net that Medicaid offers for millions of Americans who rely on the program for their healthcare needs,” Rick Pollack, president and CEO of the American Hospital Association, said in a written statement. “Access to care for vulnerable, low-income people including the elderly, disabled, children and veterans could be jeopardized by making large reductions in the program.”

The budget requests $68.4 billion for the U.S. Department of Health and Human Services (HHS), a $17.9 billion (21 percent) decrease from the 2017 enacted level, according to the HHS budget. Also included are $295 billion in cuts to mandatory healthcare programs, such as Medicare and Medicaid.

Bad Debt

Specific policy changes that drew the strongest hospital concerns include the budget’s proposal to remove uncompensated-care payments from the Inpatient Prospective Payment System in FY20 and establish a new process that would distribute those payments to hospitals based on their share of charity care and non-Medicare bad debt, as reported on Worksheet S-10 of hospital cost reports. Although the budget downplays the short-term impact of the policy on Medicare Disproportionate Share Hospital (DSH) payments, the proposal is projected to save the federal government $69.5 billion over 10 years.

Pollack described as “troubling” such cuts in assistance to hospitals that help defray some of the costs of caring for low-income seniors.

Another $37 billion in savings over 10 years would come from reducing the share of Medicare bad debt payment for beneficiaries’ non-payment of deductibles and coinsurance from 65 percent to 25 percent over three years, beginning in FY19. Exempted hospitals include rural hospitals with fewer than 50 beds and Critical Access Hospitals.

“These hospitals serve large low-income populations and face substantial financial pressure,” Pollack said about Medicare DSH payment recipients.

Another $34 billion in 10-year savings would come from a policy adjustment to allow Medicare to pay all hospital-owned off-campus physician offices at physician office rates. The proposal would expand application of the site-neutral payment policy from facilities constructed after Nov. 2, 2015, to include all off-campus hospital outpatient departments, including emergency departments and cancer hospitals.

The Federation of American Hospitals (FAH) noted that such rate cuts would come as hospitals are experiencing the lowest Medicare margins in history, according to the Medicare Payment Advisory Commission.

“Enough is enough,” FAH said in a written statement. “These unsustainable cuts would directly impact hospitals’ ability to serve patients.”

Also drawing concerns was the proposal for a new payment system for post-acute care providers such as long-term care hospitals, inpatient rehabilitation facilities, skilled nursing facilities, and home health agencies. The budget would cut $80 billion over 10 years by lowering Medicare payments for those providers from FY19 to FY23 and then implementing a unified post-acute care payment system.

Payments would be based on episodes of care and patient characteristics rather than the site of service.

Pollack described the proposal as “staggering cuts to payments for these specialized services.”

340B Cuts

The budget also would add to recent cuts to the 340B discount drug program. It proposed an FY19 policy to redistribute savings from a 2018 change to the program—reducing payments to hospitals for 340B drugs from average sales price (ASP) +6 percent to ASP -22.5 percent—to only hospitals that provide uncompensated care equaling at least 1 percent of their patient care costs. Hospitals not meeting that threshold would not get the redistributed 340B savings from the 2018 policy change. Although the proposal is expected to provide Medicare savings, an estimated amount was not given.

But hospital advocates saw the potential for big financial impacts.

“The administration has proposed to take money away from hospitals that serve high volumes of low-income and rural patients, harming access to care for Americans who are underinsured and enrolled in Medicaid and Medicare,” 340B Health, a coalition of hospitals in the program, said in a written statement. “This policy would not lower drug prices and could, in fact, lead to higher profits for drug manufacturers.”

The 2018 changes to 340B already have caused hospitals in the program to cut back on services and personnel and have weakened their ability to serve low-income and rural patients, according to the organization. The group urged enactment of legislation to reverse the 2018 cuts, which was sponsored by Rep. David McKinley (R-W.Va.) and cosponsored by 185 members of the House.

Clinician Training

The budget would consolidate graduate medical education (GME) spending in Medicare, Medicaid, and the Children’s Hospital GME Payment Program into a mandatory GME capped-grant program. The new approach, which would cut GME funding by $48 billion over 10 years, would seek to bolster medically underserved communities and areas with health professional short­ages.

The budget also would eliminate $451 million in other health professional and training programs. Those cuts stem from “lack evidence that they significantly improve the nation’s health workforce,” according to the administration.

Several hospital advocates decried the reduced clinician training, which would come in the lead-up to a projected 104,900 physician shortage by 2030.

“The president’s proposal would exacerbate the projected physician shortage by forcing teaching hospitals to absorb untenable cuts and make difficult choices between training more physicians for the future needs of the nation and maintaining life-saving clinical services for their communities,” Darrell Kirch, MD, president and CEO of the Association of American Medical Colleges, said in a written statement.

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


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