Medicare Payment and Reimbursement

Areas of Healthcare Policy Agreement Would Target Hospitals

May 29, 2018 9:21 am

Hospitals could benefit from some bipartisan policies, such as the development of common quality measurements across all payers.

May 25—Emerging areas of bipartisan health policy agreement include hospital-targeted policies, according to policy experts.

Healthcare policy continues to face deep divides at the federal level, including over whether to replace the Affordable Care Act (ACA), bolster the ACA, or move to some variant of a single-payer system, according to analysts.

But below the level of the attention-grabbing policy battles, there are emerging areas where influential conservatives and liberals agree. And many of those commonly sought policy changes would target hospitals.

For instance, both ideological camps support a broader move to so-called site-neutral payment policies, said Topher Spiro, vice president of health policy at the left-leaning Center for American Progress (CAP). “There’s differential payment rates for the same service depending on whether it’s in a free-standing physician office or in a hospital setting,” Spiro said at a Washington, D.C., policy meeting. “And that really encourages hospital systems to gobble up physician offices, and that leads to a lot of consolidation that drives up prices.”

Hospital advocates counter that public and private payers do not pay for many of the critical roles that hospitals are expected to fill, such as 24-hour access for a range of patients.

“Hospitals providing care in their communities should not be reimbursed at the same amount as physician offices and other ambulatory facilities,” Tom Nickels, executive vice president of the American Hospital Association (AHA), wrote in an op-ed. “Doing so fails to recognize the very different clinical capabilities provided by hospitals and would threaten access to care for the patients and communities that rely on that care each day.”

Farzad Mostashari, MD, CEO of Aledade and a healthcare IT leader in the Obama administration, praised the Trump administration’s recent cuts to Medicare payments for 340B hospitals, saying such cuts also are needed to discourage hospital acquisition of physician practices.

Another bipartisan focus is on greater antitrust enforcement of hospital mergers and acquisitions.

“There could be much more aggressive antitrust enforcement of hospital mergers and consolidation,” Spiro said. “To me, it is consistent with more market principles that we not allow this to happen.”

Douglas Holtz-Eakin, president of the right-leaning American Action Forum, agreed on the growing need for “effective competition.”

“I am deeply worried about the quality of competition in some of these regions,” Holtz-Eakin said.

Hospital advocates counter that mergers and acquisitions have provided needed savings for those organizations, which have been expected to spend huge sums in recent years on implementing and improving electronic health records and other costly requirements for moving to value-based payment. For instance, a January 2017 study of hospital mergers over a 10-year period found, “on average, acquired hospitals realize cost savings between 4 and 7 percent in the years following the acquisition.” Additionally, the study authors noted that from 2015 to 2016, hospital prices increased by only 1.2 percent, according to the Bureau of Labor Statistics.

Holtz-Eakin said policy changes that cut revenue for providers and others in health care are looming—despite their opposition—because “we’re now at the point where the larger problem with the federal budget is going to dwarf that and demand some action.”

Implementing such policies is simply a “question of political will,” Spiro said.

“If a Democrat is elected president, there is going to be a push for Medicare-for-all, Medicare-for-more, Medicare-option-for-all, and these kinds of cost controls we’re talking about will be part of that coverage expansion,” Spiro said.

Spiro cited a recent Kaiser Family Foundation tracking poll that found 75 percent of the public supported a Medicare-for-all proposal if “people who currently have other forms of coverage can keep the coverage they already have.”

Holtz-Eakin opposed using savings generated by bipartisan policy changes for any form of Medicare expansion because then such savings would be negated in the same manner as many cost-saving components of the ACA (such as the controversial Independent Payment Advisory Commission).

“In the big picture, you have to bend the cost curve, free up resources, expand, and do the delivery system [changes] first,” Holtz-Eakin said. “If the first change you always want to make is, ‘Let’s expand the coverage of everything,’ then we don’t actually drive down the costs and we make the problem worse.”

Beneficial to Hospitals

Policy changes where both sides agree and that may benefit hospitals include a push to reduce providers’ administrative costs. Such burdens are largely driven by the need for providers to meet disparate requirements of numerous public and private payers.

Short of national price controls for hospitals, Spiro urged the adoption of a single set of quality measures and a single set of credentials required for all physicians—instead of separate state requirements—and a move to all-electronic claims and payment.

Holtz-Eakin agreed on the need to standardize quality measures to deliver care efficiently through Medicare Advantage (MA) and bundled payments.

“There has been 50 years of dueling metrics, and it’s not getting resolved,” Holtz-Eakin said.

Rachel Block, program officer for the Milbank Memorial Fund, said putting together a “common framework” of value measures is a larger challenge than developing value-based payment models—but the former is needed for the latter to work. A common measurement approach will be driven by those with the most market power, she said.

Key Splits

A major policy divide that has emerged is over whether to institute broad price controls for providers.

Spiro said price controls were needed not only to reduce the growth in healthcare spending but to remove the leading incentive for hospital consolidation.

He cited the Maryland approach as a potential national model. Maryland’s all-payer model, which pays hospitals the same amounts for the same services and establishes global budgets for hospitals, recently received approval from the Trump administration for a second five-year period.

In its first three years, that model achieved most of its primary goals, including keeping annual per-capita hospital revenue increases below 3.58 percent (the actual total was 1.53 percent), according to the latest report.

But Holtz-Eakin said Medicare price setting already has shown that price controls fail to reduce spending growth. Medicare spending grew 3.6 percent, to $672.1 billion, in 2016, when it comprised 20 percent of total national healthcare expenditures, according to the latest data from the Centers for Medicare & Medicaid Services.

“I would like to have price discovery by competitive entities,” such as through a process by which providers competitively bid on the cost of caring for Medicare fee-for-service and MA beneficiaries, Holtz-Eakin said.

“That’s ultimately where value has to be determined; we’re not going to have value determined by insurance companies or bureaucrats—it’s going to be people,” he said.

Spiro and Holtz-Eakin agreed that over the next two years, any large-scale healthcare reforms will occur at the state level.

Spiro highlighted approaches such as the Arkansas Health Care Payment Improvement Initiative (AHCPII), a large-scale bundled payment model that included Medicaid, private insurers, and large employers such as Walmart. It was credited with saving $54.4 million in 2015 for Medicaid and reducing costs by 4 percent for hip and knee replacements and by 8 percent for chronic obstructive pulmonary disease treatment, a CAP report noted.

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


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