Medicare Payment and Reimbursement

News briefs: CMS reduces Medicare payments by 25% for many providers as part of loan recoupment

April 26, 2021 6:27 pm

CMS on March 30 began recouping Medicare advance payments from healthcare providers.

The payments were offered as loans to providers in March and April 2020 in response to the onset of the COVID-19 pandemic. CMS was authorized to recoup payment from a given provider starting one year after the provider received its first payment.

The recoupment rate is 25% of a provider’s Medicare revenue during the first 11 months of the repayment period and 50% for the next six months.

After that, if a provider still owes on its loan, the provider’s Medicare administrative contractor will issue a demand letter for full repayment of the remaining balance. If payment is still outstanding after 30 days, interest will accrue at the rate of 4% for each ensuing month.

Recoupment specifics can be found on the remittance advice documents issued for Parts A and B claims — specifically, as an adjustment in the Provider-Level Balance section.

For providers that receive periodic interim payments, CMS won’t include repayment information in the reconciliation and settlement of final cost reports. Instead, the loans will be recouped from those payments.

With the industry still feeling the financial impact of the pandemic, hospital advocates had been pushing for the advance payments to be forgiven. But no such accommodation has been forthcoming. 

HHS should ensure 340B hospitals remain eligible despite changes in payer mix, AHA says

Hospitals participating in the 340B Drug Pricing Program could be rendered ineligible because of payer mix changes stemming from the COVID-19 pandemic, the American Hospital Association (AHA) wrote in a letter urging that steps be taken to avoid such an outcome.

Program guidelines require participating hospitals — with the exception of critical access hospitals — to have a certain Medicare disproportionate share hospital (DSH) adjustment percentage. That percentage hinges on the number of inpatient days for Medicaid and Supplemental Security Income (SSI) patients.

In a letter to Xavier Becerra, secretary of the U.S. Department of Health and Human Services (HHS), the AHA wrote, “The COVID-19 PHE [public health emergency] resulted in hospitals suspending nonurgent services and shifting resources to enable greater capacity to treat COVID-19 patients. These actions combined with a slow resurgence of patient volumes have changed hospitals’ payer mix — particularly lowering the proportion of hospital patients who are Medicaid or Medicare SSI patients.”

As a result, when filing their 2020 Medicare cost reports, hospitals are at risk of losing their 340B eligibility. That could leave them unable to provide vital services to their communities, the AHA stated.

HHS should provide “a waiver of certain 340B program eligibility criteria for 340B hospitals enrolled during the PHE that may have experienced a temporary change in payer mix due to the COVID-19 pandemic,” the AHA wrote.

Recently introduced bipartisan legislation also could provide a solution. S.B. 773 would ensure 340B hospitals remain eligible for any cost-reporting period during which the public health emergency was ongoing.

Site-neutral payments could make a big dent in healthcare spending, report finds

As policymakers and analysts continue to promote site-neutral payments in Medicare, a recent report attempts to quantify the impact of applying the policy industrywide.

As part of their Health Savers Initiative, the Committee for a Responsible Federal Budget, Arnold Ventures and West Health released a report that finds implementing site-neutral payments throughout healthcare would save at least $346 billion over the next decade.

The hospital industry opposes the policy of paying the same rate for a given service regardless of the care setting.

In 2019, HHS expanded site-neutral payments to all off-campus provider-based departments, even those that previously had been exempted. The department claimed it had authority under the Medicare statute to expand the policy.

A federal judge deemed that approach a misinterpretation of HHS’s statutory authority, but an appeals court panel overturned the decision in July 2020, saying HHS acted appropriately. Hospital plaintiffs have asked the Supreme Court to review that ruling.

Regardless of the outcome in a potential Supreme Court case, site-neutral payments wouldn’t apply to settings such as ambulatory surgery centers, stand-alone emergency departments and on-campus outpatient departments.

More widespread implementation would “lower Medicare spending, lower premiums and out-of-pocket costs for beneficiaries, and reduce the financial incentives for vertical consolidation,” the Health Savers report states.

Better integration with primary care can help address the ongoing mental health and addiction crisis, report finds

Enhanced network adequacy standards, value-based payment models and targeted investments in technology are vital to improving behavioral healthcare in a way that will meet escalating needs, according to a new report on how to better integrate behavioral healthcare with primary care.

The issue has become more urgent during the COVID-19 pandemic, panelists said during a discussion hosted by the Bipartisan Policy Center (BPC), which released the comprehensive report in March.

As rates of depression and anxiety have surged over the past year, manifesting in record-breaking levels of drug overdoses, there also has been “a growing treatment gap,” said Sheila Burke, RN, a BPC fellow and the chair of government relations and public policy at Baker Donelson Berman & Berkowitz.

“We see the percent of adults with mental health conditions receiving treatment actually decreasing rather than increasing,” Burke added.

To improve access and outcomes, an integrated approach is required. The net cost in public spending would be $2.2 billion, according to the report, based on projections of $6.9 billion in spending increases and $4.7 billion in savings.

“Behavioral comorbidities can lead to medical costs for physical conditions that are two to three times higher than those without behavioral health conditions, supporting the need for integrated care,” the report states.

Benefits of an integrated approach, as seen in a handful of states, include better access, reduced hospitalizations and improved management of diabetes and hypertension, according to the BPC report.

NFP hospital profitability plummeted in 2020 despite expense mitigation strategies, Moody’s reports

Profits unsurprisingly were down in the not-for-profit (NFP) and public healthcare sector in FY20, but management strategies helped to increase liquidity amid the COVID-19 pandemic, according to Moody’s Investors Service.

The credit-rating agency’s recently published insights on last year’s preliminary medians for the sector drew on performance data from 130 health systems. With the caveat that final FY20 results may differ significantly from the preliminary data, Moody’s reported:

  • The median operating margin for hospitals and health systems was 0.5%, down from 2.4% in FY19.
  • Median operating cash-flow margin was 6.7%, down from 8.4%.
  • CARES Act funding comprised between 14% and 100% of operating cash flow, with a median of 43%.
  • Median operating expenses increased by 4.7%, compared with 3% revenue growth.
  • Median unrestricted cash and investments rose by 27.5% due to external support (e.g., Medicare advance payments, payroll tax relief) and internal approaches (e.g., deferral of capital spending).
  • Leverage metrics were mixed, with higher debt-to-cash flow (a ratio of 3.3, compared with 2.9 over the previous four years) and lower maximum annual debt service coverage (4.1, down from 4.6) but also improved cash-to-debt metrics (200%, up from 177%).

There wasn’t much that hospitals could do about FY20 revenue trends, with growth declining by 2.9 percentage points. The suspension of elective procedures and slow pace of patient volume recovery were key factors, Moody’s reported.

Management did take steps to stem expense growth, which was 1 percentage point lower than in FY19.

Specifically, management “curtailed labor expenses and saw some reduction in supply costs as volumes declined, particularly in elective surgeries,” Moody’s reported, even though costs of personal protective equipment increased significantly.

National Academy of Medicine paper explores transformation opportunities for health systems

Coming out of the COVID-19 pandemic, health systems are “looking at new ways to address gaps in financing, infrastructure and coordination to improve the sector’s overall efficiency as well as enhance preparedness for future emergencies,” according to a new paper issued by the National Academy of Medicine.

Authored by leaders of four large health systems and two hospital associations, the paper examines priorities for healthcare transformation from the perspective of care delivery organizations.

A top policy priority should be to fix “the precarious financial foundations of America’s health systems,” the authors wrote, adding that “the ongoing financial impact of COVID-19 should prompt exploration of opportunities to improve the sector’s financial resiliency.”

Health systems can take positive steps operationally, such as by diversifying revenue streams through vertical integration and risk-based arrangements with payers. They can reduce costs and capital investments to sustain cash flow, “in some cases to avoid violating financial covenants.”

But organizations need certainty from a policy standpoint, including whether pandemic-era reimbursement approaches will be sustained. The paper specifically mentions telehealth and hospital-at-home programs as models with proven efficacy that “lacked uptake” before the pandemic because of payer concerns about supply-induced demand. 


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