Payment Trends

Continued 340B eligibility is at risk for hundreds of hospitals thanks to pandemic-related factors

As published in the March 2024 issue of hfm, the following is a monthly roundup of top news for healthcare finance professionals.

March 1, 2024 8:36 am

Hospitals that rely on savings from the 340B Drug Pricing Program should examine the possibility that they will soon be rendered ineligible.

Several factors are having an industrywide impact on the disproportionate share hospital adjustment percentage, and if that tally drops below a certain threshold on a hospital’s Medicare cost report, the hospital cannot receive 340B discounts.

Roughly 425 hospitals across 49 states are in jeopardy of losing eligibility upon filing their FY23 cost report, according to data provided by the National Rural Health Association (NRHA). Others could see reductions in their allocated 340B savings.

“Particularly for smaller rural hospitals that don’t have a really large administrative staff, it’s just something that would fly under the radar,” said Alexa McKinley, JD, regulatory affairs manager with NRHA.

Congress made a waiver available at the end of 2021, but the accommodation ended after the FY22 cost-reporting period. Advocates are not confident another waiver will be provided. The earlier reprieve may have led hospitals to overlook the need to track their eligibility going into the current reporting period, McKinley noted.

New regulations should bring providers a measure of relief from prior authorization headaches

Hospitals and other healthcare providers hailed a newly published final rule designed to improve prior authorization and the electronic exchange of health information.

The Interoperability and Prior Authorization rule sets requirements for Medicare Advantage health plans, state Medicaid programs/Children’s Health Insurance Programs, and Medicaid managed care organizations, all of which, starting in 2026, must send prior authorization decisions within 72 hours for urgent requests and seven calendar days for standard requests.

“For some payers, this new time frame for standard requests cuts current decision time frames in half,” CMS wrote in a news release.

Payers will need to include a specific reason for denying authorization, theoretically facilitating resubmission of the request or submission of an appeal. They also will need to publicly report their prior authorization metrics, thereby increasing transparency and potentially affecting consumer choice of plans.

“With this final rule, CMS addresses a practice that too often has been used in a manner that leads to dangerous delays in patient treatment and clinician burnout in the healthcare system,” Rick Pollack, president and CEO of the American Hospital Association, said in a written statement.

The rule also requires payers to incorporate application programming interfaces for better information sharing with patients, providers and other payers starting in 2027.

Hospitals say Supreme Court should hear a case that affects DSH payments

Hospital advocacy groups hope the Supreme Court will review a lower-court ruling that has adverse implications for Medicare disproportionate share hospital (DSH) payments.

Six groups on Feb. 2 submitted an amicus brief to the Supreme Court regarding an appeals court’s 2023 decision backing HHS’s interpretation of the DSH payment formula. HHS has long said the formula includes a hospital’s share of patients who are eligible for Supplemental Security Income (SSI) benefits only for patients who receive SSI payments during the month that they are in the hospital.

Hospital plaintiffs argue that patients should be included in the numerator of the formula’s Medicare fraction if they are enrolled in the SSI program — even if they are not receiving payments during the month of their hospitalization.

Both a district court and the U.S. Court of Appeals for the District of Columbia Circuit have sided with HHS in the case, Advocate Christ Medical Center, et al. v. Becerra, in which the plaintiffs are more than 200 hospitals across 32 states.

A proposed rule would give Medicare beneficiaries new options for appealing their hospital patient status

CMS has issued a proposed rule that would affect the appeals process for some patients whose status is reclassified from inpatient to outpatient observation during a hospital stay.

After a 2020 court ruling that was upheld at the appellate level in 2022, HHS and CMS were obligated to create additional appeals processes. The processes would apply to Medicare beneficiaries whose status was reclassified during a stay and who either:

  • Were in the hospital for at least three days but designated as an inpatient for fewer than three days (thus affecting their eligibility for skilled nursing facility coverage) or
  • Did not have Medicare Part B coverage

As described in the rule, processes would include:

  • An expedited appeal available to beneficiaries while hospitalized, with a decision to be rendered within one day
  • A standard appeal for beneficiaries post-hospitalization, with a decision to be rendered within two days
  • A retrospective review for beneficiaries whose hospitalization took place in 2009 or later

Hospitals reached steadier ground financially as they moved into 2024

Hospitals came into 2024 with financial momentum, at least relative to the previous few years.

The year-to-date median hospital operating margin reached 2.3% in December, the high mark for 2023 and the 10th consecutive month of positive margins, according to the latest available data from Syntellis Performance Solutions, part of Strata Decision Technology. The year-over-year (YOY) increase for December was 2 percentage points for both median operating margin and operating EBITDA margin.

Volumes and revenues showed promising signs. Outpatient revenue surged by 8.7% YOY, while inpatient revenue climbed by 4.3% and gross operating revenue by 6.8%. Adjusted discharges rose by 5.3%, adjusted patient days by 1.2% and emergency department visits by 2.2%. However, operating room minutes dipped by 0.5%.

There was a notable reduction, 4.1%, in average length of stay for 2023 compared with 2022. That may indicate an easing of the operational issues that snagged patient throughput.

Cost of treating inpatients with COVID-19, 2020-22

Researchers examined 1.3 million inpatient stays nationwide over a two-year period beginning in March 2020. The adjusted direct cost to provide treatment was $11,275.

Treatment intensityAdjusted mean cost to treat, March 2020 to March 2022
Presented to ED$11,519
COVID-19 principal diagnosis$11,794
ICU stay$12,490
Transferred in$12,520
Noninvasive mechanical ventilation$12,621
Invasive mechanical ventilation$20,941
Extracorporeal membrane oxygenation$36,484
Source: Kapinos, K.A., Peters Jr., R.M., Murphy, R.E., et al., “Inpatient Costs of Treating Patients with COVID-19,” JAMA Network Open, Jan. 3, 2024


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