Payment Trends

Hospitals Targeted in Federal Cost-Saving Ideas

May 6, 2019 4:39 pm

March 6—A bipartisan group of policy advocates urged Congress to target hospitals as part of a highly anticipated legislative push on cost control.

Sen. Lamar Alexander (R-Tenn.), chairman of the Health, Education, Labor and Pensions (HELP) Committee, asked healthcare industry groups and policy advocates to offer direction for Congress’s coming initiative to cut costs in health care. Among the more than 400 responses his office received by the March 1 deadline was a set of combined recommendations from policy advocates at the right-leaning American Enterprise Institute (AEI) and the left-leaning Brookings Institution.

“The senator is reviewing comments and ideas and looks forward to working on a legislative solution,” said a spokesman.

Alexander has repeatedly highlighted his eagerness to see the AEI-Brookings response, and those recommendations were dominated by proposals that would target hospitals.

“There’s just no getting around the fact that hospitals make up a huge chunk of healthcare spending in the United States,” said Benedic Ippolito, an author of the joint letter and an economist at AEI. “So, if you want to save any substantial amount of money, it’s going to be hard to do that without having any effects on the hospitals.”

The AEI-Brookings cost-cutting proposals that would impact hospitals include:

  • Targeting merger-and-acquisition (M&A) activity
  • Eliminating any willing provider rules governing network participation
  • Requiring participation in all-payer claims databases
  • Repealing certificate of need laws
  • Requiring contracts to eliminate surprise bills
  • Expanding site-neutral payments
  • Expanding bundled payments
  • Narrowing 340B  

Specifically, AEI and Brookings urged “substantial increases in funding” for antitrust enforcement by the Federal Trade Commission and the Department of Justice’s Antitrust Division against both provider and health plan M&A.

“More funding for antitrust enforcement could have a large return in lower prices paid by consumers and employers, which in turn would increase federal revenues through the tax exclusion,” they wrote.

The proposed initiatives with the best chance of passing in the current Congress, according to Ippolito, are those targeting surprise medical bills and pushing all-payer claims databases.

The AEI-Brookings-favored approach to reducing surprise medical bills would require physicians practicing at hospitals to participate in the same insurer contracts as the hospital. However, Ippolito acknowledged that the most popular approach in Congress right now would use an arbitration-based approach.

Ippolito predicted more-conservative members of Congress would eventually oppose an arbitration approach, viewing it as merely a less transparent form of price setting.

The effort to establish all-payer claims databases (APCDs) would entail federal requirements for self-insured plans to contribute data to the repositories that collect claims records from all public and private payers operating within a state. Sixteen states have established APCDs and several more are in the process of doing so.

Chad Mulvany, a director of healthcare financial practices for HFMA, said the AEI-Brookings proposals on transparency, surprise medical bills, expanded bundled payments, and expanded site-neutral payments were most likely to garner the backing of the Trump administration. The administration has at least discussed initiatives in all four areas.

“We’ve seen this administration, like others, push the bounds of what they are willing to try to accomplish through regulatory change,” Mulvany said in an interview. “To the extent that the administration feels like they’ve got any way to do these things on their own, I would anticipate that they will.”

Although many of the proposals may not be taken up in the near term, Ippolito said the AEI-Brookings recommendations provide a blueprint for bipartisan cost-cutting initiatives that could emerge in the near future.

“It’s good that someone is taking this at least somewhat seriously,” Ippolito said. “It is in my view the single biggest outstanding policy priority in health care—how do we actually reduce costs to the extent that folks on the Hill are willing to engage in this.”

Health Plan Priorities

Health plans echoed many of the AEI-Brookings initiatives that focus on hospitals, such the request for more antitrust enforcement funding for the FTC and DOJ. America’s Health Insurance Plans (AHIP) also urged a broadened FTC review of all provider consolidation and reconsideration of “any willing provider” rules.

AHIP’s letter urged a surprise-bill response that would base payments to out-of-network providers on a federal standard.

The Blue Cross and Blue Shield Association (BCBSA) echoed the AEI-Brookings proposals to advance site-neutral payment policies.

Provider Ideas

Hospital and physician advocates urged a range of cost-cutting measures, including a more aggressive move toward value-based payments like the bundled payment models cited by AEI and Brookings.

For instance, HFMA’s letter recommended that the government continue to experiment with models that incentivize changes to care delivery. Specifically, the government should encourage plans sold to federal employees to make a percentage of their payments to providers through alternative payment models (APMs) that hold providers at risk for the total cost of care.

 A letter from America’s Physician Groups (APG) urged Congress to better incentivize health plans to work with providers on establishing APMs with downside risk.

“We remain concerned that adequate incentives on the plan side do not exist and that plans remain reluctant to delegate risk downstream outside of California,” wrote Donald Crane, president and CEO of APG.

The American Hospital Association urged Congress to ensure the stability and affordability of the individual health insurance marketplaces. The House of Representatives this week began considering three such stabilization bills.


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