MedPAC backs Medicare changes to increase hospital pay in 2021 by up to 3.3%
Congress’s leading Medicare advisers want hospitals to garner a 2% rate increase and up to a 0.8% quality bonus for 2021.
The Medicare Payment Advisory Commission (MedPAC) recently gave preliminary approval to a recommendation that CMS increase Medicare hospital inpatient and outpatient rates by the statutory 2.8% but use a portion to fund a new value-focused payment system. If Congress does not create such a system, then CMS should default to providing the 2.8% rate increase, the commissioners said.
MedPAC’s recommended Hospital Value Incentive Program would replace four existing Medicare hospital quality payment programs:
- Hospital Inpatient Quality Reporting
- Hospital Readmissions Reduction
- Hospital-Acquired Condition Reduction
- Hospital Value-Based Purchasing
Eliminating the existing quality programs would remove associated cuts that amount to 0.5% of payment, bringing the potential hospital payment increase to 3.3%.
Gap between expenses and revenues narrows for community hospitals
Community hospital expenses inched closer to revenues during a recent five-year period, according to the latest industry survey.
Among the 5,198 community hospitals surveyed, total net revenues (including non-patient-care revenue, both operating and nonoperating) in 2014 outpaced total expenses (including non-patient-care expenses) by 9%, or $75 billion. But by 2018, revenues were only 8%, or $83 billion, higher than expenses. The findings were included in the American Hospital Association’s recently released compendium of 2018 data collected directly from the 6,146 U.S. hospitals.
“Expenses are increasing faster than net revenue, which suggests hospitals aren’t financially viable long-term unless this trend reverses,” said Chad Mulvany, a director of healthcare financial practices with HFMA.
Another key development was the narrowing gap between inpatient and outpatient revenue. Inpatient revenues were $206 billion, or 16%, higher than outpatient revenues in 2014. But by 2018, inpatient revenues were higher by only $55 billion, or 3%.
“This more or less confirms the trend that everyone’s talking about,” Mulvany said. “While most places have relatively good inpatient costing systems, hospitals need to do a better job on costing across the range of outpatient settings.”
Commissioner: Increased FTC scrutiny of hospital deals coming
Federal regulators plan to challenge “a number” of ongoing hospital deals and are considering widening their net to include more such transactions, a commissioner said.
Christine Wilson, a member of the Federal Trade Commission (FTC), said at a Jan. 16 healthcare policy event in Washington, D.C., that the agency is focused on hospital deals and has reexamined its past approaches.
“We are intent on challenging every hospital merger that’s going to produce anti-competitive effects,” Wilson said at the gathering of the Council for Affordable Health Coverage. “We have a number in the pipeline right now that we are looking at.”
The agency also may increase the scope of hospital mergers and acquisitions that it challenges in federal court if an ongoing review of data indicates completed transactions have reduced consumer choice.
“We’re conducing more retrospectives to make sure that we are making the right calls,” Wilson said. “And if we sort of need to change the threshold at which we challenge those deals to preserve competition for consumers, we will do that, absolutely.”
Prominent tracking companies differ on their assessment of 2019 hospital deal volume. For instance:
- Kaufman Hall found total announced deals remained steady in 2019, with 92 transactions, compared with 90 in 2018.
- Ponder & Co. concluded that announced transactions plummeted to 85, or almost 25% fewer than the 116 it found in 2018.
New Medicaid waivers draw concern from hospitals, optimism from others
Hospital advocates were quick to denounce a new Medicaid waiver option that critics liken to “block grants,” while others see it providing benefits, such as increasing the number of states that expand Medicaid eligibility.
Key components of CMS's Healthy Adult Opportunity demonstration include:
- Establishing spending targets either based on annual total expenses or on a per-enrollee basis
- Waiving requirements for retroactive coverage
Chip Kahn, president and CEO of the Federation of American Hospitals, said the waivers will create roadblocks for patients to access care and will threaten Medicaid coverage for millions more.
But Matt Salo, executive director of the National Association of Medicaid Directors, said that “this could be an attractive option for red states to do the Medicaid expansion” allowed under the Affordable Care Act.