Hospitals Face Payment Cuts at Outpatient Sites in Budget

  • Rate cut would affect only newly acquired facilities
  • Agreement limits planned premium increases for Medicare

Hospitals could see some Medicare payments reduced as part of a U.S. budget agreement, a change that may reduce the incentive for hospitals to buy more outpatient facilities.

The deal, brokered with the Obama administration by outgoing Republican House Speaker John Boehner, lowers payments for care delivered at hospital-owned outpatient centers, but only at newly opened or acquired ones. Hospitals would have to bill for that care under the fee schedule for doctors’ offices or outpatient sites, rather than at the higher levels allowed for care delivered in the hospitals themselves.

Lawmakers have been discussing for years how to handle the hospital billing issue, which has increased in importance as hospitals bought up doctors’ practices, according to Ipsita Smolinski, a managing director at Capitol Street. The proposal out Tuesday, by grandfathering in existing facilities, will cut hospital revenue less than some had feared, she said.

It’s “not as bad as it could have been,” she said. “It’s narrow, it doesn’t start for a couple years.”

Poor, Sicker Patients

The funding cut for outpatient Medicare services is an “untested idea” that may endanger patient access, said Thomas Nickels, executive vice president for government relations and public policy at the American Hospital Association. Poor, sicker patients are most likely to be affected, along with those in rural areas, he said in a statement.

“This package cuts health-care services for seniors to fund other programs,” he said. “Continuing to raid the Medicare Trust Fund is irresponsible.”

HCA Holdings Inc., the largest publicly traded U.S. hospital company, fell 0.4 percent to $68.80 at the New York close. The restrictions on Medicare payments for off-campus facilities are for new transactions and won’t affect current arrangements, said Victor Campbell, senior vice president at Nashville, Tennessee-based HCA.
 
“I never want to say a cut’s good, but I’ve seen worse cuts,” he said Tuesday on an earnings conference call.

Medicare Premiums

The deal also holds down a premium increase for a group of Medicare beneficiaries who otherwise would have seen their costs jump by more than 50 percent. Instead, premiums for those individuals will rise to about $120 a month from $104.90.

“This could have been a big issue for seniors,” Tricia Neuman, director of the Kaiser Family Foundation’s Program on Medicare Policy, said in a telephone interview. “There still is an increase, but it’s much lower.”

Hospitals have been hiring off-site doctors and buying their practices to increase referrals, and the proposal would lower prices paid by the Centers for Medicare and Medicaid Services, said Ana Gupte, a Leerink Partners analyst in New York.

Physician Pricing

“CMS isn’t allowing them to enjoy better pricing on employed physicians,” she said by phone. “It’s a bit of a headwind for outpatient rates, but things could have been worse.”

The proposal gives some resolution to a longstanding debate over whether outpatient services provided at hospitals and other sites should be billed at different rates, said Chip Kahn, president of the Federation of American Hospitals in Washington.

“We’ll have to see what CMS does in the way they write the regulations,” he said by telephone. “If there was a public policy response, Congress has done it now, and hopefully we can move on to other issues.”

The proposal also would require generic drugmakers to pay a rebate to Medicaid on treatments when their prices increase faster than the inflation rate. Currently, the rebate requirement applies only to branded drugs.

The measure is “an important first step to addressing barriers to patient access to needed medications,” according to a statement from the Washington-based American College of Physicians, a professional group.

A vote on the bill in the House of Representatives is planned for Wednesday.

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