Court victory may not solve hospitals’ site-neutral pay problem
PHYSICIANS FEAR that a federal judge’s decision to strike down the CMS’ expansion of site-neutral payments for basic visits to a doctor’s office will further embolden hospitals to tighten their hold on markets.
“It is another arrow in the quiver of hospitals that allows them to continue to consolidate physicians and raise the cost of care,” said Jeff James, CEO of Wilmington Health, an independent physician group in southeastern North Carolina.
Bob Doherty, senior vice president of government affairs and public policy for the American College of Physicians, tweeted that the ruling will harm patients by letting hospitals add facility fees for visits to physician offices that they’ve acquired.
The American Hospital Association and Association of American Medical Colleges, two groups leading the legal fight against the site-neutral policy, were effusive in support of the ruling, saying it will “allow hospitals to maintain access to important services for patients and communities.”
But the fight is probably far from over as policymakers and regulators are likely to continue to push for payment reforms.
At the very least, economists who have called for site-neutral payment reforms for a long time say the shift won’t go away anytime soon since both liberals and conservatives support the change.
“I continue to believe that site differentials are doing harm to the healthcare system in many ways, especially reducing competition in the physician services market,” said Paul Ginsburg, director of the USC-Brookings Schaeffer Initiative for Health Policy, who characterized the decision as boiling down to a question of administrative authority rather than “good health policy.”
Joseph Antos of the American Enterprise Institute went further, arguing that if the courts ultimately block the CMS’ regulatory efforts, agency officials can always try to implement similar policies through the Center for Medicare & Medicaid Innovation.
“If this administration or a future administration wants to find a way to take a little nick out of Medicare spending in a way that is almost certainly not going to harm anyone including the hospitals, this is it,” Antos said.
The site-neutral payment policy has been in place since Jan. 1 for off-site hospital clinics that had been grandfathered into higher outpatient payment rates under an earlier law. The move is one of CMS Administrator Seema Verma’s central efforts to try to curb hospital consolidation and lower costs.
Her other big regulatory effort is revamping the 340B drug discount program by cutting Medicare Part B reimbursement to hospitals that get deeply discounted drugs from manufacturers. Hospitals are also challenging that policy in court.
Verma has made it clear all year she’s not backing down on either priority. Earlier this summer she told reporters that the CMS’ site-neutral policy and 340B cuts are connected. She sees both efforts as a way to stop anticompetitive behavior, monopolies and hospital acquisition of physician practices.
“I think it’s an enormous stretch to link the illegal reductions to 340B hospitals and the illegal payment scheme on site-neutral to consolidation,” argued Melinda Hatton, general counsel for the AHA. “Consolidation is about a lot of different forces out in the marketplace and the ability to consolidate risk and improve quality, and these payment policies I think don’t factor into that at all.”
Wilmington Health’s James pointed out, however, that hospitals—which have acquired a large number of independent oncologists since 340B was implemented in the early 1990s—get reimbursed at higher rates through their outpatient departments while receiving discounts on high-cost drugs, allowing them to pay physicians more.
“This adds cost to the healthcare system overall,” he said, adding that ultimately the government, employers and consumers pay more. “If CMS really wanted to change the dynamic, reduce the cost of care and insert competition into the system, then they should
In the long term, the outlook is even murkier. Hospital groups stand firmly opposed to any expansion of site-neutral policies, but they’re up against headwinds in the Trump administration and Congress to cut costs.
change the incentives that push folks to the most expensive centers.”
In the short term, it’s unclear how the ruling by U.S. District Judge Rosemary Collyer will affect hospitals. An agency spokesman last week said the CMS is weighing its next steps.
If the government appeals, the CMS could ask to keep the rate cuts in place while the case is active, as happened in the 340B litigation, even though a U.S. District Court judge sided with hospitals in that case as well.
In the long term, the outlook is even murkier. Hospital groups stand firmly opposed to any expansion of site-neutral policies, but they’re up against headwinds in the Trump administration and Congress to cut costs.
But Congress has struggled to combat industry lobbying even on issues that garner significant public support, like banning surprise medical bills.
A healthcare lobbyist with deep experience in the hospital sector suggested the hospital industry’s strategy of fighting the administration’s policies through lawsuits will hurt them in the end.
“The sector as a whole is not viewed favorably as solutions-based,” the lobbyist said on condition of anonymity. “It’s viewed as a cost center as opposed to a solutions factory.”
He added: “You would think these associations would recognize the (risk to the) very viability of the institutions paying their dues, not just getting through to the next billing cycle for their dues, but looking at how their space is going to survive into the next seven years.”
Hatton disputed that take, saying hospitals are “always open to talking to the administration about doing sensible things” to make healthcare more affordable.
“The lawsuits we’re talking about today certainly don’t meet that criteria,” she said. “There are many ways the administration could go at (affordability proposals) where they’d find an enormously responsive partner in America’s hospitals and health systems. If they keep implementing these policies that clearly exceed their statutory authority they’re not moving the ball forward in the most effective way that they could.” ●