Hospitals to Congress: Drop Payment Cap Proposal

The nation's four largest hospital associations and their allies at medical schools urged Congress in a letter this week to oppose a cap on payments for outpatient services in hospitals.

The cap proposal was floated earlier this year by the Medicare Payment Advisory Commission, which estimates that it could save the federal government about $1 billion.

Under the proposal, for non-emergency examinations in a hospital outpatient setting the physician would get the standard amount for the service in a hospital setting. The hospital would get the difference between the physician office payment minus the physician payment in the hospital.

The hospital associations say the proposal would reduce payments by at least 71% for 10 of the most common outpatient hospital services.

"Simply put, it is significantly damaging to beneficiaries and the providers on which they rely to enact legislation that will result in such large cuts. We urge you to oppose inclusion of these cuts in any legislation, and appreciate your continued support of our hospital and its patients," the letter stated.

The letter was co-signed by the American Hospital Association, the Association of American Medical Colleges, the Catholic Health Association of the United States, Federation of American Hospitals, and the National Association of Public Hospitals and Health Systems, and sent to every member of Congress.

Congress is already contending with $1.2 trillion in mandated cuts that take effect on Jan. 1under the Budget Control Act of 2011, which includes a 2% sequester of Medicare funding. In addition, a separate 27% cut in physician Medicare reimbursements is schedule to go into effect on Jan. 1 under the sustainable growth rate funding formula.

The MedPAC cap proposal does not appear to be on any committee agendas at least until after the November general election and the hospital associations made clear in their letter to lawmakers that they want to keep it that way.

"Knowing there is going to be tremendous pressures on policy makers to achieve more savings as we go into the next round of discussions, whether it is the physician fee fix or the bigger issues around the 'fiscal cliff,' we would just anticipate that this idea may come up again as one that is debated by policy makers," Beth Feldpush, vice president of policy and advocacy at NAPH, told HealthLeaders Media.

Feldpush says approximately 200 safety net hospitals represent about 2% of all hospitals in the United States. However, they would absorb 15% of the cap reductions—a $150 million hit—owing to their patient mix, high facilities and operations costs, and a care delivery structure that relies heavily on outpatient clinics.

"That's 15% of $1 billion: 200 hospitals; 2% of hospitals; 15% of the cuts. That is a lot," Feldpush says. "You could pretty much say that it would be incredibly challenging to stake an institution to cuts of that magnitude without seeing negative consequences in terms of the services we could offer and the people we could serve."

Much of that disproportionate hit comes because large safety net hospitals in urban settings rely on extensive ambulatory care networks. "Among NAPH member hospitals, they have on average 20 outpatient clinics. This is intentional. We manage those hard-to-reach patient populations with very complex multiple co-morbidities," Feldpush says.

"We often think of ambulatory care and the clinics providing primary care. That is certainly true, but in addition, our members have specialty clinics that often act as a medical home for those complex patient populations. For example, most of our members will have a cardiovascular clinic, a diabetic clinic, a pain clinic, cancer clinics, and the patients that we serve really don't have any other source of care to manage those really complex medical conditions."

Feldpush says capping outpatient reimbursements doesn't meld with the integrated care model that the federal government is advocating.

"As we think of moving to integrated care, providing better care in the ambulatory setting to keep people out of the hospital, reaching out to folks who don't have good access now, this proposal seems to fly in the face of that," she says.

"This proposal contradicts the agreed upon goals we are all working for, integrated care and providing care in the least-resources-intensive setting for the benefit of patients."