One observer praised CMS for 'picking a fight with powerful hospitals' in the agency's annual update to payment proposals for outpatient services.
In a slate of proposals released late Wednesday afternoon, the Centers for Medicare & Medicaid Services proposed significant cuts to the payment hospitals receive for care they provide to Medicare patients.
The proposals call for Medicare to move away from a system that pays more for a clinic visit in the hospital outpatient setting than in a doctor's office. The idea is to move to what CMS described as "site neutral payments for clinic visits."
The proposed change—which is part of the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System rulemaking for 2019—would lower reimbursements for hospital outpatient department services to match rates set by the physician fee schedule for clinic visits, according to a CMS fact sheet.
Medicare pays about $116 for a clinic visit in an outpatient hospital setting. The change would reduce that amount by about 60% to $46, according to the agency's fact sheet. Clinic visits are the most common service billed under OPPS.
During a moderated discussion Wednesday afternoon following her speech at the Commonwealth Club of California, CMS Administrator Seema Verma addressed the disparity between reimbursements for services in outpatient hospital settings and those provided in physician offices, arguing that such an arrangement motivates consolidation among hospitals and health systems, which then buy up physician offices.
"It doesn't make sense," she said. "It doesn't make sense for taxpayers, and it certainly doesn't make sense for patients because they end up having to pay more depending on the site of service."
"It's a great example of some of the bizarre things in the Medicare program that just don't make sense and that are actually having a perverse incentive on the entire healthcare delivery system," Verma added.
University of Michigan health law professor Nicholas Bagley was among the observers who praised the Trump administration for the proposal, saying CMS is "picking a fight with powerful hospitals because it's the right thing to do."
Hospitals, however, are not pleased with the proposal.
American Hospital Association
Tom Nickels, executive vice president of the American Hospital Association, said in a statement that CMS "has once again showed a lack of understanding about the reality in which hospitals and health systems operate daily to serve the needs of their communities," adding that CMS misconstrued the intent of the law behind the payment systems.
"While the agency inappropriately characterizes these clinic visits as 'check-ups,' the reality is that hospitals serve some of the sickest, most medically complex patients in our clinics, evaluating them for everything from metastatic breast cancer to heart failure," Nickels said.
Combined with another cut to 340B hospitals, these CMS proposals appear to cut nearly $1 billion from hospitals' reimbursements, Nickels said.
America's Essential Hospitals
Bruce Siegel, MD, MPH, president and CEO of America's Essential Hospitals, said the proposed rule for Medicare's outpatient payments "would make bad policies worse." The cuts are "draconian" and could imperil healthcare access for vulnerable groups, he added.
"The [CMS] frames its proposals as empowering patients and providing more affordable choices and options," Siegel said in a statement. "But we believe these proposals only would create road blocks to care in communities across the country—communities that already struggle with care shortages and severe economic and social challenges."
Siegel took particular issue with the proposals' plan to extend reimbursement reductions under the 340B Drug Pricing Program.
"These proposals would hurt the patients and hospitals least able to afford this wrongheaded approach to cost savings," Siegel added, calling on CMS to withdraw its proposals altogether.
The advocacy group 340B Health released a statement Wednesday echoing the sentiment that the proposals "would make a bad rule worse," adding that the organization is "deeply disappointed" in what CMS has proposed to do.
"In 2018, CMS slashed $1.6 billion from Medicare outpatient drug payments to many 340B hospitals, a reduction of nearly 30 percent," the organization said. "CMS now plans to make a bad rule worse by extending the cuts to drugs provided in certain off-campus hospital clinics, including facilities providing infusion therapy for cancer patients and other high-cost drug therapies to treat chronic and life threatening conditions."
The organization pointed to bipartisan support for a bill to undo the 2018 cuts and preserve funding for 340B hospitals in the future and called on CMS to withdraw its proposals.
Blair Childs, senior vice president of public affairs for Premier, released a statement saying the group purchasing organization opposes the site-neutral payment proposal.
"This proposal will undermine high quality, cost effective care," Childs said.
The agency's proposal "fails to recognize the substantial differences between physician practices and provider-based outpatient clinics that translate into higher overhead expenses for provider-based outpatient clinics," Childs added.
Furthermore, Premier shares the AHA's concern over cuts to the 340B program, Childs said.
Farzad Mostashari, MD, co-founder and CEO of Aledade, said in a series of tweets Wednesday night that hospitals will fight the OPPS rule "bitterly" but that there could be a long-term benefit for them in it.
"The truth is that this proposal could help hospitals be more competitive in value-based contracts/ alternative payment models, and they should embrace the changes," Mostashari wrote. "If rural hospitals or AMCs need subsidies, then we should do it directly, not through distorting payment policies."
Editor's note: This story was updated to include a comment from CMS Administrator Seema Verma's moderated discussion Wednesday at the Commonwealth Club of California.
Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.
Under OPPS 2019, reimbursement for clinic visits in outpatient hospital settings would be capped at the rate paid for clinic visits in physician offices.
Hospital groups argue CMS has misconstrued the law, suggesting a legal challenge over the proposals could be plausible.
Some observers argue this change could actually help hospitals in the long run.