As the U.S. prepares to end the COVID-19 public health emergency, hospitals are facing a major cut in Medicare payments used to treat patients diagnosed with the disease.
Since January 2020, hospitals nationwide have received a 20 percent increase in the Medicare payment rate through the hospital inpatient prospective payment system to treat COVID-19 patients — that policy ends May 11.
The sunsetting of the three-year policy is a key concern for the AHA because of its financial implication for hospitals already struggling with increased labor costs and inflation.
From January 2020 to November 2021, payments for the 1 million traditional Medicare patients hospitalized with COVID-19 totaled $23.4 billion, or more than $24,000 per patient, according to lobbying and law firm Brownstein.
The end of the policy also has the potential to increase medical costs for patients hospitalized with COVID-19. If patients must pay higher costs for COVID-19-related services, they may be less inclined to get tested or even seek treatment.
“It means there will be less testing in this country, and likely less treatment because not everyone can afford it,” Jose Figueroa, MD, assistant professor of health policy and management at the Harvard T.H. Chan School of Public Health, told Time Jan. 31. “Will this change the trajectory of the pandemic? It’s something we are going to have to watch.”
As of Feb. 8, the nation’s seven-day COVID-19 case average was 40,404, a 1 percent decrease from the previous week’s average. The rate of decrease has slowed in the last two weeks — the CDC’s last weekly report published Feb. 3 reported a 6.7 percent drop in cases.
The seven-day hospitalization average for Feb. 1-7 was 3,665, a 6.2 percent decrease from the previous week’s average and down from an 8.4 percent drop in cases a week prior.
On Wednesday, a joint Food and Drug Administration (FDA) advisory panel unanimously recommended that the anti-opioid overdose drug Narcan (known generically as naloxone) be made available in nasal spray form without a prescription. It’s highly likely the FDA will grant OTC approval to Narcan next month, which could make it more widely available to the public as soon as this summer.
The Gist: Narcan has become one of the most essential tools to combat the unrelenting epidemic of opioid-related drug overdoses, which claimed a record 107K lives in 2021. Even though the medication can be prescribed to at-risk individuals and others who are in close contact with drug users, access thus far has been limited mostly to emergency responders and outreach workers.
While the US has successfully reduced the availability of the prescription opioids that initially sparked the crisis, a majority of recent deaths are attributed to synthetic opioids like fentanyl. This much-needed policy change acknowledges that efforts to restrict drug supply have stalled, and shifts the focus to broadening access to effective harm-mitigation tools.
As community leaders on the frontline of the opioid epidemic, hospitals and providers can play a valuable role in publicizing expanded Narcan availability.
This week, the Biden administration released a roadmap for implementing three new drug pricing pilots through the Centers for Medicare and Medicaid Innovation (CMMI). These models seek to offer certain common generic drugs to Medicare beneficiaries for two dollars per month, test new ways for how Medicaid pays for expensive cell and gene therapies, and explore alternative reimbursement models for drugs that receive accelerated Food and Drug Administration approval.
The Gist: On the heels of last week’s State of the Union Address, the announcement of these pilots exemplifies the kind of health policy efforts we expect across the remainder of President Biden’s current term: smaller, incremental initiatives to curb healthcare costs at the margins.
But given that all these initiatives have lengthy timelines, in part to allow for industry input, they will likely require the support of the next administration, Biden’s or otherwise, to reach full implementation.
Responding to the Centers for Disease Control and Prevention’s (CDC) latest Youth Risk Behavior Survey for 2011-2021, an article in The Atlantic attempts to make sense of the historic levels of anxiety and depression being reported by today’s teens, especially girls and those who identify as lesbian, gay, or bisexual (the survey does not track trans identity).
The survey, which is the definitive measure of youth behavior and mental health in the country, found nearly 60 percent of teenage girls reported “persistent feelings of sadness or hopelessness”, and that the share contemplating suicide grew by 50 percent since 2011. The article explores several possible drivers, including a pandemic-induced effect that could subside, pervasive exposure to social media, the normalization of discussing mental distress, and the outcome of growing up with ongoing crises like school shootings and climate change. But none of the explanations fully accounts for the alarming crisis, nor do any of them present easily workable solutions.
The Gist: Echoing the drug overdose epidemic, the unfolding crisis in teen mental health is difficult for providers to address because many victims don’t access healthcare services until their conditions deteriorate to the point of requiring hospitalization, often from a suicide attempt or an overdose.
And when teenagers in mental health crisis present to emergency departments, hospitals are often forced to board them for days,as the number of psychiatric treatment facilities for teens has dropped by 30 percent from 2012 to 2020.
These data should be a call for providers to focus more upstream diagnosis and care, by partnering with children, families, schools, and other community organizations.
President Joe Biden last night highlighted several healthcare priorities during his State of the Union address, including efforts to reduce drug costs, a universal cap on insulin prices, healthcare coverage, and more.
COVID-19
In his speech, Biden acknowledged the progress the country has made with COVID-19 over the last few years.
“Two years ago, COVID had shut down our businesses, closed our schools, and robbed us of so much,” he said. “Today, COVID no longer controls our lives.”
Although Biden noted that the COVID-19 public health emergency (PHE) will come to an end soon, he said the country should remain vigilant and called for more funds from Congress to “monitor dozens of variants and support new vaccines and treatments.”
The Inflation Reduction Act
Biden highlighted several provisions of the Inflation Reduction Act (IRA), which passed last year, that aim to reduce healthcare costs for millions of Americans.
“You know, we pay more for prescription drugs than any major country on earth,” he said. “Big Pharma has been unfairly charging people hundreds of dollars — and making record profits.”
Under the IRA, Medicare is now allowed to negotiate the prices of certain prescription drugs, and out-of-pocket drug costs for Medicare beneficiaries are capped at $2,000 per year. Insulin costs for Medicare beneficiaries are also capped at $35 a month.
“Bringing down prescription drug costs doesn’t just save seniors money,” Biden said. “It will cut the federal deficit, saving tax payers hundreds of billions of dollars on the prescription drugs the government buys for Medicare.”
Caps on insulin costs for all Americans
Although the IRA limits costs for seniors on Medicare, Biden called for the policy to be made universal for all Americans. According to a 2022 study, over 1.3 million Americans skip, delay purchasing, or ration their insulin supply due to costs.
“[T]here are millions of other Americans who are not on Medicare, including 200,000 young people with Type I diabetes who need insulin to save their lives,” Biden said. “… Let’s cap the cost of insulin at $35 a month for every American who needs it.”
With the end of the COVID-19 PHE, HHS estimates that around 15 million people will lose health benefits as states begin the process to redetermine eligibility.
The opioid crisis
Biden also addressed the ongoing opioid crisis in the United States and noted the impact of fentanyl, in particular.
“Fentanyl is killing more than 70,000 Americans a year,” he said. “Let’s launch a major surge to stop fentanyl production, sale, and trafficking, with more drug detection machines to inspect cargo and stop pills and powder at the border.”
He also highlighted efforts by to expand access to effective opioid treatments. According to a White House fact sheet, some initiatives include expanding access to naloxone and other harm reduction interventions at public health departments, removing barriers to prescribing treatments for opioid addiction, and allowing buprenorphine and methadone to be prescribed through telehealth.
Access to abortion
In his speech, Biden called on Congress to “restore” abortion rights after the U.S. Supreme Court overturned Roe v. Wade last year.
“The Vice President and I are doing everything we can to protect access to reproductive healthcare and safeguard patient privacy. But already, more than a dozen states are enforcing extreme abortion bans,” Biden said.
He also added that he will veto a national abortion ban if it happens to pass through Congress.
Progress on cancer
Biden also highlighted the Cancer Moonshot, an initiative launched last year aimed at advancing cancer treatment and prevention.
“Our goal is to cut the cancer death rate by at least 50% over the next 25 years,” Biden said. “Turn more cancers from death sentences into treatable diseases. And provide more support for patients and families.”
According to a White House fact sheet, the Cancer Moonshot has created almost 30 new federal programs, policies, and resources to help increase screening rates, reduce preventable cancers, support patients and caregivers and more.
“For the lives we can save and for the lives we have lost, let this be a truly American moment that rallies the country and the world together and proves that we can do big things,” Biden said. “… Let’s end cancer as we know it and cure some cancers once and for all.”
Healthcare coverage
Biden commended the fact that “more American have health insurance now than ever in history,” noting that 16 million people signed up for plans in the Affordable Care Act marketplace this past enrollment period.
In addition, Biden noted that a law he signed last year helped millions of Americans save $800 a year on their health insurance premiums. Currently, this benefit will only run through 2025, but Biden said that we should “make those savings permanent, and expand coverage to those left off Medicaid.”
Advisory Board’s take
Our questions about the Medicaid cliff
President Biden extolled economic optimism in the State of the Union address, touting the lowest unemployment rate in five decades. With job creation on the rise following the incredible job losses at the beginning of the COVID-19 pandemic, there is still a question of whether the economy will continue to work for those who face losing Medicaid coverage at some point in the next year.
The public health emergency (PHE) is scheduled to end on May 11. During the PHE, millions of Americans were forced into Medicaid enrollment because of job losses. Federal legislation prevented those new enrollees from losing medical insurance. As a result, the percentage of uninsured Americans remained around 8%. The safety net worked.
Starting April 1, state Medicaid plans will begin to end coverage for those who are no longer eligible. We call that the Medicaid Cliff, although operationally, it will look more like a landslide. Currently, state Medicaid regulators and health plans are still trying to figure out exactly how to manage the administrative burden of processing millions of financial eligibility records. The likely outcome is that Medicaid rolls will decrease exponentially over the course of six months to a year as eligibility is redetermined on a rolling basis.
In the marketplace, there is a false presumption that all 15 million Medicaid members will seamlessly transition to commercial or exchange health plans. However, families with a single head of household, women with children under the age of six, and families in both very rural and impoverished urban areas will be less likely to have access to commercial insurance or be able to afford federal exchange plans. Low unemployment and higher wages could put these families in the position of making too much to qualify for Medicaid, but still not making enough to afford the health plans offered by their employers (if their employer offers health insurance). Even with the expansion of Medicaid and exchange subsidies, it, is possible that the rate of uninsured families could rise.
For providers, this means the payer mix in their market will likely not return to the pre-pandemic levels. For managed care organizations with state Medicaid contracts, a loss of members means a loss of revenue. A loss of Medicaid revenue could have a negative impact on programs built to address health equity and social determinants of health (SDOH), which will ultimately impact public health indicators.
For those of us who have worked in the public health and Medicaid space, the pandemic exposed the cracks in the healthcare ecosystem to a broader audience. Discussions regarding how to address SDOH, health equity, and behavioral health gaps are now critical, commonplace components of strategic business planning for all stakeholders across our industry’s infrastructure.
But what happens when Medicaid enrollment drops, and revenues decrease? Will these discussions creep back to the “nice to have” back burners of strategic plans?
In a guest essay for the New York Times this week, Dr. Eric Reinhart argues that physician burnout is not solely a product of physicians’ deteriorating working conditions, but is also driven by a loss of faith in the larger US healthcare system.
He notes that physicians have begun to lose hope in their ability to improve the system in which they work. As outpourings of appreciation for heroic healthcare workers have ended, physicians find themselves working in a system whose myriad structural flaws have been exacerbated by the pandemic. While the system might serve certain physician groups well (particularly specialists who are advantaged by the American Medical Association’s billing code structures), it often fails the patients who trust them for their care, and doctors “are now finding it difficult to quash the suspicion that our institutions, and much of [their] work inside them, primarily serve a moneymaking machine”.
The Gist:While elevating burnout to the level of culture, ideology, and faith in the US healthcare system may be met with skepticism by health system leaders interested in concrete solutions to their workforce problems, it’s important to acknowledge that material benefits and operational improvements may not fully solve engagement challenges.
Compared to peer nations, our healthcare system can be uniquely seen as unfair and unequal, whether because of medical debt, maternal mortality, or declining life expectancies—and many providers feel ill-equipped to address these concerns in their daily work.
This piece serves as a reminder of why most clinicians chose healthcare in the first place: to save lives and help people. The younger generation of physicians isrethinking what that mission means, and how it should include more than just care delivery—and they’re more open to aggressive policy solutions to address systemic inequalities.
In his second annual State of the Union address to Congress on Tuesday, President Biden pointed to his accomplishments in shoring up the Affordable Care Act, and presented a fairly modest healthcare agenda that could garner bipartisan support.
Though the back-and-forth with Republican lawmakers over Medicare cuts made headlines, his prepared remarks focused primarily on drug costs, as he touted Medicare’s new drug negotiation powers and called for Medicare’s $35 monthly insulin cap to be extended to commercial health plans.
The Gist: The fate of the President’s drug cost proposals, along with his calls for more COVID funding, mental health treatment, and cancer research, rest in the hands of a Republican House unlikely to work with him.
It brings us no joy to acknowledge that the 2024 Presidential race has already begun, meaning that substantive legislative action will likely take a back seat for the next two years. Looking ahead, we’d expect Biden’s reelection pitch to sound a lot like Tuesday’s speech, shored up by whatever he can deliver via rulemaking and executive orders.
Last week the Biden Administration announced that the federal COVID public health emergency (PHE) will expire on May 11. While the recent Omnibus law will lessen the impact, the graphic above highlights several important provisions for providers which are currently set to end with the PHE.
The Centers for Medicare and Medicaid Services (CMS) will no longer provide hospitals with a 20 percent inpatient payment boost for treating traditional Medicare patients hospitalized with COVID. The cost of COVID testing and treatments will shift from the federal government to consumers as private and public insurers can charge for tests and care, while the uninsured will bear the full costs of COVID vaccines and treatment.
Medicare’s current flexibilities around skilled nursing facility (SNF) admissions will end, as it reinstates the three-day prior hospitalization rule for SNF transfers, and ceases paying for SNF stays beyond 100 days.
The end of the PHE also means that providers willno longer be able to prescribe controlled substances virtually, without an initial in-person evaluation. This is especially significant given the volume of mental health and substance abuse treatment that shifted to telehealth across the course of the pandemic.
While the Drug Enforcement Agency has been working on regulations to address this, a proposed rule has not yet been released. Together, these changes amount tolower payments for health systems, COVID cost exposure for patients, and fewer flexibilities for providers managing care, even as thousands of patients are still being hospitalized with COVID each week.
With input from stakeholders across the industry, Modern Healthcare outlines six challenges health care is likely to face in 2023—and what leaders can do about them.
1. Financial difficulties
In 2023, health systems will likely continue to face financial difficulties due to ongoing staffing problems, reduced patient volumes, and rising inflation.
According to Tina Wheeler, U.S. health care leader at Deloitte, hospitals can expect wage growth to continue to increase even as they try to contain labor costs. They can also expect expenses, including for supplies and pharmaceuticals, to remain elevated.
Health systems are also no longer able to rely on federal Covid-19 relief funding to offset some of these rising costs. Cuts to Medicare reimbursement rates could also negatively impact revenue.
“You’re going to have all these forces that are counterproductive that you’re going to have to navigate,” Wheeler said.
In addition, Erik Swanson, SVP of data and analytics at Kaufman Hall, said the continued shift to outpatient care will likely affect hospitals’ profit margins.
“The reality is … those sites of care in many cases tend to be lower-cost ways of delivering care, so ultimately it could be beneficial to health systems as a whole, but only for those systems that are able to offer those services and have that footprint,” he said.
2. Health system mergers
Although hospital transactions have slowed in the last few years, market watchers say mergers are expected to rebound as health systems aim to spread their growing expenses over larger organizations and increase their bargaining leverage with insurers.
“There is going to be some organizational soul-searching for some health systems that might force them to affiliate, even though they prefer not to,” said Patrick Cross, a partner at Faegre Drinker Biddle & Reath. “Health systems are soliciting partners, not because they are on the verge of bankruptcy, but because they are looking at their crystal ball and not seeing an easy road ahead.”
Financial challenges may also lead more physician practices to join health systems, private-equity groups, larger practices, or insurance companies.
“Many independent physicians are really struggling with their ability to maintain their independence,” said Joshua Kaye, chair of U.S. health care practice at DLA Piper. “There will be a fair amount of deal activity. The question will be more about the size and specialty of the practices that will be part of the next consolidation wave.”
3. Recruiting and retaining staff
According to data from Fitch Ratings, health care job openings reached an all-time high of 9.2% in September 2022—more than double the average rate of 4.2% between 2010 and 2019. With this trend likely to continue, organizations will need to find effective ways to recruit and retain workers.
Currently, some organizations are upgrading their processes and technology to hire people more quickly. They are also creating service-level agreements between recruiting and hiring teams to ensure interviews are scheduled within 48 hours or decisions are made within 24 hours.
Eric Burch, executive principal of operations and workforce services at Vizient, also predicted that there will be a continued need for contract labors, so health systems will need to consider travel nurses in their staffing plans.
“It’s really important to approach contract labor vendors as a strategic partner,” Burch said. “So when you need the staff, it’s a partnership and they’re able to help you get to your goals, versus suddenly reaching out to them and they don’t know your needs when you’re in crisis.”
When it comes to retention, Tochi Iroku-Malize, president of the American Academy of Family Physicians (AAFP), said health systems are adequately compensated for their work and have enough staff to alleviate potential burnout.
AAFP also supports legislation to streamline prior authorization in the Medicare Advantage program and avoid additional cuts to Medicare payments, which will help physicians provide care to patients with less stress.
4. Payer-provider contract disputes
A potential recession, along with the ensuing job cuts that typically follow, would limit insurers’ commercial business, which is their most profitable product line. Instead, many people who lose their jobs will likely sign up for Medicaid plans, which is much less profitable.
Because of increased labor, supply, and infrastructure costs, Brad Ellis, senior director at Fitch Ratings, said providers could pressure insurers into increasing the amount they pay for services. This will lead insurers to passing these increased costs onto members’ premiums.
Currently, Ellis said insurers are keeping an eye on how legislators finalize rules to implement the No Surprise Act’s independent resolution process. Regulators will also begin issuing fines for payers who are not in compliance with the law’s price transparency requirement.
5. Investment in digital health
Much like 2022, investment in digital health is likely to remain strong but subdued in 2023.
“You’ll continue to see layoffs, and startup funding is going to be hard to come by,” said Russell Glass, CEO of Headspace Health.
However, investors and health care leaders say they expect a strong market for digital health technology, such as tools for revenue cycle management and hospital-at-home programs.
According to Julian Pham, founding and managing partner at Third Culture Capital, he expects corporations such as CVS Health to continue to invest in health tech companies and for there to be more digital health mergers and acquisitions overall.
In addition, he predicted that investors, pharmaceutical companies, and insurers will show more interest in digital therapeutics, which are software applications prescribed by clinicians.
“As a physician, I’ve always dreamed of a future where I could prescribe an app,” Pham said. “Is it the right time? Time will tell. A lot needs to happen in digital therapeutics and it’s going to be hard.”
6. Health equity efforts
This year, CMS will continue rolling out new health equity initiatives and quality measurements for providers and insurers who serve marketplace, Medicare, and Medicaid beneficiaries. Some new quality measures include maternal health, opioid related adverse events, and social need/risk factor screenings.
CMS, the Joint Commission, and the National Committee for Quality Assurance are also partnering together to establish standards for health equity and data collection.
In addition, HHS is slated to restore a rule under the Affordable Care Act that prohibits discrimination based on a person’s gender identity or sexual orientation. According to experts, this rule may conflict with recently passed state laws that ban gender-affirming care for minors.
“It’s something that’s going to bear out in the courts and will likely lack clarity. We’ll see differences in what different courts decide,” said Lindsey Dawson, associate director of HIV policy and director of LGBTQ health policy at the Kaiser Family Foundation. “The Supreme Court acknowledged that there was this tension. So it’s an important place to watch and understand better moving forward.”
This week, the Centers for Medicare and Medicaid Services (CMS) finalized a 2018 proposed rule that will impose aggressive audits on Medicare Advantage (MA) insurers. By extrapolating the audits to insurers’ entire contracts, CMS expects to claw back almost $500M annually in overpayments since 2018, but has opted not to extrapolate the audits for 2011 to 2017. While MA insurers threaten to sue over the rule’s exclusion of a “fee-for-service adjustor” that would have reduced the degree of overpayments, CMS officials note that the estimated repayments under the final rule constitute less than 0.2 percent of total MA spending.
The Gist: This MA overpayment audit is overdue, especially given how well-documented MA overbilling has become. This week the Biden administration also announced a proposed change to MA risk adjustment that would reduce MA spending by $11B annually.
Though nearly half of all US seniors are now enrolled in MA plans, the program has yet to achieve its original purpose of saving the government money by encouraging competition around delivering care more efficiently.
MA cannot continue to cost more per enrollee than traditional Medicare in perpetuity, and an eventual reduction in per-member per-year payments is inevitable.
HENRY KOTULA 