This week, the Supreme Court declined to hear an appeal challenging Medicare’s 2019 regulation calling for “site-neutral payment” for services provided by hospitals in outpatient settings, clearing the way for the rule’s implementation. The appeal was filed by the American Hospital Association (AHA), along with numerous hospitals and health systems, after a lower court ruling last year upheld the change to Medicare’s reimbursement policies.
The rule aims to level the playing field betweenindependent providers and hospital-owned clinics by curtailing hospitals’ ability to charge higher “facility fees” for services provided in locations they own. Site-neutral payment has been a longstanding target of criticism by health economists and policymakers, who cite the pricing advantage as a driver of consolidation in the industry, which has tended to push the cost of care upward.
The AHA expressed disappointment in the Court’s decision not to hear the appeal,saying that the changes to payment policy “directly undercut the clear intent of Congress to protect them because of the many real and crucial differences between them and other sites of care.” The primary difference, of course, is hospitals’ need to fully allocate their costs across all the services they bill for, making care in lower-acuity settings more expensive than similar care delivered by practices that don’t have to subsidize inpatient hospitals and other costly assets.
Over the years that legitimate business need has turned into adeliberate business model—purchasing independent practices in order to take advantage of higher hospital pricing. As Medicare looks to manage Baby Boomer-driven cost growth, and employers and consumers grapple with rising health spending, expect increasingly rigorous efforts to push back against these kinds of pricing strategies.
As we shared recently, post-pandemic healthcare volume is not returning evenly. While outpatient volume is rebounding quickly, other settings remain sluggish, especially the emergency department. We partnered with healthcare data analytics company Stratasan to take a closer look at ED volume decline. As shown in the graphic above, nationally, ED visits were down 27 percent in 2020, compared to 2019. ED-only volume (cases that started and ended in the ED) took a large hit across last year, down nearly a third from 2019. We expect that a portion of this ED-only volume will never fully recover to pre-COVID levels, with patient demand permanently shifting to lower-acuity care settings, including virtual, and some patients avoiding care altogether for minor ailments as they learn to “live with” problems like back pain.
ED-to-observation volume saw the greatest decline in 2020, likely as a result both of patients avoiding the ED, and presenting in the ED sicker, meeting the criteria for inpatient admission. However,ED-to-inpatient volume, which fell only seven percent in 2020, has been returning. In the second half of 2020, the ED-to-inpatient admission rate was 20 to 30 percent higher than the pre-COVID baseline. Across all three categories of ED volume, pediatrics saw steeper declines compared to adult cases. While some further ED volume rebound is anticipated, health systems should expect that fewer, but sicker, patients will be the new normal for hospital emergency departments.
Fewer low-acuity patients utilizing high-cost emergency care is good news from a public health perspective, but health systems must bolster other access channels like urgent care and telemedicine to ensure patients have convenient access for emergent care needs.
Though consumers say they’re increasingly confident in returning to healthcare settings, hospital volume is not returning with the same momentum across the board. Using the most recent data from analytics firm Strata Decision Technology, covering the first quarter of this year, the graphic above shows that observation, inpatient, and emergency department volumes all remain below pre-COVID levels.
Consumers are still most wary about returning to the emergency department, with volume down nearly 20 percent across the past year. Meanwhile, hospital outpatient visits rebounded quickly, and have been growing steadily month over month, finishing March 2021 at 36 percent above the 2019 level.
Meanwhile, a recent report from the Commonwealth Fund shows that no ambulatory specialty fully made up for the COVID volume hit by the end of last year. But some areas, including rheumatology, urology, and adult primary care, have bounced back faster than others.
With continued success in rolling out vaccines and reducing COVID cases, we’d expect a continued recovery of most hospital visit volume. It may be, however, that some areas, such as the emergency department, will never fully recover to pre-COVID levels. To the extent those visits are now being replaced by more appropriate telemedicine and urgent care utilization, that’s welcome news.
But the continued lag of inpatient admissions indicates that some of the loss of emergency volume is more worrisome—warranting continued efforts on the part of providers to reassure patients it’s safe to use healthcare services. Stay tuned as our team continues to dig into this data.
Kaiser Health News’latest edition of its “Bill of the Month” series features a patient who was charged a “facility fee,” which drove up what she owed to more than 10 times higher than what she’d previously paid for the same care.
Why it matters:Facility fees — which are essentially room rental fees, as KHN puts it — are becoming increasingly controversial, and patients often receive the bill without warning.
Hospitals aren’t required to inform patients ahead of time about facility fees.
Hospitals say they need the revenue to help cover the cost of providing 24/7 care.
What they’re saying: “Facility fees are designed by hospitals in particular to grab more revenue from the weakest party in health care: namely, the individual patient,” Alan Sager, a professor at the Boston University School of Public Health, told KHN.
The practice is becoming more popular as more private provider practices are bought by hospitals.
“It’s the same physician office it was,” said Trish Riley, executive director of the National Academy for State Health Policy. “Operating in exactly the same way, doing exactly the same services — but the hospital chooses to attach a facility fee to it.”
A key Medicare advisory panel is calling for a 2% bump to Medicare payments for acute care hospitals for 2022 but no hike for physicians.
The report, released Monday from the Medicare Payment Advisory Commission (MedPAC)—which recommends payment policies to Congress—bases payment rate recommendations on data from 2019. However, the commission did factor in the pandemic when evaluating the payment rates and other policies in the report to Congress, including whether policies should be permanent or temporary.
“The financial stress on providers is unpredictable, although it has been alleviated to some extent by government assistance and rebounding service utilization levels,” the report said.
MedPAC recommended that targeted and temporary funding policies are the best way to help providers rather than a permanent hike for payments that gets increased over time.
“Overall, these recommendations would reduce Medicare spending while preserving beneficiaries’ access to high-quality care,” the report added.
MedPAC expects the effects of the pandemic, which have hurt provider finances due to a drop in healthcare use, to persist into 2021 but to be temporary.
It calls for a 2% update for inpatient and outpatient services for 2022, the same increase it recommended for 2021.
The latest report recommends no update for physicians and other professionals. The panel also does not want any hikes for four payment systems: ambulatory surgical centers, outpatient dialysis facilities, skilled nursing facilities and hospices.
MedPAC also recommends Congress reduce the aggregate hospice cap by 20% and that “ambulatory surgery centers be required to report cost data to [Centers for Medicare & Medicaid Services (CMS)],” the report said.
But it does call for long-term care hospitals to get a 2% increase and to reduce payments by 5% for home health and inpatient rehabilitation facilities.
The panel also explores the effects of any policies implemented under the COVID-19 public health emergency, which is likely to extend through 2021 and could continue into 2022.
For instance, CMS used the public health emergency to greatly expand the flexibility for providers to be reimbursed for telehealth services. Use of telehealth exploded during the pandemic after hesitancy among patients to go to the doctor’s office or hospital for care.
“Without legislative action, many of the changes will expire at the end of the [public health emergency],” the report said.
MedPAC recommends Congress temporarily continue some of the telehealth expansions for one to two years after the public health emergency ends. This will give lawmakers more time to gather evidence on the impact of telehealth on quality and Medicare spending.
“During this limited period, Medicare should temporarily pay for specified telehealth services provided to all beneficiaries regardless of their location, and it should continue to cover certain newly-covered telehealth services and certain audio-only telehealth services if there is potential for clinical benefit,” according to a release on the report.
After the public health emergency ends, Medicare should also return to paying the physician fee schedule’s facility rate for any telehealth services. This will ensure Medicare can collect data on the cost for providing the services.
“Providers should not be allowed to reduce or waive beneficiary cost-sharing for telehealth services after the [public health emergency],” the report said. “CMS should also implement other safeguards to protect the Medicare program and its beneficiaries from unnecessary spending and potential fraud related to telehealth.”
Walmart has continued to grow its presence in healthcare over the past few years, with expansions of its primary care clinics and the launch of its new insurance arm.
Here are nine numbers that show how big Walmart is in healthcare and how it plans to grow:
Walmart has opened20standalone healthcare centers and plans to open at least 15 more in 2021. The health centers offer primary care, urgent care, labs, counseling and other services.
Walmart’s board approved a plan in 2018 to scale to 4,000clinics by 2029. However, that plan is in flux as the retail giant may be rolling back its clinic strategy, according to a February Insider report.
Walmart in January confirmed plans to offer COVID-19 vaccines in 11 states and Puerto Rico.
Walmart said it believes expanding its standalone clinics will help bring affordable, quality healthcare to more Americans because 90 percent of Americans live within 10 miles of a Walmart store.
The Walmart Health model lowers the cost of delivering healthcare services by about 40 percent for patients, according to Walmart’s former health and wellness president Sean Slovenski.
In October, Walmart partnered with Medicare Advantage insurer Clover Health on its first health insurance plans, which will be available to 500,000 people in eight Georgia counties.
Walmart’s insurance arm, Walmart Insurance Services, partnered with eight payers during the Medicare open enrollment period in 2020 to sell its Medicare products. Humana, UnitedHealthcre and Anthem Blue Cross Blue Shield were among the insurers offering the products.
In 2018, Walmart‘s board of directors approved a bold plan to scale to 4,000 clinics by 2029.
The timeline laid out a net investment of $3 billion, not counting profits from the clinics, and a rollout strategy, according to a February 2019 presentation to the board obtained by Insider.
The vision was backed by former Walmart US CEO Greg Foran, the health team’s biggest champion who left Walmart in 2019. And it was dreamed up by Sean Slovenski, who Foran asked to come up with a big idea in healthcare as Walmart’s biggest competitors were pushing deeper into the space.
One coalition inside Walmart is happy with the change of pace —the retailer has 20 clinics currently, with at least 15 slotted for 2021 — because healthcare is hard, and the clinics are a work in progress.
Another coalition is frustrated by what they see as a stark departure from the initial goal to provide inexpensive care for people around the US quickly as possible.
Walmart didn’t comment on whether the rollout was slowing, but said it continued to “experiment” with Walmart Health centers and that the pandemic had reaffirmed its commitment to healthcare. It pointed to the launch of pharmacy curbside delivery, COVID-19 testing sites, and vaccine administration as evidence.
Mercy Hospital & Medical Center in Chicago filed for bankruptcy protection Feb. 10, amid its plan to close that has been contested in the community.
The Chapter 11 plan includes the discontinuation of inpatient acute care services, Mercy’s owner, Livonia, Mich.-based Trinity Health, said in a bankruptcy filing.
Mercy said it plans to cease operations of all departments, except for basic emergency services, on May 31.
“There have been many steps that preceded the difficult decision to file for Chapter 11,” Trinity said.
In a news release announcing the bankruptcy, Mercy said it was losing staff and “experiencing mounting financial losses” that are challenging its ability to provide safe patient care.
Mercy said its losses have averaged about $5 million per month and reached $30.2 million for the first six months of fiscal year 2021. Further, the hospital has accumulated debt of more than $303.2 million over the last seven years, and the hospital needs more than $100 million in upgrades and modernizations.
The Chapter 11 bankruptcy filing comes just weeks after the Illinois Health Facilities and Services Review Board rejected Trinity’s plan to build an outpatient center in the neighborhood where it is closing the 170-year-old inpatient hospital. The same board unanimously rejected Trinity’s plan to close the hospital in December.
The December vote from the review board came after months of protests from physicians, healthcare advocates and community organizers, who say that closing the hospital would create a healthcare desert on Chicago’s South Side.
The state review board has a meeting to discuss the closure March 16.
Patient volumes were uneven in 2020, and a new report shows volumes will likely remain below pre-pandemic levels in 2021. This indicates challenges for hospitals looking to stabilize their finances — but there are some key strategies that can help.
Though hospital finances recovered to some extent by the end of 2020, the industry is not out of the woods yet. However, with strategic investments, especially in outpatient care and technology, hospitals and health systems can help buoy their finances in this challenging time, industry observers said.
Patient volumes have fluctuated wildly after the Covid-19 pandemic hit as Covid-19 patients flocked to hospitals and those needing or seeking elective surgery and other care staying away. Not surprisingly, this has had a significant impact on health systems’ financial health.
But outpatient settings and digital solutions offer some revenue-generating opportunities for hospitals.
“A number of the major players and some of the bigger regional systems in the country now are in a place where they get more of their revenue from the outpatient side as opposed to the inpatient side,” said Dr. Sanjay Saxena, global healthcare leader, Payers, Providers, Health Care Systems & Services and managing director at Boston Consulting Group, in a phone interview.
In fact, outpatient care was the only healthcare setting that saw an increase in patient volumes in 2020. Though emergency department visits and inpatient volumes were down from July to December last year compared to the same period in 2019, outpatient volumes actually increased by 5%, according to a report by consumer credit reporting agency TransUnion.
Healthcare providers that have well-established and expansive outpatient and ambulatory care businesses will be able to weather patient volume trends better in 2021 than those who do not, said Saxena.
Take HCA Healthcare, for example. The Nashville, Tennessee-based healthcare giant’s revenues jumped to $14.2 billion in the fourth quarter of last year, up from $13.5 billion in the same period in 2019. HCA’s ability to move care outside of the inpatient setting to the ambulatory environment really helped their financial performance, said Saxena.
On the other hand, smaller and more rural hospitals, which depend heavily on ED and inpatient care, may face a challenging year, he added.
Another key investment for hospitals will be in digital solutions to help them manage the ups and downs of patient volume.
“Resilience as a broad topic for provider executives is absolutely top of mind,” said Gurpreet Singh, health services leader at PriceWaterhouseCoopers, in a phone interview. “And resiliency can be achieved in a number of different ways. One way is [figuring out] — can you predict demand a little bit better?”
Patient demand forecasting solutions will be popular, with 74% of health executives recently surveyed by PwC’s Health Research Institute saying their organizations would invest more in predictive modeling in 2021.
Further, hospitals will see savings in some unexpected places. For example, with an increasingly remote and mobile healthcare workforce, hospitals may see cost savings on real estate and facility leases, said Singh.
They can use these savings to invest further in telehealth and at-home care programs to expand care outside of the four walls of the hospital, he added.
The industry has to come to terms with changes brought on by the Covid-19 pandemic, including the shifts in care delivery and patient preferences.
“Some of these things are structurally significant changes,” said Saxena. “Organizations ignore these things…at their peril. Some leading organizations and systems will find a way to embrace [these changes] and leapfrog others in the market coming out of 2021.”
The coronavirus pandemic has caused national health care spending to go down this year — the first time that’s ever happened.
The big picture:Any big recession depresses the use of health services because people have less money to spend. But this pandemic has also directly attacked the health system, causing people to defer or skip care for fear of becoming infected.
By the numbers: Year-to-date spending on health services is down about 2% from last year. Health spending for the calendar year may end up lower than it was in 2019.
In April, when the pandemic forced many facilities to temporarily close, spending on health services had fallen an eye-popping 32% on an annualized basis.
The largest drop-offs were in outpatient care. Telehealth visits increased dramatically but did not make up all of the difference.
Context: This is the first time expenditures for patient care have fallen year-over-year since data became available in the 1960s.
What’s next: Spending and utilization have been recovering, but could fall again if the current spike in cases prompts either hospitals or patients to again hold off on elective care.
There has been a decline in cancer screenings and visits to manage chronic conditions, but it will take more research before we know precisely how this has affected outcomes.