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.”
Large health insurers no longer just provide coverage, but are instead repositioning themselves as vertically integrated healthcare organizations that span the care continuum.
The graphic above shows five-year total revenue growth by segment for the top five health insurance companies.
Some, like Anthem and Humana, are still in the early stages of revenue diversification, leveraging partnerships and investments to fill service gaps—in Humana’s case, these are mainly centered on the Medicare Advantage population.
On the other hand, the insurance revenue of Cigna and CVS Health is already dwarfed by pharmacy benefit management (PBM) revenue (as well as retail clinic revenue for CVS).
UnitedHealth Group (UHG) is clearly leading the pack, with a robust revenue diversification and vertical integration strategy.
Its Optum subsidiary grew 62 percent over the last five years, nearly double the rate of its UnitedHealthcare insurance business. Already the largest employer of physicians in the country, Optum recently announced plans to acquire Massachusetts-based 715-physician group, Atrius Health. It also announced its intent to acquire Change Healthcare, one of the largest providers of revenue and payment cycle management solutions.
Given the outsized role of the Optum division in driving UHG’s growth and profitability, it may soon face a dilemma that other publicly traded, diversified companies have had to confront: shareholder demands to unlock value by spinning off the business into a separate company.
Central to fending off that kind of activism by shareholders: demonstrable steps to integrate the myriad businesses the company has acquired into a functional whole. Just as Amazon’s hugely profitable Web Services business has become a target of spin-off demands, so too, eventually, may UHG’s Optum.
We had occasion this week, when asked to weigh in on a health system’s “primary care strategy”, to assert once again that primary care is not a thing.
We were being intentionally provocative to make a point: what we traditionally refer to as “primary care” is actually a collection of different services, or “jobs to be done” for a patient (to borrow a Clayton Christensen term).
These include a range of things: urgent care, chronic disease management, medication management, virtual care, women’s health services, pediatrics, routine maintenance, and on and on. What they have in common is that they’re a patient’s “first call”: the initial point of contact in the healthcare system for most things that most patients need. It’s a distinction with a difference, in our view.
If you set out to address “primary care strategy”, you’re going to end up in a discussion about physician manpower, practices, and economics at a level of generalization that often misses what patients really need. Rather than the traditional E pluribus unum (out of many, one) approach that many take, we’d advise an Ex uno plures (out of one, many) perspective.
Ask the question “What problems do patients have when they first contact the healthcare system?” and then strategize around and resource each of those problems in the way that best solves them. That doesn’t mean taking a completely fragmented approach—it’s essential to link each of those solutions together in a coherent ecosystem of care that helps with navigation and information flow (and reimbursement).
But continuing to perpetuate an entity called “primary care” increasingly seems like an antiquated endeavor, particularly as technology, payment, and consumer preferences all point to a more distributed and easily accessible model of care delivery.
Fourteen defendants have been sentenced to more than 74 years in prison combined and ordered to pay $82.9 million in restitution for their roles in a $200 million healthcare scheme designed to get physicians to steer patients to Forest Park Medical Center, a now-defunct hospital in Dallas, the U.S. Justice Department announced March 19.
More than 21 defendants were charged in a federal indictment in 2016 for their alleged involvement in a bribe and kickback scheme that involved paying surgeons, lawyers and others for referring patients to FPMC’s facilities.Those involved in the scheme paid and/or received $40 million in bribes and kickbacks for referring patients, and the fraud resulted in FPMC collecting $200 million.
Several of the defendants, including a founder and former administrator of FPMC, were convicted at trial in April 2019 and sentenced last week. Other defendants pleaded guilty before trial.
Hospital manager and founder Andrew Beauchamp pleaded guilty in 2018 to conspiracy to pay healthcare bribes and commercial bribery, then testified for the government during his co-conspirators’ trial. He admitted that the hospital “bought surgeries” and then “papered it up to make it look good.” He was sentenced March 19 to 63 months in prison.
Wilton “Mac” Burt, a founder and managing partner of the hospital, was found guilty of conspiracy, paying kickbacks, commercial bribery in violation of the Travel Act and money laundering. He was sentenced March 17 to 150 months in prison.
Four surgeons, a physician and a nurse were among the other defendants sentenced last week for their roles in the scheme. Access a list of the defendants and their sentences here.
— At stake: scheduled payment reductions totalling $54 billion
Healthcare groups are applauding efforts being made in Congress to stop two different cuts to the Medicare budget — both of which are due to “sequestration” requirements — before it’s too late.
One cut, part of the normal budget process, is a 2% — or $18 billion — cut in the projected Medicare budget under a process known as “sequestration.” Sequestration allows for prespecified cuts in projected agency budget increases if Congress can’t agree on their own cuts. Medicare’s budget had been slated for a 2% sequester cut in fiscal year 2020; however, due to the pandemic and the accompanying increased healthcare needs, Congress passed a moratorium on the 2% cut. That moratorium is set to expire on April 1.
Another projected cut — this one for 4%, or $36 billion — will be triggered by the COVID relief bill, formally known as the American Rescue Plan Act. That legislation, which President Biden signed into law last Thursday, must conform to the PAYGO (pay-as-you-go) Act, which requires that any legislation that has a cost to it that is not otherwise offset must be offset by sequestration-style budget cuts to mandatory programs, including Medicare.
There are now several bills in Congress to address these pending cuts. H.R. 1868, co-sponsored by House Budget Committee chairman John Yarmuth (D-Ky.), House Ways & Means Committee chairman Richard Neal (D-Mass.), and House Energy & Commerce Committee chairman Frank Pallone Jr. (D-N.J.), among others, would get rid of the PAYGO Act requirement and extend the 2% Medicare sequester moratorium through the end of 2021.
Another bill, H.R. 315, introduced in January by Reps. Bradley Schneider (D-Ill.) and David McKinley (R-W.Va.), would extend the 2% sequester moratorium until the end of the public health emergency has been declared. In the Senate, S. 748, introduced Monday by senators Susan Collins (R-Maine) and Jeanne Shaheen (D-N.H.) would do the same.
“For many providers, the looming Medicare payment cuts would pose a further threat to their ability to stay afloat and serve communities during a time when they are most needed,” Shaheen said in a press release. “Congress should be doing everything in its power to prevent these cuts from taking effect during these challenging times, which is why I’m introducing this bipartisan legislation with Senator Collins. I urge the Senate to act at once to protect our health care providers and ensure they can continue their work on the frontlines of COVID-19.”
Not surprisingly, provider groups were happy about the actions in Congress. “MGMA [Medical Group Management Association] supports recent bipartisan, bicameral efforts to extend the 2% Medicare sequester moratorium for the duration of the COVID-19 public health emergency,” said Anders Gilberg, senior vice president for government affairs at MGMA, in a statement. “Without congressional action, the country’s medical groups will face a combined 6% sequester cut — a payment cut that is unsustainable given the financial hardships due to COVID-19 and keeping up with the cost of inflation.”
Leonard Marquez, senior director of government relations and legislative advocacy at the Association of American Medical Colleges, said in a statement that it was “critical” that Congress extend the 2% sequester moratorium “to help ensure hospitals, faculty physicians, and all providers have the necessary financial resources to continue providing quality care to COVID-19 and all patients ... While we are making progress against COVID-19, cutting provider payments in the middle of a pandemic could jeopardize the nation’s recovery.”
The American Medical Association (AMA) also urged Congress to prevent both the 2% and the 4% Medicare cuts. “We strongly oppose these arbitrary across-the-board Medicare cuts, and the predictably devastating impact they would have on many already distressed physician practices,” AMA executive vice president and CEO James Madara, MD, said in a letter sent to congressional leaders at the beginning of March.
“And, while Medicare spending on physician services partially recovered from the April low, it was still 12% less than expected by the end of June 2020,” he continued. “During the first half of 2020, the cumulative estimated reduction in Medicare physician spending associated with the pandemic was $9.4 billion (19%). Results from an earlier AMA-commissioned survey of 3,500 practicing physicians conducted from mid-July through August 2020 found that 81% of respondents were still experiencing lower revenue than before the pandemic.”
Not everyone is a fan of extending the 2% cut moratorium, however. “Bad idea,” said James Capretta, resident fellow at the American Enterprise Institute, a right-leaning think tank, at an event Tuesday on Medicare solvency sponsored by the Bipartisan Policy Center. “There’s plenty of give in the revenue streams of these systems that creating a precedent where we’re going to go back to the pre-sequester level — it’s better to move forward and if there are struggling systems out there, deal with it on an ad hoc basis rather than just across the board paying out a lot more money, which I don’t think is necessary.” He added, however, that he agreed with the bill to get rid of the 4% cut. “The bigger cut associated with PAYGO enforcement I think would be too much.”
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.”
Many physician practices weathered 2020 better than they would have predicted last spring. We had anticipated many doctors would look to health systems or payers for support, but the Paycheck Protection Program (PPP) loans kept practices going until patient volume returned. But as they now see an end to the pandemic, many doctors are experiencing a new round of uncertainty about the future. Post-pandemic fatigue, coupled with a long-anticipated wave of retiring Baby Boomer partners, is leading many more independent practices to consider their options. And layered on top of this, private equity investors are injecting a ton of money into the physician market, extending offers that leave some doctors feeling, according to one doctor we spoke with, that“you’d have to be an idiot to say no to a deal this good”.
2021 is already shaping up to be a record year for physician practice deals.Butsome of our recent conversations made us wonder if we had time-traveled back to the early 2000s, when hospital-physician partnerships were dominated by bespoke financial arrangements aimed at securing call coverage and referrals. Some health system leaders are flustered by specialist practices wanting a quick response to an investor proposal. Hospitals worry the joint ventures or co-management agreements that seemed to work well for years may not be enough, and wonder if they should begin recruiting new doctors or courting competitors, “just in case” current partners might jump ship for a better deal.
In contrast to other areas of strategy, where a ten-year vision can guide today’s decisions, it has always been hard for health systems to take the long view with physician partnerships.
When most “strategies” are really just responses to the fires of the day, health systems run the risk of relationships devolving to mere economic terms.Health systems may find themselves once again with a messy patchwork of doctors aligned by contractual relationships, rather than a tight network of physician partners who can work together to move care forward.
The payment gap was $63,000 for primary care doctors, $178,000 for medical specialists and $150,000 for surgeons.
Doctors who work for hospital outpatient facilities get much higher payments for their services from Medicare than doctors who practice independently, according to a new study.
The research, based on Medicare claims data from 2010-2016,found that the program’s payments for doctors’ work were, on average, $114,000 higher per doctor per year when billed by a hospital than when billed by a doctor’s independent practice.
Published in Health Services Research, results found that the amount Medicare would pay for outpatient care at doctors’ offices would have been 80% higher if the services had been billed by a hospital outpatient facility. In 2010, the average set of Medicare services independent doctors performed annually for patients was worth $141,000, but charging for the same group of services would have grossed $240,000 if a hospital outpatient facility billed for them.
The payment difference varied by specialty. The payment gap was $63,000 for primary care doctors, $178,000 for medical specialists and $150,000 for surgeons.
Moreover, the study found the differential grew over time. From 2010-2016, the average difference between hospital outpatient and private practice payments grew from 80% higher to 99% higher.
WHAT’S THE IMPACT?
The main reason for these large payment differences: facility fees. For each service a doctor performs, Medicare pays hospital outpatient facilities both a fee for the doctor’s work and a fee for the facility, whereas private practices receive only doctor fees.
Although the doctor fees are a bit lower in hospital outpatient locations, the facility fees more than make up for the difference, and the total payments to hospitals are reflected in higher doctor salaries and bonuses.
The Centers for Medicare and Medicaid Services has been trying to correct this imbalance for years with policies that would pay both sites the same amount. In 2015, the Bipartisan Budget Act authorized CMS to impose site-neutral payments but grandfathered existing hospital outpatient facilities. Later, CMS expanded the equal payments to other hospital outpatient facilities, but the American Hospital Association sued to overturn this regulation.
The groups filed for a petition for a rehearing, which was denied.
In February, the Supreme Court acknowledged the AHA’s request for judicial review. The government response was due by March 15, but on March 3, Norris Cochran, acting Secretary of Health and Human Service asked for an extension until April 14 to file the government’s response, according to court documents.
The significant difference between Medicare payments to hospital outpatient facilities and independent offices has encouraged hospitals and health systems to buy doctor practices, but the study noted that good research about this has been lacking up to now.
It found little evidence of a direct relationship linking the size of the pay gap between hospital outpatient facilities and independent offices, with hospitals buying doctor practices, in particular medical specialties. But it did find that doctors whose services had larger pay gaps were more likely to have a hospital buy their practice than doctors whose services had a smaller pay gap.
In an accompanying commentary, Dr. Michael Chernew of Harvard Medical School in Boston said the study had found that the ability of hospitals and employed doctors to earn more from Medicare had resulted in a greater amount of integration.
THE LARGER TREND
However, the authors pointed out that the Medicare payment difference is only one of many factors that have contributed to the huge increase in the share of doctors employed at hospitals over the past decade. For example, they found a higher probability of a doctor going to work for a hospital in highly concentrated hospital markets and rural areas.
Other studies, they said, have established that some health systems use integration with doctors’ offices as a bargaining chip with commercial health insurance plans. Also, some doctors may find that independent practice is less viable than it used to be for a variety of reasons.
It has also been suggested that many younger doctors prefer hospital employment to private practice because they crave economic security and work-life balance.
It’s been estimated that even the payments to hospitals vs. doctors could save CMS $11 billion over 10 years. But the paper illustrates that the payment disparities can also create broader market distortions because consolidation of hospitals and doctors’ offices has been shown to lead to higher prices overall.
UnitedHealth subsidiary Optum signed a definitive agreement to acquire Atrius Health, a 715-physician group based in Newton, Mass., according to The Boston Globe.
Optum said March 2 the agreement was signed the evening of March 1 after UnitedHealth’s board approved the transaction. Atrius’ board also unanimously approved the deal.
The deal will need approval from Massachusetts’ Health Policy Commission, the Department of Public Health and the Federal Trade Commission.
If the deal is approved, it would expand Optum’s presence in Massachusetts. The organization had previously acquired Worcester, Mass.-based Reliant Medical Group in April 2018.
Optum reportedly had been interested in purchasing Atrius, which has 30 locations in Massachusetts, for a few years and submitted a bid for it in 2019 when the medical group was looking for a partner. In 2019, Atrius decided to remain independent. However, Atrius said it decided to reignite potential partnership talks again due to the pressures of the pandemic.
“We looked at many alternatives and chose [Optum] because of cultural alignment, the benefit we could provide for patients, the stability it could provide for our practice, and the help we can provide to the commonwealth as it pertains to managing medical spend,” Atrius President and CEO Steven Strongwater, MD, told the Boston Business Journal.
A New York physician has been charged with manslaughter in the second degree and is facing other felonies related to the overdose death of a patient, New York Attorney General Letitia James announced Feb. 19.
Sudipt Deshmukh, MD, allegedly prescribed a lethal mix of opioids and other controlled substances that resulted in the overdose death of a patient. The physician allegedly knew the patient struggled with addiction.
An indictment, unsealed Feb. 18, alleges that between 2006 and 2016, Dr. Deshmukh ignored his professional responsibilities by prescribing combinations of opioid painkillers and other controlled substances, including hydrocodone, methadone and morphine, without regard to the risk of death associated with the combinations of those drugs.
Dr. Deshmukh is facing several felony charges, including healthcare fraud, for allegedly causing Medicare to pay for medically unnecessary prescriptions.
The indictment comes after the attorney general’s office filed a felony complaint against Dr. Deshmukh in August. In 2019, the New York State Office of Professional Medical Conduct found that he committed several counts of misconduct.