Judge Rules 340B Cuts Unlawful, Decision Applauded by Industry Stakeholders

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A federal judge reaffirmed his view that the cuts by HHS to the discount drug program are unlawful.

KEY TAKEAWAYS

In a joint statement, three hospital plaintiffs urged HHS to follow the judge’s directive.

340B Health added their approval in a statement, asking the agency to “act quickly.”

A status report regarding HHS’ progress remedying the situation must be submitted to U.S. District Court Judge Rudolph Contreras by August 5.

U.S. District Court Judge Rudolph Contreras again ruled Monday evening that the 340B drug reimbursement rate that Health and Human Services set in the 2019 Outpatient Prospective Payment System (OPPS) rule is unlawful, a decision that earned praise from various industry stakeholders. 

Five months after first vacating the 22% cut in 340B payments that HHS Secretary Alex Azar proposed late last year, Contreras reiterated that the cuts were implemented “in contravention of the Medicare Act’s plain text.”

Medicare Part B will sell prescription drugs to hospitals participating in the program at the average selling price plus 6%, well above the average selling price minus 22.5% as HHS had proposed.

“The Court also concludes that, despite the fatal flaw in the agency’s rate adjustments, vacating HHS’ 2018 and 2019 rules is not the best course of action, given the havoc vacatur may wreck on Medicare’s administration,” Contreras wrote in the 22-page ruling.

HHS will have “first crack” at crafting appropriate remedies for the two rules, according to the ruling.

Tuesday, three hospital plaintiffs applauded the ruling as a positive development for the embattled federal program, which has been deemed wasteful and rife with abuse by critics who demand additional oversight and accountability.

“America’s 340B hospitals are pleased with the District Court’s decision and urge HHS to follow the judge’s directive to promptly resolve the harm caused by its unlawful cuts to Medicare reimbursement for certain 340B hospitals,” the American Hospital Association, Association of American Medical Colleges, and America’s Essential Hospitals said in a joint statement. “The ruling reaffirmed that the 2018 cuts were unlawful and extended that ruling to the 2019 cuts. Owing to the complexity of the Medicare program, the judge gave HHS first crack at fashioning a remedy for its unlawful actions. He also asked for a report from HHS on its progress on or before August 5, 2019. We urge HHS to promptly comply with the judge’s ruling and restore to 340B hospitals all funds that have been unlawfully withheld.”

HHS has not issued a statement regarding Monday’s ruling and did not respond to a request for comment by time of publication. 

The December ruling by Contreras did have a material impact on nonprofit hospitals, according to Moody’s Investor Service, which determined in early January that the reversion of the cuts would lead to improved operating performance.

340B Health, an advocacy group for the federal program, also issued a statement Tuesday afternoon applauding Contreras’ ruling.

“On behalf of the nearly 1,400 hospitals we represent that participate in 340B, we are pleased that the court has, once again, found that HHS exceeded its statutory authority by cutting what Medicare pays for outpatient drugs delivered to their patients,” Maureen Testoni, CEO of 340B Health, said in a statement. “The cuts made in 2018 and again in 2019 have reduced hospitals’ ability to care for those in need. The sooner this policy is reversed, the better hospitals will be able to serve the needs of patients with low incomes and those in rural communities. HHS must act quickly, as any further delay will only harm patients and the hospitals they rely on for care.”

Nearly 2,500 hospitals currently participate in the 340B Drug Pricing Program, which was created in 1992 to assist safety-net and low-income providers purchase prescription drugs.

A status report regarding HHS’ progress remedying the situation must be submitted to Judge Contreras by August 5. 

 

 

THEY’RE CALLED ‘CRITICAL ACCESS HOSPITALS’ FOR A REASON

https://www.healthleadersmedia.com/strategy/theyre-called-critical-access-hospitals-reason

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It’s staggering to think of the challenges that CAHs face. Now OIG is calling for a re-examination of a program that it says has overpaid CAHs billions of dollars to provide skilled nursing services using hospital swing beds.

They’re called “Critical Access Hospitals” for a reason. These tiny healthcare outposts provide “critical access” to people who live in remote areas.

That was the intent of the legislation that created CAHs in 1997 at a time when rural hospitals were shuttering at an alarming rate. Congress understood that rural America needed extra Medicare dollars to keep the doors open at hospitals that serve an older, sicker and poorer patient mix.

It’s staggering to think of the challenges that CAHs face:

  • Because of their location and size, CAHs have few economies of scale, little leverage with vendors or payers, or a sufficiently large patient mix or volume of commercial payers to help cover costs.
  • CAHs are often limited in their ability to provide some of the more lucrative services that are cash cows for larger hospitals in urban areas.
  • Recruiting clinicians to rural areas is a slog.
  • And because of all those challenges, it’s also more difficult to merge or collaborate with other healthcare providers from such an isolated perch. It’s surprising to learn that only 40% of CAHs operate in the red.

Unfortunately, some people in Washington, DC have short institutional memories.

For the past couple of years, reports from the Office of the Inspector General at the Department of Health and Human Services have made it clear that they believe the CAH designation and funding scheme should be overhauled.

In its latest shot across the bow, OIG this week called for a re-examination of the swing bed program that allows CAHs to provide long-term care. The OIG audit claimed that the federal government has overpaid CAHs $4.1 billion over the past six years for services that could have cost less in relatively nearby skilled nursing and long-term care facilities.

Tavenner Pushes Back
Rural healthcare advocates rallied around the reply to the OIG recommendations from former Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner, who challenged the OIG findings and recommendations in her formal response, and suggested that auditors don’t understand healthcare delivery in rural areas.

In that same response to OIG, however, Tavenner said the Obama 2016 budget has called for reducing the Medicare reimbursement that CAHs receive from 101% to 100% of allowable costs, and reassessing and eliminating CAH status for hospitals that are within 10 miles each other.

 

 

CMS opening up options for states to better manage dual-eligible patients

CMS opening up options for states to better manage dual-eligible patients

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According to data from CMS, while dual-eligible patients make up only 15 percent of Medicaid enrollees, they are responsible for 33 percent of the program’s expenditures.

The Centers for Medicare & Medicaid Services is looking to partner with states to determine better models to treat the 12 million dual-eligible Medicaid and Medicare beneficiaries in the country.

CMS and states spend more than $300 billion annually on this patient population, many of whom suffer from multiple chronic conditions made more difficult to treat by social and economic barriers.

The cost for dual-eligible population is outsized when compared to its size. According to data from CMS, while dual-eligible patients make up only 15 percent of Medicaid enrollees, they are responsible for 33 percent of the program’s expenditures.

“Less than 10 percent of dually eligible individuals are enrolled in any form of care that integrates Medicare and Medicaid services, and instead have to navigate disconnected delivery and payment systems,” CMS Administrator Seema Verma said in a statement.

“This lack of coordination can lead to fragmented care for individuals, misaligned incentives for payers and providers, and administrative inefficiencies and programmatic burdens for all.”

The goal from the agency is to promote new models which can better integrate Medicare and Medicaid services and create a more seamless experience for both beneficiaries and providers working across the two programs.

One major goal is to allow states to share in savings and benefits gained from investment in better care for the dual-eligible population.

In a letter addressed to state Medicaid leaders, Verma laid out a few potential payment approaches to address the issue of dual eligible patients, including a capitated payment model which would provide the full array of Medicare and Medicaid services with a set dollar reimbursement amount.

Nine states are currently piloting the model, which creates a three-way contract between the state, CMS and Medicare-Medicaid Plans. So far, CMS said state savings for states have averaged 4.4 percent in these test markets.

Through the experiments, Verma said the agency has been able to foster a competitive marketplace with multiple offerings that incentivizes health plans to invest in services that address the patient population.

CMS said it is currently open to extending the initial state pilots and expanding the geographic scope of the capitated programs.

For states that administer dual-eligible patients on a fee-for-service basis, Verma laid out a merged managed care model that would allow states to share in Medicare savings for metrics like reducing hospital readmissions.

Washington and Colorado are currently testing out the model. In one instance, providers in Washington are using Medicaid health homes to deliver high-intensity care to high-risk beneficiaries and sharing in the cost savings.

CMS said preliminary data from Washington’s program has been positive, with gross savings for Medicare Part A and Part B of 11 percent over three years. This has resulted in $36 million in performance payments to the state.

The letter from CMS also opens up the opportunity to potentially partner on state-specific models developed internally meant to better serve dual eligible patients and reduce Medicare and Medicaid expenditures.

CMS has made payment delivery reform a key initiative, with the ultimate goal of moving towards a outcomes-based payment system and reducing expenditures as Medicare faces an uncertain future.

A few recent initiatives include the launch of the agency’s Primary Cares Model, as well as the recent expansion of supplementary benefits for Medicare Advantage beneficiaries meant to tackle social determinants of health.

 

 

 

Red states’ Medicaid gamble: Paying more to cover fewer people

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Illustration of a price tag hanging from an IV stand

Red states are getting creative as they look for new ways to limit the growth of Medicaid. But in the process those states are taking legal, political and practical risks that could ultimately leave them paying far more, to cover far fewer people.

Why it matters: Medicaid and the Children’s Health Insurance Program cover more than 72 million Americans, thanks in part to the Affordable Care Act’s Medicaid expansion. Rolling back the program is a high priority for the Trump administration, and it needs states’ help to get there.

The big picture: The Centers for Medicare & Medicaid Services, under the leadership of Administrator Seema Verma, has made clear that it wants to say “yes” to new limits on Medicaid eligibility, and has invited states to ask for those limits.

  • But CMS hasn’t actually said “yes” yet to some of the most significant limits states have asked for.
  • In the meantime, states are left either with vague ambitions they’re not sure how to implement, or with risky plans that put their own budgets on the line.

What we’re watching: State-level Republicans are waiting for CMS to resolve two related issues: how much federal funding their versions of Medicaid can receive, and the extent to which they’re able to cap enrollment in the program.

  • “These issues are going to continue to be intertwined,” said Joan Alker, the executive director of Georgetown University’s Center for Children and Families.

Verma has reportedly told state officials that she wants to use her regulatory power to convert Medicaid funding into a system of block grants — which would be an enormous rightward shift and probably a big cut in total funding.

  • CMS probably cannot do that on its own, experts said, but it could achieve something similar by approving caps on either enrollment or spending.

Where it stands: GOP lawmakers in a handful of states are looking to Utah, which has bet big on Verma’s authority, for signals about what’s possible.

  • Utah voters approved the full ACA expansion last year, but the state legislature overruled them to pass a more limited version.
  • By foregoing the full expansion, Utah passed up enhanced federal funding. It’s still asking for that extra money — a request CMS has never previously approved.
  • Utah will also ask CMS to impose a per-person cap on Medicaid spending — a steep cut that was part of congressional Republicans’ failed repeal-and-replace bill, and which may strain CMS’ legal authority.
  • If Utah doesn’t get those two requests, its backup plan is simply to adopt the full expansion.

What’s next: Utah is not the only red state leaning into Verma’s agenda, but it’s further out on a limb than any other.

  • Idaho, like Utah, overruled its voters to pass a narrower Medicaid bill. But it preserved an option for people to buy into the ACA’s expansion.
  • Alaska Gov. Mike Dunleavy has said he wants to take Verma up on her offer of block grants; so have legislators in Tennessee and Georgia. But in the absence of any detail about what that means, or what CMS will approve, that’s all pretty vague right now.

If CMS does move forward on any of this, it could face the same threat of lawsuits that have stymied its first big Medicaid overhaul — work requirements.

  • Those rules are on ice in two states because a judge said they contravene Medicaid’s statutory structure and goals. The same argument could await a partial expansion or tough spending caps.

“There’s a clear agenda here to get a handful of states to take up these waivers, which fundamentally undermine the central tenets of the Medicaid program — which [are] that it is a guarantee of coverage, and a guarantee of federal funding,” Alker said.

 

 

 

Does Beneficiary Switching Create Adverse Selection For Hospital-Based ACOs?

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Despite the many uncertainties in the current health care delivery environment, payers and providers continue to demonstrate considerable interest in alternative payment models, including Medicare Shared Savings Program (MSSP) accountable care organizations (ACOs). At the same time, concerns persist about the ability of the MSSP to provide a sustainable pathway toward transformation for health care providers and to generate savings to the Medicare program, a key outcome measure. In fact, an August 2018 Health Affairs blog post by Seema Verma, director of the Centers for Medicare and Medicaid Services (CMS), concludes that the net financial impact of the program is negative to taxpayers, and that hospital-based ACOs tend to be the drivers of this overall negative performance.

This analysis has influenced recent changes to the MSSP under the “Pathways to Success” rule, with major policy implications for participants and the program’s long-term sustainability. In particular, CMS’s analysis describes physician-led ACOS as low revenue and hospital-based ACOs as high revenue, concluding that the former had net savings of $0.182 billion, while the latter had net losses of $0.231 billion. Similarly, J. Michael McWilliams and colleagues conclude that physician-group ACOs had significantly larger savings than hospital-integrated ACOs. It has been suggested that these differences are due to hospitals continuing to pursue the high-cost activities that physician-led ACOs do not pursue, due to differing reimbursement incentives (for example, hospital revenue is more dependent on admissions, and so care management activities that avoid admissions are less robust in hospital-based ACOs). This finding has influenced new program rules allowing physician-led ACOs to stay in a lower-risk track of the MSSP longer than hospital-based ACOs.

Our MSSP experience at University of Wisconsin (UW) Health—the academic health system partner of the University of Wisconsin School of Medicine and Public Health—leads us to believe that there is an alternative explanation for hospital-based ACOs’ seemingly poorer financial performance. Specifically, as Medicare beneficiaries develop new and more complex diseases, the increased utilization they require leads them to facilities that have more specialized care, which may more likely be part of a hospital-based ACO than a physician-led one. 

A Closer Look At The Research

Several recent analyses have countered that the CMS analysis, which assesses program financial performance by comparing ACO spending to a benchmark target below which the ACO may share in savings, does not use a valid counterfactual. A more valid counterfactual would instead compare ACO actual spending to what the same providers’ Medicare spending would have been had they not participated in the ACO program. Analyses using this counterfactual have found that the MSSP has in fact produced savings for the taxpayers overall, although some have also concluded, such as CMS, that hospital-based ACOs perform worse than physician-led ACOs.

More recently, the Medicare Payment Advisory Commission analyzed spending at the individual beneficiary level, rather than the ACO level. The analysts found that individuals who were continuously attributed to the same ACO year after year had lower spending growth compared to those whose attribution was switched to a different, existing ACO from one year to the next. At UW Health, our experience as an MSSP ACO from 2013 through 2017 supports this finding and illustrates some of the potential pitfalls in the recent policy changes for MSSP ACOs. 

UW’s Analysis: Adverse Selection Among “Switchers”

UW Health participated in the MSSP Track 1 from 2013 through 2017, before switching to the Next Generation ACO program. We compared patient characteristics and use for the cohort of our attributed beneficiaries older than age 65 for whom we had 12 months of claims data in 2015 and who, in 2016, continued to be attributed to us, versus beneficiaries who were newly attributed to us in 2016 (Exhibit 1).

Exhibit 1: Spending And Use of Continuously And Newly Attributed Medicare Beneficiaries, UW Health ACO, 2015–16

Source: Authors’ analysis. Notes: HCC is Hierarchical Condition Category. PBPY is per beneficiary per year. aHCC scores are calculated to assess patient complexity and risk. A higher score is associated with increased complexity and increased expected cost. Under 2016 MSSP rules, PBPY costs are adjusted based on beneficiary HCC scores calculated from the prior year, adjusted up only for demographic changes. Therefore, the 2016 PBPY average costs in the exhibit reflect risk adjustment using 2015 HCC scores. 

While 96 percent of continuing beneficiaries in 2016 were attributed to us through services from a primary care provider, only 73 percent of those new to the ACO in 2016 received their attribution this way. In other words, more than one in four of the “switchers” were assigned to the ACO due to services from a specialty care provider. Costs for these two populations (calculated from data CMS provides to ACOs as part of program participation) were very different. The average per-beneficiary-per-year (PBPY) cost in 2015 for continuously attributed beneficiaries was $8,123, or $1,380 higher than the newly attributed population’s PBPY cost of $6,743. However, in 2016, the average PBPY cost for continuously attributed beneficiaries was $723 lower than the 2016 average PBPY cost for newly attributed beneficiaries, and costs for the newly attributed cohort rose by 49.3 percent, compared with 15.1 percent for the continuously attributed group. This suggests that the newly attributed beneficiaries experienced a significant change in their health status after being attributed to our ACO, resulting in a dramatic rise in use, and also potentially explaining their high degree of specialty care attribution.

Our findings suggest that adverse selection among individuals whose attribution “switched” into hospital-based ACOs may at least partly explain the differential financial performance of physician-based versus hospital-based ACOs. As noted previously, it is possible that the increased use these patients require leads them to facilities that have more specialized care, which may more likely be part of a hospital-based ACO than a physician-led one. For example, our ACO, made up of not only the faculty physician group but also the hospital and clinics and school of medicine and public health, includes a comprehensive cancer center. Beneficiaries newly attributed to our ACO in 2016 were almost twice as likely to have a new diagnosis of cancer in 2016 compared with continuously attributed beneficiaries (6.1 percent versus 3.3 percent—not shown).

Current MSSP Risk Adjustment May Not Adequately Address The High Complexity Of “Switchers”

Because many of the newly attributed beneficiaries were both high cost during the performance year and low cost during the prior year, they entered our program with low Hierarchical Condition Category (HCC) scores, under the system used by CMS to adjust for risk. In fact, almost 10 percent of newly attributed beneficiaries in 2016 had no health care use at all in 2015 (Exhibit 1). Prior to the Pathways to Success program, negative health status changes for continuously enrolled beneficiaries were not included in risk adjustment. For continuously attributed beneficiaries, CMS adjusted risk scores down from the previous year if the HCC score decreased but used only demographic changes to adjust up. Those beneficiaries who were healthy with little to no health care use in 2015 but with a significant change in health status in 2016 had low HCC scores coming into 2016, despite both high risk and use during the 2016 performance year. As a result, a cohort of relatively high-cost beneficiaries in 2016 would not be accounted for in that year’s risk score, resulting in an unfavorable assessment of an ACO’s true financial performance.

New program rules attempt to address concerns about adequate risk adjustment in the MSSP, allowing for a one-time benchmark increase of up to 3 percent to account for unexpected higher use due to increased complexity and health care needs among all attributed beneficiaries. While this change is generally welcomed by the MSSP community, our experience suggests it may be inadequate to account for the added complexities of switchers. The average HCC score for newly attributed beneficiaries to our ACO was 1.01 (Exhibit 1). These scores are based on the group’s health care use in 2015, when the newly attributed cohort was still “healthy,” but they were used during the 2016 performance year. However, calculated scores from the actual experience of the patients during 2016 reveals an average HCC score of 1.34, again indicating that they experienced significant changes in health status. While the new policy of allowing for an increase helps account for these changes, 3 percent may not be adequate.

Prospective Attribution May Mitigate Some Of The Impact Of Adverse Selection

The methodology for attribution of Medicare beneficiaries to ACOs has been a topic of debate since the inception of the MSSP. Under the original model, individuals were assigned to an ACO based on retrospective attribution, meaning that they received a plurality of their services from primary care providers throughout the performance year. If they received no services from a primary care provider, they could be attributed based on services from a specialty care provider. Over the years, CMS has refined the process to increase the likelihood that attribution is based on services from a primary care provider. This results in an ACO not knowing until after the year is over who exactly are their ACO beneficiaries, making it possible for individuals who were in a different ACO the previous year (or not in an ACO at all) to become part of an ACO without that ACO becoming aware until after the fact.

Some of the newer ACO models, notably the Next Generation ACO program, use prospective attribution, whereby only those beneficiaries who received care from the ACO providers in the prior year can be included in the performance year. This method allows for removal of beneficiaries throughout the year but no additions. Under the previous regulations, beneficiaries in MSSP Track 1 were attributed retrospectively, potentially resulting in ACOs becoming responsible for previously healthy individuals who were not part of the ACO in the prior year but whose health status deteriorated during the performance year, thereby driving up average costs without the ACO having meaningful opportunity to intervene. Under the new MSSP regulations, ACOs annually choose whether beneficiaries are assigned through retrospective or prospective attribution, potentially mitigating some of the adverse selection concern.

Looking Ahead

Going forward, it will be important for policy makers and evaluators alike to consider unique program elements that may result in adverse selection or other untoward consequences that are beyond the control of an individual ACO. In the meantime, CMS and ACO leaders can make some choices that help ameliorate some of the unintended or undesirable consequences. CMS can continue to look for ways to evolve program rules, including consideration of additional risk-adjustment methodologies. ACO leaders can choose prospective attribution to avoid adverse selection, especially if their ACO includes hospitals or large specialty groups. CMS can also eliminate the disparities in the program rules between hospital-based and physician-led ACOs, at least until there is increased clarity around differential performance. Ultimately, continued evaluation and program refinement, allowing for successful participation by all different types of ACOs, will be necessary to ensure that all Medicare beneficiaries receive the highest-quality, affordable care and that the program is a good steward of taxpayer funds.

 

 

More good news for Medicare Advantage plans

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Medicare Advantage (MA) plans got a better-than-anticipated pay hike this week, as the Centers for Medicare & Medicaid Services (CMS) released its final 2020 policy and payment updates for the private coverage program for seniors. MA payments will increase by an average of 2.53 percent in 2020, higher than the 1.59 percent initially proposed by CMS earlier this year, reflecting CMS’s expectation that MA services will grow faster than it initially thought.

With the announcement, CMS is also finalizing plans to allow reimbursement for supplemental, non-clinical services covered by MA plans, such as transportation, nutrition support, and housing improvements, as long as those services are intended to improve health status. The final update also confirms CMS’s intent to continue updating its risk-adjustment methodology to more accurately reflect the intensity of services delivered to beneficiaries, a change that has been controversial among insurers, who fear the new methodology will result in lower payments from the government.

Despite these concerns, shares of MA insurers traded higher after the CMS announcement, and health plans will no doubt be pleased with yet another year of good news from CMS on MA rates. Given continued strong enrollment growth, robust rate increases, and a pipeline of millions of aging Baby Boomers poised to become eligible for Medicare, large insurers (and increasingly, providers) will view MA as their primary source of growth for the next decade or more.

 

 

 

 

HRSA rolls out drug pricing site for 340B hospitals

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Drug prices

After multiple delays, the Health Resources & Services Administration (HRSA) has finally launched an online tool that 340B hospitals can use to determine the maximum that pharmaceutical companies can charge for drugs.

HRSA’s new pricing site went live on Monday morning and is one of the elements mandated in the long-delayed final rule for the 340B drug discount program. That rule, which took effect on Jan. 1, also adds monetary penalties for drug companies that overcharge hospitals in the program.

The final rule was first issued in January 2017 and was delayed five times by the Trump administration before going into effect this year. HRSA finally rolled out the rule as it determined the provisions would not interfere with the administration’s broader drug pricing policy

Provider groups and 340B advocates cheered the website’s launch. Maureen Testoni, CEO of 340B health, a group that represents more than 1,300 providers participating in the program, said in a statement that the new tool’s release “marks a positive milestone in the history of the 340B program.” 

“Today’s launch of a secure website listing the maximum allowable prices for all 340B covered drugs brings a healthy dose of sunshine into a marketplace that has, for far too long, been a black box,” Testoni said. “Until today, hospitals, clinics and health centers participating in 340B had no way to be sure they were paying the correct amount for the drugs they purchase.” 

340B Health was joined by the American Hospital Association (AHA), America’s Essential Hospitals and the Association of American Medical Colleges on a lawsuit filed in September with the goal of pushing HRSA to implement the rule.

Tom Nickels, executive vice president at AHA, said in a statement that the group was “pleased” that its lawsuit led to the site’s launch.

“As prescription drug prices continue to skyrocket, the 340B program is as crucial as ever in helping hospitals provide access to healthcare services for patients in vulnerable communities,” Nickels said. 

Amid the drug price debate, the 340B program has been under the microscope. The program has enjoyed traditionally bipartisan support, but intense lobbying from the pharmaceutical industry has led to criticism that it has grown too large.

The Centers for Medicare & Medicaid Services also slashed the program’s payment rate in 2017, a shift in a longstanding Medicare policy that culled $1.6 billion in payments from the program. Hospital groups are currently battling the payment changes in court