Proposed changes to 340B program would cut DSH eligibility by half

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A new congressional proposal would raise the minimum disproportionate share hospital adjustment percentage that DSH hospitals must meet to qualify for the 340B drug discount program, eliminating 340B eligibility for over half the participating hospitals, according to a study by 340B Health.

Under the bill, proposed by Rep. Joe Barton, R-Texas, 573 of the 1,115 DSH hospitals enrolled in the 340B program would no longer be eligible for the drug discounts. Under the current rules, DSH hospitals are eligible for the 340B program if their Medicare DSH adjustment percentage is greater than 11.75 percent. The proposal would raise the qualifying rate to 18 percent.

Here are the 10 states with the most DSH hospitals that would lose 340B eligibility under the proposal:

  1. California (39)
  2. Texas (35)
  3. North Carolina (33)
  4. Georgia (31)
  5. Ohio (29)
  6. Michigan (23)
  7. New York (21)
  8. Illinois (19)
  9. Alabama (19)
  10. Pennsylvania (18)



About 30 New Lawsuits Await Supreme Court Input in High-Stakes DSH Payments Case

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In latest filing, HHS argues there’s a broader principle at play than the potential reimbursements totaling up to $4 billion.

As the U.S. Supreme Court prepares to consider this fall whether to take up a case implicating potentially billions of dollars in Medicare payments, hospitals that provide high rates of uncompensated care are lining up to ask the federal government for their piece of the pie.

The D.C. Circuit Court ruled less than a year ago that Health and Human Services violated the Medicare statute by failing to conduct a notice-and-comment rulemaking process when it implemented a policy affecting disproportionate-share hospital (DSH) reimbursements. Since then, providers have filed about 30 lawsuits in the D.C. District Court raising similar claims, according to a filing submitted Thursday to the Supreme Court on HHS Secretary Alex Azar’s behalf.

Some of the suits include dozens of plaintiffs. Most of them have been stayed pending the Supreme Court’s next move.

“The monetary stakes and hospitals’ legal sophistication will likely lead to future cases raising similar issues being litigated in the District of Columbia, where the decision below constitutes binding precedent,” Solicitor General Noel J. Francisco wrote in the filing, arguing that the Supreme Court should take the case so HHS may argue that the appellate court’s decision should be overruled.

The respondents—who argued the Supreme Court should deny the HHS request and let the Circuit Court decision stand—include just nine hospitals, but their claims for a single year total $48.5 million in additional reimbursement. Considering that about 2,700 hospitals receive DSH payments, the financial stakes surrounding this case are clearly quite high.

Although the appellate court sided with the hospitals’ claim that HHS broke the law by skipping notice-and-comment rulemaking, the latest HHS filing argues that the ruling was faulty and that there’s a broader issue at play.

The respondents both “miss the point and are wrong” about the legal standard, the HHS filing states.

“They miss the point because the logic of the decision below would apply to any context in which the agency gives its contractors interpretive instructions about making initial reimbursement decisions,” the filing states, noting that providers have the option to challenge initial cost-reporting determinations.

In other words, if HHS is required to engage in notice-and-comment rulemaking to calculate DSH reimbursements, then it must be required to do the same in other matters that would make running Medicare and other programs unworkable, HHS argues.

The Supreme Court is set to consider in a conference September 24 whether to take up the case.



Bipartisan Senate Budget Deal Boosts Health Programs

Bipartisan Senate Budget Deal Boosts Health Programs

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In a rare show of bipartisanship for the mostly polarized 115th Congress, Republican and Democratic Senate leaders announced a two-year budget deal that would increase federal spending for defense as well as key domestic priorities, including many health programs.

Not in the deal, for which the path to the president’s desk remains unclear, is any bipartisan legislation aimed at shoring up the Affordable Care Act’s individual health insurance marketplaces. Senate Majority Leader Mitch McConnell (R-Ky.) promised Sen. Susan Collins (R-Maine) a vote on health legislation in exchange for her vote for the GOP tax bill in December. So far, that vote has not materialized.

The deal does appear to include almost every other health priority Democrats have been pushing the past several months, including two years of renewed funding for community health centers and a series of other health programs Congress failed to provide for before they technically expired last year.

“I believe we have reached a budget deal that neither side loves but both sides can be proud of,” said Senate Minority Leader Chuck Schumer (D-N.Y.) on the Senate floor. “That’s compromise. That’s governing.”

Said McConnell, “This bill represents a significant bipartisan step forward.”

Senate leaders are still negotiating last details of the accord, including the size of a cut to the ACA’s Prevention and Public Health Fund, which would help offset the costs of this legislation.

According to documents circulating on Capitol Hill, the deal includes $6 billion in funding for treatment of mental health issues and opioid addiction, $2 billion in extra funding for the National Institutes of Health, and an additional four-year extension of the Children’s Health Insurance Program (CHIP), which builds on the six years approved by Congress last month.

In the Medicare program, the deal would accelerate the closing of the “doughnut hole” in Medicare drug coverage that requires seniors to pay thousands of dollars out-of-pocket before catastrophic coverage kicks in. It would also repeal the controversial Medicare Independent Payment Advisory Board (IPAB), which is charged with holding down Medicare spending for the federal government if it exceeds a certain level. Members have never been appointed to the board, however, and its use has not so far been triggered by Medicare spending. Both the closure of the doughnut hole and creation of the IPAB were part of the ACA.

The agreement would also fund a host of more limited health programs — some of which are known as “extenders” because they often ride along with other, larger health or spending bills.

Those programs include more than $7 billion in funding for the nation’s federally funded community health centers. The clinics serve 27 million low-income people and saw their funding lapse last fall — a delay advocates said had already complicated budgeting and staffing decisions for many clinics.

And in a victory for the physical therapy industry and patient advocates, the accord would permanently repeal a limit on Medicare’s coverage of physical therapy, speech-language pathology and outpatient treatment. Previously, the program capped coverage after $2,010 worth of occupational therapy and another $2,010 for speech-language therapy and physical therapy combined. But Congress had long taken action to delay those caps or provide exemptions — meaning they had never actually taken effect.

According to an analysis by the nonpartisan Congressional Budget Office, permanently repealing the caps would cost about $6.47 billion over the next decade.

Lawmakers would also forestall cuts mandated by the ACA to reduce the payments made to so-called Disproportionate Share Hospitals, which serve high rates of low-income patients. Those cuts have been delayed continuously since the law’s 2010 passage.

Limited programs are also affected. The deal would fund for five years the Maternal, Infant and Early Childhood Home Visiting Program, a program that helps guide low-income, at-risk mothers in parenting. It served about 160,000 families in fiscal year 2016.

“We are relieved that there is a deal for a 5-year reauthorization of MIECHV,” said Lori Freeman, CEO of advocacy group the Association of Maternal & Child Health Programs, in an emailed statement. “States, home visitors and families have been in limbo for the past several months, and this news will bring the stability they need to continue this successful program.”

And the budget deal funds programs that encourage doctors to practice in medically underserved areas, providing just under $500 million over the next two years for the National Health Service Corps and another $363 million over two years to the Teaching Health Center Graduate Medical Education program, which places medical residents in Community Health Centers.


Senate strikes 2-year budget deal: 5 takeaways for healthcare leaders

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Republican and Democrat Senate leaders unveiled a two-year budget deal Wednesday that would boost federal spending for several health programs.

Here are five things to know about the budget agreement.

1. The budget deal includes an additional four-year extension of the Children’s Health Insurance Program. That extension is on top of the six years of CHIP funding Congress approved in late January.

2. The plan includes more than $7 billion in funding over two years for the nation’s community health centers. Federal funding for community health centers, which serve more than 27 million people, expired Sept. 30.

3. The spending deal would delay payment cuts to Disproportionate Share Hospitals mandated by the ACA, which have been pushed back since 2010, according to Kaiser Health News.

4. The budget deal includes $2 billion in additional funding for the National Institutes of Health and $495 million for the National Health Service Corps.

5. The budget deal would repeal the ACA’s Independent Payment Advisory Board, which was intended to hold down Medicare payments if the program’s spending exceeded a certain threshold. Members have never been appointed to the IPAB, according to Kaiser Health News.


Healthcare bankruptcies more than triple in 2017

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Regulatory changes, the rise of high-deductible health plans and advances in technology are a few of the factors that have taken a toll on healthcare companies’ finances, and these challenges may lead many hospitals and other medical companies to restructure their debt or file for bankruptcy in the coming year, according to Bloomberg.

Although hospitals are expected to face financial challenges in the year ahead, many healthcare companies are already struggling. According to data compiled by Bloomberg, healthcare bankruptcy filings have more than tripled in 2017. Healthcare bankruptcies are on the rise as filings across the broader economy have fallen since 2010, according to the report.

The challenges in the healthcare sector may hit rural hospitals the hardest due to the reduction in Disproportionate Share Hospital payments.

The ACA calls for annual ggregate reductions to DSH payments from fiscal year 2014 through fiscal year 2020. Subsequent legislation delayed the start of the reductions until fiscal year 2018, which began Oct. 1, and pushed the end date back to fiscal year 2025.

David Neier, a partner at Winston & Strawn, told Bloomberg the cuts to DSH payments may “single-handedly throw hospitals into immediate financial distress.”


Senate GOP Tax Cut Bill Heads To Full Senate With Individual Mandate Repeal

November 19 Update: Distributional Effects Of Individual Mandate Repeal

Late in the day of November 17, 2017, the Congressional Budget Office released a letter it had sent to Senator Ron Wyden, ranking member of the Senate Finance Committee, on the Distributional Effects of Changes in Spending Under the Tax Cuts and Jobs Act as of November 15, 2017 as they are affected by repeal of the Affordable Care Act’s Individual Responsibility Provision. The letter updated the analysis the JCT had released on November 15 of the distributional effects of the Tax Act that had focused solely on the effects of the legislation on revenues and refundable tax credits. The update also addressed changes the repeal of the mandate would cause in other federal expenditures, including cuts in Medicaid, cost-sharing reductions (which CBO sees as mandatory spending and thus includes in its analysis), and Basic Health Program spending, as well as increases in Medicare disproportionate share hospital payments.

The analysis concludes that under the Tax Bill, federal spending allocated to people with incomes below $50,000 a year would be lower than it would otherwise have been over the next decade. For example, CBO projects federal spending for people with incomes under $10,000 will be $9.7 billion less in 2027 than it otherwise would have been, spending on people with incomes from $10,000 to $20,000 will be $9.8 billion less; spending on people with incomes from $20,000 to $30,000 will be $8.7 billion less, spending on people with incomes from $30,000 to $40,000 will $3 billion less; and spending on people with incomes from $40,000 to $50,000 will be $1.2 billion less. The CBO calculated these figures by calculating the number of people who are projected to drop Medicaid enrollment in each income category and their average Medicaid cost considering age, income, disability status, and whether they gained coverage under the ACA.

More controversially, the CBO determined that individuals with incomes above $50,000 would benefit from the repeal. People with incomes between $100,000 and $200,000 would receive $1.7 billion more and people with incomes over $1 million would receive $440 million more. These increases are due to the increased expenditures on Medicare that will result from the bill, half of which the CBO distributed evenly across the population and half of which it allocated in proportion to each tax filing unit’s share of total income. As the increased Medicare disproportionate share payments are in fact paid directly to providers to cover their costs for serving the uninsured, who will predominantly be low-income, this seems to be an odd way to allocate these expenditures, although it is apparently standard CBO cost allocation practice, and ensuring that hospitals are not overwhelmed by bad debt does benefit people from all income categories.

The CBO specifies that it only considered the cost of the spending or spending reduction to the government, not the value placed on that spending by the recipients of the coverage it would purchase. A person who fails to enroll in Medicaid because the mandate is dropped is unlikely to value it at its full cost. Moreover, and importantly, the CBO did not take into account the cost of the mandate repeal to those who will feel it most acutely—individuals who are purchasing coverage in the individual market without subsidies who will face much higher premiums if the mandate is repealed.

The CBO also failed to consider the medical costs that will be incurred by individuals who drop health insurance coverage or the costs to society generally of a dramatic increase in the number of the uninsured.

Original Post

On November 16, 2017, the Senate Finance Committee approved by a party-line 14-to-12 vote a tax cut bill that will now be sent to the full Senate. The bill includes a repeal of the penalty attached to the Affordable Care Act (ACA)’s individual responsibility provision. This provision requires individuals who do not qualify for an exemption to obtain minimum essential coverage or pay the penalty.

A “Twofer” For Republicans: Additional Continuing Revenue And Elimination Of The ACA’s Least Popular Provision

The repeal of the individual mandate was included in the tax bill for two reasons. First, the Joint Committee on Taxation (JCT­) scored the repeal as reducing the deficit by $318 billion over ten years. This repeal would provide enough savings, including continuing savings in years beyond 2027, to allow Republicans to permanently reduce the corporate tax rate without increasing the deficit by more than $1.5 trillion or otherwise violating budget reconciliation requirements. Second, it would allow Republicans to get rid of the least popular provision of the ACA, making up in part for their failing to repeal the ACA despite a summer of efforts.

The savings that will supposedly result from the repeal of the individual mandate come entirely from individuals losing health coverage which the federal government would otherwise help finance.  A cost estimate released by the Congressional Budget Office (CBO) on November 8, 2017 projected that repeal of the mandate would cause 13 million individuals to lose coverage by 2017, including five million individual market enrollees, five million Medicaid recipients, and two to 3 million individuals with employer coverage.

The CBO estimated that this loss of coverage would result in reductions over ten years of $185 billion in premium tax credits and $179 billion in Medicaid expenditures and a change in other revenues and outlays of about $62 billion, primarily attributable to increased taxes imposed on people who would lose employer coverage. (The increases would be offset by $43 billion in lost individual mandate penalty payments and a $44 billion increase in Medicare disproportionate share hospital payments to hospitals that bore the burden of caring for more uninsured patients.)

The total reduction in the federal deficit, in the opinion of the CBO, would be $338 billion over ten years. (The difference between the $318 billion in savings in the JCT tax bill score and the $338 billion in the earlier CBO/JCT individual mandate repeal cost estimate is presumably due to the fact that the Finance bill would only repeal the mandate penalty, not the mandate itself, and some individuals would presumably continue to comply with the mandate even without the penalty because it is legally required.) The JCT also projects that the repeal of the mandate will effectively result in a tax increase for individuals with incomes below $30,000 a year because of the loss of tax credits that will accompany the loss of coverage, further tipping the benefits of the tax cut bill toward the wealthy.

Behind The Coverage Loss Estimate

At first glance, the estimate that 13 million would lose coverage from the repeal of the mandate, including five million who would give up essentially free Medicaid, seems improbable.  Moreover, supporters of the tax bill contend that no one would be forced to give up coverage—coverage losses would all be voluntary. And, the argument continues, most of the people who are now paying the mandate penalty earn less than $50,000 a year, so repeal of the mandate will in fact be beneficial to lower-income individuals.

In fact, the CBO’s estimates of coverage losses (and budget savings) may be too high. The November 8 CBO estimates were lower than earlier estimates, and the CBO admits that it is continuing to evaluate is methodology for estimating the effect of the individual mandate. There is substantial confusion regarding the mandate requirement. A fifth of the uninsured, according to a recent poll, believe that the individual market is no longer in effect while another fifth do not know whether it is or not. Compliance with the mandate may already be slipping—the Treasury Inspector General reported in April that filings including penalty payments were as of March 31 down by a third from 2015. Part of the potential effect of repeal is already being felt.

Although the mandate repeal would not go into effect until 2019, media coverage will surely cause even further confusion and even more people to drop coverage, likely dampening enrollment for 2018 in the open enrollment period currently underway.

S&P Global released a report on November 16 estimating that only three to five million individuals would lose coverage from the mandate repeal. Coverage losses of this magnitude, however, would only result in savings of $50 to $80 billion over the ten-year budget window, meaning the tax bill would add another $240 to $270 billion to the deficit and put it in violation of the budget reconciliation rules.

Whatever the level of loss of coverage under a mandate repeal, it is reasonable to believe that it would be extensive. The CBO estimated that repeal of the mandate would drive up premiums in the individual market by 10 percent. Without the mandate, healthy individuals would drop out, pushing up premiums for those remaining in the market. Unlike the increases caused by the termination of cost-sharing reduction payments, this increase would likely be loaded onto premiums for plans of all metal levels and onto premiums for enrollees across the individual market, including off-exchange enrollees. Moreover, repeal of the mandate would likely cause another round of insurer withdrawals from the individual market as insurers concluded that the market was just too risky. Insurers left as the lone participant in particular markets without competition to drive down premiums would likely raise their premiums well above 10 percent.

Who Would Have The Most To Lose From A Mandate Repeal?

The biggest losers from a mandate repeal would be individuals who earn more than 400 percent of the federal poverty level and thus bear the full cost of coverage themselves.  These are the farmers, ranchers, and self-employed small business people who have traditionally bought coverage in the individual market. They are also include gig-economy workers and entrepreneurs who have been liberated by the ACA from dead-end jobs with health benefits to pursue their dreams. Their increased premiums might well offset any tax cut they receive under the bill.

If members of these groups are healthy, they might be able to find cheap coverage through short-term policies which the Trump Administration has promised to allow to last longer than the current three month limit and to be renewable. But those policies will not cover individuals with preexisting conditions.  And if healthy individuals are allowed to purchase full-year “short-term” coverage without having to pay an individual mandate penalty, even more healthy people will leave the individual market, driving premiums up even higher as the individual market becomes a high risk pool for individuals not eligible for premium tax credits. As premiums increased, so would premium tax credits, driving up the cost for the federal government.

The CBO estimate that five million will lose Medicaid coverage seems questionable, as Medicaid coverage is essentially free for most beneficiaries. But, particularly in Medicaid expansion states, there is a thin line between individual market and Medicaid eligibility, and many people who apply for individual market coverage find out that they are in fact eligible for Medicaid. Without the mandate, fewer are likely to apply at all. Moreover, Medicaid does not have open enrolment periods—people can literally apply for Medicaid in the emergency room, and many do. Without the mandate many will likely forgo the hassle of applying (or more likely reapplying) for Medicaid and only get covered when they need expensive hospital care. But they will thereby forgo preventive and primary care that could have obviated an emergency room visit or hospitalization.

Finally, in many families, parents are insured in the individual market but children are on Medicaid or CHIP. Without the mandate, the parents may forgo coverage, causing the children to lose coverage as well—and with it access to preventive and primary care.

The Involuntary Impact From ‘Voluntary’ Coverage Losses

Even if these coverage losses are “voluntary,” they will affect many who continue to want coverage. As already noted, as healthy people leave insurance markets, costs will go up for those who remain behind. Some of these will be people who really want, indeed need, coverage but will no longer find it affordable, and who will thus involuntarily lose coverage. Indeed, this effect may extend beyond the individual market. As healthy individuals drop employer coverage, costs may go up for those employees left behind.

Moreover, the voluntarily uninsured will inevitably have auto accidents or heart attacks or find out that they have cancer. Many will end up receiving uncompensated care, undermining the financial stability of health care providers saddled with ever higher bad debt, and driving up the cost of care for the rest of us.

Republican repeal bills offered earlier this year included other approaches to encouraging continuous enrollment—imposing health status underwriting or late enrollment penalties on those who failed to maintain continuous coverage, for example. The tax bill includes no such alternatives, nor could it.  It may be possible that states could step into the gap. Massachusetts, for example, had an individual mandate penalty even before the ACA; it was the model for the ACA. The District of Columbia Exchange Board has recommended that D.C. impose its own individual mandate tax if the federal mandate ceases to be enforced. Perhaps other states will step into the gap. But I am not counting on many doing so.

The individual mandate is there for a reason. It is intended to drive healthy as well as unhealthy individuals into the individual market and thus make coverage of people with preexisting conditions possible. It has been a significant contributor to the record reductions in the number of the uninsured brought about by the ACA. Without the individual mandate, the number of the uninsured would once again rise. Maybe not by 13 million, but nonetheless significantly.


NYC Health + Hospitals cuts 476 positions amid financial pressure

Dive Brief:

  • NYC Health + Hospitals on Friday cut 476 management positions, which will reduce the current six layers of managers to four and is expected to save the health system $60 million, several news outlets reported.
  • The largest U.S. public health system cut 396 managers and eliminated 80 unfilled positions.
  • The system expects the job cuts to lead to $60 million in savings in fiscal year 2018.

Dive Insight:

The announcement of the health system’s massive restructuring day came after a $673 million loss was posted for Q3 2017. H+H interim President and CEO Stanley Brezenoff said in a statement the restructuring will reduce “unnecessary layers of management.” The health system will now be able to “better direct resources where we need them most —  at the front line of patient care.” It also cut 70 employees in February.

Revenue increased by 1.8% to $6.7 billion during the third quarter. Yet system officials said net patient service revenues dropped by 9%. The reasons behind the drop were “lower payments from the disproportionate share hospital (DSH) and upper payment limit programs,” according to the healthcare system of 11 hospitals.

At that time, H+H predicted that it would cut its $779 million budget gap this year and end with $185 million cash in hand. In April, the health system announced a redesign of its management structure after losing $776 million for the first half of FY 17, but said at that time that they did not expect layoffs.

Hospitals are facing financial issues across the country. Safety net hospitals like H+H may soon face even more difficulties. H+H has a large Medicaid population and potential cuts in President Donald Trump’s budget and the American Health Care Act – the GOP’s proposed bill to replace the Affordable Care Act – could send millions off of Medicaid. This would mean a system like H+H may soon face more uncompensated care.

H+H is looking for ways to improve its finances. One way is through a new Epic revenue cycle system that officials in May said will “improve efficiency and ensure that the health system is collecting the maximum amount of revenue for the services it delivers.” They expect it will improve clinical documentation, reduce claims denials and accelerate reimbursements.