Congressional Fight on DSH Set to Begin

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Sen. Marco Rubio (R-FL) jumped into the disproportionate-share hospital funding debate this week with the State Accountability, Flexibility, and Equity (SAFE) for Hospitals Act that would overhaul the billions distributed by the program. Florida receives one of the lowest allotments in the country the Rubio bill would tweak the DSH funding formula so a state’s allotment is based on its overall population of adults below poverty level leading to hospitals that care for higher amounts of poor patients receiving more money. Additionally, the bill would redefine the hospital costs that count as uncompensated care to include some outpatient physician and clinical services.

Under current law substansive DSH cuts go into place on Sept. 30, 2019 unless Congress acts. The Medicaid and CHIP Payment and Access Commission discussed proposed recommendations on DSH allotment reductions at its December meeting which included –

  • Phasing in reductions more gradually over a longer period of time -$2B in FY 2020, $4B in FY 2021, $6B in FY 2022 and $8B a year in FYs 2023-2029;
  • Applying reductions to unspent DSH funding first; and
  • Distributing reductions in a way that gradually improves the relationship between DSH allotments and the number of non-elderly, low-income individuals in a state.

MACPAC The Commissioners are expected to vote on the recommendations at the January 24-25 meeting.

Click here for a summary of the Rubio bill and

here to view the MACPAC presentation.

A Sense of Alarm as Rural Hospitals Keep Closing

The potential health and economic consequences of a trend associated with states that have turned down Medicaid expansion.

Hospitals are often thought of as the hubs of our health care system. But hospital closings are rising, particularly in some communities.

“Options are dwindling for many rural families, and remote communities are hardest hit,” said Katy Kozhimannil, an associate professor and health researcher at the University of Minnesota.

Beyond the potential health consequences for the people living nearby, hospital closings can exact an economic toll, and are associated with some states’ decisions not to expand Medicaid as part of the Affordable Care Act.

Since 2010, nearly 90 rural hospitals have shut their doors. By one estimate, hundreds of other rural hospitals are at risk of doing so.

In its June report to Congress, the Medicare Payment Advisory Commission found that of the 67 rural hospitals that closed since 2013, about one-third were more than 20 miles from the next closest hospital.

study published last year in Health Affairs by researchers from the University of Minnesota found that over half of rural counties now lack obstetric services. Another study, published in Health Services Research, showed that such closures increase the distance pregnant women must travel for delivery.

And another published earlier this year in JAMA found that higher-risk, preterm births are more likely in counties without obstetric units. (Some hospitals close obstetric units without closing the entire hospital.)

Ms. Kozhimannil, a co-author of all three studies, said, “What’s left are maternity care deserts in some of the most vulnerable communities, putting pregnant women and their babies at risk.

In July, after The New York Times wrote about the struggles of rural hospitals, some doctors responded by noting that rising malpractice premiums had made it, as one put it, “economically infeasible nowadays to practice obstetrics in rural areas.”

Many other types of specialists tend to cluster around hospitals. When a hospital leaves a community, so can many of those specialists. Care for mental health and substance use are among those most likely to be in short supply after rural hospital closures.

The closure of trauma centers has also accelerated since 2001, and disproportionately in rural areas, according to a study in Health Affairs. The resulting increased travel time for trauma cases heightens the risk of adverse outcomes, including death.

Another study found that greater travel time to hospitals is associated with higher mortality rates for coronary artery bypass graft patients.

In many communities, hospitals are among the largest employers. They also draw other businesses to an area, including those within health care and others that support it (like laundry and food services, or construction).

A study in Health Services Research found that when a community loses its only hospital, per capita income falls by about 4 percent, and the unemployment increases by 1.6 percentage points.

Not all closures are problematic. Some are in areas with sufficient hospital capacity. Moreover, in many cases hospitals that close offer relatively poorer quality care than nearby ones that remain open. This forces patients into higher-quality facilities and may offset negative effects associated with the additional distance they must travel.

Perhaps for these reasons, one study published in Health Affairs found no effect of hospital closures on mortality for Medicare patients. Because it focused on older patients, the study may have missed adverse effects on those younger than 65. Nevertheless, the study found that hospital closings were associated with reduced readmission rates, which is regarded as a sign of increased quality. So it seems consolidating services at larger hospitals can sometimes help, not harm, patients.

“There are real trade-offs between consolidating expertise at larger centers versus maintaining access in local communities,” said Karen Joynt Maddox, a cardiologist and health researcher with the Washington University School of Medicine in St. Louis and an author of the study. “The problem is that we don’t have a systematic approach to determine which services are critical to provide locally, and which are best kept at referral centers.”

Many factors can underlie the financial decision to close a hospital. Rural populations are shrinking, and the trend of hospital mergers and acquisitions can contribute to closures as services are consolidated.

Another factor: Over the long term, we are using less hospital care as more services are shifted to outpatient settings and as inpatient care is performed more rapidly. In 1960, an average appendectomy required over six days in the hospital; today one to two days is the norm.

Part of the story is political: the decision by many red states not to take advantage of federal funding to expand Medicaid as part of the Affordable Care Act. Some states cited fiscal concerns for their decisions, but ideological opposition to Obamacare was another factor.

In rural areas, lower incomes and higher rates of uninsured people contribute to higher levels of uncompensated hospital care — meaning many people are unable to pay their hospital bills. Uncompensated care became less of a problem in hospitals in states that expanded Medicaid.

In a Commonwealth Fund Issue Brief, researchers from Northwestern Kellogg School of Management found that hospitals in Medicaid expansion states saved $6.2 billion in uncompensated care, with the largest reductions in states with the highest proportion of low-income and uninsured patients. Consistent with these findings, the vast majority of recent hospital closings have been in states that have not expanded Medicaid.

In every year since 2011, more hospitals have closed than opened. In 2016, for example, 21 hospitals closed, 15 of them in rural communities. This month, another rural hospital in Kansas announced it was closing, and next week people in Kansas, and in some other states, will vote in elections that could decide whether Medicaid is expanded.

Richard Lindrooth, a professor at the University of Colorado School of Public Health, led a study in Health Affairs on the relationship between Medicaid expansion and hospitals’ financial health. Hospitals in nonexpansion states took a financial hit and were far more likely to close. In the continuing battle within some states about whether or not to expand Medicaid, “hospitals’ futures hang in the balance,” he said.

 

 

How to Tame Health Care Spending? Look for One-Percent Solutions

The health care system in the United States costs nearly double that of its peer countries, without much better outcomes. Many scholars and policymakers have looked at this state of affairs and dreamed big. Maybe there’s some broad fix — high deductibles, improvements in end-of-life care, a single-payer system — that can make United States health care less expensive.

But what if the most workable answer isn’t something big, but hosts of small tweaks? A group of about a dozen health economists has begun trying to identify policy adjustments, sometimes in tiny slices of the health care system, that could produce savings worth around 1 percent of the country’s $3.3 trillion annual health spending. If you put together enough such fixes, the group points out, they could add up to something more substantial.

This is a shift from the kind of research that is typically rewarded by big journal editors and tenure committees, but it could turn out to have a crucial role in understanding why our health care system is so expensive, and so unusual.

“I think focusing on the forest misses the fact that there are trees encroaching out of the forest,” said Fiona Scott Morton, a health economist at the Yale School of Management. “And we need to start cutting them down.”

A working paper published Monday proposes one possible fix. In the 1980s, Congress carved out a small group of hospitals from its normal rules for payment. These “long-term care hospitals,” which treated patients with tuberculosis and chronic diseases, could earn far more money than traditional hospitals and nursing homes if they cared for patients who stayed with them for an average of 25 days. Since then, the number of these hospitals has mushroomed, from a few dozen to more than 400, most run by two for-profit chains.

For years, analysts and policymakers have wondered about the value of these hospitals, which tend to treat very sick patients who need a lot of care, such as mechanical ventilation or dialysis. Several analyses have suggested that Medicare may be overpaying for their services. And Congress has made some small changes to limit the number of patients who are eligible for such care.

The new paper, from researchers at the Massachusetts Institute of Technology, Stanford University, and the University of Chicago, took a close look at what happened to patients as new long-term care hospitals opened around the country in places that had none.

The study, covering 1990 to 2014, found that when such a hospital opened, the odds increased that very sick patients leaving a normal hospital would end up going next to a long-term care hospital, generating a growing bill for both Medicare and the patients themselves. But the researchers found no benefit when it came to patients’ chances of dying or going home within 90 days.

The researchers concluded that the health care system could probably save a lot of money — around $5 billion a year — by paying the long-term care hospitals the same prices that are paid to skilled nursing facilities, the places that most long-term patients end up in when there is no long-term care hospital nearby.

The hospital industry disagrees with the paper’s conclusion and disputes the notion that the extra money they get is wasteful. The American Hospital Association noted that since the study ended, Congress has changed the rules for long-term care hospitals so that fewer of their patients qualify for the highest payment rates. That means that the study results might be different if they looked at long-term hospital care in more recent years.

Select Medical, one of the large chains of long-term care hospitals, said in a statement that measuring only whether the long-term care patients died or went home did not capture other, more subtle health benefits that the hospitals provided compared with other options. But the industry does not collect such measures of quality in a standardized way, making that theory hard to test.

The National Association of Long Term Hospitals, a trade group, also noted that the paper’s policy proposals were more extreme than those from other critics, who had suggested more minor changes to how the hospitals should be paid.

Neale Mahoney, a health economist at the University of Chicago Booth School of Business, who was one of the working paper’s co-authors, said the history of long-term care hospitals fit together with the economic analysis to suggest that the special hospital payment probably wasn’t appropriate.

“What’s convinced me that these institutions are a source of waste is a constellation of evidence rather than one piece of evidence,” he said.

Dr. Jeremy Kahn, a critical care physician and professor of health policy at the University of Pittsburgh, who has studied long-term care hospitals extensively, said there are some patients with particular ailments who benefit from the setting, but agreed with the economists that the hospitals are a historical accident, defined more by payment rules than patient needs.

“Long-term care hospitals aren’t to blame here,” he said. “If you see a dollar on the ground, you will pick it up, and that’s what’s going on here.”

Mr. Mahoney said the economics profession is fond of broad conclusions. The typical paper takes a narrow case and tries to draw a broader conclusion about how the world works. But he increasingly thinks that there may be value in thinking small, doing more of what he calls “forensic economics.”

One of his co-authors, Amy Finkelstein, says she has been inspired by a colleague who works in development economics, Esther Duflo, who recently delivered a speech titled The Economist as Plumber,” arguing that her colleagues should not look down on tinkering as unworthy of the profession.

“We may need to do more health care plumbing rather than health care big theories,” said Ms. Finkelstein, a health economist at M.I.T. “The history of long-term care hospitals suggests the industry will always innovate ahead of you, and you may actually have to roll up your sleeves and find these pockets of waste.”

The researchers have begun to chat during coffee breaks at conferences and in long phone conversations. Small possible sources of inefficiency, like drug co-payment coupons for generic drugs or high out-of-network payments for emergency room care, could start to add up.

The scholars involved in the project know that they are not the first group to think small. The sort of deep and narrow investigations they are undertaking have long been the focus of groups like the Medicare Payment Advisory Commission, a group that recommends changes to Congress and that had even flagged long-term care hospitals for overhaul years ago. Washington policymakers and think tanks have long assembled briefing books of options to help them nip and tuck dollars out of government health programs.

But the new effort by academics may expand the impact of such suggestions. New data about not just government spending but also private insurance has enabled researchers to examine spending and inefficiency in the health care system more broadly than ever before. After all, the health care system is much bigger than just Medicare.

“I think people say that’s too small — it’s not going to change the trajectory — therefore we shouldn’t spend time on it,” said Ms. Morton, the Yale economist. “And they are forgetting how many dollars there are.”

 

 

The Large Hidden Costs of Medicare’s Prescription Drug Program

https://theincidentaleconomist.com/wordpress/the-large-hidden-costs-of-medicares-prescription-drug-program/

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At a glance, Medicare’s prescription drug program — also called Medicare Part D — looks like the perfect example of a successful public-private partnership.

Drug benefits are entirely provided by private insurance plans, with generous government subsidies. There are lots of plans to choose from. It’s a wildly popular voluntary program, with 73 percent of Medicare beneficiaries participating. Premiums have exhibited little to no growth since the program’s inception in 2006.

But the stability in the premiums belies much larger growth in the cost for taxpayers. In 2007, Part D cost taxpayers $46 billion. By 2016, the figure reached $79 billion, a 72 percent increase. It’s a surprising statistic for a program that is often praised for establishing a competitive insurance market that keeps costs low, and that is singled out as an example of the good that can come from strong competition in a private market.

Much of this increase is a result of growing enrollment — it has doubled in the past decade to 43 million — and higher drug prices. But there is also a subtle way in which the program’s structure promotes cost growth.

When enrollees’ drug costs are relatively low, plans pay a large share, typically about 75 percent. But when enrollees’ drug spending surpasses a certain catastrophic threshold — set at $5,000 in out-of-pocket spending in 2018 — 80 percent of drug costs shifts to a government program called reinsurance. This gives people in charge of private insurance plans an incentive to find ways to push enrollees into the catastrophic range, shifting the vast majority of drug costs off their books. For example, they could be less motivated to negotiate for lower drug prices for certain types of drugs if doing so would tend to keep more enrollees out of the catastrophic range.

Reinsurance spending, which is not reflected in premiums, has been rising rapidly.

“This harms the very competition that Part D was supposed to establish,” said Roger Feldman, an economist at the University of Minnesota. Consumers are naturally attracted to lower-premium plans, but choosing them increasingly shifts higher costs onto taxpayers if plans achieve those lower premiums in part by shifting more drug expenses onto the government’s books.

Documenting this is a recent study by Mr. Feldman and Jeah Jung of Penn State University that was published in Health Services Research. The study found that the disconnect between premiums and reinsurance costs has increased over time. Additionally, insurance company plans exhibiting less of an effort to manage the use of high-cost drugs had higher reinsurance costs. This is consistent with incentives to encourage enrollees into the catastrophic range of spending.

The Medicare Payment Advisory Commission has been warning about this problem for several years in its annual reports to Congress. According to MedPAC, between 2010 and 2015, the number of enrollees entering the catastrophic drug cost range grew 50 percent, from 2.4 million to 3.6 million, now accounting for 8 percent of enrollees.

“It’s ironic for a program supposedly built on market principles,” said Mark Miller, a former MedPAC director. “You wouldn’t see this kind of thing in the commercial market.” For commercial market insurance products — such as those offered by employers or in the health insurance marketplaces — only about 1 percent of policyholders reach a catastrophic level of expenditures at which reinsurance kicks in. (Mr. Miller and I are co-authors of an editorial about Ms. Jung’s and Mr. Feldman’s study, which also appears in Health Services Research.)

Reinsurance is the fastest-growing component of Medicare’s drug program, expanding at an 18 percent annual rate between 2007 and 2016. In 2007, it accounted for 17 percent of government spending for Part D. In 2016 it was 44 percent.

The Affordable Care Act hastened this growth. The law requires pharmaceutical manufacturers to pay some of the cost of the drug benefit. (The Bipartisan Budget Act of 2018 further increased how much manufacturers must contribute.) For the purposes of reaching the catastrophic threshold and triggering reinsurance, these industry contributions count as out-of-pocket payments for enrollees, even though they are not.

That means enrollees don’t have to spend as much as they otherwise would to trigger the reinsurance program. Although this is of great benefit to enrollees, it also pushes up taxpayer liability for the program.

Changing the extent to which manufacturer’s contributions count as enrollee out-of-pocket spending is one potential reform of the program. Other solutions include increasing the liability of insurance company plans in the catastrophic range and decreasing the liability of taxpayers.

This would have the effect of bringing premiums more in line with program spending. Doing so would “return Part D to the market-based program it was intended to be,” Ms. Jung said. As it stands, there is a substantial divide between what Part D was billed as and what it actually is.

 

 

Medicare Takes Aim At Boomerang Hospitalizations Of Nursing Home Patients

https://www.npr.org/sections/health-shots/2018/06/13/619259541/medicare-takes-aim-at-boomerang-hospitalizations-of-nursing-home-patients

“Oh my God, we dropped her!” Sandra Snipes said she heard the nursing home aides yell as she fell to the floor.

She landed on her right side where her hip had recently been replaced. She cried out in pain.

A hospital clinician later discovered her hip was dislocated.

That was not the only injury Snipes, then 61, said she suffered in 2011 at Richmond Pines Healthcare & Rehabilitation Center in Hamlet, N.C. Nurses allegedly had been injecting her twice a day with a potent blood thinner despite written instructions to stop.

“She said, ‘I just feel so tired,’ ” her daughter, Laura Clark, said in an interview. “The nurses were saying she’s depressed and wasn’t doing her exercises. I said no, something is wrong.”

Her children also discovered Snipes’ surgical wound had become infected and infested with insects. Just 11 days after she arrived at the nursing home to heal from her hip surgery, she was back in the hospital.

The fall and these other alleged lapses in care led Clark and the family to file a lawsuit against the nursing home. Richmond Pines declined to discuss the case beyond saying it disputed the allegations at the time. The home agreed in 2017 to pay Snipes’ family $1.4 million to settle their lawsuit.

While the confluence of complications in Snipes’ case was extreme, return trips from nursing homes to hospitals are far from unusual.

With hospitals pushing patients out the door earlier, nursing homes are deluged with increasingly frail patients. But many homes, with their sometimes-skeletal medical staffing, often fail to handle post-hospital complications — or create new problems by not heeding or receiving accurate hospital and physician instructions.

Patients, caught in the middle, may suffer. One in 5 Medicare patients sent from the hospital to a nursing home boomerangs back within 30 days, often for potentially preventable conditions such as dehydration, infections and medication errors, federal records show. Such rehospitalizations occur 27 percent more frequently than for the Medicare population at large.

Nursing homes have been unintentionally rewarded by decades of colliding government payment policies, which gave both hospitals and nursing homes financial incentives for the transfers. That has left the most vulnerable patients often ping-ponging between institutions, wreaking havoc with patients’ care.

“There’s this saying in nursing homes, and it’s really unfortunate: ‘When in doubt, ship them out,’ ” said David Grabowski, a professor of health care policy at Harvard Medical School. “It’s a short-run, cost-minimizing strategy, but it ends up costing the system and the individual a lot more.”

In recent years, the government has begun to tackle the problem. In 2013, Medicare began fining hospitals for high readmission rates in an attempt to curtail premature discharges and to encourage hospitals to refer patients to nursing homes with good track records.

Starting this October, the government will address the other side of the equation, giving nursing homes bonuses or assessing penalties based on their Medicare rehospitalization rates. The goal is to accelerate early signs of progress: The rate of potentially avoidable readmissions dropped to 10.8 percent in 2016 from 12.4 percent in 2011, according to Congress’ Medicare Payment Advisory Commission.

“We’re better, but not well,” Grabowski said. “There’s still a high rate of inappropriate readmissions.”

The revolving door is an unintended byproduct of long-standing payment policies. Medicare pays hospitals a set rate to care for a patient depending on the average time it takes to treat a typical patient with a given diagnosis. That means that hospitals effectively profit by earlier discharge and lose money by keeping patients longer, even though an elderly patient may require a few extra days.

But nursing homes have their own incentives to hospitalize patients. For one thing, keeping patients out of hospitals requires frequent examinations and speedy laboratory tests — all of which add costs to nursing homes.

Plus, most nursing home residents are covered by Medicaid, the state-federal program for the poor that is usually the lowest-paying form of insurance. If a nursing home sends a Medicaid resident to the hospital, she usually returns with up to 100 days covered by Medicare, which pays more. On top of all that, in some states, Medicaid pays a “bed-hold” fee when a patient is hospitalized.

None of this is good for the patients. Nursing home residents often return from the hospital more confused or with a new infection, said Dr. David Gifford, a senior vice president of quality and regulatory affairs at the American Health Care Association, a nursing home trade group.

“And they never quite get back to normal,” he said.

‘She Looked Like A Wet Washcloth’

Communication lapses between physicians and nursing homes is one recurring cause of rehospitalizations. Elaine Essa had been taking thyroid medication ever since that gland was removed when she was a teenager. Essa, 82, was living at a nursing home in Lancaster, Calif., in 2013 when a bout of pneumonia sent her to the hospital.

When she returned to the nursing home — now named Wellsprings Post-Acute Care Center — her doctor omitted a crucial instruction from her admission order: to resume the thyroid medication, according to a lawsuit filed by her family. The nursing home telephoned Essa’s doctor to order the medication, but he never called them back, the suit said.

Without the medication, Essa’s appetite diminished, her weight increased and her energy vanished — all indications of a thyroid imbalance, said the family’s attorney, Ben Yeroushalmi, discussing the lawsuit. Her doctors from Garrison Family Medical Group never visited her, sending instead their nurse practitioner. He, like the nursing home employees, did not grasp the cause of her decline, although her thyroid condition was prominently noted in her medical records, the lawsuit said.

Three months after her return from the hospital, “she looked like a wet washcloth. She had no color in her face,” said Donna Jo Duncan, a daughter, in a deposition. Duncan said she demanded the home’s nurses check her mother’s blood pressure. When they did, a supervisor ran over and said, “Call an ambulance right away,” Duncan said in the deposition.

At the hospital, a physician said tests showed “zero” thyroid hormone levels, Deborah Ann Favorite, a daughter, recalled in an interview. She testified in her deposition that the doctor told her, “I can’t believe that this woman is still alive.”

Essa died the next month. The nursing home and the medical practice settled the case for confidential amounts. Cynthia Schein, an attorney for the home, declined to discuss the case beyond saying it was “settled to everyone’s satisfaction.” The suit is still ongoing against one other doctor, who did not respond to requests for comment.

Dangers In Discouraging Hospitalization

Out of the nation’s 15,630 nursing homes, one-fifth send 25 percent or more of their patients back to the hospital, according to a Kaiser Health News analysis of data on Medicare’s Nursing Home Compare website. On the other end of the spectrum, the fifth of homes with the lowest readmission rates return fewer than 17 percent of residents to the hospital.

Many health policy experts say that spread shows how much improvement is possible. But patient advocates fear the campaign against hospitalizing nursing home patients may backfire, especially when Medicare begins linking readmission rates to its payments.

“We’re always worried the bad nursing homes are going to get the message ‘Don’t send anyone to the hospital,’ ” said Tony Chicotel, a staff attorney at California Advocates for Nursing Home Reform, a nonprofit based in San Francisco.

Richmond Pines, where Sandra Snipes stayed, has a higher than average rehospitalization rate of 25 percent, according to federal records. But the family’s lawyer, Kyle Nutt, said the lawsuit claimed the nurses initially resisted sending Snipes back, insisting she was “just drowsy.”

After Snipes was rehospitalized, her blood thinner was discontinued, her hip was reset, and she was discharged to a different nursing home, according to the family’s lawsuit. But her hospital trips were not over: When she showed signs of recurrent infection, the second home sent her to yet another hospital, the lawsuit alleged.

Ultimately, the lawsuit claimed that doctors removed her prosthetic hip and more than a liter of infected blood clots and tissues. Nutt said if Richmond Pines’ nurses had “caught the over-administration of the blood thinner right off the bat, we don’t think any of this would have happened.”

Snipes returned home but was never able to walk again, according to the lawsuit. Her husband, William, cared for her until she died in 2015, her daughter, Clark, said.

“She didn’t want to go back into the nursing home,” Clark said. “She was terrified.”

 

 

 

Providers argue against Medicaid rate cuts without oversight

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States with at least 85% of their Medicaid population in managed care could implement nominal payment cuts without assuring care.

Hospitals, particularly rural providers, would be hurt by a Centers for Medicare and Medicaid Services proposed rule that would force them to take lower Medicaid rates without a review of the impact of the cuts, according to comments made to CMS asking for a reconsideration of the plan.

Provider organizations, hospitals, the Medicaid and CHIP Payment and Access Commission, are among those asking the Centers for Medicare and Medicaid Services to rethink its proposed rule.

Comments were due this week.

CMS proposed the rule in March to allow states that have a comprehensive, risk-based Medicaid managed care enrollment that is above 85 percent of their total Medicaid population to get around network adequacy rules when implementing “nominal” rate changes.

States had raised concern over the administrative burden associated with the current requirements, particularly for states with high rates of Medicaid managed care enrollment.

For states proposing nominal cuts below 4 percent a year or 6 percent over two years, the rule amends the process for them to document whether Medicaid payments in fee-for-service systems are sufficient to enlist providers to assure access to covered care and services.

These states would be exempt from access monitoring requirements and they would not need to seek public input on the rate reductions.

America’s Essential Hospitals said, “Requiring states to ensure, through monitoring, that rate reductions do not diminish access to needed services is particularly important now, as access monitoring reviews are the only vehicle left for providers to challenge state payment rate decisions.”

The Federation of American Hospitals contends that the rule would allow for more than nominal rate changes. If finalized, FAH said, the rule would allow for an estimated 18 states to implement a rate reduction of up to 12 percent over a period of four years or 16 percent over five years, without going through requirements for ongoing monitoring of the impact of the rate changes.

This would disproportionately impact vulnerable Medicaid beneficiaries and subject providers with unsustainable rate reductions, FAH said.

Most states, even those with very high rates of managed care enrollment, often exclude certain categories of particularly vulnerable groups from managed care plans, the organization said. People with physical, mental or intellectual disabilities or who are elderly, largely get services through fee-for-service, FAH told CMS Administrator Seema Verma.

The Medicaid and CHIP Payment and Access Commission said it did not find the states’ argument of administrative burden compelling enough given the federal government’s obligations to oversee state performance and assurances related to access.

“Moreover, exceptions to reporting may introduce gaps in oversight,” MACPAC Chair Penny Thompson said. “In short, the need for states to maintain resources and tools to monitor access as an ongoing element of state program administration and decision making outweighs the limited savings states would achieve as a result of these changes.”

 

Congress Urged To Cut Medicare Payments To Many Stand-Alone ERs

Congress Urged To Cut Medicare Payments To Many Stand-Alone ERs

The woman arrived at the emergency department gasping for air, her severe emphysema causing such shortness of breath that the physician who examined her put her on a ventilator immediately to help her breathe.

The patient lived across the street from the emergency department in suburban Denver, said Dr. David Friedenson, who cared for her that day a few years ago. The facility wasn’t physically located at a hospital but was affiliated with North Suburban Medical Center several miles away.

Free-standing emergency departments have been cropping up in recent years and now number more than 500, according to the Medicare Payment Advisory Commission (MedPAC), which reports to Congress. Often touted as more convenient, less crowded alternatives to hospitals, they often attract suburban walk-in patients with good insurance whose medical problems are less acute than those who visit an emergency room located in a hospital.

If a recent MedPAC proposal is adopted, however, some providers predict that these free-standing facilities could become scarcer. Propelling the effort are concerns that MedPAC’s payment for services at these facilities is higher than it should be since the patients who visit them are sometimes not as severely injured or ill as those at on-campus facilities.

The proposal would reduce Medicare payment rates by 30 percent for some services at hospital-affiliated free-standing emergency departments that are located within 6 miles of an on-campus hospital emergency department.

“There has been a growth in free-standing emergency departments in urban areas that does not seem to be addressing any particular access need for emergency care,” said James Mathews, executive director of MedPAC. The convenience of a neighborhood emergency department may even induce demand, he said, calling it an “if you build it, they will come” effect.

Emergency care is more expensive than a visit to a primary care doctor or urgent care center, in part because emergency departments have to be on standby 24/7, with expensive equipment and personnel ready to handle serious car accidents, gunshot wounds and other trauma cases. Even though free-standing emergency departments have lower standby costs than hospital-based facilities, they typically receive the same Medicare rate for emergency services. The Medicare “facility fee” payments, which include some ancillary lab and imaging services but not reimbursement to physicians, are designed to help defray hospitals’ overhead costs.

The proposal would affect only payments for Medicare beneficiaries. But private insurers often consider Medicare payment policies when setting their rules.

According to a MedPAC analysis of five markets — Charlotte, N.C.; Cincinnati; Dallas; Denver; and Jacksonville, Fla. — 75 percent of the free-standing facilities were located within 6 miles of a hospital with an emergency department. The average drive time to the nearest hospital was 10 minutes.

Overall, the number of outpatient emergency department visits by Medicare beneficiaries increased 13.6 percent per capita from 2010 to 2015, compared with a 3.5 percent growth in physician visits, according to MedPAC. (The reported data doesn’t distinguish between conventional and free-standing emergency facility visits.)

“I think [the MedPAC proposal] is a move in the right direction,” said Dr. Renee Hsia, a professor of emergency medicine and health policy at the University of California-San Francisco who has written about free-standing emergency departments. “We have to understand there are limited resources, and the fixed costs for stand-alone EDs are lower.”

Hospital representatives say the proposal could cause some free-standing emergency departments to close their doors.

“We are deeply concerned that MedPAC’s recommendation has the potential to reduce patient access to care, particularly in vulnerable communities, following a year in which hospital EDs responded to record-setting natural disasters and flu infections,” Joanna Hiatt Kim, vice president for payment policy at the American Hospital Association, said in a statement.

Independent free-standing emergency departments that are not affiliated with a hospital would not be affected by the MedPAC proposal. These facilities,which make up about a third of all free-standing emergency facilities, aren’t clinically integrated with a hospital and can’t participate in the Medicare program.

The MedPAC proposal will be included in the group’s report to Congress in June.

Even though stand-alone emergency facilities might not routinely treat patients with serious trauma, they can provide lifesaving care, proponents say.

Friedenson said that for his emphysema patient, avoiding the 15- to 20-minute drive to the main hospital made a critical difference.

“By stopping at our emergency department, I truly think her life was saved,” he said.