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Healthcare dodges bullet under proposed budget deal

Oct 28, 2015

[Taken from Modern Healthcare, Oct. 27, 2015]

Providers and policy experts say that while doctors and hospitals are facing some cuts in the proposed two-year $80 billion budget deal being negotiated on the Hill, the industry largely dodged a bullet.
The not-yet-finalized plan announced Tuesday would include continued sequester spending cuts and limit future payment rates for hospitals that set up or buy off-campus facilities. It would also raise the federal borrowing limit and prevent a looming spike in premiums for about 30% of Medicare Part B beneficiaries.

Eric Zimmerman, a healthcare lobbyist and principal with McDermott + Consulting, said the budget deal would reduce incentives for hospitals to buy doctors' practices, which has been a popular move to expand their networks and meet the Affordable Care Act's push to coordinate care.

“This will definitely affect hospitals' physician-alignment strategies,” he said, as the financial benefits will be fewer.

And although the sequestration will continue to be a drag on provider budgets, the healthcare industry in general seems OK with this agreement, he said. Still, the pay-for isn't certain to remain the same and further negotiations this week will hash out details, Zimmerman added.

Chip Kahn, CEO of the Federation of American Hospitals, said cuts are always concerning, but the debt limit had to be raised and he applauds Congress for minimizing the effects to hospitals.

The change to the payment model for hospital outpatient departments, called OPDs, has been much discussed but wasn't necessarily expected this year. It's helpful to apply the change only to new outpatient departments set up by hospitals and to delay any implementation until 2017, Kahn said.

“It would have created an incredible mess if people had to figure out how to get into compliance,” he said.

The continuation of sequestration cuts to Medicare is also disappointing, but it's an extension of the status quo. Kahn is glad to see no cuts to reimbursement of bad debt or enforcement of site-neutral post-acute care payments for inpatient rehabilitation facilities.

“That's what's really important here—what's not here,” he said.

Stephen Zuckerman, co-director of the health policy institute at the Urban Institute, said the change in payment method to hospital OPDs is reasonable.

“I think it was sort of a flaw in the payment method that was being exploited,” he said.

Zuckerman said it's not entirely clear how the budget deal would align with the permanent deal earlier this year that ended the need for an annual “doc fix” to increase physician payments.

The deal called for a 0.5% increase in payments for each of the next four years. With continued sequestration, however, it appears that doctors face a net decrease in compensation, he said.

“It's a little surprising,” he said. “I'm not sure people have thought this through.”

Thomas Nickels, executive vice president of government relations and public policy for the American Hospital Association, called the Medicare cuts in the deal irresponsible and urged lawmakers to strike the site-neutral provision for outpatient payments.

"This untested idea may endanger patient access to care, especially among patients who are sicker, the poor, minorities and seniors who often receive care in hospital outpatient departments," he said.

Medicare payments to OPDs have been a concern for years as prices for outpatient procedures continue to rise faster than other services.

A 2013 report from the Medicare Payment Advisory Commission found that Medicare was paying 141% more for a Level 2 echocardiogram in an outpatient setting as opposed to one performed in a physician's office.

“Payment variations across settings urgently need to be addressed because many services have been migrating from physicians' offices to the usually higher paid OPD setting, as hospital employment of physicians has grown,” the authors wrote. “This shift toward OPDs has resulted in higher program spending and beneficiary cost-sharing without significant changes in patient care.”

Maggie Elehwany, vice president of government affairs and policy for the National Rural Health Association, said the Medicare cuts are particularly harmful for already struggling rural hospitals.

“Nationwide we are experiencing an alarming and escalating number of rural hospital closures, which is creating a patient-access-to-care crisis,” she said. “To propose further cuts is unthinkable and will certainly mean more rural hospital closures.”

Another part of the proposal would extend the Medicare drug rebate program, in which manufacturers provide an additional generic drug rebate when a drug's cost rises faster than inflation.

Also, a large increase in premiums for the 30% of Medicare Part B beneficiaries who are not “held harmless” to rate increases higher than the cost of living adjustment would be avoided. The plan would create a new premium for those beneficiaries of $120, an increase of about $15 a month, which would be the amount paid by all beneficiaries if none were held harmless.

House Speaker John Boehner worked out this proposed budget privately with other congressional leaders, saying he wanted to push an agreement through before leaving the speakership Friday. Rep. Paul Ryan (R-Wis.), who is expected to take up the gavel, did not participate in the talks.

Hard-line House Republicans complained about being left out of the negotiations and said they may oppose the deal, but other conservatives and some Democrats voiced their overall approval.

“The bipartisan budget package unveiled last night represents real progress for hard-working families across the country,” said House Minority Leader Nancy Pelosi of California.

The budget side of the deal is aimed at undoing automatic spending cuts that are a byproduct of a 2011 budget and debt agreement, and the failure of Washington to subsequently tackle the government's fiscal woes.

The legislation would suspend the current $18.1 trillion debt limit through March 2017. The budget portion would increase the current "caps" on total agency spending by $50 billion in 2016 and $30 billion in 2017, offset by savings elsewhere in the budget. And it would permit about $16 billion to be added on top of that in 2016, classified as war funding, with a comparable boost in 2017.

GOP defense hawks are intent on reversing the automatic cuts and getting more money for the military. A key priority for Democrats is to boost domestic programs.