Hospitals Chafe Under Medicare’s New Payment Rule For Off-Campus Clinics

Eric Lewis’ plans for growth have derailed.

As chief government officer of Olympic Medical Center, he oversees efforts to offer care to roughly 75,000 folks in Clallam County, within the remoted, rural northwestern nook of Washington state.

Last yr, Lewis deliberate to construct a major care clinic in Sequim, a city about 17 miles from the medical middle’s principal campus in Port Angeles.

But these plans had been put apart, Lewis mentioned, due to a change in federal reimbursements this yr. Medicare has opted to pay hospitals with outpatient services which are “off campus” a decrease price, equal to what it pays impartial docs for clinic visits.

Over the previous decade, hospitals have been quickly constructing outpatient clinics or buying present impartial ones. It was a profitable enterprise technique as a result of such clinics may cost larger charges, on the premise that they had been a part of a hospital.

With its new coverage, Medicare is actually saying that an off-campus workplace is an off-campus workplace, no matter whether or not it’s owned by a hospital, a bunch of docs or a solo practitioner.

Making that assertion will save Medicare — and presumably sufferers — cash. The federal insurer bore the brunt of its members’ further prices, however beneficiaries typically picked up a part of that expense via deductibles and copayments. Patients with industrial insurance coverage typically had been blindsided by excessive payments — going to what gave the impression to be a traditional major care clinic, solely to find they had been charged a hospital facility fee, for instance.

Health coverage consultants mentioned the brand new coverage represents an vital step in rationalizing funds. The new coverage — a part of a method referred to as “site-neutral” cost — has its roots within the Obama administration and was a part of the Bipartisan Budget Act of 2015.

“You don’t care about where [your treatment is] happening. You care that it’s a safe and inexpensive procedure,” mentioned Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management. “And the facility fee just adds to the cost with very little added value.”

The new cost construction might damage some hospitals financially, he and different consultants acknowledged. But making reimbursements extra uniform throughout suppliers facilitates competitors and should lead industrial insurance coverage to comply with go well with — which may translate to extra financial savings.

The coverage’s two-part phase-in reduce Medicare funds for clinic visits to outpatient departments by 30% this yr, in accordance with the rule finalized in November. By 2020, the speed will probably be reduce one other 30%.

The Centers for Medicare & Medicaid Services (CMS) estimates the change will save the federal government $380 million this year and patients an average of $7 each time they go to a hospital-owned clinic as a result of their copayments will probably be decrease. Clinic visits are the most commonly charged service for hospital outpatient care in Medicare.

It may additionally reduce down on consolidation within the business, consultants mentioned, by closing the loophole that created incentives for hospitals to buy impartial doctor practices and cost larger charges for providers at taxpayers’ expense.

The American Hospital Association filed a lawsuit in December alleging that CMS overstepped its authority when setting the brand new reimbursement schedule. Olympic Medical Center is among the many named plaintiffs.

The hospital affiliation claims that the brand new rule infringes on a precedent Congress set with the 2015 price range regulation. That laws standardized Medicare funds for clinic visits to physicians’ workplaces and new hospital outpatient services, however allowed most hospital-affiliated departments that existed at the moment to proceed receiving a better price, in accordance with a comment letter from the Medicare Payment Advisory Commission. The group is a nonpartisan company that advises Congress.

The differential for site-based funds was designed initially to assist hospitals offset the upper prices they incur for sustaining the employees and tools to deal with all kinds of therapies, mentioned Christopher Whaley, an affiliate coverage researcher on the analysis group Rand Corp.

But that reduction turned an incentive for hospitals to purchase impartial practices, mentioned Dr. Ateev Mehrotra, affiliate professor of well being care coverage and drugs at Harvard Medical School. Hospitals may cost larger costs for providers carried out in newly acquired clinics. Mehrotra mentioned the brand new CMS rule might be a strategy to decelerate the pattern.

“This isn’t going to fully put the brakes on it,” he mentioned, “but it could be one push on the brakes here to kind of push that consolidation down.”

Some consultants have urged the federal government to expand the variety of providers coated by the site-neutral coverage, together with paying hospitals’ on-site clinics a price equal to what impartial docs obtain.

Hospitals acknowledged the change carried out by CMS may result in financial savings within the well being care system, however they are saying it comes at the price of affected person entry. In Washington state, Lewis anticipates a lack of $1.6 million for his hospital. The lack of a clinic in Sequim means ailing sufferers there won’t be able to get care near their properties, he mentioned.

“If you’re well-to-do financially, these aren’t big problems,” Lewis added. “But I think the poorest, elderly, sickest of our society will pay the price of this policy.”

Said Melinda Hatton, normal counsel for the hospital affiliation: “I think access trumps a couple extra dollars in copays every single time.”

On the opposite hand, many impartial physicians assist the change. Marni Jameson Carey, government director of the Association of Independent Doctors, echoed the consultants’ hope that the rule will curb consolidation. According to a report by the consulting agency Avalere Health, the variety of hospital-owned doctor practices greater than doubled, from 35,700 to 80,000, between July 2012 and January 2018. Hospitals personal greater than 31% of all doctor practices, the researchers mentioned.

Jameson Carey mentioned these mergers may also trigger issues for the native financial system. When a nonprofit hospital acquires an impartial clinic, it successfully removes a tax-paying enterprise from the realm. That’s as a result of nonprofit hospitals are exempt from paying sure federal, state and native taxes in alternate for offering group advantages.

“So not only do they [hospitals] get the facility fee,” Jameson Carey mentioned, but in addition, “they don’t have to pay taxes.”

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