Doctors will not see a 26.5% cut in Medicare payments this year. The fiscal cliff deal passed by Congress includes a one-year delay on planned cuts in Medicare payments to physicians. But, the fix is not free. Hospitals will be required to pick up the tab.
These planned cuts are the result of the 1997 law called the Balanced Budget Act which included a provision called the Sustainable Growth Rate (SGR) that has caused controversy over Medicare payments to physicians since 2002. Congress would like to repeal the whole thing, but can’t figure out how to find the $300 billion to do so, so they keep approving short term, one-year patches referred to each year as the “doc fix.”
So the SGR’s impact is again delayed for another year, at a cost of approximately $25 billion.
To pay for the “doc fix” in 2013, Mary Agnes Carey reports on the Kaiser Health News blog that lower payments to hospitals would account for about half of the $25 billion cost.
The package would reduce hospital payments in two ways. First, it would cut $10.5 billion from projected Medicare hospital payments over 10 years for inpatient or overnight care through a downward adjustment in annual base payment increases. The Senate measure also would reduce Medicaid disproportionate share payments to hospitals by an additional $4.2 billion over the next decade. These cuts are on top of those made to hospitals as part of the 2010 health care law.
Groups representing hospitals said the new plans for reductions will hurt their ability to care for patients.
‘While fixing the physician payment formula is essential, it should not be done by jeopardizing hospitals’ ability to care for seniors and their communities,’ Rich Umbdenstock, president and chief executive officer of the American Hospital Association, said in a written statement.
The Federation of American Hospitals explained in a statement on December 31st that hospitals understand “the necessity for Congressional action to avoid a dive off the fiscal cliff. However, we are disappointed that in cliff avoidance, scarce hospital finances would be used to offset the Medicare physician payment fix. It is not in the best interest of patients or those who care for them to rob hospital Peter to pay for fiscal cliff Paul. These cuts could impact hospital services for those who need them the most.” Nevertheless, it would appear that hospitals will continue to be asked to bear the burdens of the health care fiscal crisis; will we soon see hospitals having to reduce operations or close due to these financial burdens? We previously discussed reimbursement cuts under health care reform, and this new “doc fix” is further evidence that providers are continually strained and put in a position to determine how best to absorb looming reimbursement cuts and to benefit from the different payment methodologies.
The Department of Health and Human Services has released some much-anticipated rules of the road that will help implement the Affordable Care Act, including requirements on essential health benefits and preventing discrimination against people with pre-existing conditions.
The first rule makes clear that insurance companies will have to comply with anti-discrimination requirements starting in 2014. Health insurance must be made available to everyone regardless of health status, and people with pre-existing conditions cannot be charged higher premiums. Premiums are allowed to vary according to certain factors, including age, smoking status, location and family size. But, coverage can’t be cancelled because of an illness.
A second rule lays out more detail regarding benefits that must be offered by states and insurance plans. This rule requires that every health plan for individuals and small businesses offer a core package of benefits, called essential health benefits. The requirements are grouped into 10 separate categories, including inpatient and outpatient care, maternity care, prescription drugs and laboratory services.
Finally, rules that govern the use of employer-provided wellness programs were issued. These popular programs encourage employees to meet certain health goals, such as losing weight, quitting smoking, or lowering cholesterol.
The rules could still change some, but there’s not much time for people to complain or ask for tweaks. The comment period ends Dec. 26.
Governor Bentley told the Birmingham Business Alliance today that he would not set up a state-run health insurance exchange, and he will not expand Medicaid as provided under health care reform.
Once established, the health insurance exchanges will be places for individuals and businesses to shop for health insurance plans. The exchanges are supposed to be in place by January 1, 2014, when the individual mandate to buy health insurance goes into effect. Alabama had until Friday to tell the federal government if it wanted to set up a state-run health insurance exchange. This decision means that the federal government will set up a health insurance exchange on behalf of the state. Governor Bentley said he has been in communication with other governors about the decision, including the Republican governors of Louisiana, Florida and Texas, and he expects similar decisions out of those states.
Governor Bentley also said the state could not afford a Medicaid expansion. The expansion of Medicaid would have allowed individuals between the ages of 19 and 65 or households making up to 133 percent of the poverty level to enroll in Medicaid. Eligibility for the program is currently restricted to children and those on disability. A Kaiser Family Foundation study in 2010 found the Medicaid expansion could have given 244,000 individuals in Alabama insurance for the first time. Although the expansion would have been paid for almost entirely by the federal government, Governor Bentley explained that he is concerned about the long-term cost to both the state and nation.
In its front-page story on President Obama’s reelection, the New York Times reports, “For Mr. Obama, the result brings a ratification of his sweeping health care act, which Mr. Romney had vowed to repeal. The law will now continue on course toward nearly full implementation in 2014, promising to change significantly the way medical services are administrated nationwide.” President Obama’s victory and the Democratic Party’s retention of the Senate majority ensure that “ObamaCare is here to stay.”
Obstacles for the law still remain – Republican governors have vowed not to implement key provisions, and congressional Republicans could have some success chipping away at federal funding for implementation of the law. However, getting rid of the entire law now seems permanently out of reach.
Regulators are likely to be busy during the lame duck session, with major regulations needed to implement the law. According to those studying the health care sector, here are some of the rules likely in the coming months:
- Exchange rules – Fewer than 15 states have indicated they are planning to move forward and build their own insurance marketplaces, called exchanges, which are supposed to be up and running in every state by January 1, 2014. The Obama administration has given states a November 16 deadline to decide whether they plan to create their own exchanges or leave the task to the federal government. But, details about the federally-run exchange have not been forthcoming. Many of those details are expected in the next few months.
- Essential health benefits – The law requires that all health plans sold on state insurance exchanges include a minimum package of benefits, but the Department of Health and Human Services has not yet issued formal rules on what that package must include. Those details are expected soon.
- Medicaid – An important anticipated Medicaid regulation, describing the pay raises that primary-care providers would get in the next two years, was released last week. However, states are awaiting more regulatory clarity on issues related to the expansion of their Medicaid programs. The Supreme Court’s June decision gave states the option of expanding programs or leaving them as is. In the State of Alabama, after the Supreme Court decision, Governor Bentley has said that the Medicaid program’s future would depend on the election.
The election may not have yielded much of a change in the political landscape in Washington, but healthcare providers and insurance companies will be kept very busy for the foreseeable future as healthcare reform continues to be implemented.
“House members look to ease Medicare audit burden on hospitals” is the title of a recent post by Pete Kasperowicz in his The Hill’s Floor Action Blog. Last week, four House of Representatives members introduced bill H.R. 6575, that endeavors to ease the burden of a hospital during an investigation by a Medicare contractor, such as a Recovery Audit Contractor (RAC). Recognizing the multitude of resources needed to respond to an investigation, the bill proposes to limit the documentation requests from such auditors. The bill also promotes transparency for audit contractors and introduces penalties for contractors that continuously fail to meet recovery requirements, such as audit deadlines and timely communication with hospitals upon denial of a claim.
The introduction of this bill closely follows the Office of Inspector General’s (OIG’s) release of its 2013 Work Plan, in which the OIG announced 112 new investigations for the coming year. Since some auditors use the OIG Work Plan as a guideline for determining the focus of audits, a review of the 2013 Work Plan may be helpful as hospitals prepare for the possibility of audits in the coming year. Some of the audit-type items targeted at hospitals include a review of Medicare claims pertaining to same-day admissions, Medicare payments made for patient discharges, payments for cancelled surgeries, and a review of provider-based status for hospital-based entities. So, even though the 2013 Work Plan might be seen as expanding the potential for an audit or investigation, H.R. 6575 would place a limit on the number of claims a hospital must produce for the government and increase the transparency of auditors’ operations. This would be a small but welcome change in the compliance environment.
Two major but less discussed programs under the Affordable Care Act took effect October 1, 2012, which are part of the government’s effort to deliver better quality health care. Both programs aim to reward hospitals for providing more efficient and higher quality care and penalize those that don’t.
Under the Hospital Value-Based Purchasing Program, Medicare will pay hospitals according to how well they perform on a set of clinical quality measures and on patient satisfaction surveys. Medicare will do this by withholding 1 percent of its regular hospital payments over the next year – totaling an estimated $850 million – and redistributing that pot of money to the best-performing hospitals (source).
Additionally, Medicare is applying a penalty to about two-thirds of the hospitals serving Medicare patients with higher than expected readmission rates. These penalties are estimated to average around $125,000 per hospital this coming year. Data to assess the penalties has been collected and analyzed, and Medicare has shared the results with individual hospitals. Medicare plans to post details online later in October, and people can look up how their hospitals performed by using CMS’s “Hospital Compare” website (source).
Brett Norman, of Politico, wrote today about the two programs:
They are the largest efforts to date to nudge hospital payments away from paying for quantity toward so-called pay for performance.
‘I think we all see these programs as the first steps towards the way the system will be structured in the future and the way incentives will be structured in the future,” said Mindy Steinberg, director of government relations for the Association of Academic Health Centers. “But everyone needs to recognize that this is the first step in a long, complicated process.’
Questions are already being raised about whether the rewards and penalties are big enough to spur hospitals to action. And the poorly understood contribution of socioeconomic factors to health care overall, and re-admissions in particular, raises worries that the readmissions program may unfairly penalize hospitals operating in the most challenging environments.
The value-based purchasing and readmissions programs represent a new step for Medicare, which has until now limited its pay-for-performance efforts to hospitals that voluntarily participate in pilot experiments such as the ACO pilot programs and bundled payment initiatives. The new programs are mandatory for most acute care hospitals, with roughly 3,000 hospitals automatically enrolled.
“Same Doctor Visit, Double the Cost” – this is the title of a recent Wall Street Journal article written by Anna Wilde Mathews, which provides a view on the hospital-physician integration phenomenon. The article describes the higher fees charged by hospitals that result when physicians become employed by hospitals.
It is our experience that physicians would generally prefer to remain independent, but they believe that Medicare reimbursement, which often paves the way for reimbursement by private insurers, is pushing them to become hospital employees. It’s not so much that the hospital is paid at a higher rate as it is that reimbursement to physicians is so low that they believe they have little choice. There are some conspiracy theories being floated that, in fact, this is Centers for Medicare & Medicaid Services’ (CMS’s) plan, as a kind of short cut around the Accountable Care Organization (ACO) pilot projects that will result in integrated care and purely bundled payments (rather than fee for service) that will be made to hospitals, who then will determine what to pay their employed physicians. As we all know, health care reform is going to happen in one form or another, so this will be an interesting area to watch.
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The federal government’s war on healthcare fraud is going high-tech with the opening of a $3.6 million command center. The Centers for Medicare and Medicaid Services (CMS) pays $750 billion each year to more than 1.5 million healthcare providers, and healthcare fraud is estimated to cost taxpayers more than $60 billion annually (see Health Law Gives Medicare Fraud Fighters New Weapons). The government’s new anti-fraud computer system aims to adapt tools used by credit card companies to detect suspicious purchases. Peter Budetti, who oversees anti-fraud efforts at CMS, gives his insight on the new command center:
The new Command Center is bringing together Medicare and Medicaid officials, as well as law enforcement partners from the HHS Office of the Inspector General, the Federal Bureau of Investigation, and CMS’s anti-fraud investigators. The Command Center will gather experts from all different areas – clinicians, data analysts, fraud investigators, and policy experts – into the same room to build and improve our sophisticated new predictive analytics that spot fraud, and to then move quickly on a lead, once potential fraud is identified. The technology also allows us to connect with field offices to track down leads in real time.
The result is that investigations that used to take days and weeks can now be done in a matter of hours. And this new technology can help detect and prevent potential problems and payments. That can mean millions of taxpayer dollars staying out of the hands of fraudsters.
At the end of next month, CMS is expected to report to Congress the number of new scams detected by the anti-fraud computer system. In the meantime, CMS is already seeing results. The government has recovered over $4 billion in fraudulent payments this year, which is a record number.
So now is a good time for healthcare providers to conduct their self audits and to review their systems; the enforcement mechanisms are only getting more powerful and sophisticated.
After the dust has settled from the Supreme Court’s upholding of the Accountable Care Act, one key takeaway from the provider perspective appears to be reimbursement strategy. Providers must continue to determine how best to absorb looming reimbursement cuts and to benefit from the different payment methodologies. However, it remains uncertain whether the anticipated increase in insured patients – through the individual mandate, insurance exchanges and, if a particular State elects to participate, the Medicaid expansion – will benefit providers so they are able to remain financially stable.
Forward-thinking hospital systems are taking advantage of new technology to facilitate patient-doctor interaction. Providence Health Ministry in Mobile, Alabama recently announced the launch of a new smart phone app to connect patients with the doctors and physician groups practicing at Providence Hospital. The features of the app enable patients to:
- search lists of available doctors by name, practice or specialty;
- read physician biographies;
- directly access practice group websites and phone numbers;
- follow digital maps with turn-by-turn directions to physician offices;
- find updated information on hospital services and facilities; and
- access Providence Health Ministry’s Facebook page for continual updates on hospital news and events.
Providence Health Ministry is the first health system in the Mobile area to launch an app of this kind, but this innovation is likely not the industry’s last. Undoubtedly, leaders of health care systems will continue investing in technological tools and developing creative ways to make patients feel more connected to their health care providers. Some hospitals have started sending text message reminders of upcoming appointments and predictions of Emergency Room wait times. What technological advances has your practice made?