Congress Turning Attention on Hospitals

Even though some hospitals and health systems are still recovering financially from the pandemic, they are nonetheless attracting the eye of Congress. From concerns over rising costs to Medicare insolvency, here is our outlook on four key focus areas garnering attention. We know hospitals and health systems will continuing advocating with Congress on these issues, but it’s also important to understand potential impact and use this as an opportunity to take action.

Site neutral payments

Due to a variety of reasons, Congress is more focused than it has been in years on pursuing site neutral policies in Medicare. Site neutral essentially boils down to equalizing payments for the same services regardless of the setting (e.g.: physician office versus hospital outpatient department, HOPD). The most recent law enacted by Congress on site neutral happened under the Bipartisan Budget Act of 2015 (Section 603). This section prohibited new off-campus, provider-based HOPDs from receiving the enhanced Medicare reimbursement available under the outpatient prospective payment system rule (OPPS). Instead, these non-grandfathered HOPDs receive the lower physician office setting rate under the Physician Fee Schedule rate, which is roughly 40% of the higher OPPS rate. Existing off-campus HOPDs were grandfathered.   

Since then, there have been various regulatory and legislative proposals to limit growth of existing HOPDs, reduce reimbursements for additional services or establish site neutral policies for on-campus HOPDs. These have yet to advance, but this year may be different. Bipartisan support has been growing due to a confluence of issues, including if Congress needs savings (pay-fors) for other priorities. Eliminating the enhanced payment for both on-campus HOPDs and off-campus HOPDS would save hundreds of billions of dollars, but even smaller tweaks can save several billion.

Recent activity includes the U.S. House Committee on Energy & Commerce unanimously (ie: full bipartisan support) passing legislation (HR 3561, the PATIENT Act) that includes equalizing Medicare payments between HOPDs and physician offices for drug administration (saving several billion dollars). The legislation would also require all off-campus HOPDs to have a unique identifier and submit an attestation that it is compliant with provider-based requirements.

Adding support to the issue, MedPAC, an advisory body to the Congress, recommends Congress “more closely align rates across ambulatory settings for selected services that are safe to provide in all settings and when doing so does not pose a risk to access.” [See Chapter 8 in June 2023 Report to Congress]

Outlook: Potential that some type of site neutral policy (for PPS hospitals) will be passed by Congress. Long-term, we also believe the focus on these policies will continue due to a variety of issues, such as more value-based payments, rising Medicare costs, and health care consolidation among others.

Actions to take: Financially model through tools like CLA Intuition how much of your revenue is impacted under various proposals floating in DC. Understand your organization’s reliance on provider-based status and how to pivot if site neutral policies are enacted or further regulated. Keep the consumer’s perspective in mind (higher co-pays, facility fees etc).  

Price transparency

Increasing health care costs to consumers and payers (employers, government) are increasing the need for price transparency, some members of Congress say. The need for more price transparency and full compliance with existing price transparency regulations have come up in legislative hearings in both the U.S. Senate and the U.S. House.

In 2019, the Department of Health & Human Services (HHS) finalized the requirements for hospitals to post on their website a list of all hospital standard charges, including payer-negotiated amounts, in an easy-to-locate and machine-readable file along with a list of 300 “shoppable” services. Compliance with this regulation was spotty, prompting HHS to dramatically increase penalties several years later for failure to comply.

Now, the U.S. House Energy & Commerce Committee passed HR 3561 which codifies the HHS regulation into statute, but the bill goes further by enhancing penalties for noncompliance and removing an existing exemption. Hospitals are currently exempt from the shoppable services list if they have a price estimator tool. The legislation would remove this exemption after 2025. Whether or not the full House and then the Senate take up this legislation, this beginning activity shows there may be Congressional interest in pushing price transparency.

Outlook: There are growing risks for hospitals that fail to comply with price transparency regulations—risk of fines and penalties, plus risk of heightened media and Congressional attention. Price transparency is seen by some in Congress as part of the solution to rising health care costs.

Actions to take: Review your approach to CMS price transparency requirements and assess compliance. Keep your competitors in mind and consider how more price, quality, patient satisfaction transparency efforts can serve as a differentiator.  

Consolidation

Consolidation is happening across many segments of health care for any number of reasons. There have been horizontal mergers between hospitals/health systems along with vertical mergers between insurance companies and physician practices, to name two. There’s also the growing role of private equity across health care – all of which are piquing Congressional interest and concern.

On June 8, the U.S. Senate Finance Committee held a hearing on consolidation and what can be done to  curb it. The hearing is the latest in Congress to highlight issues around market concentration and the impacts of those activities, especially on increasing costs. Some solutions referenced at the hearing included antitrust efforts, site-neutral payments, 340B reforms, role of pharmacy benefit managers, and price transparency.

The Federal Trade Commission (FTC) and Department of Justice have also weighed in on antitrust concerns with various mergers or acquisitions, and HHS has proposed additional ownership disclosure requirements for hospitals.

Outlook: Expect the issue of pharmacy benefit managers to see legislative scrutiny. Hospitals should also brace for ongoing focus on site neutral policies, ownership disclosure requirements and federal (and even state/local) scrutiny over mergers and acquisitions.

Actions to take: Understand where health care is going. Understand your market. Understand your financials. Develop a strong digital/data strategy. Update your strategic plan. This will help you understand how to position your organization for the future…whatever that may hold.

340B

It is a very messy landscape for 340B covered entities, particularly disproportionate share hospitals (DSH). Over the past several years, various drug companies have limited the number of contract pharmacies hospitals can use and/or are requiring 340B hospitals to use a specific vendor to receive “rebates” as opposed to upfront discounts.

On the regulatory front, HHS reduced 340B reimbursements to some hospitals years ago, which resulted in a years-long lawsuit. 340B hospitals won that lawsuit and CMS is now required to repay those hospitals. (We are waiting for CMS to release the rule outlining how these dollars will be distributed.)

Throughout it all, there have been lawsuits and regulations, but no clear resolution on underlying 340B issues of contention – exactly why the program has come up in recent Congressional hearings.

Outlook: Many believe Health Resources & Services Administration (HRSA) should be given more explicit oversight authority for the program (extent of authority is murky due to court cases) but opening up the 340B statute legislatively could be dicey when both sides want very different things. With the issue roiling for years, Congress may be ready to make some targeted changes but we’re just not certain on whether there’s alignment.

Actions to take: A bipartisan group of U.S. Senators released a Request for Information on the 340B program. This is an opportunity for stakeholders to provide feedback. Review your 340B program financials. Review how savings are used to “stretch scarce federal resources” to expand health care services to patients and communities. Consider a mock audit of your 340B program as a compliance check.

Bonus Issue to Watch: Tax Exempt Status. Health care consolidation, health care costs, and charity care levels coupled with news stories about hospital’s bad debt or billing practices are always on the radar for Congress. Make sure you’re top notch on all things revenue cycle and 990-related.  

How CLA can help

From CLA Intuition Financial Model to cost reports to 340B program services to harnessing your data to strategic planning, CLA can help you along whatever road your hospital or health system is traveling. Reach out today.