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Hospitals against CMS proposal to cut payment in half for off-campus hospital outpatient facilities

CMS said new physician fee schedule rules would encourage fairer competition between hospitals and physician practices and align payment.

Susan Morse, Managing Editor

Two hospitals groups have come out in strong opposition to a Centers for Medicare and Medicaid Services proposed rule to cut by half payment for services provided at off-campus hospital outpatient departments.

CMS on Thursday said the payment rate would be reduced from 50 percent of the outpatient prospective payment system to 25 percent.

"CMS believes that this adjustment will encourage fairer competition between hospitals and physician practices by promoting greater payment alignment," the agency said.

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The American Hospital Association and America's Essential Hospitals said the rule would cut services and access for patients.

"The physician fee schedule proposed rule released today would pay hospitals at 25 percent rather than 50 percent of the OPPS (outpatient prospective payment system) rate for non-excepted services in 2018," said AHA Executive Vice President Tom Nickels. "CMS at the same time is proposing further cuts to Medicare rates for services hospitals provide in 'new' off-campus hospital outpatient departments. This proposal also appears to have a questionable policy basis and is yet another blow to access to care for patients, including many in vulnerable communities without other sources of healthcare."

America's Essential Hospitals is asking CMS to withdraw this proposal and another regarding the 340B drug program. CMS has proposed payment cuts for most Medicare Part B drugs of 27 percent.

"This would make the outpatient centers economically unsustainable, reducing access for people in chronically underserved communities," according to Bruce Siegel, MD, president and CEO of America's Essential Hospitals.

However, a Medicare Payment Advisory Commission report to Congress in June indicated there was little evidence to support the argument that access to care increases by having stand-alone facilities, at least when it comes to stand-alone emergency departments.

[Also: CMS rules on site neutral payments, pain meds]

Most stand-alone emergency departments have opened in metropolitan, affluent areas that already have an existing emergency department, not in rural areas, MedPAC said.

"This growth has been driven by payment systems that reward treating lower severity cases in the higher paying ED setting, competition for patient market share and an exemption in the law that allows stand-alone EDs to receive higher hospital outpatient payments for non-ED services," MedPAC said.

MedPAC also said it found that consolidation between and among hospitals and physicians has increased prices without any increase in quality.

Hospital consolidation results in increased market power, MedPAC said. Commercial prices average about 50 percent higher than hospital costs and are often more than 50 percent above Medicare prices, resulting in hospitals all-payer profit margins reaching a 30-year high in 2014, averaging 7.3 percent nationwide, the commission said.

MedPAC estimates Medicare would have spent $1.6 billion less in 2015 if prices for evaluation and management office visits in hospital outpatient departments were the same as freestanding office prices.

In response to horizontal consolidation, MedPAC recommended restraining Medicare prices rather than following the increases in commercial prices.

In response to vertical provider consolidation, the commission  recommended imposing site-neutral pricing.

"Integration that improves care and generates efficiencies would still occur, but consolidation that is driven primarily by capturing new facility fees would not," MedPAC said.

CMS's payment proposals show a willingness by a new Health and Human Services administration, headed by physician Tom Price, to level the playing field among hospitals and physician practices.

CMS said the new physician fee schedule rules, which includes the one for off-campus outpatient facilities, would encourage fairer competition between hospitals and physician practices by promoting greater payment alignment. It would improve the payment for office-based behavioral health services that are often the therapy and counseling services used to treat opioid addiction and other substance use disorders, CMS said.

[Also: CMS to pay for behavioral health, more collaborative care, in new proposed physician fee schedule]

CMS said the proposed rules would reduce administrative burdens for providing patient care, including visits, care management, and telehealth services.

The rules also aims to better align incentives and provide clinicians with a smoother transition to the new Merit-based Incentive Payment System under the Medicare Access and CHIP Reauthorization Act, CMS said.

[Also: Most physicians are lagging in MACRA understanding, preparedness, joint AMA/KPMG study shows]

"Doctors want to spend less time on burdensome regulations from Washington, D.C., and more time with their patients," said CMS Administrator Seema Verma in Thursday's announcement.

CMS is taking feedback prior to releasing the final rule later this year.

Twitter: @SusanJMorse