Published in South Florida Hospital and Healthcare Association Newsline –
Even in the middle of a pandemic, when hospitals are struggling financially due to the surge inbCOVID patients and the slowdown in ED visits, outpatient visits, and elective surgery cases, these same hospitals have been dealt a devastating 1-2-3 punch by HHS and the Courts. Here are a few examples:
- Price Transparency: The first major jab in this ongoing match between HHS and the hospital community came in late June of this year when Judge Carl Nichols, U.S. District Judge for the District of Columbia, upheld the HHS position and ruled against hospitals in a major price transparency case. Since the implementation of the Affordable Care Act, hospitals have been required by HHS to publicly post their chargemaster prices, supposedly helping consumers make more informed choices on where to go for care. But wait, hospitals argued, chargemasters don’t show the true price of care to an insured individual. Instead, the price of care is typically negotiated between the hospital and the insurer, with some (usually) small portion of the price being borne by the individual in terms of a copay or deductible. In this case, hospitals may become victims of their own argument. Back in June 2019, HHS developed and the President signed an Executive Order requiring that hospitals post the actual contracted rates with health plans for 300 “shoppable” procedures (including 70 procedures designated by HHS). In December 2019, hospital industry groups filed a lawsuit against HHS, contending that this transparency effort would undermine the free market and place hospitals at a disadvantage in contract negotiations. Judge Nichols, however, rejected that argument by saying that hospitals “are essentially attacking transparency measures generally, which are intended to enable consumers to make informed decisions; naturally, once consumers have certain information, their purchasing habits may change, and suppliers of items and services may have to adapt accordingly.” The American Hospital Association has announced that it will appeal the decision, which is currently scheduled to take effect in January, 2021.
- Site Neutral Payments: The next gut punch in the HHS/Hospital industry pricing saga came just last month, barely three weeks after the first. This time, Judge Srikanth Srinivasan, Chief Judge for the U.S. Court of Appeals for the District of Columbia, issued a ruling upholding HHS’s authority to implement site neutral payments. As a bit of history, hospitals have enjoyed the ability to price outpatient services rendered at hospital-owned physician practices, surgery centers, and diagnostic centers at a premium by using the hospital Outpatient Prospective Payment System, which pays significantly more than the Medicare Physician Fee Schedule, which physician-owned clinics are required to use. Hospital advocacy groups argued that the overhead of running a hospital as opposed to smaller, simpler business models like a physician practice or an ASC should justify these higher prices. However, physician groups, freestanding ASC’s, and HHS itself argued that Medicare and others should pay at a standard rate for the type of service performed, irrespective of the site of service. The hospital industry won an earlier court case in June 2019, but HHS appealed the ruling. This time, the Court agreed with HHS, stating that the financial interests of consumers outweighed the financial benefit to the hospitals and that the federal government should not be required to subsidize hospitals by paying more for a procedure at a hospital that at a non-hospital affiliated site. Preliminary projections show that this decision will deal an estimated $800 million annual financial hit to hospitals’ revenue streams.1
- 340B Payment Reduction: Just last week, Judge Srinivasan once again put hospitals on the ropes when he issued an Appeals Court decision to allow HHS to implement a 28.5% reduction in Medicare reimbursement for 340B drugs. Back in 1992, when the 340B legislation was first passed, Congress allowed eligible “covered entities” (including safety net hospitals) to purchase certain medications at discounted prices in order to ease the burden of providing significant amounts of uncompensated care. But the number of 340B sites and the volume of 340B drugs dispensed has grown dramatically due to hospital growth, hospital acquisitions of physician practices, and legislative action granting greater hospital access to the program. Today, about 1/3 of hospitals participate in the 340B program. Over the years, HHS came to object (1) that 340B sites could make the discounted drugs available to both compensated and uncompensated patients and (2) that it was reimbursing many of these 340B medications according to the Medicare Outpatient Fee schedule at much higher rates than it costs the organization to acquire the drug. When HHS developed a rule to lower 340B reimbursements and limit its financial exposure, hospital associations (predictably) sued. Again, a lower court ruling in November 2019 favored the hospital industry’s position that HHS had exceeded its authority in making the reimbursement cuts, but last week the Appeals Court saw it differently. This time, the adverse financial impact to hospitals is projected to be $1.6 billion annually, even worse than the site neural payment adjustment.2
So, you might ask, what’s going on? Doesn’t HHS recognize the vital role that hospitals are playing, putting their own financial futures at risk—not to mention the incalculable sacrifice of their staffs—as they serve on the front lines of combating the pandemic? HHS would likely argue that the timing is not of its making; these are longstanding court cases that are just now being decided. But timing aside, here are a few reasons why the U.S. government and its legal system are supporting these decisions, which are undeniably averse to the interests of America’s hospitals.
- First, the federal government is anxious to represent itself as the champion of the consumer in its fight against rising healthcare costs. Hospitals alone are not to blame for the skyrocketing cost of healthcare, but they do constitute the largest bucket (32.7%) of healthcare spending in the United States,3 and they therefore represent a huge target for cost reduction.
- The vulnerability of the Medicare program itself may be a driver of the repeated attempts to control the increase in federal healthcare costs. The most recent report from the Congressional Research Service indicates that, absent further legislative or regulatory action to control spending, the Medicare Trust Fund could become insolvent in 2026.4
- It important to note that HHS’ onslaught on hospitals is not about the quality of care or even the availability of care that is being rendered by the industry; it is about the pricing of that care. By attacking pricing, which is near and dear to the hearts of consumers and taxpayers, HHS can hope to avoid the backlash from members of the public, who generally (and even more so now during the pandemic) recognize that hospitals provide the critical safety net within their communities.
- Sadly, it may be that HHS sees hospitals as an easier target than other formidable industry groups, like Big Pharma or the health insurance lobby. The pharmaceutical industry spends three or four times as much as the healthcare industry on lobbying efforts, and the insurance industry spends twice as much.5 Despite repeated rhetoric that drug prices are too high or that insurance companies control too much of the decisions and the dollars in healthcare, there have not been any meaningful attempts to reform the pharmaceutical or insurance industries in recent history.
With these recent Court decisions, we in the healthcare industry may feel a bit battered and bruised. We are down but definitely not out. We know, however, that the road to financial recovery won’t be easy. Let’s continue to be good stewards of the resources we do have, but let’s also pick ourselves up, engage our stakeholders, leverage our political contacts, and educate our community about the challenges we face. When we have the opportunity to spread the word about our valiant efforts in saving lives and protecting the health and welfare of our community, we should use that same platform to enlist the understanding, aid, and support of our community leaders. As members of America’s most reliable, most essential, and most vital industry, we intend to keep it that way.
Notes:
- https://www.healthcarefinancenews.com/news/appeals-court-sides-hhs-site-neutral-payments
- https://www.healthcarefinancenews.com/news/appeals-court-sides-hhs-drug-payment-cuts-340b-hospitals
- https://www.cdc.gov/nchs/data/hus/2018/043.pdf
- https://fas.org/sgp/crs/misc/RS20946.pdf
- https://www.investopedia.com/investing/which-industry-spends-most-lobbying-antm-so/