Hospitals face payment cuts at outpatient sites under budget deal: 10 things to know

Republican congressional leaders and the Obama administration reached a tentative budget deal on Monday that would raise spending $80 billion over the next two years and includes cuts in spending on Medicare.

Here are 10 things to know about the budget deal and how it could impact hospital payments.

The tentative deal
1. The 144-page bill, which must be approved by the House and Senate, includes a section that deals with the issue of hospitals acquiring physicians' offices and then getting paid more under Medicare by classifying them as "outpatient hospital departments," according to The Hill.

2. Under the tentative deal, off-campus outpatient facilities that are bought or set up by hospitals after the date of enactment of the bill will not be eligible for reimbursements under the outpatient prospective payment system. Instead, these departments would be eligible for reimbursements from either the physician payment or ambulatory surgical center payment systems.

3. According to the draft bill, existing provider-based outpatient departments will be grandfathered in, easing the revenue cuts for some hospitals.

4. The deal also holds down premium increases for about 30 percent of the more than 50 million seniors in Medicare Part B, which covers outpatient visits. This group of Medicare beneficiaries would have seen their premiums jump by 52 percent. Instead, premiums for those individuals will rise about 15 percent, according to The Wall Street Journal.

Industry reactions to the budget bill
5. The American Hospital Association is strongly opposing the tentative deal. "The proposal would cut funding for healthcare services provided in a hospital's outpatient department — also known as 'site neutral' payments,'" said Thomas Nickels, AHA's executive vice president. "This untested idea may endanger patient access to care, especially among patients who are sicker, the poor, minorities and seniors who often receive care in hospital outpatient departments." Mr. Nickels called for the provision to be removed from the bill, saying, "Congress and the administration should not balance the budget on the backs of patients."

6. The AHA also voiced concern regarding a section of the bill that cuts payments to healthcare providers by extending the 2 percent sequester cuts to Medicare by an additional year, to 2025.

7. The Federation of American Hospitals, which strictly represents for-profit hospitals, offered a more tempered opinion of the budget bill. "The FAH has always opposed arbitrary payment reductions to hospitals and have concerns that continued cuts will harm patient access to care. At the same time, for the fiscal stability of the country, legislation to raise the debt limit and fund the government is essential," the group said in a statement. "The FAH understands that congressional leaders did their best to minimize the effects of these cuts on the hospitals that care for the nation's seniors."

8. The Alliance for Site-Neutral Payment Reform commended the provision of the budget deal addressing Medicare reimbursement for provider-based outpatient departments, calling it a "positive step forward in addressing unfair payment disparities for identical clinical services provided in different healthcare settings." The group said, "Site-neutral payment policies ensure that healthcare payments are based on the needs of the patient and not the site of service."

What should hospitals do?
9. Lawrence Vernaglia, chair of the law firm Foley & Lardner's Health Care Industry Team, weighed in on the provision of the draft bill that addresses reimbursements for off-campus outpatient departments. "As the bill now stands, if the department bills prior to the enactment of the law, the provider-based department will be grandfathered," he says. "Therefore, if any hospitals are on the cusp of developing an off-campus provider-based facility, they should get the facility operational as soon as possible. This may include dropping a bill at this time — even if it is merely a place-holder bill — if they can do so in a legally compliant and transparent fashion."

How the deal might affect industry trends
10. Mr. Vernaglia says the Medicare reimbursement provision of the budget bill will "unquestionably" reduce the incentive for hospitals to buy more outpatient facilities. "This will make the economics of outpatient care much more challenging — particularly as this version of the draft bill appears to impose all the overhead of a hospital-based entity, but at the freestanding rates," he says.

Mr. Vernaglia also acknowledged the factors that are driving more care to the outpatient setting, such as value-based care models. "And this bill doesn't affect the logic of moving care to outpatient settings to manage cost under those types of programs," he says.

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