Category: Health Care Reform
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Will the Massachusetts Proposed Legislation on Hospital Outpatient Facility Fees Have a Nationwide Impact?
In some states, including the Commonwealth of Massachusetts, “site neutrality” for outpatient hospital reimbursement is factoring into state-specific health reform and cost containment initiatives. This potentially goes well-beyond Medicare’s limitation of reimbursement at new off-campus outpatient hospital departments under Section 603 of the Bi-partisan Budget Act of 2015. Since Massachusetts’ state health reform law was the model on which the Affordable Care Act was based, many other jurisdictions look to Massachusetts to see how the state is addressing the “cost” component of the equation, especially now that the “access” component is addressed by the ACA and state initiatives. Massachusetts has taken several swings at the cost conundrum, including the latest legislation introduced in October of 2017. This recent legislation includes a provision that would essentially eliminate a large number of hospital outpatient costs, both on-and off-campus.
Treatment of “Facility Fees” Under the New State Senate Bill
On October 17, 2017, the Massachusetts State Senate released a proposed bill entitled “An Act Furthering Health Empowerment and Affordability by Leveraging Transformative Health Care.” This bill was discussed on October 23, 2017 in a packed hearing room before a Special Senate Committee on Health Care Cost Containment & Reform where representatives from teaching and community hospitals, health plans, and patient/citizen groups were present.
This bill also includes several far-reaching provisions, which we will address in future posts, including the provider price variation and out-of-network payment issues; as these provisions are also of great interest to the hospital industry. But, a major concern in the bill, from a hospital operations consideration, is a prohibition on hospitals charging facility fees for many common outpatient services, as a condition of licensure.
The contours of this prohibition are not entirely clear, but it would appear to be targeting so-called outpatient evaluation & management (E&M) services within any department of a hospital that submits a claim to any insurer (public and commercial) as an outpatient service. The bill permits the Department of Public Health (DPH) to add additional services to the ban beyond outpatient E&M. In addition to the billing ban, the proposed legislation serves up several other dishes designed to restrict or burden hospital billing for outpatient services, including limitations on payment for state employees under the Group Insurance Commission (GIC), and several sections requiring notices to patients by hospitals and other providers referring patients for hospital services. At least one of these notices is required before delivery of services in the emergency room (ER), “if practical.”
What is Included in the Massachusetts State Senate Bill?
Presumably, more will be known about the intentions of the drafters in the coming days and weeks, as well as what the House of Representatives will make of this. In the meantime, here are a few observations on the bill as written:
- If passed, Massachusetts hospitals (and, once the insurance provisions kick in, likely hospitals throughout New England and other states treating Massachusetts-covered beneficiaries), will not be able to charge facility fees for many common procedures, but must continue to incur the costs of those services, including nurses, other staff, medical supplies, facilities, overhead, power, electronic medical records, patient safety, infection control, )
- There is serious ambiguity regarding what services are subject to the ban. Is it just outpatient E&M or are other services where a physician performs some E&M service, like an emergency department or observation services impacted? Given the wording of the bill, it would appear to be extremely broad in scope, encompassing many different locations, including on-campus outpatient departments. Indeed, the accompanying Senate Report suggests that a more sweeping set of services would be subject to the payment ban.
- It is unclear which payors are covered. Since the prohibition is incorporated not in the insurance laws but, rather, as part of the hospital licensing requirements, it would appear that it should apply to all payors, including Medicare and employer-sponsored health plans covered by ERISA. This raises serious preemption and other questions. Perhaps it was intended only to apply to commercial payors and the GIC by including similar language in those statutory provisions, but clarification as to the extent of the application of this bill will be needed especially given the placement in multiple statutory provisions.
- Unlike the Medicare site-neutrality law, which permits payment to hospitals at a reduced rate for outpatient services at non-exempt site, Massachusetts is proposing a zero reimbursement rule, not a payment reduction, and with no “grandfathering” of existing locations. If the law is passed, only physicians will be able to charge for impacted services at all sites.
- Also, unlike the Medicare rule, the Senate bill appears to apply to both on-campus as well as off-campus services. Because the accompanying Senate Report suggested recommendation is that only off-campus services be targeted, we wonder if the Senate intended such broad geographic coverage.
- If only physicians can bill for these services, will physicians be required to share their fees back with the hospitals to cover the hospital’s overhead? You may recall that this was a feature of the initial CMS proposal under Medicare site neutrality. If not, is there a “Stark” (physician self-referral) Law implication on the theory that the physician is receiving “free” use of hospital space? If so, will physicians be able to charge a full physician fee schedule payment, without reduction for the “site of service differential? And if physicians cannot bill the full professional fee, does that mean that both hospitals and physicians will be provide these services for free or at a massive discount to all payors?
- Does the bill require hospitals to provide a notice of fees to emergency room patients prior to the delivery of services, and, “if practical”, does it put hospitals on a collision course with the federal government and its implementation of the Emergency Medical Treatment and Labor Act (EMTALA, also known as the patient anti-dumping law)? CMS has long been concerned that talking to patients about costs and charges before receiving emergency services may cause patients to leave a hospital ER in an unsafe medical condition and violate EMTALA.
The Impact of this Proposal May Reach Beyond Massachusetts
While we are asking a number of questions about this initial proposal on hospital costs, it appears that the Commonwealth is heading in a direction that could have a material impact on hospital reimbursements, budget, and operations if passed in any form. Hospital administrators in Massachusetts will be watching this closely. Hospital and health system leaders nationally should also be concerned that this type of state strategy may be considered in other jurisdictions too.
Interested parties should consider commenting on the State Senate bill.
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Congress is now back in session and, once again, focus has turned to health care. With all eyes on returning health care reform to the forefront, a flurry of activity has sparked new legislative efforts including the introduction of the Graham-Cassidy legislation, Medicare for All, and a Senate Finance Committee agreement to a five year reauthorization of the Children’s Health Insurance Program (CHIP). Here’s a summary of the efforts currently underway for Graham-Cassidy as well as a review of what is included in the bill. Subsequent posts will cover other congressional developments.
The Unveiling of the Graham-Cassidy Legislation
Legislation by Senators Lindsey Graham (R-LA) and Bill Cassidy (R-LA) was formally unveiled on September 13, 2017. A summary of the bill follows, but in its current form, Graham-Cassidy would block grant the funding in the Affordable Care Act (ACA) to states, make significant changes to the reforms in the ACA, and change the traditional Medicaid program into a per capita cap or block grant program.
The Graham-Cassidy legislation appears to be shy of the 50 votes required to pass the Senate, but its supporters are working hard to convince their colleagues to get behind what could be the chamber’s last opportunity to pass legislation that repeals and replaces the ACA. Senator Rand Paul (R-KY) – who supported earlier repeal and replace efforts – has been highly critical of the measure, but most Senators have been relatively quiet on their position. Without Paul’s vote, the measure will need to maintain support by the Senators who voted for earlier efforts, as well as flip two of the following: Senator Susan Collins (R-ME), Senator Lisa Murkowski (R-AK) or Senator John McCain (R-AZ). Graham is very close friends with Senator McCain (R-AZ), which could prove an interesting dynamic. Last week, Senate Republican Leader McConnell (R-KY) called on the Congressional Budget Office to expedite the score of the proposal, although he has not indicated whether he is willing to take up the measure on the Senate floor this month.
The Senate loses its reconciliation vehicle on September 30, 2017, after which the legislation will require 60 votes to pass the Senate, so it is unclear whether there would even be enough floor time to move this bill. That said, if the Republicans can secure enough votes for this measure, expect them to find a path forward before the end of the month.
The House Republicans have been closely tracking the Graham-Cassidy developments. If the Senate can get to the required 50 votes on a repeal/replace bill, the House is expected to take up the legislation.
A Review of the Graham-Cassidy Legislation
The Graham-Cassidy legislation would make drastic cuts to programs added or expanded by the ACA in 2020, including the termination of the Medicaid expansion, the premium support subsidies for individuals to buy health insurance, elimination of small business tax credits, the ending of cost sharing reduction subsidies for low-income Americans, and removing the individual and employer mandates. In lieu of these programs and requirements, the legislation would provide states with significant federal funds to develop market-based health care initiatives outside the parameters established by the ACA.
Federal Grants for Market-Based Health Care
The centerpiece of these efforts is the proposed appropriation of federal funding for seven years for market-based health care initiatives, starting at $146 billion in 2020 and increasing to $190 billion in 2026. This funding approaches but may not equal estimates of ACA federal spending nationwide. The funding would be apportioned among states in accordance with a statutory formula, and be available to states for expenditures the state makes consistent with a plan submitted to the federal government. Examples of permissible plans include:
- Programs to help high-risk individuals purchase insurance in the individual market
- Programs to stabilize insurance premiums and promote market participation
- Payments to health care providers for the provision of services
- Funding assistance to reduce out-of-pocket costs of individuals in individual market plans
- Reductions of premium cost for individual market plans and for individuals without access to employer coverage
- Insurance coverage for Medicaid beneficiaries through health insurance issuers;
- Coverage programs for individuals not eligible for Medicaid or CHIP through arrangements with managed care organizations.
In connection with these plans, states could receive waivers of ACA requirements, and could allow insurers to vary premium rates based on health status, age, or other considerations (not including sex or classes protected under the U.S. Constitution), or decline to offer the ACA’s “essential health benefits.” States could also waive medical loss ratio requirements for insurance plans.
The legislation would also retain and expand the authority under section 1332 of the ACA, which allows states to request waivers of the ACA’s insurance market requirements if they can demonstrate more effective approaches. The legislation would make approval of such requests mandatory if they meet the current statutory criteria related to cost-effectiveness, access and cost sharing for enrollees, and would extend the length of the waivers to 8 years.
Changes to the Medicaid Program
Similar to previous Republican health care efforts, the Graham-Cassidy legislation would make significant modifications to the Medicaid program. Notable program changes are as follows:
- Ends the Medicaid Expansion. While previous iterations of the legislation had gradually phased out support or allowed the expansion to continue without the enhanced federal matching rate provided for by the ACA, the Graham-Cassidy legislation would entirely remove authority from states to cover the Medicaid expansion population. This change would be effective January 1, 2020, with the exception of certain Native American beneficiaries. As a result, the 30 states that have already expanded their Medicaid programs would need to terminate coverage, and potentially could transition individuals in the expansion population to alternative initiatives funded under the market-based grants described above.
- Disproportionate Share Hospital (DSH) Payment Reductions. Scheduled reductions to state allotments for payments to hospitals that serve a disproportionate share of Medicaid and uninsured beneficiaries are retained, and would take effect as scheduled. In some cases, states could have a portion of their DSH cuts restored if they experience a “grant shortfall,” which occurs when the state’s allotment from the market-based health care grant amount increases slower than an inflation adjuster.
- Per Capita Cap. As in each of the prior Republican health care bills, Graham-Cassidy would create a new “per capita cap” financing structure that significantly reduces the growth in federal spending on the Medicaid program. The structure of this provision mirrors prior legislative efforts, with few modifications.
- Block grants. As in the prior legislation, states would have the option to apply for a block grant of federal funds in lieu of receiving funds under the normal Medicaid matching formula. Graham-Cassidy limits this option to non-elderly, non-disabled adults.
- Work Requirements. Allows states to impose work requirements on Medicaid recipients who are not pregnant, disabled, elderly, children, or caretakers of a child under the age of six or a child with disabilities. Exceptions exist for individuals who are sole parents or caretakers of a young child or a child with disabilities, for full-time students, or individuals participating in outpatient drug addiction or rehabilitation programs. Individuals that do not meet the work requirements imposed by the state would lose access to Medicaid coverage.
- Limitations on Provider Taxes. Would limit the scope of permissible health-care provider taxes that may be used to fund a state’s Medicaid program. If implemented, many states would need to restructure their provider tax programs or restructure the financing of Medicaid expenditures.
- Other Notable Changes:
- Option for states to earn quality performance bonus payments from FY 2023 through FY 2026. States would earn the payments by having lower than expected aggregate medical assistance expenditures; states would be required to distribute the bonus payments on quality improvement.
- Limits the scope of retroactive Medicaid coverage to two months before the date of application. Current law requires coverage three months before the date of application; other Republican proposals would have limited it to services in the month of application.
- New authority for four year Medicaid home and community based service demonstration projects.
- Option to expand coverage for psychiatric hospital services to individuals age of 21 to 65, notwithstanding the general Medicaid prohibition on payment for services for adults in an institution for mental disease (IMD).
- Expansion of federal support for services provided to eligible Native Americans who are Medicaid beneficiaries.
- Retains provisions in prior GOP health care bills that would prohibit federal funding to Planned Parenthood and other entities meeting certain designated criteria. The qualifying criteria have been modified in the Graham-Cassidy legislation so that other non-profit providers that are part of national chains and which provide abortion services outside the scope of the Hyde amendment could potentially be implicated.
The Graham-Cassidy legislation introduces the following insurance changes:
- Effectively eliminates employer mandate penalty, retroactive to calendar year 2016.
- Repeals the reduction of the employer deduction for retiree prescription drug plans receiving Part D subsidies, effective for tax years after December 31, 2016.
- Eliminates age restriction on the sale of catastrophic coverage plans (currently cut off at age 30), effective for plan years beginning on or after January 1, 2019.
Health Savings Account (HSA) Changes
The following HSA changes are also included in the legislation:
- HSA contribution limits will increase to the High Deductible Health Plan (HDHP) out-of-pocket limits and consumers will be permitted to use HSA funds to pay premiums for certain HDHPs, effective tax years after December 31, 2017.
- Will not allow HSA funds to be used for a HDHP that covers abortion, effective for plan years beginning after December 31, 2017.
- Allows HSAs to be used to pay for primary care service arrangements (concierge medicine), effective tax years after December 31, 2016.
- Allows HSAs to be used to pay for expenses of children under age 27, effective tax years after December 31, 2017.
- Establishes a 60-day grace period after enrollment in an HDHP to establish an HSA and also allows reimbursement of medical expenses incurred during that period from new HSA, effective for HDHP plan coverage beginning after December 31, 2017.
- Allows both spouses to make catch-up contributions to the same HSA account, effective tax years after December 31, 2017.
- HSA and FSA funds will be able to be used on over-the-counter medications, effective tax years after December 31, 2016.
- Reduces tax on non-qualified HSA and Archer MSA distributions, effective for distributions made after December 31, 2016.
Other Notable Tax Changes Introduced by Graham-Cassidy
- Eliminates the individual mandate penalty, retroactive to calendar year 2016.
- Eliminates premium tax credits, effective tax years after December 31, 2019.
- Eliminates small business tax credits, effective tax years after December 31, 2019.
- Repeals cost-sharing reduction subsidy program, effective for plan years beginning after December 31, 2019.
- Repeals the medical device tax, effective for sales after December 31, 2017.
- Excludes from definition of “Qualified Health Plan” those plans that cover abortion, effective tax years after December 31, 2017.
Stay tuned as subsequent posts will cover the other activities currently happening including efforts to stabilize the insurance exchanges, Medicare for All, and the CHIP program reauthorization.
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