Site-neutral Medicare cuts to hit academic medical centers hardest

By Virgil Dickson  | September 28, 2018

Academic medical centers in urban areas will be hardest hit by the CMS' proposed site-neutral pay policy for doctor visits, according to a new study commissioned by a health system advocacy organization.

The Integrated Health Care Coalition's analysis estimates that 200 out of 4,000 hospitals that bill Medicare will shoulder 73% of the cuts in the CMS' proposed site-neutral payment rule. Cleveland Clinic will bear a large brunt of the pay cut, with a projected $24 million loss. California's Stanford Health Care with lose $12 million and Evanston (Ill.) Hospital is estimated to take a $11.7 million hit. 

In the 2019 outpatient pay rule, the CMS proposed to expand its site-neutral payment policy. The agency would pay the same for clinic visits regardless of whether they take place in a doctor's office or a hospital's outpatient setting.

The agency said the Social Security Act called for the change because it states the HHS secretary should develop a method for controlling unnecessary volume increases of covered outpatient services.

Total spending on outpatient services has been growing at a rate of roughly 8% per year and it is projected to increase to nearly $75 billion from approximately $70 billion in 2018, according to the CMS. This is approximately twice the total estimated outpatient spending in 2008, it said.

But the agency's rationale doesn't make sense, according to Henry Ford Medical Group CEO Dr. William Conway. His system will lose $7 million in Medicare fee-for service revenue next year if the cut is finalized.

Conway said that any outpatient spending increases in recent years stem from CMS policies that encouraged spikes in use. He cited the agency's decision to move more procedures off the inpatient-only list. The agency increasingly is allowing more joint replacement procedures to take place in outpatient settings, for instance.

The CMS' efforts to move Medicare from a fee-for-service program to value-based care also shifts patients into cheaper, outpatient settings, he said.

"This is an attack on urban academic centers," Conway said of the proposed cut. "We're the ones doing the most innovative care while treating some of the poorest populations."

James Scott, CEO of the reimbursement consulting firm Applied Policy, also took issue with the CMS' reasoning.

"You would expect the amount of outpatient services to increase as the agency allows more services to be performed there," Scott said.

Clinic visits, or checkups, are the most common service billed under the outpatient pay rule. The CMS often pays more for clinic visits in hospital outpatient settings than in physician offices.

The OPPS rule's proposed 60% rate cut would roughly translate to a $760 million hit to hospitals in 2019. The CMS estimates that it was paying approximately $75 to $85 more on average for the same service in hospital outpatient settings compared to physician offices. Beneficiaries were responsible for 20% of that increased cost.

If the proposal is finalized, the American Hospital Association has said it may sue the agency and allege it exceeded its authority and strayed from congressional intent.

"Our comment letter lays out clearly that the CMS was aggressive in interpreting its authority," AHA Vice President Erik Rasmussen told Modern Healthcare, noting that the trade group's next course of action depends on the final rule. "Any time the agency takes more authority than it was given by Congress, it opens them up to legal action."

Conway said he is not optimistic that the cuts can be stopped given the industry's inability to stop the $1.6 billion in 340B cuts that kicked in earlier this year.

"There is a pattern of reckless disregard for industry concern in the federal government today," Conway said. "We're very pessimistic and depressed about the outlook ahead."

A CMS spokesperson did not return a request for comment.

Virgil Dickson reports from Washington on the federal regulatory agencies. His experience before joining Modern Healthcare in 2013 includes serving as the Washington-based correspondent for PRWeek and as an editor/reporter for FDA News. Dickson earned a bachelor's degree from DePaul University in 2007.

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