Trump admin rips up inpatient only surgery list, cuts 340B pay

Dive Brief:

  • CMS is eliminating the inpatient-only list that requires roughly 1,700 medical procedures to occur inside a hospital for Medicare members. The inpatient-only list will be completely phased out by 2024, according to the outpatient payment final rule released Wednesday. The hospital lobby balked at the change, contending the list is there to protect patients as the list of procedures can be complex and need hospital resources.
  • Ultimately, the list expands the options of where certain surgeries can be performed and may ultimately reduce out-of-pocket expenses for Medicare members as surgeries performed in an outpatient setting, such as an ambulatory surgery center, can be less costly, CMS said.
  • Also, the agency is moving forward with reimbursement cuts for 340B-acquired drugs, a hit to some hospitals. Meanwhile, the rule also loosens restrictions on some physician-owned facilities, also drawing ire from the hospital lobby.

Dive Insight:

President Donald Trump’s administration continues to finalize potentially lasting healthcare policy changes in the waning weeks of his term. Last week the administration finalized policies to rollback Stark and anti-kickback rules.

This latest change is designed to inject competition into the healthcare marketplace as many regions around the country are dominated by a few providers, CMS said.

The inpatient-only list entails procedures only paid for by Medicare if they’re performed in a hospital, giving hospitals outsized power. CMS said ripping up the list boosts competition by allowing Medicare members and their doctors more choice “without micromanagement from Washington,” CMS Administrator Seema Verma said in a statement Wednesday.

Starting Jan. 1, about 300 primarily musculoskeletal-related services will be removed from the inpatient-only list, which will dwindle down to nothing and be completely phased out by 2024. As such, about 300 procedures will be added to the list of covered services for ambulatory surgery centers, including hip replacements.

This will be especially helpful as the country is still grappling with the novel coronavirus pandemic. The pandemic rages on uncontrolled in many areas and has overwhelmed local health systems. Eliminating about 300 services from the inpatient-only list will help with capacity issues by potentially freeing up hospital space, CMS said.

The hospital lobby disagreed.

“Today’s final rule from CMS is a blow to America’s hospitals and health systems as they strive to continue to provide care for patients during the coronavirus pandemic,” Tom Nickels, executive vice president of the American Hospital Association, said in a statement.

AHA is also upset over cuts to reimbursement for certain drugs that some hospitals acquire. The program was designed to allow hospitals to buy outpatient medications at significantly reduced rates as a means to help more low-income patients. Other non-hospital competitors, or those without a 340B designation, do not enjoy these steep discounts. CMS contends this program provides an incentive for hospitals to buy up physician practices, leading to more consolidation in the industry. CMS will reduce current reimbursement for these drugs by nearly 23%.

AHA lost its legal battle in an federal appeals court to blunt this rule. CMS said it’s moving ahead with the cuts following the legal victory.

“Continued cuts will result in the further loss of resources for 340B hospitals at the very worst possible time as COVID-19 cases and hospitalizations continue to climb across the country,” Nickels said.

In addition to those changes, CMS is loosening the restrictions for certain physician-owned facilities. In order for a physician-owned hospital to receive Medicare payments, they must comply with certain requirements, including not increasing beds or operating rooms unless given an exception. CMS is now removing certain provisions in that exception process.

AHA argued physicians-owned facilities and referrals to the entities they own can lead to greater utilization of services and higher costs while these facilities tend to “cherry-pick” their patients, leaving “sicker and less-affluent patients to community hospitals, threatening the health care safety net,” Nickels said.

The lobby group did, however, welcome CMS’ changes to the star rating system, designed to compare hospitals on quality. The stars program has been controversial and industry groups have noted been critical of how CMS measures performance and compares hospitals.

In one major change, CMS will group peer hospitals for comparison. “We do appreciate that CMS has made changes to the hospital star ratings methodology that address many — but not all of its substantial flaws. We urge the agency to continue exploring ways to ensure the methodology is fair to hospitals, and meaningful to patients,” Nickels said.