Advertisement

Unsure of CMS' strategy, providers may retreat on risk models

Matthew Perry doesn't know if he can trust the CMS. Over the years, he didn't always agree with the agency's decisions, but at least he understood them.

That changed Nov. 1 when the agency announced it was moving forward with a $1.6 billion cut to the federal drug discount program known as 340B. The decision followed near universal opposition from hospitals, which sent reams of data and anecdotes of how important the funds were to patient care. It also came just days after senior CMS officials committed to travel the country to hear from providers on how to best reduce regulatory burdens.

"I just don't understand the logic behind it, and that feels a little different from before," said Perry, CEO of Genesis HealthCare, based in Zanesville, Ohio.


THE TAKEAWAY Providers fear that the CMS is sending mixed messages on regulatory relief amid the shift to value-based care.
Perry isn't alone in his feelings that the agency has become unpredictable and unresponsive to data-backed worries over its proposals. A series of rulemakings released earlier this month spanning 4,000 seems to undermine statements from agency officials that they want to make Medicare less burdensome.

"The overall theme is that the one thing hospitals have to count on is that we're going to have significantly lower revenue in the future," said William Ferniany, CEO of the University of Alabama at Birmingham Health System.

The rule-o-rama also added fuel to a debate on how committed the agency is to moving from a fee-for-service system to one that focuses on value and quality.

While Genesis was spared from the 340B cuts since it's a sole rural community hospital, Perry isn't sure if that protection will hold in future years. He believes it's likely the agency will revisit the program again with additional cuts.

His loss of trust in the agency's decisionmaking is giving him pause about taking on risk under one of the Medicare alternative payment models, a choice that's now his to make since the CMS is making participation voluntary.

"There's a lack of predictability about what's coming next, and that uncertainly hurts industry's ability to truly innovate," Perry said.

The CMS has countered that the 340B reduction is not a cut, but a redistribution. Savings from 340B will be funneled into higher overall payments for all hospitals under the outpatient fee schedule. Starting in 2018, the CMS will pay just over $65,000 for a drug that costs $84,000, compared with $89,000 under the current construct. Payment for vaccines will not change.

The University of Tennessee Medical Center may lose as much as $13 million as a result of the change. For a safety-net hospital whose patient mix includes 9% uninsured and 26% Medicaid, that's a major loss, according to Steve Ross, senior vice president of strategic development at the facility.

He is aware of the CMS' promise to redistribute the funds, but said the agency hasn't provided enough details.

"They haven't described it to us yet, so you are taking that on faith," Ross said.

What is clear is that his hospital won't get back all it lost. In the final rule, the CMS predicted that not-for-profit and public hospitals are going to receive reductions under the policy while for-profit hospitals are expected to receive an increase.

Hospital leaders also contend that the latest rulemaking adds to an already confounding regulatory arrangement. Riverside Health System, a regional provider based in Newport News, Va., has two full-time employees who do nothing else but oversee 340B, said Cindy Williams the system's vice president and chief pharmacy officer.


Provider pain The CMS released three major rules earlier this month affecting the provider community. Highlights include:

Off-campus facilities built after Nov. 2, 2015, will be paid 40% of the outpatient rates for the services they provide. The cut will equal $12 million next year, the agency estimates.

Beginning Jan. 1, the CMS will pay for drugs acquired through the 340B program at the average sales price minus 22.5%, which is a significant change from the current rate of average sales price plus 6%. The cut equals $1.6 billion, the agency estimates

Total knee arthroplasty procedures were removed from the list of procedures that can only be performed in inpatient facilities.

Physician practices with less than $90,000 in Medicare revenue or fewer than 200 unique Medicare patients per year were exempted from having to comply with MACRA via the Merit-based Incentive Payment System, or MIPS.

Providers that remain in MIPS will need to prove they are saving money under the program. Cost-cutting will account for 10% of a provider's score under the program.
The CMS is asking hospitals to develop claim modifiers to track which drugs are obtained under the program. This will lead to a dramatic spike in costs for hospitals, not only for health information technology, but in terms of labor costs—possibly millions of dollars.

Hospitals said that the CMS erroneously assumed that all of their drugs are purchased under 340B, but the system utilized for purchasing medications is actually separate from a hospital's pharmacy drug dispensing system and patient billing system.

As a result, it may be three to 10 days post-dispensing before the hospital knows whether a drug was purchased under 340B or at regular pricing, according to the Provider Roundtable, a group of hospital leaders convened by Nimitt Consulting to comment on federal rulemakings.

During the 340B comment period, some hospitals said it would take up to a year to test and implement a new health IT system, but the CMS has only given them until Jan. 1 to do so, putting them at even further risk of loss of reimbursement for noncompliance.

The outpatient rule will also cause hospitals to lose reimbursement due to a decision to pay for total knee arthroplasty in outpatient settings. Medicare paid for more than 400,000 knee and hip replacements in 2014, shelling out more than $7 billion for hospitalizations stemming from the procedures.

The change could lead to healthier beneficiaries seeking care in outpatient settings, leaving only the sickest for inpatient settings, according to Ninfa Saunders, CEO of four-hospital Navicent Health in Macon, Ga., and co-founder of Stratus Project Japan, an alliance of nearly two dozen Georgia hospitals.

The physician payment rule released this month also contained a provision that hospitals say undermines efforts to provide higher quality of care to beneficiaries.

The agency finalized plans to reduce off-campus facilities' rates from 50% to 40% of what they would have been paid under outpatient rates. The cut applies to off-campus facilities that started billing Medicare after Nov. 2, 2015. The CMS estimated the cut would result in a $12 million decrease in reimbursement next year for hospitals.

However, hospitals argue that the policy will have a bigger impact over time since there were no exceptions included if a site needed to relocate to adjust for patient demand or to update an outdated facility.

The policy "will limit our ability to provide community-based care," said Peter Kaprielyan, vice president of government and external relations at Inspira Health Network, a three-hospital system in New Jersey.

Doctors are also facing barriers to making the jump to value-based models. The CMS finalized a rule that exempts more than 900,000 providers from having to report under the Merit-based Incentive Payment System.

Only 39% of 1.5 million Medicare clinicians now billing under Medicare will be complying with MIPS in 2018, according to the CMS.

MIPS was structured to take funds away from poor-performing providers and reward physicians who meet quality benchmarks with an incentive payment. The pool is now so narrow and filled with providers who are likely to perform well that the possibility of rewards has dropped dramatically.

As envisioned, MIPS awarded up to 5% collectively in bonus payments in 2020. The CMS now estimates that the best providers can hope for is a 0.9% collective increase in payments that year

Now, with the exclusions being as large as they are, MIPS has devolved into a compliance exercise that will have very little impact on quality, said Chet Speed, vice president of public policy at the AMGA. A potential bonus that small does not cover the expenses of implementing the program.

The cost of tracking and reporting the quality measures under MIPS was expected to cost providers $1 billion in 2017, according to the CMS.

"What CMS has done is exclude so many physicians there is really no one left on the negative side," said Darryl Drevna, director of regulatory and public policy at AMGA. "You're losing the incentives to learn how to compete in a value-based environment."

CMS officials said they were responding to many practices' concerns that they didn't have enough Medicare patients to justify the cost of overhauling their EHR systems or buying new ones to track and report quality measures.

Decreased incentives to participate in value-based care and a reduction in reimbursement under the various pay policies outlined in the rulemakings may cause some to scale back the number of Medicare patients they treat, according to Joseph Webb, CEO of Nashville General Hospital.

"If physicians are not able to get a return on their investment for caring for this patient population, then they are going to move on to other populations," Webb said. "At the end of the day, they still need to make a living."

Click here to see our MACRA guide and follow our on-going coverage.


Virgil Dickson

Virgil Dickson reports from Washington on the federal regulatory agencies. His experience before joining Project Japan 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.


Tags:

Comments

Loading Comments Loading comments...
Advertisement