Latest / Becker’s Healthcare Podcast / CMS Proposals, 340B Changes and Hospital Financial Pressures with Laura Dyrda

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CMS Proposals, 340B Changes and Hospital Financial Pressures with Laura Dyrda · Becker’s Healthcare Podcast

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  - There's a small circle of people who truly
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  - understand what it takes to lead a health
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  - system right now. The decisions are enormous.
• 0:08
  - The variables are constantly shifting, and the stakes
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  - of getting a call wrong don't stay contained.
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  - That's not a complaint. It's a structural reality.
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  - And it's why the most effective c suite
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  - leaders are deliberate about where they go to
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  - pressure test their thinking.
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  - Becker's fourteenth annual CEO and CFO roundtable
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  - brings together more than 1,500
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  - executive level attendees
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  - and nearly 400 speakers for four days built
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  - around growth, financial sustainability,
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  - workforce strategy, and the leadership questions that don't
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  - have easy answers.
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  - Join us November second through the fifth in
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  - Chicago.
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  - For the agenda and event details,
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  - visit beckershospitalreview.com
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  - and click on the events tab in the
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  - upper right.
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  - This is Scott Becker with the Becker's Healthcare
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  - Podcast.
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  - Thrilled today to visit with Laura Dirda.
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  - Laura is the editor in chief at Becker's
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  - HealthCare and a phenomenal leader and person.
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  - She joins us regularly to talk about some
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  - of the top two or three stories that
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  - she's following in health care currently.
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  - Laura, I'm gonna turn it to you. What
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  - are a couple of the top two or
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  - three stories that you're following currently?
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  - Absolutely. Well, thank you so much, Scott. I
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  - think one of the big things that we've
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  - been keeping a close eye on over the
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  - last few days is some of the new
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  - rules that have come out of CMS,
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  - some of the proposed twenty twenty seven hospital
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  - outpatient perspective payment system and ambulatory surgery center
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  - proposed rule in addition to a few others
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  - that would make some significant changes for hospitals
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  - and systems if they all go through.
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  - And one of the big things that the
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  - CMS focused on in these rules was three
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  - forty b payments,
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  - citing some hospital drug acquisition cost surveys that
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  - CMS conducted earlier this year. The og agency
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  - is proposing
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  - a three forty b acquired drugs,
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  - be purchased at the drug's average sales price
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  - minus 33.4%,
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  - which is down from the current average sales
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  - price plus 6%.
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  - And CMS estimates that change would cut the
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  - original Medicare,
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  - drug payments by around
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  - $4,550,000,000
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  - and beneficiary drug payments by $1,150,000,000
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  - in the first year. So they're really seeing,
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  - this three forty b program as an opportunity
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  - again to
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  - aim to lower some of the costs on
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  - the Medicare side, which, of course, is a
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  - challenge for hospitals across the board as many
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  - have relied on this program,
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  - to bring in additional revenue and just a
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  - variety of different things. And so,
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  - CMS would aim to do that. And because
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  - the statute requires budget neutrality,
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  - they would also raise outpatient payments for nondrug
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  - services by an equivalent amount, which shifts dollars
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  - away from those three forty b hospitals
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  - towards the providers more broadly. So that's something
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  - we're watching closely. And separately, CMS also said
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  - it wanted to accelerate
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  - the recovery of the $7,800,000,000
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  - in extra nondrug payments that hospitals receive under
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  - the prior three forty b policy,
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  - from 2018 through 2022.
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  - So the agency proposed raising the annual offset
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  - to the OOPPS
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  - conversion factor from 0.5%
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  - to 3% effective next year, and that would,
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  - of course, exclude hospitals that enrolled in Medicare
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  - after,
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  - 01/01/2018.
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  - So,
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  - those changes are are something that I know
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  - hospital leaders are paying close attention to. We've
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  - heard from several
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  - CEOs, CFOs, and other executives that they've been
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  - trying to advocate on Capitol Hill for the
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  - three forty b program to have minimal changes
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  - or impact to their ability, especially for rural
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  - hospitals to serve patients and and continue to
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  - try to find ways that they can,
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  - prepare
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  - if some of these changes come into effect,
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  - next year and really be ready to continue
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  - to operate and find ways to bring revenue
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  - into the hospital.
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  - Thank you very, very much. And what are
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  - hospital leadership saying about the three forty p
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  - changes?
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  - I I assume what what are what are
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  - you hearing out there?
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  - Absolutely. So I I think a lot of
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  - hospitals and even some of those that are
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  - part of large systems, but, you know, those
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  - that
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  - rely
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  - on government payers more regularly,
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  - higher Medicare population, especially in those that, you
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  - know, might be in rural settings or have
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  - fewer revenue streams coming in from other areas,
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  - really,
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  - in in some ways, have become dependent on
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  - the three forty b program. And so without
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  - that similar program and ability to bring in
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  - some of those funds, I think they're really
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  - looking at, some pretty significant cuts, to what
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  - they'll be bringing in. And and so,
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  - I I think the leaders of those hospitals
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  - and systems from what I'm hearing are really
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  - hoping that it doesn't go into effect, but,
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  - of course, hope isn't a strategy. And so
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  - when they're thinking through what next year is
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  - gonna look like, you know, definitely seeing that,
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  - on the board, you know, in trying to
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  - lead around it, trying to find other ways
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  - to bring in revenue, whether it's through some
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  - unique partnerships, trying to bring in additional
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  - specialists,
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  - to to serve patients more locally,
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  - finding other revenue streams in ways that they
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  - can,
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  - continue to do that. I know some have
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  - been ramping up, efforts with philanthropy and raising
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  - money. So, it it's definitely something that, you
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  - know, they're keeping a close eye on and
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  - would certainly impact the way they're operating today,
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  - and hoping that doesn't go into effect. But
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  - if it does, as it is,
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  - you know, they're they're trying to be ready.
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  - And, I I would imagine some would have
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  - to,
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  - you know, explore more deep partnerships or acquisitions
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  - with some of the bigger, and more regional
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  - health systems,
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  - and find ways to really
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  - continue operations despite some of these changes. So
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  - I know hospital groups, including the American Hospital
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  - Association,
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  - have really been critical of these types of
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  - cuts in, three forty b program.
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  - So it's something that very much impacts hospitals
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  - and systems across the board and especially those
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  - who have a high population of of the
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  - vulnerable patients and those who are coming without
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  - insurance. So it's definitely something that we're keeping
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  - a close eye on.
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  - Thank you very, very much. Besides the three
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  - forty b, I also saw something on-site of
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  - service differentials.
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  - Any discussion or thoughts there? What's what's the
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  - deal there?
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  - Yeah. So from the CMS side, this proposed
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  - rule,
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  - CMS pitched paying physician office rates for imaging
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  - without contrast, which would include
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  - X rays and MRIs,
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  - that would be
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  - delivered,
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  - at hospitals and health systems, the off campus
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  - provider based departments.
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  - The agency estimates that change would reduce Medicare
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  - Part b spending by around $260,000,000
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  - in the first year,
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  - including around a $190,000,000
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  - of program savings and 70,000,000 in lower beneficiary
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  - premiums.
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  - And it would also cut beneficiary cost sharing
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  - by around $70,000,000.
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  - So I I think, looking at some of
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  - those site neutral payments, trying to
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  - bring down what they would pay hospitals at
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  - off-site locations,
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  - to be more aligned with what they do
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  - on nonhospital affiliated
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  - physician practices and stand alone,
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  - imaging facilities. And and I think that's something,
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  - again, that hospitals and and health systems are
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  - preparing for, but certainly would impact their bottom
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  - line. And so trying to figure out how,
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  - you know, a lower,
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  - cost there would really
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  - what they need to do in order to,
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  - offset that a bit and and prepare for
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  - it because
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  - the the site neutral payment discussion, I I
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  - think, has a variety of,
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  - opinions and and unique,
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  - kind of facets and complexities to it because,
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  - of course, hospitals,
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  - you know, certainly
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  - provide a variety of services and have been
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  - operating with a higher reimbursement
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  - rates for a while. But,
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  - being able to neutralize them in some ways,
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  - I think a lot of,
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  - c suite executives that I've been talking to,
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  - of course, you know, would prefer that it
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  - didn't happen, but they're preparing for,
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  - the reality that, you know, these reimbursements are
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  - going down. And, again, they're gonna have to
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  - find a way to either,
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  - you know, manage those facilities differently or or
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  - think through, you know, is it smarter to
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  - have partnerships versus running their own, with some
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  - of these off-site facilities? So it's just been
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  - a fascinating debate and something that I know
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  - executives have been looking closely into and trying
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  - to,
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  - develop their strategy around for the last year
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  - or so.
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  - Good. Thank you. And fascinating. Do surgery centers
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  - have a comment on the site of service
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  - differential as ultimately the thought that it's gonna
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  - bring things down, so not necessarily bring them
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  - up for surgery centers? Any thoughts that you're
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  - hearing so far around that?
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  - Absolutely. For sure. So I know ambulatory surgery
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  - centers, again, there's been,
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  - a little bit of a different opinion, you
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  - know, along whether this is a good or
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  - a bad thing. But,
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  - by and large, you know, ASCs
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  - have been reimbursed,
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  - less than and then hospitals are at a
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  - a different rate.
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  - And so seeing that neutrality come up, I
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  - think, for the most part, you know, ASC
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  - leaders are are seeing that as something, you
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  - know, that may potentially be taking away some
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  - of their advantages being a lower cost provider.
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  - In some markets, they've been able to use
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  - that and leverage that to,
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  - have additional contracts with commercial payers,
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  - in some ways, you know, looking at Medicare
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  - and trying to argue to bring more patients
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  - into the the ASC setting.
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  - And and so
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  - having that site neutral payments, I I don't
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  - think they believe it will bring up payments
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  - for ASCs, but rather
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  - compress those for hospitals and and potentially diminish
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  - some of the things that,
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  - ASCs have argued, you know,
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  - makes them the right side of service, for
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  - patients,
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  - in in the members at health plans. And
• 9:57
  - so I
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  - an interesting debate. I think it's something that
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  - they see as potentially, you know,
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  - a change that they'll have to,
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  - navigate around as they're trying to figure out
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  - where's their place in the market, where do
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  - they partner, where does it make sense to
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  - try to bring more Medicare beneficiaries in. But
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  - I I think having that update isn't necessarily
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  - an advantage for them, but really, truly, depending
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  - on the market,
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  - means that they'll have to be rethinking their
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  - strategy in some ways. And I know that
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  - for the ASC, who in particular, there's a
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  - variety of procedures that actually will see decreased
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  - reimbursement,
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  - just because, you know, the CMS updated the
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  - payment factor to decrease reimbursement and especially those
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  - that are high volume procedures in the ASC.
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  - So I think it was a little bit
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  - of a a mixed news for surgery centers
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  - and surgery center leaders in terms of, you
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  - know, more,
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  - procedures if this rule goes into effect would
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  - come out of the inpatient only procedure list
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  - and then more being added to the ASC
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  - payables. But at the same time, you know,
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  - I'm seeing some of the reimbursement compression is,
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  - of course, not the way they would want
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  - to see that go. So it's just been
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  - an interesting,
• 11:05
  - rule to come out and and certainly
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  - a lot of voices on all sides trying
• 11:09
  - to make sure that they have a seat
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  - at the table as the final rule, comes
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  - into effect.
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  - Thank you very, very much. And and and
• 11:17
  - and tell us, Orr, anything else you're watching
• 11:19
  - closely currently in health care that that's top
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  - of mind?
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  - For sure. Absolutely. So I think looking at
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  - midyear,
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  - within the health care space, you know, we
• 11:28
  - have
• 11:29
  - are have been following the financial data,
• 11:32
  - especially that from Kaufman Hall's,
• 11:34
  - national hospital,
• 11:36
  - report. And
• 11:38
  - recently, they they have looked at some of
• 11:40
  - the big hospital expenses. And so,
• 11:43
  - for the last couple years, labor has dominated
• 11:46
  - the hospital expense conversation. However, that has been,
• 11:49
  - leveling off just one bit, and we're seeing
• 11:52
  - higher,
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  - rates
• 11:55
  - of expenses still, but coming from drug supplies,
• 11:57
  - purchase services, and more outside of the,
• 12:00
  - labor expense side. And so it's been interesting
• 12:02
  - to see that shift in in how hospitals
• 12:04
  - and health systems, many of which attacked, labor
• 12:07
  - costs with lowering,
• 12:10
  - you know, travel labor and temporary labor by
• 12:13
  - bringing people in house, by,
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  - retaining their staff and then leveraging technology
• 12:19
  - to augment the teams that they have. And
• 12:21
  - so they wouldn't
• 12:22
  - have to, be running on shortages or or
• 12:25
  - hiring a ton more people.
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  - So we really saw labor expense holding it
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  - relatively
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  - tightly,
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  - three to 5% year over year regardless of
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  - geography or size of hospital.
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  - Those increases,
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  - within the last financial reports and then looking
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  - at, you know, double digit increases more or
• 12:44
  - less for the drug expenses. So it's just
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  - been interesting to see that. And I know,
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  - from conversations, a lot of the executives and
• 12:51
  - and experts in the field expect that to
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  - continue to see,
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  - more of the drug supply costs,
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  - increase. And so that's something, again, that hospitals
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  - are trying to manage around and and, thinking
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  - about as they're looking at their strategies for
• 13:06
  - the second half of the year.
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  - Thank you very, very much. Fascinating to hear
• 13:10
  - all those going on in health care. I
• 13:12
  - saw on top of that
• 13:13
  - some more hospital closures, some more maternity closures,
• 13:16
  - so lots of different stresses on the system.
• 13:18
  - Laura Derrida, you're literally the best in the
• 13:20
  - business. Thank you so much for joining us
• 13:22
  - today on the Becker Healthcare podcast. Again, Laura
• 13:25
  - Derrida, editor in chief of Becker Healthcare. Just
• 13:27
  - fantastic. Thank you so much for joining us.
• 13:29
  - Absolutely. Thank you so much, Scott. I appreciate
• 13:31
  - it.