CMS Proposes Increased Reimbursement for Hospitals but a Decrease for Physicians in 2025

The Centers for Medicare & Medicaid Services (CMS) released its proposed changes to the fee schedule for 2025 on July 10. Hospital compensation will increase by 2.6% from 2024 for hospital outpatient services and 2.8% for inpatient services (1). In contrast, physician payment will DECREASE 2.8% (2). This continues the trend in CMS reimbursement. Over the past 20 years, physician pay has plummeted by 26% when adjusted for inflation while hospital reimbursement has surged by 70% (3).

The proposal drew quick criticism from the American Medical Association (AMA) and the Medical Group Management Association (MGMA) (3). "With CMS estimating a fifth consecutive year of Medicare payment reductions — this time by 2.8 percent —  it's evident that Congress must solve this problem," AMA President Bruce Scott, MD, said. "In addition to the cut, CMS predicts that the Medicare Economic Index — the measure of practice cost inflation — will increase by 3.6 percent. Facing this widening gap between what Medicare pays physicians and the cost of delivering quality care to patients, physicians are urging Congress to pass a reform package that would permanently strengthen Medicare." MGMA's Senior Vice President of Government Affairs, Anders Gilberg, said the 2.8% reduction to the conversion factor would be alarming in the best circumstances, but to propose doing so at a time when 92% of medical groups report increased operating costs and are otherwise struggling to remain financially viable is critically short-sighted. Gilberg added "Medicare physician reimbursement is on a dire trajectory and these ongoing cuts continue to undermine the ability of medical practices to keep their doors open and function effectively — the need for comprehensive reform is paramount".

Over the time period of decreasing physician reimbursement, there has been a dramatic change in physician employment. Now 77% of physicians are employed, a dramatic increase from 26% only 10 years ago (5). The reason most often cited has been declining reimbursement. Although cost containment is often cited as a reason for the decline in physician payments. It should be apparent that CMS’ “cost containments” have done little to stem the rising costs of healthcare (6).  Some have associated increasing physician employment for decreasing access and quality of care (4,7).

A recent comment from George Parides asserts “what is happening now is what the government, Centers for Medicare and Medicaid Services (CMS) and all hospital systems want to happen. They want full, and I mean FULL control of all physicians …” (8). Nothing has really changed with the proposed changes in fee schedules. The trend of healthcare away from a charitable, not-for-profit 501c to a not-for-profit in name only business focused on revenue and profits continues (7). 

Richard A. Robbins MD

Editor, SWJPCC

References

1. CMS. CY 2025 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS 1809-P). July 10,2024. Available at: https://www.cms.gov/newsroom/fact-sheets/cy-2025-medicare-hospital-outpatient-prospective-payment-system-and-ambulatory-surgical-center (accessed 7/11/2024).
2. CMS. Calendar Year (CY) 2025 Medicare Physician Fee Schedule Proposed Rule. July 10, 2024. https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2025-medicare-physician-fee-schedule-proposed-rule (accessed 7/11/2024).
3. Cass A. CMS pitches 2.8% physician payment cut for 2025. Medscape. July 10, 2024. Available at: https://www.beckershospitalreview.com/finance/cms-pitches-2-8-physician-payment-cut-for-2025.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter&oly_enc_id=6133H6750001J5K (accessed 7/11/24).
4. G Grossi. Dr David Eagle: CMS Reimbursement Cuts Encourage Trend of Independent Physician Exodus. American Journal of Managed Care. Feb 12, 2024. Available at: https://www.ajmc.com/view/dr-david-eagle-cms-reimbursement-cuts-encourage-trend-of-independent-physician-exodus (accessed 7/11/24).
5. Physicians Advocacy Institute. Updated Report: Hospital and Corporate Acquisition of Physician Practices and Physician Employment 2019-2023. April 2024. Available at: https://www.physiciansadvocacyinstitute.org/Portals/0/assets/docs/PAI-Research/PAI-Avalere%20Physician%20Employment%20Trends%20Study%202019-2023%20Final.pdf?ver=uGHF46u1GSeZgYXMKFyYvw%3d%3d (accessed 7/11/24).
6. McGough M, Winger A, Rakshit S, Amin K. How has U.S. spending on healthcare changed over time? Peterson-KFF Health System Tracker. December 15, 2023. Available at: https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#Total%20national%20health%20expenditures,%20US%20$%20Billions,%201970-2022 (accessed 7/11/24).
7. Robbins RA. A Call for Change in Healthcare Governance. Southwest J Pulm Crit Care Sleep. 2024;28(6):91-93. [CrossRef]
8. Parides GC. Only a Snowball’s Chance in Hell: Comment on A Call for Change in Healthcare Governance. Southwest J Pulm Crit Care Sleep. 2024;28(6):94. [CrossRef]

Cite as: Robbins RA. CMS Proposes Increased Reimbursement for Hospitals but a Decrease for Physicians in 2025. Southwest J Pulm Crit Care Sleep. 2024;29(1):8-9. doi: https://doi.org/10.13175/swjpccs033-24 PDF

CMS Decreases Clinic Visit Payments to Hospital-Employed Physicians and Expands Decreases in Drug Payments 340B Cuts

The Centers for Medicare and Medicaid Services (CMS) has reimbursed hospital-employed physicians more than self-employed physicians. However, CMS is moving forward with plans to expand its site-neutral payment policy to clinic visits, a move that could save the agency hundreds of millions of dollars (1).

Clinic visits are the most common service billed to CMS. CMS estimates that it is now paying about $75 to $85 more on average for the same service in hospital outpatient settings compared to physician offices. Beneficiaries are responsible for 20% of that increased cost. The payment change is projected to save Medicare $610 million and patients about $150 million. Higher CMS payments to hospital-employed physicians have also been have associated with higher commercial prices and spending for outpatient care which could save CMS even more money (2).

However, CMS abandoned its 2016 plan to expand a site-neutral rule. That regulation would have paid hospital off-campus facilities less than hospital-based outpatient departments if they started billing Medicare after Nov. 2, 2015. Following pushback from the American Hospital Association and others, the agency said it decided to not finalize that provision.

CMS’ 340B Drug Discount Program requires drug manufacturers to provide outpatient drugs to eligible hospital-based departments at significantly reduced prices. CMS will expand last year's cuts to 340B discounts given to outpatient facilities. Last year, the agency cut 340B drug payments by $1.6 billion, or 22.5% less than the average sales price. CMS is expanding the 340B cut to off-campus provider-based departments to prevent hospitals from moving their drug administration services for 340B-acquired drugs to an off-campus facility to receive a higher payment.

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Dickson V. CMS slashes clinic visit payments, expands 340B cuts. Modern Healthcare. November 2, 2018. Available at: https://www.modernhealthcare.com/article/20181102/NEWS/181109978 (accessed 11/2/18).
2. Neprash HT, Chernew ME, Hicks AL, Gibson T, McWilliams JM. Association of financial integration between physicians and hospitals with commercial health care prices. JAMA Intern Med. 2015 Dec;175(12):1932-9. [CrossRef] [PubMed]

Cite as: Robbins RA. CMS decreases clinic visit payments to hospital-employed physicians and expands decreases in drug payments 340b cuts. Southwest J Pulm Crit Care. 2018;17(5):136. doi: https://doi.org/10.13175/swjpcc115-18 PDF 

CMS’ Star Ratings Miscalculated

Modern Healthcare is reporting that the Centers for Medicare and Medicaid Services (CMS) has miscalculated hospitals star ratings since they were first released in 2016 (1). Officials at Rush University Medical Center in Chicago exclusively disclosed their analysis and correspondence to Modern Healthcare. The investigators found that instead of evenly weighting the eight measures in the safety of care group, the CMS' star ratings formula relied heavily on one measure— The Patient Safety and Adverse Events Composite, known as PSI 90 —for the first four releases of the ratings and then complication rates from hip and knee replacements for the latest release. The single measure accounted for about 98% of a hospital's performance in the safety group, according to Rush's analysis. The safety group can also greatly influence a hospital's overall star rating, the analysis concluded. Rush's findings likely prompted the CMS to announce this week that it would postpone the July release of its star ratings (1).

The statistical model the CMS uses likely caused the miscalculation. The model, called latent variable modeling, uses scores for seven groups of measures to calculate the star ratings:

1. Mortality
2. Safety of Care
3. Readmission
4. Patient Experience
5. Effectiveness of Care
6. Timeliness of Care
7. Efficient Use of Medical Imaging

The three outcome groups—mortality, safety and readmissions—are each weighted the most at 22% each. Measures within each group are supposed to be evenly weighted to calculate the hospital's performance in that area. Rush's analysis found that the weight given to the PSI-90 measure was much greater than the seven other measures in the safety group. Specifically, PSI-90 was weighted 1,010 times stronger than the catheter-associated urinary tract infections measure, 81 times stronger than the C. difficile infection rates measure, 51 times stronger than the central line-associated bloodstream infection rates measure and 20 times stronger than either the surgical site infection rate measure.

Latent variable modeling changes the weighting and is inappropriate for measuring clinical outcomes, said David Levine, senior vice president of advanced analytics and informatics at Vizient (1). "Given the disproportionate weighting of the safety scores over time, they did not represent a composite measure," said Dr. Omar Lateef, an author of the analysis and Rush's senior vice president and chief medical officer (1). Lateef said he and his colleagues at Rush were alarmed by a rating drop from 5 to 3 stars because they have improved performance on five of the eight safety measures since the December release. " Lateef added that although CMS was initially dismissive of Rush’s concerns that CMS has come around since presented with Rush’s analysis.

CMS announced earlier this week that it was delaying release of the star ratings "to address stakeholders concerns." No date has been set for when the new ratings will be released.

Richard A. Robbins, MD

Editor, SWJPCC

Reference

1. Maria Castellucci M. CMS star rating system has been wrong for two years, health system finds. Modern Healthcare. June 15, 2018. Available at: http://www.modernhealthcare.com/article/20180615/TRANSFORMATION01/180619933?utm_source=modernhealthcare&utm_medium=email&utm_content=20180615-TRANSFORMATION01-180619933&utm_campaign=am (accessed 6/15/18).

Cite as: Robbins RA. CMS' star ratings miscalculated. Southwest J Pulm Crit Care. 2018;16(6):338-9. doi: https://doi.org/10.13175/swjpcc078-18 PDF 

Healthcare Payments Under the Budget Deal: Mostly Good News for Physicians

In the early morning hours last Friday (2/9/18) Congress passed and President Trump signed a massive budget agreement (1). The spending package will cost about $320 billion over 10 years, according to the Congressional Budget Office. Payments for healthcare substantially increase under the deal. Most praised the agreement. "Congress made the right choice this morning for patients and communities by voting to halt damaging cuts to hospitals that care for low-income working families and others who face financial challenges," said Dr. Bruce Siegel, CEO of America's Essential Hospitals, which represents the nation's safety-net facilities. Marc Goldwein of the Center for a Responsible Federal Budget called the healthcare provisions the one "beacon of light" in what otherwise is an exorbitantly costly budget bill. Goldwein praised its mix of structural reforms with "reasonable policy” and liked that the bill pays for the increased healthcare spending.

The bill extends Medicare physician fee cuts that provide about $38 billion in offsets to the increased spending (2). The bill preserves the planned physician fee cuts at 0.5% in 2018 but would reduce the cut to 0.25% in 2019. Not all were pleased by the continuation of the cuts. Calling it "contrary to Congress' intent” ACP President Jack Ende called on Congress to enact permanent relief from the physician fee cuts.

Other major healthcare provisions include (1,2):

• Continued funding for community health centers for two years.
• A two-year delay to the already-in-effect payment cuts to Medicaid disproportionate-share hospitals (DSH) which predominately represent safety net hospitals.
• A two-year delay in the low-volume adjustment program which predominately affects rural hospitals.
• An additional 4-year extension of the Children's Health Insurance Program (CHIP), which had received a 6-year extension in the continuing resolution that was approved in January.
• Forcing pharmaceutical companies to pay 75 percent of the cost of drugs for seniors in Medicare’s coverage gap a year earlier than planned.
• Repeal of the "therapy cap”, a move long pushed by therapy provider groups and the American Association of Retired Persons. This would permanently repeal Medicare's coverage limit on physical therapy, speech-language pathology, and outpatient treatment.
• $6 billion for the opioid epidemic, which will go toward state grants, public prevention programs, and law enforcement.
• Funding for the Maternal, Infant, and Early Childhood Home Visiting Program, which helps at-risk pregnant women and families navigate the social safety net.
• A reduction in Medicare payments to Home health agencies. They're expected to lose $3.5 billion in Medicare payments starting in 2020 due to a change in the way Medicare calculates annual payment updates.
• Funding the Chronic Care Act, which opens up new flexibilities for Medicare Advantage and care for chronically ill Medicare beneficiaries.
• A 2-year delay in implementing The Affordable Care Act's high-cost plan tax, popularly known as the “Cadillac tax”. This was a 40 percent excise tax on employer plans exceeding $10,200 in premiums per year for individuals and $27,500 for families. The tax is now scheduled to take effect in 2020.
• Repeal of Independent Payment Advisory Board (IPAB). Provider groups from the American Medical Association to the American Hospital Association applauded the move, even though Congress has never triggered the panel, which was charged to find and implement Medicare savings.

However, not all were pleased by the repeal of cost containments. IPAB repeal doesn't cost much in the grand scheme of things, said Mark Goldwein from the Center for a Responsible Federal Budget but “the long-term policy implications are huge, and a big mistake” (2). Kaiser Family Foundation Senior Vice President Larry Levitt chided that the bill demonstrates “…healthcare cost containment generally seems better in theory than in practice” (2).

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Luthi S. Beacon of light: Healthcare additions in budget law pleasantly surprise providers. Modern Healthcare. February 9, 2018. Available at: http://www.modernhealthcare.com/article/20180209/NEWS/180209895 (accessed 2/12/18).
2. Ault A. Trump signs budget deal, cuts Medicare fee in 2019. Medscape. February 9, 2018. Available at: https://www.medscape.com/viewarticle/892491 (accessed 2/12/18).

Cite as: Robbins RA. Healthcare payments under the budget deal: mostly good news for physicians. Southwest J Pulm Crit Care. 2018;16(2):88-9. doi: https://doi.org/10.13175/swjpcc032-18 PDF 

CMS Announces New Payment Model

On Tuesday, 1/9/18, the Centers for Medicare and Medicaid (CMS) announced a new voluntary bundled-payment model that will be considered an advanced alternative payment model under Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (1). The new model is the first advanced Alternative Payment Model (APM) to be introduced by the Trump administration. The Trump administration has been a vocal advocate of reducing administrative burden for clinicians and has touted voluntary models as a solution (2). The new, voluntary model comes less than two months after the CMS officially decided to eliminate two mandatory bundled-payment models created during the Obama administration.

Under the model, clinician payment will be based on quality measures during a 90-day episode of care. Participants must select at least one of the 32 clinical episodes to apply to the model. The inpatient clinical episodes are listed in Table 1 (3).

Table 1. Clinical inpatient episodes under proposed payment model.

• Acute myocardial infarction
• Back & neck except spinal fusion
• Cardiac arrhythmia
• Cardiac defibrillator
• Cardiac valve
• Cellulitis
• Cervical spinal fusion
• COPD, bronchitis, asthma
• Combined anterior posterior spinal fusion
• Congestive heart failure
• Coronary artery bypass graft
• Double joint replacement of the lower extremity
• Fractures of the femur and hip or pelvis
• Gastrointestinal hemorrhage
• Gastrointestinal obstruction
• Hip & femur procedures except major joint
• Lower extremity/humerus procedure except hip, foot, femur
• Major bowel procedure
• Major joint replacement of the lower extremity
• Major joint replacement of the upper extremity
• Pacemaker
• Percutaneous coronary intervention
• Renal failure
• Sepsis
• Simple pneumonia and respiratory infections
• Spinal fusion (non-cervical)
• Stroke
• Urinary tract infection

Providers will be eligible for bonuses based on their performance. For more information about the model and its requirements, or to download a Request for Applications document (RFA), the application template, and the necessary attachments, please visit: https://innovation.cms.gov/initiatives/bpci-advanced. Applications must be submitted via the Application Portal, which will close on 11:59 pm EST on March 12, 2018. Applications submitted via email will not be accepted.

The CMS Innovation Center will hold a Q&A Open Forum on Tuesday, January 30, 2018 from 12 pm – 1 pm EDT. This event is open to those who are interested in learning more about the model and how to apply. Please register in advance here - https://preaward.adobeconnect.com/e3cdwg6hgx9f/event/registration.html.

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Centers for Medicare and Medicaid Services. CMS announces new payment model to improve quality, coordination, and cost-effectiveness for both inpatient and outpatient care. January 9, 2018. Available at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-01-09.html (accessed 1/10/18).
2. Castellucci M. CMS launches new voluntary bundled-payment model. Modern Healthcare. January 9, 2018. http://www.modernhealthcare.com/article/20180109/NEWS/180109905 (accessed 1/10/18).
3. Centers for Medicare and Medicaid Services. BPCI Advanced. January 9, 2018. Available at: https://innovation.cms.gov/initiatives/bpci-advanced (accessed 1/10/18).

Cite as: Robbins RA. CMS announces new payment model. Southwest J Pulm Crit Care. 2018;16(1):29-30. doi: https://doi.org/10.13175/swjpcc006-18 PDF