Court Overturns CMS' Site-Neutral Payment Policy

On Tuesday of this week (9/17/19) a federal district court judge ruled in favor of an American Hospital Association (AHA) and Association of American Medical Colleges (AAMC) complaint that the Centers for Medicare & Medicaid Services (CMS) had overstepped its bounds by implementing site-neutral payments in January. US District Judge Rosemary M. Collyer said in her decision, "The Court finds that CMS exceeded its statutory authority when it cut the payment rate for clinic services at off-campus provider-based clinics" (1).

Under its site-neutral policy, CMS had begun paying the outpatient provider-based departments of hospitals the same for visits that it paid to independent physician practices. Previously, the hospital providers had been paid significantly more for these services than to community practices and the change in CMS policy was expected to level the playing field between independent offices and hospital-employed practices. In addition, it lowered the incentive of healthcare systems to acquire more physicians and their practices, according to some health policy experts.

The difference in costs is substantial with hospitals charging 2-6 times more than an independent physician office (2). The site-neutral payments were expected to cost hospitals $760 million in 2020, according to the suit.

The Medicare Payment Advisory Commission had advised Congress that hospitals were buying physician offices and converting them to off-campus provider-based departments partly because payments were higher than independent physician offices. In the Bipartisan Budget Act of 2015, Congress allowed hospitals to bill CMS at the higher outpatient department rate if they existed prior to Nov. 2, 2015. The law permitted CMS to change the payment system for newly established hospital-based outpatient departments. However, one expert told Medscape Medical News last year that this provision of the budget act hadn't had much impact, because many hospitals just added newly recruited physicians to the PBDs that had been grandfathered in (1).

Asked to comment on the court ruling, a CMS spokesperson told Medscape Medical News, "We are aware of the decision and are determining next steps" (1).  The AHA and the AAMC were jubilant. In a joint statement, they said, "We are pleased with the District Court's decision that the Department of Health and Human Services exceeded its statutory authority when it reduced payments for hospital outpatient services provided in grandfathered, off-campus, provider-based departments. The ruling, which will allow hospitals to maintain access to important services for patients and communities, affirmed that the cuts directly undercut the clear intent of Congress to protect hospital outpatient departments because of the many real and crucial differences between them and other sites of care."

John Cullen, MD, president of the American Academy of Family Physicians, said in a statement that the AAFP is disappointed with the court ruling. "The decision preserves a system that both costs patients more in out-of-pocket expenses and limits their choice of physicians by paying hospital outpatient departments more for the same services provided by community-based physicians." he said. He added, these payment disparities across sites of service "force many community clinics to close their doors or sell their practices to hospitals. The small private practices, which provide high-quality care at a lower cost, are most at risk as a result of this decision." Robert Doherty, senior vice president, governmental affairs and public policy, for the American College of Physicians, tweeted, "This is very bad news for all the patients harmed by hospitals adding 'facility fees' for visits to doctors in practices they acquired."

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Terry K. Court overturns CMS' site-neutral payment policy; doc groups upset. Medscape Medical News. September 19, 2019. Available at: https://www.medscape.com/viewarticle/918744?nlid=131645_5401&src=wnl_dne_190920_mscpedit&uac=9273DT&impID=2101100&faf=1#vp_2 (accessed 9/19/19).
2. Carey MJ. Facility fees: the farce everyone pays for. Medical Economics. August 16, 2018. Available at: https://www.medicaleconomics.com/blog/facility-fees-farce-everyone-pays (accessed 9/19/19).

Cite as: Robbins RA. Court overturns CMS' site-neutral payment policy. Southwest J Pulm Crit Care. 2019;19(3):101-2. doi: https://doi.org/10.13175/swjpcc060-19 PDF 

Physicians Generate an Average $2.4 Million a Year Per Hospital

Hospitals are more frequently employing physicians which has been associated with increasing costs (1). Physician generated revenue may be one explanation for the upsurge in hospital employed physicians. According to a survey from Merritt Hawkins, physicians generate an average $2,378,727 per year in net revenue on behalf of their affiliated hospitals (2). This includes both net inpatient and outpatient revenue derived from patient hospital admissions, tests, treatments, prescriptions, and procedures performed or ordered by physicians. Travis Singleton, Merritt Hawkins Executive Vice President commented, “Physicians continue to drive the financial health and viability of hospitals ...”.

It is not just physician specialists who generate high dollar volumes for hospitals, the survey indicates. Family physicians generate an average of $2.1 million in net revenue annually for their affiliated hospitals, while general internists generate an average of almost $2.7 million. The average net revenue generated by all physicians included in the survey ($2,378,727) is up 52% from 2016, the last year Merritt Hawkins conducted the survey. Average revenue generated by each of the 18 medical specialties included in the survey increased compared to 2016, in most cases significantly.

The survey also provides a cost/benefits analysis showing which physicians provide the best return on investment by comparing salaries in various medical specialties to revenue generated by physicians in those specialties. Family physicians showed the best return with an average starting salary of $241,000, according to Merritt Hawkins’ data, while generating nine times that much in hospital revenue. “Primary care physicians such as family physicians represent an excellent return on investment …” Singleton said.

While the number of hospital inpatient stays has decreased or remained flat in recent years, the cost per hospital stay has increased, said Singleton, one factor that may be driving the comparatively high revenue averages generated by physicians. In addition, the number of hospital outpatient visits has more than tripled since 1975 and the average cost of these visits has grown, a further reason for physician revenue increases, according to Singleton. An additional reason is that hospitals are reimbursed at a higher rate for the same services compared to physicians’ offices. According to Winn et al. (3), outpatient hospital costs are about double compared to independent physician offices for the same chemotherapy services (3).

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Kacik A. Rapid rise in hospital-employed physicians increases costs. Modern Healthcare. March 16, 2018. Available at: https://www.modernhealthcare.com/article/20180316/TRANSFORMATION02/180319913/rapid-rise-in-hospital-employed-physicians-increases-costs (accessed 3-1-19).
2. Merritt Hawkins. Survey: Physicians Generate an Average $2.4 Million a Year Per Hospital. February 25, 2019. Available at: https://www.merritthawkins.com/uploadedFiles/MerrittHawkins_PressRelease_2019.pdf (accessed 3-1-19).
3. Winn AN, Keating NL, Trogdon JG, Basch EM, Dusetzina SB. Spending by commercial insurers on chemotherapy based on site of care, 2004-2014. JAMA Oncol. 2018 Apr 1;4(4):580-1. [CrossRef] [PubMed] 

Cite as: Robbins RA. Physicians generate an average $2.4 million a year per hospital. Southwest J Pulm Crit Care. 2019;18(3):61-2. doi: https://doi.org/10.13175/swjpcc010-19 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